While intellectual property (IP) protections and the Chinese government’s willingness to pay for expensive new products represent two large and lingering question marks, Joe Panetta, president and CEO at BIOCOM, said his last trip to China was surprising.

“We visited one of the largest pharmaceutical companies in China – Yangtze River Pharmaceuticals – which is pretty strongly government-backed and which has been long known to be a generics and traditional Chinese medicine company,” said Panetta, noting a statue of Mao Zedong in the company’s courtyard. “When I got there, not only did I see their long-established generics manufacturing facilities, but I also saw their 14- and 10-story innovative research towers that are under construction. They assured me that the future for them is not in generics, and the CEO said clearly to us: ‘I want to meet companies in San Diego, and I want to access new therapies that we can commercialize here.’”

Panetta said a portion of China’s population – by some estimates a portion as large as the total US population, according to Panetta – is becoming increasingly affluent, and has the “desire to access new therapies as well as the means to access new therapies.”

Despite a rising tide of affluence in major cities, many people living in China’s outer provinces are still in need of basic medical services, a problem China’s ambitious, $125 billion health reform initiative hopes to alleviate. “First they have to build delivery centers, and [the Chinese government] is talking about building hundreds of hospitals and thousands of clinics throughout the provinces in China, and they have to first deliver basic therapies and diagnostics and devices, but the question is how soon will it be before the government begins to take an interest in more innovative technologies,” said Panetta. “They have a long way to go, but to me, what that says is that there’s a lot of opportunity for a long time in China.”

The best way to enter the Chinese market is through partnerships, said Panetta, citing talks with companies residing in “large biotech parks in Shanghai and Beijing, and the China Medical City that’s being built from the ground up in Taizhou,” as well as US and European pharmaceutical companies that have a presence in China. “The Chinese would love for our companies to go over there and set up shop,” said Panetta. “What they tell us is that they want to learn how to innovate…I think the payback for our companies is clearly the 1.3 billion person market in China.”

BIOCOM hopes to facilitate partnerships with Chinese companies through conferences and trips to China, in order to “understand who we can build relationships with, what those relationships need to look like, and where we can build those relationships,” said Panetta. “[US] companies need to be careful about how much of their intellectual property they take to China when they create partnerships, and how much they keep [in the US],” said Panetta, and concerns remain about the level of talent and skill that exists, beyond the research level. “Several years ago, the discussion on Asia tended to gravitate toward outsourcing, low-cost research and low-cost early stage discovery efforts,” said Panetta. “That’s changed pretty drastically. It’s a terrific opportunity four our life sciences industry in Southern California,” he said.

There were some surprising changes in the format of the 29th Annual JP Morgan Healthcare Conference, the world’s premier health care industry investment meeting which took place Monday through Thursday this week in San Francisco. There were increases in number of presenting companies and attendance versus last year, but curious was the first-time addition of a seventh “track” of presenting companies. The new “channel” included not-for-profit organizations for first two days and Chinese companies on Wednesday — a sign of the dynamic changes afoot.

In conversations with investors and JP Morgan staff, I learned that the nonprofits were pitching purchases of “debt.” While public companies use their presentations to promote stock purchases, the nonprofits tout their outstanding management to encourage bond purchases. Based on the sessions I attended, they sure looked like better investments than most municipal bonds. These sessions were well attended and judged a big success.

In the opening remarks on Monday, Doug Bronstein, CFO, JP Morgan Chase, covered positive economic trends across our business upon which Jamie Dimon, CEO of JP Morgan Chase, expanded at the Tuesday luncheon. Bronstein was upbeat about the conference and mentioned that there were 22 nonprofits presenting for the first time. He advised that interest in the 14 company Chinese track resulted from 40 Chinese U.S. IPOs in 2010.

