WASHINGTON Hundreds of thousands of people die each year from diseases for which there are no cures. But legislation being pushed by patient advocates and biotech firms could shave years off the federal drug approval process to get promising treatments to those who need them.

The TREAT Act, introduced by U.S. Sen. Kay Hagan, D-Greensboro, accelerates the review and approval process for medicines that treat an unmet medical need or significantly advance the standard of care for people suffering from deadly diseases. A similar expedited approval bill was introduced in the House last week.

Lisa Macdonald survived breast cancer, but still worries about her cancer coming back. Macdonald, executive director of the Carolina Breast Friends, a Charlotte support organization, met with a mother last week who learned she had cancer when she was breast feeding her second son. She has since been in chemotherapy for four years and is taking part in national clinical trials hoping for a cure.

“I’m looking at this young woman who has two small sons and that’s why the TREAT Act is really important,” MacDonald said. “For us, it’s all about providing hope. We haven’t won the war on cancer. Wasn’t it Richard Nixon who originally declared the war on cancer in the ’70s? It’s now the 21st century. A lot more breast cancer patients live and thrive like me. And there are still some who don’t.”

The bill could be a boon for the state’s smaller biotech firms that often struggle to bring drugs to market. But the legislation, which is now in committee, is expected to meet resistance from the Food and Drug Administration, those who worry that drug safety will be compromised and some large pharmaceutical companies who could potentially lose market share.

But Dr. Amy Abernethy, director of Duke’s Cancer Research Program, estimated that hundreds of thousands of people could benefit from a more up-to-date, accelerated approval process.

It takes 10 to 15 years and more than $1 billion on average to bring a drug to market. The National Organization for Rare Disorders reports that of 7,000 known rare diseases, fewer than 250 have FDA-approved therapies.

People die waiting for promising therapies, said John Vernon, an associate professor of health policy and management at UNC-Chapel Hill. A former senior economic policy advisor at the FDA, Vernon said the political consequences are much greater for the agency if a bad drug is approved and someone is hurt or dies.

“They’re pulled before Congress. They get a tongue lashing,” he said. “But nothing happens if they spend an extra two or three years studying a drug to make sure it’s perfectly safe. Think during those two or three years, how many patients die or don’t get access to treatments?”

Durham-based Chimerix is developing CMX001, a treatment for life-threatening viral infections for patients whose immune systems have been compromised by disease or drugs. President and CEO Kenneth Moch said Hagan’s bill could get CMX001 to patients faster.

“We’re a 50-person company. We obviously have limited resources,” Moch said. “This could provide additional flexibility and speed for approval. We have a drug we believe can be used for patients where there is no other available therapy.”

Pressure on FDA

Karen Riley, a spokeswoman for the FDA, would not comment on the proposed legislation but said the FDA has several existing programs for expediting the review of promising drugs. She said the agency is “happy to work with Congress to see if there are ways to better utilize our tools while retaining our high standards for safety and efficacy.”

The FDA is often under pressure from patient advocates and biopharmaceutical companies to loosen up safety requirements so more drugs can be brought to the market, said Erik Gordon, a business professor at the University of Michigan who specializes in the biomedical industry. But he said the FDA’s decisions must be based on science and not be swayed by emotion or political will.

“The first rule of medicine, the oldest rule of medicine, and probably the best rule of medicine is do no harm,” he said.

The TREAT Act would not alter existing FDA safety standards, but experts note that accelerated approval programs don’t always work in ways doctors and patients hope.

Under the current accelerated program, approval is granted on the condition that clinical trials continue after the drug’s release to verify its benefits. But Abernethy of Duke said keeping up with testing can be difficult and the industry needs to come up with better data collection methods.

She points out the case of Mylotarg, which was given early approval in 2000 to treat elderly patients with a form of leukemia. The drug had to be pulled in 2010 after ongoing clinical trials showed no improvement in clinical benefits. The FDA said more patients died receiving the drug than those receiving chemotherapy alone.

“It’s a double-edged sword,” Abernethy said. “With accelerated approval comes the expectation that we’re going to continue to investigate these drugs and follow them post-approval to understand do they really do their job and work.”

The hub of N.C. firms

The N.C. biotechnology industry employs about 36,000 people who work in pharmaceutical research, development and manufacturing. North Carolina ranks 14th among U.S. states in bioscience patents, according to the N.C. Biotechnology Center. More than 2,300 bioscience patents were granted to N.C. companies between 2004 and 2009.

According to the Biotechnology Industry Organization, a trade group for the industry, 61 percent of venture capitalists cite FDA regulatory challenges as having the highest impact on their investment decisions.

Supporters expect Hagan’s proposal would ease the challenges many small companies face trying to develop and bring new drugs to market.

