'A Race to the Starting Line': Diagnosing What's Holding Biotechnology BackPublished: March 19, 2008 in Knowledge@Wharton
New strategies will be necessary for biotechnology companies to thrive in the new era of personalized medicine, but the healthcare system itself will also have to change, according a panel of six biotechnology company representatives who participated in a discussion titled, "Emerging Technologies and the Innovation of Competitive Advantage," at the 2008 Wharton Health Care Business Conference.
John P. McLaughlin, CEO of Anesiva, a San Francisco-based biotech firm focused on pain management drug development, stressed the growing population of senior citizens as a focus of future opportunities in biotechnology. The population of those 65 and over is expected to grow from its current 35 million to 71 million by 2030, McLaughlin said. The age group 85 and over will rise from 4 million to 7 million by 2020. Given these projections, he noted, a significant opportunity exists concerning osteoarthritis.
While the advent of antibodies used against rheumatoid arthritis has advanced to the point where therapies can now help prevent the progression of the disease in its earlier stages, treatment of osteoarthritis lags behind, according to McLaughlin. "With osteoarthritis, we're not seeing any disease modifying agents out there. In fact, we're not seeing any pain agents, either."
For the 24 million people who suffer from osteoarthritis, current treatment consists of an increasingly strong regimen of pain medication. At some point, however, knee or other joint replacements become necessary to alleviate the pain. "Parts wear out," McLaughlin said.
In 2006, about 550,000 knee replacements were performed. The American Academy of Orthopedic Surgeons expects that number to rise to about 3.5 million by 2030, McLaughlin said. Given that the growing older population wants to remain mobile later in life, the demand for joint replacements will only grow with it. "Those procedures can be very painful -- with long recovery periods -- so there's substantial opportunity there" for biotech advances, he added.
Stem Cells: A 'Fractured' Industry
Stem cell research and its resulting applications will unquestionably have a major impact on the biotech market, according to Robert Gould, a patent attorney with Philadelphia-based law firm Duane Morris.
He identified three central areas that create uncertainty in the stem cell arena. The first, and probably biggest, area of uncertainty concerns companies receiving approvals by the Food and Drug Administration, Gould said. "Most, if not all, of those companies performing stem cell research are not sufficiently funded to bring their technologies to market." Such companies will need to find ways to attract new investment or be acquired by companies that have adequate financial resources.
Gould said issues surrounding patents, such as patent infringement and liability, also create uncertainty in the industry. He described that industry as "fractured," citing a lack of cooperation among companies so concerned about guarding their patents that they essentially divert funds away from the primary goal of research and development for new therapies. "There's not enough money in the industry as it stands, and diverting money to infringement issues, particularly when most of the activity is exempt anyway, is a waste," Gould noted.
John Clarke, managing general partner at Cardinal Partners, a venture fund he formed in 1997 to focus on early-stage healthcare investments, described biotechnology as being "very much in the early days" in terms of products and therapies, with biotech companies essentially being in a "race to the starting line...."
Clarke, a big fan of RNA-related technologies, is "extremely bullish" about finding the value and efficiency of new technologies, models and therapies. While creating and implanting these technologies is the primary goal, it is equally important to make sure these advances are not cumbersome or too expensive for the marketplace.
According to Stuart Pollard, vice president of scientific business and strategy at Alnylam, a Cambridge, Mass.-based pharmaceutical company, one of the next major therapeutic modalities has to do with adding on to small molecules. This RNA-related technology has advanced rapidly in the past five years, but there is still a tremendous need for innovation and invention.
The overall environment of healthcare's move toward a more individualized approach has begun to help, but more investment in biotechnology would create a more competitive arena and complement the rapid advances in technology, Pollard noted. A burgeoning number of new products is expected to enter the market over the next few years, due in part to important strategic alliances within the industry that have allowed for their development, he added.
As an example of the changing healthcare environment affecting biotech companies, Pollard cited his company's paradoxical achievement last year: It had its fewest number of product approvals in the last 24 years while reaching far greater levels of understanding about the diseases they aim to treat.
