Patent Docs: Biotech/Pharma Business

Biotech/Pharma Business

July 22, 2010

NVCA Reports 34% Increase in Venture Funding for Second Quarter

Last week, the National Venture Capital Association (NVCA), a trade association representing the U.S. venture capital industry, released the results of its MoneyTree Report on venture funding for the second quarter of 2010. The NVCA quarterly study, which the NVCA conducts with PriceWaterhouseCoopers using data from Thomson Reuters, indicates that venture capitalists invested $6.5 billion in 906 deals during the second quarter, a 34% increase in dollars and 22% increase in deals as compared to the first quarter of 2010. After adjusting its first quarter numbers, the NVCA determined that $4.9 billion had been invested in 740 deals, as opposed to its initial determination that $4.7 billion had been invested in 681 deals (see "NVCA Report Shows First Quarter Drop in Venture Funding"). In addition, the NVCA report indicates that the $11.4 billion was invested over the first half of 2010, a 49% increase in dollars over the $7.7 billion that was invested over the first half of 2009.

In contrast with the first quarter of 2010, when the Life Sciences sector (biotechnology and medical devices) led all sectors with $1.3 billion invested in 160 deals, but still suffered through a 26% drop in dollars and a 21% decrease in deals as compared with the fourth quarter of 2009, the news was all good for the industry in the second quarter. Thus, not only did the Life Sciences sector experience increases of 52% in dollars and 36% in deals ($2.1 billion invested in 234 deals), but the sector ran its string of consecutive quarters as the top sector in terms of dollars invested to five. Interestingly, the biotech industry received as much funding in the second quarter ($1.3 billion going into 139 deals) as the Life Sciences sector received as a whole in the first quarter. The biotech numbers constituted a 59% increase in dollars and 34% in deal volume as compared with the first quarter.

Of the seventeen sectors analyzed for the report, the NVCA noted that eleven experienced dollar increases in the second quarter, including the Life Sciences, Computers and Peripherals (48% increase), Consumer Products and Services (44%), and IT Services (28%) sectors.

In a press release issued by the NVCA and PricewaterhouseCoopers, Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers, noted that the first quarter numbers had venture capitalists feeling more positive about the economic outlook for investment. She also noted that quarterly investment had topped the $6 billion mark for the first time since the third quarter of 2008. According to Ms. Lefteroff, the likely driver for the strong rebound in investment was the rise in Life Sciences companies looking to go public in the second quarter. She added that "[i]f the markets remain positive, we'll likely continue to see robust investment levels for the remainder of the year, with VC funding in 2010 poised to surpass 2009 levels."

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May 25, 2010

Marks & Clerk Survey Predicts Rise in Consolidation as Biotech/Pharma Industry Nears Patent Cliff

By James DeGiulio --

Despite the global economic outlook improving considerably over the last year, an industry survey by international intellectual property group Marks & Clerk suggests that the biotech and pharmaceutical industry may be entering a critical phase in terms of drug innovation and development. The research identifies a number of industry-specific problems, the most urgent being the patent cliff facing innovator pharmaceutical companies, where a large number of blockbuster drugs are set to come off patent between now and 2014. The Marks & Clerk survey indicates that biotech/pharma companies intend to overcome this obstacle through strategic mergers and acquisitions, while increasingly relying on patent term extensions to safeguard essential blockbuster revenue. Interestingly, the survey further suggests that members of the biotech/pharma industry favor recent U.S. healthcare reforms.

Marks & Clerk conducted the survey of 381 executives across the biotech/pharma sector. The study involved respondents from the U.S., U.K., Europe, and Asia. Over half of those responding were from commercial pharmaceutical and biotechnology companies, with the remainder coming from academic and R&D environments. A small number were from the venture capital industry with a specialty interest in life sciences angel investment.

Overall, the outlook within the industry has improved since last year, with 63% of respondents indicating that the climate for doing business and access to funding has improved in the past 12 months. However, the results of the survey indicate a pessimistic outlook towards the innovation capabilities of big pharma. The research reveals that 82% of respondents predict that big pharma will be unable to innovate sufficiently from within to replenish dwindling drug pipelines. Thus, many predict a substantial increase in acquisitions to augment this insufficiency. 68% forecast substantial acquisition activity within the next two years, with 19% anticipating major activity within the next year. Further, 65% believe the improved economic situation means the industry now has the confidence to go ahead with those mergers.

Marks & Clerk predict that large innovator companies will begin to look to biotechnology startups as the source for drug development pipelines of the future. Marks & Clerk also predicts that the industry is likely to observe innovator companies move into some areas of generic competition, particularly in the area of biosimilars where they identify considerable commercial opportunity or threat.

The study also confirmed the increased importance of patent term extensions within the biotech/pharma industry. Previously viewed as merely one tool among many for securing future revenue, 97% of respondents believe that the industry's reliance on patent term extensions, or supplementary protection certificates (SPCs) in Europe, will intensify as blockbuster drugs near the end of their patent life. 87% of respondents believe that dwindling drug pipelines at innovator companies drives this reliance.

This reliance on patent term extensions has fueled the push for reform in Europe. The biotech/pharma industry is calling for reform of the European system, since SPC protection is only granted to the product subject to initial marketing approval. Incremental improvements to the drug are not eligible for SPC protection. 82% of respondents believe innovators ought to be given a longer term in which they can market their products exclusively due to the increasing cost of R&D. Further, 79% favor reform where SPC protection is broadened to protect the underlying invention, as in the U.S., rather than the more narrow protection of the active ingredient the SPC provides now.

Interestingly, the Marks & Clerk research shows the biotech/pharma sector has a much more favorable view of the intellectual property system in the United States than it does of the European system. 62% of survey respondents felt that the U.S. intellectual property system has better managed to reward innovation and meet the changing needs of the industry than that in Europe. Further, despite the recent healthcare reform in the U.S., the clear majority rejects the notion that healthcare reform will ultimately harm drug innovation in the U.S. Indeed, 65% of the respondents believe that the reforms will benefit U.S. innovation in the long run. The findings display considerable confidence in the U.S. regime overall, with 89% of respondents believing lasting capital will be attracted back into the U.S. market for the long term as a result of the reforms.

The Marks & Clerk press release discussing the research can be found here.

James DeGiulio has a doctorate in molecular biology and genetics from Northwestern University and is a third-year law student at the Northwestern University School of Law. Dr. DeGiulio was a member of MBHB's 2009 class of summer associates, and he can be contacted at degiulio@mbhb.com.

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May 12, 2010

Docs at BIO: Steve Burrill's State of the Biotechnology Industry Report 2010

By Kevin E. Noonan --

Steve Burrill, President and CEO of Burrill & Co. took the stage at BIO 2010 in Chicago last week, and once again provided in 90 minutes his impressions and opinions on the state of the biotechnology industry. Although decidedly more upbeat than last year, Mr. Burrill's talk, entitled "Adapting for Success," included a large measure of caution to go along with his trademark futuristic optimism. That optimism was best encapsulated by his overarching message, that those in the industry were fortunate to be alive at this time, when all current world problems -- climate change, sustainability, energy security, food production and security, healthcare and healthcare "reform" -- could be tackled if not solved by biotechnology. (The only world problem not amenable to the biotechnology approach, according to Mr. Burrill, was terrorism, and even there some would argue that detecting biohazards through biotechnological means was another example of the power of the technology.)

Mr. Burrill's talk began, almost unavoidably, with the economy. He contrasted the situation a year ago, with the Dow around 8500, the capital markets "essentially closed," the threat of an influenza pandemic, and the prospects for a new administration in Washington (including healthcare reform and leadership vacuums at FDA and CMS) with today. The most remarkable fact about the past year, according to Mr. Burrill (at left), was that U.S. biotechnology companies raised (through capital markets and partnering with traditional pharmaceutical companies and others) a record forty-eight billion dollars, and saw an increase in market capitalization of 31%. These successes were not limited to traditional therapeutic drug development: industrial biotechnology (such as industrial enzyme sales) constitute a $2.9 million global market, and "biogreentech is hot." Not everything was rosy in the industry last year, however; biotech sales and revenue lost almost $8 billion, and investment in research and development was down by more than $18 billion. The number of biotech companies fell almost 14% (from 357 in 2008 to 310 in 2009).

