Session 2-1: The Life Science Industry: An Overview

M. D. Anderson Cancer Center
Date:March 2008
Duration: 01: 02:12

Oli Wenker, M.D., M.B.A., Director, Technology Discovery, M. D. Anderson Cancer Center

Oli Wenker:

Alright! Good afternoon everybody. Session 2 of ideas on fire. Okay! so let's start with a few administrative remarks. First you know, we start exactly at 3 o'clock and the reason is not just to educate you to be punctual, but we have TV going right now and we are recording that stuff, so we don't want people all across the campus just sitting there and watching at an empty picture. Homework from last time, so last time we formed five teams. You were very creative and innovative, so I cannot come out with the whip and beat you up. Two teams merged into one, so we have four teams. So, it's creative. Okay! Then we said until 5 o'clock yesterday I need from each team a word document with a little paragraph of half page on what your company is about, your idea. So, by yesterday 5 o'clock I got two of them, so that's one came out as a word document, so I had to create one, but again it's about creativity, right? And the third one I had this morning. So, that makes three. Team number four, who are you. Alright! There is something called, you know, you are alone, sorry, I'm beating on you. There's something called negative creativity.

[Inaudible audience]

It's coming? No yours I got, so I'm still missing one. Okay! So whoever that might be, I only have what you call team one, two, and four.

[Inaudible]

Okay! Good. So be very creative and send it to me now. Now, next step included administrative saying whenever you talk to me or to the speaker, you ask a question or you respond, there is a button in front of you. You push that and then you have a green light. When you have a green light, it means that we are recording whatever your question or your answer whatever that might be, your comments. And again, remember people are watching on TV and then later on the videos, and the iPods, and you will be just blank when you don't push on that button. Okay! So every time you ask a question or you have a comment that I address to you, you push that button so we can record you. Alright! So you are going to send me yours and then we have four proposals. Now I know that the bunch of people. One question here?

Question. We didn't sign last time, can we still sign today?

