The US Biotechnology Industry A Market Report - Awex

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Dec 12, 2012 (4 years and 8 months ago)

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The US Biotechnology Industry




A Market Report


March

20
1
2





Bureau AWEX


New York


Edith Mayeux, Attaché économique et commercial

Patrizia Venditti, Assistante commerciale

2



Contents





I. INDUSTRY OVERVIEW AND MARKET
SEGMENTATION...........................................
.
..
..3


II. THE US BIOTECH LANDSCAPE...........................................................................................
.
.
..
5


II
I. RESEARCH AND DEVELOPMENT....................................
....................
.............................
..
.6


DRUG DEVELOPMENT AND APPROVAL PROCESS........................
............................
..
..6


R&D SPENDING.............................................................................................
......................
..
.
.7


ACTIVE CLINICAL TRIALS............................................................................................
..
..
.
..9


I
V.

BLOCKBUSTER BIOLOGICS IN
2010
-

2011
...................................................................
.
..
..
.
1
0


TOP
NINE CATEGORIES OF
BIOLOGIC

DRUGS IN TEMRS OF US SALES IN 2010
.
..
.
1
2


TOP SELLING BIOLOGICS
........
...........................................................................
......
......
..
..
1
3


TOP COMPANIES COMPRISING THE MAJORITY OF SALES OF BIOLOGIC


DRUGS IN 2010................................................................................................................
....
..
..14


V.

T
HE US IN
-
VITRO DIAGNOSTIC TESTS
MARKET.
.............................................
.......
.
..
...
.
1
6


VI.

CURRENT TRENDS...........
......................................................................
...........................
.
.
...
.
.1
7


MERGERS & ACQUISITIONS
..........................
...............................................................
.
.
..
.
.
1
7


STRATEGIC ALLIANCES
.....
....................................
........................................................
..
.
..1
8


VENTURE CAPITAL

& FUNDING
...................................................................................
.
..
.
.
20


R&D OUTSOURCING............................................................................................................

.23


HEALTHCARE REFORM....
............
..
................................................................................
.
..
.
.
2
3


PERSONALIZED MEDICINE..........................................................................................
..
...
..
2
3


GENERIC DRUGS..............
..................
.............................................................................
.
..
..
.
2
4


STEM CELL RESEARCH: LIFTING THE BAN.
..........................................................
..
.
.
.
.
.
2
4


REMS: M
ONITORING SAFETY
.....................................................................................
...
.
.
.
.
.
2
5



I
X
. FDA REGULATIONS...........................................................................................................
.
.
.
.
..
2
8


BIOLOGICAL PRODUCTS..
.............................................................................................
.
..
.
.
.
2
8


IN
-
VITRO DIAGNOSTIC PRODUCTS REGULATION..............................................
...
..
.
.
..3
5


3





I.
Industry Overview and
Market Segmentation



The
biosciences as an “industry” maintain a unique set of characteristics. They represent a varied set

of
companies that span manufacturing, services and research activities, a highly skilled workforce, and a

whole range of products and services classified amo
ng nearly 30 industry segments. Much more than

other sectors, the biosciences are dynamic and evolve with the latest research and scientific discoveries

with tremendous widespread impact on food, medicine, and alternative fuels. The common link among

this
diverse set of companies is an application of knowledge as to how living organisms function.

The
biosciences transcend industry classification, making the sector difficult to define. The existing

federal
statistical system does not identify one single indu
stry code that encompasses all bioscience

activities;
therefore, defining the industry requires a careful examination of all industries engaged in

bioscience
-
related activity. In assisting numerous states and regions in developing their bioscience

industry

base,
Battelle has identified four major subsectors

that represent the core of current and likely

future
bioscience economic activity.
1

The four major subsectors of the biosciences include the following:




Agricultural feedstock and chemicals

Firms engaged

in agricultural production and

processing, organic chemical manufacturing, and fertilizer manufacturing. This includes the

emerging industry activity in the production of ethanol.




Drugs and pharmaceuticals

Firms that develop and p
roduce biological and medicinal
products

and manufacture pharmaceuticals and diagnostic substances.




Medical devices and equipment

Firms that develop and manufacture surgical and medical

instruments and supplies, laboratory equipment, electro

medical appar
atus including MRI and

ultrasound equipment, dental equipment and supplies, and ophthalmic products.




Research, testing, and medical laboratories

Companies engaged in research and
development

in the biosciences, testing laboratories, and stand
-
alone medica
l laboratories and other
diagnostic

centers. This includes firms involved in early
-
stage (often pre
-
clinical) research and
development

activities around new pharmaceuticals and medical devices.


Research and economic activity within a fifth center of biosc
ience activity might include

academic health centers, research hospitals, and other research
-
driven institutions. Many U.S.

hospitals partner with universities and other research institutes to further advances in the

biosciences with a particular focus on
healthcare applications. Unfortunately, current industrial

classifications and available data do not allow for an isolation of these research
-
oriented

establishments outside of the larger hospitals sector. Though it cannot be reliably quantified, the

secto
r should be recognized as an important element of the bioscience industry cluster.



__________________


1
Battelle
2008 State Bioscience Initiatives Report




4


Table

1. The Bioscience Subsector Industries

NAICS Code NAICS Description

NAICS Code


NAICS Description

AGRICULTURAL FEEDSTOCK & CHEMICALS

311221


Wet corn milling

311222


Soybean processing

311223


Other oilseed processing

325193


Ethyl alcohol
manufacturing

325199


All other basic organic chemical manufacturing

325221


Cellulosic organic fiber manufacturing

325311


Nitrogenous fertilizer manufacturing

325312


Phosphatic fertilizer manufacturing

325314


Fertilizer (mixing only) manufacturing

325320


Pesticide and other agricultural chemical manufacturing

DRUGS & PHARMACEUTICALS

325411


Medicinal and botanical manufacturing

325412


Pharmaceutical preparation manufacturing

325413


In
-
vitro diagnostic substance manufacturing

325414


Other b
iological product manufacturing

MEDICAL DEVICES & EQUIPMENT

334510


Electro

medical apparatus manufacturing

334516


Analytical laboratory instrument manufacturing

334517


Irradiation apparatus manufacturing

339111


Laboratory apparatus and furniture
manufacturing

339112


Surgical and medical instrument manufacturing

339113


Surgical appliance and supplies manufacturing

339114


Dental equipment and supplies manufacturing

339115


Ophthalmic goods manufacturing

339116


Dental laboratories

RESEARCH,
TESTING, & MEDICAL LABORATORIES

541380*


Testing laboratories

541710*


R&D in the physical, engineering, and life sciences

621511


Medical laboratories

621512


Diagnostic imaging centers


*Includes only the portion of these industries engaged in
biological or other life sciences activities.

Source: Battelle
2008 State Bioscience Initiatives Report



The bioscience subsectors each operate in distinct market
s, with their own sets of product and

service offerings, suppliers, and regulatory environments. To varying degrees, the subsectors do
intersect

in beneficial ways. For example, bioscience research directly impacts the development of new
drugs and

devices
and leads to new uses for agricultural feedstocks; testing laboratories enable
breakthroughs in

medical devices; and agricultural research contributes to further innovation in drugs
and pharmaceuticals

as well as research and testing.

This report will foc
us on the drugs &
pharmaceuticals subsector.



5



II. The US Biotech Landscape



The US biotech industry remains the benchmark in international terms. It is considered to be the most
successful in the world and it is likely to maintain this leading position for the foreseeable future. The
vibrant R&D environment and access to venture

capital from investors have been the key to its success over
the years. Growing at an annual rate of 14%, the industry
in 20
10

included
about 1,
7
26

companies of all
sizes with combined annual revenues
over

$
6
1

billio
n

and total market capitalization of a
bout $
292

billion.
Forecasts predict the worth of the industry revenues to touch US $
95

billion by 20
13
.
2



Top
US Biotech
Companies

Ranked by
2011 Revenue

Company

Sales

2011

Amgen

$
15.6 billion

Gilead Sciences

$
8.39 billion

Biogen Idec Inc.

$
5.05
billion

Celgene Corp

$
4.84 billion

Genzyme/Sanofi
-
Aventis

$
4.05 billion*

Life Technologies Corp

$
3.78 billion

Cephalon
, Inc.
/Teva Pharmaceuticals


$
2.81 billion*

Alexion Pharmactuticals, Inc.

$
783.43

mil

Cubist Pharmaceuticals, Inc.

$
753.97

mil

United Therapeutics Corp

$
743.18

mil

*Sales 2010

Source
s
:

http://www.americanregistry.com

and

http://www.hoovers.com




US biotechnology at a glance
, 2009
-

2010

(US $b)


20
10

200
9

% change

Public company data


Product Sales



$5
2
.
6

$4
8
.
1


9
%

Revenues


6
1.6

56.2

10
%

R&D
expense


17
.
6

17.1


3
%

Net
Income




4.9


3.7


33%


Market capitalization



$292.0 $271.6

8%

Number of employees



112,200

106,600

5%


Financing

Capital raised by public companies

16.3


1
3
.
5


21
%

Number of IPOs



15


3

400%


Capital raised by private companies

4.4

4.6

-
3.2%



Number of companies

Public companies

315

314

0.3%


Private companies

1,411

1,389

2%


Public and private companies


1,726 1,703



1%

Source:
Ernst & Young

Data were generally derived from year
-
end information (31 December). 20
10

data a
re estimates based on January
-
September quarterly filings and preliminary annual financial performance data for some companies. The 200
9


estimates have been revised for compatibility with 20
10

data
. Numbers may appear inconsistent because of rounding.


________________


2

RNCOS
report "
Healthcare Industry:

US Biotech Market Analysis
"
,
December 2010

6


The landscape for US biotech will continue to be
a
challenging
one
. Fo
r many smaller companies, raising
capital has become quite difficult, and the results are appearing in restructurings, layoffs, bankruptcies and
delistings on stock exchanges.
According to the Biotechnology Industry Organization (BIO), there were
20% fewe
r active public US biotech companies
in 2009
with total of 85 companies no longer listed. While
almost half are accounted for by acquisition, the other half are missing in action either bankrupted, liquidated
or "inactive", meaning they no longer report r
esults to market authorities.
At the other end of the spectrum,
several mature, successful biotechs were acquired by big pharma companies during
the year
, and

the merger
& acquisition trend will continue to be the preferred exit strategy in 2010 as well.


Demand for biotechnology research in the fields of
medicine,

agriculture, food, and science

is driven by
insurers' willingness to pay for new medical treatments, the global need to produce more food for a rapidly
expanding population, and scientists' desire to find solutions for complex scientific and medical issues.
Funding for biotech research

is often provided by
venture capital funds

hoping to cash in on new products.

The profitability of individual companies depends on the discovery and effective marketing of new products.
Because the market for potential products is so large, small biotech
nology companies can co
-
exist
successfully with large ones if they have expertise in a particular line of research. The industry is
capital
intensive
: average annual revenue per worker is more than $350,000.

