Advances in the biomedical sciences are highly dependent upon researchers having a clear understanding of the current state of knowledge. This information is primarily acquired by having access to the scientific literature via professional journals and, less commonly, books.

Unfortunately, this body of literature has not only expanded greatly over the past few decades, most of it has become increasingly unaffordable to scientists. I’ve written about this problem in several previous articles, and the responses I’ve received reflect widespread frustration among scientists and librarians with the current system. Excessive pay-per-view article charges combined with exorbitant journal costs have forced scientists at many of our nation’s biotechnology and medical device companies to either do without, download articles at nearby medical libraries, request PDF reprints of current articles from the authors, or illegally “borrow” access to university collections. These high costs have effectively limited access to the scientific literature for thousands of scientists at startup or even medium size biotech companies that lack deep pockets.

Not being able to readily access new or even legacy information retards the pace of scientific advancement and is detrimental to society. According to Margaret Mead “We are continually faced with great opportunities which are brilliantly disguised as unsolvable problems.” I’d like to put forth a radical proposal for solving the problem of a lack of journal access and affordability: the creation of a new publishing model, iPubSci, which is based on a concept similar to Apple’s iTunes. iPubSci would meld two already well-designed types of programs in search (PubMed) and the sale of individual pieces of content (iTunes). This concept arose out of numerous brainstorming sessions with Seattle biotech librarian Molly Bernard.

How would an iPubSci application function? Finding articles could be done using a search tool virtually identical to the one now employed by PubMed. The search results would be provided in a manner that would blend the best features of PubMed and iTunes. Search results would list articles according to the appropriate relevancy; pointing a cursor over any particular record would bring up a floating window showing the abstract of the article. This is directly analogous to hearing a snippet of music by clicking on a song in iTunes. Next to each article would be the download price of the PDF file. Paying for articles could be done, as in iTunes, via password protected credit card numbers or pre-paid accounts.

You could look for scientific papers based on keywords, subject, authors’ names, article titles, academic institutions, etc. and get a list of articles matching the search criteria. If you were still interested in acquiring the article after reading the abstract, you could purchase and instantly download the PDF file to your computer or mobile device. I’ll even suggest a pricing structure: articles published in open access journals (or residing in PubMed Central) would be free. In the case of for-profit journals, articles more than two years old: $0.29; less than two years old: $0.49; articles less than six months old would be $1.29. Make it easy, affordable, and legal for users to get the articles, and scientists and other interested individuals will jump on board.

For those of you who have looked into downloading single research articles, you know that the going rate at many journals is in the $30-$35 range. How could the price drop as low as indicated above? Keep in mind that, unlike the music business model, none of the money obtained by article sales will actually be going to the “artists,” who in this case are the authors. It will all go … Next Page »

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Are biotech and pharma companies doing well, or falling apart at the seams? People will have differences of opinion on this, but one thing is clear: it’s all relative.

At a speech to a trade group in Philadelphia last month, James Greenwood, president of the biotechnology trade group BIO, asked the government to stop picking on the pharma industry. “The drug industry has laid off more workers than the auto industry, but they get bailed out while we’ve continued to get picked on,” he declared. Unfortunately, Greenwood’s comparison of the auto and BioPharma industries was well meaning but seriously misguided. I looked up the profitability of the Big Three auto companies and compared it to three of the largest, US-based pharma companies over a five-year period.

Here’s the data, on yearly profits or losses, in billions of dollars. Losses are expressed in parentheses, and the * indicates results following bankruptcy.

Which industry do you think has had the rougher time in the past five years?

Big pharma and the auto industry are both dominated by multi-national corporations that employ huge numbers of people. Both industries have a high cost-of-entry barrier that limits competition. And it’s also true that both the auto industry and big pharma each laid off hundreds of thousands of workers in the past few years. In the auto industry, however, the largest layoffs were focused on the people who actually built the cars. In contrast, big pharma didn’t lay off the people who make the drugs; they primarily laid off the folks who created, marketed, and sold their products. I point this out to illustrate that gross comparisons between the auto industry and pharma, are, well, rather meaningless. The two industries aren’t really comparable in a large number of ways. People die if they can’t get certain medicines, but I never heard of someone passing away because they couldn’t get a new Chevy.

Despite their recent setbacks, Big Pharma companies are still making money … Next Page »

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One or more notices of upcoming biopharma industry conferences arrive in my email every day. I give their agendas a quick glance before deleting them, as they’re seldom in areas I focus on. The vast majority of presenters are plucked from the ranks of top-tier Big Pharma; there’s a seminar from Pfizer, a speaker from Johnson & Johnson, a lecture from Novartis, a presentation from Merck.

On one level, this makes perfect sense. Why wouldn’t you expect to find representatives from the largest companies in the industry speaking about their work? Many of them certainly deserve to be there. However, I think it’s time for meeting organizers to clear out some of the stale air and introduce some fresher voices with new ideas.

I can’t speak for others, but when I go to meetings, I want to learn something new, gain a wider perspective, and do a little networking. As such, I want to hear the best and the brightest, the insightful stories, the innovative approaches that led to success. A little inspiration thrown in the mix never hurts either. Most of what I’ve learned from Big Pharma’s recent misadventures, however, is what not to do. Do you want to hear about critical issues in biopharma only from companies that have exhibited clear and convincing evidence of repeated failures in key segments of their business? Problems include large numbers of key patent expirations (with few replacement drugs lined up), massive fines for illegal marketing, a steady stream of manufacturing woes, unethical behavior by their CEOs and other leaders, over-promised and under-delivered sales numbers, quality control issues, and a litany of other failures that have caused the public to lose faith in the industry.

So why is it that you see meeting programs filled almost entirely with these presenters? The answer lies in having an understanding of who is putting on these forums. My sense is that the majority of biopharma meetings these days are organized by for-profit companies, with a lesser number of conferences set up by industry trade groups and scientific societies. The primary goal of these for-profit meetings is not to ensure that new and innovative ideas get presented; the principal objective is to fill their cash registers. And how do they facilitate doing that? By loading their agendas with speakers who will fly in for free, don’t ask for or need expense reimbursements, and are likely to bring along an Airbus full of coworkers. Perhaps even more importantly, their companies are also likely to book a large amount of exhibition space and to host various parts of the social program. I suspect that speakers are therefore chosen at many of these meetings not necessarily for the expertise they bring, but for the dollars their companies contribute and the seats they fill. Potential presenters that are not willing and able, either directly or indirectly, to subsidize the cost of the meeting are simply not invited. This practice needs to change.

Big Pharma currently finds itself in less-than-stellar circumstances with pipelines … Next Page »

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Developing new medicines is an amazingly difficult undertaking. The research portion alone is daunting, and for those of us who have actually attempted it, humbling. A recent article reminded me just how little many people understand about the drug discovery process. The basic premise of “Pharma Needs an Innovation Intervention” was that pharma should change its focus from “finding druggable targets” to “deliver a consumer-focused product and service and a business model that goes beyond the product itself.”

