Biotechnology Focus December 2015/January 2016 by Promotive Communications

INSIGHTS FOR THE LIFE SCIENCE INDUSTRY

DECEMBER 2015/JANUARY 2016 VOLUME 18, NUMBER 6

INSIDE:

Canadian Biomanufacturing:

Opportunity for pride and prosperity

Going virtual: Is your outsourcing strategy sound?

Publication Mail Registration Number: 40052410

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contents

December 2015/January 2016 – VOLUME 18 – NUMBER 6

Special Report: Going Virtual Is your outsourcing strategy sound?

FEATURES 6

Canadian Biomanufacturing

There’s a tremendous opportunity for the Canadian biomanufacturing sector to capitalize on Canada’s investments in biopharmaceutical development.

As drug development costs continue to rise, industry continues to evolve and find new ways to adapt.

By Bernard Massie, Pierre Bourassa & Sonia Thomson

Strategic Partnerships to Achieve Client Success Creating a genuinely client-centered business is by no means a simple task, but with the right people, appropriate training, positive attitudes and tools, it is attainable. By Safa’a Al-Rais

By Albert Friesen & Jan-Ake Westin

By Lisa Mckerracher and Kathleen Marsman

The challenge of scaling Canadian med tech companies

By Shawn Lawrence

New international trade agreements a positive for biopharma Two new trade agreements CETA and TPP could see Canada’s IP regime further harmonized.

Ever wonder how Canada is going to compete in this specialized field? You’re not alone. By Darlene Pratt

Mississauga’s innovative life science ecosystem is expanding The City of Mississauga’s Economic Development Office adds Andrea Mulder as its new Life Sciences Business Development Consultant.

Ensuring the quality, integrity and safety of non-clinical laboratory data.

Across Canada A call to action: Enhancing targeted commercialization funding in Canada.

The importance of GLP compliance for CROs By Dan Mamelak

Innovations in drug development and outsourcing

By Daphne Lainson and Thuy Nguyen

The Last Word Offshore manufacturing: The tide is moving, but which way? By Peter Pekos

December 2015/January 2016 BIOTECHNOLOGY FOCUS 3

PUBLISHER’S NOTE

PUBLISHER/ EDITOR-IN-CHIEF SENIOR WRITER

Outsourcing: It’s more than just a trend Pharmaceutical, biotech and med-tech companies are under constant pressure to find cost-saving alternatives to help address the issues that bog down their business. It’s just the nature of the life science industry. Some of these issues center on money or the lack thereof due to the costly nature of product development. Others deal with finding the right people or expertise to move their products along the development path. And then there are regulatory and legal aspects to consider in getting products to market. The most common way that companies deal with these mounting pressures is of course outsourcing. The benefits are numerous, but so are the risks. Recognizeing the importance of outsourcing to the industry, this issue reaches your desk with several priorities in mind. First, we strive to give you as much advice on the subject as possible, starting with our special report: Is your outsourcing strategy sound? In this report, we’ve asked three Canadian biotech C-level executives to share their best practices to enjoying a successful relationship with potential outsourcing partners. In addition to laying down some of the ins and outs, they each make their own suggestions to formulating an outsourcing deal. The outsourcing theme carries over to many of the other articles in this issue. Bernard Massie, Pierre Bourassa and Sonia Thomson’s piece on the state of Canada’s biomanufacturing industry suggests that Canada can do more to realize the opportunities in this space. Industry veterans Jan-Ake Westin and Dr. Albert Friesen follow up with their piece on the evolution of Canada’s CMO’s and their ability to adapt to meet the challenges of the changing biotech and biopharma landscape. Next Dan Mamlak’s piece focuses on the importance of GLP compliance for CRO’s. To finish things off, there’s Dalton Pharma CEO and president Peter Pekos’ take on offshore manufacturing. He suggests that biotech and biopharma companies have grown wary of foreign markets and are again turning to North America for their biomanufacturing needs. Also mentioned in this issue are some of Canada’s leading outsourcing service providers. In the end, we hope this issue proves to be a valuable resource in addressing your future outsourcing needs. Happy New Year!

Terri Pavelic Shawn Lawrence

CONTRIBUTING WRITERS

Albert Friesen

Bernard Massie

Dan Mamelak

Daphne Lainson

Darlene Pratt

Safa’a Al-Rais

Jan-Ake Westin

Kathleen Marsman

Lisa McKerracher

Peter Pekos

Pierre Bourassa

Sonia Thomson

Thuy Nguyen

Director, Content & Business Development

José Labao

GRAPHIC DESIGNER CONTROLLER MARKETING MANAGER

Elena Pankova John R. Jones Mary Malofy

CIRCULATION DIRECTOR Mary Labao circulation@promotive.net Tel: 289-879-4272

EDITORIAL ADVISORY BOARD Christine Beyaert, Cohn&Wolfe; Pierre Bourassa, IRAP, Montréal; Murray McLaughlin, Sustainable Chemistry Alliance; Ulli Krull, UTM; John Kelly, KeliRo Company Inc.; Peter Pekos, Dalton Pharma Services; Brad Thompson, Oncolytics; Robert Foldes, Viteava Pharmaceuticals Inc.; Gail Garland, OBIO; Barry Gee, CDRD; Bonnie Kuehl, Scientific Insights Consulting Group Inc.; Raphael Hofstein, MaRS Innovation; Roberto Bellini, Bellus Health; Peter van der Velden, Lumira Capital; Albert Friesen, Medicure Inc.

Biotechnology Focus is published 6 times per year by Promotive Communications Inc. 23-4 Vata Court, Aurora, Ontario L4G 4B6 Phone 905-727-3875 Fax 905-727-4428 www.biotechnologyfocus.ca E-mail: biotechnology_focus@promotive.net Subscription rate in Canada $35/year; USA $60/year; other countries $100/year. All rights reserved. No part of this publication may be reproduced without written consent. Publications Mail Registration Number: 40052410 Return undeliverable Canadian addresses to: circulation dept – 23-4 Vata Court, Aurora, Ontario L4G 4B6 National Library of Canada ISSN 1486-3138 \ All opinions expressed herein are those of the contributors and do not necessarily reflect the views of the publisher or any person or organization associated with the magazine.

If you would like to order hard copy or electronic reprints of articles, contact sales@promotive.net

4 BIOTECHNOLOGY FOCUS December 2015/January 2016

LIFE SCIENCE IS A HUMAN RACE 78% of global CEOs rank human capital as the #1 priority*

Making the next breakthrough isn’t about luck. It’s about talent, pure and simple. The brightest minds, specialized education, the insatiably curious – all blended in this unique sector of the knowledge economy. The race is always on in Life Sciences, and Mississauga, Ontario – Canada, is where great companies build winning teams. What else do you need to know?

VISIT WINTHEHUMANRACE.CA TO START NOW. *Source: PwC 15 th Annual Global CEO Survey 2012

By: Bernard Massie, Pierre Bourassa and Sonia Thomson

Biomanufacturing

Photos: PnuVax SL Bio’s Montréal plant; Final formulation

Canadian Biomanufacturing: Opportunity for Pride and Prosperity

t’s no secret that Canadian biotechs can design and develop cutting edge biotherapeutics and vaccines. For example, Calgary-based Oncolytics’s Reolysin is among the first wave of oncolytic viruses edging its way to market,1 while Vancouverbased Zymeworks successfully developed a best-in-class, bi-specific antibody design platform that attracted the attention of giants like Merck, Eli Lilly, Celgene and GSK.2 Along the preclinical development pathway, Canadian universities, research and technology organizations, consultants, and contract research organizations support the country’s biopharma developers in their quest to reach clinical trials. When it comes time to select a Good Manufacturing Practices (GMP) manufacturer for clinical trial batches however, Canadian biologics developers are likely to go south of the border, especially if their products rely on mammalian expression systems. Yet Canada’s biopharmaceutical manufacturing sector is gaining steam. Microbial fermentation, biotech’s tried and true protein factory, is well represented nationally, with players like Apotex Fermentation, BioVectra, Viventia, Microbix and KABS leading the way. Chemical synthesis remains a foolproof, rapid method for producing smaller biologics such as peptides and RNA. Firms in this space include Dalton, Patheon, Piramal, Omega, and Paraza. Egg-based platforms continue to be used by the country’s influenza vaccine producers, multinationals GSK and Sanofi, while groups around the world work to develop mammalian and plant alternatives. In terms of alternatives, plant production has certainly made a bold entry on the scene: Medicago built their success manufacturing influenza VLPs in plants and will be using plant systems to produce anti-Ebola antibodies for the Public Health Agency of Canada.3 They received nearly $75 million in financing

in 20154 that will go toward the construction of a new$245 million facility in Québec City, where 200 new high-skilled jobs will be created by 2019.5 Another player harnessing the trend is Plantform, who recently announced they will be manufacturing an anti-nerve agent enzyme in plants, as well as producing monoclonal antibodies against Ebola and HIV/AIDS and developing a biosimilar version of Herceptin.6 And finally, a few biomanufacturers with mammalian capacity are emerging to greet the spring: Therapure is expanding its business beyond plasma products to optimize mammalian expression systems and produce antibodies in CHO cells, and just announced in November that they have filed a preliminary prospectus with securities regulatory authorities in Canada in connection with a proposed initial public offering.7, 8 Meanwhile, PnuVax SL Bio acquired DSM’s former Montréal facility in 2012 and is working with the Bill and Melinda Gates Foundation to produce a low-cost pneumococcal conjugate vaccine (PCV-13) for the developing world.9 Up and coming mammalian manufacturers are just in time to meet the increasing cGMP production needs that Canadian biotechs have. The nation has a rich pipeline: about 110 firms, 90 per cent of whom are small or medium sized biotechs, are developing over 325 promising biologics – the majority of which require mammalian production in CHO or HEK293 cells.10 What’s more, about 75 per cent of these products are at the preclinical stage or earlier, and their production is not yet committed to a contract manufacturing facility abroad. As production accounts for roughly 20 per cent of the final product value (10 per cent production cost and 10 per cent profit for the manufacturer), there is a tremendous opportunity for the Canadian biomanufacturing sector to capitalize on

6 BIOTECHNOLOGY FOCUS December 2015/January 2016

Canada’s investments in biopharmaceutical development.11 Growing Canada’s mammalian biomanufacturing capacity makes sense globally as well. International trends demonstrate that CHO cells have become the workhorse of the biopharma industry. Six of the ten top selling biologics in 2014 were produced in CHO cells: Humira, Enbrel, Rituximab, Avastin, Herceptin, and Avonex.12 With annual sales ranging from US$3 billion to $12.5 billion per product for these blockbusters, profits from manufacturing each one of them may represent $300 million to $1.25 billion per year. Biologics are a successful business, and most are produced in CHO cells, so it follows that the number of facilities working with these cell lines is growing as well. A snapshot of global biomanufacturing facilities in 2007 versus 2014 reveals that mammalian producers increased their share from 41 to 55 per cent, while microbial facilities dropped from 34 to 24 per cent, yeast installations downsized from 16 to 12 per cent, and insect cell production declined from seven to four per cent. The only other segment besides mammalian production that grew or remained stable was plants, which checked in at two per cent in both 2007 and 2014.13 And what about producing biosimilars – or subsequent entry biologics (SEBs), as Health Canada calls them? Though few are presently approved in Canada compared to Europe and the U.S., the cost savings they offer over originator biologics will be difficult for regulators to ignore. As highlighted in the October/November 2015 issue of Biotechnology Focus, Merck Canada sees a major opportunity to bring these products to the Canadian market, and has partnered with Samsung Bioepis in Korea, who will take care of biosimilar process development,

