Bridging the “Pharma-Startup Gap”: How Can Pharma Companies and Digital-Health Startups Work Effectively to Bring Products to Market Faster

Episode Transcript

Bozidar: Hello and welcome to new episode of the Pharma Launch Secrets podcast. So here's Bozi host, and today I'm joined by Naomi Fried. Naomi is the founder and CEO of PharmStars, a Pharma focused accelerator for digital health startups. Naomi is also the co-founder and general partner of Ambit Health Ventures, a venture capital fund focused on early stage digital health and medical devices startups. Naomi, welcome.

Naomi: Thank you, Bozi. It's a pleasure to be here.

Bozidar: Yeah, I'm excited about our organization on my last job in the Pharma world before Ever met, was head of Digital Therapeutics. So I had the chance to talk to a lot of startups, to partner with some of them, and to learn a little bit about the world in venture capital when it comes to digital health. So this topic today is going to be a little bit different from like a classical Pharma launch and Pharma launch in the post code world. But we'll talk about how putting together startups and Pharma could potentially be beneficial for both. And to make this very practical and specific, you founded PharmStars in 2021. Can you share a little bit, like, why you did it? What is PharmStars, first of all, and then why you decided to launch it?

Naomi: Great, well, thanks for the question. So I launched Pharm Stars, really to bridge the pharma startup gap, which I had experienced firsthand. And to understand this idea, let me share a little bit about my background. I had been working in healthcare innovation for many years. I was vice president of Innovation and Advanced Technology. Kaiser Permanente. The first chief innovation officer at Boston Jones Hospital. And then I was recruited to Biogen to help them develop their innovation beyond the molecule strategy. I thought this would be a simple transition for me. I was going from one part of healthcare to another part of healthcare. When I got to Biogen, I discovered I did not understand the thing people were saying. I didn't understand the language people were talking about, medical and clinical, and these were completely different things. I didn't understand what people were doing. And it was really a very steep learning curve for someone who was already in health care coming into the pharmaceutical industry.

I eventually got up the learning curve, but I did in the process come to really appreciate the potential the digital health has to transform the pharmaceutical industry to really help not just deliver benefits to patients on therapeutic, but also to change how drugs are developed and commercialized. I left Biogen and started my own consulting firm to continue work on advising Big Pharma on digital health strategy. And I found myself in meetings between startups and Big Pharma where the startups had great ideas that the Pharma could definitely use. They built something really creative and yet when they would sit in these meetings, they would sort of talk past each other and actually no deals would happen and the startup was a great idea, would not actually solve the problem that the Pharma had because they just didn't, didn't understand each other. And that's when I came to realize that there's something that I now call the Pharma startup Gap. 

And it's a fundamentally different way that startups and big digital health startups and big pharmaceutical companies do business. So they have certainly a different language, they have a different culture, they have a different approach to innovation, appetite for risk, different timing. And so the goal for PharmStars is actually to bridge that Pharma’s startup gap and to bring startups and Pharma together in a constructive way so they actually can become partners and really take advantage of the innovation and the need for innovation and to work together.

Bozidar: Thanks for that. So what do you think are the reasons that the Pharma startup Gap exists? Some of the things are obvious. One is a very large company executing a proven business model. The other one is trying to prove a business model, get the product market fit. Where do you think are the biggest areas that kind of widen the gap between the two?

Naomi: So I think that digital health startups and pharmaceutical companies really operate different types of businesses. Pharmaceutical companies are obviously trying to develop therapeutics. They start with many possible targets, they narrow down to one product that they try to get approved by the FDA and then they sell that one product with no change as long as the patent is still available. 

Digital health startups, on the other hand, are technology companies. They are about building a rapid prototype, getting it to market, continuing to make changes, to innovate. So they have a very different approach to innovation and so they have a different approach to taking risks. 

Pharma is all about sort of minimizing the risk, betting on the best possible compounds and trying to get them all the way through startups. Digital health startups are busy taking risks, they're trying to change their product. And the timing is very different. It takes, often, ten to 15 years to bring a drug to market. A startup can build, that's in the digital health space, can write a piece of software very quickly and get it to market in six months, maybe a year. So the timing is very different and I think the budgets are very different. 

Pharma will spend, you know, as much as, you know, one or two $3 billion developing single product. A digital health startup uses a lot less, let's just say so very different ways of operating, different expectations, different timings. And that's what makes it very hard for them to actually get together and be partners, because they operate in different ways and they don't really understand each other and what it takes to actually be a good partner to the other. And that's what we're trying to do, is help both sides learn a little bit more and to come closer to the other so that they can better work together.

