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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.

Susan Kling Finston
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.

This month sees the introduction of the UK’s Open Access policy as recommended by the government-commissioned Finch Report into Open Access (OA) and initiated by Research Councils UK (RCUK). Under this new policy, any published scientific paper in the UK must be made OA immediately if it qualifies for Gold OA (an upfront payment to the publisher to allow access by anyone), or be made Green OA (have the article stored in some repository after being published in the journal) after 6-24 months embargo period. In order to pay for those Article Processing Costs (APCs) charged by journals, the RCUK is giving research institutions the cost of APCs as a subsidy as part of research grants to ensure that OA is achieved.

The original policy announced by Research Councils UK (RCUK) was drafted in March 2012, fuelled by the Minister for Science’s positive reaction to the Finch report into Open Access recommendations. Since this initial policy was announced, however, significant changes have been made to the policy which has attracted a variety of responses:

  • After liaising with research organisations, learned societies and scientific publishers, July saw the final draft released. Although fundamentally unchanged, the ability for publishers to impose non commercial clauses on Green OA was met with some criticism from researchers who viewed this as impeding the ability of a paper to reach Open Access.
  • By January 2013, RCUK announced that the embargo periods were not to be enforced, following up on an announcement in November that only 45% of APCs would be funded as Gold OA in the first year.
  • In February the government’s own Lords Science and Technology Committee’s released a highly critical report of the RCUK’s actions. Among the critiques were a lack of clarity in the policy about which papers qualify, how long embargos could last until OA is allowed and why the RCUK did not carry out a full cost-benefit analysis for Gold OA funding.
  • In response the RCUK adopted a “decision tree” developed by the UK’s Publisher’s Association in March in order to clarify which papers qualify for what type of access.

Instead of clarifying the matter, however, the revised policy guidelines drew renewed criticism from the research community. Paul Jump’s report at the Times Higher Education notes that spokespeople from the RCUK and the Publishers Association were encouraging different routes for Green or Gold options. Another article at The Scholarly Kitchen questions what procedures are in place to enforce the various avenues a researcher can go down for APC funding or publishing. Questions were also raised over the lack of enforcement for the proper management of the APC grants, given the chequered history of reporting NIH-sponsored trials.

When contacted, the RCUK was able to address the reasoning behind the block grant funding mechanics. “We see the early years of implementation as a journey so there will be a transition” said Alexandra Saxon, Head of Communications at RCUK. “As we recognise the differing nature of each research organisation, how they manage the funds is best left to them – however, we will be working with them to share best practice across the sector.  How research organisations are managing the funds will also be an area of focus for the review in 2014 and subsequent reviews.” In terms of establishing any regulatory body for the block grants, Ms Saxon did not indicate any future plans for doing so, saying “we want to ensure that the monitoring of the policy does not become a burden to research organisations.” However, she also acknowledged that the open access arena is a “very fast moving landscape” and stressed the importance of monitoring various aspects of the policy within its 2014 review.

The UK’s approach to mandating Open Access is similar to the germinating sentiment internationally. An international coalition of academic and research libraries broadly welcomed the recommendations made in the Finch report, while Australia and Ireland have already mandated Green Open Access for some time. The US has also recently initiated plans to launch its own Open Access policy for federally-funded papers. (Ms Saxon notes that any international research collaboration that acknowledges RCUK funding “should be publish[ed] under the RCUK policy.”)

None of this is to say that publishers are not readying themselves for an open access transition. Dr Neil Henderson of Palgrave Macmillan notes that currently a hybrid publishing option exists for 41 of their titles, with other open publishing options being announced. “We launched OA for 20 titles in June 2011 and added a further 20 in January 2013. Those titles that we do not yet offer OA for are largely society journals where the discussions with the society is still ongoing.” While some may hold the notion that OA may someday reduce the need for costly scientific journals, Dr Henderson notes that current standards come at a price. “As soon as you add levels of service to the package (eg online submission and peer review systems) and do something with the content (eg copy edit and typeset it, adding DOIs, ensuring the content is fed to abstracters and indexers etc) there is a cost involved. Unless someone is going to do all of this work for free someone needs to pay for it.”

