Decentralisation is Disrupting Drug Development
Both academia and the pharmaceutical industry are ripe for disruption. Open systems are emerging that have the potential to challenge the incumbents and create entirely new routes to market for drugs.
This article sits alongside its more technical companion, highlighting the traditional pharmaceutical industry’s problems and conceptually outlining its solutions. Here, I share my journey within the intersection of blockchain and science, detailing the current real-world manifestations of the proposed remedy. This makes ID Theory well positioned to invest capital at the convergence of these emerging industries. Talk is often cheap — the change has already begun.
Before founding ID Theory, I spent a decade in the pharmaceutical industry. As the Director of Discovery Research at a fully integrated biotech company, I was privileged to have a helicopter view over the entire drug development process. As a result, I constantly found myself thinking of ways that the failings and inefficiencies within each vertical could be improved by technology.
This journey started in 2009 after deep diving into the Semantic Web. This was Tim Berners-Lee’s vision of what Web3 should look like; in essence, it enabled machines to understand the world around us. Moreover, it was gaining traction in the life sciences due to the emergence of large open data (LOD) sets. Back then, I believed it represented the future.
In retrospect, it’s good that my efforts to shepherd my previous company towards this technology were met with general apathy. Unfortunately for Tim, his semantic Web3 didn’t catch on. Instead, that year, an alternative vision started catching the attention of others after Satoshi published his white paper.
Back then, I worked for a drug company developing medicine from cannabis. Now I am sitting deep within the manifestation of Web3, watching in awe as my new world collides with my old world.
Decentralised Science (DeSci)
The Ethereum Foundation recognises the importance of DeSci by placing it alongside DeFi, NFTs, DAOs, and stablecoins as a core Ethereum use case:
“DeSci hopes to create an environment where new and unconventional ideas can flourish by decentralizing access to funding, scientific tools, and communication channels.”
Joseph Cook made a compelling case for DeSci within a world threatened by political self-interest, disinformation, pandemics and climate change. He argues that traditional models within science are broken. We need better systems. The architecture must be reworked, and decentralisation helps us to get there.
Forging crypto with science will open the reservoirs of angel and venture capital that once flooded through Silicon Valley. There are lots of compelling areas picking up traction, such as regenerative finance, space tech and longevity. However, the one we are most excited about at ID Theory is pharmaceutical drug development.
Many blockchain industry insiders I have spoken to are jaded by crypto, fed up with wantless speculation and the Ponzi’s of DeFi. They instead want to apply their capital towards initiatives with more ‘tangible’ societal impact, a notion that I held back then and that had brought me to where I am now.
My Journey Here
In 2013 I discovered patients were using the dark web to access cannabis, enabled by a crazy payment method called bitcoin. This finding led to more research, filling the void left behind by the semantic web. There was a strong intuition that blockchain could revolutionise all the glaring failings of my industry.
Just over a year later, I had registered assets for this grand vision, “Curatio”, on the Counterparty network, a quasi-smart-contract platform and precursor to Ethereum, which resided on top of the Bitcoin protocol.
Over the next year, I spent a lot of time thinking about these things, propelled by the launch of Ethereum in 2015 and the realisation of smart contracts. By 2016, with crystallised thoughts, I found myself pitching to my then Chairman, a very successful serial entrepreneur, Dr. Geoffrey Guy.
Geoffrey has been intrigued by the notion of open-source drug development for one of our pipeline compounds, CBD, for a while. This was a natural compound with wide ranging therapeutic utility but its rich history of empirical use made it virtually patent-less. Thus, it lacked any incentive to be developed into a medicine.
His thinking was that funding could be sourced in non-traditional ways, for CBD to be developed by academia and contract research organisations (CROs) taking ownership of any medicine that may have resulted. Conceptually I believed Curatio dovetailed beautifully with his vision.
Managing to retrieve that presentation has been a nostalgic trip down memory lane. Harebrained ideas included the annotation of genomes with distributed compute to earn tokens (genome mining), a switch from shareholder to stakeholder-driven development (akin to a DAO) and using smart contracts for facilitating supply chain logistics, amongst other things. Here are a few highlights:
Back then, crypto and blockchain were still primarily perceived as a scam. The presentation was, understandably, met with a healthy dose of scepticism: “All very interesting James, but how do WE make money?” Had I known then what I know now with a decade of experience in crypto, that question could have been comprehensively answered. Through DeSci, and with the application of appropriate incentive design, Geoffrey’s concerns are being laid to rest.