Bozidar: Sounds like a lot of differences. And as you were sharing that, I was sharing visuals of the different meetings I've been in where I've seen that gap in play and even a different energy in the room. Or people, like sitting on a different size of the room, almost feel like two different camps, two different teams and looking at each other like, what are they talking about? What are they talking about? Even after partnerships are signed, I've seen that. 

Let's talk first of all, before I discuss a little bit, like best practices for both to understand, really, why would pharma work with a digital health startup in the first place, where they always come back to value? Where is the value? Is the value in being able to provide a complete solution to patients or being better to identify patients diagnosed? Or where do you see like, the most common use cases nowadays from all the cohorts of the startups? You see what are maybe two or three areas where startups can really help pharma on a commercial side.

Naomi: So I think there's a lot of opportunity for digital health solutions and innovations to support pharma as you reference, probably the one that's on most people's minds is how digital solutions can bring more value to patients. Where is an opportunity to do a drug plus a digital solution, a drug plus an app, a drug plus a diagnostic, a drug plus a digital therapeutic to address side effects or enhance the impact of the drug? So there's a lot of potential to use digital solutions together with therapeutics to bring more value to patients. And one of our pharmaceutical cohorts was focused on digital innovations in neurology and different diagnostics and other tools that can help diagnose and track patients conditions while they're still taking therapeutics. But I think that the value the digital health startups can offer pharma is not limited to just the patient side. 

There's actually a lot of amazing digital health startups that are thinking about how to help pharma with the drug discovery and development process. So how can they speed and get drugs to market more quickly, more cheaply? So these are all sorts of platform tools, whether they might be data analytics tools, discovery enhancing tools, a lot of different tools to help with clinical trials, whether it's with recruitment or tracking patients, there's a lot of need that pharma has and a lot of interest in making that whole drug discovery and development process more efficient. And then a lot of these diagnostic tools can be very useful for identifying patients for clinical trials, selecting the proper population, getting selection criteria that makes sense. 

And I think that there's a real opportunity to use digital solutions to help provide more precision medicine to patients by figuring out how to tailor the therapeutics to specific patients by using digital diagnostics. So, really a lot of opportunity and I think pharma is starting to recognize all of the opportunity that digital health in all its different forms can bring to it.

Bozidar: Yeah, as you were saying, I mean really across the whole value chain from, I often say if you go back to the first principles, pharma makes drugs and sells drugs or brings them into patients hands. So it's like make drugs and sell drugs. Like most other industries, you make cars. It's just basically innovation. And then you sell cars. And at the end of the day, whether that's improve drug discovery and anything in the clinical development to speed up or the second part is bringing into someone's hand, not just selling, but supply chain manufacturing, this and that, diagnostics and identifications, all of that, it means bringing it to hand. That can be of help. 

So when it comes to instead of maybe starting to talking about the best practices, how about we talk about the biggest mistakes? So we turn it around and, so biggest mistakes that you see startups make, I somehow found that when you start with mistakes, people kind of tend to remember better that and not do that. So maybe what do you see is the top three or four mistakes in your day to day that startups do that they should not do?

Naomi: So I think the biggest mistake that we see startups making and that we try to actually coach them around in our accelerator is that they don't articulate their pharma value proposition, they don't actually understand what the problem is that pharma has and how they're helping solve it. They just come with their solution and that provides a really big burden then on Pharma to think about what does the solution mean, what does it mean for me, how can I apply it, who should work with this startup? And I think that's the fundamental reason why I've seen a lot of startups get in a room with a pharma company and not be able to do a deal because they're just not stepping into the shoes of the pharma company. So we really work with startups in PharmStars to help them articulate their pharma value proposition. 

I think another challenge for startups is not really understanding how pharma is organized actually who to speak to, whether they should be speaking to someone in medical affairs, or someone in commercial or someone in market access. There are a lot of different capabilities and needs that Pharma has. And again, if serves don't understand who they're speaking to and what their objective is within the company, it's very hard to explain why your product can make a difference. And then I'd say the last piece is also sort of related to that and it's just not understanding Pharma speak. I really think Pharma has its own language. They have a huge number of acronyms. Actually, one of the things we do with our startups is we give them a whole list of Pharma acronyms so they can start becoming familiar with it. But I think just as with any good relationship, communication is really important. So it's listening to what the problem is and then it's being able to actually speak the same language.

I'd say those are probably three of the most common mistakes that startups make when approaching Pharma. There's many more, but there are at least three to get started.

