Paul Maier, Sequenom's chief financial officer, and Gov. Beverly Perdue face the TV cameras following Perdue's announcement that San Diego-based Sequenom will open a large lab in the Research Triangle.

Sequenom, a San Diego-based diagnostics company, plans to open a lab on Kit Creek Road next year and start analyzing blood samples from a new, prenatal blood test to detect Down Syndrome. The test would replace more invasive measures such as amniocentesis, which employs a long needle to sample amniotic fluid from inside the uterus.

Sequenom will invest $18.7 million and create up to 242 jobs.

The standing-room-only audience in the N.C. Biotechnology Center auditorium gave Paul Maier, Sequenom’s chief financial officer, a round of applause before Maier and Perdue faced the TV cameras and reporters outside.

Then, the biotech executives inside the auditorium went back to the unique chance that presents itself next year to shape the U.S. Food and Drug Administration.

Andrew von Eschenbach, former FDA commissioner and NCBIO’s keynote speaker, left no doubt that nothing short of a radical therapy will do.

Andrew von Eschenbach

“We’re approaching a crisis situation [in the U.S.] as far as being at the forefront of innovation,” Eschenbach said. The FDA is “in need of a systematic, systemic and formal revision. The moment for modernization is now.”

The FDA has been under close public scrutiny since 2004, when Vioxx was linked to thousands of sudden cardiac deaths before Merck pulled the pain killer off the market.

In 2009, a report released by the Government Accountability Office, the investigative arm of Congress, listed the FDA at risk of failing to fulfill its mission. Chronic underfunding, expanding responsibilities and an aging workforce that wasn’t keeping up with the rapidly advancing science hobbled the agency.

In July, FDAImports.com, a blog written by regulatory consultants, published information that suggested FDA Commissioner Dr. Margaret Hamburg was restructuring the agency’s top management tier. As a Washington Post profile pointed out, Hamburg, a Harvard-trained physician and former New York City health commissioner, had no ties to the pharmaceutical industry when President Obama appointed her.

With changes already under way at the FDA, it could become a watershed year.

In 2012, renewal of the Prescription Drug User Fee Act, or PDUFA, is up. Enacted in 1992, PDUFA established a funding mechanism for the FDA to regulate new medical products and make sure they are effective and do no unnecessary harm. The federal law has been subject to changes every five years, when Congress had to renew it to keep the system going.

The potential for significant changes is particularly large in 2012, because PDUFA for the first time is due for renewal during a presidential election year. And what a turbulent election year it promises to be four years into stubbornly high unemployment, ongoing banking crises and steep government budget cuts.

“This is going to create some interesting politics in Congress,” said J.C. Scott, the head lobbyist for AdvaMed, a trade association representing the medical device and technology industry. Scott was one of several NCBIO speakers addressing regulatory policy recommendations for overhauling the FDA.

Lobbyists for the biotech, pharmaceutical and medical device industries are not about to pass up this opportunity.

Young and small companies are getting squeezed by a lack of innovation capital. (More on innovation that isn’t being funded here.) Facing stagnant research and development productivity and the expiration of valuable drug patents in the U.S., large drugmakers have been cutting jobs for years. (More on the lack of big pharma R&D productivity here.)

The Biotechnology Industry Organization, or BIO, has already drawn up a wish list of changes. According to Cartier Esham, BIO’s senior director of emerging companies, health and regulatory affairs, who also spoke at NCBIO’s annual meeting, policy items on the list include:

• a fixed six-year term for the commissioner,
• the use of electronic health records and smart phones in clinical trials,
• faster approval of products for unmet medical needs similar to how European regulators do it,
• improved advisory committees,
• the establishment of chief medical policy officer positions and
• setting up the FDA with an independent budget. (The FDA is now funded under the U.S. Department of Agriculture.)

“It is our intent,” Esham said, “to get as many of these [policy changes] enacted into legislation as possible.”

But sitting around and complaining doesn’t help, either. So, seven Research Triangle Park area biotech companies decided to do something. Last month, they traveled to the San Francisco Bay Area on their own dime to meet with potential investors.

Peter Ginsberg

The trip to Palo Alto, Calif., was the first of its kind the N.C. Biotechnology Center organized, said Peter Ginsberg, the biotech center’s new vice president of business and technology development.

“We wanted to change the way Bay Area venture capitalists think about North Carolina companies,” Ginsberg said. “And maybe, maybe, down the line, knock, knock, knock, get them to open an office here.”

A report that the biotech center submitted to state legislators in January offers clues where investors from outside the state see shortfalls in the North Carolina biotech industry, which is centered in the RTP area and along the Interstate 85 corridor to Charlotte.

Even though in 2010 North Carolina was home to about 500 biotech companies that employed more than 225,000, ranking the state third behind California and Massachusetts, very few of the North Carolina companies generated revenue. Also, among the companies located in the state only 10 were publicly traded, according to Ernst & Young. That’s about 3 percent of all publicly traded biotech companies nationwide.

North Carolina's biotech employment is diverse.

Compared to other biotech hot spots, North Carolina lacks local life science entrepreneurs who successfully developed products and brought them to market and who financed multiple entrepreneurial ventures. (More on building entrepreneurial networks in the RTP area here and here.)

And the state’s many research institutions haven’t done a very good job translating their sponsored research into products.

