Maintaining a Healthy Biotech Industry

Jim's Corner

For emerging biotech companies, the economic climate remains challenging. As of April 2010, 38 percent of public biotech companies were operating with less than a year of cash and 24 percent were operating with six months or less of cash, much higher than historic averages.

Investors remain wary of taking risks, particularly given the current volatility in global financial markets, and biotech investments are a risky proposition. A biotech discovery runs a one in 5,000 chance of becoming an FDA-approved therapeutic product. It can take 10 to 12 years or more to bring a biotechnology therapy to market, at an average cost between $800 million and $1.2 billion.

The risks are certainly worth the rewards to society. Small, research-intensive emerging biotech companies develop therapies that can improve or extend the lives of patients living with diseases such as multiple sclerosis, Parkinson’s disease, heart conditions, cancers and a variety of congenital diseases. Because of the potential of such new therapies as well as other biotech products to benefit society, it is essential that emerging biotechs continue to have access to vital capital. Ensuring such access is a top priority for BIO and its member companies in the Emerging Companies Section (ECS).

At a time when access to funding through the capital markets is severely limited, government policies can help bridge the funding gap. Enactment of “The Patient Protection and Affordable Care Act” in March provided a critical lifeline for small biotech companies. This legislation includes the Therapeutic Discovery Project Tax Credit, which provides financial relief to small biotech companies and enables them to continue to develop cutting-edge medicines. The Obama administration has already released guidance documents initiating the program, setting timelines for applications and clarifying the evaluation process for the program.

This program was praised by an array of patient advocacy organizations — including the National Multiple Sclerosis Society and the Alzheimer’s Drug Discovery Foundation — for encouraging “investment in new therapies to prevent, diagnose and treat acute and chronic diseases.” We look forward to demonstrable results that will help convince Congress to continue and possibly expand the program. This would meaningfully help to grow this vital industry, benefiting patients, their loved ones and the U.S. economy as a whole.

A second priority for BIO’s member companies is reform of the Small Business Innovation Research (SBIR) grant program. Congress established the SBIR program in the early 1980s in recognition of the fact that markets all too often failed to fund promising, early stage scientific research that was perceived as too high risk. These grants provided not only direct support for essential medical developments, but also sent a powerful signal to private sector funding sources that a company’s research had scientific and technical merit. There are now more than 250 FDA-approved biologics developed by more than 160 companies. A third of those companies received at least one SBIR/STTR award.

Despite these remarkably successful returns to society on government investment for more than 20 years, the Small Business Administration changed its interpretation of the statute and denied eligibility to companies that were more than 50 percent owned by venture capital groups, despite the fact that grants overwhelmingly helped to fund innovative, early stage programs that venture capital groups were not funding adequately. This effectively closed access to SBIR/STTR grants to the great majority of emerging biotech companies and greatly reduced competition for the grants. BIO is advocating for reform of the SBIR program that will increase competition for SBIR grants in order to fund projects that demonstrate the greatest innovation and medical and commercial promise. Congress and the administration should increase transparency regarding the program’s operation and clarify SBIR eligibility rules to make them easier to understand. Individual agencies administering the SBIR grants should have the flexibility to make certain the program continues to serve the needs of their target industries.

A third priority for emerging companies is to advocate full funding — at $500 million — for the Cures Acceleration Network (CAN). “The Patient Protection and Affordable Care Act” established CAN and authorizes grants for public and private entities to research and develop discoveries that have shown promise at the laboratory level. These grants are expected to help advance treatments toward commercialization. By “de-risking” these therapies to a degree, they become more attractive to potential commercial partners and investors. Implementation of CAN will help NIH-funded researchers bridge the precarious gap between the promise of basic research and the practicality of clinical testing and commercialization. If funded, CAN will speed up emerging biotech companies’ ability to transform NIH research into therapies and cures.

Emerging biotech companies drive some of the most advanced research in medicine, often exploring approaches or diseases on which larger pharmaceutical enterprises are not focused. Maintaining a viable biotech industry ensures continued benefits for patients, society and the U.S. economy — a high risk proposition, but one that promises great rewards.

Dr. Ron Cohen, a member of the BIO Board of Directors and chair of the Emerging Companies Section, is president and CEO of  Acorda Therapeutics. Acorda is a public biotechnology company developing therapies for spinal cord injury, multiple sclerosis and other disorders of the central nervous system.

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