Babson Magazine

Winter 2016

Imagining the Unimaginable

Fast moving. Risky. Diverse. Complex. The multibillion-dollar biotechnology industry keeps these alumni challenged and intrigued, and they wouldn’t have it any other way.

Illustration: Federico Gastaldi
Illustration: Federico Gastaldi

In the fifth grade, Jennifer Cashton, MBA’13, received a microscope for Christmas. It was her favorite gift. As many young children do, Cashton dreamed of becoming a doctor. But after earning a bachelor’s degree in microbiology, she worked in the labs at a biotechnology company. To build on her clinical knowledge, Cashton earned a graduate nursing degree and then joined Millennium, a biopharmaceutical company. She was a clinical project manager conducting early research trials for a cancer drug when the project took an exciting turn. “We were really hopeful when we started getting patients with complete remissions. That drug is now the gold standard for multiple myeloma. It was an incredible experience,” she says, one that secured her love for clinical research and drug development.

She continued to work at Millennium, guiding its global clinical trials while getting her MBA. In 2010, she moved to Biogen in Cambridge, Massachusetts, which focuses on treatments for neurological, autoimmune, and rare diseases. Cashton currently is part of a team that makes strategic decisions for an existing multiple sclerosis drug. For example, the team explores other diseases that may benefit from the medication. “I absolutely love what I do,” she says. “I really am very proud when I hear patient testimonials like, ‘I’m able to walk now because of this product.’”

Cashton is not alone in her passion and optimism for the field of biotechnology, a rapidly growing, multifaceted industry that encompasses a vast range of products, from drugs and biopharmaceuticals to gene therapies to diagnostics and more. Broadly defined, biotechnology is “using a living organism or materials produced by a living organism to create a product that solves some human problem,” says David Blodgett, assistant professor of biology at Babson and diabetes researcher at the University of Massachusetts Medical School.

Babson alumni working in the field say it is challenging, fast moving, and complex. “It’s very, very complicated when you’re working at the intersection of chemistry, biology, physics, and other sciences,” says Kevin Munnelly, MBA’06, president and CEO of Gen9 in Cambridge, Massachusetts, which designs and manufactures synthetic DNA.

Huge costs for research and development coupled with regulatory requirements translate into enormous risk and frequent failures. The industry is in flux, thanks to a string of mergers and acquisitions, as well as privately held companies that have recently gone public. Changes in the health-care system, sparked by the Affordable Care Act, create greater uncertainty than usual about whether insurers will cover the cost of new drugs and devices. “It’s a very complex, very dynamic environment,” says Iva Toudjarska, MBA’13, life sciences consultant at Putnam Associates in Boston. She provides strategic advice and analysis to companies in the biotechnology industry. “Growing up I wanted to be a doctor and make people better,” Toudjarska says. “I am doing that now on more of a global scale.”

The excitement of working in this industry makes the uncertainties and challenges worthwhile, alumni say. “The rate and pace of scientific innovation is growing exponentially,” says Chris Guiffre ’90, president and CEO of Cerulean Pharma in Waltham, Massachusetts, which aims to improve treatment options for people living with cancer. “Things that we couldn’t even dream of doing 10 years ago are becoming routine, which allows us to dream up new ideas.”

Hoping Biology Cooperates

Biotech depends on scientific discoveries: the new drug that eases symptoms, the innovative device that solves a pressing medical problem, the novel blood test that diagnoses a disease before symptoms appear. But such discoveries take time and funding to develop. “Money is a challenge for any entrepreneur, but the amount of money required for biotechnology is higher,” says Babson’s Blodgett, “and it often takes longer to get products to a point where you can actually sell them.”

Complicating matters, projects often involve a “biological uncertainty factor,” Blodgett says. “You don’t know where the biology is going to take you.” He offers the example of replacement organs made with pluripotent stem cells, which can be manipulated to become any cell type in the human body. Scientists may know how to create a replacement kidney, for example, by layering those stem cells over 3-D scaffolds, an amazing advance. “But then you get all the biology. How do you get blood flow to the organ? How do you get oxygen to it? How do you tell it to start working? How do we make it work in a real-life scenario?” Blodgett says. “There are many biological unknowns that you have to try to address.”

So companies need the backing of investors with deep pockets who are patient and willing to tolerate tremendous risk. Nowhere is this clearer than in drug development, where new compounds not only take time to develop, but also must move through preclinical animal studies and three phases of human studies before a company can submit a new drug application to the FDA. “It’s about $3 billion to develop a drug from beginning to end,” Cashton says.

Photos: Tom Kates

Photos: Tom Kates
Gen9 in Cambridge, Massachusetts, focuses on the design and manufacturing of synthetic DNA.

