Shannon Weiman's blog

2012 is right around the bend. What might QB3 get up to over the next year? We talked to our director, Reg Kelly, who gave us a peek into his plans.

In the coming year QB3 will link more with patient advocacy groups to better understand the needs of the medical community. This will guide research, technology development, and entrepreneurial investments to fill these needs. “We are trying to be more user-driven in our innovation,” Kelly says. Targeting patients as users of biomedical innovations and catering to their needs taps into a huge market potential, attracting investors to the table. Ultimately, the products brought to market will provide critical solutions to improve health. Kelly will be working with Margaret Anderson of Faster Cures to develop a collaboration in the coming months. Faster Cures is a D.C.-based non-profit that bridges research, industry, policy, patients and investors to accelerate and improve healthcare.

Along these lines, Kelly would like QB3 to become a leader in the emerging field of systems pharmacology. This area of research uses computational biology to develop multi-drug cocktails against diseases, such as some types of cancer, that are resistant to single drug treatments. “I would like to see QB3-UCSF develop more of an international reputation for excellence in a scientific area,” Kelly says. “We have the top-ranked pharmacy school in the country, and strong research programs in genetics and systems biology. This puts us in the sweet spot to become a powerful player in the field of systems pharmacology.” He suggests bridging all three QB3 campuses to accomplish this. UC Berkeley and UC Santa Cruz offer computational expertise to perfectly complement UCSF’s expertise in medicine.

QB3 also aims to improve the efficacy of its entrepreneurial programs in the upcoming year. “We have the basic elements of what we do in place, but we have to execute better,” Kelly says. QB3 will work with Deloitte consultants to identify weaknesses and areas to work on. Formalizing and systematizing programs will be a top priority. “The Startup-in-a-Box program is a good start,” Kelly says. “We plan to do more along those lines.” Kelly suggests a similar mentoring program to enrich the incubator experience, providing startup scientists with business management skills. Overall, developing a playbook for the QB3 experience will improve both efficiency and efficacy in accomplishing program goals. On a larger scale, such a playbook will serve as a model for other organizations who would like to follow in QB3’s footsteps.

Stay tuned to the QB3 website as Reg & co’s new plans, collaborations and innovations unfold over 2012!

Neuroscience is a particularly challenging field in drug development. Complexities in molecular signaling and electrical circuitry make it difficult to understand disease and design treatment. And the blood-brain barrier stands in the way of therapies. Pfizer has developed special techniques to predict how the brain absorbs—and expels—chemical compounds. On Tuesday, December 6, Jennifer Liras, PhD, senior director for neuroscience pharmacokinetics, dynamics and metabolism at Pfizer, shared the details of some of the company’s tactics in a Quadrant industry speaker seminar.

The brain is arguably our most vital organ, and is extremely sensitive to chemicals in its environment. The blood-brain barrier protects the brain from damage by keeping many foreign and natural molecules from entering. It surrounds all blood vessels that feed the brain. It is composed of a single layer of cells, tightly bound together. Molecules in the blood cannot leak between cells, but can pass through the cells to reach the brain. This is called “permeability.” Pfizer, Liras said, uses permeability experiments in the laboratory to predict whether a drug will cross the blood-brain-barrier to reach its therapeutic target in the brain.

Pfizer also considers drug efflux, which is mediated by transporters located in cell membranes. These transporters actively pump foreign molecules out of the brain. Pfizer uses laboratory experiments and animal models to predict efflux.

Drug candidates with high permeability and low efflux are the most promising and predictable. These are ideal for carrying forward to human clinical trials. Drug candidates that do not meet these criteria require further analysis to predict complications. Mathematical modeling provides a powerful tool, Liras said.

Pfizer uses physiologically based pharmacokinetic (PBPK) modeling to further assess drug candidates that are actively transported out of the brain. This technique calculates a predicted drug distribution using mathematical equations that describe physiological and compound-specific parameters. Physiological parameters include surface area, volume and transporter abundance in various tissues. Compound-specific parameters include metabolism, protein binding, permeability, and extent of transporter interaction. Parameters are measured in laboratory assays and animal models and then applied to the mathematical model.