With regard to the capital markets, Mr. Burrill said that venture capitalists and other funding sources had little interest in "microcap" companies -- those having less than $1 billion in market capitalization. However, biotech companies were in much better shape in some ways than traditional "top-tier" pharmaceutical firms, which had lost 48% ($530 billion) in market capitalization over the past ten years. In addition, total financial returns for several major pharmaceutical companies -- including Eli Lilly, Pfizer, Merck, and Schering-Plough -- were negative over that period, and a comparison of market capitalization between biotech companies and pharmaceutical companies showed (surprisingly) that several of the biotech companies (such as Amgen) had higher market caps than pharma firms. While the number of initial public offerings (IPOs) had plummeted during the financial crisis, they are beginning to come back, with seven companies having IPOs in 2010 (including AVEO Pharmaceuticals, CorMedix, and Alimera Sciences). The amounts raised, however, were predictably much less than what similar IPOs had commanded prior to 2008, and the share price for more than half of these companies had dropped from 1-22% from the offering price. In addition, another six biotech companies are set for IPOs in 2010. He also detailed the patterns of acquisitions and partnering between biotechnology and pharma, as a way to "acquire technology" for traditional pharmaceutical companies facing the "patent cliff" of lost exclusivity on blockbuster drugs and generic competition.

Turning to healthcare, he contended that we had not had healthcare reform but rather insurance reform, and noted that it was "Economics 101" that increasing the number Americans with healthcare insurance by 32 million without providing more doctors, hospitals, or drugs would result in increased costs (from $2.3 trillion in 2010 to $4 trillion in 2015). Other negatives include the effects on major businesses, many of whom have already take large charges against earnings to offset expected revenue losses due to health care costs. Positive developments include passage of a follow-on biologics bill with a 12-year data exclusivity term, and the Therapeutic Discovery Tax Credit, which will funnel more than $1 billion in grants and tax credits to biotechnology companies (although he predicts it will take several years for the money to be disbursed). He also mentioned the increased emphasis on drug safety and comparative effectiveness as tending to retard new drug approvals, and the recent gene-patenting ruling in the Myriad case.

Mr. Burrill set these changes in the context of the changes in healthcare, and Americans' perception of "health," over the past 50 years, reminding his audience of improvements in treating illnesses that had resulted in greatly increased life expectancy. Concomitantly there had been steady increase in the cost of healthcare, both in real dollars and percent of GNP, not only in the U.S. but in all industrially-developed countries. He also returned to a recurrent theme, that the healthcare industry in the U.S. was fundamentally dysfunctional, focused on "late-stage detection" of disease and intervention rather than early detection and prophylaxis. Much of the ill-health in the country -- and its costs -- are related to behavioral problems including obesity, alcohol abuse, smoking, and non-adherence to drug regimens, all of which were relatively intractable to intervention. He cited statistics that 0.5% of patients "consumed" 25% of the healthcare budget, and that 75% of healthcare costs are for patients suffering from chronic disease. Solutions provided -- potentially or otherwise -- by biotechnology include personalized medicine, especially genomic diagnostics to predict susceptibility to genetic diseases. (Of interest to the gene patenting debate, Mr. Burrill cited costs for other genetic tests, some of which are "even more" expensive than Myriad's BRCA1/2 test cost of $3,000.) He did note the shrinking cost of "whole genome" sequencing -- approaching $1,000 -- and the implications, and difficulties, of integrating this genetic information into appropriate diagnostics. Some of the implications involved Mr. Burrill's typical "into the future" speculations, such as diagnostics built into cell phones (where you'll spit on a spot on a cell phone and have the genetic or other diagnostic information transmitted to your physician, for example). Mr. Burrill also returned to his earlier (2008) prediction that healthcare delivery would change, this year focusing on digital delivery of medical information via the web and social networking.

Mr. Burrill then turned to the "emerging" markets outside the U.S., not only in their conventional role as possible areas for commercial expansion but as competitors for innovation. He noted that countries like China, India, and Brazil showed a much greater rate of increase in patent filings and R&D activity than in the U.S., and how their some of these markets outpaced the U.S. over the past year (albeit with their overall market capitalization remaining small compared to the U.S.). But China has "dominated" the IPO markets over the past two years (raising almost $20 billion in 2008 and more than $50 billion in 2009), and showed robust (>10%) economic growth in 2010. He also noted that clinical trials, while still predominantly conducted in the U.S., were increasing globally and particularly in China and Brazil.

Finally, his talk turned to "biogreentech" and applications of biotechnology for food and fuel production. Calling these "long term issues," he said the value of biotech in these areas was to increase yields with lower water requirements (drought resistance) and increased pest and disease resistance that would involve "gene stacking" technologies for developing complex trait combinations. He predicted that 37% of biofuel production would be from "3rd generation algae" and 33% from "1st generation ethanol" by 2020, with annual revenues in biofuels to top $100 billion by 2018.

The complete Burrill Report can be purchased from Burrill & Co.; sales at BIO 2010 include access to the company website for Mr. Burrill's presentation slides.

For additional information regarding this and other related topics, please see:

• "Partnerships Between Startup Firms and Big Pharma Fueled 85% Increase in Biotech Funding in 2009," January 13, 2010
• "Docs at BIO: Steve Burrill's State of the Biotechnology Industry Report 2009," May 19, 2009
• "Bio-irony: Biotech Turns a Profit in 2008," February 26, 2009
• "Docs at BIO: Steve Burrill's State of the Biotechnology Industry Report 2008," June 19, 2008

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May 05, 2010

Deloitte White Paper Points to Recession as Turning Point for Life Sciences Industry; Indicates That Survival Will Depend on Innovation

By Donald Zuhn --

On Wednesday, while the biotech industry gathered in Chicago for the 2010 BIO International Convention, Deloitte Touche Tohmatsu (DTT) released a white paper suggesting that the global recession has likely permanently reshaped the life sciences industry. To assess the long- and short-term effects of the recession, and determine whether the financial crisis was just a difficult but not insurmountable event for life sciences companies or a turning point for the industry, Deloitte surveyed 281 senior industry executives and a number of industry leaders during the fall of 2009. The paper, entitled "The future of the life sciences industries: Aftermath of the global recession," was jointly prepared with the Economist Intelligence Unit, the business information arm of The Economist Group, which publishes The Economist.

In the paper, DTT reports that 44% of respondents believe that 20 to 40% of existing biotech companies won't exist in five years as a result of the global recession. Senior industry executives responding to the survey were even more pessimistic, with 68% predicting the elimination of between 20 and 40% of current biotech companies. More than 65% of the executives also indicated that the recession had moderately to significantly negatively affected their companies.

The survey respondents noted that companies making it past the five-year mark post-recession, would do so by focusing on innovation. Unfortunately, 43% respondents indicated that their companies had reduced R&D spending and were focusing instead on products providing immediate returns. And almost a third of the respondents (32%) believed that R&D spending would continue to drop in the future. The paper also suggests that the lines between biotech and pharmaceutical companies will become further blurred as major pharmaceutical players will expand more aggressively into large molecule research.

In a press release issued with the paper, DTT asks whether the recession is "[t]he end of biotech as we know it?" Robert Go, DTT Global Life Sciences and Health Care Industry Leader, noted that the recession had accelerated the impact of health plans driving out costs, expiring patents, and evolving generics legislation. "With the dearth of new entrepreneurial entries, the talent flight, and the encroachment of large pharma," Reynold Mooney, DTT Global Life Sciences and Health Care Consulting Leader, predicted that "the future of biotech looks grim."

Of the 281 executives responding to the survey, 30% were from pharmaceutical companies, 16% were from medical device companies, 14% were from biotechnology companies, and the remainder were from contract research organizations, health care services, distribution, and health insurance.

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April 29, 2010

Ernst & Young Report: Biotech Industry Reaches Profitability for the First Time

By Donald Zuhn --

On Wednesday, less than a week before the industry congregates in Chicago for the 2010 BIO International Convention, Ernst & Young issued its 24th annual report on the biotech sector. In the report, entitled "Beyond Borders: Global Biotechnology Report 2010," the professional services firm concludes that "[t]he global biotechnology industry was able to weather the continued worldwide economic turmoil and deliver a strong financial performance in 2009, with the world's established biotech centers reaching profitability for the first time in history." Despite the good news, Glen Giovannetti, Ernst & Young's Global Biotechnology Leader, predicted that biotech companies would continue to face a challenging funding environment for the foreseeable future. Mr. Giovannetti's comments about biotech funding align with the results of the latest MoneyTree report issued by the National Venture Capital Association (NVCA), which showed that biotech venture funding between the fourth quarter of 2009 and the first quarter of 2010 dropped by 24% (see "NVCA Report Shows First Quarter Drop in Venture Funding").

