Title An endogenous explanation of growth: direct-to-consumer stem cell therapies in China, India and USA.

Author names and affiliations Saheli DattaKing’s College LondonGlobal Health and Social MedicineStrand, London WC2R 2LSEmail: saheli.1.datta@kcl.ac.uk

Corresponding authorSaheli DattaKing’s College LondonGlobal Health and Social MedicineStrand, London WC2R 2LSEmail: saheli.1.datta@kcl.ac.uk

AbstractRecent expansion of direct-to-consumer stem cell therapies (DSCTs) across nations where medical malpractice laws are the strongest globally challenge the causal assumption that low regulatory standards in developing countries bolster DSCTs. Drawing on firm-level data of existing biopharmaceuticals, approved SCTs and DSCT clinics across USA, China and India, this paper provides an innovation studies perspective of the ways in which the paradigmatic shift in fundamental knowledge production - from in-vitro to in-vivo stem cells - is transforming SCT discovery and delivery. It argues that the endogenous and inherent disruptive attributes of SCTs, rather than exogenous conditions like regulations, provide a substantive explanation for the recent expansion of DSCTs and urges regulatory adaptation to endogenous imperatives for effective governance of SCTs.

Keywordsstem cell, direct-to-consumer stem cell therapies, regulation, governance, disruptive innovation, knowledge production, emerging models of production, China, India, USA.

Funding The research for this article was conducted as part of the work of the project ‘State strategies of governance in global biomedical innovation: the impact of China and India’, funded under the UK Economic and Social Research Council's Rising Powers programme, grant reference ES/J012521/1.

Future perspective

The study of firm-level dynamics revealed a shift towards low resource-intensive micro-to-small point-of-care SCT delivery patterns and emerging vertical integration trends at regional and global levels. This suggests that SCT development is likely to shift away from the existing 'Big-Pharma' centric models of (bio)pharmaceutical production to mosaics of micro actors and small-to-medium level collaborations between new entrants and incumbents [60]. In turn, this shift is likely to democratise participation in the global SCT economy by creating spaces for new or marginalised actors to enter global markets and possibly challenge dominance by incumbents cluster [24, 25]. Whether this shift will challenge (e.g. by China and India) the existing regional dominance of the global bioeconomy by the major developed countries is doubtful, for even in the DSCT area 570 US clinics offered DSCTs compared to 10-15 clinics each in China and India.

Moreover, the endogenous attributes like autologous cells, personalised point-of-care delivery, short shelf lives etc. that contribute to SC innovation's parallel production trajectory also raise questions of commensurability with existing regulation oriented towards (bio)pharmaceuticals with long shelf lives and process-dependant mass-scale production and distribution networks. In turn, these commensurability issues create spaces in the governance and regulation of SCTs that do little to limit the growth DSCTs. Instead, these issues bolster DSCT expansion by neglecting the salience of concomitant regulatory adaptation to the disruptive attributes needed to strengthen the accessibility and viability of approved SCTs. Invariably, these commensurability issues will have profound implications for the future development of SCTs and provide opportunities for future research.

Executive Summary Background

Endogenous disruptive attributes of SCTs, rather than exogenous regulations explain global expansion of DSCTs.

New demand conditions Paradigm shift from in-vitro halt-and-prevent approach of

pharmaceuticals to in-vivo repair-and-regenerate processes of SCs create new demand for SCTs.

Users choose DSCTs based on cost and access considerations despite DSCT's clinical inferiority to approved SCTs.

Shifting market dynamics New demand conditions lead to shifts in production and

competition from the resource-intensive 'Big pharma'-centric top-end of the market to the emerging low resource-intensive lower end of the market.

Further shifts in global market conditions are likely, as commercial viability of approved SCTs remain uncertain.

Conclusions

Struggle for commercial viability of approved SCTs reflect incommensurability between existing governance structures and emerging conditions.

This incommensurability leads to governance voids in jurisdictions worldwide that in turn bolster DSCT expansion.

Disclosure statement The author reports no conflicts of interest.

AcknowledgementI would like to thank the European Union’s Horizon 2020 Research and Innovation Programme under Grant Agreement No. 720270 (HBP SGA1) for its continued support as I wrote this paper.  

IntroductionRapid advances in stem cell (hereafter 'SC') research have evolved into two distinct innovation pathways. One is the approved therapy pathway based on conclusive clinical trial evidence in accordance with existing internationally accepted regulatory frameworks of (bio) pharmaceutical discovery. The other is the direct-to-consumer pathway whereby experimental SC therapies' (hereafter 'SCTs') without conclusive evidence of safety and efficacy are administered directly to patients by clinicians in private clinics. Not surprisingly, direct-to-consumer SCTs (hereafter DSCTs) raise substantial ethical, legal and social issues although a discussion of these are considered beyond the remit of this paper [1, 2, 3, 4, 5, 6, 7]. What is of interest to this paper is that the practice of DSCTs were initially (around the 2008-10 period) thought to be driven by causes exogenous to DSCTs like permissive regulatory environments in developing nations, and expected to be limited to those countries [1, 4, 5, 8, 9, 26, 30]. However, recent data showing growth of DSCT clinics across the US[30] and other developed1 nations[1, 4, 10] where regulations especially medical malpractice laws are the strongest globally challenge this causal assumption. How then do we reconcile the growth of DSCT clinics alongside existing discovery pathways? This paper provides an innovation studies based analysis of causes driving DSCT growth, from the comparative perspective of the existing ((bio)pharmaceuticals) and emerging innovative products (the approved SCTs and DSCTs) currently available in the global market. I aim to show that it is the endogenous and inherent disruptive attributes of SCTs, rather than exogenous conditions like regulations that provide a substantive explanation for the growth of DSCTs.

