Big change can come in small packages.

That pretty much sums up how Food & Drug Administration officials feel about a change in the type of companies that are submitting new drug and biologic applications to the agency for review. Rather than teaming up with Big Pharma partners during the development process, FDA says, more and more specialty biopharmaceutical companies are filing for approval alone, backed by their venture capital funders.

And that is having significant implications on how FDA does business.

“We’re seeing a lot of emerging companies bringing things all the way through the approval cycle,” FDA Office of New Drugs Director John Jenkins, MD, said during The RPM Report’s FDA/CMS Summit for Biopharmaceutical Executives in Washington, D.C. on December 8.

“What I was used to in the past was that these companies were getting bought out at the end of Phase II or before they submitted the application. Now, more and more, we’re seeing them carry the application all the way through approval, and sometimes even marketing the drug themselves,” Jenkins says. “The dynamic has changed. They are not getting bought out after they are approved.”

For many of those smaller companies, the go-it-alone strategy has paid off: one-third of the products approved by FDA in the last two years have been from “emerging sponsors,” which Jenkins defines as a company submitting an NDA or BLA to the agency that does not already have an approved application to market a drug or biologic.

Many emerging sponsors are focusing on orphan indications and treatments for rare diseases—programs that are being rewarded with venture capital funding and first-cycle approvals from FDA. The 2011 approval list, for example, includes the first treatment for Hodgkin’s disease in 50 years (Seattle Genetics Inc.’s brentuximab) and the first treatment for myelofibrosis (Incyte Corp.’s ruxolitnib).

But the shift also comes with challenges. Emerging sponsors tend to need more advice and meetings with review staff than larger pharmaceutical companies, Jenkins says, which means additional constraints on FDA’s time. And, he says, some of the applications that are submitted by first-time filers don’t reflect those conversations, suggesting that emerging sponsors need additional clarity from the agency.

For more “experienced” drug companies, the impact is two-fold. First, the additional time FDA needs to spend with emerging sponsors may mean less time for reviewers to answer questions about other development programs and applications under review. But it also means Big Pharma may be missing out on some opportunities to help develop or market breakthrough new therapies as companies continue to trim R&D budgets.

Whether the shift toward emerging sponsors is a permanent change or simply a pendulum swing away from Big Pharma partnerships is impossible to say. But based on statistics from the last two years, at least, it looks like the trend is here to stay. And that changes the game for FDA and industry alike.

One-Third of the Approval Pie

Of the 30 new molecular entities approved by FDA in 2011, one-third were filed by companies that did not already have a product cleared for marketing by the agency. (See Exhibit 1.) It’s a trend over the past two years that has not gone unnoticed by FDA’s Office of New Drugs.

“We’re all seeing a rapid shift in the drug development paradigm from Big Pharma research and development to small companies with venture capital-backed drug development programs,” Jenkins told the FDA/CMS Summit. “It seems like every meeting I go into, internally, it’s a company I’ve never heard of....That’s rapidly changing the dynamic both for you and for us.”

Emerging Sponsor Approvals

Sponsor	Application Type	Drug Name	Indication	2011 Approval Date
ParaPRO	NDA	spinosad (Natroba)	head lice	January 18
Trovis Pharmaceuticals	NDA	vilazodone (Viibryd)	depression	January 21
Human Genome Sciences	BLA	belimumab (Benlysta)	active systematic lupus erythematosus	March 9
Vertex	NDA	telaprevir (Incivek)	hepatitis C	May 23
Optimer Pharmaceuticals	NDA	fidaxomicin (Dificid)	Clostridium difficile-associated diarrhea	May 27
Seattle Genetics	BLA	brentuximab (Adcetris)	refractory Hodgkin's and systemic anaplastic large cell lymphoma.	August 19
Shire Orphan	NDA	icatibant (Firazyr)	acute attacks of hereditary angioedema	August 25
Apopharma	NDA	deferiprone (Ferriprox)	iron overload due to blood transfusions in patients with thalassaemia	October 14
Incyte	NDA	ruxolitinib (Jakafi)	myelofibrosis	November 16
Regeneron	BLA	aflibercept (Eylea)	wet age-related macular degeneration	November 18

The Food & Drug Administration

The good news, Jenkins said, is that some of those programs have been very successful.

