Behind the Boom in Biotech

On the margins of January's annual JP Morgan investorfest, Pharm Exec, with logistical support from health communications firm Russo Partners, convened a Roundtable discussion with nine company aspirants for leadership in the hard science of small biotech. The dialogue reveals the rigors of building a modern medicines enterprise, where calculated tolerance for risk is the essential nutrient of success. The shared narrative is about the ruthless logic imposed by market demands for differentiated therapies that fill the vacant spaces of patient need, with no place for the come-by-chance serendipity-and easy profits-associated with a broader public image that amounts to warmed-over science fiction.

- William Looney, Editor-in-Chief
 

Roundtable Participants

Daniel Cohen, Chairman and CEO, Pharnext

Prabha Fernandes, President and CEO, Cempra Pharmaceuticals

Uli Hacksell, CEO, ACADIA Pharmaceuticals

Chris Haskell, Head, US Science Hub, Bayer HealthCare

Martin McGlynn, President and CEO, Stem Cells Inc.

Mark Rothera, Chief Commercial Officer, PTC Therapeutics

Marc Rohman, President, Biocodex North America

Spiro Rombotis, President and CEO, Cyclacel Pharmaceuticals

Randall Schatzman, President, Alder Biopharmaceuticals
 

William Looney, Pharm Exec: Biopharmaceuticals are a highly competitive sector, so I'd like to begin by asking each of you to highlight your company's differentiating "pitch" to investors. Can you summarize the business mission, key therapeutic areas, market potential, and strategic/operational objectives across the three-year planning cycle?

Prabha Fernandes, Cempra Pharmaceuticals: We address a critical unmet medical need, which is the threat of drug-resistant bacteria in the hospital and community settings. Cempra has two oral antibiotic compounds undergoing Phase III clinical trials: solithromycin (CEM-101) and TAKSTA (CEM-102, sodium fusidate). Solithromycin is demonstrating superior efficacy compared to one of the most potent existing antibiotics, moxifloxacin. TAKSTA is a novel product to combat chronic infections of the bone or joint that requires long-term suppression rather than the standard treatment course of five to 10 days.

Photos: Joseph Schell

The world is in an arms race against microbes. Big Pharma has largely abandoned the antibiotics segment, and all the generic drugs currently in use are less and less effective against infections. Government has entered the picture with incentives to stimulate development of new, more powerful anti-infective drugs, but the economics of pricing continues to shape where research dollars are spent.

Pricing means that most private-sector R&D is still geared toward intravenous drugs administered in acute care settings-Cempra's model is different. Our take on the patient perspective leads us to conclude that the highest value attaches to drugs that will work best in the community, rather than in the hospital. Patients want to take their medicine in a familiar place, at home, where there is low risk of complication or additional infection. This accounts for our interest in oral, in addition to intravenous delivery. It underscores our business mission to develop products that will prove equally effective in diverse treatment settings as well as across the patient population, including children and pregnant women. Financially we are strong, having just last week raised about $150 million from investors; the offer was four-and-a-half times oversubscribed.

Randall Schatzman, Alder Biopharmaceuticals: Alder was founded in 2004. Our expertise is using monoclonal antibodies for disease indications where this novel technology platform has not yet played a role-our lead clinical program (MAb ALD403) is a therapy for migraine, but we are also exploring applications in autoimmune and inflammatory conditions.

Migraine is a debilitating condition that afflicts 36 million Americans, who suffer an average of five such headaches per month. Current treatments embody an abortive approach, in which triptan drugs are taken at the onset of pain in the hope that it will not progress.

Our strategy is to develop a safe, long-acting agent that will prevent migraine from initiating altogether. The drug targets a neuropeptide that transmits pain signals into the central nervous system. This appears to be optimal therapy for patients whose symptoms are frequent and recurrent; in our trials to date, of three- to six-month duration, a single intravenous administration of the drug has suppressed the rate of migraines from as many as 14 per month down to zero, in 40% of the patients enrolled. We are confident that our focus on preventive drug technology will be well received by patients and the clinical community. It's going to change the way migraine is treated-a major improvement in the standard of care. The confidence of investors is underscored by a well-received IPO as well as Alder's inclusion in the NASDAQ Biotechnology Index last month.