A framework for understanding innovative changeAs such, innovation is expected to a) change production processes to greater or lesser extent by b) creating value for society. For instance, therapies based on the innovative regenerative attributes of SCs like autologous haematopoietic SC transplantations are expected to improve existing 'maintenance' oriented treatments for multiple sclerosis with

intravenous drugs such as natalizumab or Tysabri [11]. However, the extent of change wrought by an innovation maybe disruptive and transformative or incremental and sustaining [12].

Disruptive innovation, variously referred as 'radical' [13, 14] , 'discontinuous' [15, 60] or 'revolutionary' [16] is transformative change whereby new knowledge co-opts the original such that "progress [runs] parallel [to the existing but] do not intersect" [16]. However, disruptive products are typically qualitatively inferior to existing ones and thus attract new entrants and new end-users at the lower-end of the market [12, 17]. In contrast, sustaining innovations add value to existing products through performance-improving incremental innovations aimed at maximising profitability from users at the higher end of the market [12] e.g. 'evergreening' blockbuster drugs with minor improvements [52]. However, studies show that user fatigue for incremental functional improvements of existing products increase user-preference for disruptive innovations [19], and thus encourage disruptive innovations (innovators) to enter the market, and over time, scale up capacity for mass-production [12, 18]. This, in turn, exacerbates the weakening of incumbent firms unable to anticipate and integrate into disruptive trajectories [15], due to "underinvestment and incompetence"[13] in research and development [14], poor strategic foresight [16] and complacence in market leadership [20]. Thus for incumbents to sustain market share and profitability, they must either adapt to disruptive innovative trajectories or adopt 'disrupt-the-disruptor' strategies [18, 21], although success in either adaptation or adoption depend on firm capacities [22, 23]. At the aggregate global level, sustaining innovations consolidate the regional dominance of sectors where incumbents cluster (e.g. 'Big Pharma') and strengthen entry barriers against new entrants through advantages like economies-of-scale and highly synergistic closed networks of influence [24, 25]. In contrast, disruptive innovations advantage regions and sectors left out of existing (incumbent) markets, democratizes participation by creating spaces for new or marginalised actors to enter global markets and ultimately challenges the dominance of incumbents in existing markets [24, 25]. Thus, if the developing1 country-led DSCT pathway prove to be disruptive, the existing dominance of the major developed1 nations in SCTs is likely to be weakened.In this paper, I use the salient attributes distinguishing sustaining from disruptive innovation (Table 1) at the firm-level to show that disruptive trajectories of DSCTs not only run alongside and increasingly compete with existing production trajectories at the global levels but therein also provides a substantive endogenous explanation for the growth of DSCTs. So far, scholarship in the area has focused on the ethical, legal and social issues of DSCTs [1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 26, 27, 28, 29, 30, 31]. A few studies explore the economic [32, 33, 34, 35], philosophical [38], and political-economic perspectives [36, 37] of either the informal DSCTs or the formal SCT market but none offer an innovation studies perspective of the combined (D)SCT market as done by this research. Salter et al's [37] use of innovation models to present the political economic analysis of the global (D)SCT market is possibly the only exception, but does not offer this study's novel innovation studies analysis of the global (D)SCT market from the perspective of all (D)SCT products available globally. For if we

measure innovative success by market demand (as a proxy for an innovation's societal value) then a comparative analysis of the emerging demand for innovative products [10, 30] like DSCTs, approved SCTs etc.) versus existing demand for (bio)pharmaceuticals, is expected to provide an empirically grounded explanation for shifting growth trajectories in the global (D)SCT market. Notably, as this study considers the global perspective, DSCTs are considered innovative products despite lacking scientific evidence as "'experimental therap[ies like DSCTs are provided]’ as regular therapy, and the acknowledgement of possible patient benefit from experimental research are accepted in large parts of the world" [83]. This follows from plural understandings of evidence as inclusive of scientific, experiential and all available evidence [87].This paper is organised as follows. Discussions of methods including limitations of the study are provided next. This is followed by an analysis of firm-level data across China, India and USA to understand the transformative capacity of SCTs. The analysis is framed within the determinants of innovative change discussed earlier and summarised in Table 1.

Table 1 Framework for understanding innovative change

MethodsThe study conducted a comparative analysis of approved SCTs available globally and a sample of DSCTs available in China, India and USA. The sampling choice of DSCT clinics in USA, China and India was considered appropriate as the research aimed to show that the global growth of DSCTs are driven by endogenous factors instead of exogenous cross-national variations in regulations between developing (China and India) and major developed (USA) nations. Thus, the final sample included firm-level data drawn from (a) Turner and Knoepfler's [30] survey of DSCT clinics in USA which has experienced a recent growth spurt and (b) survey of DSCT clinics in China and India where DSCTs were initially thought to have burgeoned due to low or no regulations [1, 8, 9, 26, 30] and still host substantial DSCT clinics [10]. Details of firms, approved SCTs and DSCTs in China, India and USA were drawn from company websites, financial databases (Financial Times and Bloomberg) and regulator webpages. To meet basic inclusion criteria of physical existence, only DSCT clinics with working websites and physical addresses were included in the study e.g. firms with email addresses but without physical addresses were excluded. Having a website was considered minimum inclusion criteria for clinics aspiring to compete in global, regional and or national health markets. Thus firms without websites were not used. Notably, the absence of a compulsory registry or

database for DSCT clinics in India, China or USA means that some DSCT clinics might have been inadvertently excluded. This is limiting, as it means that data that could have contributed to the analysis were omitted. However, the impact of this omission is expected to be negligible, as the spread and size of final sample were considered reasonably comprehensive to capture key trends.

Understanding the transformative capacity of SCs1. Disruptiveness of new knowledgeIs the science underpinning SCTs incremental or transformative?To understand the disruptiveness of SC science it is critical to understand how it differs from existing science. Traditional pharmaceuticals are chemical compounds that conform to pre-determined chemical structures regardless of manufacturing process i.e. they are process-independent. In contrast, biomedical technologies (biologics in short) are based on living cells derived from various organic materials like plants, microorganisms, humans etc. and composed of sugars, nucleic acids, proteins mostly in complex combinations of cells and tissues e.g. vaccines, insulin, blood products, skin grafts. Unlike pharmaceuticals, biologics are process-dependent meaning that the slightest change in manufacturing or preserving processes alters the final product.

