Shimasaki Craig D. The Business of Bioscience: What goes into making a Biotechnology Product

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82 6 The Product Development Pathway

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Investigational New Drug Application (IND)

To begin human clinical testing, the company must file an Investigational New

Drug Application (IND) with the FDA. The information requirements for filing are

outlined on the FDA website. Once an IND is filled, the FDA has 30 days to

respond to the application, or the company may proceed into clinical testing. If the

FDA has questions, they will respond during this 30-day period and place your

application on “Clinical Hold.” This just means that the company cannot proceed

to human testing without first satisfying all the FDA’s questions.

Phase I, II, III Clinical Studies

Once the FDA is satisfied with the data package and clinical testing protocol,

the company may begin Phase I testing in humans. During Phase I clinical trials,

the investigational drug/biologic will be administered to a small group of healthy

individuals. In some instances, the investigational drug/biologic may be adminis-

tered to diseased individuals.

If there are no safety issues raised in Phase I, the company will apply again to

the FDA to move into Phase II clinical studies where they will be administering the

drug/biologic to a larger group of individuals for whom the drug is intended for

treatment. Upon successful completion of Phase II clinical studies, there will be

significant interest in your product from pharmaceutical companies that may have

been following the company; at this point, the valuation of the company will have

significantly increased.

Proceeding to Phase III clinical studies is accomplished in a larger group of

patients that are intended for the treatment of the disease. Phase III is a pivotal

study, which is usually double-blinded, placebo-controlled and randomized, where

it can assess efficacy, dosing, and further examine safety. At the conclusion of these

studies, there will be an overwhelming amount of data to be sorted and analyzed.

One universal challenge to completing all human clinical studies is recruiting

qualified patients in a timely manner. Competition for patient recruitment is high

even with large incentives to participate. If an appropriate number of patients are

not enrolled, the therapeutic or biologic cannot be properly evaluated, and progress

toward regulatory approval is halted. Because of the patient recruitment issue many

US biotechnology companies are conducting clinical studies in other industrial-

ized countries that have greater access to more patients for their particular treat-

ment. However, all industrialized countries are beginning to experience these

same recruitment challenges. There has been an increasing shift toward clinical

trials in developing countries because they provide a new supply of patients, better

patient compliance, and they have physicians who have been trained abroad. If this

is the company strategy, be sure to consult the FDA about the type and amount of

clinical data they will accept for support of an application for approval. When

approaching patient recruitment, realistically plan for the recruitment time, recruit-

ment costs and your ability to reach the numbers of patients needed to complete the

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83Development Stages for “Treatments”

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study. Since it is likely that more than one indication will be targeted, the clinical

trial costs will multiply. It would not be unusual to see recruitment and testing

costs range between $30,000–$50,000 per patient depending on the indication

being studied. A CRO can give more precise estimates of clinical trial costs.

Treatments: Regulatory Review Stage

To receive regulatory approval in the US, the company will submit a New Drug

Application (NDA) or a Biologic License Application (BLA) with all the preclinical

and clinical data in support of claims and indications-for-use of the drug or bio-

logic. This is the culmination of all development work. Be sure to retain the best regu-

latory and clinical expertise with direct experience working with that particular

FDA division. For products that qualify, there are alternate regulatory filing path-

ways that provide a faster review time, but remember “faster” is a relative term.

There is a Fast-Track, Accelerated Review, and Priority Review designation that

that can be requested. See Chapter 13 for more information.

Once an application is filled, there will be a multitude of questions and

responses. This review period is lengthy and generates reams of paper trails, though

electronic filings may soon become standard. This lengthy review process may

conclude in a panel meeting convened by the FDA with experts in the field of your

treatment. At the conclusion of the panel review they will vote on a recommenda-

tion for approval. This recommendation is sent to the FDA, and they then make a

decision on the approval of your product. The statistics throughout the entire drug

development process is staggering. Fewer than 10 of 5,000,000 compounds

tested make it through to animal studies, and only 3 make it into human clinical

trials, and only 1 ends up being approved.