Bozidar: No, that's super clear. I've been in situations like hearing startup pitches and so on. I think one of the biggest challenges for any startup is to articulate the value proposition. And then the question that came to my mind as you were speaking is from the startups that you see, because you have this unique view of seeing multiple startups and cohorts. 

So of the startups that you see, I'm curious is the majority of those startups led by people who have many years of domain expertise and know the industry, or you see more like a fresh blood in digital health for kind of making those first mistakes. They're trying to go fast and break things, but see, that doesn't work and then they kind of find that middle ground.

Naomi: So we really tend to have a very mixed heterogeneous cohort. We accept domestic and international startups, but we also don't choose startups based on their funding stage. We just require that startups have a prototype or a product because our measure of success is deals done with pharma. So we just look for startups that have very innovative ideas that Pharma will be interested in. And it turns out we do get startups that are pivoting from elsewhere in health care that are just getting into Pharma, that have never tried to sell to Pharma before. But we also have CEOs and leaders that have worked in the pharma industry for 10, 15 years before. They're still actually often making the same mistakes. They may have a better handle on the language, they may understand who does what within the pharma industry, but there's still so much opportunity to learn about Pharma and to really craft that value proposition. And the way we organize our accelerator actually is we have a five part curriculum that we take all of the startups through, starting with Pharma basics. 

Just what's a biotech versus what's pharma, what's small molecule, large biologic. We then move into how drugs are made, how the pharmaceutical company is organized, what all those functions are. We also then get into the business of pharma. What does it mean to be a blockbuster or a niche buster? Why is there so much interest in rare disease? How does the whole patent and FDA approval process work? We then talk about Pharma as a regulated industry and then we finish. Our last module is on what we call the art of the deal and what to expect in negotiations and due diligence and doing a deal with pharma and being a good pharma partner. So even folks that have a lot of pharma experience, and we have some of those in every cohort, tell us they can't believe how much they learned. They didn't expect to learn much, but pharma is so big and so complicated and we have a very comprehensive curriculum that they always get a lot out of it.

Bozidar: One other thing that is difficult for startups is death by 1000 pilots. I was wondering and then on the other side I've been on both sides now, so on the other side, when you're a pharma, especially you're looking globally, you need scale. You need someone who has enough resources and maybe has a global reach. And maybe a lot of startups are not in that stage. Because to get to that stage, maybe you need a clinical study for what you're doing. So that means that you're at least five year old startup, maybe you're not even a startup anymore, but you're still called startup. 

So in that sense, what do you think in terms of getting for a startup, from getting from having product that has first signals of value to actually what is considered a successful path in digital health specifically. Right. I know from the marketing side I have no better overview. But on the digital health side, is it the pilot that is six months pilot with a specific KPIs to pre agreed that trigger something else or because it's very easy that you find a self situational expenditure two years where you have expenses and everything and then it's like meeting after meeting after meeting. You get drained with this big machinery of large companies.

Naomi: So one of the complaints we've actually heard from startups about the pharma companies they've talked to is sometimes the pharma companies don't seem to know what they want, not sure if they want to do a project. So the good news is that our Pharma members actually select the themes for our cohorts and they tell us what they're interested in. So our next cohort is around women's health and health equity and digital health solutions because this is a topic that's of interest to our pharma companies. 

So the good news is the Pharma members that are going to talk to our startups show up interested in this. Topic already and having some idea of what they want to do. But from the startup side, I think there's not a one size that fits all in terms of how to engage pharma. So we actually work with each of our startups to develop not just their Pharma value proposition, but also their Pharma business model and what the deal is that they should be offering pharma. And yes, it often does start with a small project or small pilot, but they need to think about what is each side bringing to the table. And is this a licensing agreement? Is this a development project? What does stage one versus stage two look like? How many people should be involved? What resources are needed? And I think that that is also a very valuable way to engage pharmaers, actually, to come with a proposal. This is how we think we can work with you and our startups spend time learning about the Pharma member. 

So it's a very personalized pitch in terms of we'd like to do this size project with you, we know you have this drug and this population, this is how we'll get involved with the clinical trials, this is how we'll engage with you, this is how we'll scale with you. And I think that that's been a really successful way to have a conversation with Pharma is actually to come with a proposal, if you will, around what their business model is and how they're going to engage together. I think that helps get us past what you talked about of death by a thousand pilots and maybe we'll try this and maybe we'll try that and I don't know, let's just keep trying it. So the startups actually, again, we coach them to do the thinking and we think with them about what success will look like. And we always emphasize that it should be a win win.

You, the startup should succeed, but there should be value for the Pharma company and a reason that they want to do this with you.

