functional overview of the biotechnology industry
DESCRIPTION
Comprehensive introductory presentation on the business of biotechnology describing legal, commercial, scientific, and regulatory foundations; used in biotech MBA programs.TRANSCRIPT
Functional Overview of the Biotechnology IndustryFunctional Overview of the Biotechnology Industry
• To accompany Building Biotechnology ISBN 9780973467666
• Relevant pages are cited within presentation
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For more information:Yali Friedman, Ph.D.
Functional Overview ofFunctional Overview ofthe Biotechnology the Biotechnology
IndustryIndustry
www.BuildingBiotechnology.comPresentation to accompany
BUILDING BIOTECHNOLOGY
ObjectivesObjectivesObjectivesObjectives
• Appreciate the diversity of biotechnology applications and the fundamentals of biotechnology
• Distinguish biotechnology from ‘traditional’ pharmaceuticals
• Understand the value proposition of biotechnology companies
• Appreciate why drugs are the most common application of biotechnology
• Appreciate the interplay of legal, regulatory, and commercial factors
• Appreciate the diversity of biotechnology applications and the fundamentals of biotechnology
• Distinguish biotechnology from ‘traditional’ pharmaceuticals
• Understand the value proposition of biotechnology companies
• Appreciate why drugs are the most common application of biotechnology
• Appreciate the interplay of legal, regulatory, and commercial factors
The Pillars of BiotechnologyThe Pillars of BiotechnologyThe Pillars of BiotechnologyThe Pillars of Biotechnology
What do Biotechnology Companies do?What do Biotechnology Companies do?What do Biotechnology Companies do?What do Biotechnology Companies do?
Use molecular biology to develop useful products and services
REDDrugs, diagnostic tests
• Large profit margins• FDA mandates that all drugs must be proven safe and effective prior
to marketing• History of successful regulation
GREENEnhanced crops, molecular farming (non-drug)
• No regulatory legacy• Development costs similar to drugs, profits are not
WHITEIndustrial processes
• Energy production, waste degradation, environmental remediation• Unresolved safety concerns, and issues in scalability
Use molecular biology to develop useful products and services
REDDrugs, diagnostic tests
• Large profit margins• FDA mandates that all drugs must be proven safe and effective prior
to marketing• History of successful regulation
GREENEnhanced crops, molecular farming (non-drug)
• No regulatory legacy• Development costs similar to drugs, profits are not
WHITEIndustrial processes
• Energy production, waste degradation, environmental remediation• Unresolved safety concerns, and issues in scalability
BUILDING BIOTECHNOLOGY Chp 6
Ecology Ecology Physiology Physiology Molecular Biology Molecular BiologyEcology Ecology Physiology Physiology Molecular Biology Molecular Biology
Source: EPA
Ecology Ecology PhysiologyPhysiology Molecular Biology Molecular BiologyEcology Ecology PhysiologyPhysiology Molecular Biology Molecular Biology
NIST
Ecology Ecology PhysiologyPhysiology Molecular Biology Molecular BiologyEcology Ecology PhysiologyPhysiology Molecular Biology Molecular Biology
Ecology Ecology Physiology Physiology Molecular BiologyMolecular BiologyEcology Ecology Physiology Physiology Molecular BiologyMolecular Biology
What is Molecular Biology?What is Molecular Biology?What is Molecular Biology?What is Molecular Biology?
Molecular biology is the study of biological processes at their most fundamental levelMolecular biology is the study of biological processes at their most fundamental level
Ecology• Species and groups of animals, plants, and microbes
Physiology, botany, microbiology (virology)• The structures that compose animals, plants, and microbes• How these structures interact with each other and the environment
• Eg. Pharmacology, neurology, immunology
Molecular biology• The chemical and physical interactions within individual cells• The processes that underlie physiology, botany, etc.
Eg. What distinguishes heart from hair cells?How is food processed into energy and physiological
structures?How do signals from the environment cause biological
responses?