Biomanufacturing

Biologics Pipeline: Made-in-Canada Opportunity

Pierre Bourassa is an Industrial Technology Advisor with NRC’s Industrial Research Assistance Program. A member of IRAP’s Biomedical Sector Team, he leads IRAP’s Biomanufacturing Initiative, which supports Canadian biologics and vaccine development through financial aid and advice. characterization, manufacturing and regulatory filings while Merck will handle their commercialization in Canada. Once these big players open the doors to SEB approvals in Canada, it’s quite conceivable that other firms will want to develop and produce biosimilars in the country, especially if mammalian manufacturers can secure a foothold. With the robust growth of mammalian production facilities worldwide, what is hampering their expansion in Canada? Firstly, developing biologics is a high risk endeavour, and most companies are afraid to compound it by working with emerging manufacturers that cannot yet boast a long track record. To attract this crucial round of early customers, governments and venture capitalists could consider investing in pilot projects between Canadian biologics developers and emerging Canadian CMOs. Governments could also contract these facilities to produce biologics and vaccines in the case of pandemics and other health emergencies, projects that would enable these producers to gain further experience and contribute to their revenue stream in the early years. Secondly, cities, provinces and the federal government could work together to remove financial obstacles to the growth of these enterprises. Manufacturers have the potential to create long term, high quality employment in their communities. Once a plant has been selected and certified for the production of a given biopharmaceutical by the FDA or Health Canada, production of that biologic is likely to remain at the facility for the duration of its patent life. The National Research Council of Canada (NRC) offers two programs that contribute to growing Canada’s biomanufacturing capacity in mammalian cells. The first is the Industrial Research Assistance Program (IRAP), which can help emerging biomanufacturers make connections with investors and provide advice about growing the business. IRAP supports the development of new technologies and business networks at the most crucial time in an SME’s evolution: when they are experiencing high levels of risk and uncertainty. The other is NRC’s Human Health Therapeutics portfolio, a strategic R&D arm that helps Canadian SMEs develop biologics and vaccines. NRC is co-developing a pipeline of biologics with Canadian firms, helping

them not only advance the product, but also develop and scale up the process for the biologic’s production in CHO cells. Biologics manufacturing is R&D intensive, and the production parameters selected have a direct impact on the product’s composition and quality, a phenomenon often summarized by the concept “the product is the process.” The NRC has been developing and optimizing its expression systems since 1987, the most recent of which, CHOBRI, is named in honour of NRC’s former Biotechnology Research Institute. The cell line’s parental genome has been fully sequenced, and can be customized for the production of Canadian SMEs’ lead candidates, with fully scalable, stable CHO clones obtained in four months. Once the most productive cell line has been selected, the production, purification and analytical processes can be scaled up, first in the lab and then inside NRC’s Cell Culture Pilot Plant – up to a capacity of 500 L. Once all the parameters have been optimized, NRC encourages SME developers to select Canadian manufacturers for Good Laboratory Practice (GLP) toxicology batch and clinical batch production using CHOBRI. Transferring NRC’s expression systems and know how to Canadian CMOs reduces risk for the developer and helps stimulate a healthy biomanufacturing sector in the country. Canada’s venture capital climate appears to be rebounding from 2008, and has shown solid growth in life science deals since 2013.14 Clinical trial providers have made considerable efforts and investments to ensure Canada remains an attractive location for commercializing new medicines. It’s time to leverage the nation’s strengths in large molecule research and roll out the red carpet for biomanufacturers, to propel Canadian developers past the hurdle of clinical batch production toward major investments and promising alliances. Let’s harness this incredible opportunity with an ounce of pride, and generate a pound of prosperity! Bernard Massie is the leader of the Biologics and Biomanufacturing program at NRC’s Human Health Therapeutics portfolio. He manages the development and transfer of NRC’s cell lines, production processes, analytics and quality assurance to biopharmaceutical developers and manufacturers.

Sonia Thomson is a Communications Officer with NRC’s Human Health Therapeutics portfolio, working to get the word out about Canada’s best kept secret in biologics development.

References: 1. http://www.onclive.com/web-exclusives/FDA-Grants-Reolysin-OrphanDrug-Designation-for-Ovarian-Cancer 2. http://www.forbes.com/sites/luketimmerman/2015/01/21/celgene-biotechsace-dealmaker-bets-on-canadas-zymeworks/ 3. http://www.medicago.com/English/ News-Releases/News-ReleaseDetails/2015/Medicago-engaged-by-theCanadian-Government-to-develop-Ebola-monoclonal-antibodies/default.aspx 4. http://s1.q4cdn.com/816223360/files/ documents_news/2015/Joint-NewsRelease-Medicago-19052015-FINAL.pdf 5. http://s1.q4cdn.com/816223360/files/ documents_news/2015/EXPANSIONMDG-EN.pdf 6. http://www.plantformcorp.com/products.aspx 7. http://www.therapurebio.com/CDMO/ upstream-process 8. http://seoprrank.com/admin001/mtherapurebio/corp/investors 9. http://www.gatesfoundation.org/ How-We-Work/Quick-Links/GrantsDatabase#q/k=pnuvax 10. https://www.ic.gc.ca/eic/site/lsg-pdsv. nsf/eng/h_hn01728.html 11. VIE-Tech Consultants, 2014 12. http://cellculturedish.com/2015/03/10biologics-on-best-selling-drugs-listfor-2014/ 13. h t t p : / / b i o p l a n a s s o c i a t e s . c o m / publications/11th per cent20Annual per cent20ReportBiomfg per cent20Table per cent20of per cent20Contents.pdf 14. https://www.ic.gc.ca/eic/site/lsg-pdsv. nsf/eng/h_hn01776.html

To see this story online visit www.biotechnologyfocus.ca/ canadian-biomanufacturingopportunity-for-pride-andprosperity/

December 2015/January 2016 BIOTECHNOLOGY FOCUS 7

By: Safa’a Al-Rais

Solutions Showcase

Strategic Partnerships to Achieve Client Success

n today’s competitive market, the client experience is essential. Creating a genuinely client-centered business is by no means a simple task, but with the right people, appropriate training, positive attitudes and tools, it is attainable. In the contract development and manufacturing organization (CDMO) industry, client-focused businesses, such as Therapure Biomanufacturing, succeed in growing their client base by delivering on project objectives and satisfying clients’ expectations. Creating a client-centric culture is all about understanding value from a client’s perspective; it does not mean doing everything the client asks for! What it does mean is focusing on the things the client cares about the most and aligning that to what is appropriate for developing and manufacturing their product. An organization that agrees to every request from a client may provide the client with some short-term satisfaction, but it may lead to longer-term problems, faulty processes, and ultimately, client disappointment. It is better to have a candid conversation with the client early on to resolve an issue with the project before it becomes a show-stopper. Even with the best designed manufacturing

processes, something unexpected may occur. The problem may be compounded by a client with limited depth of experience and expertise with scaling up processes from smallor bench-scale. An experienced CDMO, one that has developed a variety of products for multiple clients, can provide a client with insight on the scale-up and manufacturing process. Therapure, with its expertise and experience in complex biologics, works jointly with the client to identify the objectives of project, to create the implementation plan, and to improve the process if required. Many elements make up a client-centric philosophy. At Therapure, we defined what client-centric means for our organization: we understand our clients require strategic partnerships to achieve complex manufacturing solutions. We develop collaborative relationships through active client engagement contributing to a mutual understand of the process and product. Each new client is at a different development stage in the product life cycle and therefore has unique needs. We monitor how well we are meeting those needs on a regular basis. A redesign of the Therapure organization in 2009 began the philosophical change that

8 BIOTECHNOLOGY FOCUS December 2015/January 2016

put clients at the center of every business decision. The redesign started by conducting a review of our business model, operational matrix, revenue targets, policies and overall growth plan. As well, we surveyed our clients to determine their level of satisfaction. What we discovered was that the key to our success would be people and their willingness to realign the entire business towards the client experience. Some of the elements that we started to embrace as a client-centric organization included the following: • Sharing our clients’ vision and focusing on their needs • Encouraging employee empowerment and accountability • Readiness for change • Emphasizing a team culture • Adopting our clients’ passion for their products • Valuing patient safety above all else

Sharing our clients’ vision and focusing on their needs Placing a client’s needs at the heart of business decisions is a core philosophy. We help clients to identify and communicate their needs and objectives for a project, which allows us to brainstorm innovative ways to successfully implement a plan. The plan typically includes recommendations for process improvements, which add tangible value for the client.

Encouraging employee empowerment and accountability Performance management is essential at Therapure where departmental heads agreed that micromanagement is neither sustainable nor desirable. We work toward teams having a clearer understanding of their responsibilities with the authority needed to fulfill those responsibilities—and accountability for the outcomes. Admittedly, every outcome, whether positive or negative, is a learning experience for ourselves and for our clients. An example where lessons were learned was a circumstance related to readiness to manufacture—our team thought that activities planned and ready to be executed for a project were complete; however, because of a lack of clear communication and accountability, they were not. Learning from this, we established expectations for empowerment and accountability by emphasizing the following: • Setting clear, achievable and transparent expectations with all parties involved, from plant floor personnel to executives, as well as clients. This provides guidance and continued on page 10

9381 M

Medicago Technology for the future Medicago’s Innovative Technology Medicago Inc., one of the largest Canadian biotechnology companies, continues to develop its production platform to deliver safe and effective solutions for health problems around the world. With more than 700 patents to its credit and a highly-skilled workforce, Medicago is well positioned to make a difference in the future of vaccines and biotherapeutics:

2) Safe and Effective

1) Speed

3) Diverse Applications

Medicago has already demonstrated that it can rapidly produce a vaccine candidate against emerging influenza strains, such as the pandemic strain H1N1 in 2009 and H7N9 in 2013. In both instances, Medicago’s VLP Express™ allowed Medicago to quickly screen and identify the candidates just 19 days after obtaining the viruses’ genetic sequence from health authorities. It is estimated that 84,000 people died worldwide in 2009 from this pandemic strain of Influenza¹. The rapid availability of a vaccine during the first wave of the pandemic would reduce both morbidity and mortality and limit the socio-economic impact of the flu.

