Personalized Medicine to the Rescue

The story of pharmacogenomics has reached the mass media, a.k.a. the Wall Street Journal, as a means of stemming the tide of failed drug candidates beleaguering the pharma industry. The article cites drugs from Novartis AG, NitroMed, and Clinical Data that have saved drugs that had, or would have, failed to make it to market by targeting patient sub-groups based on genotype.

Of significance in the article is stating that the pharmaceutical blockbuster model is dead and that personalized medicine may represent the new paradigm. There are in fact upsides to the smaller markets that personalized medicines command, i.e. high switching costs. With a "one-size-fits-all" drug a patient can move from one medication to another with just a trip to the pharmacy, but when using a drug is customized to a patient’s genotype, switching to a drug that is known to be less effective will be a non-starter.

One local Colorado play that illustrates the resurrection of a "failed" drug is the in-licensing of bucindolol by ARCA Discovery. Although an earlier Phase III clinical trial of the drug was terminated due to lack of efficacy, evidence has shown that certain patient sub-groups that exhibit specific genetic polymorphisms can benefit from the use of the drug.

Although the NIH Roadmap Initiatives that promoted personalized medicine and biomarker approaches four years ago weren’t mentioned in the article, the cause has been taken up by the pharmas as a new way to fill those emptying drug pipelines.

Killer Semantic Apps

Is coming up with a definitive application for demonstrating the utility of semantic analysis really that difficult? TextWise, a software development company in Rochester, New York, apparently thinks a good idea for this technology is worth at least the $1 million they are offering the winner of their SemanticHacker $1M Innovators Challenge.

The rules of this contest require the contestant to use, or propose to use, the SemanticHacker API, based on TextWise's Semantic Signatures^® technology, to develop a software application for a specific industry vertical. Although it is up to the contestant to propose a vertical, TextWise suggests industries such as "healthcare or pharmaceuticals might be good places to start." Wonder who tipped them off?

As explained in TechCrunch, Semantic Signatures^® uses natural-language processing to extract relevant terms from text then applies semantic analysis to automatically categorize Web pages. Not a bad idea, but the technology can be a bit flaky. Semantic Signatures^® used Wikipedia as a reference; connecting the concepts extracted from the text and matching them to Wikipedia articles.

One of the cornerstones of the W3C specification for the Semantic Web is its use of Web Ontology Language (OWL), although OWL only specifies the format of the ontologies there is the assumption that human domain experts will be required to accurately develop an ontology. TextWise claims that ontologies developed in this way "do not align with customer needs and…rapidly become obsolete." Perhaps, but without some agreement on the ontology all you have is a folksonomy, which reduces its value in collaborative efforts.

The Holy Grail that drives the concept of semantic analysis is the ability for the software to do "connecting the dots" process that is normally done by humans. We humans can juggle a few thousand "dot" in our heads but connecting one to another, or maybe some complex combination of five to another twelve, gives most of us a headache. And when you start thinking about connecting a million or more dots, well, time to start thinking about a simpler project, like brain surgery.

Shifting Pharma Business Model

Marc-André Gagnon's recent article in Genetic Engineering News is an observation of a trend in the big Pharma business model, a trend that he feels particularly disappointed with. That trend is one in which big Pharma does less drug research and development and more marketing. Although Gagnon is a bit peeved with this, it is nevertheless inevitable and irreversible.

In a talk two years ago, Steven Burrill went so far as to predict that the big pharma R&D labs of not too distant future would be empty while the marketing department would be booming. The economic reality of rising risks and corresponding costs of developing new drugs along with the shrinking size of markets due to segmentation of diseases has left big pharma without a clear future. One thing is clear: pouring ever increasing amounts into internal R&D is not yielding the returns they used to.

A new long term business model may indeed be one in which smaller, more agile biotechs perform the early stage drug development, out-licensing to larger pharmas once success has been shown. Large pharmas could then leverage their brands, sales and marketing and distribution systems to commercialize these drugs. This is in fact what Gagnon is observing; R&D budgets are shrinking relative to sales and marketing.

