This is a guest post from Isabela Oliva. Do you have a response to Isabela’s post? Respond in the comments section below.

How to survive the expected and unexpected challenges of the start-up lifecycle in the biotechnology business

A major difference between biotechnology and information technology ventures is the time it takes to bring a product to market. Unlike Facebook and Google, innovation in the medical sciences world generally starts from the results of a long, government-funded basic research investigation.

If a scientific discovery is deemed promising and potentially lucrative, a patent is filed to protect the idea until it matures to a final commercial product. Initially, a patent value is very low due to the high risks and uncertainties associated with the early stage discovery, and it can be hard to attract interest and money from big corporations that have their focus on late stage product development. That is why biotech start-ups emerge. They cover the ground of developing the proof of concept of a new technology.

The early stage of the biotech start-up lifecycle is often called “the translational gap” or “the valley of death”, because of the technical challenges and scarcity of funds available for this early stage of product development. When the proof of concept is successfully established and clinical trials begin, patent value starts to increase, attracting big players in the Biotech/Pharma industry. At this more mature stage of the company, new demands arise, and the start-up company structure and priorities will be required to change in order to survive.

Great technology alone is not sufficient to bring a product from research to market, and leaders should be aware, from the beginning, that a start-up structure and focus will most likely need to change to successfully adapt to the different stages of the product development lifecycle.

This article correlates the different phases of a biotech start-up with the leadership skills necessary to address the most relevant challenges of each stage in an attempt to improve the success rate in surviving “the valley of death”.

Early Stage: The visionary and how to move the idea forward

The spark that ignites the creation of a new biotech start-up is the identification of an opportunity or breakthrough solution for problem in a given market. A passion for the cause, a strong belief in the idea and a clear vision of its application are essential to leadership during the first step of the start-up development.

At this stage, most leaders are the inventors or licensees of an intellectual property. In the early stage the leader must have a strong scientific background and be credible when presenting their idea to the scientific community and the general public. A can-do mentality is crucial, since the number of employees is limited and the leader will need to wear many hats to achieve the company’s goals at this stage, such as defining the technical concepts of the business plan and choosing valuable teammates and partnerships. Understanding the market, protecting intellectual property and securing early funding require a business mind-set, and it can be a challenge for scientists without prior experience outside of the academic world. Nevertheless, being passionate about the technology can help the leader motivate people to believe in the idea, and could also provide the stamina required to overcome the obstacles of the early stage.

Commercialization Stage: The fundraiser and science-to-product

The main goal of this stage is the development of concrete routes for commercialization – assuring sufficient funding to bring a product to the market. The day-to-day operations become more complex, resulting in a need for structured management, and a possibility of changing roles and responsibilities for early stage employees, including co-founders.

Commercial interest will likely replace the early-stage scientific focus as requirements for funding increase. The leader becomes the person with the power to realize the commercial vision for the company. Convincing founders that the priority is commercialization might require canceling projects that seem unprofitable, even if it means shifting the priority to a secondary project that had just entered the pipeline.

It is crucial for the leader at this stage to be strong in their decisions, yet sensitive to the company environment, in order to implement necessary changes without affecting employee relations in a negative way.  Communicating and managing change effectively is a key challenge at this stage. A growing biotech start-up cannot afford losing talented employees, many of whom are subject matter experts of the technology being developed. The implementation of professional processes, operations and organizational structures that might make some senior employees uncomfortable will most likely be necessary.

 Operational Stage: The strategist and how to deliver

At this stage the company needs to demonstrate its marketability by strengthening alliances, deals, and strategic partnerships. A shift in focus from project to transaction might take place, and the management team might be under pressure from its responsibility to investors and an imminent IPO or M&A. The main company goals are to maximize investor return while maintaining workforce retention, morale and culture. In general, it is a stage when keeping promises to business partners, investors, and the general public is extremely demanding. The leader now needs to lead a result-oriented, precise, and efficient management team, task comparable to those of managers in the large industry. Investors such as Venture Capital might want to bring their own CEO as a leader and take part in the company board of directors.

The Board and Exit Strategy

The board of directors plays a key role in advising the leader at all biotech start-up stages. Although t the leader chooses the board members during the early and commercialization stages, they may lose this control at the operational stage when investors’ pressure on ROI is high. The board generally plays an important role in deciding the exit timing and strategies, and it is the leader’s responsibility to clearly articulate the company’s strategy internally and externally. The ability to successfully react to change and to deal well with pressure is equally important when planning for the exit.

Conclusion

The growth of a biotechnology start-up company presents unique challenges that should be properly addressed to achieve the business goals at each stage. Common leadership skills such as clear communication and the ability to implement change are necessary throughout the biotech start-up lifecycle; however, a transition from a science-oriented to a business-oriented culture seems to be essential to survive “the valley of death”, and must begin within the company’s leadership. The ability to accept change, to adapt and to build and maintain relationships are the key points in the progression from science to business and finally the success of a biotech start-up company.

References

Leadership management needs in evolving biotech companies. Andreas Foller. Nature Biotechnology  20,  BE64-BE66 (June 2002).

 Managing change in biotech: startup and growth. Mary Ann Rafferty. Nature Biotechnology 25, 479 – 480 (2007).

Early-Stage Biotech Companies: Strategies for Survival and Growth. Wendy Tsai and Stanford Erickson. Biotechnol Healthc. Jun 2006; 3(3): 49-50,52-53.

About the author

This article was written by Isabela Oliva is a biological scientist currently studying technology transfer.  She can be reached at oliva.isabela@gmail.com.

This is a guest post from Susan K Finston, President of Finston Consulting. Do you have a response to Susan’s post? Respond in the comments section below.

India’s new Prime Minister  Narendra Modi has asked Ministers to set ambitious targets for the first 100 days of government,. While the BJP Party Manifesto calls for implementation of incentives for R&D Intensive Enterprises, BioPharma wallahs eagerly await clear signals on IP policy directions, where latest reports indicate that the Modi Government’s first act may be to expand pharma price controls by raising the number of drugs on the essential medicines list.