The report's silver lining concerns its finding that companies in the industry's established biotech centers of the United States, Europe, Canada, and Australia posted an aggregate net profit of $3.7 billion in 2009, which constituted a $5.5 billion increase over the $1.8 billion net loss these four markets suffered in 2008. According to the report, this marked "the first time ever that these markets have reached aggregate profitability." This declaration, however, contradicted a similar announcement made by Steven Burrill, the CEO of Burrill & Co., when he asserted in February 2009 that the biotech industry turned a profit for the first time in 2008 (see "Bio-irony: Biotech Turns a Profit in 2008"). According to the report, the improvement in the established biotech centers was driven by a "dramatic increase" in net profit in the U.S., which was due, in turn, to the adoption of cost-cutting and efficiency measures.

While the report indicates that biotech companies in the U.S., Europe, and Canada raised 42% more capital in 2009, jumping to $23.2 billion, a significant portion of this capital was raised by only a handful of established public companies via follow-on offerings. The report noted that access to capital for many companies otherwise remained scarce. This gap between the industry's "haves" and "have nots" is expected to pose new challenges for emerging companies in accessing capital in the coming year.

The report concludes that biotech companies are now operating in a "new normal," where access to capital will remain difficult. In this new normal, venture capitalists are being more selective and are directing funding to existing projects rather than to new companies. In addition, IPO investors appear to be looking for "de-risked investments," and consequently, IPOs are pricing below companies' expectations. The report lists five guiding principles for biotech companies operating in the new normal:

(1) Broadening the search for capital to include nontraditional sources of funding;
(2) Learning to use scarce capital more efficiently;
(3) Focusing on reimbursement (payor acceptance) as an end goal in product development rather than marketing approval;
(4) Using more creative partnering approaches; and
(5) Attracting potential buyers by demonstrating what truly differentiates one company's products or platforms from those of its competitors.

In breaking down the results by region, the report indicates that the U.S. biotech industry's net income skyrocketed from about $400 million in 2008 to a record $3.7 billion in 2009, which was driven by revenue growth, cost cutting, and a change in the accounting rules for acquisitions. Despite the positive results for the U.S. biotech industry's net income, revenues of U.S. public companies fell 13% in 2009 to $56.6 billion. The report also noted that total U.S. capital for the biotech industry increased by 39% in 2009 to $18.0 billion. Of this amount, venture capital constituted $4.6 billion, which was the second-highest venture funding total in history, behind the $5.5 billion raised in 2007.

In Europe, revenues of public biotechs rose 8% to €11.9 billion, which was below the 17% growth seen in 2008. Total funding for the European biotech industry was up 48% to €2.9 billion in 2009, with venture capital constituting €800 million of this total (a 21% decrease from 2008 and the lowest amount since 2003). The Canadian biotech industry, meanwhile, raised more than $733 million in 2009, an increase of $255 million.

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April 21, 2010

MPEG LA Announces Formation of Gene Patent Pool

By Donald Zuhn --

In a press release issued earlier this month, MPEG LA, LLC announced that it was launching an initiative to enhance the availability of gene patents for diagnostic testing. MPEG LA, which describes itself as the world's leading packager of patent pools for standards and other technology platforms, would accomplish this objective by creating a new gene patent pool. Currently, MPEG LA has formed patent pools for MPEG-2, ATSC, AVC/H.264, VC-1, MPEG-4 Visual, MPEG-2 Systems, 1394, and MPEG-4 Systems, so the company would be venturing outside of consumer electronics-related pools for the first time in creating the gene patent pool.

MPEG LA notes that it neither owns nor uses the patents in its pools, but rather seeks to create markets for patents that maximize profits for the patent holders and make utilization of patents affordable for manufacturers, consumers, and other users. According to the company's press release, the new gene patent initiative will address "the market's need for nonexclusive access to patents for diagnostic genetics tests leading to personalized medical solutions that save lives and reduce healthcare costs." While MPEG LA President and CEO Larry Horn described diagnostic genetics testing as "hold[ing] great promise as a driver of precision therapy," he noted that patent thickets and restrictive licensing arrangements threaten the delivery of such tests. Pointing to the recent decision in Association for Molecular Pathology vs. U.S. Patent and Trademark Office, Mr. Horn contended that a solution that "balances social cost and open access with innovation incentive" was needed.

MPEG believes that by aggregating patent rights for existing and emerging tests that may lead to personalized treatment for diseases and disorders such as hereditary hearing loss in infants, breast cancer, ovarian cancer, cardiovascular disease, and Lynch syndrome, and licensing these patents nonexclusively for diagnostic use, it can assist laboratories, testing companies and researchers in obtaining the rights they need to design comprehensive diagnostic genetics tests, and as a result, make such tests widely available through multiple channels at affordable prices.

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April 20, 2010

NVCA Report Shows First Quarter Drop in Venture Funding

By Donald Zuhn –-

On Friday, the National Venture Capital Association (NVCA), a trade association representing the U.S. venture capital industry, released the results of its latest MoneyTree Report on venture funding. The study, conducted with PriceWaterhouseCoopers based on data from Thomson Reuters, indicates that venture capitalists invested $4.7 billion in 681 deals in the first quarter of 2010, a 9% decrease in dollars and 18% increase in deals as compared to the fourth quarter of 2009. After adjusting its fourth quarter numbers, the NVCA determined that $5.2 billion had been invested in 832 deals, as opposed to its initial determination that $5.1 billion had been invested in 794 deals. While the NVCA report indicated that both the dollars and deals were down from the fourth quarter of 2009, the NVCA noted that the numbers for the first quarter of 2010 were higher than for the same quarter in 2009, when $3.4 billion was invested in 635 deals.

It was a case of good news, bad news for the Life Sciences sector (biotechnology and medical devices) in the first quarter. On the bad news side, Life Sciences investing dropped to $1.3 billion in 160 deals for the first quarter, which constituted a 26% drop in dollars and a 21% decrease in deals as compared with the fourth quarter of 2009. On the good news side, Tracy Lefteroff of PricewaterhouseCoopers noted that "Life Sciences continues to be the number one sector for VC investing, with biotechnology being the absolute single-industry leader in dollars invested over the past four quarters." In particular, the biotech sector drew $825 million in 99 deals in the first quarter. However, these numbers still represented a 24% decrease in dollars (down from $1.1 billion in the fourth quarter) and a 14% drop in deals (down from 115 deals in the fourth quarter).

NVCA President Mark Heesen said that "[d]espite a great deal of economic uncertainty in the first quarter, the venture capital industry moved forward with a more active start than it did in 2009, which bodes well for the remainder of the year." He expected venture funding to increase moderately throughout the remainder of 2010, in part because of the passage of health care reform legislation.

Additional information regarding the latest report can be found here.

For additional information on this and other related topics, please see:

• "VentureDeal Report Shows 65% Increase in Fourth Quarter Biotech Venture Funding," March 16, 2010
• "NVCA Report Shows Slight Drop in 4Q Venture Funding and Sharp Decline for 2009," January 24, 2010
• "Biotech/Pharma Companies Look to Market for Capital," December 29, 2009
• "NVCA Study Shows Increase in Third Quarter Venture Funding," October 23, 2009
• "Biotech/Pharma Financing Improving, R&D Spending Up," August 31, 2009
• "Investors Saw Biotech Rebound Coming," August 17, 2009
• "Is Biotech/Pharma Beginning to Bounce Back?" August 12, 2009
• "First Quarter Venture Capital Funding at 12-Year Low," April 23, 2009
• "NVCA Study Shows Decline in 2008 Investment; BIO Study Predicts Biotech Rebound in 2009," February 16, 2009

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March 16, 2010

VentureDeal Report Shows 65% Increase in Fourth Quarter Biotech Venture Funding

By Donald Zuhn --

Earlier today, VentureDeal, a venture capital database offering information on U.S. technology startup companies, venture capital firms, and company financings, released its latest quarterly venture capital funding reports covering the fourth quarter of 2009. The VentureDeal reports track venture capital funding in 15 technology-based sectors, with separate reports focusing on alternative energy, clean tech, energy, and environmental sectors; biotechnology, pharmaceutical, and medical device sectors; internet, digital media, ecommerce, and software sectors; and telecom, wireless, mobile, and communications sectors.

The biotechnology, pharmaceutical, and medical devices report, which can be obtained here, shows that the three sectors took in $1.9 billion in venture capital financing during the fourth quarter of 2009. According to the report, this represented virtually no change when compared with the third quarter results. However, while medical device and pharmaceutical venture funding dropped by 20% and 29%, respectively, in the fourth quarter, the report noted that biotech funding increased a "whopping" 65% during the quarter, reversing a previous downward trend. In addition, the biotech sector saw a 19% increase in the number of companies funded in the fourth quarter. In particular, 69 biotech companies secured $871 million last quarter. In contrast, 78 medical device companies secured $752 million and 45 pharmaceutical companies secured $460 million during the fourth quarter.