Biotech firms face stiff competition
from
pharm
aceutical

and other companies seeking to be first with a new product or discovery.





I
II
. Research & Development



Drug Development and Approval Process


The biopharmaceutical development process is research
-
intensive in nature, requires significant in
vestments
of time and money, and has uncertain outcomes. It begins with the identification and investigation of disease
targets and often includes the screening of thousands of compounds. Promising drug candidates then
undergo substantial preclinical and

clinical testing prior to regulatory review by the FDA. The chart below
highlights the US drug development and approval process, illustrating the activities that occur during the
estimated 10 to 15 years needed for a new drug to reach the market.


US Dru
g Development and Approval Process


Once a new compound has been identified in
the laboratory, medicines are developed as
follows:




Preclinical Testing

-

A pharmaceutical
company conducts laboratory and animal
studies to show biological

activity of the

compound against the targeted disease, and
the compound is evaluated for safety.





Investigational New Drug Application
(IND)

-

After completing preclinical testing, a
company files an IND

with the U.S. Food and
Drug Administration (FDA) to begin to t
est
the drug in people. The IND becomes



Source:
www.innovation.org


7


effective if FDA does not disapprove it within 30 days.


The IND shows 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 conducted. Progress reports on
clinical trials must be submitted at least annually

to FDA and the IRB.




Clinical Trials, Phase I

-


These tests involve about 20

to 100 normal, healthy volunteers. The tests
study
a

drug’s safety profile, including the safe dosage range.

The studies also determine how a drug is
absorbed,

distributed, metabolized, and excreted as well as the

duration of its action.




Clinical Trials, Phase II

-

In this phase, controlled

trials of app
roximately 100 to 500 volunteer patients

(people with the disease) assess a drug’s effectiveness.




Clinical Trials, Phase III

-

This phase usually involves

1,000 to 5,000 patients in clinics and hospitals.

Physicians monitor patients closely to confirm ef
ficacy

and identify adverse events.




New Drug Application (NDA)/Biologic License Application (BLA)

-

Following the completion of all

three phases of clinical trials, a company analyzes all

of the data and files an NDA or BLA with FDA if
the

data successful
ly demonstrate both safety and effectiveness.

The applications contain all of the
scientific

information that the company has gathered.

Applications typically run 100,000 pages or more.

The average review time for the 26 new therapeutics

approved by the

FDA in 2007 was 11.1 months.





Approval

-

Once FDA approves an NDA or BLA, the

new medicine becomes available for physicians
to

prescribe. A company must continue to submit periodic

reports to FDA, including any cases of adverse
reactions

and appropriat
e quality
-
control records. For some

medicines, FDA requires additional trials
(Phase IV) to

evaluate long
-
term effects.



R&D Spending


The biotech industry remains strong despite ongoing market volatility and research and development (R&D)
cutbacks. According to the
2011 BDO Biotech Briefing
, which examined the most recent 10
-
K SEC filings

of the publicly traded companies listed on the NASDAQ Biotechnology Index (NBI), R&D spending at US
biotech firms dropped 7% in 2010 to about
$54 million, making the second
consecutive year biotechs have cut R&D
costs. These cuts are in line with the
glo
bal drug industry, which saw
expenditures for discovering and
developing new drugs decline nearly 3%
from the $70 billion spent in both 2008 and
2009, according to Thomson Reuters. The
decline is also expected to continue
through 2011

as US biotechs keep
sharpening their focus on the most
promising products and initiatives and
being more strategic with their cash
reserves
.


64

58

54

48
50
52
54
56
58
60
62
64
66
2008
2009
2010
Source: 2011 BDO Biotech Briefing

Biotech R&D Spending 2008
-

2010 (mil)

8


Biotech's Biggest Spenders 2011




Amgen

-

$2.8B









Cubist Pharmaceuticals

-

$161.4M




Biogen Idec

-

$1.25B







Amylin Pharmaceuticals

-

$157.3M



Celgene

-

$1.13B








BioMarin Pharmaceutical

-

$147.3M



Gilead Sciences

-

$1.07B







Seattle Genetics

-

$146.4
M



Genzyme

-

$866.6M



Vertex Pharmaceuticals

-

*$637.4M



Actelion

-

$539M



Regeneron Pharmaceuticals

-

$
489M



CSL

-

$334M



Exelixis

-

$210.7M



United Therapeutics

-

$171M

Source:
www.fiercebiotech.com



A recent
FierceBiotech's article

"

The World's Biggest

R&D Spenders
" lists

the top 10 players in the
biopharma industry who shelled out a record $66.41 billion on drug development with big acquisitions and
bold trial plans. FierceBiotech found that despite considerable cuts in a number of R&D operations, the

top
10 players saw a collective jump of more than 10% in R&D spending. And despite plans by Pfizer
-
-
num
b
er
one in R&D spending in 2010
--
to force through a major restructuring in R&D,
big pharma is also going to be
a big spender in 2011 when it comes to d
rug research.


Top
R&D
budgets of Biopharma

Companies


Company


R&D Spending
20
10
(
billion
)


R&D Spending
2009
(
billion
)


% Change
from 2009


Pfizer

$
9.4

$7.8

20%

Roche


$9.2

$9.7

-
5%

Merck

$8.12

$5.6

45%

Novartis

$8.08

$7.28

11
%

Johnson & Johnson

$6.84

$6.98

-
2%

GlaxoSmithKline

$6.09

$5.61

8%

Sanofi
-
Aventis

$5.94

$6.18

-
4%

AstraZeneca


$5.3

$4.4

20%

Eli Lilly

$4.88

$4.32

1
3%

Bristol
-
Myers Squibb

$3.56

$3.64

-
2%

Takeda Pharmaceuticals


$3.5

$4.64

-
32
%

Source:


fiercebiotech.com











9




Active Clinical Trials


America's biopharmaceutical research companies have 901 biotechnology medicines and vaccines in
development to target more than 100 debilitating and life
-
threatening diseases, such as cancer, arthritis and
diabetes, according to a
new report

by the Pharmaceutical research and Manufacturers of America (PhRMA).
The medicines in development, all in either clinical trials or under Food and Drug Administration review,
include 35
2

for
cancer and related conditions, 18
8

for infectious diseases, 69 for autoimmune diseases and
59 for cardiovascular diseases.



Biotechnology has opened the door to the discovery and development of new types of human therapeutics.
Advancements in both cellu
lar and molecular biology have allowed scientists to identify and develop a host
of new products. These cutting
-
edge medicines provide significant clinical benefits, and in many cases,
address therapeutic categories where no effective treatment previously

existed.





10



Approved biotechnology medicines already treat or help prevent heart attacks, stroke, multiple sclerosis,
leukemia, hepatitis, congestive heart failure, lymphoma, kidney cancer, cystic fibrosis, and other diseases.
These medicines use many d
ifferent approaches to treat disease as do medicines currently in the pipeline.
According to the report, there are 300 monoclonal antibodies, a laboratory
-
made version of the naturally
occurring immune system protein that binds to and neutralizes foreign
invaders; 298 vaccines, a biological
preparation that improves immunity to a particular disease; 23 antisense drugs, medicines that interfere with
the communication process that tells a cell to produce an unwanted protein; and 20 interferons, proteins that

interfere with the ability of a cell to reproduce.



The practice of medicine has changed dramatically over the years through pioneering advances in
biotechnology research and innovation, and patients continue to benefit from the treatments that are bein
g
developed. As medicines that address significant unmet needs are developed, future innovations in
biotechnology research will bring exciting new advances to help more patients.





I
V
.
Blockbuster biologics
in
2010

-

2011



In the United States,
spending on expensive biologic drugs
3

is growing more than ten times faster than
spending on tradition
ally
-
developed “small molecule”
drugs.
4


Global biologic drug sales are expected to reach nearly $200 billion by 2015, up from $138 billion in 2010.
5

Curre
ntly, just under half of biologic drug spending is concentrated in the United States.
6


____________________

3
Biologic drug prices are an average of 22 times higher than traditional drug prices. A.D. So and S.L. Katz,

"
Biologics
Boondoggle
,"
New York Times, March 7, 2010.

4
IMS Institute for Healthcare Informatics,

"
The
Use of Medicines in the United States: Review of 2010
,"
April 2011.

5
IMS Institute for Healthcare Informatics,

"
The Global Use of Medicines: Outlook Through 2015
,"
May 2011.

6
IMS Institute for Healthcare Informatics,

"
The U
se of Medicines in the United States: Review of 2010
,"
April 2011.

11


In 2010, biotech sector sales in the US experienced a 6.5% growth rate, reaching 51.3 billion and
outperforming the overall pharmaceutical sector, whose growth lagged at 2.3%
.
7

Sales in Q
1 2011 grew by
2.9% and declined by 0.4% in Q2.


Growth trends in the United States biotech market for biologic drugs (2006

2010
)


Monoclonal antibodies (mAbs) remain the best selling class of biologics. In 2010, US sales of mAb products
reached $18.5 bi
llion, 9.7% higher than 2009 sales, keeping companies with mAb products in the lead in
revenues.
8

The growth rate of 2010 was similar to that of 2009 (8.3%), although the sales trends exhibited
new dynamics.
9

First, a substantial proportion of the growth in this sector was driven by new products.
Second, most of the best
-
selling products are showing signs of saturation or in some cases even declining
sales. With seven new mAbs reaching the market during 201
0
-

2011, there are now 34 US Food and Drug
Administration (FDA) approved mAbs in the market (Xigris was withdrawn in 2011), and sales of mAbs
constitute 36% of the total biologics market. The two best selling indications for mAbs continue to be cancer
an
d inflammatory disorders, with anti
-
inflammatory mAbs now constituting almost half (46%) of all sales,
and mAbs focused on oncology, 41%.
10

Six blockbuster products comprise 82% of the total sales of this sector. Among them, three of the top
products are
showing signs of saturation. The largest selling mAb, Janssen's (Horsham, PA) Remicade
(infliximab) has been experiencing declining sales growth due to crowding in the anti
-
tumor necrosis factor
market and competition from other novel mechanism
-
of
-
action
biologics. Similarly, Genentech/Biogen
Idec's (Cambridge, MA) Rituxan (rituximab) and Genentech's (S. San Francisco, CA) Herceptin
(trastuzumab) are showing signs of saturation in their indications with sales growth in the 4
-
6% range.

____________________
__


7
IMS Institute for Healthcare Informatics,

"
The Use of Medicines in the United States: Review of 2010
,"
April 2011.

8
Nature Biotech
nology,

"What's fueling the biotech engine
-

2010 to 2011,"
Volume 29, Number 12, December 2011.

9
Nature Biotechnology,

"What's fueling the biotech engine
-

2010 to 2011,"
Volume 29, Number 12, December 2011.