Unfortunately, the article doesn’t address two critical issues; one grounded in the past, the other the future. First off, why has Big Pharma, after being one of the most profitable industries for decades, suddenly become so remarkably unproductive in coming up with new medicines? Second, if Big Pharma walked away from the difficult task of “finding druggable targets,” then who would take over the job of creating new medicines? From a business point of view, one can see a clear need to alter a revenue model that may not be working for Big Pharma any longer. However, from a practical and societal perspective, there needs to be some way of innovating new medicines, not just new business models.

I wish I could provide a definitive reason why Big Pharma, as a group, has become so unproductive in recent years. These companies are not monolithic and have distinct styles for running their businesses. To paraphrase Tolstoy’s Anna Karenina “Productive drug companies are all alike; every unproductive drug company is unproductive in its own way.” It’s easy to congregate a lineup of the usual non-productivity suspects: excessive layers of bureaucracy, fear of making the wrong (or any) decisions, entrenched industrial group-thinking, failure to recognize and support an innovative culture, and new regulatory uncertainties. I suspect that all of these concerns contribute to the productivity problem, but it’s difficult to quantitate exactly how important each of these factors really is.

I think Big Pharma is still hung over after a difficult transition from a decades-long focus on screening chemical libraries to more of a recombinant DNA/genomic biology mindset. It may very well be that after a century or so of effort, all of the “low hanging fruit” really has been picked off of the medicinal tree. Finally, consider that Big Pharma’s recent attention was focused on developing blockbuster drugs that would bring in sufficient revenues to feed their bloated organizations. Genzyme’s marked success in treating rare diseases (along with its recent acquisition by Sanofi) illustrates how that thinking has changed.

So why is coming up with new drugs so difficult? The answer is actually pretty straightforward: because biology is amazingly complex. It’s not rocket science; it’s much harder. With all due respect to the people that design and build our space vehicles, uncovering the functional role of thousands of unique biological molecules is a significantly more complicated undertaking. Twelve years is about the average length of time it takes for a single drug to be discovered, developed, tested, and approved by the FDA. Twelve years also defines the time period between the start of the space age (the launch of Sputnik 1 in 1957) and humans landing on the moon in 1969.

Even more difficult than figuring out the function of biological molecules is coming up with a way to alter, in an appropriate way, the divergent activities of selected subsets of these molecules to treat various diseases. People can be afflicted with literally thousands of different ailments. As living organisms, we reflect eons of genetic diversification and are vulnerable to rogue viruses, bacteria, fungi, and environmental pollutants. No two of us are alike, not even identical twins. People also suffer from pain, are susceptible to psychological disorders including addictions, and are at risk of unintentional side effects brought on by numerous medications. The biological and rocket sciences do share one primary characteristic: they are both very expensive, high cost-of-entry businesses. … Next Page »

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If you bought a new toaster, carried it home, plugged it in, and it didn’t work, what would you do? Suppose you purchased a pineapple at the grocery store, sliced it open, and found it was inedible. In both cases you’d seek the same remedy: you’d return the item and ask for your money back. With reputable merchants, the chances are extremely high that you would receive both an apology and your refund. If the merchant wouldn’t return your money, you could likely get the charges reversed anyway if you paid by credit card.

Now let’s look at one more variation on this theme. Imagine that you bought (or had someone buy for you) a product that cost a whopping $88,000. You used it according to the manufacturer’s directions, but not only did this product fail to work, it significantly raised your blood pressure or caused a hemorrhage. You’d want to get your money back for sure. But in this final scenario, you are a breast cancer patient, and the thing you (or more likely your insurance company, or Medicare) paid all that money for is a cancer drug called bevacizumab (Avastin). Genentech, the medicine’s manufacturer, follows a general convention in the industry and offers no refunds if this drug doesn’t work. My question is: why not? Wouldn’t it make sense for manufacturers to refund the cost of uber-expensive drugs that provide no demonstrable benefit to a majority of patients?

The use of Avastin in breast cancer patients has been mired in controversy. The FDA created an “accelerated approval” program in 1992 to speed the arrival of critical drugs onto the market for those with life-threatening diseases, like AIDS or cancer. Avastin, Genentech’s best selling drug, won FDA approval in 2004 for treating metastatic colon cancer and in 2006 for non-small cell lung. It received conditional approval in 2008 for use in breast cancer patients, even though it failed to extend their survival in a clinical trial. The preliminary approval was given with the concomitant requirement that there be a later review to see if the drug conferred either a survival benefit or improved quality of life for patients. The subsequent analysis showed that in this particular disease indication bevacizumab provided neither benefit, and its approval for use in breast cancer patients was rescinded in December 2010. Genentech appealed the decision, but a just completed review by an FDA advisory panel led to the same conclusion. The panel voted unanimously that breast cancer patients should no longer use the drug.

This decision does not prevent doctors from still prescribing the drug “off label” for their breast cancer patients. However, it reduces the likelihood that your insurance company will pay for the drug to near zero, meaning that you will have to pay for it out of pocket. This medicine is not cheap, with doses for the typical breast cancer patient costing $88,000 a year. The practical result is that only the wealthiest patients will be able to afford this (and other) expensive medication for “off-label” treatments.

A recent Wall Street Journal editorial opined that it was bad medicine for the FDA to rescind the drug’s approval for breast cancer patients. This was based on the fact that while bevacizumab demonstrated no overall statistical survival benefits to breast cancer patients, anecdotal reports suggest that a small (but unknown) percentage of patients responded favorably to the drug. I can readily sympathize with patients who may feel that a potential lifeline is being taken away from them. However, the advocacy group Breast Cancer Action agreed with the FDA decision to withdraw the treatment’s approval for this specific disease indication. As their Executive Director, Karuna Jaggar, succinctly stated, “…anecdotes are not science….”. Christine Brunswick of the National Breast Cancer Coalition echoed these comments “The FDA’s decision on Avastin must be based on scientific evidence from well-done trials and cannot be based on any one individual story, no matter how compelling.” The FDA itself was unable to find any evidence for the existence of a population of “super-responders” to the drug.

The problem with the WSJ argument, of course, is that it could just as easily be applied to nearly all drugs. It’s possible (maybe even likely) that you could find a tiny fraction of patients tucked away in the tail end of the bell-shaped curve that might somehow benefit from any rejected medicine if you looked … Next Page »

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If you’ve been following the drug industry at all for the past few years, you know that Big Pharma has gone alliance crazy.

It seems that every other week a new deal is announced in which a pharmaceutical company has partnered with an academic institution to help identify or develop new drugs for a variety of diseases. Pharma business news these days is often indistinguishable from the sports section. When you read that someone has inked a $36 million, six-year contract, it could be referring to a relief pitcher signing with the Yankees or a biology department’s deal with Pfizer. Let’s review some recent examples to see how these deals are coming together.

