Biotech strategies for an uncertain world

Contributed by Paul Rennert

There is a lot to worry about as your biotech moves from discovery work to IND filings to clinical development. Time, money and execution are daily critical issues that color every decision. Steering a steady course is the job description for every management team but so is the ability to shift course mid-stream. “This is the business we have chosen” says Hyman Roth in The Godfather, and many days that’s a familiar sentiment: “I didn’t ask who gave the order”.

Orders indeed. For companies that survived the turmoil of Covid and then the post-Covid financing collapse the current environment feels like smoother sailing. And for those few who not only survived but did so with a reasonable path forward and a sensible valuation – private or public – well, they’ve earned the respite.

But for all of biotech the next array of critical issues to solve have appeared, and these are complex. Biotechs need to be considering strategic options now for issues they may not encounter directly for a year or two, and we are certainly doing so at Aleta Bio. I’d like to walk through a couple of these issues, share what we’ve learned and solicit feedback from those of you confronting the same issues.

Issue #1. The Biosecurity Act. We’ve all heard about it, read about it and talked about it. Honestly there is nothing I can add to the general discussion, except to recommend this article from the talented attorneys at Goodwin Law:

https://www.goodwinlaw.com/en/insights/publications/2024/03/alerts-lifesciences-the-biosecure-act-and-its-potential-implications 

This article is free to read. Also, if you have access to Biocentury they have covered this area in many articles. Nonetheless, there were a few surprises as I dug into the impact of this act on biotech operations. One is our limited knowledge as end-users of the 4 named Chinese “companies of concern” (WuXi Apptec, BGI Group, MGI, Complete Genomics) regarding their actions. The bills allege that the genomics companies (BGI, MGI, CG) share data with the Chinese military; the allegations against WuXi Apptec are less clearly stated in the House and Senate versions of the Act itself. Further, WuXi Biologics, a separate company from WuXi Apptec, is named in a committee letter as a target.

We quickly get into the realm of hearsay. On @Biotech_CH a few weeks ago we heard from a member of the Executive Committee of BIO that it was likely that members of Congress sitting on the relevant committees were seeing intelligence that implicated these firms directly (BIO is a biotech industry association and lobbying firm). On March 28th, Reuters reported that “among the (intelligence) agencies' concerns was information reflected in recent intelligence reporting that WuXi AppTec transferred a U.S. client's intellectual property to Chinese authorities without consent... The sources did not reveal the name of the client or the nature of the information due to the sensitivity of the classified material.” Finally, both WuXi Apptec and WuXi Bio are accused of having deep ties with the Chinese military, which are kept hidden from Western companies and governments.

Many of the allegations are difficult to evaluate since we don’t see the content of the intelligence briefings. Regardless the operational threat of using WuXi Apptec or WuXi Bio is very real if the Act passes and is signed into law. For example, if you have done preliminary GMP manufacturing with WuXi Bio it is likely that you will have to move your asset and your process prior to running your commercial GMP batch, since you will not be able to sell your drug to the US government through Medicare and Medicaid. Similar restrictions apply to WuXi Apptec’s IND Enabling Studies unit and their viral vector manufacturing unit.

What is the best strategy here? It can be time consuming and expensive to transfer manufacturing from one CDMO to another, but I’d argue it is critical to prepare to do just that if you have exposure. And I’d think carefully before committing to new projects with the WuXi companies. This landscape may change as the bills moves through the House and Senate, but as a rare example of legislation with strong bipartisan support, appropriate risk mitigation should be taken.

Issue #2. Can the FDA survive the courts? A highly politicized court case may threaten FDA authority over drug approvals. At issue is the agency’s approval and subsequent label expansions of mifepristone, an oral abortion medication. The drug was approved on the basis of “adequate or well-controlled studies” as understood by the relevant agency, the FDA. There are two levels to this issue. One is the concept that specific government agencies, whether FDA, EPA, TAA, DOE, DHS and so on, have the “administrative regulatory authority” to regulate in their areas of expertise, ie. such things as drug approvals. The concept is referred to as the Chevron Doctrine after a Supreme Court case that established that when a federal statute is ambiguous, courts should defer to an agency's interpretation of the law as long as it is reasonable. In practice the Chevron Doctrine can support regulation, or deregulation, as seen fit by the specific agency of each specific administration. In the case of drug approvals, no court has yet seen fit to counter the FDA’s guidance, but it will be telling to see if the court cites precedence in allowing mifepristone to remain approved (ie. allowing the agency’s regulatory authority to determine the outcome) or if the case is decided on narrower grounds. If we see the latter outcome we will have to worry that this conservative Supreme Court remains open to challenges to the Chevron Doctrine, throwing FDA and other agencies authority into doubt. Such a path will lead the industry into litigation by special interest groups seeking to block (or to force) drug approvals. Biocentury has covered this case in depth, including in this week’s latest issue. 

What is the best strategy here? Simply, follow the case and stay informed. Connect with BIO, PHARMA and other industry groups and voice your support, sign the petitions and contribute your name and your company’s name to amicus briefs that support the FDA’s jurisdiction and regulatory authority in this case and those to come. 

Issue #3. Can Biotechs survive the FDA? The flip side of FDA’s authority is that it can constrain innovation. We are already dealing with such threats as the Inflation Reduction Act that shorten patent protections for approved drugs, and target highly expensive therapies for price negotiation. Now, a Complete Response Letter (CRL) received recently by Regeneron provides an example of a significant cost and logistics threat to the most innovative of drugs – those that are candidates for accelerated approval. Regeneron received the CRL – a denial of approval – for the drug odronextamab, which had been given a conditional accelerated approval based on results from a Phase 2 clinical trial. As the date for accelerated approval approached, FDA reviewed progress on the required confirmatory clinical trial (a Phase 3). That is, an accelerated approval requires the sponsor (in this case Regeneron) to run another trial to confirm the benefit. FDA issued the CRL because although the company had initiated the confirmatory trial they had not enrolled sufficient patients by the accelerated approval date. What constitutes sufficient enrollment is not clear – 20% enrolled? 30%? 50%? We don’t know. But FDA is cracking down here, in part as a response to some of the companies that were early winners of accelerated approvals but then took their time running confirmatory trials.

For a large Pharma like Regeneron, the resulting delay won’t be fatal. But imagine a small biotech that is trying to rapidly advance an innovative lead drug, requesting and being granted accelerated approval, then having to immediately plan and fund another study such that it is sufficiently enrolled that it will not trigger a CRL as the approval date approaches. This feels like overreach. The solution to foot dragging in the past should not be to impose an onerous financial and resource commitment pre-approval for innovative drugs currently being developed.

The best strategy here is to know the risk and reach out to FDA in advance to probe the requirement for your drug. Be transparent about your limitations or the limitations of the indication: how many patients? how long to enroll? what is the cost? It will also be important to educate other stakeholders – investors, your Board, partners – that money will have to some from somewhere, potentially at risk, in order to be ready to take the accelerated approval pathway in the US.

Let us know your own critical issues, or your thoughts about this short list. As always you can reach me at rennertp@gmail.com.