Biopreneurs: The Molecular Millionaires by Ryan Baidya

B IOBUSINESS D EMYSTIFIED

BIOPRENEUR: The Molecular Millionaires

Biopreneur: The Molecular Millionaires

iii

Silicon Valley California

Ryan Baidya, PhD, MBA

California Takshila University with Miyuki Shiratani, MBA Devicenet USA, Inc. California Takshila University Press

Biopreneur: The Molecular Millionaires

All rights reserved. No part of this book may be reprinted or reproduced or translated or utilized in any form or by any electronic, mechanical or other means, now know or hereafter invented, including photocopying and recording, or in any storage or retrieval system, without written permission from the publisher.

Library of Congress Cataloging-in-publication Data is available from the United States Library of Congress. ISBN 10: 0 9822001 0 2 (hbk) ISBN-13: 978-0-9822001-0-0 (hbk) ISBN 10: 0 9822001 1 0 (pbk) ISBN-13: 978-0-9822001-1-7 (pbk)

Ryan Baidya, Ph.D., MBA Dr. Baidya, an entrepreneur, has a rare combination of expertise and professional background. He is a business strategist, an inventor, a public speaker, a thought leader (Frost & Sullivan), an educator (MBAfaculty for CTU), a mentor and an expert in bio business. He has overall 15+ years of experience in the biotech and IT -business development (domestic & International), licensing and marketing. He serves as an advisor to several technology based companies in USA, Japan and India.

Currently, he is a faculty for MBA at the California Takshila University, Silicon Valley, California. He gave numerous lectures on entrepreneurship; business strategy and technology related topics at conferences, primarily in USA, and Japan and served as a Thought Leader, Frost & Sullivan Executive Summits. He authored articles, patents, and commentaries. Dr. Baidya received an MBA at the San Jose State University; a doctoral degree in Science at the University of California, Santa Cruz; and a Master Degree from the Indian Institute of Technology (IIT) Kanpur. As a fellow of the Damon Runyon Walter-Winchell Foundation he spent five years at the University of Colorado Boulder. Miyuki Shiratani, MBA Mrs. Shiratani is a logistician with 12+ years of experience in business development and international business relation. She has worked several multinational companies in Japan and USA. Her early works include international business logistics and corporate communications in the high tech field (Sharp Corp, Japan). Later she contributed immensely in the business development of BioZak, Inc., an antiviral drug discovery company and has written on bio businesses in Japan. She currently works at DeviceNet USA in Silicon Valley and serves as an adjunct faculty of Business at the California Takshila University. Mrs. Shiratani received her BA in International Relation in Osaka, Japan and an MBA at San Jose State University, California, USA.

About the Authors

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Dedicationvii

To our Families and Friends, who have inspired, motivated and supported us. R.B. & MS

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XI: Role of Marketing in Biotech Business

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Chapter Beginning

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Chapter Biopreneurs

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XII: Investment in Biotech Industry

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IX: Valuation

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XIII: Journey of a Biopreneur

Chapter Understanding the Business of Biotechnology

Development

BRIEF CONTENT

ix THE GROUND RULE Information  Knowledge  Wisdom ** time & experience drive the process of this conversion **

x TABLE OF CONTENTS Topic Pages 1) Prelude xvii-xix Entrepreneurship in Biotechnology 2) Chapter I: 01-16 Biopreneurship: Entrepreneurship in Biotechnology 03 Crossing the Boundaries 03 Uncertainty and Biopreneurship 06 Uncertainty opens the Door for Opportunities 08 Molecular Millionaires 09 Steps towards Biopreneurship 10 Most of us dream to be a Biopreneur 12 A Calling 13 Biopreneurs 3) Chapter II 17-33 Who is a Biopreneur? 19 Valuable Opinions 21 Leadership: It is Expected 23 A Simple Philosophy 24 Inside the Minds of Biopreneurs 25 Paths to Success 27 Success Redefined 28 Summing it Up 31 Understanding the Business of Biotechnology 4) Chapter III 34-50 What is Biotechnology? 37 History and Development of the Industry 37

xi Characteristics of the Industry 39 Understanding the Drug Discovery Process 40 Research and Development 41 Efficacy Studies - Animal Model Selection 43 The Casualty of R&D 44 Future Drug Development Process 45 Business Decision-Making Infrastructure 46 Conclusion 50 Pre-clinical Development 5) Chapter IV 51-78 Preclinical Development 55 Drug discovery: A Brief Story 55 Developability Decision 57 Establishing Developability 58 Pre clinical Development Tasks 59 Animal Testing 62 History in Brief 63 Types of animals used 64 Safety Assessment (in using Animals in Preclinical Studies) 67 Dose Selection 68 Pharmacodynamics Biological Activities 69 Pharmacokinetics and Toxicokinetics 70 Immunogenicity 71 Investigational New Drug Application 73 Clinical Development 6) Chapter V 79 117 Clinical Research 81 What is a Clinical Trial? 82 Clinical Trial the Process 84 Clinical Proof of Concept 85 A Few Important Notes 86

xii Phases/Stages of Clinical Trial 87 Phase I 87 Phase II 89 Phase III 89 Phase IV 90 Regulation and Safety of Patient 92 Pre-clinical Safety Assessment 93 Pre Approval Safety Assessment in Humans 93 Safety Assessment during FDA Regulatory Review 93 Post Marketing Safety Supervision 94 Placebo and other sides of a trial 96 Benefits and risks of participating in a clinical trial 98 What are side effects and adverse reactions? 99 Sponsors 99 Beginning a Bioventure 7) Chapter VI 102-115 Business Plan and Business Planning 105 Business Plan 105 Executive Summary 106 Executive Summary Items 106 Mission statement 107 Company description 107 Technology Description 107 Market Analysis 108 Competitors and Competitiveness 110 Strategy 111 R&D 112 People and Assumption 113 Summary 114

xiii Funding for Bioventure 8) Chapter VII 117-134 Financing: from Idea to IPO & Beyond 119 Financing Bioventure 123 Financing Strategy From Idea to IPO 123 Equity capital 127 Angel Investments 127 Venture Investments 127 Debt Capital 129 Mezzanine Finance 129 Bank Loans 129 Convertible Loans 129 Corporate Bonds 130 Government’s role on a Bioventure development 131 Three Strategies model for bioeconomy 132 Vitalization of bioventure businesses 133 Fund Raising 9) Chapter VIII 135-148 Fund Raising for your Business 137 Investors 138 Getting Ready for VC Meeting 139 VCs an Introduction 140 VC Investment Features 143 Last Words 146 Valuation 10) Chapter IX 149-160 VALUATION OF A BIOBUSINESS 151 Valuation Methods 153 Comparable/Guideline Method 153 Discounted Cash Flow/Income Method 154 Risk adjusted discount factor 156

xiv Company Specific Factors 156 Biobusiness Specific Factors 158 Public Relations & Investor Relations 11) Chapter X 161-172 Pitching the Bioventure Business 165 Strategic Plan for Media Relations 166 Less/Not so Expensive Media Exposure 167 Media Tips 167 Least Cost-effective Events for Bioventure 170 Expensive Media Exposure 170 Expected Expenditure 171 Communication Assets 171 What are the Communication Assets 171 Role of Marketing in Biotech Business 12) Chapter XI 175-190 Role of Marketing Biotech Business 176 Crossing the Boundaries 177 Marketing begins in our life before we even know it 178 Basics of Marketing in Bioventure 179 Market Segments 179 Niche Marketing & Scientists’ Crossover 180 Niche Marketing Strategy 180 Differential Strategy & Niche Marketing 182 Differential Model in Business 183 Fractional Differential Strategy 184 Earlier Differential Strategy 185 Differential Strategy &Time 185 Differential Strategy & Technology 186 Power of “DS”- From dust to Castle 187 Biopreneurs & “DS” 188 Biopreneurs and the Transaction Theory of Cost 188 Conclusion 189

xv Investment in Biotech Industry 13) Chapter XII 191 202 Investment in the Biotech Industry 193 Biobusiness-a new Gold Rush 193 Paradigm of biobusiness 194 Common senses not common traits 195 Which sector offer short term return 196 Which sector offers long term return 196 How to evaluate biotech companies 197 Proprietary expertise 198 Robust pipeline and technology 198 Appropriate business model 199 Strong management 200 Financial resources 200 Market 201 Journey of a Biopreneur 14) Chapter XIII 203-211 Beginning of a Journey 205 Understanding the Reality 205 Questions of Biopreneurs 206 Revenue Based business model bound to succeed 209 It’s your Call 15) Chapter XIV 212-222 Where does the Inequality of Health Lie 215 Why do Biobusiness 217 Biotech business is more than just making money 218

xvi Success 16) Chapter XV 223-228 Success-Definition 225 Success Viewpoints of Others 225 Know Thyself 228 SUPPLEMENTS Supplement –I 233 Package of Studies to Assess Developability List of Studies Needed for IND Registration Optional Tests Depending on Phase I/IIa Strategy Clinical Trial Cost and % of Risk Supplement II 239 Time Value Money & Discounted Cash Flow Supplement-III 243 Snap Shot of Bio-VC Supplement-IV 249 Biotech Around the World

xvii Prelude

We can think of bioventure being a sleek aerodynamic car racing on three wheels technology, management, and capital. Each wheel is extremely sophisticated, and must be taken care of appropriately to drive the car to an ultimate and optimal destination. After spending many years learning and teaching, when I joined the practiced field of authentic business, I realized the need for the proper understanding of those three driving wheels. As people from the field of research work, and management, we may be aware of the greater issues related to our own unique areas of interest, but to be a truly successful biopreneur we must have a commanding grasp on all three driving wheels in our bio-business.

We know that every business is related to either inventive or innovative products or services and it must face some ups and downs throughout the phases of its development. Ultimately, and quite fortunately, a stage usually appears in typical development that can offer some comfort and satisfaction to the participants of most business ventures. But purists in any field will advocate neither satisfaction, nor comfort alone, for its own sake. It is dedication, business zeal, will power to prove proficiency, and the unforgettable love of a product that entices most people involved to continue serving business goals. Our focus and our prime concern in this book are to explore bioventure and the journey of a bioventurer.

Bioventure represents a microcosm of the world at large concentrated into the small word of biological venture capital. As far as biopreneurs are concerned we have to define a scenario with a different kind of light a light of a different color and temperature. It is an interesting and exciting a time for people wanting to appreciate the world of bioventure. And this is plainly because biotechnology, with emergent educational, governmental, and industrial support, is moving toward its wave crest.

When we look at the world of bioventure we find several cases where people intended to invest heavily, but due to a lack of suitable knowledge they decided to shy away. There are instances where companies having a potential to expand their horizons by meeting a mere

When these realizations struck me, I felt there was a lack of one extraordinary item in our immediate area which could solve our collective problems. That extraordinary item was a quality study curriculum that might be of assistance to all people in the field of bioventure. My intent is that this study material must contain substantial information for all upcoming entrepreneurs, people from the field of management, and suited investors. This would not only to serve getting people from various fields under the one roof bioventure but it would also create a feeling of unanimity within bioventure.

Working together has always been a fun for people like us. Now we have the means to create that same fun multiplied by networking our talents, invented drugs, and various other biotechnological products. At the same time there could be an additional benefit waiting for each of us involved, in the form of earned capital. In all honesty, that is simply one future that I dream of for bioventure. The best possible future relies on greater understanding among the people associated with this business. This will be possible only if we can integrate our knowledge and experience, and operate within each other’s respective fields of expertise. If we can appreciate the views that those among us want to share, and vice versa, then a treasure trove in bioventure is not far off.

Keeping all this in mind I started writing my book. Now the book is ready to begin its journey. I hope it will travel a long way binding a bio world together for a better, cheerful future in bioventure. As we all know every business has its commercial perspectives, and that is as it must be. But at the same time we must keep our eyes open for the humanitarian views. I have tried to focus on specific parts of bioventure that venture capitalists, or other prospective investors, along with biopreneurs, might always bear in mind, so that their actual goals of helping needy people is

xviii few necessities such as patenting their ideas, and technology. Simply having enough information and facts regarding selling intellectual property or research based material to pharmaceutical establishments may help some budding bioventures to succeed. But insufficient information also causes comparable ventures to lag behind other more aggressive competitors.

Ryan MiyukiBaidyaShiratani

xix the foremost issue. And the money will flow if consumers are there to buy the products, and that will happen if we don’t forget others needs. Our book is targeted for everyone associated with the field of bioventure. Whether you are preparing to start a business, a potential investor, a person from the field of management, or you are a researcher, I hope you will find reading this book essential. I have tried to say a lot, though I possibly have missed things which I will need to revise in another issue. I invite responses from you so that I can understand what you want, making an ongoing and continued conversation, an enduring process to exchange thoughts on the topic. After all we can build the future world of bioventure together, by pooling our dreams together.

xx enormoustherecognizewecentury,newaofdawntheatstandwe“As potential life…humanofqualitytheimprovingforholdsbiotechnologythat ClintonBillPresident

Chapter EntrepreneurshipBiopreneurshipI:inBiotechnology

2 Our Greatest glory is not in never falling, but in rising every time we fall. Confucius

BIOPRENEURSHIP: Entrepreneurship in Biotechnology

Crossing the Boundaries

There is a little bit of entrepreneurship in every one of us. In some it is activated, and in others it gets transformed into something else, depending

Biotechnology, at its present stage, is incredibly complex, confusing, expensive, particularly entrepreneurial, though fast paced and highly promising. Just getting out of its last phase of a closed setting, biotechnology is now flying like a freed bird reaching multi proportions in the world of business. So then this is the most risky yet challenging period to join a biotech venture (bioventure).

I would like to start this chapter wishing you all “congratulations” for your initiative in exploring and expanding your fields of interest. The biotechnology business, often called bioventure or bio-business, is complex and exciting. Biotechnology is the outcome of years of fundamental research by thousands of researchers around the world. Biotechnology was a very confined world until the early 1980s, when a group of researchers decided to apply their research findings, to practical applications, for human health. A rush of technological networks, or webs, began to accumulate around the economic zones near university campuses such as the University of California, San Francisco, UC Berkeley, MIT, Stanford, Harvard and Thisothers.rush came with optimism and high expectations; however it lacked persistence. The first round of the biotech rush died out shortly after 1992. This first biotech rush taught researchers and supporters of biotechventures bioventure valuable lessons and gave them a better understanding of what was required to succeed. A few select few from the first wave of the revolution are Amgen, Genentech, Roche and Genencor.

Biotechnology: Science and business Basics of the industry Differences between the high tech and the biotech

4 upon environment and timing considerations. The late 20th century and the beginnings of 21st century is a time for entrepreneurship and venture capitalism. Capital ventures come from the urge to be free such as in the popular lines born to be free OR born to be wild. From birth we are free to think and to do that which fits us best. However, more complete freedom comes with economic freedom. Quite often entrepreneurs begin ventures seeking to achieve economic freedom using innovative and exploratory ideas. New entrepreneurs especially almost always fall into this category. Biopreneurs are generally bio scientists with practical approaches to problems. Also many physicists, mathematicians, economists, financiers, and liberal-arts majors become successful biopreneurs too. Biopreneurs, from non bioscience fields, normally focus on the business aspects of a bioventure, while biopreneurs from bioscience can both drive the business as well as develop the requisite science. One thing seems clear that if someone is from the field of bioscience he or she has to gather information about management and business, whereas a person from the business world must acquaint himself with bioscience to understand and run a bio venture.

Moving from a scientific frame of mind to a disciplined business mindset could be very challenging and exciting. Since scientists always appreciate challenges, we see more and more scientists becoming good biopreneurs every day. Researchers are greatly focused and goal oriented. This trait, when molded into the time value money concept, can produce excellent biopreneurs. Crossing from one discipline into another is not difficult, but requires willingness and an internal driving force to move forward. Those who wish to venture into biotech fields require a good understanding of the entire biotech process, and this should not be simply a single biological process or a function based on a particular enzyme or molecule. A scientist or non scientist with little or no exposure to biotech fields can quite easily expand their understanding of an entire drug discovery process and varied business aspects of it. The following are highlights that make the biotechnology industry unique and somewhat distinct:

Regulatory requirements and timelines Business Development Issues: Business Plan and Business Planning: Markets and marketing

Public relation and Investor Relation

How are clinical studies carried out?

Regulatory issues: How does FDA approval process work?

Licensing, collaboration and partnership in the bioindustry

Interpersonal skills and bio-scientist (bio-scientist-cum-manager)

5 Drug development and scientific issues: R&D Processes and cost

Environmental and social issues

What are the concerns in the regulatory process?

Financial Issues: Financing of a biotech endeavor, operating capital, sales and marketing Social issues: The cost of drug to the society

The RISK factors: Intrinsic risk of biotechnology product development Risk factor and patience

What is management protocol for R&D management?

Management issues: What is the internal structure of biotech industry?

How are new drugs found?

Logistics of product development

Uncertainty is a normal phenomenon of the universe. On the macro scale, human beings are a speck in the universe. In 1927 Heisenberg predicted uncertainty of the universe, known as the “uncertainty principle,” or interdeterminancy principle, at the submicroscopic scale a quantum phenomenon. Heisenberg’s Uncertainty Principle (HUP) states "The more precisely the POSITION is determined, the less precisely the MOMENTUM is known.”

An odd aspect of quantum mechanics is contained in the Heisenberg Uncertainty Principle. The HUP can be stated in different ways, however, let’s first talk in terms of momentum and position. If there is a particle, such as an electron, moving through space, we can characterize its motion by telling you where it is by position and what its velocity is more precisely, its momentum. Now, let us say something strange about what happens when we try to measure its position and momentum.

 Classically, i.e., in our macroscopic world, we can measure these two quantities to infinite precision more or less. There is really no question where something is located and how great its momentum.

Uncertain Universe

It is not humanly possible to become proficient in all these fields; however, biopreneurs should master as many as possible and acquire a good understanding of all or most. Those biopreneurs, who were found to be successful were those with more than one of the above expertise and they were able to bring in people on to their team with expertise that the biopreneurs did not have at the time of inception. Learning is a continuous process and biopreneurs are often gains their understanding and strengthens theirs knowledge as they go along with the bioventure.

Uncertainty and Biopreneurship

As a result of this uncertainty, it is not possible state where a particle is located with 100% precision. Its location can only be described in terms of probability. For example, we can say that an atom is at some location with a 99% probability, but there will be a 1% probability it will be somewhere else in fact, there will be a small but finite probability that it will be found somewhere across the universe. So, the fact is if I measure x exactly, the uncertainty in p (dp) must be infinite, in order to keep the product constant.

We do not know if this indeterminism is actually the way the universe works because unifying theories, within quantum mechanics, are still incomplete. That is, we do not know if the universe actually behaves in a probabilistic manner such as, there are many possible paths a particle can move, and the observed path taken is probabilistic. Conversely, if the universe were in fact deterministic it would behave in a manner where I might be able to predict a particle’s path with 100 % certainty.

 In the world of quantum mechanics, there is a breakdown in the concept that we can measure things precisely. Let’s state this notion more accurately. Suppose a particle has momentum p and position x. In quantum mechanics, we should not be able to measure p and x precisely. There is an uncertainty associated with each measurement, e.g., there is some dp and dx, which we can never get rid of, even in a perfect experiment! This is due to the fact that whenever we make a measurement, we must disturb the system. In order for us to know something is there, we must bump into it. The size of the uncertainties are not independent, but they are related by: dp x dx > h / (2 x pi) = Planck's constant / ( 2 x pi )

We can make an analogy between aspects of life as we experience it, versus quantum mechanics and the HUP. For example, in bioventure we can compare technology with position, and success with momentum. In order to measure the success of a bioventure, biopreneurs and investors evaluate the technology. However, it is always uncertain and predictability is less than 1%. Therefore, we can conclude that bioventure is a probabilistic phenomenon.

In the US life has always been full of uncertainty, beginning during the wild west and gold rush periods, continuing through and into the cold war era. Hiring and firing is part of the normal career path. So, it is no surprise to see entrepreneurs popping up like mushroom in that particular

Traditional pharmaceuticals companies are no longer a place for life time employment, due to globalization of the bio industry, which presents economic shifts and many challenges. Former mid-level managers from there are now hedging their futures on bioventures. This is probably a good outcome from inherent uncertainty.

Uncertainty Opens the Door for Opportunities

So, seeing it from a different point of view we may ask why are there so many biopreneurs? Even after all these uncertainties or negatives! It may simply be because life as such is extremely risky and uncertain, just as it is. Human living is full of uncertainty and the environment around us is also fairly uncertain. This should not be surprising for an entrepreneur. If you compare uncertainty in life and uncertainty in the environment where we live, to the uncertainty in the success of a bioventure business, one can easily see the difference is minuscule, i.e. differential risk in life and bioventure is very small, so it is not surprising that more and more people are becoming biopreneurs.

Once, inside the socio democratic environment, corporate jobs were secure for a lifetime, and the government provided most of our other basic services. When that certainty became uncertain, people in Japan and in other socio democratic environments became more and more entrepreneurial.

As you can see in the graph biopreneurship and professional job security, are inversely proportional to each other. As biopreneur traits increase in ones life, uncertainty in job security creeps in and grows. Most of the biopreneur minded professionals stay to the right side of the threshold bar, because a higher-level of activation energy risk is required to cross from the traditional career mindset to venture mindset.

ComparisonPhDs.ofbiopreneurs with traditional professionals

9 environment. The US has been enjoying this paradigm for several decades. Currently, biopreneurship in US not only flourishes but also creates many Molecular Millionaires.

Many biotechnology companies strengthened their products pipeline and advanced their R&D projects to preclinical and clinical stages. During the year 2003, the top 100 molecular millionaires collectively held $3.2 billions in stocks. Don’t be stunned to learn that 98% of those molecular millionaires held doctorate degrees. In 2006 18 out of top 20 molecular millionaires were

Many bio-scientists who have become successful biopreneurs have been described as Molecular Millionaires by the Genetic Engineering (& Biotechnology) News, which publishes a yearly list of the top 100 financially successful biopreneurs in the US. In the year 2003, when the economy was beset by heightened geopolitical uncertainties, it was nonetheless staggering in the many parts of the world including the US and Japan. Bio economy continued showing promise and maintained its growth.

Molecular Millionaires

a) Traditional Career Path

b) Venturing Career Path

other hand the venturing career path is quite complex and has multiple entry points. For example, an individual can enter into a venture right after high school, and not need to complete a college degree curriculum. The most cited examples are Bill Gates, Steve Jobs and many like them. The most common trend for the venture path is to enter after gaining sound familiarity, and hands on expertise, in a particular field.

In Japan and India however, the model is quite different. Many individuals start their career journey as traditional employees in a relatively stable firm then become an intrapreneur an inside entrepreneur within the big firm while having nominal career security. Later they can move on to become real

Steps towards Biopreneurship

Two career paths can meet professional goals for each individual:

The traditional career path leads an individual through a structured process, where the individual goes to high school, graduates, gets a degree from college, then takes a secure job in an established company and eventually Onretires.the

Oneentrepreneurs.partingthought,

In terms of the amount of dollars invested in biotechnology by the public of the United States shares market, California, followed by Massachusetts, led the investment list. There are also several hundreds publicly traded biotechnology companies outside of US, each of which has a large number of molecular millionaires. For examples, in Japan newly traded bioventure companies such as Anges and Transgenic have created several new molecular millionaires.

an important thing that we should keep in mind, successful entrepreneurs never get retired! They move on to inspire and guide, as mentors to young entrepreneurs while building new ventures. Hence the cycle and the spirit of biopreneurship goes on forever.

11 A Lateral Biopreneurism B Infrequent path C – Rare path D Most common path Career Path : Biopreneurism High ManagementPracticalUniversitySchoolExperienceTrainingWellManaged,HighGrowthFirm Venture Business Again Bioventure Investor (Angel or VC) Never Retire High BigUniversitySchoolCompany Retire Traditional Career Path Venture Career path A C D BiopreneurismVertical B

Most of us Dream to be a Biopreneur

We think about it, talk about it, and we dream about it afraid to take the initiative to break out of the threshold region (see image Comparison of biopreneurs with traditional professionals). Yet a significant number among these dreamers begin to see their dreams and their visions in concretion.

Vision is part dream and part reality. Vision works as the connecting bridge between dream and reality, making the dream become concrete truth for dreamers. Those, who have dreams without vision never reach the important reality stage While those, who have dreams and visions but lack realism, also fail to reach the final goal in a fierce competitive business

who have a balanced mix of dream-vision-realism, become successful biopreneurs. Individuals with a confluence of all three zones reside in the shaded region of the above diagram.

12 Dream Zone Vision Zone RealismZone BiopreneurshipZone

Those,world.

Building a bioventure is a teamwork endeavor and if the leader of the team collectively possesses all three aspects the dream, the vision and the realism the bioventure will likely be a successful one.

Those, who inhabit in the dream zone, are excellent artists, writers and musicians. People with highest realism are excellent managers and business people. They excel in big corporate environments, where processes are well Peoplestructured.with dream and vision are great leaders, for example, Martin Luther King, Mahatma Gandhi. And people with vision and realism are very strong corporate executives, e.g., Leis Gustner (IBM).

This is not just for profit, but also for the promotion of our future health and wellbeing. Scientific research alone cannot create new drugs and neither can just funding. In biotechnology, science and money have to meet and combine into one, well in advance usually 7-10 years prior, in order to have a drug catered to a specific human need.

A Calling We invite all young scientists to break down emblematic walls with brainpower and the wisdom of well seasoned professors. I invite you the professors, the PhDs, and the postdoctoral fellows, to join hands with investors, individuals, and institutions, and to venture into a new frontier, the new territories of biopreneurship.

We know that after passing the age of 40 we usually need eyeglasses and our immune system function drop dramatically. We can resist acceptance of these realities and hope that someone will take a lone financial risk to develop newer drugs as we need them. These drugs that you and I all of us may need are drugs for diabetes, cancer, Alzheimer’s, anti viral drugs, and so on. Even my little kid, Akianand, needs drugs for a number health problems. Am I a responsible father? Am I taking enough of an active role in advancing new drug development? Or am I expecting someone else to take the risks incurred in developing these new drugs so my kid, and I can, utilize them as the need arises? He and I ask you the same question.

14 So, you see, we have plenty of reasons to jump onto a new wave of enthusiasm one of bioventurism. Come on scientists, investors, and bio patrons! Lets get energized and search for technology that has a reasonable potential to bring new and effective drugs to light Let’s not just think about IPO’ s and ROI’ s. Let’s focus on new development. Everyone knows that with success comes ample reward. To the scientist: you know how difficult and how much dedication it took to reach your present position. If anyone can bring a drug to the market it surely is you. Don’t let anyone tell you how over focused you are, or how it is done differently in the business world. Investors and future bio-patrons can guide you through the complexities of the business environment. Science and technology is 30% of the puzzle, while the remaining 70% lies ahead; the first steps are in science. The business world! Of course, there are certain subtleties in business. I suggest that each biopreneur spend at least 20% of his or her time reading business related journals and books, while trying to set up a new bioventure. Learn from your peers, learn from your mistakes, learn from doing it again, and again. Don’t wait any longer; it’s your turn. Make it work! Remember all the experiments that didn’t work, until you finished that thirteenth trial? Eventually, you made it work. Or I should say Just Do It which golfer Tiger Woods can insist is the Nike way. ------------------

1. They are in charge of their own destiny

7. They love what they do, and their devotion and passion allows them to move beyond the confines of the ordinary.

According to Mr. Olaf Isachson, the author of Joining the Entrepreneurial Elite, there are ten traits that biopreneurs have:

8. They are visionaries and their biggest competitors are themselves.

9. They seldom give up. Failure is not in their vocabulary

3. They move beyond the local, the provincial, the familiar and the tried and true.

5. There are no obstacles, only challenges and temporary setbacks.

10. They firmly believe there are no sins of commission only those of omission.

6. The harder they work the more energy they generate

4. They avoid time consuming trifles and are swift to make decisions.

2. They are non conformists, able to be stand alone or be with people

Biopreneurs

Chapter II

18 entrepreneur,anofmilestonesmajortheofoneis“Failure opportunity.”anisobstacleeachand

Who is a Biopreneur?

The transition from technical contributor to technical manager is not easy. Globally, in biotechnology, scientists are often given the responsibility for projects and people without much thought or additional management training. This is especially true in the case of biopreneurs who want to establish a business without outside administrative help. If they transition perfectly i.e. they understand the proper place and roles of administrative people and mold themselves in accord with that they’ll gain the same outcome as having outside managers brought into the team. The fact is that some biopreneurs make the transition rather well, though many experts agree that the industry has had a rough time in such transitional phases; it needs improvement. So, to reach the peak in your business, you cannot underestimate the need for efficient management styles. Try to understand what happens within the minds of many biopreneurs. Failure in the transitional stage to manager occurs because most people with a PhD in biotechnology, while chalking out a business plan, focus on the scientific and technological aspects of the whole matter. As they consider their potential product and related incidentals, they see it only from a scientist’s point of view. Thus when it comes to the administrative aspects

Biopreneurs or bio-entrepreneurs are normally adventurous, innovative, analytical, problem solvers. PhD training in any given field gives the primary skills and core knowledge of that field. However, there is another whole set of skills and understanding that is not covered in normal PhD training. That aspect is the understanding of entrepreneurship itself, which makes it easier to manage and administer the aspects of a specific business. With bioventure comes extreme complexity that requires business knowledge and understanding. To become an established and successful bio-entrepreneur no one can avoid the business aspects of such a venture. A successful biopreneur must acquire and command the necessary basic knowledge of general business practices. Planning a business and the execution of that plan to achieve real success are two completely different aspects of bionventure, or of any business. A person may have to go through an intermediary phase, or phases becoming a technical manager and might also have to be a lead scientist or researcher as well.

20 of the venture, they believe that implementing supervisory skills is simply a matter of time and gaining experience. They expect it to be a basic learning situation while they operate their new business. Stan Sewitch, a human resources (HR) consultant in San Diego, contradicts that all too common belief saying, "Management is not an additional set of responsibilities requiring new skills to be added to one's professional repertoire," he continues, "Management is an entirely different career from that of the individual contributor in science." Sewitch, former director of human resources for Mycogen, San Diego, CA, USA, adds that technical professionals too often believe that managing people is a skill set to be acquired. In most cases, they find out too late that this isn't the case. It’s best to take Sewitch’s advice seriously from the very outset of a project.

TRAITS OF A RESEARCHER AND A BUSINESSPERSON RESEARCHER( Science) BIOPRENEUR (Science+ Business) Determinant & Stubborn Determinant Ambitious Ambitious with realism Problem solver Problem solver & delegator Unbound Explorer Disciplined Exploration Risk taker Risk taker & hedger Leadership (some cases) Leadership & Team Player Cheer leader (some cases) Cheer leader Sales person (some cases) Sales person Hard worker Hard worker Characteristic differences between Researcher and Businessperson

A researcher willing to set up a business based on his or her concept in biotechnology, known as a biopreneur in the industry, must achieve several useful qualities to reach the goal of becoming a successful businessman. Along with gaining managerial awareness it is also advantageous to know how they themselves are different from other businessmen. It surely helps them to smooth out any pertinent difficulties while adding indispensable qualities. It is essential to prospective biopreneurs to prepare for the future

21 by learning and planning for their bio venture. They must understand, along with other things, prior to commencing their business, their own drawbacks and weaknesses and how they may overcome them or at least be prepared to face

Co-founder and Chairman of Responsys, Inc., Anand Jagannathan talked about the characteristics required to be an entrepreneur. Entrepreneurs need to have determination and drive, the ability to face rejection, and they need to be risk takers. They must know their “value proposition” with respect to customer “pain points.” Most successful entrepreneurs, Jagannathan suggests, have a clear definition of their personal success that goes beyond reaching the IPO stage, an ability to listen and adapt to customer’s

chart it is quite clear that researchers and biopreneurs are different in fundamental ways. You can recognize one thing clearly; if you are willing to become solely a researcher you may follow one path, inventing new things day in and day out. But if your goal is to become a successful businessman you will have a somewhat different pathway to take. If fortune is inviting you to become a biopreneur you must choose a special lifestyle one where you must play both roles researcher and businessman. Along with the characteristics that a researcher exhibits a biopreneur carries additional attributes which demand particular attention.

