(Not So) Wayback Machine

Readers of a certain age (“old”) will note my reference to a machine imagined by one of the most creative minds in animation, that of Jay Ward.  For those of more tender years, there is Wikipedia.  Since this is a good week to spend time with friends and loved ones which I hope you are doing as I am, I pulled out my version of the Way Back Machine to check up on the subjects of a few of my posts from the past year.  Here are my updates in reverse chronological order.

Epirus Biopharmaceuticals is a VC-backed company based in Boston with an explicit business plan for developing biosimilars (generic versions of successful biological therapeutics) made by proprietary manufacturing technology for the non-US/EU/Japan, rest-of-world markets (“Soup to Nuts” in July 2013).  The company had noted that is was in discussions for a deal on its lead product, a biosimilar for the anti-inflammatory drug, Remicade, and I posited that their model, that requires packaging products and services from technology suppliers, may make deal-making hard.  It was nice to see last month that Epirus closed its first big deal with Orygen Biotecnologica, a new Brazilian joint venture, to seek approval and then to manufacture the drug for Brazil to be followed by other Epirus products.  Orygen will build a new facility utilizing Epirus’s system and will pay the company, if all goes well, up to $275 million in milestone, royalty, and service fees (Epirus press release).  Orygen is a unique joint venture with partners being three Brazilian pharmas (Biolab Farmaceutica, Eurofarma, and Cristália) and encouragement from the government to build biologics manufacturing capacity in Brazil (Orygen BIO 2013 profile).

Back in June, I posted on Emory University’s new spin-out company called Drug Innovation Ventures at Emory (DRIVE) that was “to provide global solutions to address worldwide drug development and commercialization needs” (“Model or Muddle?”).  At the time I wrote my post, details were few and my concerns were several:  the source of molecules/lead candidates for DRIVE’s development program, whether it had the substantial funding needed for development, who will be liable for resulting products’ performance (the company or Emory), how involved Emory will be in the management, and whether the company could attract experienced management.  Recently, I noted that DRIVE has a better website although still lacking pertinent info (DRIVE) and that it had appointed Abel De La Rosa as CSO (DRIVE press release).  I noted previously Dr. De La Rosa’s experience is more in business and not science, and I am still muddled.

The Global Health Innovative Technology Fund (GHIT) was launched in May of this year by the Japanese government, the Gates Foundation, and several big Japanese pharmas, and I wondered about its impact on its stated goal of developing treatments, diagnostics, and vaccines for neglected infectious disease (“GHIT Ready”).  I posited that the program seemed to favor large companies and institutions, had too much bureaucracy, and may not award any one project sufficient funds to make a difference.  Earlier this month, GHIT announced its first awards that by design needed to be collaborations between a Japanese and a non-Japanese organization or company (FierceBiotechResearch article).  A total of $5.7 million was awarded to six groups, the largest (more than $3 million) going to two projects of the Takeda/Medicines for Malaria Venture team to fund pre- and clinical study of two new anti-malarial compounds.  It was nice to see awards also went to teams with smaller partners (three biotechs in US and Japan) and that about $500K will go to a project between Eisai, a Japanese drug company, and the Broad Institute, a research affiliate of MIT and Harvard.  The Broad has a substantial capability for identifying lead compounds unlike most academic institutions (Broad Therapeutics Platform) and is currently running about 50 screens including more than ten on global disease targets (Probe Pipeline).  I did not see in the GHIT announcement that projects will be funded for multiple years, but they should be.

About a year ago I reported on a new company in our local biotech community, Vaxxas, a start-up that is developing a nano-needle patch for vaccine delivery based on technology from an Australian researcher (“Vax Patch”).  Unfortunately, I found no news of note, and Merck remains the company’s only strategic partner.  My (free) advice is for Vaxxas to maintain its PR buzz with regular bits of news and to up its partnering effort.

Also last year (January), I reported on the take-over of the “non-profit pharmaceutical company” One World Health (OWH) by PATH, the Gates-backed global health product development program (PDP) (“Too Big to Flail”).  My rap against One World, and to a certain extent PATH, is that it had a large and expensive administration, spent too much on fund-raising, and had no clear path to commerce for its few products in development and no accountability to its backers (including me due to its tax-exempt status).  While OWH has a new website (OHW website) and a “A New Model of Drug Development” (really the standard PDP model in which commercialization [real use] is left to imagined company licensees), I did not see my concerns addressed.  On the plus side, I noted the recent announcement of practical project to develop an injectible form of an anti-viral drug for HIV prophylaxis with a potential commercial partner, Janssen (the pharma division of Johnson and Johnson) (OWH press release 1) and that it hired Ullrich Schwertschlag as CMO, an experienced drug developer and former colleague of mine at Wyeth (OWH press release 2).