As a former biotech analyst, institutional investor and company executive, Ginsberg has a good grasp of the fallout.

“We don’t have the breadth of life science venture capitalists as California or Massachusetts,” he said.

Add to that travel inconveniences.

The Bay Area is home to many venture capitalists, but without a non-stop flight to Raleigh-Durham International Airport most are reluctant to visit the RTP area, he added. “Venture capitalists travel a lot and it’s not easy for them to get here.”

So, traveling to Palo Alto for a day-long meet-and-greet with investors was similar to Muhammad going to the mountain to preach because the mountain wasn’t going to come to Muhammad.

The event was sponsored by Silicon Valley Bank, which has operations in the Triangle, and attracted more than a dozen venture capital firms, Ginsberg said. He declined to name them.

The seven biotech companies were traditional drug development companies, medical device and diagnostics companies and a company developing vaccines:

• Advanced Liquid Logic in Morrisville is working on a lab-on-a-chip based on nanotechnology developed at Duke University. Founded in 2004, the company has received $15 million in grants and $8.1 million in angel funding.
• CoLucid Pharmaceutical in Durham is testing a migraine drug in patients and working on therapies for chronic pain, Alzheimer’s disease and depression. Founded in 2005, the company has raised $42 million in venture capital.
• Heat Biologics, which relocated its headquarters from Miami to RTP this year, is working on therapeutic vaccines to combat a range of cancers and infectious diseases. Founded three years ago, the company has not released its funding.
• nContact in Morrisville develops and sells medical devices for minimally invasive treatment of heart arrhythmia. Founded in 2005, the company has raised more than $42 million.
• Scynexis in RTP is a drug discovery and development company that has delivered 11 drug candidates to customers in the past five years and is working on its own pipeline of experimental therapies. Founded in 2000, the company collaborates with Merck on a cancer drug and is part of a consortium working on the first pill to treat human African trypanosoniasis, also known as sleeping sickness.
• TearScience in Morrisville in July received regulatory approval to sell its first product, a medical device to treat dry eye patients in an outpatient procedure. Founded in 2005, the company has raised more than $60 million in venture capital. To bring the dry eye device to market, TearScience recently received $15 million in debt financing.

Ascletis will establish its U.S. research and development operations on the Hamner campus. Other operations of the company will be in the National High Tech Industry Development Zone in Hangzhou, a city about two hours southwest of Shanghai.

Jinzi Wu

Founded this year by Jinzi Wu, former head of global HIV drug discovery at GlaxoSmithKline in RTP, and Jinxing Qi, a Chinese real estate investor and chairman of the Hangzhou Binjiang Real Estate Group, Ascletis has $100 million in commitments from U.S. and Chinese angel investors. The company plans to establish a global therapeutics business that targets cancer and infectious diseases.

Allan Baxter, former global head of medicines development at GSK, will lead Ascletis’ discovery and development strategy as chief strategy officer.

According to its Web site, the company aims to buy the rights to new treatments, develop them and introduce them to the growing Chinese pharmaceutical market.

Allan Baxter

Projected to generate about $60 billion in sales this year, the Chinese pharmaceutical market is increasing at an annual rate of more than 20 percent, according to a report by strategic consulting firm The Monitor Group. By 2015, Monitor advisors expect China to rank second in market size to the U.S. and ahead of Japan, Germany, France and the United Kingdom.

Incidence and mortality rates for lung, stomach, liver and breast cancers are comparable or higher in China than in the U.S., the Monitor report pointed out. But competition among pharmaceutical companies is high in China. Nearly all multinationals and numerous local firms are jostling for market shares.

Also, health insurance coverage in China is improving rapidly. In the past two years, the Chinese government invested more than $160 billion in healthcare reform.

Bill Greenlee, the Hamner’s chief executive, and Wu, chief executive of Ascletis, signed the joint venture July 16 at the U.S.-China Governors Forum in Salt Lake City. At the same forum, N.C. Gov. Beverly Perdue and Zhao Hongzhu, the party secretary of the province to which Hangzhou belongs, signed an agreement to foster business and economic development between North Carolina and Zhejiang Province through commercial interactions.

North Carolina, a hub for young biotech companies, trailed other U.S. biotech hot spots in venture capital raised last year, according to an Ernst & Young report.

North Carolina’s Research Triangle, the third largest U.S. biotech hub, is one of those regions.

Some of the world’s largest R&D companies have operations in the Triangle, including GlaxoSmithKline, Novartis and Bayer. But the lifeblood of the area has long been young, early stage companies in pursuit of ideas developed at local research universities such as Duke University, the University of North Carolina at Chapel Hill and N.C. State University or hatched by researchers who used to work in corporate labs in Research Triangle Park.

A little more than two years after a deregulated U.S. banking industry stumbled in the fall of 2008, investors are increasingly shying away from early stage biotech companies, a high-stakes, high-rewards gamble in the best of times. Innovation capital is drying up in the U.S., according to a 2011 report the U.S. accounting firm Ernst & Young published this month.

One consequence, a Research Triangle venture capital investor said, is “deals are dying on the vine.”

“More and more small, really good startups are having problems finding money,” said Norris Tolson, chief executive of the N.C. Biotechnology Center. “We’re about the only game in town for early stage biotech companies.”