Chemistry & Physics• The processes that form the basis for molecular biology
Ecology• Species and groups of animals, plants, and microbes
Physiology, botany, microbiology (virology)• The structures that compose animals, plants, and microbes• How these structures interact with each other and the environment
• Eg. Pharmacology, neurology, immunology
Molecular biology• The chemical and physical interactions within individual cells• The processes that underlie physiology, botany, etc.
Eg. What distinguishes heart from hair cells?How is food processed into energy and physiological
structures?How do signals from the environment cause biological
responses?
Chemistry & Physics• The processes that form the basis for molecular biology
Groups of bodies
Parts of bodies
• Tissues
• Organs
• Individual cells
Parts of cells
• Large and
small molecules
Parts of molecules
Parts of atoms
Groups of bodies
Parts of bodies
• Tissues
• Organs
• Individual cells
Parts of cells
• Large and
small molecules
Parts of molecules
Parts of atoms
BUILDING BIOTECHNOLOGY Chp 3
Why is Biotechnology Usually Why is Biotechnology Usually Associated with Drugs?Associated with Drugs?
Why is Biotechnology Usually Why is Biotechnology Usually Associated with Drugs?Associated with Drugs?
Emphasis is on drugs, because:
Drugs are less expensive than hospital treatments• Save healthcare payers time and money
Drugs are the only effective treatment for some conditions• Fill unmet market needs
Post R&D, drug production costs can be very low• High markup• Years of patent-protected sales
Interrupting biological processes is easier than modifying or creating them
Cost to develop non-drugs may be similar to drugs, but profits are smaller
Emphasis is on drugs, because:
Drugs are less expensive than hospital treatments• Save healthcare payers time and money
Drugs are the only effective treatment for some conditions• Fill unmet market needs
Post R&D, drug production costs can be very low• High markup• Years of patent-protected sales
Interrupting biological processes is easier than modifying or creating them
Cost to develop non-drugs may be similar to drugs, but profits are smaller
Pharmaceutical vs. Biotech DrugsPharmaceutical vs. Biotech DrugsPharmaceutical vs. Biotech DrugsPharmaceutical vs. Biotech Drugs
Synthetic (Pharmaceutical) Drugs• Chemically synthesized• Typically small and water soluble• Can withstand stomach acids and enter
bloodstream
Biologic (Biotechnology) Drugs• Biologically synthesized• Typically large proteins, not necessarily
water soluble• Cannot withstand stomach acids• Cannot cross into bloodstream
Synthetic (Pharmaceutical) Drugs• Chemically synthesized• Typically small and water soluble• Can withstand stomach acids and enter
bloodstream
Biologic (Biotechnology) Drugs• Biologically synthesized• Typically large proteins, not necessarily
water soluble• Cannot withstand stomach acids• Cannot cross into bloodstream
Aspirin – 21 atoms
Epogen – 1297 atoms
BUILDING BIOTECHNOLOGY pp. 36-37
Drug DeliveryDrug DeliveryDrug DeliveryDrug Delivery
ImplantImplant LiposomeLiposome PatchPatch DosedDosed
Alza
BUILDING BIOTECHNOLOGY pp. 64-65
Delivering BiologicsDelivering BiologicsDelivering BiologicsDelivering Biologics
Challenge• Must invest in developing effective delivery methods• Patient compliance
Opportunity• Possible to increase efficacy, safety• Patches and favorable dosage regimens can improve compliance
Selling twice as much drug by doubling adoption and compliance is similar to selling two drugs, without the cost of
developing two drugs
Challenge• Must invest in developing effective delivery methods• Patient compliance
Opportunity• Possible to increase efficacy, safety• Patches and favorable dosage regimens can improve compliance
Selling twice as much drug by doubling adoption and compliance is similar to selling two drugs, without the cost of
developing two drugs
BUILDING BIOTECHNOLOGY pp. 64-65
Taxol: A Traditional PharmaceuticalTaxol: A Traditional PharmaceuticalTaxol: A Traditional PharmaceuticalTaxol: A Traditional Pharmaceutical
Anti-cancer drug• In 1980 it was discovered that taxol interferes with structural proteins
to prevent cell division