My earlier posting on the BJP victory addressed urgently needed regulatory reforms to restore luster to Indian drugs, devices and clinical research and ensure patient safety domestically and in highly regulated markets alike. For insights into potential patent law priorities – and leaving the important issues of data protection and patent linkage for another day –  let’s look back ten years, and revisit the policies of the prior BJP Government.

As full disclosure, I represented the international innovative pharmaceutical industry in a number of developing countries including India in the run-up to the WTO 2005 deadline for adoption of product patent protection. I remember vividly the excitement in the room at the World Economic Forum (WEF) in New Delhi on December 6, 2004 as we awaited remarks of then-Minister of Industry and Commerce Kamal Nath.  Speaking to the WEF plenary late in the afternoon, Nath electrified the crowd with his pronouncement that India would not be wishy-washy in meeting its WTO trade obligation to adopt product patents for pharmaceuticals, and that it would be good for India. Three weeks later, Nath ushered in the new era of product patent protection on December 27, 2004 with a detailed policy Statement outlining the rationale behind the BJP’s Ordinance relating to the Patents (Third) Amendment.

Let’s review the pharma / biotech highlights in the Ministry of Commerce and Industry Statement–keeping in mind that the Ordinance was watered-down by leftist amendments before passage in March of 2005 (after the BJP Government was voted out of power).

“Thus, while Indian companies spent not even a fraction of a percent on R & D ten years ago, today the larger Indian companies are spending in the region of 6 to 8 percent of their turnover on R & D. (The norm for major MNCs is 12%). The transformed Indian pharma industry is itself looking for patent protection – particularly the bio-tech sector, in which India has aggressive prospects.”

•   Continued growth of Indian Indian pharma exports to the lucrative US market depended then, as now, on maintaining a patent system consistent with WTO norms:

“When we joined the WTO ten years ago Indian pharma exports were less than 4000 crore rupees. A decade later our pharma exports are 14,000 crore rupees, and account for more than a third of the industry’s turnover. This is the result of the confidence built up in our industry due to our progressive adherence to our IP commitments. Now we are poised to achieve an annual compounded growth rate of 30% in order to double our pharma exports in three years. Some 60 billion dollars worth of drugs are going off patent in the next few years. Indian industry can grab a lion’s share of this – provided we are a bona fide member of the international trading community[.]”

• India also stood to gain from adoption of effective patent protection with growth in contract research organizations (CRO) services:

“Apart from manufacture of drugs, the pharma industry offers huge scope for outsourcing of clinical research. We have a vast pool of scientific and technical personnel, and recognized expertise in medical treatment and health care. India can take advantage of our strength in this provided we have the right legal framework in place, which provides IP protection to the results of that research.”

• The vast majority of drugs would remain ‘off-patent,’ including essential medicines, preventing steep price rises:

“The fear that prices of medicines will spiral is unfounded. In the first place we must realize the fact that 97% of all drugs manufactured in India are off-patent, and so will remain unaffected. These cover all the life-saving drugs, as well as medicines of daily use for common aliments. In the patented drugs also, in most cases there are always alternatives available.”

• The Act sought to balance access, affordability, and conformity with international IP protection norms:

“The Act ensures that the reasonable requirements of the public with respect to availability and affordability are taken care of. Public interest particularly public health and nutrition is protected. The law effectively balances and calibrates Intellectual Property protection with public health concerns and national security. By participating in the international system of intellectual property protection, India unlocks for herself vast opportunities in both exports as well as her potential to become a global hub in the area of R&D based clinical research outsourcing, particularly in the area of bio-technology.”

While hindsight is 20/20, in retrospect the Ministry of Commerce and Industry Statement appears prescient in identifying key stakeholders and the broader social and economic benefits of a product patent protection. Undoubtedly, the BJP Ordinance itself suffered from lacunae – and received significant criticism from the international innovative BioPharma industry.  At the same time, the Ordinance was recognized as a critical watershed and a substantial, positive step to move India closer to the patent mainstream.  The identified deficits in the BJP Ordinance subsequently were compounded and multiplied by subsequent Leftist amendments, effectively undermining patent protection needed by India’s innovative BioPharma companies and MNCs alike.

Let’s hope that ten years on the Modi Government may see the broader picture beyond price controls for essential medicines and may introduce patent reforms needed to reset the balance between access, affordability and effective patent protection.  This would go a long way to meet the BJP Manifesto to support R&D Intensive Small and Medium Sized Enterprises (SMEs) needed for creation and assimilation of new technologies, e.g., novel diagnostics, devices, therapies and cures for patients in India and globally.

About the author:
President of Finston Consulting LLC since 2005, Susan works with innovative biotechnology and other clients ranging from start-up to Fortune-100, providing support for legal, transactional, policy and “doing business” issues. Susan has extensive background and special expertise relating to intellectual property and knowledge-economy issues in advanced developing countries including India and South Asia, Latin America and the Middle East North Africa (MENA) region. She also works with governments, and NGOs on capacity building and related educational programs through BayhDole25. Together with biotechnology pioneer Ananda Chakrabarty, she also is co-founder of Amrita Therapeutics Ltd., an emerging biopharmaceutical company based in India with cancer peptide drugs entering in vivo research. Previous experience includes 11 years in the U.S Foreign Service with overseas tours in London, Tel Aviv, and Manila and at the Department of State in Washington DC. For more information on latest presentations and publications please visit finstonconsulting.com.

This is a guest post from Susan K Finston, President of Finston Consulting. Do you have a response to Susan’s post? Respond in the comments section below.

My maiden guest post for the Biotechblog last focused on the global impact of reduced funding for innovative bio-pharma development on clinical research and the threat to the global clinical research enterprise.   At that point the clinical research sector in India looked like an outlier with year-on-year increases in clinical trials and revenues projected to grow from $450 million in 2011 to $1b by 2016.  Now as we approach the end of 2013, that rosy scenario appears increasingly unrealistic.  India’s clinical research sector faces an uncertain future, with allegations including lack of informed consent and poor treatment of illiterate Indian patients.