The biotech center, which offers grants and loans up to $250,000, has seen the number of funding requests increase by about 10 percent, Tolson said. In the past year, about 280 applicants asked for financial support. About 130 were approved.

Traditionally, young biotech companies have relied on private investors, often venture capital investors, to kick their R&D into gear.

U.S. biotech companies raised $5.5 billion in venture capital in 2007, about twice as much as in 2000, according to Ernst & Young. But in the past three years, the amount has stagnated at about $4.5 billion annually and venture capitalists have begun to hold money back until companies reach certain milestones.

Total capital raised by biotech companies in the U.S. bounced back to $20.7 billion last year, from about $13 billion in 2008, according to Ernst & Young. But much of that capital went to mature companies. Young, early stage companies, which work on the most innovative technologies and generate more jobs than large, established companies, actually received about 20 percent less in capital than the year before.

In Europe, capital raised was more evenly distributed among startups and mature companies. In Singapore, China and India, governments are ratcheting up efforts to bolster biotech innovation. And in Latin America, Brazil’s already strong agricultural biotechnology sector is gaining attention.

But politicians, economic developers and university administrators in the Research Triangle have come up with ideas to encourage the formation of R&D startups despite the early stage funding crunch

The planned Alexandria Ag-Tech Center.

The biotech center teamed up with Alexandria Real Estate Equities, a Pasadena, Calif.-based real estate investment trust, to attract young companies working in agricultural biotech research. Alexandria, which already owns lab buildings in the Triangle, will build a $13.5 million business incubator with about 18,000-square-feet of greenhouse space near RTP.

Several universities and the Council for Entrepreneurial Development are working with the charitable arm of the Blackstone Group, a global investment firm, to turn more technologies developed at universities into companies and bolster the Triangle’s existing entrepreneurial network.

The chancellors at UNC-CH and NCSU have set up innovation funds to further support spinoffs.

And state legislators are again considering establishing a nonprofit that can loan young companies money. The legislation has come up twice before and would use about $100 million an out-of-state investor is willing to provide, Tolson said. Initially, only life science companies could benefit, but recently state lawmakers suggested that information technology and green technology companies should also be included.

“There’s a huge need for startup capital across the U.S.,” Tolson said. In North Carolina, “a lot of people are understanding the need.”

Rendering of Bayer CropScience's new greenhouse.

The 60,000-square-foot greenhouse that Bayer CropsScience is building in North Carolina’s Research Triangle Park represents a critical step in a strategic shift the German Bayer Group initiated two years ago.

The two-story greenhouse is projected to cost $20 million and will quadruple the greenhouse space Bayer Cropscience has in RTP.

Biotech crop seeds have long been part of Bayer CropScience’s business. Much of the trait development – work in the lab and greenhouse to come up with genes that improve crop yield and make corn, soybean, cotton and canola plants more resistant to insects and more tolerant to herbicides, drought and stress – has been done at Bayer’s plant technology innovation center in Ghent, Belgium.

When Bayer stepped up investment in plant technology research and development in 2009, it could have just added on to the Ghent facilities. Instead, the company shifted its focus from Europe to the U.S., where consumers are more accepting of genetically modified crops. So far, Bayer has announced close to $400 million in investments to boost biotech trait development near Bayer CropScience’s U.S. headquarters in RTP.

“We see that as a logical place,” Bayer CropScience spokesman Jack Boyne said from his RTP office.

The number of biotech crop seeds on the market has been rising steadily. In 2007, biotech seeds accounted for about $22 billion in worldwide sales with the top 10 sellers garnering about 68 percent of the global market, according to a report. Bayer CropScience came in seventh, behind Syngenta and market leader Monsanto.

U.S. biotech seed sales

The RTP area, a U.S. biotech hotspot, is home to agricultural biotech operations of four of the large companies – Monsato, Syngenta, Bayer and BASF – and several smaller companies and startups. (More about research at Syngenta’s corporate biotech research center here.)

Eager to catch up, Bayer CropScience in 2009 bought a smaller RTP neighbor with an enviable collection of crop seed traits for $365 million. Athenix, which had  research collaborations with Monsato and Syngenta, is now part of Bayer CropScience. So are Athenix’s 65 employees, but Bayer CropScience continues to hire to add a total of 125 employees by 2015. (More about the Athenix acquisition here.)

“We are making an increased investment in bioscience,” Boyne said. “We see this area as a strong growth opportunity.”

So do Monsanto, DuPont and Syngenta.

In 2009, Syngenta bought Monsanto’s hybrid sunflower seed business for about $160 million. In 2010, Monsanto broke ground to expand a soybean seed production facility in North Dakota. And DuPont announced in February that it will invest $50 million to expand its agricultural biotech research center in Delaware.

DuPont expected sales of its ag unit to rise 8 percent to 10 percent per year through 2015.

For that matter, in cases where multiple treatments are available, there may not even be any research to see which treatment does better under what circumstances.

Sure, health care providers like Duke University Health System and health insurers like Blue Cross Blue Shield keep extensive medical records to track an allergic reaction to a medication, length of stay in intensive care and other treatment results for each patient. Kaiser Permanente, the largest managed care organization in the U.S., developed a reputation early on for denying coverage of treatments that are not as effective as their cost might suggest. But in general, health insurers and providers don’t use comparative information extensively. They also rarely share the data.