Treatments: Scale-Up and Manufacturing Stage

Reaching this stage means the company has been successful in developing a prod-

uct shown to be safe and efficacious, and received regulatory approval for market-

ing. There is an entire process development science for scale-up and manufacturing,

which we will not go into here. Suffice it to say that processes and molecules

produced in the lab do not always scale-up to manufacturing levels in a straight-

forward manner. There are different limitations and efficiencies that impact the

recovery and production of the same molecule or compound from a lab process

and a scale-up process. It is important to be aware of these issues during the

Development and Lead Optimization stage. For instance, one may be able to easily

purify a molecule or compound for testing by HPLC in the lab, but this does not

make an ideal manufacturing process. Keep one eye on the downstream scale-up

issues, as this will help economics and manufacturing when reaching this stage.

Oftentimes, small biotech companies may contract the scale-up process and

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84 6 The Product Development Pathway

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manufacturing to specialty bioprocess or manufacturing houses. It is still impor-

tant to be aware of the potential issues with scale-up and manufacturing of a prod-

uct as it will impact progress.

Treatments: Marketing and Growth Stage

Growth can also bring new problems that may not have been anticipated.

Uncontrolled growth is challenging to any organization, and can result in problems

that are not easily fixed such as when the company was small. As the company

grows changes must go though several layers of approval and several departments

for collateral effect.

The marketing strategy is now a reality. The future success of the organization

depends on reaching profitability as quickly as possible. Biotech companies that

reach this stage enjoy a measure of celebrity status as long as there continues to

be a growing market for the product and they demonstrate increasing revenue.

Experienced biotech companies have occasionally run afoul by going beyond

FDA approved marketing claims by unlawfully promoting off-label usages for

their products. Though it is legal and ethical for physicians to prescribe drugs for

off-label usage, it is unlawful for company representatives to promote these

usages in their marketing efforts. Most all existing drugs find valuable alternative

uses, but it is unlawful for company representatives to promote these. Many

times these off-label usages can result in new clinical trials for these additional

indications.

Development Stages for “Analytics and Tools”

Analytics and Tools: Basic and Translational Research Stage

Just as for Treatments, the Basic and Translational Research Stage starts by taking

research experiments, and begins translating them into something of value to a

target segment of a market. A key difference for Analytics and Tools is the expecta-

tion to complete this stage and subsequent ones much quicker than for Treatments.

During this stage, expect to advance the science as far as possible to demonstrate

product development potential. To advance to the next stage, one must prove that

the product idea has merit, and the product concept can readily be translated into a

product. There are many ways to demonstrate plausibility, but the stronger the

evidence, the more enthusiasm others will have for the project.

Creativity is important at this stage. Product ideas originate and develop when

researchers think about how to creatively solve a particular problem. Inspiration

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85Development Stages for “Analytics and Tools”

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can occur anywhere, such as the example of when Karry Mullis conceived the

polymerase chain reaction while just driving along a California coast highway

one evening.

Analytics and Tools: Proof-of-Concept Stage

The goal here is to reach proof-of-concept for the technology or product. This is not

necessarily a prototype but rather proof, that can be independently verified, that the

idea or concept would be valid in the real world. For example, proof-of-concept for

a marker intended to diagnose an early stage disease condition needs to demon-

strate that a high percentage of diseased individuals possess this marker, and it is

absent or minimally present in nondiseased individuals. During this stage, the assay

system used to detect a molecular marker is not expected to be commercial ready.

It may still be labor intensive and impractical. However, it needs to be demonstrated

that it can consistently detect the marker, even in the presence of potentially inter-

fering substances usually found in these types of specimens.

For instruments and tools, the objective is similar. You want to demonstrate that

a version of the instrument can perform the function it seeks to claim. I currently

serve as an advisory member for an infrared laser company that is exploring detec-

tion of various molecules in breath as indicators of disease. The product proof-of-

concept was to demonstrate that a specific laser can reliably detect certain

molecules that correlate with asthma and its progression. This goal was not to cre-

ate a hand held laser that can detect and print a diagnosis, but to demonstrate with

high correlation that these molecules associate with asthmatic conditions. At this

stage, the instrument was not intended for commercialization, and the output was

not interpretable without a Ph.D. in physics or engineering. Once they demon-

strated proof-of-concept, they received seed funding to support further develop-

ment of this product.

Set Proof-of Concept milestones that establish credibility and reasonableness and

demonstrate the idea has merit and is worth funding. Your goal is to produce evidence

that is strong enough and convincing enough to obtain seed funding, so you can

progress to the next stage of product development.

Analytics and Tools: Prototype Development

The goal here is to develop a prototype product that can be tested for perfor-

mance in some manner, prior to human studies. If the product is an implantable

device, this means producing a prototype that can be evaluated, usually in ani-

mals, to verify the device functions properly under a variety of conditions.