Medicago’s Virus-Like Particle (VLP) vaccines have proven to be safe and have shown an elevated immune response in clinical trials. This means that Medicago’s VLP vaccines have the potential to offer broad protection against different influenza viruses circulating year-round. Proficia™ is Medicago’s robust production system for the transient protein expression and production of vaccines in plant leaves. Medicago has demonstrated that this system can be used not only to produce vaccines but for other therapeutic proteins, such as monoclonal antibodies or biobetters. This year, both the Canadian and American governments awarded Medicago contracts to produce different strains of Anti-Ebola antibodies, first against the Zaire strain, and recently against the Sudan strain. In 2014-15 Ebola caused 28,512 suspected, probable and confirmed cases of Ebola and resulted in 11, 313 deaths.²

Expanding Medicago’s Capacity To meet increasing demand for safe and effective vaccines against seasonal flu and the growing risks of emerging threats such as a pandemic flu and Ebola, Medicago has recently announced the construction of new facilities. Medicago’s headquarters will be located at this new production complex in Quebec, Canada. The multimillion dollar factory will increase production capacity to the equivalent of 40-50 million doses of quadrivalent vaccine per year. This complex will be the primary centre for the research,

development and production of various vaccines and therapeutic proteins, and will be able to offer surge capacity and contribute to stockpiles for emergency use products. “As governments around the world continue to face health threats such as pandemic strains of influenza and Ebola, we believe Medicago can make a major contribution to rapid response, surge capacity and stockpiles across the globe,” according to Andy Sheldon, Medicago CEO.

Medicago Technologies Proficia™ Technology

Medicago has developed Proficia™ technology, a proprietary alternative in manufacturing to current egg-based and cell production systems. The Proficia™ technology is a rapid, flexible, high-yielding and robust vaccine and proteins (such as antibodies) production system.

VLP Vaccine Technology

Virus-Like Particles (VLPs) are the most exciting emerging vaccine technology for generating effective and long-lasting protection. VLPs mimic the native structure of a virus, allowing them to be recognized readily by the immune system. However, unlike viruses, they lack the core genetic material, making them non-infectious and unable to replicate. A key advantage of VLPs is that they effectively trigger key aspects of the immune response in order to achieve potent immune stimulation, and foster immunological memory. Medicago’s VLP technology is presently being used to develop vaccines against influenza, rotavirus, HPV and Norwalk.

VLP Express™ Medicago has developed a proprietary screening platform for rapidly identifying the best VLP-based antigen target presentations for a disease-causing agent (in less than 10 weeks vs. several months using traditional technologies).

Medicago is using this platform as well to expand identification and development of therapeutic proteins (such as monoclonal antibodies) and biodefense products.

The benefits of these technologies are expected to make a significant difference in the rapid identification, development and manufacturing of novel vaccines and therapeutic antibodies. 1. Estimated global mortality associated with the first 12 months of 2009 pandemic influenza A H1N1 virus circulation: a modelling study. Dawwod FS et al. The Lancet Infectious Diseases, Volume 12, Issue 9, Pages 687-695, September 2012 2. Ebola Situation Reports, October 21, 2015; WHO Website

medicago.com

9381 MEDICAGO-Magazine ad-E.indd 1

Rapid Development of Novel Vaccines and Therapeutic Proteins

2015-10-30 14:43

Solutions Showcase continued from page 8 understanding as to how the expectations are of benefit to all internal and external team members, and how these will aid in moving the project forward. • Quantifying expectations so that they can be measured—this is important so ongoing performance can be assessed and used together with feedback to provide information for improving performance that is below expectations or rewarding performance that meets or exceeds expectations. Regardless of the position, individuals who understand their roles and responsibilities for a project are more involved and enthusiastic about the work.

Readiness for change For a CDMO, flexibility and an ability to evolve are crucial. We need to be proficient at dealing with clients who may have varying understanding of what is required to scale-up a process and transfer it to cGMP manufacturing. Virtual and specialty pharmaceutical and biotechnology companies are particularly well-suited to CDMO partnerships and big pharmaceutical companies are increasingly viewing CDMOs as strategic rather than tactical. Success under these conditions relies on having a comprehensive plan. This means understanding the scope of the project and its detailed requirements, while maintaining the flexibility to respond to change. Planning consists of many considerations including: scheduling; costing controls; allocation of resources (plant, equipment, or personnel); risk assessment; procurement, quality and release requirements; acceleration plans; contingencies for changes; identifying opportunities for improvement. In essence, Therapure takes a strategic view of the plan, so in the event of change, we are ready to act in the best interest of the project.

Emphasizing a team culture For a CDMO, the effort required to win new business and executive on existing projects is significant. It consists of the initial market research, early conversations, strategic assessments, quotations and contract negotiation. The value of a team culture is demonstrated by the transition from Business Development to Project Management to Operations. This is accomplished with the integration of all parties, including the client, at the project kick-off meeting. The project team structure is introduced, identifying the core team, project execution personnel, and support functions, and overseen by the

We encourage our clients to share what they’re passionate about; what medical condition their drug is intended to treat, including the patient population; and what success looks like for them. Clients are enthusiastic about educating the entire project team, and as a result every member is fully aware of the impact they have on the product and the patient. steering committee comprised of members of Therapure and the client’s organization. All parties fully understand the scope of work to be completed, which provides the client with a clear understanding of who is responsible for implementing components of the project and how they will proceed. In order to achieve the goal of integration, senior executives and members of Project Management and Operations are routinely involved, and they support Business Development with the following: • Client visits • Reviews of requests for proposal (RFPs), including technical data, risks, timelines, scope and area of client expertise • Quote generation, including labor, material and capital requirements • Contract reviews • Quality agreement reviews • Statement of work (SOW) generation • Timelines Bringing the technical leads, including subject matter experts, into the process early provides our clients with a sense of our collaborative environment and builds confidence that Therapure has the required capabilities to develop and manufacture their products.

Adopting our client’s passion for their products We’re often asked by our clients, “How is it that your staff is always willing to go above and beyond the call of duty?” Our response can be summed up into one word: passion. Cultivating shared values means taking an interest in our clients and their business. We encourage our clients to share what they’re passionate about; what medical condition their drug is intended to treat, including the patient population; and what success looks like for them. Clients are enthusiastic about educating the entire project team, and as a result every member is fully aware of the impact they have on the product and the patient. We have found this to be very ben-

10 BIOTECHNOLOGY FOCUS December 2015/January 2016

eficial—engaging employees in what they develop and manufacture provides a sense of pride in producing therapies that can improve patients’ lives.

Valuing patient safety above all else The Therapure team is fully committed to the safety of all products that are manufactured in our facility. An intimate understanding of the necessary requirements for cGMP manufacturing and testing, as well as ensuring these requirements are met, is essential. At times, we must inform a client about the need and reason for a particular test, along with its cost. As a CDMO, we understand what the requirements are for a variety of drug products, and this knowledge is a value-added benefit to our clients. To maintain a cGMP facility, we must follow robust quality control and quality assurance programs that are vital to achieving quality standards that meet regulatory requirements. We would never design processes or manufacture products without understanding how the processes affect product quality. In summary, Therapure became a clientcentric organization by committing ourselves to the success of our clients, engaging our clients from the beginning, aligning our employees on common objectives, as well as designing and measuring success while assessing opportunities to innovate and improve. This approach results in processes that are optimized for our clients’ products and that ultimately deliver therapies that can improve patients’ lives. Safa’a Al-Rais is Senior Director of Venture Management & Member of the Executive Team at Therapure. To see this story online visit www.biotechnologyfocus.ca/ tstrategic-partnerships-toachieve-client-success/

By Dan Mamelak

Solutions Showcase

The importance of

GLP compliance for CROs

Good Laboratory Practice (GLP) refers to a quality system of extensive research related controls or principles that govern the manner in which scientific research should be conducted to ensure integrity, quality and reproducibility. In the U.S., the principles of GLP are described in the Food and Drug Administration’s (FDA) Code of Federal Regulations, Title 21, Part 58 (21CFR58).1

he principles of GLP were first introduced in Denmark and New Zealand in 1972. In 1976, these principles were introduced in the U.S. following a Senate subcommittee hearing on gross scientific misconduct at Industrial BioTest (IBT) Laboratories, one of the largest and oldest product testing laboratories in the U.S. Investigators had discovered that IBT had either falsified or was unable to reproduce thousands of safety and toxicology test data performed for chemical manufacturers of pesticides and household products. These hearings led the FDA to enact statutory authority for GLP in 1979 by way of the Code of Federal Regulations, 21CFR58.2 The guidelines for GLP are laid out in several subparts of 21CFR58 to ensure the quality, integrity and safety of non-clinical laboratory data. The subparts discuss: personnel, facility, equipment, standard operating procedures, test reference articles, protocols, reporting of results and archiving the data. Laboratory work must be performed by appropriately trained and qualified personnel in a secure and suitable facility with testing equipment that is calibrated and well maintained. Management approved standard operating procedures and study protocols must clearly define the housekeeping and technical operations of the testing facility and the nature of the tests performed. Proper documentation of study data and related material including testing material, reagents, reference standards and test systems is critical to ensuring that the study data can be evaluated, repeated and, if need be, reconstructed at a later date. Moreover, all study data and associated documentation must be stored and archived for two to five years, depending on the intended purpose of the data, should reevaluation of quality, integrity and safety need to be performed at a later date. GLP does not guarantee that a scientific study will generate novel, innovative data. GLP guarantees that the study is performed

with integrity and that the data can be reproduced. Work done according to GLP recognizes that the data generated may ultimately be used to influence decisions affecting public health and safety. Since our inception, Custom Biologics™ has combined GLP with innovative science. Maintaining a GLP compliant environment can be expensive and time consuming. It requires attention to equipment maintenance and calibration and to extensive documentation and reporting. Although these procedures may extend the time required completing a study, in our experience the overall benefits of adhering to GLP far outweigh the drawbacks. Compliance with the principles and practice of GLP has brought great rewards to both our employees and clients. We have been able to attract the best and brightest scientists. The Quality Control System in place at Custom Biologics™ constantly monitors all projects and conducts all test procedures in compliance with 21CFR58. Our work meets the highest globally recognized standards and has repeatedly been used to support submissions for New Drug Applications. Custom Biologics™ continues to advance into new areas of regulated bioanalytical testing of both small and large molecules. Great science is at the heart of everything we do.

References 1. http://www.fda.gov/ICECI/EnforcementActions/BioresearchMonitoring/ ucm135220.htm 2. Baldeshwiler, A.M. History of FDA Good Laboratory Practices. Quality Assurance Journal (7) 3 2003. Dan Mamelak is Founder and President at Custom Biologics. To see this story online visit www.biotechnologyfocus.ca/ the-importance-of-glpcompliance-for-cros/

December 2015/January 2016 BIOTECHNOLOGY FOCUS 11

By: Darlene Pratt

Medtech

You are not alone: The challenge of scaling Canadian medical technology companies

Photo: Centre for Imaging Technology Commercialization (CIMTEC)

rguably, the most formidable challenge facing Canadian medical technology companies is the crucial interplay between sufficient financing and the ability to hire experienced talent early on. Steve Plymale, CEO of Profound Medical Corp. says, “It has been difficult to find Canadians with the depth of management experience needed to scale our business quickly and make it attractive to investors.” Adds Plymale, “People are eager and academically qualified, but most of the talent is junior and we don’t have the luxury of time to develop their skills.” Matthew Asselin, director of Technology Development at the Centre for Imaging Technology Commercialization (CIMTEC) echoes Plymale’s sentiments with respect to technical talent. CIMTEC’s role is to provide specialized engineering expertise to help under-resourced medical device startups develop clinical prototypes. “CIMTEC has difficulty finding Canadians with the skills and relevant industry and regulatory experience to fill our software developer and mechanical engineering roles,” says Asselin. “We’ve started looking farther afield, which has its own set of challenges.”