For example, a researcher’s character set insists on being ambitious In contrast the character of a biopreneur requires ambition based on reality. That “reality” makes an ideal situation because in bioventure you must work to promote yourself along with your company’s brand. There is no place for airy ambition as you are required to make a profit for your investors. In the case of bioventure, you will be forced into certain obligations such as: competitive intelligence, task management, finding investors and funding, tax concerns and monetary returns for your investors, marketing strategies, concrete branding the future of your brand, reworking corporate structure etc. These things will prevent you from exploring new product-lines without ample concern for profit in the venture. Thus, still retaining characteristics of a researcher, which you truly are, you will also think and execute things like a businessman. That means not to embellish, so that you will become an ideal biopreneur.

Fromthem.theabove

Valuable Opinions

 Start only if you are absolutely convinced that you are killing a real pain that exists in the market today.

Though an old familiar story but probably novel to new entrepreneurs starting anything new always has risk factors, which could lead to failure. If you are inclined to stop at this point, or move on to other tangential visions, you may never return to your dream of establishing a real bio venture and it will remain merely a fantasy. Whether it’s a new, or an established venture, risk is always an innate part of the game. But you have to stick to your original choice of acquiring success. Gururaj “Desh” Deshpande rejected thoughts of returning to his life as a professor and software engineer Re: book titled From Financial Flop to Billionaire After his first failure, Desphande stayed the course, always true to his original vision. Now a very successful entrepreneur, he relates: “A manager means doing things (the) ‘right way’ and a leader means doing the ‘right things.’” If it's something you really believe in, he asserts, "…you're going to make it happen."

Mr. Bipin Shah, a successful entrepreneur, now a V C in the Silicon Valley, once presented advice to the new entrepreneurs:

 Start only if you are committed for the long haul and prepared to go through the ups and downs.

 Start only if you have the deepest passion for what you are going to do.

 Start only if you are prepared to “fail” if things go “wrong” and they “do… ”

22 requirements, and the ability to recognize and seize opportunity. Though it may be easy to read or listen to this, it’s really very difficult to follow through. And, to materialize the whole concept is even harder.

Here, before you decide which role fits you best, you have to know exactly what right thing and exactly which right way… Reading theories and building a business plan, based on theory alone, is not very hard, maybe even a little too easy. Your planning must be based first on reality. After that you have to be prepared to pursue essential intermediate goals in order to achieve success. First and foremost, you must consider possible risk factors that you or your company may need to face. Risks have to be faced; not succumbing to your fears will make you an ultimate winner.

It may appear to be the job of managers but you also must learn how to separate your inner being compartmentalizing yourself as required for a group venture. You must know how to gain the qualities needed to accomplish the duties of full leadership. You have to sanction yourself with powers like ego power, self power and agency power. And it is your soul power the power of your spirit that will keep you totally responsive to all appropriate feedback. That power will never lead you to feel on top of anyone, nor beneath anyone either. Also ego, if used positively, can make you self aware; it can increase positive values in your life. But remember,

Itdecisions.isparticularly true that gaining something is frequently easier than retaining it. Leadership is that same sort of thing. As a leader you may have to make decisions without having all the information at hand, but your decisions will have to be a strong enough so that no one will want to oppose you afterward. Though only real experience helps true leaders to make decisions effectively, nonetheless, many times intuition, based on personal and concrete understanding, is also a great and positive assist. You have to stick to your decisions until a time when you find significant flaws in them. Here you will have to mindful that as a leader you must not play the part of a dictator. Good and generous leaders have their goals focused on their team’s goals. You have to be always ready to listen to your people because they may, in fact, have better ideas in mind than you. You must build a good team to execute what you think. Thus capable minds should surround you their suggestions, comments and interpretations will always be helpful. You should try to remain the center-point of the team, and so your communicating skills will keep them in concert. You have to be strongly connected to your team-members, ready to listen to and talk to them as needed.

Leadership It is Expected Outstanding leaders in business have the ability to convince others. You must have the ability to inspire your peers and to execute things at the right time. You have to motivate investors and partners to have faith in your abilities and concepts, so that they do not waver to invest or support your

As Deepak Chopra has shared, you as a leader have to have the ability to look and listen not normal looking, and listening you must not be blinded to observing reality. For the best possible future of your business, you must not be deaf to free flowing ideas and advice from your partners and your Interestingly,subordinates.thisvision

24 your ego power must not become tactless egotism self centered selfishness optimally it should lightly touch egoism, i.e. self-interest. That difference subtlety prevents you from losing your humanity.

is not only for you, but also for the sake of social justice and environmental responsibility. After all you must be responsible for any harm caused to ambient surroundings if it’s caused by your bioventure. So you ought to cultivate a sense of consciousness, and social environmental awareness. Consciousness differentiates tangled hierarchies. Consciousness is necessary to virtually connect with reality. And so, it is a sense of consciousness, and awareness, that every human being, whether in business or any field or job, must possess, for the betterment of society and the environment in general. A Simple Philosophy Business is a service for society, and money is the by product of that service. Every time you think of building a new venture, you ought to remind yourself of that fact. The by-product of the business is your profit, and it is the living blood of your company. The service you provide to society must not be any less than the vital need of oxygen. That might be considered yet another thing to do, but as a leader you have to be prepared for such Leadershipresponsibility.isdependent

on time and circumstances. Be prepared to prove your abilities every time you are faced with requisite circumstances. You have to create a wholly positive environment for ongoing projects. As a leader you have to have synchronicity a sense of co ordination and harmony within several jobs. A leader feels, visualizes, takes a risk, and accomplishes a commitment as he or she moves along to meet various goals. A leader never loses the winning spirit in the face of setbacks.

Now you know or at least have a vague notion of what a biopreneur is, a hint of the managerial aspects of the job, as well as the role and the ways of a leader. Now let’s take a brief journey through the mind of a biopreneur. What they hold in their minds makes them different from other researchers, as it also makes them known to the world! What is the inspiring source of such strong will power! According to Mr. Olaf Isachson, the author of Joining the Entrepreneurial Elite, the ten most traits of entrepreneurs, including biopreneurs possess, are:

Knowledge is only a stairway that leads you to a level of success you have to become successful first, by devising your own strategy. When your strategy is proven, you will establish your own rules in which to rule your business, as you see fit. This tipping point will be perceived as the birth of a real industry leader. …Hats off! Inside the Minds of Biopreneurs

Nearing the end of this section, I would like to recap and philosophize. It’s not wrong to say that leaders and followers co-create each other. Leaders, followers, and environments co arise within the same space and time. It is rule itself that differentiates the ruler from others. Although there are several points or characteristics that may help an entrepreneur to manage the role of the ruler, there is nothing that is fixed in any business. Rules work for business, but business is never for the sake of rules. Rules or basic guidelines to prepare your business are conceived from previous business experiences and observation.

 They are in charge of their own destiny. Contradicting this, anyone can say that every man is the master of his own destiny, it is true! But the winning drive is this: Like other people, entrepreneurs, when problems arise, do not leave their destiny in hands of an unforeseen circumstance.

As a leader you will have to make your own rules according to the time of the micro and macro environment. Why follow other’s rules? You are looking to make the best rules to serve your vantage point, reflecting your understanding and the avoidance of non productive rules.

They love what they do, and their devotion and passion allows them to move beyond the confines of themselves. The passion and love for what you are about to do will make its outcome much better, and of course generally positive.

They seldom give up. Failure is not in their vocabulary Just like the word obstacle they are not ready to think of failure. A small piece of advice here: it is better to have confidence, not thinking of failure or obstacles, but you have to keep your eyes open for anything of that sort too, so that you find yourself and your people ready to face it, if it appears in the future.

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They are non conformists, able to be stand alone or be with people.

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It is their iron mettle that helps them to face any situation. They know how to mold themselves in accordance with a given situation.

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The harder they work the more energy they generate They generally possess nonstop energy to go on, and on, and on… 

They avoid time consuming trifles and are swift to make decisions. True leadership is always a part of their character. Always, even in the roughest and hardest situations, they remain cool and calm to make the right and best decisions.

They move beyond the local, the provincial, the familiar and the tried and true. In short they are true risk takers.

They are visionaries and their biggest competitors are themselves. It is ultimately their unique vision and decisions that make up responsibilities for the future of their ventures. Certainly, if they are wrong, they will reverse an imminent catastrophe.

There are no obstacles, only challenges and temporary setbacks. The word obstacle does not exist in the vernacular of biopreneurs. It is a merely a challenge, as they love to call it, and obviously it is a challenge that makes them so excited and charged.

 They firmly believe there are no sins of commission only those of omission. That may differ depending on the individuals. However, it is also a particular trait that biopreneurs possess quite proudly.

We always like to know and teach, especially when we know a lot about business, leadership, etc., or about a formula that may bring success. I do not think there is any generalized formula or equation that can be used to define success. However, this does not prevent us from exploring and finding a cluster of formulas, or sets of characteristics, that may give us a foreseeable indication of a pathway to success. In bioventure this information is quite valuable. It is actually based on experience as well as the experiments of others who might inform us about possible, though not 100% flawless, paths to success. One thing might be applicable to X, though it may not equally be applicable to Z, and so on. A group of scholars at MIT’s Sloan School of Management did research on this subject for five years. According to their studies here is their model for success:

True activities, not the corporate organization charts, will become the primary building blocks in a business. Out sourcing and alliances will eliminate the need for huge personnel, and becomes the enabler of the small businessperson intent on staying lean but growing into a big business.



Due to the power of open communication by the virtue of the Internet revolution, the business model of future company might be a huge corporation or it might be a very small enterprise.

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Success takes a balance of forces. Technology is not always necessary and is almost never sufficient.

Decentralization is key phrase of the future. In order to be successful one must make decisions based on ones proximity to the knowledge of his or her customers.



Paths to Success

 Companies large and small will be both global and local. They will need the local touch and all will face global competition.

 The most impacting discovery of this research is regarding the coming golden era of micro enterprises a vision that is saturated in the power of Internet. Given the low cost of communications, everyone can be well informed and thus will make good decisions. The highly motivated, the creative and innovative, the biopreneur, will convert imparted data and knowledge into business wisdom, and build successful companies to compete with gorilla-corporations.

As I already have mentioned these are possible ways; it depends upon you, as you are the sole responsible agent for the future of your company. It is useful and a wise decision for the time being to read these ideas to comprehend the right way before you make any hasty decisions. No one and nothing in particular will bring success unless you understand and decide what is good for you. It is well said that success is the progressive realization of a worthy goal. Success comes from the ability to feel compassion. Success Redefined Inderjit Singh, founder and CEO of Infiniti Solutions and also TIE Singapore, a member of parliament in Singapore, he has shared the story of his entrepreneurship. Acquiring a seat in government or joining a multinational company formerly defined success in Singapore. This might resonate with many of us who have known success in Japan, or have equated it to signing up with a multinational organization, or gaining a government position. Singh climbed the ladder of success in Singapore through the same means. But then he attempted something a bit different; he was able to acquire venture funding from inside of Singapore, and from abroad. In doing this he ultimately realized his entrepreneurial dream by changing previously construed, or tacitly defined, limits. He said, as a member of parliament he championed the cause of transforming Singapore from a corporate based economy into an entrepreneurial one by addressing all concerns, impediments, and

29 challenges to entrepreneurship his mission leaving: “no stone left unturned.” According to him the key characteristics required to be a successful entrepreneur are as follows: 1) Determination 2) Risk taking 3) Leadership 4) Number one salesperson and number one cheerleader 5) Problem solver So you see the basic traits required to be a successful entrepreneur stay same. It is only the method of utilizing these traits that change. Over the course, methods change with things such as the mind, time, and

Thoughcircumstances.notdirectly

There was no looking back and no crying tears of woe. Ireland took on the enterprise, implementing the required bandwidth building it to the latest specifications in a very short span of time. The rest is history, thus establishing Ireland as a global center of excellence in Internet activity. And that is how one should be prepared for any forthcoming or unforeseen, unexpected, problem. Now then two questions arise: How would another country have dealt with such a challenge? How are other countries prepared to participate in similar dynamic and global marketplaces?

Problems and their solutions will remain in the background; we just have to find them. Now that we have enjoyed a couple success stories let’s explore some new ways to attend to success:

connected to bioventure let us share another important success story. A well circulated story, if not well known, is one in which Ireland was looking to become a major center for Microsoft and wanted a major server hub. Unfortunately, Microsoft’s investigation revealed that Ireland’s electronic infrastructure could not support it because it did not have enough resident bandwidth. So everything stopped. What to do now!

Support Network VCs, Board, Advisory Panel, Other Value Added People. It may look like I’m bringing the same old ideas the forefront again, but I’ll remind you once more that these things need not be strictly followed or adhered to. These are guiding principles; as such they are important yet completely flexible rules. These are tools for the sake of your business your business is not there to prove the rules practical worth. Every leader creates his or her rules, but rules come after you are sure you can call yourself a leader in business.

30 Some Critical Success Factors In Biopreneurs  Strong Will Power That Can Motivate Others.  Early Contact With Successful Entrepreneurs.  Exposure To Success Stories And Case Studies.  Gain Practical, Real World Experience Before, During And After PhD.  Be Willing To Be Unusual or Unconventional.  Agree To Embrace Risk, And Possibly Failure.  Be Ready To Leave A Large Company.  Start With Great Ideas.  Excellent And Passionate Team Near And Long Term Vision.  Able To Change Course, Mid Stream.  Execution, Execution, Execution!  Strategic And Marketing Brilliance.  Frugality And Excellent Cash Management. 

Summing it up As someone once said our best of us is not what we do, but what we inspire in others. So when we share our experience and knowledge, it increases us Whatever way we choose or wherever we move to work, the basic knowledge and methods will remain the same.

We may face failure and obstacles only to remember “Failure is one of the major milestones of an entrepreneur, and each obstacle is an opportunity.” It is not merely theory; theory is also based on what we learn from our failures and experiments. Our own failures and flaws will teach us the right way to success. This will make us winners one day. Everything depends what is in our mind the Silicon Valley is not a geographical location it is just a state of mind. Think like a winner and you will find yourself a winner. If you loose the vigor of your mind you will wind up nowhere in the future.

If experimentation is the only thing that you have to play with, do it sincerely, genuinely and with matchless passion. With human life spans longer, and the business cycle shorter, opportunities are immense for those with motivation and the guts to do it. There is no one way, and there will be no one way. It’s the biopreneur’s way, and it will be the biopreneur’s way. ~~~~~~~~~~~~~~

ScienceBiopreneur+Business

Chapter III

Understanding the Business of Biotechnology

36 discoveryaccidentalfromcamediscoveryextraordinaryMost serendipity isexampleprominentmostThe. penicillin bydiscovered isnotableAlso1928.inFlamingAlexander aspirin drugwonderthe, recentlymoreandbark,willowfrom Taxol theoftreeyewthefrom whichpainkillersofnumberlargeaalsoareThereregion.Himalayan seed.plantpoppythefromcome

Finding an easy way to understand the business of biotechnology will be easier when the technology itself is easily defined. Simply speaking anything to do with the bio or life is biotechnology. Making medicine using fancy reactions and chemical processes or fermentations of grains to make alcohol, or making tofu, are distinct parts of biotechnology. A more broad definition of biotechnology should be:

It was in the early stages of civilization when people understood the necessity of natural processes to utilize organic waste materials by converting them into fertile soil. But until the invention of the modern chemistry and microbiology the processes were not fully understood. Today can visualize the same utilization of biotechnology, for producing necessary foods. In understanding the whole biochemical process we have ascribed a name, Green Biotechnology. For the sake of controlling pests, fertilizing land, and restoring or securing the nitrogen balance to the soil, we use several organic products. Several other experiments regarding the breeding plants with other plants, modifying plants, genetic and artificial selection, were carried out to facilitate agricultural improvements. Regarding using biotechnology in other fields, the process of brewing was probably the first. It is actually a method of using yeasts with carbohydrates malted grains to produce alcoholic beverages. It has been observed that methods, using antibiotics, and vaccines, to immunize people against infection was known as early as 200 BC.

37 What is Biotechnology

Biotechnology:

The use of living organism, or their products, to modify human health, and the human environment. Early biotechnological processes were making wine, yogurt, and soy sauce. And modern biotechnology has gone through a long development process while there is still a long way to go. The information imparted there is supposed to get your attention and arouse your interest in the development of your bioventure.

History and Development of the Industry

 In 1982, the Small Business Innovation Research (SBIR) program was established. It directed each federal agency with an R&D budget in excess of 100 million, in order to “expend not less than

With the discovery of rDNA, as mentioned, a modern trend in biotechnology was at on the threshold of a new revolution. In 1976, Boyer, with Robert Swanson, established Genentech. Two years later Genentech began the synthesis of human insulin. This success led to the establishment of Biogen, Amgen, Chiron, and other university led biotech firms. The first biotech boom hit in the early 1980s, as the US economy emerged from high inflation during the Carter administration a severe recession resulted from an attempt to control it under the Reagan administration. There were calls for a need to create employment. At that same time, there were several developments at the federal level that helped boost the burgeoning biotech industry. Among them:

 In 1980, Diamond vs. Chakrabarty, a patent case, the US Supreme Court handed down a decision saying any human invention, whether animate or inanimate, could be patented in this instance genetically engineered bacterium. This decision, as one summary puts it, “opened the floodgates to the suits of biotechnology related subject matter, now available for patenting.”

 In 1979, Congress revised the Employee Retirement Income Security Act to allow parts of pension funds to be used as Venture Capital (VC), which increased available venture funding.

Recombinant DNA or rDNA came into the field which changed the style of modern biotechnology forever. Stanley Cohen and Herbert Boyer discovered rDNA in California in 1973, and it created quite a revolution.

Simply defined this is a process where the DNA of two different organisms are recombined to produce a genetically advanced DNA. The most common organism in this process is Escherichia Coli bacteria.

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Also in 1980, the University and Small Business Patent Procedures Act, popularly known as the Bayh-Dole Act, expanded in 1984, facilitated the commercialization of federally funded research.

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 In 1986, the Federal Technology Transfer Act authorized government laboratories to enter into cooperative R&D agreements with private firms, and to license inventions that may result from such arrangements.

Charactistics of the Industry

 Regional concentrations and the leadership roles are played by academia, large drug manufacturers, and medical institutions.

2.5% of that budget specifically for the SBIR program.” This requirement greatly helped small firms which were exploring biotech possibilities.

Recently, state governments i.e. California have been promoting biotech as the potential economic boosters, comparable to information technology during the 1990s.

The largest biotech concentrations occurred in Gene Town, near Boston, and Biotech Bay, near San Fransisco. Gene Town, with Harvard University, MIT and Massachusetts General Hospital as major academic backers, boasts nearly 250 biotech ventures, whereas Biotech Bay, with Stanford University and the University of California, San Fransisco, as preclinical academic backers, boasts over 200 ventures. They took large NIH grants, with Biotech Bay receiving $2,248 million and Gene Town $1,534 million in FY 2000. Among other such clusters are Pharma Country (PA, NJ, NY, CT), Bio Capital Washington D.C. and Biotech Beach San Diego.

The US biotech industry is characterized by two features:

In 1990, the Department of Energy in co operation with the National Institutes of Health embarked on the Human Genome Project. Ten years after a working draft of the DNA sequence of the human genome was completed.

htheThebecandidateathe10Myearstakeworkdevelopmentand.Itmayanother35and$5toreachpointwherepossibledrugcanenvisioned.nextstepinprocessisumanclinical

Drug discovery processes has two major components:

trials: Before those trials, a bioventure has to prove that the drug candidate is non toxic to animals. Additionally, it must perform a series of pharmacological research trials for short term and long term effects on animals. Collectively, those steps are referred to as pre clinical.

(1) Research and Development (R&D) and

40 Understanding the Drug Discovery Process

(2) Human Clinical Trials.

Research begins long before any a company considers pursuing a drug discovery project. Normally scientific discovery is made in a research institution or in a university, which notably is based on hundreds of research and scientific projects prior to a particular discovery. Once a discovery is made and shows promise for tangible commercial applications, companies will bring that discovery to the industry for further research

Once the pre clinical studies are completed, the bioventurer submits its all findings to the regulatory agencies for clearance to perform human studies. Once they receive the clearance, the company moves to the most expressive, and most critical, stage of the drug development process. Human clinical trials have 3 + 1 steps three phases of clinical trials phase I, phase II and phase III and post approval surveillance studies, also known as phase IV.

41 The following figure depicts the different stages of the drug development: Research and Development There are two essential ways a drug can reach the hands of people:  Targeted drug discovery process  Accidental finding of a novel molecule

The molecules could be a small chemically synthesizable, or a macromolecule, such as an antibody, enzyme, or oligonucleotides. Most extraordinary discovery came from accidental discovery serendipity. The most prominent example is penicillin discovered by Alexander Flaming in 1928. Also notable is aspirin, the wonder drug from willow bark, and more recently Taxol from the yew tree of the Himalayan region. There are also a large number of painkillers which come from the poppy plant seed.

Discovery phaseR & D 0 4 7 10 ToxicityStudy DevelopmentMarketR&D IND P1 P２ P３ Clinical trials Regulatory Approval 1316 Preclinical 10,000 250 5 Drug Candidate and Application Research & Experiments P4 Year Drug Development Stages

The story of penicillin’s discovery is particularly extraordinary and an example of the gift of persistence. Penicillin not only saved million of lives, but it additionally set the landscape for modern drug development.

A large number of drugs came to the market due to long term targeted drug discovery processes. A prime example of this is Augoron (Pfizer) a pharmaceutical protease inhibitor, viracept, for AIDS. It is important to note in a targeted drug discovery process of 10,000 screened targets only 250 become viable candidates for pre clinical testing. Therefore, serendipity in discovery seems mainly desirable and very economical. Unfortunately chance discoveries are rare and may happen once in every million times, and that is only if observations are made by a persistent scientist not just a talented one. In the targeted drug discovery process, when lead candidates show promise in a laboratory setting, in a cell culture or tissue culture systems, those candidate drugs go to animal efficacy testing. If animal testing shows positive efficacy, a selected drug candidate can then move on to pre clinical and safety studies.

Alexander Fleming's photo of the dish with bacteria and Penicillin mold

It is important to select animals for parallel efficacy studies. Some studies may provide misleading results. It has been reported in the past that while rat and mice studies show little or no efficacy value, dog and/or pig models can provide excellent efficacy in testing a given drug or substance, as a candidate. It is therefore important to understand what pathway or cellular structure is targeted. On that basis, one should select animal models that are closest to the human cellular/organ structure and the morphology which is being targeted. Sometimes it is not possible to find a proper animal model; in those cases tissue cultures if available is the next best option. An example of this would be the silent killer Hepatitis C (HCV). There is no widely accepted or economically viable animal model for HCV except chimpanzees. On the top this, there is also no widely used tissue culture system for a high throughput screening of drug candidates. A company I was formerly associated with was one of the few establishments with a system to screen small molecules for HCV in a tissue culture. 35.9 35.9 13.1

2.1

Over 70% of all development projects are discontinued due to lack of Efficacy or high Toxicity

Casulties of drug development processes

Efficacy Studies Animal Model Selection

Over 35% of leading drug candidates are abandoned due to poor performance in animal efficacy studies, another 35% are dropped due to toxic effects on animals. An additional 15% of drug candidates discarded for financial and funding related reasons. In the end only a lucky few move on to the next level.

Drug development processes grew longer with the better understanding of molecular science. In the 1960s our knowledge was limited to the concept that behavioral biology and drugs came mainly from plants that had been used in traditional remedies. In the 1970s, came combinatorial science and high throughput screening researchers screened large pools of plant extracts, chemically synthesized compounds and other molecules, as drug Atcandidates.thesame

The Casualty of the R&D

0 2 4 6 8 10 12 14 16 18 20 1960s 1970s 1980s 1990s 2000s 2010 Year Period Approval Clinical Trials Pre clinical R&D

time the concept of molecular biology began to emerge; it thusly influenced the requirements for clinical testing.

Targets for screening new drugs.

As the knowledge and understanding of gene and gene function grows, the resulting drug discovery process becomes more and more specific and target oriented. Before the genome project we had only a handful of targets

Future Drug Development Process

45 In the 1980s, molecular biology was in full swing, with the invention of PCR, recombinant technology, and newer modern equipment. Hence regulatory agencies demanded, rightfully so, more data and information on drug candidates, so to ensure the safety of the human life. Therefore, the span drug development processes grew to be in the range of 13 14 years. That has remained about the same for the last 25 years. With the appropriate advancement of genomincs and pharamcogenomics, we can expect a faster drug development process in the near future. Patient populations can be divided according to their pharmacogenetic make up. This will eliminate ambiguity in the study results. Also, if one can devise batteries of assessment systems to evaluate the propensities of drug candidates to become new drugs, during the R&D and pre clinical stages, it would save huge amounts of capital resources and equally valuable time. So, how does the future of the drug discovery process look?

At this point in time, out of existing processes, these newer processes seem exceptional and are very promising. Biotech corporations will now move or discard drug candidates faster, preparing to change or modify any required molecules more quickly.

Implementation of drug discovery strategies is guided by informatics e.g. genomics, pharmacogenomics and toxicogenomics.

46 for screening new drugs. Now we have over 10,000 targets. This number is expected in increase to 50,000 or more in short order. The more we learn about gene products, proteins, and their functions, the greater the opportunity to find at least 10-50 targets per protein molecule in the human body. Bioventures as well as pharmaceutical companies are taking advantage of new tools and assay systems in the drug development process. Strategies are now built with information from the pathway mechanisms, target characteristics, screening protocols, and process optimization.

Business decision-making Infrastructure

The following schematic diagram represents the coordination and deployment of different types of profiling and assays in various, specific phases, of drug development. These highly integrated processes not only bring forth the most effective drugs in a timely manner, but they also save significant cost and time in drug development.

Executives of bioventures or pharmaceutical companies need a clear snapshot view of the entire drug discovery process based on dynamic phasing. This will allow executives to make prudent decisions and allocate proper resources for the development of drug candidates. In the past, this decision-making process was chiefly responsible for delaying in drug development which resulted higher costs during the project.

State of the art tools, assay systems, and bio information technology (IT) protocols can provide a just-in-time analysis of drug development processes. The following schematic plainly shows how different sub processes interact with each other, and how the information generated from each process helps to make early decision-making tasks less complicated.

New Technologies increase Quality and Quantity of Output

The genome project not only brought understanding of biological process closer to the molecular level, but it also created a complex system of information and a virtual data jungle. Unless we implement a high level computer data gathering, analysis, and reporting systems, drug development processes will surpass the current 14 years term, to 24 years.

As information technology modernized financial institution and businesses, the IT industry is now also converging on bio industry to give it a needed face-lift. As a result a new discipline called Bio-IT has emerged. Corporations like, IBM, Oracle, Intel, Motorola and HP joined the bio fields to take on a share, from the $20B. Bio IT is now lending a helping hand in streamlining the drug discovery process, from start to finish. In drug discovery processes there are enormous inefficiencies at every stage.

Fortunately this problem has presented sophisticated IT professionals with sharp challenges to deal with notably concurrent with the post dot.com nosedive. IT professionals are now paying very close attention to making drug discovery processes more efficient and cost effective.

In R&D the lack of coordination among researchers, between research teams, and between business teams, increases the time from the lab to the pre-clinical stage. As a result, time and money are lost. Similarly, preclinical and clinical processes require high levels of coordination, control, and vigilant monitoring. These processes also create enormous mountains Application of Pharmacogenomics in Drug Discovery and Development will allow Decision Knowledge Base early on

49 of data that need to be handled and packaged in an efficient, digestible, Themanner.current

stage of the drug discovery processes has thus become much more complex and extremely sophisticated. In the future, drug discoveries and their inherent infrastructures could produce drugs in more efficient and cost effective ways. A prospective, future, infrastructure could integrate the most efficient data gathering, analysis, high powered computing, and report-generating systems along with state of the art chemical and biological computer

Infraprocessing.structure for Drug Discovery Process

50 DRUG DISCOVERYRISKS  High Cost, one drug /$100 300 millions  Long time: 14 year from discover to approve  Use out of exiting chemical REWARDSlibraries  High Pay off, 0.1 1 billion per drug for 10 12 years  Save huge social cost for different diseases  Huge social benefits Conclusion The ever expanding field of biotechnology is not only fascinating, but equally full of practical promise. Since 1980s it has come a long way and has seen variety of bio travelers. Unlike other industries, this industry can in fact modify human living standards to a great extent. But its yet greatest possibilities are not easily conceived at this stage of development. One might think of previous success stories in this field, while at the same time think of immense possible futures. We still need a number of case studies and information to understand the business of biotechnology. So, simply go on reading this survey book of information, continue inventing and innovating all for the sake of increasing the markets in biotechnology.

51 From Lab to Patient: DrugProcessesDevelopment AND QUALITY OF HUMAN LIFE

CHAPTER IV

Pre-clinical Development

54 pre clinical development is a stage, or period, when development of a new drug begins prior to clinical trials, and before testing on humans can start it’s when important safety and pharmacology data is collected.

Pre-clinical Development

Pre clinical development is defined by many pharmaceutical establishments as a process to invent a new chemical or molecule, lead it through different stages, and allow it to be tested on human volunteers, so that a new medicine might arrive in market for the betterment of humanity. So then, pre-clinical is just one stage of a new drug development that is executed before the clinical stage here we acquire important safety measurements and pharmacological data to make experimental drugs for humans effective and safe. In other words, pre-clinical development is a stage, or period, when development of a new drug begins prior to clinical trials, and before testing on humans can start it’s when important safety and pharmacology data is collected. The main purpose of pre-clinical studies is to gather information on a drug's pharmacodynamics (PD), pharmacokinetics (PK), ADME and toxicity through animal testing. This data allows researchers to allometrically estimate safe doses of a drug for upcoming clinical trials in humans. Pre clinical studies must accumulate data by behaving in accordance with Good Laboratory Practices (GLP) in ICH Guidelines to be acceptable for submission to regulatory agencies such as the Food & Drug Administration in the United States.

Before we proceed in our overview, to the several stages or requirements of pre clinical studies, it is best to have some idea about how a new drug reaches the market for the general population. In each case, inventing new drug, we first have to find our target chemical or molecule. The process of inventing a particular chemical is called drug discovery.

Drug discovery: A Brief Story

New Chemical Entities (NCEs) are the compounds that come out of the process of drug discovery. As a result of drug discovery, new NCEs will certainly have promising attributes against a particular biological target thought to be important in a particular disease. But having these NCEs at our disposal doesn’t mean that we know every aspect of the new element. That is because information about the safety, toxicity, pharmacokinetics and metabolism of the NCE in humans are still unknown.

The non clinical safety studies, although limited at the beginning of clinical development, should be adequate to characterize potential toxic effects under the conditions of the supported clinical trial. A major objective of drug development is to make a recommendation of the dose, and schedule to be used, the first time an NCE is used in a human in clinical trial which is also known as First-in-Man (FIM). At the same time we have to evaluate during this process the physicochemical properties of the NCE that means its chemical makeup, stability, and solubility. It will be further examined for its suitability as well as its effectiveness to be made into capsules, tablets or intravenous formulations. Together these processes are known in preclinical development as CMC: Chemistry, Manufacturing and Control. However, the research team must keep in mind that they have to satisfy the licensing authority to clear the legal aspects of releasing the drug into the market. In doing this they have to move through several other tests, as well. These generally constitute a number of tests designed to determine the major toxicities of a new or novel compound prior to first use in man (FIM). It is a legal requirement that assessments of major organ toxicity be performed such as on the heart and lungs, brain, kidney, liver and digestive system, as well as other parts of the body which might be affected by the drug i.e. the skin if the drug using the skin for delivery. While, increasingly, these tests can be made using in vitro methods, with isolated cells, but many tests can only be made by using research animals. This is simply because the tests performed on an intact organism can aid in examining the complex interplay of metabolism and drug exposure on toxicity. Even after clinical trials, tests continue in order to determine if the drug is free from side effects on the immune system, reproduction, and fertility related problems. Tests are also done to see if it has any noticeable cacogenic effects.

The goals of the non-clinical or preclinical safety evaluation include: a characterization of toxic effects with respect to target organs, dose dependence, relationship to exposure, and potential reversibility. This information is important in estimating an initial safe starting dose for human trials, and for the identification of parameters in clinical monitoring for potential adverse effects.

After going through as many possible tests as required by law, the drug appears with information such as its efficacy, dose schedules to be used, possible side effects, target populations, age group, etc. before an organization employed to assess new drugs. In the US we have the FDA for that purpose. A file that carries the aforementioned information and other things related to the new drug is called New Drug Application (NDA).

Observations show that most NCEs fail to hurdle this entire procedure and reach final approval.