Gilead Sciences signed a cancer research deal with the Yale School of Medicine that could pay the School $100 million over 10 years. Sanofi-Aventis recently announced a three-year diabetes research deal with an investigator at Columbia University (funding not disclosed) as well as a translational research agreement with Harvard University (funding not disclosed). UCSF in particular has gone on a partnering tear, inking deals with Sanofi-Aventis (financing amount not disclosed), Pfizer (up to $85 million over five years), and Bayer Healthcare (financial terms not disclosed). GlaxoSmithKline signed Harvard’s Stem Cell Institute to a 5 year, $25 million deal. In addition, GlaxoSmithKline announced a plan to sign up 10 academic “superstars” for long-term partnerships to develop new medicines. Their first choice, Prof. Mark Pepys at the Royal Free and University College Medical School in London, colorfully acknowledged this new arrangement by commenting “we all agree that big pharma is useless at discovering new drugs and has to get its ideas from somewhere else.” I’m sure this remark was well received by the company’s leadership group. Over on the more tech side of biotech, Agilent Technologies signed the new Synthetic Biology Institute at UC-Berkeley to a “multiyear, multimillion-dollar commitment”.

In decades past, academic-industry collaborations generally comprised agreements with individual investigators at specific universities and research organizations. More recently, however, this process has metamorphosized into agreements where pharma has established alliances with entire departments or research institutions. What’s the difference between a collaboration and an alliance? While many people use these terms interchangeably, I see a clear distinction. In general, a collaboration is established when (usually two) partners decide to work together on a specific, well defined project to answer a specific question. Once the project is completed, the collaboration is essentially done (although publications and presentations may still be in the works). Alliances, in contrast, tend to be more open ended, larger in scope, involve many more people, and often lack fully defined, detailed goals at the outset. Key decisions may not get made until the work progresses to a certain decision point, which may be accompanied by a “right of first refusal” to any discovery. As such, alliances generally require a significantly greater level of management skill than collaborations if they are to be successful.

What’s driving this sudden surge of pharma-academia deals? The primary motivator appears to be the shortage of new drugs coming out of Big Pharma’s research labs. Despite increasing their investments in research and development over the past decade, Big Pharma’s hoped for steady stream of new medicines is down to a trickle. Part of this results from a past focus by Big Pharma on developing “me, too” drugs for targets that have already been validated by competitors. For example, it was reported in 2006 that 77 percent of the drugs approved by the FDA for neurological indications during the proceeding five years were copycat medicines. Accordingly, many Big Pharma executives have belatedly decided that it’s time to try a fresh approach. They understand now that their own research investigations, while significant, are but a small fraction of the total world effort.

The new tactic: engage academic labs as an alternative source of … Next Page »

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I frequently read comments from pundits and politicians decrying the US drug regulatory system, specifically the FDA. Many of these people, reading from the same PR playbook, will try to convince you that regulation is the primary factor in stifling innovation.

But based on history, I am convinced that without adequate government regulation, companies in a number of industries, including pharmaceuticals, would run roughshod over the citizenry in an effort to maximize their profits. It’s painful to see how the drug industry has sullied its once excellent reputation by employing a variety of unethical practices, as has been widely reported.

Magazine publisher Steve Forbes recently opined how regulation was destroying the pharmaceutical industry and how it might “kill millions of us.” He claims that the declining number of new drug approvals is not a result of the failure of the industry to innovate but instead “the chief villain is the FDA.” His “insight” that the industry’s notable lack of success in developing a new class of antibiotics is a failure of the government (both the FDA and the NIH are blamed) is both reckless and overly simplistic. Forbes fails to mention the fact that many drug companies have chosen to maximize their profits by investing in drugs for chronic conditions that need to be taken for years (e.g. heart disease, arthritis) over short term medicines like antibiotics. A more balanced view of the problem can be found in a recent report on what happens “When the Drugs Don’t Work”.

The FDA is not close to being perfect. It responds to shifting political winds and is forced to make high-stakes decisions under great scrutiny while being chronically under-funded. However, I hate to imagine what the marketplace would look like without regulatory agencies balancing out the enormous marketing and lobbying efforts employed by drug companies both large and small. Let’s review some of the less savory and injudicious practices employed by drug makers before numerous laws were passed to safeguard consumers. I’ll focus on just a few chapters from the past century of drug development to illustrate problems caused by a lack of regulation.

We want our drugs to be both safe and effective. History is filled with … Next Page »

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In the first part of this article, I detailed how pharma and biotech companies, along with the federal government, provide the majority of funding for biomedical research in the U.S. In this second part, I’ll turn my attention to a number of other sources, both for-profit and nonprofit, that also provide the capital that drives drug discovery and development work.

Venture Capital on the Ropes, but New Models Emerge (Funding Level: $3.7 billion invested in biotech in 2010)

The venture capital (VC) industry is shrinking, the net result of a negative return on investments (in all areas, not just biotech) over the past 10 years. Many firms have gone out of business, and many fewer deals are getting done. Despite this, VC remains a significant source of innovation funding, with some $21.8 billion being invested in 2010 ($3.7 billion invested in 460 biotech deals). However, different approaches to funding companies are being explored in the ongoing search for a better investing model. For example, Eli Lilly is putting $50 million (and up to 20 potential drugs) into three separate funds covering different therapeutic areas, with a goal of raising an additional $250 million per fund from VC firms. Externally generated molecules acquired from academics or biotechs will also be investigated using these finances. The concept behind this funding is simply to increase the number of molecules being examined and speed up the development process. Lilly will have “preferential access” to reacquire molecules from these funds.

Other financing approaches abound. The Column Group is focusing on a “big idea” concept by only investing in transformative technologies that have the possibility of generating multiple products. Allied Minds has a similar philosophy in supporting “innovations with significant transformative possibilities”. Rather than start new companies, venBio has adopted the tactic of investing solely in existing companies. Another approach, a single asset, infrastructure light LLC model, is being tried that terminates a company and distributes its assets as a result of an ultimate licensing transaction. We shouldn’t expect any future Amgen or Genentech’s out of this investing strategy. Venture capital firms aren’t the only organizations making equity investments in biotech companies. The Bill and Melinda Gates Foundation recently made such an investment in the biotech company Liquidia. Whether any of these new models (or others) will be any more successful (either medically or financially) than ones used in the past remains to be seen. Changes in current tax laws may be helpful in reinvigorating investor’s interests in venture capital firms.

Disease Charities are Funding Many Drug Development Projects (Funding Level: Greater than $100 Million)

There are a number of disease-focused charities that raise money to fund researchers; their ultimate goal is finding treatments for various diseases. One of the first groups to do this was the March of Dimes, founded during Franklin Roosevelt’s administration to find a cure for infantile paralysis, more commonly known as polio. Its current mission is to prevent birth defects and reduce infant mortality. Traditionally, organizations such as the American Cancer Society, the Muscular Dystrophy Association, and the Leukemia and Lymphoma Society fund academic investigators at research universities. More recently, these and other charities have stepped up to the plate to fill the gaps caused by industry cutbacks. For example, The Michael J. Fox Foundation has some 38 active industry collaborations, as well as partnership arrangements with Elan Pharmaceuticals and Merck Serono. The Juvenile Diabetes Research Foundation is funding, through its Industry Partnerships, some $71 million of work at 30 companies. The Multiple Myeloma Research Foundation awarded $11 million recently through its Biotech Investment Awards Program and Research Consortium.