“We all know that new drugs come from small biotech and not big biotech,” said Dr. John Powderly, an oncologist at Carolina BioOncology Institute. Powderly said smaller biotech firms “don’t get a second swing at the bat” if the FDA changes expectations during clinical trials.

Powderly’s Huntersville clinic is often the last place cancer patients go before entering hospice care. He’s seen about 4,000 patients since the clinic opened in 2005. It provides research drugs to patients with metastatic cancer, which has spread through their bodies. Most do not make it.

“If patients can get access to a new drug and they have the right target and the drugs hit the target, there are phenomenal results,” he said.

What Hagan’s bill is for

Hagan’s proposal is similar to another FDA fast-track program. Its goal is to get medication to patients earlier provided researchers can show scientific proof of a drug’s benefits and safety. However, the process was created through regulations, not law, and its application has been limited mainly to treatments for HIV and cancer.

The TREAT Act would allow researchers to use more types of scientific evidence that can be measured to prove safety and effectiveness of drugs being considered for early release.

Hagan said she decided the legislation was needed after hearing from parents seeking treatment for their children. She met with the parents of one child with Spinal Muscular Atrophy, a rare genetic cause of infant death, she said.

“With the small number of patients available for large clinical trials, rare diseases like SMA have a hard time clearing the FDA hurdles for approval, and you can imagine the frustration of this family, and so many others like them,” Hagan said.

The National Organization for Rare Disorders, The Friends of Cancer Research, Parkinson’s Action Network and the Biotechnology Industry Organization have pledged their support for the Hagan’s proposal.

But some larger pharmaceutical companies have yet to fully embrace Hagan’s bill

Gordon, the University of Michigan business professor, said the bill could make smaller companies less dependent on big pharma. Currently many small companies often team with their larger counterparts who have the experience and capital to run long FDA trials. In return, large pharma get a share of the profits.

The trade group, PhRMA, said it’s supportive of Hagan’s efforts, but has not taken an official position on the full bill.

Sarah Alspach , a spokeswoman for GlaxoSmithKline, one of the Triangle’s largest employers, said the company thinks the best way of getting medicines to patients faster is through modifications of the current accelerated approval process.

Eric Linsley offered his perspective on personalized medicine’s development during a symposium for PMC's recent report, The Case for Personalized Medicine. Linsley joined Jennie Hunter-Cevera, Ph.D., Executive Vice President, RTI International; Jonathan Roy, Senior Director and Head of Commercial Diagnostics for GlaxoSmithKline; Amy Abernethy, M.D., Director, Cancer Care Research Program at Duke University and David King, CEO of the Laboratory Corporation of America.

The Personalized Medicine Coalition latest newsletter summarizes these perspectives.

Art Pappas will moderate and lead a discussion entitled "Are we Heading into a Pharmaceutical and Biotechnology Market of Orphan and Narrow Indications" at the 2012 BIO International Convention on June 19th in Boston, MA.

Eric Linsley will lead a discussion on "Partnering and Licensing in Neurotech" at the 2012 Neurotech Investing & Partnering Conference on May 21-22 in Boston.

Scott Weiner will present and sit on a panel at the IN3 Medical Device 360 conference on February 29th through March 2nd in Orlando, Florida.

By Arthur Pappas, Pappas Ventures
February 1, 2012

A few tweaks to the approval process would help serve innovators and investors in a sensible way.

Despite recent sniping, the Food and Drug Administration doesn’t need an adversarial relationship with drug and device makers. We’re partners in a shared mission: to bring life-saving innovations safely and efficiently to market.

That mission can succeed under stringent standards. No one is calling for laxity. But it also takes transparency, a process that values innovation, and a smart balance between risk and reward.

With just a few changes, everyone—chiefly the public—would benefit.

Toward consistency and transparency. The clinical trial process is unnecessarily daunting when the goal posts change from one product to another, or from one phase of development to another. As science accelerates, a mid-course change is sometimes necessary, but the FDA has to judge whether such a twist outweighs the need to be consistent.

Here, the FDA needs to recalibrate. It should give more weight to the value of regulatory expectations that are clear and predictable. The agency can also promote fairness by respecting statutory timelines. Currently, it can “stop the clock,” restart it months later, and count a project as on-time. Our nation’s pipeline of new cures and therapies should run on real time.

Communication is not collusion. Today’s FDA is too wary of informal dialogue. The result means a delay, at best, and at worst a chilling effect that stymies useful conversation. The process would benefit from an “open file” approach that lets applicants learn what FDA scientists and consultants are thinking during the review process, not after approval or rejection.

Reform the appeal process. There are no official penalties for appealing an FDA determination. But FDA regulators are human, and we all know how relationships suffer when one person goes over another’s head.