Responding to civil society allegations of corruption and fraud, the Indian Supreme Court has intervened directly in the conduct of clinical research in India, suspending or freezing hundreds of clinical trials.  While it is tempting to put the blame for lax enforcement of standards on the recent influx to India of MNC clinical trials, India’s Parliamentary Standing Committee on Health and Family Welfare identified similar shortcomings in oversight of both domestic Indian companies and MNCs alike, going back several years in time.

Well ahead of the Indian Supreme Court decisions in 2013, the Parliamentary Standing Committee reported in May of 2012 that  the Central Drugs Standards Control Organization (CDSC) – the primary watchdog responsible for drug safety and related clinical research – had long since been captured by the industry it was charged with regulating:

The Committee is of the firm opinion that most of the ills besetting the system of drugs regulation in India are mainly due to the skewed priorities and perceptions of CDSCO. For decades together it has been according primacy to the propagation and facilitation of the drugs industry, due to which, unfortunately, the interest of the biggest stakeholder i.e. the consumer has never been ensured. p. 9  

The Parliamentary Standing Committee cited systematic fraud, for example, in the case of Cipla’s application for approval of cancer drug Pirfenidone.  The Committee concludes that Cipla never undertook the required Phase III clinical trial in India, and yet the company received marketing approval nonetheless.

Not only the regulators, but Indian academics and specialist hospital physicians are also compromised in the process.  The Committee’s report to the both chambers of Parliament continues, documenting that the company coordinated or otherwise controlled simultaneous submission 4 separate letters of recommendation of approval from institutions located in Delhi, Mumbai, Chandighargh and Secunderabad – “all received exactly on the same day 2-7 2010 and diarized by DCGI office under consecutive references 4877, 4878, 4879 and 4880.” (p. 34)

(In October of 2010, Cipla issued a glowing press release announcing the launch of the “World’s First Generic Pirfenidone in India, Giving Hope to Suffers of IPF (Idiopathic Pulmonary Fibrosis)”  Despite the strong documentation presented to both Houses of Parliament supporting the contention that the Cipla did not conduct any clinical trials at all prior to approval of this first generic copy of a serious cancer drug, it remains on the market in India and internationally via Canadian online pharmacies – caveat emptor.)

Now the India Supreme Court process has taken matters to the other extreme, creating onerous and unrealistic new clinical research requirements and freezing clinical research in India, far exceeding requirements under the  International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human use, known as ICH. These include mandatory compensation requirements for patients, and use of audio and visual recordings of informed consent, among others.  Paradoxically, by imposing more stringent obligations than exceed ICH standards, the Indian Supreme Court rulings further reduces the likelihood that India can build needed capacities for ethical clinical research in compliance with international compliance.

In this context,  a clinical research advocacy group known as: People for the Advancement of Clinical Research – India, has lodged an online petition at Change.org and petitioning Supreme Court of India: “Allow the Review and Approval Process for Clinical Trial Applications to Resume.” The Change.org petition provides compelling reasons for the continuation of clinical trials in India – identifying the existing standards and the extraordinary new measures now required under the recent Indian Supreme Court decisions.  Everything in the petition is both true and  yet sadly irrelevant given what we know to be the unfortunate ground realities documented by the 2012 Parliamentary Standing Committee report.

The Change.org petition seeks to reinstate the status quo ante without any serious reflection on how things have gone wrong, or suggestions on how to change a drugs development culture that tolerates cutting of corners and even outright fraud.  All good intentions aside, Indian academics, industry and government agencies together have shown remarkable effectiveness at evading and undermining India’s compliance with ICH standards.

The Indian Supreme Court may have got it wrong, but the Change.org petition does not get it right.

About the author:
President of Finston Consulting LLC since 2005, Susan works with innovative biotechnology and other clients ranging from start-up to Fortune-100, providing support for legal, transactional, policy and “doing business” issues. Susan has extensive background and special expertise relating to intellectual property and knowledge-economy issues in advanced developing countries including India and South Asia, Latin America and the Middle East North Africa (MENA) region. She also works with governments, and NGOs on capacity building and related educational programs through BayhDole25. Together with biotechnology pioneer Ananda Chakrabarty, she also is co-founder of Amrita Therapeutics Ltd., an emerging biopharmaceutical company based in India with cancer peptide drugs entering in vivo research. Previous experience includes 11 years in the U.S Foreign Service with overseas tours in London, Tel Aviv, and Manila and at the Department of State in Washington DC. For more information on latest presentations and publications please visit finstonconsulting.com.

This is a guest post from Susan K Finston, President of Finston Consulting. Do you have a response to Susan’s post? Respond in the comments section below.

Perhaps like me you are working and not on vacation this early August.  If so, I hope that you will join me in a mental vacation to the Emerald Isle.  So close your eyes and think of biotech in Ireland.

One data point that may come to mind is the country’s famously low corporate tax rate, particularly following recent reports of M&A activity driven in part by the opportunity to “buy into” Ireland’s 12.5% corporate tax bracket.

The buyer, Perrigo, may be the largest pharma company you never heard of:  a Michigan-based company with strengths in over-the-counter (OTC), generic prescription, and active pharmaceutical ingredients (APIs), nutritional products (formula, supplements), and related consumer products.

In a deal announced July 29th, Perrigo is buying Irish biotech Elan for $8.6 billion and moving to Ireland, reportedly to save $150 million annually in corporate taxes. This latest news involving a major U.S. company pulling up stakes and moving to Ireland to save on taxes likely may relaunch debate by American states over the plusses and minuses of “Ireland’s model for growth using state money and incentives to lure private biotechnology companies.”

So just how likely is it that tax rates are a key driver for M&A decisions and broader biotech growth?  Not very.

It may be unsettling to hear about a major U.S company jumping ship and giving up its nationality for reported tax gains, given our complicated feelings about homeland and nationality.  Corporations, however, are not people – sorry, Mr. Romney – and when they get to be as big as Perrigo, may not retain a clear national identity.

Perrigo’s strengths in generics and OTC products are driven, for example, through international acquisitions over the last decade, including Agis Industries (Israel), Galpharm Healthcare (UK), Laboratorios Diba (Mexico), and Orion Laboratories (Australia, New Zealand), among others.   Given ongoing operations of affiliated business units in Australia/New Zealand, Europe, Latin America, and the Middle East, how American is Perrigo – even before the Elan takeover?