Non-Traditional Private Companies Enter the Clinical Funding Arena (Funding Level: Tens of Millions)

These companies represent an unusual (and not very widespread) source of capital that is being focused on specific disease targets. Billionaire and philanthropist John Kluge made his fortune as a television industry mogul prior to his death in 2010. Metromedia, his privately held broadcast and communication’s company, recently established a biosciences unit to fund a clinical cancer trial. Metromedia Bio-Science LLC has put $50 million into a clinical trial at New York’s Rogosin Institute to test … Next Page »

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In case you haven’t noticed, heart disease remains a debilitating illness for millions. Cancer, despite some recent advances, has not been cured. Drug resistant strains of bacteria are spreading across the globe. There are still no effective treatments for Parkinson’s disease, amyotrophic lateral sclerosis, muscular dystrophy, and a huge number of other illnesses.

The number of new medicines being brought to market has been declining in recent years at a time when we desperately need new treatments. A recent analysis of drugs moving through FDA trials in 2003-2010 found that the overall success rate was only about 14 percent for primary indications, and a dismal 3 percent success rate for secondary indications. The number of new drugs launched annually has fallen 44 percent since 1997, according to CMR International.

A variety of reasons have been put forth to explain this deterioration, as described below. As a nation, we should be doing all that we can to encourage innovators to find effective treatments for these diseases. Developing medications to successfully treat human diseases is an expensive enterprise, so it makes sense to ask the question: where will the new medicines come from? What financial resources are available now to biomedical researchers to fund their work, and who’s going to pay for future drug development?

A good place to start to answer these questions is to have an understanding of where our present drugs have come from. Two recent studies illustrate nicely that modern medicines originate from a variety of sources, and help explain the expanding number of partnerships between industry and academia. Robert Kneller examined every drug approved by the FDA over the past 10 years, and determined for each one whether it originated with pharmaceutical companies, from biotechs, or sprang forth from the labs of academic investigators. His analysis showed that about half of all new drugs arise from pharmaceutical companies, while the other half arise from the efforts of biotech firms and academic investigators. In a separate study, other researchers identified which medicines resulted from public sector research over the past 40 years. Their analysis identified some 153 products that were discovered or co-discovered by 75 different academic institutions. These drugs accounted for some 13 percent of all FDA approvals over that period. Having roughly quantified where our drugs come from, let’s shift our focus to how this drug discovery work gets funded. What monetary sources are available to biomedical researchers in the public and private sectors? Here’s what my informal survey found:

Pharma and Biotechs Still Lead the Charge (Funding Level: $65.3 billion in 2009)

There is no doubt that pharma and biotech companies are the major source of new drug discoveries. However, both groups find themselves under significant fiscal pressures as a result of troubles in the financial markets, recent patent expirations, and their diminishing number of drug approvals in the past decade. Why have these numbers been declining? The primary problem faced by industry is the challenge of translating basic biological discoveries (e.g. genomic sequences; RNA interference; mutated genes) into functional drugs. Although scientists have determined the causes of many diseases over the past quarter century, they haven’t figured out yet how to fix many of them. Other urgent industry concerns include pricing pressures, reimbursement issues, regulatory hurdles, generic competition, and investor expectations. Big Pharma’s response to these challenges have varied: some companies responded by either maintaining or increasing their research and development commitments (e.g. Merck), while others took the opposite approach and slashed their research dollars (e.g. Pfizer, Glaxo).

Many Big Pharma companies have been slowly transforming themselves over the past few years to be more like biotechs. They have taken note of the fact that the success rate for getting biologics (e.g. recombinant growth factors, monoclonal antibodies) approved is twice that seen with their small molecule drugs. Generic competitors of their blockbuster small molecule drugs are continuing to poke enormous … Next Page »

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Biotechnology is a challenging business, with drug development timelines that are long, costly, and dependent on the approval of government regulatory agencies. The vast majority of biotechs never succeed in developing a new drug. There are many issues that contribute to whether or not a company achieves its goals and makes it in the marketplace. These include great science, solid financing, and quality executive leadership. A little bit of luck never hurts either.

One of the other key factors is getting top quality advice, and then successfully executing a plan based on that information.

Different companies will have distinct needs: some may need financial guidance, while others need help with experimental design, clinical trial sizing, patent strategies, or regulatory assistance. Getting the right advice may determine whether your company survives and thrives, or becomes a footnote on someone’s Biotech Graveyard Website. Thus, it’s critically important to tap into the expertise of those who can truly help you.

Experience has taught me, however, that there are two kinds of people seeking advice: those that really want it, and those that actually don’t.

I’ve outlined above the rational for the actions of the first group. It’s a pretty straightforward approach: find an expert, tap into their experience and knowledge base, adapt their advice to your particular situation, and make it happen. More confounding is this second group, the ones who don’t actually want the advice they request. They seek opinions merely so they can convey to others that expert advice was sought. However, they are not really interested in what their recruited experts have to say. As Josh Billings observed, “most people, when they come to you for advice, come to have their own opinions strengthened, not corrected.” Let me share a few stories from the biotech trenches:

Several years ago, a well-known biotech company proudly announced the appointment of a world-class scientist to their Scientific Advisory Board. Landing this guy was a great coup. He was well-known and respected as a major domo in several fields, and was a named inventor on some very lucrative patents. There was no doubt he could serve as a fountain of wisdom and knowledge for the company’s young staff. A while later, I ran across a senior executive from the company, and I queried him as to how many excellent ideas had been provided by their highly touted Thought Leader.

I found his answer both surprising and disappointing, a clear reflection on my naiveté at the time. Not only had the Thought Leader not given them any new ideas, he had failed to provide significant input on projects that the company was already engaged in. It turns out the Thought Leader actually missed a good percentage of the Scientific Advisory Board meetings due to his frequent “Please Stroke My Ego” world tours. Management was OK with this, however. The true purpose of having this Thought Leader on the Advisory Board was simply to mesmerize the company’s investors, to reassure them they were a top-tier organization capable of bringing a heavy-hitter onboard to provide counsel.

The company would trot out this guy’s name and reputation in a heartbeat, but consistently failed to take advantage of what he might have been able to offer. Whether this reflected more poorly on them or their Thought Leader is difficult to determine. I can’t say if he was doing this for the stock options, to enhance his own reputation, or was just too egotistical (like many actors) to turn down this featured role with the company. Maybe he signed on with good intentions, but got derailed by his (numerous) other responsibilities. The bottom line: the corporation would have been better served by signing up a young lion (or lioness) for their Advisory Board whose insights and opinions might have been both readily available and valuable.

A consultant I met at a conference further enlightened me with a story … Next Page »

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Cognitive dissonance is defined as “an uncomfortable feeling caused by holding conflicting ideas simultaneously.” I’m suffering from a serious case of discomfort as I try to figure out which is the bigger problem facing biotech scientists: too much information, or too little.