Thus far Pfizer is pleased with the accuracy of their initial attempts at PBPK modeling of blood-brain barrier penetration, Liras said. However, inconsistency between pre-clinical animal models and human systems is troubling. The predictive power of rat and dog models is similar but inferior to non-human primates. Liras wrestles with the issue of balancing accuracy with ethics, she said.

Pfizer continues to refine their PBPK model as a way to identify promising neuroscience drug candidates. In the future they hope to incorporate this algorithm as a computation tool to aid medicinal chemists in the initial stages of drug design.

Increasing costs and diminishing returns of pharmaceutical R&D have led venture capitalists to shy away from making investments in the biomedical industry in recent years. Those who do invest do so at a much later, less risky stage in development. This leaves pharma companies struggling for enough capital to bring treatments from target identification to clinical trials, or even pre-clinical testing. Small startups may be hit hardest, but even industry giants like Abbott are feeling the burden, says Nicole Walker, director of Abbott Biotech Ventures. She outlined Abbott’s strategy to offset these costs at the QED@QB3 seminar on Thursday, December 8 at UCSF Mission Bay.

The cost of developing a single drug exceeds 1 billion dollars. For a large company like Abbott, with dozens of drugs in their pipeline, the costs add up fast. Many large pharmaceutical companies have diminished costs by decreasing in-house early stage R&D. Instead, they reallocate these funds to purchase startups who have already carried projects to later stages in development. Augmenting their pipeline using this strategy averts some of the risk and is less costly, Walker said.

Abbott has taken a slightly different approach with corporate venture investing, realizing that many promising startups don’t have the funds to carry a project far enough. Many struggle at the critical stage of IND filing through phase IIa clinical trials. Abbott develops early partnerships with these companies, investing money and operational resources to carry the project forward, with the end goal of acquisition when the project has progressed sufficiently.

This strategy is not as risky as early acquisition, Walker said, as Abbott is not committed past the initial investment. If the project takes a turn for the worse, Abbott has an easy exit strategy. Abbott also shares the financial burden with other venture capital firms who trust Abbott’s expertise to guide their own investments. It is also less labor intensive, as Abbott leaves the R&D efforts up to the other company. Overall, Walker estimates that an investment of $20 million saves Abbott an equal amount in R&D costs, while minimizing risk and enhancing Abbott’s pipeline and long-term growth.

In looking for investments, Abbott balances the interests of venture capital and pharmaceutical development. As venture capitalists, they ask questions about end market potential, such as how the product will be viewed by physicians and insurance companies. But it’s not all about commercial return, Walker said. Abbott is equally vested in the assets themselves. Abbott is particularly interested in augmenting their pipeline in therapeutic areas they are known for, such as immunology, neurology and oncology, as well as in expanding fields like women’s health and renal disease.

So how has it worked out? Abbott has approved eight corporate venture investments since the program was established in 2009. The competition is fierce, with only 1% of applicants chosen for investment. Most come from the US, but Walker and her colleagues review applications from around the globe. Thus far Walker is pleased with Abbott’s investments, which have ranged from small $200,000 seed stage funding to large $10 million dollar deals. While some have already paid off financially, the full value of the assets won’t be clear for a few years.

The 2008 collapse of the US financial market changed venture capital investment strategies in a way that has left medtech and biotech startups out in the cold, Allan May, founder of Life Science Angels, said at his QED talk Thursday, December 1 at UCSF Mission Bay. May described those changes, which have rocked biomedical entrepreneurship in the last few years, and suggested some future strategies for securing funding. Download his slides

Venture capital funds have dwindled considerably since 2008. The number of venture firms in the US has dropped from over 1,100 to under 450, and the total budget of the VC industry has dropped by two thirds. Only 30-50 firms remain that invest in medtech or biotech, and of those, even the largest are pulling out.

Why? The answer is threefold, says May. The cost and time to exit has increased (estimated at $30-80 million in 4-7 years), while profits upon exit have decreased (<$125 million). By contrast, the Web 2.0 and digital media industries, which require almost no capital to begin with, have decreased cost and time to exit and increased profits. Given the chance to invest in cancer or video games, VCs are choosing video games, May says.

