Industry

THE BIOPHARMACEUTICAL INDUSTRY:
OVERVIEW, PROSPECTS AND COMPETITIVENESS CHALLENGES
2001
CONTENTS 1. 1.1 1.2 1.3 1.4 1.5 SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canadian Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Bottom Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. 2.1 2.2
2.3 2.4 2.5 2.6
THE BIOPHARMACEUTICAL SECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Global Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Products and Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Industry Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Industry Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategic Alliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North American Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canadian Policy Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canadian Industry Snapshot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance and Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. 3.1 3.2 3.3
3.4
3.5
COMPETITIVENESS ISSUES AND COMMERCIAL CHALLENGES Access to Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Human Resource Gaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maximizing Commercial Benefits Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technology Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market Access Challenges Intellectual Property and Freedom to Operate . . . . . . . . . . . . . . . . . . . . . . . . . . . Increasing Clinical Timelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regulations and Approval Times . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Biosafety Protocol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pricing and Pharmacoeconomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bioethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technologies Drug Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pharmacogenomics and Personalized Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . Drug Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Emerging Biopharmaceuticals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Molecular Farming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. 4.1 4.2 4.3 4.4 GROWTH PROSPECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Demand Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current Industry Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current and Anticipated Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Bottom Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ANNEXES A. Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B. 1998 Global Biopharmaceutical Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C. Canadian Biopharmaceuticals in Clinical Development . . . . . . . . . . . . . . . . . . . . . . . . .
Biopharmaceuticals Overview & Prospects Page 3
1. 1.1
SUMMARY Highlights
The discovery of recombinant DNA and monoclonal antibody technologies in the 1970s marked the birth of the biopharmaceutical industry. Biopharmaceuticals are complex macromolecules derived from recombinant DNA technology, cell fusion, or processes involving genetic manipulation. They include recombinant proteins, genetically engineered vaccines; therapeutic monoclonal antibodies; and nucleic acid based therapeutics (i.e. DNA based drugs), including gene therapy vectors. Unlike orally delivered small molecule drugs that underpin the traditional pharmaceutical industry, biopharmaceuticals are usually administered by subcutaneous, intravenous, or intramuscular injection. The first drug produced via genetic engineering was human insulin which appeared on the market in 1982. By mid-2000, 84 biopharmaceuticals had been approved for marketing with almost half launched during the past three years. Worldwide sales have grown more than seven-fold over the past decade to reach US$15 billion by 1998. The US represents 46% of the market, compared to 36% for conventional drugs, due to a combination of earlier regulatory approval, easier market acceptance, and greater pricing flexibility than other countries. Although biopharmaceuticals comprise only 5% of world prescription drug sales, they account for six of the top 50 selling drugs, 13% of new medicines approved by the FDA in the 1990s and about 18% of all drugs in development. At the end of 1999, there were 369 biotechnology drugs in US clinical development against 438 disease indications with 25% in Phase III. It is important to understand the distinction between biotechnology as a new process technology and as a drug discovery research tool. The first uses genetic engineering to manufacture large molecular weight drugs that cannot be directly synthesized or extracted. The second involves the search for new therapeutic targets, with most of the focus on small molecule drugs that interact against those targets, using techniques such as cloned receptors as screens or gene knock-out technologies in the creation of transgenic organisms to determine protein function. The pharmaceutical industry will likely maintain its dominant position in small molecules through the use of biotechnology in drug discovery, but the development and manufacture of protein based drugs requires a completely different set of core competencies. 1.2 Technology
Modern drug discovery is built on four core technologies: genomics (source of novel targets), combinatorial chemistry (source of molecules that interact against those targets), high-throughput screening (testing one against the other); and bioinformatics which is crucial to the analysis of the vast amounts of data generated. While current pharmaceuticals are active against some 500 biological targets, genomics is expected to lead to the identification of up to 10,000 new targets for development. Whether these will be amenable to small molecule intervention or require protein and nucleic acid based therapies remains to be seen. Despite the heavy investment in genomics, only a handful of genomics-based drugs (defined as those based on the identification of an unknown gene sequence followed by elucidation of its function and therapeutic potential) have
reached the clinical stage. All are protein drugs. 1.3 Challenges
The pharmaceutical industry is investing heavily in new biotechnologies, building this capability internally so it can move from traditional screening and medicinal chemistry capabilities to the front end of drug discovery research, in direct competition with biotechnology firms. Access to capital is critical due to the high costs of drug development and length of time it takes to get a product approved. Most firms do not have a product on the market that can be used to generate cash flow and instead are dependent on funds from venture capital, public equity markets, and strategic alliances used to share development costs and spread risk.. The industry predominantly consists of research-oriented, royalty-based companies. Product rights are usually licensed at an early stage with multinational pharmaceutical partners gaining most of the commercial benefits. With the exception of recombinant insulin, biopharmaceuticals firms are much more expensive than traditional drugs. There is difficulty developing the data needed on long-term outcomes and evaluating benefits, some of which take the form of quality of life improvements. At the same time, there is a need for governments to recognize the overall health care and social economic benefits in evaluating formulary inclusion. The biotechnology industry has been characterized by significant litigation involving intellectual property rights. Genomic companies have filed for patent protection on thousands of genes including the proteins associated with them which is a major area of concern. Although the US PTO has recently tightened gene patents, it will take court precedents to ultimately clarify the issues. Despite decreases in regulatory approval times in the US and the EU, there has been a substantial increase in the time biopharmaceuticals spend in clinical development, from 39.4 months for products approved in the 1980's to 61.5 months in the late 1990's. A large number have also been discontinued in Phase III. Many of the earlier products were recombinant versions of natural hormones with relatively well understood properties compared to newer biopharmaceuticals with more difficult therapeutic targets and undefined disease mechanisms. Also, the hurdle for discontinuing development is higher for a biotechnology company because it only has a handful of products in clinical development and its stock price is largely determined by its lead product. 1.4 Canadian Context
The human health and bioinformatics sectors consist of approximately 168 dedicated biotechnology companies employing some 5,700 people of which 20 firms have biopharmaceuticals in clinical development. Canada ranks among the world leaders in the creation of biotechnology companies relative to its population but has a less mature industry than the US
as measured by revenues, employees, and products in commercialization. Although no Canadian developed biopharmaceuticals have yet been approved for marketing (excluded are traditional biologicals such as classical vaccines, antibiotics, and blood products, as well as small molecule drugs such as 3TC and Visudyne which are not based on recombinant DNA technologies), 14 companies have 27 products in human clinical trials against a variety of diseases, with six indications in Phase III. Industry growth and performance is dependent on a number of factors: Industry R&D: Canadian public companies are significantly smaller and spend far less on R&D than their US counterparts. There is a fledgling industrial effort in bioinformatics, protein and DNA drug delivery, and computer assisted drug design. Public R&D Government support for basic medical research lagged significantly behind other industrialized countries in the 1990s. Initiatives to strengthen research capability include the creation of the Canadian Institutes of Health Research in 2000 with a budget of $475 million compared to the $271 million of its predecessor organization Medical Research Council; $100 million in additional funding to the research granting councils; $90 million over three years for expansion of the Network Centres of Excellence Program; and $300 million for the creation of Genome Canada. Additionally, federal and provincial R&D tax incentives are among the most generous in the world. Strategic Alliances : Maximizing commercial benefits in the life sciences sector is a major challenge for Canada. Unlike the US or the EU, there are no Canadian owned pharmaceutical companies, with the possible exception of Apotex, that have the necessary financial and international marketing capability to serve as strategic alliance partners, leading to an outflow of commercial benefits and technology. Financing: Drug development is extremely long and expensive. The pressing need is patient capital for R&D rather than investment in manufacturing. Although capital is much more plentiful than a decade ago, US deals - whether venture capital, IPOs, or follow-on offerings - are much larger than those in Canada. Human Resources: In coming years, shortfalls are expected to arise in certain research areas. People with expertise in bioinformatics, a field that requires a background in genetics, mathematics, and computers, will be particularly difficult to recruit as most graduates lack such inter-disciplinary training. In addition, as firms mature, there will be increasing need for regulatory clinical personnel, people with manufacturing expertise, and senior managers who can lead firms through product development, alliance negotiations, and commercialization..The international pharmaceutical industry has been the prime source of such expertise, but competition for such skills is intense. Regulatory Framework: Canadian drug approval times are significantly longer than the US or the EU. This could result in the later introduction of breakthrough therapies compared to other
countries. Canadas performance declined relative to the US as a result of greater efficiencies at the FDA and because user fees are not being fully used to improve regulatory efficiency. 1.5 The Bottom Line The biopharmaceutical industry is a key part of the knowledge based economy. Canada has internationally recognized research capabilities and many promising companies, but as in other countries, lacks a major success story in which a firm has been able to get a product to market successfully. The major challenges for government and industry include: ! increasing R&D investment by both government and industry; ! encouraging the formation of academic spin-off companies through technology clusters and incubator facilities; ! improving information on research programs in federal laboratories, capabilities to solve specific problems, and technologies available for licensing; ! fostering technology transfer through training of such officers in universities, teaching hospitals and government laboratories and by improving access to technologies available for licensing; ! strengthening technology intelligence and forecasting initiatives in firms; ! optimizing commercial benefits for Canada from government and industry investment in R&D; ! establishing pricing and reimbursement levels that contain health care expenditures without damaging the viability of the industry; ! ensuring Canadas patent regime is competitive with other jurisdictions; ! improving regulatory efficiency; and ! addressing human resource requirements through expanded immigration and better co-ordinated education and training programs.
2. SECTOR DESCRIPTION AND MARKET CONTEXT 2.1 Product Definition Unlike chemically synthesized small molecule drugs that have long underpinned the traditional pharmaceutical industry, biopharmaceuticals are complex macromolecules 1 created through the genetic manipulation of living organisms using gene cloning, recombinant DNA (gene splicing), or cell fusion technologies. In terms of product type, these include: ! recombinant proteins; ! recombinant antigen vaccines and vaccines crafted from genetic material such as DNA; ! therapeutic monoclonal antibodies; and ! oligonucleotides (short sequences of DNA or RNA) such as antisense molecules which interrupt the production of disease causing proteins by inhibiting gene function and gene therapy which can enhance the production of a missing protein through the addition of a synthetic gene. The first recombinant protein (human insulin) was launched in 1982, the first recombinant vaccine (against hepatitis B) in 1986, the first therapeutic monoclonal antibody (against kidney transplant rejection) also in 1986, and the first and only oligonucleotide in 1998 (against cytomegalovirus retinitis in AIDS patients). No gene therapy product has yet been approved. Recombinant proteins dominate the biopharmaceutical market accounting for the bulk of sales to date. The biopharmaceutical industry cannot be identified using the Standard Industrial Classification which distinguishes firms on the basis of their output rather than their technology or production process, and international data are difficult to compare. Many biotechnology firms, for example, are identified as biopharmaceutical companies to differentiate them from the mainstream pharmaceutical industry, but their prime focus are small molecule drugs targeted against proteins thought to be important in the disease pathway (proteins can be used both as drugs i.e. biopharmaceuticals or drug targets). Biologics, an area that consists of blood derived polyclonal antibodies and clotting factors, antibiotics, and classical vaccines based on live or killed viruses, are frequently classified as biopharmaceuticals, but these long predate the emergence of recombinant DNA and monoclonal antibodies. Insulin, for example, was originally obtained from porcine or bovine pancreas while human growth hormone was extracted from the pituitary glands of cadavers. The biopharmaceutical category also often includes drugs derived from plants, fungi or marine organisms, but these are more in the realm of traditional medicinal chemistry research based on the random screening of natural compounds. 2.2 Global Context Products and Markets By mid-2000, 84 biopharmaceuticals had been approved for marketing with almost half launched during the past three years. Worldwide sales in 1998 totalled US$15 billion (Annex B). Although representing only 5% of world prescription drug sales of $300
1
Conventional drugs have molecular weights on the order of several hundred daltons but biopharmaceuticals are 100 times or more larger e.g. interferons (20,000), interleukins (15,000), tPA (70,000), and Factor VIII and several monoclonal antibodies (close to a million).
billion, biopharmaceuticals comprise six of the top 50 selling drugs, 13% of new medicines approved by the FDA in the 1990s, and 11% of all drugs in development. The US is the largest and most rapidly growing market, accounting for 46% of sales, compared to 36% for conventional prescription drugs, reflecting a combination of earlier regulatory approval, easier market acceptance and greater pricing flexibility. Europe and Japan are the next most important markets, accounting respectively for 30% and 17%. Industry Size There are approximately 3,000 dedicated biotechnology companies worldwide employing 230,000 people with the US accounting for 40% of firms and 70% of employment. Publicly traded firms - including an estimated 100 that floated IPOs during 2000 - number approximately 460 of which 74% are based in the US and 18% in the EU. The segment involved in biopharmaceuticals numbers about 150 firms. Only a handful of biotech firms - primarily those involved in biopharmaceuticals- have a product on the market. The industry as a whole continues to experience major losses because of high R&D costs. The largest and most successful (e.g. Amgen, Chiron, Biogen and Genentech) are mainly US based. With the exceptions of Serono (Switzerland), Celltech (UK), and Bio-Technology General (Israel), few non-US firms have brought a biopharmaceutical to market, reflecting their later startup dates. The total market capitalization of all public European biotechnology companies, for example, is only a little larger than Amgen. Japan has few dedicated biotechnology companies, with the industry primarily consisting of large food and pharma firms with historic strengths in fermentation attempting to diversify into biopharmaceuticals. It is important to understand the distinction between biotechnology as a new process technology and as a drug discovery research tool. The first uses genetic engineering to manufacture large molecular weight drugs that cannot be directly synthesized or extracted. The second involves understanding the molecular basis of disease and the search for new therapeutic targets 2 using techniques such as cloned receptors as screens or transgenic organisms created through gene knock-out technologies to determine protein function; most of the focus is on small molecule drugs that interact against those targets. As the pharmaceutical industry is using biotechnology in drug discovery, it will likely maintain its dominant position in small molecules, but the development and manufacture of protein based therapeutics requires a completely different set of core competencies. Industry Structure The biotechnology industry consists of three groups: dedicated biotechnology firms, usually university spinoffs, researching disease mechanisms at the molecular level; traditional pharmaceutical companies (big pharma) marketing drugs developed by biotechnology firms; and a specialized tier of companies serving both the pharmaceutical and biotechnology industries with platform technologies that can speed up the drug discovery process or improve drug delivery. The boundary between these three groups has blurred. Big pharma is investing heavily in molecular biology and genomics, biopharmaceutical firms are moving into small molecule therapeutics because of production and delivery advantages, and platform companies are entering the drug development field because of the prospects for higher returns.
