The emerging virtual biotech model,which some Angel and VC investors are now funding, so far seems a very lean and resource effective model. Virtual biotech's nowadays are actually being built with very small teams that outsource as much as possible to reduce any overhead costs. Typically from my experience these teams can be as small as one full time CEO with a fully part time/consultant executive team through to a more classical 5-10 person full time team. The aim of many of these virtual biotechs is getting to signal with their lead therapeutic, this means getting some proof concept or proof mechanism data that their drug works either in humans or animals to help raise the next financing round. So far in this tighter financing environment this model has proved to be one of the more successful strategies for founding new biotech companies, as can be seen with the Flexion Biotech deal with Pfizer. The flip side of this is that a lack of signal in a lead molecule can also be more lethal set back both to a new therapeutic and virtual biotech.

I personally wouldn't be surprised if this push to innovate both in biotech business models and how clinical development is done doesn't result in a more cash and resource effective strategy for bringing new therapeutics to the market and brings in higher returns for biotech investors.

Within the Burrell report they looked at seed, series A and B rounds which increased 43% over the same quarter last year. The information below provides an overview of the number of deals and also the percentage increase or decrease of these deals.

Disclosed deals in Biotech     Q1 2009     Q1 2010

Seed, A-B rounds     28     40     42.90%

C and later rounds     12     10     -16.70%

More good news for early stage biotech's

There's also additional good news for early-stage biotech's in regards to the upcoming R&D tax credit which the U.S. Treasury is pushing forward which will for the first time be providing grants in exchange for R&D tax credits. This tax credit was actually as a result, somewhat surprisingly of the highly unpopular patient protection and affordable care act which was signed by Pres. Obama on March 23, 2010.

The legislation allows biotech's to claim a non-refundable credit for 50% of their qualified investment costs and covered projects for the 2009 and 2010 tax years. The Therapeutic tax credit differentiates itself from previous R&D tax credits for the first time in that cash burning biotech's can request this tax credit as a grant in efforts to effectively recoup their original investment (up to 50%). The Treasury Department expects to release applications a little later on in the year. Qualification criteria are included in the link attached. This is a very promising development for fledgling biotech's, especially as it shows that the current administration is thinking about the importance and value of the innovation in the biotechnology industry!

• Scott Thacher, CEO of Orphagen
• Richard Lin, CEO of Explora Biolabs
• Gonul Velicebi, CEO of CalciMedica
• Jiwu Wang, President and Ceo of Allele Biotech
• Douglas Lappi, President/CSO of Advanced Targeting systems

What seems to really connect with Dr. Watson's statement is that our most cutting edge cancer therapeutics are often based on ancient hypothesises or assumptions.

Angiogenesis

Take Angiogenesis as an example(the need for tumors to create their own blood supply to sustain themselves), this mechanism of action was proposed by Dr. Judah Folkman back in the early 70's and after much resistance in the scientific community accepted decades later. As a result of Dr. Folkman's work and the the development of drugs that choked off the creation of new blood supplies to cancer cells our latest generation of Cancer therapeutics have emerged (Erbitux, Herceptin, Velcade and Tarceva). One seemingly important point here should be the glacial pace of Cancer development over the last couple of decades and our need to innovate out of this deadly lethargic pace of innovation.

Understanding how to differentiate between cancers

The good news is that biotech's and pharma companies are heavily investing in new experimental therapies (arguably the number 1 target for therapeutic development) through the use of newer genomic technologies and an increased understanding of how to really separate out different variations of cancer. Herceptin (Trastuzumab) only works well for certain types of breast cancer, typically on those breast cancers that over express HER2 but when it's appropriately used it can have a substantial effect, further reducing relapse risk in some women by 50%.

Future Cancer treatments

Increasingly, there's a consensus that not only do cancers have to be specifically targeted based on their specific genomic mutations (which can be a daunting task based on the latest findings of 23,000 mutations in a sequenced lung cancer cell)  but it seems likely that cancers will also have to be treated with a combination of therapeutics to reduce the risk of resistance developing (a similar concept to treating bacterial infections). As a result many current studies are ongoing to identify effective combination therapies and over time will likely be a combination of better and better biologic therapies (protein, RNAi and cellular) as well as through the use of targeted radiotherapy and surgery. 

One key entrepreneur and venture investor that I’ve followed over the last decade or so has been Guy Kawasaki, if for no other reason that he provides salient words of wisdom but in a very entertaining format to budding entrepreneurs and has been doing since the early days of Apple computers.

In one of his articles, Guy talked through some of the finer points of “The Art of the Start” and I highly recommend reading his original article. I’ve simmered down some of his key points and connected it to some of the lessons I’ve learned and observed in the biotech industry.