It was just a couple of years ago that companies were looking to “repurposed” drugs, combinations of individual blockbusters, in-licensing of new entities and diversification to include more biologics alongside small molecule drugs to replace revenues to be lost to blockbuster patent expirations. All that has changed in the face of increasing challenges to the healthy growth of the industry from continually rising product development costs without increases in number of approved drugs; increased failure rate of Phase III drugs; rapidly rising share of health care costs as portion of GDP; the heightened “bar” for FDA approvals; and rise of reimbursement to primary consideration for investment decisions. Big Pharma which so depended on the primary care blockbuster drug business model has had a crash course in finding and substituting new revenues to replace those lost to generics and the failure of anticipated new drugs to replace those revenues to be approved.

At the 2010 JP Morgan meeting, companies started to discuss opportunities in emerging markets as an additional revenue stream to help overcome lost revenues in the big seven markets. Now with almost a “herd mentality,” almost every company is after a portion of the much higher growth in emerging markets versus the traditional markets. The majors are making large investments to develop viable pharmaceutical sales and distribution operations to market their branded generic products which they believe will be better received by middle-class patients there than much cheaper domestic drugs.

The high cost of drug development in the US  and EU has led many companies to pursue much lower labor costs in China and India through outsourcing, setting up company research labs there or acquiring existing companies. Their cutbacks in headcount and closing of facilities in the Western countries are helping fund hiring of staff and facilities in these newer markets. Those familiar with costs in China and India advise that management costs are approximately or will soon be the same as in the States but savings are from manufacturing and bench scientist staff which are approximately one 12th and one 7th the cost of a U.S. worker, respectively.

So here are the prominent “themes” this year emphasized in presentations Monday and Tuesday by many Big Pharma companies, which one assumes they think match desired success parameters from the investor’s perspective. They include:
•    20-25 percent of sales will come from emerging markets by middle of decade
•    Diversification into animal health, OTC products, vaccines, diagnostics, as well as branded generics (for some this is the reverse of divestments made in earlier decades)
•    Headcount cuts in US and European staffing
•    Hiring in emerging markets
•    Going after leading company ranking in emerging markets
•    Quality of research and development, and, finally,
•    Continued interest in innovation! (At least that wasn’t forgotten.)

Abbott’s presenter Thomas Freyman, EVP, Finance and CFO, emphasized Abbott had 50% of business outside the U.S. with 20% in emerging markets; had branded generics business outside the U.S bolstered by acquisition of Solvay and was diversified with drug, medical device, diagnostic and nutritional businesses.

Merck’s new CEO, Ken Frazier had slightly different focus but all the familiar “sound bites” — “uniquely positioned to outperform broader health care market with broad portfolio from Merck and Schering Plough merger, broader footprint in key markets and strong financials, and ability to meet needs in Emerging Markets. He mentioned their strengthened efforts and partnerships in emerging markets and diversification through drugs and vaccines. Their headcount cuts included 12% reduction in their sales force; 33% in U.S. pharmaceuticals but expansion of staff in China and Russia with expectations of 25% of business coming from these new markets by 2013. But note he didn’t fail to mention “Innovation is even more important.” Merck is still a science-based company.

Roche’s Erich Hunzik, CFO, emphasized that Roche wasn’t interested in generic or biosimilar business but rather was focused on maintaining a leading late-stage pipeline and progressing personalized medicine — they were in the “best position to push this (personalized medicine) ahead.” He reminded audience that Roche Diagnostics was the largest diagnostic company and reassured the listeners that “innovation remains key” for Roche. He wanted to be clear that their cost cutting via staff reductions planned at 4,800 by the end of 2012 was not at expense of long-term future.

Finally, Bristol Myers Squibb’s Elliott Segal, Executive VP, CSO and President, R&D countered with a very different vision — he proudly emphasized focus was on biopharma with divestment of non-pharmaceutical businesses, perspective as mid-sized company and reduction of geographic footprint.  He attributed this approach taken since 2002 as resulting in 11 new products in 8 years with the potential for four new products approved in 2011.

Audrey S. Erbes is Principal of Erbes & Associates.

The current business model on which biotech has relied is flawed. Due to poor rates of

Jo Pisani, PwC

return, investment has dried up as the model carries very high risk of failure. This was illustrated recently by a study that highlighted that of the 1,606 biotech investments realised between 1986 and 2008, 704 investments resulted in a full or partial loss, while 16 only just covered their costs.