That's exactly what I'm just saying. We have a few add-ons since last week, so obviously people are going around and they liked what we did last week, so we have a few add-ons. If you already send me an email and I had about three or four of those, we accepted everybody because last time we had about 10-15 people not showing up and this is going to happen every time because a lot of you are physicians, we have clinic, we are in the operating room, some of you have to travel every once a while for national meetings, things like that, so whenever that happens you just sign in when you are here and those who didn't sign in yet or didn't sent me an email, make sure that you sign in your full name readable, we had one sign in last week we couldn't read, so that reads now question mark, question mark, question mark, Unless you want to have a certificate with question marks on it, you know, you better give us your real name so we can read it. Okay, so that hopefully will answer all the questions and everything what else I have to tell you will go as we go along. So, today's topic. Today, the first hour I am going to give you an overview just on the healthcare industry as a whole because this course is about life sciences and if you think about you know in what market you want to go into, I think you should understand a little bit how the US market looks like and the global market in different things. So, this is what we are going to try to do today. The big picture. We are going to start with the pharmaceutical industry. The big picture on the pharmacal industry is that this is a big, big market. Okay? Drugs are about four hundred billion dollar annual sales revenues. Devices about two hundred billion, a half of it. Services and e-healths, it's kind of difficult to distinguish. When you look up these numbers, you find two trillion for services and 1.6 trillion for the e-health space, but clearly these are you know this is not plus. This is not 3.6 total. There is a lot of merging here, some of the numbers will go into healthcare, IT, or into software companies, computer companies, and some of them will be put into the markets for healthcare, so take these numbers with a little, you know, there is a little question mark behind these numbers because it's not always apples and apples. When you look at the US expenditure that's kind of an interesting thing when you look in, you know, in billions, I mean it's clearly going up. About 20 years ago, it was about half a trillion dollars and now it's two-and-a-half trillion dollars closing up, you know, at three trillion so that's a lot of money, but just besides the increase, look at the GDP, Gross Domestic Product, so you kind of look at how much does the whole USA make as revenue overall and then you look how much percent the healthcare costs and we started around 10% and we saw a big increase in kind of the early 90s, it went up to about 14-15% and ever since it's kind of around to 16-17%, so the message is despite all the advances and we are seeing everything is getting more and more expensive when you really look at GDP, we are still in the same percentage rate, but which is still pretty big. So there is a lot of money flowing into healthcare so I think it's a good market. I mean, you hear because you are interested in companies and may be build your own company; you get out your own product. This is business wise speaking a very attractive lucrative market, it's a big market and in fact it's a growing market, why because now all the baby boomers are coming, people are getting older, things like that. So there is more and more disease to be treated than you know the American Diet makes us a lot of favors, you know, they are bringing us a lot of patients, it's a non-ending stream, I mean people getting bigger and bigger, more diabetes, more heart disease, and on and on, so until you start being a little smarter with your food and with your health habits, we will just see more of you in the clinic. So, revenues in 2006 in the U.S., worldwide it was about six hundred billion, US about two hundred fifty billion, but in US in just in the next two to three years that's expected to increase three to four fold, so this is again it's a growing market. USA is still the fastest growing market in pharmaceutical, although Europe is growing nicely, but US always historically and in the near future will be the fastest growing market. We have large competitive players, I mean over the last twenty years we have seen a lot of smaller players disappear and even bigger players disappeared because the game is called merge acquisition. When you do well on your stock price and you have a few blockbusters on the market, you make a lot of money. The first thing you are going to do, you are going to acquire other companies with other pipelines with new drugs and all these kinds of things, so that's the name of the game today. These companies are still typically highly profitable so there is a lot of money to be made and when you look at the stock prices of these companies over the last 20-30 years, it wasn't that bad of a deal. They reinvest roughly 18-20% back in average into their research so out of revenues roughly 20% go back into R&D and some of that we see here at M. D. Anderson in forms of sponsored research agreements. So when you look in 2006, the top 10. And you know, you don't have to learn all those, I mean, number one Pfizer, Glaxo-Smith Kline, Sanofi, Novartis, you know all these names that you know, but just look at the sales in billions, 45 billion sales per year, they are still growing, none of them is getting smaller and if you don't grow fast enough and another one is growing faster that should come and eat you up and acquire you and so here you see market shares that go with it. Just look at Pfizer number one 45 billion revenues and then Glaxo may be 37 billion, that was 2006, so I just looked up this morning, 2007, so that was 2007 Johnson & Johnson, J&J was number 7 2006 with somewhere around 30 billion, now they are with 53 billion, they are number one in sales, interestingly. They have acquired a few companies; they are very good in acquiring companies. They do mainly devices, but have drugs as well, though they have services as well, they have all kind of stuff. When you look at profits, you know revenues minus your expense, Pfizer is still number one with almost 20 billion dollar profits, so if those if you have Pfizer shares, you may be you see that, you know it's kind of probably a good, I didn't follow it up on the stock market, but these shares certainly are not too bad I would assume because still highly profitable the business. Market caps so when you multiply the outstanding shares with the share price, you get the kind of a number and that number we call a market cap so again Pfizer number one 180 billion dollars market cap and then you go down J&J, obviously almost the same number two and then it goes down. Interesting is that the top 14 companies, market caps together is four times bigger than all the biotechs that are out there in the US and we have about 450 or 430 publicly treated biotech companies last year, so that just tells you a little bit about the size between pharmaceutical and biotech. Where it goes one into the other? Well that's a gray zone, you know, I mean it depends definition, definition on what you produce, definition on the size of the finances of that company, so those are gray zones when one goes into another, but clearly when you looked at last year, I think that, you know, stock market wasn't doing too well, but you know pharma overall was up and biotech overall was down, I mean there is nothing new