The commonest SCTs are a type of biologic based on autologous interventions, where cell-donor and -recipient is the same person. Autologous SCTs begin with the administration of a stimulating factor to mobilise SCs in the patient's bone marrow for eventual isolation and harvesting from the bloodstream through an external device called a cell separator. Harvested cells are either cryogenically frozen for administering to the patient at a later date or externally purified to purge bad or non-required cells (e.g. tumour cells) before reinfusion into the patient. In certain cases harvested SCs are immediately administered like peripheral blood SC (PBSC) collections for haematopoietic SC transplantation (HSCT- i.e. blood transfusions) or minimally processed before administration e.g. in allogeneic (cells from non-self donor) treatments [40]. Allogeneic treatments using blood SCs from an unknown or non-self donor carry high risks of rejection by the recipients body or graft-versus-host-disease (GVHD) often with fatal results [41], although this maybe changing [82]. According to BLOOD, 71% of 116 patients receiving allogeneic treatments over 18 months reported "chronic extensive GVHD ...with high mortality and treatment failure" [41]. As a result, autologous treatments currently dominate the cell therapy scene with the patient-tissue as site, source and key ingredient of SCTs. This is unlike the laboratory based site-of-action of (bio)pharmaceuticals and represents a paradigm shift from in-vitro (outside the organism) halt-and-prevent approach of pharmaceuticals (and to a large extent biopharmaceuticals) to in-vivo (inside the organism) repair-and-regenerate processes of SCs. In turn, this paradigmatic shift mirrors a similar shift in the endogenous scientific basis of therapies and treatments away from but parallel to existing science underpinning mass (bio)pharmaceutical production processes.

2. Relationship between old and new knowledge production

Does SC science retain, improve or co-opt existing biotechnological knowledge and production processes? Currently, autologous interventions are the commonest SCTs and require clinical expertise and hospital in-patient facilities for application. This differs from mainstream prescription drug based treatments as below,

i) Source of delivery- like drugs and non-SC based biologics, clinicians remain the primary actor in prescribing (D)SCTs to patients [42].

ii) Cost of delivery- typically in the major developed countries, costs of prescription (bio)pharmaceutical medications are partly or wholly reimbursed by the state or insurers. However this is not the case for most SCTs which remain out-of-pocket except a) for blood transfusions, b) or if recruited to receive free treatments as part of a clinical-trial cohort or under compassionate use of experimental therapies e.g. UK's specials, EU's hospital exemption etc., and c) when approved SCTs are reimbursable by insurers (as in USA) or the state (e.g. kaihoken- Japan's state health coverage covers 20 sheets of J-Tec's JACC (Table 5).

iii) Method of delivery- traditionally patients obtain pre-manufactured medication to self-administer at home according to clinician-prescribed dosages. Exceptions are intravenously administered (e.g. Remicade for arthritis) or grafted biologics (e.g. Apligraf skin grafts) that require clinical expertise and must be administered by pharmacists or clinicians. In contrast, SCTs are clinical applications where patients typically visit a clinic for autologous SCs (from self) to be harvested and re-infused. This forges a direct clinician-to-patient relationship that precludes existing drug production processes and intermediate actors (Actor 2 cluster of many actors in Fig 1) who traditionally mediated the patient-clinician interaction with mass-produced (bio)pharmaceuticals.

Figure 1 Models of production: Existing and Emerging

The key difference between the emerging and existing models (in Figure 1) is the minimal processing step in the emerging models that replace Actor 2 in existing models. In existing models of (bio)pharmaceutical production, Actor 2 typically (a) has no interaction with patients other

than as clinical trial candidates or in the post-marketing surveillance stages of clinical trials, (b) mass produces (bio)pharmaceuticals using pre-determined formulaic knowledge, (c) enjoys significant economies of scale, and (d) uses pre-contracted networks of retail outlets and pharmacies with agreed reimbursement or profit-sharing incentives for product distribution. However, these production inputs supplied by Actor 2 in existing models (Fig 1) are precluded by the minimal processing step in emerging models, where the step's dependence on patient's tissue as the source and target of the active therapeutic ingredient (SCs) means that the production inputs needed are radically different than those supplied by Actor 2 in emerging models as below,

(a) detailed scientific knowledge: this is readily available through open access scientific journals or through low cost public access subscriptions [40],

(b) clinical-expertise in SC harvesting: this training is readily available globally either as part of medical college degree courses or through low cost short training courses like Thermo-Fisher Scientific's 3-day Gibco workshops from US$1350/workshop [43], Global Stem Cells Group's 2-day training [44]. For instance, India-based Stem-Genn Therapeutics' 4-day training "accredited by the Stem Cell Society (India) covered stem cell basics, live cases and stem cell therapy protocols. 17 doctors and biotechnologist attended and got trained. The faculty consisted of acclaimed doctors from [top medical institutions in India like] PGI, AIIMS, IIT..." [45].

(c) clinical and outpatient facilities: this is readily available through partnerships between clinicians and hospitals (discussed later in section 4),

(d) storage and cryopreservation facilities [46]: this is readily available in most hospitals and accessible by smaller clinics on rental or contractual basis [47].

(e) access to cell separator and processor: this is readily available in most hospitals and accessible by smaller clinics on rental or contractual basis, although low cost Cell separators using traditional centrifuge-based technologies in use since the 70s are easily acquired online and cost between US$1000-US$3000 for a pre-owned device. At the time of writing, a pre-owned basic separator like CaridianBCT's COBE 2991 Cell Processor cost US$1100, while a pre-owned GE's advanced StemSource 900/MB Tissue Processing System developed by Cytori Therapeutics cost US$2500 (https://www.dotmed.com/listing/cell-separator/cobe/2991/1626962).