May blames the FDA for these problems. The amount of time and capital spent on studies and in bureaucracy is out of control, he says, and even then the chances of approval are risky. The business model is unfinanceable.

Those still interested in biomedical innovation and investment are going overseas. Review times in Europe are less than one quarter of those in the US (time from first communication to clearance is 11 months vs. 54 months for PMAs, and 7 months vs. 31 months for 510Ks). Approvals are also more forthcoming, with the most advanced cancer therapies, newest minimally invasive surgeries and latest implants all available offshore years before they are in the US. Medical tourism is growing at more than 35% per year. Even some US hospitals and insurance companies are sending patients oversees for cheaper and more advanced treatments.

May suggests rethinking biomedical entrepreneurship to fight the offshore trend. New business models that highlight cost-effectiveness will have to replace old models that are no longer viable in today’s marketplace. This means using less capital to provide better patient outcomes while lowering the cost of quality healthcare. Innovators themselves will have to put as much thought and creativity into their business strategy as they do into their science. A positive business model should be used as the selling point to angel investors.

Angel investors are the best financing pathway for medtech and biotech entrepreneurship, May says. They have been picking up the slack left by VCs. While venture firms have dwindled, angel groups have tripled in the last ten years. Angels favor early stage investments, providing 90% of outside equity for seed-stage funding at approximately $20 billion/year (VC seed-stage investment is only $0.3 billion/year). The interests of angels are also more aligned with those of founders and entrepreneurs. May suggests networking with angels to best formulate your business model and to find the right angel for your venture.

Resources provided by May:

www.angelcapitalassociation.org

www.angelresourceinstitute.org

www.ownyourventure.com

www.pwc.com/innovationscorecard

Trends in Life Science Investments and Exits, Oct 2010, SVB analytics

Medical Device Investing: 2010 and Beyond, Start-Up, Vol 15 No 10, Dec 2010

FDA Impact on Medical Innovation, Nov 2010, Meer and Makower

“Academic biomedical science has a much narrower bandwidth than it perceives. And most medicine lies outside that domain,” Don Ganem, MD, Global Head of Infectious Disease Research and VP of the Novartis Institutes for Biomedical Research, said on Tuesday, November 29 during his talk in QB3’s Quadrant industry speaker series.

Ganem is not bashing UCSF or other academic centers. He is pointing out a huge blind spot of academic science that needs to be addressed if translational research is to fulfill its promise in the clinic.

Ganem himself spent the first 30 years of his career as an academic physician-scientist at UCSF. He even directed the Biomedical Sciences graduate program here. But transitioning to a leadership role at Novartis last year broadened his perspective of how to effectively approach biomedical research.

At Novartis, Ganem has to consider aspects of biomedical science beyond the scope of target molecules and pathways in the lab. Compound formulation, toxicology, pharmacokinetics and other complications arise when developing compounds for use in living organisms. Many of these critical issues are left unstudied by academic scientists. As an example Ganem cites the fact that only five academic researchers study bacterial efflux and permeability issues, which account for most drug resistance. The entire field of microbiology is focused on the wrong problem if the goal is to develop a new generation of effective antibiotics, Ganem says.

Perhaps even more importantly, academic science is out of touch with the needs of the medical community. One of the first questions that Novartis considers in initiating a project is ‘what is the medical need?’ Ganem, who was an acting physician until December 2010, uses his experience in treating patients to identify these needs and appropriately direct projects to fill them.

This clinical perspective is strikingly absent from academia. Top-tier publications like Cell and Nature Medicine pride themselves on covering cutting-edge biomedical science, but not a single physician has served on either editorial board in the last 10 years, according to Ganem. How can a group of scientists determine what is cutting-edge in medicine without any input from the medical community? He calls these publications a “collection of party tricks, like how to turn a cell blue.”

Even in elite medical schools like UCSF, the study of clinical disease is an enrichment activity, rather than a core necessity, Ganem says. He found that his interest in clinical medicine was not shared by most of his colleagues at UCSF, who tended to phase out their clinical practice in favor of studying molecular mechanisms in the lab.

Attempts to blend medicine with academic research have fallen flat, Ganem says: “The UCSF Biomedical Science program has lapsed back into a fairly traditional graduate program.” He is disappointed in the narrow scope of coursework, despite the breadth of information availableGanem declares the fact that anyone can get a PhD in biomedical sciences without learning about immunology or medicine is a crime.

