Dx Connex

Thanks to the excellent reporting of the Fierce newsletters staff, I read two announcements recently about the launching of diagnostic products specific to developing world markets.  Both are of interest since the companies involved took different paths to their products and each may be willing to partner with start-up companies for the development of additional tests utilizing the respective proprietary platforms.

In the first, ChemBio Diagnostics, Inc. (ChemBio), a New York-based company, announced two agreements with RVR Diagnostics SDN BHD (RVR), a privately-held company in Kuala Lumpur, Malaysia, that was set up in 2010 to provide point-of-care (POC) diagnostics to Asia (ChemBio press release in FierceDiagnostics).  Under the first agreement, ChemBio will transfer the information and knowledge for making its proprietary Dual Path Platform (DPP) assays, grant a license to make a number of DPP-based products, two of which are the company’s HIV 1/2 and HIV-Syphilis Assays, and grant exclusive distribution and sales rights for certain Asian countries.  In the second agreement, RVR agrees to manufacture products for ChemBio to sell outside the licensed countries.  ChemBio received an unspecified signing fee and presumably fixed pricing for RVR-made assays and will get a future milestone payment and a royalty on sales.  As pointed out in the press release, the deal gives ChemBio a cost-effective manufacturer for its products for sale in emerging and established markets (since RVR has agreed to obtain FDA certification for its facility), and RVR gets a proven product line appropriate for low-resource areas.

The agreements with RVR are an important step for ChemBio in expanding its global markets.  As a small, publicly-traded company (about $30 million in annual revenues and $2.8 million in profits), it needs to sell through distributors and compete on price.  The RVR agreements are similar to those made by the company in 2008 with the Oswaldo Cruz Foundation, a research, development, and supply division of the Brazilian government, also for DPP-based diagnostic products (see my post, “Fio Cruise”).  ChemBio is working on a number of DPP tests relevant to global human and animal disease diagnosis (e.g., tuberculosis, malaria, leprosy, leishmaniasis, leptospirosis, syphilis, and influenza; see ChemBio Products) and may be willing to enter cooperative research and development agreements with start-up companies to advance these tests or adopt its DPP platform to other analytes.  The ChemBio tests detect protein and are enzyme-based and hand-held.

In the second, Qiagen, a multi-billion dollar company based in the Netherlands (Qiagen), announced the launch of its careHPV test for the detection of human papilloma virus, the causative agent for cervical cancer, in India (FierceDiagnostics article and press release in FierceMedicalDevices).  Although in the US and Europe, screening for cervical cancer is common, screening rates in the rest of the world are in the single digits and worldwide cervical cancer is the third most common cancer among women, with approximately 470,000 women having the disease and 300,000 dying each year mostly in South and Central America, sub-Saharan Africa, and Southeast Asia (NCI Cancer Facts).  The careHPV test is based on DNA analysis, does not need sample refrigeration, and uses a portable, self-contained (reagents, water, and electricity) and easy-to-use reader.  Qiagen apparently will be distributing the test at an affordable price to public health providers as it does in China where the tests and reader are manufactured and where they were first approved for use in 2013 (Biovalley article).

The path to the careHPV product launch is a long one and began with a venture-capital-backed diagnostics company called Digene started in Gaithersburg, MD, in the 1980s (jVen Digene).  Digene was a pioneer of molecular diagnosis in which RNA or DNA sequences are read for identification and in 2004 received a $2.2 million dollar grant from PATH to develop, test, and get approved an HPV test using its Hybrid Capture technology (PATH press release).  PATH, a leading non-profit developer of global health technology based in Seattle, engaged Digene as part of a $13 million program backed by the Gates Foundation to develop cervical cancer diagnostics for areas of the world with minimal resources and medical infrastructure.  Apparently, the progress Digene was making on its PATH test and revenues from its only FDA-approved test (also for HPV) made it an attractive acquisition for Qiagen which purchased the company in a $1.6 billion cash and stock deal in 2007 (Market Watch article).  Both Qiagen and PATH conducted trials of careHPV:  Qiagen in China, Nigeria, Rwanda, and Thailand, and PATH in China, India, Nicaragua, and Uganda.  The latter showed the test can be used effectively even in very basic clinics with much higher sensitivity than other methods and that self-sampling produced useful samples, an important demonstration needed for wide acceptance.  I should note that as important as careHPV is to finding HPV infection, the next steps, detection and removal of precancerous cells, require higher levels of medical infrastructure.

What is the next assay for Qiagen to develop for its careHPV reader?  I did not find any suggestions on the Qiagen or PATH websites but think it should be obvious to use the platform for additional molecular diagnostics.  I’m assuming that PATH has thought along these lines and is looking for a research and development partner for new assays for global health, but then I lean toward optimism.