In 2012, all-in-one cell processing systems like Germany-based Miltenyi Biotec's magnetic-bead-based CliniMACS Prodigy for "streamlining cell-processing workflows: from cell separation, through cell culture, to formulation of the final product ...in a closed GMP[Good Manufacturing Practices]-compliant system" cost USA's National Institutes of Health US$144,900 [48], but more importantly did away with the need for expensive clean-room facilities (http://www.miltenyibiotec.com; see Table 2). This suggests that table top devices like CliniMACS Prodigy[50]

weighing 70kg and measuring 73.5x40x108cm decentralises and democratises supply of internationally compliant cell-processing from a handful of large institutions able to acquire and maintain clean-room facilities etc. to smaller point-of-care units delivering low volumes of autologous SCTs [51]. In 2002, a basic pre-fabricated clean-room of 120m3

and upwards cost anywhere between US$400,000 and US$800,000 e.g. Cleanroom Technology's cleanroom facilities cost between US$2500 to US$6000 per square foot in 2002 prices [49].

Moreover, the downside of these table top cell processors - of processing one treatment at a time - provide a good fit with SCTs personalised approach that require each individual (autologous) cell sample to be processed individually in contrast to existing mass-produced (bio)pharmaceuticals. This also means that the decentralised, point-of-care-based SCT production processes do not use the factors of production and distribution used by existing and mainstream models of (bio)pharmaceuticals, which remain centred around a handful of incumbent pharmaceutical majors represented by Actor 2 in existing models in Fig 1. This suggests that the endogenous attributes of SCTs shape land, labour, capital and entrepreneurship in new production trajectories that do not improve existing drugs and biologics, but co-opts them via parallel trajectories of production as summarised in Table 2.

Table 2 Production inputs for existing and emerging models.

3. Quality of knowledge produced

Are SCTs qualitatively inferior to existing treatments?According to literature in innovation studies, disruptive innovations create new demand at the lower end of the market by offering products that are qualitatively inferior to existing offerings [12, 17]. This suggests that SCTs (i.e. approved SCTs and DSCTs) should be qualitatively inferior to (bio)pharmaceuticals to be disruptive. Today, DSCTs constitute the bulk of the SC market globally due to ease of market entry made possible by a combination of low start-up costs, readily available access to basic hospital facilities, publicly accessible basic science knowledge and low levels of clinical expertise requirements for translating the science into

injectable transplants (discussed earlier in section 2). In 2014, there were around 300, 100, 45 and 20 DSCT clinics in China, Russia, India and Japan having treated 30,000, 20,000, 10,000 and 10,000 patients respectively [37]. While a recent survey found the DSCTs in the USA to have grown to 570 clinics [30]. Yet, despite their popularity, DSCTs lack conclusive evidence of safety and efficacy and are thus inferior or unproven [9, 26, 54, 55, 56] compared to (bio)pharmaceuticals and approved SCTs that are proven safe and efficacious based on conclusive clinical evidence according to existing norms of clinical knowledge production. Moreover, wide agreement that most [83] DSCT clinics profiteer from gullible patients [4, 8, 26, 28, 55] combined with instances where DSCTs have caused harm to patients further add to their inferiority [84, 85], although some proven (bio)pharmaceuticals have caused patient harm despite stringent approval processes [86].

Meanwhile approved or proven SCTs, despite being granted public marketing approval based on conclusive clinical evidence, comprise a fraction of the SCT market due to logistical issues like short shelf lives, expensive climate-controlled preservation and transportation requirements, and high treatment costs ranging from £16000 to US$1.4 million per dose (see Table 4). Of the 13 cell therapies so far approved by US Food and Drug Administration (FDA), 6 are cord blood banks, 2 are derived for bovine sources for bladder cancer (BCG-Live in use since the 80s) and gum tissue (Gintuit) respectively; only 2 are autologous cell therapies (Carticel, Provenge) and one allogeneic therapy (Imlygic) (cell therapies like Epicel are approved as medical devices; Table 4). In Europe, seven cell therapies received marketing authorisation by the European Medicines Agency (EMA). Among them, Glybera (approved in 2012) had a treatment cost €1.4million for a single infusion but withdrawn in 2017 after a single use in 2012[57]. While Imlygic - a metastatic-melanoma (aggressive skin cancer) therapy approved by US FDA and EMA in late 2015 - is yet to test market success, although interestingly a UK NICE evaluation in 2016 could not "reliably estimate the effectiveness of [Imlygic] compared with immunotherapies currently used in clinical practice" [58].

Among SCTs, only five have so far been approved worldwide, namely Prochymal (approved by Health Canada in 2012), Holoclar (approved by EMA in 2015), Strimvelis (approved by EMA in 2016), Hemacord (approved by US FDA in 2016) and Stempeucel (approved by DCGI-India in 2016) (Table 4). Prochymal and Stempeucel are allogeneic treatments and the rest are autologous. Prochymal failed phase-III clinical trials after placebo-recipients fared better in trials and has since been sold to Australia's Mesoblast - who along with Japan's JCR Pharmaceuticals plan to re-engage FDA with the re-branded JR-031 or TEMCELL. Stempeucel- the other allogeneic SCT - has so far only received limited market approval from India's drugs regulator DCGI for sale to 200 patients with the promise of full market approval within 2 years subject to patient data. Of the three approved autologous treatments, FDA approved Hemacord is a cord-blood based SC bank which along with six other cord blood banks are required to obtain Biologics License Application (BLA) since 2009. The autologous SCT Holoclar was approved in 2015 by EMA based on 65.5% success rate among 29 trial candidates although missing data in "13.8% cases" [59]. This suggests that approved SCTs are not only few in

number but also pose substantial logistical challenges and evidentiary concerns when compared to (bio)pharmaceuticals.

