The Problem with Platform Companies

Alex Harding, CEO, stealth biotech startup

I should start by saying that I am currently the CEO of a platform company. (We’re not talking publicly about what we’re doing yet.)

Yes, I recognize the contradiction between the headline of this piece and my own career choice. No, I don’t like calling it a platform company—even if that’s what it is.

There are a few different species of platform companies. The classic form (and the type I’m focused on here) is a drug technology platform, like the CRISPR gene editing companies or Alnylam, the leading siRNA company. These companies have a core technology incorporated into the drugs they aim to make.

There are also assay platform companies, which develop an assay to screen or characterize molecules. Vertex, for example, developed an assay platform to detect expression and localization of the CFTR chloride channel, which became a powerful engine to discover drugs for cystic fibrosis.

And there are companies where the platform is its expertise in a disease area. Disc Medicine, a company specialized in benign hematology, is able to use its hematology expertise to develop molecules in ways that other companies hadn’t thought of, because of its specialized knowledge in that disease area.

Platforms are great when they do what they’re supposed to, which is to create an efficient engine that generates multiple valuable programs using the same underlying technology or capability.

The problem is when that platform becomes the focal point of the company, instead of the programs it is supposed to generate. Many platform companies spend over $50 million and 3-4 years—sometimes much more—just to get to their first development candidate, the first molecule with the potential to go into a clinical trial.

These companies hire large scientific teams dedicated to the platform. Those teams do spectacular science. They publish papers in Science and Nature. Sometimes, they even make meaningful progress that the whole field benefits from.

But, too often, that progress comes at an enormous cost, without enough tangible output of the currency biotechnology companies deal in: molecules. That is, drug molecules on the path to demonstrating clinical proof of concept, on the path to becoming medicines. Instead, these platform companies exist for the sake of the platform.

The rationale for a platform company hinges on the notion that once the technical hurdles of the platform are cracked with a first program, a dam will break and there will be a flood of additional programs, justifying the upfront investment in the platform. Very often, however, the dam never breaks. After pouring $50 million or 100 million to get a first program into clinical trials, a platform company has a valuation of over $200 million and a crop of investors who are fatigued and reluctant to invest more behind preclinical programs. In some cases, the second or third programs intended to be churned out by a technology platform do not have such a compelling product profile as the lead program.

All too often, the promised flood of new programs never materializes. Instead, the company has poured money into a platform and only has a lead program to show for it. The lofty valuation, predicated on the broader pipeline potential, is hard to justify with a single asset, and the company will struggle to raise additional capital.

This is a story that has been written and rewritten all too often in biotechnology.

The label ‘platform company’ grates on me when people use it to describe the company I’m helping to build. They are not wrong—we do have a technology platform. But I prefer to think of ourselves as a pipeline company. We have a technology platform oriented to producing new programs, new molecules that have the potential to become medicines.

The word choice matters to me. Our platform exists solely for the sake of the pipeline, and our resources are allocated accordingly. We invest in our platform in a targeted manner, always with a clear vision of what the therapeutic application will be.

This also means that there are certain platform investments we won’t make. If the science is too early, too distant from a program, we choose to spend our money on other efforts that can make a more immediate impact on our pipeline. For an early-stage startup like ours, we want an investment into our platform to yield a development candidate within a year or so.

A company is defined by how it chooses to allocate the capital it is given. Targeted capital allocation to a platform makes sense, so long as the focus remains fixed on generating new programs. But the moment the platform comes first, you have lost the tune.

So please, don’t call mine a platform company. We’re a pipeline company.