Hiring the right people from abroad comes at a premium price that is often not attainable for cash-strapped startups. But, after realizing that an investment in experienced people is critical to success, both Profound Medical and CIMTEC have retained the services of specialized recruitment agents to help them source talent internationally. With a domestic labour market roughly ten times the size of Canada’s, the U.S. has an advantage in attracting and retaining international talent. And, although early stage companies in the U.S. have a similar commercialization path, they are able to draw on larger pools of unencumbered capital through the Small Business Innovation Research (SBIR) program. SBIR funds allow entrepreneurs to hire directly into their companies, which shortens development timelines and opens up investment avenues. By comparison, Canadian tech entrepreneurs report that they have to work much harder than their U.S. counterparts to secure less money. “We spend an inordinate amount of time and energy raising relatively small chunks of money,” says Dr. Lionel Lenkinski, president and CEO of NerveVision. “Any momentum we gain quickly stops because the

12 BIOTECHNOLOGY FOCUS December 2015/January 2016

money runs out before we can raise more and hire the necessary resources.” Matthew Asselin believes that if Canada is going to compete in specialized fields such as advanced medical devices, entrepreneurs need the ability to more easily bring the right talent into growing sectors. In addition to significant financial incentives, Asselin and Plymale agree that Canada would benefit from more permissive immigration laws to make it easier to entice foreign-trained talent into Canadian firms. Having the right talent on the team can greatly accelerate the time to market. For example, early on Focal Healthcare raised significant capital from private Canadian and Chinese investors who “understood the value proposition and had a willingness to move quickly.” That initial large investment allowed Focal to hire skilled people and concentrate its efforts on developing a clinically ready product that will catapult the company to its next regulatory milestone. Focal Healthcare can be considered an outlier in the medical device startup world because its first product will be on the market within two years of company creation. Lauren Killip, business development manager at Focal, attributes the company’s success to the strong vision and extensive network of both its founder, Chicuong La, and its lead investor. Two essential and co-dependent elements to successfully scaling medical technology companies in Canada are hiring experienced talent and gaining access to large sums of capital. But, Steve Plymale has another important piece of advice for entrepreneurs. He says, “Before you worry about money and hiring, make sure the vision and value proposition for your company is extremely clear. Be very diligent in your approach and exhaust every avenue to find the sources of capital that are compatible with what you’re selling and,” he adds, “Don’t give up!” Darlene Pratt is Director of Marketing Communications at CIMTEC.

To see this story online visit www.biotechnologyfocus.ca/ you-are-not-alone-the-challengeof-scaling-canadian-medicaltechnology-companies/

Compiled by Shawn Lawrence

Outsourcing Report: 2015

Is your outsourcing strategy sound? Outsourcing, it’s more than a trend in biotech, it’s a means of survival. Companies that provide biotech companies with specialized services ranging from contract research and manufacturing, to legal and regulatory consulting have developed a niche in the industry by helping biotech companies of all sizes to overcome the challenges that bog down their business. This is especially so in Canada, where more and more often companies are employing a virtual business mode. In this special report, we ask three Canadian biotech C-level executives to weigh in on the keys to enjoying a successful relationship, some of the ins and outs to dealing with outsourcing partners, as well as why outsourcing is integral piece to their collective business plans. Participating in this special Q&A report are: RepliCel Life Sciences new CEO and president (formerly the company’s VP of business and corporate development) Lee Buckler, Cynapsus Therapeutics president and CEO Anthony Giovinazzo, and Aquinox Pharmaceuticals president and CEO David Main.

Checklist of things to consider when shopping for an outsourcing partner Conduct due diligence on the potential outsourcing partner. Find out who its clients were and are. Contact some of the other clients to see if they were satisfied. If unfamiliar with the outsourcing process, use a consultant. Do a site visit. Get familiar with the vendors capability and capacity. Select a vendor not just on basis of cost but for the right technical fit as well. Before choosing, have the scientist or project manager spend some time at the vendor site so that they have a chance to fully interact with staff.

December 2015/January 2016 BIOTECHNOLOGY FOCUS

Outsourcing Report:

Is your outsourcing strategy sound?

Checklist of things to consider when discussing the contract Make sure everything is defined in the contractual agreement. Ensure the vendor knows your expectations, and build appropriate clauses in the contract for your protection. The statement of services should include a listing of personnel, from both the vendor and the sponsor. Milestones, timelines and deadlines should be clearly stated in detail. Language should be written into the contract which allows the sponsor to send someone to the site to ensure services provided are in accordance with regulations and protocol. Have it clearly stated in the contract that services will be audited. Make certain the agreement specifically addresses exactly what role the sponsor will play and what role the contract service provider will play. Building flexibility into the contract is important in case something goes wrong and you’re forced to terminate the contract. Emphasize confidentiality and protection of intellectual property. It’s important to create a contract that shares goals, risk and rewards.

Respondent#1

David Main

president and CEO, Aquinox Pharmaceuticals velopment. Our general philosophy as a company is that we have internal expertise, but wherever we can find external contractors to do most of the heavy lifting, that’s where we outsource. We find this a more economical and cost effective approach then trying to build up an entire staff to do it ourselves. There probably isn’t an area in our business except maybe the finance/accounting areas where we don’t do some level of outsourcing. It is very much the way of the future in this business, as the days of building extremely large fully integrated companies to do everything in house, I think are gone in the biotech sector.

What factors do you consider important when designing an outsourcing plan or strategy? The first thing is we make sure that we have the internal expertise to be able to provide the strategy for oversight and management, and then we just go through a process of having multiple contract outsourcing organizations bid on the work. We then try to pick those with the best track record in areas of specialization and expertise that best fit what we’re looking for.

Q Biotechnology Focus: What do you outsource and what role does outsourcing play in your business plan? David Main: It’s a pretty broad answer in that we try to outsource or partner on virtually all aspects of our business. This includes everything from manufacturing, to regulatory affairs, to clinical deBIOTECHNOLOGY FOCUS December 2015/January 2016

Q What are some of the challenges in finding the right partner to meet your needs? For the most part, we haven’t had any challenges. This is becoming such a standard part of the pharmaceutical industry these days, and as a result there are a lot of choices out there in terms of partners. It’s a highly competitive field. The biggest challenge is whether or not as a company you have the financial resources to

Outsourcing Report:

Is your outsourcing strategy sound?

always pick the partner you want because there’s a wide spectrum of pricing on some of the outsourcing contractors out there.

Q Does bigger mean better when it comes to choosing a vendor? It comes down to fit, regardless of size. If we find a smaller contractor that’s been working in a particular area that’s very relevant to what we’re doing, that will probably tip us in their direction more so than a larger contractor.

Q What factors into your decision to go with one vendor over another? Everything from experience in a given area, good references, cost competitiveness, demonstrative commitment of a team that will be dedicated to the project , and whether or not they compliment us or are a fit in terms of building a strong working relationship. The personality of the vendor’s team is also important.

Q Are you more likely to go domestic in your vendor selection, or does location not factor into your choice? And why? We go absolutely as far and wide as we have to, to find the right partner. Location really doesn’t play a major factor in our decision unless there are two potential vendors that we feel are equal, and one might be in a more favourable time zone relative to the project. That might influence us, but in general we just try to find the best partner possible from an overall cost-effectiveness perspective for the project. However, there are some considerations that may keep us away from certain partners or even jurisdictions. For example, when we are going to jurisdictions that are farther afield, we spend a lot of time making sure that we are comfortable with not only quality and the project team, but also the legal, political and economic environment that we will be operating in. All those things are taken into consideration.

Q In terms of the contract itself, what are key terms and loopholes to look for or be wary of? When we talk about outsourcing, there are just so many different areas, and likewise just so many terms to be mindful of. There are the obvious ones around milestones and financials, but things like legal jurisdictions for disputes, indemnity clauses, acceptance, and time is of the essence, those are some of the key ones that are purely contractual that I think are key terms. One thing to be mindful of is in any kind of contract you always have to anticipate the worst case scenario, or the possibility that you may need to terminate a contract. You need to envision that and decide how

would be the best way to wrap up a contract if you needed to in advance of a project being completed. It’s something that every person should do in any kind of contract, and not just think about how quickly can we do business with this group, but if things don’t go the way we want them to go, how can we effectively and efficiently terminate the relationship.

Q How can you make sure you are getting the most out of your outsourcing partner? How do you monitor that relationship? There are always people within the company that have direct responsibility for managing the relationship. As part of the whole contracting process, we often work right into the contract what the milestones and metrics for measuring success are going to be and it’s not just budget and overall deliverables, but there are usually milestones that are set along the way. We also try to agree on realistic timelines, and then more recently we’ve been working into our contracts both penalties and bonuses around what we consider realistic timelines.

Q What are some of the metrics you use to measure the success of the relationship? Staying on budget, staying on time, and having efficient project team meetings between ourselves and the vendor. Another one that is quite important is the number of change orders required. You want that number to be low. Sometimes both parties try to define the scope of a project as accurately as possible up front, but invariably things happen along the way that neither party anticipated and so you may have to change the scope along the way, but you want to see that happen as little as possible.

Q How do you protect yourself from a breakdown in a sponsor-vendor relationship? One is contractually, in the sense of making sure that there are clear expectations and not leaving a lot of ambiguity. A second way, which I think is actually more important, is start early with your relationship building. This begins during the whole RFP process, when you’re first seeking bids, you want to meet with their team. Once you’ve selected someone you want to set-up a kick-off meeting. In the contract itself you should also establish well defined communication standards for maintaining the relationship. This usually includes regular project management meetings between the two parties. Our experience has been that vendors are motivated people working at companies that want to be successful just like us, and if you put in the time to build that relationship and make sure that it’s a win-win partnership rather than an adversarial, “You are my supplier,” type of association, odds are there won’t be a breakdown in the relationship. December 2015/January 2016 BIOTECHNOLOGY FOCUS

Outsourcing Report:

Is your outsourcing strategy sound?

Respondent#2

Lee Buckler

CEO and president, RepliCel Life Sciences our chief scientific officer is employed, and we do a lot of our early stage research in that lab. We use a contract manufacturer for our biologics, and this CMO has tremendous process development capabilities. We also use CROs for the management of our clinical trials, so we don’t have armies of clinical management staff. On the device side, we use contract designers and contract manufacturers. Essentially, we have more consultants and contractors than we do employees. Our reasoning is we aren’t looking to build a multi-generational empire or saddle ourselves with infrastructure; we’re simply looking to play a very important role in bringing key products to market while at the same time creating value for our shareholders. Outsourcing also allows us a lot more flexibility when negotiating strategic collaborations, joint ventures, licensing, and partnerships. Since we aren’t saddled with a tremendous amount of hard infrastructure, it’s easier to turn things off and on much quicker. Geography plays a part here too. We’re located in Vancouver, Canada, and it’s not a cheap place to have infrastructure here, and it has its limitations in terms of talent. If you can wrap your head around managing people virtually, by outsourcing, we’re able to cherry-pick teams to contribute to our projects based on the best available expertise and experience from around the world - not just who happens to be in town. From our regulatory consultants in Boston, our CMOs in Austria and our CROs in Europe, it allows us to bring in top notch people that are more defined by expertise, cost, and experience, rather than by geography.

