The Business of Global Health (No. 3)

Thanks to the broad and deep coverage of the biotech and medtech industries by the editors and reporters of the Fierce newsletters, I noted the following recent stories relevant to global health.

Last week an article in Fierce Medical Devices reported that a not-for-profit organization, Engineering World Health (EWH) recently received a $1.5 million grant from the GE Foundation to expand its program of training technicians in the repair of medical devices into Nigeria, in addition to previous GE support (Fiercemedicaldevices article). EWH was started in 2001, became an independent, volunteer organization in 2008, and runs 3-4 year programs in Cambodia, Rwanda, Ghana, and Honduras, with about 50 students enrolled each year. Also two recent studies found marked improvement in equipment “up-time” in the hospitals with EWH-trained technicians and improved technician productivity (another FMD article). It looks to me as if EWH is a good funding and good works opportunity for a medtech company looking to enter developing world markets. It also runs a small product design competition (EWH Competition).

As some readers may remember, I have written about the need and potential for therapeutics to treat Sickle Cell Disease (SCD), especially in Africa where it is a major cofactor in mortality (“Still Neglected”). So I was pleased to learn of another company, Global Blood Therapeutics (GBT) with a promising preclinical SCD drug candidate. San Francisco-based GBT was launched in 2012 with a $41 million Series A funding by Third Rock Ventures, so its likely first market will be the US (about 100,000 patients out of a world total of 15 million).

Also some readers may remember that earlier this year I wrote about Knight Therapeutics receiving FDA approval for a drug that is effective against leishmaniasis, a protozoan infection that occurs annually in about 1.3 million people and causes 20-30,000 deaths (“GUD Knight”). In addition and since the disease is neglected and without any good treatments, Knight also received a Priority Review Voucher, which confers to the holder expedited regulatory review for a product and therefore 6-10 month sooner market access.   Fiercebiotech recently reported Knight is offering the voucher for sale but also that, because the FDA is expediting approvals in other ways, its value is uncertain (Fiercebiotech article). To his credit, Knight’s CEO, Jonathan Goodman, is also quoted as saying the company’s goal (in addition to getting funds) is to “set the bar high to encourage others to invest in R&D for neglected tropical diseases.”

Finally, Fierce also reported that PanVax, a vaccine company “committed to providing both attractive financial returns and social returns,” has expanded its marketing team with the addition of vice presidents for North American and global sales and marketing and five U.S. sales people (another FBT article). This personnel is added to that obtained when the company acquired an approved oral typhoid vaccine last month (“More Bits and Bytes”).

 

Headed East Replay

Recently, I read an interview with Omar Ishrak, CEO of Medtronics, one of the largest medical device companies, in which he said that the company’s emerging market strategy was working but not yielding the goal of a 20% growth rate (it was 10% in 2014, Massdevice interview). Medtronics’ tough road reminded me of a post I put up in March 2013 on medtech companies’ strategies for entering the Chinese market. Here is a replay of that post with a bit of an update at the end.

A couple weeks ago I summarized an Economic Times article on India’s booming medical device industry that now comprises about 700 companies with $5.2 billion in revenues (“Indian Kathi”). The other big medtech boomer is China, that, according to a recent McKinsey report (McKinsey report), has a medical products market four times as large at $20 billion as of 2011. So, I appreciated several insights into that country’s health care/medtech business provided by Stephen Stevens in a posting at Massdevice.com (Simpson blog). Some of his points were:

  • while 90% of the country’s 1.3 billion citizens are covered by a government insurance program that provides for basic care, access for 900 million rural Chinese is a problem;
  • co-pays are high, 20-60% per procedure depending on the relative wealth of the patient’s location and 50 to 70% for medical device, imported and domestic, respectively;
  • the government is starting to control device prices by pooling procurement for national or regional providers;
  • domestic companies are competing with foreign companies on price with complex equipment like ultrasound machines priced at 20-35% less, devices like stents 20-50% less, and consumables as much as 65% less; however, foreign companies still garner 60-70% of device spending;
  • domestic companies are also competing on product quality with a few companies making the jump to the highly-regulated the US and EU markets; and
  • with the increase in access to high-quality, affordable products and government spending on health care, the annual growth in the number of procedures performed is in the teens.

