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HHS: VCs to Play Critical Role in Personalized Medicine(BioWorld Today Via Acquire Media NewsEdge) Washington Roundup WASHINGTON - As with the biotechnology industry, venture capitals are playing a critical role in driving the development of personalized medicine by helping to translate multiple breakthroughs in molecular medicine technology into marketable products, said the authors of a new paper commissioned by the Department of Health and Human Services (HHS). The paper, one of seven commissioned by the government, is included in a new report about personalized medicine - medical practices targeted to individuals on the basis of their specific genetic makeup - issued Friday by HHS Secretary Michael Leavitt. The report, the second issued by Leavitt since he launched his personalized health initiative in 2006, also included case studies of 10 institutions, including Harvard-Partners Center for Genetics and Genomics and Vanderbilt University School of Medicine, where personalized medicine techniques are being used. HHS issued an earlier report last year. (See BioWorld Today, Sept. 20, 2007.) Even with the advancements in modern medicine, Leavitt wrote in the prologue of the new report, the medical community still is at the early stage in differentiating between variations in the biology of individual patients and providing effective treatment for various diseases. "We have developed powerful pharmaceuticals, yet most drugs prescribed in the United States today are effective in fewer than 60 percent of treated patients," he said, noting that "trial-and-error" remains the most common process for diagnosing and treating patients. But, Leavitt proclaimed, molecular-based diagnostics and therapy development supported by modern information technology will enable medical professionals to identify patients' predisposition to disease or to spot diseases early, even before symptoms appear, so that more effective steps can be taken to prevent or delay illnesses. VCs likely will remain the primary source of financing for young innovators in personalized medicine "due to the extraordinary risk associated with investing in health care technologies," said authors RS& Co. Venture Partners' Kathleen Behrens; Kleiner Perkins Caufield & Byers' Risa Stack; Foley Hoag's Bruce Quinn; and the National Venture Capital Association's Kelly Slone, in one of the commissioned papers. However, despite its enormous promise, personalized medicine faces numerous barriers, some of which stem from current regulatory policies and the uncertain reimbursement outlook for new technologies, the VC authors contended, adding that other barriers have resulted from the recent turmoil in the capital markets. For each variable, they said, even minute fluctuations and adjustments can alter the risk profile for even the most promising technology. "Working in concert, they can price risk beyond levels acceptable even to venture capitalists - effectively stunting the development of emerging technologies and undercutting the incentive for future innovation," the authors of the paper warned. While venture investors generally assume significant technology development risks, health care presents some unique and additional challenges, which largely relate to the added complexity of long product development time frames - often associated with clinical trials - government regulation, significant capital requirements and the complexity of reimbursement associated with the health care payer system, the authors noted. Those factors add up to larger capital requirements on the part of VCs and other stakeholders and an investment time horizon that stretches to 15 years or longer, which all increase risk, they said. Nonetheless, the VC industry invested $9 billion in the biotechnology, medical devices and health care services sectors in 2007. An important role of VCs is to help facilitate change within an industry, and in health care those investors act as an advocate, not only for the entrepreneur, but also for patients by helping to drive advances in care, such as with the commercialization of advances in DNA research into biologic drugs and other treatments, the authors wrote. VCs' role in personalized medicine, they explained, includes working with entrepreneurs to craft the business strategy, recruiting the management team and often catalyzing the key relationships necessary in building the business. The demand for personalized therapies will only grow as people begin to understand aspects of their personal health in unprecedented detail and look to take greater control over that health, the authors surmised. But, they said, the question remains about whether the medical product industry will be able to bring those personalized treatments to the marketplace. VCs will continue to step up during the critical early and middle stages to assume the risks inherent in building those companies, the authors maintained. But, they said, VCs "can only take personalized medicine and the innovative companies that drive it so far." Without a joint effort by government and industry players to remove or ease existing barriers, the authors argued, personalized medicine "may never achieve its full potential." Hearing Focuses on Life Sciences Funding Biomedical research and drug development are key elements in driving the nation's economy, Rachel King, CEO of Gaithersburg, Md.-based Glycomimetics Inc., told lawmakers Thursday during a hearing about investing in biomedical research. Life sciences R&D provides high-wage jobs at both public research institutions and in the biotech companies that typically locate near centers of academic research, she said during testimony before the House Energy and Commerce Subcommittee on Health. "The indirect effects of increased research funding on the regional economy is significant," King said, speaking on behalf of the Biotechnology Industry Organization. For instance, she said, sponsored biomedical research directly generates jobs in the host institutions, and indirect and induced job creation in the region amounts to additional job growth. In fact, King said, the nation's 1.2 million bioscience jobs generate an additional 5.8 million jobs in the U.S., resulting in a total employment impact of 7 million jobs. Additionally, she said, wages for bioscience workers have increased 6.4 percent since 2001 compared with only a 1.4 percent increase in real earnings for the average U.S private-sector worker. An increase in research supported by the National Institutes of Health (NIH) will "yield more basic scientific findings and can also advance clinical and translation knowledge associated with the diagnosis and treatment of diseases," King said. But, she noted, annual appropriations for the agency in recent years have fallen below the rate of biomedical research inflation. And while Congress has been able to provide some incremental funding increases, King said, "we fall well short of the costs associated with biomedical research and technology development inflation." To maintain research grants at current funding levels, annual increases of at least 3.5 percent to 5 percent are required, King insisted, noting that the funding of the last five years effectively has resulted in a 17 percent decrease in spending power for the NIH. "This is a serious challenge to the biotechnology industry," King declared. She called on Congress to add an additional $1.9 billion in funding to NIH's budget, which, King said, would "put us on the track of sustainable growth that is necessary to realize our potential." To infuse much needed capital into the biotech industry, she added, Congress should consider capital formation tax provisions as part of an economic stimulus package and tax reform legislation, including corporate tax proposals allowing loss-making companies to immediately use their accumulated tax assets, such as net operating losses and R&D tax credits. Also, any reforms to the current rules limiting the use of NOLs upon a substantial change in ownership would encourage investment, King added. n ? ? Copyright ? 2008 Thomson BioWorld, All Rights Reserved. |