By Kevin E. Noonan —

The Biotechnology Industry Organization (BIO) held one of its periodic meetings with the press today for a wide-ranging discussion of its policy goals and agendas for the new Congress and administration.  A panel of BIO officials, headed by President and CEO James Greenwood, answered questions from more than a dozen reporters for about 90 minutes.

Mr. Greenwood (at left) was positive in his opening remarks, saying that BIO's member companies were positioned to be important in the economic recovery and in many of the initiatives under consideration by the Obama administration (see BIO press release on President Obama's stated national priorities).  That technologies like healthcare and biofuels were in the companies' "sweet-spot" were part of the basis for this optimism.  Mr. Greenwood also mentioned President Obama's reference in his speech before Congress on Tuesday night to a new effort to conquer cancer, including a six billion dollar increase in funding for the National Cancer Institute that BIO "applauded."  He cited statistics that the average survival time for cancer patients had increased by about a full year since the 1970's, and that the five-year survival average had risen from 43% in 1974 to 65% in 1997.  While BIO supported additional Federal funding for basic research, Mr. Greenwood asserted that this was but a first step — biotechnology companies were necessary to translate basic research into treatments and, hopefully, cures.  In this regard, Mr. Greenwood said that biotechnology companies have 254 products in the pipeline for a variety of cancers, actually enumerating about two dozen different cancers.

However, a good portion of the discussion following these remarks focused on a statistical report commissioned by BIO on the economic health of the biotechnology industry (see BIO statistics on current economic climate for biotech industry).  To put it succinctly, it isn't very good.  According to the report, 120 companies (30% of BIO's membership) had less than 6 months of cash on hand at their present burn rate; this represents a 90% increase compared with 2007.  One hundred and eighty companies (45%) have less than one year of cash remaining, a 65% increase over 2007.  And only 10% of the 370 publicly-traded biotechnology companies have "positive" income at this time.  (Ironically, this discussion was had on the same day that Steve Burrill announced that 2008 was the first year in the 40-year history biotechnology that the industry as a whole was profitable; see "Bio-irony: Biotech Turns a Profit in 2008").  James Greenwood explained that BIO had worked with Congress during the negotiations over the stimulus package to see whether some form of tax credit, or refundable grants were available for the industry, to no avail.  In response to the question, "Will half of BIO's members drop dead this year?" the panel said that its companies were very experienced in managing cash-flow and burn rate and would find ways to weather the storm (indeed, the experience small start-up biotechnology companies have had in the roller-coaster investment environment through most of the industry's history should help them in this regard).  Most (85-90%) of BIO's 1,250 member companies have less than 100 employees and about 5 pending projects.  The economic downturn might cause them to reduce the number of active projects or pare down their personnel numbers, but it was unlikely that many would be bankrupted (although they could become more attractive takeover targets).  Members of the panel stated that while the biotechnology business model was fundamentally sound, the industry's reliance on investment due to the long product development timelines means that Congress may need to act.  In this regard, BIO reminded reporters that there will be additional bills in Congress and attempts to address the economic crisis — "stimulus 2" — that may provide opportunities for BIO to advocate for help for its members.

"We feel challenged right now [economically]," Mr. Greenwood said, but despite this, the short-term outlook was surprisingly good.  Recent surveys of investors showed they are bullish for biotech.  Sixty-six percent of analysts expect biotechnology companies to outperform the healthcare sector this year, and 70% expect biotech to outperform the rest of the market.