Without exposure to clinical medicine, biomedical researchers focuse on diseases with high visibility in the media and scientific publications, rather than the true medical needs of practitioners and patients. Ganem cites hospital acquired infections and kidney disease as examples that don’t get much press or attention in academia, but are common and often lethal problems in the clinic. A whole world of medicine exists outside of “big-ticket” items like cancer, and these needs are not being met by academic biomedical research, he says.

Alex Shoemaker

This week’s Quadrant Industry Speaker Series Seminar featured Alex Shoemaker, PhD, associate director of global pharmaceutical research and development at Abbott Labs. Shoemaker highlighted new targets in cancer drug development and Abbott’s efforts to develop combination therapies to more effectively kill tumor cells.

Most cancers develop when a cell accumulates a number of genetic mutations. These mutations lead to abnormalities that allow for tumor formation. In a normal healthy cell, mutations and other damage to DNA are corrected by DNA repair mechanisms. Six different pathways are in place to repair different types of DNA damage. When one or more of these pathways malfunctions, mutations accumulate rapidly. These mutations translate into mistakes in cellular processes that can be dangerous to the cell and organism as a whole. This genomic instability is a key step in progression to cancer.

To prevent a cell from getting out of control, an internal sensing system exists to detect dysfunctional DNA repair. If a cell detects too much DNA damage, it will commit suicide.

Abbott and other pharmaceutical companies, including Pfizer, AstraZeneca and Merck, are taking advantage of the cell suicide process in a new strategy in cancer drug development. By designing molecules that interfere with DNA repair pathways, they hope to push tumor cells over the edge into suicide mode. Poly ADP ribose polymerase (PARP) inhibitors are a class of drugs that inhibit one of these pathways.

In normal cells PARP inhibitors have little effect, as a single dysfunction in DNA repair can be taken in stride. However, in cancer cells that already have problems with DNA repair, adding insult to injury can tip the balance between life and death. Breast and ovarian cancers with BRCA1 and 2 mutations, as well as some colon cancers, are good candidates for this type of therapy.

In cases where tumors do not have documented mutations in DNA repair, Abbott is taking another approach. They hope to give these tumors an extra shove by using PARP inhibitors in combination with other drugs that induce DNA damage. These drugs, such as TMZ and cyclophosphamide, are used in isolation to treat cancers in the clinic. However, high dosing, prolonged treatment and tumor resistance cause problems. Adding PARP inhibitors to the mix increases efficacy while decreasing tumor resistance, required dose and duration of treatment. Combination therapy hits the tumor hard and fast without giving the tumor a chance to fight back.

Abbott’s PARP inhibitor, veliparib, is currently in phase II clinical trials. To achieve FDA approval, they will have to determine optimal dosing and combination regimens in the context of particular types of cancer. In the future Abbott plans to explore options to expand treatment. Combination therapy may also improve efficacy of classic chemotherapy agents such as cisplatin and radiation. Studying tumor genetics may reveal additional cancer types that will respond to PARP inhibitor combination therapy.

For your startup to succeed, you need to hire the right people. This means finding employees that not only have the right skill sets, but also share your core values, says Shellie Williams of ON Search Partners. Williams shared her expertise from 20 years of recruiting experience at the QED@QB3 seminar yesterday at UCSF Mission Bay. As president of Artemis Search, CEO of Williams Search Group, and former principal staffing leader at Genentech, she has honed the interviewing process to identify the ideal candidate.

The first step to finding the right employee is defining a clear picture of what you are looking for, Williams says. She recommends holding a meeting to discuss and define company core values. These will help you to pick the right match for your team. In addition, you should define core competencies and skills specifically required for the position.

Once you have defined the desired qualities, develop a standardized set of question to probe them. Williams recommends using behavioral-based interviewing to do so. This style focuses on a candidate’s actions and behaviors as they approach a task (core competencies), rather than the end result or goal. The model uses past behavior as a predictor of future behavior and success, allowing you to identify stellar candidates who also fit your team’s working style.