in that message, we see that very frequently and these trends clearly favor acquisition, so if your biotech goes down, the market dry up there is a less IPOs, Initial Public Offerings or follow-up offerings to the public market where you can raise money then these biotechs run out of money and they have a pipelines, drugs in phase one, two, three, we'll talk about what that means and so they need to be acquired because they run out of money or they go bankrupt and so big companies come in there and just acquire the whole company with the pipeline and so that's one way to create new drugs in your pipeline. So the industry where is it in the world. Well, half of the industry and the pharmaceutical industry is in the US, okay. We are biggest here when it comes to sales, production, whatever it is. Europe number two with 25 and then the rest of the world. So this is very US centric driven, it's a US economy part. This is kind of a interesting thing. Look at the blue line going up, the light blue, that's global sales, so over the last 20 years or 15 years clearly, global sales have increased year by year after year after year, so have R&D expenses, that's the red line going up. So, you would think if R&D goes up we should get smarter now we have computers helping us with drug development, we know a lot of things, I mean, we can speed up drug development, correct? That's the yellow line, no difference. It still takes about the same time today as it did 15 years ago in average to create a new drug and when you look at the blue line, the dark blue that goes down, that's the output. So we spend at least two or three times as much as we did 15 years ago and the output is about half, that's the bad news, guys, so we have less coming out for whatever reason and out of the pipeline. Little difference we have to look out, so here the red line is the R&D investment. You know we are reaching now 40 billion dollars a year in R&D in pharmaceutical industry. The yellow bars are, you know, in the last 15 years, the approvals by the FDA of new drugs and you see them in the mid 90's we had a nice boom, everybody was excited, biotech and pharma was hot, and ever since it's going down. Last year or two years ago, 22 new drugs, last year 19 new drugs approved. It's tough to get new drugs approved in US, okay. I have right now a device that I submitted to the FDA last week, it's tough, you know, I don't know, if I'm lucky 90 days I have an approval, if not I'm just going to spend more money and time and I cannot start my company. So, what kind of drugs do we see drug approvals by specialty in 2000 that was last year. Well umber one is the red one, that's oncology, and number two is kind of the grayish one and that's inflammatory, the anti-infectious, antibiotics and things like that. And everything else is minor. Okay. It's kind of interesting to see. That's pharmaceutical industry. When you look at that with the biotech industry later, it's a little different picture. So, what does it take to get a drug approved? Okay, from discovery to drug development to approval and this is what I tried to show you, you know starting all the way up and then kind of sliding down. So, first you discover something, a target, you know, whatever you discover in your lab and I recognize many faces here that have been sitting in our office not too long ago, just telling me about their new targets and then what we try to do is to find something that, you know, attaches to that target or something that is a compound that does something positive. Here we at M. D. Anderson so typically, you know, eliminates cancer, slows down cancer growth in a cell line and in the animal, things like that. And then we try to identify elite compound. So we have at least one chemist amongst us here and he created a whole database of something like 50-60 compounds around one drug formula that they found, one structure and we spent about what four or five months figuring out which one would be the elite compound and in fact that's one of the companies that you worked that is part of this little thing we are doing here with these business plans okay. And so you need to identify the elite, so that takes a while, then you need to do preclinical development, you go one more time into cell line, then you need to do toxicology and all these kinds of things, formulation and then you needed to apply for an I&D that's an Investigation of New Drug Application with the FDA and they will tell you what else you are going to need, you know, more animal studies or more different dosages, things like that, the dosage schedule needs to change, whatever that might be, and once you go through that then you can enter phase one. Phase one means safety and dosage typically. We want to make sure that stuff is safe, so you typically take some healthy volunteers and we are going to test to make sure that, you know, you don't have side effects. Limited studies we will come back to that. Phase two now we are going to take some diseased people with your target disease and you are going to treat those. Phase three now you are going to go all over the US or the world and do multicenter studies, big studies and then you get hopefully approval, which is the NDA, the New Drug Approval, okay, or the New Drug Application Approval and after that you still have studies to do which we call the after market studies, which will bring down drugs like Vioxx. They are out there for one or two or three years and then many people do studies with them and suddenly they found whoops we're creating a whole lot of heart attacks here and so it comes off the market again. You know, so this is kind of typical run through the drug approval process. And as you see, there is a funnel, many drugs go in, or many compounds and only one comes out, okay. It's a very brutal process. So, one more time phase one, two, three, and four. Phase one, drug safety okay. You increase typically a little bit the dose and you make sure that at any dose level the stuff is safe. Phase two and these are healthy volunteers. Phase two you take your diseased patients, typically around a 100, 200, 300 and now you look, you make sure that the drug does what it is supposed to do in that patient population still is safe and still has right drug dosage level. Phase three now you really want to make sure it's effective, it has all the benefits, you start looking at all the side effects and typically you know thousands of patients all across multicenter studies, then you get out in the market and then you do the post-marketing studies. Again thousands of ten thousands of patients and then you compare to existing drugs, make sure it's really better than existing drugs, and this is how you find sometimes some bad news, okay. The bad news with this whole process is of dose, many, many drugs that we look at only a few make it into phase one, but those of that make it into phase one, 38% fail and those who make it, 60% of those will fail in phase two and then 40% will fail in phase three and then at the end of the day, you basically have another 23% of drugs that will fail to be approved even if everything kind of went okay for whatever reason. So only about the 11% of whatever goes into phase one will get through to approval, so that's really again a brutal, brutal process that costs a lot of money, okay. So you ask why drugs cost a lot of money, well that's one of the reasons. The other reasons is the stock needs to do well, the shareholders maybe you, some of you want to have some money back or at least some value back so these company have to make sure, you know, that that the drug costs a little bit money so they make money.

