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This story was corrected on July 24. An explanation of the correction is at the end of the story.

Scott E. Koenig has worked most of this decade trying to bring to market cutting-edge medicines for treating diabetes, cancer and autoimmune diseases. Now he is also working in the political arena on the issue of biosimilars, the subject of heated debates in Congress and the bioscience industry, to ensure that his efforts and those of his 160-employee company can continue.

Koenig is CEO and president of MacroGenics, a Rockville biotech that also has an office in South San Francisco, Calif. A medical doctor who also holds a Ph.D. from Cornell University, he oversees the company's research and development of biologic treatments, which are complex, large-molecule products derived from living matter, such as proteins. He also helps guide these products through time-consuming, expensive clinical trials and, eventually, he hopes, through the federal regulatory maze to get them into patients' hands.

On top of that, Koenig also makes sure that MacroGenics has an ample supply of the lifeblood on which every venture depends: money.

"It's said that $800 million is needed to recoup the cost of product development and the failures associated with getting it to market," Koenig said, with the average biologic treatment taking from 13 to 16 years to make it successfully to market.

The privately held company lists on its Web site some two dozen investors and partners, including pharma giant Eli Lilly & Co., which is collaborating with MacroGenics on its juvenile diabetes treatment, teplizumab, which is now entering a phase 3 clinical trial. If approved by the Food and Drug Administration, it would be the first new product for juvenile diabetes approved in the U.S. since insulin in the 1920s, Koenig said. In other words, there is a big potential market.

So far, MacroGenics and Lilly have spent "hundreds of millions" of dollars developing teplizumab, and Koenig and other biotech executives are lobbying Congress to ensure they can recoup their investments.

How long is long enough?

At issue is legislation that would regulate how other manufacturers could create and sell their own, presumably less expensive, versions of biologic treatments. Currently, such regulations oversee the production of generic versions of conventional, small-molecule drugs, which are easier, cheaper and quicker to replicate than biologics.

The biotech industry has several concerns about the production of biosimilars, or follow-on biologics, including the need for clinical trials to ensure they are as safe and effective as the original treatments. The most hotly debated question on Capitol Hill, however, regards just how many years biotechs can maintain data exclusivity for their innovative products. Other companies could try to produce their own versions of biologics — provided they did not infringe on the original patents — but they would not have access to the biotech's proprietary data during that period.

Supporters of legislation proposed by California Democratic Rep. Henry A. Waxman say a five-year waiting period is long enough to ensure profitability for the innovating biotechs. They argue it is important to get these potentially life-saving and cheaper treatments onto the market as soon as possible. Waxman's bill has 14 co-sponsors, including John P. Sarbanes (D-Dist. 3) of Towson.

Another Democratic representative from California, Anna G. Eshoo, has introduced a bill requiring a 12-year period. That's the bill supported by Koenig, the biotech industry and 137 cosponsors, including Roscoe G. Bartlett (R-Dist. 6) of Buckeystown; Frank M. Kratovil Jr. (D-Dist. 1) of Stevensville; and C.A. Dutch Ruppersberger (D-Dist. 2) of Cockeysville. Otherwise, they argue, venture capital will dry up — even more than it already has.

President Barack Obama has proposed a seven-year period as a compromise.

‘Money has begun to evaporate'

"The point is that these investors now need to find ways … to place bets on a certain number of companies," Koenig said. "The whole fuel to keep this innovative industry going could collapse."

Without a guarantee of sufficient return on their investments, "venture capitalists won't have access to money from limited partners," he said. "A lot of venture capital groups are moving away from biotech or shutting down, unable to raise new rounds of money. Money has begun to evaporate."

Koenig cited more bankruptcies among biotechs, with "30 to 40 percent having less than six months of cash."

Jack Lasersohn, general partner with Vertical Group and a board member of the National Venture Capital Association, emphasized these points in his testimony before House Judiciary Committee subcommittee hearing on biosimilars last week.

Lasersohn drew distinctions between publicly held pharmaceutical companies and privately held biotechs, saying the latter's cost of capital is significantly higher than the former's. He cited a recent study by professors from Harvard Business School and the Boston University School of Management that found the cost of capital for small private biotechs funded by venture capitalists is at least 20 percent, versus the 10 percent previously assumed.

"The report also found that 44 percent of VC investments in biotech result in either partial or total loss of capital," Lasersohn said, according to a transcript of his testimony. "Most disturbing, the report concluded that the VC fundraising rate for all sectors has declined by 50 percent in 2009, but the VC biotech investment rate has declined by 75 percent in 2009."

Koenig said he recently shared his concerns with Sen. Barbara A. Mikulski (D) of Baltimore. Last week, Mikulski voted with the majority in a Senate health committee markup on an amendment approving the industry's favored 12-year exclusivity period.

The 1,200-member trade group BIO — the Biotechnology Industry Organization — is heavily lobbying Congress, calling last week's committee vote a "victory" for the industry.

It's unclear just what will become of biosimilars legislation, especially as Congress focuses on reform of the nation's medical insurance system and other elements of the medical industry.

"There are so many moving pieces, we don't know what will happen with this one piece," said Sandi Dennis, BIO's general counsel. The biosimilars legislation could be "contemplated as part of an overall package."

Correction: A previous version of this story incorrectly reported Rep. Eshoo's first name as Anita, not Anna.