A small, underfunded applicant may stake its entire future on its reviewers’ good graces. Both sides would be better served by a formal, non-confrontational appeals process. This could take the form of a rapid-response arbitration panel, or possibly even a market for appeal rights that combines the spirit of cap-and-trade with the peremptory challenges of jury selection.

Be aggressively progressive. The FDA works hard to reduce one kind of risk: bringing something unsafe or ineffective to market. It needs to work harder to avoid the opposite risk: delaying or rejecting innovations that people need.

The agency was founded to counter both threats, but its culture has swung too far toward holding things back. One solution is an aggressive program of “progressive approval,” that allows regulators to make case-by-case, risk-reward judgment calls and approve products for use when the evidence tells them the benefits likely outweigh the risks.

I’ve been on the front lines for both triumph and failure in this process. My firm played a part in one recent success story, a product that uses genetic targeting to combat melanoma. Its creators were able to keep up a robust dialogue with their FDA counterparts, and together, the innovators and the regulators brought physicians a new treatment much faster than usual.

Unfortunately, my experience tells me that’s an exception. I’ve seen the chilling effect of regulatory uncertainty at work. I’ve been in the room when we had to shut down funding for promising avenues of research because the path through the FDA was just too unclear.

By its own description, the FDA is “responsible for advancing the public health by helping to speed innovations.” It is meant to be both a policeman and a partner.

No one—neither venture investors nor the people in lab coats—wants to be hasty in the way we approve drugs or medical devices. We’re not asking for an easy process. We want a transparent, predictable one that lets innovators and investors plan and carry out their work in a sensible way.

Arthur Pappas is managing partner of Pappas Ventures, a Durham, N.C.-based venture firm that specializes in life sciences.

By Arthur Pappas, Pappas Ventures

A few tweaks to the approval process would help serve innovators and investors in a sensible way.

Despite recent sniping, the Food and Drug Administration doesn’t need an adversarial relationship with drug and device makers. We’re partners in a shared mission: to bring life-saving innovations safely and efficiently to market.

That mission can succeed under stringent standards. No one is calling for laxity. But it also takes transparency, a process that values innovation, and a smart balance between risk and reward.

With just a few changes, everyone—chiefly the public—would benefit.

Toward consistency and transparency. The clinical trial process is unnecessarily daunting when the goal posts change from one product to another, or from one phase of development to another. As science accelerates, a mid-course change is sometimes necessary, but the FDA has to judge whether such a twist outweighs the need to be consistent.

Here, the FDA needs to recalibrate. It should give more weight to the value of regulatory expectations that are clear and predictable. The agency can also promote fairness by respecting statutory timelines. Currently, it can “stop the clock,” restart it months later, and count a project as on-time. Our nation’s pipeline of new cures and therapies should run on real time.

Communication is not collusion. Today’s FDA is too wary of informal dialogue. The result means a delay, at best, and at worst a chilling effect that stymies useful conversation. The process would benefit from an “open file” approach that lets applicants learn what FDA scientists and consultants are thinking during the review process, not after approval or rejection.

Reform the appeal process. There are no official penalties for appealing an FDA determination. But FDA regulators are human, and we all know how relationships suffer when one person goes over another’s head.

A small, underfunded applicant may stake its entire future on its reviewers’ good graces. Both sides would be better served by a formal, non-confrontational appeals process. This could take the form of a rapid-response arbitration panel, or possibly even a market for appeal rights that combines the spirit of cap-and-trade with the peremptory challenges of jury selection.

Be aggressively progressive. The FDA works hard to reduce one kind of risk: bringing something unsafe or ineffective to market. It needs to work harder to avoid the opposite risk: delaying or rejecting innovations that people need.

The agency was founded to counter both threats, but its culture has swung too far toward holding things back. One solution is an aggressive program of “progressive approval,” that allows regulators to make case-by-case, risk-reward judgment calls and approve products for use when the evidence tells them the benefits likely outweigh the risks.

I’ve been on the front lines for both triumph and failure in this process. My firm played a part in one recent success story, a product that uses genetic targeting to combat melanoma. Its creators were able to keep up a robust dialogue with their FDA counterparts, and together, the innovators and the regulators brought physicians a new treatment much faster than usual.

Unfortunately, my experience tells me that’s an exception. I’ve seen the chilling effect of regulatory uncertainty at work. I’ve been in the room when we had to shut down funding for promising avenues of research because the path through the FDA was just too unclear.

By its own description, the FDA is “responsible for advancing the public health by helping to speed innovations.” It is meant to be both a policeman and a partner.

No one—neither venture investors nor the people in lab coats—wants to be hasty in the way we approve drugs or medical devices. We’re not asking for an easy process. We want a transparent, predictable one that lets innovators and investors plan and carry out their work in a sensible way.

