A new biotech startup launched Monday with an unorthodox and ambitious mission to undercut the makers of high-priced drugs by developing similar, but sharply lower-priced medicines.
EQRx, led by veteran biotech venture capitalist Alexis Borisy and backed by $200 million in initial funding, isn’t setting out to make generics or biosimilar copycats. Instead, Alexis and his co-founders believe there’s a growing opportunity for a company committed to inventing and introducing new drugs at “radically different” prices than what brand-name drugmakers typically charge today.
“There’s this larger disconnect from the ever-increasing prices we, as an industry, are charging for great new medicines and, at the same time, the technological base that is allowing us to rethink, reimagine, re-engineer and remake the whole process of how you make a drug, prove it and sell it,” Borisy said in an interview.
Borisy, who left the venture capital firm Third Rock to start EQRx, aims for his new company to develop “equally as good, or better” versions of drugs already known to work. But rather than pricing such “me-too” medicines at par with on-market competitors, and striving through vast marketing efforts to convince insurers, physicians and patients to use its product, EQRx will compete on price.
“Our price is going to be much lower — so much lower that it’s not about a rebate or a discount, it is a fundamentally lower price,” said Borisy, referring to the payments drugmakers offer to insurers from a therapy’s list price to secure coverage.
EQRx can do that, Borisy claims, because the current moment in medicine allows for drugmakers to move faster and more reliably through preclinical and clinical testing. And, by going after known disease targets and established drug mechanisms, EQRx can sidestep some of the biological risk that can doom biotech endeavors.
Price competition, of course, is not a new concept in business, nor is it in the world of off-patent pharmaceuticals and biologics. Branded drug markets work differently, however, with few novel drugs introduced at a discount to their marketed rivals. Instead, drugmakers engage in a opaque game of negotiation with insurers, trading rebates for formulary placement and wielding clinical trial data to carve out less contested slices of markets for themselves.
There are some examples of new drugs being launched at lower-than-market prices, such as
Roche’s multiple sclerosis drug Ocrevus, but they are typically the product of unique circumstances in an individual therapeutic area.
EQRx, by contrast, aims to replicate its vision at scale, with a grand goal of launching one new drug in five years and 10 in a decade. The company didn’t disclose what disease and drug targets it will go after, but Borisy said they’d likely focus on oncology, immuno-inflammation and rare disease — categories that both command high prices and account for large chunks of healthcare spending on drugs.
“He’s trying to develop a business model for a market that doesn’t currently exist,” said Scott Gottlieb, former Food and Drug Administration Commissioner and now a partner at venture firm New Enterprise Associates, in an interview.
“He may well have an opportunity to do that because I don’t think the status quo — in terms of the business model where companies use rebates to buy formulary access — I don’t think that lasts,” added Gottlieb, who is familiar with EQRx’s approach.
Borisy’s ambition is backed by his track record of successfully launching biotechs, including Blueprint Medicines, which last week
won its first drug approval, and Foundation Medicine,
bought out by Roche a year and a half ago for $2.4 billion. All told, Borisy has founded or had a hand in launching 15 companies.
At EQRx, Borisy will be joined by Melanie Nallicheri, former chief business officer at Foundation. Robert Forrester, who previously led Verastem Oncology, will be CXO.
Joining them as co-founders and advisors are Peter Bach, an oncologist and drug pricing expert at Memorial Sloan Kettering, and Sandra Horning, formerly chief medical officer and R&D head at Roche’s Genentech.
The company will have $200 million in funding to start its work, raised in a large Series A round led by GV, ARCH Venture Partners, Andreessen Horowitz and Casdin Capital, among others.
It will need it, too, because executing on the fast timelines proposed by Borisy will be a daunting challenge. The executive didn’t share many details about EQRx’s plans in clinical development, such as whether the company would run head-to-head studies.
If EQRx is able to make it to market with new medicines quickly, winning market share away from well-resourced pharma companies will also be difficult, even with a lower price.
Makers of biosimilars, low-cost copies of biologic drugs, could offer a case in point. While legal hurdles have held up many of the biosimilars approved in the U.S., those that have launched have entered at prices between 15% and 35% discount to the branded drug’s price. Results have been mixed,
sparking debate this year about whether the biosimilar market can succeed.
EQRx’s Nallicheri acknowledged the challenges faced by biosimilars, but argued the U.S. experience to date could offer lessons for EQRx.
“If you want to change the trajectory on pricing, going about it in a timid way is not going to change the game,” she said.
Whether EQRx succeeds in meeting its many challenges is a question that will take years to answer. But there’s no doubt that the company is made for the current moment, as drug pricing questions remain in the political forefront and Chinese biotechs prove they can make and launch products mimicking Western drugs at sharply lower prices.
“If you think that the world of the pharmaceutical industry and how drugs are priced looks the same 10 years from now, then you have another thing coming,” Borisy said. “I see that world changing radically, whether it’s from a company like EQRx, whether it’s from the coming wave of Chinese competition five to 10 years from now, or whether it’s from the politicians in D.C.”