As for the other sectors monitored by VentureDeal, the alternative energy, clean tech, energy, and environmental sectors took in $232 million among 33 companies in the fourth quarter, which constituted a 45% decrease in funding and a 6% decrease in companies being funded; the internet, digital media, ecommerce, and software sectors secured $1.8 billion among 286 companies, which marked a 38% increase in funding and a 25% increase in companies being funded; and the telecom, wireless, mobile, and communications sectors took in $231 million among 49 companies, which constituted a 17% decrease in funding and a 14% increase in companies being funded.

The funding totals in the VentureDeal reports were similar to totals presented in the latest National Venture Capital Association (NVCA) MoneyTree Report on venture funding, which was released in January (see "NVCA Report Shows Slight Drop in 4Q Venture Funding and Sharp Decline for 2009"). While the VentureDeal reports indicate that 560 companies secured $4.16 billion during the fourth quarter, the NCVA report showed that there were 794 deals involving $5.0 billion in the fourth quarter. The differences between the two reports with regard to total venture funding may be due to the difference in the number of sectors each organization monitors, as VentureDeal examines 15 sectors and the NVCA looks at 16 sectors. As for biotech funding, the NVCA report indicated that there were 108 deals involving $1.0 billion during the fourth quarter.

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January 24, 2010

NVCA Report Shows Slight Drop in 4Q Venture Funding and Sharp Decline for 2009

By Donald Zuhn –-

Over the entire year, the NVCA report indicated that venture capitalists invested $17.7 billion in 2,795 deals in 2009, which marked the lowest level of funding in twelve years. The 2009 totals also represented a 37% decrease in dollars and a 30% decrease in deals as compared with 2008 -- the second consecutive year of declines in deals and dollars invested.

While the overall investing numbers were down slightly in the fourth quarter, biotech investing saw a 10% increase in dollars in the fourth quarter, with $1.0 billion being invested in 108 deals. As a result, the biotech sector was the number one sector for dollars invested in the fourth quarter and the only sector to receive more than $1 billion in the quarter.

The biotech sector was also the top sector for the whole of 2009, drawing $3.5 billion in 406 deals for the year. Despite the top ranking, however, biotech investing declined by 19% in both dollars and deals in 2009. The Life Sciences sector, which comprises the biotechnology and medical device industries, accounted for 34% of all venture capital dollars invested in 2009 as compared to 28% in 2008.

In a press release announcing the release of the new MoneyTree Report, the NVCA pointed to fourth quarter increases in the number of first-time and early stage deals completed as "potentially marking the beginning of an uptick in investment levels for 2010." NVCA president Mark Heesen predicted that "[n]ow that the economy has begun to show signs of improvement, we expect to see dollars flow more freely back into those sectors that offered the most promise before the recession began -- clean technology, life sciences and IT." Tracy Lefteroff, the global managing partner of the venture capital practice at PricewaterhouseCoopers, noted that "[d]espite the overall drop in funding in 2009, VCs placed more bets in the fourth quarter of 2009 than we've seen all year," adding that venture capitalists were "investing fewer dollars in these companies but the fact remains that there are still entrepreneurs out there with great ideas who are getting the opportunity to take the next step forward with their businesses."

Additional information regarding the latest report can be found here.

For additional information on this and other related topics, please see:
• "Biotech/Pharma Companies Look to Market for Capital," December 29, 2009
• "NVCA Study Shows Increase in Third Quarter Venture Funding," October 23, 2009
• "Biotech/Pharma Financing Improving, R&D Spending Up," August 31, 2009
• "Investors Saw Biotech Rebound Coming," August 17, 2009
• "Is Biotech/Pharma Beginning to Bounce Back?" August 12, 2009
• "First Quarter Venture Capital Funding at 12-Year Low," April 23, 2009
• "NVCA Study Shows Decline in 2008 Investment; BIO Study Predicts Biotech Rebound in 2009," February 16, 2009

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January 13, 2010

Partnerships Between Startup Firms and Big Pharma Fueled 85% Increase in Biotech Funding in 2009

By James DeGiulio --

Industry investor and analyst Steven Burrill (at right), CEO of Burrill & Co., reports that a record $55.8 billion was raised by the biotech industry in 2009, which constitutes an 85 percent increase over the $30.1 billion recorded in 2008. Mr. Burrill noted that these results were driven by $37 billion in financial partnerships between large drug companies and biotech startups, but warned startups that licensing their most promising developments will ultimately lead to long-term limits on company growth. "You're not going to grow a lot more Genentechs or Amgens," Mr. Burrill said. His comments regarding 2009 biotech funding were reported in an article appearing in the San Francisco Chronicle ("'Big Pharma' feed biotech startups record funds").

Smaller biotech firms hope to use partnerships to fund the development of a biomedical breakthrough while retaining enough control to preserve the growth potential of the company. In order to survive a tough year, biotech startups have increasingly been forced to turn to partnerships and licensing for revenue production. Though smaller biotech firms have had success in developing marketable drugs, these firms have typically struggled to meet the cost of developing drug sales efforts. Partnerships and buyouts have become an easier way to raise the necessary capital than initial stock offerings.

James DeGiulio has a doctorate in molecular biology and genetics from Northwestern University and is a third-year law student at the Northwestern University School of Law. Dr. DeGiulio was a member of MBHB's 2009 class of summer associates.

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January 04, 2010

December 29, 2009

Biotech/Pharma Companies Look to Market for Capital

By Donald Zuhn --

Over the past five months, biotech and pharma companies have increasingly turned to the stock market for much needed infusions of capital. In August, Nashville-based Cumberland Pharmaceuticals snapped a two-year industry dry spell when it conducted an initial public offering (IPO) that raised $85 million (see "Is Biotech/Pharma Beginning to Bounce Back?"). And in October, Talecris Biotherapeutics and Omeros Corp. conducted their own IPOs, raising $950 million and $68.2 million, respectively (see "Biotech/Pharma IPO Binge"). Meanwhile, Inspire Pharmaceuticals and Seattle Genetics managed to raise $115 and $136 million, respectively, in public offerings of their common stock, and Anthera Pharmaceuticals announced plans for a $70 million IPO.

Coupled with the (slow) rebound of venture capital funding, the recent announcements of public offerings and registrations for public offerings are a possible indicator that the biotech/pharma industry has begun to bounce back after suffering through one of the worst economic downturns in history (see "NVCA Study Shows Increase in Third Quarter Venture Funding"). A number of other biotech/pharma companies have joined the IPO fray since our last report in October, including Trius Therapeutic, Ironwood Pharmaceuticals, AVEO Pharmaceuticals, China Nuokang Bio-Pharmaceutical, Rules-Based Medicine, Tengion, Codexis, Med BioGene, Alimera Sciences, and Aldagen.

• In early November, Trius Therapeutics announced that it filed a registration statement with the U.S. Securities and Exchange Commission (SEC) regarding a proposed initial public offering of shares of its common stock. According to a FierceBiotech report, the San Diego-based biopharmaceutical company, which focuses on the discovery, development, and commercialization of antibiotics, is looking to raise $86 million through its IPO.

• Late last month, Ironwood Pharmaceuticals announced that it filed a registration statement with the SEC relating to the proposed initial public offering of shares of its Class A common stock. According to a report in The Boston Globe, the Cambridge, MA-based pharmaceutical company has yet to announce the amount it expects to raise via the IPO.

• Earlier this month, AVEO Pharmaceuticals announced that it filed a registration statement with the SEC regarding the proposed initial public offering of shares of its common stock. The biopharmaceutical company, based in Cambridge, MA, focuses on discovering, developing and commercializing novel cancer therapeutics, including its lead product candidate, Tivozanib, a novel, highly potent and selective oral inhibitor of vascular endothelial growth factor (VEGF) receptors 1, 2 and 3. According to a report on StreetInsider.com, the company plans to raise $86.25 million through the IPO.

• On December 10th, China Nuokang Bio-Pharmaceutical, which offers a number of therapeutics for bleeding control and hematological, cardiovascular, and cerebrovascular disease diagnosis, treatment, and prevention, began trading on the Nasdaq Global Exchange under the ticker symbol NKBP. The company's shares, which opened at $8.24, closed at $7.78 today (see StreetInsider.com report).

• Last week, Rules-Based Medicine, which provides protein biomarker products and services based on its Multi-Analyte Profiling (MAP) technology platform, announced that it filed a registration statement with the SEC for an initial public offering of up to $90 million of its common stock (see StreetInsider.com report).