Too Big to Flail Recycled

Last week I wrote about the challenges the Bill and Melinda Gates Foundation’s need to address in its program-related investment program, particularly in investing in early-stage biotech companies and in steering them towards the foundation’s goal of “global access,” that is, assuring that, if and when a product results, it will be accessible by the afflicted in the developing world.  That post reminded me of a similar challenge the foundation faced when its lack of oversight of more than $100 million in grants to the “nonprofit pharmaceutical company,” OneWorld Health, may have contributed to that organization’s slow progress on its global health goals.  Here’s my post from January 12, 2012:

In the biotech world, the acquisition of a company by another is an occasional but newsworthy event since it typically means that the acquired company has succeeded in creating sufficient value that an acquirer is willing to pony up significant cash (and/or stock) to buy out the acquired company’s founders and investors (e.g., Takeda’s recent purchase of Intellikine for $300 million plus, Fierce Biotech article).  And since the IPO market is pretty well closed to biotechs, acquisition is the primary way the investors can get their money out of one company and into others, thereby recycling capital in the entrepreneurial ecosystem.  But what does it mean when one granted funded, global health product-oriented organization acquires (absorbs?) another?  An alert colleague brought to my attention the recent announcement that OneWorld Health (OWH), which calls itself the “first nonprofit pharmaceutical company in the U.S.” (OWH History), was becoming an “affiliate” of PATH, the Gates Foundation’s favorite conduit for global health technology development (PATH press release), or according to one source was being acquired by PATH (Humanosphere blog).

The PATH press release provided no clarity on what had happened and why, although it is clear OWH’s CEO, Richard Chin, is out.  But what will OWH do as an affiliate of PATH, who directs the programs and funds, does the hiring, calls the  shots?  Is the move driven by synergy?  Lethargy?  The PR language is opaque:  “By becoming a PATH affiliate, OneWorld Health will be able to scale and accelerate its successful drug development efforts,” which sounds to me like the plan will be to get rid of unproductive people and programs, which is often part of a for-profit acquisition.  OWH has always been a puzzlement to me since it called itself a pharma company but has never acted like a business, with a plan and accountability to its investors.  I reckon it is a global health product development program (so-called PDP), a grant-funded, primarily research-oriented, and academically-advised organization with a mission to develop new diagnostics or treatments for neglected diseases- a welcome addition in global health but not a company (for more on PDPs, see the DFID 2020 PDP report).

In one of my 2010 posts (“The Emperor’s New Clothes” 6/17/10), I noted, while the OWH has been successful in garnering grants since its 2000 founding, more than $150 million primarily from the Gates Foundation and the UK’s Department for International Development, the organization had not developed and commercialized any drug (not-withstanding statement in the PATH press release, “OneWorld Health has a successful track record in developing and delivering effective, affordable drugs,”).  OWH’s lead product, an injected version of paromomycin, an off-patent aminoglycoside antibiotic, for treating visceral leishmaniasis (VL), a protozoan parasitic disease, had been approved in 2006 but its sale has been on hold pending completion of a “Phase IV demonstration program” to determine if the drug can be delivered and be effective in rural conditions.  I also noted according to the only financial data then available, a Form 990 which the IRS requires all 503(c) non-profits to file, OWH spent about $30 million in 2008:  $7 million on salaries, $3.7 million to its law firm, $1.3 million on travel, $7.6 million in contract labor and services (which, I am guessing, is for R and D), paid a “professional fee” of $2.7 million, and gave $5 million in grants yielding an uninspiring overhead rate of 50%.  In my post, I also noted that OWH had won a lot of awards and was offering two product tie-ins, a video camera and a charm bracelet charm.

I revisited the OWH website to see what has changed over the past year and half that may explain the PATH take-over.  The website is re-designed (as of June), the product tie-ins are gone, and apparently the lead drug is still in testing.  A November press release announced that OWH will be part of a new consortium with the aim of “establishing and implementing new treatment modalities as successful tools to support the elimination of VL in South Asia’s most endemic regions.” Then, “Upon completing the study, a feasibility report will be published, which will include recommendations for the private sector engagement using new treatment modalities,” more paperwork and no delivery (OWH press release).  As for financial accountability, OWH is still not doing annual reports, relying instead on the Form 990s to provide a snapshot of its finances.  The most recent (OWH 2010 Form 990) shows no financial problem:  expenses did not exceeded grant “revenue” ($27 million in and $19 million out for salaries, operations, and grants) and there is $26 million in assets “in the bank.”  And its large executive team was well-paid.  OWH also reported that CEO Chin got $400K in compensation and the top 10 salaried employees earned about $200K each.  I can’t help but note that, since the cost of treating one person with VL with the OWH drug is $20 (another OWH press release), for the cost of one its top-ten compensated employees, OWH could treat about 10,000 cases of VL, which is about 2% of the 500,000 new cases each year, possibly averting about 20% of the annual 50-60,000 deaths.

