Functional Overview of the Biotechnology Industry To accompany Building Biotechnology ISBN 9780973467666 Relevant pages are cited within presentation Type CTRL-L to toggle fullscreen view Presentation starts on next page For more information: Yali Friedman, Ph.D. [email_address] www.BuildingBiotechnology.com

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Building Biotechnology

ISBN 9780973467666

Relevant pages are cited within presentation

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Functional Overview of the Biotechnology Industry www.BuildingBiotechnology.com Presentation to accompany BUILDING BIOTECHNOLOGY

Objectives 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 Biotechnology

What do Biotechnology Companies do? Use molecular biology to develop useful products and services RED Drugs, diagnostic tests Large profit margins FDA mandates that all drugs must be proven safe and effective prior to marketing History of successful regulation GREEN Enhanced crops, molecular farming (non-drug) No regulatory legacy Development costs similar to drugs, profits are not WHITE Industrial processes Energy production, waste degradation, environmental remediation Unresolved safety concerns, and issues in scalability BUILDING BIOTECHNOLOGY Chp 6

Use molecular biology to develop useful products and services

RED

Drugs, diagnostic tests

Large profit margins

FDA mandates that all drugs must be proven safe and effective prior to marketing

History of successful regulation

GREEN

Enhanced crops, molecular farming (non-drug)

No regulatory legacy

Development costs similar to drugs, profits are not

WHITE

Industrial processes

Energy production, waste degradation, environmental remediation

Unresolved safety concerns, and issues in scalability

Ecology  Physiology  Molecular Biology Source: EPA

Ecology  Physiology  Molecular Biology NIST

Ecology  Physiology  Molecular Biology

Ecology  Physiology  Molecular Biology

What is Molecular Biology? Molecular 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 BUILDING BIOTECHNOLOGY Chp 3 Groups of bodies Parts of bodies Tissues Organs Individual cells Parts of cells Large and small molecules Parts of molecules Parts of atoms

Molecular 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

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 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 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 Aspirin – 21 atoms Epogen – 1297 atoms BUILDING BIOTECHNOLOGY pp. 36-37

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

Drug Delivery Implant Liposome Patch Dosed Alza BUILDING BIOTECHNOLOGY pp. 64-65

Delivering 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 BUILDING BIOTECHNOLOGY pp. 64-65

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 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 Drug 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 BUILDING BIOTECHNOLOGY pp. 10-11, 36

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

The Pillars of Biotechnology

The Path From Science to Drugs BUILDING BIOTECHNOLOGY Chp 4

Genentech is a Prototype for Biotechnology 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 BUILDING BIOTECHNOLOGY pp. 13, 184

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

Genentech’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 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 BUILDING BIOTECHNOLOGY p. 326

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

Path 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 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 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&D Technology Push vs. Market Pull Does the product solve a painful problem? Drugs are the only effective treatment for some conditions What is the value to the customer? Drugs are less expensive than hospital treatments Can R&D expenses be recovered? Post R&D, drug production costs can be very low High markup Years of patent-protected sales BUILDING BIOTECHNOLOGY Chp 13

Technology Push vs. Market Pull

Does the product solve a painful problem?

Drugs are the only effective treatment for some conditions

What is the value to the customer?

Drugs are less expensive than hospital treatments

Can R&D expenses be recovered?

Post R&D, drug production costs can be very low

High markup

Years of patent-protected sales

The Pillars of Biotechnology

Regulation FDA Safety and efficacy of drugs must be demonstrated prior to marketing Food, feed additives, medical devices Orphan Drug Act and Hatch-Waxman Act provide incentives USDA Plant pests, plants, veterinary biologics EPA Pesticides of chemical and biological origin Novel organisms that may have industrial uses BUILDING BIOTECHNOLOGY Chp 8

FDA

Safety and efficacy of drugs must be demonstrated prior to marketing

Food, feed additives, medical devices

Orphan Drug Act and Hatch-Waxman Act provide incentives

USDA

Plant pests, plants, veterinary biologics

EPA

Pesticides of chemical and biological origin

Novel organisms that may have industrial uses

Clinical Trials Demonstration that drugs are safe and effective BUILDING BIOTECHNOLOGY p. 141

Demonstration that drugs are safe and effective

Clinical Trials Provide Value Milestones Identify a useful target Find and refine a drug Pre-clinical trials Clinical trials Market and sell drug Basic research Proof of principle Refine properties Prototype and scale Market and sell product Drug development: Non-drug biotechnology: value value Milestones facilitate funding, provide exits BUILDING BIOTECHNOLOGY pp. 242-243

Timeline for Product Development Apply R&D to reduce risk and increase the value of products Concept  Patent  Pre-clinical  Phase I-III  Approval BUILDING BIOTECHNOLOGY pp. 362-264

Apply R&D to reduce risk and increase the value of products

Concept  Patent  Pre-clinical  Phase I-III  Approval

The Pillars of Biotechnology

Intellectual 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 BUILDING BIOTECHNOLOGY Chp 7

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 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 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 … Biotechnology’s value proposition: Apply R&D to develop novel products worthy of a multiple on investment Concept  Patent  Pre-clinical  Phase I-III  Approval

Biotechnology’s value proposition:

Apply R&D to develop novel products worthy of a multiple on investment

Concept  Patent  Pre-clinical  Phase I-III  Approval

Building Biotechnology on Facebook Join the Building Biotechnology group on Facebook to ask questions and network with biotechnology students from other schools http://www.BuildingBiotechnology.com/support or http://www.facebook.com/group.php?gid=11590055093

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students from other schools

http://www.BuildingBiotechnology.com/support

or

http://www.facebook.com/group.php?gid=11590055093