Proteins expressed by genes are the targets of most drugs on the market and in development. Companies look for a compound that binds to a protein, either activating it or block it from working. In some cases, a protein can also be used as a drug e.g. insulin or human growth hormone.
Strategic Alliances Drug development is extremely capital intensive, costing an estimated $500 million and taking 10 years or more to bring a product to market. Most biotechnology companies have no product sales (oft-quoted revenues and exports consist mainly of interest income from invested capital and income earned from alliances) and lack the resources to exploit the products they are developing. For biotech firms, licensing brings in much needed income and improves access to the equity markets by validating their commercial potential to outside investors. The multinational pharmaceutical industry in turn gets an infusion of new products and technologies to sustain earnings at a time it is suffering from a dramatic decline in new chemical entities. Pre-commercial payments over the life of an alliance typically consist of a combination of upfront licensing fees (cash and usually equity purchases), R&D remuneration, and milestone payments geared to technical and regulatory accomplishments. These average US$55 million for contracts signed at the early stage to US$76 million for late stage projects (Chart 1). Because agreements are primarily structured towards milestones, most of the risk is borne by the biotechnology company who will only collect the full amount if all milestone targets are met and the project proceeds to conclusion. Over half of alliances are renegotiated or cancelled prior to project completion and only 10% meet the expectations of pharmaceutical executives.
The biotech industry predominantly consists of royalty based companies. Few have the ability or resources to manufacture or market their own products. The royalty rate negotiated depends on a number of factors: the inherent risk, availability of competitive technologies, size of up-front payments, any sharing of clinical trial costs, extent of territorial rights granted, therapeutic field of use, whether manufacturing rights are included, and royalty stacking (any sharing of third party royalties such as drug delivery licenses). Because the majority of deals are signed at a very early stage (Chart 2), most of the commercial benefits (profits) flow to big pharma. The earlier a collaborative partner becomes involved the lower the returns (Chart 3) because of the greater risks that the product will never reach the market and the greater the investment required by the partner. With the emergence of contract research organizations, the biotech industry is not as dependent on big pharma for clinical expertise. By advancing products further down the pipeline, a firm will not only derive higher
royalty rates but may also be rewarded with a higher market valuation allowing it to raise more cash with less dilution. The present strategy is to take a product through to Phase II to show proof of concept and then find a partner to conduct the more comprehensive Phase III studies.
2.3 North American
Context
A number of government policies are important in shaping the pharmaceutical and biotechnology industries. On the supply side, these include public funding of biomedical research, tech transfer initiatives, education and immigration, regulatory approval, orphan drug legislation, intellectual property laws (weak patent protection policies hamper investment and innovation by removing incentive for research while too strong policies hamper innovation by stifling competition), R&D incentives,3 and capital gains tax policies that bear on venture capital. The demand side is strongly influenced by federal and provincial price controls and government sponsored vaccine programs.
3 Government subsidies were the prime factor in the growth of the German biotech industry; an estimated 80% of German companies received public monies. Although Germany now leads Europe in terms of numbers, most of the firms are very small and the country lags well behind the UK in market capitalization and drugs in clinical development.
The USs predominant position is due to a combination of factors: intensive federal funding for the National Institutes of Health (budget of US$ 20 billion for 2001), the worlds premier medical research organization and a source of highly trained employees for the private sector; differences in the institutional structure of medical research, with hospitals assuming a much stronger research function than in continental Europe (this advantage also applies to Canada); the 1980 Bayh-Dole Act to encourage commercialization of research at federal agencies and in universities funded with federal monies; greater entrepreneurial culture; strong venture capital market and easier stock exchange listing requirements, resulting in initial public offerings about a decade ahead of Canada and Europe; greater mobility of research scientists; the landmark Supreme Court ruling in 1980 that allowed the patenting of genetically engineered bacteria, making it easier to raise investment capital; a large domestic based pharmaceutical industry able to commercialize research results; and strengths in information technologies critical for life sciences research. Over 60% of all clinical trials are performed overseas with the majority conducted in the UK, followed by the US and Canada. There has been a substantial reduction US drug approval times over the last decade so that they are now similar to Europe. As a result, by the end of the 1990s 50% of biotech drugs were first introduced on the US market compared to only 20% 10 years earlier. Canadian review times on the other hand are on average six months longer. This places Canadian contract research organizations at a competitive disadvantage, limits Canadian clinical experience, and diminishes the availability of new drug therapies. Investigational New Drug applications in the UK have been exempt from regulatory review, encouraging firms to undertake Phase I trials there and to use the data to subsequently file in North America (a new EU directive mandating a 60 day default review period across member jurisdictions will erode this particular advantage). Canadian trials until recently were subject to a 60 day default period (the company may proceed with the trial unless it was notified within 60 days that its application was deficient) whereas the default period in the US is 30 days. To shorten review times and make clinical trial applications internationally competitive, new regulations came into effect in Canada on September 1, 2001: a 30 day default period from Phases I through III, and a seven day target for the review of bioequivalence trials and Phase I trials in healthy volunteers (excluded are Phase I studies using somatic cell therapies, xenografts, gene therapies, vaccines, or reproductive or genetic technologies). Improved efficiencies at the FDA were due to the1992 US Prescription Drug User Fee Act (PDUFA) which addressed drug approval times and the Food and Drug Modernization Act of 1997 (FDAMA) improved the clinical development process. PDUFA implemented specific review time frames and established user fees (currently about US $290,000 per application) which raised over US$700 million since 1993 and allowed the hiring of 660 additional staff (exempted from user fees are orphan drugs, pediatric indications, and the first application from a qualifying small business). FDAMA helped shorten drug development times through initiatives such as industryFDA meetings to review clinical research protocols, use of surrogate endpoints such as white blood cell counts in the evaluation of antiviral drugs in AIDS patients as substitutes for survival time, timeline performance goals for each phase, and so called fast track designation for those products offering a significant improvement over drugs already on the market or for treatments for serious and life-threatening diseases. Since 1997, about 80 biologicals had requests for fast track designation and were likely to be priority reviewed because of their orphan drug designation.
The 1983 US Orphan Drug Act provides a seven year period of market exclusivity and financial incentives for the development of drugs against diseases affecting small patient populations (defined as less than 200,000 people). 56% of biopharmaceuticals launched in the US between 1982 and 2000 were first approved under this designation compared with only 14% for conventional drugs, and since 1998 70% of orphan designations went to biotechnology firms. The most important feature of the program and a major factor in attracting venture capital investment is market exclusivity - the FDA will not approve another application for the same drug treating the same indication during the seven year period. (Market exclusivity does not protect orphan drugs from the approval of clinically superior drugs and a company can lose exclusivity if it cannot produce enough product to meet demand). Similar legislation has since been enacted in Japan (1993), Australia (1998), Singapore (1999), and the EU (2000). Canada has no orphan drug program. Orphan drug laws will become increasingly important as companies use genetics to define disease subtypes. There are some significant differences in patent laws between Canada, the US, and the EU: the US system is based on first-to-invent while rest of the world follows first-to file. Also, a reissue procedure is available in the US where claims of a recently issued patent can be broadened under certain conditions, or if a related application is still pending, it can be used to pursue claims broader than those of the issued patent. US patent applications filed after November 29, 2000 will now be published 18 months after filing (provided the application is also filed in a foreign jurisdiction) rather than at the time the patent is issued, bringing the US system in-line with other countries. However, applications filed before this date will continue to be secret until the patent is issued. The change reduces the commercial risk for competitors who previously could not be certain if others had filed first. the patenting of higher life forms as represented by the Harvard oncomouse, a transgenic strain with a predisposition to cancer used in cancer research, has been available in the US since 1988 and subsequently in Japan and Europe, but not in Canada. The Canadian Intellectual Property Office (CIPO) has only allowed microbial life forms such as bacteria, yeast, fungi, algae, cell lines, and viruses to be patented. In August 2000, the Federal Court of Appeal ruled that the oncomouse can be patented, but the Canadian government has appealed the judgement to the Supreme Court. The ultimate decision will have a wide ranging impact on patents on mammals which are being genetically modified to secrete biopharmaceuticals in their milk; pigs for human organ transplants; and plants designed to carry therapeutic proteins, antibodies, and vaccines. bioinformatics algorithms can be patented in the US but not in Canada or the EU. Methods for organizing and searching on-line genomic databases and for processing data provide an important means of intellectual property protection in the genomics field. unlike the US or EU, Canada does not offer patent term restoration to compensate for regulatory delays. Additionally, patent term extensions are now available in the US for PTO delays. methods of medical treatment can be patented in the US but not in Canada or the EU. Gene therapies, assuming the treated cells are returned to the host, are considered to be methods of medical treatment and are therefore not patentable in Canada, but processes to modify the cells outside the body are patentable. a patent opposition procedure is available at the European Patent Office (EPO) whereby third parties can challenge the validity of a patent within nine months following grant for a small fee; after nine months, a competitor will have to attack the patent in each jurisdiction separately. An
opposition with appeals can delay enforcement by two to six years. About 8.5% of biotechnology and pharmaceutical patents are subject to such challenges. Opposition procedures are not available in Canada or the US, placing the burden on the courts for adjudicating patent disputes which is a much more expensive process. patent protection in Europe can be obtained by filing national applications in each country or through the EPO designating the states that protection is desired (the latter is cheaper if protection is sought in more than three countries). However, an EPO patent must still be enforced at the national level, and the national cost of patenting in the EU is about 10 times that in the US for roughly a similar size market. There has been been a steady migration of European R&D to the US because the US is the most profitable pharmaceutical market in the world, has a more rapid uptake of new drugs, and pricing is largely unregulated by the federal government. As the major European pharmaceutical companies have research operations in the US and are therefore closely tuned to US technical developments, they have looked first to the US biotech industry for collaborative venture, making it difficult to attract investment to Canada. However, factors such as Canadian research excellence, lower wages and infrastructure costs, and access to capital for Qubec based startups proved instrumental in attracting companies such as Intellivax, Methylgene, DSM Biologics, and Amgen. A number have also executed major alliance deals attesting to the commercial of their technology: SemBioSys/Dow AgroSciences (US$12 million) for molecular farming; GlycoDesign/Seikagaku (US$56 million) for anti-inflammatory agents; Inflazyme/Aventis Pharma (US$91 million) for respiratory diseases; and Xenon Genetics/Warner Lambert (US$58 million) for elevating high-density lipoprotein to clear cholesterol from blood. 369 biotechnology drugs4 were in US clinical development against 438 indications (Chart 4) at the end of 1999, with one quarter in Phase III. The three largest categories were vaccines (27%), monoclonal antibodies (16%), and gene therapy (7%). Cancer, mainly breast, melanoma, and prostate, accounted for 40% of indications (Chart 5). Canadian products in the survey included human parathyroid hormone for osteoporosis (NPS Allelix); GMCSF - granulocyte-macrophage colony-stimulating factor (Cangene); stress protein against papillomaviris-related dysplasia (StressGen); group A Strep vaccine (ID Biomedical); breast cancer vaccine (Biomira); and anticancer oligonucleotides (Inex).
Defined as products based on recombinant DNA, monoclonal antibodies, continuous cell lines, gene therapy, and cellular therapy
2.4 Canadian Framework
Public Policy
Public R&D Investment: Excluding regulatory activities, federal expenditures on biotechnology R&D in 1999/00 reached $392 million (about 6.4% of overall federal S&T). Almost 47% ($185 million) was performed directly by government laboratories, with the National Research Council (NRC) accounting for the largest share at 56% followed by Agriculture and Agri-Food Canada (30%). Of the $207 million/53% performed outside of government, the largest recipients were the higher education sector ($169 million) and business enterprises ($35 million). MRC (Medical Research Council) provided $128 million to higher education followed by NSERC (Natural Sciences and Engineering Research Council) with $40 million. Within its 16 medical faculties and associated teaching hospitals, supported in large part by MRC, Canada has research strengths in genetics, cancer, cardiology and neurosciences. After a period of cutbacks in the 1990s, there has been an injection of funds for R&D in the last few budgets. The Canadian Institutes for Health Research (CIHR), created in June 2000 as a replacement for MRC, will have a budget of $402
million in 2001/02, up from $365 million in 2000. The government also made a major investment in genomics, providing $300 million towards the creation of Genome Canada in support of the creation of five genome centres, plus $55 million for genomics research in federal laboratories. Despite these funding increases, support for medical research is less than one fifth of the US level on a per capita basis, while countries such as Singapore (US$1 billion over five years) and Taiwan (US$870 million since 1997) are making major investments in biotechnology. Technology Transfer The Networks of Centres of Excellence Program was launched in 1989 to strengthen Canadian science-industry links and build critical mass in areas of strategic importance. Seven networks are currently involved in biomedical research: Canadian Bacterial Diseases Network; Canadian Genetic Diseases Network; Protein Engineering Network; Network for Vaccines, Cancer Immunotherapeutics and Chronic Viral Diseases; Canadian Stroke Network, Canadian Arthritis Network; and the Stem Cell Genomics and Therapeutics Network. Industrial R&D Incentives: The federal government's main vehicle for promoting industry investment in innovation is the Scientific Research and Experimental Development (SR&ED) tax incentive. Combined with provincial credits, this provides Canadian firms with among the most generous R&D incentives in the world. A unique feature of Canada's 35% tax credit for Canadiancontrolled private companies is that this is refunded to firms as cash. However, the credit for public firms is lower (20%) and non-refundable so that companies can only take advantage of the credit if they are in a profitable position. Because most public biopharmaceutical firms continue to operate at a loss after 10 years, many of these accumulated credits are starting to lapse. Industry has expressed many concerns about Revenue Canadas administration of the program (e.g. lack of timely decisions) as well as a number of interpretational issues: the eligibility of clinical trials (of all phases) which were not conducted in their entirety in Canada (companies claim that the size of the Canadian patient sample is insufficient for drawing statistically valid conclusions); ineligibility of costs pertaining to the development and preparation of clinical trial material in Canada for use outside of Canada; and exclusion of pharmacoeconomics studies. In addition to SR&ED tax credits, financial support is also available through Technology Partnerships Canada (TPC) and NRCs Industrial Research Assistance Program (IRAP), but the number and size of biotechnology applications far exceed the resources of both programs. Industry concerns about TPC centre on the excessive time it takes to process applications, determining repayment provisions, and meeting the requirement for substantial domestic manufacture (because of alliances, the biotechnology industry cannot ensure where any future products will be manufactured). Canadian Biotechnology Strategy: A National Biotechnology Strategy, first drafted in 1983, helped support over the years increased research funding, human resource development, and the establishment of a regulatory framework. In 1998, a renewed Canadian Biotechnology Strategy identified a number of themes for government and industry action such as consumer confidence and new R&D initiatives. The Canadian Biotechnology Advisory Committee (CBAC), an arm's length advisory body, was created in 1999 to advise the federal government on a broad range of policy issues that cut across various government departments such as the patenting of higher life forms, genetic privacy, regulation of genetically modified food, social and ethical considerations relating to biotechnology, and use of genetically based interventions.
