Pieter Droppert | Biotech Strategy Blog

Biotechnology Innovation – is a systems based approach the way forward?

By Pieter Droppert on February 21, 2011

Thanks to Justin Chakma, a student at the University of Toronto, who brought to my attention an interesting article on innovation that he published on Vijay Govindarajan’s Harvard Business Review Blog.

Justin discusses how in emerging markets, venture capitalists (VC) create intentional links between the companies they invest in, compared to the more typical stand-alone investment model we see in Western countries.

By creating an innovation ecosystem, VC’s in emerging markets are able to leverage their investment in multiple companies. I encourage you to read Justin Chakma’s article, in which he discusses the advantages of this approach in emerging markets.

However, he takes the analysis further and argues that a systems based approach to innovation also has relevance in developed markets. As an example he states:

“It’s possible for a drug discovery start-up to identify the most relevant patients, and improve clinical trial success and reimbursement rates, if the VC invests in diagnostics or biomarkers at the same time.”

I certainly think that in emerging markets, where there may be a lack of infrastructure and service providers, taking a portfolio or systems based approach can help bring products to market, and capture value for the VC.

However, are venture capitalists in developed countries really interested in creating an ecosystem around their investments? A VC investing in a biotechnology company has no need to buy a contract research organization for clinical trials, plenty exist nor is there a need to develop the whole system of outsourced service providers necessary to bring a drug to market. I am also not sure that VCs in America are interested in the huge cost of biomarker and diagnostics development for start-ups.

Many VC’s already diversify by investing in a range of companies within a sector. Is there additional value to them in creating formal links and synergies within this portfolio, turning VC’s into mini-conglomerates? I think we need to see more data in support of the idea that a systems based approach does in fact speed-up innovation and time to market.

Is Orlando a future biotechnology region?

I’m off to a conference in Orlando today, so thought it might be interesting to follow-up on my previous post about the emerging medical device/biotechnology cluster around Austin, Texas to think about what’s happening in Central Florida.

Orlando is most well-known for Disney and theme parks, and major conferences (see my post on attending the ASH annual meeting in Orlando last year). However, the opening of a new medical school, children’s hospital and medical research institute will undoubtedly lead to biotechnology and biomedical companies considering start-ups in the surrounding area.

Florida, like Texas, offers no personal taxation and Orlando is also well connected for flight connections throughout the country.

Orlando, in my opinion, is further behind Austin, and to some degree all cities with a medical school, in it’s attempt to drive research and innovation. Whether Central Florida can establish a critical mass of companies and sufficient industry talent is the challenge, especially as multiple regions across the United States are also competing for biotechnology $.

However, even if Orlando does not become a major biotechnology cluster, it is more likely to become a major center for clinical and biomedical research.

In April 2009, the La Jolla based Sanford-Burnham Medical Research Institute opened a new research facility at Lake Nona in Orlando. It is home to 900 scientists undertaking R&D on drug discovery, stem cells, nanomedicine and translational research.

One of research areas it is focusing on is diabetes and obesity, or diabesity as it is rapidly becoming known, an area that is rapidly reaching pandemic proportions in the United States. A symposium on Frontiers in Biomedical Science: Metabolic Networks and Disease Signatures will be held on March 11.

Luke Timmerman’s post on Xconomy about the Institute and the $50M gift it received last year to change its name is well worth a read. In another post, he also raises the question of whether biotechnology companies can make money going after diabesity, notwithstanding the market opportunity? Need and market opportunity don’t always translate into valid targets for drug development, especially when many of the issues to do with diabetes and obesity relate to lifestyle and food content.

The Sanford-Burnham Medical Research Institute is the cornerstone of a cluster of bio-medical research companies and healthcare institutions, including the M.D. Anderson Orlando Cancer Research Institute, the new University of Central Florida (UCF) College of Medicine that opened in 2009, and Nemours Children’s Hospital that will open in 2012.

I think it will take several years before we can see if a significant biotechnology cluster grows up around these research and medical institutions. Whether Central Florida and Orlando can grow into a leading biotechnology region remains to be seen.

Should companies be able to patent human genes?

By Pieter Droppert on February 14, 2011

That is the interesting question that struck me after reading Sam Kean’s informative article in the February 4 edition of Science. Ten years on from the sequencing of the Human Genome, the patenting of human genetic information presents unique challenges at the interface of science, law and innovation.

