Saturday, November 26, 2011

Not Dead Yet.... (Apologies to Monty Python)

As we continue on toward the last quarter of the year, we—as investors—continue to look at the life sciences sectors and long for a bright spot, or ten. Much has been written in the last year about the lack of private equity money for biotechnology companies. In fact, much has been said about the lack of money available in general. Well, I have news.  There is still hope. As proof,  two private early-stage companies closed significant early rounds last week. While both are involved in current industry “hot spots”—oncology and orphan diseases—both companies are signs of life in the funding sector.

The first, Agios, recently completed a $78 million C round, with participation from Arch Partners, Flagship Ventures and Third Rock Ventures, as well as Celgene (who has an alliance with Agios) and other private and public equity sources. This round, along with upfront monies received from Celgene on the signing of its deal, brings the cash available to Agios to north of $200 million. The company is focused on discovering and developing compounds that address issues with cancer metabolism, i.e., how cancers metabolize, thus allowing tumors to form. The company is also hoping to identify biomarkers during the early stages of the development process to enable the identification of target groups of patients most likely to benefit from treatment. This approach, in theory at least, would open the door to quick proof-of-concept trials.

The other, Biocartis, just closed a $100 million C round, with public and private equity groups in Europe. Using technology acquired from Philips, it is developing a new assay system that quantifies multiple DNA- or RNA-based biomarkers, and can be used in a wide range of patient sample types (e.g. blood, urine, tumor tissue). It has partnerships with bioMerieux and Janssen Pharmaceuticals, both signed this year. Biocartis’s goal is to enable physicians to match patients with the right treatment immediately.

These are but two examples of companies that are trying to move forward in life sciences and able to raise the money to do it. Both benefit from very early partnerships with established companies (Celgene and Johnson & Johnson, respectively), who also made equity investments in earlier rounds of funding. Agios and Biocartis are both exploring how to use new developments or accepted rules to move forward. Both are at least paying lip service to the idea that biomarkers can be used to help move compounds more swiftly through the clinic by pairing treatment with patients who would prove most genetically receptive—or by matching treatment and patient at the point of diagnosis.

There is no doubt that the present financing environment is making things challenging for both new ideas and existing companies alike. However, as we bemoan these tough times, we should also remind ourselves that there are signs of life. Promising companies are still being funded—and, given Agios and Biocartis as examples—not in a stingy way. Time will tell if this was money well spent, but isn’t this true of all our investments?

Monday, October 24, 2011

The Bottleneck: A Classic Hurdle

As we all know, bottlenecks happen constantly, in life and in science. Many are at least somewhat predictable and preventable. There has been discussion recently in life sciences about the pending bottleneck represented by the growing and significant amount of genomic data being amassed by various sequencing companies. Last month, sequencing companies in the US, including Complete Genomics, discussed the need to have a central clearinghouse for all the data we have and the data to come, as sequencing continues on its path to becoming more affordable. The argument—a solid one, and one made elsewhere—is that in order for genomics to realize its potential in personalized medicine, data will need to be easily accessible for all researchers, and eventually doctors. 

With the advent of “cloud” technology, this can become reality, perhaps not as quickly as predicted by the swarm of companies calling for it, and/or working in the field. There will likely be privacy, cost, and regulatory issues to be dealt with first—but this is an idea whose time has more than come. Companies in the sequencing game recognize that their growth and the impact of sequencing is tied to how this data is used. Making it accessible to researchers and scientists will be the key. In this spending-constrained era, most healthcare systems do not have the resources or IT space to develop a large application to run through all the genomic data. The advent of cloud technology has turned this notion on its head.

