In his recent NVCA blog post Mark Heesen points to several alarming signs in the venture capital ecosystem indicated by three major funds walking away from the healthcare sector! The reasons?
To quote Scale Venture Partners’ Kate Mitchell in her blog post, even though companies within the Scale portfolio recently had five NDAs approved by the FDA, it “took longer and used more capital than planned from the start”.
Prospect Venture Partners’ Managing Director Alexander Barkas announced the decision not to deploy the $150 million they had raised in their fourth $250 million health-care fund. They do not believe “$150 million would enable them to build a sufficiently diverse portfolio of biotechnology and medical-device companies with adequate reserves” reports Dow Jones Venturewire.
Morganthaler Ventures and Advanced Technology Ventures on the other hand lost their health care teams who will soon launch their own medically focused healthcare firm. While the Wall Street Journal Venture Capital Dispatch does not point to a change in the firms’ strategy, Mark Heesen concludes that the funds are spinning their healthcare investment practices off.
Perhaps the most concern is raised in the Vital Signs Report from the NVCA’s MedIC coalition. Dr. Jonathan Root, general partner at U.S. Venture Partners and MedIC Steering Committee member, states that “While many factors are at work in driving away investment from U.S. medical innovation, it is the FDA approval process – and the cost, time, and unpredictability that it adds to the development of innovative products – that weighs most heavily on investors. The FDA and the Administration are already taking significant actions to reverse these trends, but we need the support of Congress to make sure these reforms are effective and lasting.”
So while we wait for these actions to wind their way through the political gridlock in the Beltway, what is industry to do other than collective hand wringing?
I totally agree with Lisa Suennen when she says in her blog post on the subject, “As the Age Wave crashes over our country, we will need the next generation of drugs, devices, services and technologies that can effectively serve the needs of our population. Those who are there with innovations that grease the wheels of progress will be tomorrow’s Charlie Ledleys.”
What specifically does innovation in the bio-pharma space look like? Here are a few avenues for action. Some of these have been on the FDA Critical Path Initiative since 2006 however their adoption across the industry is still evolving.
1. Innovative clinical trial approaches to reduce time to filing
There are several approaches that promise to reduce the time taken to move from Proof of Concept to an NDA/BLA through newer clinical trial designs. Two in particular have attracted a lot of interest.
First, Adaptive Clinical Trials offer potential to reduce timelines and increase chances of meeting the FDA’s efficacy criteria. Setting these trials up is not straight forward and may not apply to all situations but adaptive designs must be considered as one of the ways to speed up the path to a successful NDA/BLA for the new therapeutic product.
Second, Bayesian approaches to clinical trials may also make it possible to shorten timelines and be more cost effective. The great advantage here is that unlike traditional clinical trials, Bayesian statistics leverages information available prior to the trial being conducted thus building on the evidence base that already exists.
These approaches may not be applicable in all instances. In addition they require a change to business as usual in clinical trial design as they are more complex to setup and require significant cross functional collaboration. However success in gaining competency not only promises to reduce development timelines, but also to bring new sources of competitive advantage.
2. New biomarkers to help reduce cost of development
Many of the biomarkers currently in use have been around for decades and are not up to the task of dealing with newer therapeutic agents. In the Critical Path initiative, the FDA highlighted this to be another area of development. Many new biomarkers have been proposed but actually confirming their value in clinical development still requires work. Qualifying newer biomarkers along with new drug development will most certainly deliver shorter development timelines.
At least four areas have been highlighted starting with powerful new biomarkers that arise from genomic, proteomic and metabolomic technologies. FDA has already approved several “omic” based biomarkers and there is the potential to develop many new ones that can revolutionize diagnostics and drug development.
The second area is a range of safety biomarkers which could improve effectiveness of safety screening prior to First in Human trials all the way to clinical trial safety and thus improve the overall development effectiveness.
Another key area is to qualify additional surrogate endpoints. This is very exciting as every new surrogate endpoint that is qualified can significantly cut the development timeframes short. In spite of the amount of work required to establish the confidence that changes in such endpoints indeed reliably point to clinically meaningful outcomes.
Of course the most exciting area is personalized medicines. Whether it is more precise disease classification, directing new agents at molecular targets or developing dosing protocols based on genetic profiles, this has to be an area with the greatest impact on drug development. The possibilities of shorter paths to highly effective and profitable co-dependent technologies surely offer the best opportunities in which to invest.
3. Upgrade Market Access competency
Even big pharma does not always get this one right. An excessive focus on getting past the regulatory approval hurdle often prevents healthcare product development teams from paying adequate attention to developing the evidence base for payers early enough. The result? Knock backs from payers for prices that could have been justified if the evidence for cost effectiveness was developed during clinical development. Better market access will surely mean better returns for investors. Specific areas for action:
From Proof of Concept, market access professionals must be part of the cross-functional team that guides the development program. Whether it is choosing the right endpoints, patient reported outcome measures or comparators, this is where it starts and yet products still reach P&T meetings with inadequate evidence. A Value Demonstration Plan must be in place as the Phase II/III trial plans are developed.
Approaching launch, the teams could get so much better prepared to hit the ground running to ensure that when the request for submission comes from a payer, a quality value dossier is ready. Once the much awaited marketing approval is received, tracking those formulary submissions and ensuring they get reviewed in the very first P&T meeting would get the return on investment flowing a lot faster from investors!
4. Focus on Launch Excellence
Many opportunities to get the product launched on time and with the best possible marketing program are lost because teams are not supported with best practices for managing launches.
Activities to help establish the brand in the market such as developing and executing communication material, medical education events or patient familiarization programs all can be executed so much better if the teams are not forced to reinvent the wheel.
Using simple but highly effective launch execution kits can make the launch team’s jobs significantly easier and deliver high physician awareness and opportunities to try the product in a clinical setting soon after FDA approval. The result – improved ROI on the development and launch investment.
5. Target unmet medical needs
So yes this is motherhood and apple pie! Clearly, cutting out the “me three” analogues and targeting truly unmet medical needs with first-in-class agents has to be the best way to get to market faster and with greater success. The opportunity to take advantage of the FDA’s priority review is perhaps the best way to achieve superior returns for investors.
Witness the recent priority review designations for the March 2012 action date . Roche’s new skin cancer drug vismodegib and Chelsea’s Northera are excellent examples of therapies that target genuine unmet needs. Roche’s drug promises to address advanced basal cell carcinoma for which there is no effective treatment. Northera, which targets a much smaller area for dizziness in Parkinson’s patients. Both are clearly unique offerings and will bring excellent returns to investors.
BMS/Pfizer’s Eliquis is an interesting case in that it is actually the third entry competing with Boehringer Ingelheim’s Pradaxa and the Bayer/Johnson & Johnson drug Xarelto for a slice of the $9 billion anti-clotting market. However superior early trial results gave sufficient reason for the FDA to grant the product a priority review.
Unmet medical needs are surely one of the best ways to improve ROI on healthcare investments. Perhaps the exit of some of the possibly excess venture capital money from the healthcare sector will refocus investments on genuine innovation.
I remain optimistic that these approaches offer investors in healthcare the promise of superior returns. Let us not forget that with an aging population and better understanding of genetic drivers of chronic disease, the market opportunity is still huge. This is not a sector with market risk. Sure there are technical risks in implementing cutting edge approaches such as adaptive clinical trials and qualifying new biomarkers. Isn’t this what venture capital’s all about?