The same study showed that the gross rate of return on these 1,606 biotech investments was 25.7% compared with a pooled average return of 17% on all venture capital invested over the

same period. However, costs and ‘overhang’ from unrealized investments reduced the net rate of return to about 15.7%. There were also huge variations in the cash multiples earned by the 886 investments that did make a profit. On top of this, the external conditions that have allowed companies to thrive are now vanishing.

As Asia’s emerging economies invest more heavily in higher education and the reverse ‘brain drain’ picks up pace, the research base is shifting East. This is shown by the number of students graduating with doctorates in the physical and biological sciences.

Between 1998 and 2006, the number soared 43% in India and a staggering 222% in China, far outstripping the rate of increase in the West. Emerging economies are also now competing more aggressively and many are even actively building domestic biotech industries.

In the last 18 months, China has invested $9.2 billion in technologies R&D, including biotech, and India is currently exploring plans to become one of the top five biosimilars producers by 2020. These particular companies pose even more of a risk to Western biotech having learnt from their mistakes. They are now sidestepping the costly infrastructure that places burdens on companies in developed countries to create new business models that are leaner and more economical, as well as pioneering innovative products and processes.

Furthermore, financial investors are getting increasingly more cautious and capital is no longer easy to raise. In 2008, biotech raised just $16.3 billion in the US, Europe and Canada, 45% less than in 2007, and no significant improvements are expected.

According to one estimate, 207 of the 266 private and public European biotech companies with products or platform technologies either in clinics or on the market, urgently need to raise around $8 billion between them. Given that the total amount of European venture capital invested in the sector was just $666.6 million in the first half of 2010, it is doubtful many will succeed. However, yet another change is taking place as the boundaries between biotech and pharma continue to blur resulting in the creation of the biopharmaceutical industry. Despite this development, all biopharmaceutical companies will need to adopt a very different business model if they are to survive.

A united front
So, what would this new model look like? Efficiency is the name of the game and, as collaboration will accelerate and facilitate innovation, discovery and development, which in turn will reduce costs, two new concepts — precompetitive discovery federations and competitive development consortia — lend themselves to just such an approach and could be the keys to unlocking the industry’s potential.

Pre-competitive discovery federations
Pre-competitive discovery federations are public-private partnerships in which biopharmaceutical companies swap knowledge, data and resources with each other and additional third parties, such as government agencies and universities. Their aim is to overcome bottlenecks in early-stage biomedical research and a number have already been established. Many of these are fairly new and sit toward the philanthropic end of the spectrum. One such alliance, the Structural Genomics Consortium, has already proved a success.

Backed by organizations such as GlaxoSmithKline, Merck and Novartis it published 450 protein structures within three years of starting work, and aims to publish another 660 structures by July 2011. It is much too early to assess the overall impact of pre-competitive discovery federations in terms of reducing lead times and costs, or treating intractable diseases. Nevertheless, given the benefits, including, cash savings as investments costs will be lower and reduced duplication, it’s probable that all precompetitive research will be conducted in this way by 2020.

Determining the boundaries between pre-competitive and competitive research is difficult and opinions will vary. However, it’s possible to see how some of the lines might get drawn. For example, data preceding the point of filing for a patent could provide various opportunities for pre-competitive collaboration with many companies possibly prepared to go considerably further.

Competitive development consortia
Closer collaboration could also benefit the development process with the introduction of competitive development consortia (as we’ve called them). These consortia allow rival biopharmaceutical companies to join forces with each other, as well as with contract research organizations and platform technology providers.

The pooling of their portfolios could enable them to concentrate on the best drug candidates, regardless of which company had invented them, thereby eliminating a great deal of waste. Big Pharma has traditionally shied away from such arrangements, yet competing heavyweights in a number of other industries have successfully come together to develop new products.