So what’s up with the acquisition?  Maybe someone in the Gates Foundation (like Trevor Mundel, the new head of global health, see my post, “Free Advice, Trevor,” 10/6/11) realized that OWH had not much to show for the $150 million it had received, that Dr. Chin was not a good choice for a CEO, or that OWH’s administrative expenses could be cut, fewer studies done, and more could be done to get a treatment to the people with VL.  As an indirect investor in both organizations (through the tax code and government grants), I’d like to know the rationale for and the expectations of the new OWH-PATH affiliation, but, unlike the acquisitions among for-profits, they are not obvious.

PATH Finding

My post of last week on the announcement of the affiliation (or acquisition) of the non-profit global health disease drug developer, OneWorld Health, by the one of the world’s best-funded (about $1 billion from Gates Foundation since 2001), oldest (25 years), non-profit global health technology developer, Program for Appropriate Technology in Health (PATH), reminded me that I had written about PATH  about two years ago (“Where Does this PATH Lead?” 2/25/10).  I looked at PATH as an investor (which I am indirectly since PATH receives government grants and doesn’t pay taxes):  what’s the mission, is it being met, and will my investment yield the return I want.  From that perspective, I saw room for improvement:  a need to focus its mission, document how it is meeting its mission, clarify and publicize its performance measures, adopt a more centralized and less matrixed structure, and, since it passes through much of its revenue (grants and contracts), clarify how its grantees are selected and made accountable.  Unfortunately, I found few signs of improvement in the past almost two years.

For my admittedly superficial revisit I looked at PATH’s website, most recent annual report (2010 Annual Report), and its required report to the Internal Revenue Service (2010 Form 990).  PATH reported that it received $280 million in grant and contract revenue in 2010 making it well-funded compared to most global health technology development groups.  The five others I checked have less than one-fourth as much:

Organization Revenue ($ million) Data Source
Foundation for Innovative New Diagnostics 28 2010 Annual Report
Drugs for Neglected Diseases  Initiative 32 2010 Annual Report
Global Alliance for TB Drug Development 45 2009 Financials
Medicines for Malaria Venture 58 2010 Annual Report
International AIDS Vaccine Initiative 62 2010 Form 990

As I noted before, PATH does a lot of subcontracting ($67 million passed through to other organizations) and has a de-centralized structure (lots of programs, and departments) and generous compensation.  PATH’s 990 reported $76 million in salaries and benefits and that Christopher Elias, president and CEO, received $550K in compensation and the average of the compensation of fifteen managers was $267K (another eleven are listed).  PATH also seems to have a large stash of capital in that it has assets $318 million in “pledges and grants receivable” and owns $248 million in publicly traded securities, mostly corporate and government bonds, purchased with grant funds.  The latter seems unusual to me and with my limited accounting knowledge, I wasn’t sure how liquid are these assets or if they represented restricted (obligated) grant funds.

I was glad to see that PATH states it is assessing its progress in improving health (How PATH Measures Impact), and “to get a fuller picture of the performance of our organization as a whole over time, we are developing ‘cross-program indicators’- measurable steps toward interventions that improve health.”  But search the website as I may, I could find no information on the development of the indicators (what, who, when) or to what programs they have been or will be applied.  The Annual Report wasn’t much help in that it takes a very broad-brush approach to the organization’s many projects, so I tried to find a PATH publication that described or evaluated those “measurable steps,” specifically the manufacture, distribution, use, and outcome of use for any of PATH’s technologies (other than vaccines, see below) (Publication List).  I found none.  According to “PATH’s Framework for Product Introduction” document (Framework), PATH has had multiple collaborations with public, private, and commercial institutions that have resulted in the commercialization of 26 technologies, 19 of which are in use in more than 25 countries, but no details are given.  In “Technology Solutions by the Numbers” (Solutions), very brief descriptions are given for three diagnostic, two injection devices, and a vaccine monitor (which I posted on in “Technology Fix or Fixation?” 12/10/09) but no specifics are provided on who was manufacturing and distributing/selling these solutions and at what price, all very useful and relevant information for any organization or company trying to develop and introduce its own global health technology innovations.  “Together, PATH and its partners harness the efficiencies of the private sector, reaching poor and underserved populations with vital health interventions (Framework, page 3).”  If so, PATH should share the details so I can learn their approach.

