by Richard V. Smerbeck
Small businesses in the medical device, biotech and pharmaceutical (MDBP) industries often find that a well-funded co-development partner is a critical ingredient for successful commercialization of technology or early stage products. These heavily regulated industries typically have later stage development costs that include clinical trials, major capital equipment purchases, production facility development and considerable investments in industry-specific personnel. Together these can add millions of dollars to the total cost of commercialization-amounts well beyond what most small businesses can fund.
Additionally, small businesses in the MDBP industries require Phase III funding far earlier in product development than businesses in other fields. Typically, Phase II SBIR funding will only partially fund a program through early development. A medical device product launch (first revenues earned) may still require 3 to 5 years of funding while a pharmaceutical or therapeutic biologic product launch may still be 8 to 10 years out.
Funding and/or developing MDBP products also represents a high-risk proposition for any investor. The hurdlesset by FDA, Europe's EMEA and Japan's MHLW require a number of considerable hurdles to overcome in order to achieve acceptable safety and efficacy for a new drug, biologic or medical device. The vast majority of potential products entering the regulatory process fail to gain market approval. This means that potential Phase III investors cautiously examine even those opportunities with significant technical merit.
MDBP business development specialists and VCs discuss the numerous opportunities they see but are reluctant to fund. While the technology was sound and there was product potential, obstacles to a rapid, regulatory approval were obvious. They look for technologies with the clearest path to market, which is as important as the technology itself. To create a clear path to market for a technology, a small business needs to:
To maximize commercial potential, a small business should develop its technology in much the same manner as a large MDBP corporation. Creating a clear path to market can be done, but it requires more than just a good idea and a solid technology. It also requires forethought, planning and a deep commitment on the part of the small business.
With multi-year development times as the norm for MDBP products, a strong patent position is considered to be "table stakes" for a technology to even be considered for licensing. Bausch & Lomb Pharmaceuticals Business Development manager, Cynthia Edington, explains that, "Intellectual Property is essential and a key ingredient that business development professionals look for," as part of the package for bringing in new opportunities. In the case of MDBP products, the best IP is in the form of patent protection. Protecting a technology through the patenting process should be considered essential, even when funds are tight. The patenting strategy for a small MDBP business should proceed as follows, in order of importance:
According to Edington, "Having a solid intellectual property portfolio gives a competitive advantage to those companies looking to either out-license or exit from the technology through acquisition."
Non-clinical R&D studies, and the study results, are the basis for determining the technology's potential development into a commercially viable product. To submit these results as part of a formal application for regulatory agency approval, they must have beetinn generated from R&D studies conducted under specific guidelines. The Food and Drug Association (FDA) has codified these guidelines in the U.S. under Good Laboratory Practices (cGLPs) and Good Manufacturing Practices (cGMPs).
Typically, small businesses will not have the resources to fund the clinical trials required for regulatory approval and will most likely require Phase III funding at this stage. However, the small business will, as part of their R&D efforts, have generated non-clinical results to support the predicted safety and effectiveness of the technology in a product form. The quality of these studies can positively or negatively impact licensing opportunities. Results from required non-clinical studies carried out under cGLPs can be submitted directly to FDA, but if these studies are not carried out under cGLPs a licensor/investor will have to repeat them leading to extensive delays.
Of note for small businesses in the Medical Device industry is that under the cGMPs, medical device designers are considered to be manufacturers and must follow the Design Control Regulations, found in the Medical Device Quality Systems manual. Design control regulations allow FDA to trace a medical device's design history from inception. To ensure a medical device is safe and effective when used as directed, the FDA believes that it must be developed according to quality systems. Because a design history is difficult to recreate after the fact, a licensor/investor is more likely to invest in a device developed according to regulations.
To maximize Phase III funding opportunities, small MDBP businesses should:
Development efforts that shorten the time to commercialization allow the small business to command a higher value from a licensor/investor.
Licensing a technology to a large company is the culmination of significant financial and intellectual efforts for many small businesses. This is not the case in the MDBP arena where an agreement to develop a technology often requires several years and millions of dollars until product commercialization is realized. It also requires the licensing company and the technology licensor to work together from the date of acquisition through the date of regulatory approval, which increases the partnership commitment.
In the MDBP industries, licensing companies and investors are looking for a small business that:
In other words, the small business needs to have the desire to effectively work together for the duration. Under this set of circumstances, collaboration produces efficiency and competition produces delays and possible failure.
There are many solutions to any problem. In the health care market, there are many different medical devices and drugs that can resolve the same condition. When looking to license, acquire, invest in or co-develop a technology, MDBP companies will look at a number of technologies that have the potential to be a product and/or fill an unmet need. With many potential solutions, the companies will be drawn to the technologies that appear to be safe and effective. From there, they will want to see their investment protected by intellectual property. They will want the technology that is at the most advanced stage of development resulting in the shortest time to approval and to market. They will want a partner that is as committed as they are to getting the product launched. The small business that provides these is most likely be the one that realizes success.