Researchers have obtained patents for isolating different sections of DNA that occur naturally in our bodies. Whether this should be permitted is still open to debate. Currently, diagnostic companies who want to launch a new cancer test face the challenge that patents now cover many genes.

The Science article cites start-up Foundation Medicine in Cambridge, MA who estimated the cost of investigating possible patent infringement for a new diagnostic test at $35M, a cost that exceeded the company’s $25M of VC funding.

Add in the costs of any royalties or licensing fees and the issue of prior patents is now a nightmare for any diagnostics company. It is simply not practical to license every gene that may be implicated in a multifactorial disease such as diabetes. Pre-existing patents have become a barrier to market entry.

As the Science article reports, gene patents cover not only very small snips of DNA, as short as 15 nucleotides, but can prohibit the sequencing of associated DNA. Companies such as 23andMe that sequence an individual’s genome to test for the presence of certain genes may be violating patent rights of others.

What’s more so called “method” patents cover the linking of a gene sequence with a specific medical condition.

As advances in personalized medicine continue, there is a need to balance the competing interests of protecting scientific discovery and rewarding innovation, while at the same time allowing access to human genetic information that many think should be “free to all men and reserved exclusively to none.” Quotation from Bilski v. Kappos, 130 S.Ct. 3218, 3225 (2010)

A law suit currently on appeal to the US Court of Appeals for the Federal Circuit may lead to a change in the current practices of the US Patent & Trademark Office. The American Association of Pathologists and others have challenged several patents relating to the breast cancer genes BRCA1 and BRAC2 held by Myriad Genetics and the University of Utah Research Foundation.

BRCA1 and BRCA2 genes are associated with an increased risk of breast and ovarian cancer. The US district court for the Southern District of New York in a surprise decision by Judge Robert Sweet, invalidated Myriad’s patents. The New York Times article about the case has a link to the Judge’s 156 page opinion. The decision that isolated but otherwise unaltered DNA should not be patentable is now being appealed by Myriad.

In their legal brief, arguing for the decision to be upheld, the United States Government states:

“The fact that a particular segment of the human genome codes for the BRCA1 protein in a human cell, for example, rather than for adrenaline or insulin or nothing at all, is not within the power of science to alter. Such basic natural relationships may not be the subject of a patent.”

If the District Court’s decision is upheld on appeal, it would represent a fundamental policy shift on what patents can be obtained for human genetic information. Such a decision would prevent Myriad from charging royalties and exclusivity for the genetic testing of BRCA1 and potentially invalidate similar types of patents. Depending on your point of view this will either harm the biotechnology industry or increase the market opportunities.

Given the stakes involved, it is likely the Myriad case will end up being considered by the United States Supreme Court, and what they may decide is anyone’s guess.

To read more in-depth analysis about the Myriad case and the legal issues involved with the patenting of genomic information, I strongly recommend the “Genomics Law Report”, a blog written by Dan Vorhaus and others.

Ten years after the human genome was sequenced we are still working out the intellectual property rights. The question as to whether companies should be allowed to patent unaltered human genes is one that will be answered in the not too distant future.

Merck’s cathepsin-K inhibitor odanacatib in osteoporosis

Following on from my recent blog post on emerging treatments in osteoporosis, one of new approaches in development is the inhibition of cathepsin-K.

Cathepsin-K inhibition is a novel approach to osteoporosis treatment and Merck’s odanacatib is leading the way in this new class of drugs. It is currently in phase III development, with 16,716 subjects enrolled (NCT00529373).

Cathepsins are lysosomal proteases. Cathepsin K (Cat-K) is a cysteine protease that plays an important role in the function of osteoclasts (the cells responsible for bone destruction). Cat-K acts to degrade bone collagen. By inhibiting it, the removal of bone matrix proteins by osteoclasts is reduced.

However, Cat-K inhibitors such as odanacatib do not kill off the osteoclast, but allow it to still produce chemokines and growth factors such as WNT that are responsible for the effective function of osteoblasts (the cells responsible for bone formation).

The net result is that Cat-K inhibitors reduce bone resorption.