When developing a medical test, the prototype must be tested on the intended

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86 6 The Product Development Pathway

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use population and/or run by the intended end-user. Ideally, this means com-

pleting development of a prototype that is near final or very close to it.

Notwithstanding regulatory issues, there could be reasons why one would want

to use an early stage prototype and introduce final changes later, if a new tech-

nology such as a better chip is available soon. However, be wary of unproven

components no matter how wonderfully touted. You do not want to place the

future of your product into the hands of others by becoming codependent on

their quality and performance. For medical tests, realize that downstream

changes may introduce variation or unforeseen chemical reactions that may

alter results in an unanticipated manner.

Some prototype development activities should be contracted out to help keep

your infrastructure at a reasonable level. As discussed previously there may be the

temptation to significantly expand the capabilities of your organization because you

have the funds in the bank and you need the work done. Before doing this you

should determine which core competencies are your strategic assets. If an activity

is not a core competency you should not consider anything other than subcontract-

ing the service, unless it is reasonably inexpensive, requires little human capital, and

you will always need it, and you can do it cheaper, faster or better in-house –

otherwise forget about it. However, if a new function strengthens your core compe-

tency, then add to it. For instance, if you are a gene discovery company and your

core competency is proprietary methods of discovering genes that correlate with

disease, anything tangential to this objective builds on your strength. Whereas, you

would outsource, say specimen acquisition or regulatory functions early on in the devel-

opment of an organization. Do not forget that your functions during this stage are

dynamic and should be reassessed periodically. What is best now may not be ideal

six months or a year later.

Prototype development time and costs differ significantly, depending on the

development objectives. This is the stage when companies typically run out of

money, or find that the development timeframe takes longer than expected. The

ultimate goal at this stage is to produce a prototype that demonstrates its intended

capabilities, and allows the company to move to the subsequent stage where a final

assessment of efficacy can be determined.

Analytics and Tools: Clinical Validation Stage

During this stage, the company must have a final product that will be used for com-

mercialization. This is because they must test the product in, or on, the intended use

population. For medical testing and devices not considered to be “High Risk,” some

studies may be conducted on clinical specimens without first receiving an

Investigational Device Exemption (IDE) from the FDA prior to testing (companies

developing High Risk medical devices must first file and receive IDE approval prior

to testing in humans). The goal during this stage is to validate results in multiple

populations. Ideally, you will want to have independent validation from other

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87Development Stages for “Analytics and Tools”

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nonassociated institutions conducting the testing. The results from these studies will

be used to submit a 510(k) or a PreMarket Approval (PMA) application.

Analytics and Tools: Regulatory Review Stage

During this stage for US marketing, the company will submit either a 510(k) or a

PMA application to the FDA. The statutory review time for a 510(k) is 90 days,

whereas the PMA review time is 180 days. However, this review time is based on

the FDA clock and does not include response time. In addition, the clock can be

reset if there is significant reason to support this. During review, expect several

rounds of correspondence and questions based on the complexity of the submission

and the uniqueness of the product and technology. More information on the regula-

tory process for medical devices and IVDs is reviewed in Chapter 13.

Analytics and Tools: Scale-Up and Manufacturing Stage

Congratulations! By reaching this stage the company has been successful in

developing a product and has received regulatory approval. For commercialization

in the US, the manufacturing processes needed to meet FDA regulatory guidance

includes Good Manufacturing Procedures (GMP) and optimally ISO certification.

There are many excellent resources available that provide a good understanding of

GMP and ISO requirements. I would recommend that entrepreneurs familiarize

themselves with these before reaching this stage.

Analytics and Tools: Marketing and Growth Stage

The marketing strategy has now come into reality. The future success of the orga-

nization and its ability to become profitable, and ultimately have an exit strategy for

investors and a reward for management and employees is at stake. If the com-

pany’s product is in a desirable market, there will be great potential for marketing

partnerships, licensing, or even an acquisition of the company.

Growth also brings new challanges that may not have been anticipated.

Uncontrolled growth can be detrimental to a young organization, and result in prob-

lems which are not as easily fixed when the company was small. In a small com-

pany, changes can be immediately implemented throughout the organization before

the end of the day. Whereas now, changes must filter though layers of approval and

departments for collateral effect, such that many decisions may not be implemented

for weeks or even months. Successful companies will learn to adjust to these

changes, because they have reached their goal – commercialization.

