By Rob Wright, Chief Editor, Life Science Leader
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There has been much debate as to how much it costs to get a new drug from discovery to market — anywhere from Light and Waburton’s 2011 estimate of R&D costs being in the neighborhood of $59.4M to PhRMA’s mind-numbing figure of $1.32B. R&D costs aside, what cannot be debated is the time it takes to get a drug approved, which is, in a nutshell, a long time.
Drug discovery and development is measured in years, often taking more than a decade to get from the laboratory onto pharmacy shelves. For some unfortunate few, the process can be even longer. Sangart, a biopharmaceutical company based in San Diego, recently passed the 14-year mark without a successful commercial drug launch of its oxygen therapeutic agent (OTA).
Founded by Dr. Robert Winslow in 1998, Sangart created a new model for thinking about the mechanisms of oxygen transport and delivery in the body. In short, the Sangart team had created a means to enhance how red blood cells work to optimize how gases can be delivered to tissues. For example, improving oxygen delivery has a therapeutic benefit for patients experiencing trauma-related oxygen deprivation by rapidly providing oxygen to where it is needed most. The trauma compound in development is referred to as MP4OX. Discoveries from Sangart’s research looked so promising that they were granted patents and widely published in numerous scientific articles. It seemed the company was doing everything right, and yet no commercially viable product had made it to market. In 2008, Sangart took a very bold initiative, replacing its founder and CEO, who also served as chief science officer, chief regulatory officer, and chief medical officer, with a nonscientist. Brian O’Callaghan, Sangart president and CEO, arrived with extensive commercialization experience and one objective — to be the first company to successfully launch an OTA. But, first he had to address past strategic errors which, in his opinion, had placed the company at a drug discovery dead end. O’Callaghan’s two-pronged approach of first assessing the product and then assessing the management team has placed Sangart back on the path toward commercialization.
Assessing The Product Requires Tough Discussions
When O’Callaghan arrived at Sangart, one of the first issues he had to overcome was the company’s focus on developing a blood substitute and the perception this had created with the medical community and regulatory agencies. Not being a scientist (he had started his career in the industry as a field sales representative in Ireland for Pfizer), he approached the problem from a different and rather simplistic perspective. O’Callaghan looked at the product in development, keeping in mind all of the properties blood possesses, and asked Sangart’ scientists, external experts, and consultants a very simple question, “Are we truly saying, that if somebody loses vast quantities of blood, we’re going to inject them with milliliters of this fluid and it’s going to be a blood substitute and do everything that blood does?” The consensus was a resounding “no.” With that he then asked, “So what do we have then? What does this product actually do?” The only things the company could realistically claim were that the product has some oncotic properties, i.e. drawing fluid back into capillaries and restoring pressure, and is very effective at delivering oxygen to ischemic tissue. “Why shouldn’t we develop this as an oxygen-delivery agent?” O’Callaghan inquired. By asking simple questions, O’Callaghan was working with the team to help each other understand where the company was and where it needed to go. It also prepared them for the next difficult message he had to convey.
O’Callaghan had the unenviable task of informing Sangart stakeholders (i.e. the internal team and the external investors) that the company had failed to implement a build-it-to-label commercialization strategy (the process of creating a drug with appropriate labeling geared toward eventual commercialization). “They thought they had developed the product,” he states. “They didn’t realize there was such a long road remaining.”