• On Christmas Eve, Tengion announced that it filed a registration statement with the SEC relating to the proposed initial public offering of shares of its common stock. The regenerative medicine company, based in East Norriton, PA, has developed the Autologous Organ Regeneration Platform in which biocompatible materials and a patient's own cells are combined to regenerate diseased and failing organs and tissues (i.e., neo-organs and neo-tissues). According to a report in The Philadelphia Inquirer, Tengion is looking to raise $42.25 million in the IPO.

• Yesterday, Codexis announced that it filed a registration statement with the SEC for a proposed initial public offering of shares of its common stock. According to a Reuters report, the Redwood City, CA company, which makes "super enzymes" for use in pharmaceutical, chemical, and transportation fuel manufacturing and air and water treatment, plans to raise $100 million in the IPO.

• According to a report on StreetInsider.com, Med BioGene filed a registration statement today with the SEC for an initial public offering of its common stock. Med BioGene, which is based in Vancouver, British Columbia, focuses on the development and commercialization of genomic-based clinical laboratory diagnostic tests.

• In addition to the above reports, Alimera Sciences and Aldagen have each announced that they have refiled earlier IPOs. According to a FierceBiotech report, Atlanta-based Alimera, which originally pulled a proposed $75 million IPO last spring, has now refiled an IPO seeking to raise $80 million. A report in The Wall Street Journal indicates that Aldagen, which tabled its earlier IPO in October 2008, has now refiled an IPO seeking to raise $80.5 million. The Durham, NC-based biopharmaceutical company develops regenerative cell therapies.

• Finally, Vertex Pharmaceuticals announced earlier this month that it had raised $500.5 million in a public offering of its common stock. The Cambridge, MA-based biotech company focuses on the discovery and development of small molecule drugs for treating viral diseases, cystic fibrosis, inflammation, autoimmune diseases, cancer, and pain.

For additional information regarding this and other related topics, please see:

• "Biotech/Pharma IPO Binge," October 9, 2009
• "Is Biotech/Pharma Beginning to Bounce Back?" August 12, 2009

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October 23, 2009

NVCA Study Shows Increase in Third Quarter Venture Funding

By Donald Zuhn –-

On Tuesday, the National Venture Capital Association (NVCA), a trade association representing the U.S. venture capital industry, released the results of its latest venture funding study. The study, conducted with PriceWaterhouseCoopers and Thomson Reuters, indicates that venture capitalists invested $4.8 billion in 637 deals in the third quarter of 2009, a 17% increase in dollars and 3% decrease in deals as compared to the second quarter of 2009.

According to the study, the Life Sciences sector, which comprises the biotechnology and medical device industries, had a "solid quarter" relative to other industry sectors. In particular, the biotech industry, which received the highest level of funding in the third quarter, secured $905 million in 104 deals (a 4% decrease in dollars and a 16% increase in deals relative to the second quarter), and the medical device industry received $617 million in 71 deals (a 6% decrease in dollars and 15% decrease in deals). In contrast, the Software sector dropped to its lowest level of funding since 1996, and ten of the 17 sectors examined by the NVCA experienced dollar declines in the third quarter, including Semiconductors (14% decline; a 10-year low), Healthcare Services (57% decline), Computers and Peripherals (40% decline) and Telecommunications (17% decline).

Tracy Lefteroff, the global managing partner of the venture capital practice at PricewaterhouseCoopers called the increase in third quarter venture capital funding "very encouraging," and predicted that the pace of investing would "continue to strengthen over the next several quarters as long as the IPO markets begin to open up and M&A activity increases."

Additional information regarding the study can be found here.

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October 09, 2009

Biotech/Pharma IPO Binge

By Donald Zuhn --

In August, we noted negative economic indicators for the biotech/pharma industry were finally giving way to more positive signs (see "Is Biotech/Pharma Beginning to Bounce Back?"). Among the positive signs was the return of the biotech/pharma initial public offering (IPO), with Cumberland Pharmaceuticals becoming the first U.S. drug company to go public in nearly two years, and Seattle Genetics and Inspire Pharmaceuticals announcing IPOs shortly thereafter. A few additional biotech/pharma companies have now joined or are expected to soon join the fray.

This week, Seattle-based Omeros Corp. announced that 6.82 million shares of its common stock would begin selling at $10.00 per share on the NASDAQ Global Market on Thursday under the ticker symbol OMER. On Friday, Omeros' shares closed at $8.46. The company announced that the proceeds of its IPO would be used to fund the completion of Phase III clinical trials and subsequent commercialization of its product candidate OMS103HP, for improving postoperative joint function and reducing postoperative pain during arthroscopic surgery. Omeros also intends to use the IPO proceeds on two other product candidates it has in the clinic: OMS302 for ophthalmology and OMS201 for urology.

Talecris Biotherapeutics Holdings Corp., based in Research Triangle Park, NC, announced the closing of its own IPO on Wednesday. According to a Bloomberg report, Talecris raised $950 million in the second-largest IPO in the U.S. this year. Talecris's shares, which were initially offered at $19 each, were trading at $21.18 on Friday. Talecris makes protein therapies such as Prolastin and Gamunex, which are derived from human blood plasma and which are used in the treatment of immune deficiencies and disorders.

In September, the San Francisco Business Times reported that Anthera Pharmaceuticals of Hayward, CA had registered with the U.S. Securities and Exchange Commission for the purpose of selling up to $70 million in stock on the NASDAQ exchange under the symbol ANTH. According to the Business Times, Anthera has an anti-inflammatory drug ready for Phase III clinical trials and two other drugs ready for Phase II trials.

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September 11, 2009

Analyst Lists Five Biotech Companies to Watch

By Donald Zuhn --

Last week, Dr. Simos Simeonidis, a Senior Biotechnology Analyst for Rodman & Renshaw, LLC, provided FierceBiotech with a list of five biotech companies to watch in the coming months ("Five Biotech Companies to Watch"). On Dr. Simeonidis' list were Poniard Pharmaceuticals, GTx, OncoGenex, MannKind Corp., and Rigel Pharmaceuticals.

Dr. Simeonidis noted that he liked the chances of South San Francisco-based Poniard announcing the successful completion of a clinical trial of its platinum compound, picoplatin, for the treatment small cell lung cancer. He believed that a successful trial would allow the company to secure a worldwide partnership for picoplatin, or alternatively, make Poniard an attractive target for acquisition.

GTx, headquartered in Memphis, made the list because of the possibility that the company could receive an approvable letter requiring additional data with respect to its compound, Toremifene, for preventing bone fractures in men with prostrate cancer on androgen deprivation therapy (ADT). Dr. Simeonidis, however, did express some skepticism regarding the prospects of Toremifene.

Dr. Simeonidis believed that on the strength of recent efficacy data, Vancouver-based OncoGenex could find a partner for its molecule, OGX-011, for treating prostrate and lung cancer. Aternatively, he thought the whole company could be acquired, noting that OncoGenex is valued at a fraction of the $894 million Johnson & Johnson recently paid for Cougar Biotechnology. Earlier this week, Patent Docs reported on a patent OncoGenex recently obtained for using OGX-011 to enhance cancer cell chemo- or radiation-sensitivity (see "OncoGenex Announces Issuance of Patent for Antisense Cancer Therapeutic").

According to Dr. Simeonidis, MannKind, which has been developing Afresa, an inhalable form of insulin, has been in active discussions with pharmaceutical partners for the co-development and commercialization of Afresa. He expects MannKind, based in Valencia, CA, to secure a partner sometime this fall.

Finally, South San Francisco-based Rigel made the list for demonstrating strong efficacy in one of two trials of its compound, R788, for treating rheumatoid arthritis. The other trial, however, yielded inconclusive results. Nevertheless, Dr. Simeonidis believed Rigel's shares were undervalued, and suggested that Rigel could secure a partner for R788 sometime this fall.

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September 09, 2009

BIO Top Brass Meet the Press

By Kevin E. Noonan --

The Biotechnology Industry Organization (BIO) held a media briefing on Federal policy issues today, with most of BIO's executive staff assembling at BIO headquarters in Washington, D.C. In addition to the media present on site, BIO hosted several more members of the press by teleconference.