The driver behind this trend is the investment community; what business model can big pharma adopt to continue the returns they have achieved in the past? The Dow Jones US Pharmaceutical and Biotech Index continues to drop as the industry searches for a model. Extending the life and markets of existing drugs through promotion and minor modification may offer an interim solution until a more sustainable solution is reached.

But assuming that big pharma will continue to innovate scientifically simply because they have been successful with it in the past or that it has been a compelling marketing message is steering toward an economic downfall. The innovation must be within the business strategy; to capitalize on the current and future strengths of the industry.

Investing in Theranostics

Making a strong case for the commercial development of personalized medicines, Lisa Haile, JD, PhD calls for greater investment on the part of venture capitalists and pharmaceuticals in a recent article in Genetic Engineering News. Theranostics is the term coined for combining diagnostics and therapeutics; an essential part of delivering on the personalized medicine promise.

Not only will theranostics reduce the risks of developing drugs, Dr. Haile states, but lower the costs of development as well. Yet as compelling as that sounds, she writes that the number of commercialized theranostics products today is unacceptably low and lays the blame at the feet of the VCs and pharmas.

Personalized medicine is no doubt a paradigm shift from the "old" blockbuster pharma model, a model that pharma is loathe to abandon. More than a paradigm shift, this may in fact be a technology disruptive to the industry. As in the case of many disruptive technologies, they do not fit nicely into the industry's business models and as a result are usually passed over for technologies that provide the promise of blockbuster status.

I don't think all VCs are oblivious to the promise of theranostics however. Steven Burrill introduced me to the term two years ago in a talk where he was singing its praises. Atlas Venture, Boulder Ventures, Skyline Ventures and InterWest Partners have backed a start up pharmacogenomic play called Arca Discovery to develop cardiac theranostics. As is often the case with a disruptive technology, it requires an entrepreneurial effort to make the initial forays into commercialization.

Moving Forward with Personalized Medicine

A recent article in Genetic Engineering News highlights the progress Personalized Medicine is making in the healthcare environment and some obstacles that still must be overcome. Although the FDA and health insurance companies are beginning to open up to the possibilities of personalized medicine, this is far from being a common medical practice.

The one shining success in PM is the ability to distinguish between different types of breast cancer based on the expression of the HER2 gene. The results of this test indicate which therapy will provide the best treatment for the patient. One reason for this success has been an absolute convergence between diagnostic testing, devices, drugs and information.

The realization that the current model for drug development will not yield profits when applied to the smaller populations served by PM therapies is beginning to sink in. Yet no viable alternative business model for pharmas exists. There is the thought that PM is still in its infancy, that the blockbuster model still has a few more years left in it. Pharma is trying out some innovative new business models but no clear success has been achieved.

There are also regulatory hurdles to overcome. Very few FDA guidelines for clinical trials of PM therapies exist. PM is also going to require some very highly integrated information systems, combining the whole of the biomedical knowledge base with the patient's own electronic record.

Consensus is that PM will be the norm by 2020 if all stakeholders; regulators, policy makers, and private industry can work together on it. The benefits are compelling but the obstacles daunting.

Pfizer Mending Fences

When drugs fail late in the development process it's R&D that usually gets the blame, but with the massive $2.8 billion write-off on Exubera by Pfizer, the ball falls squarely in marketing's court. Producing an insulin delivery system that doesn't require injection does sound promising, but the disadvantages were more than the market could bear. Exubera requires the use of an unwieldy inhaler to deliver the drug and costs around twice the amount of injectible insulin. Not to mention the unknown long term safety concerns.

Sales this year were an unimpressive $12 million, a long way from the $2 billion a year Pfizer predicted in five years. This was in part due to the reluctance doctors had in prescribing the drug due to the unknown long term effects of insulin residue on the lungs.