More broadly,  as noted back in Biotechnology in Countries Starting with “I”  (Part 3  –  back in March 2013), Italy, and not Ireland, places third in the EU for biotech after the UK and Germany, as measured by the number of pure biotech companies. Italy’s corporate tax rate is nearly triple that of Ireland.

How does Ireland stack up in the EU looking –  beyond straight numbers of pure biotech companies?  According to the EU’s Innovation Scoreboard (2013), Ireland is the tenth (10th) most innovative market for biotechnology in Europe, falling short of the most successful biotech markets in the EU.

Using its own composite index including human resources, firm investment, strength of research systems, entrepreneurship intellectual assets and related economic impact, the EU’s top-4 picks are Denmark, Finland, Germany and Sweden.  Corporate tax rates play a limited role at best, in the biotechnology ecosystem.

Will we likely see similar transactions this year, where companies outside of Ireland acquire Irish assets and relocate to the Emerald Isle?  Possibly, given that M&A is again on the upswing and at least two Irish healthcare companies are rumored as attractive take-over targets.  There has to be more on the table than a more favorable tax rate to justify a term sheet, as one analyst has noted:

“A deal that is solely driven by tax purposes could be a slippery slope.” 

Susan K. Finston is President of Finston Consulting LLC, and, together with biotechnology pioneer Ananda Chakrabarty, is co-founder of Amrita Therapeutics Ltd., an emerging biopharmaceutical company based in India with cancer peptide drugs entering in vivoresearch. She is currently preparing to launch her first Crowd Funding campaign for Amrita Therapeutics first-ever therapeutic oncology medical device. For more information see AmritaTherapeutics.com or FinstonConsulting.com.

This guest post is from the BiotechBlog Intern,  Fintan Burke. Fintan is a student at the School of Biotechnology at Dublin City University. Do you have a response to Fintan’s post? Respond in the comments section below.

One of the more enduring financing trends in recent years has been to turn to public interest to help fund for research. As Susan Finston has noted on this blog before, the successes seen in other areas has more recently been translated into the biotech world, with such sites as Petridish.org and scifundchallenge.org forging ahead in public financing in the sciences.

For emerging technologies a new website promises to add an extra aspect to the crowdfunding framework; innovation in the technology itself. Marblar.com was recently established in order to facilitate crowd-orientated uses for new technologies developed by the patent holder.

Marblar cofounder Gabriel Mecklenburg explains new technologies have limited potential under the old system. “You typically have a physics technology and a professor comes down from tech transfer office, talks to their physics guy and those two people – [who] may be opposed to being thrown into the mix – will then have to come up with the best way of applying this technology. We figured ‘well that’s maybe not the best way of doing it.’ Science has become such a vast field now these days that maybe actually the physicist isn’t the best person to find that killer application for this piece of physics technology.”

“So we figured to really open up the sectoral process to a much much wider crowd and break down the technologies in a way that a non-expert could understand them and open it up to anyone around the world, be they neurologist, chemists, engineers, business people- get all these different perspectives together and create this kind of crowdsourcing platform where [what] we do is put each technology out as a competition and say ‘Okay, come up with the best new market application, the best new way of using this technology.’”

Marblar works by having the patent holder post their technology up on the website and having the community suggest potential applications. Those viewed as particularly innovative get voted on and discussed before entering a final shortlist. The community then continues to vote for what is deemed the best use of the new technology, which is finally selected by the technology holder and is rewarded with a cash prize and points towards their Marblar profile. “Ultimately it’s not a life changing amount of money. More importantly than that there is this community that we’ve built all working towards the same goal that I mentioned earlier; realising the promise of science and actually being in this community of really really bright, motivated people and working with them and collaborating in coming up with these ideas is actually hugely rewarding for a lot of these people, much more so than the money. It’s what drives actually self creativity, pretty senior people in some cases, very very qualified people spend a lot of time on the site and developing these ideas.”

In order to open up the doors for innovation as wide as possible, Gabriel and his team have put considerable effort to elucidate the technology. “We actually spend quite a lot of time digesting down the key features of the technology and presenting them in a way that makes them easily understandable to someone who’s coming cold to the technology. And one key feature of the platform itself is its open nature; that the inventors can interact in real time with the crowd. So the inventor can actually mould each idea with their feedback pack and that way – even if the original application wasn’t quite technically feasible – through this real time tech feedback between the crowd and the inventor the ideas are actually shaped into much more feasible incarnations. You do want the outsider’s perspective.”

As crowdfunding in science grows, the benefit of the outsider’s perspective is increasingly being recognised. As Jeanne Garbarino notes in her post at Nature.com, the growth in science-based crowdfunding has helped lead the way in a new era in connecting science to the general public. By opening their project funding (or even part thereof) to the public, there is an extra imperative to scientists to explain and engage with the public about their research, their methods and eventually their end goal. This potential for outreach-through-crowdfunding is being recognised by websites such as scifundchallenge.org which aim to not only raise funds for research, but also help researchers with outreach activities and help the public connect with the work being carried out. In one of the first papers to fully explore the psychology of crowdfunding from the individual’s perspective, Crowdfunding: Why People Are Motivated to Post and Fund Projects on Crowdfunding Platforms, Elizabeth Gerber et al found that as crowdfunding grows and becomes more common, people will tend to be more discerning about who they choose to fund, increasing the imperative for researchers who choose to crowdfund their research to illustrate its benefits. In the same paper, however, they noted that people who chose to undergo the crowdfunding route found added validation to their work, establish long-lasting professional connections and expand the awareness of their work to both the public and other like-minded professional bodies, thereby helping to increase their chances of getting funding through crowdsourcing in the future.

For Gabriel and the rest of the team at Marblar, having a simplified, accessible explanation for emerging technologies has already shown itself to be beneficial in reaching a wider-than-predicted range of people looking to be a part of the next big thing. “Where our last count it’s people from a hundred and thirteen countries and that’s really running the gamut all the way from a gang of high school students that are sneaking past the age limit all the way to emeritus professors kind of spicing up their retirement by having a go at some of the new science coming through some cutting edge discoveries.”