Jim Greenwood (at left), BIO's President and CEO, started the meeting with prepared remarks concerning healthcare reform, patent reform, and the energy bill. With regard to healthcare reform, Mr. Greenwood reiterated BIO's support, provided that any healthcare bill recognize four fundamental objectives: access for all ("every man, woman and child"), cost containment, quality, and innovation. Mr. Greenwood also mentioned biosimilars legislation, where he expressed pride that BIO had "played it straight" with legislators "from the beginning." BIO's position was consistently that a 14-year data exclusivity period was the right length, and didn't advocate for longer terms of 16-18 years as a negotiating ploy. He said that BIO had done "quite well" against a "well-organized coalition" of generics companies, the AARP, the White House, and other factions. He also said that BIO was willing to accept the Senate bill's compromise of 12 years if that was what it takes to get a bill passed. He also voiced BIO's support for "comparative effectiveness" as a tool for making medical decisions but not for reimbursement. On energy, Mr. Greenwood maintained that there was no way to significantly reduce greenhouse gases without contributions from biotechnology, including cellulosic ethanol technology, algae, and other methods of energy production. Mr. Greenwood ended his remarks with patent reform, which he characterized as a "long, hard fight" contested "at a great disadvantage" against an IT industry that supported "reforms" that would make it "easier to infringe patents." He voiced BIO's support for the compromise that had produced a bill in the Senate.

Also addressing the press was Dr. Stephen Sherwin (at right), BIO's chairman and also the Chairman of Cell Genesys, Inc. Dr. Sherwin, a biotech entrepreneur throughout his career, spoke on the economic climate for biotechnology. He mentioned the obvious -- that it had been an "extremely difficult and challenging time" for biotech over the past 18-24 months, with almost half of the organization's member companies having enough cash for 12 months and a quarter having less than 6 months of cash reserves. He also mentioned that there has been no significant IPO activity in the biotech sector in almost two years. The reason is that investors are nervous about the regulatory environment if there is a follow-on biologics bill and the effects any FOB bill may have on the timing of product development. (In response to a question, Dr. Sherwin said that Wall Street hates uncertainty, even when it is uncertainty Wall Street has created.) On the bright side, Dr. Sherwin mentioned that there had been "some thawing" in the capital markets in the face of "good news" from clinical trials, etc. He also noted that he had met with the new FDA commissioner, Dr. Hamberg, and was pleased with her "science-based" approach. He also noted that there was progress on reauthorizing SBIR grant legislation that would permit companies having venture capital funding to compete for such grants. He said that he was optimistic, but that "we have our work cut out for us."

In the question-and-answer portion of the meeting, Mr. Greenwood responded to a question from Reuters on healthcare reform that certain revenues for smaller companies -- like royalties and milestone payments -- should be exempt from the fees (or taxes) that the Obama administration proposed on drug sales revenues in an agreement with the pharma industry announced earlier this summer. Mr. Greenwood also reminded listeners that predictions such as a recent one by BioWorld, that biotech drugs would represent 50% of all new drugs by 2015 and 71% by 2025, might not come to pass if a shortened data exclusivity period drove investment away from the biotech sector. The 12-year period is the minimum required to maintain the incentives for investment in new biologic drugs, which is why BIO supports this number. Investors have other opportunities that are less risky that they will take if there isn't a sufficient data exclusivity period to support such investment, Mr. Greenwood said.

Business Week asked about BIO's position on the "politics" of 'partisan gridlock" over the healthcare and energy bills, where Republicans might oppose the bills merely to hand the Obama administration a political defeat. Mr. Greenwood said it wasn't BIO's role to try to "change the playbook" for the parties, and that the "big picture" required healthcare reform. BIO has been (and by implication, will continue to be) "religiously non-partisan" on the healthcare issue, resulting in strong bipartisan support (with 28 of 38 Democratic members and all but one Republican member of the Energy and Commerce committee voting for the biosimilars amendment supported by BIO). There is nothing partisan about using biotechnology in reducing greenhouse gases, he said. Brent Erickson (at left), BIO's Executive Vice President, Industrial and Environmental Section, chimed in that opposition to the energy bill was not partisan so much as regional, reflecting differences in the reliance of different sections of the country on fossil fuels. It has been "a bit of an uphill battle" in educating Congress about the contributions of biotechnology in addressing climate and energy problems, he said.

Mr. Greenwood had another opportunity to remind his listeners that BIO had played the role of honest broker in the healthcare debate, in response to a question from the Pink Sheet about whether BIO would need to "cut a deal" with the Obama administration like PhRMA did (according to the Pink Sheet reporter). Mr. Greenwood said there had not been any horse-trading or quid pro quo in BIO's position -- he said that BIO's success in pursuing its agenda regarding FOB legislation was the result of old-fashioned "shoe leather" politics, by meeting with "scores" of Congressional leaders and explaining BIO's position. He mentioned that he carried two things to these meetings: a model of the aspirin molecule and a DVD showing the structure of erythropoietin (see image at right). Mr. Greenwood also said that BIO's success makes getting a bill passed even more important, since BIO's "enthusiasm for the package [will be] dramatically diminished" if the bill undergoes major changes in the House.

Dr. Sherwin addressed a question about the priorities BIO would advocate for the FDA. He mentioned that he was "encouraged' by the new FDA commissioner's (science-driven) approach, which he says he expects to be characterized by "efficiency" and "clarity." He said there will be an effort to strike a balance between safety and efficacy, a balance he said was familiar to all physicians in assessing risks and benefits of any course of treatment. While acknowledging that a single meeting could not address complex issues, he said he was "encouraged" by having someone with her background in her position early in the Obama administration.

Andrew Noyes from Congress Daily asked about patent reform, and Brent Delmonte, BIO's Vice President for Governmental Relations said that BIO hopes for support for the Senate bill, a "fair, responsible compromise," and that contentious bills (like H.R. 1908 from the previous Congress) could slow patent reform. He mentioned "great ideas" from both sides of the Hill, including re-examination and the "second window," and the "gatekeeper" function of judges on the damages issue. On balance, BIO remains "hopeful" for a patent reform bill in this Congress, but doesn't see any "date certain" for the bill coming to the floor.

A reporter from Scripps News asked the panel about the SBIR bill, and Mr. Greenwood said that BIO was very pleased with the result of the vote on the reauthorization bill in the House, which passed the bill 386-41. Alan Eisenberg, BIO's Executive Vice President Emerging Companies and Business Development, mentioned that the SBIR program is funded by a 2.5% set-aside from other departments and Federal agencies (the Department of Defense, the Department of Energy, the National Institutes of Health), and that the bill was an attempt to overturn "fairly arbitrary" administrative agency (Small Business Administration) decisions that prevented venture capital-funded companies -- the majority of BIO's small company members -- from participating. BIO is confident that Congress will be able to resolve differences between the House and Senate versions of the bill.

Hans Sauer, BIO's Associate General Counsel for Intellectual Property, fielded a question on the Bilski case, specifically why BIO was interested in the case. Mr. Sauer provided a brief synopsis of the case, mentioning that the Federal Circuit had fashioned a rule on patent eligibility of method claims that was far broader than necessary to answer the question of whether the business method claims in the Bilski patent should be patent-eligible. This broader rule put at risk the patentability of claims to important methods, such as biomarkers and biological correlations with disease, and personalized medicine, that made the issue one important to BIO. He noted that biotech methods, not business method cases, were some of the first cases affected by the Federal Circuit's new rule. He expressed confidence that the Supreme Court would understand these distinctions when it fashions a different rule in deciding Bilski.

A reporter from the Journal of Commercial Biotechnology and Scientific American brought the discussion back to the economy, and Mr. Eisenberg provided some additional sobering statistics. He said that the total number of public companies has been reduced, some by mergers and acquisitions, and others by bankruptcy, with more than 20 biotech member companies having declared bankruptcy under Chapter 11. He also mentioned that the statistics were more certain for public companies, which are under an obligation to report bankruptcies, and that privately-held companies may be able to just "sell their assets" and disappear. The number of public biotech companies has decreased from 370 to less than 330, and "well over" 100 companies have laid off employees (with a total of 10,000 to 12,000 employees being laid-off throughout the industry). The most ominous and telling fact, according to Mr. Eisenberg, is that companies were "shelving" projects having positive clinical data, simply because the companies don't have the money to continue funding these projects, and the capital markets have not recovered their interest in the sector.

Finally, Mr. Greenwood reiterated that BIO is in favor of healthcare reform, but that it was just as important that any healthcare reform bill doesn't disincentive innovation. As it is, investors are sufficiently concerned about FOB legislation that it is an impediment to investment, and it would help investment, and be favorable to innovation, to get a bill passed and end the uncertainty that is inhibiting investment in the industry. Mr. Greenwood said that the slogan "heat, heal and feed the world" reflects BIO's view that you cannot address these problems in a sustainable way without contributions from biotechnology.

