BioScience Biz

Cashing in on grant opportunities

Maybe you are a small business, or perhaps a health care company, a state agency or even a university researcher and would like to glean some of the largess from the federal recovery act. Or, perhaps you have a timely project that could use funding from a state agency or a private foundation. If so, what would you give for a 55% success rate in securing these highly competitive dollars? Over the last six years, an Ohio and Washington, DC-based company has been providing this grant success rate for a wide range of national clients. grants, federal grants, foundation grants, grant success rate, Gwen Mathews, Strategic Health Care,

The evolution of SHC's grant writing division

Stick with me here as I explain how this company got into the grant writing business. The company, Strategic Health Care, actually has been around for 16 years, specializing in congressional, state and regulatory affairs, public policy analysis, and association management within the health care industry. However, after many of SHC’s clients requested help in finding and securing federal funds, the company established a Federal Grant and Fundraising Division, hiring Gwen Mathews as Senior Vice-President to run the endeavor.

In the beginning, after Mathews was hired away from her own consulting business, there was just Mathews and two part-time grant writers. Six years later, the division boasts three full time employees and a stable of 35 professional contract grant writers and editors as well as some 11 account managers scattered across the US.

While the initial focus of SHC's new grant writing division was to help existing health care clients secure federal grants, the division’s success soon resulted in an expanded role including finding and securing grants from state governments and private sources such as the Avon, Kellogg, Krestge, William Randolph Hearst, Bill and Melinda Gates and Robert Wood Johnson foundations. Furthermore, as word of SHC grant-writing success spread, clients outside the health care industry also began seeking their services. While SHC still emphasizes health care fundraising, the company also has successfully obtained grants for clients from a wide range of federal departments and agencies, including NIH, DoD, DoL, DoE and the USDA. Since this summer, SHC has written and submitted grants for a Houston-based energy company, for a systems biology research project and for the Universities of Tennessee and Cincinnati, among several others.

“Business has mushroomed each year since (setting up the division)…We’re seeing a lot of non-healthcare people taking an interest (in what we have to offer),” explained Mathews. As an example, she said that SHC is in the final stage of negotiations with the state of Delaware to help all of that state’s agencies identify and secure federal grant dollars, most of which would not be healthcare related.

Mathews, who splits her time between SHC’s Columbus and Washington, DC offices, went on to say that SHC has worked on “hundreds” of grant applications over the last six years and that the grant writing division currently has 25 active clients for which about 50 grant applications have recently been submitted and are awaiting funding decisions.

What is the secret for SHC’s success?

“We can help (clients) determine if a project is a good match for the funding opportunity they want to pursue. In terms of return on investment, the average grant is about $500-$600K, with a range of $250K-$3M. So the investment they make (in SHC) enhances the chances of being successful. We bring to the table a group of folks who are very, very skilled in what they do and understand, not just federal grants, but the grant world in general and (who) have a great depth of knowledge (in the grant application process) that the average client doesn’t have.” Mathews said. “In the long run, we really save (our clients) money. We have had many clients come to us who have put in multiple applications that have not been successful and we helped them develop successful applications, so we do save them money.”

Michael Stein, Executive Director of Government Affairs for Bassett Healthcare in New York, used SHC to successfully secure a federal Health Resources and Services Administration grant for a tele-health network system. He pointed out that it was a very complex project involving several partner organizations and had a very short lead time of less than three weeks. Stein searched online for a grant writing service, interviewing several and “…was impressed with the ‘grant game’ at SHC.” SHC put a team of grant writers on the project and made the deadline—normally SHC assigns one account manager and one grant writer to a project, but this illustrates the company’s flexibility in dealing with granting tribulations that many businesses could not tackle.

Stein added that although the grant received the highest score of the many grants that were submitted, it was not funded since they were not in a healthcare shortage area, one of the preferred, but not necessary, requisites in the RFP. Mathews, who was acquainted with the HSRA program officer, called and inquired about the grant’s status, which eventually led to it being funded. In fact, Mathews added that she was close to calling in the government relations team at SHC to see if Bassett’s congressional representatives could influence the agency’s decision. This exemplifies the value of not only having professional grant writers, but also of being familiar with the federal grant system and being able to bring other useful resources to bear in order to address the all-too-frequent exigencies of applying for federal grant funding.