General Motors, Daimler and BMW collaborated to create the hybrid petroleum-electric engine, for example. And there’s evidence that some large pharma companies may now be willing to take a more open stance Indeed, AstraZeneca and Merck recently embarked on a partnership to develop a combination therapy for cancer, each contributing an investigational compound to the mix. Combination therapies for cancer are common, but they’re usually tested late in clinical development, after registration, or a new potential treatment is tested in combination with the standard therapy.

However, AstraZeneca’s compound was still in Phase II, and Merck’s compound had only been tested on 100 people, when the two companies decided to join forces. As trials have moved on, and look promising, collaboration has also been agreed for testing the treatment in Phase 1 trials. The big question is how regulators will respond if they are successful as no one has ever co-registered two unregistered drugs before. The success of these new federations and consortia will hinge on the existence of data aggregators. No such organizations currently exist. Nor, indeed, do some of the tools required to manage vast amounts of biological and chemical data.

Nonetheless, solutions to the challenges are starting to emerge as big technology providers enter the computational bioinformatics space and the use of semantic technologies for integrating and analysing data grows. An ‘innovation culture’ and a new spirit of realism, on the part of all involved in the chain, will also be vital if this approach is to succeed. Organizations will need to share assets and insight that they have previously ring-fenced for themselves, will need to be willing to take risks and work with third parties and assets that they don’t own and this will require investors to take a longer term view on rates of return and change the funding model.

The size of the prize
By following this new model, the biopharmaceutical industry would be able to use their precious resources more intelligently, make more astute investment decisions and ultimately develop and deliver better medicines and even small savings could yield significant savings. We have estimated that, given average development costs and lead times, a 5% increase in success rates for each phase transition and a 5% reduction in development times could cut R&D costs by about $160m, as well as accelerating market launch by nearly five months. In fact, a 5% improvement in phase transition rates alone would trim about $111m from the tab.

In addition, there is also room for companies to benefit individually. The biggest companies will see increased access to innovation, higher productivity and lower costs — improvements that will help them to fend off growing criticism from healthcare payers and patients angered by the high prices of many new medicines that are currently coming to market. Meanwhile, the smaller companies will be in a position to obtain more stable, long-term financing, better opportunities for benchmarking the value of their own contributions and access to vital regulatory and marketing skills. There are considerable cultural, behavioural and practical hurdles to overcome if the industry is to succeed but, given the rewards collaboration can bring, they’re well worth resolving.

Making the sums add up
Hard-pressed governments are now struggling to meet the healthcare demands of growing populations and their changing demographics. More effective and more economical medicines are now more important than ever and only when the industry can work together will it be on track to meeting the demands of today’s society.

About the Author
Jo Pisani is Partner, Global Pharmaceuticals and Life Sciences at PriceWaterhouseCoopers, UK.

How do you extend basic health insurance coverage to 900 million people while simultaneously creating a new drug payment system to promote efficient prescribing and preserving support for medical innovation?  This is the challenge for China:  and if succeeding there carries the high stakes of a debut performance at Carnegie Hall, then what is going on now is a live experiment  – with lessons that bear repeating on the global stage.

That was the message resonating from a wide range of experts who convened  at the annual meeting of the Sino-American Biomedical and Pharmaceutical Professionals Association [SABPA]  in San Diego on November 6.

Zhu Hengpeng of the Chinese Academy of Social Sciences, who advises the Beijing government on health reform, emphasized the sweeping nature of the transformation undergoing the delivery and financing of health care services .  The sheer weight of reform requires some level of prioritization. Of the five goals of the program – universal cover, creation of a national essential drug system, restructuring of state hospitals, building primary health care institutions, and more equity in health – Zhu noted that the focus is on the first three.

Right now, the major challenge facing the government is reconciling the long-term efficiency gains from reform of the drug payment system to the high short-term costs of increasing access to necessary medicines.

Placing more medicines on the new Essential Drug List [EDL] means a zero mark up in prices so hospitals can no longer derive the bulk of their revenue from the high margins traditionally obtained from dispensing drugs. In turn, this means that with revenues dropping, hospitals are in no position to help fund the goal of increased access for those projected to enter the health care system through the commitment to universal coverage.