Information overload is a serious issue in biomedical research, if not virtually all high tech fields. Simply put, there is too much to read, and too little time to read it. Recently, however, I have become aware of what may be an equally serious affliction: information underload. I thought I was possibly coining this term, but a quick Google search revealed that the phrase has been used before, notably by Bill Gates in a 1995 speech. I define information underload as a situation where an individual lacks access to timely, critical information that they need to optimally do their job. Information overload usually results from time constraints, whereas information underload arises from accessibility issues.

I uncovered this information underload predicament when I called a friend at a local biotech company to discuss a newly published paper on stem cells. His response stunned me. “No, I haven’t seen the paper,” he replied “because we don’t have a library here.” I queried “No library? How to you and your colleagues keep up with the literature, with how science is progressing, with what your competitors are doing?” The simple answer was: they generally don’t, at least on a day-to-day basis.

When I shared this story with friends and acquaintances at other small biotechs, they chimed in with a pretty similar response. No library to speak of. Subscriptions to a very restricted number of biomedical journals. Limited online access. Yes, there was a small budget to purchase journal access on an article-by-article basis. However, they were highly frustrated by this approach. They couldn’t really determine if the information in a given paper would be truly useful until they had paid for it. This is like getting to take a test drive only after you have purchased the car. So how do scientists at smaller biotech companies keep up with the scientific literature, with their peers, with their competitors? At a time when more and more papers are published, when information overload is a given, does a lack of access to the information become an equally large problem?

As research scientists know, keeping up with information in our various disciplines has become increasingly difficult. The problem is not just reading and thinking about the latest scientific papers; it’s being able to afford access to them. The cost of subscriptions to a broad spectrum of biological journals has become, in a word, expensive. Excessive, exorbitant, and prohibitive also come to mind. The overlapping nature of disciplines within the biological sciences means that someone developing a new cancer treatment will often need to keep up with the literature in specific areas of biochemistry, genetics, toxicology, computational biology, developmental biology, cell biology, immunology, stem cell biology, and, of course, oncology. This is all in addition to keeping up with general development trends in the industry as well as technical advances in experimental reagents, devices, and methodology.

The growth in the number of published scientific journals has been proceeding apace for at long as such journals have existed. Scientific societies and for-profit publishers both contribute to this expansion. In recent years there has been an explosion in the number of biological science journals. Twenty-five years ago, at the very minimum, you wanted to keep current with at least three journals: Cell, Science, and Nature. Much of what was done on the cutting edge of biology was published in the Big Three. Yes, you also wanted to keep tabs on papers published in a number of … Next Page »

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Doctors, patients, and investors who follow the biopharmaceutical business all recognize that the industry is exceedingly complex and in the midst of change. Companies struggle daily with a multifaceted mix of scientific, clinical, and business unknowns. Will a drug be medically effective and make it through clinical trials? Will it get the thumbs up from the FDA? Will insurance companies pay for it? Will side effects turn out to be a major problem? Will manufacturing ramp up without a hitch? Will drug sales meet expectations?

All of these things are unknown in the early days of a research project. One can make informed predictions, some better, some worse, but uncertainties abound at virtually every stage of the drug development process.

Unfortunately, many predictions turn out to be nothing more than wishful thinking. There is only one dead-on, absolutely predictable element within the industry that companies can determine with certainty: the date on which their drug patents will expire. They can put it on the corporate calendar as soon as the patent is awarded. So how can patent expirations be considered a surprise, and why do drug company executives fail to adequately plan for them?

The current big bugaboo in BioPharma is the “patent cliff.” This phrase has become a neologism, which Wikipedia defines as “a newly coined word or phrase ….. that has not yet been accepted into the mainstream language.” “Patent cliff” certainly fits the bill. I have a sense that the word “cliff” was picked by whoever coined the phrase to give it a sense of danger and foreboding. Picture Indiana Jones dangling by his fingertips over crocodile-filled waters. For some, this phrase wasn’t sufficiently scary, so “patent apocalypse” was fashioned to further invoke fear and terror. Thankfully, “patent armageddon” has already been used in a different tech setting, so we won’t have to read about this one in the biopharma field.

So what, exactly, is the “patent cliff?” It is most often described as an industry-wide expiration of the patents of a number of blockbuster drugs, resulting in their replacement with generics and the emergence of a large hole in the collective financial pocket of the industry. Some define it as being in a single year (2010), while others point to a multi-year drop off ending in 2015. The “patent cliff” casts a long shadow over the bestselling new drugs (that is, those still protected by patents) on the market. Of the 50 top selling medicines in 2006, only six of them were approved for sale before 1993.

During the current five-year period 2010-2014, the sales revenues of drugs having patents that will expire are about $89.5 billion, according to data compiled by IMS Health Midas. The focus of the patent expirations is on small molecules, not biologics, since the FDA is still developing a clearly defined pathway for the approval of biosimilars in the US. At first glance, the $89.5 billion figure quoted above would seem to be a pretty big cavity to fill in the industry’s collective revenue pipeline. However, to truly judge this figure, we should have a comparator number, something we can gauge this against. The value of drugs having patents that expired during the preceding five-year period (2005-2009) was actually slightly higher at about $90.5 billion. On a five-year basis, there is no patent cliff. Not even a patent incline, patent slope, or patent slant. It looks more like a patent plateau. Yes, there are individual drug companies where a significant portion of drugs generating sales revenue will go off patent in the near future. However, as an industry this is not the large problem that some would have you believe. A graph illustrating drug industry revenues at risk due to patent expirations from 2001-2015 resembles the Rocky Mountains, with lots of ups and downs, but no cliff. In fact, despite this loss of patent protection, IMS Health is forecasting that the industry will grow some $300 billion in revenue during the 2010-2014 time frame, with global drug sales topping $1.1 trillion in 2014.

The “patent cliff” is a red herring that distracts us … Next Page »

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[Updated: 11:30 am, 11/4/10] The biotech industry was a key beneficiary last spring of the new health care law. $1 billion worth of Qualifying Therapeutic Discovery Project Credits were dangled in front of the small to mid sized biotechs that met the designated criteria. The Treasury Department and IRS were put in charge of this program, which was designed to cover expenses incurred by the companies in 2009 and 2010. If a biotech company had a tax liability, it could get a 50 percent tax credit; if there was no tax liability, it would qualify for a tax-free grant in the same amount. The maximum credit or grant that any one company could obtain was $5 million, based on certification of $10 million in qualified investments, since the credit or grants are funded at a 50 percent rate.

The announcement of this stimulus program ignited a small frenzy among companies that resembled a school of piranha going after a fresh carcass. The awards come at a good time for the industry. Due to the tough economy, some 52 publicly traded biotechs (and an untold number of privately held companies) in the U.S. have gone out of business in the last three years, according to a recent BIO Factset.

By way of comparison, the $1 billion available through this program was equivalent to about half of the total investments made by VC firms in the second quarter of 2010 to 234 biotech and medical device companies in the US. While the government program is (at present) a one-time thing, venture firms often return to further invest in their targeted companies. Still, this was a significant amount of money put into play by the government to kindle the smaller companies in the biotech industry.