Happy Thanksgiving, y’all.

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.

Bottleneckrophobia

Thanks to serious international efforts and multiple years of funding from foundations like the Bill and Melinda Gates Foundation and US and European governments, the pipeline of new drugs and drug combinations to treat the big three infectious diseases (HIV/AIDS, tuberculosis, and malaria) is starting to pump out products.  As pointed out by researchers at Policy Cures, a non-profit consulting group in Sidney, Australia, the good news is that there are 20 or so new drugs for diseases of the developing world that have been or are in the process of being approved by several regulatory authorities (Moran et al. 2011).  The less than good news is that the national regulatory authorities (NRAs) in many of the countries where the drugs are intended for use (such as in Africa, the authors’ focus) are not sufficiently staffed and trained to render rapid approvals.  In the past the NRAs have relied on the approval process of the “stringent” authorities of the world, e.g., the US FDA and the European Medicines Agency, but this route has resulted in drugs being approved but not tested in the countries in need or being withdrawn based on first world risk/benefit ratios.  While this bottleneck is clearly a problem for the several non-profit drug developers, e.g., Medicines for Malaria Venture and the Drugs for Neglected Diseases Initiative, it is a strong disincentive for most for-profit developers, excepting the few multinational pharmas with deep pockets and vision, like Sanofi and GlaxoSmithKline.  To my (naïve) way of thinking, a clear path to approval and registration of new drugs (and vaccines, devices, and diagnostics) in the countries of need is required (along with patient investment and vision) for the many mid-sized, and maybe even small, companies to risk a try at developing new, affordable drugs for the neglected diseases.

Harmonization and coordination of drug approval processes is not a new problem, of course, and there has been a substantial effort, focused mainly in the major market, and more recently, emerging market, countries.  As noted recently by PharmaManufacturing.com (MPC article), the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) and a working group of the US Pharmacopeia (USP), both which started 20 years ago, have achieved good progress on certain aspects of standardization like testing protocols and documentation, mostly in the past five years.  The challenge is large though; another group, the Pan American Network for Drug Regulatory Harmonization, has more than a dozen working groups including those on bioequivalence (to approve “follow-on” or generic drugs), counterfeiting, good clinical practices, good laboratory practices, good manufacturing practices, promotion, biotechnology products, and vaccines (PANDRH).   The MPC article also notes the cost of non-harmony is high; multiple regulatory filings and plant inspections can comprise tens of millions of dollars per product.

One approach to supplementing (or more politically problematic, supplanting) the country-by-country approval process would be an international approval agency.  A possible model for such an agency is the WHO’s Prequalification of Medicines Programme (PQP).  Begun in 2001, the program reviews medicines for treating HIV/AIDS, tuberculosis, malaria, and more recently for reproductive health for eligibility for purchase by international procurement agencies like UNICEF.  These purchases are made by the countries of need, are often subsidized by donors (governments and foundations), and run into billions of dollars per year (PQP Fact Sheet).  Although the PQP has approved 240 products, is low cost (free to applicants thanks to about $10 million per year given by UNITAID; see UNITAID Programs), and strengthens NRAs through a training program, it is slow (two-year average for approvals according to Moran et al.) and only evaluates generic drugs and new combinations and formulations of generics for which there are substantial data and sometimes stringent NRA approvals on the original product.  While the PQP’s approval of such generics is important in making needed treatments accessible and affordable, it would need substantial funding and political will to evolve into a novel drug registration agency.  The WHO also has a similar program to pre-approve vaccines from applicant manufacturers that is slightly different in that it relies on NRAs for initial approval but then requires the NRAs to meet a standard of competence (WHO vaccine program).