Scott Evangelista

In the United Kingdom, regulators look at how new medicines fare against existing ones in clinical and cost effectiveness before they approve the new medicines for sale.

In the U.S., the standard test to get regulatory approval for a new medicine is a comparison with a placebo, a drug that is designed to do nothing, Scott Evangelista, a Deloitte consultant who lives in Chapel Hill and helps life science companies with tough problems nationwide, told an audience of hundreds this week at the North Carolina Biotech conference in Raleigh.

And when the new medicine passes the test, the drugmaker can claim, “We’re better than the sugar pill,” Evangelista said. The test results provide few clues how effective the new medicine is in a real-world situation.

But the pressure is rising to get the right medicines to the right people at the right time and the right value, he said.

For the more than 500 biotech companies in North Carolina – the majority of them call the Research Triangle area home – this could mean significant changes.

“You have to get your customers involved and you have to listen to things you don’t really want to hear,” Evangelista told the crowd at the conference.

Things like comparing a new drug head-to-head with existing ones, which can end favorably for the competition. Zeroing in on a small group of patients who stand to benefit most from a new drug, thereby limiting the drug’s sales potential. Adding a test to make sure only the patients who benefit from a drug get it, which makes the treatment more expensive and less convenient. Or suspending development of a drug, because it will cost a lot more than existing ones but is only a little bit more effective.

A 2010 report in the Journal of the American Medical Association suggested that of more than 300 studies the top six medical journals published over 15 months in 2008 and 2009, 43 percent included comparisons of different medications. Only 2 percent of the studies analyzed which treatments were better values.

Indeed, of the more than $2 trillion in annual U.S. health expenditures, only an estimated 0.1 percent is spent on researching the comparative effectiveness of medical treatments, according to a 2007 report of the Congressional Budget Office.

Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group

The lack of information has contributed to health care costs that have little to do with how well patients do.

Case in point: Blood-pressure lowering drugs.

An 8-year-long study that followed more than 32,000 high-risk Americans age 55 and older found that diuretics were not only superior but also cheaper than newer enzyme inhibitors and calcium-channel blockers, according to outcome results published 2002 in JAMA.

With annual health care expenditures doubling to 16 percent of the U.S. economy in about 30 years and projected to reach 20 percent by 2016, this disconnect between costs and outcomes has insurers, employers and politicians pushing for a change in course.

In the past two years, Congress approved health care reform that stresses patients’ rights, earmarked $1.1 billion for comparative effectiveness research as part of the federal stimulus bill and established the Patient-Centered Outcomes Research Institute to set research priorities, oversee clinical trials and hand out money.

“None of this would be happening if cost wasn’t an issue,” Evangelista said.

Of course, comparative effectiveness isn’t a new concept in U.S. health care. It’s been around for more than 30 years. Two federal institutes to evaluate health care technology have opened and closed since 1978.

But this time around, America is graying – 10,000 baby boomers turn 60 every day, said Deidre Connelly, president of GSK North America Pharmaceuticals and a featured speaker at the biotech conference – treatments for chronic diseases account for an estimated 75 percent of U.S. health care spending and the rapid switch to electronic medical records will make comparative effectiveness analyses easier within a few years.

One Midwest health insurer has already launched its own research arm with plans to analyze its medical records for comparative effectiveness and conduct its own clinical trials, according to a report by CenterWatch, a trade publication that tracks the contract medical research industry.

This time, Evangelista said, “it’s going to happen.”

Wayne Flournoy, president of Entex Technologies

A few weeks ago, I reported on water quality expert Kenneth Reckhow’s concern that we will be unable to achieve water quality standards set by states in response to the Clean Water Act. Municipal water treatment plants have been improved “to the limits of technology,” he said, and additional cleanup was going to have to happen with somewhat unlikely changes like limiting development, changing farming practices, and prohibiting lawn fertilizers.

Last week, I had the opportunity to discuss the challenges of cleaning wastewater from the perspective of an entrepreneur who has been working with municipalities and industry to improve treatment plant performance. Wayne Flournoy is cofounder and president of Entex Technologies, a Chapel Hill company that designs systems for upgrading wastewater treatment plants or for new plants.

Flournoy gave me a quick and revealing introduction to the history of wastewater treatment. Essentially, every system designed since the British began treating water in the nineteenth century uses some form of microorganism or “beneficial biomass” to clean contaminants out of water. Those contaminants are primarily carbon, nitrogen and phosphorus, which Flournoy pointed out are nutrients in agriculture or horticulture but contaminants when they run off into water.

Typical treatment plants grow the waste-eating microorganisms in aerated tanks, settle them out, and concentrate them into what Flournoy calls “ a slurry of microorganisms or beneficial biomass.”

Wastewater treatment module using bioweb, a substrate that looks like a soccer goal, is able to clean more contaminants from water than traditional systems.

If you can enable your system to sustain a larger mass of “biology,” your system will be more efficient. That’s what Entex does. It provides two substrates that allow more of the beneficial microorganisms to grow and that allow them to stay in the treatment tanks longer. One, BioWeb, is a fabric that looks much like a soccer net, which Entex licenses from its manufacturer, and the other, BioPortz, is a floating medium that looks a lot like rotelle pasta. It’s all about “creating an environment that the right kind of biology likes,” said Flournoy. He added, “The real magic is . . . in manipulating the microbial environment to maximize the beneficial biology while minimizing the nuisance organisms.”

