Moving your Cell Therapy from Concept to Product

There are a variety of funding sources available for small start-up companies that have generated proof of concept (POC) data, as well as for those companies that have yet to do so and are seeking funds to establish POC. The available sources of financing at this stage in a company’s life cycle will generally include a combination of non-dilutive capital from the federal / state government, angel investors, disease foundations and potentially VC’s and/or industry partners.

At the Federal level, two available sources of financing for start-up companies include the Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) program. SBIR grants provide for up to $1.5 million over two years and are geared towards small businesses at the early stages of R&D. STTR grants provide for up to $1 million of funding over three years and are focused on small businesses that have a formal cooperative R&D effort with a US research institution. The total available funding for these programs in FY2012 was approximately $715 million.

Angel investors and disease foundations represent two additional sources of capital early during a company’s life cycle. Angel investors who may have a specific interest in the area of research due to personal or other altruistic reasons should be considered. For example, Tech Coast Angels (based in San Diego) has invested over $120 million in 200+ companies across a variety of industries. Disease foundations such as the Michael J Fox Foundation, The Muscular Dystrophy Association and the Juvenile Diabetes Research Foundation (to name a few) all invest in early stage R&D and represent an alternative source of capital prior to more traditional funding sources such as venture capital and industry partnerships.
In addition, foundations such as The Thiel Foundation’s Breakout Labs provide funding to “spur innovation by filling the funding gap that exists for research and development outside the confines of an academic institution, large corporation, or government facility.” Brekout Labs funds transformational ideas and will generally not consider applications from companies that have raised over $1 million.

Once proof of concept has been established, the available sources of funding may broaden to include traditional venture capital investors and industry partners. VC’s each have unique styles and there are several firms in the life sciences space that will typically invest before a product reaches human clinical trials, such as Third Rock, Atlas and Versant (to name a few). Other VC’s prefer to wait to see human clinical data. Traditionally, to generate interest from Big Pharma (although not always) human proof of concept data was required, however, given the lack of productivity in their pipelines, the breadth of late stage product failures, and the need to externalize R&D costs there has been a general shift in the landscape and Big Pharma has recently been willing to invest in earlier stage assets.

Overall, early stage start-up companies have a variety of funding alternatives to help advance their technology and will typically need to secure funding from multiple funding sources to be successful. These will typically include the federal and/or state government, angel investors, disease foundations, other non-profits organizations as well as more traditional sources of financing such as venture capital investors and industry partners. Once proof of concept has been established, the more accessible traditional sources of funding will become, however, it will come at a cost and so alternatives forms of non-dilutive financing should still be pursued.

About CIRM:
CIRM was established in November 2004 with the passage of Proposition 71, the California Stem Cell Research and Cures Act. The statewide ballot measure, which provided $3 billion in funding for stem cell research at California universities and research institutions, was overwhelmingly approved by voters, and called for the establishment of an entity to make grants and provide loans for stem cell research, research facilities, and other vital research.

CIRM’s Mission:
"To support and advance stem cell research and regenerative medicine under the highest ethical and medical standards for the discovery and development of cures, therapies, diagnostics and research technologies to relieve human suffering from chronic disease and injury."

Progress to Date:
To date, CIRM has provided over $1.8 billion in awards to 69 different California institutions, resulting in the publication of more than 1,200 journal articles and has provided funding for 77 translational projects in 38 therapeutic areas. CIRM has also provided funding for 43 translational projects in 26 therapeutic areas. In addition, CIRM funded the construction of 12 dedicated stem cell facilities ($271 million commitment of state funds resulted in more than $800 million in private donor and institutional funds for construction), and supported the relocation of more than 130 faculty level stem cell researchers into the state.

Additional information can be found at the following links:
About CIRM: http://www.cirm.ca.gov/
Progress toward therapies: http://www.cirm.ca.gov/our-funding/progress-toward-therapies
CIRM’s blog: http://cirmresearch.blogspot.com/

The answer to this question is unequivocally the latter strategy – it is imperative that you start as early as possible using cGMP (current good manufacturing practice) that may be scaled-up and scaled-out as your process moves through clinical development. While having dispersant manufacturing areas at various hospitals may be suitable for phase 1 studies involving small numbers of patients, this process will not easily scale for phase 2 and particularly phase 3 trials involving larger number of patients (and it certainly will not work for commercial scale production).

