# An abandoned cause

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### Withdrawal of industry

The largest and most equipped healthcare companies have widely divested from therapeutics development in psychiatry markets, and some have even [shut down psychiatric R\&D operations](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3662213/) altogether. This industry-wide shift away from psychiatry has created a crisis in available funding for mental health R\&D efforts, especially in early-stages.

Preclinical and early-stage clinical drug development in other parts of the pharmaceutical industry such as oncology, immunology, and weight loss are often incentivized by higher success rates. In contrast, psychiatric drug development is characterized by translational difficulties (complete inability to confidently translate findings from animal models to humans), complex regulatory hurdles, and an overarching 'trial-and-error' model for treatment plans, which impedes everything from drug development to patient care. This combination of factors has turned many companies away from pursuing this area.

On a high-level, the two most common points of inception for early-stage healthcare ventures are: A researcher coordinates an academic or governmental spin-off using a technology they’ve been developing using grant funding, or an entrepreneur licenses a technology and then attempts to raise money. Although there have been outliers to this pattern, such as in the case of [Roivant Sciences](https://roivant.com/), [PureTech Health](https://puretechhealth.com/), [Bridge Bio](https://bridgebio.com/) (as well as a few others), the examples above have repeatedly proven themselves to be the dominant form for venture creation throughout the industry.

We believe that the primary issue with these organizational structures – and why an estimated [90% of these ventures resulting in failure](https://www.geekwire.com/2023/dont-spin-out-too-early-and-get-out-of-the-way-advice-for-biotech-founders-from-dr-jim-olson/) – is heavily linked to the fact that core layer (private entity or academic institutions) is a de-facto walled garden enforcing stringent policy, information silos, bureaucracy, and, in turn, discouraging open collaboration and information exchange. We will explain in the next section how this is true in psychiatry more than just about every other area in healthcare.

As it turns out, this problem most commonly occurs in healthcare - likely being attributed to the fact that healthcare is hyper-permissioned by nature - whereas other industries (namely information technology) have been able to adopt and scale open-source concepts quite well. In fact, it could be argued that the most important technologies of our time, ones that have led to the creation of immense wealth and economic growth, were open source. Wordpress, React JS, the Apache Web Server, and the Linux operating system are just a few examples. As these technologies are widely utilized by the world's leading companies to this day, we view the relationship between socially imperative commercial projects and the utilization of open source as inanimate.

### Early-stage biomedical innovation financing

With an annual budget of around $50 billion, the NIH (US National Institutes of Health) is the world’s leading funder of biomedical research. With a significant portion of this budget being allocated towards funding basic research (the process of discovery and exploration of fundamental scientific mechanisms) through grant awards, private investors tend to have very little tolerance for funding basic research.

In turn, it is widely accepted that investors prefer to fund late-stage therapeutics development, where commercialization and exuberant profits are imminent. While this model works well for late-stage biopharmaceutical companies, it leaves early-stage companies – those that the industry rely heavily on for new therapeutic candidates – with few options available for financing.

As a widely discussed topic and even with ongoing empirical research underway in the world of financial engineering, we find that newly proposed solutions for alternative financing options remain insufficient for early-stage efforts, often having high barriers to entry, such as the need to register as a publicly traded company on a tier-1 stock exchange. [\[8\], ](https://www.drugsandalcohol.ie/33429/1/The_Inequities_of_Mental_Health_Research.pdf)[\[9\]](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4968434) In the rare case where an early-stage drug development effort can procure private investment, their ability to receive additional funds is all but certain.

Between high unmet medical needs for patients, sub-par organizational structures, and limited options for financing much-needed early-stage development, we propose a comprehensive solution that seeks to address bottlenecks that have stifled innovation in this area.