As is their wont, Moran et al. offer several alternatives to widen the bottleneck:

  • Include a representative of the endemic country NRA in the deliberations of stringent agency approval of a new neglected disease drug (NDD) [but who is the ultimately responsible party?];
  • Allow a NDD approved by a stringent agency to qualify for WHO prequalification status (this was done for generic HIV/AIDS drugs) [but still means that NDDs may not be reviewed with the appropriate criteria];
  • Use the “Article 58” process of the EU (in which an expert panel renders an “opinion” on the use of a drug outside the EU) but gie those drug developers a shorter path to EU market approval [as an incentive to developers of dual market drugs; but for ND-only drugs?];
  • Strengthen the WHO PQP with help from stringent NRAs or expert panels to allow it to recommend/almost approve new drugs [might work, see below]; and
  • Create regional regulatory agencies responsible for each of Africa’s main regions [sounds too bureaucratic and piecemeal to me].

Overlooked by Moran et al. is the deep expertise, experience, and possible motivation of the for-profit drug developers themselves.  After all, the major and mid-tier pharma companies spend billions of dollars conducting trials by themselves or through contract firms (CROs), more often in countries where costs are low but registration is not expected, and are willing to pay substantial “users’ fees” to the USFDA to make sure the agency does its job (about 60% of the FDA budget or $570 million in 2011 according to a Washington Post business blog, Klein blog).  While having such a financial dependency of a regulating agency on the regulated may not be a good idea, I think there is a concordance of interest between industry and the harmonization efforts of the ICH, USP, and others (like the Bio Supply Management Alliance I mentioned last week) on one hand and the WHO PQP and the NRAs of the rest of the world and given the right framework these groups may cooperate to build a better international registration system, one that provides a path and an incentive for the development and registration of NDDs.  I can see an upgrading of the PQP with regulatory expertise from stringent NRAs and industry to create an alternative path to country-by-country registration with the “qualified” products and manufacturers being eligible for purchase by “qualified” buyers, which would be any government or group able to commit to negotiated volumes and prices.  Another close-to-international registration program for NDDs could result from cooperation between the PANDRH mentioned above and the Pan American Health Organization’s Revolving Fund mentioned in my post, “More Bang for the Buck”.  Clearly, I need to do more research on this idea and get others’ input (policy wonks, speak up), but think it has merit.

BIO Bits

I am abbreviating this week’s post since I’ve been busy attending BIO’s International Convention.  This annual confab is held in Boston every third year and last fall I was fortunate to have my proposal for a panel session on “Accelerating Access to Pubic Sector Markets” accepted by the program reviewers.  Also fortunately, I was able to garner the participation of a crackerjack panel (Una Ryan, CEO, Diagnostics for All; Inder Singh, former Executive Vice President, Clinton Health Access Initiative and now CEO Transform Health; Eric Olson, Cystic Fibrosis Franchise Lead, Vertex; Michael Watson, VP Vaccination Policy and Advocacy, Sanofi Pasteur; Ellen Strahlman, Senior VP and Global Head, Neglected Tropical Diseases, GlaxoSmithKline) that provided expert and useful insight to the Monday session attendees, who numbered about 15.  So as a substitute for my usual rambling, here is a selection of interesting bits I gleaned from the biofest, starting with my panel.

Accelerating Access:  during the Q and A, Don Joseph, CEO of BIO Ventures for Global Health, asked the panelists what is needed to get companies involved in global health product development, and the “wish list” was:

-more information on country-specific disease burdens to better gauge demand and reduce uncertainty;

-more information on disease pathologies, mechanisms, and targets;

-global harmonization of trade rules and regulation;

-government intervention to minimize middleman markups that make drugs expensive; and

-SBIR set asides for global health product companies.

A Practical Guide to Global Health:  while PDPs are doing a good job of getting product candidates into human testing, they expect a “hand off” to big pharma but are doing little if anything to make it happen, resulting in a “last mile” problem, that is, products may not reach patients.  My naïve idea is that they need to do more business development before and during trials to identify partners.

Palm PCR:  of course everyone knows that PCR (polymerase chain reaction) technology is used to increase the number of copies of a DNA molecule in the first step in reading its sequence of bases and therefore making it possible to tell if a DNA sample is from a pollywog or a psychotic killer.  I knew PCR machines were getting smaller but my jaw dropped when I saw the Palm PCR at the exhibit hall booth of Ahram Biosystems of Korea which, as names implies, is a hand-held DNA amplifier (Palm PCR).  It is fast (30 minutes for 1000 bases), reasonably priced at $3000 to $6000, and come in bright colors.  Now we need a palm sequencer so that scientists in the field like epidemiologists (and CSI) can tell really fast what animal, plant, or bug they’ve sampled.