10

Nature Biotechnology,

"What's fueling the b
iotech engine
-

2010 to 2011,"
Volume 29, Number 12, December 2011.

12



A substantial decline in sales growth was also observed for mega blockbuster Roche/Genentech's (Basel,
Switzerland) Avastin (bevacizumab), whose sales growth declined from a high of 30% t
o 15% in 2007
-

2009 to 2% in 2010. During Q1 and Q2 of 2011, its sales further fell by ~5.3% and ~1.5%, respectively.
This decline is due to FDA's withdrawal of its metastatic breast cancer indication.


Top nine categories of biologic drugs in terms of
US sales in 2010



The pie chart shows US sales of these drug categories. The table shows the growth rates of the categories between 2009 and 20
10.
The red boxes indicate the major categories showing the fastest growth rate during that period. For
therapeutic enzymes, their
manufacturers do not break out the US sales, so their sales were estimated assuming 20

30% of worldwide sales were generated
in the United States.


Source:

Nature Biotechnology,

"What's fueling the biotech engine
-

2010 to 2011,
"
Volume 29, Number 12, December 2011.




13





One mega blockbuster mAb that
has sustained its double
-
digit
growth in sales is Abbott's
(Deerfield, IL) Humira
(adalimumab). In 2010,
Humira's sales grew by ~15%,
twice the growth rate of the anti
-
TNF market
(~7%). At the
current growth rate, Humira will
likely be the top
-
selling biologic
in the United States in 2011 and
2012. One potential catalyst for
Humira is indication expansion
to include ulcerative colitis,
spinal arthritis, uveitis and
hidradenitis s
uppurativa.

Another blockbuster,
Genentech's Lucentis
(ranibizumab, a humanized
antibody FabV2 fragment that
targets vascular endothelial
growth factor; VEGF), grew by a
double
-
digit rate, with ~28%
growth, reaching sales of ~$1.
8

billion in 2010. This ro
bust
growth could be due to less off
-
label use of Avastin for wet age
-
related macular degeneration
(AMD).




*

Based on La Merie, “Top 30 Biologics 2010 (global sales),” March 2011.



Note: Numbers reflect annual sales in the United States; total (global) annual sales are


considerably higher. U.S. sales for Avastin, Rituxan, Herceptin, and Lucentis have been converted


from Swiss francs (CHF).


Source:

AARP Public Policy Institute
,

"
Biologics in Perspective: The New Biosimilar Approval Pathway
,"
October 2011.









14




Top companies comprising the majority of sales of biologic drugs in 2010



The pie chart
shows the fraction of total biotech sales of the top 13 companies. The table shows the annual growth rates of the top
ten companies. Red boxes indicate companies that had biologics sales growth of >10%. For the purpose of this analysis, Rituxa
n
US sales ha
ve been split equally between Genentech and Biogen Idec; Erbitux US sales were split 40/60 between Lilly and Bristol
-
Myers Squibb. J&J, Johnson & Johnson; BMS, Bristol
-
Myers Squibb.


Source:

Nature Biotechnology,

"What's fueling the biotech engine
-

2010
to 2011,"
Volume 29, Number 12, December 2011.








15


One factor driving biologic spending is that the U.S. Food and Drug Administration (FDA) only recently
acquired the authority to approve less
-
expensive generic versions of biologic drugs, known as biosimilars.

Conventional drug products fall under the pur
view of the Federal Food, Drug, and Cosmetic Act, which has
a streamlined process to approve generic drug products. However, the majority of biologics fall under the
Public Health Service Act, which did not have an equivalent approval pathway until the pas
sage of the
Affordable Care Act in 2010. The new biosimilar approval pathway is expected to result in biosimilars
entering the market by 2014.
11



While the need for a biosimilar approval pathway was widely accepted, the newly created pathway is a
source o
f considerable debate. One of the most prominent issues is the 12
-
year market exclusivity period, or
the amount of time that brand name biologic manufacturers are protected from generic competition.

Brand name biologic manufacturers maintain that a 12
-
yea
r exclusivity period is needed to recover the costs
associated with biologic drug development and support continued innovation. However, the U.S. Federal
Trade Commission (FTC) concluded that 12 years of exclusivity was unnecessary and could negatively
imp
act innovation.
12


Based on drug manufacturers’ U.S. sales data alone, most top
-
selling biologic drugs are able to recoup their
manufacturer’s development costs
13

within a single year (see
the chart of
US Sales for Top
-
Selling Biologic
Drugs in 2010
, page

13

of this report
).


The FTC also concluded that the costs associated with biosimilar development, manufacturing, and marketing
will likely limit biosimilar entry to biologic drug markets with more than $250 million in annual sales. Thus, only
biologic d
rugs that can quickly recoup their development costs are likely to face competition.


In addition, unlike traditional generic drugs, a variety of factors are expected to prevent biosimilars from
rapidly gaining market share. Consequently, brand name biolo
gic manufacturers will likely continue to earn
substantial profits even after biosimilar versions of their products enter the market.
14


Between the rapid rise in the number of biologic drugs
15
and regularly expanding indications for the products
that are
already on the market,
16


biologics are becoming an increasingly common treatment option for
conditions that primarily affect older populations, such as cancer, rheumatoid arthritis, and multiple less
-
expensive biosimilars should help patients facing the s
ubstantial out
-
of
-
pocket costs that can be associated
with biologic drugs.


However, an unnecessarily lengthy market exclusivity period will impede access to biosimilars and

increase costs for consumers,

employers, and publicly
-
funded
programs like
Medicare and

Medicaid.



______________________

11
IMS Institute for Healthcare Informatics,

"
The Global Use of Medicines: Outlook Through 2015
,"
May 2011.

12
US Federal Trade Commissio
n, "
Emerging Health Care Issues: Follow
-
on Biologic Drug Competition
," June 2009.

13
The average cost to develop a new biologic drug is $1.2 billion. This figure includes the costs a
ssociated with compounds that
fail to reach the market. J.A. DiMasi and H.G. Grabowski,

"
The Cost of Biopharmaceutical R&D: Is Biotech Different?
",
Mana
gerial and Decision Economics, 28, no. 4
-
5: 469
-
479.

14
US Federal Trade Commission,

"
Emerging Health Care Issues: Follow
-
on Biologic Drug Competition
,"
June 2009.

15
W.H. Schacht and

J.R. Thomas,

"
P.L. 111
-
148: Intellectual Property Provisions for Follow
-
On Biologics
,"
Congressional
Research Servi
ce Report,
April 26,

2010.

16
For example, Avastin, which was approved in 2004, is currently involved in more than 1,000 clinical trials investigating its
use in
over 50 tumor types and different settings.

"
Ro
che 2010
Annual Repor
t
"
, 2011.

16



V.
The US In
-
vitro Diagnostic (IVD) Tests Market


According to

RNCOS's new report

"
US Diagnostic Market Outlook
2014
," the US represents world's largest
and one of the most developed diagnostic markets

accounting for 47% of the total global IVD market in
2011
.

The European region accounted for 31% of the global IVD market with Germany accounting for the

largest sh
are of 23.24% followed
by
France (16.89%) and Italy (16.41%).

Huge investment in research and
developments and commercially successful innovations in diagnostic industry has helped the US to
outperform other prominent diagnostic markets including EU, Japa
n etc.

Looking ahead, the US is expected
to maintain its position of the world's largest IVD market, growing at a moderate CAGR of around 9.3%
during 2010
-
2014.

Favorable reimbursement policies for clinical lab testing, increasing awareness about
early d
isease detection, and aging population that demands increased diagnostic testing will be the main
growth drivers.

A
nother

report


The World Market for Molecular Dia
gnostics


released by Kalorama Information predicts
the world market for molecular diagnostic tests will grow 11% annually, reaching $8.085 billion U.S.
dollars in 2015. Back in 1995, the market for these nascent tests was estimated to comprise just 2% of
the
total in vitro diagnostic (IVD) market or $360 million. Today that number stands at $4.765 billion.

The
report

highlights the primary growth drivers for molecular diagnostics, and describes challenges facing the
IVD industry in the future.

It

attributes the continued growth in the market to the introduction of numerous
assays over the past 5 years, as well as publication of the Human Genome Project and advances in
functional genomics, bioinformatics, miniaturization, and microelectronics.

At
the same time, demand for
testing has been fueled by an increase in cancer patients, proliferation of infectious diseases and growing
interest in parental gene carrier analysis.

Especially notable is the fact that many of these complex tests
have been com
mercialized as proprietary lab
-
developed tests offered by reference labs and company
-
sponsored lab services.

But major challenges obstruct use of molecular diagnostic assays, including getting stakeholders, payers,
physicians, researchers, and regulators t
o work together to close the gap between research and clinical
applicability. Physician education is also lacking, and reimbursement problems threaten further
implementation of these tests.

More than 75% of the molecular diagnostics market is controlled by

nine companies: Roche Diagnostics,
Qiagen, Gen
-
Probe, Abbott Diagnostics, Siemens, Becton Dickinson, Cepheid, bioMérieux, and Beckman
Coulter.
17

Roche is the undisputed market leader with almost 30% share and an unparalleled product
portfolio, which inc
ludes molecular diagnostic tests for oncology, virology, microbiology, and blood
screening.

Sales of molecular diagnostic tests for infectious diseases generate approximately 60% of overall molecular
diagnostics market revenues.
18

Market participants larg
ely focus on developing and marketing infectious

disease molecular diagnostics, which primarily include tests for human immunodeficiency virus (HIV),
HPV, hepatitis B and C (HBV/HCV), and CT/NG. With the exception of the HPV molecular diagnostics


___________________

17
Genetic Engineering & Biotechnology News,

"
Infectious Disease Molecular Diagnostics: Market Review and Opportunities
,"
(Vol. 31, No. 20), November 15, 2011.

18

Genetic Engineering & Biotechnology News,

"
Infectious Disease Molecular Diagnostics: Market Review and Opportunities
,"
(Vol. 31, No. 20), November 15, 2011.

17


market, most of these
testing areas are very mature with growth rates settling around 5%.
19

HPV testing,
however, remains an enormous market opportunity with growth rates expected to remain as high as 20%
through 2014.
20




V
I
. Current Trends


Mergers & Acquisitions


So far 2
012 has provided plenty of action on the M&A front, from Roche's hostile $5.7bn bid for Illumina to
Amgen's $1.1bn takeover of Micromet. These are encouraging signs of life compared to 2011, when global
mergers and acquisitions between pharma and biotech c
ompanies slowed dramatically on the previous four
years. Data from
EvaluatePharma

show that only
136 M&
A deals were struck in 2011, down from 171 and
170 seen in the previous years. Most markedly, big pharma was almost moribund in 2011, the analysis
shows, spending only $23.4bn in 13 deals. Outside of Johnson & Johnson's $21.3bn acquisition of Synthes,
a
medtech deal, the biggest purchase of a drug developer by big pharma last year was Bristol
-
Myers Squibb's
$475m takeover of Amira.