He pointed specifically to Seattle Genetics’ success in getting brentuximab (marketed as Adcetris) to approval with very large response rates in patients with advanced Hodgkin’s disease. And in just three years, Incyte took ruxolitinib (Jakafi) from early-stage development to FDA approval for myelofibrosis. “It can be done, and it can be done by a small company,” Jenkins said.

That kind of lightning-fast development plan is due in part to the fact that many emerging sponsors are focusing on treatments for rare diseases and orphan indications—the kind of products that FDA will designate as priority review and quickly approve, if the data meet FDA’s standards. About one-third of drug approvals each year are for rare diseases, Jenkins said, noting that while larger companies are jumping into the fray, “it seems to be a great area of focus for a lot of small companies.”

Seattle Genetics’ Adcetris and Incyte’s Jakafi, for example, were approved by FDA in less than six months. Two other priority review novel drugs, Vertex Pharmaceuticals Inc.’s telaprevir (Incivek) for hepatitis C and Optimer Pharmaceuticals Inc.’s fidaxomicin (Dificid) for Clostridium difficile-associated diarrhea, were approved by FDA six months after submission. Also see "FDA’s Banner Year for Drug Approvals: Time to Change the Focus" - Pink Sheet, 1 January, 2012.

Still, the majority of applications for novel products in 2011 were either from established drug companies or smaller companies working with larger partners. GlaxoSmithKline Inc., for example, partnered with smaller companies on with three approvals of new molecular entities, while Bristol-Myers Squibb Co. and AstraZeneca PLC each had two novel approvals.

Johnson & Johnson also chalked up a number of novel approvals in 2011: Edurant (rilpivirine) for HIV infection, which was developed internally at J&J; rivaroxaban (Xarelto) with Bayer AG; and Zytiga (abiraterone), developed by Cougar Biotechnology Inc., which J&J acquired in 2009. J&J also counts Incivek (telaprevir) in its 2011 approval column: Vertex Pharmaceuticals Inc.submittedthe NDA, but J&J’s Janssen-Cilag International holds the European rights.

A Need for Greater Clarity

But the actual source of innovation is less the issue for FDA’s review teams than is the sponsor engaged in the dialogue surrounding approval. So the fact that Cougar first developed Zytiga doesn’t matter when it comes to the nuances of communication at the NDA stage: it is J&J’s familiar team that interacts with FDA.

But when a Seattle Genetics or an Incyte takes a product through FDA on its own, that is a very different proposition. And that is having a direct impact on the way that the agency does business.

At the most basic level, interacting with emerging sponsors on a development program takes more time on the part of FDA staff, Jenkins said at the FDA/CMS Summit. “Inexperienced companies need more advice and meetings with us than the large companies do who have more experience. And we also find that these small companies need greater clarity from us in the advice they receive.”

For example, Jenkins said, when there is a potential issue with a development program—perhaps an endpoint or safety issue about which FDA is concerned—it is common for a reviewer to tell sponsors it will be a “review issue,” FDA-speak for “let’s drop this for now and argue about it again later.” It does not mean the issue is resolved. But what a sponsor that has not gone through the process often hears is “’that will be just fine,’” Jenkins said. “And that’s not what we mean.”

“We try not to be overly prescriptive during the development phase in telling you exactly what you have to do, because there are often multiple ways to get to the end,” he said. “So we give you advice. Sometimes companies choose not to follow the advice. And they want to know: ‘What do you think of this?’ And we say, ’We need to see the data. It will be a review issue.’”

“When we see the data, it may be OK. It may not be OK. But all too often I think the small companies go away and saying ‘Well, FDA said it’s fine. We are good to go.’”

Ed Mathers, a partner in the healthcare and biopharmaceuticals practice at the venture capital firm New Enterprise Associates, took issue with Jenkins’ portrayal of emerging sponsors as “inexperienced.” In order for small companies to receive VC funding—increasingly scarce for start-up biopharma companies—the management team needs to know what they are doing, he pointed out. That usually means that executives in emerging companies have deep experience with FDA from prior positions.

“The one thing as venture capitalists we look for is having the right experience and the right team in place—people who have done this before and done many drug approvals and taken it through the agency,” Mathers said. So while the company itself may be “inexperienced” in that it has never had a drug approved by FDA, executives at that company likely have experience in getting a product successfully through the agency.