1. Early Cash flow is king – Not Profits! : This is a tough one for us in the land of biotech start ups as it’s often touted that it takes 7-12 years to develop a therapeutic and anywhere between $800M-$1BN USD to get a therapeutic drug approved by the FDA. Statistically, this may be true (and I wouldn’t want to doubt Tuft University’s numbers in aggregate) but the reality of it is that a really solid platform technology with proof of concept data (even in vitro) could be enough to raise, angel, venture or even grant funding and I have known of Biotech entrepreneurs in the past that have been able to raise substantial sums (in the millions) of even non-diluting grant funding from the government and non-profits. Other interesting models are starting a service business (even if only temporarily) or in the medical device/tools space it may be possible to start selling/partnering your technologies sooner to jump start a positive cash flow.
2. Bottom up forecasting is the way to go!: market segmentation is a class that’s taught in business schools globally and can also lead to some pretty confused thinking for first time entrepreneurs if you listen too much to your B-School Prof theories on assessing essentially established markets and apply that rational to tiny or non-existent  but rapidly developing markets. It doesn’t really matter if the market for your particular drug/device or service is in the billion dollar range, your market size might be limited to the 10 researchers that would be willing to try out your device in the first year in their lab or how much you can get for your first licensing deal in year 1. My advice is to see past the excel worksheet and really think about how you personally will sell your biotech product!
3. Truly understand that you’re building a scrappy start up (under staff and chose your battles): this is perhaps my favourite of Guy’s points and links in with cash being king, for a bootstrapped start up you have a precarious lack of both time and money, this means on the one hand you should buy as much off the shelf (rather than bespoke) equipment as possible but on the other hand realize that you will likely have to under staff your start up initially to gauge the true level of resource need but be careful not to fall foul of any existing rules or regulations in our highly regulated industry (OSHA being just one example)!

I’ve highlighted a few points that I felt are particularly important to bear in mind as you start up your projects/garage biotech. The catch in our industry of course is that there is a vast difference in how you’d structure your project/biotech dependent on your individual focus, be it tools, devices, diagnostics or therapeutics.

I’m always interested in finding out more about how innovative Garage biotech’s have surmounted these challenges so please feel free to get in touch or leave a comment.

Most lab scientist currently still use notebooks, strategically placed by their lab benches to track their progress but you could argue the need to manually insert each procedure would be too time consuming for a part time scientist. One method of stream lining this necessary process of tracking experimental progress by garage biotech enthusiasts is through the use of  webcam videos that can (if needed) be saved and then later modified to ensure that your work can be easily reviewed at a later date and time and also potentially be easily distributed. An excellent illustration of this technique was the Video Diaries created by Will Smith’s fictional character in the movie “I am legend” which showed the power and simplicity of tracking experiments in a video format (these webcam software programs are already widely commercially available).

I’ve included one example of a video that shows and explains how to extract DNA, pretty neat!

It's very difficult to get any sort of statistics on the number of Garage Biotech's being started or run currently by scientists or small entrepreneurs as many are hesitant to disclose their projects until they're close to completion (not unlike the Garage entrepreneurs of Silicon Valley) but anecdotally there seems to have been a rise at least in regards to resources available to this types of biotech entrepreneurs with dramatically dropping assays, used lab equipment sold on ebay and increasingly sophisticated open source bioinformatics tools.

There have also already been signs of success for some small biotech/bioinformatics start ups:

Eric Engelhard - is bioengineering a honeybee in his garage and hoping to use this technology to develop non-venom producing honey bees.

James R. Graham - was inspired while making electronic music on a half-dozen computers in his bedroom and used the algorithms that he developed to create Diction, a tool that converts the genome into a series of waveforms and locates crucial regions that are actively producing proteins utilizing the human genome which is publically available at the NIH website.

Agribiotics - an agricultural biotech start up was aquired by Nitragin for $24M and was developed by a garage biotech entrepreneur.

Spaltudaq - Johnny Stine a lone entrepreneur in Seattle and a former scientist at Icos founded a small therapeutic biotech called Spaltudaq which has been successful in setting up three partnerships to make rabbit-based antibody drugs for biotech and pharma companies. These partnerships could generate as much as $200 million, if he manages hit all of his targeted milestones (which as we know in the biotech world can be difficult).

So it seem that even though hard statistics may be hard to find in this growing niche, there's definitely growing promise!

Cosmetic Neurology?

Last year Nature, the scientific journal published the results of an informal online poll asking whether readers attempted to sharpen "their focus, concentration, or memory" by taking cognition enhancing drugs. One in five respondents said they did. The majority of the 1,400 readers who responded said that healthy adults should be permitted to take brain boosters for non-medical reasons which at the time was an incredibly brave finding for Nature to publish due to the resistance in mainstream society against prescription drug use in healthy people.