To temper my rant though, I need point out that PATH’s vaccine development programs (the Vaccine Development Program, the Malaria Vaccine Initiative, and the Meningitis Vaccine Project) which account for about one-fourth of PATH’s staff and almost half of its budget, are making substantial progress in inventing needed vaccines and, in the meningitis program, have an approved vaccine in use (see my post on the Meningitis Vaccine Project, “Watch Out Big Pharma?” 12/16/10).  Under “Progress” on its Accountability page (Accountability), PATH has a link to an evaluation study of the vaccine programs done under a contract from the Gates Foundation (alert:  appearance of a conflict of interest).  I found it interesting that the study, done by the Boston Consulting Group (Vaccine Development Program Assessment), while generally praising the program’s “strong performance,” recommends that PATH increase biopharmaceutical industry representation in its advisory groups and, more to my point, integrate into its programs more “commercial considerations” like “such as modeling of cost effectiveness, impact, and projected cost of goods over the product lifecycle; anticipated acceptability among target users; and physical delivery considerations such as delivery channel capacity and cold chain requirements.”  Clearly these considerations are needed if the program’s vaccines are to be used and improve health.

More path finding PATH, please.

Too Big to Flail

In the biotech world, the acquisition of a company by another is an occasional but newsworthy event since it typically means that the acquired company has succeeded in creating sufficient value that an acquirer is willing to pony up significant cash (and/or stock) to buy out the acquired company’s founders and investors (e.g., Takeda’s recent purchase of Intellikine for $300 million plus, Fierce Biotech article).  And since the IPO market is pretty well closed to biotechs, acquisition is the primary way the investors can get their money out of one company and into others, thereby recycling capital in the entrepreneurial ecosystem.  But what does it mean when one granted-funded, global health product-oriented organization acquires (absorbs?) another?  An alert colleague brought to my attention the recent announcement that OneWorld Health (OWH), which calls itself the “first nonprofit pharmaceutical company in the U.S.” (OWH History), was becoming an “affiliate” of PATH, the Gates Foundation’s favorite conduit for global health technology development (PATH press release), or according to one source was being acquired by PATH (Humanosphere blog).

The PATH press release provided no clarity on what had happened and why, although it is clear OWH’s CEO, Richard Chin, is out.  But what will OWH do as an affiliate of PATH, who directs the programs and funds, does the hiring, calls the  shots?  Is the move driven by synergy?  Lethargy?  The PR language is opaque:  “By becoming a PATH affiliate, OneWorld Health will be able to scale and accelerate its successful drug development efforts,” which sounds to me like the plan will be to get rid of unproductive people and programs, which is often part of a for-profit acquisition.  OWH has always been a puzzlement to me since it called itself a pharma company but has never acted like a business, with a plan and accountability to its investors.  I reckon it is a global health product development program (so-called PDP), a grant-funded, primarily research-oriented, and academically-advised organization with a mission to develop new diagnostics or treatments for neglected diseases- a welcome addition in global health but not a company (for more on PDPs, see the DFID 2020 PDP report).

In one of my 2010 posts (“The Emperor’s New Clothes,” 6/17/10), I noted, while the OWH has been successful in garnering grants since its 2000 founding, more than $150 million primarily from the Gates Foundation and the UK’s Department for International Development, the organization had not developed and commercialized any drug (not-withstanding statement in the PATH press release, “OneWorld Health has a successful track record in developing and delivering effective, affordable drugs,”).  OWH’s lead product, an injected version of paromomycin, an off-patent aminoglycoside antibiotic, for treating visceral leishmaniasis (VL), a protozoan parasitic disease, had been approved in 2006 but its sale has been on hold pending completion of a “Phase IV demonstration program” to determine if the drug can be delivered and be effective in rural conditions.  I also noted according to the only financial data then available, a Form 990 which the IRS requires all 503(c) non-profits to file, OWH spent about $30 million in 2008:  $7 million on salaries, $3.7 million to its law firm, $1.3 million on travel, $7.6 million in contract labor and services (which, I am guessing, is for R and D), paid a “professional fee” of $2.7 million, and gave $5 million in grants yielding an uninspiring overhead rate of 50%.  In my post, I also noted that OWH had won a lot of awards and was offering two product tie-ins, a video camera and a charm bracelet charm.