Spiro Rombotis, Cyclacel Pharmaceuticals: Cyclacel's mission is focused on oral therapies that target the various phases of cell cycle control to suppress cancerous tumors, hematological conditions and other serious diseases. We were founded in 1996 by Sir David Lane, a prominent UK researcher best known for his discovery of the p53 gene as a major tumor suppressor master switch. Our operations are split between New Jersey and Scotland, where we enjoy strong support from government and academia.

Cyclacel has two compounds in clinical development, addressing some of the most challenging areas of cancer therapy. Sapacitabine, a cell cycle modulating nucleoside analogue, is being investigated for treatment of acute myeloid leukemia in elderly patients over age 70. It is currently in Phase III trial, under a Special Protocol Assessment agreement with the FDA. We are also pursuing indications for sapacitabine in myelodysplastic syndromes, a bone marrow impairment most common among the elderly, as well as chronic lymphocytic leukemia.

The other compound, seliciclib, is a cyclin-dependent kinase (CDK) inhibitor being investigated for lung cancer and nasopharyngeal cancer. CDK inhibitors are an R&D priority for several big Pharmas, including Pfizer, whose drug for metastatic breast cancer, palbociclib, is likely to be the first such product approved by the FDA. (Editor's note: palbociclib, brand name Ibrance, received authorization on Feb. 3).

Led by Professor Lane, CDK inhibition has been the focus of Cyclacel's work for 17 years. Investors often told us this investigational platform had no future. Our contrarian stance on the science behind seliciclib and follow-on molecules has now been validated. But it took a lot of tolerance for risk to get here. The analogy I like to cite is of being that soldier in boot camp where the drill sergeant says not to befriend your fellow GI's-because only half will be around when you get back.

Mark Rothera, PTC Therapeutics: I serve as chief commercial officer and have been working to build a global commercialization strategy to bring the first therapy from our pipeline to patients. Our science is based on a deep understanding of RNA biology and is centered on development of orally bioavailable therapies that modulate protein expression for patients who are missing an essential protein that can cause a variety of diseases, such as Duchenne muscular dystrophy (DMD), cystic fibrosis, and spinal muscular atrophy.

The last two years have been transformational for PTC, with a successful IPO and follow-on rounds that gives us a stable position for our research and development plans through 2017. We have worldwide rights to our first drug, Translarna, which enables production of essential proteins through read-through of a premature stop codon caused by a nonsense mutation in the mRNA. Translarna is indicated against DMD, but the science behind it is potentially applicable to approximately 2,000 rare monogenic disorders. Assuming successful read-out of our confirmatory Phase III trial in DMD, we plan to launch Translarna in the US in 2016, following FDA approval; we are currently launching it in Europe and supplying other regions through early access programs.

In addition, we have a confirmatory Phase III clinical trial on a second indication in nonsense mutation cystic fibrosis, are in the process of initiating a proof-of-concept study in MPS I, and plan to initiate a proof-of-concept study for Translarna in an additional indication this year. We hope to file a marketing authorization application with the EMA in the second half of this year for Translarna in cystic fibrosis based on data from a previous Phase III trial. Finally, something I am very excited about is PTC's pursuit of another RNA platform, which we call alternative splicing, that holds significant promise in treating spinal muscular atrophy through an oral small molecule drug. An ongoing Phase Ia/IIb trial on a drug candidate is underway in partnership with Roche and the SMA Foundation.

Chris Haskell, Bayer HealthCare: I manage the Bayer HealthCare US Science Hub, an externally focused R&D partnering and licensing program that the company established in 2011 to leverage the great science here in the Bay Area. Among other projects, I manage our CoLaborator unit, which provides space, equipment, and expertise to a select number of start-up biotechs. We are located in the Mission Bay district, in close proximity to the UCSF academic programs in life sciences, with whom we signed a master agreement on partnering in 2010. The Hub's therapeutic efforts center on oncology, cardiology, hematology, and, increasingly, ophthalmology, due to the Eylea macular degeneration franchise we manage with Regeneron.

