A brief presentation for the upcoming Bioconference Live meeting

1. Bridging the Valley of Death:
A Tale of Two Cultures
Robert W Malone, MD, MS
Consulting, Vaccines and Biologicals
@ RWMaloneMD.com
Your world is our world

2. What is the success rate for
Biotechnology products?
Therapeutic rDNA Humanized Chimeric Synthetic NCE
area mAb mAb Peptide
Anti-infective 23% ND ND 13% 28%
Anti-neoplastic 17% 25% 29% 33% 16%
CV/hemostasis 26% ND ND 22% 18%
Endocrine 58% ND ND 30% 18%
Immunological 41% 17% 29% 6% 15%
All products 32% 18% 26% 20% 17-23%
Generally, one in four, to one out of five biotechnology products in development
achieve licensure and marketing !
Source: Tufts Center for the Study of Drug Development
New Biotechnology Therapeutics
Challenges for the industry
Janice M. Reichert, PhD (2004)

3. What is the cost of developing
Biotechnology products?
• Average Cost To Develop A New Biotechnology Product Is $1.2 Billion.
• A new biotech product takes 97.7 months (8 years) on average to wend its
way through clinical development and regulatory review (8% longer than
traditional pharmaceuticals)
• Average out-of-pocket cost (cash outlays) per approved biopharmaceutical
for the preclinical period totaled $198 million. When capitalized, this
estimate is $615 million per biopharmaceutical.
• Average out-of-pocket clinical period cost per approved biopharmaceutical
was $361 million. When capitalized, this estimate is $626 million.
• Capitalization increases biopharmaceutical costs relative to traditional
pharmaceutical costs because of a longer development timeline and a
higher cost of capital.
• Biopharmaceuticals had an overall clinical approval success rate of 30.2%
vs. 21.5% for traditional pharma firm pipelines.
Source: Tufts Center for the Study of Drug Development
2006

4. What constitutes the “valley of death”
for technological product development?
Fundamental challenges involved in transitioning from
research and development discoveries to commercial
products and processes
Operational implementation of R&D discoveries is
frequently difficult
Transitions from discovery to product implementation often
result in "skeletons in Death Valley.“
In crossing the valley, new technologies and product
candidates must survive two types of challenges;
1) Can the candidate meet performance requirements,
and
2) Will it survive being “tossed over the fence”
FROM: RESEARCH TO OPERATIONS IN WEATHER SATELLITES AND NUMERICAL WEATHER PREDICTION
CROSSING THE VALLEY OF DEATH
Commission on Geosciences, Environment and Resources
National Academiy Press (2000)

5. What fence?
Discovery
Research
Culture Product
Corporate environment Development
Business practices
Capital sources Culture
Regulatory environment Corporate environment
Project management Business practices
Capital sources
Regulatory environment
Project management

6. Eight Critical Determinants of Success
(Bioshield testimony, Major General Dr. Phillip Russell)
1. A credible threat determination and threat analysis (clear unmet medical
need)
2. A defined deployment and utilization policy for the product (target product
profile)
3. Government-wide agreement on the requirement (internal stakeholder
consensus)
4. A mature science base demonstrating proof of principal and ability to
manufacture (POP, POC and feasibility)
5. Funds and funding mechanism for early and mid-stage industrial
development (adequate capitalization)
6. Sufficient acquisition funds (obligation authority) to provide the incentive for
industry (existence of a well defined market)
7. Consultation and support for the manufacturer from the acquisition agency
and the FDA to assist in meeting regulatory requirements (reasonable
regulatory pathway to licensure)
8. Ability to indemnify the manufacturer (manageable safety/liability risk)

7. Back to that fence…
(pssst… it’s also cultural)
Discovery
Research
Cultural focus on innovation and disruption
Corporate environment more academic
Business practices relatively unstructured
Capital sources directed to opportunity area, generally risk tolerant
Regulatory environment focused on research risk and ethics
Difficult to predict timelines, milestones, budgets
Advanced Product
Development
Cultural focus on compliance and predictability
Corporate environment more commercial
Business practices highly structured
Capital sources milestone driven, risk averse
Regulatory environment focused on
GXP, QA, clinical safety and efficacy endpoints
Project management is critical to success

8. Anecdotal observations of
one consultant over 20 years
 New funding is often immediately followed by profligate
spending, subsequently followed by “biotech hell” when
funds near exhaustion and milestones have not been met.
 Innovation and experimentation is prone to creating
regulatory licensure challenges.
 Discovery researchers are often unaware of regulatory
challenges and key obstacles to licensure.
 Teams involved in advanced product development are
often relatively uninformed about the underlying scientific
and medical rationale of the product.
 Advanced development teams rarely communicate well
with the discovery research scientists and the research
teams that have detailed understanding of the product KISS !
candidate and underlying science.
 It always takes more money and more time to get to market
than you think it should.

9. What does the future hold for
Biotechnology product developers?
 Outsourcing (virtual pharma business model)
 Rigorous project planning and management practices which couple technical
milestones to disbursement of project funds
 Fewer startups, with launches requiring a more advanced “technology
readiness level”
 Increased reliance on financing new technology development via non-dilutive
capital (government, NGO), partnering, and profit from existing operations
 Earlier stage emphasis on viability of product development pathway by non-
dilutive capital sources, and increased insistence on meeting product
deliverables
 Discovery and pre-clinical stage biopharmaceutical product development
activities must be aligned with the regulatory, QA, manufacturing, and clinical
safety/efficacy demands of advanced development.
 The bulk of the out of pocket financial risk in biopharmaceuticals is incurred
during advanced development, and additional steps to de-risk this investment
must be integrated throughout the entire product development process.

10. How can you help bridge the “Valley
of Death” for your company and
product?
 Manage project funds carefully from the outset using
industry best practices (project management tools and
planning).
 Employ leaner and more tightly controlled business
practices (particularly in the discovery research
phase).
 Continually seek ways to understand, mitigate and
address CMC, Regulatory Affairs, Clinical
Development, Quality Assurance and licensure
endpoint risks and considerations from the very
KISS !
beginning of the product development.
 Continue to keep the discovery research scientists
and team engaged in the development of the product
throughout the advanced development process.

11. Questions and
discussion?
Thank you for your interest, attention
and participation, good luck with your product,
and please remember to Keep It Simple!
Robert W Malone, MD, MS
Consulting, Vaccines and Biologicals
@ RWMaloneMD.com
Your world is our world
RWMaloneMD@gmail.com