Q Biotechnology Focus: What do you outsource and what role does outsourcing play in your business plan? Lee Buckler: We’re a biotech company with three cell-therapy products in development called RCT-01, RCS-01, and RCH-01, and we are also developing an injection device for delivery of our RCH-01 and RCS-01 products. Our whole business is driven by a couple of philosophical views. One, we consider ourselves an R&D licensing shop, so we don’t aspire to take any products to market. Second, we want to create high-value assets through to mid-level clinical development and then position these assets into the hands of co-development and licensing partners. With this philosophy, we try to minimize the amount of infrastructure and obligations we have and keep things as flexible as possible - focusing solely on our products. Essentially we are a virtual company, and we outsource almost everything. For starters, we have a contract research agreement with the University of British Columbia, where BIOTECHNOLOGY FOCUS December 2015/January 2016

Q What factors do you consider important when you are designing an outsourcing plan or strategy? That depends on whether you’re talking about vendor selection or managing the outsourcing strategy. Regarding selection, it’s really about who you think has the best expertise and experience and is a good corporate fit. When it comes to management, when you’re so heavily dependent on outsourcing key components, you have to be prepared to do a little more plane time and also find online tools that you can use to help you stay in touch with your vendors.

What are some of the key factors when you go through the vendor selection process? How do you balance the desire to pick the best vs. someone you trust? What’s more important to you? It really depends. In our case, our contract manufacturer came to

Outsourcing Report:

Is your outsourcing strategy sound?

us rather serendipitously through relationships, and as we started to engage them, that relationship just continued to grow and solidify. I’m almost convinced it wouldn’t have been the party we would’ve chosen to if we’d gone the RFP route, but it’s the perfect fit for us right now because it grew organically through relationships. When you’re starting out cold, you don’t have any of those relationships or preferences, and you’re doing just an RFP kind of process. For the most part, the people who rise to the top and get on the short list, have the basic expertise, and they all have the alleged experience. They probably don’t differ so much in terms of cost, but cost does become an important differentiator. But at the end of the day, it’s who you think is the best. Also, while I’m not a fan of calling these conceptual relationships partnerships because it is just a fee-for-service kind of relationship, but it feels a lot like a partnership because they’re so embedded in everything you’re doing, and so the fit factor becomes really important. Also, especially in our field which is relatively new – cell-based therapeutics – there is a lot of young and small players. What I’ve seen and experienced on both sides of the equation, is this factor that when you have to justify a really big contract, like manufacturing for instance, to your Board, and it’s someone they’ve never heard of, there’s a comfort level that comes with an entity that’s well-established and proven - even if they’re more expensive - because the risk of them disappearing on you, or not being able to meet their obligations, is perceived to be less.

Q When you design a contract with your

taking place even while you have product in clinical testing. So we’re still learning a tremendous amount about these products, how to manufacture them, the costs of goods and the technologies that are critical to them. So to some people, particularly those with more complicated products where the science is still really evolving, I feel that in order to develop their product optimally, they need to be really close to it, much closer than a contract manufacturer allows them to be. There’s still a lot of unsolved manufacturing being done in cell therapy because it’s not just about economics and you’re not just leveraging standardized procedures, technologies and tools, you’re iterating constantly. Therefore, people have a desire to be close to that iteration, to drive it, to see it, and feel it every morning when they get into the plant. For us, it’s a little different. All of our products are innovative but also in a way, more innovative because of their simplicity than a lot the gene modified cell-therapy products out there today. We don’t gene modify our cell products or differentiate our cells. We’re not working with a stem cell. Our technology is a simple cell expansion play, and we’re investing heavily in different kinds of bioreactors, cell expansion technologies and media formulations to optimize our products, but that science and technology is arguably less complicated than what a lot of people in the industry are doing. For us, with the kind of products we’re developing, it’s arguable that it’s easier to do it without outsourcing partners. Other companies just might not feel comfortable at the same stage.

Q How can you make sure you are getting the most

outsourcing vendors, what are some of the key terms to look for within that contract?

out of your outsourcing partner? How do you monitor that relationship?

For small companies like us, any type of risk sharing is an important discussion to have. Exit or flexibility clauses also become an important consideration because to be successful at what we’re doing; we have to be nimble. We can’t lock into multi-year contracts with a lot of take or pay obligations and no exits. At our stage of development, we need partners that can, to some extent, be flexible. Now, they have a business to run too, so that’s a tension you have to balance.

Like I said earlier, I think you have to be prepared to spend more time on a plane because real-time, face-to-face interaction, and being on site, matters in maintaining a connection to your vendor. You also have to spend more time on the web, and on the phone, than in the boardroom - in terms of project management. If you’re sloppy and you’re not constantly talking with your vendors, there are a lot of things that can just slip through the cracks. One of the other things we did was embed a person in our CMO’s plant. This helps to alleviate some of the need to be there; we feel like we know what’s going on because we have a person there full time. Not every contract manufacturer allows that, but we have a relationship that allows it, and it’s become pretty critical to us because it’s someone we know and trust, and at the end of the day, we know is working for us. If it was a contract manufacturer a couple of hours away from us, it might not be as important, but it’s a long flight and on another continent. I think it’s also important to make sure you have external people available to come in, do inspections and audits, on an as needed or on a regular basis, to keep people honest and to be assured that things are going well.

Q As a cell-based therapeutics company, you mention that many potential outsourcing partners in your space are very young. As such, are there challenges in this space to finding a partner that aligns to your needs? One of the overriding considerations in our field that really dictates whether or not they use a contract manufacturer is that there’s still a lot of process, product and manufacturing optimization that’s

December 2015/January 2016 BIOTECHNOLOGY FOCUS

Outsourcing Report:

Is your outsourcing strategy sound?

Respondent#3

Anthony Giovinazzo

president and CEO, Cynapsus Therapeutics There are very good CROs both in Canada and in the U.S. that can perform chemistry analysis, from a lead optimization and delivery technologies standpoint.

What factors do you consider when designing your outsourcing strategy?

Q Biotechnology Focus: What do you outsource and what role does outsourcing play in your business plan? Anthony Giovinazzo: In the companies I’ve been involved in which include my current company Cynapsus Therapeutics, prior companies Cervelo Pharmaceuticals Inc. and Cita NeuroPharmaceuticals Inc., I’ve always employed an outsourcing model. This involves identifying those elements of the value chain that you can in-fact rely on partners to outsource to because they are experts in a particular area. In addition, they are more current on the latest technologies and processes associated with their particular area of expertise, and they will cost it out on marginal basis rather than a start-up or mid-sized company trying to build all of those elements. The specific areas that you outsource depends on where you are in terms of being very small and pre-clinical versus clinical or even a commercial stage company. In my own experience, it’s been in areas such as manufacturing and lab-based analysis. BIOTECHNOLOGY FOCUS December 2015/January 2016

The way I have done it, for example, is that we’ve outsourced manufacturing at Cynapsus, by hiring an excellent chief scientific officer and executive vice president of chemistry, manufacturing and controls (CMC) to manage the relationship. He comes with a background in large pharma, multiple products launched in multiple countries on a simultaneous basis, and the process is a pretty standard one. You have to sit down as a company and make a list of the technical and business aspects that are critical to you in that particular area. For example, in our case it’s CMC , clinical and pre-clinical laboratory work. And once you have defined the technical and business terms, you then assign a waiting list and the priorities to those aspects. Sometimes you can’t get them all, but there are certain aspects that are critical and important, and once you’ve done that, then you seek to find organizations that have those requisite capabilities and skills, and you evaluate them either through a process of a request for proposals (RFP), or on an individual basis, where you approach them and ask for quotations and proposals. What we tend to do, from our experience, is that we like to enter what’s called an ‘umbrella agreement,’ and once we’ve done that, we then go into specific work orders on very specific pieces of various puzzles that we’re trying to solve with the organization. To summarize, we internally evaluate what the technical and business aspects are, then we put together a RFP and approach several organizations that are the most likely to be able to supply us with the requisite skills. Timing for us is critical, so we’re looking for organizations that have flexibility, that have a sense of urgency and apply that on a very acute basis. We pride ourselves on being able to get things done quickly, and we need partners that do that as well. We then evaluate those proposals and select the organization we feel is the most appropriate. It doesn’t stop there though, because then you have to sit down and insure that there’s alignment on the specific projects as well as the timing associated with those projects. One additional element that we associate very importantly with that process is that

Outsourcing Report:

Is your outsourcing strategy sound?

the members of our team that are involved in that particular area, be it manufacturing, preclinical or clinical, must have an intimate relationship in terms of the negotiation of the terms, conditions and execution plan. This includes having a process in place for identifying red flags early and as well as defined solutions, should something go wrong. One of the practices that we employ in that respect is a design of experiments approach. You break the various pieces down into sub-parts, and you design experiments for those sub-parts that will result in an answer that will help you go to the next stage, and then again to the next stage and so on.

Q What are some of the challenges in finding the right partner to meet your needs? You have to be willing to go through a process of identifying more than one service provider or capable organization and evaluating their strengths and weaknesses. A second element is you have to have someone from your team that’s a very good project manager, who has the respect and commitment of the people on the other side of the fence. That’s not trivial. You need to make sure there is no conflict of personalities, no conflict of timelines, and ensure that you have that organized well. The way it works best is that we have the right person on our team that can manage the project and have open dialogue with the organization that is supplying us with the outsourcing service, such that there is a real joint commitment, a shared approach to success and solving problems.

Q How can you make sure you are getting the most out of your outsourcing partner? How do you monitor that relationship? Let me start by adding to that question. Earlier I said that the internal person has to be very experienced, and must be able to oversee things from a project management point of view very well. That person must have an ability to establish a relationship with the service organization. But one of the things we require is more than just site visits. You conduct a site evaluation obviously at the very beginning before signing any contracts, but it doesn’t stop there. One of the elements we insist on is that our people have continuous ability to visit the site on various aspects of the design of experiments and the successful completion of that design of experiments. We try not to be too pesky or in their hair too often, but it’s important for us to be there frequently, in some cases on a monthly basis. It’s about ensuring things are going in the right direction, and also, in all fairness to the outsourcing organization, to have access to someone that has responsibility, authority and accountability to ensure things go well, so that if there are questions that need to be answered, they are done so in a timely fashion.

Q When choosing a vendor, does size or location of the outsourcing partner factor into your decision? I have never put restrictions on geographic location. It’s nice to have people around the corner, but many times you can’t. What is critical for us is that the alignment on timing, quality of work, problem solving, that the service provider is responsive to our needs in terms of an overall plan or timeline and the very design of experiments. In terms of size, again, no limitations. In some cases we work with huge global manufacturing companies, in others we work with niche players that have a very specific capability. The underlying theme in both cases is to do it right, if you have a clear rapport and open dialogue with the vendors, you are on the right track.

Q What are some of the metrics you use to measure the success of the relationship? We use both positive and negative metrics. Completing work on a timely basis, identifying problems early and the ability to supply solutions to problems as opposed to waiting for us to create a solution are all positives. When you have a win-win situation, the counter party is very interested in what you are doing and interested in gaining more work. On the negative side, we look for whether or not there are large numbers of change orders and whether or not there’s this bait-and-switch attitude. We’re always prepared to make a change of supplier or vendor if things are not going as expected.

