FDA Seen As Chief Barrier To Biotech Success, Survey Says

AUTHOR: ROBIN EISNER, pg. 5,17,25. A poll of 166 biotech firms cites frustration with FDA and U.S. Patent Office as major concerns of companies The typical biotechnology company regards the Food and Drug Administration's lengthy approval process for new drugs as the greatest barrier to success, according to a recent survey of 166 United States biotech firms. And if FDA isn't enough of a thorn in the side of the companies, U.S. Patent Office delays and a lack of management expertise are two other major factors the industry sees as preventing biotechnology from reaching its full potential, the survey reports. The results of the study indicate, however, that companies do not consider state and local government regulations a major hindrance. And neither are four financing factors--venture capital, seed funding, public financing, and government research funds--perceived as significant obstacles by respondents. The survey was conducted by the North Carolina Biotechnology Center, a nonprofit institution based in Research Triangle Park, N.C., dedicated to the promotion of biotechnology in the state and nationwide. In November 1989, the center sent questionnaires to 689 top managers of U.S. biotechnology companies and asked them to rate 22 different factors as barriers to success (see accompanying table). Factors beyond a company's control, such as financing sources and government regulations, were categorized as external barriers, while factors within a company's control--the degree of business or management expertise or the availability of scientific, marketing, or production personnel--were considered internal barriers. INDUSTRY* Factors Rating External Food and Drug Administration 2.91 Patent decisions, U.S. 2.84 Government regulations, U.S. 2.55 Patent decisions, foreign 2.50 Public financing 2.25 Venture capital 2.25 Environmental Protection Agency 1.94 Government regulations, state 1.94 Government research funds 1.82 Seed funding 1.82 Government regulations, local 1.81 U.S. Dept. of Agriculture 1.80 Internal Management expertise 2.60 Availability of scientific personnel 2.50 R&D technical expertise 2.45 Availability of marketing personnel 2.38 Business strategy expertise 2.38 Fiscal expertise 2.32 Availability of production personnel 2.17 Public acceptance of biotechnology 2.12 Fermentation/bioprocessing expertise 1.84 Availability of materials/reagents 1.71 * Factors were rated by 166 respondents on a scale of 1 (not a barrier) to 5 (a high barrier). This table originally appeared in BioPharm (4 [3]:16-20, 1991) and is reprinted with the permission of Aster Publishing Co., Eugene, Ore. The companies responded between December 1989 and February 1990. At the time of the survey, these firms had been in existence for an average of eight years and had an average of 102 employees, a representative sample of the biotechnology industry as a whole, according to the survey authors. The survey asked the firms to rate each factor on a scale of 1 to 5, with 1 meaning that the factor was not a barrier, 3 a moderate barrier, and 5 a significant barrier. After looking at the data from the 166 companies, the survey takers developed average barrier ratings for all the companies and more specific ratings after dividing the firms by market sector and size. "We did the survey because everyone thinks they know what barriers to success are facing biotechnology companies, but we wanted to semi-quantify the specific factors affecting the different-sized companies and the different biotech industry sectors--health care, agriculture, and chemistry," says Noel P. Gries, professor of business at Kenan-Flagler School of Business at the University of North Carolina in Chapel Hill and coauthor of the survey. The results of the study were published in Bio-Pharm, a trade publication for the biotech industry. Mark Dibner, coauthor of the survey and director of the biotechnology information program at the North Carolina Biotechnology Center (NCBC), hopes that, by identifying problems in the industry, the survey will help managers make informed decisions affecting their respective companies' futures. For most biotechnology companies, the FDA approval process is too much of a burden, especially for those firms in the health-care sector of the market. This barrier received the highest overall average rating--2.91. Therapeutics companies rated the FDA process as a significantly higher barrier (3.9) than did diagnostics companies (3.0). This reflects the fact that the regulatory process for therapeutics and the time it takes for FDA approval are much greater than for diagnostics, according to the survey authors. This survey is not the first to identify FDA as a concern to the industry. In hearings before Congress, industry spokesmen have criticized the agency for having a shortage of trained personnel, and they allege that poor communication between the agency and the companies results in long approval delays. But Dibner suggests that biotechnology companies may need to develop a longer-term relationship with FDA. He says that large pharmaceutical houses do not have as negative an impression of the agency as do the biotech firms. The respondents rated the U.S. Patent Office as the second highest burden (2.84). The biotechnology