Pharmaceutical Price Controls: Over the past decade, pharmaceuticals have been the fastest growing component of health care costs in Canada, increasing from 11.3% of health care expenditures in 1990 to 15.5% in 2000, due mainly to the increased utilization of new therapies. To control rising drug costs, the federal and provincial governments have instituted a number of price control mechanisms. At the federal level, the Patented Medicine Prices Review Board (PMPRB), established in 1987 in conjunction with the amendments to the Patent Act, monitors the pricing of patented drugs and R&D of pharmaceutical companies. Drug prices are reviewed in relation to changes in the Consumer Price Index and the range of prices of related products to treat the same disease. The guideline for breakthrough drugs and those offering substantial therapeutic benefits are the median of the prices charged for the same drug in other industrialized countries. The industry feels that the Board is overly restrictive in designating medicines as breakthrough therapies which could be particularly difficult for biopharmaceuticals as they tend to be much more expensive than new chemical entities. Provincial governments provide some form of publicly funded drug coverage for seniors, those requiring social assistance, and those suffering from certain diseases such as cystic fibrosis and multiple sclerosis, but manage prices for these drugs through the use of formularies, mandatory generic substitution, price freezes, and limits on markups and dispensing fees. Although most drugs are purchased or paid for by health care institutions, private insurers (e.g. unions, insurance companies), and individual patients and while hospitals are able to negotiate bulk discounts with suppliers, the prices paid by these groups are influenced by provincial formularies. Without a more flexible pricing policy, the introduction of innovative medicines may be delayed compared to other countries. Intellectual Property: Canada, like other countries subscribing to the 1994 WTO Agreement on Trade Related Aspects of Intellectual Property (TRIPs), provides 20 years protection from the date of application for product and process patents applied for on or after October 1, 1989. However, for pre-1989 applications, Canadas policy was to maintain the old term of protection, i.e. 17 years from date of grant. On February 20, 2001, the government tabled amendments which will implement a WTO ruling that the 20 year term should apply to these patents as well. Although the Patent Amendment Act, 1992 (Bill C-91) eliminated compulsory licences for the production of generic copies of patented drugs, the Act did not prevent generic manufacturers from developing and testing a generic equivalent prior to the expiration of the patent or from stockpiling the generic so that it was ready for shipment once the patent expires. As a result of a EU challenge at the WTO, stockpiling is no longer allowed but the research and testing provision was found to comply with WTO regulations. The EU provides data exclusivity in product submissions for regulatory approval because such information is considered proprietary whereas Canada has a less generous regime. The first generic biopharmaceuticals are expected to hit the North American market within five years. 2.5 Canadian Industry Snapshot According to a 1999 survey undertaken by Statistics Canada, the human health and bioinformatics sectors consisted of 168 dedicated biotechnology firms employing some 5,700 people with revenues and R&D expenditures totalling $1.1 billion and $723 million respectively. About 85 % of the industry was concentrated in three provinces: Quebec (38%), Ontario (27%) and BC (21%).
The two largest firms - Aventis Pasteur and Biochem Pharma - are foreign owned, accounting for about 25% of employment. The highest rate of new company formation has occurred in Quebec. Not only has the province been the most aggressive in cultivating a biotechnology industry via mechanisms such as government-backed venture capital funds, tax holidays for key staff, and enhanced R&D tax credits, NRCs Biotechnology Research Institute, established in the mid1980s, has been instrumental in the creation of a large biotechnology cluster in the Montreal area. No Canadian biopharmaceuticals have yet reached the marketplace. (Excluded are conventional vaccines with an estimated value of CAN$150 million which account for the bulk of domestic biotechnology production, and products such as 3TC (BioChem Pharma) and Visudyne (QLT) because these are not based on recombinant DNA technologies). Domestic sales of imported biopharmaceuticals in 1999 totalled C$325 million, up from C$209 million in 1997. As of mid2001,14 companies had 27 biopharmaceuticals in the clinic against a variety of diseases, with six indications in Phase III (Annex D).
Box 1 Selected Canadian Biopharmaceutical Companies Biochem Pharma, St. Foy - recombinant vaccines against meningitis, S. pneumoniae, and Group B Streptococcus Biomira, Edmonton - cancer vaccines Cangene Corporation, Winnipeg and Mississauga - human growth hormone, granulocyte macrophage colony stimulating factor for bone marrow transplants Methylgene, Montreal - antisense drugs against various cancers Viventia, Toronto and Winnipeg - human monoclonal antibodies against non-Hodgkins lymphoma and malignant melanoma NPS Allelix, Mississauga - recombinant parathyroid hormone for osteoporosis Aventis Pasteur, Toronto - anticancer vaccines Stressgen Biotechnologies, Victoria - heat shock (stress) proteins for activating the immune system focusing on vaccines against cancer and infectious diseases Synsorb Biotech, Calgary - carbohydrate based therapeutics against recurring antibiotic associated diarrhea
The genomics area is represented by companies such as MDS Proteomics, Canadas largest dedicated proteomics firm; the population genomic firms SignalGene and Xenon Genetics (identification of disease causing genes based on founder populations); the pharmacogenomics company Visible Genetics (DNA sequencing systems to identify HIV mutations that confer drug resistance in order to determine the most appropriate antiviral therapy); and Base4 Inc in bioinformatics. MDS SCIEX (mass spectrometers), Imaging Research (image analysis systems for microarrays and high throughput screening), and Virtek Vision (DNA microarrayers and laser scanners) are major suppliers of specialized instrumentation used in drug discovery and genomics. Companies involved in molecular farming (use of transgenic plants and animals to manufacture recombinant proteins) include Nexia, TGN Biotech, Medicago and SemBioSys; Chromos Molecular Systems has developed a gene delivery method to generate transgenic animal herds. In contrast to the US, there are few dedicated gene therapy firms; research is primarily conducted in teaching hospitals and universities such as The Hospital for Sick Children (Toronto) and the Samuel Lunenfeld Research Institute at Mt. Sinai (Toronto). There is also a fledgling industrial effort in gene and protein delivery technologies: Generex (aerosol delivery system for absorption of insulin through inner cheek walls), Intellivax (nasal/oral vaccine delivery based on proteosomes), and Chromoss gene delivery system for ex vivo gene therapy .
Cangene (proteins), Aventis and BioChem Pharma (vaccines), and Synsorb (glycotherapeutics) have in-house manufacturing capability certified to cGMP (current Good Manufacturing Practices) standards. Contract cGMP ferementation capacity is available from DSM Biologics and Intelligene, while Cangene and Draxis provide fill and finish services including protein lyophilization (freeze drying). Additional contract fermentation capacity will be available in 2002 when Cangenes new facility is validated. There are no domestic FDA licensed suppliers of monoclonal antibodies or oligonucleotides. 2.6 Performance and Competitiveness Because only a handful of firms in the world produce biopharmaceuticals or have a biotechnology derived product on the market, it is not possible to assess industry performance using measures such as output, market share, export growth, or productivity gains. Instead, Table 1 uses data based on measures such as R&D and revenue for public companies. It can be seen that in all size categories Canadian publicly traded firms are smaller than their US counterparts, generate far less revenue, and invest much less in R&D. This is partly due to Canadas earlier stage of development and the tendency in going public sooner. Also, biotech mergers and acquisitions are much more common in the US (approximately 140 deals over the last 24 months compared to a handful in Canada), benefiting the sector by creating companies with more critical mass, larger capitalization and better liquidity, and more diversified technologies. Canada also trails most countries in the number of biotechnology patents (a broad indicator of technological activity) and in patent citations (a measure of the importance of the underlying invention) at the European Patent Office as illustrated in Chart 6.
Table 1 Public Biopharmaceutical Companies (US$ millions) Canada Number Large (over 150 employees) Medium (101-150) Small (up to 100) employees) Number Profitable Large Medium Small Total Employment Large Medium Small Revenue Large Medium Small Revenue per firm Large Medium Small R&D Large Medium Small R&D per firm Large Medium Small R&D per employee Large Medium Small 22 2 2 18 2 2 0 0 2203 1017 362 824 248 213 22 13 11.3 106.5 11 0.7 113 30 29 54 5.1 15.2 14.5 2.9 51000 29900 80300 64300 US 169 34 37 98 16 8 5 3 42849 32926 5214 4709 8603 7625 547 431 50.9 224.3 14.8 4.4 4756 3045 730 982 28.1 89.6 19.7 10 111000 92500 140000 208500
3. COMPETITIVENESS ISSUES AND COMMERCIAL CHALLENGES 3.1 Access to Capital Few biotech firms are profitable, with most living on invested capital. Whereas the mid to late 1990s period was characterized by low stock prices and drastic decline in public offerings, the year 2000 saw the industry raising over US$26 billion on a global basis (Table 25), more than in the previous five years combined. However, with the collapse in the public equity markets at year end , the near term window for IPOs and follow-on offerings has closed and the supply of venture capital is expected to decline. With no IPO exit route, venture capital funds will be forced to carry their existing investments longer in their portfolios, reducing the amount of cash to be recirculated to new startups. A major challenge for Canadian firms is the dramatic disparity in deal size making it difficult to forge a sustainable business; the constant search for new capital is a considerable drain on management time that can interfere with scientific milestones.
Table 2: Estimated Biotechnology Equity Financing 2000 (US$ millions) Type Venture Capital Average Deal Size IPOs ( #) Average/Median Deal Size Follow on Average/Median Deal Size Total # Deals over US$100 million # Public companies Market Capitalization % Years cash >4 years 1-4 years <1 year Canada 334 2.6 110 (8) 14/16 674 15/15 1118 1 66 18300 27% 48% 25% US 3198 13.6 6,485 (63) 103/86 9710 202/105 19393 49 300 353000 40% 39% 21% EU 696 1 2,773 (39) 71/52 2300 105/25 5769 14 105 70500 60% 27% 13%
Source: PricewaterhouseCoopers, MacDonald & Associates, Ernst & Young, and Recombinant Capital
Angel investors play a much more important role in US venture capital, particularly for seed and early stage financing, than in Canada where such investors are in short supply or difficult to find. The US market benefits from well established networks of alumni and business angels and a
5
Caution should be exercised when making comparisons: figures are from different sources; classification of industries may not correspond; and US venture data exclude investments in public companies and unsecured debt.
rollover tax provision which allows investors to defer capital gains taxes from one investment if the proceeds are invested in another qualifying business (a similar Canadian tax policy was only recently initiated). The US association BIO is advocating a number of initiatives to improve access to capital ranging from reduction in federal capital gains taxes for investments in early stage companies, legislation at the state level to encourage state pension fund managers to invest in local high-tech firms, to following New Jerseys lead in allowing local biotech firms to sell net operating losses. There are also some important differences in the public equity markets. Canadian firms go public sooner than their US counterparts (similar size deals in the US would be financed via venture capital), and when public, prefer private placements (bought deals) with selected buyers over conventional follow-on offerings because of quicker access to cash, without the time and expense of investor road shows. The shortage of large cap stocks (four firms account for over 90% of the market capitalization of the Canadian life sciences sector) results in an industry unable to attract the broad institutional market because of liquidity and earnings concerns. Pension funds, for example, buy and sell significant blocks of shares and prefer minority ownership; however, small and mid cap stocks are thinly trade so it is difficult to take a stock position without affecting the price or acquiring control. In the area of strategic alliances, platform technologies are more important to big pharma than inlicensed products. The most financially lucrative deals have involved genomics combined with target validation and pre-screened small molecules. These accounted for 68% of the US$7.3 billion earned by the biotech industry from alliances during the period 1997 through to 2000 compared to only 32% for products. Canada has few platform technology firms so it has not been able to capture a significant share of this R&D investment. Mergers and acquisitions in the pharmaceutical industry could result in a slowdown in alliance activity. Existing collaborations will be at risk if the merged entity discovers redundancies in its R&D programs, overlaps in alliances, or decides that the product under development no longer fits its corporate strategy. There will also be fewer companies available for partnering and the larger entities that remain will have higher threshold sales targets. Mid-size pharmaceutical companies keen to develop and market drugs for niche disease areas will probably be more attractive partners. 3.2 Human Resource Gaps Biopharmaceutical research encompasses a wide range of scientific disciplines: genetics, molecular biology, biochemistry, microbiology, physics, pharmacology, and information technologies. The educational system appears to produce enough graduates to meet demand for entry level positions but skill shortfalls exist in a number of specialized research areas (e.g. biophysics, carbohydrates, and computational chemistry). The other end of the technology spectrum requires expertise in process engineering and industrial scale-up (fermentation and downstream recovery and purification) and regulatory affairs (documentation and validation of manufacturing processes and quality control assurance); however, most of these skills are in short supply and must be imported. Skill shortages also affect the ability of regulatory agencies to keep abreast of scientific advances and to efficiently review the increasing number of new products. The diverse range of skills required along with the dramatic pace of change is not reflected in
current university courses. For example, bioinformatics requires a background in genetics, statistics, and software development, but most graduates lack such multi-disciplinary training. Also, there are no Canadian undergraduate degree programs in bioengineering; specialization options are normally offered within more traditional engineering programs. Initiatives to fill these skill gaps, include a post degree certificate program in bioinformatics launched by the Canadian Genetic Diseases Network and course requirements for an accredited degree program in bioengineering being developed by the Professional Engineers of Ontario in conjunction with the Canadian Engineering Accreditation Board. The industry will also face an increased demand for experienced senior managers who can lead firms through strategic alliance negotiations and commercialization, and mentor younger managers. Canadian industry has not yet reached sufficient maturity to find managers with the necessary expertise. The international pharmaceutical industry has been an important source of managerial talent but there is intense competition for such managers worldwide. The shortage of qualified personnel is universal with all countries pursuing similar policies such as early science education, specialized training programs, job posting sites, tax credits for training, and enhanced research budgets for star scientists. Canada faces a number of challenges: countries such as the UK, Ireland, Germany and Australia are increasing their R&D budgets to entice their expatriates back; Singapore is allocating considerable funds into biotechnology and recruiting prominent foreign scientists; and the US offers greater opportunities, better career prospects and higher salaries, and its graduate schools draw many foreign doctoral students, a large proportion of which may decide to remain after graduation. When US employees are attracted to Canada, companies face difficulties in integrating their higher pay into their salary structure. Canadian immigration programs should perhaps target the Far East where sciences are more popular with students than in the west. Federal funding through the Research Chairs Program should enable Canadian universities and teaching hospitals to attract and retain renown researchers. The Biotechnology Human Resource Council (BHRC), a partnership between industry and Human Resources Development Canada, has initiated a number of services to strengthen human capital needs of the biotechnology sector: an inventory of biotechnology-related programs in colleges and universities; a compensation survey; a job skills inventory; a career awareness program for senior high school students; a job bank; and skill training programs and workshops; most of these efforts are long term and not immediately relevant to industry. 3.3 Maximizing Commercial Benefits Most biotechnology firms do not have the interest or resources in bringing a product to market, preferring instead to focus on research and early clinical development where they feel they can add the most value; commercialization for these companies means developing the technology to a point where it can be licensed out using royalties to fund the next generation of products. Manufacturing Only a handful of companies (e.g. Amgen, Genentech, Biogen) have in-house manufacturing capability. The majority contract out their production needs because it is faster and