Big Pharma M&A analysis

2011

2010

Pharma deals

Total deals

Pharma deals

Total deals

Five Year Total

(2007
-

2011)


Company

Value
($bn)

Count

Value

($m)

Count

Value
($bn)

Count

Value
($bn)

Count

Value
($bn)

Count

Roche

0.2

1

0.6

3

0.4

1

0.7

3

53.1

17

Bristol
-
Myers Squibb

0.5


1

0.5

1

0.7

1

0.7

1

4.2

5

Novartis

-

-

0.5

1

38.0

4

38.0

4

52.3

13

Merck & Co

0.4

1

0.4

1

0.5

2

0.5

2

42.5

7

Pfizer

0.05

2

0.05

2

3.8

3

3.8

4

72.9

15

GlaxoSmithKline

0.04

1

0.04

1

0.9

8

0.9

8

8.1

22

Sanofi

-

-

-

-

20.8

6

21.4

7

32.3

19

Johnson & Johnson

-

1

21.3

2

2.2

2

2.7

3

30.1

17

AstraZeneca

-

1

-

1

-

-

-

-

16.3

3

Eli Lilly

-

-

-

1

1.2

2

1.2

2

8.1

6

Schering
-
Plough

-

-

-

-

-

-

-

-

15.6

1

Abbott Laboratories

-

-

-

-

4.5

2

4.5

2

15.0

9


Total


1.2


8


23.4


13


73.0


31


74.4


36


350.5


134


Excluding mega

mergers


1.2


8


2.1


12


14.9


29


16.3


34


115


128

Source:
www.epvantage.com

_____________________

19
Genetic Engineering & Biotechnology News,
"
Infectious Disease Molecular Diagnostics: Market Review and Opportunities
,"
(Vol. 31, No. 20), November 15, 2011.


20
Genetic Engineering & Biotechnology News,

"
Infectious Disease Mo
lecular Diagnostics: Market Review and Opportunities
,"
(Vol. 31, No. 20), November 15, 2011.



18


After spending $74.4bn in 36 deals in 2010, the drop to $23.4bn in 13 deals represents a substantial decline
for the big pharma group
in 2011 but some pretty
sizeable deals happened
.

By far the largest M&A deal was
Takeda Pharmaceutical’s $13.
1bn

purchase of Nycomed, a deal that broadened the
Japanese pharmaceutical
company’s global footprint and boosted its position in the global market
place
.


Another major

acquisition is

Gilead Sciences’ $11
bn

purchase of Pharmasset and its Phase III hepatitis C virus (HCV) nucleotide
analogue
, representing the
largest acquisition

ever

of a clinical
-
stage biotech

company
.




Top
10 Pharma/Biotech M&A Deals in 2011 and 2010

Year

Rank

Acquiring Company

Deal Type


Target

Deal Value
($bn)

2011

1

Takeda

Company Acquisition

Nycomed

13.1


2

Gilead Sciences

Company Acquisition

Pharmasset

11.0


3

Teva Pharmaceutical Ind
.

Company Acquisition

Cephalon

6.8


4

Forest Laboratories

Company Acquisition

Clinical Data

1.3


5

Alexion Pharmaceuticals

Company Acquisition

Enobia Pharma

1.0


6

Amgen

Company Acquisition

BioVex

1.0


7

Alkermes

Business Unit

Elan Drug Technologies

1.0


8

Daiichi Sankyo

Company Acquisition

Plexxikon

0.9


9

Teva Pharmaceutical Ind.

Majority Stake

Taiyo Pharmaceutical Ind.

0.9


10

Shire

Company Acquisition

Advanced BioHealing

0.8







201
0

1

Novartis

Majority Stake +
Company Acquisition

Alcon

38
.0


2

Sanofi

Company Acquisition

Genzyme

20.1


3

Teva
Pharmaceutical Ind.

Company Acquisition

Ratiopharm

5.0


4

Valeant

Pharmaceuticals

Company Acquisition

Biovail

4.5


5
5

Astellas Pharma

Company Acquisition

OSI Pharmaceuticals

4.0


6

Abbott Laboratories

Business Unit

Piramal Healthcare Solutions

3.8


7

Pfizer

Company Acquisition

King Pharmaceuticals

3.6


8

Grifols

Company Acquisition

Talecris Biotherapeutics

3.4


9

Celgene

Company Acquisition

Abraxis BioScience

2.9


10

Johnson & Johnson

Company Acquisition

Crucell

2.2

Source:
www.evaluatepharma.com



Stra
t
egic Alliances


It’s no secret the pharma industry is facing some formidable challenges this decade.

In 2011 alone, the
patents to more than 10 blockbuster drugs worth nearly $50 billion in combined annual sales
are due to

expire.
21

The year before that, major drug companies cut 53,000 jobs on top of the 61,000 jobs cut during
2009


much deeper cuts than

most other sectors.

And, though R&D spending has risen
over the past five
-
year period,
the F
DA has approved fewer new drugs.
22




_____________________


21
Life Science Leader,

"
Strategic Alliances: The Cure For What Ails Pharma
?"


22

Life Science Leader,

"
Strategic Alliances: The Cure For What Ails Pharma
?"




19


To address these challenges, the pharma industry has begun to fo
rm strategic alliances, also called strategic
partnerships.

These relationships between pharma and CROs, pharma and biotech, and even large pharma
can reduce costs and decrease product cycle times.

Strategic alliances also allow companies to share risks
and rewards as well as offer the opportunity to learn from each other.



Top 10 Pharma/Biotech Partnering Deals of 2011

Partners

Date

Value

($bn)

Subject


Boehringer Ingelheim,

Eli Lilly


Jan 2011


2.4

Licensing, development and option
agreement to
co
-
market and co
-
develop
insulin analogues


Lundbeck, Otsuka


Nov
2
011


1.8


Co
-
development and co
-
promotion
agreement for up to five innovative
p
s
ychiatric and neuroscience products

Amylin Pharmaceuticals,

Eli Lilly


Nov 2011


1.6


Terminated their
alliance for Bydureon
(exenatide)


Alios Biopharma, Vertex


Jun 2011


1.5


Worldwide licensing agreement for
ALS
-
2200 and ALS
-
2158


Aveo Pharmaceuticals,
Astellas


Feb 2011


1.4


Collaborative R&D and
commercialization agreement for
tivozanib


Emergent BioSolutions,

US Government


Oct 2011


1.2


Contract Service and supply agreement
for BioThrax


Amgen, Micromet


Jul 2011


1.0


Collaborative R&D agreement for BiTE
antibodies against three undisclosed solid
tumor targets

Servier, miRagen
Therapeutics


Oct 2011


1.0


Development agreement for miR
-
208
and miR
-
15/195 plus additional target

Janssen Biotech,
Pharmacyclics


Dec 2011


975 mil


Co
-
development, licensing and
marketing agreement for PCI
-
32765


Evotec, Roche


Sept 2011


830 mil


Worldwide development and licensing
agreement for MAO
-
B inhibitor

Source:

www.currentpartnering.com












20


Venture Capital

& Funding



Investment

in biotechnology by venture capitalists jumped 22
%

in 2011, with $4.7 billion going into 446
deals, according to the MoneyTree Report released by PricewaterhouseCoopers and the National Venture
Capital Association.

Biotechnology was the second largest
in
vestment sector for the year, which
totaled $28.4 billion and 3,673 deals
across all sectors
-

the third highest
annual investment total in the past ten
years.


Investment

in medical devices rose 20
%
,
finishing the year as the fourth largest
sector with $2
.8 billion going into 339
deals.


The life sciences sector, which combines
both biotech and medical devices,
accounted for 27
%

of all venture capital
dollars invested in 2011.


At a time when access to capital has
become more challenging and VCs are
Source:

www.pwcmoneytree.com

and

www.nvca.org




having to hold their existing portfolio










companies longer, it is worth examining



where inves
tors are placing their bets with regard to the next generation of start
-
ups.

Not surprisingly
the
new released Ernst & Young report "
Beyond Borders: Global Biotechnology Report 2011

"
reveals that
companies with a cancer focus commanded the largest

share of significant rounds (those over US$5 million).

Companies focused on diagnostics,

inflamma
tion and

central nervous system

ailments also attracted

a



healthy share of this



funding. It is worth noting

that very little of the money


going to fund new
companies went to
cardiovascular firms


a
sign, perhaps, that investors
are increasingly wary of a
segment that is likely to face
stiff

competition from
blockbuster products that are
going off
-
patent and also
require large and expensive

clinical trials at a time of
increased regulatory opacity.


The top five metropolitan
regions receiving Life
Sciences venture capital

funding during 20
11

were


Cancer, 23%

Diagnostics, 13%

Inflammation,

13%

Central nervous
system/

Neurology,

11%

Metabolic
Endocrinology,

10%

Ophthalmic, 7%

Respiratory
system, 7%

Autoimmune,

4%

Infection, 3%

Hematology/

Blood and
lymphatic
system, 3%

Cardiovascular,

2%

Other, 4%

What are VCs funding? US and European seed and first
-
round

financings over US$5 million

21



New England ($987 million), Silicon Valley

(
$
889
million
),
San Diego

(
$
458

million
),
New
York

Metro (
$
245

million
)

and Philadelphia
Metro ($176million)
.
23



The four states with the nation’s largest

biotech
clusters

were faced with similar challenges
shared by most
U.S. regions seeking to build

their life science presence.

Hurdles

included a
capital squeeze

particularly

for early
-
stage
biopharmas, the
reality of the industry’s
international growth, and the need to attract new
businesses and retain existing ones.

All four
top
-
tier biotech states

California,
Massachusetts, North Carolina, and Maryland

did, however, find numerous ways to address these cha
llenges. They rolled out new financing programs or
improved
existing ones. In some cases they reached out to regions around the world

and in

others they
identified promising niches within their clusters. Signs of success
can

be seen in a series of new cons
truction
and expansion projects

that are under way
.


Biocom, the life science industry group for the San Diego region, is stepping up efforts to help smaller
biotechs find partners, Joseph Panetta, president and CEO, told G
enetic
E
ngineering &
Biotechnolog
y
N
ews

(GEN)
.

San Diego biotechs captured $317.66 million in venture capital in the first three quarters of 2011,
down from $331 million in the first nine months of 2010.
24

The number of biotechs reportedly dipped from
45 to 41 between 2010 and 2011.
25


During 2011, Massachusetts basked in the expansion activity of pharma and biotech giants. Seven projects
totaling more than 1.5 million square feet began construction, according to Richards Barry Joyce &
Partners LLC.

The largest, at 1.1 million square fe
et, is composed of two 550,000 sq. ft. buildings for
Vertex.

Biogen Idec also has two properties under construction, Broad Institute is working on an

expansion, Pfizer has lease with MIT to relocate the company’s cardiovascular, metabolic, and endocrine

diseases (CVMED) and neuroscience research units, and another facility is being built on a speculative

basis by Skanska.

