EQRX - The World Has Its Way With EQRx
2023-05-09 20:29:00 ET
Summary
- EQRx stated that it hoped to have ten drugs in ten years, and that's where I threw my hands up in the air.
- The company went public in 2021 (via a SPAC merger, very fashionable at the time), with a somewhat changed business model.
- The company went public at $10/share, and right now it's at about $1.67.
I wrote here in 2020 about an interesting startup called EQRx (EQRX). It began with a loud blast of trumpets, heading in to disrupt the pharma pricing system by coming up with a list of fast-follower drugs in several categories that would then compete on price. This is a difficult idea to execute, but it's not impossible. But as you can see from that blog post, though, I thought that their claims about how this would work (and especially about how quickly it would work) were in fact impossible. EQRx stated that it hoped to have ten drugs in ten years, and that's where I threw my hands up in the air. Fast-followers or not, no company has ever done that from a standing start, for a lot of very solid reasons that are very difficult to work around. Their Silicon-Valley-style handwaving about screening a billion compounds in the cloud overnight (that's a quote) got under my skin even more. But as I said at the time:
Let's get real: no matter how spiffy your data science integration is, discovery and development of a new drug - even one that copies an existing one as closely as possible but is still patentable - just takes longer than that. Finding the compound. Setting up and validating the assays. The counterassays. Screening. Analog synthesis and analog screening. Scale-up. Pharmacokinetics. Toxicology. More toxicology. Formulations. GMP scale-up. Design of a trial. Recruiting patients. Running the trial. Sending it all to the FDA. These things take irreducible amounts of time, and not-so-irreducible amounts of cash. I know that I sound like a crusty codger who's all salty 'cause he's about to get Amazoned, sure. There are people in the Valley who live for that kind of story and to see the looks on the faces of people once the Mighty Disruption hits them.
I put up a $500 wager , in fact, that it would do no such thing (proceeds to charity), although in the end no one took me up on it. The company went public in 2021 (via a SPAC merger, very fashionable at the time), with a somewhat changed business model: buy up me-too compounds from Chinese companies and get them approved in the US - and yeah, then compete on price. But last year there were signs of trouble . The company announced that it would sell its first two drugs at market prices instead, and in February it had a round of layoffs. Yesterday it announced that it's getting rid of both of those Chinese-discovered drug candidates, that it is abandoning their entire strategy of trying to change the biopharma pricing model, and that it is laying off over half of their remaining employees. Here's Stat on this story , and here's the writeup at Endpoints .
To be sure, their model (at any conceptual stage) also seemed to depend on running really fast and cheap clinical trials in China, and that hasn't worked out so well. In February of last year, Eli Lilly (LLY) had an antibody drug of theirs run into severe regulatory trouble after trying that strategy, with the advisory committee saying that the trial did not meet standards . The FDA later issued a CRL (complete response letter) to that effect, and everyone's ideas of get-it-done-in-China evaporated. EQRx's management has blamed this change for a lot of their problems, and it sure didn't help, and it is also blaming the passage of the Inflation Reduction Act. It doesn't seem to be able to explain quite how that affected them - presumably it's the provisions about "maximum fair price" for Medicare Part D drugs, which start kicking in in 2026. But the real reason was that it overpromised hugely. The company's model always depending on everything working far more quickly and with far less money than anyone has been able to ever manage, and this never matched up with reality. Their founder said yesterday that "the math didn't work any more", but you know, it never did.
It raised over a billion dollars back in 2020 and 2021, and you have to wonder what those investors are thinking now. The company went public at $10/share, and right now it's at about $1.67. Its prospects are not that good - it is down to one drug candidate (the CDK 4/6 compound lerociclib ), and it's not like that's a wide-open therapeutic area, either. There are three such drugs approved already that have been on the market for several years now, and I don't know what EQRx is bringing to the field that isn't there already (assuming it even gets that far). This odd little story is now definitively over.
Disclosure : None.
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The World Has Its Way With EQRx