Phase II clinical trial results for odanacatib presented at the American Society of Bone and Mineral Research (ASBMR) annual meeting last year (abstract #1247), showed an increase in spine and hip bone mineral density (BMD) after four years of follow-up, suggesting that odanacatib use leads to increased bone strength. As reported by Merck in their press release:

In postmenopausal women who received odanacatib 50 mg weekly for four years (N=13), an increase in BMD of 2.8 percent at the lumbar, and 2.7 percent at the hip were demonstrated between years three and four of treatment. Over four years of treatment, these women had increases in lumbar spine (10.7 percent) and hip (8.3 percent) BMD from baseline.

If you are looking for further information on the science, the February 2011 issue of “The Journal of Bone and Mineral Research” has several papers on odanacatib, osteocytes and cathepsin K inhibitors.

Merck has 16,716 subjects enrolled in their phase III trial for odanacatib, and July 2012 is indicated as the date when data will be available for the primary end-point of reduction in fracture risk over the three year treatment period. We can expect the phase III results shortly after that, and if positive, an FDA approval could be expected in 2013.

The development of odanacatib by Merck is clearly a strategy to combat generic alendronate, which has eroded Merck’s market share and profits for Fosamax. Both odanacatib and generic alendronate, are once weekly doses. The timeline for a product launch for odanacatib appears to be in the late 2013/2014 period, and I am sure further clarity on this will appear from Merck nearer the time.

The challenge for odanacatib is that by 2015, analysts estimate that Amgen’s RANKL inhibitor denosumab will be a blockbuster (more than $1 billion in sales) and sales of parathyroid hormone analogues will have tripled to $1.4 billion.

Although the market opportunity in osteoporosis is likely to grow given the aging population around the world, it remains to be seen how the cost/benefit of odanacatib will stack up against the competition, and whether Merck can capitalize on this.

NYC Medical Technology Life Sciences Networking Event

By Pieter Droppert on February 10, 2011

After I wrote my previous blog post about the emerging biotechnology region around Austin, TX, one of the comments I received was about the importance of networking opportunities within a cluster or region.

So I am pleased to have been invited to a medical technology-life science networking event in New York City (NYC) organized six times a year by Ted King of Saddlerock Advisors, Wendy Brown of Merrill Lynch and John Lieberman of Perelson Weiner.

The event, later today, has a format of a featured speaker and presentations by three emerging companies that provides them with the opportunity to network and showcase their technology, new drugs or medical devices to investors, industry partners, academics and researchers.

This evening there is a presentation on the proposed changes to the FDA’s 510(k) clearance process for medical device approval. This is the route by which the majority of medical devices come to market by showing they are comparable to an existing approved or marketed product.

The three featured companies include BioView (an Israeli technology company involved in cell imaging and automation of genetic testing), Cel-Sci (a Virginia based biotech company that has as immunotherapy product in development about to enter a global phase III clinical trial in head and neck cancer) and PatienTech (a company that develops elastic-sheet, pressure sensing systems that can be used with medical devices).

It will be interesting to see who attends, and whether the presentations by the companies are what I consider to be the typical investor “puff and fluff” presentations, or whether there is any meaningful discussion of science, marketing strategy and new product development.

Emerging drugs in development for Osteoporosis

The February 2011 issue of Nature Reviews Drug Discovery has an interesting review by Kawai, Mödder and colleagues on “Emerging therapeutic opportunities for skeletal restoration.”

Some of the new products they discuss include:

Parathyroid Hormone-Related protein (PTHRP)
Cathepsin K Inhibitors: odanacatib
Wnt-ß-catenin pathway targets: sclerostin, DKK1 antagonists, lithium.

The market opportunity for osteoporosis remains significant, affecting 44 million people in the United States over the age of 50, resulting in healthcare costs in excess of $15 billion a year; numbers that are set to increase with the ageing population of baby boomers. The low bone mineral density (BMD) associated with osteoporosis results in increased risk of hip fracture, from which the mortality rate is 20-30% in the first year.

The current competitive landscape for osteoporosis includes antiresorptive agents such as the bisphosponates (alendronate, risedronate, ibandronate, zoledronic acid) that inhibit bone resorption. These compounds reduce fracture-risk by 20-30%, but long-term safety issues remain a concern. High doses of zoledronic acid (Zometa) has been linked to osteonecrosis of the jaw (see previous blog post).

Amgen’s new monoclonal antibody, denosumab, binds to RANK-L, thereby inhibiting its action, with the result that osteoclasts (the cells responsible for bone resorption) cannot form, function or survive. The result of this mechanism of action is a reduction in bone loss and bone destruction.