Arthur Pappas is managing partner of Pappas Ventures, a Durham, N.C.-based venture firm that specializes in life sciences.

Eric Linsley Speaks On CED Life Science Conference 2012 Agenda

The CED Life Science Conference will be held on February 15 and 16, 2012 in downtown Raleigh, NC. The Conference is hosted by CED in partnership with the North Carolina Biotechnology Center and NC Biosciences Organization.

Eric currently serves as the Chairman for the Board of Directors for CED.

Bruce Booth

Early stage life science VC

It’s certainly not Breaking News that M&A deals are an important source of liquidity in biotech VC today.  But last year did mark an important milestone for biotech over the past few years: in 2011, the capital returned to investors from private M&A alone likely exceeded the total capital invested into private biotech companies.

2011 was a banner year for private company M&A.  Based on the data compiled by BioCentury, and Walter Yang in particular, deal values were up over 3x since the nadir of 2008.  Here’s the snapshot:

• 64 private M&A deals closed in 2011, representing $23B in proceeds (upfronts and milestones).  This includes great deals like Plexxikon/Daiichi, Calistoga/Gilead, Amira/BMS, BioVex/Amgen and Advanced BioHealing/Shire, among others.

• Only 45 of these 64 deals disclosed financial information

• Nycomed was worth $13.6B and was clearly not venture capital, so taking that out leaves $9.4B in total

• Several of the remaining deals had significant earnouts; removing these milestones leaves $7.1B (i.e., only upfront payments)

• If you assume that investors owned on average 75% of these exits, which is in line with ownership benchmarks, then an estimated $5.3B was realized last year from this set of disclosed deals.

(see graph)

Comparing these capital flows to the biotech venture capital investment pace reveals a surplus of realizations.  In 2011, again according to BioCentury’s database, $4.8B was invested in biotech venture capital deals (therapeutics only).  Compared to the $5.3B in estimated realizations above, this yields a $500M surplus.  By comparison, in 2008 over $3B more flowed into financings than M&A.  The chart below captures the net capital flows between these two over time.

(see graph)

Having more realizations than investments is not remarkable; in fact, its critical for long term viability of a sector.  But it is remarkable that just this set of disclosed M&A deals of private biotechs alone outpaced the total amount invested, and highlights how strong the biotech M&A market was in 2011.  The reality of the full realization picture for biotech is obviously even better than these numbers: first, this M&A dataset doesn’t include any public equity realizations, so misses both sales by venture investors of post-IPO biotech stocks or public biotech acquisitions where VCs still had big positions (e.g., Burrill’s position in Pharmasset, NEA’s in Inhibitex).  Second, many VCs also do PIPE investments and a number of these were big hits this year as well (e.g., Amarin). Third, as noted above, almost a third of the private M&A deals didn’t reveal their financials, clearly biasing the overall number lower.

This positive net capital flow by M&A in biotech is better than the relative impact of M&A on the aggregate, cross-sector venture landscape: according to the NVCA, $23B in venture-backed, disclosed M&A deals closed in 2011, so using the same assumptions that investors owned 75%, that would imply $17B in realizations.  The early data on 2011′s total venture financings (from CBInsight) has the aggregate funding at $30B.  The data might not be perfect, but it does suggest a large net-negative relative capital flow.  A big caveat is that IPOs have played a big role in social media and IT in 2011, but when comparing relative M&A impact, its fair to say venture-backed biotech had a great 2011.

While it’s true that the amount returned and the amount invested in any given year aren’t directly related (i.e., one year’s exits represent capital invested over many prior years), the crossing of these trends in capital flows is quite positive and highlights the increasing investment realizations we’re getting in the life science venture world.

A second metric is also worth highlighting: the realizations from these 2011 M&A deals also outpaced the likely biotech allocation of recent venture capital fundraising. If one assumes that ~17% of all recent venture fundraising will go to biotech (in line with biotech’s share of venture investments over the past five years, according to MoneyTree), then last year’s $18.2B in venture fundraising will provide $2.8B in biotech allocations in these new funds. This is substantially less than the $5.3B in estimated returns.  The chart below captures the net capital flows between these two over the past few years, trending favorably towards returning more capital after the challenging years of 2008-2009.

(see graph)

A caveat to this data is that the real gap probably isn’t this large, as corporate VCs don’t have to report their fundraising and play an important role in 20-30% of biotech venture financing's.

In summary, 2011 was a solid year for biotech investor returns through M&A.  As life science companies chalk up more exits, and both fundraising and fund sizes continue to be ‘right-sized’, its likely the this surplus of biotech realizations over both investment pace and fundraising will continue for the foreseeable future.  This is a good thing for venture capital and our LP’s, and will hopefully bring a better appreciation of the merits of life science venture capital.