Arena Bioworks: Changing the Incentive Model for Biomedical Research

By Allison Proffitt 

April 30, 2024 | Last week, Steve Pagliuca was flying to Milan to catch an Atalanta football match, an Italian professional football club of which he is part owner. But before his flight, he stopped to talk biotech at the Bio-IT World Venture, Innovation & Partnering Conference held in conjunction with the Bio-IT World Conference & Expo.  

Arena Bioworks is Pagliuca’s new investment venture, a biomedical research institution focused on uncovering the mechanisms of human disease to identify opportunities for therapeutic intervention. Pagliuca, with Stuart Schreiber and Tom Cahill, co-founded the effort. Founding investors include Pagliuca, Michael Dell, Michael Chambers, Jim Breyer, and Elisabeth DeLuca. The core scientific team includes Stuart Schreiber and Keith Joung, with more to be announced.  

Arena Bioworks grew out of the investment team’s findings when they explored how universities, pharma, and non-profit research centers conducted their businesses, Pagliuca said. “We tried to pick up the best demonstrated practices and get rid of the worst demonstrated practices and align an economic situation—a strategic situation—and take all those best practices and put them under one roof.”  

It's a metaphor he returns to often. Fittingly, Arena’s logo is roof-like, gathering scientists and drug developers with a common goal “for good and for profit,” Pagliuca said. Scientifically, Arena will start with targeting brain health, cancer, and the immune system. Technologically, they plan to build expertise in genomics, gene editing, machine learning, and small molecule design.  

Productivity By Design 

Every structure of the institution is designed to employ best practices to speed the discovery process.  

The Arena Bioworks compensation model incentivizes collaborative research, rewarding the entire team, not just one scientist. “Because the problems are so multifaceted today, you can’t just know about one thing,” Pagliuca said. “You can’t just know about the heart, or know about machine learning, or know about cancer. You need interdisciplinary work. This model unites everybody economically, strategically, under the same roof to turbocharge coming out with products.” 

For researchers he hopes this will offer a welcome alternative to traditional funding models that rigidly restrict researchers to their original hypothesis, limiting their ability to explore where the science might take them. Pagliuca estimated that researchers spend close to 50% of their time on compliance, another 15% of their time writing the grants to keep getting funding. “When we looked at this, they were spending two-thirds of their time, in our view, unproductively: not being like Bell Labs and 100% just finding new cures and new drugs and experimenting. So this is a very attractive model for them because they don’t have to fundraise. It’s funded for the long term.”  

For the investors, Arena Bioworks takes a venture capital model, with founding investors taking small equity stakes—2% to 3% Pagliuca said—in all of the companies spun out of the lab. For the business as a whole, 50% of any gains in companies that come out of the incubator go back into the institute so that it will be self-sustaining. 

Drugs in Our Lifetime 

While the funding is for the long term, the science is meant to move much quicker. Pagliuca believes that long, 50-year basic research projects are just as foolhardy as rushed, short-term efforts that prioritize speed-to-market over complete scientific understanding. “Our approach is going to be right in between those. We’re going to use things like machine learning, simulations, a collaborative structure,” he said. “We’re going to have a lot of basic science, but it’s going to be basic science with an eye toward strategically accomplishing something in some area, whether it be cancer or autoimmune diseases or the brain. It’s going to be targeted, long-term, basic, but also actionable.” 

The economic systems of pharma companies and universities don’t reward researchers for changing tact when an approach is failing, Pagliuca said. “They’ve worked on [a problem] for three years, and maybe it’s just marginal. It’s not working that well. But they don’t want to let it go. So they spend another $100 million or $200 million and when you’ve really looked at it, you can see it doesn’t have a path to success, but the human motivation is to keep trying.”  

At Arena Bioworks, work will be grouped into research pods with regular, quarterly, scientific review. “We’re looking at this very dynamically on a three-month basis to double down on things that are proved working, and really cut the ones that aren’t,” Pagliuca said. “That’s going to have huge efficiency in our capital versus the current system, where people spend two to three times as much as you should spend… on something that had a low chance of success.”  

And he expects researchers who value such prioritization to be drawn to this model. These are already individuals who are somewhat comfortable with risk, he pointed out. They may be professors who are leaving tenured positions to join the Arena vision. “People have self-selected to follow a mission. They’re not really coming here for money, although it will be a great career, and if we discover great things, it can be a huge financial upside! But they’re really coming because their fundamental belief is they want to translate basic research rapidly using these technologies in a new way, where they’re totally focused on it.”  

Arena Bioworks Today 

While the Arena Bioworks vision is grand, it is still early stages. The venture has leased lab space from Alexandria Real Estate and has an agreement from Thermo Fisher Scientific to provide instrumentation. “We’re kind of a mad dash now, evaluating talent, getting the facility up and working so it’ll be the best, we think, state-of-the-art lab in the world,” Pagliuca said.    

Pagliuca isn’t making promises. “Now, I can’t guarantee it’s going to work… we sat with the scientists and said, ‘You know, this is risky. Most new models don’t work. Communism didn’t work when it was invented. On paper it sounded good, but it never worked.’ But as we stepped back, we said, you know. We’ll take the risk!”  

On paper, anyway, Pagliuca believes the team has eliminated the worst and most costly parts of the drug discovery system. “We’ve freed up scientists—like Bell Labs!—to focus on their passions and really spend all their time in coming up with those cures and focusing on those cures,” he said.  

“There’s an attitude in the office that we’re not here just to write academic papers. We’re here to get lifesaving drugs to people to cure diseases, and we want to do that while we’re alive.”