The construction wave will continue into next year, Susan Windham
-
Bannister, Ph.D.,

president and CEO of the Massachusetts Life Sci
ences Center (MLSC) told GEN, fueled by cutbacks
elsewhere in the nation. Novartis plans to break ground on a new building in 2012 and Ipsen announced
plans to build a $45 million R&D facility.

North Carolina

is also dealing with a tight state budget, scra
mbling to plug a $2.4 billion deficit for the fiscal
year that started July 1. State legislative leaders cut about $2 million, or 10%, of the North Carolina
Biotechnology Center’s $19.5 million subsidy, leaving the center with about $17.5 million for the f
iscal year.
Lawmakers also failed to create the proposed Life Science Development Corp., which was to finance
companies with $100 million from a 15
-
year private investment from banks and institutions.


______________________


23

Biotechnology Historical Trend Data for the year 2011
,
PricewaterhouseCoopers
MoneyTree Report.



24
Genetic Engineering & Biotechnology News
, "
Largest US Biotech Clusters Faced Similar Challenges This Year as Seen
Elsewhere
,"
December 27, 2011.


25
Genetic Engineering & Biotechnology News,

"
Largest US Biotech Clusters Faced Similar Challenges This Year as Seen
Elsewhere
,"
December 27, 2011.

Source:
www.genengnew
s.com


22


Disappointments such as these were more than balanced out by other activity. In 2011, officials increased
from 5% to 7.5% the percentage of pension
funds the state can invest in alternative investments in biotech,
green tech, and IT. Last month state treasurer Janet Cowell announced a $35 million “accelerator” offshoot
to the $232.3 million North Carolina Innovation Fund launched last year. This accel
erator offshoot is aimed
at early
-
stage biotechs.

Venture capital was a
brighter spot

for the state
, with investors reportedly pumping
about $146.2 million in biotech startups during the first three quarters of 2011 compared with $112.6 million
a year ea
rlier.
26

But the number of biotech companies winning funding dipped during that period, from 11 to
8
.

Maryland biotech startups seeking capital will have a new option in 2012: the new InvestMaryland fund.

The state will auction off up to $100 million of t
ax credits to insurance companies that pay state premium
insurance taxes. The auction is expected to yield a minimum $70 million, of which 67% will be allocated to
three or four venture capital firms to invest in promising startups in biotech as well as cl
eantech, green tech,
and mobile health. The remaining 33% will be deposited into the state’s 15
-
year
-
old Maryland Venture
Fund.

The state this year kept stem cell program funding at FY 2011’s $12.4 million, about half what was
available three years earlie
r. State funding for Maryland Biotechnology Investor Tax Credits is also stable at
$8 million, the same as FY 2011 and $2 million above FY 2010.
2
7



Top 5 biotech venture capital deals,
1st half of

2011


Symphogen

$131M

Tesaro

$101M

Circassia

$98M

Radius Health

$91M

Merrimack

$77M

Source:

www.fiercebiotech.com



Top 15 Biotech Venture Capital Deals of 2010


1.
Pacific Biosciences

-

$109M





8.
Otonomy

-

$49.07M

2.
Reata Pharmaceuticals

-

$
78M




9.
Tetraphase Pharmaceuticals

-

$45M

3.
Relypsa

-

$70M






10.
Agile Therapeutics

-

$45M

4.
Pearl Therapeutics

-

$69M





11.
Incline Therapeutics

-

$43M

5.
NanoInk

-

$65M






12.
NeuroTherapeutics

-

$43M

6.
TetraLogic Pharmaceuticals

-

$59.83M



13.
Cellular Dynamics International

-

$40.6M

7.
Achaogen

-

$56.31M






14.
Calistoga Pharmaceuticals

-

$40.22M

Source:
www.fiercebiotech.com





15.
Sagent Pharmaceuticals

-

$40M





_______________________


26
Genetic Engineering & Biotechnology News,

"
Largest US Biotech Clusters Faced Similar Challenges This Year
as Seen
Elsewhere
,"
December 27, 2011.


27
Genetic Engineering & Biotechnology News,

"
Largest US Biotech Clusters Faced Similar Challenges This Year as Seen
Elsewhere
,"
December 27, 2
011.




23


R&D Outsourcing


As biopharmaceutical companies look to cut costs and improve speed
-
to
-
market, more of them plan to
outsource R&D and clinical trials and shift this work overseas to places such as China and India, finds a
survey released by global
consulting firm Booz & Company.

This study confirms that outsourcing will
become an increasingly important part of the competitive landscape and provides key insights into why and
how the outsourcing process will radically evolve in the next two to three
years.

For example, many
biopharmaceutical companies will begin outsourcing formerly core activities such as clinical trial monitoring
and protocol development to contract research organizations (CROs).

This shift will be driven by new
service offerings
in real
-
time data processing and virtual platforms that allow people around the world to
securely access clinical data in real time.

Outsourcing more of these critical activities along the entire R&D
spectrum will transform the nature of outsourcing relat
ionships.

To see a full copy of the study,
please
visit:
http://www.booz.com/media/uploads/BoozCo
-
BayBio
-
Outsourcing
-
Life
-
Sciences.pdf



Healthcare
R
eform


The
United States may finally be on the verge of making its much
-
delayed, long
-
anticipated, often
-
feared
transition to universal

healthcare coverage.

Like the coming
wave of generic drugs
, this change would be
nothing short of momentous


a dramatic expansion

in the world’s largest (and most
laissez
-
faire
) drug
market.

Indeed, recognizing healthcare’s paradigm
-
shifting power, the Obama administration is positioning
healthcare reform as one of three investments in the future (energy and education are the
others) that will lay
the foundation for a more competitive 21st
-
century economy. For drug companies, expanded coverage will
likely bring

new pricing regimes where buyers have concentrated bargaining power. Meanwhile, the push
for electronic medical recor
ds to increase efficiency could produce vast volumes of data for companies to

mine in developing better treatments


creating new winners and losers, including perhaps from competitors
and collaborators that emerge from outside the traditional healthcare
sector.

Healthcare reform will likely
include

the adoption of pay
-
for
-
performance metrics.

The challenge for the drug industry will be to make
sure that these metrics maintain the right incentives
for innovation rather than simply aim to lower costs.




Personalized Medicine


Since the mapping of the human genome in 2003, the pace of

discovery, product development, and clinical
adoption of what we know as personalized

medicine has accelerated.

Personalized medicine may be
considered an extension of trad
itional approaches to

understanding and treating disease, but with greater

precision.

A profile of a patient’s

genetic variation can guide the selection of drugs or treatment protocols

that minimize

harmful side effects or ensure a more successful outco
me.

It can also indicate susceptibility

to certain diseases before they become manifest, allowing the physician and patient to set

out a plan for
monitoring and prevention.

Physicians
will be able to

go beyond the “
one size fi
ts

all” model of medicine to

make the most effective clinical decisions for individual patients.


Pharmaceutical and biotechnology companies are increasingly turning to personalized medicine in order to
improve the drug development process and also to speed up the approval of new dru
gs.

One of the biggest
challenges for the biotechnology and pharmaceutical companies in the 21st century will be to develop and
deliver drugs that fit the individual patient’s biology and pathophysiology. This change from blockbuster
medicine to personal
ized medicine will, to a large extent, influence the way that drugs are going to be
developed, marketed and prescribed in the future.





24


According to
a recent report "
Personalized Medicine Market Worldwide (2010
-

2015)
" issued by
Research
and Markets
, t
he personalized medicine market
worldwide
is projected to grow 1
1.56
% annually and reach
U.S. $148.4 billion by 2015.
28

The fastest growth is expected to come from the proteomics and genomics
segment. Targeted biologics is one of the most exciting areas
of therapeutic medicine and may represent one
in every four newly commercialized drugs in the future.

It is expected to grow steadily with a compound
annual growth rate of 10%.
29


Generic Drugs




During the past five years, the use of generic small
molecules has increased drammatically in the United
States. In 2010, 78% of all prescriptions in the country were generics, compared with 63% in 2006.
30

Because of several imminent patent expirations in the next three years, it is projected that by 2015,

86% of
all small
-
molecule prescriptions in the United States will be filled by generics. Such high use of generics is
likely to steal share from biologics and require cost and comparative effectiveness data to justify their use in
approved indications
.
31



In 2010
, FDA released a roadmap for the approval of biosimilars. This raised the debate about
"interchangeability" (when one drug can be substituted for another by a pharmacist), which is a key facet of
the rise of generics and erosion of sales for sma
ll
-
molecule brand drugs that are off patent; as yet, it remains

unclear how many biosimilars will qualify for interchangeability. The FDA has established a pathway for
two types of biosimilars, one of which will be a superior product (with interchangeabil
ity in the label) and
the second, a "regular" standard product (with no interchangeability)
.
32

Cheaper off
-
patent biologics could
substantially lower the financial burden on patients and payers, but could lead to an overall decline in sales
of the market
and price erosion
.
33




Stem Cell Research: Lifting the Ban


In an important symbolic victory for the

biotech industry, President Obama issued

an executive order in
March 2009 lifting

the restrictions imposed by President

Bush on federal funding for
research on

human

embryonic stem cells.

The reversal was expected, as the

president


long a proponent of stem cell

research
and regenerative medicine


had

pledged a policy shift on the campaign

trail.

Advocates have stressed,
however,

that

the change
is more a symbolic move

for industry than a true financial driver.

Federal research
grants, distributed

almost exclusively to government

agencies and academic research centers,

will not
generally end up in biotechnology

companies.

Thus companies pursuing

embryonic stem cell research will
still

need to raise funding from investors,

which has become more challenging
during

the economic crisis.



______________________



Research and Markets,

"
Personalized Medicine Market Worldwide (2010
-

2015)
,"
February 17, 2011.


29

Research and Markets,

"
Personalized Medicine Market Worldwide (2010
-

2015)
,"
February 17, 2011.


30
IMS Institute for Healthcare Informatics,

"
The Use of Medicines in the United States: Review of 2010
,"
April 2011.


31
Nature Biotechnology,

"What's fueling the biotech engine
-

2010 t
o 2011,"
Volume 29, Number 12, December 2011.


3
2
Steven Kozlowski, M.D., Janet Woodcock, M.D., Karen Midthun, M.D., and Rachel Behrman Sherman, M.D., M.P.H.,

"
Developing the Nation's
Biosimilars Program
,"
New England Journal of Med.
365
, 385
-
388 (August 4, 2011).


3
3
PR Newswire,

"
Biosimilar erosion of branded ESA market share will be more rapid in the US than in Europe
,"
November 4,
2010.

25


Breakthroughs in stem cell research are occurring at a rapid pace thereby providing exciting evidence of the
potential for stem cells to trea
t many health problems from cardiovascular disease to neurological disorders.