In another example of a satisfied client, Rick Giecek, Chief Development Officer for the University of Tennessee Medical Center said that they have used SHC to apply for 6 grants from the federal and state governments and the Avon foundation, three of which were awarded. Their latest awards totaled almost $1 million for diabetes education and for digital mammography equipment. Giecek opined that “…Strategic does good work, they have a lot of depth and breadth.”

As this article was in preparation, SHC founder and President, Paul Lee, announced in an email that SHC had landed its largest grant for a client--$45 million dollars from the USDA.

That probably would be another satisfied client.

To contact the SHC grants division, email Gwen Mathews at: Gwen.Mathews@shcare.net

For the purpose of fairness, the author discloses that he is a part-time contractor for SHC. grants, federal grants, foundation grants, grant success rate, Gwen Mathews, Strategic Health Care,
© 2009 Steven S. Clark, PhD, some rights reserved.  Articles contained herein, are meant to be distributed freely to interested parties. However, any use, including excerpts from any article, must credit Steven S. Clark and provide a link to the original article published in BioScience Biz.

Disclaimer: The authors used their best efforts in collecting and preparing the information published herein. However, neither Steven S. Clark, nor other authors, assume, and hereby disclaim, any and all liability for any loss or damage caused by errors or omissions, whether such errors or omissions resulted from negligence, accident, or other causes.

Clinical research activity up significantly in 2008

According to a report in FierceBiotech, surprising news came out of the recently completed 45th Annual Meeting of the Drug Information Association (DIA).  Despite cutbacks in the international biopharma industry, clinical trial activity was up in 2008. Overall, 795 new clinical trials were launched in 2008, compared with 662 that were initiated in 2007. There were 5,700 active INDs in 2008, which represents a greater than 20 percent increase over the 4,744 INDs active by the end of 2007—a substantial increase.

Trial activity was also assessed by the number of new FDA form 1572s, which all clinical investigators on FDA-approved trials sign as a promise that he will abide by the federal guidelines set forth in the Code of Federal Regulations for the use of drugs in an investigational setting. The FDA registered 23,827 new 1572s from clinical investigators in 2008, up 5.8 percent from the previous year. However, the number of new 1572s from China-based clinical investigators fell 30 percent due to the long approval process, but Indian-based 1572s rose 14 percent. South Korean investigators submitted 74 percent more 1572s while submissions from Taiwan rose 21 percent. Clinical trial activity is also up in Eastern Europe where the FDA saw significant increases from Russian investigators (20 percent), as well as Romanian (44 percent), Polish (17 percent) and Bulgarian (57 percent) clinical researchers.

It will be interesting to see the data for 2009.

DIA is a professional association of more than 18,000 members worldwide who are involved in the discovery, development, regulation, surveillance, or marketing of pharmaceutical products. The DIA annual meeting is the biopharmaceutical industry's largest, longest running, international event.  

The Biotech Industry: Promise vs Reality

The Promise

Biotechnology as a business burst on the scene in 1976 when Genentech was launched to commercialize the new discoveries of how to clone and express human genes in bacteria.  This was soon followed by biotech companies commercializing monoclonal antibody technology, combinatorial chemistry and more recently “omics” technology (genomics, proteomics, metabalomics), high throughput screening and other continually emerging and commercializable technologies. 

"The lofty promise of all of this was that through improved technology and enhance understanding of biological activities, the process of drug R&D would become more efficient, faster, less risky and cheaper."

The lofty promise of all of this was that through improved technology and enhance understanding of biological activities, the process of drug R&D would become more efficient, faster, less risky and cheaper. This promise helped foster the perception that, compared to the pharmaceutical giants, smaller biotech companies are more agile, innovative and productive at R&D and, therefore, fill an important gap that the larger, ossified drug companies can not. It has been suggested by more than one industry observer that big pharma should focus on production, marketing and improving current products, leaving the innovative and cutting edge research to the more flexible and adaptable small biotech companies.