The present chapter deals with only one part of drug developent known as pre clinical. As already known to some extent, the stages used in taking new drugs into the market allows us, for the present, to make pre clinical our main area of concern. In later chapters we will discus in detail the latter clinical stages of drug development. While exploring the whole concept we will encounter several terms related to these other topics. We should continue, adjunct to the main thrust, discussing those terms as well.

From Develop(ability) Decision, to Clinical Proof of Concept

Let’s presume your bioventure passed through the exploratory investigational phase in the laboratory. At this stage biopreneurs need take into consideration the requirements of the regulatory agencies. Most of the work done now will be used to file for regulatory reviews. Bioventures and regulatory agencies take extraordinary measures to ensure the safety and efficacy of all approved prescription medicines. The processes hereafter become very expensive. So it is important to take extra measures to make sure the drug candidate has real potential as a drug.

The product has shown academic and scientific charm, and has potential for piquing a scientific quest for knowledge. We have passed the dream and vision cones of the biopreneurs’ universe; now it’s time to enter the realism cone. Here product has to be tangible and feasible for commercial production. Next step: establish the development ability of the drug candidate.

Is the large molecule mutagenic or cytotoxic by in vitro (bacterial or mammalian) genotoxicity screens?

At what dose does the large molecule show limiting toxicity after acute administration to rodents?

Once our lead molecule has been identified, it is prudent to evaluate the develop(ability) develop-ability of the molecule using less expensive tests which have been proven to identify problems with safety and drug delivery in later development. It’s important, before starting expensive pre clinical processes, to evaluate the ability of any molecule with inherent possibilities. Questions to be answered

What is the plasma half life in rats and dogs following single dose intravenous administration?

large molecule cross human intestinal epithelium as predicted by Caco 2 cell permeation studies?

Is the large molecule stable in the formulations to be used in early Isstudies?thelarge molecule degraded or metabolized and if so, to exactly Doeswhat?the

Can the parent molecule be measured in biological matrices over the right concentration range and according to GLP standards?

Establishing Develop(ability)

Does the large molecule penetrate membranes as predicted by the MDCK cell culture model?

Is the large molecule stable in biological matrices under normal sample handling and storage conditions?

Preclinical study involves several stages or steps to satisfy researchers and examining teams, such as the Institutional Review Board (IRB), in order to get a license to conduct clinical studies of an Investigational New Drug application (IND). We must also keep in mind other institutions that look after the welfare of animals. These tests require several animal species, and we might also assess possible, or intended, results of our tests. All those steps or required tests with adjunct related information which, we might term preclinical development tests are listed below to enable a swift glance at the possibilities of preclinical study.

PRECLINICAL DEVELOPMENT - TASKS Chemistry and Analytics:Chemistry, Manufacturing And Controls SuppliesUp And Process ManufacturingManufacturingDevelopment Analytical/Bioanalytical Capabilities

What should be the subchronic tox species for study based on metabolism and pharmacokinetic considerations?

What are the target organ systems of toxicity?

At what dose does the large molecule show limiting toxicity after repeated dose administration to rats and dogs?

60 Pharmacology and Toxicology tests

General Toxicology Studies -range biodistributionfinding Species

PK / ADME Tissue distribution/mass balance Toxicology Services

Caninestransgenicsincludinghumanprimates

studiespharmacology/toxicologyoncology,PharmacologyCV,CNS)

developmentalcarcinogenicity)toxicologymodels

In addition to the aforementioned information, the develop ability in preclinical studies needs greater clarification to make that information clear. This includes topics like estimated costs, kinds of testing required to satisfy assessment, and on what exactly are those tests are executed. I have tried to gather potential information in a short list, to give you a fairly quick informational track see Appendix I; table titled: Package of Studies to Assess Develop-ability. These lists will undeniably help you to build a model of what is what, in preclinical development. The rest of this chapter will inform you about remaining study information. Typically, both in vitro and in vivo tests are performed for the sake of safety and research values. Studies of a drug's toxicity include which organs are targeted by a drug, as well as if there are any long term carcinogenic effects or toxic effects on mammalian reproduction.

In vitro is a Latin term meaning within the glass. The term in vitro represents the technique of performing a given experiment in a test tube, or to express in a better way, in a controlled environment, outside the living organism. In vitro fertilization is a well known example of this. Many experiments in cellular biology are conducted outside organisms or cells. Thus, results may not correspond to those results inside an organism. Consequently, experimental results are often annotated as in vitro. In vivo is just the opposite of in vitro process. It is, however, also a Latin term meaning within the living. So, it is easily understood as a process that

61 Pathology tests Pathology // Histopathology evaluations Clinical Pathology differentials

Animal Testing

Animal testing or animal research represents the utilization of non human animals in experiments, to know the primary effects and related side effects on them. As it is done prior to a clinical study, it is easy to understand that its purpose is to see if an invented molecule, or chemical, is applicable to

62 A SSESSING D EVELOPMENT Single IV/Oral Dose Pharmacokinetics in Dog or Monkey (DM4) Single IV/Oral Dose Pharmacokinetics in Rat (DM3) Single (acute) Dose IV in Mouse (TX1) Ames mutationbacterial(GT1 lymphomaMouseassay(GT2) Bioanalytical Method Validation (BA1) CrossvalidationCrossvalidationRatPlasma(BA2)DogPlasma(BA3) In Vitro Metabolism MetabolicCacoStability2Cell Permeability (DM2) Single (acute) Dose IV in Rat (TX2) Repeat Dose Range Finder & Toxicokinetics in Rat (TX4) Repeated Dose Range Finder & Toxicokinetics in Dog or Monkey (TX5) Lead Identified Is Lead Developable? Go to Flowchart 2 Identify New Lead Compound Yes No Pharmaceutical Development Assessment: Solubility, Stability, Synthesis takes place inside an organism. In science, in vivo refers to experimentation done in, or on, the living tissue of a whole, living organism as opposed to a partial or dead one. Animal testing and clinical trials are forms of in vivo Bothresearch. in vitro and in vivo processes require more information and we will continue with this later in this chapter.

63 human beings. It is estimated that 50 to 100 million animals worldwide from fruit flies and mice to non-human primates are used annually in various scientific experiments. This research is carried out at universities, medical schools, pharmaceutical companies, farms, defense-research establishments, and commercial facilities that provide animal testing services to industry. Nobel Prize winning research such as organ transplantation in dogs, penicillin in mice, etc., has proven the necessity of animals in the medical research sectors. Counter arguments claim as opponents reveal it is unnecessary to use animals for research. Using rationales such as: animal research is not only inhuman but it increases expenditures, and it is ‘bad science’ to use animals in such ways, antagonists have many reasons to support their position. However, in my judgment, that may not resolve our situation. My job is mainly to deliver the when, how, and which, kinds of information as is related to animal testing in preclinical studies. Expedience is an end-all imperative, in my view. History in brief It is not the current state of preclinical testing activity that witnesses animal testing in drug development, but it still bears a reputation of long existing practice. History tells us that the Greeks started it as early as third and fourth century BC. They were first to use animals for this purpose. According to history, Aristotle 384 to 322 BC and Erasistratus of Chios 304 to 258 BC were the first among the Greeks to execute such experiments on living animals Re: Cohen and Loew, 1984. To add to this, it is general knowledge that Galen is the “Father of Vivisection”. Galen, in second century BC, dissected pigs and goats in Rome. Mentioned earlier, animals have had a role in numerous and notable experiments. I might also mention the name of Louis Pasteur who explained germ theory by experimenting with anthrax in sheep during the 1880s. Insulin, which plays a considerable role in the treatment of diabetes, was first isolated and produced from dogs in 1922. Before trying the multi-drug antibiotic treatments for leprosy on humans, it was tested on armadillos in 1970s. And the most noted of them all, Dolly the sheep, the first cloned mammal from an adult cell, was born in 1996.

Thus, every way you have at your disposal to satisfy various queries related to these fields and tests should be arranged in as many possible ways to assist your efforts. The number of animals used in research work both in purely research based and in applied research as data shows, changes day by day. You may also do single instance research when applicable.

According to the U.S. Department of Agriculture, the total number of animals used in that country in 2002 was 1,137,718, not counting birds, mice, and rats, which make up around 85% of research animals excluding invertebrates. Other sources estimate the percentage of all lab animals which are rats, mice, or birds at 85 95%. The Laboratory Primate Advocacy Group has used these specific figures to estimate that 23 25 million animals are used in research annually in America.

We can also add Xeno-transplantation research, for example in the development of modern medical science using animals. It primarily uses non-human primates as the recipient of pig hearts. The British Home Office released figures in 1999 showing that 270 monkeys had been used in xeno research in the UK during the previous four years. In 1999, three baboons and 79 cynomolgus macaques were also used.

Types of Animals Used As in vitro tests is simply not enough to collect necessary toxicity and other information. We have to depend on in vivo processes. Using animals, which impart relevant information regarding an invented molecule/chemical, is still the only way to move toward fruitful drug development. The intention of any test in drug development, whether it is preclinical, or clinial, is to estimate efficacy of a drug, safety measurements, possible schedules, and the amount of intended doses its side effects both in short and long term, its target users, etc.

In 1986, a report produced by the U.S. Congress Office of Technology Assessment reported that "estimates of the animals used in the United States each year range from 10 million to upwards of 100 million," and that their own best estimate was "at least 17 million to 22 million.” In 1966, the Laboratory Animal Breeders Association estimated in testimony before

According to the BBC, as reported in 2005, using 2,812,850 animals in 2,896,198 procedures, the numbers of animals used continued to rise there.

In this instance the word procedure means a process or experimentation that may continue for several months or even years. There are two basic ways that the animals are killed the first being an experimental drug which caused the death, and the second is procedural where animals are killed and then routinely dissected. Conversely, the British Union for the Abolition of Vivisection (BUAV) estimates that over 100 million animals are used for medical purposes around the world, every year. Animals bred for experiments are not counted in other more official totals.

To accommodate medical services we use rodents, invertebrates, fish and amphibians, rabbits, dogs, cats, and most notably non-human primates. The majority of the list of animals is attributed to invertebrates. As in the case of Caenorhabditis elegans, a nematode, the lineage of all the organism’s cells is well known Also, with Drosophila Melanogaster, a fruit fly, there are

It is difficult to say the exact number of animals used globally. The figures above represent the number in US only. We might also take the UK into consideration. The number 2,778,692 animals, as a report of the British Home Office shows, utilized in 2004, reveals not only the third consecutive annual rise in number, but also the highest figure since 1992. It shows an increase of 63,000 animals from 2003.

65 Congress that the number of mice, rats, guinea pigs, hamsters, and rabbits used in 1965 was around 60 million.

In 2004, the Department of Agriculture listed 64,932 dogs, 23,640 cats, 54,998 non human primates, 244,104 guinea pigs, 175,721 hamsters, 261,573 rabbits, 105,678 farm animals, and 171,312 other mammals, a total of 1,101,958 a figure that includes all mammals except purpose-bred mice and rats. Of that total, 615,000 were listed on experiments that did not include more than momentary pain or distress, 399,000 were associated with experiments in which pain or distress was relieved by drugs, and over 86,000 were listed on experiments that planned to cause pain and distress that could not be relieved. The use of dogs and cats in research in the US decreased from 1973 to 2004, from 195157 to 64932, and from 66165 to 23640, respectively.

66 various characteristics making it advantageous to genetic studies. Most important, invertebrates, compared with vertebrates, have a short life-cycle, which helps scientists to assess effects and side effects with greater numbers of individuals. Except for some cephalopods the entire population of invertebrates is not protected under most animal research legislation, and thus the total numbers of these species used in research is obviously Theunknown.reare various reasons such as availability, low cost, fast reproduction rates, size etc. which has made mice so popular among rodents in laboratories. In addition, with mice we commonly use guinea pigs, rats, hamsters and gerbils. Mice share 99% of genes with humans, and thus are widely used in research sectors like inherited human disease. Despite the fact that the number of mice and rats used in USA are not counted it is estimated 15 20 million are used every year. In the UK in 2004, 84.5% of the total numbers of animals were that of mice, rats, and other rodents. In medical research, as far as amphibians and fish are concerned, the most used species are Danio rerio or zebra fish, and Xenopus laevis African clawed frogs among amphibians. A total of 13,318 amphibians, in the year 2005, were used in the UK, while the number of fish species used the same year was 230,315.

Albino rabbits are generally used for eye and skin irritancy tests. And that’s because rabbits have less eye pigment and they do not generate much tearing while undergoing irritancy test, this makes it easier to visualize the effects on their eyes. In toxicity tests, surgery and dental experiments, beagle dogs, are used for their friendly nature. In 2005 the number of dogs decreased to 5,373 compared to the prior year’s number of 8,018 in the UK. Most non human primates (NHPs) currently used are baboons, chimpanzees, marmosets, and macaques. These NHPs are generally used in research like HIV, malaria, reproduction related problems, stroke, infectious diseases, xenotransplantation, genetics, Parkinson’s disease, etc. Indications are found in US, that the use of NHP is on rise these days because the amount of biomedical research funds has increased since 1990s Although another

67 report by U.S. Department of Agriculture claims that the number is somewhat steady since 1973. In China, the data shows, that the use of NHPs is increasing. It is likely, that the outsourcing of Western research is also increasing there as well due to low budget considerations. The British Animal Procedures Committee has banned the use of wild caught primates in 1996. Only when adequate reason is shown might the committee reconsider using primates, and that is if they are poised to use old world primates such as baboons and macaques.

The biological activity together with species and/or tissue specificity of many biotechnology derived pharmaceuticals often preclude standard toxicity testing designs in commonly used species such as rats or dogs. Safety evaluation programmes should include the use of relevant species.

A relevant species is one in which the test material is pharmacologically active due to the expression of the receptor or an epitope in the case of monoclonal antibodies. A variety of techniques e.g., immunochemical or functional tests can be used to identify a relevant species. Knowledge of receptor/epitope distribution can provide greater understanding of potential in vivo toxicity. Relevant animal species for testing of monoclonal antibodies are those that express the desired epitope and demonstrate a similar tissue cross reactivity profile for human tissue. This would optimize the ability to evaluate toxicity arising from the binding to the epitope and any unintentional tissue cross reactivity. An animal species, which does not express the desired epitope, may still be of some relevance for assessing toxicity if comparable unintentional tissue cross-reactivity to humans is Safetydemonstrated.evaluation programs should normally include two relevant species. However, in certain acceptable cases one relevant species may suffice e.g., when only one relevant species can be identified, or where the biological activity of the biopharmaceutical is well understood. In addition, even where two species may be necessary to characterize toxicity in short term studies, it may be possible to justify the use of only one species for

Safety Assessment (in using animals in preclinical studies)

When no relevant species exists, the use of relevant transgenic animals expressing human receptors, or the use of homologous proteins, should be considered. The information gained from use of a transgenic animal model expressing human receptors is optimized when the interaction of the product, and the humanized receptor, has similar physiological consequences to those expected in humans. While useful information may also be gained from the use of homologous proteins, it should be noted that the production process, range of impurities, or contaminants, pharmacokinetics, and exact pharmacological mechanism(s) may differ between the homologous form and the product intended for clinical use.

The route and frequency of administration should be as close as possible to that proposed for clinical use. Consideration should be given to pharmacokinetics and bioavailability of the product in the species being

In recent years, there has been much progress in the development of animal models that are thought to be similar to the human disease. These animal models include induced and spontaneous models of disease, gene knockout(s), and transgenic animals. These models may provide further insight, not only in determining the pharmacological action of the product, pharmacokinetics, and dosimetry, but may also be useful in the determination of safety e.g., evaluation of undesirable promotion of disease progression. In certain cases, studies performed in animal models of disease may be used as an acceptable alternative to toxicity studies in normal animals. The scientific justification for the use of these animal models of disease to support safety should be provided.

Where it is not possible to use transgenic animal models or homologous proteins, it may still be prudent to assess some aspects of potential toxicity in a limited toxicity evaluation in a single species, e.g., a repeated dose toxicity study of less than 14 days duration that includes an evaluation of important functional endpoints e.g., cardiovascular and respiratory.

68 subsequent long term toxicity studies, such as when the toxicity profile in the two species is comparable in the short term. Please note, toxicity studies in non relevant species may be misleading and are therefore discouraged.

Dose Selection

To justify high dose selection, consideration should be given to the expected pharmacological or physiological effects, availability of suitable test material, and the intended clinical use. Where a product has a lower affinity to or potency in the cells of the selected species than in human cells, testing of higher doses may be important. The multiples of the human dose that are needed to determine adequate safety margins may vary with each class of biotechnology derived pharmaceutical and its clinical indication(s).

Consideration should also be given to the effects of volume, concentration, formulation, and site of administration. The use of routes of administration other than those used clinically may be acceptable if the route must be modified due to limited bioavailability, limitations due to the route of administration, or to size or physiology of the animal species. Dosage levels should be selected to provide information on a dose response relationship, including a toxic dose and a no observed adverse effect level (NOAEL). For some classes of products with little to no toxicity it may not be possible to define a specific maximum dose. In these cases, a scientific justification of the rationale for the dose selection and projected multiples of human exposure should be provided.

69 used, and the volume that can be safely and humanely administered to the test animals. For example, the frequency of administration in laboratory animals may be increased comparing to the proposed schedule for the human clinical studies in order to compensate for faster clearance rates or low solubility of the active ingredient. In these cases, the level of exposure of the test animal relative to the clinical exposure should be well defined.

Pharmacodynamics - Biological Activities

Simply stated, pharmacodynamics is the study of the biochemical and physiological effects of drugs and the mechanisms of drug action, and the relationship between drug concentration, and effect. Biological activity may be evaluated using in vitro assays to determine which effects of the product may be related to clinical activity. The use of cell lines and primary cell cultures can be useful to examine the direct effects on cellular phenotype and proliferation.

Pharmacokinetics and Toxicokinetics

70 Due to the species specificity of many biotechnology derived pharmaceuticals, it is important to select relevant animal species for toxicity testing. In vitro cell lines derived from mammalian cells can be used to predict specific aspects of in vivo activity and to assess quantitatively the relative sensitivity of various species including human to the biopharmaceutical. Such studies may be designed to determine, for example, receptor occupancy, receptor affinity, and pharmacological effects, and to assist in the selection of an appropriate animal species for further in vivo pharmacology and toxicology studies. The combined results from in vitro and in vivo studies assist in the extrapolation of the findings to humans. In vivo studies to assess pharmacological activity, including defining mechanism(s) of action, are often used to support the rationale of the proposed use of the product in clinical studies. For monoclonal antibodies, the immunological properties of the antibody should be described in detail, including its antigenic specificity, complement binding, and any unintentional reactivity and/or cytotoxicity towards human tissues distinct from the intended target. Such cross reactivity studies should be carried out by appropriate immunohistochemical procedures using a range of human Thetissues.previous concept of pharmacodynamics has been expanded to include Multicellular Pharmacodynamics (MCPD). MCPD is the study of the static and dynamic properties and relationships between a set of drugs and a dynamic and diverse multicellular four dimensional organization. It is the study of the workings of a drug on a minimal multicellular system (mMCS), both in vivo and in silico. Networked Multicellular Pharmacodynamics (Net MCPD) is the further extended concept of MCPD to model regulatory genomic networks together with signal transduction pathways, as part of a complex of interacting components in the cell.

It is difficult to establish uniform guidelines for pharmacokinetics studies for biotechnology-derived pharmaceuticals. Single and multiple dose pharmacokinetics, toxicokinetics, and tissue distribution studies in relevant species are useful; however, routine studies that attempt to assess mass balance are not useful. Differences in pharmacokinetics among animal

Whenever possible, systemic exposure should be monitored during the toxicity studies. When using radiolabelled proteins, it is important to show that the radiolabelled test material maintains activity and biological properties equivalent to that of the unlabeled material. Tissue concentrations of radioactivity and autoradiography data using radiolabeled proteins may be difficult to interpret due to rapid in vivo metabolism or unstable radiolabeled linkage. Care should be taken in the interpretation of studies using radioactive tracers incorporated into specific amino acids because of recycling of amino acids into non-drug related proteins/peptides.

Immunogenicity

It is often summarily stated that pharmacodynamics is the study of what a drug does to the body, whereas pharmacokinetics is the study of what the body does to a drug. And to evaluate the ultimate result of a preclinical as well the clinical studies it’s useful to consider both the cases.

71 species may have a significant impact on the predictability of animal studies or on the assessment of dose response relationships in toxicity studies. Alterations in the pharmacokinetics profile due to immune mediated clearance mechanisms may affect the kinetic profiles and the interpretation of the toxicity data. For some products there may also be inherent, significant, delays in the expression of pharmacodynamics effect relative to the pharmacokinetics profile e.g. cytokines or there may be prolonged expression of pharmacodynamics effect relative to plasma levels. Pharmacokinetics studies should, whenever possible, utilize preparations that are representative of that intended for toxicity testing and clinical use, and employ a route of administration that is relevant to the anticipated clinical studies. Patterns of absorption may be influenced by formulation, concentration, site, and volume.

Some information on absorption, disposition and clearance in relevant animal models should be available prior to clinical studies in order to predict margins of safety based upon exposure and dose.

Many biotechnology-derived pharmaceuticals intended for humans are immunogenic in animals. Therefore, measurement of antibodies associated

72 with administration of these types of products should be performed when conducting repeated dose toxicity studies in order to aid in the interpretation of these studies. Antibody responses should be characterized, such as titer, number of responding animals, neutralising or non-neutralising, and their appearance, should be correlated with any pharmacological and/or toxicological changes. Specifically, the effects of antibody formation on pharmacokinetic and pharmacodynamic parameters, incidence and severity of adverse effects, complement activation or the emergence of new toxic effects should be considered when interpreting the data. Attention should also be paid to the evaluation of possible pathological changes related to immune complex formation and deposition. The detection of antibodies should not be the sole criterion for the early termination of a preclinical safety study or modification in the duration of the study design unless the immune response neutralizes the pharmacological and toxicological effects of the biopharmaceutical in a large portion of the animals. In most cases, the immune response to biopharmaceuticals is variable, like that observed in Ifhumans.thoseissues do not compromise the interpretation of the data from the safety study then no special significance should be ascribed to the antibody response. The induction of antibody formation in animals is not predictive of a potential for antibody formation in humans. Humans may develop serum antibodies against humanized proteins and frequently the therapeutic response persists in their presence. The occurrence of severe anaphylactic responses to recombinant proteins is rare in humans. In this regard, the results of guinea pig anaphylaxis tests, which are generally positive for protein products, are not predictive for reactions in humans; therefore, such studies are considered of little value for the routine evaluation of these types of products. It is important to investigate the potential for undesirable pharmacological activity in appropriate animal models and, where necessary, to incorporate particular monitoring for these activities in the toxicity studies and clinical studies. Safety pharmacology studies measure functional indices of potential toxicity. These functional indices may be investigated in separate studies or incorporated in the design of toxicity studies. But the aim of all

Having shown that the large molecule is developable as a drug product the following questions need to be addressed before permission will be granted for testing the new drug form on humans. An IND (Investigational New Drug) application must be filed to FDA if the drug is to be administered to humans in the United States. Although the experimental work needed in animals is not different, there is no formal filing for the government in the United Kingdom, if the drug is to be given to healthy volunteers. Rather, a submission of scientific information an expanded investigator’s brochure is made only to the ethical review committee responsible for the clinical study’s site being considered. All the tests and experiments, as previously mentioned, are included in this schedule, for the intended goal of satisfactory results, as well as data intended to be merged in Investigational New Drug Application (INDA).

73 these separate safety pharmacology studies should be to reveal any functional effects on the major physiological systems such as cardiovascular, respiratory, renal, and central nervous systems. Investigations may also include the use of isolated organs or other test systems not involving intact animals. All of these studies may allow for a mechanistically based explanation of specific organ toxicities, which should be considered carefully with respect to human use and indication(s). In a nutshell we can prescribe whichever test that may be required to get the ultimate medicinal approval the foremost important, among them, is given to the safety assessment of the drug. Without a proper execution of those tests it is possible not pass on to the next stage of drug discovery, nor get the long hoped success in a bioventure. Before proceeding further into the world of pre clinical operations, we have also tried to briefly discuss the rules and regulations required during these stages.

Investigational New Drug Application

Questions to be Answered

Are there any pharmacological effects on normal pulmonary function as measured in the anesthetized rat?

What are the target organs of toxicity?

Are there any effects on behavior as measured by the modified Irwin screen in rodents?

Is the drug absorbed if given orally to a rodent species and a nonrodent species? If so, what is its bioavailability?

What enzymes are responsible for the metabolism of the drug in human and animals?

Where does the drug go in the body and how quickly and what routes excrete it in animals used in toxicology testing?

What is the predicted pharmacological dose (systemic exposure) in humans? Is the drug antigenic in hamster and monkey models?

Is there any evidence of mutagenicity using in vivo tests in Doesrodents?the drug affect fertility and reproductive performance in male or female rats?

Is there any evidence of embryo toxicity or teratogenicity in rat or rabbit models?

Are there any pharmacological effects on cardiovascular function in conscious animals?

What is the minimal no effect dose (systemic exposure) of drug given over 28 days to a rodent species and a non rodent species?

Charts containing “List of Studies Needed for IND Registration” and “Optional Tests Depending on Phase I/IIa Strategy” may be seen in Appendix I for better understanding the entire process, as well as required, approximate, expenditures within the process. Mutagenicity testing in vivo is required before the first human exposure if any of the in vitro studies (GT1 and GT2) are positive. However, if the in vitro screens are negative, then this testing does not need to be done until before Phase II clinical testing. The preclinical studies chart givesl the type of studies necessary. If you need a fast summary of the full scenario it would be good to follow though here and read it one time through. In the US, reproductive toxicology results do not need to be available prior to human testing so long as the drug will be administered to human females who have no chance to conceive or where extensive methods are employed to prevent conception. These tests must be performed before a new drug can be given to women of child bearing potential.

There is some management related assistance available from peripheral companies. These companies are well equipped with the required expertise to go through these various stages. So, if you are in need of executing specified stages, in liaison with certain companies you might want to contact Everythingthem.boils down to cost effectiveness in drug development. In short, some people will not relate to using animals in lab tests. But until an exact and satisfactory substitute is found, and implemented, researchers are not poised to ignore this phase. After all, no one is willing to play with human lives without some sort of animal testing beforehand. Yet researchers are still engaged in seeking out alternatives to animal research. The two most effective alternatives to animal testing under development are Computer Simulations (CS) and In Vitro Cell Culture techniques. However, there are different opinions about these processes. Some insist these are not

ToxicityAssessment in Dogs or MonkeysAfter 4 WeeksExposure & Toxicokinetics(TX7) Antigenicity G.Pig or Mouse Anitgenicity Cyno Monkeys

76 true alternatives, since CS uses data from prior animal experiments and cultured cells, and often require animal derived products e.g. serum. Others think that animals cannot be replaced completely, as researchers are ever unlikely to provide enough information about complex animal interactions in living systems. Examples of CS available include models of diabetes, asthma, and drug absorption, though potential new medicines identified using these techniques are currently still required to be verified in animal tests before licensing.

Cardiovascular Safety Telemetry in Animal & PK/PD (SP1) Test of Behavior and Body Temperature (SP2) NormalFunctionPulmonary(SP3) (SP4)

Irwin

Brain Permeation MDCK Cell Lines (DM7)

ADME and Metabolite ID Rat (DM8)

Rabbit Purkinje Fibers

Lead Developableis Is Lead Safe to Give Humans?to Reproductive Toxicology Studies RT1, RT2, RT3, RT4 Optional: In Vivo Bone Marrow MicronucleusTest in Rodents (GT3) Stop No Go Flowchartto3 Yes Flowchart 2: Preclinical Studies For IND

ADME and Metabolite ID Dog or Monkey (DM9)

At present, cell culture is the most successful and promising alternative to animal usage in research work. For example, cultured cells have also been developed to create monoclonal antibodies; prior to this, production animals were required to undergo a procedure likely to cause pain and distress. The basic behavior of newly developed drugs is a third, and most important, alternative process. It consists of an evaluation using humans receiving doses far below that which are expected to produce serious effects on their entire body. ToxicityAssessment in RatsAfter 4 WeeksExposure & Toxicokinetics(TX6)

Conscious

77 Whatever the process, or however they are used by researchers, the main aspect of all stages is to provide human beings with the most safe, yet effective, life-saving medicines. We might only expect better processes which can satisfy both groups using either animals or their antagonists. At the same time health guarantees must be offered generally, to all people concerned. -------------

Real Knowledge is to know one’s ignorance

CHAPTER V Clinical Development

80 A clinical trial, also known as clinical research, is a research study using human volunteers to answer specific health related questions, bearing in mind the effects of the new drug candidate. Carefully executed clinical trials are the fastest and safest way to develop new drugs and learn their effects on humans.

Really, the US system of new drug approvals is perhaps the most rigorous in the world. Based on information regarding drugs approved from 1994 through 1998 the Tufts Center for the Study of Drug Development reveals the process takes 10 to 15 years on average for an experimental drug to travel from the lab to US patients. Only five in 5,000 compounds that enter pre clinical testing make it to human testing and only one of those five is approved for sale. On average, it costs a company $802 million to get a new medicine from the laboratory and through US patients, according to a November 2001 report by the Tufts Center for the Study of Drug TDevelopment.hevastpicture

of developing a new drug the applicable cost, required time and painstaking process requires even average persons to know the facts and processes of clinical trial systems. This is a very useful a chapter for biopreneurs, especially budding ones, to learn the details.

bio-informatics

We know what biotechnology is and we know, in addition, what role red biotechnology is playing in improving the impact of bioventure concepts in modern civilization. This red biotechnology or medical biotechnology is important not only for its usefulness in the medical field, but also its contribution to the economic growth of any given country is inexpugnable.

If we consider the Indian market we would find that the medical biotechnology sector annually contributes over two thirds of the biotechnology industry turnover. Currently, in India, the biopharmaceutical sector occupies the largest market share at 76%, followed by bio agriculture at 8.42%, bio services at 7.70%, and industrial products at 5.50% while is at 2.45%.

In that scenario in medical biotechnology, the long wait for new drugs to be approved for general use is tolerated because government acceptance, as a fact of life, depends on the underlying fact that any drug is in many ways somehow life dependant. Thus when we come to know that in U.S. the waiting period for getting a new drug to market is at least 10 to 15 years, we may react but for positive reasons with relation to safety.

81 Clinical Research

The factors that allow someone, a volunteer, willing to ingest drugs, and participate in a clinical trial are called inclusion criteria and those that

A compound, having crossed obstacles during pre clinical processes is allowed to go on to clinical trials. In clinical studies the accepted drug candidate is allowed to be tested on human beings, under the vigilance of a team of expert doctors and nurses. The whole process is extremely timeconsuming, and necessary, since no national authority would willingly approve a drug without first knowing its overall effects on humans amounts of dosage, side-effects, and the like. Before moving to our next question what happens during clinical trial, or what’s the procedure in clinical trial? we should look at some other points. These small but important things will unquestionably help you to understand the what, why, and where, of the clinical phase of inventing a new

The first question arising in mind after hearing the term clinical trial is what it exactly means. A clinical trial, also known as clinical research, is a research study in human volunteers to answer specific health related questions bearing in mind the effects of the new drug candidate. Carefully executed clinical trials are the fastest and safest way to find treatments and effects of new drugs on human volunteers. Interventional trials determine whether experimental treatments, or new ways of using known therapies, are safe and effective under controlled environments. Observational trials address health issues in large groups of people or populations in natural settings. This process is distinguished from the theoretical or basic science in the ways that it is purely based on observation, and treatment, of volunteer participants.

What is a Clinical Trial?

some terms related to volunteer subjects of research work. Since this is extremely dependant on volunteers, we must know their criteria. All clinical trials have guidelines about who can participate as volunteer subjects. Each drug has its particular way of creating consequences. When looking for volunteer participants we have to keep these things in mind. Inclusion and exclusion criteria are important principles in medical research, helping to produce reliable results.

First,medicine.letusexplore

There’s a set document called an informed consent document which is used to inform the volunteer of the expected duration of the study, the purpose, and necessary procedures, with key contacts. The risk factors and beneficial aspects are depicted clearly in that document. It is then his or her decision whether to sign this contract. After signing, a volunteer may leave the program at any given moment by showing some valid argument. As we now understand, from the above information, regarding inclusion and exclusion of participants in a set trial, it depends on certain criteria. Also we realize that some participants intend to take part in a trail in order to gain of a new chance of recovery from a disease. However, due to age, treatment history, or other exclusion criteria, he or she may not gain customary trial inclusion. Keeping these situations in mind the US Food and Drug Administration (FDA) regulations permit manufacturers of Investigational New Drugs (IND) to provide an expanded access use of a Thedrug.basic or primary objective of that expended access system is to provide the people with life threatening, incurable, or serious disease, with no alternative treatment facility, access ability to a new drug. Accessing additional information about a drug is a secondary purpose of that expended access system. That system is applicable to drugs in which clinical investigators are actively experimenting in well controlled studies, or on a drug which studies have been completed. It must carry enough evidence for getting an effective result on these patients, or at least not expose a patient to unavoidable risk of life.

