Functional Overview of the Biotechnology Industry

Functional Overview of the Biotechnology IndustryFunctional Overview of the Biotechnology Industry

• To accompany Building Biotechnology ISBN 9780973467666

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For more information:Yali Friedman, Ph.D.

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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


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


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


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


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



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


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


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




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


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


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


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