Systems designed with these media can host more biomass and therefore process more wastewater in the same amount of space. They can also provide enhanced levels of treatment, that is, getting a greater percentage of the contaminants out.

Aside from potentially doubling the amount of waste a plant can handle, it turns out that the ability Entex technology to keep the microorganisms in the treatment tanks longer has some additional benefits. Flournoy told me about an Owens-Corning plant in Ohio that needed to remove color dyes from its wastewater, and about a pilot project in Durham for removing a class of drugs called endocrine disruptors that arrived in sewage. These and other pharmaceutical compounds often arrive in treatment plants after being flushed or washed down the drains in households–sometimes as part of human waste and sometimes in as a result of efforts to dispose of surplus drugs.

Entex Technologies showcases FlowTex and other products at the 2009 Water Environment Federation Technical Exhibition and Conference

In both cases–the color dyes and the pharmaceuticals–the ability to keep the biomass sludge in the tanks for longer periods of time helped accomplish the goals. The Durham project, done in collaboration with Duke engineering professors Andrew Shuler and Claudia Gunsch and funded by the North Carolina Biotechnology Center, is important as greater attention is paid to pharmaceutical byproducts that arrive in our water treatment plants. Traditional technology does not remove those compounds. At the moment, they are not regulated, but Flournoy said, “I have no doubt that that will become an issue.”

I asked Flournoy what was the next big thing in wastewater treatment. His response was an echo of Kenneth Reckhow’s statement that we’ve reached “the limits of technology” on wastewater treatment. “To reach low levels of nitrogen,” Flournoy said, “you can’t do it all biologically.” Entex has exclusive rights to a cloth filter that they are marketing in a product called FlowTex for even more thorough removal of contaminants. It’s part of Entex’s plan to grow into a bigger company poised to handle evolving challenges in water treatment.

Entex was incorporated in 2004 and has eight employees, all with a science or engineering background. In October, it was named one of 25 North Carolina Companies to Watch by CED.

Dan Vorhaus

Dan Vorhaus is a lawyer with Robinson Bradshaw and Hinson in Charlotte, N.C. where a portion of his practice comprises the growing field of personal genomics law. Given the interest in personal genomics in the Triangle, I thought I’d create an expanded version of the short question-and-answer interview I did with him for an up-coming issue of the Sci-Tech section in the Charlotte Observer and the Raleigh News and Observer (be on the lookout for that next Monday in print and online), and post it here. Vorhaus also authors the Genomics Law Report, a blog about the legal side of personal genomics, and he will be giving testimony to the Food and Drug Administration in the near future as the agency attempts to sort out particulars of how it plans to regulate genomic diagnostic testing.

How did you become interested in concentrating on personal genomics as an area of the law?
I have a master’s in bioethics; I did that degree before I went to law school. So as I started thinking about the areas of law and policy that were most interesting to me, that was clearly one of them. And it seemed like there was a tremendous opportunity for a field that is developing and emerging and creating all sorts of new and exciting legal issues. And it’s something that I’ve always had an interest in the underlying science and technology, and I was fortunate enough in law school to start working with some real pioneers in the field, specifically George Church in the personal genome field. Everything sort of built from there. Now, it’s how I make my living, it’s my career. And I love it. It’s something new and fascinating every single day and I can’t get enough of it.

It sounds like the bioethics degree had a big influence on you.
It did, although I already had this interest before, that was what caused me to pursue the bioethics degree. And I knew I was going to law school. I kind of applied those two things simultaneously. So, they have kind of worked together simultaneously. And I decided kind of early on that I was more interested in pursuing the law than some of the pure policy or philosophy or ethical issues behind a lot of these technologies. I think there is a real need… One thing you find with the law is that new areas tend to lag in new areas of technology and new areas of social development. And that is certainly true in the areas of personal genomics, personalized medicine, there is a long way for the law to go to catch up to where science and technology already are. And they continue to press on ahead. And the law continues to play catch up. So it seems that there is a real opportunity to be involved in helping to lay the legal framework for what I think will be important and meaningful technologies and services in people lives for years and decades to come.

That formalizes what I had suspected, with some of the things I’ve read about the Myriad ruling and the FDA announcing its intent to regulate direct-to-consumer genomic testing, it does seem that these formal regulations and policies are lagging behind the business practices.
That’s right. Both the examples you gave, the Myriad litigation — and really, the state of biotechnology patents more broadly – and the FDA and Congress’s involvement in genetic testing, especially consumer genetic testing, both of those are areas where there is a lot of uncertainty right now whether the law today is doing as good a job as it could be as far as protecting individuals and enabling commerce, and really striking the right balance between allowing the science and the technology to press forward while making sure that we have the right protections in place for people using these technologies. That is always going to be a tension in this area, I don’t ever foresee that dissipating; but that does not mean that we should work any less hard to get that balance as close as we can as quickly as we can.