83 discourage someone from participating are called exclusion criteria. These criteria are based on factors such as age, gender, the type and stage of the disease, previous treatment history, and other medical considerations. Before joining a clinical trial, a participant must qualify for the study. Some research studies seek participants with illnesses, or conditions, studied in a clinical trial, while other studies need healthy participants. There is nothing personal about this. Indeed, the criteria are used mainly to identify appropriate participants and to keep them safe. It is used to seek the best possible result. The criteria help to ensure that researchers will be able to answer the questions they plan to study.

Now we have arranged our necessary participants for the clinical trial process; let us start moving through several phases of a trial. Later on we will introduce a few more terms and features related to the clinical system.

Clinical Trial the Process

The initial point in time of a clinical trial, just before the participant starts to receive the experimental treatment is also a baseline. At this reference point, some quantifiable values such as CD4 counts are recorded. It is easily seen that safety and efficacy of a new drug are most often determined by monitoring changes from baseline values.

Before taking the plunge into the pool of clinical research we should understand the one basic essential which helps measure the results of new drugs. This is known generally as the baseline. There are several ways as to understand or utilize the baseline. It is sometimes based on information gathered at the beginning of a clinical study. Actually, it is the desired effect from which variations found in the study are measured. To emphasis, it may be a known value, or quantity, of a previously used drug from the same standard with which the new drug is compared when measured, or assessed.

After completing pre clinical testing, a biopreneur files an application with the Food and Drug Administration (FDA) for permission to begin human testing. The drug, antibiotic, or biological drug, having passed its pre clinical stage is now used in a clinical investigation. It is now known as an Investigational New Drug (IND). The application seeking its investigational rights on human volunteers is called an Investigational New Drug Application (INDA). The IND becomes effective if the FDA does not disapprove, within 30 days.

The INDA references results of previous experiments; how, where and by whom, the new studies will be conducted; the chemical structure of the compound, how it is thought to work in the body, any toxic effects found in the animal studies, and how the compound is manufactured. All clinical trials must be reviewed and approved by the Institutional Review Board (IRB) where the trials will be effectively conducted. Progress reports on clinical trials must be submitted at least annually to FDA and the IRB.

What is the maximum tolerated dose in humans following acute intravenous, oral or other preferred route of administration?

How does the effect of the drug compare to currently available Isdrugs?there any evidence of antibody production in humans?

The clinical proof of concept will be realized, if the drug works to improve a disease condition or affect a surrogate marker of ultimate clinical response in a way predicted by the proposed mechanism of action. Before these studies can be done, safety and tolerance in healthy subjects must be established. This is also a good time to capture clinical pharmacokinetic information that will guide dosage levels later in drug development, and may help explain different responses observed among the subjects.

What are the limiting side effects associated with acute use of the drug?

How much ‘cover’ exists between the largest dose systemic exposure expected in humans and the minimal no effect dose in the rodent and non-rodent species used in toxicology testing?

Is the systemic exposure of the drug proportional to the dose given?

Questions to be Answered

Are the pharmacokinetics of the drug described by onecompartment or multi compartment models?

Is their any association between any observed effects of the drug and measured plasma levels systemic exposure in healthy human subjects or asthmatic patients?

What is the dose response of drug in patients?

Clinical Proof of Concept

There are in some cases human studies that are subject to provide clinical proof of concept. The overall information is presented in a chart below, Early Human Studies Aimed at Providing Clinical Proof of Concept to help understand the initial process.

Diagnostic Trials are structured to find better ways fir tests or procedures in diagnosing a disease or health condition. Screening Trial applies to finding certain ways to detect diseases or health conditions.

A Few Important Notes IRB (Institutional Review Board), in US, is a committee of statisticians, physicians, community advocates and others, who make certain that a trial is ethical and the rights and health of study participants are protected. Every institution that conducts or organizes clinical or biomedical research must have an IRB associated with them by federal regulation, to review and initially approve the project.

Prevention Trial is the method used to find a better way to prevent disease in people who have never had the disease, or to ensure prevention of a disease from returning. The approaches may include medicines, vitamins, vaccines, minerals, or lifestyle changes. The ultimate findings are then used for the sake of the betterment of people in general.

FDA (Food and Drug Administration) is the US Department of Health and Human Services agency responsible for ensuring the safety and effectiveness of all drugs, vaccines, biologics and medical devices including those used in the diagnosis, treatment, and prevention of HIV infection, AIDS, and AIDS related opportunistic infections. We see the FDA also working with the blood bank industry to look after the nation's blood supply.

Quality of Life Trial is also known as supportive care trials. It deals with people having a chronic illness. It explores new ways to improve comfort and quality of life for these people.

There are five types of clinical trials namely: treatment trials, screening trials, diagnostic trials, quality of life trials and prevention trials.

Treatment Trial is completely based on experimental treatment. Its intention is to find out new surgery methods, new combinations, the usefulness of drugs, and the utilization of radiation therapy.

Phase I This represents initial studies to determine the metabolism and pharmacologic actions of drugs in human volunteers. It generally requires 20 to 100 healthy participants or patients to gain faster evidence of net effectiveness. The side effects associated with increasing doses are also RisingDoseSafety,ToleranceandPharmacokineticsin SingleHealthySubjectsFollowingDoseIVAdministration

Design

Stop No Yes Flowchart3:ClinicalProofofConcept

Stop No Yes Flowchart 3: Clinical Proof of Concept

Approved ? Has Concept

Phases/Stages of Clinical Trial Right after the types of clinical trials are described this is definitely the right moment to know the different stages of clinical research. There are actually four stages, or as they are better known, phases in a trial.

PharmacokineticsSafety,(CP1)ToleranceandinHealthySubjectsFollowingSingle DoseOralor2ndRoute(CP2) Safety,Toleranceand SubjectsPharmacokineticsinHealthyFollowingRepeatedDosing (CP3) EfficacyinPatientsFollowingAdministrationbyDesiredRoute(s)(CP4) FileIND ProtocolDesignFirst(CP1)

File

AssessDesignPhaseII&IIIClinicalProgramInitiateLongTermToxicologyClinicalDrug:DrugInteractions

Dose Oral or 2nd Route (CP2) Safety, Tolerance and Pharmacokinetics in Healthy Subjects Following Repeated Dosing (CP3) Efficacy in Patients Following Administration by Desired Route(s) (CP4) IND Design First Protocol (CP1) IND Proven?Been Phase II&III Clinical Program Long Term Toxicology Assess Clinical Drug:Drug Interactions

Initiate

Randomized Trial a term representing another form of trial. A randomized trial is a study in which participants are randomly or by chance assigned to one of two or more treatment arms of a clinical trial. This type of trial is utilized when accepting its findings could be positive and useful in almost in every trial process. It has with regard to a direct connection to an invented drug nothing to do with previously mentioned trials.

Rising Dose Safety, Tolerance and Pharmacokinetics in Healthy Subjects Following Single Dose IV PharmacokineticsSafety,(CP1)AdministrationToleranceandinHealthySubjectsFollowingSingle

ApprovedIND? HasConceptBeenProven?

Let us look at a detailed picture of what we acquire in phase I and what should be considered in next phases, because of the results of phase I. It also shows its importance as the beginning of this clinical stage of research.

It goes something like this:

chart, related to ‘phase I’ of clinical trials, reveals much information, not simply regarding this phase, but it also helps to meter out possible steps during forthcoming phases.

88 calculated throughout the study. The studies also determine how the drug is absorbed, distributed, metabolized, and excreted, as well as the duration of its

Theaction.above

1) MTD determination is the primary objective of Phase I trials.

2) The MTD is that dose which exhibits acceptable and predictable toxicity.

4) Defined as dose with fewer than 2/6 patients demonstrating DLT first in human study.

10) The process is not hypothesis driven. Phase II

This phase is conducted to evaluate the effectiveness of the drug for a particular indication, or indications, in patients with the disease or a condition under study, and to determine the common short term side effects and risks. In this phase, controlled trials of approximately 100 to 500 volunteer patients with the disease assess a drug’s effectiveness.

5) We find the mechanism of action. 6) It shows promise in animal studies. 7) It helps find the best dose in humans. 8) Dose, route, and schedule are additionally defined. 9) It is a single agent and combination therapy.

3) The MTD will be recommended as the starting dose for subsequent phase II trials.

Phase III

This phase involves expanded controlled and uncontrolled trials after preliminary evidence suggests the effectiveness of a drug. It is intended to gather additional information, evaluate the overall benefit-risk relationship of the drug, and provide a sufficient basis for physicians in labeling. This phase usually involves 1,000 to 5,000 patients in clinics and hospitals. Physicians monitor patients closely to confirm efficacy the maximum ability of a drug, or treatment, to produce the best possible result regardless of dosage and identify adverse events.

At the end of phase III previously known as an IND, or Investigational New Drug, it is now almost ready to hit the market. Before general marketing begins, the medication is granted permission to be utilized by and number

90 of new participants. This known as a Treatment IND is typically a part of phase III studies. To be considered for a Treatment IND a volunteerparticipant cannot be eligible to be in the definitive clinical trial.

This phase deals with post-marketing research to collect additional information such as the drug's risks, benefits, and optimal use. As the description suggests this phase is added to the total process of inventing a new drug, only after the medication reaches the market for medical patients

Phase IV

We know how a drug becomes part and parcel of the market yet there is another category, which is also approved by FDA. Having very unusual target buyers, orphan drugs, as they are known, are mainly for very rare kinds of diseases and/or special situations. As the rarity in numbers of buyers, these drugs have very infrequent or little sponsorship in

The duty of inventors doesn’t end with the drug crossing the third phase of trial. That is actually a new beginning. Once any medication goes to phase III it has to be advanced by the FDA, gaining a license to market the medication. To serve this purpose the manufacturer has to prepare a report for the drug to be assessed by the appointed agency. That report, carrying information about the results of various researches is called a New Drug Application (NDA). An NDA typically runs 100,000 pages or more, containing all the feasible scientific reports regarding the drug. The all-new medication is available to physicians only when a scrupulous and satisfactory reading of NDA is complete. After this approval, the new drug being the approved drug, the biopreneur must continue submitting reports, including any cases of adverse reactions an unwanted side effect caused by administering the drug. It may be sudden, or it may develop over time. The biopreneur must also submit appropriate quality-control records, to the regulatory agency. That is included in phase IV of the clinical process.

There is another situation of prescription drugs used for special conditions, and particular patients, other than those approved by the FDA, this is off label use of a drug.

91 pharmaceutical manufacturing, thus hindering development of these medicines. However, there is financial incentive for certain manufacturers to prepare and provide such medications to the rare numbers of people in need of them.

Before moving on we might take a momentary look at the total process, including preclinical trials, to make the entire scenario vivid. We should review the following chart to see the total procedure of drug discovery.

Regulatory processes in drug development Preclinical I N D P R O C E S S Clinical Trials Phases N D A P R O C E S S RegulatoryApproval PhaseIVI II III Years 6.5 1.5 2 3.5 1.5 byrequiredtestingmarketingpostAdditional- agencyregulatorytheTest Population Laboratory & Animalstudies 20 to 100 volunteersHealthy 100 to 500 volunteersPatient 1000 to 5000 volunteersPatient ProcessesApprovalReview& Purpose formulationsactivitybiologicalsafety,Assessand SafetyDetermineanddosage side,effectivenessEvaluatelookforeffects longreactionsmonitoreffectiveness,Confirmadversefromtermuse Success Rate 10,000 compoundsevaluated Enter5trials 1 Approved The huge canvas of clinical research process also includes tasks like: Protocol Development Study Document Development Case Report Form Development

Regulation and Safety of Patient

All these additional tasks are executed during the four phases of clinical research. More information on these tasks, along with other inseparable terms, will be provided in later chapters of this book.

SeriousStudyManagementCloseoutAdverseEvent Reporting

GCP MedicalCommitteeMedicalBiostatiDataDocumentFinancialProjectAuditingManagementManagementManagementManagementsticalServicesWritingSupportMonitoring

As far as the safety of patient is concerned, the ethical and legal codes that direct medical practice are also applicable to clinical trials. In addition, most clinical research is federally regulated with built in safeguards to protect participants. Each and every phase of the trial follows a carefully controlled protocol a study plan that details what researchers will do in the study. As the clinical trial progresses, researchers report the results of the trial at scientific meetings, to medical journals, and various government agencies. This is not for the sake of advertisement of the medication but for general information about it and any possible aftermath in using it. While in the study, every participant’s name remains secret and is never mentioned in any of these reports. Meanwhile research-based pharmaceutical companies, and the FDA, take extraordinary measures to ensure the safety and efficacy of all approved prescription medicines in the United States.

92 Site Selection Site InvestigatorsStart-up Meetings Study Monitoring Site

That safety measurement is taken in four stages as follows:

Safety Assessment during FDA Regulatory Review

During each stage of clinical research, including quality-of-life and pharmacoeconomic studies, patients are observed for adverse events. All reactions, whether beneficial or detrimental, are reported to the FDA; when appropriate, the information is incorporated in a drug’s package labelling for further safety regulation.

2) Pre approval safety assessment in humans.

4) Post marketing safety surveillance.

1) Pre clinical safety assessment.

Before any drug proceeds to testing on human volunteers, pharmaceutical companies conduct laboratory and animal studies to determine the biological activity of a compound against the targeted disease, as the compound is evaluated for safety. The goal of pre clinical animal studies is to characterize the relationships between increased doses of a drug and toxic effects in animals. The development of a drug is terminated when such tests suggest that it poses a significant risk for humans, especially organ damage, genetic defects, birth defects, or cancer.

Pre clinical Safety Assessment

Pre-Approval Safety Assessment in Humans

As the name suggests, it falls in between pre clinical tests and the FDA review period. A drug sponsor can begin clinical trials in humans once the FDA is satisfied that the pre clinical animal data do not show any unacceptable safety risk to human beings. It usually takes several years for a clinical development program to gather sufficient data to prepare a New Drug Application (NDA) seeking FDA regulatory review, in order to market a new drug product. Each clinical trial evaluates safety regardless of the stated objective of the trial.

A sponsor submits an NDA to the FDA for approval to manufacture, distribute, and market a drug in the United States based on the safety and

3) Safety assessment during FDA regulatory review.

Thus, as a condition of approval, the FDA can require a company to conduct a post marketing study a Phase IV trial or the company on its own may decide to undertake such a study, to gather more safety information. These studies may consist of new clinical trials, or may be re evaluations of existing databases. It is satisfying for the consumer of a drug to know that safety monitoring continues throughout the life of the medication. Post marketing surveillance is a highly regulated and labor intensive global activity. Even before a drug is approved, multinational pharmaceutical companies establish large global systems to track, investigate, evaluate, and report ADRs for that product, on an ongoing basis to regulatory authorities around the world.

Pharmaceutical companies must inform regulatory agencies of reports of serious and unexpected ADRs they receive from anywhere in the world within 15 days. Information is promptly collected and communicated to the medical community. Pharmaceutical companies and the FDA take as a

The FDA usually completes its review of a standard drug in 10 to 12 months. One hundred and twenty (120) days prior to a drug anticipated approval, a sponsor must provide the agency with a summary of all safety information in the NDA, along with any additional safety information obtained during the review period.

Post Marketing Safety Supervision

After going through the many stages of safety in all phases, there’s little chance of any Adverse Drug Reactions (ADRs). Safety is always a priority when collecting efficacy information. Following a drug’s safety parameters is very complex in wide markets. Adverse reactions occurring in fewer patients than those typically tested in clinical trials before approval one in 3,000 to 5,000 patients are more likely to be detected when large numbers of patients use a drug after approval.

94 efficacy data obtained during the clinical trials. In addition to written reports of each individual trial, an NDA must contain an integrated summary of all available information received from any source concerning the safety and efficacy of the drug.

Confidentiality Regarding Trial Participants refers to maintaining the secrecy of trial participants including their personal identity and all personal medical information. This rule is in some ways similar to the privacy regulation. Medical trial participants' consent to the use of records for data verification purposes should be obtained prior to the trial, and assurance must be given that confidentiality will be maintained for very obvious Datareasons.Safety and Monitoring Board (DSMB) is an independent committee that reviews data while clinical trials are in progress. The DSMB consists of research experts and community representatives, making sure that

In addition, each adverse event that is fatal or life threatening must be reported within seven days. A sponsor has a special obligation to ensure that the FDA, the IRB, and all participating investigators are promptly notified of any significant new adverse effects or risks associated with a drug.

95 primary responsibility the duty to ensure the safe use of all approved medicines in the United States.

Beyond these federal requirements, sponsors often take additional steps to ensure that their products can be used safely. For example, they may use independent safety monitoring boards to monitor specific areas of concern so that, if a significant problem arises, a trial can be terminated at the earliest possible time. In addition, they conduct specific safety trials, such as drug interaction trials or trials in special patient populations, and provide medical information concerning the safety and efficacy of their products to other health care professionals after their products are marketed.

Privacy Regulation is another, though not directly connected, safety Nearlyprocedure.all research developing new medication is required to demonstrate safety and effectiveness, depending on data from patients and their healthcare providers. Because of privacy issues, patients do rely solely on researchers or manufacturers involved in such processes. It is therefore essential that, in protecting a patient’s right to privacy, the government must also protect the public interest and its overall well being.

Protocol development, as utilized in the various job descriptions relates to clinical trials. It is simple yet very important process; it defines how the entire research project is conducted. The entire clinical trial is based on a particular study strategy, designed in such a way that it covers the safety plan for participants, as well as sketching out required answers to queries prior to the trial start. The protocol description also includes the norms required for inclusion/exclusion criteria, along with dosages, trial duration, medication, and of course the schedule of tests.

Placebo and other sides of a trial

When clinical research is rigorously followed it is not simply drugs that are supplied to participants to evaluate efficacy. Researchers use other substances pills and other forms typically with no medical value. These are inactive powders, pills, and liquids, posed as medication. These are called placebos. They are used to evaluate any real clinical effectiveness of the drug under test conditions. This process is used to explore psychological potentials when taking a given medication it is known as a placebo control study.

In such a process the participants are usually divided into two groups. A placebo is supplied to one group, while the other group utilizes a genuine investigational medicine. A report availing medical disclosures compares the real effect of the medicine with desired effects. The emotional or sometimes the physical change, which certainly is not the effect of any kind of true medicinal substance occurring when a placebo is used is noted as the placebo effect. Whatever the outcome of the psychological results, it is usually positive because it reflects the required, or intended, change by

There are patient support communities and organizations looking after the family and the needs of participants during typical trial processes in the US One such group might be known as an Advocacy and Support Group. The group’s duty is to support the family, as well the participant, by providing varied resources and life style support tools.

96 participants are not exposed to undue risk. Once trial goals are achieved, or safety concerns emerge, the team may suggest stopping the trial.

97 participants. It actually reflects the expectation of those persons participating in the given study. Drug testing is conducted by human beings; so it is possible to get prejudiced or deeply opinionated results. When a certain point of view produces discriminatory results we call it a bias. In clinical trials bias is prevented using two tools blind or masked, and randomized trials. Before we learn more about these we must understand a term known as an arm. An arm is actually a specific grouping of trial participants. Arms are usually utilized in randomized trials. In most trial systems two arms are generally found, but three or more arms can be seen in certain situations. When developing arms participants are randomly selected, this makes it a truly randomized trial.

When the participants have no idea whether they are part of a controlled arm of the study, or given placebos, and/or a standard treatment, this process is called a blind or a masked trial. This is actually a variety of a randomized trial, where the participants know nothing regarding the treatments.

The process of randomization reduces the differences among various groups equally by arranging people with varied characteristics equally among all the trial arms. The researchers involved do not know which treatment is best. All that is known at the time is that any one of the treatments chosen could be beneficial to a participant. Treatments may deliver the desired result, or they may not. Any of the arms may be provided placebos.

There are two treatment systems involved in a medical trial. One is the controlled treatment and the second is standard treatment. While FDA approves the standard treatment as effective in getting a desired result for a specific ailment or situation, the controlled treatment is another standard with which the efficacy of the new investigational medication is compared. Both processes are used simultaneously where participants are divided into two or more arms. Volunteers from either arm cannot say whether they are under the controlled or the standard treatment system. Participants also will not say if they are given placebos. Thus a biased result is prevented.

 Gains expert medical care and leading health care facilities during the trial.

Double blind research is expected to produce accepted result because expectations of any of the participants or investigators do not affect its Whenaftermath.both the participants and investigators know the drug or vaccine they are using it is an open label trial.

Any clinical study can produce both positive and negative reactions on human volunteers. It is your duty as researchers, before commencing any such trial, to let the participants know what the possible adverse reactions are, or what may happen adversely to their health. At the same time you must mention the expected positive effects that they can get expect through the process. Doing that you may recap the following benefits that a wellplanned and well executed trial offers to participants:  Plays an active role in participants’ health care.

Benefits and risks of participating in a clinical trial

If, in any study, both the participants and the investigators are unaware of which arm is using a medication, or a placebo, it is called a double blind study.

 There may crop up unpleasant, serious, or life-threatening, sideeffects to experimental treatments. Though everything is under a superb supervision there are chances of negative results.

 Expands access to new investigational medicine before they are widely available in market.

 Helps others by contributing to medical research process. Benefits and detriments, or as applicable here risk factors, always move along side by side. So, possible risk factors are:

If, in a blind or masked trial, when either the participants or the investigators are unaware of which arm is using the placebos, or another form of the medication, and which arm is affected with a real investigational drug, the process is called a single blind study.

What are the side-effects and adverse reactions?



Sponsors Though the company interested in developing and marketing new drugs is mostly responsible in investing money, during each investigative stage in trial clinical studies, trials are also sponsored and funded by a variety of organizations or individuals.

The experimental treatment may not be effective for certain participants. Participants may desire one result and the ultimate result may hold something different for him or her. Sometimes an opposite reaction occurs.

So, investigational treatments must be evaluated for both immediate and long lasting side effects.

People and organizations such as physicians, medical institutions, foundations, volunteer groups, and pharmaceutical companies, in addition to federal agencies such as the National Institutes of Health (NIH), the Department of Defense (DOD), and the Department of Veteran's Affairs (VA) are generally interested in investing in certain causes

Trials can take place in a variety of locations, such as hospitals, universities, doctors' offices, or community clinics. But wherever they may happen the whole process must be under the supervision of an IRB. At the trial’s

The last two items have nearly nothing to do with risk related matters, but the situation may generate adverse reactions for the participants.



Side effects are any undesired action or aftereffects of the experimental drug or treatment. Negative or adverse effects may include headache, nausea, hair loss, skin irritation, or other physical problems in patients. It might depend on many factors such as the substance used, the dosage, or anything of that order. It may be an immediate reactions or a long term aftereffect.

The protocol may require more of the participant’s time and attention than a non protocol treatment including trips to the study site, more treatment, hospital stays or complex dosage requirements.