Bozidar: Yeah, and sometimes we call it like clarity sessions. Sometimes when you say like, someone from Big Pharma wouldn't know what they want, but startups job sometimes is to ask them questions and get into that clarity and basically through that, even qualified people. The other piece I wanted to ask about, I mentioned that sometimes really it's about getting clarity from Pharma on what is it that they want. And sometimes through that process, by asking skillful questions, you can realize that maybe that Pharma person is not the right person to spend three to six months of your life trying to invest because there is nothing, they're not sure what they want. 

So I think that's a really important skill set that I had the chance to learn from both sides. What about Pharma? So what are some of the biggest mistakes you see on Pharma side that prevent them from working successfully with startups?

Naomi: Great question. So I think the first mistake we see Pharma sometimes make is that they actually don't have enough clarity of purpose. They don't know why they're talking to startups, they think we want to be in innovation, we want to be engaged in digital health, but they haven't actually thought about the problems that they need solving. And that makes it very difficult then for a startup to actually deliver something of value because the strategy is not well articulated on the Pharma side. I think the other mistake that we see a lot that some pharma make is that they don't have an appreciation for the speed with which startups need to move. That they can't actually wait two years to do a deal that they actually need to do a deal and start at least engaging in the project in order to be able to demonstrate to their investors that they actually have a viable business and that they will be able to make money through selling to pharma. 

So I think what we see sometimes is that pharma just doesn't move fast enough and they don't really understand why startups are in such a big hurry. And then I think sometimes they just also don't understand how certainly for smaller startups, let's just say hungry and under resourced they are, that there's not going to be a general counsel in most startups that's going to be able to negotiate a deal, that it's going to be the CEO who's talking to the lawyer on the pharma side. So I think not always understanding that it's a David and Goliath in terms of resources and staffing. So I think those are some of the mistakes that we see pharma make when they are just starting to try to work with startups.

Bozidar: Yeah. And I've seen it's very interesting because, again, I've been on both sides, so it just changes your perspective. And I think I've seen people who are pharma who actually had their own companies, or maybe they have startups when they were in a real state of their career. Maybe they have failed startup, or maybe they work for a startup. That's very rare among pharma executives. But the ones they had that experience, they work very differently. When they talk to startup they come from that sense of empathy and understanding like hey guys, I know we can drown you in our, what we call, I call it machinery, we can drown you in the meeting machinery, resources. Because at the end of the day we are going to exist no matter what for the foreseeable future. 

So when you know that okay, startups, okay, they may have a runway for the next twelve months, maybe six months, maybe 18 months, that they are looking at it very differently. They don't have time to be in all these meetings. So I've seen a difference and maybe sometimes I will be in these meetings. I'm like, it would be really nice to, before doing anything, kind of spend 15 minutes on each side, say, a day in the life of and then really try to understand each other better. Or maybe switch, maybe work. 

For one day on both sides and have that kind of accelerated perspective shift, because otherwise there is this gap, like an elephant in the room that no one is really talking about that actually leads to frustrations, to prolonged timelines, to fail pilots, or to a huge amount of excitement for startups, while on the Pharma side, they're just like potentially exploring something. So I've seen those ups and downs and I think understanding maybe that could be an idea for an episode, a day in the life of so bridging the gap through helping them understand motivation, timelines, runway, things like that.

Naomi: I think one way that PharmStars is really very fortunate is the Pharma members that we have are represented by what we call the champion liaisons. But they aren't just champions because that's their job, they're actually working on the front lines of digital health partnerships and innovations and so those folks actually do have that kind of appreciation you were just talking about and understanding and interest in startups. So they're really good at then sort of facilitating a relationship with different people within the pharmaceutical industry that would be the business partner and helping to sort of do some of that liaison and some of that translation that we're talking about in terms of expectations around timing and speed. 

So it's really wonderful for the startups to come through our accelerator that they get to work with these champions that have been sort of hand picked because of their interest and appreciation and understanding of startups and that those champions help open the doors then and find the right subject matter experts and the right connections and the right sort of business owners within the organization and then continue to sort of support and facilitate the relationship between the start up and to bring this all together.

Bozidar: Is there any example you can share with a startup that you work? Anything you can share you're allowed to share? An anonymized anonymized of course, the anonymous better that you can share bringing this together like something that worked well.

Naomi: So we have had 34 startups go through our three cohorts already. We usually do about ten startups at a time and we have a number of startups that are in conversations with Pharma. We think one of our startups is going to be doing a very large, hopefully seven figure deal will be closing in the next couple of months. And what's really exciting is they just started talking to the Pharma company in June. They were part of our second cohort, so they met with the pharmaer the first time in June and I think if they have a deal that comes together in early 2023, to have a deal done in seven or eight months with a huge pharmaceutical company of that magnitude is really a great success. Again, the deal is not done, they can't reveal any of the details, but we're seeing really good engagement. 