The author also pointed out that several of the larger foreign companies (mentioned are Zimmer, Medtronic, and Stryker) have moved beyond just selling their products and have made strategic acquisitions of Chinese companies to obtain existing low-price product lines and access to lower-cost manufacturing, and he posited that these assets will be useful in entering and competing in other emerging markets.

Doing some positing on my own, I wondered if I were heading a US- and technology-based growth stage company with a novel diagnostics platform, what would my China strategy be? The authors of the McKinsey report implied that diagnostics, especially those that are low-cost and give patients actionable information, may be a good fit with the evolving Chinese market. The report noted that the country is becoming more urban and elderly and more middle class (defined as annual incomes of $7000-27000) with the 30% of total population in 2005 growing to 75% in 2020, hence giving individuals more money and motivation to spend on their health. Moreover, “many highly prevalent and burdensome conditions (such as cancer, depression, and respiratory illness) remain under diagnosed and under treated.”

Based on my admittedly superficial research, I’d say the big multinational diagnostic companies (the test providers like Hoffmann-La Roche and Becton, Dickinson and the service providers like Quest Diagnostics) are not good partners for my company since they have substantial investment in proprietary platforms and are cautious about doing business in China. A counter-example though is Alere, a company I wrote about last week (“Dx Rock Stars” ) that has four ventures in China, covering R and D, manufacturing, and sales (Alere China). A second category of potential partners are the major domestic companies and I found several: Auto Bio, Tecom Science Corp., and ChemClin/China Medical Devices. Without investing in a market research and analysis report, I can’t say which of these have an interest in new technology, have a competitive position, or are even accessible to contact from the US. One up-and-coming domestic company I noted is Kindstar Global, formerly Wuhan Kindstar Diagnostics (Kindstar), which provides central laboratory services to hospitals. Kindstar, as reported by Businessweek (Businessweek article), was founded in 2003, now has 2000 hospitals as customers, and has raised more than $20 million in local and foreign venture capital. One challenge for the company was the lack of a national service to shuttle samples so it built its own network that now engages half its 1000 employees. Part of its growth plan is to expand the number of tests it offers, in part through a licensing deal with the Mayo Clinic’s Medical Laboratories subsidiary.

A company I found that seems poised to enter China that both technology- and US-based is True Diagnostics (True). True “specializes in providing accurate, economical and easy-to-use advanced rapid in vitro immunodiagnostic test systems” using a lateral flow format and a reader to provide quantitative data (True press kit). While the company has about 60 tests in development, only two are approved for sale (tests for PSA and TSH) and it has a manufacturer each in mainland China and Taiwan. Of course, True itself is in the hunt for a corporate partner to adopt its platform so unless it offered a the right manufacturing capability and distribution channels it may not be a good partner for my company.

If my company’s tests were simple enough for home use, another way to enter the Chinese market is by offering over-the-counter kits, those in which a sample is taken and sent to a lab for processing or read by the user. I’m sure there are regulatory/approval challenges, but, given the growing middle class, internet access, and need, an on-line or OTC kit business may be viable. The best known tests widely available in the US are for pregnancy, ovulation, and glucose monitoring, but tests are also sold for infectious disease like HIV and hepatitis C and cholesterol, anemia, allergy, and cancer screening (see list of tests as of 2009 in a Pharmacy Times article). A few model companies are:

  • Quick Check Health, a start-up based in Minnesota;
  • Mode Diagnostics, a UK start-up; and
  • BioIQ  that includes in-home tests as one of its services for “enabling clients to measurably achieve their optimal health improvement goals.”

Yes, there is gold in them thar Eastern hills but good partners, planning, and luck will be needed to find it.

[Update on True Diagnostics: the company recently announced a marketing agreement with Merck KGaA for its thyroid stimulating hormone (TSH) test in China, an important step in positioning the company’s tests for wide use within the Chinese health care system (True Diagnostics press release).]

