Functional Overview of the Biotechnology Industry


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Comprehensive introductory presentation on the business of biotechnology describing legal, commercial, scientific, and regulatory foundations; used in biotech MBA programs.

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Functional Overview of the Biotechnology Industry

  1. 1. Functional Overview of the Biotechnology Industry <ul><li>To accompany </li></ul><ul><li>Building Biotechnology </li></ul><ul><li>ISBN 9780973467666 </li></ul><ul><li>Relevant pages are cited within presentation </li></ul><ul><li>Type CTRL-L to toggle </li></ul><ul><li>fullscreen view </li></ul>Presentation starts on next page For more information: Yali Friedman, Ph.D. [email_address]
  2. 2. Functional Overview of the Biotechnology Industry Presentation to accompany BUILDING BIOTECHNOLOGY
  3. 3. Objectives <ul><li>Appreciate the diversity of biotechnology applications and the fundamentals of biotechnology </li></ul><ul><li>Distinguish biotechnology from ‘traditional’ pharmaceuticals </li></ul><ul><li>Understand the value proposition of biotechnology companies </li></ul><ul><li>Appreciate why drugs are the most common application of biotechnology </li></ul><ul><li>Appreciate the interplay of legal, regulatory, and commercial factors </li></ul>
  4. 4. The Pillars of Biotechnology
  5. 5. What do Biotechnology Companies do? <ul><li>Use molecular biology to develop useful products and services </li></ul><ul><li>RED </li></ul><ul><li>Drugs, diagnostic tests </li></ul><ul><ul><li>Large profit margins </li></ul></ul><ul><ul><li>FDA mandates that all drugs must be proven safe and effective prior to marketing </li></ul></ul><ul><ul><li>History of successful regulation </li></ul></ul><ul><li>GREEN </li></ul><ul><li>Enhanced crops, molecular farming (non-drug) </li></ul><ul><ul><li>No regulatory legacy </li></ul></ul><ul><ul><li>Development costs similar to drugs, profits are not </li></ul></ul><ul><li>WHITE </li></ul><ul><li>Industrial processes </li></ul><ul><ul><li>Energy production, waste degradation, environmental remediation </li></ul></ul><ul><ul><li>Unresolved safety concerns, and issues in scalability </li></ul></ul>BUILDING BIOTECHNOLOGY Chp 6
  6. 6. Ecology  Physiology  Molecular Biology Source: EPA
  7. 7. Ecology  Physiology  Molecular Biology NIST
  8. 8. Ecology  Physiology  Molecular Biology
  9. 9. Ecology  Physiology  Molecular Biology
  10. 10. What is Molecular Biology? <ul><li>Molecular biology is the study of biological processes at their most fundamental level </li></ul><ul><li>Ecology </li></ul><ul><li>Species and groups of animals, plants, and microbes </li></ul><ul><li>Physiology, botany, microbiology (virology) </li></ul><ul><li>The structures that compose animals, plants, and microbes </li></ul><ul><li>How these structures interact with each other and the environment </li></ul><ul><ul><li>Eg. Pharmacology, neurology, immunology </li></ul></ul><ul><li>Molecular biology </li></ul><ul><li>The chemical and physical interactions within individual cells </li></ul><ul><li>The processes that underlie physiology, botany, etc. </li></ul><ul><li>Eg. What distinguishes heart from hair cells? </li></ul><ul><li>How is food processed into energy and physiological structures? </li></ul><ul><li>How do signals from the environment cause biological responses? </li></ul><ul><li>Chemistry & Physics </li></ul><ul><li>The processes that form the basis for molecular biology </li></ul>BUILDING BIOTECHNOLOGY Chp 3 <ul><li>Groups of bodies </li></ul><ul><li>Parts of bodies </li></ul><ul><li>Tissues </li></ul><ul><li>Organs </li></ul><ul><li>Individual cells </li></ul><ul><li>Parts of cells </li></ul><ul><li>Large and </li></ul><ul><li>small molecules </li></ul><ul><li>Parts of molecules </li></ul><ul><li>Parts of atoms </li></ul>
