Kerentech

Three separate research programs in Seattle were awarded about $5 million each by Washington state’s Life Sciences Discovery Fund.

Winning grants were:

— Stephen Friend of Sage Bionetworks, of Seattle. His program focus, according to the fund, is “to more accurately and comprehensively model biological systems through their network of interactions to develop safer and more effective drugs and diagnostic tests.”

— Thomas Matula of the University of Washington. His program focus, according to the fund, is “to develop, translate and commercialize new ultrasound techniques for molecular imaging and therapy.”

— Peggy Porter of Fred Hutchinson Cancer Research Center. Her program focus, according to the fund, is “to facilitate cancer treatment through comprehensive biological collection and distribution.”

Fund officials said 19 proposals were submitted before the three winners were chosen.

Started in 2008, the fund draws $35 million a year for 10 years from a settlement with tobacco companies. It’s administered by an 11-member board of trustees. The governor appoints seven trustees, and four are appointed by legislators

THE BIOTECH INDUSTRY is vital to the Massachusetts economy and the complex drugs made by companies here deserve robust protection as intellectual property. But giving exclusive markets to those companies for too long means that the drugs are priced beyond the reach of some patients for years – and it only adds to the upward pressure on health care costs.

But giving exclusive markets to those companies for too long means that the drugs are priced beyond the reach of some patients for years – and it only adds to the upward pressure on health care costs.

That’s too long, more than double the five years of protection from competition guaranteed for conventional drugs. It’s quite likely that extensive lobbying accounts for some of the disparity; The New York Times recently reported that lobbyists for the biotech firm Genentech ghostwrote parts of official statements made by 42 members of Congress on the parts of the health care reform bill related to generic biotech drugs.

The 12-year protection is also excessive because competition from generics is not likely to erode the ability of the original biotech manufacturers to continue reaping profits. There are onerous technical barriers to making so-called biogenerics, unlike generic versions of conventional medications, so companies that invent original drugs are likely to retain market share despite the new competition. In Europe, where a path for approving generic versions of biologics already exists, the original drugs’ prices have dropped only by about 25 to 30 percent, according to the New England Journal of Medicine.

The downside of this, of course, is that approving generic versions is unlikely to eliminate the drugs’ annual five- and six-figure price tags anytime soon.Yet even modest savings add up. Medicare spends more than $2 billion per year on just one biologic drug, Epogen, used to treat anemia in kidney patients. The Congressional Budget Office estimates that the government could save more than $9 billion over the next decade if biogenerics come on the market after seven years. The long-term savings would be even greater.

In clearing the path for generic alternatives to expensive biologics, Congress should enact a shorter window of market exclusivity than 12 years, but more than the five years afforded to simpler, conventional drugs. A protection period that falls directly in between these extremes would strike a balance between encouraging companies to make biologic drugs and making them affordable.

In this case, what’s optimal for Massachusetts drug firms is not good for the nation or for suffering patients. A compromise is necessary. 

Matthew Herper, 10.16.09, 6:00 AM ET

Just a year ago, it seemed a near certainty that the global financial crisis was going to decimate the biotechnology industry.

In January, half of 370 small biotech firms had less than a year of cash, according to the Biotechnology Industry Organization. Seventy biotech stocks were trading at less than $1 a share. Yet financing was hard to come by, with no new initial public offerings. In March, Stephen Brozak at WBB Securities warned of “zombie biotechs,” companies without the financial wherewithal to get research done.

But biotech didn’t die off–it came roaring back. A Forbes screen of the industry shows that 50 companies that traded for less than $1 a share in the past 52 weeks now trade for at least $2, and 30 of them sport market capitalizations of more than $100 million–13 have ballooned to more than $200 million. Ten have seen a price increase of 1,000% or more, although most still count as risky micro-caps.

What happened? For the most part, the same thing that always saves biotechnology companies: luck. More specifically, “binary events” like clinical trial results, regulatory approvals and other signs that moribund products might sell turned these companies around.

Human Genome Sciences, which just months ago traded for 50 cents a share, is now at $19.50 thanks to blowout results for its lupus drug Benlysta, an increase of more than 4,000%. Before that, the smart money was on failure.

Vanda Pharmaceuticals had gotten a “not approvable” letter from the FDA for its antipsychotic, but managed to get the FDA to change its mind. Then, this week, it sold the rights to the drug to Novartis for milestones and a royalty. It’s up 2,000%.

Jazz Pharmaceuticals has rocketed more than 1,000% on data that its narcolepsy drug Xyrem may work in fibromyalgia.

The most amazing comeback is that of Vermillion, a tiny developer of diagnostic tests that is still in Chapter 11 bankruptcy. The company, which developed a blood test called OVA1 to measure the likelihood that ovarian tumors are malignant, was facing worries about whether it could pay bondholders before the financial crisis hit. Its stock was delisted from the Nasdaq on Sept. 26, 2008.