Like other big Pharma, Bayer understands that good ideas are not found solely in our own labs; we have to be proactive in a scientific community that is increasingly cross-functional and diverse. As scientific discovery expands into new areas, we seek innovators with the platform technologies best positioned to yield drugs that advance the standard of care. We bring these innovators closer together, engage with them, and sign deals that aren't your traditional one-off option licensing contracts. It's a strategic approach to licensing, in which academic scientists and industry professionals with deep knowledge of various therapeutic areas work on projects with our research staff. Our approach to partnerships is to be flexible and mutually reinforcing, without the pre-conditions that often discourage ideas that turn out to be commercially promising.

Daniel Cohen, Pharnext: I am a geneticist who worked on the mapping of the human genome and helped co-found the company, Millennium, now part of Takeda. I founded Pharnext in Paris in 2007; it is very small, privately held, with only 35 full-time employees. We seek to apply our knowledge of the human genome to identify disease molecular networks containing various molecular targets that could lead to drugs for common and rare CNS disorders. This platform we refer to as pleotherapy, which relies on gene mapping to identify the best low dose combinations of medicines to safely fight most any chronic disease.

Our lead drug candidate, PXT-3003, is a three-drug combination indicated for Charcot-Marie-Tooth disease, a rare neurological disease afflicting around 100,000 patients in the US and Europe that causes atrophy of muscles in the arms and limbs, resulting in severe disability. A small 80-patient trial of PXT-3003 has confirmed improvement beyond stabilization; a larger, 300-patient trial of PXT-3003 is planned to confirm these results. We are evaluating sites, choosing the participants, and hope to communicate the results sometime in the next several years.

Marc Rohman, Biocodex North America: Biocodex is a family-owned French pharmaceutical company founded in Paris 60 years ago, with operations in 128 countries. I manage the US and Canada, which has become our largest commercial region. While our worldwide legacy business is in gastroenterology, we've begun to pursue other areas, including neurology and oncology. Our lead product, Florastor (saccharmoyces boulardii), is the world's top-selling probiotic (available in over 27 different brand names worldwide); Totect (dexrazoxane) is an oncology supportive-care product, and the only FDA-approved treatment for anthracycline extravasation.

Biocodex has a distinct marketing model that relies on professional selling and high-touch pharmacy, where we combine digital access technology with extensive private pharmacy services that are regulatory-compliant. Based on this model, Biocodex is now expanding to oncology supportive care, where we believe there are great opportunities in making clinical activities more productive, providing higher patient compliance, and potentially lowering costs of treatment. Our major business development challenge is anonymity, particularly as we seek to expand our portfolio worldwide. Many in the industry remain unaware of Biocodex's underlying strengths: private ownership, zero debt, significant cash reserves, and a strong, well-positioned commercial sales force. We are actively seeking product acquisitions, scientific partnerships, and in-licensing opportunities.

Martin McGlynn, Stem Cells Inc.: I lead a cell therapy company, so our pathway is distinctive from companies in small molecules or biologics. Stem Cells pioneered the discovery and development of a highly purified, expandable population of human neural stem cells derived from human brain tissue. We have created a commercial model that we believe will yield three product-based applications: neuroprotection, neurogenesis, and neuroregeneration. Our clinical/therapeutic targets include vision loss from dry eye age-related macular degeneration (AMD); chronic spinal cord injury; and various myelin-related disorders of the CNS. The novelty of our approach is in relying on the inherent natural properties of the cells, which, when transplanted, are regulated by the host environment. Thus, the same active biological ingredient, i.e., the human neural stem cell, can be directed in different ways to create useful therapies.