Uni-versal

August is a slow news month (and I’ve got other things to do) so I am updating past blogs.  Last October, I wrote about Gradian Health Systems (GHS), a non-profit enterprise that is trying to deploy its “universal anesthesia machine” to improve the safety of surgery in low-resourced parts of the world.  For some background, here is an excerpt from my post, “Universal”:

GHS was started in 2010, is based in New York City, and is funded, possibly solely, by a grant from the Simons Foundation, a philanthropy that funds basic science and mathematics research (Simons).  GHS’s lead product is a “universal anesthesia machine” (UAM) that was designed by the company’s scientific founder, Paul Fenton, is fully-engineered and manufactured, and has earned a CE mark (a European Union medical device approval process based on a safety demonstration and intended use; see Medcitynews for a comparison to the USFDA approval process [Medcitynews article]).  To learn more about the commercialization of the UAM, I watched a December 2011 TED (Technology, Entertainment, Design) talk by Erica Frenkel, GHS’s Director of Business Strategy, (UAM talk) which has had about 250,000 views (congrats!).  Ms. Frenkel spoke mostly about the need for safe anesthesia (“35 million annual surgeries without safe anesthesia”), some about the machine’s unique features (has a backup battery and can use room oxygen), a bit about its current use (some number are in 13 hospitals, donated or sold?), but, unfortunately, nothing about affordability/pricing, distribution, partnering, funding, revenue projection, or other bits of a business strategy.

I expect that the management of GHS has worked out a commercialization strategy since the CEO, a consultant, and one board member have medical device company start-up experience (GHS Team).  To me, such a strategy is key for convincing founders, whether grantors or investors, that GHS can effectively address the need.  Whatever plan exists though, it apparently needs additional details since the company is advertising for a Director of Product Management (GHS Blog) among whose responsibilities are: develop a marketing plan; liaise with the manufacturer for production, R and D, and introduction; find distribution partners in target countries; and create training programs for use and maintenance along with eleven others.

I am clearly an amateur in the medical device field and not knowledgeable about surgical anesthesia, but my quick search indicates that there is some research that GHS can draw on to build its marketing plan.  A study by Hodges et al. gathered data that defined the problems in anesthesia delivery in Uganda (Hodges et al. 2007) and Jochberger et al. gathered similar data for Zambia (Jochberger et al. 2008).  I also found that the World Ananesthia Society (WAS) is dedicated to supporting anesthesiology in the developing world including through training, so may be helpful in assessing UAM adoption and use.  GHS could also contract with consultants for specific parts of its plan to get a handle on pricing, adoption rate, and customer preferences and ability to pay, but the consultants would need to understand emerging world markets which may be a rarity.  While GHS as done an amazing job of building and testing its UAM, it still needs to leap over the commercialization valley-of-death.

Recently I checked the GHS website and found the company has not made much (any?) progress in explaining its marketing strategy or designing and implementing its marketing plan.  As indicated by a blog posting last November (GHS Nov post), it is still looking for director of product management and may still be working out a strategy because it hired a “Business Strategy Associate” in March of this year.  The new associate seems to be a nice, capable person with an MIT business degree but has no medtech operational or practical marketing experience (GHS Mar post).  I also found on the site an article written by students in Stanford University’s School of Business Program in Healthcare Innovation dated August 2012, “Marketing to Multiple Stakeholders in a Complicated Field” (PHI article).  In it, Ms. Frenkel describes GHS’s general strategy consisting of six parts:

  • publish meaningful results [this helps but should be limited to a few otherwise conducting multiple “pilot studies” is a distraction from finding potential buyers];
  • build a network of key opinion leaders [these are known in the biz as KOLs and are a standard practice; again a few is better than putting effort into getting many];
  • connect with potential users through conferences [again, standard in the biz and should be coupled with on-going information gathering on potential customers and decision-makers];
  • develop audience-specific talking points [goes without saying];
  • bid on contracts (Ms. Frenkel noted that GHS hired a consultant to help but perhaps one for each type of contract, NGO, government, private, is needed); and
  • create a database of donor organizations that buy and distribute medical equipment [I surprised this hadn’t already been done; a basic question of any company with a product is who is going to buy it].