Vermillion filed for bankruptcy protection on March 30, 2009, when it had less than $1 million in cash left. The entire executive team resigned to save cash, continuing to work on a consulting basis. The board took payment in equity. Only three employees–one in regulatory affairs, one in quality control, and one to handle financial affairs–remained on the payroll. Gail Page, the company’s executive chairman, says the only way she could keep the company alive was to put it in suspended animation.

On Sept. 11, 2009, the Food and Drug Administration cleared the OVA1 test, and Vermillion shares began to rocket upward on the Pink Sheets. Quest, Vermillion’s marketing partner, gave Vermillion $1.5 million in funding and said it wouldn’t demand that a $10 million loan made in 2005 be paid off immediately. Its shares are up 180,000% from their 52-week low. Page says her investors include Quest and the family of biotech giant George Rathmann.

Vermillion is still a bankrupt company trading on the Pink Sheets, with all the risks that implies. Right now, it doesn’t have an estimate for the potential market for the OVA1 test. The company has until Nov. 29 to file a plan of reorganization. Eventually, it hopes to re-emerge on the Nasdaq.

Not every company has escaped. Some, like genomics firm DeCode Genetics, are still living on as hobbled stock. Others, like brain drug maker Memory Pharmaceuticals, got bought up cheap. (In Memory’s case, the buyer was Roche.)

Brozak, the analyst who warned of biotech zombies, notes that Big Pharma’s troubles are keeping biotech valuations up. He points to Johnson & Johnson’s $1 billion purchase of Cougar Biotechnology as one of the deals that keep biotech investors hoping that their stock will get acquired, too.

Phoenixes Or Flukes?
These biotech companies were all recently penny stocks, but now have market capitalizations of more than $100 million after price increases of 1,000% or more.
Company Name	Recent Price	Market Capitalization (Millions)	52-Week Low	Increase (%)
Vermillion Inc.	18	100.8	0.01	179900
Human Genome Sciences Inc.	19.42	3,118.30	0.45	4216
Vanda Pharmaceuticals Inc.	11.88	313	0.45	2540
Keryx Biopharmaceuticals Inc.	2.24	127.4	0.09	2389
Jazz Pharmaceuticals Inc.	8.66	241.4	0.52	1582
Winner Medical Group Inc.	6.08	130.8	0.38	1500
Ista Pharmaceuticals Inc.	4.42	138.5	0.29	1424
Helicos BioSciences Corp.	2.64	194.1	0.21	1157
Antigenics Inc.	2.15	186.4	0.19	1032
BioCryst Pharmaceuticals Inc.	9.47	352.4	0.85	1014

Sources: Interactive Data and Reuters Fundamentals via FactSet Research Systems.

One of the inconvenient truths of the biotech and pharmaceutical industry is that only about one out of every 10 drug candidates good enough to enter clinical trials passes all the tests to graduate as an FDA-approved therapy. Every major drugmaker is searching for ways to boost that success rate, and yesterday I got an interesting glimpse into how the world’s largest biotech, Amgen, thinks about how to raise its game.

Amgen is based in Thousand Oaks, CA, but has 900 employees in Seattle and about 200 more in Cambridge, MA, many of whom play critical roles in the perilous early steps of R&D where a lot of time and money get wasted. I got an overview from Amgen’s senior vice president of translational sciences, Joe Miletich, while he was in Seattle this week to meet with employees (and briefly enjoy the view of Elliott Bay from the office CEO Kevin Sharer sometimes uses).

Amgen (NASDAQ: AMGN) had $15 billion in revenues a year ago, largely from products for patients with anemia, autoimmune diseases, and cancer. About one-fifth of that revenue, $3 billion, was poured into the R&D budget. Much has been written about how Amgen coasted on the success of its first two blockbusters in the 1990s, acquired another one in 2002 from Seattle-based Immunex, but has more recently sought to re-ignite its innovation engine, particularly for cancer drugs, this decade under R&D boss Roger Perlmutter, a former Merck executive and University of Washington immunology professor.

Since it often takes a decade or more to develop a new drug, this effort is still a work in progress, but Amgen now has 50 drugs in the pipeline from the late discovery stage through Phase III clinical trials. Amgen has organized the pipeline with three key guys who report to Perlmutter from beginning to end. David Lacey runs the early discovery, Miletich handles translational steps from there through early-stage clinical trials, and Sean Harper is responsible for late-stage clinical trials.