Menlo Park, California
-
based Geron Corporation, for example, has published the results of its experiments

that show that when certain cells (called OPCs) derived from stem cell
s were injected in rats that had spinal
cord injuries, the rats quickly recovered.

According to the company, “Rats transplanted seven days after
injury showed improved walking ability compared to animals receiving a control transplant.

The OPC
-
treated an
imals showed improved hind limb
-
forelimb coordination and weight bearing capacity, increased
stride length, and better paw placement compared to control
-
treated animals.”



REMS:
M
onitoring
S
afety


Public attention has focused on drug safety in recent
years, largely due to several high
-
profile products
receiving media attention, including:




Merck's Vioxx, a prescription painkiller that was pulled from the market in 2004 due to potential
cardiovascular risks




Selective serotonin reuptake inhibitors (SSRI
s), a widely used type of antidepressant medication that
was linked to higher suicide rates.
3
4




Tysabri, a multiple sclerosis drug voluntarily withdrawn after three clinical trial subjects developed
progressive multifocal leukoencephalopathy (PML), a serio
us viral infection of the brain.
3
5

(Tysabri
was later reintroduced with a mandatory risk minimization program).
3
6


While there is some debate on the validity of the science behind these drug safety issues, the events attracted
widespread media coverage and

criticism of the FDA, creating a political climate in which there was strong
support for major changes in the US drug safety system.


With the signing of the Food and Drug

Administration Amendments Act

(
FDAAA
) in September 2007,
sweeping

changes were made in the FDA. The Act’s

greatest impact on future drug approva
ls

could be
through its mechanism for

post
-
marketing safety surveillance, the

risk evaluation and mitigation strategy

(
REMS
). Of course,
post
-
approval studies

are not new, but as of 2008, these are

no longer voluntary post
-
marketing

commitments, but rather, enforceable

studies with predetermined time frames

and outcome
targets.


Most of the legislation dealing with drug safety is in Title
IX of the Act. Below is a summary of the key

changes related to drug safety introduced in the law.




1.

Increased authority to monitor drugs after approval


The FDAAA gives the FDA authority to require studies at the time of approval or after approval b
ased on
new safety information. The agency can also require labeling changes or other risk minimization activities,


_______________________________

34
Food and Drug Administration,
FDA Public Health Advisory:
Suicidality in Children and Adolescents Being Treated With
Antidepressant Medications

(FDA, Rockville, MD, 14

October 2004)


35
FDA News, "
FDA Approves Resumed Marketing of Tysabri Under a Special Distribution Program
", 5 June 2006


3
6
FDA News, "
FDA Issues Safety Alert on Avandia
", 21 May 2007

26


if necessary. The ability to require new studies must be based on scientific data and is limited to certain

specific purposes including:




Assessing a known serious risk related to the use of the drug




Assessing signals of serious risk related to use of the drug




Identifying an unexpected serious risk when available data indicates the potential for a serious
risk.


The ability to require a study is further limited by the need to find that the adverse event reporting and the
active post
-
market risk identification and analysis system, which are to be established under the Act, will not

be sufficient to meet the
purposes without the study. While the FDA has been able to request these actions

for some time, their ability to enforce the requests was limited, and significant public concern arose over a

2006 FDA report that concluded that sponsors had failed to start

65% of the approximately 1200 requested
studies.
3
7


Under the new legislation, the sponsor must submit a timetable for completion of the study or trial, provide
periodic reports on the status of the required study (including whether enrollment has begun),

the number of
participants enrolled, the expected completion date, and any difficulties encountered in completion. The
study must also be registered on
www.clinicaltrials.gov
. The FDA can levy civil monetary

penalties for
noncompliance with post
-
approval study requirements.




2. New requirements for risk management


The FDAAA enables the agency to require REMS (Risk Evaluation & Mitigation Strategies), both as part of
the drug approval process and once the
drug is on the market. REMS are comprehensive risk management
programs aimed at ensuring that a drug's benefits outweigh its risks.


As of December 2008, the FDA

had approved 21 REMS from companies

submitting new drug applications

(NDAs).

For an updated
list, please visit the following website:
www.fda.gov
.
The majority of these
REMS

have required the submission of a

medication guide
to address drug
-

and

drug class
-
specific issues
and provide

further information to help patients avoid

serious adverse events.

In a few cases,

the FDA also required that the programs

include steps to assure safe use, such

as the
certification of prescribe
rs and

pharmacies and enrollment of patients in

special programs to ensure that they
fully

understand the associated risks.


REMS programs are not restricted to

new drugs seeking approval; the FDA can

also require them for
existing, approved

products. The
FDA posted its first list of

previously approved products requiring

REMS
in March 2008, which included

products such as Biogen Idec and Elan’s

multiple sclerosis drug, Tysabri,
and

Celgene’s multiple myeloma and MDS

therapy, Revlimid.




3.
Safety
-
related labeling changes


The Act gives the FDA new authority to require labeling changes based on new safety information. The
FDA must promptly notify the sponsor if it becomes aware of new safety information that should be included


____________
_________


37
J. Wechsler; "
Safety Concerns Drive Demand for Registries
,"
Applied Clinical Trials
, June 2006, 26
-
30
.

27


in the labeling of the drug. After notification, within 30 days the sponsor must submit a supplement
proposing changes or notify the FDA that they do not believe a labeling change is warranted and state why
not.



4. Increased transparency


The Act aims to improve transparency and communication about risks by requiring manufacturers to post the
results of all clinical trials involving approved drugs. The FDA can then use the data, along with data
generated from
post
-
approval studies and risk management programs, to demand labeling changes to
approved products. The FDA can also require labeling changes or other actions based on data that it gathers
through its own surveillance system.


The FDA can now

require dru
g companies to develop and

propose a REMS (which can include a

medication
guide, patient package insert

or a communication plan) to ensure

that the benefits of a drug outweigh the

risks.






28


VII
. FDA Regulations



Biological Products


Both the FDA’s Center for Drug Evaluation and Research (CDER) and Center for Biologics Evaluation and
Research (CBER) have regulatory responsibility for therapeutic biological products, including premarket
review and oversight. The categories of therapeuti
c biological products regulated by CDER (under the
FDC
Act

and/or the
PHS Act
, as appropriate) are the following
:




Monoclonal antibodies for in vivo use.




Most proteins intended for therapeutic use, including cytokines (e.g., interferons), enzymes (e.g.
thrombolytics), and other novel proteins, except for those that are specifically assigned to the
Center for Biologics Evaluation and Research (CBER) (e.g., v
accines and blood products). This
category includes therapeutic proteins derived from plants, animals, humans, or microorganisms,
and recombinant versions of these products.


Exceptions to this rule are coagulation factors (both
recombinant and human
-
plasm
a derived).




Immunomodulators (non
-
vaccine and non
-
allergenic products intended to treat disease by
inhibiting or down
-
regulating a pre
-
existing, pathological immune response).




Growth factors, cytokines, and monoclonal antibodies intended to mobilize, s
timulate, decrease or
otherwise alter the production of hematopoietic cells in vivo.

Categories of Therapeutic Biological Products Remaining in CBER



Cellular products, including products composed of human, bacterial or animal cells (such as
pancreatic isl
et cells for transplantation), or from physical parts of those cells (such as whole
cells, cell fragments, or other components intended for use as preventative or therapeutic
vaccines).




Gene therapy products. Human gene therapy/gene transfer is the admin
istration of nucleic acids,
viruses, or genetically engineered microorganisms that mediate their effect by transcription and/or
translation of the transferred genetic material, and/or by integrating into the host genome. Cells
may be modified in these ways

ex vivo for subsequent administration to the recipient, or altered
in vivo by gene therapy products administered directly to the recipient.




Vaccines (products intended to induce or increase an antigen specific immune response for
prophylactic or therape
utic immunization, regardless of the composition or method of
manufacture).




Allergenic extracts used for the diagnosis and treatment of allergic diseases and allergen patch
tests.




Antitoxins, antivenins, and venoms




Blood, blood components, plasma derived products (for example, albumin, immunoglobulins,
clotting factors, fibrin sealants, proteinase inhibitors), including recombinant and transgenic
versions of plasma derivatives, (for example clotting factors), blood s
ubstitutes, plasma volume
29


expanders, human or animal polyclonal antibody preparations including radiolabeled or
conjugated forms, and certain fibrinolytics such as plasma
-
derived plasmin, and red cell reagents.


Please refer to the Transfer of Therapeutic

Biological Products to the Center for Drug Evaluation and
Research at
http://www.fda.gov/oc/combination/transfer.html

for updates that further define the categories of
biological products tha
t are regulated by CDER and CBER.





Establishment Registration

Blood Establishments

-

All owners or operators of establishments that manufacture blood products
are required to register with the FDA, pursuant to section 510 of the Federal Food, Drug, and
Cosmetic Act, unless they are exempt under
21 CFR 607.65
.

A list of every blood product
manufactured, prepared, or processed for commercial distribution must also be submitted.

Products
must be registered and listed within 5 days of beginning ope
ration, and annually between November
15 and December 31.

Blood product listings must be updated every June and December.

Human Cells, Tissues and Cellular and Tissue
-
Based Products (HCT/Ps) Establishments

-

Establishments that manufacture HCT/Ps that are

regulated solely under section 361 of the PHS Act
and the regulations in part 1270 are required to register and list under 21 CFR Part 1271 in 2001.

Establishment that manufacture HCT/Ps that are: 1) Drug, 2) Medical Devices, 3) Biological
Products, 4) H
ematopoietic stem cells from peripheral and cord blood, 5) Reproductive cells and
tissues; or 6) Human heart valves and human dura mater, are required to register with FDA and list
HCT/Ps using the registration and listing procedures in 21 CFR part 1271, s
ubpart B.

HCT/P
establishments that only manufacture HCT/Ps currently under IND or IDE do not need to register and
list their HCT/Ps until the investigational HCT/P is approved through a Biologics License
Application (BLA), a New Drug Application (NDA), o
r a Premarket Approval Application (PMA);
or cleared through a Premarket Notification Submission 510(k).





Investigational New Drug Application

-

A drug that passes animal safety studies may move into human

testing following the submission of an investigational new drug (
IND
) application to the FDA. Most

studies, or trials, of new products may begin 30 days after the agency receives the IND.
During this time,

FDA


has an opportunity to review the IND for safety to assure that research subjects
will not be

subjected to unreasonable risk.



Almost every new drug goes through multiple clinical trials, beginning with early studies (Phase I) in

small groups of patients to test safety. Larger mid
-
stage trials (Phase II) examine safety and obtain

preliminary efficacy data. The final stage of pre
-
market testing (Phase III) seeks to gather convincing

efficacy data in the specific patient population the drug's developer hopes to treat.



There are three IND types:


o

An Investigator IND is submitted b
y a physician who

both initiates and conducts an
investigation, and under whose immediate direction the investigational drug is administered or
dispensed.