Both academia and the pharmaceutical industry are ripe for disruption. Crypto has removed friction from the pooling of global capital. Blockchain technology can be utilised to incentivise the coordination of patients and academics to develop medicines via this new paradigm. The time is right.
Please see my companion essay that details how DeSci can address a lot of the problems this industry faces today.
In the end, Geoffrey identified a way to make CBD a medicine, profitably. He leveraged the orphan drug regulatory pathway, and through the use of early clinical signals, had the reassurance he needed to pursue full scale development.
Epidiolex (CBD) was approved for a rare type of refractory childhood epilepsy called Dravet Syndrome after a very swift clinical programme in summer 2018. It received that approval within five years of the programme starting (as opposed to the ordinary decade it usually takes) and now had exclusivity for seven years without the need for a patent. It was evidence enough that things could be done differently.
Enter Molecule
I met Paul Kohlhaas at an investors’ retreat in the summer of 2019. In the alpine meadowlands of the dolomites, he described the vision that he and co-founder Tyler Golato had for Molecule. To decentralise the development of new therapeutics in biotech and pharma through open systems. The core innovation is an intellectual property (IP) framework using NFT wrappers. Within DAOs, people would work together to identify compelling research and translate it into meaningful treatments, acting as both the supply and demand side of IP NFTs.
Paul envisaged scientist syndicates running experiments remotely, generating IP, and having complete control over it. The creation of truly decentralised collaboration with experiments conducted remotely by CROs.
Here was someone building within a domain I had dreamed about 5 years prior. Maybe I couldn’t create this thing myself, but I was now in the fortunate position to be able to fund it! I invested in the pre-seed in December 2020, offering advice and keeping close tabs on Paul and Tyler’s progression. In July this year, Molecule completed its seed round with a 12.7m investment that included prestigious Biotech VCs such as NorthPond and KdT, and I was invited to join the Board of Directors.
A combination of web3 native instruments (IP-NFTs) owned by web3 native entities (DAOs) helps Molecule achieve its goal of creating sustainable circular economies, i.e., perpetual funding. All proceeds from the IP (in the form of royalties and milestone payments) go back into the DAO treasury and on to fund future projects. No one is paid any dividends or revenue. The value of a DAO token is in its ability to control how those funds are spent through participating in governance.
IP-NFTs and Data-NFTs:
Early-stage research mainly occurs in academic institutions with IP locked up and controlled by the tech transfer offices (TTOs). These were the bane of my existence while working in the industry; we shipped a lot of materials to these labs, and I was constantly negotiating legal agreements to ensure the control of any resultant IP.
A new model emerges where legal rights and lengthy agreements are transcribed to the chain and automated without as much need for lawyers. The resulting IP wrapped by NFTs can be used as access keys to federated data-storage areas. In addition, these NFTs can be listed in marketplaces enabling fluid price discovery and access to global liquidity previously unheard of in early-stage biopharma research.
They can further leverage DeFi, using IP as collateral for loans. Just as DeFi enables complete programmability around financial primitives, there will be programmability around these IP primitives; fractionalisation, pooling, and splitting rights via geographies, therapy areas, sexes and age groups.
Biotech companies can take their IP public, access crowdfunding, liquidity and the attention of the crowd. Large Pharma can offload shelved IP and re-discover value from dormant assets. Scientists can showcase their inventions and use the wisdom of the crowd to assess viability. Patients can help to fund the further development of these assets and directly participate in their upside.
These constructs can also be used for something other than patents. They can include pay-for-success contracts, valuable preclinical and clinical data sets, trade secrets protected by zk proofs and other forms of proprietary information that can generate returns. In addition, royalty-based payments can be structured so that individuals and institutes are recognised by those who build on their work, similarly to how citations recognise the work of prior publications.
VitaDAO — a Triple World First
VitaDAO is a community-owned collective that funds early-stage longevity research. No one is in charge, and anyone can join and, in return for services, start earning $VITA. This is its governance token that controls how the DAOs IP is commercialised.
The DAO recently issued the first IP-NFT to Morten Scheibye-Knudsen, a leading researcher on human ageing at the University of Copenhagen. He was also the first researcher to have his project fully funded using Molecule’s protocol in August 2021. He received $300,000 to fund a project focused on extending the human lifespan using repurposed drugs.
This was the first time in human history that the transfer of rights for research and IP was coordinated on-chain. VitaDAO now owns the resulting data & IP, which this community manages. The amazing achievement was to obtain blanket rights to the IP with the TTO.
Vita has just closed an institutional fundraise with over $4m in commitments from institutional investors, including Pfizer Ventures, Shine.vc, L1D.Digital and an anonymous $2m lead.