Sustainable Vaccine Business Solutions:  Sanofi is serious about vaccines for global health.  In addition to a pipeline of about 16 vaccines, half of which intended to meet developing world needs (e.g., the soon-to-launch dengue vaccine and a TB vax in collaboration with the Statens Serum Institute), the company has some type of partnership with ten or so regional manufacturers and so will be in position to make and distribute vaccines at the lowest cost.

Cancer Drug Access:  I have written about the recent shortages of mainstay cancer drugs in the US (“Drug Bust”, 9/29/11) and learned at this session that the rest-of-world (ROW) situation is much worse- shortages, poor quality, and high prices.  The sad news is that the problem is complicated by weak health care systems and the lack of government support for cancer care (e.g., the most used ROW cancer drug is morphine for palliative care).  The less sad news is that, due to the low labor costs, some patients can be treated and cured at a fraction of the US cost (e.g., $100 to cure a case of cervical cancer).  Overall, a tough problem with few advocates.

Innovative Financing for Global Heath R and D (or PRIs Revealed):  as acknowledged by one panel member, David Farnum, the PRI (program-related investment) officer of the Bill and Melinda Gates Foundation (BMGF), the financing presented was not really innovative, just new to the BMGF.  I had hoped to learn more about the BMGF’s PRI program, specifically the rationale behind the investment of $10 million in Liquidia, a company with a “nanotechnology” platform and no global health focus.  Unfortunately the concerns I wrote about in a post last year (“BMGF Ventures LLP”, 4/14/11) were confirmed.  David described the three-year-old, $400 million PRI fund as “experimental,” and it looked like an uncontrolled experiment to me.  To date investments had been made almost randomly with unspecified amounts given to start-ups like Liquidia (others were not named but David said “a couple more are in the pipeline”) and into investment funds that somehow, somewhere seem to do something in global health (specifics were lacking).  The good news is that the experiment has been judged a success and the BMGF is assigning $1 billion to PRIs; the bad news is that there is no application or submission process so it looks like the PRI group will operate like the rest of BMGF- giving big chunks of money to insiders without established investment criteria or performance expectations.  Neal Fowler, Liquidia’s CEO, gave a few details of their deal:  it started by a chance meeting, BMGF got a board observer seat (not voting like the rest of the company’s investors), and the BMGF has been a great partner, which I took to mean undemanding of progress on global health products.  Neal mentioned the company is working on applying their technology to a pneumo vaccine, but did not give any details.  The company website refers to completion of a Phase 1/2a trial (Liquidia Vaccines) but not to published results.

Top O’ the Hub with Samsung Biologics:  the company held a nice reception at this landmark restaurant which, at 50 stories up in the Pru building, has great views of Boston and surrounds.  I enjoyed the food and drink and a conversation with one of their BD people who declined to confirm a plan I had suggested in a recent post, to sell very low cost biological drugs to the developing world (“Discount Drugs”, 5/24/12).  My suggestion to acquire new and possibly cost-saving technologies from academics was better accepted, and I wished them well in becoming the Wal-Mart of biosimilars.

Another half day at BIO today (Thursday) and if I hear any earth-shaking news, I’ll write about it.

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.

A Long Strange Trip

A couple weeks ago, Ranbaxy Laboratories Ltd. of Gurgaon, India (Ranbaxy) reported that it had received marketing approval in India for an new anti-malaria drug, a combination of arterolane maleate and piperaquine phosphate (Fierce Biotech article and Economic Times article).  The announcement was notable because Ranbaxy is a fifty-year-old generic drug maker (and since 2008 a division of the Japanese pharma company, Daiichi Sankyo Co. Ltd.) and the new, unnamed drug was its, and maybe India’s, first novel pharmaceutical.  The story of the drug’s discovery and development a good example of how a company can take on the risk of developing low-margin products for under-served markets with planning, persistence, imaginative public-private deals, and luck.