A physician might submit a research IND to propose studying an unapproved drug,
or an approved produ
ct for a new indication or in a new patient population.


o

Emergency Use IND


allows the FDA to authorize use of an experimental drug in an emergency
situation that
does not allow time for submission of an IND in accordance with


21CFR ,
Sec.
30


312.23

or
Sec. 312.34.


It is also used for patients who do not meet the criteria of an existing
study protocol, or if an approved study protocol does not exist.


o

Treatment IND

is submitted for experimental drugs showing promise in clinical testing for
serious or immediately life
-
threatening conditions while the final clinical work is co
nducted and
the FDA review takes place.





There are two IND categories:


o

Commercial

o

Research (non
-
commercial)



The IND application must contain information in three broad areas:

o

Animal Pharmacology and Toxicology Studies

-

Preclinical data to permit an assessment as to
whether the product is reasonably safe for initial testing in humans.


Also included are any
previous experience with the drug in humans (often foreign use).


o

Manufacturing Information

-


Information pertai
ning to the composition, manufacturer,
stability, and controls used for manufacturing the drug substance and the drug product.


This
information is assessed to ensure that the company can adequately produce and supply
consistent batches of the drug.


o

Clini
cal Protocols and Investigator Information

-

Detailed protocols for proposed clinical
studies to assess whether the initial
-
phase trials will expose subjects to unnecessary risks.


Also,
information on the qualifications of clinical investigators
--
professi
onals (generally physicians)
who oversee the administration of the experimental compound
--
to assess whether they are
qualified to fulfill their clinical trial duties.


Finally, commitments to obtain informed consent
from the research subjects, to obtain re
view of the study by an institutional review board (IRB),
and to adhere to the investigational new drug regulations.

All Biological IND submissions must be made in triplicate and should be addressed as follows:

Center for Biologics Evaluation and Research

HFM
-
99, Room 200N

1401 Rockville Pike

Rockville, MD 20852
-
1448

Tel: (301)827
-
1800






Biologics License Application

-

Biological products are approved for marketing under the provisions of

the Public Health Service (PHS) Act. The Act requires a firm who manufactures a biologic for sale in

interstate commerce to hold a license for the product. A biologics license ap
plication is a submission that

contains specific information on the manufacturing processes, chemistry, pharmacology, clinical

pharmacology and the medical affects of the biologic product. If the information provided meets FDA

requirements and the esta
blishment passes the inspection, the application is approved and a license is


issued allowing the firm to market the product.

Form 356h

specifies the requiremen
ts for a BLA.

This

includes:


o

Applicant information



31


o

Product/Manufacturing information



o

Pre
-
clinical studies



o

Clinical studies


o

Labeling



Some responsibilities of a licensed biologics manufacturer include:


o

complying with the appropriate laws and regulations relevant to their biologics license and

identi
fying any changes needed to help ensure product quality


o

reporting certain problems to FDA’s Biological Product Devia
tion Reporting System


o

reporting and
correcting product

problems within established time
frames


o

recalling or stopping the manu
facture of a product if a significant problem is detected





Post
-
Approval

-

Every approved drug comes with an official product label, in a standardized format,

whose contents are developed by the FDA and the company marketing the drug.

The label contents

include the approved indication, as well as a description of the drug, its side effects, dosage, clinical trial

summaries and other information useful to phys
icians.

Although doctors may prescribe a therapy "off
-

label" for indications not expressly approved by the FDA, manufacturers are prohibited from marketing

off
-
label indications, and insurance does not always cover such uses.




The story does not end w
ith approval and labeling.

Companies often conduct additional Phase II and

III trials in other indications and may apply for approval through a supplemental BLA.

If

approved,

the

new indication is added to the product label.



Companies also conduct P
hase IV trials to refine knowledge about the drug. In addition, drug makers

are required by law to report adverse events to the FDA, and they are subject to ongoing

manufacturing a
nd marketing rules.



General Biological Product Standards




Potency

-

Tests for potency shall consist of either in vitro or in vivo tests, or both, which have been
specifically desig
ned for each product so as to indicate its potency in a manner adequate to satisfy the
interpretation of potency given by the definition in 600.3(s) of this chapter.




General Safety

Test

-

A general safety test for the detection of extraneous toxic contami
nants shall be
performed on biological products intended for administration to humans. The general safety test shall
be conducted upon a representative sample of the product in the final container from every final
filling of each lot of the product. If an
y product is processed further after filling, such as by freeze
-

drying, sterilization, or heat treatment, the test shall be conducted upon a sample from each filling of
each drying chamber run, sterilization chamber, or heat treatment bath.




32




Sterility Test





Purity

-

Products shall be free of extraneous material except that which is unavoidable in the
manufacturing process described in the approved bi
ologics license application. In addition, products
shall be tested as provided in
paragraphs (a) and (b) of this section
.




Identity

-

The contents of a final co
ntainer of each filling of each lot shall be tested for identity after
all labeling operations shall have been completed. The identity test shall be specific for each product
in a manner that will adequately identify it as the product designated on final c
ontainer and package
labels and circulars, and distinguish it from any other product being processed in the same laboratory.


Identity may be established either through the physical or chemical characteristics of the product,
inspection by macroscopic or
microscopic methods, specific cultural tests, or in vitro or in vivo
immunological tests.




Constituent Materials

-





Total Solids in Serums

-

Except as otherwis
e provided by regulation, no liquid serum or antitoxin
shall contain more than 20 percent total solids
.




Permissible Combinations

-

Licensed products may not be combined with other licensed products
either therapeutic, prophylactic or diagnostic, except as

a license is obtained for the combined
product. Licensed products may not be combined with non
-
licensable therapeutic, prophylactic, or
diagnostic substances except as a license is obtained for such combination.




Cultures




Labeling Standards



Container Label

(a)

Full label

-

The following items shall appear on the label affixed to each container of a product

capable of bearing a full label:

(1) The proper name of the product;

(2) The name, address, and license number of manufacturer;

(3) The lot number or other lot
identification;

(4) The expiration date;

(5) The recommended individual dose, for multiple dose containers.

(6) The statement: "`Rx only'" for prescription biologicals.

(7) If a Medication Guide is required under part 208 of this chapter, the statement req
uired under

208.24(d) of this chapter instructing the authorized dispenser to provide a Medication Guide to

each patient to whom the drug is dispensed and stating how the Medication Guide is provided,


33


except where the container label is too small, the
required statement may be placed on the

package label.


(b)

Package label information

-

If the container is not enclosed in a package, all the items required for

a
package label shall appear on the container label.


(c)

Partial label

-

If the container is capable of bearing only a partial label, the container shall show as

a minimum the name (expressed either as the proper or common name), the lot number or other lot

identification and the name of the manufacturer; in addition, for mul
tiple dose containers, the

recommended individual dose. Containers bearing partial labels shall be placed in a package which

bears all the items required for a package label.


(d)

No container label

-

If the container is incapable of bearing any label, t
he items required for a

container label may be omitted, provided the container is placed in a package which bears all the

items required for a package label.


(e)

Visual inspection

-

When the label has been affixed to the container a sufficient area of t
he

container shall remain uncovered for its full length or circumference to permit inspection of the

contents.




Package
L
abel

The following items shall appear on the label affixed to each package containing a product:

(a) The proper name of the
product;

(b) The name, address, and license number of manufacturer;

(c) The lot number or other lot identification;

(d) The expiration date;

(e) The preservative used and its concentration, or if no preservative is used and the absence of a
preservative is

a safety factor, the words "no preservative";

(f) The number of containers, if more than one;

(g) The amount of product in the container expressed as (1) the number of doses, (2) volume, (3)
units of potency, (4) weight, (5) equivalent volume (for dried p
roduct to be reconstituted), or

(6) such combination of the foregoing as needed for an accurate description of the contents,
whichever is applicable;

(h) The recommended storage temperature;

(i) The words "Shake Well", "Do not Freeze" or the equivalent, a
s well as other instructions, when
indicated by the character of the product;

(j) The recommended individual dose if the enclosed container(s) is a multiple
-
dose container;

34


(k) The route of administration recommended, or reference to such directions in an
enclosed
circular;

(l) Known sensitizing substances, or reference to an enclosed circular containing appropriate
information;

(m) The type and calculated amount of antibiotics added during manufacture;

(n) The inactive ingredients when a safety factor, or
reference to an enclosed circular containing
appropriate information;

(o) The adjuvant, if present;

(p) The source of the product when a factor in safe administration;

(q) The identity of each microorganism used in manufacture, and, where applicable, the p
roduction
medium and the method of inactivation, or reference to an enclosed circular containing
appropriate information;

(r) Minimum potency of product expressed in terms of official standard of potency or, if potency is a
factor and no U.S. standard of p
otency has been prescribed, the words "No U.S. standard of
potency."

(s) The statement: "`Rx only'" for prescription biologicals.




Proper name; package label; legible type

(a)

Position

-

The proper name of the product on the package label shall be placed

above any
trademark or trade name identifying the product and symmetrically arranged with respect to
other printing on the label.

(b)

Prominence

-

The point size and typeface of the proper name shall be at least as prominent as the
point size and typeface

used in designating the trademark and trade name. The contrast in color
value between the proper name and the background shall be at least as great as the color value
between the trademark and trade name and the background. Typography, layout, contrast, a
nd
other printing features shall not be used in a manner that will affect adversely the prominence of
the proper name.

(c)

Legible type

-

All items required to be on the container label and package label shall be in legible
type. "Legible type" is type of
a size and character which can be read with ease when held in a
good light and with normal vision.




Divided manufacturing responsibility to be shown

If two or more licensed manufacturers participate in the manufacture of a biological product, the
name, address, and license number of each must appear on the package label, and on the label of the
35


container if capable of bearing a full label.



Name and add
ress of distributor

The name and address of the distributor of a product may appear on the label provided that the
name, address, and license number of the manufacturer also appears on the label and the name of
the distributor is qualified by one of the
following phrases: "Manufactured for _____", "Distributed
by ______", "Manufactured by _____ for _____", "Manufactured for _____ by ____",
"Distributor: _____", or "Marketed by _____". The qualifying phrases may be abbreviated.




Bar code label
requirements

Biological products must comply with the bar code requirements at 201.25 of this chapter. However,
the bar code requirements do not apply to devices regulated by the Center for Biologics Evaluation
and Research or to blood and blood componen
ts intended for transfusion. For blood and blood
components intended for transfusion, the requirements at 606.121(c)(13) of this chapter apply
instead.



In
-
vitro Diagnostic (IVD) Produc
ts Regulation





Establishment Registration

-

Manufacturers (both domestic and foreign) and initial distributors

(importers) of medical devices must register their establishments with the FDA.

All establishment

registratio
ns must be submitted electronically unless a waiver has been granted by FDA.

All registration

information must be verified annually between October 1st and December 31st of each year.

In addition

to registration, foreign manufacturers must also designate a U.S. Agent.