  11. 11. Why is Biotechnology Usually Associated with Drugs? <ul><li>Emphasis is on drugs, because: </li></ul><ul><ul><li>Drugs are less expensive than hospital treatments </li></ul></ul><ul><ul><ul><li>Save healthcare payers time and money </li></ul></ul></ul><ul><ul><li>Drugs are the only effective treatment for some conditions </li></ul></ul><ul><ul><ul><li>Fill unmet market needs </li></ul></ul></ul><ul><ul><li>Post R&D, drug production costs can be very low </li></ul></ul><ul><ul><ul><li>High markup </li></ul></ul></ul><ul><ul><ul><li>Years of patent-protected sales </li></ul></ul></ul><ul><ul><li>Interrupting biological processes is easier than modifying or creating them </li></ul></ul><ul><ul><li>Cost to develop non-drugs may be similar to drugs, but profits are smaller </li></ul></ul>
  12. 12. Pharmaceutical vs. Biotech Drugs <ul><li>Synthetic (Pharmaceutical) Drugs </li></ul><ul><ul><li>Chemically synthesized </li></ul></ul><ul><ul><li>Typically small and water soluble </li></ul></ul><ul><ul><li>Can withstand stomach acids and enter bloodstream </li></ul></ul><ul><li>Biologic (Biotechnology) Drugs </li></ul><ul><ul><li>Biologically synthesized </li></ul></ul><ul><ul><li>Typically large proteins, not necessarily water soluble </li></ul></ul><ul><ul><li>Cannot withstand stomach acids </li></ul></ul><ul><ul><li>Cannot cross into bloodstream </li></ul></ul>Aspirin – 21 atoms Epogen – 1297 atoms BUILDING BIOTECHNOLOGY pp. 36-37
  13. 13. Drug Delivery Implant Liposome Patch Dosed Alza BUILDING BIOTECHNOLOGY pp. 64-65
  14. 14. Delivering Biologics <ul><li>Challenge </li></ul><ul><li>Must invest in developing effective delivery methods </li></ul><ul><li>Patient compliance </li></ul><ul><li>Opportunity </li></ul><ul><li>Possible to increase efficacy, safety </li></ul><ul><li>Patches and favorable dosage regimens can improve compliance </li></ul><ul><li>Selling twice as much drug by doubling adoption and compliance </li></ul><ul><li>is similar to selling two drugs, without the cost of </li></ul><ul><li>developing two drugs </li></ul>BUILDING BIOTECHNOLOGY pp. 64-65
  15. 15. Taxol: A Traditional Pharmaceutical <ul><li>Anti-cancer drug </li></ul><ul><ul><li>In 1980 it was discovered that taxol interferes with structural proteins </li></ul></ul><ul><ul><li>to prevent cell division </li></ul></ul><ul><li>Production issues </li></ul><ul><ul><li>Only natural source was slow-growing, endangered Pacific Yew </li></ul></ul><ul><ul><li>Six 100-year old trees required to treat just one patient </li></ul></ul><ul><li>Synthetic synthesis </li></ul><ul><ul><li>Three methods have been developed, none are economically efficient </li></ul></ul><ul><li>Semi-synthetic synthesis </li></ul><ul><ul><li>Taxol precursors are extracted from yew needles and converted to taxol </li></ul></ul>
  16. 16. Biotechnology has Revolutionized Drug Development <ul><li>Injected insulin directly supplements an insufficiency in diabetics </li></ul><ul><li>Prior to 1982, insulin was primarily extracted from pig pancreas </li></ul><ul><li>50 pigs sacrificed to produce sufficient insulin for one person for one year </li></ul><ul><li>Risk of disease transmission, shortages, immune system rejection </li></ul><ul><li>Use gene splicing to insert human insulin gene into bacteria </li></ul><ul><li>Plentiful supply </li></ul><ul><li>No risk of animal disease transmission </li></ul><ul><li>Reduced risk of immune system rejection </li></ul><ul><li>Traditional pharmaceutical methods involve chemical synthesis and </li></ul><ul><li>biological extracts and pharmaceuticals are often indirect effectors </li></ul><ul><li>Biotechnology uses biological synthesis and biologics are often direct effectors </li></ul>BUILDING BIOTECHNOLOGY pp. 10-11, 36
  17. 17. The Pillars of Biotechnology
  18. 18. The Path From Science to Drugs BUILDING BIOTECHNOLOGY Chp 4
  19. 19. Genentech is a Prototype for Biotechnology Business Development <ul><li>Initially focused on applications of one innovative technology </li></ul><ul><li>The only biotech company that has never traded below its IPO price </li></ul><ul><li>Profitable for all but two of its years as a public corporation </li></ul><ul><li>Successfully diversified beyond its original commercial focus </li></ul>BUILDING BIOTECHNOLOGY pp. 13, 184