As the bearer of bad news, he attempted to soften the blow by reminding them of the significance of their achievement in terms of what it might mean to patients and science in general. But, the reality was, unless the product achieved commercialization, their efforts would only serve as a manual for how not to commercialize an OTA. In order to keep the team motivated, as well as to prevent a mass exodus of investors looking to cut their loses, O’Callaghan believed the company needed a different business strategy which involved having more than one potential commercially viable product in its portfolio. Sangart scientists had conducted some preliminary research on the possibility of enhancing the delivery of low doses of carbon monoxide (CO). The benefit of delivering CO in low doses is that it acts as a messenger to cells and reduces both inflammation and oxygen requirements while preventing programmed cell death (apoptosis). Sangart began development of MP4CO, which may prove useful in treating sickle cell anemia. O’Callaghan thought the company had the opportunity to restrategize on one product, MP4OX, and properly strategize from the beginning with MP4CO. “To get MP4OX successfully licensed and on the market,” he says, “we needed to go way back in the process and restrategize, because previous management hadn’t considered the regulatory implications.” He explained to the team that it would be a three-to-four-year process just to get back to where the employees already thought they were — on the verge of launching MP4OX. O’Callaghan admits that in all areas of the company, people were simply not prepared for receiving this message. He dusted off his selling skills and began the process of convincing the entire organization, as well as the investors, on a new vision for Sangart — “developing life-saving medicines specifically designed to enhance the perfusion and oxygenation of ischemic tissue through targeted oxygen delivery, not trying to claim MP4OX was God’s gift as a blood substitute,” he states. The new strategy was going to involve proof-of-concept studies going all the way back to phase 2A for MP4OX. “We were going to have to negotiate with the regulatory authorities a brand-new pivotal path for MP4OX, i.e. identify an actual and meaningful indication that not only served an unmet clinical need but had some commercial viability as well,” says O’Callaghan. In addition to getting MP4OX relabeled as an OTA as opposed to a blood substitute, the company began the initiation of phase 1B studies for MP4CO and the pursuit of U.S. Orphan Drug Designation, which they received in November 2010.
Sangart began the MP4OX relabeling process by putting together clinical and regulatory advisory boards, as well as reaching out to the medical community to gain additional perspective. “From all angles, the regulatory perspective was much easier to manage as an oxygen therapeutic agent, not as a blood substitute,” states O’Callaghan. “We had to stop using the term blood substitute and convince regulatory authorities that this wasn’t just a cosmetic exercise of relabeling our product,” he clarifies. “To truly understand our product better, it had to be characterized much more accurately.” O’Callaghan describes this as “a big wake-up factor for Sangart to truly realize who and what we are.” With this new focus, investigators are now focused on developing an oxygen-delivery agent, and regulatory authorities are regulating it as such. In addition to the error of pursuing the commercialization of a blood substitute as opposed to a drug, there were other strategic errors made by the company — some of which turned out to be blessings in disguise.
Strategic Errors On The Path To Commercialization
According to O’Callaghan, for many of the scientists working at Sangart, this was their first experience with developing a drug through to commercialization. “It was not a lack of intelligence or education or drug-development experience,” he elaborates. “But, in terms of drug-development experience with a regulatory pivotal path attached to it, they thought that the build-it-and-they-will-come strategy was enough, but it wasn’t.” In addition to inexperienced management, O’Callaghan identified a number of other strategic errors.
For example, none of the development work was being done in the United States. This was intentional and not intended to snub the United States. “You can generate data in Europe and use it in the United States,” states O’Callaghan. “But it’s usually advisable to have at least some of your data being generated in the United States if you want to create a meaningful dialogue with the FDA.” If you intend to launch a drug in the United States, it is better to have results from a pivotal clinical trial conducted in the United States when approaching the FDA for approval.
Another strategic error was the company’s decision to move very quickly through the clinical trial phases. O’Callaghan recounts, “There was very little Phase 2 work actually done. So, there were a lot of unknowns about this drug when they were going into what were two very large Phase 3 studies — one for the prevention of hypotension in hip surgery. This was taking us down a dead end because we were talking about developing an oxygen therapeutic agent.” OTAs and hemoglobin-based oxygen carriers (HBOCs) are products being used for patients experiencing hemorrhagic shock and severe bleeding with the goal of restoring oxygen delivery to ischemic tissue and organs. In any Phase 3 study, there are several objectives, such as demonstrating a safety profile with recognized adverse events and having an indication which meets an actual unmet medical need. These were not achieved because of another strategic error — not having a real indication for the Phase 3 study — as evidenced by the study being conducted in a very low-risk patient population.
The strategic error of not conducting any clinical trials in the United States and the premature implementation of the two large phase 3 trials turned out to be blessings in disguise. First, early on in OTA/HBOC development, Sangart had several U.S. competitors. As a result of initial findings by former competitors, the FDA questioned the safety of HBOC development and put a hold on all U.S.-based clinical trials. Since Sangart was conducting studies overseas, the company was able to continue conducting research. Second, the results from the large phase 3 studies were very promising in the areas of safety. Instead of considering these as Phase 3’s, Sangart approached the FDA with the data positioning them as really being phase 2 trials. This proved very important when beginning to renegotiate the relabeling of MP4OX with the FDA as an OTA and not a blood substitute — a key component in attempting to get Sangart back on the pivotal path.
