Biotechnology can be defined as the use of living organisms (such as bacteria), biological processes or biological systems in order to create a desired end result or end product for human benefit. Primary markets for biotechnology include: 1) Agriculture, where genetically-modified seeds are now in wide use in many nations. These seeds deliver plants that have much higher crop yields per acre, and often have qualities such as disease-resistance and drought-resistance. 2) The manufacture of enzymes, including enzymes used in food processing and in converting organic matter into ethanol for fuel. 3) Pharmaceuticals, where biotechnology creates antibodies, interleukins and vaccines based on living organisms (as opposed to the chemical compounds that make up traditional drugs) that are able to target specific cell types, often with dramatic results and fewer side effects.
Biotechnology is a modern word that describes a very old science. For example, bio-enzymes have always been essential in the production of cheese. The modern difference is that much of the world’s cheese production today utilizes a bio-engineered version of an enzyme called microbial chymosin. This chymosin is made by cloning natural genes into useful bacteria. Another example: For thousands of years, mankind has used naturally-occurring microbes to convert fruit juices into wine.
Analysts at global accounting firm Ernst & Young estimate global biotech industry revenues for publicly-held companies at $89.8 billion in 2012, up from $83.4 billion in 2011 and $80.6 billion in 2010. The firm also estimates that revenues of publicly-held biotech companies in the U.S. were $63.7 billion in 2012, up from $58.8 billion in 2011, which as down from $61.6 billion in 2010.
Genetically-engineered drugs, or “biotech” drugs, represent an estimated 10% of the total global prescription drugs market, and about 20% of the U.S. prescription market. The U.S. Centers for Medicare & Medicaid Services (CMS) forecast called for prescription drug purchases in the U.S. to total about $283.7 billion during 2013, representing about $900 per capita. That projected total is up from $200 billion in 2005 and a mere $40 billion in 1990.
Estimates of the size of the drugs market vary by source. Analysts at the widely respected firm IMS Health forecast that the global prescription pharmaceuticals market was $956 billion during 2011. The firm estimated U.S. domestic prescription drug sales at $325.8 billion for 2012, a decline of about 3.5% on an inflation-adjusted, per capita basis. (See www.imshealth.com.)
By 2020, American drug purchases may reach $450 billion or more, according to the CMS, thanks to a rapidly aging U.S. population, increased access to insurance and the continued introduction of expensive new drugs. Global drug sales were in the $1 trillion range for the first time in 2013, a growth of nearly $300 billion over five years.
Advanced generations of drugs developed through biotechnology continue to enter the marketplace. The results may be very promising for patients, as a technology-driven tipping point of medical care is approaching, where drugs that target specific genes and proteins may eventually become widespread. However, it continues to be difficult and expensive to introduce a new drug in the U.S. According to FDA figures, 39 new molecular entities (NMEs were approved in the U.S. during calendar 2012, significantly surpassing the previous year. Few of these were drugs with blockbuster potential. The good news is that this is the highest number of approvals since 2004, when 36 new drugs were approved, although it is down dramatically from the record high of 53 during 1996.
These NMEs and biologics are novel new active substances that are categorized differently from “NDAs” or New Drug Applications. NDAs may seek approval for drugs based on combinations of substances that have been approved in the past. Also, a large number of generic drug applications are being approved each year. That is, an application to manufacture a drug that was created as a brand name at another firm, and has now lost its patent so that competing firms may seek FDA approval to manufacture it.
New Drug Application Categories
Applications for drug approval by the FDA fall under the following categories:
BLA (Biologics License Application): An application for approval of a drug synthesized from living organisms. That is, they are drugs created using biotechnology. Such drugs are sometimes referred to as biopharmaceuticals.
NME (New Molecular Entity): A new chemical compound that has never before been approved for marketing in any form in the U.S.
NDA (New Drug Application): An application requesting FDA approval, after completion of the all-important Phase III Clinical Trials, to market a new drug for human use in the U.S. The drug may contain active ingredients that were previously approved by the FDA.
Biosimilars (generic biotech drugs): A term used to describe generic versions of drugs that have been created using biotechnology. Because biotech drugs (“biologics”) are made from living cells, a generic version of a drug may not be biochemically identical to the original branded version of the drug. Consequently, they are described as “biosimilars” or “follow-on biologics” to set them apart. In Europe, their manufacture and sale has been allowed for some time under special guidelines. In February 2012, the FDA created guidelines for biosimilars in the U.S. Manufacturers will now be able to rely to a large extent on the clinical trials research previously conducted by the maker of the original version of the drug.
Priority Reviews: The FDA places some drug applications that appear to promise “significant improvements” over existing drugs for priority approval, with a goal of returning approval within six months.
Accelerated Approval: A process at the FDA for reducing the clinical trial length for drugs designed for certain serious or life-threatening diseases.