less risky than building a facility and ramping up expertise in-house. Proteins are more difficult to manufacture than conventional drugs, and the time and cost of building and validating a facility certified to current Good Manufacturing Practices (cGMP) standards (up to three years and US$100 million) is a costly and risky commitment, particularly if there is only a single product in advanced stages of clinical development. An added challenge for Canadian companies is the scarcity of bio-chemical engineers with expertise in taking products from the bench through to pilot and commercial scale. The contract biomanufacturing industry is facing capacity constraints due to the large number of protein-based drugs in development combined with the market success of monoclonal antibodies and their great demands for mammalian cell culture. Biotech firms are beginning to queue up for production time and long lead times are expected over the next few years, threatening to increase the time and costs of product development. A number of factors will affect future capacity: the success rates of the products presently in the clinic, actual dose levels of these drugs, the possibility of improving existing manufacturing yields, facility expansions, and the success of molecular farming technologies. Marketing Control over marketing and sales can lead to substantially higher profit margins than royalty income but pre-launch expenses on sales staff and promotional expenditures is significant for a new drug, costing up to US$10 million, not including any Phase IV post-launch activities that may be required. Some biopharmaceuticals may not be suitable for a company to market on its own: the prescribing physician base could be very diverse, resulting in high sales expenses; customized, complex therapies (e.g. gene therapy) or products geared to smaller patient groups may be more expensive to promote; reimbursement policies may be complicated, requiring large marketing resources; or the lack of other marketable products makes setting up a sales force for a single product uneconomical. Maximizing commercial benefits is a major challenge for Canada because of the shortage of Canadian owned pharmaceutical firms that have the resources to serve as alliance partners. Because multinationals generally assign little value to Canadian distribution rights due to the size of the market, Canadian companies should be encouraged to carve out Canada for themselves during licensing negotiations as a means of gaining additional value. Technology Transfer Universities, teaching hospitals, and government research institutes have contributed to advances in biotechnology and innovative approaches to disease intervention. Examples include the Cohen-Boyer patents on recombinant DNA technology (Stanford), hepatitis B vaccine (University of California, licensed to Merck), monoclonal antibody against respiratory syncytial virus (NIH, licensed to Medimmune), and a meningitis C vaccine developed at NRC. Research is transferred to the commercial arena through licensing, industry collaborations, employment of graduate students, appointment of academia to company scientific advisory boards, and creation of spinoff firms. Spinoffs not only fill a critical gap because many technologies may remain unlicensed they also contribute to regional economic development by attracting related firms to the area, leading to the formation of biotech clusters. Because dedicated specialized facilities are important to spinoffs in their formative years, several provinces and many US states are using public funds and foundation grants to build incubation centres located on or near campuses and teaching hospitals. It is noteworthy that Toronto, one of the worlds top medical research centres, does not have a biomedical incubator. Successful tech transfer capacity requires well staffed offices with personnel experienced in
business startups, patents, negotiation skills, market needs assessment, and knowledge of faculty research areas and companies with an interest in these areas. The emergence of university technology transfer offices occurred about a decade earlier in the US than in other countries, largely due to the 1980 US Bayh-Dole Act which led to a substantial increase in academic patent filings and university spinoffs as these institutes were allowed to retain title to inventions created under federal research grants4. US federal labs provide tech transfer training to government scientists and provide a centralized on-line database of licensing opportunities to small businesses which can also identify which federal agencies have expertise in specific technologies. US Cooperative Research and Development Agreements allow each laboratory director the authority to negotiate licenses with an industrial partner; royalties received remain within the laboratory that develops the technology, with a portion going to the government inventor. Although Canadian academic institutions are now quite active in pursuing commercial opportunities, tech transfer offices are undermanned and poorly funded by comparison. A small levy on government grants or a special university targeted program to help recruit tech transfer staff e.g. UKs Biotechnology Exploitation Platform Program have been proposed as possible solutions. A Canadian difficulty is the relatively low industrial receptor capacity which results in many technologies being licensed to multinationals. Economic development can be enhanced by increasing seed financing for spinoffs. The Networks of Centres of Excellence Program has led to over 70 company spinoffs. Genome Canada will likely spur the creation of biotechnology clusters around the five regional centres. NRCs institutes such as BRI offer industry research collaborations and provide incubation services to a number of firms; however, their focus tends to be regional with the result that areas that have considerable biotechnology activity such as Toronto, Vancouver and Calgary are not adequately covered. NRC IRAP has a pilot project to enhance technology diffusion by bundling (strategic matching) related firms in a specific niche e.g. photodynamic therapy. IRAP has also begun to place a number of its Industrial Technology Advisors at or near teaching hospitals to help commercialize biomedical technologies. Medical research depends on ready access to research tools such as transgenic mice genetically predisposed to contract specific diseases, cell lines, tissue samples, methods for introducing DNA into cells, sequences of cloned pieces of DNA, receptors, and combinatorial chemistry libraries. Past practises allowed for relatively free exchange of this material, but because of aggressive patent protection, tool developers now often require formal agreements from universities specifying conditions under which these tools can be used. Many include reach-through claims demanding rights to any future intellectual property facilitated by the use of their tools, or the insistence on exclusive rather than non-exclusive licensing. Apart from protracted negotiations, pre-commitments to future discoveries can undermine a universitys ability in seeking research funding from other companies or interfere with technology transfer opportunities. 3.4 Market Access Challenges
Gross license income earned by US universities, hospitals, and research institutes in 1999 totalled US$935 million, the bulk coming from a handful of blockbusters. For NIH license revenues from 1995 to 2000 totalled US$200 million. Despite the amounts earned, many tech transfer offices operate at a loss because of patent prosecution costs, operating expenses, and revenue sharing with research scientists. The NIH ranks the fostering of scientific discoveries and rapid transfer of new technologies to the bedside well ahead of royalties when evaluating returns.
4
Intellectual Property and Freedom to Operate The biotechnology industry is characterized by widespread litigation involving intellectual property rights. Disputes are more common than other fields because of overlapping research efforts, evolving patent policy and precedents, and the use of lawsuits as a commercial strategy. Broad patents were much more prevalent in the early days of the industry because of the pioneer nature of the technology, but US courts now require much more stringent disclosure requirements, invalidating patents with exceedingly broad claims on grounds of either an inadequate description of the claimed subject matter (e.g. of the compounds or sequences claimed) or inadequate enablement (insufficient detail disclosed to enable the claimed invention to be reproduced by others). Examples of broad patents with the potential to stifle competition include Prodigenes edible vaccines which cover the development of vaccines in all plants; Infigens nuclear transfer technology for cloning mammalian cells, affecting the production of therapeutic proteins in animal milk; Monsantos patents on all genetically engineered brassica plants which prevents others from using transgenic canola to carry therapeutic proteins; Wicells stem cell patents using cloned embryos; or drug targets which often claim any molecules that may act on the target. The accelerated interference period dictated by the new US 18 month publication law (one year from publication as opposed to one year from issuance) may encourage applicants to strategically draft broad claims and publish early to narrow the window within which competitors must initiate an interference or lose the chance to do so. The patenting of genes is a major area of controversy. Over 6,000 gene patents have already been issued by the US PTO and another 20,000 are pending. Many have broad claims related to gene families or any medical application (a threat to competitors because a gene can express different proteins depending on the physiological condition). A related concern is a 1998 US PTO ruling that partial gene sequences (expressed sequence tagsor ESTs) could be patented based on their utility as probes for the corresponding full length gene; the patenting of gene fragments could lead to several parties holding title to part or all of the same gene, complicating licensing arrangements. Many believe gene patents will impede innovation5, that they do not meet the traditional non-obviousness and utility standards, and that they lie more in the realm of discovery than invention because gene isolation and cloning are now well established techniques. The biggest challenge facing gene patents is the utility criterion. Whereas the first approved gene patents were obtained by starting with a known enzyme or protein having clear medical utility e.g. insulin and working backwards to find the gene that produces that enzyme, today scientists begin with the genetic sequence and work forward using automated DNA sequencing techniques to identify genes via an in silico approach6. In early 2001, US PTO utility rules for obtaining gene patents were tightened but ultimately court precedents will be necessary to clarify the issues. US courts have yet to issue any significant decisions pertaining to patent claims directed to ESTs.
Human Genome Sciences, for example, patented a gene which produces a protein that acts as a docking site (receptor) on immune system cells - blocking that site might form the basis for a wide range of medicines; unaware of this, others identified the genes precise role in HIV infection which appears to be covered by the original patent.
6 Gene sequences are entered into a computer data bank which predicts the amino acid sequence of the resulting protein. By comparing this hypothetical protein with known proteins, an educated guess is made at what the underlying gene sequence does and how it might be useful in developing a drug or diagnostic.
A November 2000 ruling by the US Court of Appeals (Festo vs SMC) which is under appeal to the US Supreme Court has important ramifications for the biotech industry. Under Festo, any amendments or narrowing of claims during examination - a common practice in negotiations with the US PTO - excludes the company from claiming protection under the doctrine of equivalents. The doctrine had long prevented others from duplicating a patented invention through minor alterations (e.g. slight differences in amino acids) if the end result was functionally equivalent. Because a competitor will be now able to examine which claim provisions have been amended and then design an invention with minor alterations, there is a concern that Festo will diminish the value of existing biotech patents to the benefit of big pharma and result in a longer and more expensive patent application process as companies spend more time drafting claims that would not need amendment later. On the positive side, it could also introduce more certainty in biotech patent law by encouraging the drafting of tighter and clearer claims. Biotechnology patent applications usually take a long time to grant compared to other technologies. This is due to the pioneer nature and complexity of the subject matter; the time lag in understanding any new technology by a countrys patent office; the breadth in the scope of protection being sought by applicants, often leading to long prosecutions to ensure the claims are properly supported; and the ever-increasing number of patent applications from the fields of genomics and combinatorial chemistry. Biotech patent applications at the US PTO, for example, have grown from 18,695 in 1996 to 32,705 in 2000. Long delays cause uncertainty as to the scope of patent rights that will ultimately issue and reduce the effective length of patent protection. Patent pendency - the amount of time between filing an application to issuance or abandonment averages about 45 months in Canada compared to 25 months in the US and the EU, largely due to resource differences (CIPO only has 15 biotech examiners). Increasing Clinical Times The time biopharmaceuticals spend in clinical development has substantially increased over the last 20 years so that they are now on par with traditional drugs. Whereas products approved in the period 1982-89 spent an average 39.4 months in the clinic, the time increased to 46.5 months during the period 1990-94 and then to 61.5 months from 1995-99. Biotech products also have a high failure rate in Phase III (at least 36 products from 1983 to 1998, or about 43% of products approved). Many of the earlier successes were recombinant versions of natural hormones with relatively well understood properties and defined mechanisms of action compared to newer products targeting increasingly complex pathologies. Trial failures may be the result of poor trial design such as neglecting to identify optimum patient subgroups or the most appropriate clinical end point7. Many early stage biotech trials are based on small patient populations, often targeting indications with low incidence; larger populations would enhance statistical power but stretch the resources of undercapitalized companies. Finally, most firms have only a handful of products in the clinic and because their stock price is largely determined by the lead product, they have a high hurdle for discontinuing development. Nearly 80% of trials fail to enrol the required number of patients within the appropriate time
For example, many early setbacks in the development of angiogenesis inhibitors against cancer were due to the enrollment of patients with advanced stages of the disease, but inhibition of blood vessel growth is more effective when tumors are smaller, and were based on standard end points and doses typical of chemotherapy.
frame. Any improvement in the pace of clinical trials - e.g. using the internet for e-recruitment of investigators and patients to web-based capture and analysis of trial data - could translate into savings and faster market introduction. Web-based information on ongoing and upcoming clinical trials, inclusion/exclusion criteria, and an interactive on-line pre-screening service to identify interested candidates is already available in the US. The web can also streamline the collection and management of clinical trial data in real time across multiple trial sites by eliminating the need to transcribe and process paper data forms which can take three months or more. The FDA plans to establish a paperless electronic filing system for drug applications by 2002 which will save the industry millions of dollars in copying costs and document storage. Regulations and Approval Times Biopharmaceutical companies are more sensitive to approval times than big pharma because of their cash constraints and pressures from investors for positive news. During 1997/98, the mean approval time for biopharmaceuticals was 12.2 months at the US FDA and 10.6 months at the EMEA. However, the European advantage disappears because companies must then negotiate prices with each country before the products can be marketed, adding one to three years to the process. To improve approval times, the EMEA plans to establish a new 150 day approval for fast track products and initiate meetings with industry to review clinical trial design. The lack of a competitive regulatory climate in Canada could lead to a decline in domestic clinical trial activity and the later introduction of breakthrough therapies. Clinical trials are important in keeping a countrys medical system at the forefront of modern treatment8 . The International Conference on Harmonization (ICH) has been working since 1990 towards standardizing test protocols and drug registration procedures. The ultimate goal is the mutual recognition of approvals to reduce certification costs and to facilitate the simultaneous launch of new drugs in multiple markets. As a first step, a Mutual Recognition Agreement on cGMP inspections has been negotiated, which will eliminate the need for pharmaceutical companies to seek certification of manufacturing facilities in various markets (the agreement would not affect the approval of individual drugs). There is a three year transitional period with the expectation that as of December 1, 2002 the parties will mutually accept each others GMP certification. The ICH recently reached agreement on a Common Technical Document which outlines a common format for a registration dossier yet accommodates country-specific administrative requirements. The FDA permits drug sponsors to include clinical data conducted in other countries but there must be at least one US trial in order to validate the foreign data. This is due to concerns about differences in trial designs and adherence to clinical protocols by foreign investigators; difficulty in reviewing foreign clinical records; and differences in population characteristics, diagnostic procedures, and therapeutic practices. Japan, long reluctant to accept foreign clinical data because of perceived differences in diet and race, has relaxed requirement that the trials be repeated as long as they are supported by a bridging study demonstrating its relevance to Japanese patients. On the other hand, Japanese clinical trial practice will have to be raised to international standards because of their looser efficacy requirements.