To date, we have completed two Phase I trials for rare pediatric neurodegenerative disorders and have recently completed enrollment in Phase I trials in dry AMD and thoracic spinal cord injury. Enrollment is underway for a Phase II trial in cervical spinal cord injury and we will shortly initiate a Phase II trial in dry AMD. There is enormous market potential in dry AMD, which accounts for 90 % of all cases of AMD, and for which, in contrast to wet AMD, there are currently no therapeutic interventions. Finally, a Phase II trial for Pelizaeus-Merzbacher disease, a fatal inherited pediatric myelination disorder, is of great interest to us, but we lack the resources to fund three Phase II trials concurrently.

Uli Hacksell, ACADIA Pharmaceuticals: ACADIA is building a CNS specialty franchise on the foundation of our lead drug candidate, Nuplazid, which, if approved, will establish a novel pharmacological approach to treating psychosis as well as being the first drug approved in the US for the indication of Parkinson's disease psychosis. About 40% of all Parkinson's patients have this condition, and their only option at present is off-label use of antipsychotic drugs, which carry a black box warning and are associated with increased mortality in elderly patients with dementia. Nuplazid selectively blocs the activity of receptor interactions that cause some of the unpleasant and dangerous side effects of broad-spectrum antipsychotics. FDA has given the compound breakthrough status-I believe it is the first time the FDA has accorded such status for an antipsychotic drug. On the basis of this and some encouraging Phase III trial results, we plan to submit a new drug application for Nuplazid during the first quarter of 2015; if approved, we intend to commercialize Nuplazid for the indication in the US by establishing a specialty sales force. Looking forward, we see Nuplazid as a platform for additional development programs in neurology and psychiatry, including Alzheimer's psychosis, where the market is much bigger than for Parkinson's, and which is the focus of another trial we have underway, and for maintenance therapy in schizophrenia, where the need for better compliance is great.

Worry lists

Looney: The common thread in these brief comments is the challenging nature of the science you are pursuing. The science is big, the ambition is outsize, but your companies are small. How do you manage the low points when the problems mount and resources are eclipsed by investor expectations?

Rombotis: Is there a day in any week when we don't face this dilemma? I have worked in the industry for 30 years. Experience has taught me to be a contrarian because, in this business, the risks are always high-but the rewards can be tremendous. And I am not speaking from a purely financial perspective. When a physician tells me our drug pulled a patient back from the brink, and that three years later she is still in remission because of one small pill taken prior to every meal- ell, then, what we have done is actually a big deal. It's well worth those risks.

Schatzman: The major pharma companies have a different perception of risk. It is important not to follow their lead but to stick to your own convictions. We certainly faced some skeptics when we pitched the idea of investing in an expensive large-molecule design when the migraine market was being commoditized through generics. Some biologists questioned the logic of using monoclonal antibodies in CNS. Our response emphasized the treatment implications that would follow from our success: we are building a medicine not for patients with that one-off occasional migraine, but for truly desperate patients suffering from 20-plus migraines a month. It's an entirely different space in terms of medical need, one that drives our will to succeed.

Rothera: Years ago, when I began working in biotech, I was often refused a hearing by physicians who doubted there was any clinical value in antibody-based treatments. Today, this segment is a $30 billion dollar business. My lesson from this is to be wary of conventional wisdom, and to pursue objectives based on what the science tells you.

Regulation: Right for science?

Looney: All of you are making big bets on truly novel technologies that require long lead times for validation. Down in the trenches, as you are, is the regulatory process fit for purpose in helping small companies build that validation case and speed time to market?

McGlynn: Some recent FDA reforms could be helpful to our field, including fast-track designation and accelerated approval status based on Phase II data. Both sponsors and the FDA carry an obligation to make the process work. Companies must focus on educating all stakeholders, including the regulator, about the science and clinical merits of their technology. The stem cell field has a heavy responsibility here. This is the only way to build trust: to show the FDA that your data is strong and verifiable, and when there is a problem you will come forward and 'fess up to it.

It's equally important to create a "no surprises" reputation with regulators, who frankly confront the same challenges as we do in keeping up with the constant, rapid changes, in technology and science. As CEO, I prefer a "no hype" stance where we simply let the data speak for itself. I can't say this works for everyone-Stem Cells may be paying a price in the marketplace, with a lower valuation among investors than might be the case were we to try to oversell ourselves.