Like zoledronic acid, denosumab also has a risk of osteonecrosis of the jaw developing. However, one additional long-term safety issue for denosumab is the fact it suppresses TRAIL (tumor necrosis factor-related apoptosis-inducing ligand) that is not only produced by osteoblasts (the cells responsible for bone formation), but also by immune cells. This raises the possibility of skin and immune adverse events, which were seen in the clinical trial data.

Kawai & Mödder in their review article conclude that:

“There is still a need for therapies that reduce fracture risk beyond the level achievable with bone-resorbing agents, particularly as virtually all of the currently available drugs do not eliminate the possibility of future fractures.”

However in addition to having a market opportunity and scientific rationale, any biotechnology company looking at osteoporosis as part of their marketing strategy, must face up to the increasing ethical concerns over placebo-controlled clinical trials. This topic was highlighted last year in the New England Journal of Medicine.

In the future there is likely to be increased pressure not to recruit subjects at high-risk of osteoporosis (T score less than -2.5) into placebo-controlled trials, thus increasing the costs, number of patients and time to bring new products to market. In addition, the regulatory barriers to entry are becoming higher, given that regulatory agencies require a reduction in fractures over 3 years to establish the efficacy of a new drug. This ultimately results in the need for large, expensive, and long phase III clinical trials.

In forthcoming posts, I will discuss the opportunities for market entry by new osteoporosis drugs targeting the Wnt- ß-catenin pathway, Cathepsin K inhibitors and Parathyroid hormone-related protein.

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MIM Software receives FDA approval for iPhone and iPad Imaging App

By Pieter Droppert on February 7, 2011

Following on from my blog post last week that discussed the use of iPads and other tablet computers in clinical trials, MIM Software have just received FDA 510(k) clearance to market their iPhone and iPad medical imaging app in the United States. This is the first such approval by the FDA, and the app will be sold in Apple’s itunes store.

This new mobile radiology application will allow physicians to review medical images on their iPhone and iPad. The FDA in their press release indicate that it is not intended to replace full work stations, but to provide the ability to view images and make diagnoses when a workstation is not readily available.

The FDA reviewed luminance, image resolution quality, and results from demonstration studies with radiologists that showed that images could be safely interpreted for diagnostic purposes under appropriate lighting conditions.

What is more, using software from MIM, the images can be further analyzed and distance measurements made.

The ability to have wireless access to medical images will be particularly useful to physicians working remotely, in emergency situations and in clinical trial networks where the central imaging review facility may not be local.

As the screen resolution of iPad’s and other tablet computers increases, perhaps we will see advanced visualization software available on the iPad? It is certainly an area where innovation is taking place, and one that I think will impact clinical research in the biotechnology industry before too long.

Austin’s growing and emerging biotechnology cluster

I was in Austin last week for a business meeting (spot the snow around the State Capitol) and was interested to learn that Austin, TX is an emerging and growing biotechnology cluster.

Michael Porter in the Harvard Business Review has written about the importance of clusters of interconnected companies, universities, suppliers and service providers and how these drive increased productivity, innovation and stimulate further new businesses. An important contributor of growth and economic development is the pool of talented workers that develops and is attracted to the local area around the cluster.

Despite being better known for its high tech companies such as Dell, and as the “live music capital of the world”, there is an emerging biotech cluster around Austin. Austin boasts warm winter weather (most of the time), proximity to the flagship University of Texas at Austin, and the incentives of a tax friendly, State of Texas (no personal or corporate taxation).

According to the Austin Chamber of Commerce, there are now more than 100 companies in the areas of research, diagnostics, pharmaceuticals and medical devices. These include Abbott Spine, Arthrocare Corp, Agilent, Alk-Abello, Asuragen, Luminex, Viagen and Zimmer Biologics. Although the University of Texas at Austin lacks a medical school, MD Anderson established a Science Park for basic and translational cancer research in the area. This reminds me of similar facilities in La Jolla.

The University of Texas at Austin also provides a growing pool of educated workers, and I see the convergence of information technology in drug discovery, as where the many IT graduates with an interest in life sciences, can have an important role to play. Bioinformatics and computational biology is becoming increasing important in cancer research, for example.

The University, like many others, provides an incubator for technology start-ups that has raised over $725M in funding. You can read about the important role incubators have to play in the development of biotechnology companies in Christopher Pirie’s interesting article in the MIT Entrepreneurship Review).