A significant proportion of discovery events occur in the clinic. Viagra, for example, was originally developed as an anti-hypertensive while human growth hormone was found to improve muscle strength and reduce opportunistic infections in AIDS patients.
Trade Barriers While there has been international progress in harmonizing policy areas affecting trade in pharmaceuticals, regulatory and patent issues can still hamper and distort trade flows. For example, the World Trade Organization Agreement on Trade Related Aspects of Intellectual Property (TRIPs) establishes certain minimum protections for intellectual property, but allows countries some significant areas of discretion such as the patenting of higher life forms. The subject was supposed to be highlighted during the 1999 review of TRIPs but was deferred to the upcoming WTO negotiations. Certain countries, most notably India and Israel, do not offer patent protection for therapeutic substances, only for their manufacture. Another controversy concerns poor and developing countries that need to import medicines against major epidemics. Brazil, for example, is feuding with multinationals over the high cost of AIDS drugs, threatening to issue a compulsory licence under a national emergency clause. Developing countries which tended to use patent policy to protect local industries were given until 2005 to bring their patent systems into compliance with TRIPs, but whether they will be able to set up the appropriate legal mechanisms by that date remains to be seen. Actions are also being taken to address concerns that health, safety and environmental regulations (including certification, marketing and labeling) may constitute barriers to trade. Some believe that Japan still has a regulatory bias against their medicines, while in the area of pricing, France appears to discriminate in favour of its own firms. Biosafety Protocol Biopharmaceutical firms take special precautions to limit the environmental risk posed by their activities. Safety measures include the design of secure containment facilities for biological substances posing significant risk and the use of microorganisms that are disabled so as to limit their ability to survive or reproduce outside the vessel in which they are held. No final decision has been reached on whether this will be sufficient to exclude these medicines from the scope of the Biosafety Protocol. Pricing and Pharmacoeconomics Biopharmaceuticals with the notable exception of insulin are much more expensive than small molecule drugs. Monoclonal antibodies, for example, are in the range of US$ 15,000 to $25,000 per year, estimates for ex vivo gene therapy are over US$100,000, while certain orphan drugs e.g. genetically engineered blood clotting factor for hemophiliacs can cost as much as US$150,000 per year. The new generation of vaccines will not be affordable outside industrialized countries. Governments and third party payers are increasingly demanding evidence that pharmaceuticals generate benefits commensurate with their high costs (e.g. reduced public health care expenditures, decreased mortality, functional improvement, increased quality of life, or shorter length of therapy). Ontario, BC, a number of countries (Australia, New Zealand, Finland, UK, France, Italy, Norway and the Netherlands), and several US managed care groups (e.g. Blue Cross, Blue Shield) have instituted mandatory costeffectiveness submission guidelines. However, comparisons are difficult because of the lack of standard study methodologies, the use of placebos in clinical trials, problems in measuring quality of life benefits and improved workplace productivity, and in accounting for differences in the cost of health care inputs from country to country. Clinical trials have generally not been aimed at demonstrating long term health outcomes and cost savings so the need to capture this additional information will increase trial costs and extend development times. Bioethics The biopharmaceutical industry has remained unscathed by the by the hostile public
reaction faced by the agri-food sector because the medical field is market driven, with welldefined needs that cannot be satisfied with existing products. Instead, concerns are usually linked to animal testing, undermining of research by corporate links with academia, and advances in genetics and reproductive technologies (Box 2). Several biotech firms have formed Ethics Advisory Boards to address these issues.
Box 2 Ethics and Medicine ! Animal testing is probably the most controversial part of drug development. Computer simulation models of mammalian cells, tissues and organs combined with functional genomics for improved in vitro toxicity assays and screening procedures could reduce the number of animals used. !In January 2001, the UK became the first to authorize therapeutic cloning, the creation of human embryos for use in stem cell research (reproductive cloning is prohibited). On August 9, 2001 US President Bush authorized federally funded research only on existing 60 stem cell lines already derived from human embryos, but no funds will be provided for research on new embryos. No restrictions are placed on the private sector but the firms depend on academic researchers whose institutions risk the loss of federal money if the regulations are violated. In Canada, under the proposed Assisted Human Reproduction Act which was tabled on May 3r d , 2001, human cloning and the intentional creation of an in vitro embryo solely for research purposes would be prohibited, but research on in vitro embryos originally created for reproduction but found to be in excess of a couples needs would be allowed. ! technologies to modify the gene content of future generations are regarded with apprehension because it foreshadows the genetic improvement of the human race. Gene therapy research has been restricted to somatic cells (muscles, bone, nerve, etc.); germ line therapy (involving the cells that make the sperm, egg or their precursors) is currently prohibited in all countries because of the impact on offspring. Similar objections have been raised about injecting genetic material directly into tissues of a developing fetus to alleviate a rare disorder because of the risk that some of this material will find its way into those fetal cells that give rise to sperm or eggs, enabling the artificial gene to be passed on to future generations. !Increasing corporate funding of academic research could undermine research integrity. A US group, Center for Science in the Public Interest, has launched a web site that lists university and government scientists and their corporate sponsors; the database already includes several Canadian universities. Because many clinical investigators have a financial interest in the companies sponsoring their research, the FDA in 1998 required drug sponsors to disclose any financial arrangements such as compensation and shares paid to the clinical investigator, interest in any patent held by the investigator in the product being tested, or payments by the sponsor to the investigator for on-going research, equipment, or retainers for consultations. !The use of genetic test results has sparked a great deal of controversy because of possible genetic discrimination and the uncertainty about the interpretation of test results. The US and the Netherlands have enacted legislation that restricts genetic discrimination while the UKs Genetics and Insurance Committee has endorsed the use of a genetic test for Huntingtons chorea, a fatal brain disease, and is examining tests for familial adenomatous polyposis; myotonic dystrophy; Alzheimers; multiple endocrine neoplasia; hereditary motor and sensory neuropathy; and hereditary breast and ovarian cancers. !The mining of DNA samples from closely-knit populations derived from a small founder group such as Iceland, the Basque region of Spain, or Israels Ashkenazi Jewish population so as to more easily pinpoint genetic mutations and associated illnesses has raised fears about patient confidentiality and the sharing of benefits between the local population and multinationals. !Companies and patients are also struggling to devise an appropriate method for rationing scarce drugs. Genentech, for example, was forced to institute a lottery for distribution of its breast cancer treatment Herceptin because of supply problems, and similar difficulties were encountered by hemophiliacs for Bayers recombinant blood clotting factor.
3.5 Technologies Current technologies and technical challenges are summarized below. The Life Sciences Branch has launched a biopharmaceutical Technology Roadmap initiative to identify emerging technologies critical to a globally competitive sector. Drug Discovery Drug discovery is based on four core technologies: genomics (source of novel drug targets); combinatorial chemistry (molecules generated from small chemical building blocks to interact against those targets); high throughput screening (methods to assay one against the other using cultured cells to mimic some aspect of a disease of interest); and bioinformatics (computerized techniques for managing and analysing biological information stored in databases such as DNA sequences, and protein structure and function). While existing drugs are active
against some 500 targets, genomics is expected to lead to 10,000 or more new targets for drug development. Whether these will be amenable to small molecule intervention or result in the discovery of new proteins with biological effects that can be useful as therapies in themselves remains to be seen. Big pharma is bringing these technologies in-house, moving from traditional screening/chemistry capabilities to the front end of drug discovery research, in direct competition with biotechnology companies. The initial focus of genomics was on sequencing the human genome (Human Genome Project) and genomes of species such as mouse, fruit fly, yeast, and roundworm because genes are often grouped in the same way on chromosomes, and genes and biochemical pathways tend to be conserved during evolution. However, gene sequence data by itself provides little information about a genes relationship to a particular disease. Efforts have now shifted to the determination of the biological function of each gene (functional genomics) using DNA microarrays (also called gene chips or biochips) to detect mutations in specific genes as markers of the onset for a particular disease and to measure differences in gene expression (protein production) in healthy and diseased cells. 9 Proteomics (identification of the protein profile of each cell type along with the proteins structure and function using 2-dimensional gel electrophoresis, mass spectrometry and X-ray crystallography) complements functional genomics. Because most diseases are due to protein imbalances or aberrations in protein-protein interactions, those proteins involved in critical interactions can be developed as targets for therapeutic intervention. Protein analysis has been slower to automate because proteins are much more complex than nucleic acids and because a gene may make several proteins, each of which may have a different role. Molecular biologists have been using the internet for a number of years, scouring proprietary and public genetic databases for DNA sequences, protein structures or metabolic pathways. Several companies offer internet-based subscriptions to their proprietary genomics databases which are integrated to public domain information. Pharmaceutical firms have taken the most advantage of this opportunity, paying millions of dollars in annual subscription fees, leaving researchers in academia and small and mid-size biotechnology firms struggling to keep up with the latest analysis software and ever-expanding public databases. Despite the heavy investment in genomics, only a handful of genomics-based drugs (defined as those based on the identification of an unknown gene sequence followed by elucidation of its function and therapeutic potential) have reached the clinical stage. All are protein drugs. Also, no drugs have been discovered by the exclusive application of combinatorial chemistry/high throughput screening, nor is there is any evidence that the success rate has materially improved in the clinic. The multiplicity of targets has become a major bottleneck and many targets used in screening programs have not been properly validated (defining the role of the receptor, enzyme or target protein and confirming it is relevant to the disease process), as compounds are ultimately found to interact with irrelevant targets. There is a need for better target validation technologies and cell-based assays that more closely mimic a specific disease state, and for standardized
9 Biochips consist of glass slides on which are deposited thousands of bits of DNA designed to bind to any complementary DNA sequence in a test sample. Since the pattern of gene expression directs a cells biological character, studies of the levels and timing of gene expression are useful in identifying the genes involved in cell differentiation, development, function, and in understanding the mechanisms underway.
bioinformatics software platforms so that biologists can share and compare data from multiple computer operating systems. The whole drug discovery field is being driven by the need for higher throughput resulting in advances in miniaturization, microfluidic chip based screening systems, automation and robotic chemistry devices, protein microarrays, novel signal detection and imaging systems, and advanced algorithms and pattern recognition software. Pharmacogenomics and Personalized Medicine Inherited variations such as the genes that specify enzymes responsible for drug metabolism or in the receptors that bind to drugs contribute to variability in drug responses among the population. The detection of single nucleotide polymorphisms (SNPs - slight differences in DNA sequences among individuals leading to variations in protein expression) will enable companies to segment people according to how they react to a particular drug (high responders, low/non responders, and those who will suffer a severe side effect), ushering an era of personalized medicine tailored to ones genetic makeup.10 The technologies employed (DNA microarrays and sequencing) overlap with those in genomics but presently are too expensive for routine use and few doctors know how to interpret the results. Tests for drug responses are particularly relevant when the drug therapy is either expensive or risky, or a high probability of non-response exits (e.g. the monoclonal antibody Herceptin for breast cancer which is only effective in those 30% of women that overexpress a particular growth factor). Pharmacogenomics can also change the way clinical trials are undertaken. By screening candidates based on their genotypes to eliminate poor responders from the study population early in the process, the number of patients required to produce statistically significant results can be reduced, resulting in a major reduction in clinical trial costs. The technology comes with a number of challenges and opportunities for both industry and government: diagnostics will have to be developed for each drug, increasing costs; customized drugs will narrow big pharmas market, making orphan drug legislation important, and resulting either in lower returns or large price increases to counteract the lower market if the customized therapy proves more effective; and people with a certain genetic profile run the risk of being denied insurance coverage. On the other hand, pharmacogenomics will provide biotech firms with an opportunity to target niche markets that would be unattractive to big pharma (e.g. under $200 million in sales). Drug Delivery Unlike orally delivered small molecule drugs, proteins are large molecules which degrade rapidly in the digestive tract and must be administered by subcutaneous, intravenous, or intramuscular injection, usually in a hospital or clinic, resulting in high health care costs. Also, many injected drugs are rapidly cleared from the blood so that relatively high doses and/or frequent injections are often needed, resulting in side effects and poor patient compliance. Drug delivery systems designed for small molecules such as transdermal patches and slow release capsules are not applicable to biopharmaceuticals. A variety of delivery technologies are in development: needle-free injection devices (commercialized for liquid doses of insulin, human growth hormone and vaccines; in development for proteins and vaccines which can be reformulated into dry powders); sustained release injectables which can cut the number of injections needed from daily to monthly using biodegradable polymers to microencapsulate the protein of interest (Genentechs encapsulated human growth hormone approved in December 1999 is the first sustained release protein to be marketed); pulmonary drug delivery via liquid
10
For example, people who carry variants of the enzyme P450 CYP2D6 do not benefit from codeine as they are unable to convert into morphine
based aerosols or dry powders (insulin and Pulmozyme for cystic fibrosis are at an advanced stage of clinical development, but not all large molecules can easily be reformulated to be absorbed through the lungs); pegylation (conjugating the protein to polyethylene glycol to increase its half life - commercialized for interferon, in Phase III for insulin and GCSF); fusing the protein to blood serum albumin (interferon alpha in early stage development); and oral transmucosal routes (advanced stage for insulin, early stage for a number of vaccines). Because each product has some unique features, the market will require more than one technology to address all applications. Emerging Biopharmaceuticals Mimetics and peptidomimetics (small molecule compounds that mimic proteins and peptides) have advantages over proteins in terms of ease of delivery and cost, but there are considerable technical challenges in mimicking the large and intricate protein-protein interacting surfaces and overcoming the weak binding forces of small molecules, a major cause of side effects. Examples include mimetics of insulin and granulocyte colony stimulating factor (in early stage development), peptide based mimetics of erythropoietin (late stage), and Montreal based Neurochems mimetics of glycosaminoglycans (GAGs - complex carbohydrates that promote amyloid fibril formation characteristic of Alzheimers) which compete with naturally occurring GAGs to inhibit deposition of amyloids (early stage). Glycotherapeutics (complex sugars/carbohydrates) have significant potential both as drugs and drug targets because of their diverse biological roles (cell surface carbohydrates act as binding sites for other molecules, playing structural roles in cancer transformation, immune system regulation, tissue repair, and anti-infection responses, as well as genetic disorders such as Gauchers and Fabrys diseases) and their enormous structural diversity (more than 10 million polysaccharides can be formed from nine common monosaccharides compared to 16,000 peptides from 20 amino acids). However, their application as biopharmaceuticals has lagged far behind protein drugs because they are difficult molecules to analyse and synthesize. Fully Human Monoclonal Antibodies First generation mouse-based antibodies provoked a strong immune reaction in humans limiting their clinical utility. Strategies to generate more human compatible antibodies include mouse-human chimeras (60%-70% human protein) first introduced in 1995, followed by humanized antibodies (90%-95% human protein) in 1998 in which certain mouse antibody amino acid fragments are grafted onto a human antibody. The next generation now in clinical development are fully human antibodies produced via methods such as transgenic mice containing human antibody genes, phage display, or collection of human B cells from infected individuals which are then fused with human tumor cells to create antibody producing hybridomas. Because of their high costs and large dose requirements, advances in manufacturing capability are needed to meet market demand. Vaccines Conventional vaccines based on inactivated (killed) viruses; live, attenuated (weakened) viruses; microbial toxoids; or antigenic fragments (subunit vaccines), have a number