Miletich was formerly a professor of internal medicine and pathology at Washington University in St. Louis and a Merck executive. His team in the middle of the R&D machine takes drugs after they’ve graduated from the discovery phase, and then runs them through a battery of genetic tests, cell-based tests, animal tests, models of disease, and biomarker studies to see which types of people might respond to such a treatment. The goal is to test whether the candidates are safe, and whether there’s “evidence of biological impact” that gives the company “a high degree of certainty” on whether the drug is actually hitting the desired target and doing what it is supposed to do in people, he says. If done right, this work is supposed to answer which of those 50 drugs on the roster, and which of the 6 to 8 new ones that enter human trials each year, are truly worthy of putting major-league resources behind in the ultimate proving grounds of Phase II and III clinical trials. The rest of the candidates, Miletich says, may need more long-term observation in people, while some should be killed early before too much money is wasted, he says.

This isn’t revolutionary stuff—it’s what other companies do, Miletich acknowledged. But it is an effort to weave together basic research and clinical development in a closer way than had been done in the past, when research might just hand over a drug to development to see if it worked, Miletich says. He says this more integrated, or “translational,” approach should pay off directly by raising Amgen’s success rate above the usual industry rule of thumb.

“Over the next five years, I’d like to see us have about a 20-30 percent higher success rate over the historical average,” Miletich says.

That sounded pretty bold, but Miletich was quick to throw in qualifiers.

There are apples-to-oranges comparisons when stacking up a low-risk program to develop another statin drug for lowering cholesterol, as opposed to a new drug for lupus, which uses a completely new mode of action for a disease that doesn’t have effective therapies. Amgen has been known in the past to take on some of these lower-risk projects, like making longer-lasting versions of erythropoietin (Aranesp) and pegfilgrastim (Neulasta). But now Amgen’s pipeline is a bit more daring, with about two-thirds to three-fourths of its candidates being aimed at diseases where no one has a marketed product that works the same way, Miletich says.

One of the most interesting examples that Miletich offered up is a new antibody drug emerging in Amgen’s pipeline, called AMG-785. This is based on biological work that says a protein called sclerostin normally neutralizes production of osteoblasts, the cells that build new bone. Some patients with rare genetic abnormalities, who lack the gene to make sclerostin, have been shown to end up with severe deformities from bone overgrowth by the time they are in their 30s, Miletich says.

Even more interestingly, patients with only one of two functioning copies of the sclerostin gene have no symptoms of disease, but they have really strong bone mineral density, which means they don’t develop osteoporosis later in life, and usually “they don’t break bones” in accidents, Miletich says.

So Amgen’s vision is to build on that fundamental genetic insight to create a drug that does that same thing, blocking sclerostin in a carefully calibrated way. With some clever in-house protein engineering, Miletich says Amgen showed an experimental antibody drug could block the correct functioning of the sclerostin protein and offer the desired bone cell-building effect in early stage studies. That drug, code-named AMG-785, is now one of the molecules that Amgen and its partner, Belgium-based UCB, are most excited about based on early studies that showed “a very robust response with a single injection,” Miletich says. The drug still has a lot to prove—it’s now in one Phase II trial and entering another—but it has forced its way to the top of Miletich’s priority list based on all indications from the early-stage studies.

There’s also a business case to be made for such a drug, and Miletich was no stranger to that. Nothing currently on the market for osteoporosis can build new bone. This product also dovetails nicely with the most visible drug in Amgen’s pipeline, denosumab. That product candidate, currently awaiting FDA approval, has been shown to lower fracture risk of patients through a different mechanism, stopping osteoclast cells from breaking down too much bone. That drug could generate $2.2 billion in annual sales by 2012, according to a Rodman & Renshaw analysis. Any new product that does the opposite—building up bone—could be given to patients with early-stage osteoporosis. Those patients could be brought back to a healthy state, and then put on denosumab therapy for “maintenance” to keep them healthy.

“This could give physicians and patients both sides of the lever,” Miletich says.

Whether that turns out to be true won’t be known until the late-stage clinical trials either prove or disprove what Miletich’s troops have done so far in their methodical quest to understand what the drug is doing at early stages. Even with a $3 billion research budget that can buy every state of the art tool, and recruit world-class scientists, Miletich made it clear this is still a very humbling industry.

“I don’t like to overhype things,” Miletich says. “All of us in the field do a disservice when we celebrate success in a way that comes out sounding like we’ve answered everything. That’s not true. Human biology is enormously complex.”

By Robert Weisman, Globe Staff 

Life-sciences companies face a funding squeeze as pharmaceutical giants consolidate and financial markets cool toward biotechnology start-ups, industry leaders said yesterday.

“The biotechnology industry is a huge consumer of capital,’’ Peter Wirth, executive vice president at Genzyme Corp.,

the giant Cambridge biotechnology company, told a leadership panel at Suffolk Law School. “It takes a billion dollars to develop a drug. The critical dilemma now is how are we going to continue to pay for innovation.’’