Most drugs fail at some point along the way. “Only 10 to 15 percent of drugs make it to market,” Toudjarska says. She notes that in the case of drugs for Alzheimer’s disease—an area of tremendous need and blockbuster potential because the disease is expected to affect so many as baby boomers age—96 percent of all drugs fail. Toudjarska understands drug development on several levels. Having earned a doctorate in molecular genetics, she worked as a research associate in MIT’s Whitehead Institute and later joined Alnylam Pharmaceuticals in Cambridge, Massachusetts, where as a senior scientist she started the company’s hemophilia program, now in clinical trials. Her current work at Putnam Associates focuses on commercial aspects of drug development, including pricing and reimbursement.

Given the costs, many companies are halting research programs earlier in the development process if drugs appear to fall short of goals. Pulling the plug on unsuccessful projects in the pipeline opens up resources for more promising programs, Toudjarska says. Cashton’s employer, Biogen, cut 880 jobs last fall due in part to disappointing results in a late-stage trial for an MS drug, The Boston Globe reported. Executives told the Globe the company would reinvest in other projects, including a new drug for Alzheimer’s disease.

In 2001, soon after Guiffre was hired as general counsel with Cubist Pharmaceuticals, the company received word that it failed a phase 3 trial. “That almost put the company out of business,” he says. But he credits Cubist’s CEO at that time with keeping the business on track. Guiffre’s current company, Cerulean, also faced a failed trial, but in reviewing the data, the team discovered “problems with the protocol, not with the drug,” Guiffre says. “Here we are, still in business. If you’re really lucky and very creative and you actually have a drug that should help patients, then you can defy the odds and stay alive.”

With soaring R&D costs, some large pharmaceutical firms have moved away from new drug development altogether. Instead, they’re looking to acquire smaller biotech companies that are more willing to take those risks. And venture capitalists seem to support these smaller companies; an analysis by PwC found that VC investment in biotechnology firms rose 29 percent in 2014, and the upward trend continued in 2015. Why are investors willing to tolerate these risks? The potential returns are great, says Guiffre. “Most drugs never make it to market, but most that do make it become quite profitable,” he says. “Similarly, most biotechs don’t succeed, but those that do succeed create outsized returns for their investors.”

Recently Guiffre witnessed “lots of capital flowing in the equity markets to venture-backed companies that wanted to go public. The last three years or so have been record years for taking biotech companies public.” He should know. Guiffre served on the team that helped take Cerulean Pharma public in 2014. Interestingly, Guiffre never intended to work in the world of biotech. After earning a law degree and MBA, he worked in a large Boston law firm and then as general counsel for an IT consulting firm, helping grow the business and ultimately sell it. But when the bottom dropped out of IT consulting, Guiffre decided to enter biotech, one of Boston’s healthiest industries. He served in executive roles in several biotech companies and landed at Cerulean in 2012. At the time of Cerulean’s initial public offering, his title was chief business officer, but he also filled the positions of CFO and general counsel, which were vacant at the time. He called the IPO process “a grueling experience, but an amazing one, too.”

Guiffre thinks the pendulum is shifting to less available capital, but he continues to hustle to generate funding that will keep the company operating. “Cerulean, like many biotechs, is not yet profitable,” he says. “We have no revenue stream until we launch a product and generate sales, so we live from financing to financing. We never stop thinking about how to raise the money we need to develop our drugs.”

David Ure, MBA’05, describes a similar focus in his work as co-founder, CEO, and president of Inanovate, a Durham, North Carolina, firm developing blood tests, based on a protein- analyzing technology, to screen for cancer. He estimates he has spent 75 percent of his time in the last year fundraising, which means meeting with potential investors or people who can connect him to investors, working with existing investors, and producing materials to share with people considering investment.

“It hasn’t been my experience that there is a lot of money sloshing around for biotech, certainly not in the early stages,” Ure says. Most venture capital goes to companies already generating revenue. The exceptions, he believes, are companies founded by people with a proven track record of building successful biotech firms, well-known researchers from prestigious universities, and senior executives from large pharmaceutical or diagnostic companies. “These companies tend to have a much easier time attracting VC money,” he says.

Regulatory Challenges

For some biotech companies, an even bigger challenge than funding is making it through the processes implemented for consumer safety. In the U.S., biotech companies must plan for the regulatory process and Food and Drug Administration review, key steps before products can be used by the public.

To streamline the process of getting new drugs to market, some companies now connect with the FDA sooner in the cycle. “Smart companies involve the regulators as soon as they believe they have a true potential development candidate, typically from phase 2 of development, because they really want to assess what regulators think about the product,” Cashton says. This allows companies to head off potential concerns sooner. While drugs can fail at any point, she says, phase 3 candidates—the phase leading up to FDA filing—represent the largest risk in terms of investment due to the size and complexity of the testing.