You’ve posted about the Myriad gene patent litigation, in which a federal judge invalidated patents that Myriad held for human genes, BRCA-1 and BRCA-2, which are used to test for the likelihood of developing breast cancer. What was the most unusual thing about this ruling, because it seems to have caused quite a splash?
You’re right, it does cause a splash, but I would say the splash that it caused is probably greater than its legal significance, at least for right now. It’s important to keep in mind that this was a district court ruling, so without getting to much into the weeds, there is a long way to go with this litigation before it gets to the point where it will really impact the commercial landscape, before it really impacts what people feel comfortable doing in laboratories – whether it is research laboratories or commercial laboratories – it needs to .. It’s already been appealed to the federal circuit, which is the federal appeals court that hears patent cases. And it’s quite possible that from there it will go to the Supreme Court, and we’re talking at least another year. Perhaps two. Maybe even three more years before we get a final resolution in this case. The reason I think it garnered so much attention is because it really struck a nerve – and going back to this idea of law not always keeping up with where science is – it really struck a nerve when people heard that there were companies out there that held patents on human genes. And we are talking about isolated human genes, genes outside the body, no one owns you, but it is the case that some companies have patents on genes, and they have the ability if they want – and Myriad has done this because of the way patents work – they grant the patent holders monopoly rights, they have the ability to keep other people from doing tests to analyze those genes, to sequence those genes, to ask what does this mean, in the case of BRCA, for the susceptibility of a woman’s or a man’s, risk of getting breast cancer. And I think that struck a nerve with a lot of people.

It’s not the only sort of development with this area… [Other reports] have gone to the Secretary of Health and Human Services that looked at these issues and looked at the gene patent landscape and said this is a problem, this is impeding our ability to do the type of diagnostic or clinical work that we need to do, to advance the state of science and technology. There is another supreme court case that will likely come out on Monday, that also may be significant as far as the extent of biotech patents, in terms of how far they can reach. And it all goes back to this question of trying to strike the right balance. In the case of patents, we’re trying to strike the right balance of information disclosure and getting these technologies out there and allowing people to benefit from them, and preserving the commercial incentive to investments. That is how our legal system works, we build up this body of law over years and decades – in this case, patenting of human genes which reaches back to a 1980s Supreme Court case, probably even further, and it built up incrementally. And science does not work that way, it moves much faster. It was only 10 years ago that we published the first draft of the human genome sequence, and now, 10 years later, we are routinely sequencing whole genomes, let alone individual genes. And so, again, it’s that pace of technological innovation and scientific advancement that is much faster than we have the ability to move in the legal realm. So that causes a conflict in cases like Myriad where now everyone has to sit down and ask, do we have the right balance here? Should genes be patentable? Is this where we want to be? I think there is plenty of debate about that. It may be something that litigation solves, or maybe Congress steps in, or maybe there are people out there working on industry private solutions to work things out without having to wait on the courts to solve it.

One thing that confused me about this, is the idea of patenting human genes. In the case of Myriad, one of the things I was wondering was why do they have to patent a human gene? Why can’t they just patent their test? That seems like a more level playing field.
You’re right, that would be a more level playing field, and I think the simple answer is that if you are going to invest a lot of money into developing a test and researching an association between a gene a certain disease, and then figuring out the corresponding test, you may not want a level playing field. You may want to do all the testing, and that is what Myriad does. I should mention, there are other companies out there that have patents on human genes, and they have a patent that allows them to have exclusive rights to practice that patent. So, to conduct a test, or even to examine the gene, if the patent is one the gene itself; but they license out that patent or set of patents. Myriad, for example, I think has several dozen patents with almost two hundred claims, so we’re not talking about one or two patents, they have a whole suite of patents, that protects this business they’ve built around diagnostic testing for breast cancer, but there are other companies out there that have similar patents that do license them out to other people, and they say, here you can use this technology, you can use this gene that we’ve patented, there is going to be some sort of commercial terms with that, you’ll pay us some sort of royalty, or some kind of fee based on tests that you do, but you can get in the game too and essentially provide the same sort of service that we are providing.

Or, Myriad is a good example. They did not actually patent this themselves, they licensed this from the University of Utah. And so it is interesting because one of the reasons why Myriad was swept up in this litigation is because there are thousands of genes that are patented, Myriad only has patents on a handful, but the reason they became a target in this litigation is partly due t otheir practice of not licensing out their IP, their intellectual property, and not giving people a chance to conduct or to develop competing gene tests. But that is the prerogative of a patent-holder. You have the right to exclude everybody else from practicing your patented invention. You can wave that right, in the form of a license, out to other people, if you want, but you don’t have to. So that is why there is this big question over what should be patentable. The technical discussion centers around section 101 of the Patent Act which defines what is patentable subject matter. And the question is, are genes patentable subject matter, or are they what is considered to be a product of nature?

Is it that things in the natural world can’t be patented?
Well, it doesn’t specifically say that in the Patent Act, but that is the way it has developed in the case law over time. The 1980 case that I referred to earlier … said that what is patentable is anything under the sun made by man. And there is this products of nature doctrine, and it says, well the Supreme Court says, that something that is a product of nature can’t be patented. And then the question is, what is a product of nature? And Myriad argues, in this case, that this is not a product of nature because you are taking genes, which occur naturally in the body, and you are separating them out, you are isolating them, you are doing things to them technically that make them no longer products of nature. And in the technical sense, that is correct because genes do not naturally occur in laboratories. But what Judge Sweet ruled is that what is fundamentally important in these genes, what really makes them significant, is the information that they carry. And that is the same whether you are talking about a BRCA gene in your body, in my body, or in Myriad’s laboratory. The information content is the same, and that is what is significant, so they are products of nature and they can not be patented. Whether that ruling stands up, remains to be seen. There is quite a good chance that it won’t.