In the past, drug development was funded by venture capital firms and other private investors in biotech and medical technology start-ups, but such backers have become discouraged by increasingly longer development cycles and a dearth of initial public offerings during the economic downturn, executives said.

At the same time, big pharmaceutical companies, which contributed funding through alliances with biotechs, have been acquiring one another, effectively shrinking the financing pool. The result is fewer bidders and joint venture partners for small and mid-size biotechs, said Steven C. Gilman, chief scientific officer at Cubist Pharmaceuticals in Lexington.

“As the large companies consolidate, there becomes less and less competition for investments in the medium-size companies,’’ he said. “The prices and the competition come down.’’

Yesterday’s panel was moderated by Susan R. Windham-Bannister, chief executive of the Massachusetts Life Sciences Center, in Waltham.

She said the center, created through the Patrick administration’s $1 billion life-sciences initiative, has helped to fill the funding gap through working capital loans, tax incentives, and strategic investments in start-ups. “This is an area where there are jobs,’’ she said. “And I really believe the way to get out of the current recession is by creating jobs.’’

But state money can go only so far. Wirth said more companies may have to adopt a “marathon model’’ of bringing drugs to market on their own. The previous “relay model’’ of conducting research and development and then selling it may now be broken, he said. “That model worked well until a couple of years ago, when the guy who was supposed to take the baton wasn’t there,’’ Wirth said.

Proximity to Academic Hubs and Capital Remains a Crucial Factor in Hatching a Thriving Cluster

Gail Dutton, Genetic Engineering News, Jul 1 2009 (Vol. 29, No. 13)

Regions are looking to biotech to make the difference between boom and bust for their economies, but it takes more

than tax incentives, buildings, and land to construct a winning biotech incubator. Unfortunately, the regions doing the planning often ignore that basic fact and proceed blithely onward despite a scarcity of the type of human capital and infrastructure that makes the difference between success and failure.

“A lot of things have to happen in order to have a successful biotech initiative, and the state can only do so much to build a better environment,” stresses Maik Klasen, senior healthcare consulting director at Frost & Sullivan.

Without the key ingredients, “it’s difficult to understand why regions think they can compete with established clusters,” muses Joe Panetta, CEO of BIOCOM, San Diego’s biotech association. Success, he says, “comes down to the ability to do the most innovative research.” Intellectual property must be on the cutting edge.

“Go to any established cluster,” Panetta says, “and there are strong universities.” San Diego’s companies can collaborate with researchers at the University of California at San Diego, The Scripps Institute, the Salk Institute, and other nearby stellar resources.

San Francisco companies have the University of California at San Francisco, Stanford University, UC-Berkeley and, to some extent, Cal Tech. Boston has Harvard University and MIT. Seattle has the University of Washington. Research Triangle Park is relatively near Duke and the University of North Carolina. Buffalo, NY, cites the Hauptman-Woodward Medical Research Institute, as well as the University of New York at Buffalo with its strong departments of chemistry, engineering, and bioinformatics.

Having worldclass researchers nearby fosters an intellectual climate in which ideas are exchanged easily and partnerships are developed. Consequently, both business and academia are strengthened. “The combination of abilities to do innovative work is a powerful stimulus,” Panetta says.

MaRS is another good example. Located in the heart of downtown Toronto, the MaRS facility is less than a mile from five major teaching hospitals, the Ontario legislature, and the University of Toronto. More than two dozen research institutes and Toronto’s financial district are also nearby.

“Collaboration is the essence of the new economy,” insists Ross Wallace, director of strategic partnerships at MaRS. “There’s a new focus on the power of institutions to generate intellectual property and ideas, and then build around them.”

Consequently, MaRS is a vertical incubator, with a wide variety of companies and stages of development. That mix helps companies better understand the conditions that foster growth. MaRS is home to more than 65 organizations, including The Hospital for Sick Children, the Ontario Institute for Cancer Research, Merck Frosst Canada, the McEwen Centre for Regenerative Medicine, Celtic House Venture Partners, AIM Therapeutics, and AstraZeneca Canada.

Talent Depth

“It’s all about collisions and density of collisions,” Wallace says, referring to the serendipitous results of bumping into brilliance again and again in the work environment and in social settings. That’s why clusters flourish.

“Incubators need close proximity to academic hubs and to key hubs for the city,”Anthony Johnson, CEO of Empire Genomics and partner at Buffalo Biosciences, says. A study of successful incubators, made while Buffalo Biosciences was in the planning stages, indicated a need to be within five miles of one of those hubs, he adds. In contrast, incubators that are physically isolated find development more difficult.