Turning to follow-on biologics legislation, Mr. Greenwood reiterated BIO's commitment to getting a bill through Congress (see BIO's principles on follow-on biologics).  He said it was a misperception by the media and some politicians that BIO or its member companies were against biosimilars legislation.  Mr. Greenwood reaffirmed that BIO believes that the issues are patient safety and data exclusivity.  Specifically, he said BIO supported the Dingle bill, particularly those portions involving surveillance over foreign sources of ingredients used to make biosimilar drugs.  He also said that the process for bringing a biosimilars bill to the floor for a vote should be transparent, not "a small number of players in a very small room" cutting a political deal.  For specifics, Mr. Greenwood deferred to BIO's Vice President for Federal Government Relations, Brent Del Monte, who said that the issue of preemption could become an issue, and that BIO also supported the Insley bill.  He also said that the BIO community recognized that "things have changed" in Congress with Mr. Waxman taking the chair of the House Committee on Energy and Commerce.  He also cited a report showing that the difference between 10 and 14 years data exclusivity would produce a healthcare cost saving to the public of about 1.02% of total costs.  In contrast, the reduced revenues to innovator companies could be as high as 12%, which Mr. Greenwood said could represent a "go, no go" decision point for innovator companies to bring biologic drugs to market.

In response to a question from a Reuters reporter, Mr. Del Monte said that biologics could not be treated like small molecules under the Hatch-Waxman regime (where there is only 3-5 years of data exclusivity).  In another distinction with traditional drugs, he said that the timelines for biologic drug approval resulted in patents providing insufficient exclusivity times, and that the industry needs data exclusivity to provide adequate time for sufficient return on investment for innovator companies to be able to bring biologic drugs to market.  John Taylor, BIO's Executive Vice President for the Health sector, disputed a statement by a reporter from Drug Store News that BIO supported a 17-year data exclusivity term based on a white paper report.  The report showed that economists predict that 17-year data exclusivity was necessary on average for the profitability a biologic drug to "break even."  The report showed that on average it took 13.5 years for a generic drug to go to market (ranging from 12.9-16.1 years) and that the higher capital costs of developing biologic drugs resulted in the 17-year "break-even" point.  Despite this, BIO supported a 14-year data exclusivity term.

Another reporter asked about BIO's position on the proposal that biologic drugs should be prevented from "evergreening," i.e., permitting an innovator to produce — and protect — additional formulations of its drugs.  The BIO panel responded by saying that the innovator should be able to make new products and that improving products is not a bad thing.  Moreover, these practices do not thwart generic competition.  What it does, according to the panel, is undervalue the innovator's commitment to make the new formulations, dosage f
orms, or other improvements.  Permitting these kinds of "new and improved" drugs for biologics would incentivize advancement (incremental or otherwise).

Turning to healthcare reform, Mr. Greenwood said that "reform" could
not be just "squeezing" the last drop of savings from reducing
reimbursement to doctors, hospitals, and other healthcare providers (see BIO's principles on universal access to health care).  The future, according to Mr. Greenwood, is treating chronic illnesses like diabetes and Alzheimer's disease.

A reporter with the Associated Press asked whether there was any concern that the Obama administration had not overturned the Bush administration's ban on Federal funding for stem cell research.  Mr. Greenwood attributed the delay to the controversy surrounding President Obama's first choice for Health and Human Services secretary; he said he thought it might be a question of the proper protocol, having the Secretary confirmed before the administration made any important policy decisions.  In addition, Mr. Greenwood shared his impression that the Obama administration wanted Congressional action (presumably to prevent such funding to be at the whim of the proclivities of different administrations).

Turning at last to patent reform, we noted that, in BIO's letter to President Obama, the organization suggested that legislative patent reform efforts should have a respite in favor of administrative efforts.  Our question was what proposals did BIO think Congress should consider in legislation, consistent with its view of the limitations of Patent Office rulemaking authority?  BIO's Vice President and General Counsel, Mr. Tom DiLenge, said that BIO believed there were many portions of the bills Congress considered last year for which there was broad consensus, and that BIO supported these provisions (without going into detail about what these provisions were).  Mr. DiLenge said that other provisions (which he also did not name) were being promoted by specific industry sectors, and that BIO opposed these provisions.  BIO supports provisions to improve quality and Mr. DiLenge said that this is necessary for economic competitiveness.  In response to a Chemical and Engineering News reporter's question, Mr. DiLenge would not commit BIO's support to either the Kyl bill or the Leahy bill, but said that BIO was hoping for "consensus" and "a good bill."

Finally, in the most amusing exchange of the session, Mr. Greenwood refused to pick a favorite candidate for FDA commissioner.