In comparison, clinical trial design and results of (bio)pharmaceuticals are robust and clear like the 94-97% success rate in global-level post-marketing surveys of Harvoni - the world's highest selling drug in 2015 [61] (Table 3). As such, clinical data for (bio)pharmaceuticals are based on large trials generating robust results e.g. the safety studies of the world's second highest selling hepatitis-c drug Humira (adalimumab) is based on clinical data from "2468 patients with 4870 years of exposure clinical studies" [62]. Compare this robust evidence to EMA's newly approved SC gene therapy Strimvelis with a 100% survival rate but so far tested on only 12 trial candidates with infection steadily decreasing from 0.63 to 0.17 times/year over a 7 year period [63]. The UK National Health Service'evaluation of Holoclar illuminates these evidentiary concerns of SCT as they write "There will be an inevitable delay waiting for the cells to grow, the product has a short shelf life (36 hours), and it is sensitive to mechanical and temperature stress. In some cases, the culture may be unsuccessful..."[64].

In sum, clinical evidence of safety and efficacy in approved SCTs are less robust and thus inferior to existing (bio)pharmaceuticals. While unapproved DSCTs are considered inferior to both for lacking clinical evidence. This suggests that in accordance with disruptive innovation theory, endogenous attributes of SCTs render them qualitatively inferior to "currently available products"[17]. In this sense, DSCTs provide an attractive option for self-pay patients - "appeal[ing] to new or less-demanding customers"- who are unable to afford the high costs of approved SCTs but willing to try inferior DSCTs at lower costs (discussed next in section 4) [17].

4. Relationship between old and new

Do incumbents or new entrants dominate the scene? Is it easy for new entrants to enter the market or is entry restricted to incumbents? Do SCTs maintain or displace existing market share, or do they create a new market?'

Key actors in existing (bio)pharmaceuticals and emerging SCT markets are summarised in Tables 3 and 4 respectively.

Table 3 Overview of existing (bio)pharmaceutical markets

Table 4 Overview of emerging cell, SC and gene therapy markets

(SCTs in orange)Table 4 continued...

Table 4 continued...

----- End of Table 4; See supplemental data file for data source----

Three of the four approved SCTs currently available are produced by national level incumbents with some regional presence, namely Japan's JCR Pharmaceuticals (Prochymal), Italy's Chiesi Farmaceutici (Holoclar) and Cipla India (Stempeucel) (Row 2, Table 5). The fourth approved SCT Strimvelis is produced by the global incumbent GlaxoSmithKline with market capitalisation above US$103.35billion. Interestingly, despite their scale, all four incumbents work through joint ventures with smaller firms, which is consistent with the trend of new entrant-incumbent vertical integration in the biotechnology sector [62, 63] (Row 1 in Table 5). This suggests a nuanced reading of market participation conditions in approved SCTS as incumbent-dominated but simultaneously dependant on vertical integration with smaller new entrants.

Table 5 Firm-size details (approved SCTs)

The unproven DSCT market far outstrips the global approved-SCT market in quantity of therapies supplied and is dominated by new entrants ranging from micro (<10 employees), small (10>50 employees) and medium enterprises (<50 employees) (http://www.oecd.org/cfe/leed/1918307.pdf). In the US, the DSCT market is dominated by small to micro actors according to a sample of the first twenty businesses in Turner & Knoepfler's [30] list of US DSCTs. Thirteen of the twenty businesses sampled was found to offer SCTs as an 'additional service' alongside other services like diagnostics, (non)surgical procedures, complementary and alternative therapies. However, most clinics were (a) led by specialist-clinicians also affiliated with reputable medical research institutions and hospitals and or (b) had been in business for sometime providing non-SCT based clinical services but had recently 'added' SCTs e.g. the Arthritis Treatment Center had been founded in 1981 by Dr Wei - a highly qualified rheumatologist - and had recently added DSCTs (http://arthritistreatmentcenter.com/about-us/). This suggests that most DSCTs in the US are offered as an additional service in clinics setup for other medical services and in existence for sometime. This, in turn, suggests that the mosaic of private clinics for public health delivery in the USA (for both insured and self-pay patients) appeared to have provided a ready structural base of private clinical spaces to also offer DSCTs. In this sense, case for the expansion of DSCTs

in US needs to be nuanced, as expansion of DSCTs does not suggest a similar expansion of DSCT clinics. Notably, the absence of medium to large research or medical institutions providing DSCTs in the USA, presumably due to strongly embedded norms of evidence-based medicine in USA which reject DSCTs, is interesting although an exploration of its causality is beyond the remit of this paper.

In India, DSCT actors range across the spectrum from large hospitals like Fortis or Apollo Group to micro clinics but dominated by the latter (Table 6). Specialist-clinicians who work through networks of partnerships with local hospitals to access clinical facilities for DSCTs typically run micro- and small- DSCT clinics. For instance, in the Delhi area there were approximately 450 Orthopaedists (most with MBBS qualifications) providing SCTs 'For Orthopaedic Conditions' (https://www.practo.com/search) mostly in partnership with local hospitals. A handful of specialist had their own dedicated DSCT clinical facilities equipped with 10 to 40 beds, basic intensive care emergency equipment etc. (e.g. Dr Alok Sharma's NeuroGen Brain & Spine Institute in Navi Mumbai (http://www.neurogen.in). Aside from these micro-actors, national-level incumbents in healthcare (not biopharmaceuticals) like Fortis and Apollo were also active in the DSCT scene. Fortis Healthcare owns 55 hospitals across India with 2530 employees and a market capitalisation of INR80.50billion (US$1.2billion; Table 6). While Apollo Hospitals have 9215 beds across 64 hospitals with 43,560 employees and a market capitalisation of INR184.68billion (US$2.8billion; Table 6). Importantly, Fortis and Apollo delivered DSCTs in a handful of disease areas but via smaller clinics embedded within large hospitals in major cities, similar to the incumbent-SME vertical integration in the approved SCT market (as shown in Table 5). For instance, Fortis Vasant Kunj in Delhi runs an approved clinical trial on diabetic foot ulcers, offers transplants for leukaemia, lymphoma, multiple myeloma, sickle cell anaemia and DSCTs for cartilage & bone regeneration, arthritis etc. (as found on a health-tourism website (https://www.health-tourism.com/stem-cell-therapy/india/). The significant finding here for understanding the new-entrant-incumbent relationship in India's (D)SCT scene, is that (a) incumbents like Fortis and Apollo offer DSCTs through smaller clinics embedded within large hospitals, and (b) compete at the lower end of the market populated by micro and small DSCT clinics but not in the incumbent tier of the market which so far doesn't exist conceivably due to the personalised one-at-a-time nature of (D)SCT production.