The nature of biomedical research today increasingly requires multidisciplinary teams that include genetics, bioinformatics, biochemical, and chemical expertise. Therefore, when institutes build new lab spaces, they are constructed in a way that causes researchers from multiple disciplines to interact. The University of Michigan did this in its 230,000-sq-ft Life Sciences Institute.

North Carolina, in a different approach, established a program that brings leading academic scientists into a company for one or two years, Johnson says. The scientists learn to work on commercial products, and the corporation gets the benefit of fresh insights.

Many of the regions hoping to build a biotech cluster, however, lack universities with strong programs that relate to biotech. “You have some level of innovation at each university,” Klasen admits, but “the highly ranked schools have more entrepreneurs, which increases the likelihood of spin-offs.”

So although a researcher may generate the ideas for the next blockbuster, to bring them to fruition there must be a pool of people with the skills not only to start a company but to help it grow. That means more than just the senior executives and scientists, but also the chemists, biologists, research scientists, and marketing and communications experts, cautions Steven Hochhauser, senior healthcare consultant for Frost & Sullivan.

Private Incubators

Private incubators are a relatively new addition. They can be a boon of innovation for pharmaceutical firms and help ensure early sales for young companies. The catch is that the sponsoring company has the right of first refusal regarding the output from companies in the incubators. The question then is whether the young company can become viable.

“Pfizer has an incubator here in San Diego,” Panetta says. Likewise, according to Johnson, “Biogen Idec is establishing an incubator in New York.” With an anchor tenant and emerging companies, the initiative helps Biogen Idec develop projects at lower costs and with less risk, integrate promising projects into its pipeline, and benefit from the cross-fertilization of ideas.

Capital

Very good companies can acquire capital regardless of where they are located. That said, it’s easier when the company is near the money because venture capital companies tend to concentrate on the dominant industries. Firms in biotech hubs like Cambridge, San Diego, or San Francisco can access local venture funds. Biotech companies starting in less biotech-intensive locations such as Oregon and Oklahoma will find that local firms are focused on other industries, so venture capital will be harder to attract.

Colorado is succeeding in this endeavor. Since committing the state to bioscience in 2003, bioscience investments through 2008 totaled $1.3 billion, ranking Colorado number 11 in the U.S. for bioscience venture capital investments, according to the just-released Colorado BioScience Association study. This was accomplished through state funding for proof-of-concept activities and through proceedings to strengthen bioscience infrastructure with increased university competency and business networks.

Training

Entrepreneurial support and training are vital to biotech start-ups. Brilliant scientific founders aren’t necessarily brilliant in business, and even experienced executives can be stymied by the regulatory considerations associated with bringing a drug to market. To fill in some of the gaps, the savviest business accelerators hold regular get-togethers and seminars.

For example, BIOCOM’s monthly meetings typically attract more than 200 people. It hosts more than 100 networking opportunities each year. Some of the topics have included financing trends, transitioning from the lab to leadership, a briefing on the key concepts of modern biology, and strategies to inspire innovation.

MaRS has a virtual education program dubbed “Entrepreneurship 101.” One February class features budgeting, another agrifood innovation. The classes are available at no cost, and anyone can register. The program also includes blogs and discussion groups such as the drug development and cancer targets groups. So far, MaRS has relied on viral marketing to get the word out.

Buffalo Biosciences has a seminar series that takes entrepreneurs through the entire process, including raising capital, grant writing, licensing, and working with universities for partnerships and tech transfer. “You have to take resident knowledge and transfer it to a body of knowledge people can use,” Johnson says. “Different technologies and ideas drive business.”

Support Services

“An incubator needs not just a group of accountants, but a group of experts with hands-on experience in taking a product from idea to market,” Johnson says. “This is totally different from the academic world.”

To provide that expertise, MaRS developed the MaRS Venture Group. This team of experienced investors, entrepreneurs, technology experts, and advisors works with companies to help them bridge the gap between entrepreneurial start-up and experienced growth company. The Venture Group provides market intelligence as well  as advisory services such as strategic planning, partnership and alliance building, intellectual property management, marketing and communications, sales strategy, channel development, financing, and human resource development. It works with groups outside the MaRS orbit, too.

Government Involvement

“The state or county can only provide infrastructure, land, tax breaks on capital equipment, etc.,” Klasen says. “For example, Southern California-based Amgen received a $10 million tax break when it located a new manufacturing plant near Chicago,” Hochhauser adds. That region’s goal is to develop a new biotech cluster.

Williamson County, Tennessee, is another example. With Nashville as its hub, the county decided to build a healthcare cluster that included biotech. Building on existing industry, the county developed the Cool Springs Life Sciences Center to house biotech and bioscience firms. BioMimetic Therapeutics is the anchor tenant.