  20. 20. Genentech’s Value Proposition <ul><li>Efficiently manufacture large quantities of biological drugs to satisfy unmet needs </li></ul><ul><li>1973: Stanley Cohen and Herbert Boyer demonstrate gene splicing </li></ul><ul><ul><li>Enables production of human proteins in bacteria, yeast, cell cultures </li></ul></ul><ul><li>1976: Boyer and Robert Swanson form Genentech </li></ul><ul><li>Proof-of-principle: somatostatin </li></ul><ul><li>1982: Recombinant human insulin licensed to Eli Lilly </li></ul><ul><li>1985: Genentech becomes first biotech company to market its own drug - hGH </li></ul>
  21. 21. Calgene’s Flavr Savr Tomato <ul><li>Produce a novel tomato product that can be sold at a premium price </li></ul><ul><li>Most tomatoes are gas-ripened </li></ul><ul><li>Picked while green to prevent damage during shipping </li></ul><ul><li>Sprayed with ethylene to ‘ripen’ prior to sale </li></ul><ul><li>Result is bright red but tasteless tomatoes </li></ul><ul><li>Vine-ripened tomatoes sell for a premium </li></ul><ul><li>Tastier than gas-ripened tomatoes </li></ul><ul><li>Cost more to deliver to market, have shorter shelf-lives </li></ul><ul><li>Polygluconase enzyme was associated with ripening in 1984 </li></ul><ul><li>Highly expressed in red tomatoes, absent in green tomatoes </li></ul><ul><li>Calgene set out to reduce expression of polygluconase to delay ripening </li></ul><ul><li>Produce tomatoes that can be transported like gas-ripened tomatoes </li></ul><ul><li>but are worthy of vine-ripened prices </li></ul><ul><li>Can compete with vine-ripened tomatoes because of </li></ul><ul><li>greater durability and longer shelf-life </li></ul>BUILDING BIOTECHNOLOGY p. 326
  22. 22. Path to Development <ul><li>Isolate PG gene and generate antisense tomatoes </li></ul><ul><li>Develop assay for ripening </li></ul><ul><ul><li>Flavr Savr tomatoes spoiled slower than wild tomatoes at room temperature </li></ul></ul><ul><ul><li>1 lb weight and timer to measure firmness </li></ul></ul><ul><li>Field test </li></ul><ul><ul><li>Flavr Savr tomatoes ripened as fast as wild tomatoes, rotted slower </li></ul></ul><ul><li>File Patents </li></ul><ul><li>Solicit FDA Approval </li></ul><ul><ul><li>Demonstrate that Flavr Savr tomatoes do not pose a health risk </li></ul></ul>
  23. 23. Market Launch <ul><li>Taste of Flavr Savr tomatoes not as good as competing premiums </li></ul><ul><ul><li>Flavr Savr gene was not introduced into premium tomato varieties </li></ul></ul><ul><li>Flavr Savr tomatoes could not withstand shipping </li></ul><ul><ul><li>Firmer than vine-ripened, but not as durable as green tomatoes </li></ul></ul><ul><li>General lack of expertise in the fresh-tomato business </li></ul><ul><ul><li>Product pulled from market </li></ul></ul><ul><li>Flavr Savr tomatoes had marginal added value; </li></ul><ul><li>could not be sold at a profit </li></ul>
  24. 24. Epogen – Biotech’s First Blockbuster <ul><li>Erythropoietin (EPO) is a hormone that increases red blood cell proliferation </li></ul><ul><ul><li>Used to treat anemia </li></ul></ul><ul><ul><li>Reduces need for blood transfusions </li></ul></ul><ul><li>Development timeline </li></ul><ul><ul><li>Initially purified from 2,500 quarts of human urine in 1976 </li></ul></ul><ul><ul><li>Patents filed in 1984 </li></ul></ul><ul><ul><li>Efficacy demonstrated in 1986 </li></ul></ul><ul><ul><li>Approved for HIV patients in 1990 – 14 years after first purification! </li></ul></ul><ul><ul><li>Expanded approvals thereafter </li></ul></ul><ul><li>Developed by Amgen </li></ul><ul><ul><li>CEO is a former US Navy nuclear-submarine chief engineer </li></ul></ul><ul><ul><li>Prior science training: High-school biology, college chemistry </li></ul></ul>