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88 6 The Product Development Pathway

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Product Development Milestones

Product development milestones are measurable accomplishments that incrementally

move a product closer to commercialization and incrementally reduce development

risk. Specific product development milestones vary according to the product

category. It is important to identify appropriate product development milestones at

the outset. When milestones are met, they instill trust between the company and its

investors. This credibility is vital should the company encounter unanticipated

problems that require additional capital in the future.

For a Treatment, examples of value-enhancing, risk-reducing milestones include

the following:

Licensing the core technology from the owing intuition•

Licensing additional patents that provide freedom-to-operate in that field•

Securing new issued patents with required claims•

Establishing a top-notch Scientific Advisory Board•

Completing proof-of-concept experiments successfully•

Determining mechanism-of-action for the compound or biologic•

Improving the compound’s efficacy through structure-function relationships•

Successfully selecting a lead compound•

Successfully completing animal studies without any safety, efficacy, dosing, or •

delivery concerns

Publishing results in top-tier peer-reviewed journals•

Winning Phase I and Phase II SBIR grants•

Entering into a service agreement with a well-respected company or organization•

Forming a partnership or strategic alliance with a credible marketing partner•

Successful filing of an Investigational New Drug (IND) application with the FDA•

Licensing the product to a pharmaceutical company•

Completing Phase I Clinical Studies with successful results•

Completing Phase II Clinical Studies with successful results•

Completing Phase III Clinical Studies with successful results•

Filing an New Drug Application (NDA) or Biologic License Application (BLA) •

with the FDA

Obtaining FDA approval•

For Analytics and Tools, examples of value-enhancing, risk-reducing milestones

include the following:

Licensing the core technology from the owning institution•

Licensing additional patents that provide freedom-to-operate in that field•

Securing new issued patents with required claims•

Establishing a top-notch Scientific Advisory Board•

Completing proof-of-concept experiments successfully•

Demonstrating feasibility and prototype production of the product•

Completing pilot clinical testing of the prototype or final product •

Publishing results in top-tier peer-reviewed journals•

Winning Phase I and Phase II SBIR grants•

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89Product Development Assistance

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Entering into a service agreement with another entity or organization•

Forming a partnership or strategic alliance with a market partner•

Completing clinical validation studies demonstrating efficacy or improved •

sensitivity and specificity over a gold standard

External clinical studies that validate in-house clinical data•

Filing a 510(k) or a Pre-Market Approval (PMA) with the FDA•

Obtaining FDA marketing clearance or a PMA•

Choose development milestones specific to your particular product, then work to meet

these milestones in a timely manner and within budget. By consistently meeting product

development milestones the company will ensure the best opportunity for success.

Commit Your Plan to Writing

A product development plan must be reduced to writing. List product development

stages, key milestones, and the results you expect to achieve at each stage. Identify any

uncertainty in these plans and utilize project planning software to create a Gantt or

PERT Chart of the timeline (see chapter 17 for additional information on project

mangement). The plan should show timeframes for parallel and critical path activities

along with any slack time. Once a written plan is developed, it can later be modified

and updated with any new information. Do not worry about being too detailed at this

time; just be sure to capture major milestones and key requirements, along with any

specific needs to achieve these. Project planning should be continually updated and

modified on an ongoing basis.

Next, estimate the costs to complete each stage of the plan. One helpful way to

estimate reasonable costs is to talk with a Contract Research Organizations (CRO),

which are companies that assist at any and all development stages of a product. Good

CROs will spend the time to talk with a company about their product development

questions. The company will most likely need their help sometime during product

development or clinical testing phases. Also, look for experienced biotech executives

that have worked through each of these development stages and get their advice.

Another way to benchmark estimates for total development costs is to access data-

bases such as Dow Jones VentureSource. These databases list privately held compa-

nies and their capital raises for each round of financing. From this information,

comparable product development costs can be gleaned, along with a total develop-

ment cost estimate and the number of rounds of capital needed to reach specific

product development stages. This information may not be broken down into develop-

ment stages but one can glean overall costs for development to a particular stage.

Product Development Assistance

A biotech company can never have too much assistance. Explore alternate ways to

stretch development dollars by applying for free services available from the federal

government. The National Institutes of Health (NIH) has a wealth of resources and

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many of these programs are free, even to for-profit companies. Consider these

programs in addition to grants when seeking ways to stretch development dollars.