100 conclusion an NDA must be approved by the FDA to get the requisite license for marketing the medication. The FDA has added 900 new reviewers made possible by the user-fees paid by pharmaceutical companies to approve new drugs more expeditiously than in the past, while still maintaining the highest safety standards. Over the years, the percentage of applications approved and rejected by the FDA has remained essentially the same. Two decades ago, 10 to 15 percent of all NDAs were rejected by the FDA which is basically the same today. It is for the sake of safety, for the sake of a willingness to invent new medications to serve humankind, and for the sake of proving new scientific truths and capabilities, that we do this. Last, but not the least, it is for the sake of preparing totally new dimensions to the calling of our field of choice, biotechnology.

~~~~~~~~~~~~~

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102 Where so ever you go, go with all your heart Confucius STARTING A BIOVENTURE

Beginning a Bioventure

CHAPTER VI

104 Biobusiness People FinanceTechnology Three key components of a biobusiness

How to begin a Bioventure

Business Plan and Business Planning Business planning begins with mind planning. Quite often biopreneurs have an idea about a particular technology he or she would like to commercialize. He or she may have the overall view of the user and the market size, and some rough ideas about the cost and timelines. This information however is not thoroughly researched or substantially backed by a logical analysis. Therefore, systematic planning and a written business plan is always required, to insure the basic concepts of the entrepreneur. Plan Business plan consist of several key sections and each of the key section contains several sub sections. A typical bioventure business plan will have the

Business

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followingA.items:Executive Summary B. Mission Statement C. Company and Business description D. Technology Description E. Market Analysis F. Competitive Analysis G. Strategyi.R&D Plan ii. Human resources iii. Funding strategy H. Financial

As the executive summery is in essence a reflection of your business and you must be prepared and use that to attract venture capitalists (VCs) or other investors, you must excel in the process of preparing an executive summery to avoid initial competition.

It is also important to remember, an “Executive summary is NOT a preface, an introduction, or an abstract of your business plan. Even though it is called summary, it is not a true summary. It is a very precise extract of your business plan.”

 Why

 Technology

 Development

 Key

Executive Summary

 What

A well stated summery describes how your plan and company is different from others. It’ll reflect the confidence you have, the willingness in yourself, and the work you have already done to come to such a good point of resolution.

 Company

Executive Summary Items structure, mission statement and competitive advantage and Intellectual Property (IP) position strategy need and market potential team member and their relevant background are you looking for: investment, partnership or loan the fund will be used this is a good investment or opportunity for the investors and partners.

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Executive summary is a micro-business plan. It gives a reader the complete overview about your company, technology, market potential; team, strategic direction and present financial position. It also provides the reader with an idea of what are you looking for. It is normally two to three pages long and may contain figures and data table.

 Market

 How

Here you have to provide basic information about your proposed company.

How it is begun. What kinds of corporate structure it will use, for example, corporation, partnership etc. It may describe the company’s physical location, if you are already in business, giving a short history.

Technology Description

Company Description

This is where you can excel. Describe the company’s technology platform target products or fields. If the mechanism of action is known explain it briefly. Use drawings, images, and pathway flowcharts to explain your technology in a very simple way, so that your grandmother can easily understand it. It is important to understand that every investor, whom you may attract with your technology description, may not be from your field of expertise or they may not have any connection with biotechnology. But

Here you need to consider the several phases you are going to go through while developing new drugs or the like. This is because you have to have appropriate facilities such as a place to conduct animal research, or other clinical studies, and a place to collect experimental results. The company description, in your plan, must contain these specifics so that you can avoid problems of physical presence in your establishment, or in getting licenses for various processing. If you miss any necessary specifics in constructing your plan, the next stages can become the death knell in any competitive business zone. Because it is your plan it can bring funds and investors, it is your plan that can help you secure licenses to facilitate your research. It’s only a seemingly foolproof plan that will help you market your product. The company description is just a part of your business plan, and just like any plan it has to be better than others to succeed.

107 Mission Statement

It represents the intention behind your project. It reveals how noble an inclination inspired you to start your venture. The future goal and possible future success of your company, as well as your own, must be a part of this description. You have to express how you see the possibilities of profit in the proposed venture.

You can divide your market into two segments: (a) primary market and (b) secondary market. This part of assessing the market potential of the product is very crucial in business development. If your calculations are somehow below that of market reality, then you will have to increase pace of production in the future to cope with needs; this will definitely hinder the success of your company. Again, if your calculations are more than the scope of the market the product must be stored in warehouses for long periods. You have to be careful and experienced enough to estimate the

This part of your business plan is analogous to the discussion section of an article that you normally would write for a scientific publication. In the discussion section you place all the relevant current and past scientific data and compare them with your newly produced data and information. You then make some correlation and emphasize potential inference of your research and investigation. You also describe in the discussion section the future scope of your work. Likewise, the market analysis of your business plan contains detail descriptions of target market, current market potential of your product(s) and future scope of the technology in other fields which may not be immediately apparently.

108 investors will have some interest in the profit that your venture will provide. If your plan is full of technological details, they may get bored and lose interest before seeing any financial possibilities. So, avoid too much technical jargon and express things with the best clarity and highly lucid Youlanguage.mayhave a business plans similar to someone else or it may look like that to the prospective investor. The investor may think it as just another application for investment funding. But your technology and your management team are the best weapons you can depend upon to win out against any competitors. So, like the description and organization of your team in the executive summery, you have to be thorough in describing your technology which you are proposing to utilize. And when planning this project you have to be soundly aware of the current trends in technology markets which are facilitating support of your technology.

Market Analysis

The number of consumers interested in your product whether new or a rejuvenated version of an established product is your market potential. Among those numbers, some people may not be proven potential buyers. Some of them may not have the required cash or some may be far away from product retailers; thus the product may not be accessible for those two segments of your market potential. The rest of interested consumers consist of an attainable market for your product. The attainable market may be roughly 45% of your market potential. As a new product you will face difficulties reaching some territories, you may decide not to target some places for special reasons. Thus the attainable market will be reduced, and the remaining number will be contained in a term: actual market served. This, once more, will not attract all potential buyers, as they may be further disinterested. So the actual people buying the product will become your actual sales. The number representing actual sales may be 20-25% of the total market potential.

Again, your marketing plan is related to your competition in the market. If there are existing companies with the same product you have to know how to avoid clashes with previously established products. If your material is a first of its kind in the market you have to be prepared to face any upcoming competitor with the same kind of product line. Here you have to understand the strength and weaknesses of your competition; at the same time you have to be prepared to cover your weaknesses to protect your business.

Important: To estimate the actual market you must know how to calculate it. First of all you have to know the total possible number of consumers. And to do that you have to survey the market, you have to talk to consumers to know whether they need the product and if they are positive regarding your product. Then you must know how to respond to demands. Here I mean, whether they are excited, or how do they react, which is in the intensity of their response.

109 future market near an exacting potential, while your team must be capable of helping you with proper information and valuable concepts.

Your marketing team may provide you with the first figures i.e. the market potential and from that you may extrapolate actual sales. Result might

Two key questions you should ask in this section:

(a) Which other companies or organizations are working in this technology, product, or illness market?

110 differ but this process is really effective calculating the future actual sales of a company. You must know how to increase curiosity in people, whether by advertisement, or by arranging seminars, attracting media, or similar methods. Created interest must be intense enough to draw people to ultimately buy your product.

(b) If there are other products in the market, which products are replaced by your new product?

One can begin working on these questions first by making a list of companies, their products in the market, products in the pipeline, stages of development, and their corporate strength. If you find yourself in a better position both technologically and planning wise, then you can move in to replace older products. If not, then you may still, with good technology, and planning, move forward with new products. To help planning and to build a better company strategy one can get the help of Competitive Intelligence (CI). Though it is not acceptable in some of the established institutions, it can produce better results if used properly, and ethically. It is also has been witnessed in some biotechnological firms that they used no CI, or improper CI systems. This is highly avoidable if you want to win, or at least hold with the competition.

Competitors and Competitiveness

Locate any business in the world and you will surely face one or another kind of competition. It makes the business world tough, but if taken positively, it is competition that rejuvenates your aggressive spirit bringing you to the zenith of your success.

An old proverb: “slow but steady wins the race.” This adage still is true now, and when you start working with some big companies in the market you will slowly get bigger through various introductions. Doing this you will build your own recognition and that kind of personal ‘branding’ will attract more people interested in investing in your business. So just walk slowly until you gain stronger ways to prove your competence.

The next most important item in your strategy is human resources. You have to be very careful building the team. You must remember that you may have a better plan, a better technology and support, a better product and a better financial background than others, but without a proper business team responsible for all kinds of operational matters, including marketing and research, you will never be able to win at your dream.

Strategy In this part of your business development you must deal with several objectives. You must consider a practical R&D department, build a great team; you will consider human resources, and then you develop your funding strategy. Here R&D is directly or sometimes indirectly related to the marketing team and the rest of your strategy. Your hypothesis is to establish yourself based on concepts in present market and current trends. Markets and trends influence your plan and define the job of R&D. Research is executed based on what you want to invent.

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Now that you have a plan for R&D and built a team, it is now time to look at business finances. The BP’s executive summery will help you draw investors. But getting investors is not an easy job and it is not always possible all startups to come into contact with them. So, you must devise other ways to attract money for your business. At the beginning you may have to invest in your company, or you may ask your relatives or friends to spread your idea for your venture. Thus you may assemble some working cash. Here you might think of starting small, with modest plans, and you are absolutely right.

R belongs to Universities and D belongs to Biopreneurs

For a new biopreneur, the development of a product based on a well established and protected scientific discovery, from a university laboratory, is a very viable path. The biopreneur should bring the inventor/professor of such a technology onto his or her team. Generally speaking, the biopreneur may need the full support from the inventor, at least, for the first two years. Moreover, full access to the inventor’s laboratory is critical for further development of the technology, to the point where a proof of concept is should offer to the inventor/professor a reasonable stake in the venture so that they will have an intrinsic interest in the success of the project. While the technology is further polished in the laboratory, the

Thecomplete.biopreneur

R&D (research and development)

We may consider a requirement balancing between R&D and a marketing team. We know that being fully immersed in business activities biopreneurs can not allow very much time for research. But at the same time, as their job is highly connected to biological innovations, they cannot forget research work either. Here they must have a conduit between the marketing team and the R&D. The task will be divided as the marketing people will collect information on market needs and requirements, i.e. they will help define areas of research based on which scientists are best suited to the task. So the research will be based on diseases that are still in the healing focus.

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We have a simple suggestion for scientific researchers or professionals from bio related businesses who are considering starting a biotech business please stay away from the research oriented projects and focus on the development of product related inventions. Research is very expensive and also a most open ended affair. Biopreneurs have neither the resources nor the prestige to do extensive research as part of their business. The critical DS here is identifying a good technology that has market value. Biopreneurs may consider developing technology termed as an orphan drug as a niche marketing strategy.

113 biopreneur should try to convince the investment community to back the technology as well as the biopreneur. Along with a balanced R&D and marketing team and marketing strategy you have to have your eyes open calculating a possible, if not an exact, future of your product. You have to have good interpersonal skills to understand the market so you can utilize the best of your research. Scientists are always engaged in research awhile the marketing and management team is busy thinking of investors and product sales. Using the best combined results of research and information, from both pre clinical and clinical studies, with applicable marketing data you will be seeking the best outcome

It’s important, especially during the R&D phase, to identify the Intellectual Property (IP). You have to determine if R&D is properly aligned in accordance with requirements present in key disease areas, as created by your marketing team. There may be several molecules to attract attention for further research, but you have to determine which ones to choose for your pre-clinical phase. And among them you must decide which ones may require the support of partner, and which ones would be profitable if run solely by your organization. Once things are prepared in such a way, there might be no problem reaching for the sky in your foreseeable goals.

People and Assumption

Sometimes,possible.atthe

As far as marketing for any venture, giant or miniscule, we have to have two very important parts 1) People and 2) Assumption. Preparing a marketing strategy is a quite extensive job while executing business plan is even tougher. The execution requires keen interpersonal skills, dealing with many kinds of people and problems. We must understand scientific matters and biotech marketing aspects as well. As

early stages of developing a biotechnological firm, you may depend on a synergistic relationship with mega pharmaceutical firms. That will bring you not only a best possible marketing support, but at the same time you’ll be able to gather funds to cater to the primary needs of your firm and its research work.

You have gone through several key points depicting better ways to get started with a new bioventure. The rest, as always, depends on you. To draw good conclusions, you have to be very decisive, very attentive and extremely fastidious about planning from the very outset. You have to determine each step very carefully so that the following step doesn’t

You may increase your sales and your manufacturing processes may move in accordance with market demand. Extensive market research during each phase of pre clinical and clinical study, mingled with an experienced conjecture should bring the best results for any product.

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With the help of people engaged in strategy-based marketing and research as well the early assumptive processes, you have to determine the best labeling description, the target start and development area, and a future marketing strategy. You have to reach the peak selling point as early as possible, so you can remain there a peak during the licensed period of production. You have to be prepared for added manufacturing pressure and it is much better if you can avoid such pressures by correct assumptions regarding the life of the medication.

Summary

Early assumptions are important for preparing an NDA file. Clinical trials will inform you of the efficacy and safety matters of the proposed drug and that’ll help you to decide its future. Once a drug is licensed for particular use, a lead indication will set the tone for the entire life cycle of that product. Market sizes, competitive landscapes, ease of data collection, and physician preferences, are important factors to consider when determining the most advantageous indications for a new drug. Quantitative market research that analyzes physician preferences, measured against factors such as price and efficacy, can help the project team determine what the lead indication will be.

much as possible, early and accurate assumptions regarding future markets of any drug is very important in the field of biotechnology. You have to understand where the market is going, and how patients will react in response to your medication.

-------------------------------If you think you can do it, you’re right. If you think you cannot, you’re right too. ~~

become ill affected from the previous. Preparing plans for several phases of your business is like laying bricks in a wall. Just as in the case of building walls, one brick is supportive of the bricks placed on top of it one plan in a venture is responsible for the successive plans that follow. If every step is right from the beginning, then as a whole the business will be positive and right and it should provide you with success. In concluding this chapter we like to say:

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116 Japan, India and some EU nations’ are increasingly taking into consideration the importance of biotech. According to the policy makers, the current situation of biotech sectors is the need to make a broad leap forward. They think, in order to achieve this goal, it is essential that both the government and the people work together and make a concerted effort to tackle the tasks at hand.

Funding for Bioventure

CHAPTER VII

118 …First roadblock biopreneurs face these days starting a bioventure is “finance”…

“Suppose you have a working product prototype or a technology that you have developed in a university by working with inventors. Now you want to start a bioventure with that experience behind you. But you require a lot of capital to complete the R&D to pre clinical, and clinical stages, in order to develop this business. What would be your financing strategy?”

Financing: from Idea to IPO & Beyond

While drafting this book we have encountered these stages years ago. It is now easy, in hindsight, for us to share what we had to face during those early periods how we overcame the difficulties, and the planning aspects we have learned from our past experiences and our mistakes. We have constructed a working roadmap here, used for our own bioventures over the past years with significant success. You may reference our roadmap, used it as a baseline, and in time develop your own roadmap as required. It is easy to read about these things in theory, but you have to understand firsthand that it is very competitive and brutal out in the financing arena. One of our mentors, Mr. Koichi Motegi, once told us “capital is very timid and does not like any ambiguity.” I keep his words close to my heart and I ask fellow biopreneurs to keep the following statement in mind as much as possible:

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To that question, you need to know what financing is in biotechnology and how to build an effective strategy for to arrange it. It is necessary to know things clearly so that you don’t encounter undue difficulty while planning for your forthcoming venture.

Financing is the second item in a bioventure planning process. Once biopreneurs have recognized a new invention that is widely producible and has useful application for human/animal well-being and health, biopreneurs must seek out the second key ingredient capital for the bioventure.

Bioventures generally evolve in stages from seed to incubation, to start-up, to early stage, to emerging, and so on. A bioventure requirement for capital also evolves in synchronization with these same stages. Capital needed for the different stages vary and are normally supported by different groups of investors. In this chapter we will review the life cycle of a bioventure and the nutrient capital required, for each phase of that life-cycle.

Acquiring funding for a business used be to very simple during the “dotcom” days. During the stock market euphoria, many people opened bioventure businesses with public money. The public, very naturally, attracted to the future that was set before them, invested money rather freely. Unfortunately in the end, generally people lost, while pseudo biopreneurs and dishonest investors benefited from the market’s insanity. Here is a story that comes from that period:

A group of biopreneurs found a likely sounding technology (e.g., tissue engineering, or a new process to detect cancer); they hyped the utility of this potential product. They continued to hype, and hype, and hype. They got the media to do news features on it. …Attracted shareholders big insurance companies, pension funds and hungry merchant banks. Everybody got lured into the future benefits and returns of what seemed an otherwise plausible plan. These clever rogues had no interest in people’s expectations. They awarded themselves big salaries; took a suite of offices at a local Technology Park, drove expensive while doing expositions and

A Dot-com story for amusement

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…First roadblock biopreneurs face these days starting a bioventure is “finance”… Most bioventures get their technological license from universities and research institutes. And it is very difficult to calculate the value of a biotech firm as the value is measured by many intangibles, such as a patent portfolio, and the integrity of their scientific team. With biopreneurs, friends and family fund most of bio businesses at the earliest stages. That is because finding and using financial support from outsiders at the beginning is nearly out of question. Risk in starting a business is not extremely high but it is high enough that it is a waste of time to try to measure that risk. As statistics say 50% of all start ups died in first two years, and 90% of the remaining 50% will close their business in five years. Starting new businesses is not a day job, but a job for around the clock. Building a bioventure is very difficult and risk is rather high. As some people have put it one has to be crazy to be a biopreneur a good kind of craziness really.

This went on for months, as they published a few somewhat dismal forecasts. Yet they still remained hopeful for a couple of more months. Eventually they drained off a million or two into offshore bank accounts, and published new upbeat forecasts. Finally, they admitted the truth, and got sacked. They took the money, and went to the Caribbean for some fun. And that was the end of their bioventure. A real “happy ending,” something like a heart aching, brain throbbing, and nerve wracking Hollywood style gangster movie.

121 shows. Their main interest was getting investor money, and they continued attracting it. They did press releases and published promising forecasts more hype, on top of more hype.

The cash earned that way would run their life for a period of time but what about afterward? The path you are preparing to negotiate is not easy. But think of the achievement, think of the end of a tough journey, think of the notoriety all around you once you’ve reached the results of your research. That thought process, regarding every infinitesimal thing, should work as an additional inspiration throughout your journey. It is a cunning and challenging journey. Since most of you are hard working talented intellectuals, it seems difficult challenges for you are more exciting than the deceitful scenarios and tricks that people quite often play in the honest the other side of the story, I want to say that this was a different time in general. And times have changed. No one would believe this kind of approach now even if you had the purest and best intentions. I think you might imagine, now, how tough it would be to encourage people with falsehoods and misrepresentations. And, if you work using one method then why use lies? Why don’t we applaud the best of any issue? It will not only acquire needed money for your business and yourself but it’ll place fame and blessings on people for the right reason. Always remember your

Toworld.characterize

If anyone feels that bioventure is as smooth and rosy as this story, think again. The story may enlighten you and even inspire what could be an easy way of earning fast cash, but before you initiate anything like it think twice! Was it really a happy ending? Will they be able to come back and start a new venture again?

Afterward comes time for earning money. Make approaches to the “big corporate;” suffer through interminable corporate inspections. And sell the business as a “going concern” for only a modest profit. You pay off your creditors, then bank the profits, and get to pay the taxman. Now you can look around and start all over again. This is okay if it happens! You can repeat the same process? Yes, your patents are sold; someone is making fortune on them. But ask are you making profitable business from your point of view?

Once more preparation is the key here. The more we learn and educate ourselves the less we fall into making money for others. Yet, we must prepare ourselves for this kind of outcome. As statistics show 10% of the bioventures eventually make it to the end of the road. One important point I must make even though the bioventure did not go all the way to the end game, you may have gathered great experience and wisdom which, will land new opportunities. A closed door will surely teach you the art of opening more doors. So while building a new bioventure, always build good relationships with the other fellow biopreneurs. Those relationships become very useful during the down times. You might remember: ‘fight begets fight, hatred begets hatred and love begets love’. If you think of everyone positively they will not forget you in a positive light.

122 business is a service to society, and money is its by product. If you remember that you serve then the stream of monetary by-products will not cease. Let’s forget this gloomier side of the bioventure. Bioventure is not all black. Some gloom is true for every business or every job in the world; it’s only because there are still some good guys around in this world that we still have faith in people, and their concepts. I think some of you may like to try the Findfollowing:areally good technology; sink your life savings into fitting out a garage, or a start-up business, with any equipment you can afford. Of course, you have an option of utilizing money from other sources. Then develop the technology with certainty, conceptualize the best product, and make efforts toward borrowing from a bank, your parents, neighbors, and friends. In the end you should try to patent everything you can.

Biopreneurs considering starting a business automatically may think what they need is initial venture capital. While that is true in some high technology ventures, especially with breakthrough innovations and secure professional venture capital within the first round, these ventures represent less than one percent of all new ventures. It is important to realize this fact in advance. Once we are comfortable with the fact that only 1% of new companies get VC funding, then we can plan and strategize bioventure financing by thinking creatively about what it really takes to fund a “start up ” and where those funds realistically come from.

The amount of money needed and the capital costs at any point in time is a function of the stage of development of the bioventure. During R&D, the risks are generally related to the technical feasibility a molecular invention and its efficacy, and the competitive advantage of the product over existing

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Bioventures face the difficult challenge of finding the necessaryfunding. At the same time fund providers understand the risk of a bioventure, and therefore are often reluctant to provide funding. Seed funding is often required to complete proof of concept, even development of a prototype and it generally comes in the form of “friendly money” and government grants. Once the business is operational, the need for larger sums of money often requires that the biopreneurs bring in capital from outside sources, such as “angel investors” and venture capitalists (VCs).

VCs invest in one of 10,000 businesses. This number could be misleading because in the 10,000 low tech businesses such as service companies, retail stores, and small family owned businesses are included. Funding for the high-tech and biotech businesses are more within the range of 1 or 2 percent. One of the unique issues related to bioventure is the extraordinarily long research and development time about 7 to 9 years for a new drug, up to 5 years for a medical device. This means that a bioventure team is constantly in the fund raising mode, which can detract from its other research efforts.

Financing Bioventure

Financing Strategy—from Idea to IPO

An idea is conceived and born. The idea is then researched and assessed for commercial viability the market research stage including whether a patented technology can be licensed from your inventors. The outcome of this brainstorming phase is to draft a business plan. Here a biopreneur will require $25,000 to $50,000 approximately. The life of this stage should be about 3 6 months.

124 products, if any, or competitor technologies. At this stage, friends, private investors, and government grants typically fund your company. Once the bioventure is launched as a structured business, ready for further R&D, pre clinical, animal toxicity, and pharmacology studies, the private investors and venture capitalists will come into play, as well as strategic partners. Clinical and post clinical marketing are generally done through strategic partnering, with pharmaceuticals and/or medium size biotech companies. The following are the stages that a biopreneur may go through the entire life cycle of a bioventure:  STAGE GROUND ZERO THE IDEA

 STAGE IV (GROWTH)

Bioventure has survived three years, and grows to an operational company with 25 50 employees. The company has a well defined mission, goals and corporate structure. Biopreneurs have matured with better understanding of the business world and the rough edges associated with it. It is a good place to be, however danger is still present. Funding should come from VCs, strategic partners, and product revenue. Capital requirement: $15 50M with a life cycle of 3 5 years. Financing may come in the form of strategic partnering and/or follow-up investment from a VCs. A liquidity event such as merger acquisition (M&A) or a sell out is also possible at this stage.

Biopreneurs attracts key participants for the project, the technology is licensed and it received blessings from friends and family, with helping capital. The outlines of the company now become clearer; a corporation formed, either KK or another format. The money required at this stage is estimated at $100,000 to $300,000 and the approximate lifespan of this stage is 3 6 months. STAGE II(START UP)

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 STAGE I(THE LAUNCH)

The Company has demonstrated that it is competitive often having reached the break even point it is ready for further development. For example, this can involve capacity expansion, new product development, or penetration of new markets. The company is seldom self financing.

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Biopreneurs now begin to work day and night with a tight shoestring budget. Biopreneurs will primarily work with universities or research labs for further product development of technologies. From now on the clock is ticking. Speed is the key. If biopreneurs desire success, they should avoid moon lighters or wind shoppers. Here a biopreneur takes his or her journey past a point of no return. Capital of $500,000 to $5,000,000 is necessary for a 2 3 year life cycle. STAGE III(EMERGING PHASE)

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Large funds over $50M normally comes from revenue through products sale, licensing fees, and royalties. The bioventure now has become an emerging biotechnology company, with significant professional involvement to support the biopreneurs who now acquired more gray hair than when they started the venture. Financing strategy may consist of one or more of the following events: initial public offering (IPO), strategic partnerships, and M&A.

STAGE V(BIOPHARMACEUTICAL)

The bioventure is no longer a venture. It is a biopharmaceutical not yet pharmaceutical. Traditional pharmaceutical drugs are small chemicals molecules that treat the symptoms of a disease or illness one molecule directed at a single target. Biopharmaceuticals are large biological molecules known as proteins. If your company has products in the market, a strong pipeline of products for several different diseases, partners, maybe one or two wholly owned subsidiaries, and a strong revenue stream, some biopreneurs may retire, to spend more time with the family and do philanthropic and philosophical work, while some biopreneurs may continue to build the company to the pharmaceutical stage like Morita-san of Sony Corporation.

There are three main sources of equity capital: first, a bioventure can sell their company’s equity to themselves, their friends, and family, second, high net worth individuals with substantial knowledge about the business, angel investors, and third being the institutional investors that include venture capital (VC) and corporations.

There are two major ways to raise capital for bioventures from its inception to the growth stage (i) equity capital and (ii) debt capital.

Equity capital

Angel Investments Angel investors are normally high net worth individuals who wish to provide early stage companies with capital and bring different kinds of competence to the companies. Angel Investors usually are successful entrepreneurs, business persons, who have accumulated substantial amounts of money to invest. Quite often angel investors help companies in early phases with experience and insights that they have acquired from their past endeavors in bio or another business area. They like to invest in industries with which they are familiar, and they place a lot of importance on the management team. Sometime they bring good people to fill the management gaps. Also like any other investors, they need a way to exit the business, though they often stay with a business much longer than a VC would. Angel investors generally fill the gap between friendly money and venture capital up to about five million dollar ($5M).

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Venture Investments Venture capitalists (VCs) manage professional pools of funds generally much larger than the angel investor. VCs typically make large investments, usually in the second rounds when the bioventure is well formed and the technologies and/or products have proven their value. VCs normally flock to names brands. A company with a unique technology, and a liquidity event such as an IPO or acquisition in its future, may easily attract VC

We now know that VCs who focus on later-stage investing, provides finance to help the bioventure grow at a critical stage, which attracts public

128 funds if the biopreneur has prior name recognition and fame. VCs require higher rates of growth and return on their investment in short periods of Theretime. are three distinct types of VC funding: VC funding can take many forms and while many venture funds often focus on start ups, others concentrate on companies at much later stages in the life cycles. VCs may invest from $0.5 to $5.0M in the early stage and $15 25M as a syndicate at the growth stage.

(1) Seed Level VC Funding A venture capitalist may invest before there is a tangible product or before the company has developed an organization. At this stage VC funds are between $500,000 1,000,000. For a Biopreneur it is very costly money, since the VC at this stage requires a big chunk of equity in the company.

(2) Early Stage Funding A VC may provide capital to start up a bioventure in its primary or secondary stages of development. Normally the VC invests $2 5M at this stage (3) Emerging VC funding A the VC may provide the finance required for helping a bioventure to grow beyond the critical mass, on its way to becoming wholly successful. Bioventures at this stage may need funds for pre clinical or corporate development, so that they can attract corporate partners. At this stage several VCs collectively invest $10 25M. Each VC fund has its own investment strategies; hence not all venture capitalists invest in all of stages. Some funds may invest in bioventures at various later stages of the business life cycle, and in some cases throughout a bioventure’s life. So throughout the life stages of a bioventure the value of shares, as well as the returns on the shares will change. You may look at the graphical presentation of the potential change of share value and the associated growth of the venture in graph “Investors Expectations of Share Price Growth.”

Mezzanine capital is a temporary type of financing, put into place to help already up and running ventures. Bioventures that require growth capital and in such situations, where they may not be able to obtain conventional debt, or equity financing, due to a shortage of equity, unusual and rapid growth, or for other constraints, may use mezzanine financing. In the recent years bioventures have used mezzanine funding to take the company public and initial public offering (IPO).

Bioventures normally at this stage will have a very prudent chief financial officer (CFO) who is well-qualified and extremely knowledgeable about the financial instruments. Success of a bioventure definitely depends on well thought out debt financing strategy.

Debt capital

129 participation through stock offerings (IPOs). VCs may help the bioventure attract an M&A proposition, by a mature biotechnology company or pharmaceutical firm, thus providing liquidity and an exit for the bioventure’s initial equity holders.

Convertible loans are the type of financing that offers lenders the option to convert the loan into a predetermined number of shares at a future date. A

Conventional business bank loans are the most typical type of financing, especially during periods when the stock market is under pressure. The drawback of this type of financing is the possibility of high cost of capital. The bank normally provides lease financing, equipment financing, and real estate financing, where the bank can have some-tangible assets as collateral. Some banks provide loans against purchase orders from customers.

Bank Loans

There are four different type of debt financing: (1) mezzanine financing, (2) bank loan, (3) convertible loan and (4) corporate bond. These types of financing are most suitable for the emerging and growth stage bioventures.

Mezzanine Finance

Convertible Loans

130 convertible loan is a combination of an ordinary bank loan and an option to purchase bioventure shares. This type of financing can be used to bridge a short term financial gap.

Corporate Bonds Corporate Bond is a substitute for traditional bank financing. The company offers bonds either to a closed consortium of investors or to the general public. To compensate for the relatively higher credit risk when investing in a company, these bonds are characterized by having a higher dividend rate, compared to a government bond. Corporate bonds, as opposed to bank loans, are a marketable type of financing and therefore they provide companies with the possibility of receiving a continuous pricing of its debt. Bioventures at the expansion stage may offer corporate bonds for building manufacturing facilities, acquiring new technologies and products and other purposes.

Ms. Mary Woolley, the President of ResearchAmerica, asked the USA Government to take a much larger role in advancing research and coordination in health and life sciences in the U.S. We all anticipate and work towards scientific weAccordingbreakthroughs.toher,whatneednowmorethan

Most radical new technology begins as basic research funded by government agencies. Government grants also serve as seed capital for prototype development and testing. In the USA Small Business Innovation Research Grants (SBIR) and STTR grants are specifically designed to encourage the transfer and commercialization of technologies. Recently

131

Government’s role on a Bioventure development

ever is an advocacy breakthrough, particularly, advocacy by innovators and biopreneurs. She advocates the need of public investments in both the fundamental research as well as in the technology commercialization. These investments in turn will create more jobs and stimulate the nation’s economy. She further emphasized the need for regenerative research in order to stay ahead of the global competition. Countries like Singapore, South Korea, India and EU nations are implementing more of the current knowledge of the regenerative technologies than the USA. Clearly we need more public awareness and governmental support in this area-she further mentioned.

Three Strategies model for bioeconomy Japan, India and some EU nations’ recent economic policies takes into consideration the importance of biotech. According to the policy makers the current situation of biotech sectors in their home country are in needs to make a broad leap forward. They think, in order to achieve this goal, it is essential that both the government and the people of the nation work together and make a concerted effort to tackle the tasks at hand. With this aim in mind, policy makers proposed a set of strategies categorized into three fields:

The first, Research and Development taking advantage of the extremely rapid pace of scientific advances in this field, to provide technological "seeding."

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The third, create a public understanding of biotech (not mere an euphoria) - this is a new field of technology, and the development of standards for safety and ethics is therefore of immediate and vital importance. It is the resultant understanding that will serve as a foundation for the acceptance of biological technology and its benefits. It is essential that these three strategies be implemented in concert. Furthermore, given that the leaps the Government is aiming at are broad, it is indispensable that the strategies in every one of these fields be both bold and ambitious.

132

Several foreign countries including Japan, Singapore, Taiwan, Malaysia and China went to the Silicon Valley, San Diego, Boston and other places to bring bio business to their local economy. Except for China, most countries’ efforts were merely public relations tours.

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State and local governments are competing bringing biopreneurs from major hotbeds of biotechnology to their own locale giving the home economy a boost. But the success of this strategy was somewhat limited.

The second, Industrialization practical applications that will bring the fruits of such science and technology to bear in improving the lifestyles of our citizens and the national economy. •

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They also realized that it is extremely difficult for a bioventure that is going in alone to perform successfully on the global stage, since the biobusiness requires significant funding. Thus, the policy makers recommend that the government promotes the bioventures in a way that does not simply imitate the USA bioventure business model, where resources are easily available to the biopreneurs, but takes advantage of the unique characteristics of their own environments. At the end bioventure is beneficial in every way. The investor gets a return, and that makes him or her happy, a biopreneur gets cash to run the business, that makes the biopreneur happy, and finally the general population having nothing to do with bioventures directly gets a form of medication, or another biotechnological product, that leads the better living. So indirectly people in general are also happier. All this happiness is due to anticipated success in bioventure. If in this scenario a bioventure business is successful, then who would like to join the current trend in some meaningful and plausible role!

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Vitalization of bioventure businesses

Policy makers also recognizes that in biotech, unique ideas and inventions can often lead to high revenue generating products and business opportunities, and such inventions and products are developed regardless of the size of the company from which they arise.

134 Your SUCCESS in this Global Economy might require AVOIDING Two MISTAKES … JUST 2! 1. Acting when you should not act. 2. Not acting when you should act

Fund Raising

CHAPTER VIII

136

Fund raising is the second priority in building a bioventure, the first being Yourplanningplan might be the greatest, promising future fortunes, but if there is no funding to support the plan then it is nothing but words on So,paper.your plan must include strong ideas for finding funds to support your proposed business.

Like every other business endeavor capital is of the key ingredient of success. Entrepreneurs in bioventures have to borrow, raise, or earn, capital from the beginning, in order to start, build, and grow the business. How an entrepreneur build a business quite often depend on the ranges of time and place. In early 20th century entrepreneurs built their businesses from their own capital, such as the development of trading companies, and electronic industries. Then came supported business development, like automobile Atindustries.theend of the 20th century bioventure business was developed through OPM Other People’s Money i.e., investments from Venture Capital (VC) or private investors. However, after the dot com bubble burst OPM became hard to find. Entrepreneurs now need to invent new and innovative strategies to begin new ventures. We have seen more and more a combinations of multimodels accessing capital for venture business: (i) use of one’s own money, and that of friends and family (ii) external funds: from government grants, private investing, corporate strategic investment, and VC financing. The source of cash capital we generally call in business jargon a fund may either come from your own pocket, or you will have to look for investors. How you acquire your funds from various sources is known as fund raising. The job of arranging cash is extremely important, and obviously not an easy task. It’s not only a great plan that attracts investors, but you have to be proactive in reaching out and talking to investors. At this stage, you need to take special care of your business plan and you need well supported intellectual property to make your plan’s approach more verifiable.

Fund raising for your business

137

Having such partners, means, like any other thing, you have advantages as well as disadvantages. The advantage is that you are, first, getting financial support for your venture. Partnering with them will prove beneficial for you in other ways, such as there is no requirement for reimbursement of invested capital, and you don’t have to put together any security to get the VC funding. Name of such corporate houses will also add some extra

The first calculated estimates presented, we have to move on how much liquid cash is needed to face initial and midterm business liabilities. You must prepare a clear plan on this subject, so that you don’t confront unseen problems or financial setbacks.

Before you get ready and meet investors you have to have important information regarding them; at the same time you must be prepared for all the potential inquiries regarding your business plan. First of all you have to calculate how much investment is needed. Your calculations must be accurate, so that you won’t have to change your projections on required funding. This is based wholly on your assumptions about how you are going to set up your business, and the required financial plan regarding it.

Investors Now that you are prepared with the information required, it’s time to look for investors. The first ones as I have said that should come to mind, are friends, family members, and the people close to you. They become the shareholders of your potential profits. However they will not always be available or ready to support you, so be prepared and don’t lose all hope. There are many other ways to get your funding.

Actually, these days, it’s quite feasible, hopefully, to get funding if you use proper planning. The exact term that we are going to introduce you to is a venture capitalist or VC for short. You can propose to them to invest in your business, but here you must understand that they will only invest if your plan looks good enough to make money and thus get funded. If they agree to invest, as they generally can, they’ll be the financial partners of your venture thus they’ll receive share of your profits. That is their main interest in attraction to your venture. As a rule, they do not make a loan; they become part of the entire game.

138

Getting Ready for VC meeting

The amount that you expect to get as a return in your venture, and the amount you need to support the business to achieve the target, must be Yourdescribed.document must have a short description of your management and research team descriptions of the expertise of your team, as well as yours, must be clear.

Before you meet a VC or any kind of investor you have to prepare your presentation. You have to submit papers, an executive summary, containing all the information in a short but expressive and uniquely revealing manner, so that it can attract persons reading it. Always remember that the persons you are supposed to meet are extremely busy, and proposals like yours are not new to them. You have to take the time to design a unique executive summery. It has to be very precise with words, and not more of what will be Nowrequired.the question is how to design it to gain the best impact. You must remember some simple yet very important aspects. First of all the language you are going to use must not be difficult or full of scientific or technical jargon. The investor may not be well versed in the subject, or he may be from another field. In cases where you use exclusive terminology the presentation may appear practical, but at the same time indecipherable. You must describe the planning stage of your company. Future goals must be pointed out, clearly. Here you have to include future products and possible target market that you recognize.

139 weight to the name of your company. A disadvantage is that they will surely take part in your business. But that can be another added advantage too, as valuable support in executing several projects, and their experience in the field, will be certainly helpful. They’ll do much for the betterment of the business since they are vested in it.

The reason for starting such a business must accompany your executive summery. You also need to describe why and how your plan is different

Mr. Tom Baruch, founder and general partner of CMEA Ventures, supports getting VCs as partners of any fledgling firms. “We get to apply the resources of a large corporation to extend the capabilities of our investment and” he continues “they can be an immense help on due diligence". He added to his opinion telling "anything we can do for our portfolio companies to reduce their time to market is critical, and corporations have ways to move things along more quickly."

Yourbenefited?description

140 from others, and how it will achieve its target. And how are targeted clients

must have some ground of support such as charts showing previous business achievements, or another kind of example, so that you can show the investor that your assumption is not based on a fairytale it will also show the intensity and dedication of your research about the proposed venture. Now when everything is set you may prior taking it to an investor show it to an experienced person and revise it to see if there’s any flaws in your summery. Remember excellent content in the summery is not enough to attract someone. You have to see that the total presentation must be equally eye Thecatching.following

VCs – an Introduction

chart provides an image of what an investor could expect in share price growth over the company’s development. Usually one expects around 5 10 fold return at the time of acquisition/merger or IPO the most common exit strategy for the investors.

At this point I mention that big pharmaceutical houses play quite a heroic role in investing to budding bioventures. What is their interest in such small and unfamiliar companies? It’s mostly because new innovative ideas, fresh talents, and zeal of youth, attracts them to support smaller firms. They know how to cash in on all the material. It’s not a one way thing; they also are there to get something in return. There's no question that these corporate VCs are in serious pursuit of their goals.

If you have any doubt about how much you can ask for from a VC you must understand that it’s completely up to you; the exact question would be how much you need.

141 Investors Expectations of Share Price Growth 1 1.5 2.5 5 10 0 2 4 6 8 10 12 Seed Stage-I Stage-II Stage-III Stage-IV Phases ($)/SharePrice

Previous information in this chapter suggests how to get VCs aligned with your company, and what benefits you may get for them. Yet it’s not easy to connect with a VCs, and not easy to attract investors. Unless you can show profits in some feasible way, nobody will spend time, or money, for your Alongplanning.with the text required explaining what fund collecting is, I want to describe my own experience in this matter. Many of us have been through some of the stages of these processes in raising funds for their bioventures.

Baruch also noted that well known corporate houses liked to control the market and the new companies tried to enter into the market. In that way they had harmonizing missions and they could help each other through cross licensing and things like manufacturing, distribution etc. So, these are added advantages that you would be availed of after having partnered with some VCs.

At my former company, we also had gone through the stages of bioventure financing i.e. idea, seed, early stages, etc. As you know a company has many stages. At first it is planning, and then just the idea. With time the development proceeds and it moves through stages seed, start-up, early stage, emerging growth, lower middle, middle market stage, etc.

142 STAGES OF FUNDING FUNDING SOURCE START-UP EMERGINGGROWTH MIDDLELOWER MARKETMIDDLE $0 $1 M $1 $10 M $10 $50 M $50 $500 M Bootstrapping Yes Yes Possible DevelopmentCommunity & Government Agencies Yes Yes Possible Individual Investor Yes Yes Possible Angel Investor Yes Possible Commercial Bank Possible Yes Yes Yes Asset based Lender Possible Possible Yes Yes Commercial Finance Yes Yes Yes Leasing Concern Yes Yes Yes Yes Private Equity (Non buyout) Possible Yes Yes Venture Capital Fund (VC) Yes Yes Possible Mezzanine Fund Possible Yes Yes Buyout Fund Possible Yes Yes Strategic of Industry Investor Yes Yes Possible Merchant Bank Possible Possible Yes Micro cap Public Concerns Yes Yes Possible

VC-Investment in Japan and USA

Five key differences between biotech investment in USA and in Japan

143 VC Investment Features

Private investors (Angels and VCs) from different regions and countries invest in bioventures quite differently. Investors in USA are quite different than those of India and Japan. In India private investment through VC model is fairly recent and more risk avert, while in Japan it has taken significant shape over the past 12 years and of “middle-path” of ROI.

iii) Japan likes to watch the US markets and wait. This waiting method in biotechnology cannot work since it limits practical choices to license or replicate. This process does not really create sustainable growth or future opportunities.

ii) Japanese VCs do not have large sized funds to access. Only JAFCO/NIF and a few other VCs in Japan can really participate in VC. Institutional investment in Japan is the best way to acquire large investments.

i) Individual investors in Japan are very cautious and conservative about their investment, which is why they put their money in a Japanese savings bank to earn 1% per year or less. The Americans are willing to take a gamble. However, many American VCs are not real VCs like in the old days when you funded Steve Jobs as he was working in his garage. VCs are more conservative and cannot risk more failures from recent bubble bursts of dot com days. Actually, the IT-Internet sector is to blame for this, not biotech.

Japan’s VCs normally would invest internationally in partnership with local VCs - and most often follows west-model than the east-model. However, there are distinct differences between Japan and USA VC models of investing in the biotech sector.

The biotech space-time effect is moving at an exponentially accelerating pace If you cannot move in that time scale you will lag behind, watching

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144 things move beyond your reach. To stay in the market you have to be equally innovative, or more so, to get new things out there. These all may provide you with equivalent opportunities to expand your markets. If you think that you can do better by having Xeroxed copies of what the rest of the world has, the only market you can gain is inside your own country using a little innovation you can extend yourselves worldwide.

iv) There is no support for entrepreneurial spirit in Japan, while it is fostered in the US, especially in the Silicon Valley the origin of that sense of spirit. All private biotech companies need to have a CEO who can work his heart out, seeing light at the end of the tunnel, even when everyone else thinks he’s crazy.

v) In Japan you need to have partners or important connections. The doors are closed to foreigners in many areas, but in the US anyone can start a

VC Investment Features of Europe and USA First round investment size normally is between US$2-5M Revenue is not a requirement for VC investment Follow on rounds could be between US$5 25M In general over 50% bioventures receive follow-on investment Most VC investments are syndicated with a lead investor



Just like any other business or sport or whatever else you can compare it to, bioventure is a result of good teamwork. If any part of that team is weak then other parts have to be so strong to balance the system. If you cannot balance your work, or if you cannot cope with recent and fast moving trends in bioventure, you are going to lose control sooner rather than later.

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Tocompany.beconservative is all well and good until it adversely affects business. It’s a case where you will know you are making the worst of things because of your conservative mind set. Then it’s better to be more open minded at least to some degree. A change of mentality can lead to bigger and better markets as well as eliminate differences in business approaches between countries. It can reduce problems working with other people and with foreigners.

CRO Services: pre clinical, clinical trials, and selective R&D Bioventures those would like to attract VC investment in India follow a cyclic model of financing (as shown below).

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Diagnostics: India-specific infectious disease cost efficient at-site diagnostic and prognostic kits

Selective technology development and drug discovery Stem cell, Agri-bio (GMO-crops)

Small molecules: Ayurveda / biodiversity drug discovery supported by strong knowledge in traditional medicine (Ayurveda, Sidha and Unani)

145 In contrast VC investment in India has following characteristics  1st round investment size US$0.5 1M  Follow-on round US$1-5M (collectively)  Revenue is a must for VC investment in most cases  Insignificant syndication in VC investment in India  Most receives follow-on investment Indian VC’s investment driven by local markets, bio diversity, traditional medicine and cost saving biotech related services. Three key areas for VC investment in India are: 



Cyclic Financing Model Revenue Investment Revenue Investment

Each episode of investment is expected to augment revenue of the bioventure and fail to do so mean lower chance of getting a follow on investment.

Last Words

There are more roles for all sorts of other players equipment makers, processing firms, venture consultants, service suppliers. There will be

It’s obvious that by last words I mean to say concluding words for the chapter. It’s relevant to the business you are about to commence. As you start sowing seeds of a business you must wait for the plant to come out from the ground. Here, in the case of a bioventure, seeds are sown in university laboratories or other research institutes; water is drawn from venture capitalists (VCs) securities markets, new bioventures, and existing life science companies, are there ready to nurture the plants.

146

Everything is exciting for budding and willing biopreneurs. The market is surely being developed day by day, in India, Japan USA and EU nations; however the scenario is still not fully satisfactory. The people and government may have seen or is going to see an expansion of the market of biotechnology, but at the same time you must look at the increasing numbers of aspiring bioventures.

If you juxtapose this information you’ll see that improvement in the market is disbursed among all these businesses. So, there is still no truly big fish in the pond. The remaining hope is that this biotech pond is still growing. On the other hand, the bio economy of the world is also changing at a very fast pace. Better still I predict that the world economy, influenced by the improved ventures in biotechnology, is changing, and that change is toward a better future in the biotech industry of every nation.

147 business linkage stretching across Americas, Asia and around the world. Biopreneurs are there with their new projects and investors. They are prepared to support their business in order to realize profits. The only thing required is the just right match between them. In this way bioventures are establishing themselves at the center of a broad and promising capital-growth field.