I revisited the OWH website to see what has changed over the past year and half that may explain the PATH take-over.  The website is re-designed (as of June), the product tie-ins are gone, and apparently the lead drug is still in testing.  A November press release announced that OWH will be part of a new consortium with the aim of “establishing and implementing new treatment modalities as successful tools to support the elimination of VL in South Asia’s most endemic regions.” Then, “Upon completing the study, a feasibility report will be published, which will include recommendations for the private sector engagement using new treatment modalities,” more paperwork and no delivery (OWH press release).  As for financial accountability, OWH is still not doing annual reports, relying instead on the Form 990s to provide a snapshot of its finances.  The most recent (OWH 2010 Form 990) shows no financial problem:  expenses did not exceeded grant “revenue” ($27 million in and $19 million out for salaries, operations, and grants) and there is $26 million in assets “in the bank.”  And its large executive team was well-paid.  OWH also reported that CEO Chin got $400K in compensation and the top 10 salaried employees earned about $200K each.  I can’t help but note that, since the cost of treating one person with VL with the OWH drug is $20 (another OWH press release), for the cost of one its top-ten compensated employees, OWH could treat about 10,000 cases of VL, which is about 2% of the 500,000 new cases each year, possibly averting about 20% of the annual 50-60,000 deaths.

So what’s up with the acquisition?  Maybe someone in the Gates Foundation (like Trevor Mundel, the new head of global health, see my post, “Free Advice, Trevor,” 10/6/11) realized that OWH had not much to show for the $150 million it had received, that Dr. Chin was not a good choice for a CEO, or that OWH’s administrative expenses could be cut, fewer studies done, and more could be done to get a treatment to the people with VL.  As an indirect investor in both organizations (through the tax code and government grants), I’d like to know the rationale for and the expectations of the new OWH-PATH affiliation, but, unlike the acquisitions among for-profits, they are not obvious.

Watch Out Big Pharma?

I group the costs of making the neglected diseases (those without treatments) less neglected into:  the costs to develop and manufacture a new treatment and the costs of buying (at a price which is the cost plus a profit to make the production sustainable and the producer economically viable) and distributing it.   The latter seems to me to require increasing the resolve and resource allocation by governments around the world to providing health care as one of their basic responsibilities.  The former, since it involves human biology and a regulatory process, is time- and capital-intensive, but, to me as a biologist and technologist, seems a more tractable problem.  Since I know something about drug and vaccine development, I‘ve tried to contribute ideas to reducing this cost (my posts of March 11, April 4, and November 4 this year) and posited a general scheme for “cheap” drug discovery and development, but other than pointing to several products and services that may contribute to lowering the cost, I’ve not had a real life example to learn from.  But that’s changed.

Last week the Meningitis Vaccine Project (MVP), a partnership of the World Health Organization (WHO) and PATH, announced the launch (deployment) of a new meningococcal vaccine called MenAfriVac™ in the West African nation of Burkina Faso as the start of a campaign to eliminate epidemic meningitis in 25 countries of sub-Saharan Africa (PATH press release; also NYTimes article).  Meningitis is a life-threatening infection of the lining of central nervous system (the meninges) that can be caused by a number of a bacteria or viruses and that occurs, for reasons unknown, in 7-14-year epidemic cycles in Africa, most recently in 2009 when 88,000 people were afflicted and more than 5000 died (WHO fact sheet).  The causative agent is Neisseria meningitides, specifically subgroups A, B, C, W135, and X.  While the potential elimination of the epidemics is great news, the interesting sub headline is that, when the MVP started the project in 2001, it aimed to keep development costs as low as possible and find a manufacturer who could price it at less than $.50 per dose- and they did.  I looked through their literature for techniques that may be generally applicable to reducing development and manufacturing costs (MVP website).

Although I was not able to find a specific number, PATH indicated the vaccine development cost was about $50 million or, according to them, one-tenth the “typical” cost for vaccine development (PATH press release).  The relevant points I found were:

  • MenAfriVac™ is a monovalent vaccine, meaning it stimulates an immune response only to the A subgroup bugs unlike the existing vaccines which are tri- or tetravalent but also means it works well in infants and confers a longer-lasting immunity than the existing vaccines [keep the product as simple as needed and focus on performance];
  • Its basic design (a polysaccharide antigen conjugated to tetanus toxoid as an immune stimulant) is similar to existing vaccines [build on pre-existing and proven technology]; and
  • Clinical trials were done in India, the Gambia, Ghana, Mali, and Senegal [use relatively low-cost settings for trials].

A setting target purchase price of under $.50 per dose is praiseworthy but seemed arbitrary.  MVP apparently conferred with the public health officials of the endemic countries (their public sector customers), picked $.50, and, according to Luke Timmerman of Xcomony, confirmed that this price was close to a feasible manufacturing cost with industry experts (Xconomy article).  Then MVP had “discussions” with unnamed major vaccine companies, but none was interested in the project and the price ceiling, and somehow selected and licensed the Serum Institute of India (SII) as the manufacturer in 2002 (it’s not clear if the MVP tried a competitive bidding process) (MVP About).  While not giving the exact price, PATH states SII’s price for the purchasers, presumably the Global Alliance for Vaccines and Immunization (GAVI, see below), is under $.50 per dose (PATH press release), but it is not clear if SII’s costs are actually this low and if there is any profit.