“Access to care is at odds with the reduced income of hospitals so there are demands that the government make up the difference with higher fiscal subsidies, to enable the new approach to work,” said Zhu.  “The problem is that those subsidies don’t exist at present and need to be generated through alternatives to the reliance on drug margins; it is no surprise that some 42 per cent of total health spending in China today consists of purchases of medicines, which is largely borne by the individual consumer out of pocket”.

A Short-term Fix
As  a result,  Beijing has opted for a piecemeal approach, pressuring the provinces to implement the reforms but only at the lowest level, covering rural clinics for the poor run by county-level hospitals. In the interim, the plan is to wait for complementary changes to the hospital payment structure – led by capitation, prospective payment and diagnosis related group [DRG] incentives  — to kick in.  The hope is that this approach will reduce the reliance on drug pricing as a driver of hospital income, provide a more stable and predictable source of financing at this institutional level, and thus allow the other two priorities – full implementation of the EDL and universal access – to move forward.

Big Pharma: Science and Quality as the Key Value Differentiator
How long this will take is anyone’s guess.   2013, the target date for implementation of the entire reform agenda, seems overly optimistic.   Investors in China will need to be prepared to adapt and respond flexibly as the central government and the provinces respond to what is a highly politicized pattern of engagement.   As always, the best fallback for foreign drug makers in China is to focus on the link to quality in medicine, which in China is the ultimate guarantor of brand awareness.  What also matters for the future is the association that can be made between quality and cost effectiveness – over time, with the EDL as gatekeeper in  drug procurement,  the value proposition will be just as critical in China as it is now in Western markets.

Helen Disney

When most of us look at taking a new medicine we tend to think it will make us better. Some of us may think about possible side effects but few of us expect the medicines we take to actually be dangerous. Recently, the public and policymakers have become more aware of the issue of counterfeit medicines — especially as patients increasingly learn about how to shop safely online for pharmaceuticals. But scant attention has been paid to a safety issue that is also important to patients — the problem of substandard medicines.

Unlike counterfeits, which have been much more widely discussed, substandard pharmaceuticals have been legally authorized for manufacturing and, more often than not, approved for market and sale by a national or regional drug regulatory authority. Despite this, these medicines nevertheless do not meet the required quality or safety requirements for that particular drug or treatment, compromising safety and efficacy.

It may appear that this is more likely to be a problem affecting developing countries such as China, India or Latin American countries, and indeed these countries are certainly affected. But this issue is not just one that affects developing countries. Especially now that global supply chains bring medicines quickly and easily from one country to another, substandard medicines can reach also American or European patients. While safety regulations may look good on paper, several countries are still failing to meet the required standards and the consequences for public health are worrying. Regulators need to take a closer look at what is happening on the ground.

A new report by the Stockholm Network, Keeping Medicines Safe, cites examples and case studies from China, India, Brazil, Argentina and Turkey to demonstrate the lethal effects that counterfeit and substandard drugs can have on public health. It shows how bad, non-existent or unenforced regulations can play a serious part in this process.

For instance, current regulations in India divide regulatory responsibilities between state and national authorities. The delegation of inspecting and enforcing Good Manufacturing Practices (GMP) to the state level has resulted in substantial variation in the quality of medicines produced, despite all manufacturers having been certified by the relevant authorities. Some Indian states do a good job of maintaining high levels of manufacturing practices but other states do not. As a result, substandard medicines can easily move from one state to another.

In Argentina, the government and national drug regulator actively promote the prescription and use of a category of medicines called ‘similars.’ These drugs are advertised as being generic drugs, but in actual fact ‘similars’ have not been tested for bioequivalence — a prerequisite in much of the developed world for labelling a drug a generic.

China’s national drug regulations are comparable to those of Europe or North America, but the lack of implementation and enforcement is glaring. China is one of the world’s largest producers of both substandard and counterfeited medicines. One of the main reasons for this is wide-spread and pervasive corruption, even among government regulators. Indeed, only five years ago the head of the national medicines regulator was executed on charges of corruption.