The parts are sound, but a strategy needs to include more stuff like distribution channels and partners, comparative products, differentiation from competition, pricing, service offerings, identification of decision-makers, and closing sales.  As Ms. Frenkel said in the article, “We’re working on it.”  I’d suggest she tap into local medtech expertise, starting with NYC Tech Connect, an entrepreneur support group that has an “executives-in-residence” program with one exec, Jerry Korten, who looks to have the right experience (NYC Tech Connect EIR).  GHS is facing all of the challenges of starting a business plus selling into an under-resourced market and may as well draw on and adapt the experience of other medtech start-ups.

 

Headed East

A couple weeks ago I summarized an Economic Times article on India’s booming medical device industry that now comprises about 700 companies with $5.2 billion in revenues (“Indian Kathi”).  The other big medtech boomer is China, that, according to a recent McKinsey report (McKinsey report), has a medical products market four times as large at $20 billion as of 2011.  So, I appreciated several insights into that country’s health care/medtech business provided by Stephen Stevens in a posting at Massdevice.com (Simpson blog).  Some of his points were:

  • while 90% of the country’s 1.3 billion citizens are covered by a government insurance program that provides for basic care, access for 900 million rural Chinese is a problem;
  • co-pays are high, 20-60% per procedure depending on the relative wealth of the patient’s location and 50 to 70% for medical device, imported and domestic, respectively;
  • the government is starting to control device prices by pooling procurement for national or regional providers;
  • domestic companies are competing with foreign companies on price with complex equipment like ultrasound machines priced at 20-35% less, devices like stents 20-50% less, and consumables as much as 65% less; however, foreign companies still garner 60-70% of device spending;
  • domestic companies are also competing on product quality with a few companies making the jump to the highly-regulated the US and EU markets; and
  • with the increase in access to high-quality, affordable products and government spending on health care, the annual growth in the number of procedures performed is in the teens.

The author also pointed out that several of the larger foreign companies (mentioned are Zimmer, Medtronic, and Stryker) have moved beyond just selling their products and have made strategic acquisitions of Chinese companies to obtain existing low-price product lines and access to lower-cost manufacturing, and he posited that these assets will be useful in entering and competing in other emerging markets.

Doing some positing on my own, I wondered if I were heading a US- and technology-based growth stage company with a novel diagnostics platform, what would my China strategy be?  The authors of the  McKinsey report implied that diagnostics, especially those that are low-cost and give patients actionable information, may be a good fit with the evolving Chinese market.  The report noted that the country is becoming more urban and elderly and more middle class (defined as annual incomes of $7000-27000) with the 30% of total population in 2005 growing to 75% in 2020, hence giving individuals more money and motivation to spend on their health.  Moreover, “many highly prevalent and burdensome conditions (such as cancer, depression, and respiratory illness) remain under diagnosed and under treated.”

Based on my admittedly superficial research, I’d say the big multinational diagnostic companies (the test providers like Hoffmann-La Roche and Becton, Dickinson and the service providers like Quest Diagnostics) are not good partners for my company since they have substantial investment in proprietary platforms and are cautious about doing business in China.  A counter-example though is Alere, a company I wrote about last week (“Dx Rock Stars” ) that has four ventures in China, covering R and D, manufacturing, and sales (Alere China).  A second category of potential partners are the major domestic companies and I found several:  Auto Bio, Tecom Science Corp., and ChemClin/China Medical Devices.  Without investing in a market research and analysis report, I can’t say which of these have an interest in new technology, have a competitive position, or are even accessible to contact from the US.  One up-and-coming domestic company I noted is Kindstar Global, formerly Wuhan Kindstar Diagnostics (Kindstar), which provides central laboratory services to hospitals.  Kindstar, as reported by Businessweek (Businessweek article), was founded in 2003, now has 2000 hospitals as customers, and has raised more than $20 million in local and foreign venture capital.  One challenge for the company was the lack of a national service to shuttle samples so it built its own network that now engages half its 1000 employees.  Part of its growth plan is to expand the number of tests it offers, in part through a licensing deal with the Mayo Clinic’s Medical Laboratories subsidiary.

A company I found that seems poised to enter China that both technology- and US-based is True Diagnostics (True).  True “specializes in providing accurate, economical and easy-to-use advanced rapid in vitro immunodiagnostic test systems” using a lateral flow format and a reader to provide quantitative data (True press kit).  While the company has about 60 tests in development, only two are approved for sale (tests for PSA and TSH) and it has a manufacturer each in mainland China and Taiwan.  Of course, True itself is in the hunt for a corporate partner to adopt its platform so unless it offered a the right manufacturing capability and distribution channels it may not be a good partner for my company.