Specifically, questions should follow the “JOBS” model to probe behavioral examples used in past job experience. Questions should be:

J Job related
O Open ended
B Behaviorally based
S Skill definition based

When listening to responses, use the “SHARE” model to identify core competencies.

S Situation: Identify the situation
H Hindrance: Did the candidate face any hindrance?
A Action: What action did the candidate take?
R Results: What were the results of that action?
E Evaluation: Compare the candidates behavior with predefined qualities

This structured and consistent interviewing process is essential to an organized and effective search, Williams says. Don’t be tempted to undermine your success by rushing or skipping the process, making snap judgments, or following gut feelings.

Keep an eye out for candidates with “adaptive excellence,” who demonstrate a pattern of achieving excellence in all things. This could include being captain of the soccer team in college, president of the homeowners association, or project leader in a past job. These individuals are generally dependable, self-directed, adaptable, team players who take initiative and go above and beyond expectations. They will be a valuable addition to your team.

In the end the ideal candidate has the technical skills required for the job, core values that match your company, and adaptive excellence to lead your company to success. Don’t settle for less. The time and effort you put into the hiring process will pay off in the long run.

“The idea that China is a competitor to the US economy is a small-minded view of the world. The potential for collaboration with China is huge, and the US cannot afford to miss out,” QB3’s associate director Douglas Crawford said last Monday, November 7th at “Protecting Life Sciences IP in China: Innovation, Legal Change and Business Strategy,” a half-day conference organized by the Asia Society and held at the UCSF Mission Bay campus.

Keynote speakers Wei Huacheng, chairman of Beijing Pharmaceutical Group, and Oliver Lutze, head of IP rights for Bayer China, traveled from China to share their expertise. Speakers and panelists depicted the Chinese economy as rapidly evolving from manufacture to innovation, with government agencies driving IP regulation and enforcement. While many Chinese, including entrepreneurs, do not yet respect IP, improvements in recent years have made China a safer and more productive country for life science investments.

The pharmaceutical industry has invested deeply. Most industry leaders, including Pfizer, Bayer, and Novartis, have established billion-dollar R&D centers in Shanghai over the last decade. However, IP protection has been a challenging issue for the life science industry in China.

The Chinese have traditionally viewed IP regulations as a hindrance to their economy, which was based on the cheap manufacture of goods. IP law did not exist in China until 1984, and new chemical entity protection was not established until 1993. Adherence to and enforcement of new regulations has not been ideal.

However, a recent strategy shift by the government is improving the situation. Recognizing the limitations of a manufacture-based economy, the government declared a push towards an innovation-based model in 2008. To jumpstart the initiative, it invested $200 billion in healthcare and life science innovation. $15 billion was dedicated to new drug development through the “Mega New Drug Creation and Manufacturing Program.”

An innovation-based economy relies on strong IP protection to uphold the value of inventions. “IP and IP protection is a function of economic need,” said Greg Scott, president and founder of ChinaBio LLC. “China now understands that IP is important from a business perspective, internally and internationally.” The government is seeding a cultural respect for IP among its citizens. The “IP Enforcement Initiative”—one would love to know the details, but few were provided at the conference—took place from October 2010 through June 2011. Some believe the Ministry of Commerce should continue the program indefinitely, according to panelists.

Government enforcement of IP regulations initially favored Chinese entities in international disputes. However, the government soon realized that this approach was driving international investments away. The government reformed its approach and demonstrated a new balanced stance in landmark cases won by Eli Lilly and Pfizer in 2007. These cases instilled trust in the Chinese IP system. As a result, international pharmaceutical companies confirmed their commitment to invest in China.

While China has undergone vast improvement in IP protection in the last 30 years, more work needs to be done to meet international standards. Current law excludes medical treatments from IP protection, which stifles innovations in drug delivery, devices and personalized medicine. The Chinese government is making an effort to catch up by engaging with industry representatives and governments to guide IP law amendments and implementation strategies. Mobilizing policy, science and business in coordination, China hopes to be at the forefront of global innovation by 2020, Lutze said.