Interestingly, the micro-actor dominance of the DSCT scenes in India and USA may be changing. In the US, a few medium-level actors like Regenexx, Lumin Spine Care, Mallory Family Wellness, Minnesota Regenerative Medicine, Tricity Pain Associates, University Foot and Ankle Institutes have 50, 10, 7, 8 11, and 10 micro-to-small branches or franchisees respectively, across USA [30]. While India's Fortis and Apollo (who are new entrants on the global stage with some regional presence treating patients from middle-eastern and south-east Asian countries) partnered with mostly US-based middle-level companies to compete in India's micro-level DSCT markets [67, 68, 69]. In 2011, Fortis Healthcare Holdings Ltd tied-up with US California-based TotipotentRX Cell Therapy Pvt. Ltd to provide SCTs in select locations in India and setup research centres within its hospitals [67, 68]. Similarly, Apollo Hospitals was "setting

up an R&D center at Dholka, Ahmedabad in association with Cadila Pharma and StemCyte, USA" with plans for a "stem cell center" [69]. This suggests that some micro-actors are not only on the pathway to becoming future local DSCT incumbents but also poised for growth, bolstered by global expertise and growing demand.

Table 6 DSCTs in India: Firm details (see supplemental data file for data source)

In China, ten of twelve D2SCT clinics studied were large hospitals ranging from dedicated DSCT hospitals like the 70-bed Beijing Puhua International Hospital or the 350-bed An Yinhua Stem Cell Transplant Center to small DSCT clinics embedded within hospitals e.g. in Beijing Armed Police Force General Hospital (Table 7). As public health delivery apparatus in China is almost entirely dependent on public or military hospitals, it is not unusual that DSCT clinics would be concentrated within these hospitals e.g. the neurological and SC department at Beijing's largest and famous 4000-bed The Navy General Hospital-PLA (301 hospital; PLAGH). This is in contrast to India where the bulk of the nation's healthcare needs (in the absence of universal health coverage) are typically served through private clinician-specialists working out of

private clinics; or USA, where networks of private clinics serve both insured (on Medicare, Mediclaim or private insurance) and self-pay patients. This suggests that a ready base and cultures of private clinical practice make it easier to offer DSCTs privately in India and USA and contributed to the dominance of micro-small DSCT clinics in both nations. This is in contrast to China, where this research could not find similar specialist-run DSCT micro clinics as in India and USA. This is presumably because unlike India and USA, China lacks a ready base and cultures of private clinical practices, except perhaps for a miniscule wealthy segment and overseas patients able to afford private healthcare. For instance, this research found only a handful of specialist-clinicians offering DSCTs through expensive hospital-like clinics in and around Beijing, complete with beds, basic intensive care facilities and cell processing e.g. Dr Wu's Wu Medical Center and Professor Zhang's ReLife International Medical Centre in Beijing. These are not unlike Dr Alok Sharma's Neurogen clinic in Mumbai, India or Dr Centeno's Regenexx in USA. What is significant in China is that (like in India), the bulk of DSCTs are offered via smaller DSCT clinics embedded within medium-to-large hospitals but dedicated to (D)SCTs e.g. Stem Cell Institute (within Yanda International Hospital) or Guangzhou Meyo Stem Cell Hospital (within Bo Ai Group's Guangzhou Modern Cancer Hospital). Thus like in India and USA [65, 66], the Chinese scene also conforms to the broader global trend for delivering DSCTs either via micro-to-small clinics or through vertical integration of new entrants like Stem Cell Institute and Guangzhou Meyo Stem Cell Hospital with incumbents Yanda International Hospital and Bo Ai Group's Guangzhou Modern Cancer Hospital respectively.

Table 7 DSCTs in China: Firm details (see supplemental data file for data source)

Importantly, this predominance of micro-small-medium level actors with low resource requirements not only argues for the relative ease of market-entry by new entrants but also emphasise the lack of advantages enjoyed by traditional (bio)pharmaceutical incumbents in (D)SCTs. For instance, scalar advantages of incumbents like large production capacities and immense capital and labour resources that represent formidable entry barriers for new entrants [12, 18] present almost no advantages in (D)SCTs. This is mainly because in autologous SCTs, the need for personalised one-at-a-time clinical processes are better suited for one-at-a-time table top cell processing at point-of-care and cannot be produced with mass production systems in which incumbents have developed relative advantages. This is also why point-of-care delivery via private clinics in India and US, and public and military hospitals in China have so easily become the sites of 'also-DSCT' delivery and expansion in each nation. At the same time, this shift towards personalized point-of-care clinical settings explain the vertical integration trends whereby the incumbent-tier of the market must partner with the typically ignored lower-end of the market dominated by new entrants [19] to participate in the SCT market. In turn, this shift has led to a structural shift of production and competition in the global bioeconomy from the higher

resource-intensive and restricted entry 'Big pharma'-centric top-end of the market to the emerging low resource-intensive lower end of the market.