The biotech industry has certainly bought into this hope—it is rife with optimism that it can transform the pharmaceutical industry. The expectation has been that the biotech industry would follow a trajectory similar to that of the more mature semiconductor sector where the advent of solid-state technology stimulated fundamental product improvements and reshaped the whole electronics industry.

It is hard to dispute the notion that since genetic engineering technology first appeared in the early 70’s, we have seen the greatest scientific revolution in history.  By all measures—publication rates, patent activity, growth of biological databases—biomedical information has exploded.  This success has greatly increased the number of potential therapeutic targets and new molecular entities (NME) that represent potential new drugs. All of this has bred wide optimism by scientists, investors, Wall Street, policymakers, and others, that this life science revolution would lead to a trove of new drugs and ultimately to enormous financial rewards.

A further, related promise of the biotech revolution is that enhanced understanding of biological processes will allow more intelligent selection of new drug candidates and drug targets, thereby making drug R&D more efficient, less risky and less costly.  

The Financial Reality

Indeed, there have been impressive biotech success stories, such as Amgen, Genentech, Genzyme and a handful of others, but, how has the sector as a whole lived up to this lofty promise?  Thirty years after the launch of the biotech industry, Gary Pisano, a professor at the Harvard Business School, decided to empirically test how well the biotech sector has lived up to its potential.  He collected and dissected financial and productivity data for 293 publicly held biotech companies and from 20 large pharmaceutical companies that existed between 1975 and 2004 and his results, published in the book, Science Business, are sobering.

"...over the years, income has been flat, hovering close to zero..."

Here is what he learned about investment returns on public equity: A hypothetical investor who purchased all 340 biotech IPOs between 1979 and 2000 and held those shares until January 2001, or until company acquisition, would have realized an average annual return of 15%.  Not bad, but not stellar for such a high risk sector.  If the same investor purchased a diversified biotech portfolio in 1981 and sold it at the end of 2003, he would enjoy an 8-fold return, or about a 10% compounded rate of return per year.  Compare this to the more risk-adverse investor who invested in Treasury Bonds; he would have realized a 12-fold total profit and the same investment in the Dow Jones would be worth 21-times more.  Clearly, the return on biotech investment is disappointing when compared to alternative and less risky investments. To be fair, this comparison pits the entire biotech industry against other investment vehicles.  An individual investor who was more selective in the biotech companies he invested in, could have done much better (or worse) depending on his portfolio.

More revealing, however, was Pisano’s analysis of revenue and earnings for the whole biotech sector between 1975-2004. To measure this, he created a yearly aggregate income statement for the entire biotech industry. In other words, he combined the income statements of the 293 companies into one industry-wide income statement. 
   
His analysis showed that over time, total sales for the sector increased exponentially, as one would expect.  However, over the years, income has been flat, hovering close to zero until about 2000, when total sector income actually began to decline.  By 2004, however, the industry showed its first positive income of about 7% of total sales.  But, this is misleading since the most profitable firm, Amgen, heavily skews the results.  Excluding Amgen from the analysis reveals that the remaining biotech sector sustained steady losses throughout its history and never has been profitable. Pisano points out that since this analysis does not include privately held companies, the situation for the biotech sector is even bleaker since almost all privately held biotech companies lose money.

Pisano also noted that positive economic performance is concentrated in only a very few biotech firms—the vast majority of biotech companies have never been profitable.  When considering only those companies with positive cash flows, just fifteen firms account for 93% of the positive income for the sector and two, Amgen and Genentech, accounted for 53% of the total income of these profitable companies.  Some firms have existed for close to 20 years without ever generating positive cash flows.