Quick question...

Push the button, and make sure it's green while you talk.

Quick question. I'm curious why pharmaceutical company goes to Europe first for clinical trials?

Okay. Why do they go to Europe or even to other countries in Asia for clinical trials? Well, because sometimes the FDA in the USA is a little more difficult to pass through than the European agencies and especially when you go to Asia, it's much cheaper, faster, less, the bar is a little lower on doing clinical trials. So you can do I mean most of the pharmaceutical companies do now at least 50-70% of their early stage and clinical trials and even basic research work in Asia, China, India, I mean this is, this is big export, this is a big industry, okay. The problem is still, the quality of the data and things like that, so that's an issue that M. D. Anderson is addressing as well here as a global oncology strategy. Okay. So this slide just shows you what I told you before, it's got big pharma, you start with, you know, ten thousands of compounds and then you have one at the end that stays over, okay. So, it's a brutal selection process. Okay, overall as a summary, we are looking at about eight hundred fifty million dollars investment for one drug and about 12 to 15 years to go through that pipeline and that includes all the hundred thousand that fall away and then one will stay over and that's the price you have to pay for all of those that kind of fell off as well. When you look at the costs in addition to that to launch the drug and then to look at post-market studies, the estimation right now is about $1.7 billion. Okay, so this is why a drug is expensive, it's one of the reasons why drugs are expensive. Now once the drug company cashes a lot of money from those who can pay then they go into secondary markets and make the drugs cheaper so that those who cannot afford it at this high price will be able to afford it at a lower price, that's when we get mad and say why do we have to pay a hundred dollars while somewhere else just across the border it's just twenty dollars, right? So it's all politics strategy, financing, all these kind of things. The FDA approval time had been falling, but it is going up again, so that's bad news again, so mid-90's was a pretty good time for pharmaceuticals and big pharma is aggressively partnering now with small biotechs to do more in-licensing okay. Summary of the pharma industry, you know, there is concern with reputation. When you do surveys, the trustworthiness of pharmaceutical is somewhere just similar to an insurance company, which typically, you think insurance company are good companies for you, you know, most of them have a kind of, but they are worse in car manufacturing and I was very mad at my manufacturer, although I have a very nice car now and they're adjust above to tobacco industry so that's about where they stay in trustworthiness, so and that has to do with, oh you're scamming me off with a hundred dollars for these tablets, you know, which I should be able to buy for fifteen dollars so you don't trust them anyway right? So that's a problem for them, it's an image problem and not everybody understands and, you know now, how expensive it is, how long it takes and how many failed trials you have until you get the drug out on the market. This is really one of the reasons, so if everybody would know that and understand that I guess they would look a little bit better in the public eye. The other problem they have, we have a lot of drugs coming off patent and so a lot of other companies will just take and make generic drugs out of them and sell them for twenty dollars and now here you lose millions and billions and billions of dollars and that's a huge problem for the pharma industry, but still overall it's still a health industry, it's still driving, it's still growing and they grow mainly by merger acquisition as we already talked about. Biotech, number two so we kind of come back a little bit to pharma because whenever we talk about biotech, we need to talk pharma as well, but currently there are roughly one and half thousand biotech companies in the U.S. and about third of them are publicly traded, so two-thirds are still privately held companies. They generate roughly about fifty billion. Now remember Pfizer and J&J this is one year worth of revenues for one company, okay, so all of them together in 2006 made about as much money as one of the big ones in the pharma, so just to again give you a relation on the size. Market cap was about four hundred and ten billion, so much smaller. They are eager to collaborate, so pharma, a biotech likes to work with other biotech, likes to work with academics and likes a lot to work with big pharma because that's where they get a lot of money from and this is what you see in the numbers here. When it comes, you know, to raising funds, how to continue typically you go to the public market, you make a IPO, an Initial Public Offering and there were only 21 in 2006, 16 in 2005 and I tried to get numbers for 2007 and I didn't find them. You know it's always tough to find those numbers, they are always hidden in reports where you have to pay two to three thousand dollars to get the report, so you have to search for a while until you find these numbers, so by next time I'll do this, I'll have the new number, but they you know 25-26% of all the new drug launches in 2004 were from biotech, so this is why big pharma is watching that very, very closely and then you become a hot target and suddenly you sell your company for you know few hundred million dollars, that's a nice exit. So when you looked at global, biotech where is it? All over the world? Well, it's very clear, it's in US. We are number one in biotech. Absolutely clear and we will probably stay like that for a while, has to do with innovation, creativity, investment, okay, but don't forget Asia, Asia is coming on strong, okay, so that's a globalization, the world is flat issue at this point. When you go into the U.S., where do we stand in Texas? Well, we are there on the map, but we're still not very high up. California by are far number one and then the Boston area number two. Market caps, and again, you see a big fluctuation here and so the idea is not the absolute number, the message in this slide is it goes up and down, why because it goes up and down with the stock price. If the stock goes down, your market cap comes down, you do exactly the same research, you sell exactly the same drugs, but it's a perception issue, it's a stock market issue and you go up and down and this kills these companies or makes them rich, either way, okay. So, they are very, very... It fluctuates a lot here. Interesting to look at over the last maybe 10 years or so when you look at sales okay in billions 9 to 10 billion, went up to 30 billion, so it's a growing market. Revenues went from 12 billion to about 50 billion, overall as the whole as we already said, but the expense. Look at the expense, went up three folds, so when you really look at the math, it's a loss and that has now changed. So overall biotech industry is losing money, okay. And the amount of companies has been pretty much stable as well. So, remember in pharmaceuticals we said oncology was number one and then the antibiotics or anti-infectious was number two, well same thing here with biotech. Number one is oncology. We at M. D. Anderson we are the world's largest cancer center, so the research you do if you come up with a good invention with a new drug, you are in a hot market, this is number one, okay. Number two in this case will be nervous system, so big pharma is still not catching up, that's still a biotech field. And then number three again infectious diseases, but number four kind of interesting coming up slowly and steadily is metabolic diseases. Again that relates to the American diet. Okay, so we are trying to get weight loss drugs, more drugs for diabetes, things like that, cholesterol lowering drugs, things like that. So, that's coming on strong and the big ones will probably acquire those and I assume a few years from now this will be a much larger market than the pharma industry as well. Very interestingly, we looked at R&D and I got this one from Merck a few years ago. They were looking at, you know, how many drugs does a big pharma develop in-house and how many do they bring in? And at the time in the early, you know, in the mid-90s or early maybe 2000s, a lot of the stuff was still developed in-house and that is changing. Big pharmaceuticals do less and less in-house and they acquire more and more, which is a good news for academic centers because we start seeing more pharmaceutical companies coming to us to look at what we have and Liz Hileman and Stan Tucker who sit over there they are taking care of these connections with big pharma and they make these umbrella agreements and how many millions did we do? Are we allowed to announce that here? Kind of you don't look very happy.