To this end, several groups have begun developing systems that enable the massive amounts of genomic data to be used by doctors and scientists alike. In theory, the data can be accessed to help with diagnoses, as well as to aid in the development of targeted treatments. The UK has a consortium of groups, led by Eagle Genomics Ltd and partially funded by the Technology Strategy Board, working on developing a “genetics cloud.” BGI, the very large sequencing company based in China, is working on something similar for use with its data. Last week, DNAnexus, a California-based start-up, raised a second round of financing to the tune of $15 million to fund development of its DNA data management and analysis platform. The round was co-led by TPG and Google Ventures. All players mentioned here have a common goal:  to develop a central store for the genomics data being collected every day.

These programs are a start in clearing up the looming bottleneck. The very real promise of genomic data and its uses to improve diagnosis and treatment of a wide-range of diseases and conditions is coming to fruition. Private companies and government entities see the wisdom of putting it together in one place. Of course, there are still matters to figure out—who will own the intellectual property; how are profits shared/divided that are derived from genes that are identified by one group but that are developed into therapeutics or diagnostic tests by another group are two examples.  However, to enable the sorting and matching of tons of sequenced data to help find common genetic links—or to better a diagnosis—is a big step forward in the evolution of sequencing and “personalized medicine.”

Wednesday, October 12, 2011

The Innovator's Dilemma

When I heard that Steve Jobs had passed away last week, I was reminded of how tricky the cult of personality as a management style can be. Mr. Jobs was a visionary and truly changed the way we view the world.  Design and evolution of how we communicate and what we demand of our gadgets was his hallmark. When he took a medical leave in 2010, the stock suffered.  When he stepped down a few months ago, the stock suffered. While there is no doubt that Apple, a well-established global brand, will go on under the auspices of CEO Tim Cook (appointed in August 2011), Mr. Jobs’ absence also underscores the dilemma of what to do when it is time for a charismatic leader to go off the stage.

We have seen this again and again in life science companies. Founders of these companies--most often scientists—take a compelling (in theory) idea and lead a company through the start-up phase. These leaders often occupy the central role in fundraising—the reason the investors are willing to take a chance on promising technology and science.  This is ever more true during the current dire state of affairs the industry finds itself in these days. As a company evolves, the founder often becomes synonymous with the “brand.”  And therein lies the rub. Companies advance and change. In these times, they try to do more with less and seek creative financing avenues. When one person is the brand, rather than a team, risk increases. This is true across technology and biotechnology, and has never been truer than now in life sciences. Companies founded in the last five years, are staying private longer due to a barely existent IPO market for life science companies.

This means that founders—in many cases, a company’s visionary—are staying much longer. Due to financial constraints, teams are smaller. While the current market conditions may be better suited to the entrepreneurial mindset, at some point, running a business becomes more than the selling of an idea, concept or vision to investors. It becomes deal-making and horse-trading with other companies, vendors and potential partners.  As companies mature, the entrepreneurial mindset must give way to operating the business. This does not mean giving up nimbleness and flexibility.  What it does mean is that a company built around a “big” personality” may suffer in the long term. (The investors in the Martha Stewart empire and in Oprah’s fiefdoms are nervous for this very reason.) Balance is essential for a company as it develops. A founder has to be willing to shift roles, allow for growth of key members of his or her team and clearly communicate a succession plan. Apple did this the right way. Life sciences and healthcare are littered with examples of companies and founders that did not.  (See:  board-pressured removals of any number of founders or turn-around CEOs who overstayed their welcome.)

Even in this era of tight financing, most life science ventures cannot survive into the medium term without a plan to shift from entrepreneurial mode to day to day business mode.  This can be a difficult shift for most “visionaries.” In Apple’s case, the company will go on. Mr. Jobs’ and his vision will be missed—and long remembered. He was a shining example of how a founder can shift roles.  It is helpful to remember, though, that he left Apple for several years in the late 90s before returning as CEO of a more established version. He was the example that surpasses the rule.