Some of the points relevant to keeping the manufacturing cost down I found were:

  • SII has strong experience in producing low-cost, public-sector vaccines (it sells UNICEF most of the vaccines in its immunization programs) [manufacturing experience is helpful];
  • MVP was able to license a vaccine conjugation technology from the USFDA at no cost (a royalty-free license) and therefore did not have to pass that cost to SII (MVP product development) [get no/low cost licenses from government and academia];
  • the USFDA transferred its technology to SII at no cost [negotiate tech transfer with a license];
  • SII used the least costly methods (“… Serum [Institute] made a conscious decision to be as frugal as possible to meet the vaccine price requirements,” MVP product development) [again experience counts]; and
  • Regulatory approval was through the Indian government and the WHO vaccine manufacturer prequalification process (MVP About)  and not through the FDA [skip the costly FDA route, if possible].

The MVP director, Dr. F. Marc LaForce, also emphasized good project management and business planning in a presentation in 2007 (LaForce 2007), specifically:

  • Understanding of the motivations of the participating groups, lots of communication, and not relying on “benevolence” [use friendly but forceful persuasion, I guess];
  • Business arrangements that make economic sense;
  • A business plan that is well-negotiated, sound, and includes milestones;
  • CROs for obtaining critical practices and knowledge; and
  • Guidance of the partnership with clear, economically viable goals.

MenAfriVac™ is now in its launch phase, and the cost of its full deployment in the afflicted countries is estimated at $570 million (PATH press release) which means that the cost of vaccine (300 million doses at $.50 per dose or $150 million) is about 25% of the overall cost.  $95 million (17%) has been raised to date through GAVI, Michael and Susan Dell Foundation, Médecins sans Frontières, and UNICEF, so there is more needed to meet the distribution cost.

So bravo to Gates, PATH, MVP, and SII for cost-effective vaccine development, but does this mean “watch out big pharma” as Luke Timmerman titled his article (Xconomy article)?  I think so, especially if SII has the rights to use the technology they licensed and developed (as they should) and if they can use it to make multivalent meningitis vaccine and get it approved world-wide.  The 2009 market for preventative meningitis vaccines is $1.8 billion and is estimated to grow to $4.5 billion by 2017 (Globe Data report).  The typical price for the current vaccines, e.g., Menactra® by Sanofi and Menveo® by Novartis, is about $80 (group) to $103 (individual) (CDC vaccine price list), so, even if SII’s tetravalent vaccine costs twenty times the cost of MenAfriVac™ (or $10 per dose), its pricing will crush the competition and make them a boat-load of money (to use in other ND vaccine projects).

Commercialization: A Going Concern

To my simple way of thinking, commercialization is the final step of innovation:  all the steps needed to sell a new product or service and at an affordable price to a customer for whom it fulfills a need.  Ideally, the sales revenue allows recouping of the expenses the product’s  development, manufacture, distribution, and marketing plus an increment as profit to investors and to “refuel” the process, making the company sustainable (in business speak, a “going concern”).  Although the conventional wisdom is that products and services for global health are not commercialized and that a for-profit approach does not work, the failure of the traditional, non-market approach (multi-year, multi-million-dollar aid programs) to generate sustainable solutions has stimulated interest in considering and adapting a commercialization approach.

In the “product development program” (PDP) model for innovation in treatments and diagnostics for the neglected diseases, the development costs are supported by a grantor (foundation or government) rather than investors and, eventually, the manufacturing and distribution costs will recouped by sales to intermediary (a donor organization, international or national agency) who provides the product to the customer with no out-of-pocket (like in the US where most of us have insurance and minimal out-of-pocket costs).  The long-term effectiveness and viability of the PDP model is yet to be known (the first PDPs started in the early 1990s).  A variation on this model, and one the PDPs are pursuing, is for the commercialization process be competed by a for-profit company, a partner with the know-how and infrastructure to make a profit and hence sustain the delivery of the needed product or service at an affordable price.  I thought it would be worthwhile to look for examples of global product commercialization especially where for-profits were involved.