Q How do you protect yourself from a breakdown in a sponsor-vendor relationship? Our preference is to try to anticipate various scenarios in the very beginning, not to be ignorant of it, but ensure from the very start you have the right partners. Obviously, sometimes you can’t predict how things will go, so you do your best to protect yourself through agreements that first respect your intellectual property, and second give you the ability to terminate agreements within a reasonable time without a significant cost associated with termination. We do this by having clauses included in an agreement that calls for arbitration if there are insurmountable differences that need to be reviewed and agreed to, as well as adequate insurance coverage. To see this story online visit www.biotechnologyfocus.ca/outsourcing-report-2015-isyour-outsourcing-strategy-sound/ December 2015/January 2016 BIOTECHNOLOGY FOCUS

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By Albert Friesen & Jan-Ake Westin

Drug Development

Innovations in Drug Development and Outsourcing Major Challenges New drug development costs have steadily risen in the past four to five decades, approaching $3 billion for one new medicine, including the cost of failures. Expanding regulatory requirements over time has been a major cost driver.

hifting disease targets and changing science to better understand those new disease targets, with resulting complexity of the R&D infrastructure, are other major cost drivers. Failure is inherent in new drug development, but success rates have decreased as costs have risen. It is estimated that approximately 10 per cent of molecules that enter clinical testing gain regulatory approval, and a much smaller fraction than that counting the entire R&D process. Decreased success rates and uncertainty about pricing of new medicines has increased the financial risks. The combination of these challenges continue to raise the stakes for new drug development.

Adaptations to Meet the Challenges The pharmaceutical industry has gone through dramatic change over the past few decades. Drug companies in the ‘70s and ‘80s had core competencies across a spectrum of functional and operational disciplines that few could replicate. They were the best at and often the only ones capable of discovering and developing new drug treatments. Even if academia or government researchers discovered a new potential treatment, few outside the industry had the know-how, expertise or infrastructure to even think about development, manufacturing, packaging or commercializing the drug product. As regulatory, cost and pricing challenges increased, short-term financial performance drove big pharma business, with resulting major mergers and large infrastructure changes. Big pharma looked to outsourcing as a way to preserve capital and reduce direct costs to deliver earnings. Outsourcing included manufacturing and packaging, drug development, and more recently sales organizations. Major Contract Research Organizations (CROs) emerged with global reach to meet the increasing big pharma needs. To support its infrastructure, major CROs looked for strategic partnerships and preferred service provider relationships with big Pharma. With changes in big pharma, new drug discovery has increasingly been relegated to academia, government-funded projects and primarily small biotech companies. In the process of strategic or preferred big pharma and large CRO relationships, small pharma and biotech companies became increasingly squeezed out of access to quality CRO services. With the burst of the biotech investment bubble in the early 2000s, compounded by the global economic down turn in the late 2000s, venture capital dried up, which aggravated small pharma and biotech challenges to access large CRO quality resources, and ability to build up their own infrastructure. December 2015/January 2016 BIOTECHNOLOGY FOCUS 13

Drug Development Emergence of Specialized Innovative CROs The restructuring of big pharma resulted in massive lay-offs of highly qualified and experienced staff in both preclinical and clinical R&D. Many of those professionals were absorbed by large CROs as part of strategic partnership- and preferred service provider- agreements with big pharma. Many others chose to go their own way to start up new CROs. Those entrepreneurial ventures initially sought to partner with their former employers, but soon discovered the challenges of complying with the rigorous, and perhaps overly generalized, global compliance requirements of big pharma. Both small biotech and small CROs found themselves squeezed out of the major action, despite the fact that they probably had the most innovative solutions with the greatest chances of success. This environment forged new solutions for innovative competency and resource sharing. The entrepreneurial culture fit accelerated that process. Today, we have in Canada a group of innovative service providers built upon a model of strict identification of core competency requirements, and a culture of finding solutions and resources for everything else at highly competitive costs with excellent quality and timeliness of delivery.

Emerging Innovative Clinical Trial CRO Case Study One of those companies is Genesys Venture Clinical Development Solutions (GVI-CDS). GVI-CDS spawned out of a “life science incubator” established in 2007. GVI-CDS has identified as its core competencies expertise in broad clinical development and associated regulatory affairs, coupled with in-depth expertise in clinical development resource procurement and project management. Strict adherence to core competencies, avoids build-up of unnecessary infrastructure and associated over-head. It allows GVICDS to be highly cost-competitive, even compared to low-cost service providers in emerging regions of the world, and with more reliable and better quality service. The clinical resource procurement expertise and experience encompasses all stages of clinical development: identification of therapeutic area experts that have the right expertise and culture fit with the sponsor-company, high enrolling investigators with efficient research infrastructure, current and efficient clinical data capture systems (eCRFs) and biostatistics, central laboratories, imaging vendors, other speciality service providers required for a specific trial, and therapeutic

area monitoring expertise. This enables GVI-CDS to scale up rapidly depending on client needs. Over the years in its existence, GVI-CDS has built up an extensive network of highperforming investigator sites and therapeutic area experts in cardiovascular, nephrology, diabetes and oncology. Examples of recent projects include a Phase 3 clinical trial of myocardial infarction prevention during coronary artery bypass graft (CABG) surgery that enrolled 3,000 patients at 140 US, Canadian and EU sites in a one year period. GVI-CDS were responsible for full service execution of the protocol developed by the sponsor. Another example includes a Phase 2 trial, where GVI-CDS had conducted this sponsor’s proof-of-concept trial, of contrastinduced acute kidney injury prevention during percutaneous coronary intervention that enrolled 360 patients at 30 sites over a one year period. GVI-CDS advised on the protocol, prepared FDA briefing documents, identified key therapeutic experts, identified and contracted all investigators, project-managed and monitored the trial, and provided ongoing clinical trial conduct advice to the sponsor. Other examples include early stage diabetes and oncology trials where GVI-CDS provided clinical and regulatory expertise along with regulatory filings, investigator identification and monitoring. The organization has core competency in the process of clinical development, regulatory affairs and clinical procurement, which gives it the ability to take on new disease areas. Client comments have been extremely positive referring to excellent service, timely advice and guidance, and of on-budget high quality results.

Emerging Innovative Medicinal Chemistry CRO Case Study Medicinal chemistry outsourcing services are sought by big pharma, and by new life science and biotech start-ups. In most cases, pharma has used the outsourcing services to complement or add services to reduce the cost and time of drug development. The biotech model for start-ups has been somewhat different in that it has been used to remain virtual, outsourcing all non-core activities and in some cases all activities other than the CEO, Board of Directors and Advisory Committee functions. In the total virtual model, companies have established a drug discovery platform entirely through a virtual, distributed model, by outsourcing the entirety of drug design, computational chemistry and medicinal chemistry

14 BIOTECHNOLOGY FOCUS December 2015/January 2016

so there is no need for staff or laboratory facilities. In a total virtual model, the start-up company can establish a complete small-molecule discovery and development platform that spans early discovery through to early development without hiring staff or spending any money on infrastructure, saving tens of millions of dollars. Often, in such models, the virtual company establishes a direct partnership with a complete service CRO. One of our CRO’s, CanAm Bioresearch Inc., provides this complete medicinal chemistry service with a particular focus on serving small to medium size companies that want to remain virtual or who do not want to set up their own discovery chemistry operation. The CanAm service is all inclusive, integrating with the client’s operation. Daily interaction, by skype, phone and email directly with the CanAm chemists actually doing the chemistry enables the virtual company client to run the discovery and development chemistry program remotely. This saves the client company the significant burden of fixed chemistry infrastructure costs referred to above plus the annual costs of staff, maintenance and keeping up with the latest equipment and technology. This number can be significantly higher if a virtual company were to equip for a blend of synthetic chemistry, analytical chemistry and pharmacology, such as offered by CanAm Bioresearch. The CanAm program of integrating its services into the virtual early stage company has proven successful, with one example being CanAm’s collaboration with EpiTherapeutics ApS, a Denmark based company with the mission to develop first-in-class selective small molecule inhibitors of epigenetic regulation of gene transcription. EpiTherapeutics was recently purchased by Gilead Sciences, Inc. for US$65 million. The CanAm model appears to be far cheaper and faster in both early discovery, where generating good drug-like hits and leads is the goal, as well as in the latter stages of drug discovery, such as final lead optimization and candidate selection. With the CanAm service model, the client’s fixed costs are minimal and the variable cost is the CRO service that can be expanded or reduced on very short notice to meet the client’s financial and program needs. This allows the client to allocate resources dynamically based on program requirements on a month-to-month basis. This is in contrast to high fixed-cost models where decisionmaking is driven by how to deploy, and pay for, the annual costs of buildings, labs and an installed employee base.

Drug Development One of the reasons CanAm’s model is successful stems from the fact that CanAm integrates its services into the client’s operation so the client feels that the CanAm chemists on their project are part of the client’s company, with the same goal and mission. This reduces the silo effect often experienced if departments have different objectives. The CanAm model demands that the entire team is really part of the design and selection of all targets, the strategy and the details of experimental design. The flat structure of CanAm also contributes to the chemists focus on their work, and enables true teamwork for powerful brainstorming sessions and problem resolution by this all-PhD group. The CanAm model is more about the mindset of the team than it is about the underlying technology. We believe that the GVI CDS and CanAm model of integrating the outsourcing services into the client’s operation is an important driver of success for today’s and tomorrow’s drug discovery programs.

and President of the Winnipeg Rh Institute, Dr. Friesen oversaw the development of Canada’s first biotech product, WinRho, and is a founder of BIOTECanada. Dr. Friesen is the General Partner of CentreStone Ventures Partners, a $22 million life science fund based in Winnipeg, Canada. Dr. Friesen serves as a Director of Canada Foundation for Innovation, on the Manitoba Innovation Council, as Co Chairman, and the Premier’s Economic Advisory Council.

He is the recipient of a number of awards, including Distinguished Alumni, University of Manitoba, The Order of Manitoba and the BIOTECanada Gold Leaf Award for Industry Leadership. To see this story online visit http://biotechnologyfocus.ca/ innovations-in-drug-developmentand-outsourcing/

Jan-Ake Westin is an accomplished clinical scientist and business executive with over 40 years of experience in the Life Science Industry. He is highly skilled in Clinical Program Development, Effective Conduct of Clinical Trials, Good Clinical Practices, and topics related to Life Science Business Strategies. He has a long list of post-graduate studies which include Business Management, Clinical Trial Methodology, Pharmacokinetics, and Good Clinical Practices. He has held major management positions in several of the leading Pharmaceutical, Biotechnology and Contract Research Organizations in the US, Canada and Europe. He received his Pharmacy Degree and M.Sc. in Social Pharmacy from the University of Uppsala, Sweden. Dr. Albert (Bert) D. Friesen, Ph.D. is the CEO of Medicure Inc. and serves as the President of Genesys Venture Inc., a life science accelerator based in Winnipeg, Canada. He has been instrumental in founding and developing several Canadian health industry companies. As the first full time employee December 2015/January 2016 BIOTECHNOLOGY FOCUS 15

By Lisa McKerracher and Kathleen Marsman

Across Canada

A CALL TO ACTION: ENHANCING TARGETED COMMERCIALIZATION FUNDING IN CANADA

ince 2001, the Canadian Institutes of Health Research (CIHR) has offered a funding opportunity for commercially-minded health researchers through The Proof of Principal Program. Affectionately known as “PoP”, the program provided funds to help advance early stage developments in health research, and to establish the data and other intellectual property that is prerequisite to commercialization. The PoP program filled an important gap by providing short term support in the form of one-year grants, for studies to evaluate the commercial potential of health technologies. In addition to receiving the funding, successful ap-

plicants could point to PoP as an endorsement of their technology to garner the attention of potential commercial partners. On December 7 to 9, 2015, the PoP Program committee held its final meeting to determine the last group of successful applicants. The CIHR does not have a succession plan for this specialized program, replacing it instead with “knowledge translation.” However, commercialization of inventive products is not the same as knowledge translation because product development for drugs and medical devices, necessarily involves lengthy timelines. Unfortunately, CIHR did not collect information on successful drugs and medical devices developed after initial POP funding. The POP program was terminated during the funding reforms, before surveys of applicants could be conducted.