I don't think we want to talk about numbers but we're in multimillions in terms of collaborative agreements under the alliances that we've set up.

So multimillions and it's a lot, okay. So, if you do a good invention and we see that they have the connections to pharma, pharma comes to look at us, pharma brings maybe to us drugs they have and we evaluate them so there is a back and forward going on basic research and clinical research and that's what our office does as well, so that's part of our deal we do in our office. That's another kind of slide showing very similar things, so that's the collaborations between pharma and biotech and the different colors mean basically early stage, mid stage, or late stage, you know, in the development, so the message again is, it's increasing. So, big pharma is buying more and more for small biotechs or midsize biotechs. Again, good news for you if you want to open a company, have a new drug to, you know, to go forward with in the next few years and after we now tell you how to open a company, how to write a business plan, and all these things you are in a good market, okay. So the summary again it takes as much money and as long as with big pharma, okay. Most biotechs are losing money. There is a lot of R&D going on, collaborations with big pharma. 72% of biotech revenues are in the US, but so are the expenses, oncology is a big field, you know, this is hot and as we get older there is going to be more cancer and more oncology and more need for drugs and right now we see markets, IPOs and all these kind of things, markets are very critical for biotech and these are volatile markets right now. The problems that the whole industry has biotech and pharma together is that they are losing patents. So they are going to lose about 40 billion dollars in despite of 10 leading companies alone and basically this year and last year together, that's a major, I mean, incredible amount, so they have to make up for that, okay. FDA approval is low, it's almost at an all time low, so the pipelines are thin, the approval is low, they are losing the blockbusters, so they are in a crunch, so they are eager to get some new stuffing, so you should develop new stuff, build a company, they are eager to find that stuff, okay. And we are not sure yet what the overall stock market will look like as long we still hear the word recession or, you know, that's not going to help. Number three industry we talk today is the device industry. What do we put into devices? Minimal invasive technologies, imaging, the big machines, the MRIs, the CT scanners, molecular imaging, meaning mainly agents that we can use to see the function, for example, of the brain or tumor by using a big machine, we'll look at implantable devices, we'll look at access devices for the minimally invasive surgery, we are looking at surgical tools, all kind of new inventions, making things easier. When I did my surgical residence and fellowship, you know, it took me two to three hours to get a nice bypass done in the guts, today it takes about three minutes, you know, with a little stapler, bang, bang, those of you are in surgery you have seen that. You know, and it's as good if not better, so I mean things are really making progress. Drug delivery devices big field right now. So, let's just walk through those a little bit. Minimal invasive surgery, big market about 13-14 billion dollar market last year, minimal invasive surgery, less blood loss, less complication, less side effect, shorter hospital stays, less pain, less scarring, and people go home earlier, so the costs of doing business are coming down, okay. And it's much more comfortable for the patient and less complications. So there is a lot of money to be made with robots, with these access devices, these trocars, you know, the plunging through the skin. Jack Diehl [assumed spelling] who will be here one of our speakers, the venture capitalist, he was one of the earliest companies developing these trocars and they made billions with that stuff or millions you know, I mean maybe he'll tell you how much he made. He was right then there at the right time and saw this stuff and said this is what we need and this was the device you push through the skin and the moment you go through the skin there is a safety kind of sheath, sheath comes down and protects whatever is underneath from the big needle, so you don't injure all the bowel or whatever is below that you know the skin. So, you know, these kind of things, so big markets. Imaging technology, I mean, just here at M. D. Anderson we are getting one new MRI scanner after the other, big CT scanner, PET scanners and all these scanners, okay. The software is getting much better, so we can diagnose better. It used to take for the old CT an hour of CT and now we have spiral CT, it takes 30 seconds, zzzip it's done, okay. So, technology is really moving forward that helps us a lot in the clinic. And now you start using molecular imaging. Using the big machines you can now look stuff at the cellular level. You can look at you know the red one, you know, on your left would be the function, you know, the metabolism of the cell of a brain, the next one would be what brain cells are active, for example, in a certain disease or non-disease. This is kind of interesting thing, a regular MRI and then an inventor here at M. D. Anderson invented the second one where you see kind of these pathways and what we can do here, we can out of an MRI picture we can extract with the software algorithm a 3D picture and turn that around and look at it 3D in the OR and we can see exactly what fiber is still active and which one is broken. Image just a tumor, how far can I resect a tumor without injuring that patient. It can look at this right there, real time, 3D and the surgeon looks at this and then goes back into the brain and just starts working. A patient with a spinal cord injury coming in, you know, with an accident. Well, we can see whether that spinal cord is still functional or not, if not you can do something you know rehab right away. If yes, then you can go into surgery right away, for example. So there are a lot things you could do, I mean this is still early stage, but we are testing this here right now at M. D. Anderson, okay. What other trends do we see? We see going away from the simple operating room or the simple treatment room. We see, start seeing these multifunctional diagnostic treatment facilities where you go in and you diagnoses, treatment, and treatment outcome all in one shot basically, so the idea is to get a patient in, inject something, that something will attach, for example, to the tumor and you make an image and you see how big that tumor is, where it is, you inject the therapy right there and then because maybe you just have a little gene shift next to it, the machine where you would just plug that in and then you would find out what kind of the tumor, in what stage, and what drug will respond to that then you send a little mini-robot to that cancer and they will destroy it right there and then and you can measure that after about an hour. Right, still the patient is still on the table and then you can send that patient home and say okay, your outcome is you know very likely to be like this, this, this, or you didn't respond at all, so we need to change your treatment. So, that's kind of the trend we see. Personalized medicine and multifunctional medicine, okay and we see this more and more. You come to the Ors her, we already have a couple of these multifunctional ORs here at M. D. Anderson, that's an MRI OR, or the brain suite we call it and you are able to watch it on IP TV a few times here at M. D. Anderson when they did brain surgery, so they are in the MRI scanner and you see the surgeon is basically in between the MRI there and I don't know if you see this, but all the way up there in the corner somewhere is, let me see, where is the well whatever, all the way up in the left corner, there is an anesthesiologist, that would be kind of me, you know, hidden, so what's the problem for me. Well the room is dark, I don't see my patient, he is somewhere under this machine, if something pulls the tube that I use for breathing or an IV then I have no connection to my patient, all the machinery and the equipment I need to use has not to be magnetic because otherwise the MRI will attract it, so there are many new challenges that we have as clinicians to deal with these new technologies, okay. So another kind of device related industry is the stint industry. What are stints? Stints are little wire meshes that you put into blood vessels typically or some other pipes that you want to kind of open and the first one you see the small ones, that's a coronary stint that you will put into your heart somewhere and open the blood vessels. So, you know, only 15-20 years ago every patient with an occlusion on the coronary arteries would go to surgery, that has completely changed, I mean this is typically one of the first things you do is the stint placement right now. Interventional cardiology, okay, so they took a lot of business away from the cardiac surgeons, not everything, so now there is still valves to do and other stuff and there's still disease you cannot solve that way. Well, what's the biggest stint? The biggest stint is an aortic stint with an aortic valve on it. Okay, so you can replace the whole valve and the aorta with these stints. You can put them in with big surgery or we can put them in through a little hole in your inguinal region, okay and push it up and expand it. How do you expand these things? Oops. Oh before I show you how you expand, I have a slide about the market size. So three years ago about 5.5 billion then a lot you may be remembering these news articles that drug eluting stints, stints that had drugs attached to them would kind of prevent the stint from re-occluding and then suddenly you had higher death rates because they occluded anyway, so suddenly the stint market took a hit, went