If my company’s tests were simple enough for home use, another way to enter the Chinese market is by offering over-the-counter kits, those in which a sample is taken and sent to a lab for processing or read by the user.  I’m sure there are regulatory/approval challenges, but, given the growing middle class, internet access, and need, an on-line or OTC kit business may be viable.  The best known tests widely available in the US are for pregnancy, ovulation, and glucose monitoring, but tests are also sold for infectious disease like HIV and hepatitis C and cholesterol, anemia, allergy, and cancer screening (see list of tests as of 2009 in a Pharmacy Times article).   A few model companies are:

Yes, there is gold in them thar Eastern hills but good partners, planning, and luck will be needed to find it.

Indian Kathi

I hesitated to write sequential post about India but I saw a recent article in the Economic Times that is worth recapping.  In it, the authors noted a boom in the country’s medical device industry, now about 700 companies and $5.2 billion in sales, and quoted a KMPG report that said 2013 growth is expected to be 25% (Economic Times article).  The article cited several motivating factors:  a maturation of the graduates of biomedical educational programs that were started at many technical institutes and colleges about 10 years ago, a crop of successful medical device distributors (64% of the countries’ devices are imported) moving into manufacturing, a pressing domestic need for relatively inexpensive and low-resource-appropriate technology, and increasing opportunities to distribute these products into emerging markets in Africa, the Mideast, and Southeast Asia.  Putting on my business development glasses, I noted data points that may be useful to the small US-based medtech companies, those pre- and modest-revenue companies that make up most of the US industry and the many university-based wannabe medtechs that I am familiar with.

First, the article mentioned several companies, two of which (Phoenix and Forus) have explicit efforts to sell inexpensive, India-appropriate products:

  • Forus Health (FH) whose main product is an inexpensive, portable “pre-screening” system for detecting diabetic retinopathy, cataracts, glaucoma, and cornea and refractive problems now in 100 institutions, domestic and foreign;
  • Perfint Healthcare (PH) which invented precision-guided therapy delivery machines for the relatively new field of interventional oncology, with 40 machines placed in India and the rest overseas (Forbes article);
  • Phoenix Medical Systems (PMS) which designs, manufactures, and sells neonatal and maternal care equipment, including a jaundice phototherapy light that was licensed from D-Rev, the US-based, appropriate medtech design company (D-Rev products), one of the few examples that I know of successful medtech transfer between the not-for- and for-profit sectors;
  • Sutures India (SI) a manufacturer and distributor of disposable surgical products; and
  • Trivitron Healthcare (TH), India’s largest medtech company with sales of about $130 million annually.

Second, the article also noted that these companies have been successful in raising funds from a range of investment firms, all either India-based or with local offices.  For US companies with innovative technology looking to expand into India, these firms may be a good place to start to look for funding:

Lastly, the authors noted a few of the challenges for the industry, quoting the founder of Trivitron who complained of the lack of government support for local manufacture and innovation unlike in China and Brazil, home to companies exporting medtech products to India.  I was bit surprised that the article did not mention the inconsistent and non-transparent regulatory system which I had gathered from a report by the consulting firm, PwC (PwC report), that I reviewed for a previous post was a challenge (“New and Improved!”).  It is worth mentioning that the report and my post emphasized the need and ways for companies to change their operational models to suit the Indian environment, e.g.:  understanding the market and buyers’ needs and concerns (like the middle- and lower-income out-of-pocket buyers); redesigning existing products to simplify procedures and decrease accessory cost; and designing new products for affordability and value, not just low price.

Since I am on an Indian roll (which I understand is a mix of meat and veggies rolled in flat bread that originated in Kolkata), here are other data points.  According to a Times of India article last August, the in vitro diagnostics market is growing substantially at about 13% per year and a major multi-national player in it, Roche Diagnostics, is expecting double–digit growth in its IVD business over the next five years (Times of India article).  Roche is targeting blood screening and HPV testing as part of its growth strategy.  Other multinational device companies are getting stiffer competition from local companies, and a recent Fierce Medical Devices article noted that the multinational companies should be looking for cooperative rather than competitive opportunities.  They may be missing opportunities to learn from local partners about how to tailor their products for emerging markets beyond India as well as getting insight into strategic acquisitions they may make in India (FMD article 1).