Hacksell: Small companies have to differentiate their value proposition to a degree that the major players do not. Positive investor sentiment is critical to our growth prospects. You must spend time with them, creating a strong narrative where you tell them what you have done and what you are going to do, and do it repeatedly until you obtain their trust. I usually meet with potential investors as many as 10 times until I can be certain they understand our story. If you nurture the relationship and keep things honest, there is the opportunity to get them on board.

McGlynn: Further to Chris Haskell's point, investors and companies alike have not yet realized the potential for positive impact deriving from the initiatives of regulators to improve incentives for medicines for small populations or diseases for which there is no therapy. Literally, the old clinical trial nomenclatures attached to Phase I to Phase II to Phase III are fading. There are numerous examples where one single trial has been sufficient to obtain FDA approval. It means that the regulator is demonstrating a much higher degree of flexibility. A successful innovator will study that trend very carefully and adjust its strategy for approval. But it's even more important today to think beyond the regulatory proposition to the value proposition in the marketplace. Cell therapy companies have stumbled repeatedly here, either due to cost of goods or manufacturing and reimbursement issues.

Rothera: Investing in clinical trials can be a high-stakes game. Often a company enters uncharted territory in determining which endpoint to select for regulatory approval while also striving to meet the needs of payers. European regulators are pilot-testing a concept called adaptive licensing, designed to bring down the cost of rare disease medicines by focusing on very small populations where the drug is expected to have the greatest benefit, and focusing on analyzing the risk/benefit ratio to speed access to the therapy for patients with high unmet need-in return for a lower introductory price. The catch is that the licensing decision can be revisited over time, in the light of evidence from real world use of the product. This could require additional investments in observational studies or follow-up trials, as well as the possibility that the therapy's initial indication could be changed or even withdrawn. Clearly, for this program to work, there must be a high level of trust and cooperation between regulators, the company, and, in particular, the reimbursement authorities.

Rombotis: I wonder about the feasibility of combining the scientific complexity of licensing approval with the economics of drug pricing. Industry lacks the evidence and information base to anticipate the expectations of the other stakeholders. Payers and registration bodies have different grounds for decision-making, which may-or may not-be based on legislative authority. From a purely political point of view, industry also has to recognize that payers operate within fixed global budgets for medicine. That single fact can trump what registration authorities might see in the clinical dossier.

Every other industry except our own is pursuing a market access strategy based on the principle of satisfaction guaranteed-or your money back. It's time to proactively shape the process instead of waiting for change like ostriches, heads in the sand. This means presenting a clear, value-based proposition to regulators and payers, and managing clinical development to avoid front loading all the risks and costs to Phase III, which virtually guarantees your offer price is going to be unaffordable for many constituencies.

Top of mind: Pricing, access, and IP

Looney: Let's move to P&R issues. How well is payer activism translating to more options for patients, at affordable prices?

Fernandes: Government is supporting some of the development costs of new antibiotics but this is countered by a misaligned approach to reimbursement. Volume sales potential is a key driver of how an anti-infective medicine developed in the private sector gets priced. Public actions like out-of-pocket tiering of reimbursement means that physicians are not empowered to choose the best antibiotic for the patient's condition. You have to try all the weaker drugs first before the patient is really ill and one of the newer, more potent drugs is authorized. I understand the argument about demonstrating value, but restricting access to the full clinical armamentarium can raise the overall cost of treating a runaway infection.

Rothera: This trend is driving much of the effort to personalize medicine, by targeting small patient populations for drugs whose benefits can more easily be demonstrated using available data. Everyone talks about a "global price." The reality is that not only are geographic markets very different, with variable delivery systems and levels of affordability, but so, too, are the product/therapeutic segments-these are being sliced and diced, according to genotypes or other measures of clinical differentiation, to a level not seen before. Technology now allows that.

Schatzman: Small companies are highly vulnerable to industry-wide pressures on pricing. All it takes is one letter from a senator complaining about prices for one product or a therapeutic category to raise questions about the sustainability of our entire business model. Some categories have seen price adjustments in the double digits due to concerns raised in Congress. In practical terms, that means you cannot raise the money you need, which over time affects the pace of innovation in the industry at large. It's counterproductive.