At a previous start-up company, we utilized an NIH program to screen candidate

compounds for antiviral activity using their in-vitro and in-vivo assays. A substantial

amount of time and resources would have been required for us to set up these testing

models and protocols. With their help we got critical proof-of-concept data, which

was used to help raise investor interest. In another instance, we took advantage of the

NIH’s cancer screening program to screen a group of potential antitumor compounds.

The NIH also has assistance in other areas of drug development such as the synthesis

in bulk of small molecules, development of analytical methods, isolation and purifica-

tion, pharmacokinetic/ADME studies including bioanalytical method development,

development of suitable formulations, and manufacture of phase I drug supplies, to

name a few.

Assistance for preclincial therapeutic and biologic drug development is available

from the NIH through a program called Rapid Access to Interventional Development

(NIH-RAID). A similar program, Rapid Access to NCI Discovery Resources (RAND)

is also available; partnerships are selected on a competitive application basis. These

programs are for academic and not-for-profit investigator – initiated studies only,

but depending upon the stage of license from your research institution, there may be

ways to work together to utilize these programs. The study must be investigator-

initiated, but small businesses (less than 500 employees) may still qualify even after

they have licensed the intellectual property from the research institution.

These programs are available for both US and non-US institutions meeting

certain requirements. Additional information and requirements can be obtained

through their website.

Certain requirements must be met for each of these services,

but if a company qualifies, these services are available to assist in the development of

certain drugs that are deemed important to the welfare of the US public. Check out

these and other resource opportunities. It will be time well spent, and can accelerate

product development, and save precious research and development dollars.

Significance of Winning Competitive Grants

Winning competitive grants provide additional money for product development,

but also indirectly gives validation to your technology or product concept. Securing

a sizable phase II SBIR grants can significantly boost a company’s scientific

credibility, not to mention this money is nondilutive (money that does not require

giving up equity). If the company does not have a person who is a good grant writer,

or those in the organization have not written competitive federal grants before, there

are resources available to help. Just remember SBIR grants are not handouts to pay

for clinical studies or purchase a piece of equipment. Awarded grants seek to solve

scientific problems of broad interest, that could result in a product development.

NIH-RAID website: www.nihroadmap.nih.gov/raid/ RAND website: www.dtp.nci.nih.gov/

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91Market Development and Business and Organizational Development Paths

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SBIR grants must be hypothesis-driven, meaning applicants must be asking an

interesting research question and be testing a hypothesis. Remember, these grants

are ranked and evaluated, most often by academic researchers. Make your

research approach intriguing, and demonstrate its significance such that scientific

reviewers can see its value. Do not forget that SBIR grant are awarded for projects

that could result in an economically viable product, so be sure to carefully outline the

commercial value of the research.

Commercialization Help from SBIR

By winning nondilutive funding from a Phase II SBIR grant, a company then

becomes eligible for help from the NIH’s Commercialization Assistance Program

(CAP). This program was started in 2004 and is currently run by the Larta Institute

which provides help in finding partnerships, raising money, and assisting in the com-

mercial development of a product. This assistance supports all segments of the bio-

technology industry such as specialty therapeutics, diagnostics, medical devices, and

other healthcare support services. This valuable resource is a 10-month program

available to selected SBIR Phase II awardees. This service provides workshops, train-

ing, and mentoring to support an organization with the information and tools needed

to improve one’s success in raising capital and in progressing through product devel-

opment. The CAP program is funded through the NIH and its continuance will likely

depend on success measures and future appropriations from the federal government.

The NIH states their program objectives are to help the biotech company with:

Developing or improving strategic business planning•

Developing or improving market identification, definition, and research capabilities•

Developing or improving marketing materials, e.g., investor pitch, company •

brochure, etc.

Developing a roadmap for, and establishing licensing opportunities•

Developing a roadmap for, and establishing strategic and/or investment partnerships•

Seeking regulatory approvals•

You can find more information about NIH CAP program at the following websites:

http://grants.nih.gov/grants/funding/cap.htm, and at http://www.larta.org/

Market Development and Business and Organizational

Development Paths

There are two additional development paths that run parallel to the Product

Development Path we just reviewed. These development pathways should not be after-

thoughts – these are Market Development, and Business and Organizational

Development paths. It is just as critical to make progress along these paths (reviewed