In a 2001 paper Belinda Clarke suggested that the best way to tackle the worsening lack of interaction between researchers and the public would be to create a forum where the two could interact in non-technical dialogue, away from issues of the media and interest groups acting as middle men and obscuring the message. With the financial appeal that crowdfunding offers and the relative ease in collaborating and explaining to the public about emerging technologies, researchers may yet realise the benefits to putting their mouth where the money is.

About the author:

Fintan Burke is a student at the School of Biotechnology at Dublin City University. His main fields of interest include biomedical therapies and recombinant organisms.  Fintan may be contacted at fintan.burke2@mail.dcu.ie .

This guest post is from the BiotechBlog Intern,  Fintan Burke. Fintan is a student at the School of Biotechnology at Dublin City University. Do you have a response to Fintan’s post? Respond in the comments section below.

While the dust has settled on the oral hearings of Association for Molecular Pathology (AMP) v Myriad (read our report here), the Supreme Court has yet to deliver its verdict in light of those hearings on April 15^th. AMP’s argument against Myriad’s claim on the BRCA gene for its cancer diagnostic test was heavily reported, with amicus briefs by James Watson and the US Solicitor General  emphasising the gravity given by the US government and scientific communities alike. The case is notable by many in regards to both the fundamental question posed (“Are genes patentable?”) and its implications for the commercial future of personalised medicine.

The case comes in light of two previous cases that addressed diagnostic claims head on. In re Bilski was a US Federal Circuit Court of Appeals decision backed by the US Supreme Court which reiterated that if you need a machine to do some process, or doing that process changes one thing into another, then the process is patentable under Section 101 of the Patent Act (the “Machine or Transformation Test”). The second case, Mayo v Prometheus, gave the controversial decision that a newly discovered law of nature is unpatentable, with its application in a process also unpatentable if there is nothing new introduced into the art.

Dr Eli Loots, a partner in the San Francisco IP law firm Knobbe Martens, does not consider the Prometheus case beneficial to this one.

The court had a variety of reasons for disliking those claims. The claims defined a method but it didn’t require, necessarily, the invention itself in that particular scenario. You could definitely see many people struggling with the fairness of that issue. That can happen any time you have a litigation where one side is being very aggressive on their claim interpretation. This follow-on case is in my mind – and I think in many more practitioners’ minds – are much more telling of the future; of diagnostics in particular and biotech generally.

One source of difficulty for this case, says Loots, is the idea of defining invention in the science world.

At some level you just can’t see a lot of these inventions. You need years of training to understand what these building blocks are made out of. Are they actually there? You can get an expert up there and say ‘well these electrons are distributed on a probability function’ and everybody’s going to fall asleep! Because of that, what biotech has done in the past is to define things functionally… what ends up happening is it appears from the functional language that you have a new, non-obvious invention, but it also appears that you have some really broad claims that may encompass more than people originally envisioned.

From a legal point of view, the biggest cause of concern is the attack on the patent under Section 101, which sets out what is and is not patentable subject matter. During the oral hearing itself, Chief Justice Roberts was heard to ask whether the whole case would not be better off examined under the ‘previously non-obvious’ clause that makes up Section 103. One attorney of a high profile Californian firm (who did not wish to be named) agreed with this suggestion. “They were really just saying ‘you isolated the gene out of the body and you did some things to it but all those steps you did were not novel. They were obvious. They’ve been done before, so you shouldn’t get a patent.’ And a lot of the commentators said ‘well that’s a 103 argument, that’s not a 101 argument.’”

He also explains lifting the patent could damage investment and innovation in the field, though could also lower the price for consumers and offer second opinions. Friend-of-the-court briefs from both sides of the argument echo the ramifications of ruling whether or not genes are patentable. The Biotechnology Industry Organisation stated that “The PTO has been granting patents on isolated DNA molecules for thirty years” and that “modern biotechnology industry has developed and flourished under this regime of consistent protection.” A lift in genetic IP protection may see generic gene diagnostics flooding the market, making the field undesirable for investors. Meanwhile an amicus filed by The Nation Woman’s Health Network et al states “Because Myriad’s patents give them a monopoly on genetic testing for breast and ovarian cancer in the United States … physicians in our country cannot give second opinions regarding a diagnosis for the disease.”

The attorney also considers the previous Mayo v Prometheus case, which got several mentions in this case’s oral hearings, to have underperformed in clearing up patentability matters. “A lot of us in the field think that the Supreme Court sort of muddled the Prometheus opinion. If you read it you’ll see there’s an awful lot of references to obviousness and 103 and that’s probably how they really decided it. Under the guise of ‘you can’t patent mental operations’ is what Prometheus essentially said. But really they were saying ‘and everything else that was part of that was obvious.’”

“Every disinterested observer I talked to thought the Prometheus patent was really, really crappy—outrageous, and a huge mistake by the USPTO” says John Conley, Kenan Professor of law at the University of North Carolina when contacted. “In Myriad, I suppose it’s possible that the court will say, let obviousness handle it, but I think they’ll make a decision under 101.” Continuing his comment on his blog at genomicslawreport.com he notes “What difference will it make? If the Supreme Court invalidates genomic DNA patents, it will be seen as a win by the growing personalized medicine industry. Companies using isolated genomic DNA to screen patients at multiple gene loci will no longer have to worry about whether the genes they are testing are patented—though the industry hasn’t seemed terribly worried about that problem thus far.”

The court is expected to give its decision within the next month.

About the author:

Fintan Burke is a student at the School of Biotechnology at Dublin City University. His main fields of interest include biomedical therapies and recombinant organisms.  Fintan may be contacted at fintan.burke2@mail.dcu.ie .

This is a guest post by Morrison & Foerster‘s  Marc A. Hearron, James J. Mullen, III and Matthew I. Kreeger. Do you have a response to this post? Sound off  in the comments section below.

The Supreme Court of the United States recently heard oral argument in Association for Molecular Pathology v. Myriad Genetics, Inc. (No. 12-398) to decide the question, “Are human genes patentable?” The Court’s decision in Myriad could have broad implications for biotechnology companies. Morrison & Foerster was present at the argument.