Following the success of Vita, there has been a demand for BioDAOs, therapeutic DAOs and patient community DAOs. These wrappers are the perfect instrument to help coordinate the highly motivated latter group. For example, VibeBio is a DAO targeting rare diseases that have partnered with two patient advocacy groups.
In September, Paul and Tyler announced bio.xyz, an accelerator and meta-governance layer for BioDAOs. It is a DAO of DAOs as well as an $index. Its first cohort includes AthenaDAO — women’s reproductive health, PsyDAO — psychedelics and mental health, ValleyDAO — synthetic biology and biomanufacturing, and HairDAO — alopecia and hair loss.
LabDAO — Distributing Research
A vital component of the DeSci drug development stack, LabDAO is an open, community-run network of wet & dry laboratories accelerating progress in the life sciences. It helps get funding for and facilitates group participation in open-ended research. This type of research is where patents are more likely to be discovered, unlike studies with known endpoints usually commissioned by research contracts. Scientists can now benefit from a reorientation of incentives to do more novel, innovative, and potentially impactful research.
It recently raised $3m in funding, with ID Theory participating.
LabDAO reviews applications from laboratories and onboards them over time to maintain quality and create an array of DeSci labs. Such labs permit the creation of IP NFTs directly, as scientists contribute work towards BioDAOs. Specific tasks are incentivised, and completed tasks earn ownership stakes in the underlying DAO. This shows the beauty of blockchain network participation, where contributing beyond just capital can earn a piece of the pie.
When I was on the pharmaceutical conference circuit, some of the best ideas were hatched around the hotel bars late at night. However, with everyone siloed in their respective institutions, they were often prevented from being explored. LabDAO enables a group of independent scientists to collaboratively go anywhere, rent an Airbnb and some local labs, perform that experiment, and fully own the discoveries they make.
BeakerDAO — the Ultimate DeSci Investment Vehicle
We have written extensively on why we believe legally wrapped investment DAOs are the optimal vehicles to gain exposure to emerging verticals. They are highly performant, have access to unrivalled deal flow, and cleverly leverage their hiveminds to get in front of markets.
It was the right time to set up such an entity with the sole focus of investing in the DeSci space.
BeakerDAO was “summoned” earlier this year to bring founders, scientists, and investors together to deploy capital into this emergent DeSci ecosystem. It aims to fund technology platforms & infrastructure, disease, patient and drug discovery DAOs, and data & intellectual property to create community-owned, cost-effective, globally accessible, safe and efficacious treatments.
Future implications
Whilst the essential inroads of this transition have already been made, the surface has only just been scratched and we expect an explosion of innovation to follow.
I can imagine a world where prescriptions for DeSci-developed medicines are available for free to owners of those DAOs and purchased with “prescription smart contracts”. By monetising the supply of these medicine to non-DAO owner it would incentivise non-stakeholders to invest in late stage IPs.
Some treatments (e.g. prophylactics) are hard to demonstrate efficacy for; promising compounds have trouble proceeding from the discovery phase to the clinical phase for this reason. I am extremely excited about new development paradigms and regulatory frameworks for treatments that challenge the current regime:
• Prophylactic (preventative) drug developments.
• Generational and epigenetic medicines.
• Hope where financial burdens were previously prohibitive.
• Medicines from natural compounds.
Finally, there will be an emergence and proliferation of new businesses to sit on top of these networks, especially those that exist in marginal profit zones unexploitable without blockchain technology.
Conclusions
The convergence of Web3 and Science is the culmination of many years of siloed problems within big pharma and parallel solutions built utilising blockchain. My passion for this intersection stems from its unique promise to deliver significant societal impact.
Whilst the incumbent pharmaceutical industry presents many restructuring opportunities for DeSci, symbiosis is required, and the entire industry is unlikely to be replaced. Instead, restructuring will occur where needed, and a novel system of generative value will be created that wasn’t possible without blockchain.
We are still at an early stage, but the DeSci ecosystem is beginning to flourish with the benefits of open-source technology and composability- it is reframing what is possible and in what timeframe.
Special thanks to Graham Stanton, Charlie Edwards and Harry Ephremsen for reviewing and providing critical feedback.
ID Theory may hold positions in some of the assets discussed in this post. This post is strictly for informational and educational purposes only. It does not in any way constitute an offer or solicitation of an offer to buy or sell any investment or cryptoassets discussed herein. Always perform your own research and conduct independent due diligence prior to making any investment decisions.
Interested in partnering with ID Theory or building something special? Get in touch through our website or at info@idtheory.io.