On June 25, 2013, CIRM hosted a Roundtable with experts from around the country entitled “Key Tools and Technology Hurdles in Advancing Stem Cell Therapies” and one of the three topics discussed were the challenges in scaling up manufacturing for cell therapies products (the other two were imaging and assay & biomarker development). It was the recommendation of the Roundtable that cGMP processes be implemented as early in the process as possible in order to ensure a smooth transition to phase 3 and commercial-scale production. The Roundtable participants agreed that the most expensive and time consuming steps in manufacturing often involve removing processes that worked for phase 1 (or even phase 2 trials in some cases depending on patient numbers), but will need to be removed or changed for larger scale production. Thus, developing a commercially-viable process early on is crucial to saving time and money down the road as your product advances through clinical development and commercialization.

CIRM is currently in the process of writing a White Paper about the key themes and outcomes of the June 25th Roundtable – please check back on our website in early September for the full report which will discuss cGMP and manufacturing scale-up in greater detail.

There are a multitude of opportunities to interact with the FDA during the product development cycle that should be taken advantage of, with the earliest interactions beginning at the “pre-pre-IND stage”.

Pre-pre IND interactions are informal discussion, focused primarily on preclinical issues. These interactions are always handled by teleconference and there is no set time frame to schedule these interactions. In addition, they are nonbinding in nature so the FDA cannot be obligated or bound based on these discussions for any future regulatory decisions (again, these are informal interactions). Pre-pre-IND interactions were created to offer general guidance for IND-enabling preclinical programs.

Clearly, meetings with the FDA are valuable opportunities to discuss data and current and future study design and to address the development pathway to ensure that safe and effective products are brought to market in a timely manner.

One great way to begin interactions with the FDA is by utilizing a Target Product Profile, or TPP. The TPP is a useful planning tool for preclinical, IND-enabling studies and clinical trials and for effective communications with the FDA. Successful product development begins with having the end in mind, and the TPP conveys the long-term aspirational product attributes and overall intent of the development program.

For additional reading, several of my colleagues at CIRM co-authored the following paper: “Communications with the Food and Drug Administration on the Development Pathway for a Cell-Based Therapy: Why, What, When, and How?”

You can find the paper at the following link: http://stemcellstm.alphamedpress.org/content/1/11/825.long

To learn more about the TPP, please see the following link where CIRM’s Vice President of R&D, Ellen Feigal, discuss the concept in detail: http://www.cirm.ca.gov/about-stem-cells/video/target-product-profile-ellen-feigal-2011-cirm-grantee-meeting.

In addition, the following link provides the Draft Guidance from the FDA for the TPP: http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/ucm080593.pdf

Often times a strategic partnership is a great way to advance your technology or product candidate. There are many forms of strategic relationships, ranging from collaborations where the strategic partner is very hands-on and involved in the development (often committing in-kind services), to others where the partner may simply help fund the development based on milestones with no or little direct involvement.

When evaluating a potential partner, it is important to think about the scope of the collaboration and what type of assistance (beyond financial), you may benefit from. Does the potential partner have expertise in your area of research? Have they successfully brought a similar product to market? What is their interest in your technology and how will it complement their own technology and / or products?

Often times the benefits of a strategic partnership go far beyond the financial component and allow you to access expertise that as a small start-up company you may lack. This can be particularly important in clinical development where a small company may not have in-house clinical or regulatory expertise necessary to successfully navigate product development and ultimately gain regulatory approval.

The single best recommendation I have for a successful IND submission is to make sure that you have communicated with the FDA throughout the development process. This can be accomplished by communicating with the agency via a pre-pre-IND meeting, which is an informal discussion focused primarily on preclinical issues (and always handled by teleconference). The pre-pre-IND dialogue can help ensure that the IND proceeds and mitigate the risk of a clinical hold; however, the focus of the pre-pre-IND is only preclinical and sometimes very preliminary CMC, and for this reason, a standard pre-IND is still highly recommended.

The pre-IND discussion is a key venue to communicate with the FDA where critical issues are raised, addressed, clarified, and resolved prior to the IND filing. There is one pre-IND meeting available to sponsors and sponsors should prepared with the questions and data the FDA will need to review to answer their questions.