As a starting point, I revisited two recent reports on innovation in products and programs in global health.  Unfortunately, neither, while impressive for the useful information they provide, have little in the way of examples of commercialization.  Last year, BIO Ventures for Global Heath (BVGH) published a report called “Global Health Innovators” which descried six collaborations between companies, academic groups, and the PDPs.  All interesting, but none of the six have reached commercialization stage yet (GH Innovators).  Also last year, the Alliance for Case Studies in Global Health, an ad hoc group composed of the Association of University Technology Managers, the Bill & Melinda Gates Foundation, Global Health Progress, the International AIDS Vaccine Initiative, and Tropical Disease Research published its “Case Studies for Global Health” (GH Case Studies).  Of the 33 studies, eight involved technology or product development (most were programs of various sorts); there were:  five vaccines, one diagnostic, one glaucoma treatment, and one vaccine vial monitor.  Of these, only the monitor has been commercialized (more below).  So not much help.

The only organization that I found with a track record in global health product commercialization, albeit a modest one, is PATH (PATH), which is the Gates- and government-funded, Seattle-based organization with 25 years of experience in global health (and which was the topic of my posting of February 25, 2010).  PATH has a Heath Technologies Group that is working on range of solutions (Health Technologies), some of which, according to PATH’s write-up, Technology Solutions by the Numbers (By the Numbers), have been distributed in the billions of units.  Impressive, but to understand PATH’s distinction between “distribution” and “selling,” which is the goal of commercialization, I looked for details in the Group’s Technology Updates (Updates).  Of the 31 products described, I excluded three as variations, leaving 28 unique products, and of these, five had been commercialized:

-two syringes (Uniject and Soloject) had been licensed to Becton-Dickinson (BD) and are being used widely in global immunization programs (I estimated to give 300-400 million doses each year);

-two diagnostics (for malaria and HIV) which had been licensed to companies in Germany, India, Argentina, Indonesia, and Thailand were selling in about 300 thousand and one million units, respectively, each year; and

-the vaccine viral monitor mentioned above which is sold by the Temptime Corp. (Temptime) (apparently PATH provided “guidance” in this product’s development since licensing is not mentioned) and which is used on about 140 million vials per year (my estimate).

Bottom line:  PATH has a limited record on commercialization and, if it is to be successful with the other 25 products in its pipeline, some of which have been under development for multiple years, needs to improve its commercialization process.  I would suggest the management of the Technology Solutions Group implement a best practices review and adoption process, thin out its pipeline, and concentrate on getting its products in the hands of those that need them.

The other bottom line is that the how, who, and what of global health product commercialization is under development and, therefore, is ripe for innovation of its own.  Potential innovators, including those previous noted, are:

-BIO Ventures for Global Health, e.g., through its Partnering Forums (Compelling Business Models);

-PATH, since commercialization is stated as one of its goals (2008 Annual Report);

-McLaughlin-Rotman Centre for Global Health (MRC) which has projects in “Commercialization in Emerging Economies” (MRC Projects);

-Research Triangle Institute which has a Gates-funded program to help in commercialization (Venture Investment Technical Assistance, VITA)

-the many companies who are selling health care products in the ROW (rest of the world), non-“major” markets, e.g., vaccines (DCVMN), pharmaceuticals (Moksha8), and diagnostics (RDT Manufacturers); and

-self-employed consultants like me if given a chance.

MedTech Made Easy

This week I was pleased to be able to attend the first (hopefully of many) World Health Medical Technology Conference (MedTech Conference) organized by Boston University’s School of Management’s Institute for Technology Entrepreneurship and Commercialization (ITEC).  Directed by Jonathan Rosen, ITEC is a relatively new center at BU that supports entrepreneurship among its faculty and students through learning opportunities like classes, conferences, business plan competitions, and a new mentoring program called Kindle (Kindle).  ITEC and BU are also one of the sponsors of the best local meeting for social venturing, the Forum for Social Entrepreneurs, last held in 2008 and hopefully to be held in 2010 (ForSE 2008).

The underlying theme of the conference is that there is a growing number of local medical device/technology companies developing products aimed at serving the “under-resourced” populations, those depending on public subsidy to meet their health care needs (as in what Medicare, the Veteran’s Administration, and the health insurance reform legislation do/will do for about one-third of the US population).  This is an important theme, both globally, since affordable technology is needed to solve many global health challenges, and locally, since new England has one of the largest concentrations of medical technology companies in the US, according to the Massachusetts Medical Device Industry Council (MassMEDIC Report), and finding new markets is important to their long term profitability.  The program included presentations by two CEOs of local medtech startups (Drs. Ryan and Rodriguez of Diagnostics for All and Daktari, respectively), and representatives of the academic (Drs. Burke and Olsen) and non-governmental (Drs. Schneideman of PATH and Blander of Bienmoyo), and venture sectors (Bailey of Commons Capital and Sandoski of Norwich Ventures).  These presenters made good points, but I wish to mention those that represented the two ends of the medtech innovation spectrum:  Earl Jones, general manager of GE Healthcare’s eHealthcare division, and two teams of student inventors.

