25 Years of Biotechnology – Has It Met Its Promise?

1. 25 Years of Biotechnology – Has It Met Its Promise? Gilad S. Gordon, MD, MBA

2. Disclosures • Consultant to: • Allos Therapeutics • Array BioPharma • Attenuon • GlobeImmune • Intarcia • Kinex • MetaBasis • OSI • QLT • Quark Pharmaceuticals

3. 25 Years of Biotechnology – Has It Met Its Promise? • Yes • Remarkable strides since human insulin approved in 1982 • Cured some diseases • Improved quality of life for many • Clearly a mature industry with hundreds of drug approvals • No • No clear drug products from Human Genome Project • No clear therapeutic path to individual genomic based pharmacotherapy

4. Biotechnology History • 1953 – Structure of DNA defined • My parents get married • 1957 – Lord Todd wins Nobel Prize “for his work on nucleotides and nucleotide co-enzymes” • I am born • 1962 – Watson and Crick win Nobel Prize • I enter Kindergarten • 1974 – Boyer and Cohen demonstrate the expression of a foreign gene in bacteria • I apply to college • 1976 – Genentech, first biotech company is formed • Dr. Bill Haseltine is assigned as my tutor, I go pre-med • 1978 – First successful laboratory production of recombinant human insulin • I take the MCATs

5. Biotechnology History • 1980 – Genentech goes public • 1980 – First human test of recombinant insulin • I begin second year of medical school • 1982 – Human insulin approved by FDA and marketed by Eli Lilly under license from Genentech • Senior year - I undertake studies on intra-nasal insulin with future Dean Dr. Jeffrey Flier • 1983 – First monoclonal antibody test approved for testing for Chlamydia Trachomatis • We graduate Harvard Medical School!

6. Biotechnology History • 1985 – Genentech receives FDA approval for human growth hormone – first drug to be marketed by biotechnology company • 1985 – Polymerase Chain Reaction (PCR) technology developed • 1986 – Chiron receives FDA license for Hepatitis B vaccine – first recombinant vaccine • 1986 – Muromonab-CD3 receives FDA approval for reversal of acute kidney transplant rejection – first monoclonal antibody approved for therapy • I finish residency in Internal Medicine

7. Biotechnology history 1990 – First gene therapy for ADA deficiency 1990 – Jurassic Park published – public aware of risks 1991 – UCSF and Stanford earn $40 million from patents – changes way universities look at biotechnology 1991 – Alglucerase approved to treat Gaucher’s disease 1997 – First cloned sheep - Dolly 1997 – Rituximab receives FDA approval – first antibody based treatment for cancer (non-Hodgkin’s Lymphoma) 2000 – Human Genome mapped

8. Companies Public Total Revenue* Net Loss Research and Development** # employees United States Worldwide 336 710 1452 4275 $55.4 B $73.5 B $3.5 B $5.4 B $22.8 B $27.8 B 130,600 190,500 Biotechnology Companies (2006) *52 companies are profitable **For comparison: 2006 NIH Budget - $28.7 B Ernst & Young, 2007

9. Biotechnology today 2000 • 3 biotech product categories with over $1 billion in sales out of 36 total products with over $1B in sales 2006 • 18 biotech product categories with over $ 1 billion per year in sales out of 101 total products with over $1B in sales • 10 biotech product categories with over $2 billion in sales out of 36 total products with over $2B in sales

10. New Biotech Drug and Vaccine Approvals/ New Indication Approvals by Year New Biotech Drug and Vaccine Approvals/ New Indication Approvals by Year Bio, 2007

11. Drug Human insulins (diabetes)* Epoetin alpha (anemia)* Etanercept (arthritis) Darbopoetin (anemia)* Rituximab (NHL) Infliximab (Crohn’s, arthritis) Trastuzumab (breast cancer) PEG-filgrastim (neutropenia)* Bevacizumab (colon cancer) Adalimumab (arthritis) * ”Replacement therapy” 2006 Sales $7.8 B $6.1 B $4.4 B $4.1 B $3.9 B $3.6 B $3.1 B $2.7 B $2.4 B $2.0 B Top 10 Biotechnology Proteins Ernst & Young, 2007