of disadvantages. 11 New vaccine strategies include: - recombinant antigen vaccines where the antigen is produced in bacteria or yeast rather than extracting it from chronic human or animal carriers (e.g. hepatitis B); - recombinant vector vaccines using weakened viruses such as poliovirus, vaccinia virus or salmonella bacterium as carriers of the disease causing organism to overcome the inability of inactivated whole antigens or recombinant antigen vaccines to enter cells and express the desired gene product (hepatitis B, HIV, herpes simplex, in development); - DNA vaccines, produced from a core gene of a virus, are effective against those pathogens that change their exterior protein coat by attacking the interior proteins of a virus (HIV, malaria, and a number of anticancer applications are the closest to commercialization); and - RNA vaccines (particularly applicable to yellow fever and polio caused by RNA viruses) Genomics has the potential to improve the effectiveness of existing vaccines and design vaccines for diseases for which no protection currently exists: by sequencing invading bacterial and viral organisms, those critical genes that encode the proteins that cause disease can be identified, leading to the development of novel and more effective antigens. Complete DNA sequences of most human pathogenic viruses and more than 20 bacterial pathogens have already been determined. The first genomics derived vaccine (Group B meningitis) developed by Chiron is expected to enter clinical trials in 2001. Vaccines are also being developed as anti-cancer agents, involving attempts to activate immune responses against antigens in the tumour to which the immune system has already been exposed. Research is also being undertaken on edible vaccines e.g. transgenic bananas in order to offer an improved mode of delivery. Gene therapy Whereas recombinant proteins and antibodies are produced outside the body and administered to the patient, gene therapy has the potential for the body to produce the desired protein on its own if a synthetic gene with the correct DNA sequence for that protein can be inserted into targeted defective cells. A number of major challenges have to be solved: design of a safe and effective gene delivery system, the short duration of gene expression, control over where the transferred gene is expressed, and possible immune reaction caused by the vectors, genes or new proteins. Many efforts now concentrate on conditions that require only transient gene expression, e.g. cancer and coronary artery disease, because sustained gene expression is not necessary once the targeted tumor cells die or new blood vessels grow to bypass blocked arteries. Molecular Farming Biopharmaceuticals are typically produced by microbial fermentation (e.g. insulin and human growth hormone in E. coli, recombinant hepatitis B vaccine in yeast) or mammalian cell culture (e.g. tPA, Factor VIII, in Chinese hamster ovary cell lines). Production is not the primary cost driver except for those proteins that must be administered in large amounts e.g. antibodies, or over a period of many years. Transgenic plants, the mammary gland of transgenic animals, and eggs from transgenic chickens may offer more attractive alternatives because of their low cost (factor of 10 to 100 over mammalian cell culture), ease of scale-up, and
11 Inactivated vaccines (e.g. influenza, hepatitis A, cholera, pertussis, Salk polio) usually require multiple boosters to generate continued antigen exposure, and the virus is unable to enter host cells which renders the vaccine useless if the mechanism of infection is intracellular. Live virus vaccines (e.g. mumps, tuberculosis, Sabin polio, measles, rubella) provide continual antigenic stimulation but at the risk that the microorganism will revert to its pathogenic form; people with compromised immune systems are usually not given live vaccines. Subunit vaccines (e.g. influenza type b) use only parts of the pathogen to minimize risks but the antigenic properties may not be effective against future exposures.
ability to express complex, large, correctly folded proteins (not possible with microbial fermentation). No products derived via molecular farming have yet been approved. The most advanced is antithrombin for managing coagulation during open heart surgery expressed in transgenic goats (Phase III completed). Others in clinical development include alpha-1-antitrypsin for cystic fibrosis expressed in sheep (Phase II); alpha glucosidase against Pompes disease expressed in transgenic rabbits (Phase II); and the anti-coagulant hirudin in canola, monoclonal antibodies in corn, and interleukin-10 in tobacco leaves (all in Phase I).
4. GROWTH PROSPECTS 4.1 Demand Outlook An increasing elderly population in industrial nations over the next 25 years will be the most important factor in the growing demand for therapies. The main causes of death are cardiovascular disease, cancer, and respiratory disorders, all of which are strongly age-related. Other age-related illnesses such as osteoporosis, arthritis, Alzheimers, and Parkinsons are major factors affecting quality of life. Mortality from cancer, diabetes, liver and kidney diseases has hardly changed, offering significant areas for research breakthroughs. Cancer, poorly served by traditional chemotherapies, is a major opportunity for biotech firms because the investment needed to develop a cancer drug is lower than other diseases: the field has high priority with regulatory authorities who are willing to give it fast track status on the basis of smaller (and therefore cheaper) clinical trials (a few extra months of survival could be enough to win FDA approval); the clinical community is highly concentrated; and the market size is often larger than the approved indication because of a high off-label use (for other cancers). Infectious diseases, the third most common cause of death in the US, highlight the pressing need for new vaccines and antibiotics with novel mechanisms of action to avoid growing drug resistance. Only one new class of antibiotics has been approved over the last 30 years.
Figure 1
Global biopharmaceutica l sales are expected to increase by 5% p.a. over the next five years approaching US$20 billion by 2004. Growth will largely be driven by therapeutic monoclonal antibodies, new approved indications for drugs already on the market, and second generation versions of existing blockbusters such as EPO and interferon alpha and beta. Many of the new biopharmaceuticals in development are aimed at niche markets and may never reach the blockbuster status of EPO, human insulin, or human growth hormone. Recombinant proteins Most diseases are complex and are unlikely to be treated with a single protein drug but, for the near term, recombinant proteins will continue to dominate the biopharmaceutical market. Genome sequencing efforts are making it possible to identify new protein candidates; protein product life cycles are longer than synthetic molecules because they are harder to duplicate and manufacturing methods are unique; new delivery vehicles may make oral or inhalation delivery possible; and proteins such as growth factors will allow firms to enter the market for regenerative medicine organ and tissue repair. The first drug candidates derived from genomics (an anti-obesity drug from Amgen and four drugs from Human Genome Sciences for wound healing, obstructed arteries, infections, and as an adjunct in cancer chemotherapy) are all protein drugs. Protein Biogenerics A number of US biopharmaceutical patents (e.g. interferon alpha, human insulin, human growth hormone, and hepatitis B vaccine) will expire within the next five years, potentially opening the market for biogenerics. However, competition may not be as intense as that currently experienced in the generics industry. With traditional chemical generics, extensive clinical trials are not required for marketing authorization as long as bioequivalence studies confirm that the rate and extent of drug adsorption and hence safety and efficacy are similar. Proteins on the other hand are much more complex molecules whose mode of action is not completely understood and whose properties are influenced by many factors during the
production, purification, and formulation processes, such as host cells and culture conditions. Because biological products are produced in living organisms, they do not have the same manufacturing consistency as drugs based on synthetic chemistry. Regulatory standards for biogenerics are still being developed. To prove that impurities and inactive compounds, which might differ from the original process, do not affect the safety and efficacy of the generic, new clinical trials may be required to validate the manufacturing process. The costs required for these trials, as well as the fact that the manufacture of biopharmaceuticals is more difficult and expensive, could be a significant barrier to entry. In addition, patent holders are developing second generation products which are longer lasting and do not have to be injected as often. Recombinant vaccines The first FDA-approved recombinant vaccine (against hepatitis B) was in 1986, followed in 1998 by a vaccine against Lyme disease. (Chiron also developed a recombinant vaccine against pertussis (whooping cough) but this is only marketed in Italy). The dearth of approvals is due to numerous technical challenges: devising the correct recombinant antigens (the antigen must be the same as is present in the real virus and must be non-pathogenic); increasing the immune response (the engineered protein has a limited lifetime in the body which reduces its antigenicity compared to inactivated/innocuous viruses); and designing broad antigenic variants of rapidly mutating RNA viruses such as HIV and influenza. Monoclonal Antibodies (Mab). Since the first approval of a therapeutic Mab in 1986, it took a decade for the next product to reach the market (to treat blood-clot-related complications in patients undergoing angioplasty), and are now achieving notable successes e.g. respiratory syncytial virus. Mabs are more versatile than other drugs as they can be constructed to treat a wide range of diseases such as cancer, rheumatoid arthritis, and Crohns disease; are one the fastest ways of translating genomics-derived targets into therapeutics by targeting novel cell surface receptors; and entail relatively fewer subjects for clinical trials as they are designed to target specific cells. As anti-cancer agents, antibodies can be used alone to disable cancer antigens; conjugated to cytotoxic drugs or radioisotopes to kill tumor cells; or used as a vaccine in which an antibody is designed to mimic a tumor antigen in order to stimulate the immune system to identify and eliminate cancer cells with that particular antigen on its surface. The first anti-cancer antibody (against non-Hodgkins lymphoma) was launched in 1997 and the first antibody linked to a chemotherapy agent was approved in 2000 against relapsed myeloid leukemia. Gene Therapy Gene therapy was originally proposed as a treatment for genetic disorders such as hemophilia, sickle cell anemia, and cystic fibrosis, but over 80% of clinical activity is currently focused on cancer, AIDS and cardiovascular disease, areas considered to be more commercially promising. Worldwide, approximately 4000 patients participated in nearly 400 trials since 1990 for a variety of diseases but no convincing evidence of a long term beneficial effect has been established. In the US, 25 products were in clinical development at the end of 1999 with over two thirds in Phase I. Only in cancer has gene therapy progressed into Phase III with only two products (against head and neck cancer and melanoma)12. Still to be established is whether the entire solid tumor can be killed or only those cancerous cells around the site of the injection, and
12
The first Phase III trial of any kind for gene therapy was against glioblastoma in 1996 but it did not extend patient survival.
whether there will be any effect on malignant cells that may have migrated elsewhere in the body.
Antisense Antisense involves the use of nucleic acids (oligonucleotides) to prevent the production of proteins expressed by specific genes through RNA targeting. It is still an experimental technology with considerable challenges such as finding the right gene to target, delivery mechanisms and costs. Only one product (Isis Formivirsen for the treatment of CMV retinitis, a virus that causes blindness in AIDS patients) has been approved. Most antisense drugs are a long way from market and suffer from the same delivery problems as gene therapy. 4.2 Current Industry Strengths Canada is noted for its academic excellence in medical research which includes facilities such as the University of Toronto and its affiliated teaching hospitals, one of the largest medical faculties in North America. These institutions have considerable expertise in fields such as gene therapy, cancer, vaccines, and cardiovascular disease. Canada also has a strong public health system and a relatively low cost research infrastructure that can attract international investment. On the industrial side, Canada is also strong in certain product areas, notably cancer vaccines and blood substitutes, glycotherapeutics, peptide-based imaging agents, drugs to treat antibiotic-resistant microorganisms, and the application of mass spectrometry to proteomics. Canada has a growing pipeline of products in clinical development with nine products in advanced stages. Canada also has a number of GMP certified facilities for the production of recombinant proteins, humanized monoclonal antibodies, DNA plasmids, and carbohydrates. Finally, the country ranks among the leaders in the creation of biotechnology companies with a steady flow of spin-off companies from university research, particularly in Quebec. Venture capital and public equity markets have established significant expertise in biotechnology compared to a decade ago. 4.3 Current and Anticipated Competitiveness Challenges A major challenge for the sector is to capture increased value by moving towards the commercialization of research findings. International marketing and distribution channels are controlled by big pharma while universities often assign their intellectual property rights to foreign companies which adds little value to the domestic economy. The size of the domestic marketplace is insufficient to support the growth of Canadian biotech firms. However, there are few Canadian-owned pharmaceutical companies with the necessary financial and international marketing capability to serve as strategic partners. The long product development time period requires access to sustained and patient risk capital. However, financing rounds are much smaller than in the US forcing management to spend a disproportionate amount of time raising capital. The importance of shortages in scientific, technical and managerial skills must also be addressed. Another broad challenge is to ensure that an appropriate policy framework is in place to support the industry's development. A number of issues have been flagged by the industry. First, the level
of government support for basic research falls extremely short of other industrialized nations. Second, with respect to patents, there is concern about broad patents which could restrict industrial development in Canada. In the area of genomics, patents on genes are being concentrated in a handful of multinationals. Thirdly, concern has been raised about the length of regulatory process for drug approval in Canada and a lack of commitment to improve agency performance. Attention has also been drawn to fact that Canada currently lacks legislation similar to the US Orphan Drug Act which has stimulated the growth of the US biotech industry. Canadian firms are smaller and invest much less in R&D than their US competitors. Although foreign firms are aware of Canadas attractiveness as a site for competitively priced clinical trials, there is a need for a strategy that can better define Canadian industry from its competitors in specific niches so as to attract attention from foreign investors. With the notable exception of BioChem Pharma (3TC), Canadian success stories are not well known. 4.4 The Bottom Line The biopharmaceutical industry is a key part of the knowledge-based economy, providing valuable employment opportunities for Canadian researchers and creating outputs that have great potential to contribute to Canadian well-being. Biopharmaceutical development, however, is inherently a high risk activity. Canada has many promising companies with good potential in selected niches, but these firms face significant financial, human resource and other impediments to their long-term growth. The major challenges for governments and industry include: ! strengthening long term investment in biomedical, genomics and bioinformatics research and encouraging multi-disciplinary research; ! increasing financial support for laboratory infrastructure; ! encouraging the formation of academic spin-off companies through incubator facilities; ! increasing linkages between institutions and companies to better exploit Canadian research; ! fostering technology transfer through training of such officers in universities, teaching hospitals and government laboratories and by improving access to technologies available for licensing; ! strengthening technology intelligence and forecasting initiatives in firms; ! optimizing commercial benefits for Canada from government and industry investment in R&D; ! establishing pricing and reimbursement levels that contain health care expenditures without damaging the viability of the industry;
! ensuring Canadas patent regime is competitive with other jurisdictions; ! improving regulatory efficiency; and ! addressing human resource requirements through expanded immigration and better co-ordinated education and training programs.
ANNEX A GLOSSARY OF TECHNICAL TERMS