In 2003, Colorado decided to make the biosciences a key driver of the state’s future economy. Since then, its universities have increased bioscience research capabilities and added classes to support biosciences. Colorado is capitalizing on its strengths in medical devices by expanding the biotechnology sales and use tax credit to medical-device companies, maintaining a dedicated bioscience staff for the Governor’s Office of Economic Development and International Trade, and making a long-term commitment by funding ongoing development projects, including medical campuses, technology parks, and superclusters. A Biosciences Executive Corps also has been created to mentor start-up companies, along with entrepreneurial support networks.

Quality of Life

Quality of life is a final concern in locating a biotech incubator. People expect—and require—a certain level of cultural entertainment. Singapore, for example, boasts symphony and theater, but found it needed something extra to attract the top- echelon executives and scientists it wanted for the Biopolis project several years ago. Therefore, it persuaded The Las Vegas Sands Corp. to open a Las Vegas-style casino in Singapore; the Marina Bay Sands is expected to open within a year.

What It Takes to Succeed

* Access to capital

* Innovation

* A critical mass of expertise

* Leaders experienced in all stages of development

* A diverse service provider community

* Experienced workforce

Increased VC investment will benefit the industry, patients and Israel.

Kenneth Abramowitz

Venture capital plays a vital role in the future of the life science sector in particular, and Israel in general. VC finances 30% of all innovations in the drug and medical device sectors.

The truth is simple: without these funds and the management capabilities they hold, innovation in the medical sector will grind to a halt. On the other hand, given adequate resources, the venture capital community can contribute to innovation, for the good of the industry, patients and Israel.

The state of the sector is important and cannot be taken for granted. The industry suffers from a significant lack of investment following a fall of 50% in support in 2009. In order to deal with the problem, the Israeli government must be proactive and work with the universities, hospitals and health institutions as well as private investors.

I’d like to suggest five steps that it is worth the government taking during 2009 and 2010 to increase investment in venture capital.

1. Allocating resources to VC: The government should allocate resources to venture capital through the Chief Scientist of the Ministry of Industry, Trade and Labor and other authorities that are involved in early stage financing. $50 million should be allocated over 10 years. This sum would be divided among existing funds by a supervisory fund and a fund or two would participate in every category. In order to receive financing a fund must raise private capital of at least double the amount being offered by the government. Only funds that invest at least 25% of their capital in Israel would be eligible.

2. Raising funding of innovations at universities: The government should encourage the universities to raise their funding of innovative applied research. At the same time universities and hospitals should support investments in start-up companies through between 5-10% of their donation reserves.

3. Tax benefits for VC investors: Capital taxes should be cancelled on all money invested in funds that was raised from 2009-2011 and at least 25% of capital is invested in Israel.

4. Income tax must be reformed to make Israel more business friendly. The required change would raise income from taxes and attract capital and jobs to Israel. As part of the reform in taxation law pre-rulings should be discontinued and when a pre-ruling is necessary a solution must be provided within a month at most.

5. There should also be reform regarding clinical trials: This reform should include changes and improvement in the supervision process for clinical trials by government regulators and hospitals, and this would speed up approvals and the start of new trials without compromising hospital safety. Israel can learn from procedures in the UK and US.

Kenneth Abramowitz is a co-founder and managing general partner of NGN Capital

Published by Globes [online], Israel business news – www.globes-online.com – on September 1, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

The Cambridge-based biotech giant has been struggling to overcome production problems at the plant that caused a summer shutdown and the temporary rationing of a pair of Genzyme’s key enzyme replacement drugs, Cerezyme and Fabrazyme. That makes Allston Landing ground zero for the company’s campaign to rebuild inventories of the drugs – and restore its reputation – in the face of mounting competition.

Last week, Poole, 45, hosted inspectors from the European Medicines Agency who wanted to see the improvements Genzyme had put in place to prevent a recurrence of the virus that forced the decontamination and sterilization of the plant. Poole marked the effort’s success by getting the sixth and last bioreactor up and running, shortly after 2:30 a.m. Friday, returning the plant to full production for the first time since the virus was discovered in June.

Next up: a return visit from Food and Drug Administration inspectors, who have been critical of Genzyme’s manufacturing operations over the past year and are eager to examine the new controls and procedures it has implemented over the summer.

“We know they’re coming back in the coming weeks or months, and we’re ready for that,’’ said Poole, who took over in early July as Genzyme’s senior vice president for biologics operations and site leader at the Allston Landing facility, which overlooks the Charles River.

The FDA inspection has yet to be scheduled, and officials at the regulatory agency are keeping mum on their likely timetable. “We don’t as a rule announce our inspections,’’ said FDA spokeswoman Karen Riley. But with the agency in recent weeks giving a pair of competitors, Shire and Protalix Biotherapeutics, approval to prescribe rival drugs more widely before they have won commercial approval, the stakes are high for Genzyme.