148 …… as a Biopreneur, you need to know at least an approximate value of your venture in order to communicate with potential investors such as angels and VCs for funding. Likewise, a biotech investor also needs to know the value of a potential investment opportunity.

Chapter IX

Valuation

150 This chapter will explain the basic tools required for investing in biobusinesses.

Likewise hurdle biopreneur faces in raising fund from the private investors (VCs and angels) on a periodic basis due to fluidic nature of the valuation methodologies used for the valuation of biotech business and its IPs. It is not to put burden on the mathematically tools and analytics alone but to recognize that the highly fragmented biotech industry is just coming out of its infancy and evolving. We would thus like to advocate the need of sound understanding of the field (biotech) and its specific characteristic including non financial parameters in valuing a biotech business.

Publicly traded biotech and high tech market seems to go through cyclic turbulence and that can be traced back to the lack of proper valuation.

After having general ideas on funding and fund raising Biopreneur needs to have fundamental understanding of valuation and valuing a company, project and intellectual property (IP). Valuation has always been a crucial issue in finance and investing in biotech business at all stages start up, early stage, and publicly traded (IPOed).

151

While not much introduction is required for justifying the importance of valuation of a biobusiness, the question remains whether we know enough about valuation and whether the present methodologies are adequate for biotech businesses. This is specifically true in pre IPOed cases since traditional parameters are unable to identify future survivals, estimate exact worth of intangible assets (IP), to estimate pre-approval regulatory risk and post approval complications of the drugs. Moreover most companies may not even have any product in the market and little if any positive cash flow for years to come.

VALUATION OF A BIOBUSINESS

152 Q: Is valuation of a biobusiness a science or an A:art?Perhaps both. It is a science mathematicalbecause:equations and formulas are used in all methods of valuation. It is also an art because: modelling and forecasting of future events based on non-financial analytics (e.g., management/key employees, tastes/fashion /sentiment, behavioural issues and biases, overconfidence, overreaction, loss aversion, herding, hedging, and regret).

(2) Determine appropriate financial multiples and parameters through financial analysis (3) Finally, estimate the value of the biotech company by applying appropriately selected multiples.

Advantages and disadvantages of the Comparable method

For practicality most early stage biotech companies and private investors use simplified discounted cash flow methods. While valuing a start up or an early stage biotech company VC uses a range of arbitrary discount factors based on company’s stage and factors that are non financial.

Comparable/guideline method and (2) Traditional/Income method. Since biotech has its specific characteristics, academics have debated on the accuracy and adequacy of these two methods “as is” application. Some have developed modified and normalized formulation in order to value a biotech company without elaborate financial parameters.

Comparable method is based on direct comparison with other similar biotech companies’ financial parameters. This approach is more suitable for a publicly traded company than the early stage or the start up. Fundamental assumption for this approach is that the market (stock market) is efficient and Stepsfair.involved in this method are:

(1) Identification and selection of similar biotech companies in the same or similar areas of interest and reasonable comparability

There are some specific advantages of using comparable method  It is quicker and easier than the DCF approach  Reflects current market conditions investors’ sentiment, demands and bargaining power. While,

Comparable/Guideline Method

Valuation Methods

153

There are two major quantitative methods for valuing biotech businesses (1)

Discounted Cash Flow/Income Method

and n =

The most robust and most commonly used method to valuing biotech business is the discounted cash flow (DCF) method also known as income approach. In this method value of a biotech business is calculated by estimating cash flows and discounting them at a rate that reflects the risk associated with these cash flows. The value of a biotech business normally divided into two components: (i) present value (PV) of cash flow during explicit forecast period and (ii) PV of cash flow after explicit forecast period (i.e. terminal value). DPVn discounted present value, discount rate, future value at the nth year, number of years

154  Difficulties in selecting comparable companies those are similar enough i.e., comparing public vs. private, future prospects, sector, management quality, market position, and capital structure  Doesn't capture that "uniqueness"...  Doesn't capture value of different scenarios and "what ifs".  This method also does not capture systemic under or over valuation of the companies by the market and market euphoria.  Discontinuity between a multiple and inherent firm value.

d =

 n n DPVFVd  1 Where,

155 VALUATION From P/E x E = P, one can obtain: Direct Comparison: valuation by applying a direct comparison ratio to the related bioventure quantity. P = Price, E = earnings, no of years = n Bioventure RefFirmsYearn Current RefFirms BioventureCurrent Yearn xE E P P  A scenario • Bioventure with 2,000,000 shares held by founders seeking funding • New investor adds $1,000,000 for new shares • Exit (horizon) time = 5 years ( Bioventure Year5 E ) • Investor demands 50% annualized return (i.e., discount factor is 0.5) • Venture income of $1,000,000 per year @ exit ( Bioventure Year5 E ) • Similar bioventure sold shares to public for $10,000,000 ( RefFirms CurrentP ) • Similar bioventure income =$2,000,000 for last year ( RefFirms CurrentE ) $2,000,000x$1,000,000$5,000,000P$10,000,000 Bioventure Year5  Bioventure Present P = ((1d)nP = $5,000,000((10.5)5 = $316,872 Pre money valuation: $316,872 Post money valuation: $1,316,872 Percentage of the company investor would take = 1,000,000/1,316,872 = 0.7593 = 75.93%

(%)factorDiscount

It is important to note that the longer the explicit period, more difficult it is to make accurate assumptions about the future. Furthermore, measurement of the key two main variables, cash flows and the discount rate, always come with some uncertainty and subjective assumptions. This is more so in the early stage companies than at the growth phase. This method may become largely arbitrary and consequently lead to a misleading valuation, which stems mainly from the lack of tangible assets and measurable cash flow. Risk adjusted discount factor

I: The Launch 40 70 R & D/Pre clinical Stage II: Start up 30 60 Clinical trial/P I

Following table gives an overview of discount factors that quite often investors negotiated with the biopreneurs.

IV: Growth

25 35 Clinical trial/P II

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Investing in biotech has two types of risks (1) biobusiness industry specific; and (2) company specific. These risk factors addressed through the determination of discount factors (rate) in the valuation model.

zero The Idea 70 80 Planning

III: Emerging

15 20 Clinical trial/P III

Company Specific Factors Company specific factors that are non-financial and influence significantly in the valuation of a biotech business are:

Typical Discount Factors in VC/Angel Funding Company stage Product phase Ground Stage Stage Phase Stage phase

157 Management team  Past experience and track record of success  Diverse talent and skill sets  Financial incentives package and other perks to keep them in place  Ability attract funds Individual members  Key players and doers  Entrepreneurial traits  Ability make sound business judgment  High motivation, commitment and loyalty Directors/scientific board  Highly respected in industry and academia  Independent thinkers  Proactive involvement  Good mentor Product  ground breaking rather than just evolutionary/me2  High market demand  Scalability and stability Business model  Makes sense, simply and revenue first  Broad customer base  Distribution channel Industry structure  None or few substitutes  Minimum rivalry among existing competitors  High barriers of entry Intellectual property  Strong patent position  Strong other IP (copyright, trade secret and technical knowhow) protection

factors that are specific to the biotechnology industry include: Scientific excellence, 2) IP ownership through patenting, 3) The importance of regulatory environment Partnering with large companies. Global markets situation, 6) International regulatory hurdles, 7) High entry barriers, 8) Constant evolution of industry structure 9) Technological uncertainty disruptive versus me2. 10) Capital requirements, 11) Access to distribution channels and 12) Access to skilled Employees..

158 Stage of technology  Ready to commercialize  Ready for clinical studies Technological partnerships & alliances  High probability of partnering  Diverse collaboration Management of future innovation  Robust pipeline  High chance of second generation product development

Biotech industry is very dynamic. Situations change very fast and there could be significant uncertainty regarding its future state. It is possible that the laws governing the industry today may be totally different twelve years from now as we have seen in case of stem cell related discovery projects (ideological differences); GMO related crops (sociological and immunological effects) and infectious diseases field (potential bioterrorism Typicalissues).

Biobusiness Specific Factors

2. Weighted average cost of capital approach (WACC)

One may even utilize modified discounted cash flow (mDCF) depending on the financing schedule of their biobusinesses. There are at least four different type of mDCF and since the underlying financial assumptions are different these methods may give different valuation of the company. mDCF are:

To conclude this chapter we would like to say "Cash is King" "Cash is fact profit is an opinion" "Earnings do not pay the bills" And, value is in the cash.~~~~~~~~~~

As a biopreneur you need to know at least an approximate value of your venture in order to communicate with the potential investors-angel and VCs for funding. Similarly a biotech investor also needs to value a potential investment opportunity. Simplistic approaches discussed here will give you that start point. For further fine tuning and in depth analysis one may use more complex methods 1) Qualitative methods, 2) Decision trees, 3) Discrete binomial lattice, and 4) Continuous models.

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1. Equity-Approach Flows to equity approach (FTE)

3. Entity-Approach: Risk Adjusted Net present value approach (rNPV)

4. Total cash flow approach (TCF)

160

161 BIOVENTURESfor 21ST P PR R & &IIR R S ST TRRAATTEEGGY Y BioZak InfoBase

162 Communication Assets A flow of credible good news is important such as, products completed, pre clinical, moving into clinical trials, academic affiliations, institutional investment, partnership, and licensing deals etc. Followings are the important events that you can keep in mind while planning for press releases:  Collaborations and partnership  A critical personnel appointment  Clients and customer acquisitions  Intellectual Properties patents issued  Scientific Endorsement

Chapter X Public InvestorRelations&Relations

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Most biopreneurs have tendency to overlook or ignore media relations. There may be two reasons. First, biopreneurs scarcely have time for PR and IR after managing other things like fund raising, team building, planning, and executing research and development. Second, they do not comprehend the role or importance of these two tools in bioventure business development this can cause innate vulnerabilities in the venture. There is another thing moving parallel to this. Some established and budding biopreneurs, with ample financial background, often use PR and IR without a proper plan or strategy, which later becomes obvious from communication style in your statements. It is like nuclear power. Some parties are for it and some against. There are some people so obsessed with the thought of using nuclear power, that they are trying to find applications for it without thinking of the aftermath. But a person truly acquainted with it will utilize it properly to make the earth more useful, fertile, and joyous living. It’s also true with PR and IR in relationship to bioventure. A simple though impacting PR could bring significant advantages over the competition. To move on to the next stages of business biopreneurs need to attract more capital and talent. Every single aspect including fund raising will be like chain reaction if the two tools of PR and IR are used properly and safely.

Whether you sell cabbage or cars you must have a business strategy. A business strategy, without a plan for public relations (PR) and investor relations (IR) is nothing but falsehood. To depict a scenario on a wide canvas we can imagine a river of fast-flowing business. Here water is replaced with another sort of liquid we’ll call business. Two opposing shores of that river are PR and IR. So these two shores are the two sides of the business. If either of those shores are lost from view, flawed, or not solid then the business/river will lose direction it will move without positive direction.

165 Pitching the Bioventure Business

Strategic Plan for Media Relations

Step I: Develop master boilerplate media material that may be modified for different magazines and journals.

Step IV: Team-up with tiny media ventures and build synergistic relationships, i.e., you help them to grow, while they help you to get free exposure.

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Before we plunge directly into the pool how, where and what of media strategy, it is better we clarify two phases of media relations. It’s important because of money we are going to use for PR and IR is directly connected to the assumed funding of proposed bioventure. In general we can divide it into two parts, and the division is purely based on invested capital. The first is less expensive media exposure, and second is expensive media exposure. The first step is useful at the outset of any bioventure, whereas the second phase should be followed only after achieving a certain level or position in the world of business when you can spend more money. Before jumpstarting a media operation or a plan for it, you must have a well developed outline of a media strategy. There are mainly four stages or steps that you always need to follow to get the best results. The steps are as follows:

Step II: Identify media outlets that will publish your articles and write ups and design a matrix determine their influencing people. Study the types of articles published various media outlets, newsletters, magazine, scientific journals and newspapers.

It’s like a bridge between the bioventure and people with knowledge and money. The more the venture is properly exposed the greater the chance of gaining the proper path.

Step III: Pitch yourself and your organization to media writers.

3) Decide the order in which materials will arrive.

Clarify the points that you want to say and demonstrate, so that viewers or readers are not perplexed. As far as a material for general audiences are concerned, don’t try anything long or tedious. It may not bring the result you anticipated while designing your presentation. Be specific, and clear.

Here, you first have to move to identify the “Two Ts” of bioventure business. The “Two Ts” Time and Team has to be perfect like any part of a bioventure.

Now the team is ready with an ideal plan; you may wait for the ideal time for its release. If that time is less than ideal then your plan will not have the desired impact. This is because selling umbrellas is far easier when it’s So,raining.agreat combination of these Ts Team and Time can render a strong and effective portrait of your bioventure.

Meida Tips: Deciding materials for “Creative Media Coverage”

Less/Not so Expensive Media Exposure

2) Put aside do not eliminate what is not of direct relevance. You may find them useful at a later date.

4) Decide the structure of the final program.

As most bioventures do not have superfluous amounts of money to support immediate cost outlays, it should include people from your own R&D, marketing, and the business development division. Let them first identify media and move to Creative Media Coverage (CMC) which represents the preparation of a master plan for media exposure in a creative way. That plan may include stories available about your partners and collaborators regarding their success. If you find those stories effective for your investors or your target audience, you can readily make it a part of a standard plan.

1) Gather as much documentation and text materials as possible.

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The word Target is an important term; it will appear again and again in this essay about media relations. Target is nothing but the audience/reader you are preparing materials for. You have to decide that target first, as the nature of media as well as its material depends mostly on target. You have to keep in mind the age group, educational and living standard and probable life style during the making of presentation. Materials for scientists and a layman may never be the same and again materials for a 15 year age group will never match with that of a 50 year age group. If your target is general people, then it’s better to avoid using difficult words and technical jargon. careful in designing the and the ending of your audio/visual program. It’s only because the beginning and ending greatly affects the Strategic Media Matrix

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beginning

MEDIA CLASS TYPE OF A PUBLISHEDRTICLES ADVANTAGES DISADVANTAGES BioventureJournal Hotgoodtechnology,earnings Insider readers, sales boost Low circ, low production value JournalsScience Inventions endorsementTechnology Specialized audience magazinesBusiness ManagementPromoteteam CredibilityBusiness Difficult to publish Bio Magazinetrade News, PR, Company profiles Domain readers Need connections & fees News Papers Timely topics (e.g.,HCV)SARS, Bigger audience Need an introduction TV GreaterbenefitHuman Consumer prestige Little benefitimmediateunlesshasproductstosale Radio GreaterbenefitHuman Bigger audience Little benefitimmediateunlesshasproductstosale

169 overall impression of your presentation. If possible add an element of visual Asurprise.picture is more powerful than a thousand words put together. Picture speaks a universal language whereas your text element is for specific strata of Aspeople.thisphase is useful or actually related to the beginning of any bioventure biopreneurs must understand proper division of media and their nature. It is even advisable to established biopreneurs; too, to understand that part as the outcome of media relation depends mostly on perpetual understanding of nature and target of that particular media. The following chart will describe how and why you have so many options open to your media relations regarding bioventure business development.

The chart shows clearly that there is lot of range with so many forms of media available; use what you can to reach your target readily. But it’s not only the media that you need to announce your presence. The success of media relations will vastly depend on choosing the best media for your material. You have to have understanding the nature of media. For example you need to reach people from bioventure circles to reveal the technological aspect of your business. Then it is best to use well-circulated biotechnical journals. If the same advertisement were to show on television, then a general television audience for that media will not identify with the subject matter. And so the money spent for showing this advertisement will be a waste of capital. In the same way, you have to understand the nature of an audience attached to media like radio and television, newspapers, entertainment magazines, science journals etc. At the same time you must make out the coverage area of the particular media. That understanding and calculation will provide you with not only the right media but it will help you design better material, and calculate the best time for your ad to appear in that particular media. From bioventure journal to radio each and every component of media is important and useful if it is used properly. As mentioned earlier, first you have to find the target for your bio-product. Once the target is established, the exacting media matrix will readily take on a name and usefulness for

Expensive Media Exposure

This is the subway deviating from the highway named ‘less/not so expensive media exposure’. It’s actually cost-effective ways that you can follow to stay or get connected to desired business people. These are as follows:(1)Send update on the business to the investors, potential investors and people who have you business cards.

(5) Attend cost effective local meetings only.

170 that product with its target. From there on you may keep your eyes on building the most required branding for your bioventure.

There are other strategies that you may experience in your business. They all are effective on the target audience. At best, the least effective measure you might take is finding people who are willing to arrange special meetings with parties of interest, to organize informational seminars. Here you may even write to them for a chance of getting a minimum 15 30 minutes for oral presentation for your venture and product.

In comparison with the less/not so expensive media exposure the present i.e. expensive media exposure is easy provided, you have money to expense. It generally comes after 3 4 years of starting the venture. When you have enough currency to spend it on media relation, you can send your advertisements to any media you wish. But still you have to be careful of the coverage and the target. In that phase you may even move to attend several national and international meetings/seminars. You also can hire expensive media relation firms to design your future media planning.

(3) Organize Forums and Seminars once in three months.

Least Cost-effective Events for Bioventure

(4) Jointly organize forums on the subject you are working on.

(2) Hold half yearly company meetings and invite friends, investors, partners, and vendors.

Communication Assets

If and when deciding to issue a press release biopreneurs should evaluate the newsworthiness of the press release. A flow of credible good news is important. At the same time a mere good flow of news of every trivial event

It may be cost effective or it may not have anything to do with your budget but still you have to know how much is better as expenditure on the media relations. It’s even expected that at the very beginning firms cannot afford any extra cost for such things. So, you have to know how to utilize the possible sources even while trying to save money.

Here you must know that these expenses are phantom expenses. And they do not produce a tangible outcome immediately. However, they do indirectly produce huge returns when executed in an efficient concerted way with similar events in the company.

Expected Expenditure

With a very small fee a bioventure can utilize paid PR services such as PR news wire, Bionews wire and others. It is advisable to put aside 0.5% of the initial fund for the PR & IR related direct costs. After first year of operation bioventure may wish to spend 2-3% of the fund for media relation. During and after the third year a bioventure should seriously consider having a full time PR & IR person and a budget of 5% of the total operating budget.

At the very end of the chapter I’d like to describe one of the most effective tools that a biotechnological firm must include in their assets. It’s a very well known fact that biopreneurs are, by origin, creative. They create wealth from ideas, products from concepts, and happiness from hard work. An intangible creative asset is communication better known as the PR. There are many ways to bring values through communication, thus creating an asset value. As a biopreneur you may wish to put an arbitrary value to such an asset so that you can better be in touch with it. Once you can feel the asset value, it’s easier to plan and execute tasks to set loose the value of the asset. What are the Communication Assets?

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 A critical personnel appointment: When a bioventure appoints a wise and talented person for a critical position, especially when the person is somewhat famous figure; and issues an informative press release, the partners and public take serious look at the bioventure.

172 in the bioventure is not quite important at all. Some press release worthy news are progresses in product deployments, such as, products completed, pre clinical, moving into clinical trials, academic affiliations, institutional investment, partnership, and licensing deals etc. All these are important aspects that you can keep in mind while going for press releases:

 Collaborations and partnership: A partnership with another bioventure or a pharmaceutical company gives an external validation of the technology of company. A well constructed PR for this event may create a pleasant perception about the bioventure.



Clients and customer acquisitions: Having clients and customers supporting or approving the business model as well as the technologies of the bioventure. A good PR could bolster the public image.  Intellectual Properties patents issued  Scientific Endorsement: Peer reviewed publications, addition of scientific advisory board members and key talents acquisition.

After exhausting all avenues in media relations you must accept that another previously neglected subject can help you make the future of your bioventure quite viable. Assuming your willingness, I can add another small bit of information. Along with your self-sustaining approach towards the expansion of your brand, you may also desire help from various government agencies. In Japan entrepreneurs can get the help from JETRO (Japanese External Trade Organization). In Japan you may wish to attend meetings where JETRO or other organizations are implementing bioventure promotional campaigns. In this way all budding entrepreneurs can seek help from their respective government, too. In this way branding of your product will be least costly and most effective in marketing creativity.

173 Marketing - communicationcommunication,Communication,

Bioventure is all about DS (fractional differential strategy). Biopreneurs are the craftsman of DS. Like a good craftsman, a biopreneur needs to learn the art of the crafting strategies in business using every opportunity as it appears at every millisecond.

Fractional Differential Strategy

Right now the economy is slow; individual investors are more conservative than ever. Pressure is everywhere. Therefore, biopreneurs and investors have to find a sustainable business that is supported by measurable DS.

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Chapter XI

Role of Marketing in Biotech Business

Previously, bioventure firms used to concentrate on their researches and thus, marketing was quite secondary in bio business. Realizing the fact that business, as most integral and inseparable part to make the venture a successful one, is required to be developed, firms have provided marketing strategy some priority and thus they have started looking at the betterment of their investors, too.

Again, as biotechnologists or biotechnology firms were not well acquainted with commercial aspect of the business they have started looking at much experienced pharmaceutical companies. In 2002 there were 31 deals between pharmaceutical and biotechnology firms valued at over $200 billion. Comparatively total number of deals decreased, as was evident from 2001 business deals, but the amount involved increased that year. On the other hand there were some biotechnology firms ready to face the marketing related problems themselves. Day by day they were becoming more business oriented and even they were ready to compete with big pharmaceutical houses. Names like Genentech, Biogen-Idec, Amgen and Genzyme may be noted as examples in that matter.

Role of Marketing in Biotech-business

Biotechnology may go on developing new and innovative products, but for biotechnology companies to succeed i.e. to calculate success of biopreneurs; customers, willing and able to pay a profitable price, must exist. Our present chapter deals with a really important subject: Marketing and its role in success story of biopreneurs. We are going to discuss not only the planning and implementation of marketing strategy but we will also depict with possible example the pitfalls of the total scenario.

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Before we start learning what is what in marketing of biotechnology better we have a look at why do we need it. It’s only because if we feel the urge of using something the aftermath of that utilization becomes much more striking than ever. It’s not true only with marketing but the same thing is applicable to each and every tool of bioventure. First, you have to feel the need; you have to understand why do successful businessmen had ever used them. You have to evaluate what would happen if you don’t insist using it. But the question arises how should you estimate the need? How or who would tell you the reason of using it? And here my reply is ‘the past’ i.e. the

It’s quite easy for any drug to estimate the market if there is any drug previously available to get compared with the clinical results of its new competitor. But, the problem starts with a breakthrough product, as there is no analogue to compare. Bringing in a marketing based pharmaceutical company to help promote the drug and size the market is a better way to find solution, but this does not absolve a biotechnology firm from conducting in depth marketing research.

Crossing the Boundaries In Strategic Business Modeling session, Professor Mark Fruin explained that most events in the business could be explained by a single theory called the "Transaction Theory of Cost", which establishes that transactions that are cheaper within a firm will be done internally, whereas those that are cheaper outside will be outsourced from the marketplace. Such mechanism enables the firm to minimize its transaction costs.

177 history of the world of bioventure will help you find the solution. That’s the only way to know the result of several drawbacks in a marketing strategy or even it’s the only way, at least sometimes, to judge your own planning.

The Transaction Theory caught our attention rather quickly then because we knew from the breakthrough work of Einstein that almost all physical events could be explained using his Quantum Theory. The dominance of Einstein’s Theory continued until the proposition of the "String Theory".

Possibly you comprehend very well why we need proper understanding and estimation of potential market. The strategy of marketing is as important as the planning of a bioventure business and phases like pre clinical and clinical. It’s only after the clinical phase is over and a drug is licensed for market that we feel the basic need of proper marketing plan. Typically it takes 12 18 months of rigorous planning to make, well we may hope for the best, a conspicuous launch of a new drug. An early collaboration, as Professor Alicia Loffler, Kellogg School of Management, reveals, between R&D and marketing through market planning and development is essential and small biotechnology firms often overlook that part. Pharmaceutical companies, on the other hand, have a better understanding of the importance of that relationship.

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Marketing begins in our life before we even know it

The latter not only accommodates physical events but also explains the gravitational and cosmological phenomena, which Quantum Theory failed to do. The String Theory, in a sense, is a universal theory in physics at the time being.

The Transaction Theory of Cost seems to resemble the String Theory in light of its universal applicability. Business firms of all sizes from different parts of the world can benefit substantially from the successful implementation of the Transaction Theory in real life business world. If one looks hard, one can often find significant similarities between science and business concepts. Such similarities can prove convenient in building a bridge between the two disciplines in order to create a synergetic entity. It is important to note that crossing from science to business is more viable than crossing from business to science. Past and present examples have shown that crossing from business to science is extremely difficult.

Let me share with you my first lesson in marketing. This is surely going to make things easy for you, if you already have taken them impossible kind of things. It was in a very different world when I first learned marketing and received my first hands-on marketing lesson. In my early days of university, I was trying to get attention of some highly popular girls. It was, as you can imagine, a very competitive matter then. All contenders were rich and famous kids, sport stars and club presidents. Among all the big shots, I appeared just a simple good kid. I, however, was not ready to give up. That was the only positive thing I had to support my luck. I set out to meet one of my older friends, a professor in the university business school. He listened to me with some added light of interest on his countenance. For him it was quite like marketing the only different being the product I was supposed to sale was I, myself for some selected and lucky showrooms. He explained to me what marketing really is. I was there somehow to create my own market but what I received was far better than that. With his help, I was able to see my Strengths, Weaknesses, Advantages and Threats (SWAT). The professor guided me in building a strategy around my

 When

 Where do

to buy

are

 Who

 How do

And  How

179 strengths and advantages, taught me how to guard against my weaknesses and handle various threats. After a weeklong lesson, alas the girls were gone then, he commissioned me to "go and win the world". Since then, I have been living his teachings, especially the concept of SWAT, in many different areas including bio business.



Marketing can be defined broadly as the function of a bioventure that wishes to generate a profit by utilizing the venture’s resources and activities to identify and satisfy the needs of consumers. Consumers can comprise of individuals, corporate clients, as well as investors. One must distinguish marketing from "selling" and "advertising". Marketing is a strategic function, which determines the following: are the customers? do they need and want? do they want it? they want it? they want it? much they willing to pay? Biopreneurs can solve these questions and build a marketing strategy based on Market Segmentation. Market segmentation is another powerful tool that allows a biopreneur to identify its niche in the bigger market. Market Segments



Basics of Marketing in Bioventure

Street Market: Market with low penetration, high competition and low margin of profit, e.g. more established products.

Dominant Market: Market share being the largest at any given time, e.g. small molecule drugs.

 What

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 Ground-breaking Market: Revolutionary technology that changes the business landscape within 10 years of its arrival, e.g. Internet, Recombinant technology, stem cell.

Entrepreneurial

Niche Marketing & Scientists’ Crossover Marketing is vital to the success of a bioventure. Most researchers have been aggressively marketing their talents, knowledge, skills and personalities since they first start conducting fundamental research at the university level. In doing so, they are able to negotiate with professors for attractive research topics, deal with their peers in academic conferences and seminar presentations, and peruse grants agencies for funding and scholarships. Bioventure marketing, as we see it, is a natural crossover from a set of academic norms to a set of business norms. Researchers are always very specific in marketing their specialized products (research results) to very sophisticated customers (the highly educated group). In bio business, we use a simple word to describe this whole process Niche Marketing.

Niche Marketing Strategy

 Niche market: Demand is present but market size too small for big players. In fundamental research field scientists focus on very specific question (niche) of a bigger puzzle, which is being solved by a large number of scientific bodies. Likewise biopreneurs should primarily be concerned with the niche marketing strategy. We will, thus, look further into the niche marketing concepts and its application in bio-business.

The most fundamental aspect of niche marketing strategy is "specialization". Key characteristics of Niche Marketing Strategy are:  Niche market has to be large enough to provide profit.  Niche market has been overlooked or ignored by the market leaders.  Niche market can be defended through cost effectiveness and goodwill in case of competition.

Niche Market: Bio IT, diagnostics, generics Utility

Biopreneurs need to find a very small segment of technology potential and/or existing market. Since the economy and other structural environment is not fully developed, niche market business model is, perhaps, one of the best ways to go about a technology-driven and specialized bio-business.

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Dominant Technology Ground breakers: Moves fast enough to catch the traditional model (stem cell, Peptide and antibody)

During the high-tech boom (1990s), Cisco Systems, Intel, Softbank and Sycamore all started as venture business with their own niche marketing strategy. Niche marketing concept is so powerful that we won’t be surprised if one day someone surpasses Pfizer or Takeda through an effective niche marketing strategy.

In Japan, for example, one can find several niche markets that are either overlooked or ignored. Purely because of the size of the potential revenue the pharmaceutical and biotechnological giants quite often leave smaller niche market aside as an orphan market. This is where our aspiring biopreneurs may jump in. Your target at the outset may be quite small but it’ll flourish soon. Currently we have identified several niche markets in Japan, for example:

Niche Market Concept

Period Street Market

Like fast food delivery on call any time a reagent ordered by a researcher through a phone call will be delivered to his/her research lab as soon as possible.

Customized Reagent Supply

Bio business is all about technology. A biopreneur should first seek patented new technologies that have just been invented in university laboratories. Then, by partnering with respective researchers and professors, the biopreneur can develop incubate further before licensing a bioventure. Once the technology is ready to hatch, the biopreneur begins a bioventure around the incubated technology.

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Services Contract research, assay services, protein and other bio-molecules preparation, Bio IT services, research information services, advisory consulting, and strategic bioscience consulting.

Generic Drug Manufacturing

Platform Technologies

A large number of high profile revenue-generating drugs are coming out of patents and becoming generic. Biopreneurs can take advantage of the patent releases by setting up a generic drug manufacturing business.

Differential Strategy & Niche Marketing in Bio-business

In previous areas we have discussed differential strategy (DS) and its successful utilization in trading, high tech, and other conventional businesses. We will discuss again this subject in the light of niche marketing, for the sake of clarity. A combination of DS and niche marketing strategy can give a bioventure an extraordinary advantage over many other similar entities that are competing

Differential Model in Business

183 for similar resources, such as financial capital from prospective investors, grant-funding from government agencies, and brain-capital.

Differential model is very simple mathematical calculation d/dx (fx). In words a small difference in any functional property may be defined as differential model. Functional property (fx) could be a business environment, a business situation or a cultural knowledge. Any strategy that is based on the differences of any particular factor that we just mentioned above is called differential strategy. If one uses a fraction of the differences in order to advance a business or win a deal, we call it fractional Differential Strategy (DS).

How does it work? It is like having two variables in your equation of success. Once you understand and have control over one variable say DS then you can easily maximize the other variable niche marketing to manage external factors financial, people, competition for desired outcomes.

I gave a presentation on Bio IT at World PC Expo, Makahari Messe in 2001 just after the 9/11 incidents in the US. Then the whole world was in a state of panic. The airline industry was on a downward slide along with other industries that were dependant on tourism and transportation. I was curious what differential strategy would emerge from such a horrendous act. Now it is very clear what the strategy is the security industry. Bio defense, internet-security and other defense related businesses are the result of this DS Incidentally.

most of my presentations at WorldPC was on DS. I explained how IT companies could use DS to make a way into bio businesses and create a four billion dollar new industry better known as Bio-IT. Advancement of the Genome Project, streamlining of clinical trials, and packaging of business intelligence offers excellent opportunities to former dot-com burdened IT companies.

Fractional Differential Strategy

Regret

Earlier Differential Strategy Culture and Language

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Key components: Culture, Time & Technology

Over a period different business entities and organizations have used different factors for DS. Most common factors among them are fear, religions, patriotism, culture, time and technology. For our discussion we will stay within the CTT (culture, time & technology). In short, a successful DS states that to win a match, game or a fight; one does not need to be the strongest, biggest, or most perfect. One just needs to be slightly stronger, better or faster than the opponent to win at competition. The figure titled Differential Strategy: Culture, Time and Technology attempts to give you a pictured view of CTT differential strategies that are used by pioneers in the field.

MoveYou&Win Or Risk Averter Wait

Take for example trading companies like Mitsui, Itochu and Nissho Iwai have used DS extensively in order to build their huge corporations. These trading companies were using language and cultural differentiation between the east and the west Differential Strategy: Culture, Time and Technology GeographyCultureand Mitsui, Itochu Time Currency Arbitrage Soros Technology Softbank &

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Differential Strategy &Time

There is a common saying on the street timing is everything”. Time is being used every day in business as one of the key differentiating factors. Time to bring in a technology, time to market a product, and time to identify potential opportunities; are some of the examples where timing is

As the world becomes smaller and smaller due to plane-train-automobile and finally the revolution of the Internet, a trading company DS seems to coalesce. The differences become so small that there is not much business left to extract. Thus we see more and more trading companies are venturing into the new business front. Mitsui has an aggressive mission and vision to exploit Biotechnological advancement. Mitsui, however, expanded in to the east and made Singapore and China key places for obvious reasons. China is showing some opportunities for DS seekers who are expert in culture and Onlanguage.theother hand Nissho and Iwai went to the west through its investment arms. It would be an interesting academic project to study entire giant trading corporations in Japan, their current strategies, as used to redefine their business models and roles in society. This strategic investigational research may provide insight into the opportunities that biopreneurs may utilize to build new business using its own DS.

Trading companies may implement an autonomous system in bringing the best out of the biopreneurs, in Japan, rather than reinventing the wheel by themselves. An existing trading company strategy most suitable for CRO, clinical trial management and certain other sub-disciplines in the biotech industry where structured and process oriented. If one wants to convert a well-structured corporation into an unruly innovative corporation, he or she has to make drastic changes that are not necessary or desirable. A middle path is most suitable for the current environment. Mitsui’s move to build a knowledge based business entity in Tokyo would be a good research model for an MBA student with a biotech focus. We hope to see a synergistic relationship between the biopreneurs and the trading corporations.

Biotech offers an exciting time dependent DS, to the trading companies, VCs, pension fund, investors and Biopreneurs. Some country as whole may use this new wave of technological revolution to stay ahead of the economic curves. Singapore, Taiwan, Korea had a jump start but no specific new DS in place. Japan is just joining in this trend. It is reinventing new strategies to fit the need of bio-business.

186 everything. When time is efficiently implemented as a key component of one’s DS, one may make a fortune or even steer the economic fundamentals of the world. We all recall Asian bubble in 90s. Where currency traders used time to create fortunes, or lose them. That completely changed the economic Currently,landscape.

Differential Strategy & Technology In the 90s the Internet was moving in to every household. The US initiated a technology revolution and a buzz began the dot com boom. Again, Japan is slowly managing its affairs and shocks from the Asian bubble. The famous Masayosi Son SoftBank then envisioned a future IT revolution that would take 300 years to build, and Japan is still far behind in working out that vision.

Japan’s Strategic plan is most fundamentally based on solid historic business model, with some ornate changes learned from the Silicon Valley experimental model. This strategy has some advantages and some disadvantages. If appropriately employed in a specific field of biotechnology then this strategy could bring economic success to the Japanese nation. If a nation, as a whole, effectively utilizes this window of time coupled with enterprising concepts, the DS economic landscape of the country may change within next 20 or so years. So far, we have seen only one nation other than the US have any greater strategic plan coupled with DS, and thus determined to change the economic landscape within 10 years or less. That is China! We encourage biopreneurs to study only a small fraction of their strategy that gears toward bio-businesses and if possible to follow China’s entire strategy.

187

PeopleCOMDEX.wondered what kind of revenue Son san was going to make from those media and market place businesses perhaps peanuts. Son san did not acquire those businesses just for revenue. It was a key strategic move based on unprecedented DS to enter a circle of opportunity in the IT arena.

Now let’s present an example of what you can achieve using the powerful differential strategy as a tool. When Hitachi, Sony, Panasonic, NEC, NTT and many other big IT corporations in Japan wondered how to catch up with advancing new-economies, Son-san was busy making deals acquiring an IT media company and buying large shares in IT markets such in

Son san wasn’t bigger than Hitachi, Sony, Panasonic, NEC, and NTT. However, Son san was faster than those large corporations ready to move with the technological tsunami and revolution in the US. He became a mogul of IT in Japan literally overnight. He used DS to its fullest extent. Son-san identified the need of IT and related technology in Japan. The US only a 5000 miles from Japan has all of the IT technology that Japan could use. Here differential is the distance and the time to develop a new and/or competing technology in Japan. Son-san reduced the time gap by licensing most of the technology for Japan from US corporations; he also acquired decision influencing shares in the leading IT corporations in the US. Some of them were successful, others were not. Overall he became a winner. Even though most of his paper wealth evaporated with the IT bubble bust, he kept his DS active, and reemployed his DS in broadband and eureka!! He was again on the rise.

An unconventional DS strategy that Hong Kong Billionaire Li Ka Shing used in 1950s is a direct evidence of the power of DS. Mr. Li used completely different DS at a very difficult economic and political time. Mr. Li started his entrepreneurship with a small grocery store first. Later, he began trading with China when no one dared to trade with it. He used an econo political DS that presented itself to him at the time building his business from literally nothing. In the recent years Mr. Li gave back some of his wealth to China, just as a thanks, giving to the country that helped

Power of “DS”- From dust to Castle

Biopreneurs and the Transaction Theory of Cost

Every entrepreneur started small before they build their business and succeeded. All successful entrepreneurs implemented at least one, or sometimes more, unimagined DS. It is now your turn to start a business and look for a suitable DS that fits the present environment, time, economy and political situation.

Biopreneurs always pay considerable attention to the cost of transactions.

Biopreneurs & “DS” Bioventure is all about DS.

188 him become a billionaire. So, you can see the positive outcome that will be availed in using the DS. One thing you must understand that these true stories are simply examples and inspiration for future utilizations of an essential tool.

Savvy biopreneurs minimize the transaction costs by utilizing academic resources, peers consultancies and government supports, thus bringing success to the business in the initial stage. Invariably, each transaction requires preparation sound marketing tactics.

Biopreneurs are the craftsman of DS. Like a good craftsman, a biopreneur needs to learn the art of the crafting strategies in business using every opportunity as it appears at each millisecond. Right now the economy is slow, individual investors are more conservative than ever, and corporations are not spending their funds in any exploratory project to keep the P/E ratio high. This is so they can hold a steady stock price. Pressure is everywhere. Therefore, biopreneurs and investors have to find a sustainable businesses that is supported by measurable DS

Biopreneurs are experts in applying the transaction theory even though they do not possess a degree in the Transaction Theory. A biopreneur first enters into a transaction with his/her prospects where they join as a team to secure the golden promise of the liberty of intellectual pursuits and economic success. Thereafter, the biopreneur may initiate millions of other transactions in getting necessary funding and additional human resources for the team, handling technology licensing issues, negotiating partnership/collaboration and launching product sale.

Like fundamental researcher, biopreneurs have to explore and find opportunities that exist at every situation that are most often blurred by the average view noises (unclean data). Biopreneurs always have to find a new solution and a new path to complete a task, a project and a business.

189 Conclusion

We would like to conclude this chapter quoting Mr. Henry Ford (General Motors). He once said, "If you think you cannot do it, you’re right. If you think you can do it, you’re right too." It was true with the automobile then, and it is absolutely true with the bioventurer now. It is biopreneur’s creative skill and entrepreneurial spirit that would help to find the way to begin and move forward a bio business during any external or internal unfavorable conditions such as economy, bureaucracy, and social acceptance.

Success will follow you everywhere if you can think positively and can amend the prescribed strategy for the best of your bioventure. The future is yours. ----------------

190 venturerevenues,hugesuchforpotentialtheWithgusher.alikeisithits,drugaWhen startbiotechininvesttocontinuewillcapitalistskinds.”allofups Byers&CaufieldPerkinsKleinerofB.Byers

Biotech

Investment in Industry

Chapter XII

Steve G Burrill of Burrill and Company, a leading biotech investment banker, on his keynote speaker presentation at a bio venture forum, shared his vision of the life sciences in the

192

Just to give a quantitative feeling of his statement

receiveareadiseasesmemoryoutBurrilldecades.comingMr.pointedthattheandmetabolicrelatedwillthehighest attention from the market. He also indicated that more and more people were gravitating toward the staying well concept thus the market opportunities for the wellness industry are undisputable.

Current drug market is about US$240 billion while size of the wellnessproductmarket(OTC)isUS$300billionandgrowing. One of his encouraging statements for the entrepreneur was “big company is not an innovator, small company is”. He had one piece of advice for biopreneurs “when seeking investment biopreneur must realize that the use of investment capital comes with the change in strategy.”

193 Drug Bio business a new Gold Rush Bio-business comprises over 10 trillion dollars or 30 percent of the global economy. Countries throughout the world have identified new opportunities in the bio-business arena as the next hot-technology area and are investing in training their scientists, setting up state of the art life science and technology-knowledge clusters, establishing viable biotechnology industries to fuel growth in bio business areas. In the recent years, there is more willingness and push for cross disciplinary work and ventures between high tech and biotech. Professional and business investors may find biotech as a new Gold Rush of our time. Biotech offers infinite opportunities as long as human beings reside on this planet. It is considered that the bio business is going to be the fastest growing sector of the world economy during this century. Some even designate the 21st century as the bio-century. ………. Can you afford to be simply a spectator? ……..

Investment in the Biotechnology

convergence

we may realize. With the

Paradigm of Bio-business

everyday life from toothpaste to the medicine cabinet. It occupies more and more of our personal economics and social relationships, from happiness to love, a

biotech

194 Top 10 biotech companies (based on market capitalization value) Rank 1991 1996 2001 2006 2007 1 Amgen Amgen Amgen Genentech Genentech 2 Genentech Genentech Genentech Amgen Amgen 3 ALZA Chiron Elan SciencesGilead SciencesGilead 4 Centocor ALZA Shire Celgene Celgene 5 Chiron Biogen ALZA IdecBiogen Genzyme 6 Genzyme Genzyme Biogen Genzyme Biogen Idec 7 Cetus InstituteGenetics Chiron (ADR)Serono Elan 8 Synergen Centocor Immunex eMedImmun Actelion 9 InstituteGenetics IDEXX muneMedIm Elan Novozyme 10 ProductsDiagnostic Immunex niumMillen Actelion Qiagen data source Burrill & Company.

than

IT and nanotech with biotechnology, the Bio field is growing and enabling more economic opportunities to be latched onto.

The business is witnessed in lot what recent of

195

Biotech drug discovery businesses come with high risk and high return blessing Only about five drug candidate enter into the clinical trial out of 250 that have passed the test-tube and petridish studies; and only one of those lucky five become final drug for human use.

Common Senses not common traits

Common sense of fundamental doctrines in most businesses is universal and applicable all of the time either in a depressed or vibrant economy. What chiefly differ are the business and the intrinsic model that follows the Knowingbusiness. the specifics and understanding the unique-nature of the field gives one professional tools, skills, and wit to win a race of apparent ambiguity.

As every discipline goes through its roller-coaster of highs and lows, bio has gone through its own high and lows in the mid 80s, while the IT dot.com had its day in the late 90s. During this roller coaster ride many fared well in the game while considerable others lost a big chunk of their portfolio net worth; however, the fundamentals remained the same and those who maneuvered with sound understanding of the field fared the best.

There are about 100 blockbuster drugs in the market that accounts for the one third (1/3) of the total pharmaceuticals market. Following table gives some representative names of blockbuster drugs.

People fail in their endeavors not just because they do not know, but moreover because of confusion and lack of confidence which arises from the weak understanding of the interlinking of the many ‘bio parts’. Biotech, by virtue, has its own specific and unique distinction. Having spherical knowledge and understanding of the field would help one to make prudent decisions either for business investment or for career development within the field.

Which sector offer short-term return

Short term returns can be found in companies that have platform technologies and medical devices. These companies can generate revenue in the short term and they only need 510K or PMA approval, which is less costly and less time consuming than the preclinical/clinical processes for drug approval. For therapeutics, the only option would be a company that can get orphan drug status approval which shortens the time and cost.

196

Which sector offers long term (5+years) return

For long term the best investment is in therapeutics based on antibodies. Antibodies are going to be the keys that open the next biotech bubble in addition to pharmacogenomic applications. Many of the drugs in Phase 3 clinical trials are antibodies and these drugs have much history behind them. Pharmacogenomics will allow more drugs to be approved for specific individuals and it will end up being safer for the patient. The FDA is pushing companies to meet this future need, which is actually coming soon. Most pharmaceuticals and Biotechnology companies hope to land a blockbuster drug in their product portfolio at least once in five years. Thus, the quest for blockbuster drugs has been the foundation of their R&D strategy. (A blockbuster drug is one that produces $1 billion or more in revenue per year.)

197 Blockbuster drugs from big pharma and Biotech companies No. Blockbuster drugs Companies 1. Allegra Aventis 2. Augmentin GlaxoSmithKline 3. Avastin Genentech 4. Claritin Schering Plough 5. Glucophage Bristol Myers Squibb 6. Lipitor Pfizer 7. Losec AstraZeneca 8. Neurontin Pfizer 9. Nexium AstraZeneca 10. Norvasc Pfizer 11. Plavix Bristol Myers Squibb 12. Prevacid TAP Pharmaceuticals 13. Pravachol Bristol Myers Squibb 14. Prozac Eli Lilly 15. Rebetron Schering Corporation 16. Taxol Bristol Myers Squibb 17. Viagra Pfizer 18. Zithromax Pfizer 19. Zoloft Pfizer 20. Zyprexa Eli Lilly

One of the most striking aspects of the biotech industry is its scarcity of earnings. Most biotech companies carry losses for years, even after they have launched a new product. As a result, valuing biotechs is a precarious undertaking at its best.

How to evaluate biotech companies

The unpredictable and complex nature of biotech firm’s business makes its evaluation a highly precarious job, says Alok Gupta and Mark van der Geest. It’s really necessary to evaluate or know the status of any company before investing on that. Though the ways, using which the biotechnological firms are evaluated, are well established, but still it’s quite a tough job.

In addition, the company’s financial well being and corporate partnerships may further complicate the valuation analysis. The large cap and profitable biotechnology companies have had the broadest appeal to investors, but that is only a handful of companies. Investors in biotech stocks take a long term approach to investing. There are stocks that can significantly appreciate in value overnight if a trial is successful. Conversely, they can also drop by 30 per cent to 70 per cent in value with disappointing results. Biotech companies’ stocks tend to be heavily influenced by favorable or unfavorable news regarding the development or testing of a product.

Key factors that one needs to look for while evaluating a biotech company are: Proprietary expertise Specialist in house knowledge and expertise is key to the belief that a company can offer something novel and differentiate itself from a large pharmaceutical or biotech player. This is sometimes referred to as a platform technology.

Predicting the probability of a single product’s success in the clinic depends on many variables such as clinical trial design, difficulty of indication, and quality of phase II data.

The details of a biotech firm’s business, its research methods, its test results, even the products themselves, can be highly complex. The success or failure of a drug during clinical trials is difficult and often impossible to predict.

Robust pipeline and technology

Investing in biotechnology stocks is somewhat unlike other investing stocks because in valuing biotechnology stocks, it has always been difficult to use traditional net present value and discounted cash flow approaches in isolation, particularly for the clinical and pre clinical stage companies.

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A broad pipeline of potential drugs at various stages of development provides some comfort that a company’s fortunes are not hinged on the

There are limited checking that can be performed on products while in clinical trials. Analyzing the available data is prerequisite, but direct contact with the lead investigators in the trials can provide additional discomfort or concerns. An ideal due diligence process would include checks with medical opinion leaders, clinicians, companies with competing products, and practitioners with specialized knowledge of the therapeutic field.

Has the clinical trial program been designed with doable readily achieved end-points? If the trials are pivotal for approval, do they fulfill all the regulatory requirements? Appropriate business model for collaborations

The most appealing on a risk perspective is the model based on partnering drugs at an early stage of development. Biotech companies that fail to link up with a corporate or academia partner can have trouble surviving. To ensure survival or lower risk, biotechnology companies can attempt to engineer several collaborative agreements with various pharmaceutical companies for research or marketing. Partnerships with major

The important issues to address for a potential drug candidate would include: Does the product address an unmet medical need of new or existing therapies, or is there a potential to offer superior efficacy and/or reduced side effects?

Is the published pre clinical data suitably compelling to initiate progress of the product to the next stage of development?

199 success of one product. If for some reason the product proves to lack efficacy, then the company has something to fall back on. Another approach is to look for companies diversified around a specific disease class or that have a niche technology that can be used as a platform for a range of different drugs. However, historically stock prices are largely geared around the fortunes of the most advanced development product.

200 pharmaceutical companies provide valuable endorsement of the product in addition to the essential financial support for ongoing development. However, the terms of any deal must be analyzed well to assess the longterm returns for the biotech company. Deals, which appear generous in up front and milestone payments, are often to the detriment of downstream royalties. Biotech companies, that adopt a go-it-alone approach, are, of course, inherently at higher risk. Bearing the full cost of clinical development, together with manufacturing and the investment in sales and marketing infrastructure, is more than most companies and investors would like to stomach. However, an appropriate strategy could be to retain rights for certain indications or specific geographic regions.

Strong management

For early phase companies, it is critical to have senior management with a proven track record of taking a drug through the regulatory hurdles and to the market place. The management teams should be able to set out their expectations and deliver on them. Being able to achieve stated milestones is key to market performance for companies that are at the development stage.

Financial resources

To a large extent, the biotech sector became a victim of its hype in the latter half of the nineties, as companies failed to deliver on promises, causing investor and market confidence to slip. Inherently, the market should expect some setbacks in drug development, but many of the missed milestones of this period were put down to the inability and inefficiency of management to guide on timelines and events.

The majority of product oriented companies in the biotech universe are still working at a loss, as they fund the discovery and clinical development of candidate drugs. The release of a commercial product is often many years away and requires millions of dollars. Thus a company will burn cash in ongoing research and development that burn rate is a critical measure of the company’s longevity. Companies that have a minimum of two years in cash reserves are in a rather comfortable position.