Deciding when and if to “spin-out” a company from an academic lab largely depends on the ability to secure the intellectual property (IP) rights from the academic institution, the ability to finance the new entity, and the ability to properly manage the new entity in order to drive the technology forward towards commercialization.

The first consideration for establishing a new entity should be the ability to “spin-out” the IP from the university into a new entity. These discussions should take place with the university’s technology transfer office. The tech transfer offices of universities are responsible for out-licensing IP from academic labs and are charged with generating licensing revenue for the university. Thus, this is a good place to start your conversations with your host institution.

The second consideration when establishing a new spin-out, and arguably the most important and often overlooked, is financing. Clearly, without the proper financing even spinning out the IP will not be feasible. Beyond securing the necessary financing to secure the IP rights, it is critical to have the necessary funds to advance the technology as well as pay salaries and any overhead expenses (many spin-outs are virtual companies and have a low cost structure with minimal overhead).

The third key consideration is management. How much time does the academic team plan to devote to the spin-out? Will an experienced management team be hired to drive development and commercialization? Having a quality management team in place is often a critical component of securing financing from the private sector.

Other factors to consider when interacting with the university to consider is will the spin-out require access to university facilities and equipment, will the university want to retain any of the IP either for research or for certain commercial applications, and will the university want equity ownership in the new entity. I would recommend starting your conversations with the tech transfer office as each university is slightly different and the tech transfer office should be able to provide their details regarding their standard policies and help you think through the various options.

This is typically what investors refer to as “positioning” and is the crux of a good pitch. The key items to discern are how is your technology/product different from the competition? Is your technology entirely novel, or does it built upon and improve what is already on the market? What sets you apart from the current standard of care and importantly, why should insurers be willing to reimburse for your technology. Tackling the healthcare economic (i.e. reimbursement) argument early and upfront will show investors you are planning ahead which can all too often be the exception and not the norm for small start-up companies.

The best way to make your company stand-out is to focus on what makes your technology unique and better than what is currently available and/or in development. The other key to standing apart is to have realistic expectations and demonstrate you are planning ahead – if you are entering phase 1, demonstrate that you are acutely aware of how the results may inform your phase 3 trial to achieve the necessary endpoint for regulatory approval. Also, not all products will achieve +$1 billion in sales in the first five years of reaching the market – unrealistic revenue expectations are a sure sign of an inexperienced management team. Demonstrating you have realistic expectations and understand the dynamics of the marketplace will help separate you from the pack and provide investors and potential partners confidence you have the experience necessary to move the technology forward.

In the case of therapeutics, one great tool to help plan ahead is the Target Product Profile, or TPP. Successful product development begins with having the end in mind, and the TPP conveys the long-term aspirational product attributes and overall intent of the development program. This type of foresight and planning is exactly what will help separate you from the competition.

To learn more about the TPP, please see the following link where CIRM’s Vice President of R&D, Ellen Feigal, discuss the concept in detail: http://www.cirm.ca.gov/about-stem-cells/video/target-product-profile-ellen-feigal-2011-cirm-grantee-meeting.

In addition, the following link provides the Draft Guidance from the FDA for the TPP: http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/ucm080593.pdf

I do not think there is one answer to this question – there are a variety of factors that will determine if a product is ultimately successful in the market including its positioning (i.e. what market segment or sub-segment you are targeting), competition, reimbursement, pricing as well as a host of other factors. Beyond the obvious need to demonstrate safety and efficacy, a lot will depend on the market dynamics – what I mean by this is will your product replace one that is currently on the market or is it a “me too” product? If you are targeting a specific sub-set of a patient population and your product will be used as a combination therapy, a lower price point will be necessary as insurers will have to reimburse for your product as well as others (mispricing a product can have devastating results and is often hard to fully recover from).

The best advice I can give is to be sure to plan ahead. I would encourage you to talk to the end user, be it physicians, specialists or other point of care providers and ask how your product will benefit their daily practice and how they will incorporate it, if at all. Talk to insurers about reimbursement and make sure to understand what they will need to see in order to reimbursement your product – don’t wait for the product to be on the market to think about this (it is too late by then).