down last year to about 4 billion and it stayed that way. So, we are still at 4 billion, so it's a very big market, it's mostly still drug eluting stints, they are just trying new drugs and new technologies to attach the drugs to the stints and the average cost of a stint is about two-and-a-half thousand bucks. So, last time we did this here together with MIT Boston, Harvard Medical School, we had a company here that was in the stint market and it's a very lucrative market still. They came up with a new idea, got acquired and made a lot of lot of money that way and these are the market leaders: Boston Scientific, J&J, I didn't check if anyone got acquired in the last two weeks, so I still have them up there. So this is how they work. You put them in with a catheter, so you go in somewhere in the groin and you push them all the way forward to the heart into the vessels, you can watch that on an imaging technology screen and then you ring the catheter, you blow up the balloon and then the mesh kind of gets wide and you deflate the balloon and the mesh stays and then you take the balloon away and this is how you open blood vessels or you know biliary vessels or whatever you might want to open. Other technology, drug delivery technologies, that's a hot market too. Not just about what kind of tablet or capsule you are swallow and how it's going to be dissolved and when it's going to be dissolved, you have now capsules and tablets that have three different components in there. You can swallow and the first component gets dissolved right away, the second one will wait another few hours to be dissolved a little further down in your gastrointestinal tract and so on. So, you have delayed absorption things like that. We see a lot of implantable pumps for the spinal cord, for example, epidural space things like that and we do a lot of stuff here at M. D. Anderson in that regard, of course because of pain medication. You have these sprays, so you have a little pistol and you can just shoot on your skin and you can inject that way, little microinjection instead of making it with the big needles. You have microchips that you can implant and the future here clearly would be a little reservoir with, let's say, insulin in there and a microchip that will measure constantly your glucose levels and the chip would just, you know, release then a little bit of insulin, yes or no, or pain medication and they will measure how much sweat you have, how much sodium on the skin or something and that would be part of the stress measurement and for pain patients that's typical what happen when they are in pain. So, things like that, you can swallow that stuff, okay, that's a tongue with a few, you know, technologies there are different tablets, pills, capsules, and those that you see below, these are all cameras, so you've heard about that, you can swallow a camera and it takes a picture all the way through until it comes out again and then the computer puts together 3D image and you can fly through like Disney World, yeah, you know high, I mean, you go through the gastrointestinal tract, but you can see what's happening there, you can see tumors and things like that. So, that's a very cheap or it's a comfortable diagnostic tool for a patient you know, just to swallow one capsule. We see a lot of new technologies in the brain, with the hearing, with vision, I already saw now some vision implants where you have a computer that you implant as well the computer chip and you can start seeing for blind people again depending on where the defect is. So there is a lot of stuff you are going to see in the near future. This is a big field. Here at M. D. Anderson as well. Microfluidics, DNA chips, okay. So what is it? We put in a little something, a very micro drop of blood into a little chip and after a few seconds we have a complete blood count, we have cholesterol levels, we have biomarkers for cancer. That we would put them on a little microchip, DNA chip and we measure that and, you know, and immediately we see we can take cancer samples and run them over these chips and see to what it attaches and then see what markers are there or not there, so that's a big thing and we have an entire center that does that now here at M. D. Anderson, okay. Nanotech, the big buzz word, okay, everything is nano, right, don't use Nanotech in your business anymore, it has lost a little bit to buzz effect so today a lot of investors will walk away when they see nano, but still nano is great and it has a buzz a little bit, but I think the big nano time is still to come, so we are going to use nano for therapeutics, diagnostic implants, imaging, drug delivery. They have really the potential to do what I said to you before with the multifunctional medicine. A nanoparticle can attach a diagnostic, can attach an antibody that will go and attach to a certain tumor so you can then see where the tumor is because you can put a radioimaging agent in let's say this buckyball here and so that the, the agent will attach to the tumor, you can diagnose the tumor, it can have some chemistry attached to it that will kill the tumor or a little gold shell and you heat it up with infrared and then you cook the tumor, you can implant these things, you can watch them, you can see the effect right away and you can maybe do some outcome study right away all in the first hour. So, I think Nanotech is one of these things that have a lot of promise here and again through our office we, Stan manages, the nanolines to a certain extent or, you know, hopes to keep some paperwork going and all that, right, so if you need some contacts in nano, you don't have them, please contact us and we can kind of guide you to the right person, okay. So the summary on the device industry, it's a big industry two hundred billion, competitive, very fast moving, so if you have a device, you better move fast, okay. We need to develop that device real quick, I mean this is what we do, you have an idea for a prototype, we think it's hot, we are going to try to pay that for you and to get it done. This is what we do here with the early stakes running in our office. And just be aware, the moment you have that idea, ten other people around the world are working exactly at the same idea or either the next generation. So these things are not things that you are going to think about for the next ten years by that time it's gone. It is a fast moving market. Minimal invasive surgery with all the tools that go with it, a combination of device and drug, I mean, all these multifunctional stuff molecular imaging, big, big, these days because we know this is where you capture the cancer, you know, when you get them and you can't make sure that the cancer kills itself that will be the best. We see faster return in investment. It's much more attractive for investors. They don't have to wait typically 15 years until the drug goes in the market, for a device typically it's about five years, four or five years until you get all the approvals going in market, okay. Software might even be a faster okay. And that brings us to software to the last industry. You know, the e-health industry. So what is that? It is software related typically computer related, internet related, so we're talking electronic medical records, computerized physician order entry forms, electronic services such as coding, billing, supply chain, whatever you have it, education, I mean this course will be broadcasted is right now broadcasted live from the IPTV that's e-health and it is going to be on the web and I just got blinks today from last week's course that looks pretty good. I would say it looks great, so I'm going to send that forward assuming and we will make sure and we've got the captions and all that in there and I got a CD delivered to me to check to make sure every thing is good on that so all these tools we use for education and then the Ipods later on. So that's all e-health okay. And we are going to see how much education plays a role in e-health. We are looking at telemedicine. Galveston is a big telemedicine center and NASA of course is interested in telemedicine and things like that. Drug discovery uses computer these days. Drug discovery in silico. Again, we have a person here who designs in silico and then gets it out and done in real time. You can save time that way. We do remote monitoring. You want to see whether grandma drinks water at home or not, whether she puts on the light at night or not, whether she walks around, opened the door, got out of bed, used the toilet, maybe you want to analyze the urine right there and then, you know, that's all remote healthcare. Intel, IBM, Microsoft, they are all hot and big on these kind of things, it's a big market. Variable technology, you know, walk around, I can walk, I mean we have technology today where I can walk around with this little thing that pilots have. Retina display device and I can see what happens in my OR. I can see the vital signs of the monitor displayed to me through a little wireless device. It is all here. We have these wireless networks going. Somewhere here is probably as well in this room some router and so we can use these things in medicine. So remote variable technology. Runners that are running the marathon you can measure heart rates, sweat analysis, you know, speed all these things and so you can monitor grandma at home as well, same thing. This one is very interesting. When you look at the risk of deaths per year in the United States when you fly airplane? So when you go to a medical meeting and your spouse says, uhh don't go it's dangerous, rethink, okay, just take that slide with you, you know, you have about an average 50 people die in the United States airplane related okay. We have ten times as many related to the workplace, okay. So if you think it's more dangerous to go to the airport than to work rethink. You're much more dangerous here at M. D. Anderson than down at the airport. Twice as dangerous, if you stay home, so don't stay home.