All of these circumstances are causes for concern, but there is a further wrinkle in the ointment. The development of biological drugs makes the problem of substandards potentially far riskier — especially when it comes to similars. As the use of this type of drug increases, patients and policymakers can expect to encounter more problems with defective medicines than they did before.

Policymakers and regulators need to acknowledge the problem of substandard drugs and improve the regulation of drug manufacturing and the enforcement of good manufacturing processes. If they fail to do so, some patients who faithfully take a seemingly innocuous white pill could be doing themselves more harm than good.

Helen Disney

Neil de Crescenzo

Just a few days shy of the one year anniversary of the launch of Oracle’s Health Sciences Global Business Unit, Neil de Crescenzo, senior vice president and general manager for the business unit sat down with Pharm Exec to talk about the future of clinical trial software and technology and the need for standards and integration.

What’s the biggest challenge pharma companies are facing when it comes to their IT systems?
I think things are changing. Historically, pharma might have focused on one area where they were looking for new business functionality. Now, I think they’ve stepped back and asked, “How do I step back and get an end-to-end process that’s flexible to [provide different capabilities as my business changes], but also to serve as a platform to add new capabilities as we go forward?”

Companies are approaching us and other companies to find out how they can create a new way of approaching their business problems, where they can get many of them solved through the platform approach.

Where does cloud computing fit into the mix? It’s generating a lot of buzz, but is it the future?
I think the challenge of cloud computing is that they are really focusing on one element of how to deliver software and it’s often by companies who are trying to differentiate themselves by delivering that. You will find that the largest companies generally want options, because they would like different methods for delivering hosted software.

Hosted applications work well in environments like smaller countries or developing markets, but there might be other areas where they might have outsourced IT services and they might want them to host the applications. And there are other instances where they initially or eventually would want to take the applications “in house.”

It’s important to differentiate between the product and the delivery of the product. A lot of companies say that the future is cloud computing, but the reality is that some companies want cloud computing for some instances but not for the whole enterprise.

Have you had a boost in requests for your platform in the “Pharmerging” markets like India and China?
We are seeing that market growing dramatically in the past couple of years. I think it started with many of the global companies having operations there and expecting their local affiliations to use the same software as the rest of the corporation uses.

In the last couple of years, we have seen a newer trend where the domestic or regional companies deciding to start investing in global software solutions. In the past year we expanded our footprint in India and sold our systems to the largest CRO there. There is an enormous amount of innovation happening in India with smaller companies and all of them are expected to continue to grow quite rapidly.

We also sold our software into domestic Chinese CROs that are trying to take into account the trial growth in China, as well as Taiwan and South Korea. These are all institutions that have been active for quite some time in clinical development and research, but more recently decided that they need to have similar platforms to what companies outside the region have had historically.

Are pharma companies coming to you looking for more cost effective ways of streamlining their IT?
While the economic environment has been constrained for everybody, in particular because of the continued interest in the pharma companies to innovate to fill their pipeline, and the fact that software can be so instrumental in helping them do that, they’ve continued to maintain a reasonable investment in this space. At the end of the day, the value they get from the software offsets whether they can save 20 percent by going with a vendor with more affordable software.

We give our customers capabilities to free up what would have been labor expense in a process and allow them to get insights earlier into the issues around trial process. It’s all about getting accurate information earlier in the process that you can rely on and you need software to do that. You can’t have someone taking notes faster in the notebook.

What has impressed you at DIA?
Did you go to the OMO project panel? It’s the Observable Measures of Outcomes partnership that FDA and NIH put together that looks at taking data from insurance claims, electronic health records, and other sources and data mining that data in order to get insights into safety issues going forward.

FDA said in a panel that they envision a platform for safety and pharmacovigilance which has certainly been encouraged by the legislation. But, the agency wants to create a platform around safety and extending it from the clinical trial process to post marketing and into the healthcare environment. They talked articulately about extending it from therapeutics to devices, to veterinary health, to food.