Beginning October 1, 2007,

most establishments are required to pay an establishment registration fee. Please find below the schedule

of registration fees for each fiscal year.


Ye
ar

FY 2008

FY 2009

FY 2010

FY2011

FY 2012

Fee

$1,706

$1,851

$2,008

$2,179

$2,
029


M
ore information about FDA establishment registration can be found at:
http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/Overview/default.htm#reg
.





Classification of
IVD Products

-

FDA classifies IVD products into Class I, II, or III according to the

level of regulatory control that is necessary to assure safety and effectiveness. The classification of an

IVD (or other medical device) determines the appropriate premarket process.


Class I Devices
: include commodity products such as stethoscopes, scalpels, and other commodity
products that pose relatively little patient risk. Makers of these products need only register their
establishment, conform to Good Manufacturing Practices (G
MP) and notify the FDA at least 90 days

before they start marketing the devices. GMP's are standards set by the FDA for ensuring manufacturing
quality. More information about GMP requirements can be found at:
http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/PostmarketRequirements/QualitySy
stemsRegulations/default.htm
.

36




Class II Devices
: include devices

that present a moderate degree of risk to the patient. Examples include
x
-
ray machines, endoscopes, and surgical lasers. Manufacturers have to provide the FDA with some
evidence of safety and efficacy and meet certain performance standards. In addition
, they are responsible
for post
-
market surveillance and maintenance of patient registries.


Class III Devices
: these are sophisticated products that present significant risk to patients and must go
through extensive clinical trials before undergoing FDA r
eviews. Included in this category are life
supporting devices, such as implantable cardiac pacemakers, angioplasty catheters, stents, and similar
devices that prevent potentially dangerous medical conditions such as heart attacks and cardiac
arrhythmias.




Premarket Notifications

-

Premarket notifications are also known as 510(K). This is a more commonly

used filing and applies to devices that are Substantially Equivalent (SE) to approved products already on

the market. Many Class I devices are exempt f
rom the 510(K) process, although other regulations apply.

Once the device is determined to be SE, it can then be marketed in the U.S. The SE determination is

usually made within 90 days and is made based on the information submitted by the submitter.

Detailed

information about the 510(K) process can be found at
:


http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/Overview/default.htm
#reg

In many cases, descriptive data and a labeling review are sufficient, though some devices may require
further clinical studies to support a 510(K). Before marketing a device, each submitter must receive an
order, in the form of a letter, from FDA whi
ch finds the device to be substantially equivalent and states
that the device can be marketed in the U.S. This order "clears" the device for commercial distribution.
The submitter may market the device immediately after 510(K)

clearance is granted.





Premarket Applications

-

Premarket applications (PMA) apply to most Class III devices due to the level

of risk. PMA is the most stringent type of device marketing application required by FDA. The applicant

must receive FDA approval of its PMA application prior to marketing the device. PMA approval is

based on a determination by FDA that the PMA contain
s sufficient valid scientific evidence to assure that

the device is safe and effective for its intended use(s). An approved PMA is, in effect, a private license

granting the applicant (or owner) permission to market the device. The PMA owner, however,
can

authorize use of its data by another.

FDA regulations provide 180 days to review the PMA and make a determination. In reality, the review
time is normally longer. Before approving or denying a PMA, the appropriate FDA advisory committee
may review t
he PMA at a public meeting and provide FDA with the committee's recommendation on
whether FDA should approve the submission. After FDA notifies the applicant that the PMA has been

approved or denied, a notice is published on the Internet (1) announcing th
e data on which the decision is
based, and (2) providing interested persons an opportunity to petition FDA within 30 days for
reconsideration of the decision.

On October 26, 2002 the Medical Device User Fee and Modernization Act of 2002 was signed into

law.

This law authorizes FDA to charge a fee for medical device product reviews.

These fees apply

to

Premarket Approvals (PMAs), Product Development Protocols (PDPs), Biologics Licensing
A
pplications (BLAs for certain medical devices reviewed by FDA's Ce
nter for Biologics Evaluation

and
Research), certain supplements, and Premarket Notif
i
cation 510(k)s.

37



The fee must be paid for the above listed applications, unless the applicant is eligible for a waiver or

exemption.

Small businesses may qualify for a

reduced fee.

Payment must be received on or before

the

time the application is submitted.

If the applicant has not paid all fees owed, FDA will consider the

application incomplete and will not accept it for filing.


FY 20
12

Device Review User Fees (U
.S. Dollars)

Application

Standard

Fee

Small Business

Premarket Application (PMA, PDP, BLA, PMR)*

$2
2
0,
050

$5
5,013

First

premarket application from firms with

gross receipts or sales ≤ $30 million

Not Applicable

Fee is Waived

Panel
-
track Supplement

$1
65,038

$
41,259

Efficacy Supplement (for BLA)

$2
20,050

$
55,013

180
-
day Supplement

$
33,008

$
8,252

Real
-
time Supplement

$
15,404

$
3,851

Annual Report

$7,702

$1,925

30
-
day Notice

$3,
521

$1,
760



* PMA=Premarket Approval; PDP=Product Development Protocol; BLA=Biologics License Application;



PMR=Premarket Report (for a reprocessed device)



Source:
www.fda.gov


The following types of applications require
no fee.



Special PMA Supplements
-
Changes Being Affected



PMA Manufacturing Site Change Supplements



Humanitarian Device Exemption (HDE)



BLA for a product licensed

for further manufacturing use only.


The following exemptions or waivers apply.

Fee Exemptions and Waivers (No Fee for These)

Category

Exemption or Waiver

First

premarket approval submission (PMA,
PDP, BLA, or premarket report) from a small
business with gross receipts or sales <$30
million.

One
-
time waiver of the fee that would otherwise
apply.

Any application for a device intended solely
for pediatric use.

Exe
mpt from any fee. If an applicant obtains an
exemption under this provision, and later
submits a supplement for adult use, that
supplement is subject to the fee then in effect for
an original premarket application.

Any application from a State or Federal
Government entity.

Exempt from any fee unless the device is to be
distributed commercially.

38





Labeling

Requirements

-


The label for IVD's mus
t state the following information, except in cases

where it is not applicable.

In addition, all information must appear on the outside container or wrapper,

or be easily legible through the outside container or wrapper. If the presence of any label inf
ormation

will interfere with the test, the information may appear on the outside wrapper or container instead of the

label. If the immediate containers are too small, or otherwise unable to bear labels with sufficient space,

then the required labeling
as listed below annotated with an asterisk
(*)
may appear on the outer container

labeling only.

Label requirements
for the immediate container
:

o

The established and proprietary names of the product, e.g., cholestrolometers;

*

o

The intended use or
uses, e.g., pregnancy detection, diabetes screening, etc.;

*

o

A statement of warnings or precautions for users listed in 16
CFR

part 1500



(hazardous substances) and any other warnings appropriate to user hazards, and a



statement "For In Vitro Diagno
stic Use"
;


o

Name and place of business of the manufacturer, packer, or distributor;


o

Lot or control number traceable to the production history



-


Multiple unit products must have traceability of the individual units;



-


Instrument lot numbers mus
t allow for traceability of subassemblies; and



-


A

multiple unit product that requires use of its components as a system should have the


same lot number, or other suitable uni
f
orm identification, on all units.



For
Reagents
:


o

Established (common or

usual) name;


o

Quantity, proportion, or concentration of all active ingredients: e.&., mg.,

weight per unit



volume, mg./dl etc., and for reagents derived from biological

materials the source and



measure of its activity, e.g., bovine, I.U., etc.;


o

Storage instructions, i.e., temperature, humidity, etc.;


o

Instructions for manipulation of products requiring mixing or reconstitution;


o

Means to assure that the product meets appropriate standards of purity, quality,

etc., at the


time of use, i
ncluding one or more of the following:



1.
expiration date (date beyond which the product is not to be used);


*


2.
statement of any visual indication of alteration;


*

3.


instructions for a simple check to assure product usefulness;


*
-

The net qu
antity of contents.

39





L
abel requirements for inserts and outer packaging
:



Labeling must contain in one place the following information in the
format

and
order

listed below,
except where information is not applicable, or as specified in a standard for a
particular product class.
If the device is a reagent intended as a replacement in a diagnostic system, labeling

may be limited to
that information necessary to adequately identify the reagent

and to describe its

use in the system. If
the device is a mul
tiple purpose instrument used for

diagnostic purposes, and not

committed to

specific diagnostic procedures or systems, labeling can be restricted to those points

annotated by an
asterisk (*).



*

o

The proprietary and established product name;


*

o

The

intended use of the product and whether it is a qualitative or quantitative



type of procedure, e. g., screening, physician's office, home use, etc. ;


o

Summary and explanation of the test, including a short history containing methodology



and the sp
ecial merits and limitations of the test;


o

The chemical, physical, physiological, or biological principles of the procedure.


For Reagents
:


o


The common name, if any, and quantity, proportion, or concentration or each

reactive
ingredient; and for biol
ogical material, the source and measure of its activity;


o


Appropriate cautions or warnings listed in 16 CFR Part 1500; the statement: "For

In Vitro
Diagnostic Use;" and any other limiting statements appropriate to the

intended use of the
product;



o


Adequate directions for reconstitution, mixing, dilution, etc.;


o


Appropriate storage instructions;


o


A statement of purification or treatment required for use; and


o

Physical, biological, or chemical indications of instability or deterioration.





Exemptions from Labeling Requirements

-

Shipments or other deliveries of IVD devices are exempt

from label and labeling

requirements in the above headings and from standards listed under Part
861

provided the following conditions are met:



o

A shipmen
t or delivery for an investigation subject to Part 812, Investigational

Device



Exemption (IDE), if the device is in compliance with the subject IDE;
or


o

A
shipment or delivery for an investigation that is
not
in compliance with Part 812

(most IVD


a
re exempt from the IDE because of the following labeling) if the following conditions are


met:

40



-


A
product in the laboratory research phase, not represented as
an
IVD, that is

prominently


labeled: "For Research Use Only. Not for use in diagnostic
procedures;"


and


-


A product that is being shipped or delivered for product testing prior to full

commercial


marketing that is prominently labeled: "For
I
nvestigationa
l

Use Only.

The performance


characteristics of this pro
duct have not been
established.





Investigational Device Exemption (IDE)

-

An investigational device exemption (IDE) allows the

investigational device to be used in a clinical study in order to collect safety and effectiveness data

required to support a Premarket Approval (PMA) application or a Premarket Notification [510(K)]

submission to the FDA. Clinical studies are most ofte
n conducted to support a PMA. Only a small

percentage of 510(K)'s require clinical data to support the application. Investigational use also includes

clinical evaluation of certain modifications or new intended uses of legally marketed devices. All

c
linical evaluations of investigational devices, unless exempt, must have an approved IDE before the

study is initiated.

Many IVDs are exempt from IDE requirements.