Meanwhile, the emerging lower tier of the market focused on DSCTs is poised for growth as the lower costs of DSCTs compared to approved SCTs are likely to continue attracting self-pay patients (thus creating demand), or at least until states and insurers begin to reimburse the exorbitant costs of approved SCTs which is unlikely in the near future. For instance, the approved SCT TEMCELL costs around US$113,000 to US$170,000 per treatment depending on the country of sale [72]. Similarly, the approved SCT Strimvelis costs US$665,000 per treatment and around US$20,3924 per dose [73] (Table 4). At these high costs, sale of approved SCTs become crucially dependant on state reimbursements in Euro-American markets that are highly controversial based on considerations like the rare diseases treated by most approved SCTs, quality of adjusted life-years etc. [74]. For instance, private insurers in USA so far only cover the lower cost products like Carticel and Epicel. Meanwhile, reimbursements for approved SCTs in China and India are also unlikely as their governments focus on meeting basic public health needs of large populations rather than spend on a few afflicted with rare diseases. Thus, if self-pay is the only option for patients to access SCTs then the comparatively lower cost of DSCTs ranging between US$10,000 to US$25,000, is likely to continue attracting out-of-pocket patients, thus bolstering DSCT demand despite being clinically inferior to approved SCTs [71].

This also means that the commercial success of approved SCTs is unlikely until Euro-American markets agree to reimburse them and doubtful even then. Consider Strimvelis, which despite receiving reimbursement from the Italian government and marketing approval in May 2016, received its first patient almost a year later in March 2017 [75]. Similarly, Glybera went "bust" in 2017 after a single use, with its administering clinician claiming to have written "a thesis" to persuade German insurers and regulators to reimburse Glybera's US$1million price tag [57]. This suggests that in addition to the low-cost advantage of DSCTs, users are likely to prefer DSCTs as "they are [comparatively] simpler, more convenient"[17] to access despite being considered inferior to clinically approved SCTs by most experts [9, 26, 54, 55, 56]. Additionally, patients seeking DSCTs are typically those for whom existing healthcare options have either failed to appreciably improve health or have been ineffective [27, 55, 71]. For this patient-segment, DSCTs offer options that are otherwise unavailable, thus bolstering demand for DSCTs. In sum, (a) the shift in (D)SCT production away from the resource-intensive Big-Pharma dominated top end of the global bioeconomy towards the low resource-intensive low end populated by new entrants (with or without tie-ups with incumbent), coupled with (b) emerging demand for lower cost inferior DSCTs create new market conditions that run alongside existing (bio)pharmaceuticals and approved SCTs.

5. Response from existing knowledge producers

Do incumbents integrate SCTs in their existing business models?

As already discussed, incumbents undertake adaptation strategies of reducing scale to smaller units by vertically integrating with research institutions to participate in the (D)SCT market (see Table 5). For example, Chiesi's joint venture with University of Modena (Table 5) is reflective of a broader global trend in the last decade towards "academic entrepreneurship" whereby universities have themselves become new entrants in the bioeconomy by commercialising research through firm-university collaborations [76, 77, 78] e.g.. Similarly, Australian Mesoblast joint venture with Japan's national incumbent JCR-Japan for TEMCELL is consistent with the trend of commercialisation in the biotechnology sector through smaller units [79] and as also seen in DSCTs (e.g. with India's Fortis and Apollo Groups, and China's Yanda and Bo Ai Groups).

However, evidence shows that incumbents’ adaptation strategy of reducing scale through joint ventures to compete in the low-resource intensive SCT space may not be working due to logistical issues of distributing SCTs to patients [80]. Consider the logistical issues of distributing University of Modena and Chiesi's joint venture SCT Holoclar as highlighted by Chiesi's Project Leader Diego Ardigo:

The product's shelf-life of 36 hours meant we had to take a decision to either have the patients from all over Europe come to our clinical store [in Italy], or have the product within 36 hours to all member states of EU" in 15°C–25°C temperature-controlled transport [81].

First, Ardigo's comment highlights the incommensurability between (a) SCTs localised one-to-one production needs, short shelf life (see Table 4) and logistical constraints with (b) the logic of mass distribution, -production and -sales that underpin existing revenue-earning models of (bio)pharmaceutical incumbents. Second, given these fundamentally incommensurable endogenous differences in production and application, whether incumbent's adaptation strategies of reducing scale to participate in (D)SCT markets will be sufficient in generating the immense revenues needed for long-term sustainability, remain questionable.

Nevertheless, incumbent's quest for novel adaptation strategies to generate the high revenue flows required to remain viable shows (a) incumbent's keenness to participate in emerging innovation trajectories, while (b) emphasizing the growing competitive significance of (D)SCTs as a knowledge production trajectory. Consider GlaxoSmithKline's (GSK) novel strategy for getting the Italian state to reimburse its approved SCT Strimvelis at half the state's traditional treatment-cost burden by guaranteeing to pay back money based on Strimvelis' performance in treating children diagnosed with ADA-SCID [73]. According to Phil Reilly of US-based gene-therapy investment-fund Third Rock Ventures, GSK's reimbursement strategy might contribute a paltry US$8million to its whopping revenues of US$30billion but serves the important purpose of "...a new [revenue generating] model for ultra-rare disorders, [as GSK is] going to develop these treatments ...[with] hundreds if not thousands of disorders that fall into this category." Indeed, developing therapies for 'ultra-rare disorders' or orphan diseases has been the preferred discovery pathway for most SCTs seeking regulatory approval due to the pathway's

comparatively lower clinical data requirements and hence fast-track regulatory approval processes in getting therapies to market faster. However this also means that given the low incidence of orphan diseases, the blockbuster earnings potential from blockbuster global sales of globally demanded (bio)pharmaceuticals like Humira or Harvoni are redundant for orphan drugs and therapies. For incumbents like GSK, finding a novel revenue-generation strategy for adapting to the lower expected revenue flows for orphan-disease therapies (like ADA-SCID targeted by Strimvelis) is key to long-term sustainability. In this sense, GSK's reimbursement offer to the Italian state is based on a strategy of revenue maximization by higher per unit pricing and low sales volumes, whereby GSK receives guaranteed reimbursement by the Italian state at Strimvelis' US$665,000 per treatment cost[73]). This strategy is radically different than GSK's existing revenue model for (bio)pharmaceuticals based on revenue maximization by high sales volume but at comparatively lower per unit cost. As a GSK spokesperson commented,

We hope that Strimvelis will be the first of a number of innovative gene-therapy medicines that we will bring to patients. ...[GSK recognizes] that the industry will need to adapt the way in which medicines are priced and funded [73] [bold added for emphasis].