12. Major Challenges • Complexity and costs of clinical research • FDA policies • Pricing • Financing

13. Phases of Clinical Research • Phase I – 50-100 patients • First in Man • Dose escalation • Define Maximum Tolerated Dose • Phase II – 200-1000 patients • Early efficacy trials • Define therapeutic dose • Define study population

14. Phases of Clinical Research • Phase III – 500-5000 patients • Large clinical trials • Define safety and efficacy in target population • Define limitations of drug • Phase IV – thousands of patients • Post-approval • Better define safety • Identify other target populations

15. Clinical ResearchTimelines and Costs • Overall costs – discovery to approval • Time: 4-14 years • Costs: • $30-$200 million • Over $800 if amortize costs of failed drugs • Number of patients: • Minimum 500 for rare disease or unmet medical need • 5,000 for drug for common disease, i.e. arthritis • Over 60,000 for recent vaccine for RSV

16. Clinical Research Ongoing challenges • Access to patients • Access to investigators • Availability of research personnel • Location of research • United States • Developed world • Under-developed world

17. FDA Policies • Overall, fewer new drug approvals • Balance of off-label use vs. restriction on off-label use • Balance of safety vs. demand for new therapeutics • Currently weighted towards safety • Increased need for post-marketing safety studies • Demand for increased size of trials to demonstrate safety • What is role of generic proteins, i.e. bio-similars?

18. Costs of Treatment of Colon Cancer • 1996 • Total costs of drugs: $500 • Expected median survival: 11 months • 2007 • Total costs of drugs: $250,000 • Expected median survival: 24 months • IS TREATMENT WORTH $20,000 PER ADDITIONAL MONTH OF LIFE? Ernst & Young 2007

19. Pricing • What is a fair price? • Company perspective • “Appropriate” return on investment to investors • Assure future investments in the field • Comparable pricing to “similar” products • Favorable cost-effectiveness analyses • Drug costs are still less than 10% of total costs of healthcare • Public health perspective • Can payers afford $500 to $35,000 (Eculizumab for PNH) per month? • Is this price-gauging? • Should prices be based on “cost of goods”? • What is the “value” of the drugs? • Why are prices lower in other countries?

20. Pricing - Response of Payers • Governments – develop cost-effectiveness guidelines for drug pricing approval • UK – Rejected use of bortezomib, bevacizumab, and cetuximab based on price • Australia – Rejected use of Human Papillomavirus Quadrivalent (Types 6, 11, 16, and 18) Vaccine, Recombinant based on price • Local Payers • Strict criteria on who gets drug • Insurance companies • Increase co-pays • Individuals • Decision to forego therapy • Overall, should there be a “pricing policy” and what would be its implications?

21. Financing Sources • Government • Venture capital • Partnerships • Public markets

22. Additional Challenges • Basic research • Pre-clinical research • Intellectual property • Pharmacogenomics • Individual therapeutics

23. Early Stage Research • Basic research • Harder to justify in corporate world – role of NIH • Who will fund? • Pre-clinical research • Most active area of research • Need to define more appropriate pre-clinical efficacy models • Need to define more appropriate toxicology models

24. Intellectual Property • How to protect Intellectual Property? • Role of Universities • Changing rules – “first to file” vs. “first to invent” • Value of IP in developing countries

25. Pharmacogenomics • How to integrate human genome knowledge? • How to translate findings of the human genome into population based therapeutics? • How to determine if specific DNA mutations cause disease? • How to develop therapy for different mutations in different genes which cause the “same” disease? • How to treat different mutations in the same disease-causing gene? • How to develop specific therapeutics for specific DNA mutations? • Population-based genotype databases? • Critical to understand disease, the effect of therapeutics, and the safety of therapeutics? • How can one preserve confidentiality in age of “insurance discrimination”?

26. Individual Therapeutics • How to develop individual therapeutics? • Can genotype differences predict response to a therapeutic? • i.e different responses amongst African-Americans to isosorbide dinitrate/hydralazine for heart failure • How to develop drugs for individual patients • The ultimate holy-grail of medicine! • Requires change in paradigm of FDA review • Are there valid “pre-clinical” models that can be used? • Need to focus on individual efficacy vs. population based safety and efficacy

27. 25 Years of Biotechnology From Human Insulin to Today….…. • Industry is certainly mature • Hundreds of drugs approved • Many patients have benefited • Challenges remain • Overall – promise of the new technology of 1983 has largely been met and even exceeded!

28. The Future…………….