On Monday Pfizer announced that they would partner with Sermo, a social networking/community Web site for physicians. This could conceivably provide Pfizer with some advanced knowledge of what physicians will or will not prescribe. Or, more likely, they will be able to provide some influence into the medical community. Any overt attempts at influence will surely be met with some skepticism on the physicians' part. Better watch for those full disclosures.

The two events seem oddly coincident. Pfizer is taking a considerable risk by sponsoring the Web site. By most standards, social networking sites are not strictly censored, allowing members to write their thoughts with impunity. Although Sermo does check to make sure that all members are indeed MDs or DOs, the site does not require members to identify themselves by their real names. This could bring up legal concerns if misleading or inaccurate information is posted. But given Pfizer's unfortunate experience with Exubera they may be willing to take on some risk in order to try something new.

Data Glut in Research

Chemical & Engineering News placed information management in pharmaceutical R&D on their cover for the October 1 issue. In addition to pointing out some of the information ills that plague the industry, C&EN has added a blurb on the "Internet Orphan" Semantic Web. Although short on concrete examples of just what SW can do, the article points out that SW technologies could replace data-mining as a way to derive knowledge from your data.

So what about this "Internet Orphan" label? Apparently since SW technology has been around for several years and no one has really picked it up it has earned the name. Life sciences with their exploding stores of data, and thinning drug pipelines, has a real need for technologies that can wring more knowledge from the databases. Coupled with the fact that biology is a science, and is therefore smaller and more quantifiable than the Web as a whole, applying the structure of SW to the biological knowledge domain makes much better sense than applying it to the entire Web.

And least I forget the hype; SW is being compared to the early days of the Web. "What is happening now on the Semantic Web is similar to what was going on in the five years leading up to that explosion [of 1995 that kicked off the Web]," claims John Wilbanks, executive director of Science Commons.

Systems Biology Overview

In the cover story for the September issue of Bio-IT World John Russell has written on the current state of Systems Biology; Systems Biology's Awkward Adolescence. As the title implies, systems biology may not be fully cooked. Russell is a diehard SB advocate which causes him to ponder the slow rate of adoption of SB in the life-science industry. He has rounded up the usual cast of SB players to comment on current state of SB and its obstacles to adoption.

Consensus seems to point to the lack of any big wins for SB in pharma; although there are some successes they are primarily based on SB's ability to pick potential failures rather than predict winners. Gosh, sounds kind of like a disruptive technology doesn't it? Early versions are often low quality but they usually have some new market niche that sustains them. Maybe this is what Russell means by "awkward adolescence?"

So what is the new market niche that will lift SB? Pharmacogenomics, toxicity, pharmacodynamics? SB is gaining some ground in these and in other areas, it is not clear that it is indispensable for those areas. What will render SB indispensable is a healthy return on investment, and that is not yet proven.

A few big pharmas, Pfizer and Lilly to name two, have invested in internal SB initiatives. On the other hand, some early adopting pharmas have curtailed their internal initiatives; either to outsource them or take a different approach. But at least one smaller pharma, Merrimack Pharmaceuticals, is taking an SB centered approach to developing their own drugs. Perhaps dismayed by the lack of a market for SB tools, or the realization that there is greater return in developing the drugs, Merrimack feels that applying SB technology to the development of in-licensed compounds is a more viable business model.

Adoption of SB in big pharma may suffer from those factors that typically prevent adoption of disruptive technologies; entrenched systems that are threatened by the new technology. As Clayton Christensen has observed, the only way disruptive technologies can be nurtured by a large corporation is by removing the development group from the mainstream organization. Hence Lilly's establishment of their SB group in Singapore.

An alternative method for developing a disruptive technology by large corporations is to partner with independent companies, as may be the case with Merrimack. Although Merrimack does not disclose who their investors are, it would make sense that a large pharma would back them in order to gauge the effectiveness of SB. If and when Merrimack does prove to be successful, the large pharma would have access not only to their drug pipeline but to their development platform.

Having access to an SB drug development methodology does not mean ready adoption however. In fact SB may not achieve optimum value unless integrated throughout the drug development process, a daunting objective for a large pharma. This could indicate yet another case for outsourcing more drug development to smaller companies with large pharma in-licensing the results.