Monday, September 19, 2011

Cash Crunch

Cytos Biotechnology, a Swiss-based company and a 16-year veteran of the biotech funding wars, announced last month that it has hit its wall. It laid-off  nearly 90% of its staff; the CEO resigned; and it shut down 4 of its 5 research programs. All due to a common problem for biotech companies in the last 3 years—not enough cash (combined with a looming convertible bond payment in early 2012). The company hopes to cut enough costs to survive and renegotiate. Cytos is keeping its most promising, later stage program going—CYT0003-QbG10 (just rolls of the tongue, doesn’t it). This program has shown promise in the treatment of allergic rhinitis and allergy-related asthma. The Cytos example, while somewhat extreme (perhaps they left it a bit late), certainly mirrors what most companies in this universe face—a lack of financing whether you are public or private. High expectations—or yielding to the pressure to set them—has run several companies aground. Dendreon’s recent retrenchment is only the latest example.

Price Waterhouse Coopers issued its overview of the financial outlook for biotechnology and healthcare companies last month. Despite continued quarter over quarter gains in the number of deals and funds invested into deals, year-over year venture capital funding has slowed to a very thin trickle. As the trend continues, alternatives are looming larger as Big Pharma’s internal venture funds and non-profit disease foundations are stepping into the gap. Vertex’s first collaboration with the Cystic Fibrosis Foundation in 1998 was a forerunner but we have seen more recent deals with a focus on rare or orphan disease, like spinal muscular atrophy (SMA). The SMA Foundation has bankrolled the SMA programs at ISIS Pharmaceuticals and PTC Therapeutics. These types of investments are not limited to biotechnology—Novartis is partnering with the Foundation to launch a study in 2013. 

Another source—which potentially provides a win/win for all parties—is the pharmaceutical venture fund. Big Pharma has (on the whole) deep pockets. Investment can enable early access to promising technologies and compounds. And a competitive advantage, perhaps in feeding their pipelines. With traditional VC’s shifting their focus from the long-term to early stage programs or technologies with a timeline closer to three years rather than until the promising company is purchased or goes public. Good business in these markets, but bad news for the promising biotechnology idea.

There was an upswing of M &A activity in the first half of this year, which saw some promising private companies acquired by established pharma and biotech players. This means venture capitalists got an exit strategy and now have cash on hand to invest. All is not lost, despite the challenges.

This crunch shows no substantive signs of abating any time soon. I say, time to get even more creative. Cutting staff and R&D projects is only one way.  Any group still has to bring in more revenues and investors. There are still great ideas out there—find them and invest wisely. We, as an industry, have long taken the following two approaches:  1) great tech, let’s see where it works, or 2) great molecule, let’s chase down every possible disease to which it could apply. Every once in a great while, the scattershot approach pays off. (Vertex, with its hit-out-of-the-ballpark Incivek, is a fine example. Anyone else remember the book The Billion Dollar Molecule?) But, it is no longer a model that often or truly works in the new normal of biotechnology. Good ideas still get traction but there is no question that the biotech universe is shrinking. There are other factors at play than cash but cash is a key player. This industry is needed. So, how do we ensure that the promise is realized?  In this economy, we are evolving, but there are options coming forward that provide some hope.

Thursday, August 18, 2011

Biomarkers: One Step Closer to Bureaucracy and This is a Good Thing (No, Really)

The FDA issued its recommendations on August 10, 2011 for biomarker approval. As expected, the FDA wants to find a clear standard for biomarker approval but also indicates that it will be hard to identify consistent and clear standards. This may seem a bit discouraging. The committee—going by the oh-so-jaunty title of Efficacy Working Group of the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use—does want to establish guidelines that will result in standardized structure for genomic biomarker submission. The committee acknowledged that its recommendations are based on its experiences with previous submissions. Much of the its previous experience in this area is either with a single biomarker or a large scale assay used as a product-marketing application. In other words, the FDA has the best intentions but no significant clarity on the best unified approach to submissions going forward. It is clear, however, that the FDA has faith in the utility of biomarkers (as yet largely untapped) to add substantially to the drug development process from discovery to post-marketing. This is an improvement over the not-so-distant days of having to fight the FDA to consider biomarker data. So, what’s next?