[ Laughter ]

Okay. Because you're going to do stupid things like turning the light bulb on a little chair and it's going to fall and you are going to break in your neck. So accidents at home, so if you are a wild one like me you like a little exercise sports then twice as risky as at home, okay. And if you dare driving to work, you're twice as much at risk as when you do sports. But the most dangerous place about 21/2 times more dangerous than the freeway is the hospital and I am not talking people that come here and die because they have a disease I am talking people here that die that shouldn't die, okay. This is all related to preventable adverse effects such as the wrong drug at the wrong time to the wrong patient in a wrong dosage. You read about that all the time, again so the most dangerous place is the hospital. So I need to, you know, that gives you a little freedom to negotiate at home all right. Hopefully. You don't want to come to work, I understand now, all right so be creative with that number. So this is why even the government says, you need to have electronic medical record because then we are going to forget about all these mistakes because we cannot read the physician's handwriting, all right. So already in 2005, the White House, President Bush said we need to implement electronic medical records all across the US and there are hundreds of companies in this field and there is a lot of integration going on with big software companies like Microsoft and so all the big ones playing here. It's a big market. The only thing is really that kind of bothers me with all this is we had September 11, we had three-and-a-half thousand people dying in the twin towers and we created a multibillion dollar homeland defense something. We lose per year in United States roughly and that's a study that is already quite old now it's about seven years old we lose about 4 to 7000 people a year because of mistakes with prescriptions, drugs, and all that that could be prevented with electronic medical record. So in the last 5 years we have lost about thirty thousand people, ten times more than with September 11 yet the White House or the government in general has put in only a few hundred millions into that project. They leave it up to the hospitals so it's going to take a while, but what's going to happen is that Medicare and Medicaid will say well if you're not converted by 2015, we are only going to reimburse 10% of your charges and then it's going to happen, but that's something that should have had a much, much higher priority. Now maybe not in the first hour because when you do something new in software, you have seen this, you know, Microsoft version or whatever and Netscape version 1, 2, 3 they all had bugs, it doesn't work, they're expensive, so you get better, but once you're down about version 3 or 4 after a few years these things are pretty robust and pretty good so that's when, we're in that timeframe now, I mean right now there should be a huge push for this kind of thing. We would save a lot of lives. Just to show you the market is increasing so if you have an idea for software related to healthcare improving imaging, improving medical records or whatever, it's a growing market. That's typically cheap to invest. It's good to do. You just need a good idea and a few good programmers and then go out there. So where do we see innovations? We see a lot of innovation in remote healthcare, okay, diagnostics. It's a twenty billion dollar market. Health information management, billing, all these kind of things, your record, medical record, you know, implantable chip, RFID chip. You go to the OR, zzzip and then we know who you are, it compares with the database somewhere and the whole record comes out, things like that, forty billion, and then of course the big winner with only three billion is education. So education is obviously not that important okay. It is so, but it's just much smaller. Electronics in the workplace, so I don't know, if this is, I think it's me, yeah. That's just my colorful hat there, but what I want to pay attention to is look at all these monitors? I am counting one, two, three, four, five, six, I see a little bit more than you because I know where to look for, okay. So this is all electronics in the operating room and that's just anesthesia related monitoring. The surgeon has a bunch of towers to himself and the nurses have some computer stations all that. Plus then we have pharmacy, we have pathology, all these things, all electronic, okay. So this is big time, these days, I mean, this is not the future, this is the current, you know, time. We invested in a little software piece here that just took normal pictures CT, MRI this was an MRI here, looked at the certain algorithm and improved the image. Look how much improved that image is. We decreased the false negatives and false positives and this made a big difference already in stratifying patients for therapy, and you know, you want to tell the patient oh I see a tumor here, oh and then you improve the picture and say no it wasn't it's just an artifact. So we have a bunch of software pieces that we financed and we love them because it did cost us about twenty to fifty thousand dollars to do that about six months and then we have something we can license to GE through Toshiba, I mean, all these IBM all these big scanner companies, you know, in the million dollar range. We love it, it's good return on investment, it's fast, it's great for our patients, you know, so it's something you can make an impact pretty quickly. Computers used for drug discovery. We are doing silico, we looked at genes, we look at protein folding all these models. We try to find the pocket where a drug will bind into. We shifted away from just using the computer as a spatchy putting in data to using the computer now to acquire the data, work the data, and do something with it, and then fill it in back into a data sheet, okay. So the computer has become much more than just a data entry point, yeah and this market again four billion dollars right now and growing and I think one of your proposals has to do somewhere by far, you know, with something with laboratory tools. Remote ICUs. When that came up about ten years ago, we all thought yeah right, okay. I was running the surgical ICU at that time here at M. D. Anderson. We said, right, you know, a surgical remote ICU is some body is watching us with cameras and will be better than me standing at the bedside. Well, guess what? The mortality went down about 30%, morbidity went down about 50%, cost went down about I think 70% using these remote ICUs. Why? Because we're not always at every bed, we're in the OR, we're somewhere else, and the nurse who is there can just click on a button and then somebody remotely would just see the face, can have the camera zoom in, zoom out, we will see all the monitors right there and then and can do a one minute, you know, diagnosis and just right there make a prescription, you know, say do this, this, this and it has worked to the astonishment of most of us clinicians. We thought this is kind of a fluke it's never going to work. It does work, okay. Now this I'm not sure yet, okay. The remote physician, the robot physician, Robodoc. So you can walk around with Robodoc. He sits at home, you see his face and quite honestly I mean they have several hospitals that use that now and interestingly the patients like it. Physician likes it I guess, you can stay at home and just do your remote thing. I would love that, you know, I'll be on my treadmill and this, you know, a little breathing hard, but that's okay, you know. So they use that in ICU for kids, for pediatrics so they can talk to the parents at any given time and things like that so, it seems to work, we'll see what happens in the next few years. I think we may already have robots here at M. D. Anderson that go at night and deliver drugs to certain floors, and they just have sensors so that they don't go in the OR. We certainly have a big robot that does the drug filling and we installed that about 10-11 years ago and we went from a hundred drug errors per day to zero in about 7 years, okay. I mean it's amazing when you automate these things in a good fashion, okay. So a little baby of mine, the internet, why I own an internet publishing house that I opened in 94 and today we're the world's number one electronic medical publishing house that do online publishing. I've 75 journals now. We have about 23,000 readers everyday on the website creating over a million hits every day. So for me this is very interesting to see. 58% of internet users will first search Google or Yahoo or something before they go to their doctor, okay. They will look for reliable information. 35 will first visit their doctor to ask and then go on the web and those who never use the web 80% of those as well will prefer to use the web before they go to the doctor, so we're obviously not very trustworthy. Well they know, they have a long waiting time, it's expensive, and all that and the information on the web is so easily obtainable these days, you just Google stuff and you have it, okay. For us, it means, you know, ten additional minutes typically. I saw that in the ICU, you know, people come in very complicated disease and they'll say why don't you do this, this, this, this and say Huh, you know, I only heard about three of those, what's number four? And they looked at me and said, did you study medicine? I just read that yesterday on the web, okay. So he'll look at us and no way and then comes the night shift and he says, yeah maybe so they stop playing you out okay, the patients, I mean this, it's a nasty game that goes on here. It's a good game and it's a nasty game at the same time. So we saw all the plusses and minuses of internet information technology being distributed that way. Interestingly, over 60% of users on the internet think it's going to help them to prevent medical visits, kind of interesting developments so take it as it is. This is what the internet does. So the summary of this industry is it's an enormous market. It's bigger than the drugs when you take that, again, it's very difficult to get a handle whether it is 1.5 trillion or 2 trillion depending on what services you put in there and what you don't, you know, like supply chain it's not technically electronic, but today supply chain is done with RFID chip, it's all electronic, even here at M. D. Anderson okay. It's a very highly competitive market so if you have an idea for software device anything like that my message to you is move, come to us, talk to us, we need to move quickly because it's being done somewhere else in the world right now. It's fast moving. Interphases really with all the aspects of medical care and drug development every where. A computer, there's nothing that goes in medicine any more without computers unfortunately. So we start having trouble with the younger generation to go out there and do medicine with a finger and looking at somebody's eye and smelling and looking at the color of the skin and all that. These are skills that are getting lost slowly and steadily and that's certainly not good, but it has a significant impact on healthcare. The government will demand electronic implementation because it is safer and we are going to see big companies like Microsoft that would just backward integrate and start being a big player in healthcare and Intel they already are. I mean, it's just expanding their market for their products. So that's really the medicine of the future. It's personalized, it's targeted, it's digitized, it's automated, it's multifunctional, it's minimally invasive, it is drugs, devices, diagnostic software. So whenever we talk about business plans, opening companies in the healthcare space, you typically go either a drug, device, diagnostic, or software. This is typically everything we see. You can put any invention you have in that space in one of those typically. And so that's the industry overview, we're right on time, and I would entertain maybe one or two questions if you have some.