Thalidomide Pharmion

At the same time Johnson & Johnson is developing new pricing strategies for their multiple myeloma drug, Velcade, new drugs showing efficacy against MM are coming to market. Pharmion, a local Boulder pharmaceutical, is moving toward FDA approval with Thalidomide, a compound that has been around for many years but whose therapeutic properties in the treatment of cancer have only recently been proven.

Given the relatively low efficacy of oncological drugs, Patrick Mahaffy, President and CEO of Pharmion, questioned the ability of J&J to make their pay-for-performance model profitable. If Velcade were simply prescribed to all MM patients across the board, Mahaffy asserted, charging $49,000 per successful treatment would not be enough to cover the costs of those treatments that were not beneficial. The only way it could work would be to screen for those patients most likely to benefit.

Welcome to personalized medicine! There does seem to be this idea within the biomedical community that prescreening patients is somehow invalid. Screening for relatively healthy patients that would have a high success rate regardless of treatment does tend to make the drug look more efficacious. But the ability to take other phenotypic characteristics into account in the screening process is of value, especially in pay-for-performance pricing contracts. Patients that are on the margin for benefit will be in the greatest risk here; the drug companies won't want them treated if their chance of benefiting from the drug is low.

The answer, according to Mahaffy, is to charge less for the drug treatment and abandon the pay-for-performance model. We'll be interested to see how Thalidomide Pharmion competes against Velcade in the UK market once its approved.

Money Back Guarantee

Well Nordstrom does it, so why not Johnson & Johnson? If a pharmaceutical company expects a patient, or the patient's healthcare payer, to pony up some $48,000 for a cancer drug shouldn't they have assurance that the drug will provide some benefit?

The British National Health Service, the healthcare provider/payer in the U.K., determines which drug treatments they will reimburse. The NHS had been struggling to justify approving the reimbursement of the drug, Velcade, because of its high price. Then the manufacturer, Janssen-Cilag/Johnson & Johnson, approached the NHS with its novel pricing experiment: pay for the drug only if it does its job.

Although the drug development/approval process is intended to reduce the risk and prove the efficacy of a new drug, in reality not all patients will benefit from a particular drug. Whether this is due to genetics of the patient, disease sub-type, co-morbidity or any number of factors is not usually well understood. Despite this knowledge, the pharmaceutical manufacturers still charge all patients the same; the ones that improve as well as those that do not.

With the new pricing model, however, the risk is shared between the payer and the drug manufacturer: the payer only pays when the drug works. Velcade is ideal drug for this model; its efficacy is easily monitored, proven and is known fairly soon after the treatment has begun.

Is this a new paradigm that will soon be sweeping through healthcare? Pay for performance is attractive to consumers but performance is difficult to measure in many cases. Even the case of Velcade is up for debate with Janssen-Cilag calling a tumor reduction of 25% proof of efficacy and the NHS requiring a 50% reduction.

This is certainly an interesting trend and one which could change the pharmaceutical industry; satisfying the FDA is no longer sufficient for drug success, it must benefit the individual patient as well.

Price Pressure on Drugs

With patents giving drug companies a virtual monopoly on a drug treatment and peoples' lives on the line, what, if anything could put pressure on the companies to cap their drugs' prices? Shareholders are pressuring pharmas for higher profits while the cost of developing drugs continues to soar as does pressures from the government for safety. Isn't it only reasonable that a pharmas charge as much as possible for the few drugs that eventually do make it through to the market?

In a story featured in the WSJ last March, Dr. Steven Harr, an analyst at Morgan Stanley, says "no." Although drug companies may not be responsive to the complaints of a single patients, those patients have political representatives, representatives that can make life very difficult for drug companies if they choose to regulate drug prices.

Although the government has yet to step in to set price controls, there is some thought that the Democrat controlled Congress may do just that if prices grow too high. Prices for cancer drugs are increasing rapidly with five costing over $40,000 for a course of treatment. Cancer drugs accounted for 13% of the country's drug spending in 2002, in 2007 it will be 22%.

