Pappas Capital Announces the Passing of…

Perhaps the biggest personalized medicine breakthrough of 2011 was the progress of melanoma drug Zelboraf and its companion diagnostic, both of which sped through regulatory approval.

Clinical trials demonstrated that Roche‘s (OTC:RHHBY) Zelboraf was extremely effective in treating skin cancer. But the drug doesn’t work for everyone. Only patients whose tumors express a particular gene mutation respond to the drug. The companion diagnostic also developed by Roche identifies the appropriate patients for Zelboraf. Under priority review by the U.S. Food and Drug Administration, approval of that diagnostic was expected this November. The agency beat that target by nearly three months.

Not all personalized medicine drugs and diagnostics will have such a speedy path through the FDA. But the companies, academics and investors who have a stake in personalized medicine are working to smooth the path for future personalized medicine breakthroughs.

The Personalized Medicine Coalition has released a report “The Case for Personalized Medicine,” choosing Research Triangle Park, North Carolina, where the group has a large cluster of members, to formally announce the document. In addition to supporting personalized medicine education and innovation, the group is also pushing for new legislation that would go further than the Genomics and Personalized Medicine Act of 2007. Among the group’s goals are forging a more predictable regulatory path for personalized medicine products and getting Medicare coverage of personalized medicine diagnostics. PMC President Edward Abrahams discusses some of the group’s legislative goals here.

The coalition hosted a panel discussion at the North Carolina Biotechnology Center on the opportunities and challenges facing personalized medicine. Here are some highlights.

Personalized medicine’s promise: In the last quarter, Burlington, North Carolina laboratory services and diagnostics company LabCorp (NYSE:LH) has released two personalized medicine tests, one of them a companion diagnostic for Zelboraf. The other, an Abbott companion diagnostic for lung cancer patients, predicts patient response to the Pfizer (NYSE:PFE) drug Xalkori. LabCorp CEO David King said that at one time, personalized medicine was thought of primarily in terms of reproductive testing such as pre-natal and neo-natal testing. But the technology today has come far and it promises to go even further.

Dr. Amy Abernethy, director of the Duke Cancer Care Research Program, sees many of those tools in the clinic. The kinds of tests that are available for her to use to make diagnostic and treatment decisions are vast and they grow each year. “The way we’ve practiced medicine in the clinic has rocketed forward in the last decade,” Abernethy said.

The challenges: While Abernethy embraces the new diagnostic tools, she said she’s not sure when a new test will show up in an electronic system with a reimbursement code. Jonathan Roy, director of commercial diagnostics for GlaxoSmithKline Biologicals (NYSE:GSK), offered a different perspective on reimbursement. In the United States, a company might get reimbursed, but not at a level they’d like. “In the European market, you might not get reimbursed at all,” he said. Roy said the global regulatory environment is wildly inconsistent from one market to another. But in finding partners for companion diagnostics, GSK must think globally because its goal is to make a test and a treatment available to the largest number of people. LabCorp’s King also sees regulatory as well as cost challenges for companion diagnostics. But as these tests become more common, he also sees challenges for clinicians. Personalized medicine will mean the generation of an enormous amount of data and it will be a challenge to process it and manage it. King likened the challenge to standing on the beach staring at an approaching 60 foot tidal wave. “And there will be one every minute,” he said.

Solutions. There is no shortage of companies angling for financial backing of new therapies and diagnostics in personalized medicine. Durham venture capital firm Pappas Ventures, which focuses on life science investments exclusively, receives more than 1,000 proposals a year. The firm has made several investments in companies developing personalized medicine products. One of them, California biotechnology company Plexxikon, developed the drug that is now Zelboraf. Plexxikon was acquired by Japanese pharma company Daiichi Sankyo earlier this year in a deal valued at more than $935 million. Pappas Ventures saw a return greater than 10 times its original investment in the firm.

Pappas Ventures Managing Partner Eric Linsley said he’s an optimist who believes in personalized medicine. But he added that he’s paid by the firm’s limited partners to be a skeptic. Linsley said he believes solutions will come from innovation. But for that to happen, the FDA must encourage that innovation and payers must modernize how they reimburse new technologies.