Looney: What can be done to build a more positive consensus on the link between pricing and support for innovation? Sick fund payers in Germany are suggesting companies could voluntarily furnish more data on the R&D costs they incur in development as a way to justify a premium on price. This concept is embedded in the US ACA reform law for insurers, who must certify that 85% of their revenues are earmarked to support patient claims. Might this provide a possible way forward?

Fernandes: As a small company with an expensive development program for an oral antibiotic, where there are few other alternatives, I know we are going to be pushed on the link between cost and price. We are keeping detailed records of these costs. Our costs are significantly higher today, precisely because of the priority that government attaches to our progress. The FDA, for example, is constantly requesting more information and data to support our dossier submissions.

Rothera: Asking industry to account for its R&D costs on a per-product basis raises some questions. Is there an agreed methodology to address the unallocated costs of "dry holes?" Do we add the funding of the extensive post-marketing study commitments that are increasingly made contingent on the grant of the registration license? What about the infrastructure that we must build to actually bring the new drug to patients, a cost which weighs most heavily on smaller companies?

Haskell: The main cost driver can never be allocated: it's the nine companies that failed to bring a compound to market, for every one that succeeded. Drug development is expensive because there is no consolation prize-the failures become part of our official P&L statement and are thus borne entirely by the company investing in them.

Rombotis: Little is said about the cost of exploratory research not tied to the development of a particular compound. Yet this is critical to advancing medicines innovation overall. In addition, the stakeholder interests outside the drug industry are a major source of inefficiency. We rarely hear about the pricing distortions in oncology, whereby physicians benefit from an add-on percentage to the ex-factory price of an injectable chemotherapy drug because it is administered in-office, as opposed to being dispensed in pill form. I suggest our industry might be better off in working to remove these distortions through the commercial process rather than trying to educate a politician in a debate that will die out because there is no substance to the interchange, only rhetoric.

McGlynn: Another item is why perceptions of what our industry does are so different than other industries facing similar circumstances. The perfect analogy is the oil and gas trade, where companies drill 10 dry wells for every gusher. That's the same for us, but we face an added social and political challenge because biopharma investments are expected to accomplish something fundamental: to improve the health of humanity and be accessible to all.

Cohen: There is a disconnect between the price of a drug and its cost. Most people are unable to distinguish between these two terms. In particular, there is a lack of understanding as to how development time cycles and failures in our industry raise the cost of a new drug. One of the unstated arguments in favor of innovation is that innovation, viewed over the long-term, actually contributes to lower costs where it really counts, which is in the health outcomes experienced by patients.

Looney: Is IP still a mission-critical function in biotech today?

Fernandes: There is no doubt as to its importance, especially in my business, where US law offers developers of new antibiotics an additional five years of patent protection. This has had a measurable impact on the pace of innovation in our field. Actually, the patent system can contribute to the quest for better access at affordable prices, for all medicines. Innovative approaches like extending the patent term for therapies already on the market in return for investing in an area of unmet medical need is one way to accomplish that goal.

McGlynn: An interesting dilemma has emerged between an approach that focuses on protecting know-how as a trade secret and the traditional strategy of filing a patent, which of course requires disclosure of the innovative step behind an invention. Some of the technology being pursued now will take more than the life of the patent to get approved, much less commercialized. This is certainly true in stem cells, where the perceived value of patents is declining. On top of that, there is a disconcerting trend in the courts where the "common good" argument appears to sway judges and juries over the rights of patent holders.

Cohen: Pressures are mounting to disclose more about the technologies you are attempting to bring to market, especially among potential investors. The message is "if you won't tell me exactly how it works, I won't play."

Fernandes: Everyone wants to know about your manufacturing technology for a compound in development. Process patenting is more prominent than ever to successful commercialization; the details have to be kept close at hand.