While the APC subsidy indicates change from the current library subscription model, the staggered development of the UK’s own OA policy – considered a front runner in Europe for Golden Access mandates – suggests a long path to a change in the current publishing model internationally. While the UK developments bring a cautious optimism among OA enthusiasts, Dr Henderson suggests “it will take quite some time though before any significant switch occurs.”

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.

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 .

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.

Susan Kling FinstonVCs are starting to talk again about the ‘perception’ of scarce funding for early stage bio-pharma:

At the New Paradigms meeting (a satellite of JPM Conference), a panel I was involved with discussed the perceived funding gap and whether great companies were still getting financing.  The unanimous view was that innovative new startups were continuing to attract capital.

Whenever I hear VCs affirmations that all the good, innovative startups are funded, or that the problem is optics, my antennae go up and I want to see the data.

In other words:  Show me the money – and exactly where it is being invested.

Fortunately we live in a world where VC investment is measured and analyzed obsessively – and not just by bio-pharma startups.

Rather than rely on a straw poll of self-selected VCs, we can consult data for 2012 from the National Venture Capital Association’s MoneyTree report that shows an overall 10% fall in 2012 as compared to 2011, and double-digit year-on-year declines for biotech (down 15%) and medical devices (down 13%).

Sadly, the MoneyTree report confirms that it is not the best of all possible worlds for early stage life sciences companies and related devices.

So why the evident disconnect between the (anecdotal) views of funders and actual macroeconomic trends?

As the saying goes, where you stand, depends on where you sit.  As an independent life sciences consultant, and – full disclosure – CEO / Managing Director of Amrita Therapeutics Ltd., an early-stage bio-discovery company seeking funding, my experiences likely are very different from those of VCs in the JP Morgan bubble.

From their perspective, life sciences may be trending positively, particularly given compression of early valuation –  where companies are saddled with much lower valuations as compared to fifteen, ten or even five years ago, using the same metrics.  This gives VCs and Pharma Venture Funds the opportunity to gain far greater leverage over small companies at lower capital commitments, essentially transferring value from founders to funders.

The really good news for funders is that at these lowered valuations, early stage biotech is a great investment opportunity, particularly given mounting evidence that the life sciences are a much better bet for IPOs than IT and Social Media.

For 2013, let’s hope that VC’s can take a break from their Facebook accounts, and make their own perceptions of greater early stage funding a reality for more bio-pharma companies!

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 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.

Susan Kling Finston When I started working for PhRMA nearly 15 years ago, the mantra was “Fail early, Fail cheap.”

Given the exponentially increased cost of advancing compounds pre-clinical into clinical research and through pivotal Phase II and larger Phase III trials, it makes sense for companies to investigate as many compounds as possible through early stage pre-clinical research and then cherry pick compounds for clinical trials based on a well-developed understanding of the compounds structure, toxicity and other key characteristics.

An R&D program that fails at the pre-clinical stage is far less costly than one that makes it through the Investigational New Drug (IND) application and into clinical trials, only to tank due to lack of efficacy or safety. So why are Bio-Pharma companies taking the opposite tack –  investing huge sums in late-stage compounds for R&D programs, with faltering results in late clinical stage trials?

Why are companies no longer ‘failing early’?

The same factors driving bio-pharma M&A strategy motivate companies to acquire late-stage research assets to fill depleted pipelines.
And cash-rich bio-pharma companies competing for a limited pool of late stage programs, bidding up the cost of acquisition (perhaps at times also hindering full due diligence).

In theory, these assets are lower-risk than early stage programs because they have reached the clinical trial stage. In practice, this has resulted in 30% failure rates at the Phase III clinical trial stage, with a further 50% attrition rate between the clinic and the marketplace, where  “peak sales projection is more art than science, and the art often looks rather comical in retrospect.” In sum, only about one third of launched drugs make back their R&D costs.