That’s an interesting interpretation.
And it’s one that people share. I think it resonates quite strongly with people at a gut level. But again, there are limits to how that can be implemented by law in courts. Congress of course has the ability to change the law. As has happened in many, many cases, if Congress does not like a law they have the ability to go out and change the law.

The Food and Drug Administration is constricting regulations for direct-to-consumer genetic testing services offered by companies that scan a person’s genome and offer analysis for health risks or ancestry. What are the FDA’s specific concerns?
It’s interesting… since the whole Walgreens-Pathways thing blew up about five or six weeks ago now, they went after five or six companies. They’ve taken a step back and said, you know, we think we need to regulate all genetic testing. It’s important to remember that most genetic testing is not what is known as DTC [direct to consumer] or commercial or consumer genetic testing. Most of it occurs in a clinical context, done in clinical laboratories, and that is the vast majority of genetic testing on the market right now. Now, the concerns they raise about taking a risk-based approach to regulation, and specifically they are concerned about the safety and efficacy of these tests. So, making sure that the tests are accurate, making sure that – accurate in the sense that when you test for X, you actually get X – that’s what’s called analytical validity.

And then also what is known as clinical validity, which is making sure that the association or the link reported by the tests so that if you do have X, that means you have an increased risk of getting breast cancer, is actually a valid one. And in an area of science that is so new and so changing, that is something that can be difficult to show. Or it may be controversial. So there is a lot of recorded genetic associations that require confirmation, maybe they need more traditional studies to confirm the results, and some studies that have disproved associations, so that is a concern too.

Then there is a third problem which is what is known as clinical utility which is that even if you measure the association correctly and it does mean what you say it does, so you have X, you’ve actually measured X accurately and it does mean that you have an increased risk of disease Y, then clinical utility asks, Can I do anything with this? Can I take this to my doctor and can he start me on a new medication, or tell me that if I lose 15 pounds, then I can prevent myself from developing condition Y. That’s the clinical utility prong, and there is a lot of disagreement there about whether that is something the FDA should really be concerned with, or if that is something that should be left up to individuals. And there are varying definitions as to what constituted clinical utility. Alzheimers is a good example. There aren’t many drugs on the market right now that can be used to reverse the effects of Alzheimers, or be used as a preventative measure for preventing Alzhiemers.

But there are a lot of lifestyle changes that have some evidence that they might help. And there are lot of people that argue that for me, clinical utility means just knowing. If I want to know, then I should be able to know because then I can engage in family planning. I might decide to take an earlier retirement. I might do other things differently. There is going to be a big public meeting July 19 and 20 in DC where I will be at the FDA to talk about some of these issue and give them feedback as they start writing regulations. And of course, in addition to the FDA, the House of Representatives, Congressman Waxman’s committee, have gotten involved with writing letters and they appear to be gearing up to hold hearings and maybe do something in this area. I heard recently that Senator Hatch has a bill out that would address genetic tests and specifically create a new division within the FDA to address those. There is another bill on the House side, I think,… that would also wade into this area. So there are a number of different pathways on the table right now for how the regulation of genetic tests may develop. It’s a bit of a scramble right now.

Even though you said that direct-to consumer genomic tests are a small slice of the genomic testing pie, what legal concerns do consumers need to be aware of when using personal genomic testing?
Well, it is a small… let me back up by saying that consumer genetic testing is a small slice of the overall genetic testing pie, but diagnostics — and that includes an increasingly large percentage of what we think about when we talk about personalized health care – and there are some people that believe that within the not-to-distant future, it’s going to be diagnostics riving therapeutics, so drugs and pharmaceuticals, and not the other way around. Right now, you’ve got these big diagnostic companies, and you’ve got big pharmaceutical companies, but that may flip. We are really looking at, I think, a shift coming down the road. There are some questions associated with consumer tests. A lot of the issues are similar to just the issues associated with learning about genetic information in any context. You want to know that you understand… what information you will find out, if it will be useful to you.

There have always been concerns about somebody else getting ahold of that information and somebody else using that against you. That’s one reason we passed the information non-discrimination act in 2008, to prevent employers and health insurers from using that information. But, that doesn’t mean that other people can not potentially get access to that information and use it against you. That could be your friends, or your co-workers or your family workers.

One thing you hear happening is non-paternity as a result of genetic testing, so you go get tested and your father gets tested and you find out, wait a second, our DNA doesn’t match. I think it’s something like a 10 percent non-paternity rate in this country, which is pretty high compared to what the known rate of non-paternity is. So there is a lot of those cases out there that I think are probably unknown to the family. So you can find out information that might be upsetting to you, or that might be surprising to you. You can also find out information that might be very useful, or interesting to you. That is a balance that everybody needs to sort of strike for themselves and think carefully about. So there are privacy concerns, discrimination concerns. The accuracy of the information… you have to be prepared that it’s not always accurate. There is clinical genetic testing and consumer genetic testing.