Michael Shuster

This week’s QB3 Entrepreneurs’ Discussion (QED@QB3) talk addressed the issues of patent law in life sciences ventures. Michael Shuster, PhD, a partner in the Intellectual Property Group and co-chair of the Life Sciences Group at Fenwick and West, LLP, outlined important changes made by the Leahy-Smith America Invents Act, also known as the Patent Reform Act of 2011.

The America Invents Act aligns US patent law with international standards; simplifies the process for determining what counts as “prior art;” and creates a new post-grant review process to help weed out bad patents soon after they issue. Bad patents place an enormous burden on commerce, Shuster said. The post-grant review process should bring the patent system closer to its original purpose (as set out in the Constitution) so that it promotes rather than hampers innovation.

Shuster described the ongoing developments in patent law interpretation as “recalibrating the line of where patentability lies,” and pointed to cases such as Prometheus (now in front of the Supreme Court) as an example of the struggle to balance the patent system’s abilities to hamper or promote innovation.

The new laws award patents to the “first to file” as opposed to the “first to invent.” This is the standard in international patent law. This means that whoever files the patent or publicly discloses the invention first can obtain a patent, provided they file within one year of public disclosure. Shuster noted that in some cases, a patent filing can secure a priority date even if the invention has not actually been “reduced to practice,” although this would depend on particular factors that include “predictability of the art,” and how well the application described and enabled the invention.

Shuster said that this new system encourages entrepreneurs to file as early as possible. He recommends filing a provisional application that describes the invention, and to limit the application to work the inventors expect to be able to complete within one year of the filing date.

In response to a question posed during his talk, Shuster suggested that although grant applications do not generally count as public disclosures under patent law (new or old), one should indicate that a grant may contain proprietary information. This may offer some protection if requests from third parties come into the granting agency seeking to obtain a copy of the grant. Designating a grant as proprietary information allows the submitter to redact information prior to the grant’s release.

Most of the new legislation goes into effect on March 16, 2013.

Shuster and his colleagues at Fenwick and West, LLP, offer their expertise at low or no cost as part of the QB3 Startup in a Box program, a package of services intended to take UC entrepreneurs from concept to a successful SBIR grant application.

Rusty Williams, MD, PhD

Rusty Williams, CEO and founder of Five Prime Therapeutics, delivered the keynote address at Thursday’s Deloitte QB3 Award for Innovation ceremony. In keeping with the American Idol theme, he likened himself to celebrity guest Lady Gaga whose innovative acts and leadership in the music industry parallel Williams’ efforts in the biomedical industry. Williams, an MD/PhD in internal medicine and cardiology, started his career as a physician-scientist, winning HHMI investigator status and nomination to the National Academy of Sciences. More recently he has applied his biomedical background to industry endeavors. In his keynote address, Williams shared insights and anecdotes from his career.

Williams noted that innovation is difficult to stimulate and even recognize in the moment because it is by definition a forward looking process. However, he does point out some essential ingredients to the innovative process.

Innovation often occurs when a person has skills in two different areas which are often unrelated, he said. He cited the cardiologist William Withering, who applied his knowledge of botany to develop the first heart failure drug. Knowledge of a different subject can yield novel solutions to problems that remain unsolved within a field, Williams explained. Familiarity with a different topic is also conducive to thinking outside the box. Addressing a problem from a different perspective can reveal new ways to solve old problems.

Innovation also requires an environment where mistakes are tolerated, and even encouraged. “Error is not simply a phase that you have to suffer through on the way to success. Error often creates the path that leads you out of your comfortable assumptions. Being right keeps you in place. Being wrong forces you to explore,” Williams quoted from Steven Johnson’s book “Where Good Ideas Come From.” The key to making mistakes is to learn from them. Williams quoted again: “In the history of being spectacularly right, lurks behind it a history of another kind, a history of being spectacularly wrong, again and again and again,” and from Michael Jordan: “I have failed over and over in my life and that is why I have succeeded.”

Both academia and industry can contribute to innovation, Williams said. While universities have historically been the hubs of innovation, some projects work better and occur in a more innovative fashion in industry. QB3 aims to combine the strengths of both and maximize the innovative potential of research by fostering collaborations between the two. The collaboration with Deloitte demonstrates this initiative, with the Award for Innovation serving to both recognize and stimulate UC-generated innovations in translational biomedical research.