The San Diego Story

Jan 01, 2011

Above, Left to Right: Bob Baltera, Amira Pharmaceuticals; Kathy Bowdish, Anaphore Pharmaceuticals; Jay Lichter, Avalon Ventures; Kleanthis Xanthopoulos, Regulus Therapeutics; Joseph Panetta, BIOCOM; Bill Newell, Sutro Biopharma; William Looney, Pharm Exec; Margi McLoughlin, Pfizer
Biotechnology is now a global industry, but success still requires that elusive mix of localized, clustered assets incorporating money, know-how, and a business culture that tolerates risk. Two years ago, Pharm Exec visited San Diego to identify what makes that region work as a locus for risky investments in the big ideas that lead to biotech breakthroughs ("San Diego's BioCluster by the Sea," May 2008). In this Roundtable, held on November 8, 2010, with support from the regional trade association, BIOCOM, Pharm Exec highlights the faces behind the feature, allowing some of the key personalities that drive the San Diego region's growth to express their thoughts—on biotech's future in an era of scarce capital, high risk, and indifferent regulators; on building effective partnerships between a bureaucratized Big Pharma and a stressed startup community; and on how to maintain the key elements of an entrepreneurial culture. With special regard to the latter, can you engineer innovation like a Chinese cookbook? Not a chance, in this group's view.

PHARM EXEC: Biotechnology exists as a contradiction: While workflows are structured around the precise metrics of hard science, commercial success depends on effective deployment of the imponderables of human enterprise such as connectivity, collaboration, and creativity. These are hard to replicate in a fixed model. In this fluid environment—where many have failed—how has BIOCOM contributed to the industry's deep and successful roots in San Diego?

Joeseph Panetta, President & CEO, Biocom
JOSEPH PANETTA, CEO, BIOCOM: This is a relevant question coming just a week after the Congressional mid-term elections, a change in administration in Sacramento, and the impact of the global financial crisis on national competitive advantage in strategic sectors like biotech. Our greatest strength is that the Southern California region has the most densely concentrated pool of biotech resources anywhere in the world. You can literally walk across a parking lot and find people with the best skills, whether it be sourcing funds, establishing proof of concept through basic research, or drafting a clinical trial protocol. What BIOCOM exists to do is build the incentives necessary to replenish this rich base of human capital. An example is our success in creating a diverse infrastructure: While just 10 years ago San Diego was the center for a lot of startup investment, all the Big Pharma majors now have a presence here as well.

PHARM EXEC: How robust is the level of government support for biotech here in California and at the federal level?

PANETTA: Predictability is a strong selling point for biotech investors. There are forces at play that sow doubts about the capacity of government to deliver it. The most prominent is the fraying balance between support for innovation and tolerating risk. The FDA is approving fewer new medicines while the cost of developing those medicines is rising. The notion that the regulator exists to help support industry innovation is under strain and the FDA decision process has become politicized to the point where many companies now prefer to focus their initial registration efforts in Europe. I was in China last month, and in visiting a local biotech center I noticed that the SFDA (China's State Food and Drug Administration) has built its own facility on site. When I asked about it, I was told the SFDA was there to help drive the process of innovation to secure speedy approvals. I don't really see this perspective alive within the FDA today.

Ties that Bind: BIOCOM and FDA Reform
There are three priorities necessary to restore the policy balance on innovation. The first is restoring the capacity of FDA to reward innovation with a prompt, transparent, adequately resourced, and accountable registration process. Without this, the US will continue to lose ground to Europe and Asia because fewer investors will spend upwards of $2 billion bringing a product to market if the FDA is unable to make a decision. We documented our concerns in a new survey study we have just released in cooperation with PricewaterhouseCoopers on industry relations with the FDA (see sidebar). Second, we need to preserve our global leadership in the funding of basic research as well as the intellectual property that complements it. Finally, federal and state economic policy must provide the incentive to take on risk. A good example is the therapeutic tax credit provision of the health reform bill.

PHARM EXEC: Do we have a group consensus on what must be done to build industry confidence in the FDA?

Jay Lichter, Managing Director, Avalon Ventures
JAY LICHTER, MANAGING DIRECTOR, AVALON VENTURES: The problems do not rest entirely with the FDA. Our experience is that the FDA does try to reach out, particularly when you can make the case that approval will address an unmet medical need. Confidence requires building consensus with the regulator around what is a true and useful innovation. San Diego has a great advantage because local biotech companies tend to specialize in finding new ways to commercialize breakthrough ideas—if I might say it, the crazy ones.

Margi McLoughlin, Senior Director, R&D Business Development, Pfizer
MARGI MCLOUGHLIN, SENIOR DIRECTOR, R&D BUSINESS DEVELOPMENT, PFIZER: What concerns me is a public perception that the definition of innovation is "first in class." Changing that dynamic could be a real confidence builder. When you examine the flow of new medicines approved by the FDA in a particular therapeutic class you can easily see a progression to better, clinically superior drugs; the drug that ends up as "best in class" is rarely "first in class." If our regulators fail to support this evolution with the right incentives, then the US will lose ground as a global source of innovation.