A podcast of the media briefing can be obtained here.

Posted at 11:59 PM in Biotech/Pharma Business, Follow-on Biologics, Food and Drug Administration, Patent Legislation, Patentable Subject Matter, Supreme Court | Permalink | Comments (1) | TrackBack (0)

September 06, 2009

VC CEO Believes Biotech Is Entering Golden Era

By Donald Zuhn --

In the August issue of Life Science Leader Magazine, Randal Kirk, Chairman and CEO of the venture capital firm Third Security, LLC, writes that while some 600 to 800 life science companies are expected to go out of business or be absorbed by other companies within the next two years, biotech is at the edge of "a golden era of valuable discoveries that forever will revolutionize its foundation" ("At the Outset of the Golden Era of Biotech"). According to Mr. Kirk, however, this golden era of biotechnology will be quite different from any previous stage of the industry's development.

Not surprisingly, one impetus of change in the biotech industry will be the economic recession. Mr. Kirk (at left), however, argues against the "common misconception that the industry has suffered a setback similar to that of others -- largely due to the poor economy -- and that, with recovery in the general economy the industry eventually will return to normal." He suggests that "the biotech industry will not return to a state that we recently knew as 'normal,'" and instead will "morph[] into a new state." A "new state" of biotechnology is required, Mr. Kirk contends, because "much of the biotech industry is based on flawed logic and processes that in the cruel light of day reveal themselves to have been chasing specious objectives with an overabundance of poorly directed capital." With the economic woes leading to a withdrawal of venture funding, and many in the industry pointing to inadequate funding as the problem, Mr. Kirk notes that "the more obvious lesson seems to have gone largely unlearned: We have been creating too little value."

According to Mr. Kirk, the real problem with the biotech industry can be traced to its dependency on the healthcare industry, the latter of which "lacks critical feedback mechanisms that are normal to other consumer industries in a market-based economy." Mr. Kirk notes that because the consumption decisions of healthcare consumers have been divorced from their payment obligations as a result of third-party payment systems, the healthcare industry lacks incentives to produce higher quality products (i.e., more effective treatments) at lower costs. Mr. Kirk argues that "the healthcare industry has actually been selling a product that is quite different from what may reasonably be termed 'healthcare' and that product is called 'hope,'" adding that "[a]s a product, hope offers considerable profit opportunity." As an example, Mr. Kirk points to "many of the cancer therapies that gross billions of dollars per year today [but] only manage to move overall survival rates by an average of a few weeks and are largely ineffective for the majority of patients who take them."

Mr. Kirk therefore suggests that the solution to the biotech industry's problems will be to rededicate itself to "providing constantly improved value to the consumer." In other words, "[c]ompanies should be focusing on adding genuine value to the maturation process of the health care industry by developing technologies that produce a higher quality product at lower cost." For example, Mr. Kirk argues that clinical trial expenses for ineffective therapeutic candidates could often be avoided by performing "a simple proof-of-concept study [to] determine if the underlying premise -- that the product candidate could achieve its therapeutic goal -- was valid or not."

Mr. Kirk concludes his article by suggesting that a handful of disciplines will lead the biotech industry into its new golden era: "Within the life science fields, the most promising space includes molecular biology, cellular biology, and genetics, and the intersection of the three." He notes that "[t]his space is accruing intellectual capital at such a fast rate that . . . the quantum of what is known is doubling every 2-3 years." Drawing an analogy between where the biotech industry currently stands and the place where the semiconductor and software industries were in 1980, Mr. Kirk states that "[j]ust as GUI screens, object oriented code, data base software, optical fiber and many other science-based technologies became established as fairly fixed concepts in the development of a meteoric increase in productivity for those industries, biotech today is on the verge of identifying the technologies and motifs that will be the bases of its growth hereafter." He also notes that the analogy is more than casual, stating that while the biotech industry spent its first 30 years focusing on genes, their modification, and the processing of their output, the industry is beginning to shift its focus to non-transcribed portions of the genome. Mr. Kirk writes that "researchers now understand that the regulatory domains act as logical controllers, and, indeed, that DNA is nature's logic controller."

Mr. Kirk will be speaking at the 2009 Mid-Atlantic Bio Conference on November 4-6, 2009, where he plans to discuss the impact of the economy on the biotech industry, offer more thoughts on the next wave of advancements in the biotech industry, and provide predictions regarding the future direction of the industry.

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September 02, 2009

Cancer Drug Development in The New York Times

By Kevin E. Noonan --

The fastest-growing part of the biotech/pharma industry is anticancer drugs, according to an article in The New York Times today ("For Profit, Industry Seeks Cancer Drugs"). Written by Andrew Pollack, one of the paper's senior business and technology writers, the article highlights the interplay between scientific interest and business opportunity driving this phenomenon.

The article supports its thesis on the recent rise in anticancer drugs with some telling statistics: there are "more than twice the number of experimental drugs for heart disease and stroke combined, nearly twice as many as for AIDS and all other infectious diseases combined, and nearly twice as many as for Alzheimer's and all other neurological diseases combined." This corresponds to 860 anticancer drugs currently in clinical trials.

The scientific reasons for these efforts stem from the nature of cancer as a disease. Robert Weinberg (at left) from the Whitehead Institute at MIT is quoted in the article as saying "Cancer is not a single disease. It's really dozens, arguable hundreds of diseases." Bert Vogelstein (below right) from Johns Hopkins is quoted as saying that a typical tumor may have 50-100 genetic mutations, with any two patients having the same type of cancer having as few as five mutations in common. Accordingly, there are many approaches and molecular targets for small molecule, immunological, and other avenues for attacking cancer cells in an effort to find a cure. In addition, the situation is ripe for "personalized medicine," or efforts to tailor the treatment to the tumor based on the unique signature of genetic mutations and the corresponding phenotype of an individual's cancer and the targets for therapeutic intervention expressed by each individual's tumor.

But this very complexity is the main reason why cancer remains so daunting after 40 years of concerted efforts to find a cure. On the one hand, individual cancers even of the same type or in the same tissue vary dramatically in changes in gene expression, chromosomal abnormalities, and cancer-associated phenotypes, so that treatments that are effective for some cancer patients are completely ineffective for others. This has caused the "war on cancer" to resemble a "grinding war of the trenches," according to an uncredited quote by a cancer researcher. And intractable clinical situations provide a correspondingly broader scope of opportunities for new drugs effective against cancer in some portion of the patient population.

However, on the other hand, the efficacy of many anticancer drugs is limited at best. The article cites the instance of drugs like Erbitux® used as a "last ditch treatment for colorectal cancer" providing on average about 90 days of additional life to patients. And Taceva®, used for treating pancreatic cancer (a cancer having a 3% 5-year survival rate that hasn't changed in the past 100 years), extends life for pancreatic cancer patients on average only 12 days (the basis for its approval by the FDA for this indication).

Since 1998, when there were twelve anticancer drugs in the world's 200 medicines having the greatest sales, the number of anticancer drugs has almost doubled (to 23), and 20 of the 126 drugs having revenues of $1 billion are anticancer drugs. Despite these efforts, however, only a handful of new anticancer drugs are approved each year (two in 2008, one so far in 2009). Nevertheless, the article cites studies by IMS Health, a pharmaceutical market research company, for evidence that "[c]ancer drugs have been the biggest category of drugs in terms of sales worldwide since 2006 and in the U.S. since 2008."

One factor driving anticancer drug development is the revenues that can be generated from their sales, which carry a hefty price tag. Taceva® treatments cost about $3,500 a month, according to the article, and Erbitux® costs $10,000 per month (with an "extra" cost per patient averaging $50,000, based on the average length of treatment course). These costs have resulted in ImClone having revenues of $1.6 billion in 2008 for Erbitux®, revenues that the article asserts motivated "Eli Lilly & Co. to outbid Bristol-Myers Squibb to acquire ImClone for $6.5 billion."

While these costs are exorbitantly high, the article notes that "[p]atients are often desperate, and insurers risk outrage by denying payments for a[n anti]cancer drug," even when there is little chance of benefit from the treatment. "Cancer is such an emotional issue that the free market doesn't work like it does for bicycle wheels and umbrellas," according to Robert Erwin, head of the Marti Nelson Cancer Foundation. Money will flow to anticancer drugs "[a]s long as the health care system will pay the price." This situation raises special concerns for the healthcare system as a whole, particularly under the current economic climate, the pressures to reduce drug costs, and the amount of investment required to determine whether an anticancer drug lead compound will come to market. These circumstances are characterized as "the biggest bubble you've ever seen," according to Dr. Mark Ratain (at right), a University of Chicago oncologist.