The heart of the matter is how to prove the value of biomarkers throughout the pipeline-from discovery through treatment of targeted populations. There is hope. Earlier this week, Roche and partner Daichii Sankyo received early FDA approval (2 months ahead of PDUFA date) for Zelboraf to be used for the treatment of metastatic melanoma. Zelboraf targets the mutated BRAF gene and has a companion diagnostic, which was approved simultaneously. In clinical trials, Zelboraf was shown to reduce the risk of death by 64%.  By any measure, this is significant – especially in the cancer world. The success in the clinic, which led to early approval, represents a substantive step forward in personalizing treatment for certain cancers. Biomarkers played a role here—particularly the biomarker that indicates mutations in the BRAF gene. Zelbroaf, though sales are estimated to perhaps be a bit lighter than for BMS’s Yervoy, is expected to be a blockbuster. (Analyst and industry consensus for total peak revenues for Yervoy is just over US$1billion, while early consensus for Zelboraf point to US$735 million by 2015. Potential peak revenues could be as high as US 1.5 billion but there is not yet a consensus.) Its companion test will sell for US$150. On a side note, the companies plan to explore whether these two compounds work well together.

Biomarkers remain a bit of a dark horse as far as smooth approval processes goes, but there is progress being made. Biomarkers are being used as an Alzheimer’s early detection tool, for ovarian and prostate cancer and many other disease areas. Researchers and companies already know what the FDA just stated…..  it is not a walk in the park to come up with “consistent standards” that will add structure but still be flexible enough for specific characteristics of the biomarkers in each submission.    

As in nearly everything else to do with biotech, research and even bureaucracy—patience and perseverance will be the key. These recommendations, despite focus on data format and a structure checklist, are a step forward in this evolving situation.

Wednesday, August 10, 2011

Prostate Cancer and the Single Biomarker

As per my last post, biomarkers have a key role to play in biotechnology and medicine. It is also becoming clear that more than one biomarker in a diagnostic test is better, or a combination of biomarkers may be even better. There is always room for tweaks and improvements, as diagnostic tests are as much an art (and a lot of luck) as science.  Take the case of prostate cancer­­. Prostate-specific antigen (PSA) has become an accepted, if not foolproof, biomarker for testing for prostate cancer. Using a scale and environmental factors (patient’s family history, age etc.), doctors use PSA to help determine if the cancer warrants more aggressive treatment. However, PSA is not perfect. There is a risk of false positives—perhaps too many for comfort. These false results have led to unnecessary biopsies and other costly, invasive treatments and tests. Despite its less than perfect track record, PSA is still a useful tool on the whole. 

There is clearly a need for more biomarkers to work in tandem with PSA or on their own.   Prostate cancer is the leading cause of cancer for men in the United States, with 223,000 new cases reported a year, according the Centers for Disease Control. (This is based on 2007 statistics which are the most recent numbers available, according to both the American Cancer Society and the Centers for Disease Control.) At the moment, however, we are using a similar “throw the spaghetti on the wall” approach for everyone.  

There are several new biomarkers on the horizon for prostate cancer. Most are still in the early stages but some are moving along from academia into validation. For example, PCA3 is a gene that is over-expressed in prostate cancer cells and was identified by a group of researchers at Johns Hopkins in June of this year. Since PCA3 is only detected when there is prostate cancer in the body, it is currently thought that a urine test is all that will be necessary to detect its presence.Yesterday, a group of researchers from the University of Cleveland and Harvard University published a study in the British Journal of Cancer.  The group has discovered a biomarker, GSTP1, which boosts the efficacy of the PSA test. GSTP1 is more sensitive in detecting the difference between benign prostate troubles and prostate cancer than PSA. Like PCA3, it can be identified via a urine or blood test.