Finally, also from Fierce Medical Devices, is an article on Core Diagnostics, a clinical testing firm using molecular diagnostics for oncology and cardiology, that started up in New Delhi in January (FMD article 2).  Core is interesting because it is founded by two 20-something Indian nationals; has backing from a major US diagnostics company (CardioDx), a pharma company (Genentech), and a VC firm (Artiman); and is utilizing technology obtained/licensed from OncoMDx, a Silicon Valley start-up (OncoMDx) (FMD article 3 and Core).  Whoever was involved in starting Core gets my creative business developer(s) of the year award.

Accelo-rama

One of the big splashes in the world of start-up companies is the proliferation of new venture accelerators (the other big splash is the selling of private equity on-line but that splash has yet to hit the fan).  These accelerators are the hipster version of the old-school business incubators that are a staple of economic development agencies.  They are typically sponsored by a mix venture capital firms, corporations, and service providers (e.g., law firms), require start-ups to pass an entry process, and provide money on the order of $20K in exchange for equity (5-7%), mentors, and office space with amenities like foosball and coffee.  Their focus is exclusively on information technology (IT) and their aim is to generate something that looks like a business in a short time (like three to five months), get it funded and generating revenue (or at least a lot of users), and pass it to professional investors looking to flip it at a premium to a corporation desperate for innovation.  According to Seed-DB, a database of accelerators, there are almost 150 programs across the globe (Seed-DB), and two of the big daddies of accelerators, Y Combinator and Tech Stars, are now national brands.

Recently the accelerator splash has been driven by a boom in accelerators for health care (for a humorous take on this point, read Lisa Suenen’s post at Venture Valkyrie).  There has also been a flood of VC money into IT health care start-ups.  A report last year by Rock Health, a health care IT accelerator, put total 2011 VC funding of digital health companies at about $1 billion and the mid-2012 level at $675 million (RH Report).  By comparison, VC funding of biotech companies was about $4 billion in 2012 (FierceBiotech article).  Of course, it is too early to know if these accelerated IT start-ups will yield products that have an impact on health care, or even if they will offer a return on investment, given the herd mentality of the VC industry.  With all this booming and flooding, I wondered if the accelerators offered opportunities for start-ups with global health product ambitions.

While IT is not my forte, I have tried to keep up with the enthusiasm for IT solutions in global health (e.g., my post “mmmmmHealth”) and recognize the attraction for starting an IT global health company: the fast pace of software development and minimal regulatory barriers, the huge need to make health care affordable by lowering costs, and interest and belief in IT solutions by governments and providers.  Using my limited knowledge, I reviewed several accelerators for their friendliness to global health.  There were:

Not surprisingly, I found these accelerators and their acceleratees are solely focused on the US health care market and typically on solutions that require extensive and extensive internet capability, so not global-health friendly.

That being said, what are options for a Boston-based global health IT venture looking for the seed funding and the other amenities of an accelerator?  One is to apply to Rock Health and Healthbox and see if they will step out of their US focus.  The application process seems relatively easy, similar to that for a business plan contest, and, for what it’s worth, I’m happy to help with any team’s application pro bono.  Fortunately, there are programs that offer some of the most important features of the accelerators:  access to advisers and service providers, visibility with sources of potential funding, and community.  The programs that have no initial costs are university-based programs (but require an institutional affiliation) like Harvard iLab, Boston University’s Kindle, and MIT’s Venture Mentoring Service Venture Mentoring Service, and MassChallenge, an accelerator program that offers post-program funding but is definitely social-benefit venture friendly.  For start-ups with some funding, the best environment is the Cambridge Innovation Center (CIC).   It is pricey (a desk costs about $400 per month), but it may soon host an international accelerator for “mission-driven,” i.e., social benefit, start-ups called The Hub (see Hub Boston and a Boston Globe article).  I could not find information on participation costs, but I am guessing that there will be some subsidization.  Finally, a colleague brought to my attention a new program, StartUp Health, which is billed as an “academy” in which participants get a “structured curriculum” on entrepreneurship and an “advisory board on steroids.”  It has an ambitious goal of helping 1000 startups in 10 years and is backed by large number of sponsors, including GE Healthcare, but appears US-centric.