[ Pause ]

You keep on pushing and now you talk, no you keep pushing and you talk. Talk, hold it and talk.

Okay. So we already debated that the biotech industry is usually more, more innovative than big pharmas because big pharmas they vary being efficient pipelined for drug discovery and development and also more they depends on the acquisition and the merging and all of such things. They also face the problem of as you mentioned the patent expiration and also the competition from generic companies, instead for biotech companies they don't have this kind of problem at least at this stage like the their product is more specific for certain diseases and even the patent is expired it is very hard to duplicate those things so from the long-term point of view, what do you think of the future of both big pharmas and the biotech companies.

Okay the answer to your first statement is yes every thing was right. Then the next question would be what I think for the future for Biotech. It's great. If you have a new idea, that's the way to go. You start with a small company, you grow, and then the big pharma will watch you because they want to come in when you have de-risked the technology somewhat. They don't want the high risk technology. So basically, the way that goes, we start here at M. D. Anderson for example as an academic institution. We do basic research. Where do we get the money from? NIH, NCI, and all these grants that you get. So you make your basic research. The moment you have something that we can move into a phase I trial, you start seeing biotech and pharma coming and financing that so in between you have this gap for the funding and this is what we do with our office here. This is why you should come to us if you have an invention. We try to finance you to get to that level and so you're going to see that when you build a company or when a small company licenses that from you they are going to start developing that and then a bigger biotech will come and acquire and then the big pharma will acquire that biotech or license it either way it doesn't have to be an acquisition so this game will continue so how do I see the future? Pretty good for those who have inventions because there is a street a highway ready for you to drive through that has money waiting at every stage of the way if you succeed. That's the way it is. If you don't, you're gone.

  When is the good time for patenting? Now if you have a discovery, you want to patent it, but in the industry you told that it takes about 10 to 12 years before the drug really comes to the market if it is approved. But in academy I think it is even a slow process, it might take a lot more extra time. So where do you draw the line actually, you know, by the time you are successful, your patent life is already 10-12, 13 years so you have a very short window to make the coffee.

Again, there may be sign up there, do we hear that this question? Okay good. Liz how much do you want me to tell that? You are going to tell next time huh? So I'm going to leave her the main answer. The only thing that these words repeating twice so I'm going to say it once she is going to say it the next time. If you have a new finding and you go in April to ACR, in May to ASCO or wherever your annual meeting is. You make a publication, you make a poster, you do whatever, you publish that to the world, you lose your patent rights. She is going to explain you what you lose, when, for how long, and so on, okay. So the answer to that is we should file as quickly as possible. However, filing patents is very expensive, so should we file a patent on every thing? The answer is no. Now you can go very liberal and say we are going to file everything, you're going to lose a lot of money, or maybe you're going to have these winners in there that 10 years later will crave a lot of money and then it's a winning game, maybe not and you lost a lot of money. You can do the other thing you can say I'm not paying any patent until I have a company interested in yours. You might lose a lot of patents that way or, you know, and especially the patent law is changing right now, which is another issue I'm not sure we're going to talk about that. Okay maybe not because it's changing in the next two or three months and we don't know exactly it how it maybe, we don't know how it's going to be. So the answer to that is what you need to do every one of you here in this room the moment you have an invention you need to disclose it and then leave it up to the outer office, it's called to office of technology commercialization here at M. D. Anderson. In any given University, it's called the technology transfer office typically. They are going to decide whether they want to file a patent right away, whether they'll file a what we call a provisional patent and all these things and we are going to talk about all these things in upcoming sessions, okay. Okay, so I'm going to cut it down here and get ready for the next speaker so before I do that, this is the homework.

I'm going to receive one more email with a little idea for a company. You're going to create a two page executive summary for your company. What is in there in an executive summary? You're going to learn in the next hour. You're going to send that to me. I am trying to make you less creative now because I was a little bit too creative, okay and you know sometimes you have to draw the box but we're still going to be creative in that box, but I want a word document or a PDF file whatever you prefer, okay. So at least we have some thing we can send out easily and, you know, several people will read that and we have a little jury kind of reading that, but besides that, I'm going to say no rules as long as you deliver on time, okay. After all, this is about innovation and creativity. I'm going to leave you how much you want to put in there whether its readable or not readable or whether you want to put just pictures in there or you write in there, whatever, it's up to you, make it, you know, just make it pleasant to read. If I read stuff and that is not readable, I don't like to read it. Okay. An exec summary will typically go to an investor or somebody who you want to be involved in your company otherwise you wouldn't give him an exec summary. So make it sure that these people like to read your summary. You're going to, you know, learn in the next hour a little bit how to do this thing. The due date will be Monday, March 17, so you have basically two weeks time now to do that and you're going to e-mail that to me and good luck and have fun.  That's your homework okay. One question to that.

People who weren't here the first lecture,

Yeah

How are they going to fit in the groups?

People who were not here last time, and there is a bunch, how many were not here last time? Hand up, one, two, three, four, five, good here's the sign up sheet you are with the next group and there are already another few people that are probably going to join you so your goal is not just to write an exec summary, your goal is within three days by Thursday I want the e-mail from one of you with the idea for a company; it can be a real company, a fantasy company, make sure if it's a real company that you don't disclose anything that is not yet disclosed to the University so we don't lose patents if we talk about this and somebody watches this who shouldn't watch it okay. So just a word of caution, and so you're going to send that to me.... We have now one more group okay, and I am going to put this up here, upfront so when you're done everybody who is not in a group yet will register in this group number five. Okay. Good! At this point, Paul.

So it's my very great pleasure to introduce Paul Campbell and we know each other from quite a few years... I don't know if we were at the same time possibly MBA students or maybe I was just a year ahead of you or something like that, but he was organizing a drive some life science event and he was very active in that field, and in the meantime, he is a venture capitalist, he has his own company, pretty interesting, you should tell a few words about this and I think your first slide has a few things so he is going to tell a little bit more about the, you know, he is one of the guys who is in the trenches. He sees a lot of that stuff. He sees a lot of business plans. He looks at them as a venture capitalist. He is a CEO of a company so he has done it before. He is doing well in the market, the way I understand, so here you have somebody, you know, he is not yet an oldie like me, but he is hot, so we try to get the people that are hot into this course here so you've got one here okay.
[Pause]