The reality of the situation, as Dr. Harr puts it is: the "market structure effectively provides no mechanism for price control in oncology other than the companies' goodwill and tolerance for adverse publicity." But this is the kind of incentive that companies need to undertake the risk of developing new drugs, right?

Although financial incentives of this magnitude certainly provide motivation for undertaking such risky ventures, they also lead to fairly inefficient and unproductive drug development processes, processes that won't change unless there are financial reasons. This is precisely what has been done in so many other industries; even though the complexity of the product has increased, costs have been kept under control and so too have prices to the consumer. If the computer and telecommunications industries can do, so can the pharmas.

Risk Mitigation

As a serial entrepreneur you may think Dr. Michael Bristow has a high tolerance for risk, but in a talk yesterday morning at the downtown Denver offices of Holland & Hart, Dr. Bristow stressed the importance of mitigating risk in the drug development process. Dr. Bristow was a founder and the Chief Science and Medical Officer of Myogen, a biopharmaceutical company focused on the discovery, development and commercialization of small molecule therapeutics for the treatment of cardiovascular disorders. In November 2006, Myogen was sold to Gilead Sciences for $2.5 billion.

Although a whopping success by most counts, Myogen did not achieve this lofty value without a few pitfalls. Development of enoximone, their first drug to be brought to clinical trials, was halted in Phase III after burning through $100 million on development due to its failure to demonstrate significant benefit. Ironically, Myogen's stock began to climb after this, the result of investor confidence in the other drugs in Myogen's pipeline.

When asked what could have been done to have better predicted the outcome of the enoximone trial, Dr. Bristow indicated that it was known that a certain patient sub-group characterized by a phenotype responded better to the drug than the population as a whole. He felt that by selecting for patients with this phenotype for inclusion in the clinical trial would have greatly improved the efficacy of the drug to the point where it would have received approval. But either because recruiting a sufficiently large patient sub-group with this phenotype would have taken too long or the FDA had not yet accepted a personalized approach to drug therapy, that approach was scrapped and the more risky strategy of recruiting patient's from the broader population was adopted.

Dr. Bristow has once again taken a risk on risk mitigation by starting up a new company; ARCA Discovery that is developing genetically-targeted therapies for cardiovascular disease. The FDA and the pharmaceutical industry is warming to the idea of personalized medicine as a way of improving patient health and reducing the costs of drug development.

Aversion to Adverse Events

The Wall Street Journal reported on Saturday on a report commissioned by the FDA regarding their development of a next generation Adverse Event Reporting System for the tracking of dangerous side effects associated with drugs on the market. The report was prepared by the Breckenridge Institute and delivered to the FDA in November 2006 but has not been released to the public. Although we don't know what it says specifically, "highly critical" is probably putting it lightly. No wonder the FDA is keeping it under wraps.

But reading between the lines, is the FDA really making major managerial mistakes here? The report contends that the FDA could have purchased an off-the-shelf software product in 2004 and have it up and running by 2005 for around $4.5 million. This would have only covered drugs and not medical devices which are also regulated by the agency. The FDA would then have to come up with another system, perhaps a custom built one, to cover medical devices and then integrate it with the off-the-shelf system.

If you put a conservative safety factor of two to the off-the-shelf system, double that for the medical device system and then throw in another $10 million to integrate them we're talking $40 million not including maintenance, support and training. The Breckenridge report states that the off-the-shelf software was a "one-time cost"? Wasn't the theory of "one-time cost" software thrown out with OS/2?

The FDA is making due with an existing "dysfunctional" system; their original AERS which results in a loss of 45 minutes per day per FDA employee because of inefficiencies and snags in the system. Presumably better software would solve that problem but it is a difficult call. Ideally the entire process could be automated resulting in the loss of the FDA employee, which is highly unlikely.

What the FDA needs now is a study to analyze why they gave the contract to the Breckenridge Institute in the first place.