The Productivity Reality

In simple terms, the raison d'être of the biotech and pharma industries is to turn financial resources into drugs, which in turn should drive profitability.  But, it is no secret that over the last few years, the big pharma R&D productivity has slipped dramatically. Even though R&D spending has increased, the rate at which NMEs are introduced has steadily decreased. Many industry observers argue that biotechnology will be the cure for this malaise and that big pharma companies ought to outsource its novel R&D to the leaner, meaner biotechs. 

Pisano also investigated this promise that the biotech industry is the answer to the productivity crisis in the pharmaceutical industry.  As a measure of productivity, he compared the inflation-adjusted cost per NME between the top 20 pharma companies in the world and the panel of 293 publicly held biotech companies. This analysis was complex with many confounding factors that needed to be accounted for, but these details are beyond the scope of this review. The important thing is that Pisano’s analysis showed no evidence that biotech companies are any more or less productive or innovative than pharmaceutical companies. Productivity and innovation between these two industries has been a dead heat almost since the beginning of the biotech industry.  

"..the biotech R&D productivity and novelty boom that has been
expected has not happened."

In other words, evidence shows that, when it comes to R&D, biotech companies are not more productive or innovative than their larger brethren, which means that the biotech R&D productivity and novelty boom that has been expected has not happened. Pisano writes, “If big pharmaceutical companies are looking to biotech to help them fill their revenue gap, these data would not make one optimistic.”

Conclusions

The malaise of the pharmaceutical industry is no secret, but Pisano’s analysis suggests that, by both financial and operational measures, the biotech sector also has not been healthy during its entire 30 year life. Only very few companies have ever been profitable, and an even smaller number of biotech “elites” have achieved substantial profits. These include Amgen, Genentech, Genzyme, Biogen, Idec and others, which, interestingly, were also among the earliest entrants into the industry. Hence, one might argue that with time, additional companies will rise up to finally realize the biotech promise. But after 30 years, or about 2 product development life cycles according to Pisano, there is nothing to suggest that this will happen in the foreseeable future. In fact, projections that profitability is just around the corner have been made since the earliest days of the biotech industry and have been consistently wrong. The bottom line is that the biotech sector so far has failed to reach its enormous commercial and economic promise.

This begs the question—given this lackluster performance, how has the biotech sector been able to continually attract capital over such a sustained down period from market forces obsessed on quarterly performances? A more important question is whether the industry will continue to be able to attract such capital if it continues to operate in the red. An ominous history lesson might come from the dot-com bubble and burst.  Pisano points out that once it became clear that the vast majority of these internet firms lacked a viable business model, the capital markets quickly pulled the plug. Pisano attributes the remarkable resiliency of the biotech sector to an “irrational exuberance” by investors who hope to invest in the next Amgen, and this is not unlike the exuberance that led to the dot-com bubble. But the sobering reality is that in 2006, only 20% of all publicly held biotechs had any products on the market or earned any royalties from products commercialized by partners. 

Thus, the vast majority of biotechs are simply R&D entities that have nothing to sell, and are not much different than most of the dot-com companies that existed just before the bubble burst.  Sobering indeed.

Fighting back against the high-handed nay-sayers

In a Wall Street Journal op-ed, authors David A. Shaywitz and Thomas P. Stossel take on high-minded academics who relentlessly attack university-pharma associations.  Labeling such critics as "PharmaScolds" they point out that relationships between university researchers and medical product companies are under relentless attack by critics who portray these associations as a morality play in which noble academics struggle to resist the dark, corrupting influence of industry. Then they follow with this question: why are leading disease-research foundations increasingly choosing to partner with industry rather than condemn it?

"The goal of medical research is not to publish papers,
but to develop new treatments..."

The answer is that by prioritizing the needs of patients, medical philanthropies remain keenly aware of something academic critics of industry may have forgotten as they've scaled the ivory tower ladder. The goal of medical research is not to publish papers, but to develop new treatments for people suffering from disease. And translating laboratory research into new therapies, in the words of Robert Beall, president of the Cystic Fibrosis Foundation, is something "academics are really not good at."