Good in theory, bad in practice …

It may be time to recognize that in terms of net-present value, later-stage compounds are not lower-risk than pre-clinical programs factoring in Phase III trial costs, likelihood of failure at Phase III (or before launch), and more realistic revenue projections,  into valuation of late-stage assets.

Given the foregoing, taking a case-by-case approach to acquisition of R&D programs at earlier stages of development would reduce overall risk, providing better long-run returns.

Failure is always going to be with us.  With ever increasing complexity and cost of human clinical trials, Bio Pharma would be better off taking the long view and at least failing earlier in the process at a fraction of the cost!

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 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.

Susan Kling FinstonIt looks like the ‘new normal’ is not just for biotechnology startups and SME pharma companies  – the CROs (and other vendors) who previously benefited from better R&D funding streams also feel the chill of the ongoing funding freeze.

Discussions with CROs and research consultants in the US and abroad reveal concerns relating to lengthy delays between initial discussion of research and final approval, reduced budgets for research programs, and generally falling demand for CRO services.  Their concerns are not just anecdotal.  A recent National Academy of Sciences (NAS) study sees the U.S. Clinical Trial Enterprise in particular as in decline:

There is ample evidence that U.S. trials are be-coming more expensive (DeVol et al., 2011). Worse, 90 percent fail to meet enrollment goals, and additional evidence points to disillusionment among American investigators (Getz, 2005). The rate of attrition among U.S. investigators is increasing, even among experienced researchers with strong track records of productivity, while 45 percent of first-time investigators abandon the field after their first trial. The system has become so inefficient that even the NIH is offshoring clinical trials at a substantial rate (Califf, 2011; Kim et al., 2011), using taxpayer funding to conduct trials in countries with less expensive and more efficient CTEs, despite concerns about generalizability as noted above.

The EU has seen a 25% decline in registration of new clinical trials and has begun a legislative process to improve the research environment in Europe. More broadly, an interesting Canadian clinical trial survey available here, shows a decrease in trials and related sites globally between 2008 – 26,241 sites and 990 trials – and 2010 – 22,358 sites and 760 trials respectively.  While finding increases in clinical trial activities in developing countries in Asia, they note the overall global trend of reduced clinical trial starts.

So the fundamental realignment of early-stage biotech valuation that makes it more challenging for start-ups and SMEs also has had unintended consequences for Clinical Research Organizations (CROs) providing pre-clinical and clinical research services.  And research budgets are falling across the board, more broadly, as larger companies and even public research institutions face cost containment pressures.

Given the critical importance of the clinical research enterprise for generation of social and economic good, it will be interesting to see how policy makers respond and / or if the market will rebound if economic growth increases.

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 is a guest post 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.

It has now been more than a year since the FDA published a welcomed revision of the 1987 guideline “Process validation: General Principles and Practices” in early 2011. This guideline serves as a complete rewrite to its previous incarnation, eliminating outdated practices, putting more emphasis on scientific evidence and completely redefining its definition of “process validation.” This update follows in a wave of acts by the FDA to reinvent the way it tackles an aspect of life science that was initially poorly understood.

Initially this guideline was developed in response to concerns raised in the early 1970s that end-product testing to test process standards was insufficient. While this guideline led to a more direct and formal protocol for process validation, the broad language used throughout left many companies to follow their own interpretation. For example, the 1987 guideline states that the process efficacy should be validated by producing a certain number of batches in a row successfully, though it never actually mentioned an appropriate number of trials (eventually the idea of “Three Golden Batches” emerged among companies). As expresspharma also pointed out, the guideline put pressure on manufacturers to maintain the process that created these “Golden Batches” without needing to understand, or even control, the parameters that caused them.

In other words, as long as a process was proven to work enough times, being disciplined in this procedure took precedent to understanding it.

What followed were years of criticism of the FDA’s attitude to Good Manufacturing Process (GMP) guidelines. As discussed at globepharm, the FDA routinely failed to update its GMP standards by claiming such standards were only the minimum held, thereby shifting the responsibility to companies to keep their standards current. Though revisions were often promised, they never seemed to have come to fruition.