The confluence of the exponential increase in genetic information over the past decade and the technical ability to identify genetic polymorphism and outright mutation with different cancer phenotypes presents an unprecedented opportunity for developing new anticancer therapeutics. Mr. Pollack's article is a reminder that the science is only part of the equation, and that the economic realities of drug development and the healthcare marketplace will also have a role in determining how many, and which, of these drugs will be available for the next generation of cancer patients.

Posted at 11:59 PM in Biotech/Pharma Business, Biotech/Pharma News, Media Commentary | Permalink | Comments (2) | TrackBack (0)

September 01, 2009

BioWorld Reports on the Top 25 Biotech Drugs

By Kevin E. Noonan --

BioWorld Today posted an article last week about the top 25 biotech drugs currently on the market. Written by Michael Harris, Executive Editor, the piece represents a précis of a longer report by BioWorld, entitled "Market-Leading Biotechnology Drugs 2009: Blockbuster Dynamics in an Ailing Economy."

In its brief overview, the piece mentions the pitfalls and opportunities evident to anyone familiar with the technology. These include what Mr. Harris calls an "innovation glut" of good ideas, novel and ground-breaking technologies, and inspired and dedicated scientists. On the "downside," Mr. Harris writes, the "technologies are just as complicated as they are inspired," and as a result, "they tend to take a long time to go from dreams to drugs or to evolve through the concept-to-currency cycle." He quotes a term for a successful clinical trial as taking about nine years, not including discovery, preclinical testing, or the time it takes for the Food and Drug Administration to approve a biologic drug after filing of a BLA.

Despite these difficulties, the future looks promising to Mr. Harris:

The truth is, people will continue to be susceptible to disease and drug development innovation, an aesthetic dynamic, unlike material products, that will never fall out of favor. Investors know that ideas are the primary origins of drug development and that foundation must be nurtured with money in order to cultivate the process to a marketed stage.

The proof is in the biologic drug pipeline: the biotech industry has already produced "more than 200 prescription [drug] products, hundreds of diagnostics tools and tests and also has more than 400 candidates in clinical trials." The following chart illustrates these successes:

As shown, while the number of approved biotechnology-based products approved per year is variable, the trend is upward. Mr. Harris characterized biotechnology drugs as being the fastest-growing sector for drug development, and predicts that biotech drugs will comprise over 50% of all drug approvals by 2015 and more than 75% by 2025. These predictions are supported by the expected benefits of increased understanding of drug targets and the molecular and genetic bases of disease, as well as the declining conventional small-molecule drug pipelines in most major pharmaceutical companies.

The table below represents information from Mr. Harris' article, setting forth the revenues for each of the 25 top biotechnology drugs in 2008, and in addition includes the date each drug product was first approved by the FDA and when patents protecting each drug are due to expire. It should be kept in mind that one feature of all these drugs is that they have been approved for more than one indication; indeed, Mr. Harris reports that Genentech's Avastin is being tested in more than 450 clinical trials for treating more than 30 different types of cancer. It should also be kept in mind that 7 of the 25 "biotech" drugs are small molecules, and another 6 are antibodies. We leave it as an exercise for the reader to assess the relative levels of protection provided by patents and data exclusivity should Congress pass a follow-on biologics bill this year.

Finally, the article includes a prediction of the estimated sales and the identities of the top 10 biotech drugs expected in 2014 (see table below). Eight of the ten are top 25 biotech drugs today, with the other two being the small molecule drugs Crestor (rosuvastatin, used for lowering cholesterol) and Spiriva (tiotropium, a bronchodilator for treating asthma and COPD).

This list is the same as the list compiled by EvaluatePharma, a market forecasting firm specializing in the life sciences sector, earlier in this year (see "Future Drug Sales Predictions Highlight Importance of Follow-on Biologics Legislation"). Interestingly, the top three current drugs reported by EvaluatePharma (Lipitor, Plavix, and Advair) are all small molecule drugs having higher revenues than the highest biologic drug, Enbrel (Lipitor's revenues are more than double Enbrel's), and half the top ten in that survey are small molecule drugs and three are antibodies; Amgen's Epogen and Enbrel are the only recombinant drug products in EvaluatePharma's top ten. In contrast, 11 of the 19 drugs in BioWorld's top 25 are recombinant products.

The BioWorld report follows other recent reports indicating that the biotechnology sector continues to improve, weathering serious threats caused by the economic downturn last year (see "Biotech/Pharma Financing Improving, R&D Spending Up"; "Investors Saw Biotech Rebound Coming"; and "Is Biotech/Pharma Beginning to Bounce Back?"). In view of the sentiments expressed by Mr. Harris about the reality that the need for new drugs is never-ending, that constitutes good news for biotech and pharma companies and the public combined.

Posted at 11:25 PM in Biotech/Pharma Business | Permalink | Comments (6) | TrackBack (0)

August 31, 2009

Biotech/Pharma Financing Improving, R&D Spending Up

By Donald Zuhn --

A recent article in Signals Magazine reports that biotech and specialty pharma companies raised 41% more revenue in the first six months of 2009 ($8.3 billion) than they did in the same period in 2008 ($5.9 billion) ("Biotech Financing Gathers Steam"). Despite the overall rise in funding for the first half of the year, investment in the second quarter dropped by 4% ($180 million) from the first quarter of the year. The online biotech industry magazine also noted that while public offerings contributed more than $1.8 billion to the funding total (up 78% from 2008), and money raised by alternate financing schemes added $4.8 billion (up 75% from 2008), venture capital was down 8% from 2008 (from $2.4 billion to $2.2 billion). Despite the drop in venture funding, the report suggested that Clovis Oncology's ability to raise $145 million in venture capital demonstrated "once again venture capitalists' (VC) old adage that there will always be money for the right company."

Signals Magazine contended that the data on the whole "indicate[d] that VCs are not turning their backs on biotech start-ups, contrary to some analyses" (without mentioning the sources of such analyses), and cited the latest MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association (NVCA), which showed a 15% increase in venture dollars (rising from $3.2 billion in the first quarter to $3.7 billion in the second quarter) for roughly the same number of deals (up slightly from 603 in the first quarter to 612 in the second quarter). The MoneyTree Report noted that biotechnology received the highest portion of these venture dollars, securing $888.1 million of the second quarter talley. While second quarter biotech venture funding was up 54% from the first quarter ($576.6 million), it still lagged behind venture funding from the second quarter of 2008 ($1,062.3 million) -- as the Signals Magazine report had also indicated.

In summarizing the biotech/pharma financial landscape for the first half of the year, Signals Magazine concluded that:

By all accounts . . . the capital markets are starting to ease -- if ever so slightly. Biotech and specialty pharma companies are raising money again through underwritten public offerings (20 of them by the end of July) and registered direct offerings (33 by the end of July). The credit markets opened to a few select biotech firms in May, and venture capital investments are holding steady.
But make no mistake: The financial crisis is far from over. While the biotech sector raised 41 percent more money in the first half of 2009 than it did in the first half of 2008, it's still severely under-funded. Companies raised 55 percent less money in the first half of 2009 than they did in the first half of 2007 ($18,559M) and 49 percent less in the first half of 2009 than they did in the first half of 2006 ($16,458M).

Meanwhile, BusinessWeek reported last week that while research spending has been dropping over the past few years (decreasing 4% from the fourth quarter of 2007 to the second quarter of 2009), thirteen of the 25 companies that "most aggressively" increased their research budgets over the first half of 2009 were from the pharma/biotech sector ("Drug, Biotech Research Spending Hangs Tough"). The article notes that these thirteen companies raised R&D spending by a collective $2 billion in the first half of the year.

For additional information regarding this and other related topics, please see:
• "Investors Saw Biotech Rebound Coming," August 17, 2009
• "Is Biotech/Pharma Beginning to Bounce Back?" August 12, 2009
• "Docs at BIO: Steve Burrill's State of the Biotechnology Industry Report 2009," May 19, 2009
• "Docs at BIO: Ernst & Young Hosts Super Session Addressing Financial Performance of Biotech Industry," May 19, 2009
• "First Quarter Venture Capital Funding at 12-Year Low," April 23, 2009
• "BIO Meets the Press," February 26, 2009
• "NVCA Study Shows Decline in 2008 Investment; BIO Study Predicts Biotech Rebound in 2009," February 16, 2009
• "NVCA Predicts Another Slow Year for Venture-backed Businesses in 2009," December 18, 2008

Posted at 11:59 PM in Biotech/Pharma Business | Permalink | Comments (1) | TrackBack (0)

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