Photo: Tom Kates

Photo: Tom Kates
Kevin Munnelly, MBA’06, president and CEO of Gen9

But Cashton knows from experience that drugs can be pulled from the market even after approval. One of Biogen’s MS drugs was removed from the market when a small number of patients developed a rare but serious brain infection while taking it. However, patients and physicians missed the drug and reacted strongly, testifying before the FDA about its benefits and making passionate pleas that it be reintroduced. The medication was back on the market within about a year and a half, Cashton says, with new guidelines about how best to manage its benefits and risks.

In cases of cutting-edge biotech, the FDA and other regulatory entities often are ill-equipped to keep up with the pace of change, says Munnelly of Gen9. He began his career as a pharmaceutical researcher after earning undergraduate degrees in biochemistry and molecular biology. Munnelly then spent more than a decade in drug development before shifting his focus to the business side of science. “I think providing access to these very novel treatments can be game changing,” he says, “and regulatory bodies need to keep up.”

Munnelly adds that Gen9, which makes synthetic DNA, is not currently monitored by the FDA or other bodies, so it is “literally self-regulated,” following its own guidelines to ensure safe, ethical operations and promote biosecurity. For example, Gen9 has contacts in government agencies to whom it can report suspicious activity, such as clients who request products with genes coding for dangerous pathogens, and Gen9’s policy is to turn down orders from risky “watch list” agents around the world. Munnelly believes agencies such as the FDA should institute smart monitoring to ensure all companies operate with similar safeguards.

Guiffre of Cerulean believes “the FDA does a pretty darn good job with not enough resources in a very complex space.” But in an ideal world, he would like to see reforms, including some type of preliminary approval that would “allow drugs to be approved on less data than is currently required,” which he says would speed the process of getting new drugs to patients. However, he doesn’t expect this scenario to become reality. “Our society expects the FDA to ensure that all approved products are safe and effective,” Guiffre says. “There is nothing wrong with that expectation, but it costs an enormous amount. To meet society’s very high expectations, the FDA needs to be a large and complex organization. And to meet society’s very high expectations, drug developers need to spend many years and many hundreds of millions of investment capital per drug to embark on risky projects, most of which will never provide a return on investment.”

Given the resources that companies invest in getting products through phase 3 trials to the regulatory process, what happens if a drug fails to get FDA approval? “That’s nuclear winter,” Guiffre says. “That means you’ve worked on something for more than a decade, you’ve raised many hundreds of millions in capital, and you’ve basically reached a dead end.”

Fostering Conversations

If a drug comes through the approval process, the next hurdle is making sure people use it. Biogen’s Cashton says she is increasingly focused on maintaining a connection to the patients who use the MS drug she oversees. The market for MS drugs is crowded, and patients and doctors have multiple options from which to choose. “We want to make sure we understand what is most meaningful to patients,” Cashton says. “How are our products benefiting them? If they switch to another product, why? What is really behind the behavior of our prescribers and patients?”

Photo: Tom KatesJennifer Cashton, MBA’13, program director of asset leadership at Biogen

Photo: Tom Kates
Jennifer Cashton, MBA’13, program director of asset leadership at Biogen

When Biogen makes an announcement concerning her product, Cashton and her team monitor social media to see how the news resonates with patients. This year the product celebrates its 10th anniversary, and Cashton’s team is thinking about ways to use the patient voice to guide such activities as future research and marketing. “The patient voice was instrumental in bringing the product back to market” after it was pulled, she points out.

Ure of Inanovate uses storytelling to help people understand how his product works. Inanovate’s technology could have been used in a range of ways, says Ure, but he made a strategic decision to start with breast cancer diagnostics. “Breast cancer gives an anchor point to your story, and everyone gets that,” Ure says. “Depending on the audience, you can then talk about the proteins, and then the platform, and why other technologies wouldn’t be able to run this test as effectively, precisely, or as cost efficiently as our platform can. It’s also easy to explain that this is just application number one, that we can use this platform and technology to go into other cancers and then other diseases.”

Gen9 found a creative way to spark public conversation about ideas for using its synthetic DNA by launching its annual G-Prize competition. Entrants propose ways to use the product, and the winners receive a million base pairs of DNA, “which has a street value of half a million dollars,” Munnelly says. “We want to spur new applications in the industry, novel uses of synthetic biology that are so outlandish and forward-thinking that nobody else is going to fund them.”

Past winners include a NASA team that proposed a DNA tool kit for space exploration. Another idea involved “living perfumes” that would allow users to change their scent at will from, for instance, chocolate to strawberries. “We think the possibilities are endless,” Munnelly says, and the G-Prize is designed to spur those dreams.

Alumni in biotech believe in the importance of continuing public conversations about the industry and the products it produces at such a dizzying pace of innovation. “I would say that the majority of efforts going into biotech are ultimately for the benefit of humanity, and not just making money,” Munnelly says. “I think that’s important to note. We are trying to cure diseases and help people live better, more fulfilling lives.”

Erin O’Donnell is a writer in Milwaukee.