Read the full article here.
______________________________________________________________________________________

Dr. Shaywitz is a management consultant in New Jersey.

Dr. Stossel is a professor of medicine at Harvard and a fellow at the Manhattan Institute.

Drug Industry Needs "Open Innovation" Says J&J's Stoffels

The Health Blog just reported on a conversation with J&J's head of drug R&D, Paul Stoffels, on what the drug industry needs to do to survive in a difficult economic and regulatory environment.  Here is what he said as reported by HB.

Drugmakers’ struggle for survival boils down to finding new medicines to replace the old. The key, Stoffels told the Health Blog, is “open innovation,” or looking outside of companies for innovation and then collaborating with biotechs or academics on promising compounds.

 

“All simple diseases have been solved,” Stoffels said. “The next-generation drugs, therapies, are much more complex… You need much more information and science than what you can get out of your own internal labs.”

Stoffels said he learned the value of external partners “the hard way and also the good way.” When his first HIV drugs — developed in-house — were tested in patients, they didn’t work. He realized he didn’t know enough about the clinical complexity of HIV.

He sought the help of hospitals and other institutions working with patients. A 10-year collaboration led to two J&J HIV medicines — Prezista and Intelence — now on the market.

Others in the industry also have acknowledged that external partnerships will be important for developing innovative drugs moving forward. Critics say the drug industry has no choice but to look to biotechs or academic for help, given companies’ weak internal pipelines and stagnant R&D spending.

The future of the drug industry, Stoffels told the Health Blog, is “building networks where together with a number of different groups you come up with solutions to solve different medical needs.”

Pharma makes a pragmatic left turn in this election, by Steven S. Clark

Reversing trends where drug makers routinely throw their financial support behind the Republicans, big pharma decisively backed the Democrats this election year. Pharma gave the Obama campaign more than three times the money they gave to Republican, John McCain. Compare that to four years ago when drug makers gave Bush twice as much as Kerry. Indeed, over the last decade, the drug industry has spent millions to keep Republicans in the White House as well as in Congress, according to a report in Politico.

Even more revealing about the industry’s left turn is how poorly McCain fared during the primaries. As of the end of September, drugmakers gave $758,724 to Obama, $632,219 to Clinton, and a paltry $284,900 to McCain—just 20% of the Democrats’ total.

This trend was repeated in the Congressional races where, for the first time in six election cycles, House and Senate Democrats reveled in receiving the lion’s share of pharma campaign donations. Clearly, the industry preferred equids over pachyderms this election year.

Does all this reflect a love affair with Obama and the Dems, disappointment with McCain and the Republicans or both?

Factoring into all of this is McCain’s feud with the pharmaceutical industry, which he famously tagged “the big bad guys” and he likes to boast about “taking on the drug industry,” which certainly didn’t sit well with pharma executives.

But are hurt feelings enough to reverse historical trends? The evidence suggests that the issue is deeper and more complicated and is, in fact, tied to a significant shift that is underway in the health care market in this country.

Both parties favored similar drug policies

When looking at the two presidential candidates’ policies, it is hard to understand pharma’s Obama obsession. For instance, headlines during the campaign declared the following: "Obama plan could whack Big Pharma", "Big Pharma could be big loser under Obama health plan", "...neither candidate loves pharma" and this, "Barak Obama and John McCain go to war with Big Pharma."

According to the Boston Consulting Group, Obama favors letting a federal agency set discounted drug prices, which will cut the drug industry’s revenues by a whopping $10-30 billion a year. And the Wall Street Journal’s Health Blog speculates that this would be further exacerbated if private insurers, following the government’s lead—and why shouldn’t they—also insist on paying less for prescription drugs. To make matters even worse, the Dems’ favorite son also favors importation of cheap drugs from abroad.  These are issues that are hotly opposed by the drug industry.

"These are issues that are hotly opposed by the drug industry."