Fast Track Development: An enhanced process for rapid approval of drugs that treat certain life-threatening or extremely dangerous conditions. Fast Track is independent of Priority Review and Accelerated Approval.
The promising era of personalized medicine is slowly, slowly moving closer to fruition. Dozens of exciting new drugs for the treatment of dire diseases such as cancer, AIDS, Parkinson’s and Alzheimer’s are either on the market or are very close to regulatory approval. In a few instances, doctors are now beginning to make treatment decisions based on a patient’s genetic makeup. New breakthroughs in genetically targeted drugs occur regularly. An exciting new drug for certain patients who suffer from the skin cancer known as melanoma was approved in the U.S. in 2011. Zelboraf, developed by drug firms Roche Holding and Daiichi Sankyo, will dramatically aid melanoma patients who are shown through genetic tests to have a mutated gene called BRAF. In trials, about 50% of such patients saw their tumors shrink, compared to only 5.5% who received chemotherapy.
Stem cell research is moving ahead briskly on a global basis. The Obama administration relaxed limitations on federal funding of stem cell research that were established by the preceding administration. In 2009, the National Institutes of Health set new guidelines for funding that will dramatically expand the number of stem cell lines that qualify for research funds from a previous 21 to as many as 700. However, research into certain extremely controversial stem cells, such as those developed via cloning, will not be funded with federal dollars.
Stem cell breakthroughs are occurring rapidly. There is truly exciting evidence of the potential for stem cells to treat many problems, from cardiovascular disease to neurological disorders. Menlo Park, California-based Geron Corporation, for example, has published the results of its experiments that show that when certain cells (called OPCs) derived from stem cells were injected in rats that had spinal cord injuries, the rats quickly recovered. According to the company, “Rats transplanted seven days after injury showed improved walking ability compared to animals receiving a control transplant. The OPC-treated animals showed improved hind limb-forelimb coordination and weight bearing capacity, increased stride length, and better paw placement compared to control-treated animals.” However, Geron shut down the clinical trial in late 2011 and began divesting its stem cell assets in January 2013.
A handful of doctors around the world are now collecting a human patient’s stem cells, cultivating them in a laboratory, and reinjecting them into the patient. Many claim dramatic results from this method, in treatment of spine and joint problems, cardiac disease and other conditions. The procedure can cost thousands of dollars and remains experimental. Noted Americans who recently used this procedure include Governor Rick Perry of Texas and New York Yankees baseball team pitcher Bartolo Colon.
Despite exponential advances in biopharmaceutical knowledge and technology, biotech companies enduring the task of getting new drugs to market continue to face long timeframes, daunting costs and immense risks. On average, of every 1,000 experimental drug compounds in some form of pre-clinical testing, only one actually makes it to clinical trials. Then, only one in five of those drugs make it to market. Of the drugs that get to market, only one in three bring in enough revenues to recover their costs. Meanwhile, the patent expiration clock is ticking—soon enough, manufacturers of generic alternatives steal market share from the firms that invested all that time and money in the development of the original drug.
Global Factors Boosting Biotech Today:
1) A rapid aging of the population base of nations including the EU, much of Asia and the U.S., such as approximately 75 million surviving Baby Boomers in America who are entering senior years in rising numbers and require a growing level of health care.
2) A renewed, global focus on developing effective vaccines.
3) Major pharmaceuticals firms paying top prices to acquire biotech drug companies.
4) A growing global dependence on genetically-engineered agricultural seeds (“Agribio”), with farmers in at least 28 nations planting genetically modified seeds.
5) Aggressive investment in biotechnology research in Singapore, China and India, often with government sponsorship—for example, Singapore’s massive Biopolis project.
6) A government-subsidized emphasis on bioethanol and other biofuels as substitutes for petroleum-based fuels.
7) Promising research into synthetic biology.
8) Dramatic decreases in the cost of personal genetic studies, moving one step closer to the era of personalized medicine.
9) Highly advanced biotech technologies known as gene therapies are finally, slowly beginning to prove their ability to cure patients.
10) Rapid growth in the overall prescription drug markets in emerging nations, especially China, India and Brazil.
11) An increased focus on the discovery and manufacture of new drugs that impact rare diseases or relatively small portions of the population.
12) Controversy over high drug prices and overall prescription drug expenditures in mature nations, particularly America and the EU countries. Overall health care costs will be under intense scrutiny in these nations.
Source: Plunkett Research, Ltd.
Internet Research Tip:
The FDA regulates biologic products for use in humans. It is a source of a broad variety of data on drugs, including vaccines, blood products, counterfeit drugs, exports, drug shortages, recalls and drug safety.