While the decks are stacked against a global health IT venture finding an accelerator-type home, at least there are several tables to try one’s hand.

Ringing in Another Year (also in My Ears)

‘Tis the season to be jolly and for looking back at the previous year which I am glad to do since writing a new post will take more time than I have today.  So bear with me while I point out few posts from 2012 that I enjoyed writing and hoped were enjoyable, or at least informative, reading.  They are:

  • “Bottleneckrophobia” in which I noted the concern among the professional global health policy people about a bottleneck in the approval process for neglected disease drugs and suggested one approach to an international drug approval authority may be based on the WHO Prequalified Medicines program bolstered with expertise from “stringent” country approval authorities (like the USFDA) and industry (like CROs);
  • “Rolling the Dice” in which I posited that a biotech start-up company with the goal of developing a HCV drug costing less than $10 per treatment course was a reasonable investment of $3-5 million for a big pharma company (or even a VC firm), although one with a lower potential return than that BMS expected for its $2.5 billion investment in Inhibitex and its HCV drug of which BMS wrote off $1.8 billion when the drug tanked in Phase II; and
  • Universal in which I made  an argument for more medtech/device companies to enter the global health products market and mentioned as one example Gradient Health Systems that is developing a “Universal Anesthesia Machine.”

In addition I wanted to add an update to a post I made back in March (“A Tale of Two Companies”), in part because the title recalls that of the popular Dickens’ novel and Dickens wrote a famous Christmas tale and because I had heard recently that one of the companies of the post, Medicines in Need (MEND), was no longer functional.  My less-than-thorough investigation found that the company’s website still has not been updated since September 2010 and that since January 2011 MEND’s CEO, Andrew Schiermeier, has been the COO of another local company, Aura Biosciences, that is developing nanoparticle drug delivery (nice animation at Aura Research).  Not being functional is fine, it happens, but I would hope that MEND’s investors, principally Harvard University which granted MEND a license to its base technology and the Gates Foundation which gave it about $11 million in grants, know what happened and learned how to do it better next time.  As for the other of the two companies, Breathable Foods and its AeroShot inhaleable caffeine (AeroShots), it seems to have dodged the FDA bullet and is doing well (but not good).  Anyway, for your reading pleasure here is my original post.

A Tale of Two Companies

In a previous post, I wrote about Medicine in Need (MEND), a Cambridge, MA-based, not-for-profit, primarily because their mission, to apply “emerging and advanced delivery and manufacturing technologies to drug and vaccine candidates for diseases of poverty,” may yield inhaleable dry powder products, a promising route for low-cost, large-scale drug and vaccine delivery.  But MEND appears to be stuck in low gear.  Founded in 2003 and a licensee of “nanoparticle” technology from the David Edwards laboratory of Harvard University, MEND has been supported by grants and donations including about $11 million from the Gates Foundation to create dry-powder versions of a TB vaccine and other products (MEND PR), but, although the TB trials were to start in 2009 (Genome Web article), I found no progress reported on the vaccine or other products.  The most recent news at MEND’s website is from 2010 when the company was named a World Economic Forum “Technology Pioneer,” and my on-line search for more recent news found only a January 2011 press release from the Wellcome Trust, a global health foundation, that reported MEND is participating in a project with the Hilleman Laboratories (New Delhi, India) to test the feasibility of its technology in a rotavirus vaccine (Wellcome press release).  So MEND seems to be making little progress in fulfilling its mission which is disappointing since, when I met the MEND CEO, Andrew Schiermeier, several years ago, I thought he had the right experience, e.g., as a biotech company CEO (AS Bio), to get products to market.