Amino Acid Building blocks of proteins. There are 20 comm on amino acids that can be combined in various combinations (sequence) to form proteins. Antibodies Proteins (also called im mu noglobulins) produced by spe cialized blood pla sma cells (B and T cells) in response to the introduction of foreign molecules called antigens. The antibody combines with the antigen and neutralizes it. Mon oclonal antibody is a highly specific purified antibody derived from only one clone of cells and which recognize s only one antigen. Ch imeric antibodies are those that consist of both m ouse and hum an regions. Antisense Peptide s which interfe res w ith the production of a specific protein by binding to its m RN A. cGMP S (current good m anufacturing prac tices). Regulations that dictate the manner in which biopharm aceuticals, drugs, and medical devices are produced. Standard operating procedures must be followed, processes validated, equipm ent qualified, and properly trained staff m ust maintain a sterile environm ent. Chromosome Threadlike structures found in the nucleus of a cell composed of a DN A com plex that contains the genetic m aterial (genes). Each cell contains 46 chrom osomes except for the sex ce lls (sperm and ovum ) which contain 23. DNA (Deoxyribonucleic acid) Long double stranded helix molecule coiled inside cells held together by bonds between pairs of nucleotides or bases -adenine (A), cytosine (C), guanine (G), and thymine (T) - with A always binding to T and G to C. Genetic information is specified by the sequence (order) in which these bases occur. The hum an gen om e conta ins roughly 3 billion bases pa irs organized into distinct units called chromo som es. DNA marker or probe (gene probe) A m olecule usually a nucleic acid that has been labelled with a radioactive isotope, dye or enzyme used to locate a particular nucleotide sequence or gene on a DNA m olecule cDNA (complementary DNA) mR NA artificially translated back into DN A bu t withou t the non coding sequence gaps found in the original gen om ic DNA Express Ability of a cell to produce a given protein. Protein production begins in the nucleus of the cell when the gene is copied (transcribed) into a pre cursor ribonuc leic acid (pre-m RN A) w hich is processed in the nucleus to mR NA . mR NA then mo ves from the nucleus to the cells cytoplasm where it is translated by the cell into protein Expression system is a recomb inant cell or virus used to produce a selected protein Ge l electro phoresis Movem ent of suspended particles through an agar or agarose gel under the action of an applied electromotive force which separates particles based on molecular weight. Used to identify proteins, isolate DNA fragments, and gene mapping. Gene A segm ent of D NA that directs a cell to add am ino acids to make specific proteins. A gene occupies a specific position on a chromosom e. Hum an genes vary in length from fewer than one thousand bases to several million. Many diseases are caused by alterations of the DNA sequence in a gene resulting in the overexpression or underexpression of the protein for which the gene codes. By sequencing a gene of interest (determining the order of the four bases), researchers are able to correlate specific gene mutations with a disease. Genom e Complete DNA sequence in a full set of chromosomes for a given organism. Glycopr otein Proteins having carbohydrates attached to specific amino a cids In vitro In glass, test tube or other laboratory apparatus. In vivo In the living organism.
Mapping Locating all genes and other landmarks as well as their relative positions on the chromosome. Nuc leic acids Macromolecules composed of sequences of nucleotides. Each nucleotide is made up of a sugar molecule (deoxyribose in DNA, ribose in RNA), a phosphate group, and a nitrogen containing aromatic base (A, G, T, or C in D NA ; A, G , U or C in RN A). Phage D isplay Method for producing very large diverse collection of peptides and fully human antibodies using bacteriophages (viruses) that infect bac teria. The cod ing sequence for a peptide or antibody fragm ent is inserted into the gene that encodes the viral coat protein. The antibody fragm ent is then expressed on the surface of the phage . Peptide A m acromolecule composed of 50 am ino acids or less. Longer peptide chains are called polypeptides or proteins Plasmid A sm all circular piece of DNA found in certain bacteria that can exist and replicate independently of the cells chrom osomes. Plasmids are the principal means of inserting genes into m icroorganism s. Protein A large molecule com posed of 50 or more chains of amino acids in a specific order which is specified via the genetic code an d when folded into its natural shape will have a unique biological activity. Exam ples are horm ones, enzym es, and antibodies. Receptor A binding site located on the mem brane of a cell that responds to a specific molecule RNA Ribonucleic acid, similar to DNA, but unlike the large double-stranded DN A, RN A m olecules have only one strand and a different base (uracil) substitutes for thymine, one of the bases in DNA . Genes in DNA are copied into an RNA molecule through a process called transcription and the RNA is then decoded (translated) into amino acids that ma ke a protein. Sequencing Process of determining the order of the four bases in a DNA m olecule. Transcription First step in a two step process w hereby a cell converts the informa tion encoded in its genes into proteins. During transc ription, a m olecule of m esseng er RN A is m anufactured. Translation Second step in the process whereby mR NA directs the manufacture of a protein Vector Vehicle such as virus which transfers foreign DN A from one cell to another Virus Subm icroscopic age nts without a cell wall that are only able to reproduce by inserting itself into a host cell using parts of that cells reproductive system. A retrovirus is a type of virus that has the ability to live dormant within the cells genetic code.
ANNEX B 1998 GLOBAL BIOPHARMACEUTICAL SALES ($US millions)
Product Erythropo ietin Human insulin GCSF
Indication anem ia in dialysis diabetes chem o induced white blood cell deficiency growth deficiency
Sales 3780 1875 1655
M arketer Amgen, J& J, Sankyo Eli Lilly, Novo Amgen, Sankyo
Human growth hormo ne
1540
Genentec h, Pharma cia, Novo, Eli Lilly Schering/Biogen, Hoffmann-La Roche Biogen, Chiron/Schering SmithKline Beecham, Merck Bayer Gene ntech/Roche H oldings, Centocor Genzyme Genentech Immunex, Schering
Interferon-alpha
hepatitis B &C, cancer, genital warts multiple sclerosis hepatitis B hemophilia A blood clot dissolver
1145
Interfero n-beta Hepatitis B vaccine rFactor VIII tPA
972 960 740 500
rGluco cerebro idase rDornase alpha GM CSF
Gauc hers disease cystic fibro sis chem o induced white blood cell deficiency hemophilia B renal cell carcinoma transplant rejection, angiop lasty, cancer various
411 150 138
rFactor IX Interleukin-2 Therapeutic antibodies
111 106 900
Genetics Institute Chiron, Hoffmann -La Roche J&J, Centocor/Eli Lilly, Glaxo, Immunex various
Diagnostic antibodies/others Total
457
15440
Source: Decision Resources, December, 1999
ANNEX C
CANA DIAN BIOP HAR M ACEU TICALS IN CLINICAL D EVELO PM ENT, DECEM BER 2000
Company AltaRex Biochem Pharma Biomira
Product/Indication -OvaRex monoclonal antibody/ovarian cancer - recombinant meningococcal vaccine - BLP25 MUC1 vaccine/non small cell lung cancer - liposomal idiotypic vaccine/B-cell lymphoma - Theratope vaccine/metastatic breast cancer (a) GMCSF (Leucotropin) autologous bone marrow transplants (b) GMCSF (Leucotropin) mobilization of peripheral blood stem cells - Fibrimage, recombinant fibronectin/thrombosis imaging agent - INX-3280/antisense/solid tumors - INX-3001/antisense/leukemia -GTI 2040/antisense/cancer - MG98/antisense/cancer - MBI 853NL peptide antibiotic/S. Aureus - MBI 226/venous catheter related bloodstream infections - MBI 594AN/peptide antibiotic/acne - ALX 1-11/postmenopausal osteoporosis - ALX -0646/migraine - ALX -0600/short bowel syndrome - ALX- 26015/dementia - RP128/technetium 99 labelled peptides for imaging infection, inflammation /Crohns disease, arthritis, infected prosthesis - RP527/peptide receptor/prostare, breast, lung cancers - HspE7 - immunotherapeutic stress protein against precancerous cervical dysplasia - HspE7 - for genital warts - Synsorb Pk/ E.coli based kidney damage in children - Synsorb Cd/recurring antibiotic associated diarrhea - NOVOMAB-G2 IgM/humanized monoclonal antibodies/melanoma - NOVOMAB-G2 scFv/humantibodies/non-Hodgkins lymphoma - NovoVAC-M1/antibody based anticancer vaccine/melanoma
Status -Phase II (Canada, US) - Phase I (Canada) - Phase II (US) initiated 3Q99 - IND submitted to FDA to commence Phase I - Phase III (US) initiated 4Q98 (a) Phase III (Canada) 1997 (b) Phase III (US) terminated 4Q99 due to slow patient recruitment - Phase III (Canada) - IND filed Canada 4Q99 - Phase I/II (Canada) - Phase I (US) commenced Dec/99 - Phase I (Canada, US) 2Q99 - Phase I (US) initiated 1Q00 - Phase II (US) completed 4Q99 - Phase II (US) - Phase II (US) complete; Phase III 1Q00 - Phase I (UK) complete - Phase II (Canada, US) - Phase I (UK) - Phase II complete - Phase II (Belgium) - Phase III (US) - Phase II (US) - Phase III (Canada, US). Terminated Dec/00 - Phase III (Canada, US) - Phase I (US) complete - Phase I (Canada) complete - Phase I/II (US)
Cangene
Draxis Inex
Lorus MethylGene Micrologix
NPS Allelix
Resolution
StressGen
Synsorb
Viventia