The average cost of the research, development, testing and clinical trials needed to bring a new drug to the commercial market is a matter of great controversy. According to a study released in 2001 by the Tufts Center for the Study of Drug Development, the cost of developing a new drug and getting it to market averaged $802 million, up from about $500 million in 1996. (Averaged into these figures are the costs of developing and testing drugs that never reach the market.) Expanding on the study to include post-approval research (Phase IV clinical studies), Tufts increased the cost estimate to $897 million. Even more pessimistic is research released in 2003 by consulting firm Bain & Co., which found that the cost is more on the order of $1.7 billion, including such factors as marketing and advertising expenses. Such estimates seem logical to many observers, while they bring loud protests from others who think the estimates much too high.
What is definitely clear is that the largest pharma companies, such as Pfizer, invest vast sums in their efforts to develop new drugs, and the number of drugs they finally commercialize as a result is very small. Smaller drug firms that are more focused on a particular type of disease or therapy are likely to spend less, as are firms based in lower-cost nations. Pfizer, one of the world’s largest drug companies, invested $60 billion on R&D between 2000 and 2008, but won FDA approval for only 9 new drugs (NMEs) during that period.
What is equally clear is that the traditional business model of the major drug companies simply isn’t working as well as it did in the past. Research costs have soared, while the number of new drugs approved yearly has remained relatively flat since 1950. Partly as a result, the U.S. drug industry has reduced employment by about 300,000 since 2000. Meanwhile, global competition in the drug industry has soared, while the market for drugs in emerging nations is booming. (For example, during the third quarter of 2011, Pfizer enjoyed 15% growth in revenues from emerging markets compared to a drop by 3% for U.S. sales for the same quarter in 2010.)
The typical time elapsed from the synthesis of a new chemical drug compound to its introduction to the market remains 10 to 20 years. Considering that the patent for a new compound only lasts about 20 years, a limited amount of time is available to reclaim the considerable investments in research, development, trials and marketing. As a result of these costs and the lengthy time-to-market, young biotech companies encounter a harsh financial reality: commercial profits take years and years to emerge from promising beginnings in the laboratory.
Generic drugs get the largest share, by volume, of all drugs sold. Many major drugs have recently gone off patent, or will do so in the near future, which will be a significant boost to generic manufacturers that will quickly issue their own low-priced versions. (By one count, top drugs going off-patent during 2011 alone represented more than $30 billion in annual sales.) In the U.S., about 84% of pharmaceutical sales by volume are generic drugs. Since they are short on resources of their own, small- to mid-size biotech firms continue to look to mature, global pharmaceutical companies for cash, marketing muscle, distribution channels and regulatory expertise.
Since national governments pay for a significant part of prescription drug costs in major markets worldwide, the current need for many government agencies to control costs will have a dampening effect on total drug revenues in the U.K., U.S., Japan, France and elsewhere. However, advances in systems biology (the use of a combination of state-of-the-art technologies such as molecular diagnostics, advanced computers and extremely deep, efficient genetic databases) may eventually lead to more efficient, faster drug development at reduced costs. Much of this advance will stem from the use of technology to efficiently target the genetic causes of, and develop novel cures for, niche diseases.
The FDA is attempting to help the drug industry bring the most vital drugs to market in shorter time with three programs: Fast Track, Priority Review and Accelerated Approval. The benefits of Fast Track include scheduled meetings to seek FDA input into development as well as the option of submitting a New Drug Application in sections rather than submitting all components at once. The Fast Track designation is intended for drugs that address an unmet medical need, but is independent of Priority Review and Accelerated Approval. Priority drugs are those considered by the FDA to offer improvements over existing drugs or to offer high therapeutic value. The priority program, along with increased budget and staffing at the FDA, are having a positive effect on total approval times for new drugs.
The FDA quickly approved Novartis’ new drug Gleevec (a revolutionary and highly effective treatment for patients suffering from chronic myeloid leukemia). After priority review and Fast Track status, it required only two and one-half months in the approval process. This rapid approval, which enabled the drug to promptly begin saving lives, was possible because of two factors aside from the FDA’s cooperation. One, Novartis mounted a targeted approach to this niche disease. Its research determined that a specific genetic malfunction causes the disease, and its drug specifically blocks the protein that causes the genetic malfunction. Two, thanks to its use of advanced genetic research techniques, Novartis was so convinced of the effectiveness of this drug that it invested heavily and quickly in its development.
Key Food & Drug Administration (FDA) terms relating to human clinical trials:
Phase I—Small-scale human trials to determine safety. Typically include 20 to 60 patients and are six months to one year in length.
Phase II—Preliminary trials on a drug’s safety/efficacy. Typically include 100 to 500 patients and are one and a half to two years in length.
Phase III—Large-scale controlled trials for efficacy/safety; also the last stage before a request for approval for commercial distribution is made to the FDA. Typically include 1,000 to 7,500 patients and are three to five years in length.
Phase IV—Follow-up trials after a drug is released to the public.