O’Callaghan identified some other strategic errors as well. For example, the company had chosen Voluven as a comparison product, which worked very well in the treatment and prevention of hypertension and hip surgery. “It’s nearly impossible for an OTA to demonstrate true benefit and overcome safety concerns in that patient population,” says O’Callaghan. “You will demonstrate certain end-points regarding safety, but you’re certainly not going to demonstrate a benefit over Voluven, especially when it comes to pharmacoeconomics, which weren’t even built into this study.” Pharmacoeconomics refers to the scientific discipline that compares the value of one pharmaceutical drug or drug therapy to another. Not considering pharmacoeconomics as an integral component of the study was yet another strategic error. In Europe, where the studies were being conducted and where Sangart was anticipating the initial submission and launch, reimbursement is critical and pharmacoeconomic end-points are as important as chemical end-points. The company would not be able to prove pharmacoeconomic superiority over Voluven because it was less expensive compared to Sangart’s product, which was anticipated to cost between $1,000 and $2,000 a bag.
Failing to plan for commercialization was yet another strategic error. “They were running a fine facility,” O’Callaghan explains. “But being a pilot plant, it was not capable of producing peak projective commercial quantity. There was no planning for either expanding this facility or creating a new facility elsewhere.” In effect, Sangart had no chemistry, manufacturing, and control (CMC) section for the drug submission process. “If by some miracle the Phase 3 studies were actually suitable for submission, not having a CMC section would have prevented approval,” he states. “It would have taken, at best, 18 months, but more than likely two years to produce at that stage.”
Assessing An Acquired Leadership Team
After a thorough review of the product, O’Callaghan began assessing the Sangart leadership team he had inherited. He would advise those coming into a similar situation to first begin with an objective mindset. “Unfortunately,” says O’Callaghan, “there are too many general managers or CEOs who believe they have to come in and clear the decks, automatically assuming that because the strategy is wrong or because something has not worked out, that management is incompetent, is not experienced enough, and needs to be replaced.” In his experience, this is usually not the case.
Over the years O’Callaghan has found two consistent problems with management teams —they lack core competencies and/or experience. This was the case with Sangart. For example, the CEO he was replacing was serving in too many capacities. “By default, we did not have core competency from a regulatory or clinical perspective,” he explains. “A good chief scientific officer does not necessarily make a good CEO, CMO, or head of regulatory. These are very distinct and different core competencies.”
Regarding lack of experience, O’Callaghan describes it as executives lacking executiveness. Clarifying, he says, “You have people in management who may not actually be executives. They have found themselves in these positions by default, because they were very early recruits to the company who initially did everything from washing the dishes to developing the drugs. They have inherited titles that they wouldn’t have if they were at Pfizer or any established biotech company.” O’Callaghan had to effectively right-size people, a conversation and process not achieved in just one day. “You have to build a sense of trust over time, and the first part of that is the chemistry between you and these people and how you communicate,” he states. Communicating the type of competencies necessary to build a c-level leadership team and bringing in people with those competencies to serve as mentors to those being right-sized builds trust among employees. Rather than pass out a bunch of pink slips, O’Callaghan took the approach of creating a leadership team for the former c-level executives he had to right-size. “Now, the leadership team,” he explains, “is very important because they’re responsible for the execution aspect of the company, making sure all project management is effectively conducted and all project teams are effectively managed and ensuring that our overall corporate strategy is followed and all milestones are met.” Communicating that every decision being made is to benefit the company, not the individual, is key. “That is where trust builds up and people begin to see how they will benefit,” he concludes.
Being right-sized can be tough to take. But had this step not been taken, these execs would most likely have been out looking for jobs for which they weren’t qualified because Sangart would have gone out of business. By retaining most of the team and taking a mentoring approach, O’Callaghan believes these former executives are now capable of stepping up to the VP titles they previously held. Some have left the company in order to do so, which he sees as a good thing for growth and development. “They need to get experience throughout the industry that they won’t get at Sangart,” he asserts. By conducting a thorough product assessment and retaining top talent with an active mentoring approach to those who required right-sizing, O’Callaghan believes he and his team have now positioned Sangart back on the pivotal path toward commercialization — developing an OTA (not a blood substitute), having more than one product in the pipeline, gaining U.S. orphan drug designation for MP4CO, and having a recently signed cooperative R&D agreement with the U.S. military in developing MP4OX.