Franz F. Hefti, vice president of neuroscience at Avid Radiopharmaceuticals, a Philadelphia-based molecular imaging company, said Alzheimer's disease represents a significant opportunity for investment. In terms of technology and diagnostics, Heft described neurodegenerative diseases today as "hot," similar to the way cancer diagnostics and treatment were 10 years ago.
Since neuroscience typically lags behind other areas in terms of technology, many technological advancements that are just now coming to the forefront will provide a much-needed better view of the human brain, Hefti said. "You have to see into the brain to see what's happening."
Understanding vs. Trial-and-Error
According to Kim Popovits, president and CEO of Genomic Health, a Redwood City, Calif.-based biotechnology company, improved understanding and use of medical data is an important development in the movement toward personalized medicine and away from the trial-and-error approach to diagnostics and treatment. "If we understand diseases at the molecular level, then we should be able to do better, and that's really where personalized medicine comes in," Popovits said. "What's exciting right now are all of these targets that are sitting there and all the new technologies" available to help better understand them.
Another challenge for the future, she said, is to learn how to use diagnostics to improve the average time and money -- 14 years and $1 billion -- it currently takes to bring a new biotech product to market.
Leaving behind the "blockbuster drug" mentality, which relies on one product to provide large amounts of revenue, must be part of a new mindset for biotech companies, Popovits said. "That probably isn't the model that's going to work for the future." Developing more drugs for smaller markets, shortening the timeline of clinical trials and improving patient response rates to new drugs are some of the changes necessary for biotech companies to remain competitive.
"Our healthcare system won't tolerate where we are today in terms of response rate," Popovits noted, adding that current response rates of new drugs range from 15% to 25%, sometimes at a cost of more than $100,000 per patient. "That's not a good model for the future. That's not a model that's sustainable if all of these wonderful ideas and targets that are in the pipeline want to eventually get to patients."
Popovits said better diagnostic tools are needed to help maximize the effectiveness of therapies by targeting patients who will likely benefit. She gave the example of chemotherapy as a relatively ineffective therapy that remains overused. "Clinical data says that only about four in 100 women who receive chemotherapy for breast cancer actually benefit."
Better diagnostics would also help focus clinical trials by eliminating patients who are unlikely to respond during the course of the trial. "If we could get those patients out of the trial ... we would reach our endpoints faster. We would certainly reduce the costs of clinical trials, and presumably develop medications a lot faster," she said.
Other barriers to the future of biotechnology, she added, include issues like intellectual property, federal regulations and the reimbursement system. "Our regulatory system and our reimbursement system have not been designed for what you're hearing us talk about today. We've really got to focus on building the infrastructure around the development of these technologies.... But I couldn't be more optimistic about where I think we can take healthcare."
Blockbusters and Sledgehammers
Charles Beever, vice president of Booz Allen Hamilton and the panel moderator, questioned panel members on the prognosis for biotechnology. Hefti responded that with the expected segmentation of the industry due to personalized medicine, there is no single answer. "I think the way to look at it is that for every disease, there will be one or two optimum strategies," Hefti said, citing the example of stem cells, which he predicted will be the best route for treating spinal cord injuries but will not become a so-called blockbuster therapy applied to numerous areas.
Clarke identified "regenerative medicine" as a potential best bet for the future. "If you can do what nature does, you have a better shot at having a successful drug or therapy." Asked about barriers to the advancement of biotechnology, Clarke noted that there must be changes in the current system of regulation and reimbursement, which is oriented toward "blockbusters and sledgehammers.... We're really swimming against the current with this process," he noted.
According to Popovits, the trend away from primary care toward specialized medicine should help raise the confidence of healthcare payers if therapies become more focused and effective. "Payers won't mind paying for a drug that works." Gould and McLaughlin added that generic biotech products might become more prevalent in order to keep costs down.
Despite the many changes predicted, some aspects of the current system are sure to remain the same. Money needed for clinical trials is significant, and big pharmaceutical companies will stay as the likely source of that funding, according to Clarke.
Also, the role of physicians who use the diagnostic tools and prescribe the medicines will not change anytime soon, Popovits suggested. "We are never going to be able to develop the one-size-fits-all tool or diagnostic. There will always be the practice of medicine and the ability to use these diagnostics and tools."