Meanwhile, according to the BCG study, John McCain was “officially silent” on the issue of negotiating drug prices. But, a few years back, he voted against President Bush’s Medicare drug benefit plan partly because it didn’t allow the government to negotiate drug prices.  Furthermore, just like Obama, McCain favored the re-importation of prescription drugs to save money.  Both candidates also endorsed increased use of generic drugs and favor making the exclusivity period of biological drugs as short as possible, all of which pharma steadfastly opposes.

Clearly pharma didn’t feel the love from either candidate, so what explains their swoon for Obama? Did they just close their eyes while kissing up to the presumptive winner?

What are the stakes?

In order to answer this question, we first need to understand basic economics of health care in the US. This country has long favored a free market model for health care, believing that this leads to increased consumer choice and promotes the production of new medicines. A big new drug is reckoned to cost $800 million to develop and the drug giants argue that they need the higher profits from the US free-market in order to drive the R&D required to develop these expensive new drugs and therefore protect their product pipeline and future revenue.

It is said that scientific research follows the money and this is no more evident than in Europe which is not free-market driven and regulates drug prices. Europe also is simultaneously steadily losing its pharmaceutical edge to US labs, which generated two thirds of the new drugs launched in the world over the past five years.  So, while the US produces most new drugs, its free market also almost entirely subsidizes the cost of their development from high consumer drug prices. It follows that any reduction in US drug profits will diminish the ability of pharma companies to support future R&D for new drug development. 

Thus, as Motley Fool analyst, Charly Travers, often points out, any US government policy that caps drug costs will reduce both the number of drugs that can be developed as well as the profits for already approved drugs—a double whammy for the pharmaceutical industry.

Unfortunately, this argument is tempered by the troublesome fact that drug prices in the US are rising at a rate of 7% a year, which is difficult to continually absorb. Hence, the political pressure for price controls on drugs in the US has increased to the tipping point where, for the first time, presidential candidates from both parties favored price controls on drugs—a move away from the free market.

A health care monopsony favors the Dems

It seems that big pharma is looking into a gathering perfect storm—blockbuster drugs are coming off patent protection, drying up current profits; a thin product pipeline imperils future profits and the unprecedented specter of government regulated drug prices, which further threatens future profits.  However, there is a glimmer of hope that explains their leftward lean in this election cycle and, ironically, we can thank President Bush’s un-conservative profligacy for this political realignment.

“…we can thank President Bush’s un-conservative profligacy for
this political realignment.”

Historically, insurers have picked up most drug costs, but during the Bush administration, the heaviest burden has shifted to the federal government, which currently picks up about half the tab. Thus, there is a growing shift in the US health care market away from private insurers and toward federal health care programs—a shift that was accelerated by Bush’s expensive Medicare drug plan for senior citizens.  It truly is ironic that this erosion of the health care free market is driven by a Republican President.

The word economists use for a market in which goods or services are offered by several sellers, but purchased by only one buyer, who can dictate prices, is “monopsony.”  It is a word that too often comes with the antecedent modifier, “government.”  But, despite the tremendous purchasing power of the growing government monopsony, US taxpayers right now get no pricing leverage like they do in most European countries and Canada, where the governments negotiate and regulate drug prices. Clearly, this is going to change with a Democratic monopoly in Washington.  This government monopsony will invariably lead to regulated drug prices in the US, moving us away from the current free market, and as explained above, this worries the pharmaceutical industry enormously.

It light of these shifting market forces, it makes perfect sense that drugmakers are beginning to view the US government as their primary future market and, for this reason, they understandably want to make sure that government-run health programs are robust and bountiful. They know that Dems are more likely than Republicans to deliver on this magnanimity, and this explains why pharma cozyied up to Obama and Congressional Democrats, both of which favor more government-run healthcare.

No one ever accused drugmakers of not being pragmatic and it is in the sprit of such pragmatism, coupled with an eye to the future that accounts for pharma making nice to Dems.  But, with liberal Democrats ruling Washington and Republicans likely relegated to passive observer status after the election, pharma’s leftward lean this year could quickly return to the right if the liberal monopsonists take too big a bite out of US drug profits.