Although one must be cautious about reading tea leaves from oral argument, a majority of Justices at the argument seemed skeptical that isolated human genes are patentable subject matter.

BACKGROUND
Myriad Genetics, Inc. is the patentee of several U.S. patents with claims directed to the human genes BRCA1 and BRCA2. The presence of mutations in these genes is highly correlated with the risk of developing breast or ovarian cancer. A coalition of groups and individuals brought a declaratory-judgment action over the patentability of the BRCA1 and BRCA2 claims.

A divided Federal Circuit panel held that claims covering isolated DNA sequences are patentable subject matter under 35 U.S.C. § 101. In March 2012, the Supreme Court sent the case back to the Federal Circuit for that court to reconsider its decision in light of the Supreme Court’s decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012). In Mayo, the Supreme Court reaffirmed the principle that laws of nature are not patentable.

On remand, the Federal Circuit wholly reaffirmed its prior ruling. The challengers petitioned the Supreme Court for review. The Supreme Court granted certiorari to decide one question: “Are human genes patentable.”

THE BRIEFS BEFORE THE SUPREME COURT
The plaintiffs assert that Myriad “did not invent any genes or variants or cause their significance” and that Myriad’s patents “cover the BRCA genes of every person in the United States, even genes that Myriad has never seen.”

Because human genes and genetic variants of those genes are “products of nature,” they are not eligible for patenting. The fact that the BRCA genes have been isolated from the human body makes no difference because under that rationale, “a kidney ‘isolated’ from the body would be patentable, gold ‘isolated’ from a stream would be patentable, and leaves ‘isolated’ from trees would be patentable.” The challengers’ position is supported, in whole or in part, by 24 amicus briefs, including briefs by the American Medical Association, AARP, and the American Intellectual Property Association.

Myriad contends that the claimed isolated DNA molecules “fall on the inventive side of the line” drawn by Section 101 and Supreme Court precedent. According to Myriad, “(o)nly by human intervention have the claimed molecules come about.” “Where others failed, Myriad identified the BRCA genes, and then, using information it had collected and discerned from studying the genes, characterized, defined, and isolated these particular molecules. The creation of new molecules never before available to the public is invention.”

Myriad’s position is supported by 26 amicus briefs, including briefs by the American Bar Association, the Biotechnology Industry Organization (BIO), the Pharmaceutical Research and Manufacturers of America (PhRMA), and a number of pharmaceutical companies.

The Solicitor General filed an amicus brief on behalf of the United States, nominally supporting neither party, but which, in practical terms, is seen as supporting the challengers. In a departure from the position of the Patent Office, the Solicitor General argues that “isolated but otherwise unmodified DNA is not patent-eligible.” According to the Solicitor General, the “public’s ability to study and use native DNA would be unduly compromised if changes caused by the extraction of naturally-occurring substances from their native environments were sufficient to trigger patent-eligibility.” The Solicitor General departs from the challengers when it comes to “complementary DNA” (cDNA) molecules, which the government describes as “synthetic molecules built by scientists to include, in a single contiguous DNA segment, only the exons of a naturally occurring gene, without the introns and regulatory regions that are normally interspersed with exon sequences in genomic DNA.”

ORAL ARGUMENT
The Justices’ questioning at oral argument suggests that a majority of Justices seem inclined to agree with the challengers’ argument that isolated human genes are not patent-eligible. As to cDNA, however, several Justices suggested that it is the product of human invention and would be eligible for patenting under Section 101, although it may or may not be patentable under other doctrines such as obviousness.

The Challengers’ Argument
Counsel for the challengers began his argument by asserting that Myriad invented “nothing.” The decisions as to what the genes contained were “made by nature,” not by Myriad. Myriad merely “unlocked the secrets” of the genes; it did not invent them.

A number of Justices asked the challengers to clarify exactly what they contend is and is not patentable. Justice Sotomayor asked why the test for the presence of the BRCA genes had not been patented. Justice Scalia asked why the method of isolating the genes was not patented. Justice Kennedy asked whether the challengers were asserting that the process of “tagging” the isolated DNA was not patentable. Counsel answered that the method was patented but had been freely licensed for years, and he clarified that the challengers were not asserting that the process of tagging the DNA could not be patented.

Justice Alito was one of the only Justices to ask questions at oral argument suggesting outright agreement with Myriad that isolated genes can be patented. Justice Alito asked how the isolated DNA was different from a plant in the Amazon that is discovered to have therapeutic properties but which requires a chemical to be extracted and concentrated. Counsel agreed that the process of concentrating the substance might make it patentable. Justice Alito suggested that that was no different from isolating the gene because both the isolated gene and the concentrated plant substance have a different “function” and are in a new “form.”

Several Justices, including Justices Scalia, Kennedy, and Kagan, asked whether there would be sufficient incentives for biotechnology companies to perform the type of work that Myriad performed if the genes are not patentable. Justice Sotomayor stated that the isolated gene itself “has no value,” but rather it is “the use you put the isolation to” that has value.
As to cDNA, the Justices were far less receptive to the challengers’ argument. Justice Sotomayor stated that cDNA is “not a product of nature; it’s a product of human invention.” Justice Breyer stated that there is “no such thing in nature” as cDNA and that cDNA has properties that are not true of the isolated DNA. Justice Kennedy suggested that cDNA has features that regular DNA does not. Counsel repeatedly tried to assert that cDNA is found in nature, but he appeared to make little headway.

The Solicitor General’s Argument
Solicitor General Donald Verrilli himself argued as amicus on behalf of the United States, reflecting the importance of this case. The Solicitor General’s middle-ground position—that isolated genes are not patentable but that cDNA is—appeared to be carrying the day with several of the Justices.

The Chief Justice queried whether patentability under Section 101 was the proper way to consider these issues, suggesting that the doctrine of obviousness was the better course. He stated that taking a small part of something bigger is obvious, and thus it would be obvious to take an isolated gene from an entire chromosome.

“I don’t understand how a small part of something bigger isn’t obvious,” remarked the Chief Justice.

Nevertheless, the Solicitor General urged the Court to focus on patentability under Section 101 as it did in Mayo.
Justice Alito pointed out that the government has changed its position and that there are conflicting opinions within the Executive Branch. The Solicitor General acknowledged as much.