The discussion within the Nature article focused on the two main cognition enhancing drugs that are currently being used "off label" by some individuals in the hope of enhancing their performance and they are likely very familiar therapeutics to the majority of you, as they are used for the treatment of ADHD and Insomnia:

• Adderall
• Provigil

At the moment those embracing Nootropics, i.e. new chemicals or therapies to enhance their own cognition, are beginning to develop an interest in many of the experimental therapies that are being developed to treat cognitive decline in Alzheimer's and Dementia which include Ampakines and Cholinesterase inhibitors that have shown some promise within the clinic. We can all connect at least partially with the idea of striving to be better, faster, stronger and the idea of enhancing our own cognitive abilities can be seductive. However, it’s important to remember that our brains are finely balanced biochemical machines and by altering the concentration of certain chemicals and neurotransmitters within a healthy mind we run the risk of unexpected consequences, not least of which could result in classical mental illnesses or new dysfunctions.

For those of you on the bleeding edge of this fascinating Nootropic trend, I wish you the best of luck! Please make sure to tread carefully and let us know your thoughts in the comments section, as Forest Gump once said “Life is like a box of chocolates, you never know what you’re going to get!” Corny, I know!

However, there is a lot of promise for those with Paraplegia in the targeted use of derivatives of human stem cell lines (oligodendrocyte progenitor cells) that have currently been shown to be effective in mouse models by researchers at University of California, Irvine in collaboration with Geron (a San Francisco Bay area biotech company). In theory these oligodendrocyte progenitor cells could also be derived from adult stem cells from the same individual (reducing any risk of an immune response to a cell therapy). These progenitor cells essentially repair the function of neurons by allowing them to conduct electrochemical signals again (called remyelination) to and from the brain.

The leading oligodendrocyte progenitor cell therapy developed for Paraplegia by Geron, was approved for first in human clinical testing by the FDA in Jan 2009 and has shown substantial promise in animal models of Paraplegia. The Preclinical evidence as highlighted in Geron's FDA Investigational New Drug application suggests that, numerous animal studies demonstrated “significantly improved locomotor activity and kinematic (movement) scores” after treatment. This suggests a substantial return of function of the lower extremities, including significant recovery of the animal's ability to move and bear weight after they are treated with GRNOPC1 (Geron's hESC derivative treatment), assuming these finding translate into humans this would literally be a breakthrough treatment for those with Paraplegia that would help afflicted individuals regain substantial function in their limbs and at least some movement.

I was also recently asked whether these promising paraplegia treatments, if successful in human clinical testing would still be effective in those with long term paraplegia (10+ years). Based on a review of the current animal data for oligodendrocyte progenitor cells in the treatment of Paraplegia which has shown promising results in rats at multiple time points after injury (7 days through to 9 months) and linking this with the understanding that rats typically only live 2-3 years, would indicate that the remyelination and functional repair of neurons can occur even with longer term paraplegia injuries with a high rate of success. If this pans out with humans then even a 10yr+ spinal injury may be still treatable as long as the Neuron can be remylinated to conduct electrical signals. This means there is definitely still plenty of hope for those with long term Paralysis for a real scientifically effective treatment!

 One of the biggest challenges in the development of a successful CNS compound is finding a way to get the drug across the blood-brain barrier (BBB).  If we can get a compound into the brain, we then have to figure out how to get sufficient amounts into the brain without delivering so much drug to the body that systemic toxicity is an issue.  If biomaterials such as lisosomes and polymeric nanoparticles (Nature; September 2009) could be used to facilitate efficient transport across the BBB (creating a 1:1 ratio of brain-to-plasma drug levels rather than, say, a 1:10 ratio), we could potentially give less drug and yet see more in the brain.  Dose-limiting toxicity might not be such an obstacle if we could see the desired pharmacodynamic effect with lower levels of drug circulating in the body.  

 But even disease modification is usually defined as slowing the rate of decline or the rate of progression of symptoms.  What if we could not only change the course of the disease, but what if we could actually restore previous function?  What if further decline was not inevitable?  In addition to serving as drug delivery vehicles, biomaterials can be used to deliver other therapeutic agents (trophic agents and growth factors, e.g.) and even genetically modified cells directly to effected areas. Imagine the possibilities if we could stimulate the regrowth of dopaminergic neurons in Parkinson’s patients while simultaneously protecting the functioning neurons. NsGene has successfully implanted its encapsulated cell biodelivery product (NsG0202) into 6 patients with Alzheimer’s disease.

So many of us are in the race to develop the next blockbuster CNS drug, that we may be missing the mark.  Perhaps the solution is more bio, less tech.  Biomaterials may be the missing piece in the massive efforts being put forth by big pharma to cure the incurable. I say, forget symptom management.  In fact, forget disease modification.  Let’s focus on getting back to baseline. Optimistic?  Naïve?  Maybe.  But if we if we shoot for the stars we just might hit the moon.