NuPathe Inc. CEO Jane Hollingsworth agrees. While Nupathe’s first NDA is pending at the agency (the transdermal sumatriptan patch Zelrix, which received a “complete response” letter in August 2011 over manufacturing issues), Hollingsworth has shepherded other applications through FDA as co-founder of Auxilium Pharmaceuticals Inc., which has two approved products for urology and sexual health.

The implication that the FDA needs to work with emerging sponsors in a different way because levels of expertise are lower than that of a larger pharmaceutical company are “a little bit off the mark,” Hollingsworth maintains. “For us to fund a development product, we have to have people that are really good, and very well proven and very successful at what they do. The level of expertise isn’t the issue. We have people who have done it many, many times, very successfully.”

One thing that all sponsors need—regardless of size—is better overall communication with FDA, Hollingsworth said. Zelrix is a case in point: NuPathe was under the impression that FDA’s review was going smoothly—especially given that sumatriptan is a known drug—but was caught off guard by the “complete response” letter.

NuPathe’s leadership team had “pretty good experiences” with FDA while at other companies, Hollingsworth said. “So we walked into [the Zelrix development process] with an expectation that it would continue, and that it certainly wouldn’t deteriorate.” But as NuPathe got ready to submit the Zelrix NDA, she said, “we saw a deterioration in the process” with “less communication and less interest in communication than we had experienced in all the years before.”

Acorda Therapeutics Inc. CEO Ron Cohen agreed. “That’s been our experience as well. These are not excuses; these are realities. Time and time again, you wind up with issues that delay you by six months, a year or more that certainly could have and should have been brought up much earlier in the process. And the impression that one gets is of terrible inefficiencies within the agency itself.”

While that’s certainly not a complaint that is specific to emerging sponsors, smaller companies do have less of a cushion when something goes wrong. “These can be fatal issues,” Cohen said. “Bigger companies roll with it, because they have the infrastructure and the case to do so. But a six-month delay for a start-up company without a product on the market can be fatal. And it has been fatal.”

FDA has a “huge storehouse of knowledge” and “we have seen that they are increasingly cautious about sharing that knowledge,” Cohen said. “The level and the amount and the quality of the communications...with FDA needs to improve. We saw it deteriorate ourselves over the course of the last eight years. We used to have a certain amount of informal conversations. That has totally dried up.”

There are some changes on the way that should give all companies greater transparency and clarity about the review process. FDA plans to hold more formal meetings with sponsors while an application is under review, and hire liaisons to aid communication between a drug sponsor and the review team. But those changes will come with a slightly longer review time.

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“Drug Development by Press Release”

Jenkins pointed to another issue that FDA is facing with emerging sponsors: what he calls “drug development by press release.” Small companies, he said, tend to be much more transparent in reporting for the public their interactions with FDA than larger companies, which may have a different financing structure, internal communication policies, or a definition of what constitutes a “material event.”

The fact that an emerging sponsor is in an environment where it is constantly trying to raise capital has implications on the way it communicates with investors.

“So you have a teleconference with FDA, and we’re surprised to see the next day you issue a press release telling the world what the teleconference was about,” Jenkins said. “Unfortunately, we find that those statements are often overly optimistic in their characterization of the interaction and don’t capture the nuance of what we actually talked about or the advice we actually gave.”

The problem for FDA is that it is constrained in its ability to monitor all those statements. “We don’t have the staff time to be monitoring all those press releases and all those investor calls,” Jenkins said. “And we’re also constrained by law in how much we can say about what’s happening under the IND.” In a case where FDA sees something reported by a company that is “truly egregious,” it can refer the case to the Securities & Exchange Commission. But in general, he said, “we just don’t have time to monitor all this.”

“This is driving the dynamic of a lot of the communication about these smaller companies,” Jenkins said. “We’re all struggling to figure out how to operate in an environment where every interaction is public, but only one side of the interaction is public. I would really like for us to be able to release the meeting minutes, or the telecom minutes from those interactions, so you can see the FDA side of the story.”

