Sunitha Malepati and Craig Lipset on Patient-Led Drug Development for Ultra-Rare Disease

Craig Lipset argues that the pharmaceutical business model cannot cover thousands of individually small disease populations, and that the field has to stop asking it to. Sunitha Malepati is building what comes next: a financing model for the patient organizations now running these programs themselves.

Sunitha Malepati is the founder of the Buffalo Initiative, a patient-led effort to advance drug development for ultra-rare disease that operates as a program of Renaissance Philanthropy. An attorney by background, she came into the field through her family, after her daughter was diagnosed with a CACNA1A-related neurogenetic disorder shortly before her third birthday.

Craig Lipset is the founder of Clinical Innovation Partners and a clinical leader for the Buffalo Initiative. He is co-founder and co-chair of the Decentralized Trials & Research Alliance, a nonprofit working to make clinical research more accessible, and previously served as head of clinical innovation at Pfizer. He has worked in drug development for more than two decades.

Three years to a diagnosis, and nothing after it

Malepati was an attorney doing something else entirely when her daughter was diagnosed, after a search that was long by any standard and short against the field’s average. “We were almost three years of working at trying to find a diagnosis which I know is actually short compared to the average which is seven to eight years to just get a diagnosis,” she says.

The physician told the family nothing could be done, that no treatments were on the horizon, and that they should go home and love their kid. They went to PubMed instead and found the opposite. “There was a lot of research going on in the space but not much of it if at all was being translated into therapies or medications,” she says. The science was there. Nothing was carrying it toward a medicine. “We’ve got to make something happen because no one else is going to do it,” she says.

Rare is not rare in aggregate

Lipset puts the scale first. Rare disease is “an aggregate of diseases that spread so wide and thin, 7,000, maybe 10,000,” he says, and a geneticist recently told him “even 10,000 maybe a lowball number for the total number of rare and ultra rare conditions out there.” Most have no robust therapeutic option, at a point when the mechanism and delivery strategy are understood.

He reached the ultra-rare end of that range through his inbox. Lipset is himself a patient with sarcoidosis, a rare disease that does have pharmaceutical programs behind it; writing about that publicly brought messages from families whose conditions had none. “Craig, you seem to care about rare and you seem to know your way around pharma. Can you get pharmaceutical companies to call us back?” Under each one sat the same premise: “if we get it to the state of an IND or near an IND, that’s when industry comes in and does the heavy lifting.”

Why the industry does not pick these up

That premise is what he wants retired. “But pharma’s not coming. And we have to stop begging pharma to come because if we try to guilt and beg pharma to take interest, it doesn’t fit their business model,” he says. When budgets tighten the position gets worse: “large publicly traded pharmaceutical companies had to scale back some of their pipelines… these are the first assets to go.”

Malepati gives the arithmetic. “We cannot rely on pharma or even smaller biotech to solve this massive crisis that we have in rare disease drug development. The model just doesn’t work,” she says. These diseases affect small, geographically dispersed populations, and the venture-backed structure funding most early programs has to clear a return: “you’ve got to take a bet on diseases that have enough of a population to recoup that investment and that risk that you’re putting in.” That calculation, she says, “doesn’t always work in the favor of these small disease populations.”

A third category of drug development sponsor

Lipset frames what follows as an expansion of who may sponsor. A few decades ago a biotech developed an asset to an IND and licensed it out, because the cost and expertise sat elsewhere. “We’re now starting to see the same phenomenon just extended to now this new category of drug development sponsors, the most highly motivated drug development sponsors out there,” he says, meaning patient-led organizations. He expects artificial intelligence and emerging regulatory flexibilities to accelerate it by democratizing the technology and expertise.

In his account the invitation has flipped: “groups like Buffalo are inviting pharma to partner with them and they’re looking for partners. Their doors are open.”

Lemonade stands, and the wall behind them

Money for a patient organization comes from fundraisers, family and friends, and stops where it gets expensive. “We talk about this colloquially as like a lemonade stand and bake sales. And you’re able to get the science to a point, but then you really need a large amount of capital,” she says. The wall is usually IND-enabling studies or the first trial.

Buffalo is built to cover that stretch. “What we’re trying to do is create this alternate model that’s a blended finance model that will essentially be given out in the form of debt or loans,” she says. Buffalo takes its money back through a royalty when a program is licensed, acquired or approved, and waits: “we are very patient with this capital,” ten-year capital in her description. The other half is aggregation, since most investors cannot take an equity stake in a nonprofit program. It has a close cousin in venture philanthropy, where a nonprofit deploys capital on investment terms and recycles the returns.

Lipset names the two moves. “One is this element of bundling and the other is this blending,” he says. Bundling assets into a portfolio spreads risk; blending family offices, philanthropy and grant capital raises more.

States as a unit of innovation

Ellis brought in California, which funds regenerative medicine through the California Institute for Regenerative Medicine, and an earlier conversation with a former chief medical officer at the NIH translational-science center who expected states to act. His own case for state-level research systems is on this show.

Malepati sees the pull already working. “California is definitely leading the way here and it’s driving organizations, both patient organizations as well as small biotech companies… to set up shop in California,” she says, and she knows of no other state considering it. Lipset adds a reason a governor might listen: “you can think about the economic impact of state Medicaid programs,” where the costs of severe childhood disability land, alongside what a rare diagnosis does to household earnings. Lipset calls California “a bit of an outlier,” at “the third, fourth, fifth largest economy on the planet,” so others may have to work regionally.

The parents who did it first

The individual version of this already works. Malepati points to milasen and the work of Julia Vitarello, to Terry Pirovolakis for SPG50, and to John Crowley for Pompe disease, families who assembled the infrastructure themselves and “made it to the finish line for their loved one,” in her words. Lipset sees the same pattern in Japan, Israel and across Europe, and in US foundations like FoxG1 and TESS pursuing a therapy for an N of one or a small identified cluster. Emily Whitehead’s family said yes to a therapy no child had received.

What is missing is the scaffolding around those stories. “There’s no systemic solution here that supports these efforts as an actual asset class or an actual separate industry class,” Malepati says, so each group starts at ground zero and repeats the last one’s mistakes. She treats the patient search as global by default, and flags US innovation moving offshore as a risk worth watching.

Whether any of it pays for itself

Lipset states the economics without hedging them. “These therapeutics can generate an economic return. These therapeutics can be self-sustaining, just not at the levels of return that traditional pharma are used to,” he says.

Getting that heard is the hardest part of Malepati’s job. The biggest challenge at Buffalo, she says, is “this misconception that these programs or these targets can’t generate a financial return. They absolutely can.” She needs impact capital willing to sit ten years below venture returns. Her advice to biotech: “we don’t often think of patient groups as being able to develop drugs and I think we’re increasingly showing that there are groups that are able to do that.”

Lipset’s hardest experience is the one that sent him here. “I used to lead innovation in a very large pharmaceutical company, one of the biggest on the planet. And I did that believing that these organizations can change. And perhaps they can, but I just don’t believe that they are built to make even the incremental changes that we aspire to in a short enough time frame,” he says. The urgency in this community is “exactly what’s needed to help derisk some of the innovations,” and he expects industry to fast-follow once a path is proven. For investors, the analogy is the airline business: “not everybody is going to launch United or Delta. There’s a lot of small regional players that serve different markets.”