The credits and grants covered qualified investments in “therapeutic discovery projects”, which were defined in a previous Xconomy post. The applications were due on June 21st, and the victors were revealed today on the IRS Website on a state-by-state basis. A quick read of the numbers indicates that the entire $1 billion that was up for grabs has been distributed. As predicted, the grants and credits were spread out geographically among 47 states (and the District of Columbia) so as to provide a wider boost to the economy nationwide, and to give local politicos (or at least those that supported the health care legislation) something to crow about. Both traditional biotechs as well as med tech companies received awards.

[Update: 11:30 am, 11/4/10] Mining through the data in more detail revealed some interesting nuggets of information. By my calculation, 41 percent (37 of 90) of the eligible biotech companies in Washington state (where I live) received grant money. Given that we don’t know how many companies actually applied for the awards, the success rate could be considerably higher. These are numbers that would make an academic researcher swoon, given the success rate for NIH grants is measured in the single digits. An unanswered question: did the companies that didn’t get awards get turned down, or did they not apply? This is a subject that their investors should probably raise with them. Finally, despite the fact that these awards were thought of in many quarters as being specifically for biotechnology companies, many medical technology companies were eligible to compete, and they did very well. By my accounting, 40 medical technology companies in Washington State received grants, which is more than the number of awards given to biotech companies. For those who are interested, I have posted some of this analysis on my website.

California, not surprisingly, took home the most money, with $281 million, and Massachusetts landed about $129 million. A few states (Alaska, Idaho, and Wyoming) received no funds at all, and there were three awards to undefined “foreign addresses.” A quick back of the envelope calculation suggests that some 2,400 different companies or so received an award, with a mean value of … Next Page »

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I recently enjoyed reading two books on the mortgage meltdown, “The Big Short” by Michael Lewis and Gregory Zuckerman’s “The Greatest Trade Ever.” They each provided a detailed post-mortem on the implosion of the housing bubble. What fascinated me most about their accounts was how virtually everyone on Wall Street, with a few notable exceptions, was completely wrong about the stability and direction of the housing market. This, of course, fits the classic definition of Groupthink, a term coined by social psychologist Irving Janis to describe faulty decision making that results from a deterioration in “mental efficiency, reality testing, and moral judgment”. The lesson I took away from this is crystal clear: you must think on your own, forming your own opinions from the data in front of you. Remember that the “experts” are not always right, and indeed, are often very wrong.

Is Groupthink a problem for the Pharma/Biotech industry? A recent summary of “Pharma’s Biggest Flops” readily illustrates that both companies and the analysts who cover them can, from time to time, be dead wrong in their pronouncements and expectations. However, I only see weak evidence of Groupthink in BioPharma, nothing anywhere near the scale of what was seen in the mortgage meltdown debacle. Pharma and biotech are a much more fragmented and diversified industry than the mortgage business, and as a result it is much more resistant to having everyone think the same way. It is also harder to place specific financial wagers either for or against the industry in general, especially since many biotechs are not publicly traded.

So how does one avoid getting sucked in by industry Groupthink? Critical reading and thinking are the best defense against this problem, but this requires a serious brainpower commitment. I spend a lot of time reading and, more importantly, thinking about where the industry has been and where it is going. Science journals, newswire reports, and industry missives fill my computer screen on any given day. I know that many of you share my pain: so much information to process, so little time.

We all deal with information overload. More and more, however, I find myself spending inordinate amounts of time trying to understand a single number or the ramifications of a particular finding that are either poorly explained or don’t make sense. A lack of clarity can simply indicate poor writing, but it often reveals sloppy thinking. Herman Melville said it very well: “A man of true science uses but few hard words, and those only when none other will answer his purposes; whereas the smatterer in science thinks that by mouthing hard words he proves that he understands hard things.”

Consider the simple phrase “….. is the best selling drug.” What does this mean? … Next Page »

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I agree with Carl Weissman’s recent Xconomy column about the ZymoGenetics acquisition when he says that Seattle needs to be a place where biotech startups thrive. Unfortunately, his column didn’t put forth any novel solutions for making this happen (I know this wasn’t his point in writing the article). I am also in agreement that hand wringing doesn’t help ease the loss, but a moment of reflection here is certainly called for. I will admit to being saddened by the Bristol-Myers Squibb acquisition of ZymoGenetics and the potential loss of some 300 plus jobs from the local biotech scene. I felt just as bad (actually, worse, being a scientist myself) when their research group was previously shut down and the scientists were let go. I haven’t heard anyone suggest that the latest biotech buyouts (Trubion Pharmaceuticals and ZymoGenetics) are harbingers of doom, though they may seem that way to those who lose their jobs. However, it is naïve to think that they won’t have a negative impact in the short term. Ted’s comment in response to Carl’s piece did a fine job of capturing the painful impact that may await many of those employees.

Biotech advances flow from the well of scientific discovery. Individuals who haven’t worked in a biotech setting don’t always grasp the synergistic benefits of putting together a research team that recombines individual talents to innovate fantastic discoveries that lead to new drugs. This doesn’t happen often in the industry and is a rare and valuable thing. Many of us who competed against ZymoGenetics over the years would acknowledge that they had assembled such a team. ZymoGenetics own website points out that products that they discovered or developed (and which are currently marketed by other companies) have combined yearly sales of over $3 billion. Another example: look at the articles that have been written chronicling how Roche has bent over backwards not to perturb the research culture of the recently acquired Genentech. They recognize their valuable investment and the need to protect innovation. They are hopeful that the Genentech group will continue to produce novel drugs at their industry-leading pace. Making money investing in biotech, whether as a VC or as a stock market investor, is certainly very demanding. However, actually developing a novel drug and getting it on the market is significantly more difficult. There are numerous examples of companies that have been acquired (thereby returning money to their investors) but the drugs that they were purchased for didn’t pan out.

A quick look at the WaBio website shows only about 33 job openings at local biotech companies, with about an equal number of jobs listed for academic and other institutions. Since 2002, when Amgen bought Immunex, there have been over 3,200 layoffs at local biotech companies (not including any upcoming layoffs at ZymoGenetics or Trubion), and I would wager that a lot of these folks were unable to find employment locally. Taking their skills elsewhere did not benefit us here in Seattle. The loss of ZymoGenetics may indeed lead to new companies being formed by those with an entrepreneurial spirit, as Carl suggested. However, it will take years (if ever) for these putative new companies to employ the number of individuals who typically are let go in these acquisitions. This also assumes that these companies get VC or other financial backing, which in the current economic climate is far from guaranteed. Also, Carl suggests that acquisitions recycle liquidity to investors, but how many of those investors are actually here in Seattle? Won’t most of that money go to support ventures (and not necessarily biotech) in other parts of the U.S. and, indeed, the world?

