5. Drug-Device hybrid model
The biotech investments are volatile in nature considering the probability that the drug would fail during clinical trials phase II or III, after much of the time and money has been spent. It is characterized by high risk, in terms of capital commitment and probability of success, and high reward, in terms of profit potential and exit scenarios.
For example, in India, the diabetic drug insulin is manufactured by Torrent Pharmaceuticals, under licence from Novo Nordisk India, and distributed by Abbott India verses the blood glucose measuring device called ‘AccuCheck’ is manufactured and marketed by Roche diagnostics alone. In this scenario, although the cost or risk is reduced the profit is also shared.
The best way to describe the drug-device hybrid is to look at one of the most successful examples set forth by Johnson & Johnson, who created the market opportunity for the drug coated stents used in the coronary artery diseases. As a result, start-up device companies have been formed to develop drug coated stents, or are adapting their strategies to do so. The prospective for the biotech market indicates that the drug-device combination products will experience a promising future and this drug-device hybrid companies would impact the investment allocations by decreasing the cost and lowering the risk.
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