companies are frustrated, say the authors of the survey, because extensive delays in patent approvals retard progress toward bringing a product to market. Although there has been an increase in biotechnology-related patent approvals from 1,391 in 1988 to 1,948 in 1989, as of May 1990 there was a backlog of 8,000 biotech applications. The establishment of the Patent and Trademark Office's (PTO) Biotechnology Institute is expected, however, to reduce the time it takes to review biotechnology patent applications from the current average of four years to PTO's goal of 18 months in 1994. Besides delays in patent approvals, foreign infringement on U.S. patents is a concern for the biotech industry (2.50). Foreign countries make products abroad based on U.S. patent-protected processes, cutting into revenues of the U.S. firms. Policymakers are trying to stop this practice by toughening international intellectual property rights through trade negotiations. And Rep. Rick Boucher (D-Va.) introduced the Biotechnology Patent Protection Act to help protect American biotechnology company patents. While FDA and the U.S. Patent Office are perceived as the chief villains, the respondents, by ranking the other 20 barriers in order of importance, highlighted additional issues, such as the need for management expertise, as critical to the industry's continued success. The most important result of the survey, according to Dibner, is that those surveyed feel that lack of management expertise is the leading "internal" barrier to the industry's success. Specifically, many respondents believe that their firms are lacking individuals with the know-how to turn a small company into a large one, says Dibner. Hubert J.P. Schoemaker, chairman and chief executive officer of Centocor Inc. in Malvern, Pa., which specializes in monoclonal antibody applications, agrees that the lack of this type of manager prevents biotechnology startups from realizing their dream of becoming major pharmaceutical firms. "If you think of an emerging company starting with a few individuals and [try to project] it growing to a company of 10,000, like a major drug company, the management skills that are needed at Day 1 are clearly different than those at Year 2 and so on," says Schoemaker. "A very low percentage of the total biotech companies can make the transition from a research and development boutique to a fully integrated pharmaceutical company with R&D, manufacturing, marketing, and sales because they lack appropriate management." What happens then, Schoemaker explains, is that these companies evolve to fill specific niches in the biotechnology marketplace, rather than becoming full-fledged pharmaceutical firms. "They become supply houses for the industry as a whole, or they do contract research. There is nothing wrong with that. They provide a major contribution to the field," he says. Survey coauthor Gries says that strategic alliances between smaller startups and large pharmaceutical companies could ameliorate the need for this kind of management expertise: "As products get past research and development and are ready to be marketed, the small company can set up a relationship with the pharmaceutical house to do the marketing house to do the marketing, production, and distribution." Besides the management issue, another significant finding of the survey is that companies in the 12 states with biotechnology regulations did not consider regulations any more of a barrier to success than those firms in the 38 states that do not have them. "We felt it was necessary to ask about this factor to see if those [in] states with regulations felt put upon," says Dibner. The results seem to dhow that regulating are not so awful. "They allow science to go on, and the public feels protected," he adds. Agricultural biotechnology companies cited public perception of biotechnology as the largest internal barrier they face. The recent Wisconsin and Minnesota bans on the use of genetically engineered bovine somatotropin, a hormone given to cows to increase milk production, are an example of negative public reactions, says Gries. On average, financing was not considered a barrier to success. However, when the companies were divided by size, the smaller ones did put venture capital as a barrier at the top of their list. One conclusion of the survey that might be misleading, says Dibner, is that a personal shortage in bioengineering and fermatation is not considered a major problem. The companies rated this impediment 1.84, the second lowest, just ahead of availability of materials and reagents. Dibner thinks that this assessment shows a lack of foresight on the part of the managers, and he believes there will be a shortage of bioengineers in the future if something isn't done tho increase the pool of available workers in this area now. "When more and more companies have more and more products on the market, there will be a need for this kind of personnel," the survey coauthor says. "When I look around the country I see very few programs that focus on bioengineering and fermentation. "I think we should start thinking about this issue on a national basis and set curricula to train people in this area."

FDA Seen As Chief Barrier To Biotech Success, Survey Says

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