This all changed as part of the “Pharmaceutical cGMPs for the 21st Century” initiative launched in 2002, when the FDA began its review of the guideline to better the approach of quality control for the pharmaceutical industry.

The most obvious change to the 2011 edition was the new definition of process validation, which shifted from requiring only the end product as proof of good process to instead consistently checking the process designs throughout the product’s life cycle to see if standards are met. This meant that the 3 Golden Batches concept became obsolete and a new measure of process evaluation was needed. To this end the FDA also explicitly emphasised in its guidelines the need for a 3 stage process evaluation; a process is first designed based on previous process knowledge, proven to generate reproducible results and finally routinely verified to ensure the whole process is controlled.

This more holistic, life-cycle based approach is seen as a massive improvement to the 1987 guideline particularly since the wording now vividly states what is expected of the industry, while still being applicable to individual companies. Several new questions have surfaced, however. By deserting the 3 Golden Batches concept, companies must reassess how many batches must be tried to prove standards are met. This, as Dr Mike Long et al discuss, is one area where the new guideline remains obscure; it instead merely states that enough tests should be run to statistically justify going into commercial production. Another problem is that the guideline clashes at some points with EU regulations. Apart from differences in the wording of some principles, Annex 15 (article 25) of the EU Guide to GMP also seems to recommend the 3 Golden Batches method, directly contrasting the FDA’s efforts to quell its practice.

While changing regulation, the FDA is being proactive in its approach to enforcing these regulations. For example, a recent event held in Colorado allowed industry representatives to discuss with FDA representatives from that district some of the challenges encountered during inspections. In recognition of the growing multinational behaviour of product manufacture the FDA is also collaborating with the European Regulatory Network to monitor foreign companies in their own territories. This follows a successful application by the FDA to become a member of the Pharmaceutical Inspection Co-operation Scheme (PIC/S) in November of 2010, a process that required a lengthy review period that involved each division of the FDA applying individually to PIC/S in order to gain admittance, thus furthering its modernisation and easing pressure to establishing GMP guidelines.

There can be no question that the FDA has recently taken a turn for the better in trying to modernise its efforts in bioprocess regulation, an area it initially had failed to develop. Despite these improvements, criticism remains. It appears too that the FDA’s recent efforts are just the beginning of an international trend in reviewing bioprocess standards, with a major update to the European Commission’s GMPs in bioprocesses coming into effect early next year.

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 .

For Third Rock Ventures' Mark Levin, personalized medicine is nothing new. Instead, he sees the history of pharma as a gradual homing in on the roots of disease, and genomic mapping is just the next step. By Damien Garde, Fierce Biotech. From the herbal remedies of early civilizations to the dawn of modern pharmaceuticals, researchers have been slowly drilling down, Levin said, personalizing treatments one step at a time. Now, with the help of sequencing, we can move beyond treating phenotypic effects and get to the heart of disease: its genotypic origins. That is, if we can all get along. Levin spoke to a packed house Tuesday at the Personalized Medicine Coalition's State of Personalized Medicine Luncheon in Washington, DC, and his message was simple: Personalized medicine has the potential to revolutionize biotech and pharma, but only if stakeholders work together. Levin's had a long career in the industry, going from an engineer and project leader at Eli Lilly ($LLY) and Genentech to CEO of Millennium Pharmaceuticals. Since 2007, he's been at the helm of Third Rock Ventures, a VC firm that invests in and builds innovative biotech companies. Through 36 years in the field, Levin said he's seen the great promise of genomics inspire minds around the industry, only to be slowed by the usual suspects: companies unwilling to collaborate, regulators reluctant to cooperate and researchers getting a little ahead of themselves in the news media. Now, however, as the cost of <b>...</b>
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Part 2 of 2. Social media is becoming an important gateway to patients and consumers for biotechnology companies wishing to commercialize without the major investment required for a sales force. Greg Stanley, Chief Commercialization Officer of Oncimmune, talks to Journal of Commercial Biotechnology reporter Rolf Taylor about engaging with smokers and ex-smokers on Facebook.
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