CIHR FUNDING REFORMS In the world of research funding, change is the constant upon which we can depend. Over the past two years, CIHR has reformed the investigator-driven funding programs. Not only have the categories of funding opportunities changed, but also the application and review processes have been remodeled to permit a streamlined application process as well as electronic review. Funding decisions will be made on the basis of electronic reviews submitted by members selected from of a College of Reviewers. The intangible benefit of the face-to-face scientific gatherings will be replaced with undeniable efficiencies promised by the new electronic format. With the implementation of these reforms, CIHR has replaced operating grants as well as most other theme CIHR grants by two new funding schemes: a Foundation Scheme focused more on the basis of a researcher’s individual potential, and a Project Scheme for which the proposed project is itself the focus of evaluation. Within these schemes, available funds will no longer be reserved for specific medical categories, such as cardiovascular or neuroscience research, as had previously been the case for operating grants. Nor will a set budget be available to support commercialization projects. Thus, any grant application that includes commercialization requests will necessarily compete with basic research proposals within the Project Scheme. Pitting commercialization programs against basic research to compete for the same money that had previously been designated for operating grants is a counter-productive approach. Commercialization funding is needed downstream of basic research, not in place of basic research.

A SPECIALIZED APPROACH IS NEEDED TO ASSESS COMMERCIAL POTENTIAL Evaluation of the commercial potential of a project requires specialized criteria evaluated by specialized reviewers. Criteria such as having a proprietary position in the marketplace, a view to the potential competitors, and knowledge of the barriers to market access were assessed in the review of PoP applications, setting the application form apart from other CIHR grants. PoP was distinct in the application process and the review process, which both differed from the regular grant 16 BIOTECHNOLOGY FOCUS December 2015/January 2016

Across Canada

Canadian universities rate highly in the world, and continued support of commercialization funding will allow Canada to continue its role as an international leader in health innovation. Sadly, the loss of commercialization funding is likely to result in the loss of industry jobs and Canadian-derived products as technology is exported elsewhere. competitions. The proposed research and the commercialization plan were given equal weight in the PoP evaluation process. Applicants were required to collaborate with their university’s technology transfer office (TTO) to complete the commercialization plan, including an assessment of intellectual property, market and competition assessment and a business plan or partnering plan. Moreover, the TTO contributed to the feasibility of the plan and co-signed the application. The PoP application process was beneficial to both the investigators and the TTO, and by association the universities, research centers, and university spin-out companies. Reviewers of commercialization grants were also different. Committee members were drawn from among commercialization-savvy academic research scientists, the biotechnology and pharmaceutical industries, technology transfer officers, intellectual property experts, and venture capitalists. In recent years, the non-academic members comprised about 60 per cent of the PoP committee membership. The diverse background of the PoP committee members ensured that both science and commercial potential were rigorously debated during the face-to-face meetings where the diverse committee membership drove decisions on projects based on commercial potential and strong science. Another aspect not available in the regular CIHR competition, the applicant received written reviews of the commercialization plan by a panel of experts, providing valuable commercial feed-back to the researcher. Commercialization grants resembling the PoP program are noticeably absent from the new funding schemes. While expenses relating to commercialization are not excluded as budget line items, the streamlined application form does not request information about a project’s commercial potential, or ask questions about market evaluation, existing intellectual property, or patent searching. Such information is critical for the evaluation of a project commercial potential. The PoP application form has been tailored over the past 14 years to ask specific questions of the applicants and of their university technology transfer offices. Without addressing these specific questions, applicants and reviewers alike will have little structure or context within which to evaluate the commercial potential of submitted research plans. Assimilating the PoP program into a common application process in the new funding schemes provides no incentive for a researcher to seek a commercial partner at early stage of research. This may lead to a loss of funding to CIHR.

A CALL TO ACTION FOR THE BIOTECH COMMUNITY CIHR must create and expand programs available to Canadians to stimulate the innovation community to create drugs and devices. Canadian universities rate highly in the world, and continued support of commercialization funding will allow Canada to continue its role as an international leader in health innovation. Sadly, the loss of commercialization funding is likely to result in the loss of industry jobs

and Canadian-derived products as technology is exported elsewhere. For those readers involved in commercialization of research that originated in academic centers, or for those readers who may have their own success stories of a product developed from PoP funding or from early stage commercialization funding: the authors of this article want to hear your story, as we put together a catalogue of support from the biotechnology and health research community. Please email us at POP@bioaxonebio.com. Dr. Kathleen Marsman is the current Chair of the CIHR Proof of Principle grant review committee, and is a patent agent at Borden Ladner Gervais LLP in Ottawa, Canada. Dr. Lisa McKerracher is the current Scientific Officer of the CIHR Proof of Principle grant review committee, and is CEO of BioAxone BioSciences in Cambridge, MA, USA, and Adjunct Professor at McGill University.

Contract Research Laboratory Services Based in Vancouver, British Columbia, since 1991. Serving pharmaceutical and life sciences companies in Discovery, IND- and NDAEnabling Studies: In Vitro and In Vivo Drug Metabolism / PK / ADME •14C-labeled metabolite profile & biodistribution •Standard Council of Canada GLP accreditation Cancer Cell Lines & Xenograft Models •Biomarker assays •Efficacy and toxicity endpoints GLP Bioanalytical Assays Development and Validation •Thermo-Watson LIMS data management •Clinical PK sample collection kit and stability evaluation cGMP Analytical Chemistry, Manufacturing and Controls •API & Drug Product Stability •Impurties Ms. Clara Faan, VP Business Development Phone: 604-432-9237 x224 Email: cfaan@bripharm.com Website: www.bripharm.com

December 2015/January 2016 BIOTECHNOLOGY FOCUS 17

By Shawn Lawrence

Spotlight

Mississauga’s innovative life science Ecosystem is expanding

t’s a topic often discussed at many life science conferences, summits and industry gatherings. What are the common catalysts and elements to building a booming life science cluster? By the numbers, the City of Mississauga seems to have many of the right elements already in place. It ranks as the second largest life science cluster in Canada in terms of employment and the fourth largest in terms of number of companies. It’s also home to a talented labour pool and leading educational and healthcare institutions. But perhaps most importantly, its local government has long been a great champion for the industry and has nurtured its growth. With all these things going for it, the City of Mississauga’s Economic Development Office recently undertook another significant step in support of its life science industry, through the appointment of Andrea Mulder to the newly created position of Life Sciences Business Development Consultant. Reporting to the Manager of Sector Development and Economic Partnerships, Bonnie Brown, Mulder will act as a liaison between industry and government. According to Brown, she will provide leadership and support in developing and implementing initiatives that will further achieve and advance Mississauga’s Life Sciences sector “The idea is we’re going to be exploring partnership programs growth and innovation. “Part of the whole portfolio shift that we’re where we can have mid-sized biotech companies’ link with taking here in Mississauga is to really get into a smaller ones, offering their insights on best practices to the deeper level of understanding of all of our key industry sectors, and it’s no accident that the smaller companies to help them grow and flourish. That’s an first sector we’re starting with is life sciences, as example of an ecosystem that’s helping itself grow.” it is a key sector in terms of economic development in Mississauga,” says Brown. — Andrea Mulder “We know that Mississauga has a strong leadership role in Canada already with its life to something big moving forward into the future.” sciences cluster, but we want to grow it even more,” she says, and She adds she’s always been impressed with the way the city and that one of Mulder’s responsibilities will be to develop a life science the local government has always championed the sector. cluster strategy for the next five years. “So essentially answering the “Our past mayor Hazel McCallion was always very supportive questions: where are we today? Where do we want to go? How of the life sciences sector and our current mayor, Mayor Bonnie are we going to get there? And how are we going to measure our Crombie has continued the tradition with her ongoing commitment. success?” The whole strategic focus from the top-down is aligned to this secAccording to Brown, Mulder was chosen because of her extensive tor as one of the key pillars of success for the future of economic industry experience and because she was knowledgeable of existdevelopment in Mississauga. I believe we are well poised to start ing sector issues and trends. Prior to joining the City of Mississauga, to implement some really innovative and exciting ideas,” she says. Mulder held several senior leadership positions in the life Sciences Explaining what she wants to accomplish, Mulder says her primary industry, including with UCB Canada Inc., King Pharmaceuticals responsibility will be to look after the interests of Mississauga’s existCanada Inc. (a Pfizer Company), Pharmacia and Upjohn (also a ing corporation base of more than 390 biotech, biopharma and life Pfizer Company) GlaxoSmithKline and Roche Canada. An added science companies, while at the same time developing programs and bonus was that many of these companies were Mississauga-based, initiatives that connect companies and the life sciences ecosystem and this gave her a unique perspective. together. The first step, she explains, is reaching out to companies “We felt strongly that it was important to have someone from the in Mississauga to learn about what the City of Mississauga can do industry who had experience in working with pharmaceutical, bioto support their businesses. Some feedback she has heard already tech and life science companies, and knowledge of the Mississauga is that Mississauga’s life science companies want to connect and market,” says Brown. She adds that Mulder was able to identify with network with each other at a greater level. As such, one of the first who the major players were. initiatives that Mulder hopes to launch is a new Mississauga life sciFor Mulder, it’s a role she’s truly excited to take the ball and run with. ences sector partnership program. “What attracted me was the real innovative nature of this new “This program will speak to who’s here now, and will be about position, and having the ability to carve new paths and really lead 18 BIOTECHNOLOGY FOCUS December 2015/January 2016