This suggests that Strimvelis' success, and for that matter the success of all approved SCTs, depend as much on scientific discovery as on the ability of incumbent producers to adapt existing structures like reimbursement to SC science's inherent disruptive attributes. Nevertheless, the extent to which these novel adaptation strategies will sustain incumbent's in the long-term remain uncertain and hinged on future discovery of medically viable allogeneic SC products sellable over-the-counter and mass-producible with existing (bio)pharmaceutical models of production.

Nevertheless, GSK's struggle to find successful adaptation strategies is emblematic of three things. First, it is emblematic of the causal salience of the endogenous disruptive attributes of autologous SCTs. Particularly, in enabling the paradigm shift of therapeutic delivery from existing mass-produced over-the-counter (bio)pharmaceuticals distributed via pharmacies to SCTs low resource-intensive personalised point-of-care settings. Consider GSK's case, where the endogenous imperatives decide the need to adapt to exogenous regulations - not vice versa. This in turn enables low resource-intensive personalised point-of-care DSCT clinics (that readily meet the scale-based requirements of SCTs) to enter the incumbent-centric bioeconomy and provides a compelling explanation for their global increase from a few clinics in the developing nations in 2008 to rising numbers in USA [30] and other nations [10] by 2016. Second, the acute threat perceptions among incumbents like GSK implicit in their rush to adapt to the emerging trajectory, is emblematic of the increasing competitive relevance of latter processes that enable DSCT clinics. Third, GSK's struggle to adapt existing structures to the new scientific imperatives of SCTs is emblematic of the drug development industry's larger struggle with the incommensurability’s between existing governance structures and emerging SCT production. This in turn has led

to governance voids in jurisdictions worldwide further bolstering DSCT expansion and is expected to be explored in future research.

ConclusionThis study contributes to the fields of innovation studies and regenerative medicine. Specifically, it contributes to the body of knowledge on (a) firm-level innovation dynamics of (un)approved SCTs in the SCT sector and (b) their sectorial comparative dynamics with existing (bio)pharmaceuticals. Findings across the range of key determinants of innovative change - from knowledge production processes, knowledge producers to the knowledge produced - supported the hypothesis that the paradigmatic shift in biomedical science from chemicals and organic tissue (underpinning biopharmaceutical development) to the patient's body as the source and target of SCT development has opened up disruptive trajectories of biomedical innovation. As a result, the opportunity for micro- small- and medium-level new-entrants (like DSCTs) to enter the incumbent-centric resource intensive global bioeconomy has been a key outcome of this transformative change in the fundamental knowledge rather than a result of factors exogenous to the science like permissive regulations. For regulations, or its lack, bolster the endogenous conditions that drive this transformative shift in production trajectories, but do not create them.

Future perspective The study of firm-level dynamics revealed a shift towards low resource-intensive micro-to-small point-of-care SCT delivery patterns and emerging vertical integration trends at regional and global levels. This suggests that SCT development is likely to shift away from the existing 'Big-Pharma' centric models of (bio)pharmaceutical production to mosaics of micro actors and small-to-medium level collaborations between new entrants and incumbents [60]. In turn, this shift is likely to democratise participation in the global SCT economy by creating spaces for new or marginalised actors to enter global markets and possibly challenge dominance by incumbents cluster [24, 25]. Whether this shift will challenge (e.g. by China and India) the existing regional dominance of the global bioeconomy by the major developed countries is doubtful, for even in the DSCT area 570 US clinics offered DSCTs compared to 10-15 clinics each in China and India.

Moreover, the endogenous attributes like autologous cells, personalised point-of-care delivery, short shelf lives etc. that contribute to SC innovation's parallel production trajectory also raise questions of commensurability with existing regulation oriented towards (bio)pharmaceuticals with long shelf lives and process-dependant mass-scale production and distribution networks. In turn, these commensurability issues create spaces in the governance and regulation of SCTs that do little to limit the growth DSCTs. Instead, these issues bolster DSCT expansion by neglecting the salience of concomitant regulatory adaptation to the disruptive attributes needed to strengthen the accessibility and viability of approved SCTs. Invariably, these commensurability issues will have profound implications for the future development of SCTs and provide opportunities for future research.

Executive Summary Background

Endogenous disruptive attributes of SCTs, rather than exogenous regulations explain global expansion of DSCTs.

New demand conditions Paradigm shift from in-vitro halt-and-prevent approach of

pharmaceuticals to in-vivo repair-and-regenerate processes of SCs create new demand for SCTs.

Users choose DSCTs based on cost and access considerations despite DSCT's clinical inferiority to approved SCTs.

Shifting market dynamics New demand conditions lead to shifts in production and

competition from the resource-intensive 'Big pharma'-centric top-end of the market to the emerging low resource-intensive lower end of the market.

Further shifts in global market conditions are likely, as commercial viability of approved SCTs remain uncertain.

Conclusions Struggle for commercial viability of approved SCTs reflect

incommensurability between existing governance structures and emerging conditions.

This incommensurability leads to governance voids in jurisdictions worldwide that in turn bolster DSCT expansion.

Disclosure statementThe author reports no conflicts of interest.

References: Papers of special note have been highlighted as: • of interest; •• of considerable interest• Key work on ethical, legal and social issues of 'unproven' SCTs.

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