“I’m not sure they were as attentive to the problems at first as they could have been,’’ said Ira Loss, executive vice president at Washington Analysis, a research firm in Washington, D.C., that tracks regulatory issues. “The FDA wants to make sure somebody is responsible, that somebody is accountable for production there.’’

That somebody is Poole, who was born and raised in the Canadian province of Ontario and ran Genzyme’s production plant in Geel, Belgium, outside Brussels, for the past five years.

Poole had been scheduled to return this year to Cambridge, where she worked previously, in a corporate position in global affairs. But that plan changed after the FDA sent Genzyme a warning letter in February identifying deficiencies in its drug-producing equipment and processes that inspectors found at the Allston plant last fall.

Genzyme’s top executives decided to tap Poole to oversee operations at Allston Landing as well as a Framingham plant under construction. The new plant will also make Cerezyme and Fabrazyme, ensuring Genzyme has enough capacity to avoid rationing in the future.

Poole has quickly assembled a new management team. It includes new hires, managers from other Genzyme sites, and the woman she succeeded, Kathleen Retterson, who has taken a job as vice president of biologics and risk management.

Poole also is on a corporate steering committee that oversaw an investigation that determined the virus detected at the Allston plant was Vesivirus 2117, the same strain found twice in the past at Genzyme plants. In those cases, the company had enough inventory on hand to avoid rationing of its drugs.

Poole said her team at Genzyme has been busy all summer designing new tools for testing for the virus, scanning incoming raw materials, and segregating personnel and equipment in the cell culture prep area from other production areas of the plant. While it has ruled out many possibilities, the company still has not identified the root cause of the virus, and Poole said it’s not certain it ever will.

She said no effort will be spared to prevent another virus from contaminating the plant. “Do I feel like I’m under a magnifying glass?’’ she said. “I suppose. This is a vital effort for Genzyme. This is really being billed as a global program. We’re developing a remediation program that we’ll use at all our biologics plants.’’

Robert Weisman can be reached at weisman@globe.com.

The Finance Ministry and Chief Scientist’s fund will allocate 75% of capital to biopharmaceuticals and 25% to medical devices.

Gali Weinreb

The NIS 200-350 million national biotech fund is getting underway. Although the final tender has not yet been published, the Ministry of Finance and the Office of the Chief Scientist today published – a month early – a request for proposals (RFP) outlining the fund’s guidelines. The national biotech fund will be leverage to about NIS 1 billion through investment from external financial institutions. The tender’s first binding document will be published in a few months. By September 4, the public can submit responses to the outline guidelines. When the government announced plans for the national biotech fund, an argument broke out between industry parties over the sharing of the budgetary pie between medical devices and biotechnology. Another argument erupted over which companies would be eligible for funding: early stage start-ups and incubator companies, or mature companies. The RFP sheds some light on these matters. It states that the fund will allocate 75% of capital to biopharmaceuticals and 25% to medical devices, considerably than medical device entrepreneurs had sought. The RFP adds that if the biotech fund manager raise more than triple the supplementary government financing from private sources, the fund managers can invest the surplus at their discretion. The national biotech fund aims to help only Israeli companies in the industry to independently overcome the obstacles in registering drugs and medical products in the market. The vision is for at least one company to become an industry leader alongside Israel’s pharmaceutical leader, Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA). Currently, most biotech companies fail, sometimes due to financial reasons, or are sold at an early stage. Chief Scientist Dr. Eli Opper is leading the initiative for the fund, who launched the idea in 2006. The Ministry of Finance later joined the plan. The RFP states that the national biotech fund can only invest in companies undertaking human clinical trials of their products, a fairly advanced stage of development. This issue was also a source of disagreement in the industry: commercialization companies, incubators, and early-stage companies had hoped for support for very early-stage start-ups, since Israel has fewer than ten companies currently undertaking Phase IIb or Phase III clinical trials, whereas there are scores of companies preparing for Phase II trials. Investment in a company is limited to 15% of the fund’s cash. Investment can reach 20% with the permission of a joint Ministry of Finance and Ministry of Industry, Trade and Labor committee. If the fund managers succeed in raising two or three times the amount of government support, the maximum investment in a company will be NIS 150 million. This amount is in line with the fund’s objective of supporting companies undertaking advanced clinical trials. Another important question is who will invest in the fund. The RFP implies that Ministry of Finance and the Office of the Chief Scientist want 2-3-fold leverage on the money, in other words, a total of $300 million available for investment. Market sources believe that this is a very difficult time to find an investment institution willing and able to invest such an amount, even with generous government funding. The RFP states that the fund might be shares between two investors, which would bring the total amount of investment by any single firm to a more reasonable figure. A final question concerns the fund manager. The RFP states that the manager should be an entity independent of the investors, at least in terms of legal standing. The manager must have expertise in life sciences investment, and preferably with foreign experts on its board. The fund manager must promise to invest 1% of the fund and management fees cannot exceed 1.5%. Sources inform ”Globes” that currently no Israeli institutional investor has decided to bid in the tender. Some institutions said that they will not participate because of the terms stated in the RFP. The sources added that foreign investors have expressed an interest in the fund. Published by Globes [online], Israel business news – www.globes-online.com – on August 20, 2009 © Copyright of Globes Publisher Itonut (1983) Ltd. 2009