Many of us who work in the industry use the term “biotech anchor tenant”, but the phrase is often employed without benefit of a clear definition. Given that this term may mean different things to different people, I will offer one. A biotech anchor tenant for a city or a region, to my mind, is a company that meets two general criteria: (1) it is a near constant source of at least some jobs, owing to it’s relatively large size, rate of employee turnover, growth rate, or combination of these factors, and (2) is stable in the region and is not likely to close, relocate, or be acquired. This second criteria is getting harder and harder to meet. Even Big Pharma has closed down a number of its research facilities in the past year, with significant negative effects on the communities involved. For example, Pfizer abandoned its New London, CT research campus (and moved 1,400 jobs) leaving the town devastated. And even Big Biotech (e.g. Genentech), as we now know, was not too big to be acquired. Amgen’s Helix campus here in Seattle would meet this general definition as an anchor tenant, but more significantly, I would argue that Dendreon … Next Page »

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The drug discovery and development process is a difficult one that takes considerable expertise in both the research and business realms. Seattle currently has approximately 103 biotechnology companies, 21 of which are publicly traded. The area also has a number of non-profit research organizations that participate in a variety of efforts to find new medicines. Biotech companies have been operating here for some 30 years now, during which time some 42 companies have either been acquired or gone out of business. So what are the prospects for developing new drugs here in Seattle? To address this question, I thought it might be helpful to look back at the track record of our local biotechs. Just how many drugs have we developed locally?

Deriving an answer to this question turned out to be anything but simple. Some drugs were discovered and developed here, some drugs were discovered elsewhere but were developed for new clinical indications by Seattle companies, and some drugs were simply acquired and then sold by our local biotechs. There are a few other caveats I should point out. A majority of these drugs were developed with the help and financial assistance of big pharma partners. Biotechnology also formed the technological basis for several companies that developed medical devices that went on to become FDA approved and treat patients, as noted below. Finally, I want to acknowledge that there have been a number of successes locally in medical devices, agricultural biotech, diagnostics, and biocomputing software applications. However, my focus today is on drug discovery and development. Let’s take a look back and see where we’ve been:

Seven Drugs Discovered and Developed by Seattle Biotechs

Leukine (sargramostim) was developed by Immunex and was FDA approved in 1991 to stimulate the proliferation of white blood cells in patients recovering from bone marrow transplants. Leukine only captured a small share of the market due to stiff competition from Amgen’s competing drug filgrastim (Neupogen), which was approved a month earlier by the FDA for a much wider clinical indication. Amgen’s purchase offer for Immunex led to the divestiture of Leukine to Berlex, the US subsidiary of Schering AG, for antitrust reasons. Berlex was in turn acquired by Bayer in 2006, who subsequently sold Leukine to Genzyme in 2009.

Enbrel (etanercept) was originally developed by Immunex for use in the treatment of sepsis, but it failed in its clinical trials. While most companies would have buried a failed drug, Immunex resurrected Enbrel by testing it in clinical trials with rheumatoid arthritis patients. Strongly positive results led to FDA approval in 1998. Subsequent clinical trials expanded its use for a number of disorders, including juvenile rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis, and plaque psoriasis. Acquiring Enbrel was the primary reason Amgen purchased Immunex in 2002. Enbrel went on to become the best selling biologic drug in the world, with worldwide sales in 2008 of $7.4 billion. Amgen’s purchase of Immunex also brought on board the monoclonal antibody that would become panitumumab (Vectibix), and prevented a nasty patent war between the companies over intellectual property that led to the newly approved osteoporosis drug denosumab (Prolia).

Cialis (tadalafil) was initially discovered by … Next Page »

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The rules regarding the Qualifying Therapeutic Discovery Project Credit have now been released by the Treasury Department. You can read the fact sheet, and detailed description of the legislation yourself, but here are 10 key points I came away with after reading them.

1. The first thing that everyone can do is relax. In contrast to rumors that have been floating around, the program is not set up on a “first come, first served” basis, and nobody needs to get these applications in on Monday to push theirs to the top of heap. The Formal IRS applications (Form 8942) will not be available until June 21st or thereabouts. Those who had lined up their staffs to work this entire weekend should send them home early today with instructions to enjoy the weekend!

2. The application period opens on June 21 and ends on July 21. The postmark on the application is deemed to be the date of delivery. Preliminary review of the applications is to be completed by Sept. 30; this is to ensure that applicants are eligible taxpayers and that their applications are complete. Applicants will receive determinations as to whether or not they qualify for credits and/or grants, and how much they will receive, by Oct. 29. Note: there is no conference or appeals process for these grants and credits. If you don’t get one, or you are not happy with the amount awarded, there is no way to change the decision. Separate applications are required for each project that you wish to apply for.

3. The maximum credit or grant that any one company can obtain is $5 million, based on certification of $10 million in qualified investments, since the credit or grants are funded at a 50 percent rate. I read a report of one company that had planned on asking for $42 million in credits. Not going to happen. The government wants to spread the money around, hence the $5 million cap. The money is likely to be spread around geographically as well.

4. The total amount to be spent by the government $1 billion. Applicants can request grants or credits for project spending that already occurred in 2009, during 2010, or for projects that spanned both years. It is not known if more money will be added at a later date (that is a political decision).

5. Though not explicitly stated, it appears that all projects will be ranked and the money allotted to the highest ranking applications first. According to the published materials “the service determines that the taxpayers project is among the projects that have the greatest potential…..”.

6. Applications will require a DUNS number (available for free from Dun and Bradstreet) and must register with the Central Contractor Registration.

7. Winning companies will have their applications and amounts awarded subject to public disclosure (see the above attached documents for how this works, and how proprietary information is handled).

8. The government has estimated that the average time that applicants will spend on the applications to be about 12 hours and seven minutes. The government expects about 1,200 applications!

9. Brochures, DVDs, and other types of presentations are NOT permitted as part of the application. No additional information can be incorporated by reference.

10. The applications do not appear to be very lengthy. There are some yes and no questions, as well as certain Project Information Memoranda. A project overview is required with a 250-word limit, and there are three additional questions that also have 250-word limits. A few of the questions will allow for the inclusion of five literature citations. Those of you that have written up thousands of words to document your case are going to have to do some serious editing once the applications come out.

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The biotech industry won a major victory last month when President Obama signed healthcare reform into law. Biologic drugs, those developed through genetic engineering techniques and incubated in living cells, will now be granted a 12-year period of data exclusivity on the market, to protect them from cheaper copycat competitors. That will allow the innovative companies to recoup their long investment in R&D.

But that’s not the only significant benefit for biotech tucked into this piece of legislation.

In a recent Xconomy op-ed piece I mentioned the Therapeutic Tax Credit, details of which have now been spilling out. This portion of the legislation, now officially called the Qualifying Therapeutic Discovery Project Credit, looks like another big win for the biotechnology industry in general and its research efforts in particular. Indeed, this legislation was backed by the Biotechnology Industry Organization and is especially favorable to startups and small companies. Dean Zerbe provided a detailed description of this program in a recent posting on Forbes.com. People running the tax and finance departments of biotech companies employing less than 250 workers (i.e. the vast majority of them) should evaluate this program to see if they qualify for this tax credit. Here are the highlights of the program, according to the Forbes article:

If your biotech company has a tax liability, you can get a 50 percent tax credit; if you have no tax liability, you can get a grant in the same amount that is tax-free. The credit covers qualified investments in “therapeutic discovery projects.” What defines this? In order to receive the tax credit, the research program must fulfill at least one of the following three criteria:

1) It is designed to treat diseases via preclinical research or clinical studies for the purpose of getting FDA approval of the treatment.