GE Healthcare is a major division of GE with about $18 billion in annual revenues, and eHealthcare is a new group within it aimed at decreasing costs through integrated IT (GE eHealthcare).  Earl evidently is familiar with how most of the world lives by leading sales and partnering activities for GE’s water purification business, i.e., in places where water is not abundant or clean, and with operating a global business.  His first point of note was that GE is putting money into finding new technologies to support its global business through a corporate venture fund called the Healthymagination Fund (Healthymagination Fund).  Started at $250 million, the fund has three investment objectives which are in line with companies developing medtech products for global health:  diagnostics, information technology (think mobile healthcare delivery), and biopharmaceutical and vaccine R and D methods.  A handy submission button is provided on the site (Proposal Submit).  Earl also mentioned that GE is embracing “reverse innovation,” which was described in a Harvard Business Review article last October (and co-authored by the GE CEO, Jeffrey Immelt):  “Rather than follow its historical path of developing high-end products and adapting them for emerging markets, GE is developing local technologies in these regions and then distributing them globally“ (Reverse Innovation).  Although GE has a way to go to make its exemplar $1000 EKG machine affordable in the many places where annual per capita healthcare spend is less than the cost of one machine (Health Care Spend), its leadership on creating global markets is much–needed for US corporations.

At the other end of the medtech innovation spectrum are the many student teams (and their faculty advisers) who are learning the innovation process through inventing and developing, at least to prototype stage, new technologies for the under-served.  There were a handful of student groups presenting and postering at the BU meeting (unfortunately, a summary booklet was not produced).  I mention two:

-No-name solar-powered pulse oximeter:  an oximeter measures non-invasively the degree to which a person’s hemoglobin is carrying oxygen and therefore is a key diagnostic for respiratory insufficiency possibly caused by pneumonia, a leading cause of death.  Specifically, this one is designed to be used by rural community health workers of Zambia and to be cheap, grid-independent, and rugged.  The Boston University College of Engineering students, Max Condren, Bryan Lublin, Matthew Fleming, are advised by Drs. Muhammad Zaman (whom I have met at the Smart Global Health meeting, c.f. my post of April 29, 2010), Phillip Seidenberg, Jonathon Simon, and Donald Thea (Oximeter Story).

-EyeHeme:  current methods of measuring anemia (low red blood cell count and indicative of nutritional disease, parasitic infection, or internal hemorrhage) require a blood draw.  EyeHeme is a non-invasive anemia diagnostic based on reflectance spectroscopy and the blood vessels of the eyelid (EyeHeme Slides).  It is in early stage development by MIT students, Arianne Jong, Seema Kacker, and Kristin Kuhn, supervised by Dr. Amy Smith at MIT’s D-Lab.  The D-Lab “fosters the development of appropriate technologies and sustainable solutions within the framework of international development” and “serves as an educational vehicle that allows students to gain an optimistic and practical understanding of their roles in alleviating poverty” (D-Lab).

So did BU’s first World Health Medical Technology Conference deliver on its billing?  The goals of the meeting were wide-ranging and laudable; specifically, to explore:

-how innovative medical technologies are changing the quality of care in global health settings [not really accomplished since so few of the products described have been implemented];

-how innovative distribution channels are opening new global markets for medical technologies [not really accomplished, although GE certainly could be a primary player in global distribution];

-how global medical technology companies are attracting traditional venture capital investments [the speakers were a bit of a disappointment although in his talk Dr. Rodrigeuz mentioned he made 75 VC pitches to get his $3.5 million];

-how cooperative partnerships are changing the medical technology global landscape [well-addressed, with PATH and Bienmoyo as good examples];

-how to conduct successful clinical research and new product trials in global health settings [an important topic but unaddressed];

-how to achieve design innovation for advancing patient care [design was clearly the strong suite of presenters, both company and student, so this topic was amply covered]; and

-how to create and maintain intellectual property in global health medical technologies [not an important topic but an interest of a sponsoring law firm].

Overall scorecard:  the meeting is a good start aimed at filling a important need in the commercialization of medical technologies for global health, but it needs more participation by and promotion to the local medtech industry.   For example, I’d suggest involving MassMEDIC and local companies with global health/market interests, e.g., for diagnostics:  T2 Biosystems, Pointcare, and Boston Microfluidics; for mobile health:  Dimagi; and for surgical products:  Wadsworth Medical Technologies.