Justice Kagan brought up Justice Alito’s hypothetical about the Amazonian plant. The Solicitor General contended that the use of the substance in the plant would be patentable but that the substance itself would not.

Myriad’s Argument
Counsel for Myriad withstood a barrage of questioning about the patentability of merely isolated human genes, which several Justices stated are “found in nature.”

Justice Sotomayor, for example, likened the case to a new recipe for improved chocolate-chip cookies, stating that the cookie might be patentable because the inventor has done something new with the ingredients but that the basic ingredients themselves—salt, flour, eggs, and butter—could not be patented.

Myriad’s counsel argued that there was human invention in the decision where to begin the gene and where to end the gene—i.e., where to snip the gene from the rest of the chromosome. He likened isolating the gene to a baseball bat that has been isolated from the rest of a tree, stating that a baseball bat is found in nature but the decision where to start and end it is decided by humans. Justices Scalia and Breyer resisted the analogy, stating that this DNA is found in the human body. The Chief Justice also stated that the baseball-bat analogy is “quite different” because that is not just snipping. “Here,” he stated, “what’s involved is snipping. You’ve got the thing there and you snip—snip off the top and you snip off the bottom and there you’ve got it.”

Justice Kennedy remarked that isolated DNA is not useful until “tags” are added to it. He thus suggested that DNA that is isolated but not tagged is not different from how it exists in the body.

Justice Breyer stated that “the patent law is filled with uneasy compromises.” Returning to the hypothetical about the plant in the Amazon, Justice Breyer stated that the historically recognized compromise is that processes to extract the substance from the plant are patentable, that newly discovered uses of the substance are patentable, but that the substance itself is not. This “hornbook patent law,” he suggested, keeps substances themselves free of patent restrictions but encourages innovation to develop new uses for those substances.

Myriad’s counsel urged the Court to defer to the views of the Patent Office, which “sits at the intersection of law and science.” He pointed out that the Patent Office did not join the Solicitor General’s brief and has adopted the position that isolated genes are patentable. Justice Ginsburg responded that the federal government has disavowed the Patent Office’s position, and that “the strength of the presumption would be diluted” as a result.

Justice Kagan referred to the Patent Office as “very patent happy.”Justice Kagan asked whether the “first person who found a chromosome and isolated it” from the body could have patented chromosomes. She also asked whether “the first person who found a liver” could patent the liver.

Myriad’s counsel answered that these would be patentable under Section 101 but might not be under other provisions, such as 35 U.S.C. § 103. Justice Breyer responded that “that’s the problem” because it would mean “(a)nything from inside the body that you snip out and isolate” could satisfy Section 101. Justice Sotomayor added that “if you cut off a piece of the liver or a piece of the kidney,” that does not make it patentable, suggesting that the same should be true of a piece of a chromosome.

In the most explicit signs that the Court might accept the Solicitor General’s view, Justice Kennedy asked Myriad’s counsel whether, if the Court were to agree with the government, it would “give the industry sufficient protection for innovation and research.” And in the challengers’ rebuttal, Justice Sotomayor asked whether there would be “some value to us striking down isolated DNA and upholding the cDNA.”

Myriad had argued in its brief that the Federal Circuit erred in concluding that any of the challengers has standing. At oral argument, none of the Justices asked any questions about Myriad’s standing argument, suggesting that standing likely will not be a basis for the Court’s decision in this case.

CONCLUSION
One should not read too much into the Justices’ questions at oral argument because the Court does sometimes rule differently from how observers expect it to rule based on questioning. Many Justices, however, did seem to be searching for a middle ground in which isolated human genes could not be patented but syntheticDNA is patent-eligible under Section 101. A decision is expected by the end of June.

 About the authors:

Mr. Kreeger is San Francisco-based chair of Morrison & Foerster’s Patent Interferences practice, representing clients in technology, life sciences, and medical diagnostics. Mr. Mullen, managing partner of the firm’s San Diego office, represents IP clients across a range of cleantech and biotech industries, including medical therapeutics and diagnostics and nucleic and amino acid sequencing. The other co-author is MoFo associate Marc Hearron, a member of the firm’s Appellate and Supreme Court group in Washington.

This is a guest post from Susan K Finston, President of Finston Consulting. Do you have a response to Susan’s post? Respond in the comments section below.

Even if you have never heard of Thomas Kuhn, your thinking about science has most likely been effected by his theory of what causes paradigm shifts.

Over 50 years ago, Thomas Kuhn published The Structure of Scientific Revolutions (1961), one of the most cited academic books of all time.  Kuhn’s theories about the fashion of research challenged the conventional wisdom of science as a logical, step-wise progression.

Kuhn demonstrated that rather than a step-by-step process, scientific research proceeds in fits and starts, with new, potentially important discoveries bumping up against established theories and prevailing fashions. He documented the empirical difficulties of establishing new science paradigms, where scientists may have a vested interest in preservation of the status quo.

Simply put, scientists with funding are loathe to discard research programs, regardless of whether they are breaking new ground – that is the human condition.  And grant-making organizations and corporate funders similarly prefer the familiar over the unknown.  This has the effect of pushing away new, possibly better ideas, even in the face of inconsistent data.

So until an overwhelming amount of these data points accumulate that cannot be reconciled with the existing paradigm, the science establishment resists change.  Then once the tipping point is reached, we come to Kuhn’s paradigm shift where continuing the status quo becomes unacceptable and change is unavoidable.

Now we can add Cancer R&D models to the long list of Kuhn’s illustrations where a science revolution is long overdue and blocked by over-commitment to the status quo.

Given the vast financial resources needed to bring new cancer drugs to market, the substantial time required to move from in vitro to in vivo research and through the regulatory process, and the professional stake of countless scientists and institutions to the status quo, the area of cancer research may be the least open to science revolution.