How far out do you think we are out from having universal standards for data?
We are getting closer, but it’s not so much that we’ll ever reach a environment where all the standards necessary to have the kind of data one might want will be accessible instantaneously. It’s really a matter of picking up  the pace and picking up the breadth. The pace happens when a number of vendors that operate in multiple industries decide to focus on standards in life sciences and pushing them forward.

In the past, the standards have been looked at as if they were in silos. But what we would like to see is standards around data information that extend beyond boundaries. We need to pick up the pace in specific areas, but in addition we need to look at standards that are broader as well as deeper in specific areas.

Let the emerging market come up with low-cost must-have medicines, though, and we’ll see how long the US fights to keep them out. A handful of sucessful medicines from India and China could end up doing a remarkable amount to transform the US drug industry and US drug regulation.

I finally met a pharm exec who’s pursuing that insight as a way to build his company, when Abe Abuchowski, founder and COO of Prolong Pharmaceuticals, stopped by to visit not long ago. You’ve probably heard Abe’s name already. He’s the biotech pioneer who developed the technique of attaching polyethylene glycol (PEG) to protein-based drugs. PEGylation, the subject of Abuchowski’s thesis at Rutgers back in 1971, proved to be an effective way to reduce the immunogenecity of biotech drugs and to increase the amount of time they remained in the body, and it’s gone on to become one of the field’s gold-standard technologies.

Abuchowski himself went on to found Enzon (starting with just half a dozen people in 1983), which he developed into a fuly integrated company. “We had to,” he says. “At the time you couldn’t just hire services like toxicology.” Enzon’s pegylation technology led to several important products, including Adagen (pegylated adenosine deaminase, for severe combined immune deficiency disease, just the fifth biotech product to win FDA approval), Oncospar (pegaspargase for certain cancers), and the blockbuster PegIntron (pegylated interferon A, for Hepatitis C, developed with Schering Plough and approved in 2001).

With PegIntron, Enzon was profitable, but it turned away from pegylation, leaving the field to Nektar. (The company announced earlier this week that it was considering divesting itself of its biotech business.) Abuchowski, meanwhile, had left in 1996, spending more than a decade as a stay-at-home dad and part-time consultant. He never lost the entrepreneurial urge, though, and in 2005 launched Prolong. (The name refers in part to the way that pegylation prolongs the time a protein spends in the body.)

The new company’s strategy is to develop patented, second-generation biotech products in India and China, using Prolong’s expertise in pegylation (which Abuchowski says is not part of the Indian/Chinese biotech arsenal) and to partner with companies able to manufacture at low cost.

Low-hanging fruit is the name of his game. Within the past month or so, Prolong announced a partnership with Zydus Cadila, one of India’s 30,000 biotechs, to produce a pegylated erythropoietin (an anti-anemia drug in the same class as Amgen’s Epogen and J&J’s Procri) and another deal is in the works in India for a pegylated granulocyte colony-stimulating factor (GCSF) drug, similar to Amgen’s Neupogen. When last I spoke with Abuchowski, he was just back from China, where he formed a tentative agreement with a biotech company over one, or possibly two, products.

“All the modern technology we have here they are copying,” says Abuchoswki. “All the first generation of biotech products are being made there and brought into the marketplace. The benefit is that they are starting with scientific knowledge that is mature rather than developing that knowledge from scratch. They have the benefit of waiting for 20 years, then building the most modern facilities with the cheapest labor and developing these products at the lowest cost possible. There are an unbelievable nmber of biotech companies, and being able to link up with a company like ours will allow them to differentiate themselves from the others in the ferocious competition that goes on there.”

Expect an announcement soon. In the meantime, more news from Prolong:
The company has just received a grant from the National Heart Lung and Blood Institute to supply Prolong’s developmental blood replacement product (which, not surprisingly, is based on pegylated hemoglobin) for researchers in such areas as combat surgery.

“It’s exciting to us because it changes the dynamic of the company,” says Abuchowski. “Instead of raising money to test our product, we can sell it to the research community while still working on it as a product, and make a little money on it. And researchers will find new uses for it. We hope that various branches of the military will want to buy it for their own application.”