For a company like Vivus Inc., for example, communicating regulatory updates to investors about its lead clinical product, the obesity drug Qnexa (phentermine/topiramate), has been a top priority. ([A#2011500168])

Between December 2009, when Vivus submitted the Qnexa NDA, and early January 2012, Vivus published at least a dozen press releases on its interactions with FDA over Qnexa. Several of the press releases gave a “regulatory update” on Qnexa following conference calls with agency officials. The most recent press release (January 9), discussed an agreement with FDA to remove a proposed contraindication for women of child-bearing potential—an usual disclosure for a product that is still under review.

Mathers, from the venture capital firm NEA, said he understands why venture-based companies adopt that strategy. “You have to appreciate that a lot of these companies are fighting for their share of voice—share of voice not only with pharma, but also within the venture community. So they’re trying to figure out ways that gives them a share of voice to hopefully get recognized where there is an opportunity for them to raise capital, either via a business development deal or a venture capital deal.”

“But a lot of times you do see a lot of press release activity out there, and a lot of that may or may not be a good thing. I think it does hurt companies to just put press releases out there to say ‘we just had a meeting with the agency, we can’t say anything about it’. I think those are of minimal value,” he said. “So I appreciate why they’re doing it, but I don’t think the messages necessarily really help them in the long run.”

And it can also cause some tension between an innovator company and their Big Pharma partner, if there are differing philosophies on what information about communications with FDA should be made public.

“It causes some interesting conversations between some of the Big Pharma companies and some of the partners, in terms of risk tolerance and approach,” Pfizer Inc. VP-worldwide regulatory strategy Robert Clark said. “We’ve had some interesting debates over the years.”

Changing Approval Standards

There are also “interesting debates” between FDA reviewers and venture-backed companies about the agency’s approval standards—especially when FDA is asking an emerging sponsor for additional data.

“One thing we hear a lot from small companies is: ‘Can’t you change your standard? We can’t afford to do that, or we’re going to be out of business,’” Jenkins said. “We can’t compromise on the standard. We don’t have a standard for Pfizer that’s different from a standard from a venture capital or virtual company that has two employees. The standards have to be the same.”

“We have flexibility. We work with companies to try to make development programs efficient and high-quality. But when companies tell us, ‘If you don’t agree to this, we’re going to go out of business next week,’ it’s hard for us to respond to that. We understand. Sometimes, we’re just as frustrated as they are that a good idea may not go anywhere. But we can’t change the standard to accommodate that lack of funding. So, that’s another dynamic that our staff are learning to adapt to.”

Smaller companies share that frustration. Acorda’s Cohen said he was told a number of times by people at FDA: ‘It doesn’t matter if you can’t afford it. That’s not our business. We can’t take that into consideration.’ And I understand that to a point. But someone needs to take it into account.”

“It seems that we are in an era where the FDA is asking for stuff because it can be done,” Cohen said. “So when a new scientific insight is achieved, and theoretically you can do a new test, all of a sudden, it’s a new requirement. It’s one straw after another. Every one of those new requirements can add tens of millions—months to years—to the development process. And if you add that next straw, boom. Camel breaks. And that’s what we seeing happening.”

As one example, Cohen pointed to FDA’s change in the approval criteria for antibiotics for upper and lower respiratory infections late in the review phase of several investigational treatments. Also see "Getting the Bugs Out of Antibiotic R&D: Commercial Implications of a Higher Regulatory Hurdle" - Pink Sheet, 1 June, 2007. Three smaller biopharma companies that had invested in that area are now out of business: Oscient Pharmaceuticals Corp. filed for bankruptcy; Replidyne was bought out by privately held Cardiovascular Systems Inc.; Advanced Life Sciences Holdings Inc. suspended operations in May 2011.

That, in essence, is the challenge that emerging sponsors face in drug development.

“In the past, when we told Pfizer, ‘Sorry, you need to do another trial,’ they went and did another trial,” Jenkins said. “When we tell a small company, ‘You need to do another trial,’ we starting hearing, ‘Well, we don’t have enough money to do another trial; we’re going to be out of business, and this compound may be lost.’ And that’s in some cases very distressing, because it may be a very promising compound. But we have to have the same standards.”

Despite the inherent challenges, NuPathe’s Hollingsworth says emerging companies are here to stay. “I don’t think it’s a pendulum swing, or a flavor of the day. It is an evolution in our entire industry.”

“It is something that we really need to face if we are going to continue to come up with innovation and address some of the issues that exist for patients. The old way of bigger companies with big budgets developing those products obviously is changing dramatically.”

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