This is a research environment that rewards predictable R&D over truly ground-breaking research models, and where over $100 billion dollars is spent on research yielding few new effective therapies or cures:

“Jim Watson, the Nobel-winning discoverer of DNA’s double-helix structure, caused a minor sensation recently by arguing that curing most metastatic cancers — cancers that spread in the body — remains more daunting than ever, while researchers pursue scientific dead ends.  Lamenting a “conservative” research establishment that he suggested is reluctant to take scientific risks, he urged scientists to follow new, unexplored, yet more promising directions.”

Given recent high profile failures of late-stage cancer programs, even cancer research fast may be reaching the point where it is no longer possible to ignore the need for truly novel approaches.

Are you ready for the coming revolution in cancer R&D?

About the author:
President of Finston Consulting LLC since 2005, Susan works with innovative biotechnology and other clients ranging from start-up to Fortune-100, providing support for legal, transactional, policy and “doing business” issues. Susan has extensive background and special expertise relating to intellectual property and knowledge-economy issues in advanced developing countries including India and South Asia, Latin America and the Middle East North Africa (MENA) region. She also works with governments, s and NGOs on capacity building and related educational programs through BayhDole25. Together with biotechnology pioneer Ananda Chakrabarty, she also is co-founder of Amrita Therapeutics Ltd., an emerging biopharmaceutical company based in India with cancer peptide drugs entering in vivo research. Previous experience includes 11 years in the U.S Foreign Service with overseas tours in London, Tel Aviv, and Manila and at the Department of State in Washington DC. For more information on latest presentations and publications please visit finstonconsulting.com.

This guest post is from the BiotechBlog Intern,  Fintan Burke. Fintan is a student at the School of Biotechnology at Dublin City University. Do you have a response to Fintan’s post? Respond in the comments section below.

Bioethics in the public eye has been recognised as an integral part of modern biology research for a while now. When the Human Genome Project began, James Watson dedicated 5% of the estimated $2.7bn budget to the Ethical, Social, and Legal Issues (ELSI) that concerned the project. As funding trends change and demand for scrutiny of the field increases, the public increasingly needs to be aware of the changes and misinformation presented to them.

Above all else, research is affected by funding. Traditionally biotechnology was funded from government-affiliated agencies, venture capitalists, or deals with Big Pharma. Recently, as the Wall Street Journal noted, funding from the latter two has been dwindling since the 2008 financial crisis. This has lead to researchers applying for grants from some underused sources and in the case of the UK the creation of incentives to bridge the funding gap.

Recognition of the commercial application of biotechnology has lead to the UK’s formation of the Synthetic Biology Leadership council, whose roadmap aims for an “economically vibrant” biology sector “of clear public benefit.” Particular emphasis is put on noting that “public acceptability…cannot be adequately dealt with through communication through the public.” Professor Joyce Tait serves on this leadership council and examines the social impact of scientific developments with the Innogen Center at the University of Edinburgh. “I think what the public needs to be educated about is judging the quality of the evidence that’s presented to them” she says when contacted. “There’s a terrible tendency in this area for any group, no matter what their motivation, to bias the evidence that’s around out there to suit their case … especially when it becomes the potential for conflict.”

For Peter Pitts, President and Co-Founder of the Center for Medicine in the Public Interest, communicating any research benefit to the public can be a problem. “Generally speaking the only thing you read about genetically modified foods – from those who actually think they’re a good idea – are extremely technical comments that are of use to almost nobody.” For Peter, scientific jargon and rhetoric are preventing any meaningful public discussion with researchers. “I can sit in a room with scientists, I can talk shorthand and know exactly what’s going on, but everybody else is completely confused like we’re speaking in some sort of ancient Latin or something.”

“Every explanation has to be a 94 PowerPoint slide presentation as opposed to the quick, obvious media savvy answer.”

Research potential may be further overstated by the press, skewing the image of the research even more. In an interview with the Guardian, Professor Hilary Rose notes the paper’s editorial on new stem cell research (which notes it may someday “make the blind see, the crippled walk, and the deaf hear”) as an example of the misinformation supplied to the public.

Henry I Miller of the Hoover Institution at Stanford University also feels that modern science journalism needs to be redressed. “Specialty journalism is waning, and reporters often create a “moral equivalence” between opposing views of an issue, even after one viewpoint has been discredited. Newspapers are failing, and people increasingly are using websites to become “informed” about issues.” This feeling of declining speciality journalism is echoed by Peter Pitts. “Years ago a journalist covering the FDA, for example, would have been covering the FDA for years; reading the ins and outs of what was going on. Today you’re talking to people who today they’re covering the FDA, yesterday were covering a baseball game.”

Anti-GM companies are also a persistent, unregulated source of biased information for the public. There are, however, indications of public attitudes cooling as seen in a public attitudes survey last year, where extreme pro- and anti-GM attitudes shrank and the indifferent middle ground grew. “I thought that was an excellent outcome” says Prof Tait “it was no longer a politically contentious issue for a lot of people.” She notes however a tendency for anti-biotech lobbies to misreport the findings still exists. “If you actually look at the way… it’s still being represented by anti-GM pressure groups, they’re focusing on the one end of that scale and they’re not pointing out that if you look at if you look at the other end of that scale there’s an equal move in the opposite direction!”

The main risk of a poor public attitude can be seen reflected in the funding decisions made in government. “I think among politicians there’s kind of a fear of the fear of the public, in Europe in particular [there’s] a really strong concern to avoid a kind of public backlash against any particular technology, I think that’s been true for nanotechnology, which was a subject of concern about 4 or 5 years ago” explains Prof Tait. “[Public opinion] seeps through to what governments will decide to fund and that then feeds through to the opportunities there are for the scientists.”

For Peter Pitts, one way to address that is to open up social media. “I think the FDA should facilitate the use of social media by regulated entities, by pharmaceutical companies, etc – to use it more robustly and to send a green light that they want them to do that.”

“I think we can get people more excited and get more people into the fields of science relative to young kids in high school – for example, pursuing a career in science. I think that will probably help politicians support larger budgets for research …and it will also allow people to accept the benefits of the science – GM foods for example – much more readily than they do now.”

About the author:

Fintan Burke is a student at the School of Biotechnology at Dublin City University. His main fields of interest include biomedical therapies and recombinant organisms.  Fintan may be contacted at fintan.burke2@mail.dcu.ie .