Production issues• Only natural source was slow-growing, endangered Pacific Yew• Six 100-year old trees required to treat just one patient
Synthetic synthesis• Three methods have been developed, none are economically efficient
Semi-synthetic synthesis• Taxol precursors are extracted from yew needles and converted to taxol
Anti-cancer drug• In 1980 it was discovered that taxol interferes with structural proteins
to prevent cell division
Production issues• Only natural source was slow-growing, endangered Pacific Yew• Six 100-year old trees required to treat just one patient
Synthetic synthesis• Three methods have been developed, none are economically efficient
Semi-synthetic synthesis• Taxol precursors are extracted from yew needles and converted to taxol
Biotechnology has Revolutionized Biotechnology has Revolutionized Drug DevelopmentDrug Development
Biotechnology has Revolutionized Biotechnology has Revolutionized Drug DevelopmentDrug Development
Injected insulin directly supplements an insufficiency in diabetics
Prior to 1982, insulin was primarily extracted from pig pancreas• 50 pigs sacrificed to produce sufficient insulin for one person for one year• Risk of disease transmission, shortages, immune system rejection
Use gene splicing to insert human insulin gene into bacteria• Plentiful supply• No risk of animal disease transmission• Reduced risk of immune system rejection
Traditional pharmaceutical methods involve chemical synthesis and biological extracts and pharmaceuticals are often indirect effectors
Biotechnology uses biological synthesis and biologics are often direct effectors
Injected insulin directly supplements an insufficiency in diabetics
Prior to 1982, insulin was primarily extracted from pig pancreas• 50 pigs sacrificed to produce sufficient insulin for one person for one year• Risk of disease transmission, shortages, immune system rejection
Use gene splicing to insert human insulin gene into bacteria• Plentiful supply• No risk of animal disease transmission• Reduced risk of immune system rejection
Traditional pharmaceutical methods involve chemical synthesis and biological extracts and pharmaceuticals are often indirect effectors
Biotechnology uses biological synthesis and biologics are often direct effectors
BUILDING BIOTECHNOLOGY pp. 10-11, 36
The Pillars of BiotechnologyThe Pillars of Biotechnology
The Path From Science to DrugsThe Path From Science to DrugsThe Path From Science to DrugsThe Path From Science to Drugs
BUILDING BIOTECHNOLOGY Chp 4
Genentech is a Prototype for Genentech is a Prototype for Biotechnology Business DevelopmentBiotechnology Business Development
Genentech is a Prototype for Genentech is a Prototype for Biotechnology Business DevelopmentBiotechnology Business Development
• Initially focused on applications of one innovative technology
• The only biotech company that has never traded below its IPO price
• Profitable for all but two of its years as a public corporation
• Successfully diversified beyond its original commercial focus
• Initially focused on applications of one innovative technology
• The only biotech company that has never traded below its IPO price
• Profitable for all but two of its years as a public corporation
• Successfully diversified beyond its original commercial focus
BUILDING BIOTECHNOLOGY pp. 13, 184
Genentech’s Value PropositionGenentech’s Value PropositionGenentech’s Value PropositionGenentech’s Value Proposition
Efficiently manufacture large quantities of biological drugs to satisfy unmet needs
1973: Stanley Cohen and Herbert Boyer demonstrate gene splicing• Enables production of human proteins in bacteria, yeast, cell
cultures
1976: Boyer and Robert Swanson form Genentech
Proof-of-principle: somatostatin
1982: Recombinant human insulin licensed to Eli Lilly
1985: Genentech becomes first biotech company to market its own drug - hGH
Efficiently manufacture large quantities of biological drugs to satisfy unmet needs
1973: Stanley Cohen and Herbert Boyer demonstrate gene splicing• Enables production of human proteins in bacteria, yeast, cell
cultures
1976: Boyer and Robert Swanson form Genentech
Proof-of-principle: somatostatin
1982: Recombinant human insulin licensed to Eli Lilly