Rombotis: Years ago, in one IP case I was involved in, we realized at an early stage in the patenting process that we were required to deposit our master cell line with a tissue-type culture collection. That's like handing another interested party the keys to your factory. We took a courageous decision to delay filing for a discovery patent on the compound. We lobbied the US patent office to change the cell line deposit requirements and allow us to deposit the actual antibody, instead of the parent cell line. It took four years of delay to accomplish that-a huge extra risk with regard to being able to attract any funding over that time.

Haskell: IP issues are among the first things to come up in our negotiations. We want to know how the IP runway for the asset was laid out, how effectively you have built out from that, in terms of patent coverage, whether it is formulation or use patents, in addition to discovery protection. The big challenge right now is protection against commercial rivals who are moving in the same space or even running ahead of it-the science is advancing rapidly in areas like cell and gene therapy. So we are going to have to learn how to do some things differently in IP. But we have no doubt as to its overall importance to the business.

Patients and partnering

Looney: Patient groups are becoming more involved in biotech's drug development activities. An example is the recent decision of the Cystic Fibrosis Foundation to sell its royalty rights from an initial investment it made in Kalydeco, the new potential breakthrough treatment from Vertex, to another drug company. Is this a positive trend or will it create more complications for inventors?

Rothera: It surely is an extraordinary development, simply from the vantage point of seeing a patient organization with the resources the Foundation will now have to promote its work. The $3.3 billion windfall creates the opportunity to invest in a whole series of activities around different technologies. It also leverages the strength the Foundation already has through its networks and connections in clinical trials and academic research. As a longtime advocate for more investment in a cure for cystic fibrosis, the Foundation now has the assets to do so directly.

Cohen: I have a concern that direct patient group engagement in research may skew the system in unpredictable ways. I like competition, but the point must be made that when patient organizations invest capital to influence R&D, they cede their neutrality and develop conflicts of interest.

Hacksell: I see patient organizations simply as a catalyst to draw more attention to a disease. On balance, that is a good thing.

Looney: I'd like to ask Chris Haskell, as a big Pharma interlocutor with the small biotech community, what you identify as the key criteria for a strong partnership.

Haskell: The principle that underlines all our relationships-from early academic post-ops to multi-target options deals at the preclinical phase to licensing of late stage assets-is knowing the people involved well and leveraging that trust to align Bayer's value proposition with their own capabilities and interests. As such, initial contacts and scouting with no specific deal in mind are very important. It builds the base for a productive deal, when the other party knows firsthand about what we are bringing to the table, and vice versa. It also helps us in our work to get out in front and identify where that next cycle of innovation is going to be.

Biotech vs. big Pharma: Size, scale, and culture

Looney: From a personal point of view, what would you identify as the single biggest barrier that big Pharma has in placing risky bets on unproven emerging technologies that might drive this next cycle of innovation?

Haskell: For most big companies, research is a zero sum game. Resources are not infinite. In our case, we have a structured decision process founded on the principle that we don't take on anything new without giving up something we are already doing internally. What this means in practice is we take a very hard look at emerging technologies because, if we invest there, we take away from activities that perhaps we know more about.

Rohman: Risk aversion is not unique to pharma, big or small. My company is privately held, quite small, and very entrepreneurial, yet our ownership is cautious in assessing ventures. This is a strategy that has paid off well for us for six decades. We don't have the luxuries that larger companies have to spread their risk across several speculative scientific and commercial opportunities. Schatzman: There is a human element to this issue. In many organizations, large and small, you put your career on the line when going forward with any innovation-by definition, the action will challenge the way thing are done. Failure might mean diminished career prospects or even the loss of your job. In other words, it's easier in these organizations just to say "no." Truly innovative companies have an ethos that encourages employees to get to a "yes." These are two radically different approaches to doing business.

Looney: What calculations come to mind when evaluating the merits of staying private or being publicly held?

Fernandes: Publicly held companies in biotech have to face down the unrelenting pressure that assumes they will be acquired by someone bigger, who is only interested in gaining control of an asset, not the company. When you are private, the pressure is much less.