Astute readers, or those immersed in the multi-media stream, will recognize that MEND is not the only venture where Dr. Edwards is applying his technology and promotional skills.  The good doctor, in addition to being the founder of the ArtScience Labs at Harvard and the Paris-based LaboGroup, helped start the company, Breathable Foods, Inc. (BFI), in late 2010.  According to Dr. Edwards’s personal website, the idea behind the company is “to bring the aesthetic experience of aerosol cuisine to commercial markets for delivery of natural nutrients with special healthcare benefits,” and “The new Cambridge (USA)-based company led by CEO Tom Hadfield spun out of ArtScience Labs and the Paris-based LaboGroup.  In August 2011, the company raised $8.5 million in a series A financing led by Flagship Venture Partners and Polaris Venture Partners.”  And BFI took less than a year to get its first product, AeroShot, to market.  As was widely publicized, AeroShot is a dry-powder mix of carefully-sized particles that includes 100 mg of caffeine (about one large coffee’s worth), B vitamins, and flavoring in a handy cylindrical delivery device.  The product’s web page is nicely-laid out (AeroShots) with links to all the current social marketing tools (Facebook page, Twitter feed, YouTube videos, Tumblr) and a snappy tagline, “giving you the energy you need to go forth and conquer.”  A description on the website of Flagship Ventures implies that BFI may also have pharmaceutical products in the queue:   “Additionally, Breathable Foods’ novel nutritional delivery platform can be utilized for delivery of nutrients or pharmaceuticals directly to the mouth for ingestion, thus avoiding common safety concerns of delivering active molecules to the lungs” (Flagship).  AeroShot’s launch made a big media splash last October and caught the attention NY Senator Charles Schumer who got the attention of the FDA’s Office of Compliance which issued the company a “warning letter” last month.  The letter expressed concern that AeroShot may be mislabeled because the company does make clear whether AeroShot delivers its jolt by inhalation or ingestion, the former being a route requiring testing and approval and the latter qualifying the product as a dietary supplement and therefore not needing FDA approval (FDA letter).  The letter also expressed concern about BFI implying that the product is safe without addressing its use by minors, use with alcohol, or accidental inhalation.

This tale of two companies led me to wonder what may account for the difference in the speed in delivering (or not delivering) the companies’ products (“TBVacShot” and AeroShot) to market.  Clearly, for BFI, the using a new technology for a consumer product is less technically challenging than for a pharma product, and BFI has an easier, non-regulated path to market (once BFI gets its marketing message straight anyway).  MEND’s vaccine requires years of expensive preclinical and clinical testing although other dry powder vaccines are making progress in development (see my post, “A Holy Grail Horse Race” 10/7/10).  But I’ll posit the difference the companies’ product development efforts is due to accountability and engagement.  BFI’s founders, managers, and backers understand the need to market products quickly to generate revenue and interest in the company by potential acquirers so they will get a return on their investment.  The investors in BFI have skin in the game (money at risk) and are therefore are engaged in the management of the company.  The Gates Foundation doles out billions of dollars to many groups but has no mechanism for engagement or accountability for a grantee like MEND that receives a mere millions of dollars.  Dr. Edwards, as a founder of both MEND and BFI, may derive personal satisfaction from his engagement in MEND but has no personal stake in its success, while it is likely he is a share-holder in BFI and therefore has a potential financial gain, hence the several interviews available on-line in which he promotes the company.  MEND has no board of advisors as far as I can tell, so it has no independent but interested overseers to expect and encourage progress.  A party that could or should be engaged and concerned about accountability is Harvard University.  Harvard licensed the Edwards’ technology to MEND and presumably included in the license an obligation of diligence in product development.  I say presumably because Harvard is a signatory to the “Nine Points” statement, which is a policy guidance document to help universities use “strategies that might facilitate the delivery of health-enhancing discoveries to neglected patient populations around the world, such as in developing countries,” and includes the use of licenses with “affirmative obligations of diligence, with license reduction, conversion (i.e., to non-exclusivity) or termination as the penalty for default” (Harvard and Nine Points statement).  However in my experience, university technology licensing offices typically track licensees’ financial obligations like repaying patent expense reimbursements or royalties on sales, and not diligence in product development.  So it looks to me as if Harvard, like the Gates foundation, Dr. Edwards, and MEND’s management, is not holding MEND accountable for its product development efforts over the past nine years.  As for the millions of people suffering the consequences of living in countries with a high-burden of TB, they aren’t in a position to hold anyone accountable.