 Public and private companies also continue to make headway in this area. Some are still in early stages, some in the key validation phase. Tests that run the gamut—using one or two biomarkers to full assay panels with many markers—are expected to launch in 2012 and 2013.These tests are hoping to go one step better than “just” PSA. (For a brief sampling, read this.)

It is clear that biomarkers, in prostate and other cancers will continue to move along.
As investors, scientists and doctors, we are impatient to see the promise of biomarkers pay-off. Now, the possibility of a growing light in the tunnel—and one that is not attached to a speeding freight train fueled by wasted R&D dollars—is here.

Friday, July 22, 2011

Biomarkers: Time, more time (and bit a more money), please

The Duke University scandal and a recent JAMA article questioning the usefulness of biomarkers has sparked general “navel-gazing” in the scientific and drug development communities about the worth of biomarkers. When put into perspective with the traditional lengthy cycle of discovery and development in the biotechnology and pharmaceutical environment, one can argue that we are still in the early stages of biomarker research. There is a use for these markers, and a potentially cost-effective and treatment-effective one at that.  

There has been growing support for the concept of personalized medicine over the last five years.  Coinciding with the human genome project, personalized medicine and targeted treatments became accepted terminology in the industry. Once these terms entered the lexicon, we seemed to forget  the reality—personalized medicine hasn’t quite arrived. To paraphrase what has been said well other times, good science hasn't quite caught up with the stampede of financing, early licensing deals, and business. It will take much more time, resources and research to truly develop the personalized medicine field the way that it is broadly pictured—using biomarkers and proteins to actually select those who will benefit most from certain treatments, or to develop targeted treatments or to be able to more accurately predict treatment outcomes. 

Questions from the AMA and others regarding the usefulness of biomarkers are not new.  It seems that every time there is a data disappointment or a string of favorable articles regarding new findings, articles in prestigious journals appear disregarding the potential of biomarkers in providing better treatment. This is, in many ways, what a research community should do —provide a healthy exchange of theories and ideas. However, to discount the potential use of genetic signatures or protein markers is to disregard an area with remarkable potential.

The biotechnology industry has seen many surprises over the years. (A recent large scale government study, co-sponsored by Abbott, showing that elevating good cholesterol has no impact on one’s risk for cardiovascular events is but one example.) Questionable leadership and data issues in the Duke University project aside, there is no reason to toss promising research out the window. Biomarkers have proven effective in certain rare cancers, where the correlations are very strong.  (HER-2 /neu marker is a good example.)  There is still room for more findings to impact cancer and other diseases that present serious public health issues. The answer to the dilemma is time, patience and funding.  Pick and choose what we pursue. However, walking away from an area that has had some success seems premature at best.  Biomarkers are not an answer in themselves, at least not at this point.  In practice, they are—as in the case of PSA measures for prostate cancer—taken into account with other factors. But as data points, depending on risk correlation, they can be effective.

Doctors are not likely to use journal articles on new findings to guide the treatment of their patients.  Researchers should share their information in the public domain so that others can validate and build on the data. The community should show more patience. We have barely reached the halfway mark in the average 20 year cycle of development. This may not pan out, but we owe it to ourselves to continue in the effort. After all, it is too early to call. In the last 20 years, research and investment have helped many cancers, certain cardiovascular diseases and HIV to an extent to become chronic manageable diseases rather than life sentences. Emphasis on diagnosis has aided in the transitions. Biomarkers and their surrogates played a definite role.  These transitions did not happen overnight—and nor did the pay-off. 

Often, new technologies and concepts will have drastic ups and downs on the way to real answers.  (Anyone else recall the excitement over RNA inhibitors, accompanied by significant early funding which begat dismissal of the technology 2 to 3 years ago, which in turn recently begat some successful data? RNAi is currently on an upswing.)  We still have time to see if biomarkers can realize their full potential.  Let's wait it out.