1985: Genentech becomes first biotech company to market its own drug - hGH
Calgene’s Flavr Savr TomatoCalgene’s Flavr Savr TomatoCalgene’s Flavr Savr TomatoCalgene’s Flavr Savr Tomato
Produce a novel tomato product that can be sold at a premium price
Most tomatoes are gas-ripened• Picked while green to prevent damage during shipping• Sprayed with ethylene to ‘ripen’ prior to sale• Result is bright red but tasteless tomatoes
Vine-ripened tomatoes sell for a premium• Tastier than gas-ripened tomatoes• Cost more to deliver to market, have shorter shelf-lives
Polygluconase enzyme was associated with ripening in 1984• Highly expressed in red tomatoes, absent in green tomatoes• Calgene set out to reduce expression of polygluconase to delay ripening
Produce tomatoes that can be transported like gas-ripened tomatoes but are worthy of vine-ripened prices
Can compete with vine-ripened tomatoes because of greater durability and longer shelf-life
Produce a novel tomato product that can be sold at a premium price
Most tomatoes are gas-ripened• Picked while green to prevent damage during shipping• Sprayed with ethylene to ‘ripen’ prior to sale• Result is bright red but tasteless tomatoes
Vine-ripened tomatoes sell for a premium• Tastier than gas-ripened tomatoes• Cost more to deliver to market, have shorter shelf-lives
Polygluconase enzyme was associated with ripening in 1984• Highly expressed in red tomatoes, absent in green tomatoes• Calgene set out to reduce expression of polygluconase to delay ripening
Produce tomatoes that can be transported like gas-ripened tomatoes but are worthy of vine-ripened prices
Can compete with vine-ripened tomatoes because of greater durability and longer shelf-life
BUILDING BIOTECHNOLOGY p. 326
Path to DevelopmentPath to DevelopmentPath to DevelopmentPath to Development
Isolate PG gene and generate antisense tomatoes
Develop assay for ripening• Flavr Savr tomatoes spoiled slower than wild tomatoes at room
temperature• 1 lb weight and timer to measure firmness
Field test• Flavr Savr tomatoes ripened as fast as wild tomatoes, rotted slower
File Patents
Solicit FDA Approval• Demonstrate that Flavr Savr tomatoes do not pose a health risk
Isolate PG gene and generate antisense tomatoes
Develop assay for ripening• Flavr Savr tomatoes spoiled slower than wild tomatoes at room
temperature• 1 lb weight and timer to measure firmness
Field test• Flavr Savr tomatoes ripened as fast as wild tomatoes, rotted slower
File Patents
Solicit FDA Approval• Demonstrate that Flavr Savr tomatoes do not pose a health risk
Market LaunchMarket LaunchMarket LaunchMarket Launch
Taste of Flavr Savr tomatoes not as good as competing premiums• Flavr Savr gene was not introduced into premium tomato varieties
Flavr Savr tomatoes could not withstand shipping• Firmer than vine-ripened, but not as durable as green tomatoes
General lack of expertise in the fresh-tomato business• Product pulled from market
Flavr Savr tomatoes had marginal added value; could not be sold at a profit
Taste of Flavr Savr tomatoes not as good as competing premiums• Flavr Savr gene was not introduced into premium tomato varieties
Flavr Savr tomatoes could not withstand shipping• Firmer than vine-ripened, but not as durable as green tomatoes
General lack of expertise in the fresh-tomato business• Product pulled from market
Flavr Savr tomatoes had marginal added value; could not be sold at a profit
Epogen – Biotech’s First BlockbusterEpogen – Biotech’s First BlockbusterEpogen – Biotech’s First BlockbusterEpogen – Biotech’s First Blockbuster
Erythropoietin (EPO) is a hormone that increases red blood cell proliferation• Used to treat anemia• Reduces need for blood transfusions
Development timeline• Initially purified from 2,500 quarts of human urine in 1976• Patents filed in 1984• Efficacy demonstrated in 1986• Approved for HIV patients in 1990 – 14 years after first purification!• Expanded approvals thereafter
Developed by Amgen• CEO is a former US Navy nuclear-submarine chief engineer• Prior science training: High-school biology, college chemistry
Erythropoietin (EPO) is a hormone that increases red blood cell proliferation• Used to treat anemia• Reduces need for blood transfusions