Clearly malaria is a major and continuing global health problem with more than 3 billion people at risk of infection, 250 million new cases annually, 900,000 deaths (mostly children in Africa), and $12 billion per year in direct costs (Roll Back Malaria facts).  And new drugs are needed since the parasites causing the disease, protists of the Plasmodium genus, have become resistant to both the traditional and the newer “first line” drugs, which use derivatives of the natural compound, artemisinin, by themselves and in combination with traditional drugs (Medicines for Malaria Ventures resistance research).  For the past 22 years, the Medicines for Malaria Ventures, a donor-funded product development program (MMV) has been a key player in promoting new drugs and has an important role in the discovery of the Ranbaxy drug.

As was described in a 2002 article (WHO Bulletin), the discovery of the new drug’s active ingredient, arterolane, started when John Vennerstrom, a medicinal chemist at the University of Nebraska, and colleagues received a small $70K grant from the WHO Tropical Disease Research Program, a collaborator of the MMV.  The group succeeded in finding bioactive compounds, specifically derivatives of artemisinin with reactive oxygen groups, and was granted $1 million by MMV who brought in the Swiss pharmaceutical company, Hoffmann-La Roche, for its past malaria drug development expertise.  Two other academic groups participated; the Swiss Tropical Institute tested the compounds in mouse models, and a researcher at Monash University in Australia did pharmaco-kinetic studies.  As for the intellectual property, the University of Nebraska did the right thing and assigned the rights to the compounds and synthesis method to MMV without payment (WHO Bulletin summary).  According to a recent Business Standard article (Business Standard article), Roche left the party in 2003 giving its “development and marketing rights” back to MMV, and shortly thereafter MMV found a new partner, Ranbaxy.  A 2007 article quoted MMV’s clinical development director, “We wanted to go with a partner based in a disease endemic country [and] Ranbaxy was the best company we talked to” (LiveMint.com article).

But as in wont to happen in drug development, the candidate drug delivered less than outstanding results in human studies, both pharmaco-kinetic and efficacy, and MMV pulled its support in 2007 to focus on more promising candidates, writing off a $15 million investment (LiveMint.com article).  Undeterred, Ranbaxy decided to continue, but to defray the cost of the Phase III trials, it struck a deal with the Indian government’s Department of Science and Technology (DST).  The DST agreed to partially fund the project, and Ranbaxy agreed to supply the (maybe) drug for domestic public health needs at a price just 10% more than its cost of production.  And the DST would also get a 3% royalty on sales outside of India (Business Standard article).  I can only dream that the NIH could be this imaginative.  I couldn’t find any reasons given by Ranbaxy for continuing, perhaps just it was just faith, or the desire to do good, since apparently arterolane’s overly-reactive, “ozonide” structure is risky for a drug candidate, at least according to the medicinal chemist and blogger, Derek Lowe.  In 2009, he noted that the drug had one of the “funkier” structures to make it to Phase III, but that “I have to congratulate the people who had the imagination to pursue these things.” (In the Pipeline).

So after ten plus years and about $30 million of its own and others money (my estimate), Ranbaxy has a novel anti-malaria drug that is potent (requires three doses over three days vs. four tablets taken twice a day for three days for the current best-in-class combo drug, Novartis’s Coartum) and is cheap to make allowing it to sell at an affordable price (Ranbaxy said one-third of Coartum’s already-discounted price).  And expected sales are decent; in India the market is about $90 million annually and growing at 20%, and the international market is between $400 and $500 million (Sharekahn.com).  And MMV has come came back on board and is testing the ability of the drug to avoid Plasmodium resistance (MMV research).  Kudos all around, to MMV for funding the work from discovery through Phase II and for partnering with Ranbaxy, to Ranbaxy and Daiichi Sankyo for altering course from making generics to pursuing a novel drug program and for striking a deal with the DST, and to the DST for doing a deal.

But the story hasn’t had its happy ending yet.

Getting affordable, effective drugs to the people who need them is a major challenge in global health, and a problem with which the international anti-malaria community is struggling, especially in Africa where 90% of the infections occur and almost all the deaths.  Because of the availability through local shops of really cheap, but useless or even counterfeit, drugs, any alternative drug needs to be equally available and nearly as cheap.  As I noted in a previous post (“AMFm: Not Your Ordinary Radio,” 6/10/10), the Global Fund to Fight AIDS, Tuberculosis, and Malaria launched the Affordable Medicines Facility-malaria in 2009 with about $225 million of donor (but not US) money as a way to subsidize and therefore lower the market price of retail, first line anti-malarials (AMFm).  So Ranbaxy needs to get approval by the WHO to participate in the AMFm and sell its drug in the largest market and that is apparently underway (Business Standard article).  Meanwhile, the AMFm may turn out not to be the best distribution channel.  Although the first review of the program, albeit by its backers, noted that its goals were being met, primarily bringing down retail prices (Last Mile Meeting 2010), there are indications of problems.  An organization outside the Global Fund sphere called Africa Fighting Malaria (AFM) reported some findings in a policy paper recently including:

-over-purchasing of the first line drugs by a few countries (four of the 12 eligible countries accounted for 70% of drugs’ production);

-diversion of AMFm-subsidized drugs to non-purchasing countries;

-selling of purchased drugs above the agreed-to ceiling prices; and

-a shortage of drugs in public clinics and for the US government’s President’s Malaria Initiative because most of the drugs are being bought by distributors for the private market (AFM paper and American Enterprise Institute article).

Bill Brieger, a Johns Hopkins professor of public health, noted drug availability problems in his blog posting of May 2011 (Malaria Free Future blog).  So will the AMFm sort out its problems, will Ranbaxy get its approval, and will people with malaria get a better, cheaper drug?  To be continued.

 

Verify Then Trust

One concept for accelerating the development of drugs for neglected diseases (i.e., those whose treatment is not reimbursed by insurance companies) is application of the “open source” innovation model in which distributed groups of researchers, mostly at academic laboratories, share tasks and pool information to advance drug discovery and development.  I have written about the utility of this approach, but not favorably.  In my post, “Open source Sesame” (3/11/11), I commented on a draft study, “Open Source for Neglected Diseases:  Magic Bullet or Mirage?” put out by the Center for Global Health R and D Policy Assessment (the final report is at CGHRDPA report) and noted two fundamental limitations of the open source approach as applied to drug development.  It is really only applicable to the discovery of drug candidates, and therefore unlikely to have much of an effect on  the overall costs, and the early stages need to  informed and guided by continuous input from those responsible for the later stages, that is, a positive feed back loop as is the case in companies who are continuously pruning their R and D efforts to get to a product.

As it turns out I had missed a third, possibly fatal, flaw in the utilization of academic labs for distributed, or possibly any, drug discovery, that is, the high rate of results irreproducibility.  This topic took on a personal angle when I caught up recently with a friend of mine who is CEO of a company based on academic research and who is now the process of selling the company’s assets because duplicating (proving) the original research turned out to be beyond of scope of his start-up’s investors.  Upon further research, I found that, in September, Asher Mullard wrote a Nature Drug Discovery Reviews article on this topic and his analysis is an eye-opener (Nature Reviews).  His starting point is a report by the major pharma company, Bayer, which found that in-house experimental data do not match published results in 65% of target validation projects, leading to project discontinuation, and that the confirmation of results by another academic group did not improve data reliability.  He also cites two academic studies of gene expression and proteomics data that found almost the vast majority of results were not reproducible.  As for the causes, Mr. Mullard references a 2005 essay in which the author, John Ioannidis, noted the causes include “investigator prejudice, incorrect statistical methods, competition in hot fields and publishing bias, whereby journals are more likely to publish positive and novel findings than negative or incremental results” (PLOS Medicine article), but also that academic labs do not work to achieve the same standards as industrial labs, particularly in incrementally verifying materials and results.  As for the professional investor view of the problem (after all the VCs are the ones we expect to take risks and go where pharma companies fear to thread [but not neglected diseases, yet]), Mr. Mullard, as well as my friend, refer to a post from March of this year by Bruce Booth of Atlas Ventures (Booth Blog).  One of his points is:  “The unspoken rule is that at least 50% of the studies published even in top tier academic journals – Science, Nature, Cell, PNAS, etc. – can’t be repeated with the same conclusions by an industrial lab.”  Troubling to say the least.

Beyond being troubling, why this is important, after all drug development is highly risky and even the biggest and the best companies fail at it (see Fierce Biotech article on Phase III failures, Fierce Biotech article)?  Funding  for neglected disease drug discovery and development, while growing over the past ten years, is still inadequate and needs to be used efficiently.  Since the leaders in the field, the product development programs like Medicines for Malaria Ventures (MMV) and the Drugs for Neglected Disease Initiative (DNDi), rely heavily on academic advisors and research, they need to adopt industrial standards and methods for data verification.  I’m sure this is not on their “to-do” lists but should be.