Rothera: One thing I have learned from being in both situations is that as a privately held company, our key people spent an undue amount of time worrying about capturing that next few million dollars from collaborations and VC funding. Frankly, the focus on short-term capital was a drain on more important activities. As a public company, you have access to a much more significant stream of funding. This makes it possible to think more strategically about the long-term value creation vital to market success.

Schatzman: Small companies face a stark reality: everyone around the negotiating table is counting their eggs in expectation of being acquired. The less stock you have out floating in the market, the better the return for shareholders when that big deal comes through. When we were privately held, the discussion with investors always seem to lead to dilution of the offer-if you want $25 million, they counter by asking us to take $20 million. Being public means having greater accessibility to larger amounts of cash. At the same time, there are those regular quarterly results and the calls you have to make to shareholders, where the trade off is more pressure to perform. And you face share price setbacks caused by external forces you don't control, like a drop in shares after a congressional hearing on biotech pricing. If you are private, you don't have to confront that kind of shock.

Future states: Biotech's growth agenda

Looney: Can we identify the key emerging areas of growth in biotech? What interesting plays can we expect from science in the next five years?

Rombotis: Immunooncology (IO) is finally hitting its stride, particularly as a pathway to more targeted and less invasive cancer treatments. The challenge remains in understanding how to combine immune therapies, with each other or small molecules, to enhance their effectiveness around specific cancer mutations. The typical evolution of science is you get some early adopters who attract the attention of other researchers, which leads to a better understanding of what it takes to tackle the hard issues in the field. Then you have a decade or more of incubation where work proceeds quietly, culminating in a real breakthrough that spawns its own imitations, that together define clinical benefit for patients. I think within five years we will see more combinations of small molecules and IO biologics. This is important, because IO biologics and small molecules may play complementary roles in blocking the ability of cancer cells to multiply, while also reprogramming-re-sensitizing-cells that have become resistant to therapy as a result of the process of mutation or clonal evolution.

Rothera: We are also at an exciting stage of understanding RNA, which is leading to many alternative approaches to treatment for diseases, from rare to chronic. The interesting fact is that companies are not pursuing a uniform approach, which will stimulate innovation overall.

Cohen: Decoding of the human genome is unleashing a flood of genetic data that can be applied to study populations of patients, large and small. Such data allows for a better understanding of disease mechanisms, which are key to finding efficient drugs. Gene therapy and stem cell therapies are less sensitive to the lack of precise molecular knowledge, as both approaches replace deficient systems in the body. However, as it is unlikely that any approach will be 100% efficient, combining these different methods-for example, plenotherapy with stem cell therapy-could greatly benefit patients. This holds real promise for progress in treating diseases.

Looney: What is the one priority that you would propose to fellow stakeholders in the biotech sector in helping to improve the industry's growth prospects and enhance the conditions for innovation in drug development?

Hacksell: Elimination of regulatory hurdles to speed the time to market is critically important to our future. The FDA is aware of this and is reaching out to industry to examine additional ways we can make innovation happen faster in its journey to the patient. One of the more promising inquiries is for more flexibility and creativity in the design of clinical trials, which is the major area of expense for most compounds in development.

Schatzman: We'd like to see more structure to the partnership that all stakeholders now agree is necessary to make the transition to commercialization faster and more seamless. This has to happen well before product launch, and the aim has to be explicitly clear: market access.

Rombotis: There must be more specificity in incorporating patient-reported outcomes to establish the value of drug interventions in the healthcare system. The FDA is for the first time producing draft guidance on validated standards of such outcomes that can be applied to bolster evidence compiled through clinical trials. The agency is working to give patients a voice in the demonstration of a drug's clinical effectiveness and to compare against the quality of life they experience with-or without-the medicine. If you give a cancer patient a drug that will shrink their tumor without contributing to early mortality, while he is at home with his grandchildren rather than intubated in a hospital room, then that is a good deal, not just for that patient but for society. We can be confident that, as this process builds, the value of drug therapy will be reinforced, as an antidote to the budgetary silos that often leave drugs vulnerable to cost reduction pressures. So if we embrace this movement and help shape it, we will gain in social acceptance.