However, what cements my view that Austin is an emerging cluster, is the fact that growing start-up companies are now choosing to relocate to Austin, rather than move to more established biotech areas such as Boston or Seattle. Pain Therapeutics Inc. a San Mateo, CA company announced in October last year they would be moving to Austin by the end of 2011 and planned to hire 50-100 employees in Research & Development. As more companies move to the Austin area, this trend is likely to continue.

If you are a growing, biotech start-up company, Austin should be on your radar of potential areas to build your business.

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Do you have a policy for the handling of incidental findings in clinical trial medical images?

By Pieter Droppert on February 1, 2011

I was supposed to be at the Innovation in Healthcare Symposium today at MIT in Cambridge, MA, but the winter ice storm that’s set to hit the North East has forced me to change my plans and return early from Boston to New Jersey. I am hoping to outrun the storm this morning (unlikely I know).

Hopefully, the presentations will be videoed and uploaded to You Tube or Webcast. Having traveled to Boston specially, I’m disappointed not to be able to write about the Symposium as planned.

A hot topic that came to my attention courtesy of an article in the Irish Medical Times, is how companies are handling incidental findings in the medical images they obtain during clinical trials. To me, this is the flipside of innovation in that it often yields both positive and negative consequences.

Innovative medical imaging such as positron emission tomography (PET), Optical Coherance Tomography (OCT) and Dynamic Contrast-Enhanced Magnetic Resonance Imaging (DCE-MRI) are now widely used in clinical trials, and have opened the door to new ways to visualize joints, blood vessels, organs and tumors. This innovation is leading to the development of imaging biomarkers such as reduction in joint space or reduction in tumor size that became surrogates for drug efficacy.

However, in the process, these clinical trial medical images are generating “incidental findings” (IF). An incidental finding is something that shows up in a medical image obtained during a clinical trial, but is not related to the clinical trial protocol or study objectives. The challenges is that what the reviewing radiologist sees may impact the health of the subject, making it an ethical issue not only for the reviewer, but for investigators and sponsors such as biotechnology companies. How companies handle incidental findings in clinical trial imaging is a hot topic at the moment.

Part of the debate is to whether this is something that companies should worry about, given that we are talking about may be a relatively low incidence. A September 2010 paper from Fletcher et al, “Incidental Findings in Imaging Research,” published in the Archives of Internal Medicine, reported that 39.8% (n=567) of 1426 research medical images showed an incidental finding. Of these, in only 6.2% was clinical action taken upon the IF and in only 1.1% (n=6) was there resulting clinical benefit to the patient. This raises the questions of to what extent there is an obligation to report findings, who pays for this, and whether it is ethically necessary?

The National Institute of Biomedical Imaging and Bioengineering (NBIB) has published recommendations, that states researchers should anticipate incidental findings and have a policy to deal with them.

If I were a biotechnology company looking to hire a Contract Research Organization (CRO) or other outsourcing company for central review of clinical trial images, one of the questions that I would ask is what is their policy for handling incidental findings?

While innovation in medical imaging provides new ways of measuring and detecting disease, this innovation also generates unanticipated data that has to be addressed.

WIPO Intellectual Property Courses

By Pieter Droppert on December 31, 2010

World Intellectual Property Organization Logo Intellectual property (IP) rights are important in the biotechnology industry; one only has to look at a licensing, consulting or service agreement to appreciate this.

If you are a non-lawyer new to the area, and wish to gain a basic understanding of the different types of intellectual property protection such as copyright, trademarks, industrial design, patents and unfair competition, then the World Intellectual Property Organization (WIPO) Academy offers a free general course (DL-101).

The course is delivered online, twice a year, over 6 weeks. If you are a native English speaker, it takes far less time to complete than the 50 hours suggested. What makes the course work well is you can download the study material as PDF files. These can then be read anywhere – I used my kindle.

An additional benefit, if you have an ego wall in your den or office, is that WIPO send you a certificate after you pass a final exam. When I lived in the UK, I put all my certificates on the wall in the downstairs toilet, an idea I “borrowed” from Mrs Thatcher’s eye surgeon when I had dinner at his home. British understatement at its best.

Although the WIPO general course is not focused on biotechnology or the life sciences industry, it does provide a useful overview of international treaties and IP regulation to build upon. It is worth considering if you are new to the area.

With best wishes for the New Year, may it bring you good health, happiness and prosperity.

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