And the other thing is that all of the startups report that they feel so much more empowered in talking with Pharma again because they understand now who's on the other side of the table. One of the startups from our first cohort said they had been working with Pharma before but they never felt comfortable sort of asking Pharma any questions when they go into the meeting. So they weren't sure again about how the pharma was organized. They weren't sure they were using the right terminology, so they would just try to answer the questions, but they wouldn't ask them. After going through and sort of learning about Pharma, they felt now empowered to actually be really more of a partner and say, well, what about this and what about that? So we've had so much positive feedback about how Stars feel after they've learned about pharma and how to engage them. So there's been a lot of successes.

Bozidar: That's bridging the gap. One other question I want to ask is because you're running accelerator but also a venture fund. So why did you decide to do both and how those two work? Synergistically, I would assume. Can you tell us a little bit more about that?

Naomi: I watched the venture fund because I felt that there was an unmet need in the market around early stage funding for digital health companies, particularly Diagnostics and therapeutics. So that's where Ambit Health Ventures is really working. There's a lot of investors that have large funds that want to write large checks, and that's good if your startup is a little bit larger. But if you're in that sort of seed, pre seed stage, you don't want those big checks, you want smaller amounts of money and you want to have investors that actually can provide strategic support, introductions, advice, guidance. So that's really where my partner and I have sort of a lot of experience and we thought we could really bring value to the startups we invest in. PharmStars is a great way to see digital health startups. 

The startups in our program want to talk about funding as well as working with pharma. So we talk about the investment landscape and opportunity in what we call graduate school. So we have our basic pharmacy program that Stars graduate from the program, but then we stay in touch with them and we continue to build the community and we put them together in what's called graduate school. And they all come and we have workshops and speakers and special interest groups around topics of interest. And the fundraising is actually an area that comes up time and again because every startup needs to get funding because they're not, you know, revenue positive, they're not cash flow positive yet. So there's a lot, a lot of synergy between the two activities. 

For me, it's just a passion around working with startups and really a belief in the importance of digital health as a transformation to the whole healthcare industry and as a way to bring so much more value to patients.

Bozidar: Got it. Yeah, thanks. My hope is that whether it's pharma companies working with folks from pharma working with startups or startups listening to this episode got like two or three or four tips and ideas as part of the conversation and some of them maybe reach out to you, maybe part of the cohort or maybe some of. The pharma companies connect with you while identifying startups? Because those discussions are happening. I've been involved in a bunch of those. And if they start to your point with identifying the problem that needs to be solved, that's usually you the best so that you have all these alignment happening before you reach out to startups. I know we found when I was a tenant, we found some of the best companies like that. So we would have a year spent aligning with the problem we are solving and then talk to startups, so then things would happen much faster. So at the very end, I like our listeners to get to know a little bit the person that I'm interviewing. So ask you rapid fire questions, such as, what's your favorite buzzword of 2022?

Naomi: It has to be Digital therapeutics.

Bozidar: Digital. All right. That was, I think, coined by Sean Duffy from Omada Health about ten years ago. So it's very still popular.

Naomi: Yeah. The other one, I have to say is, I'm a big fan of digi-seuticals. I like that.

Bozidar: What's the best book you've read over the past year or so?

Naomi: I read The Chancellor by Katie Martin about the biography of Angela Merkel. I found it very interesting and inspiring and super educational.

Bozidar: Chancellor, nice. And then is there anyone in the world of pharma or digital health or who in the world of pharma and digital health would you take out for lunch and pick their brain?

Naomi: I'd like to go to lunch with Myrtle Potter. She's the CEO of Samita Van. And I think that is an amazing three year old biotech company, part of a bigger Japanese pharmaceutical company, but really very innovative and I'd love to talk with her about it.

Bozidar: Awesome. Well, maybe she's listening. So, Myrtle, if you're free there you go. And then what one center piece of her device would you give to anyone just starting in healthcare and healthcare innovation today?

Naomi: I would say take risk. Still be afraid of failure. Every failure is just an opportunity to learn and to keep growing.

Bozidar: And then where can people find you? 

Naomi: Online, LinkedIn. I'm very active. I try to post fairly regularly. And of course, you can hear more about and learn about PharmStars at Pharmstars.com.

Bozidar: All right, it was a pleasure having you today, Naomi, and looking forward to hear about successes the partnership with pharma and startups.

Naomi: Thank you, Bozi.It was really a pleasure to talk to you today.