~~~~~~~~~~~

As such, biotech companies are dependent on the vagaries of the capital markets to provide periodic capital injections, with the only other source being partnership agreements, which involve giving up certain rights. Support from the market cannot be guaranteed, and this has forced some companies into highly dilutive rights issues to ensure their ongoing viability.

To sum up, we can say that investing in a biotech business is quite a delicate matter. You must understand several things; at the same time you must be able to assess the future of such a product or venture. Using a management team you can calculate the market, and thus any possible profit.

For companies requiring further cash before reaching a stage of profitability, a suitable financing strategy is to access the markets after reaching important milestones. Market Biotechnology companies, developing products aimed at markets for new drugs, or under serviced sectors, will be obvious winners. Another key factor in a drug’s success is the frequency of usage how often will it be prescribed? Drugs that are used to treat chronic conditions related to aging, or HIV/AIDS, will generate a lot more cash flow than infrequently used treatments, such as vaccines. Life style diseases, Re: cancer, heart disease, stroke, or other illnesses which diet and exercise are believed to play a part, will increase as industrialized cultures spread around the globe. Biotech companies that are targeting these therapeutic categories will share in a large demand for related products.

Though the money is a chief concern in any business the return in the form of human life is also an immeasurable but intangible gain. Either way, there is profit; and if you wish to support the research work, it is certainly of some benefit. Now knowing the possibilities it’s obviously your turn to choose between two options stay in the field and ameliorate, or leave it forever.

If a medication is discovered and marketed then the profit cannot be evaluated only by its monetary return.

201

The Journey is the-reward Taoist Proverb

202

203 Chapter XIII

Journey of a Biopreneur

204

We have personally met several young graduates from Japan (Tokyo, Kyushu and the Kansai areas), India (Hyderabad, Bangalore, Cochin, Kolkata and Durgapur) and China (Beijing, Shanghai and Hong Kong).

Journey of a biopreneur

Beginning of a Journey

We will attempt to bring an intercontinental prospective to our topic materials. As we know, a process or protocol that works in a US laboratory should also, and must, work in a laboratory in China, India or Japan. However, a process or protocol in bio business that works in the Silicon Valley or the Medicon Valley in Europe may not work in a high tech park in Japan, China, Malaysia or India. An obvious question arises, why? That’s really a million dollar question especially when we are on the threshold of a new journey. We want to try to learn why through your participation and your views. We always wonder why there are so many start ups in US and relatively so few in Japan, India and other Asian countries. Comparing the bioventure markets among several countries, we find good news for the entrepreneurs there are more opportunities for the free-spirited risk takers in Japan, India and other Asian countries

205

Understanding the Reality

It’s really tough to remain still once you’ve found the way and means to begin moving. It is true not only for children but for adults as well. When we are charged and free-spirited, it is impossible remain in one place, for one moment. The same idea is applicable to new and experienced biopreneurs. Some people must begin their journey through the land of bio business, immediately, after having the essential concepts and plans worked out. And it’s like having a new car. You should not be restless; at least you shouldn’t show your agitation for not driving at the limits of the new car, before you know its idiosyncrasies. So we are going to take a test drive with you.

(b) Where do I get a suitable technology for the company?

206

(a) How do I start a Biotech company?

Questions of Biopreneurs

They are absolutely a new generation, hybrid technologists, ready to take However,off. we also found some of them were puzzled by some valid contradictory concepts and theories about how to start a biotechnology business. They have showered us with questions which we would like to share with you, so that you can provide us with your thoughts, for a secondround discussions.

(h) How do I do the valuation of our company?

(f) How do I know which market to focus on?

(g) How do I determine my products’ market?

(e) What do VC's look for?

(i) Can a woman enter into this exciting field of bio business?

(j) How do I develop partnership and offer out licensing? Upon examination, we see those queries are not made simply for the sake of asking questions. Each and every one is important. If you can find their resolution your business will automatically be geared up to go. But before we start analyzing and promulgating our opinions, let’s have a look on the other side of the coin. First you have a plan. It looks flawless. It looks like you are going to make out well. The next prominent name in the field of biotech will be yours. Okay calm down! We know you have the ability. But still, you have several things to explore before jumping into the world of business

A biopreneur’s first challenge is to convince his or her friends to join in the project. He has to explain the plan and concept to others so that they also can add their opinions or make corrections if needed. Without the proper selection of manpower a business will never see its real potential. Once biopreneurs build a small highly cohesive team, and then look for strong, well developed, technologies and discover market demand there is no looking back.

Now when the basic business team is ready, inventors must join the project as a regular biopreneurs or advisors. Biopreneurs need a professors’ blessing and easy access to a laboratory and libraries for the further development of the product. Biopreneurs need legal assistance for a technology patent transfer. In the US, government funded universities have policies in force to afford bioventure preference over large pharmaceuticals and biotechnological companies. Also typical licensing terms and conditions, including fees, are quite nominal. Universities and the government encourage biopreneurs to begin bioventures. So, in every conceivable all this can only help you set up your required business. Now, for the money part: We have discussed in detail money for bioventure in the funding chapter. Always ask every partner to make some financial commitment. Without financial commitment people tend to be moonlighters. Once biopreneurs put money into the business, it becomes more convincing to friends and family to put funds into your venture. If investors get interested in your business, and if they truly find it promising,

207

First of all, you need to consider three primary components that require immediate attention before starting a bioventure. You need people who can jump into the venture whole heartedly along with you. At this stage avoid moonlighters people who want to keep their feet inside two boats. They generally change teams whenever it seems like a good idea. It’s better to think of a management team that can support you with the latest needs of the market, as well as create new market to attract consumers and VCs. Next, you need a technology or products that you can license from a university. Never try to invent technology while involved in a bioventure. Then the most important of all, you need finance.

208 they will likely get financially involved. If this does not happen you should believe there is something wrong, either with the plan or the way you are trying to convince others. People are not finding enough faith in your Let'sventure.go

back to our questions. Those are representative questions as we now recall them. We have tried our best to show them with spontaneous replies. We feel a group of hungry minds are waiting to explore this breaking the boundaries of any self limits. You are the explorers of the 21st century as biopreneurs should always be. We realize that a platform like the Biopreneur is very important for our readers at this stage of development in biotechnological entrepreneurship. If you are passionate for solutions, hungry for new ways to reach your goals, then the next extension of your bioventure effort is waiting merely for you to start. As mentioned earlier, there is no place for words like failure or obstacle in a biopreneur’s lexicon there is no place for the word shy, either. A biopreneur should be extremely polite but shyness must stay far away from their business dealings. Biotech business is in a growth stage in US and in some parts of Europe. It’s better to learn things from others, and your own experience will in turn relate to new thoughts for future generations of bioventurers. It will be useful to learn from previous achievements and former mistakes. It’s also valuable to understand other views about the present positions of a fruitful Therebio-economy.are,just like any other place, positive and negative sides mingled in the future of biotechnology globally. Fortunately if it’s challenging and exciting enough for you, It is a far better state of mind to exclaim okay and thus begin the new era of bioventure. I assume you must be very excited to get involved with a biotech business, right? If you are thinking to start a company, then let’s hear some stories on how to begin a biotech company.

209 Revenue Based business model bound to succeed

This is related to a scenario where a company was developed with a true revenue model. This is based on a real situation. Dr. Akio Mori sat for hours in his small apartment; his brain vibrating with ideas about how to start a biotech company. There he was, without any desire to fool anyone. The opportunities he envisioned were absolutely endless: DNA vaccines, cancer cures, veterinary medicine, and more. He turned possibilities over and over in his mind. He made plans, rebuilt them, dismissed everything, and started planning again. But soon Mori san realized that he did not have money enough to buy a PCR machine. But Mori san had something else; that was faith in his ability to solve problems, by working hard until he found the solution. He was a stubborn a man who didn’t know the meaning of giving up. With the right mix of people and ingenuity nothing was insoluble. It was a matter of running through the steps until the equation balanced. He talked to countless teachers, classmates, family members, friends, and friends of friends. There was barely anyone who escaped the searching gaze of Mori san. Ultimately, his grandfather and a few others were willing to lend him money, though not enough to start a biotech business. He wrote letters, e mail messages, made phone calls like a telemarketer. He made presentations in front of the venture capitalists and bankers. He received a simple answer, no! “Did he quit, or did he follow through to start a business?”

Answer is he did start a new venture with one of his friends, and they financed their project with credit cards. They started their business, with revenue in mind, from day one. They provided custom plasmid DNA an essential ingredient for making DNA vaccines. But what they needed was a customer. Finally they found one, a researcher in Kobe. They are in operation now. This is an account based on a true story which really happened several years ago names and places have been changed.

210

That’s what’s called real business spirit. Mori san predetermined his future for himself. He made the right decision and followed it step by step towards a final end without thinking for a single minute to deviate. You are now ready. You planning, the reality of your position in the global market, the role of your government in biotech, the help that you will need during your venture and you are determined with real and the learned experience from other people. What are you waiting for!! Make your own plan and conceptualize! Get your bags packed. Call your friends to be a part of the new adventure and journey. Hit the road. And…well… do you need me anymore? All right then… last words… Bon Voyage!

211

212

The roots of all goodness lie in the soil of appreciation for goodness. ~Dalai Lama

213 Chapter XIV

It’s your Call

214

The inequity lies with the 2/3s of the world’s 6 billion people that live in the developing world. The greatest need is among the 1 in 6 that lives on less than $1 per day.

Where does the inequity lie? With the 2/3 of the world’s 6 billion people that live in the developing world. The greatest need is among the 1 in 6 that lives on less than $1 per day. die unnecessarily each year from diseases that are currently treatable or preventable TB and malaria alone kill 6 million people annually preventable diseases kill more than 2 million children annually to existing, effective health interventions is severely limited for most of those in need for delivery of vaccines don’t regularly reach all of those in need available for many years in wealthy countries, but are not used widely in the developing world.