  25. 25. Marketing as a Driver for R&D <ul><li>Technology Push vs. Market Pull </li></ul><ul><ul><li>Does the product solve a painful problem? </li></ul></ul><ul><ul><ul><li>Drugs are the only effective treatment for some conditions </li></ul></ul></ul><ul><ul><li>What is the value to the customer? </li></ul></ul><ul><ul><ul><li>Drugs are less expensive than hospital treatments </li></ul></ul></ul><ul><ul><li>Can R&D expenses be recovered? </li></ul></ul><ul><ul><ul><li>Post R&D, drug production costs can be very low </li></ul></ul></ul><ul><ul><ul><ul><li>High markup </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Years of patent-protected sales </li></ul></ul></ul></ul>BUILDING BIOTECHNOLOGY Chp 13
  26. 26. The Pillars of Biotechnology
  27. 27. Regulation <ul><li>FDA </li></ul><ul><ul><li>Safety and efficacy of drugs must be demonstrated prior to marketing </li></ul></ul><ul><ul><li>Food, feed additives, medical devices </li></ul></ul><ul><ul><li>Orphan Drug Act and Hatch-Waxman Act provide incentives </li></ul></ul><ul><li>USDA </li></ul><ul><ul><li>Plant pests, plants, veterinary biologics </li></ul></ul><ul><li>EPA </li></ul><ul><ul><li>Pesticides of chemical and biological origin </li></ul></ul><ul><ul><li>Novel organisms that may have industrial uses </li></ul></ul>BUILDING BIOTECHNOLOGY Chp 8
  28. 28. Clinical Trials <ul><li>Demonstration that drugs are safe and effective </li></ul>BUILDING BIOTECHNOLOGY p. 141
  29. 29. 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
  30. 30. Timeline for Product Development <ul><li>Apply R&D to reduce risk and increase the value of products </li></ul><ul><li>Concept  Patent  Pre-clinical  Phase I-III  Approval </li></ul>BUILDING BIOTECHNOLOGY pp. 362-264
  31. 31. The Pillars of Biotechnology
  32. 32. Intellectual Property Protection <ul><li>Cost of innovation is high, cost of imitation is low </li></ul><ul><li>R&D involves high up-front costs and years of research </li></ul><ul><li>Sophistication of tools and techniques makes copying products relatively easy </li></ul><ul><li>Pioneers require a mechanism to recoup R&D expenses </li></ul><ul><li>Patents grant a temporary monopoly, preventing competitors </li></ul><ul><li>from undercutting innovators </li></ul><ul><li>Lack of IP protection would motivate a commodity-based market </li></ul>BUILDING BIOTECHNOLOGY Chp 7
  33. 33. Intellectual Property <ul><li>Patents </li></ul><ul><ul><li>Prevent others from practicing an invention </li></ul></ul><ul><li>Trade Secrets </li></ul><ul><ul><li>Protect information and know-how </li></ul></ul><ul><li>Trademarks </li></ul><ul><ul><li>Protect company and product name, look and feel </li></ul></ul><ul><li>Copyright </li></ul><ul><ul><li>Protect the products of ideas – not generally applicable to </li></ul></ul><ul><ul><li>biotechnology </li></ul></ul>
  34. 34. Patents and Trade Secrets <ul><li>Patents grant the right to exclude others from making, using, or selling an invention </li></ul><ul><ul><li>Term is 20 years from date of filing </li></ul></ul><ul><ul><li>Must demonstrate: </li></ul></ul><ul><ul><ul><ul><li>Non-obviousness </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Novelty </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Substantial utility </li></ul></ul></ul></ul><ul><ul><li>Require publication of best mode to practice an invention </li></ul></ul><ul><li>Trade secrets protect know-how and information </li></ul><ul><ul><li>Do not require publication </li></ul></ul><ul><ul><li>Can potentially last indefinitely </li></ul></ul><ul><ul><li>Competitors may reverse-engineer or independently derive an invention </li></ul></ul>
  35. 35. If You Only Read One Slide … <ul><li>Biotechnology’s value proposition: </li></ul><ul><li>Apply R&D to develop novel products worthy of a multiple on investment </li></ul><ul><li>Concept  Patent  Pre-clinical  Phase I-III  Approval </li></ul>
  36. 36. Building Biotechnology on Facebook <ul><li>Join the Building Biotechnology group on Facebook to ask questions and network with biotechnology </li></ul><ul><li>students from other schools </li></ul><ul><li> </li></ul><ul><li>or </li></ul><ul><li> </li></ul>