By Catherine Larkin

 

June 25 (Bloomberg) — Biologic drugs should be subject to generic competition in the U.S. after seven years, the Obama administration said, calling it a “generous compromise.”

 

Access to cheaper copies of medicines made by Amgen Inc., Roche Holding AG and other biotechnology companies is “a key element” in reducing health-care costs, White House officials said in a letter to Representative Henry Waxman obtained today by Bloomberg News. Brand-name companies have lobbied for 12 to 14 years of exclusivity, while Waxman proposed only five.

 

Americans spend more than $60 billion a year on biologic drugs to treat cancer, rheumatoid arthritis and other serious illnesses at a cost of as much as $200,000 for each medicine, Ernst & Young estimates. Unlike conventional pills, biologics can’t be copied even after patents expire. Patient groups, payers and generic drugmakers have battled biotechnology companies for more than two years over how to allow competition.

 

“Lengthy periods of exclusivity will harm patients by diminishing innovation and unnecessarily delaying access to affordable drugs,” wrote Nancy-Ann DeParle, director of the Office of Health Reform, and Peter Orszag, director of the Office of Management and Budget, in the letter dated yesterday.

 

Obama has urged lawmakers to rein in record health-care spending, expand coverage to the 46 million uninsured and modernize record-keeping. His proposed budget in February called for legislation allowing generic biologics after a period “generally consistent” with the 1984 law that provides five years of protection to most conventional pills and seven years of protection to so-called orphan drugs for rare diseases.

 

Health-Care Overhaul

 

Waxman, a California Democrat and chairman of the House Energy and Commerce Committee, sent a letter to Obama earlier this month asking him to discuss the potential savings from generic biologics and what can be done to prepare the Food and Drug Administration to regulate this new category of products.

 

The White House is conducting “a serious review of FDA’s existing authorities” to ensure that the agency can quickly take on the role of approving generic biologics once legislation is passed, DeParle and Orszag wrote to Waxman.

 

Generic biologics may be included as part of the Senate health committee’s plan to overhaul the $2.5 trillion U.S. health-care system, but lawmakers haven’t agreed to specific details for their proposal. The panel passed a bipartisan bill in 2007 that called for 12 years of exclusivity.

 

Advertising Effort

 

Drug-plan managers today began an advertising campaign urging lawmakers to reject proposals that would delay generic competition when biotechnology companies make “minor changes” to their formulas. The ad is sponsored by the Pharmaceutical Care Management Association, a Washington-based trade group representing Medco Health Solutions Inc., CVS Caremark Corp. and other companies that coordinate drug benefits for employers.

 

The U.S. lags behind Europe, where Teva Pharmaceutical Industries Ltd., of Petah Tikva, Israel, Novartis AG’s Sandoz division, of Basel, Switzerland, and Hospira Inc., of Lake Forest, Illinois, have won approval for copies of three biologic drugs.

 

Amgen, of Thousand Oaks, California, and Genentech, a unit of Swiss drugmaker Roche, are the largest U.S. makers of biologics. They say their medicines can’t be replicated like conventional pills produced through chemical synthesis because of complex manufacturing and finished products that have slight variances.

 

Amgen Comment

 

“Without a fair and sustainable cycle of investment and returns in innovative R&D, biotech discovery will be stifled,” said David Polk, a spokesman for Amgen, in an e-mail today. “We look forward to working with Congress on legislation which strikes a necessary balance.”

 

The Biotechnology Industry Organization, a Washington-based trade group, has backed a measure from Representative Anna Eshoo, a California Democrat, that would set a high bar for approving generics and only after a brand-name product was on the market for 12 to 14 years.

 

Generic biologics may be sold at a 10 percent to 30 percent discount, allowing for “substantial consumer savings” without eroding market share for brand-name drug companies, the Federal Trade Commission said in a June 10 report.

 

Amgen’s Epogen for anemia and Neupogen to boost white blood cells after chemotherapy will probably be among the first biologics copied in the U.S., Ronny Gal, an analyst at Sanford C. Bernstein & Co. in New York., said in a Feb. 24 presentation. Both drugs already have competition in Europe.

 

To contact the reporter on this story: Catherine Larkin in Washington at clarkin4@bloomberg.net.