Development timeline• Initially purified from 2,500 quarts of human urine in 1976• Patents filed in 1984• Efficacy demonstrated in 1986• Approved for HIV patients in 1990 – 14 years after first purification!• Expanded approvals thereafter
Developed by Amgen• CEO is a former US Navy nuclear-submarine chief engineer• Prior science training: High-school biology, college chemistry
Marketing as a Driver for R&DMarketing as a Driver for R&DMarketing as a Driver for R&DMarketing as a Driver for R&D
Technology Push vs. Market PullTechnology Push vs. Market Pull
• Does the product solve a painful problem?Does the product solve a painful problem?- Drugs are the only effective treatment for some Drugs are the only effective treatment for some
conditionsconditions
• What is the value to the customer?What is the value to the customer?- Drugs are less expensive than hospital treatmentsDrugs are less expensive than hospital treatments
• Can R&D expenses be recovered?Can R&D expenses be recovered?- Post R&D, drug production costs can be very lowPost R&D, drug production costs can be very low
- High markupHigh markup- Years of patent-protected salesYears of patent-protected sales
Technology Push vs. Market PullTechnology Push vs. Market Pull
• Does the product solve a painful problem?Does the product solve a painful problem?- Drugs are the only effective treatment for some Drugs are the only effective treatment for some
conditionsconditions
• What is the value to the customer?What is the value to the customer?- Drugs are less expensive than hospital treatmentsDrugs are less expensive than hospital treatments
• Can R&D expenses be recovered?Can R&D expenses be recovered?- Post R&D, drug production costs can be very lowPost R&D, drug production costs can be very low
- High markupHigh markup- Years of patent-protected salesYears of patent-protected sales
BUILDING BIOTECHNOLOGY Chp 13
The Pillars of BiotechnologyThe Pillars of Biotechnology
RegulationRegulationRegulationRegulation
FDAFDA• Safety and efficacy of drugs must be demonstrated prior to Safety and efficacy of drugs must be demonstrated prior to
marketingmarketing• Food, feed additives, medical devicesFood, feed additives, medical devices• Orphan Drug Act and Hatch-Waxman Act provide incentivesOrphan Drug Act and Hatch-Waxman Act provide incentives
USDAUSDA• Plant pests, plants, veterinary biologicsPlant pests, plants, veterinary biologics
EPAEPA• Pesticides of chemical and biological originPesticides of chemical and biological origin• Novel organisms that may have industrial usesNovel organisms that may have industrial uses
FDAFDA• Safety and efficacy of drugs must be demonstrated prior to Safety and efficacy of drugs must be demonstrated prior to
marketingmarketing• Food, feed additives, medical devicesFood, feed additives, medical devices• Orphan Drug Act and Hatch-Waxman Act provide incentivesOrphan Drug Act and Hatch-Waxman Act provide incentives
USDAUSDA• Plant pests, plants, veterinary biologicsPlant pests, plants, veterinary biologics
EPAEPA• Pesticides of chemical and biological originPesticides of chemical and biological origin• Novel organisms that may have industrial usesNovel organisms that may have industrial uses
BUILDING BIOTECHNOLOGY Chp 8
Clinical TrialsClinical TrialsClinical TrialsClinical Trials
Demonstration that drugs are safe and effectiveDemonstration that drugs are safe and effectiveDemonstration that drugs are safe and effectiveDemonstration that drugs are safe and effective
Likelihood o
f FD
A a
ppro
val
Phase ISafety
Phase IIIExpanded trials
Phase IISafety and efficacy
20%
40%
60%
80%
Drug ApprovedPatent filed
BUILDING BIOTECHNOLOGY p. 141
Clinical Trials Provide Value Clinical Trials Provide Value MilestonesMilestones
Clinical Trials Provide Value Clinical Trials Provide Value MilestonesMilestones
Identifya usefultarget
Find andrefine adrug
Pre-clinicaltrials
Clinicaltrials
Market andsell drug
Basicresearch
Proof ofprinciple
Refineproperties
Prototypeand scale
Market andsell product
Drug development:Drug development:Drug development:Drug development:
Non-drug biotechnology:Non-drug biotechnology:Non-drug biotechnology:Non-drug biotechnology:
valu
evalu
evalu
evalu
e
Milestones facilitate funding, provide exitsMilestones facilitate funding, provide exitsMilestones facilitate funding, provide exitsMilestones facilitate funding, provide exits
BUILDING BIOTECHNOLOGY pp. 242-243
Timeline for Product DevelopmentTimeline for Product DevelopmentTimeline for Product DevelopmentTimeline for Product Development
Apply R&D to reduce risk and increase the value of productsApply R&D to reduce risk and increase the value of products
Concept Concept Patent Patent Pre-clinical Pre-clinical Phase I-III Phase I-III Approval Approval
Apply R&D to reduce risk and increase the value of productsApply R&D to reduce risk and increase the value of products
Concept Concept Patent Patent Pre-clinical Pre-clinical Phase I-III Phase I-III Approval Approval
BUILDING BIOTECHNOLOGY pp. 362-264
The Pillars of BiotechnologyThe Pillars of Biotechnology
Intellectual Property ProtectionIntellectual Property ProtectionIntellectual Property ProtectionIntellectual Property Protection
Cost of innovation is high, cost of imitation is low
• R&D involves high up-front costs and years of research
• Sophistication of tools and techniques makes copying products relatively easy
• Pioneers require a mechanism to recoup R&D expenses
• Patents grant a temporary monopoly, preventing competitors from undercutting innovators
• Lack of IP protection would motivate a commodity-based market
Cost of innovation is high, cost of imitation is low
• R&D involves high up-front costs and years of research
• Sophistication of tools and techniques makes copying products relatively easy
• Pioneers require a mechanism to recoup R&D expenses
• Patents grant a temporary monopoly, preventing competitors from undercutting innovators
• Lack of IP protection would motivate a commodity-based market
BUILDING BIOTECHNOLOGY Chp 7
Intellectual PropertyIntellectual PropertyIntellectual PropertyIntellectual Property
• Patents• Prevent others from practicing an invention
• Trade Secrets• Protect information and know-how
• Trademarks• Protect company and product name, look and feel
• Copyright• Protect the products of ideas – not generally applicable to
biotechnology
• Patents• Prevent others from practicing an invention
• Trade Secrets• Protect information and know-how
• Trademarks• Protect company and product name, look and feel
• Copyright• Protect the products of ideas – not generally applicable to
biotechnology
Patents and Trade SecretsPatents and Trade SecretsPatents and Trade SecretsPatents and Trade Secrets
Patents grant the right to exclude others from making, using, or selling an invention• Term is 20 years from date of filing• Must demonstrate:
• Non-obviousness• Novelty• Substantial utility
• Require publication of best mode to practice an invention
Trade secrets protect know-how and information• Do not require publication• Can potentially last indefinitely• Competitors may reverse-engineer or independently derive an
invention
Patents grant the right to exclude others from making, using, or selling an invention• Term is 20 years from date of filing• Must demonstrate:
• Non-obviousness• Novelty• Substantial utility
• Require publication of best mode to practice an invention
Trade secrets protect know-how and information• Do not require publication• Can potentially last indefinitely• Competitors may reverse-engineer or independently derive an
invention
If You Only Read One Slide … If You Only Read One Slide … If You Only Read One Slide … If You Only Read One Slide …
Biotechnology’s value proposition: Biotechnology’s value proposition: Apply R&D to develop novel products worthy of a multiple on investmentApply R&D to develop novel products worthy of a multiple on investment
Concept Concept Patent Patent Pre-clinical Pre-clinical Phase I-III Phase I-III Approval Approval
Biotechnology’s value proposition: Biotechnology’s value proposition: Apply R&D to develop novel products worthy of a multiple on investmentApply R&D to develop novel products worthy of a multiple on investment
Concept Concept Patent Patent Pre-clinical Pre-clinical Phase I-III Phase I-III Approval Approval
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