 Vaccines

 Access

 Systems

 Vaccine

215

Where does the Inequity of Health Lie? In an extraordinary speech on human health crisis in developing countries by Dr. Boris Nikolic, Senior Program Officer at Global Health Discovery, at the Bill and Melinda Gates Foundation, Dr. Nikolic challenged every biopreneur citing the current inequality of health that exist in the world. The guiding principle of the Bill and Melinda Gates foundation is all lives no matter where they are, have equal value. It is foundation’s goal to reduce inequality of all lives.

 Millions

 AIDS,

Dr. Nikolic concluded his callings with the vision of the Gates foundation "There is no bigger test for humanity than the crisis of global health. Solving it will require the full commitment of our hearts and minds. We need both. Without compassion, we won’t do anything. Without science, we can’t do anything. So far, we have not applied all we have of either."

216 The Result: a global health problem that undermines economic development, social and political stability 7 Priority Diseases and Conditions • Infectious Diseases • Acute Diarrheal Illness • Acute Lower Respiratory Infections • HIV/AIDS • Malaria • Tuberculosis • Vaccine DiseasesPreventable • Other DiseasesInfectious • Nutrition • Micronutrient deficiencies • Nutrition for children under the age of 2 • Maternal, Neonatal, Child, and Reproductive Health Diseases and conditions burdenglobal38%Foundationbyaddressedtheofthehealth Injuries 12% Communicable diseases not addressed by the foundation – 3% Non conditionscommunicable47% Total Global Health Burden Disability Adjusted Life Years Lost Foundation Focus

217 Should it be just about Financial Success?

WHY

We must realize that economy is constantly evolving, alternating. We have to comprehend those changing faces of world economy. Economic waves splash and subside and economic currents come and go making room for new knowledge and new elements in our economic environment. It seems we are now swirling in a biotech gyre. Biotech, unlike the high tech dot.coms is altogether a different kind of creature. Biotech and its products have a direct implication on our physical well-being. Biotech economy is extremely slow, highly risky, yet excessively rewarding. Any of the great invention and marketing stories in that field will insist in the truth behind my thought. Therefore, biopreneurs should take the biotech business as a challenge for their intellectual adventures in order to succeed in their business strategies. Challenges associated with intellect invariably require implementation of innovative, as well as alternative, resources, along with conventional methods. do biobusiness

Two motives must coexist in order to succeed in bioventure. One motive is invariably the conventional notion of making money where profits or returns on investment count most. The other is the less recognized, but could be the more compelling motive for doing anything in biotech: intangible societal and health insurance. We have gone through the gyration of dot.com madness. During the dot.com years, many made money while even more lost their wealth. Many confusing and unreliable technological and business concepts were sugar coated with glorious endorsements from Wall Street investment gurus and perpetuated by human greed. A large number of institutional investors, bankers and individual investors, like me, got involved with this exciting transcendent period of world economy, which all took an unexpected downturn towards the ending years of the past millennium.

218

As pointed out earlier, biotech investment can be viewed in the light of acquiring health insurance. We buy health insurance; most of the time free from sickness but are worried that sickness will befall. Human bodies are sophisticated biological engines that occasionally fall short of expectations due to age deterioration and/or accidents.

Biotech business is more than just making money

For those who are wealthy and can afford to put aside extra funds without compromising the standard of living, investing, for them, in biotech companies is a wise thing to do. Though it is true that in the end few will succeed, and only few investors associated with these companies stand to gain direct returns in monetary forms. Direct returns on investments are sweet but we should not fail to see the big and long term picture: humanity gains through the soft side effects produced in the success of companies which turn available medication for ill and aged people general advancement in biotech. Investors need to look beyond the immediate horizon by realizing that soft benefits derived from a successful company are far reaching and can have a profound effect on our own lives. Even if we gather large sums of paper wealth, putting our names on the Forbe’s list of millionaires, a new SARS outbreak in China and the Pacific may not provide a barrier against an invisible virus for us. The West Nile virus every summer scares the hell out us. Or a sudden spread of hepatitis A infections from green onions can put more than 540 people into sick beds the list goes on the flu in new annual strains, the famous anthrax scare a few years ago. There are others like Ebola, malaria, dengue hemorrhagic fever (DHF) killing thousands of people in Africa and other developing countries. We might say that these new bugs are not coming to developed countries but we can not be certain. We presumed similar thing about HIV/AIDS now it is all over the globe. SARS was contained in the Pacific but now Canada has been hit. And, we all know it’s better to prevent illness, rather than to spend sums of money after suffering an outbreak for months and years. We could say it is not going to be in my backyard perhaps, that is wrong too, we just never know our best bet is to find cure with our proactive participation. It does not matter whose company introduces the product, as

I can’t help but to mention a Mr. X. He is a successful business executive and also a colon cancer patient. He resisted investing in biotech companies.

219 long as someone brings forth a curing process for a given disease. Every one can wait for someone to come up with a torch and the first ray of light. But if we think and take it as our social duty or a proof of real humanity to serve people with life-giving medication, the future of bioventure will really be able to enhance more lives.

I approached a global industry leader in software who is involved with more than 50 hi tech companies. He is infected with HBV and must rest regularly. The economic losses due to his disease are staggering. I thought if he could put in a little money into the biotech field, and to a certain extent a little courage a cure might have been more likely. I expressed my concerns and conveyed my thoughts to him. I asked if he would be interested in supporting our HBV cure project. He was not positive about my proposition.

I wonder how much time, productivity, and money are lost due to his ill health. If he had invested in cancer research he could have helped implement the process of discovering a new cure for cancer; and as a result enjoy the added health and vivacity that enable him to contribute more to life, his company, and his community. This is an enlightening event to me.

There are a lot of people like these two men I just described. You may think that I tried to get them involved in business using their soft spots like psychological blackmail. You might also think what those people would not do with medicines or research that was not be complete during their lifetime. But the truth is that you must try to realize things for others too. If they would have realized that the result of research work might be of great help to people with same problems, they would readily invest. If it’s not for you, then it may be for others. That is the exact maxim of bioventure.

Biopreneurs have to understand that they have responsibility to society. Do it for you, do it for society do not do it simply for money. I have mentioned in another chapter that money is the by product of business. And business means the job you are supposed to deal with. So, if you take your venture as one for the sake of social welfare the by product will automatically be generated for you.

The diagram above shows the expenditure ratio in three industries namely, Defense, Biotechnology and Life and Health Insurance. Where the total Chart of investment in several sectors

220 DefenseBudget23% InvestmentBiotech3% Life InsuranceHealth&74%

We must take the initiative to enhance the process of drug development. We cannot afford to wait for someone to bring out the drugs for us from nowhere. Some drugs take up to 40 years or a lifetime to develop, while we lose good friends and family members to diseases. We have already lost good scientists, journalists, national leaders, and we are still losing. Currently, the world is facing new life threatening diseases. Are these not our problem? It takes only one terrorist to bring in a box full of germs to our peril. Therefore, we need to collectively and actively pursue biotech innovations in a global scale perhaps our children will benefit from what we strived for now. If I were asked how much I would pay if my child was infected with a deadly disease, my answer would be up to the last penny in my pocket. I am sure other parents will unequivocally say the same. We do not know at our investment that a cure will definitely develop. However, we do know that a cure has to be discovered in advance of contracting a disease.

221 expended amount is near about 1340 thousand million dollars, the biotech industry received just 38 (3%) thousand million. The defense budget was to utilize almost 996 (74%) thousand million and the rest i.e. 306 (23%) thousand million was spent to cover the health related insurance in the year 2000 in the USA

***********

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“livesourofqualitytheformeasurethebecomesgoalthisattainingtogetwecloseHow

222

SUCCESS

Chapter XV

224 Success Winston Churchill described success as “the ability to go from one failure to another with no loss of enthusiasm.” From this definition one can draw energy to stay on track. This statement doubles something found in ancient India scriptures paraphrased as “in success or failure remain the same”. In other words we are different than or more than success and failure. Keeping our focus on consciousness and inner strength we can remain steadfast in the face of challenges as well as success.

225 Success - definition

Success viewpoints of others

This book would be incomplete if we did not spend a moment pondering the theme of success. Just like the “uncertainty principle” where time and position are not measurable at the same moment, in one situation success is measurable and in another situation success is immeasurable. To explore success further seems to be a dynamic belonging to another or a 5th dimension that is borne out of the interaction of space (three dimensions) and time (the 4th dimension) the fifth dimension. Thus to measure success one may have to include physical achievements with time, which give spiritual (not religious) fulfillments. th dimension ? Point (0) Length(1) Area (2) Volume (3) Time( (4) Success 5th

Many famous individuals have defined success, in their own way, and many not-so-publicly-known people have achieved success in their own manner, equally successful in their own rite. They have had an important and a

Understanding the 5th dimension Success Success has no past and future & it is only in the present and is in one’s fulfillment of spirituality, happiness & wisdom Success

According to a venture capitalist and banker “Success is being content with who you are. Everyone decides which yardstick one will use to

226 broader scheme of life and happiness. After all the primary of goal success is to bring peace and happiness to our personal life without which success has very little meaning. Winston Churchill described success as “the ability to go from one failure to another with no loss of enthusiasm” from this definition one can draw energy to stay on track. On October 29, 1941, U.K. Prime Minister Winston Churchill visited Harrow School to speak to the students. When he was invited to give his speech, Churchill stood up and said, "Never, ever, ever, ever, ever, ever, ever, give up. Never give up. Never give up. Never give up." It is important to reach a goal in the journey of one’s life including one’s ventures in bio business. Here we will share salient outcomes of a short survey that produced very useful and thought provoking views of success that we as biopreneurs can use in our journey.

227 measure one’s personal success it could be money, fame, friends, and family (MF3). When you go to sleep at night, if you are content and satisfied with yourself, you are within the perimeter of success. Don't let anyone else define and shape your measurement of success, because all of those measures of success are relative, ephemeral, meaningless and irrelevant. They lack an internal compass which only you can see and navigate by….”

A technocrat changed his view on success through his life changing experience. He wrote, “Since my near-death experience about three years ago, my definition of success has changed quite a bit. In my three decades of technology based career, the continuous climb to the top of the corporate ladder had caused a negative shift in my personality. I lost focus on the important things of life.

A scientific researcher wrote “Achieving my goals in a simple, measurable, attainable, realistic and tangible (SMART) manner within a time frame decided by myself in tandem with a balance between my professional and personal life.”

Money, position, power, and fame became the center piece of my everyday life. My actions and activities affected people around me. I was unaware of how my goals and aspirations had changed me.”

He further added, “I have revived my outlook on what is truly important in life. Yes, I am still a hard core IT professional, but that is not what makes me successful. In today’s world, I am more successful than I have ever been in my life because I have a new level of respect and loving relationship with my families. My co workers admire me because I am willing to assist when needed, my friends laugh with me as I can laugh at myself; and my adversaries fear me since I have no fear”

Another Finance-individual states success as the satisfaction of making a positive difference, howsoever small, to an individual, family, organization, group, society, nation and the universe at large, irrespective of personal benefits.

It is being able to achieve the goal one has set for oneself. The goal can come in many forms, material, spiritual, and social. If at the end of the journey of life, amidst ups and downs, one can discover life's true purpose and have the courage and will to follow one’s destiny, then that is success.

An artist describes success as to be able to have an impact on people and the planet, to be useful to the world. She added “this is the only measure of success for me. It does not necessarily mean I need to be recognized for it, just knowing I have been a part in building a better future for everybody”

Thankyou.

Finally, success is earned in the road to "Know Thyself." To have success is to truly understand one's potential gained through reflection, for it is in understanding who, what, why and how you do things that give you the ability to have clear conception, a tenacious confidence, a consistent concentration towards personal and professional commitments.

Know Thyself

A business person sees success as “to look back and around and see the people you helped to grow, the things you accomplished and the friends you have, is to be sure that you stand on your own feet having been honest and fair in every business you did, and because of that, have a peaceful message.”

228

… with an eternal Sanskrit saying……. Tamaso Mā Jyotirgamaya (Lead us from darkness to Light).

229 www.biopreneur.org

230

SUPPLEMENTS

231

232

233 SUPPLEMENT-I  Package of Studies to Assess Developability  List of Studies Needed for IND Registration  Optional Tests Depending on Phase I/IIa Strategy  Clinical Trial Cost and % of Risk

234 Supplement-I Type Of Study (Study Number) Species/# Glp Ames Bacterial Mutation In vitro Yes Mouse Lymphoma Assay In vitro Yes Bioanalytical Method Development and Validation Human Yes GLP Validation Rat Plasma Rat Yes GLP Validation Dog Plasma Dog Yes In Vitro Metabolism Metabolic Stability in Blood and Against a Variety of Endogenous Enzymes In vitro variety of enzyme and fractionscellular No Caco 2 Cell Permeability (DM2) or MDCK Cell Permeability In vitro No Single Dose IV/Oral Pharmacokinetic Screen in Mice or Rats Mice or Rats (3-4 per dose route) No Single Dose Pharmacokinetics / Bioavailability Assessment in Rat Rat (18) Yes Single Dose Pharmacokinetics / Bioavailability Assessment in Dog Dog (4) Yes MTD Assessment Mouse or Rat Mouse (52) or Rat (52) Yes Repeat Dose Range Finder & Toxicokinetics Rat (90) Yes Repeated Dose Range Finder & Toxicokinetics Dog (4) Yes Package of Studies to Assess Developability

235 Type of Study (Study Number) Species/# GLP Formulation Development and Optimization Including Sourcing Drug Substance Stability Formulations Used in Toxicology Testing Yes Prepare CMC Specifications for Clinical Trial Materials Yes GCP & GMP Toxicity Assessment in Rats After 4 Weeks Exposure & Toxicokinetics Rat (134) Yes Toxicity Assessment in Dogs or Monkeys After 4 Weeks Exposure & Toxicokinetics Dog (32) or Monkey (32) Yes ADME and Metabolite ID Rat Rat (66) Yes ADME and Metabolite ID Dog or Monkey Dog (6) or Monkey (6) Yes Antigenicity Assessment in Rodents Guinea Pigs or Mice Yes Antigenicity Assessment in Monkeys Cyno Monkey Yes Cardiovascular Safety Telemetry in Conscious Animal & PK/PD Dog Monkey(4),(4) or Minipig (4) Yes Irwin Test of Behavior and Body Temperature Rat (25) Yes Normal Pulmonary Function Rat (30) Yes HERG K Channel CHO Cells Patch Clamp Electrophysiology In Vitro Yes Rabbit Purkinje Fibers In Rabbitsitu(6) Yes Type of Study (Study Number) Species/# GLP Brain Permeation MDCK Cell Lines (DM7) In vitro No In Vivo Bone Marrow Micronucleus Test in Rodents (GT3) Rat or Mouse Yes List of Studies Needed for IND Registration Optional Tests Depending on Phase I/IIa Strategy

236 Type of Study (Study Number) Species/# GLP Segment I: Fertility Assessment in Rats (RT1) Rat Yes Segment II: Embryotoxicity Assessment in Rats (RT2) Rat Yes Segment II: Embryotoxicity Assessment in Rabbits (RT3) Rabbit Yes Validation Assay in Rabbit Plasma Rabbit Yes Crossvalidation Assay in Rat Fetal Samples Rat Yes Segment III: Peri & Post Natal Assessment in Rat (RT4) Rat Yes Type of Study (Study Number) # Subjects Rising Dose Safety, Tolerance and Pharmacokinetics in Healthy Subjects Following Single Dose IV Administration (CP1) 20 - 28 Safety, Tolerance and Pharmacokinetics in Healthy Subjects Following Single Oral Dose or Other Preferred Route (CP2) 18 Safety, Tolerance and Pharmacokinetics in Healthy Subjects Following Repeated Dosing (CP3) 6 18 Efficacy in Patients Following Administration By Preferred Route(s) (CP4) 20-40 Early Human Studies Aimed at Providing Clinical Proof of Concept

Average years to completion: 1 1.5

The costs of conducting clinical trials and the animal tests required to support these clinical trials

Number of clinical trial subjects: 100 500 Cost per-subject: $8,000 $15,000

Probability of eventual FDA approval: 70% Risk: 30% FDA approval

Time to completion: 0.5-2 years

Approval costs (Prescription Drug User Fee Act II fee and the remainder for preparation of the NDA or BLA): $1 $2 million ($400,000 for the PDUFA II fee).

Probability of eventual FDA approval: 20% Risk: 80% Phase II

237

Average years to completion: 1.5 Supporting animal studies: ~$1 million

Phase I

Probability of eventual FDA approval: 30% Risk: 70% Phase III

Average years to completion: 3.5 years

Clinical Trial Cost and % of Risk

Supporting animal studies: ~$500,000

Number of clinical trial subjects: 1,000 5,000 Cost per subject: $4,000 $7,500

Number of clinical trial subjects: 20 100 Cost per subject: $10,000 $15,000

Supporting animal studies: ~$1.5 million

Probability of eventual FDA approval: 80% Risk: 20%

238

239 SUPPLEMENT-II

DiscountedTime-Value-Money&CashFlow

240

241  n n FVPVr  1

Discounting is

or discounted

Present value is the value today of a cash flow at a specific date to a specified is the discounted present value of the future cash flow (FV) the nominal value of a future cash the interest rate. the process of present value (NPV) present value number of

calculating present values. Sometime PV also written as net

(DPV)  n n n FVd r FV PV    1 (1) d is the discount factor that is i/(1+r) N is the

Time-Value-Money & Discounted Cash Flow

FV is

years before the future cash flow starts. For multiple cash flows in multiple time periods following equation is used      n t tt r PVFV 0 1 1 For each cash flow (FV) at a time period (t), summed over all time periods. n n r FV PV (1)  

rate. PV

earn interest at

flow I is

to be received

in the future, assuming an opportunity

Following graph demonstrates how the present value changes with time (year) at different discount rate.

242

243 Supplement-III Snap Shot of Bio-VC

244

Strategic VCs a small division of a large technology company

(pharmaceuticals/high-tech)

245 A Snap-shot on bio-Venture Capital Types of VCs:  Angel investors  Financial VCs  Strategic VCs Angel Investors  Typically a high networth individual  Often with a high tech/biotech background, and has proficiency to judge high-risk investments  Investment usually < $1M in a early stage company Motivation:  High return on investment via exit or liquidity event such as: o Initial Public Offering (IPO) of company o Subsequent financing rounds  Has interest in biotech industry Financial VCs  An investment firm  Most common type of VC  Capital raised from institutions and wealthy individuals  Often organized as formal VC funds, with limits on size, lifetime and exits strategy  Sometimes organized as a holding company  Fund compensation: carried interest  Holding company compensation: IPO  Fund sizes: Motivation:~$25-100M  Purely financial: maximize return on investment (ROI)  IPOs, Mergers and Acquisitions (M&A)

 Typically

 Process

The Funding Process: Single Round and interested VCs connect each other makes its pitch to multiple VCs: Business plan, executive summary, financial projections/pro forma with assumptions, competitive analysis VCs engage in due diligence: market, competitiveness, business development, current scientific team and management and accounting lead investor is identified, rest are follow on following are negotiated: Company valuation of round investor share of round of investment repeats several times, and builds on previous rounds

 Typically

 Company

Typical VC Investment Contract/Term Sheet Initially laid out in a term sheet (non binding!) Typically comes after a fair amount of due diligence important elements/rights: Board seats and reserved matters Drag-along and tag-along rights Tag along rights: follow founder sale on pro rata basis Drag along rights: force sale of company



 Size



 Assist

 May



 Legal

 Terms



 Technological,

 Bioventure



 A

246 

 Not

 Other



 Lead

 The

 Interested

Examples: Mitsui, Takeda, Softbank, Intel, Cisco, and Dell, Corporate funding for strategic investment companies whose success may drive revenue growth of VC corporation exclusively concerned with the ROI provide bioventure with valuable connections and partnerships take a hands-off role in funding

247  Liquidation and dividend preferences  Right of first refusal on sale of shares  Liquidation preference: multiple of investment  No compete conditions on founders  Right to participate in subsequent rounds (usually follow on)  Later VC rights often supersede earlier  Anti-Dilution Protection • Re compute VC shares based on subsequent “down round” so that issuing more shares does not “dilute” the value of VC’s holding • Two re computation methods: weighted ratchet and full ratchet  Participation rights: VCs can participate private sales  Matters in bridge rounds and other distress circumstances Corporate boards  Not involved in day to day operations  Hold great control in major corporate events such as sale, mergers, acquisitions, IPOs, and bankruptcy  Lead VC in each round takes one or more seats on the board  Reserved matters (approval or veto):  Any acquisition, merger, sale, and liquidation  Budgetary approval  Executive appointment or discharge 

 VCs



Convertible security-position enables them to exercise control through effective voting rights without owning a majority of voting shares (normally common stocks) places the VCs at a preferable position in claiming assets, should the firm fail, while retains the right to participate in company’s upside trend.

Strategic changes in the core business and Convertible Securitiesalmost always take a position on some type of convertible securities either convertible debt/notes or preferably convertible preferred share.

248

Exit Strategies defined by the VCs  VCs are not long-term equity investors. They seek to add values to the portfolio companies and at an appropriate time harvest their investment (normally 10 fold ROI).

(1) Initial Public offering to the outside investors VCs normally do not exit at the IPO. They hold on to the share for potential growth and dispose at a suitable financially strategic time.

(3) Redemption option In rare occasion, VCs sell their share of the company back to the founders/biopreneurs.

(2) Merger and Acquisition (M&A) simply sale the company to a bigger biotech or pharmaceutical company

Three primary Exit routes

249 Supplement-IV

Biotech Around the World

250

Biotech Around the World Biotech is one of the major growing sectors in world economy. Since its birth in ’70 biotech field grew extraordinarily due to the rapid discovery and development of applicable technologies in drug screening methodologies, PCR, monoclonal antibodies, genomics, proteomics and advance

Theinstrumentation.currentglobal

251

biotech drug market is valued over $80bn with double digit growth distinctly higher than that of the overall pharmaceutical market. According to the industry analysts and academicians biotechnological market is to continue its strong growth, with exciting new developmentsboth technologically and commercially over the next 12 years. Bio world primarily can be divided into regions (i) developed/established and (ii) emerging/high growth (See Map above).

252 Current World’s biotech revenue is over US$100B while that of pharmaceutical revenue is around US$1000B. data source Burrill Company& . World’s Major Biotech Regions:  USA  Canada  Western EU  Eastern /ScandinaviaEurope  China  India  Japan  South Korea  Malaysia  Singapore  UAE/Dubai  Kuwait  Israel  Brazil  Chile  Argentina  Australia  New Zealand  South Africa USA $89B 85% EU $12B 12% Asia Pacific $3.5B 3% Bio-Market Size in Three Major Regions (based on sales/revenue)

to reach US$25 billion by 2010 as predicted by the Japanese government. It is also expected to create over thousand new job related to biotech businesses. Driving force behind this development primarily overhaul strategic changes in Government policies regarding technology transfer from academic to industry, cash infusion into the entrepreneurial bioventure and relaxed regulation on academicians. 40% of the current market in Japan is in the bio pharmaceuticals and rest comprise of biomass, processes, food, diagnostics and services. BioIndia India has been providing the developing world comprise of 2/3 of the world’s population with the necessary medicines from common cold to HIV, from antibiotics to anti-diabetics for the past several decades. Over these periods India has developed a well developed drug manufacturing industry that now poised to compete with multinational pharmaceuticals companies such as, Pfizer, Roche, Merck and GSK globally. Initial model of the Bio

In contrast to the US and EU where small entrepreneurial companies made the first steps into biotech, large Japanese companies lead the way in Japan’s early bioventure business. In Japan traditionally, large firms are responsible for seeding and nurturing innovations that ultimately create new ventures, as opposed to biopreneurial initiatives or venture capital seeding as in the United States. Typically, these companies will incubate a venture as a special department or project until it is ready to conduct business on its own an intrapreneur model. Around 46% of bioventures are spin offs from the larger companies that are seeking to commercialize academic research. However, new more independent model is emerging as more venture capital companies are established. The Japanese government is also a big biopreneurship player that has funded long term projects that would not have gained market support

BiopreneurshipBioJapan in Japan

253

BioJapanotherwise.isexpected

254 industry was to provide medicine to the bottom of the pyramids emerging as the model to provide cost saving options to the top of the pyramid (CK IndianPrahalad).pharma and biotech corporations have obtained clearance from FDA to launch several generics drug in USA and many are in the pipelines. More and more biotech and pharma companies in India are partnering with their counter parts in USA for pre clinical and clinical studies an emerging bio outsourcing economy. India has developed a solid infrastructure for pre clinical and clinical studies that is approved and recognized by FDA. Recently FDA expressed its intend to house inspectors and agents in India to assist Indian and USA bio companies in their drug development, manufacturing and regulatory processes and compliance protocols A step forward for BioIndia.

Current share in the global market is just 1.1% percent but it has the necessary ingredients to become a prominent player in the global biotech market. BioIndia is expected to grow over US$5 billion by 2012. BioIndia is one of the leading members of the Asia pacific region with increasing collaboration with BioJapan the second largest bio market of the world. driving factors for BioIndia’s growth are: large and strong pool of qualified scientific researcher trained management and leaders and upcoming research facilities and institutional networks. bio-diversity species commitment of local and central government

 High

 Strong

 A

 Existing

The

 Internationally

BioIndia Major Areas of Concentration

Bio generic India's long presence in the generic drugs manufacturing enable India to enter into the Bio generic pharmaceutical global market. The biopharmaceutical segment contributed about 75% of the Indian Biotech market.

 Stem

products

 Gene therapy for incurable disease  Mass production of protein DNA chip system  Production of high value protein

It is estimated that there are more than 600 biotechnology companies in Korea with over 61 per cent are biopharmaceuticals and 39 per cent non biopharmaceuticals such as bio foods, bio chemicals, bio environments, bio fuel, medical devices, and bioinformatics.

BioKorea

 Therapeutic

255 Agro biotechnology. India’s 25% GDP is agriculture based; and agriculture and allied fields employ over 60% of the work force. Indian Government and the market force drive this sector of the biotech venture in India.

 Biomaterial

Opportunities in BioKorea Korea’s mid term and next generation project will be focused on: protein by culture cell research and development by intelligence-type bioinformatics

Clinical Trials India offers great advantages in conducting clinical trials. These include efficient patient accessibility and enrollment, an excellent pool of qualified doctors, investigators, and health care professionals; and compliance with the ICH and GCP guidelines.

animal cell

The Korean Government is firmly committed to the biotechnology and authorized to invest US$1.35 billion. This is in addition to state based US$9.2 billion R&D projects and raising another US$22 billion through issuing state based bonds to foster the commercialization of next generation technologies, particularly biotechnology. The leading private company groups also established their biotechnology companies to pursue the business opportunities. Academic or research institutes' engagement in the bio research is active.

Investigating and developing genomic drugs and vaccines for disease prevention and  Cure particularly for cancer, hepatitis, and AIDS.  Agro-biotechnology.

 One of the government’s strategies in developing biotechnology has been to establish biotechnology parks. BioChina focuses on  Improvement of Anti bacterial drug manufacturing.

 Amino acid industry engineering.

New drug target research and development, mainly on cancer therapeutics.



 Tracing and following up global modern biotechnology growth. Developing protein technology and plant genome technology.

 New vaccine and enzyme reagents development, particularly for HBV, HCV, and AIDS.



With China’s rapid economic development, per capita incomes continue to increase, particularly in major urban areas. Better healthcare products and services are an increasing focus for wealthy population. Biotechnology is therefore expected to continue to grow at over 10 per cent per year for the next decade or two. Biotech resources and manpower are being consolidated into major clusters such as Shanghai, Beijing, Guangzhou, Shenzhen, Changchun, and Shijiazhuang.

 Improvement on traditional Chinese medicine active components.

BioChina’s strategic plan focuses on

256 Bio-China



The Chinese Government has targeted biotechnology as a priority. Biotechnology is one of the fastest growing industries in China. In China current 'me too' products represent 90 per cent of total market Chinese drug market. China has very few of its own patented drugs on the world market. This situation has been a major concern of the Chinese Government resulting in the concerted effort to make biotechnology a key driver in healthcare and the drug industry.

 Developing active protein/peptide for drugs, mainly on interferon, human hormones.

R&D expenditure in the UK is estimated to be US$1.0 billion, and an estimated 15,000 people are employed by the biotech companies. More than 80 per cent of all German biotechs are small and medium enterprises and have 50 or fewer employees. Only seven per cent employ more than 100 people. Germany Germany is one of the leading countries for biotech in Europe. Germany’s biotech sector has close to 600 biotech companies, employing approximately 40,000 people, of whom the maximum are in basic research. Germany is well-known for its strengths in basic research and for its excellent universities and research centers. German investments in R&D were over US$1.5 billion 15 per cent of European biotech R&D spending. Funding of biotech companies remains strong in fact, 40% of all European biotech venture capital is invested in Germany.

EU-Biotech

German biotech companies’ primary focuses are in the fields of therapeutics, platform technologies, diagnostics, bioinformatics and proteomics. In the therapeutics area oncology, infectious and cardiovascular diseases are the main concentration.

The European biotech market is around $12 billion, of which human healthcare is the largest market segment (65%); bio food product accounts for 10% of the total market and the rest comprises agro-products and industrial enzymes. Despite having a large share of the world market and in spite of an intense dynamism that has been observed recently in EU biopreneurship, Europe lags behind the US. United Kingdom Accounting for nearly 50% of the total market size as well as research expenditure in biotech UK simply dominates Europe’s biotechnology industry. UK is currently the major site for biopreneurs and bioventures. There are almost 600 biotech companies in UK operating in the various leading sub sector of biopharmaceuticals field. Less than 25% of these biotechs are public and the rest are small privately held.

257

Germany is considered to have a lead over UK in the diagnostics segments such as Pregnancy Test kits, Diagnostic Quick Tests, Diagnostics/Immunoassays, Cancer, Cardiovascular Diseases, and Blood Factors. Biotech is rapidly gaining momentum in Germany in fact, experts believe that 30% of the economy will depend on biotech by 2015.

There are more than 400 biotech companies in France. The biotech sector employs around 7000 people. Approximately 4000 of these people work specifically in research and development. Companies that are indirectly related to the development and production of biotechnologies employee additional 20,000 people.

The biotech industry in France is driven by: Government and private funding to academic research Technology transfer between academia and biotechnology companies Venture capital and stock markets Pharmaceutical biotech alliances The growth of the healthcare market Switzerland

A snapshot of the Swiss biotechnology industry: Switzerland is a key player in the European biotechnology arena, because of its pharmaceutical and food companies. There are around 140 biotechnology companies 5600 people employed third in Europe (behind UK and Germany)



The French biotechnology industry is the third largest in Europe, behind the UK and Germany in terms of the number of listed companies. French biotech expanded international since the 1990s and is continuing to develop and expand at a rapid rate.

France

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 Approximately $2.5 billion industry turnover second in Europe. Europe remains optimistic about the fundamentals and longer term prospects of the bioindustry. Experts believe the European market for biotech products will quadruple within 10 ~~~~~~~~~~~years.

General Disclaimer

259 Copyright © 2008, Biopreneur. All rights reserved. California Takshila University (CTU) Authors wish to recognize and acknowledge the dedication and sincerity of Mr. Warren Spies of Tech edits (www.technoedits.com) in making this body of work.

In many instances, for the sake of language clarity, certain text material is utilized from a variety of sources. Ryan Badya, Miyuki Shiratani, and the editors (dba Tech Edits) wish to claim “fair use” of all such material. In most cases, unless otherwise noted, the chief source in use was GNU Wikipedia, Inc, “the free encyclopedia.” Additional Sources: 1. From Financial Flop to Billionaire, by Kenneth Chan 2. Indian Express Group (Mumbai, India, How to evaluate biotech companies? 3. www.biopreneur.org

Technoedits.com

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261 “Yes we can” ~~ Presidential victory speech, Barack Obama

262 Writing the book, Biopreneurs: The Molecular Millionaires we, Ryan Baidya and Miyuki Shiratani, have tried to cover the ordinary and extraordinary resources that readers can utilize to understand the biotech industry. While writing the book, we kept in mind those without biotech backgrounds. So, the book does not emphasize dry hard facts from life science subjects, or financial figures from the stock market. It is rather a lucid situational analysis of the biotech industry. It strives to educate prospective investors in how and why to invest in start-up ventures, and early stage companies. In addition, it also provides tools, knowledge, and expertise, identifying appropriate times to realize profits in a particular field. In a nutshell, we have earnestly tried to incorporate as much information as possible to make this book your best friend, philosopher and a guide for those people interested in biotechnology. “..Vision without action is a daydream. Action without vision is a nightmare..”

Biopreneurs: The Molecular Millionaires

Articles inside

Supplement-IV

Supplement-III