Opinion: How the pandemic is changing Big Pharma

Lou Shipley is Senior Lecturer, Technological Innovation, Entrepreneurship, and Strategic Management at the MIT Sloan School of Management.

BRYCE VICKMARK

By Lou Shipley – MIT Sloan School of Management

In December, the U.S. Food and Drug Administration (FDA) granted emergency-use authorization for Cambridge-based Moderna’s innovative mRNA Covid-19 vaccine. Moderna is expected to provide hundreds of million doses to the federal government in next six months. Millions of doses of the Moderna vaccine have already been manufactured and inoculations are underway.

This is a stunning achievement for a barely 10-year-old, unprofitable, 800-person startup that had never shipped a commercial product. What’s even more remarkable is the Moderna mRNA vaccine was developed and approved for use in less than a year, completely resetting the scientific world’s expectation for what is possible in vaccine development. As Drew Armstrong at Bloomberg BusinessWeek wrote, “The world’s most loathed industry gave us a vaccine in record time. At least one thing went right in 2020: Pharmaceutical companies came through. Thank you, science.”

That’s disruptive, game-changing innovation. And it’s not a one-off, because Moderna’s revolutionary drug/vaccine development processes are repeatable and scalable.

Vaccines typically had taken a decade or more to develop, test and manufacture. The chickenpox vaccine, for example, took 28 years to develop; it took 15 years to develop a vaccine for human papilloma virus, which can cause six kinds of cancer; and Jonas Salk required six years to develop and test the first polio vaccine. 

Also, consider that Moderna brought its vaccine to market well ahead of Johnson & Johnson, one of America’s largest pharmaceutical company in the world with $56 billion in annual revenue and 130,000 employees. How could this happen? Are J&J and other vaccine developers working on the wrong things? Not necessarily, but they are utilizing vaccine development processes that are much more time consuming. 

Moderna’s innovative approach and processes for vaccine development (and other drug development) are disrupting the pharmaceutical industry in the same way that Elon Musk’s Tesla innovation has disrupted the automotive industry. Both companies identify with and behave like software companies rather than a traditional pharmaceutical or an automotive company.  

Traditional automotive approach

The Fords and the GMs of the world differentiate their products based on hardware. As in hardware development, when a company builds a new product they create a physical piece of hardware — metal or plastic — then design a printed circuit board; write firmware or instructions for the hardware, and only then write the software. This is the exact approach that traditional pharmaceutical companies have used in the past: Companies differentiate potential vaccine candidates by laboring in labs for months (more often, years), working hands-on with inactivated disease-causing organisms before any testing begins on test subjects. 

As a startup, Moderna faces challenges quite similar to Tesla’s. Both compete in a highly profitable industry with significant barriers to entry: large capital investments needed to research, test and manufacture vaccines; large, established distribution networks; enormous patent portfolios; teams of staff to handle regulatory hurdles, not to mention the challenge of global competitors with track records of developing successful vaccines and incredible brand recognition. 

To be competitive, Moderna recognized it needed to implement a revolutionary development model. From rapid research, to testing, to clinical trials, to manufacturing and distribution, Moderna employs a software development-like model and uses its differentiation as a digital-native company to enable what matters most: getting to market quickly while maintaining the highest levels of vaccine safety and effectiveness. 

Like Tesla, Moderna operates like a software company and has digitized all its processes to enable incredible speed to market. It is fair to say that Moderna has more in common with Zoom and Slack than it does with pharma giants.

Moderna’s unique approach

Moderna’s unique approach to vaccine development — mRNA — pioneered by research originally done by MIT bioengineer Robert Langer, the world’s most cited engineer in history, shortens vaccine development to a fraction of time traditional vaccines take to get to market. 

The FDA-approved mRNA vaccines produced by Moderna and Pfizer-BioNTech are faster to develop as they do not require companies to produce protein or weakened pathogen for the vaccine.Traditional vaccines typically use a weakened version of the pathogen or a protein piece of it, but because these are grown in eggs or cells, developing and manufacturing vaccines takes a long time. By contrast, by using just the genetic material that makes the Spike glycoprotein – the protein on the surface of the coronavirus that is essential for infecting human cells – the design and manufacture of the vaccine is vastly simplified and streamlined.

Moderna’s software-platform approach shortens each phase of the vaccine development process.  The approval process for safe use and effectiveness has not changed. What has changed dramatically is the time it takes to develop an initial vaccine candidate. This is the speed and agility advantage that has been proven so crucial during the pandemic. It’s the same advantage Tesla uses to distance itself from traditional automakers.

Moderna’s differentiation isn’t just its unique mRNA approach to vaccine development. At Moderna, enablement has been combined with digital-first execution at all levels. It is surprising how much physical paperwork is required even today in running clinical trials. Like Tesla, Moderna embraces a digital foundation upon which all its processes depend.  It embraced cloud computing from its inception and runs much of its infrastructure on Amazon Web Services rather than building out its own IT infrastructure.

Given Moderna’s and Pfizer-BioNTech’s success, we can expect to see a rapid competitive response from the well-known, deep-pockets pharma giants. They, like the auto makers who now recognize Tesla as an existential threat, will attempt to emulate Moderna’s approach.

It won’t be easy.

The large pharmaceuticals have built their expertise over many years and cannot respond rapidly to a startup. But at least the pharma companies are not in denial about the success of Moderna as the automakers were when Tesla hit the market with its software car. Most likely, Big Pharma companies will go on a buying spree, acquiring nimble startups as they re-equip their traditional vaccine and other drug development businesses to respond to software-platform approach. But can they shed their old ways and begin to think and act like software companies?

Major change for behemoth companies is not easy. The clock is ticking.

Lou Shipley is Senior Lecturer, Technological Innovation, Entrepreneurship, and Strategic Management at the MIT Sloan School of Management.