Generally, Fast Track approval is reserved for life-threatening diseases such as rare forms of cancer, but new policies are setting the stage for accelerated approval for less deadly but more pervasive conditions such as diabetes and obesity. Approval is also being made easier by the use of genetic testing to determine a drug’s efficacy, as well as the practice of drug companies working closely with federal organizations. Examples of these new policies are exemplified in the approval of Iressa, which helps fight certain types of cancer in only 10% of patients but is associated with a genetic marker that can help predict a patient’s receptivity; and VELCADE, a cancer drug that received initial approval in only four months because the company that makes it worked closely with the National Cancer Institute to review trials.
Personal genetic codes are becoming less expensive and more widely attainable. Today, the cost of decoding the most important sections of the human genome for an individual patient has dropped dramatically.
Global trends are affecting the biotech industry in a big way. Post 9/11, an emphasis was placed by government agencies on the prevention of bioterror risks, such as attacks by the spread of anthrax. This factor, combined with global concern about the possible spread of flu, has been a significant boost to vaccine research and production. At the same time, the rapid rise of offshoring and globalization is contributing to the movement of research, development and clinical trials away from the U.S., Japan and Europe into lower cost technology centers in India and elsewhere. In fact, biotech firms are rising rapidly in India, China, Singapore and South Korea that will provide serious future competition to older companies in the West.
Likewise, retail drug markets have tremendous potential in emerging nations over the mid term. For example, consultants at McKinsey estimated that the drug market in India will grow from $6.3 billion in 2005 to $20 billion in 2015. China offers similar opportunities, while Russia, Brazil and Turkey are also likely to be significant growth markets. The Southern Medicine Economic Institute forecast that pharmaceutical sales in China will soar to $107.1 billion in 2015 from $74.8 billion in 2012.
This means that major international drug makers will be expanding their presence in these nations. However, it also means that local drug manufacturers have tremendous incentive to expand their research, product lines and marketing within their own nations.
The Coming BioIndustrial Era:
Some of the most exciting developments in the world of technology today are occurring in the biotech sector. These include advances in agricultural biotechnology, the convergence of nanotechnology and information technology with biotech, and breakthroughs in synthetic biotechnology.
The rapidly growing worldwide base of biotechnology knowledge has the potential to create a new “bioindustrial era.” For example, scientists’ ability to capture refinable-oils from algae and other organisms (organisms that remove carbon from the atmosphere as they grow) may eventually create a new source of transportation fuel. Oil industry giant ExxonMobil is backing research in this regard at Synthetic Genomics, Inc. with hundreds of millions of dollars.
The use of enzymes in industrial processes may enable us to bio-engineer a long list of highly desirable substances at modest cost. The end result could easily be a lower carbon footprint for many industrial processes, less industrial and residential waste to deal with, and a significant increase in yields in chemicals, coatings, food and other vital sectors. DuPont’s 2011 acquisition of global enzyme leader Danisco is a good indicator of the looming era of bioindustrial advancements. DuPont is making a $5.8 billion bet that it can help a vast variety of manufacturers to achieve significant product enhancements and efficiencies.
Global panic over quickly rising food prices in 2007-08 and 2010-11 finally gave the genetically modified (GM) seed industry the boost it needed. High food prices going forward are likely to further this trend. Agribio (agricultural biotechnology) is spreading rapidly, with genetically modified seeds now planted in at least 28 nations worldwide. This is biotechnology in one of its most productive arenas, the modification of the genetic makeup of seeds in order to make plants resistant to insects, capable of fighting off diseases, loaded with nutrients, able to grow with less water and/or much more productive per acre of planting. This is a science that has evolved through the years to the point that, in a good year, a densely populated nation like India can be capable of growing enough grain to feed its hordes of people. Partly because of rising incomes—leading to more demand for foodstuffs—and a growing global population, a forecast made by analysts at the UN’s Food and Agriculture Organization in February 2010 is that agricultural output worldwide needs to increase 70% by the year 2050. Consumer acceptance of GM food products will increase quickly, along with steady growth in the global population and an expanding global middle class.
Significant ethical issues face the biotech industry as it moves forward. They include, for example, the ability to determine an individual’s likelihood to develop a disease in the future, based on his or her genetic makeup today; the potential to harvest replacement organs and tissues from animals or from cloned human genetic material; and the ability to alter genetically the basic foods that we eat. These are only a handful of the powers of biotechnology that must be dealt with by society. Watch for intense, impassioned discussion of such issues and a raft of governmental regulation as new technologies and therapies emerge.
The biggest single issue may be privacy. Who should have access to your personal genetic records? Where should they be stored? How should they be accessed? Can you be denied employment or insurance coverage due to your genetic makeup?
Internet Research Tip:
For the latest biotech developments check out www.biospace.com, a private sector portal for the biotech community, and www.bio.org, the web site of the highly regarded Biotechnology Industry Organization.