Have you tested your genome?
I have. I’ve had myself genotyped by 23AndMe, which is one of the companies that is in the middle of all this. Probably one of the most prominent companies. I paid for it myself. I did not want a conflict of interest because they have gien away a number of reduced cost or low-cost kits and I did not want to have any conflict there. And I think that is all I’ll say about that, because I’m going to be talking publicly about that in the not-too-distant future.

U.S. Rep. Dick Gephardt

He carried a to-do list with him that he plans to take to Congress and the Obama Administration.

Changing the way the Food and Drug Administration regulates the development of new medicines,  making the research and development tax credit for companies permanent and establishing a federal office to spearhead public-private partnerships between universities, the National Institutes of Health and R&D companies were among the suggestions on the list.

“It needs to be the new space program in my view,” Gephardt told about 100 people at the packed Capital City Club in Raleigh. 

Gov. Beverly Perdue, mayors and economic development officials from across the state attended the event, which was meant as a first step to build grassroots support for Gephardt’s to-do list.

At stake is the global leadership position the U.S. built in the past 30 years in discovering new medical treatments, improving quality of life and advancing health care, according to a report the Battelle Technology Partnership Practice released June 10. The Council for American Medical Innovation, or CAMI, an advocacy group Gephardt chairs, commissioned the report.

Experts, investors and bright minds from industry, universities and foundations whose brains the Battelle researchers picked, pinpointed several risk factors that the U.S. is in danger of losing its medical innovation edge.

Among those factors is the declining number of novel medicines that have come to market in the past decade. Between 2005 and 2008, the FDA approved on average 19 per year compared to an average 31 per year during the 1990s. A nearly 29 percent decline in venture capital that set emerging biomedical companies back during the recession was also troublesome. So were the science scores among 12th graders, which declined almost 3 percent from 1996 to 2005.

Health care and research to find new treatments have long been among Gephardt’s interests. What caught his attention was a novel triple cancer therapy that saved his son’s life nearly 40 years ago, he said. Gephardt supported a form of universal health care and helped double the NIH’s budget to support basic research to about $30 billion in 2003.

The unprecedented increase in NIH funding several years ago and a $10 billion boost the NIH received in stimulus funds last year benefited research institutions across the Triangle, including Duke University, RTI International and the University of North Carolina.

But Gephardt’s agenda to spur medical innovation and create more R&D jobs in the U.S. will face a Congress and a White House trying to gain control over a ballooning federal deficit. Gephardt didn’t think the NIH’s budget will be cut, but he acknowledged the belt-tightening mood in Washington by saying that his to-do list isn’t a “big ticket item. Yes,” he added, “this costs money, but the payoff is enormous.”

The visitors made it clear they and other investors remain skittish, but they also noted signs of hope, such as the handful of initial public offerings by biotech companies in past months and an adjustment in venture funding last year in favor of early-stage companies.

Stephen Sands

“When we look at a year ago, we’re really all taking a breath of relief that the Dow [Jones stock index] is over 10,000,” said Stephen Sands, vice chairman of U.S. investment banking in Lazard’s healthcare group, who moderated a panel addressing the future of biotech funding at the conference.

But Sands and panel members, which included Cecilia Gonzalo, managing director at Warburg Pincus, a firm that has invested more than $35 billion in the past 40 years; Ed Mathers, a partner at the venture capital firm New Enterprise Associates; and Lauren Silverman, managing director of an investment fund Swiss drugmaker Novartis established in 2007; provided few clues about new ways of financing innovation and job creation to help the U.S. compete with lower-cost countries such as China and India.

Mathers suggested companies take more advantage of government grants, which are becoming more plentiful, especially for the development of “green” technology. But don’t become a government contractor, Silverman warned.

So what’s an entrepreneurial researchers to do whose innovation doesn’t catch the eye of a traditional investor?

Dr. Allen Roses

Dr. Allen Roses, a Duke University professor and former executive at GlaxoSmithKline’s U.S. Headquarters in RTP who spent years researching genetic risks of developing Alzheimer’s disease, offered one solution at the conference: “You can go it alone,” he said.

That’s what Roses did to develop a novel approach that promises to delay the onset of Alzheimer’s. The approach combines a test to detect a genetic marker linked to an increased risk for Alzheimer’s and a medicine that addresses the gene-based risk factor. Such a combination of test and therapy is generally known as personalized medicine, a new area of drug development.

Roses said he used his house to borrow money from the bank and established three companies to generate revenue and pursue regulatory approval of the test-and-therapy combo over the next five years. One company offers consulting services to large drugmakers also looking into personalized medicine. A second company develops diagnostics, including the test for the Alzheimer’s marker. The third company is focused on getting the rights to a diabetes drug that, Roses believes, addresses the gene-based risk factor that about one-fourth of the U.S. population carry for developing Alzheimer’s.

The test, which will be used in a clinical study the Food and Drug Administration approved of in October, looks for a protein that transports cholesterol in the bloodstream. A gene provides the instructions to make the protein, known as apolipoprotein E4, or APOE4. Research involving the APOE gene has shown that Type 2 diabetes may be linked to dementia, but it is unclear how.

GSK studied rosiglitazone, also known as its diabetes drug Avandia, as an Alzheimer’s therapy, but the clinical trial results were disappointing.

Roses declined to provide details about the diabetes drug he’s interested in for his test-and-therapy combo.

“It’s a new way of looking at a complex disease,” he said.