2) It is designed to diagnose diseases or find molecular factors (e.g. biomarkers) related to diseases by developing diagnostics that can be used to make therapeutic decisions.

3) It is designed to develop some methodology that would advance the delivery or administration of therapeutics (e.g. technologies that are being developed to deliver siRNA).

By my reckoning, a very large percentage of biotechnology companies would qualify to apply for these tax credits. However, there are some additional criteria that will also be used to judge the research applications:

The research should have direct or indirect medical benefits. The emphasis here will be to finance programs that “will treat areas of unmet medical needs or prevent, detect or treat chronic or acute diseases or conditions.” Programs that will cut long-term health care costs are also favored, as are … Next Page »

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Research is the lifeblood of the biotech and pharmaceuticals business. The pharma and biotech industry spent some $65 billion dollars on R & D in 2008, according to the Pharmaceutical Research and Manufacturers Association. That’s a tremendous amount of money considering that the FDA only approved 24 new drugs (21 new molecular entities and 3 biologics) that same year. If the PhRMA numbers are true, this would imply that it cost about $2.7 billion/drug to win FDA approval, a very poor return on investment since few drugs would ever be able to recoup that expense.

These numbers suggest that drug makers need to find a more efficient way of developing medicines. A recent report from financial analysts at Morgan Stanley recommended that large pharma companies abandon their own early stage drug development programs, and switch to a less costly licensing model. Rather than try to discover drugs, Big Pharma should simply buy them from smaller, more nimble and innovative biotech companies. It was claimed that such an approach, as reported in the Financial Times, “would boost success rates, lower costs, and triple returns”. This scheme would certainly fit into the plans of most venture capital (VC) firms, who could cash out large profits if Big Pharma acquires the biotech startups that they have invested in.

Even before the Morgan Stanley report came out, Big Pharma had embarked on a major job shedding binge, eliminating positions duplicated as a result of mergers and a number of research programs. Merck is eliminating 16,000 jobs after buying Schering-Plough, Pfizer around 19,500 positions after acquiring Wyeth, and Roche about 1,500 jobs after purchasing the remainder of Genentech. Layoffs, however, were not confined to companies making acquisitions. To stay competitive, Johnson & Johnson is cutting 8,000 jobs this year, Eli Lilly is axing 5,500, and GlaxoSmithKline around 6,000 positions.

In seeking additional resources to fill holes in their drug development programs, many Big Pharma companies have partnered with academic institutions. Pfizer and Genentech have both partnered with UCSF, GlaxoSmithKline with the Immune Disease Institute, Solvay Pharmaceuticals with Emory University, and Janssen Pharmaceutica with Vanderbilt University. These alliances provide money to academic investigators, usually in exchange for licensing rights that arise from any discoveries made. Grant pressure on academic investigators (80 to 90 percent of applications to the NIH do not currently get funded) makes them willing partners to help solve Big Pharma’s empty pipeline problem.

These academic collaborations, though quite helpful to Big Pharma, are not a substitute for real drug discovery and development work. If Big Pharma ramps down its research efforts, can smaller companies ramp up their research programs to compensate? I have no doubt that some of these organizations could provide a true fountain of research innovation that the larger companies can drink from. But are these companies sufficiently productive to shoulder a much larger share of the responsibility for the industry?

I believe the answer is no. Many of the smaller companies will not be up to the challenge. Tight finances have caused numerous companies to reduce or even eliminate their research staffs. Here in Seattle, two of the oldest and most established biotech companies, ZymoGenetics and … Next Page »

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Well, 2009 did not turn out to be the biotechnology disaster here in Seattle that many people had predicted.

By my reckoning, only four of the local biotech companies that I track on my website went bust in 2009 (Eden Biosciences, VizX Labs, Northstar Neurosciences, and Rosetta Inpharmatics). This last blow was softened when Microsoft bought some of Rosetta’s assets from Merck (it’s biosoftware division) and hired a number of its employees. Many of the VizX employees (along with its GeneSifter software) were absorbed by Geospiza. The loss of four companies put Seattle on a roughly equal footing with Boston, which saw at least five companies fold, and San Diego, where at least six companies went under.

Although we didn’t lose quite as many companies, it was still a very tough year locally for those employed in the biotech sector. At least nine companies reported significant layoffs, including Cardiac Science, CMC Icos, Trubion Pharmaceuticals, Cell Therapeutics, Poniard Pharmaceuticals, Amgen, Targeted Genetics, ZymoGenetics, and VLST.

On the positive side, Dendreon moved much closer to being able to sell sipuleucel-T (Provenge), their novel treatment for prostate cancer, and has been on a hiring frenzy. OncoGenex Pharmaceuticals had a breakout year with its own prostate cancer treatment. Partnerships were both formed and broken at a dizzying pace, with Seattle Genetics, ZymoGenetics, MDRNA, Alder Biopharmaceuticals, Arzeda, Ikaria, Kineta, Trubion, and Nanostring among the notable participants. Amgen won its long running patent fight with Roche and was able to block them from selling generic erythropoiesis stimulating drugs in the U.S. Some top executives moved around, with Immune Design gaining part-time help from ex-Zymo CEO Bruce Carter, and with Peter Thompson leaving Trubion and Stewart Parker departing Targeted Genetics.

Other notable events: PATH won the $1.5 million Hilton Prize, the world’s biggest humanitarian award, for it’s work improving health in poor countries, and local biotech Omeros was successful in launching their IPO (although the stock price has dropped some 25 percent since then).

A number of new companies launched or moved into the area, including Arrowsmith Technologies, Beat Biotherapeutics, Qwell Pharmaceuticals, ImaRx, Novo Nordisk, AVI Biopharma, Covance, Arzeda, Xori, Presage Therapeutics, Integrated Diagnostics, Sage Bionetworks, and Genzyme (via its acquisition of Leukine from Bayer). Chris Rivera got off to an excellent start as he took over the head job at the Washington Biotechnology & Biomedical Association. The State’s Life Sciences Discovery Fund expenditures were cut by 41 percent to help balance out the state budget deficit.

In 2010, at least three companies that operate in Seattle will hope to have their drugs approved: Dendreon’s sipuleucel-T (Provenge) for prostate cancer, Amgen’s denosumab (Prolia) for osteoporosis, and Cell Therapeutics’ pixantrone for non-Hodgkin’s lymphoma. Here’s hoping that they all fair well.

Health care reform is sure to bring numerous changes to the industry. One key change likely to be enacted via legislation in 2010 will define a regulatory pathway for the approval of follow-on biologics, which are generic versions of biologic-based drugs. This has the potential of providing significant savings for consumers, although such benefits will depend on the period of market exclusivity awarded to innovator drugs.

Continuing economic problems indicate to me that 2010 will also be a very challenging year for biotech companies in Seattle and beyond. I expect to see many more deals for the acquisition of product candidates, but not so many acquisitions of companies. I wish all of you on the local biotech scene a productive and successful year in 2010.

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