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THE BIOPHARMACEUTICAL INDUSTRY:

OVERVIEW, PROSPECTS AND COMPETITIVENESS CHALLENGES

2.3 2.4 2.5 2.6

3. 3.1 3.2 3.3

Biopharmaceuticals Overview & Prospects Page 3

Biopharmaceuticals Overview & Prospects Page 7

Biopharmaceuticals Overview & Prospects Page 8

Biopharmaceuticals Overview & Prospects Page 9

2.3 North American

Biopharmaceuticals Overview & Prospects Page 11

Biopharmaceuticals Overview & Prospects Page 14

2.4 Canadian Framework

Biopharmaceuticals Overview & Prospects Page 18

Biopharmaceuticals Overview & Prospects Page 19

Biopharmaceuticals Overview & Prospects Page 20

Biopharmaceuticals Overview & Prospects Page 21

Biopharmaceuticals Overview & Prospects Page 25

Biopharmaceuticals Overview & Prospects Page 26

Biopharmaceuticals Overview & Prospects Page 27

Biopharmaceuticals Overview & Prospects Page 28

Biopharmaceuticals Overview & Prospects Page 31

Biopharmaceuticals Overview & Prospects Page 32

Biopharmaceuticals Overview & Prospects Page 33

Biopharmaceuticals Overview & Prospects Page 34

Biopharmaceuticals Overview & Prospects Page 35

Biopharmaceuticals Overview & Prospects Page 37

Biopharmaceuticals Overview & Prospects Page 39

Biopharmaceuticals Overview & Prospects Page 40

ANNEX A GLOSSARY OF TECHNICAL TERMS

Biopharmaceuticals Overview & Prospects Page 41

Biopharmaceuticals Overview & Prospects Page 42

ANNEX B 1998 GLOBAL BIOPHARMACEUTICAL SALES ($US millions)

Product Erythropo ietin Human insulin GCSF

Sales 3780 1875 1655

M arketer Amgen, J& J, Sankyo Eli Lilly, Novo Amgen, Sankyo

Human growth hormo ne

Interfero n-beta Hepatitis B vaccine rFactor VIII tPA

972 960 740 500

rGluco cerebro idase rDornase alpha GM CSF

411 150 138

rFactor IX Interleukin-2 Therapeutic antibodies

111 106 900

Diagnostic antibodies/others Total

Biopharmaceuticals Overview & Prospects Page 43

Company AltaRex Biochem Pharma Biomira

Lorus MethylGene Micrologix

Biopharmaceuticals Overview & Prospects Page 44

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