SPOTLIGHT creating a family here where we’re all helping and supporting each other, to develop partnerships between the corporations, healthcare and educational institutions within the city of Mississauga,” she says. “So often companies in Mississauga are using the services of a company in another jurisdiction, not realizing that the same services are available to them from a business just down the street. What we want to do is raise awareness of some of the innovative companies we actually have in Mississauga because that helps our own life sciences family to grow and succeed. It’s part of an economic development strategy when you look at your own ecosystem and integrate the services within it.” Moreover, she wants to see the scope of these partnerships expand beyond traditional business-to-business transactions. To this end, the City of Mississauga will be exploring things like mentorship programs between companies. “The idea is we’re going to be exploring partnership programs where we can have mid-sized biotech companies’ link with smaller ones, offering their insights on best practices to the smaller companies to help them grow and flourish. That’s an example of an ecosystem that’s helping itself grow,” says Mulder. She also wants to include local institutions like the University of Toronto in Mississauga and Sheridan College, as well as some of the associations that feed into that greater life science ecosystem into these types of programs, exploring deep partnership opportunities in areas of talent and innovation. “The idea is if a company here in Mississauga needs some key talent, and as an example there are 30 to 40 new grads coming out of the UTM Masters of biotechnology program every year, we want to make sure that those corporations are connecting with UTM to hire their graduates. Moreover, we also want to work with our post-secondary institutions to help them expand the programs they offer in order to fill gaps that might exist with some of these corporations in terms of education and talent in the future.” In addition to supporting these types of local initiatives, Mulder says she has some external priorities as well including launching initiatives that attract new investment and businesses to Mississauga. “This includes promoting the city’s life sector at domestic and international trade shows. We want to get the message out there that Mississauga is the place to be for life sciences.” She adds there is much to promote. “We have a very innovative culture here, with exceptional talent. It’s also a very diverse sector, with multiple sub-sectors. We’re not just a collection of pharmaceutical and biotech companies. We have everything from diagnostic, digital health, nutraceuticals, medical supply/ devices, manufacturing, consultants, and other healthcare companies that feed into this whole ecosystem. And I think this diversity is what allows for that ecosystem to ebb and flow and keep talent here even when times are tough.” According to Mulder, the end goal or vision is to be the number one life science and biotech cluster in Canada. “That’s our vision, long term. It’s ambitious, but very possible,” she says. She encourages those wishing to learn more or get involved in the life science industry in Mississauga, to reach out to her through the City’s Economic Development Office either by phone 905-615-3200 ext. 4406, or by email at Andrea.mulder@mississauga.ca . To see this story online visit http://biotechnologyfocus.ca/mississaugas-innovativelife-science-ecosystem-is-expanding/

Life Sciences Ontario Annual Awards Gala Dinner

Recognizing 2016 Award Recipients Reserve your table or ticket today February 24, 2016 at Liberty Grand, Exhibition Place, Toronto

Lifetime Achievement Award: Dr. Murray McLaughlin, Executive Director, Bioindustrial Innovation Canada; President & CEO, Sustainable Chemistry Alliance

Community Service Award: Dr. Bonnie Schmidt, Founder & President, Let’s Talk Science

LSO Volunteer Award: Jason Locklin, Director, Global Government Affairs, Alexion Pharma Canada

Public Service Award: Allison Barr, Director, Research Branch, Ontario Ministry of Research and Innovation

LSO Leadership Award: David Allan, Board Member Formation Biologics

Life Sciences Company of the Year: Profound Medical Corp Steve Plymale, CEO

For more information on registration and sponsorship phone: 416-426-7293 or email: admin@lifesciencesontario.ca. For more details, please visit: www.lifesciencesontario.ca December 2015/January 2016 BIOTECHNOLOGY FOCUS 19

Special Report

Biopharmaceutical Companies Set to Benefit from International Trade Agreements

ajor international trade agreements – the Comprehensive Economic and Trade Agreement (CETA) and the Trans-Pacific Partnership (TPP) – will see Canada’s IP regime further harmonized with our major trading partners, bringing benefits to biopharmaceutical companies. The text of CETA was released in September, 2014, and the text of the TPP on November 5, 2015. Both agreements contain several IP provisions, but for biopharmaceutical companies, it is the agreement to provide additional protection to pharmaceutical products protected by patents that may be the most notable changes.

Patent Term Restoration

Both CETA and the TPP include provisions that will provide for “patent term restoration” (PTR): an extension to patent term. The basic patent term is calculated as 20 years from the filing date of the application for a patent. Other jurisdictions, such as Europe and the US, have long recognized that regulatory delays in bringing a drug to market can significantly erode the effective patent term. PTR is thus available in the US and Europe to address this delay, and if CETA or TPP are ratified, then there will also be PTR in Canada. CETA includes clear guidance on how this additional period of protection is to be calculated. The term is to be for a period equal to the time between the patent application filing date and the date of the first marketing authorization minus five years, and then capped at two to five years. While Europe provides up to five years, the Canadian government has indicated that the maximum period in Canada will be two years. There are other limitations in CETA regarding PTR, including that term may only

be extended on one patent per product, and the extension applies only to the approved pharmaceutical product and use. CETA will also allow an exemption to permit Canadian made generic drugs to be exported during the PTR period. The government has also indicated that PTR will not apply to previously approved products. The TPP provides no guidance on what the PTR regime should look like. However, it is expected that implementation of PTR under TPP will not differ under CETA.

Additional Exclusivities

The TPP provides for a possible further extension to patent term to account for unreasonable delays by a patent office. Innovators patenting in the US will be familiar with “patent term adjustment” (PTA), which is a further extension to term that is entirely separate from PTR, and is not limited to pharmaceutical/biopharmaceutical patents. Neither CETA nor the TPP will require Canada to provide any additional exclusivities to protect biopharmaceutical products. For instance, the data protection regime for “innovative drugs” will not be expanded beyond the current eight years (8.5 years with a pediatric extension), despite longer terms being available in some countries for biologics. In addition, neither agreement will require orphan drug exclusivities.

ment has indicated that they will use this opportunity to end “dual litigation.” Under the current system, the same patent can be litigated as between the same parties for the same product twice. TPP does not address this issue.

Concluding Remarks

CETA has not yet been signed, and TPP is still subject to review. It is unclear when either agreement will therefore be ratified and Canadian law amended for CETA or TPP compliance. But, we are optimistic that harmonization – and particularly PTR - will eventually come to Canada. Daphne Lainson

is a partner in the Ottawa office of Smart & Biggar.

Thuy Nguyen

is a partner in the Ottawa office of Smart & Biggar.

Further Changes: Patent Litigation

For those familiar with the Patented Medicines (Notice of Compliance) Regulations, and the problems innovators may encounter in appealing a negative decision, CETA includes a provision to provide effective rights of appeal. The Canadian govern-

20 BIOTECHNOLOGY FOCUS December 2015/January 2016

To see this story online visit www.biotechnologyfocus.ca/ biopharmaceutical-companiesset-to-benefit-from-internationaltrade-agreements/

CALENDAR JANUARY 2016

APRIL 2016

MAY 2016

January 11-14

April 4-6

May 2-3

BIO Europe Spring 2016 J.P Morgan Healthcare Conference + Biotech Venue: Stockholm, Sweden Showcase 2016 new card:Layout 1 1/31/2013 9:09 Page 1 Web:AM www.ebdgroup.com/bes/index.php Venue: San Francisco, CA Web: www.jpmorgan.com

Bloom Burton & Co. Healthcare Investor Conference Venue: Toronto, ON Web: www.bloomburton.com

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April 17-20 January 23-27 SLAS2016 Venue: San Diego, CA Tel: (630) 256-7527 Fax: (630) 741-7527 Email: slas@slas.org Web: www.slas2015.org

World Congress on Industrial Biotechnology Venue: San Diego, CA Web: www.bio.org/events/conferences/ world-congress-industrial-biotechnology

June 5-9 Canadian Chemistry Conference and Exhibition Venue: Halifax, NS Tel: 613-232-6252 Web: www.csc2016.ca

FEBRUARY 2016

SRC101

February 8-9 Bio CEO & Investor Conference New York, NY Email: bd_registration@bio.org Web: www.bio.org/events/conferences/ bio-ceo-investor-conference

February 24 LSO Annual Awards Gala Venue: Toronto, ON Tel: (416) 426-7293 fax: (416) 426-7280 e-mail: admin@lifesciencesontario.ca Web: www.lifesciencesontario.ca/events/ eventsCalendar/LSOGala2016.php

February 26-28 Annual BIOTECanada Investor Summit Venue: Whistler, BC Web: www.biotecanada.ca/en/what-we-do/ events.aspx

MARCH 2016 March 6-11 PITTCON 2016 Venue: Atlanta, GA Tel: (412) 825-3220 Fax: (412) 825-3224 email: info@pittcon.org Twitter: @Pittcon Web: www.pittcon.org

March 30-April 2 AMMI Canada - CACMID Annual Conference 2016 Venue: Vancouver, BC Tel: 613-260-3233 Fax: 613-260-3235 Email: info@ammi.ca Web: www.ammi.ca

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For a quick response please fax: 905-727-4428 or e-mail: circulation@promotive.net December 2015/January 2016 BIOTECHNOLOGY FOCUS 21

THE LAST WORD

By Peter Pekos

Offshore Manufacturing: The Tide is Moving, But Which Way? “Because things are the way they are, things will not stay the way they are.” — Bertolt Brecht, German poet

M Peter Pekos,

President and CEO Dalton Pharma Services

uch of my working life is spent attending industry conferences, participating in expert panel discussions, taking in anecdotes after hours, and listening intently to what my clients are saying. About four years ago, I became aware of a change in the dialogue about offshore manufacturing more talk about bringing business back to western CMOs, and more news about business actually moving back. This has escalated with each passing year. I am not surprised at this development. My reasons are outlined below. First, we are seeing the normal business cycle that accompanies migration of difficult or demanding manufacturing operations to countries with low labour rates. With time, wages go up, and infrastructure costs increase as the sophistication of the manufacturing increases. This has happened to pharma CMOs in China and India, and their cost advantage is shrinking. At some point the decline in cost differences may no longer justify the added risks inherent in offshore manufacturing. If decision makers come to that conclusion, they may look at two alternatives: 1) bring the manufacturing back to western CMOs, or 2) try to recapture the high cost differential by looking for opportunities in countries with a much less developed pharma industry and low wages, perhaps Russia, Brazil, or Eastern Europe. Second, there are a host of pragmatic considerations because of other trends in our industry. Regulatory compliance continues to become more stringent, and this will continue. China and India have been working hard to catch up with North American CMOs, but they are not there. Some sponsors appreciate the powerful reality that offshore CMOs are ascending the learning curve on their dime and will become their competitors in the future. Compliance is an even bigger issue as we move toward more complex manufacturing requirements for newer formulation of drugs and therapeutic vaccines, and toward precision medicines linking products with diagnostics. For products that treat smaller populations, there is added incentive to value the superior security of supply and overall reliability provided by western CMOs. Sponsors are becoming more realistic about the relative price of dosage forms in drug development. The cost of the dosage for an advanced clinical trial program is typically 10

22 BIOTECHNOLOGY FOCUS December 2015/January 2016

to 25 per cent of the clinical cost. In some trials the cost per patient is upwards of $30,000 so the dosage cost can be an even smaller fraction. Since the fee for an effective trial tends to be accepted as “fixed”, it was natural to try to shave the manufacturing budget by going offshore. The potential savings are a small percentage of the total cost. Is it worth the disadvantages of dealing with an offshore vendor, including the added management complexity and business risk? It is not only offshore CMOs that want contract manufacturing business. Some countries, especially ones in Asia, are willing to make massive investments to get North American drug producers to move all manufacturing there. In one case I know of, an offer was made to a manufacturer of a critical line of drug products to move all Canadian production to a completely new offshore facility built to the specifications of the company. The cost of the facility and infrastructure would be of the order of $350 million. The offer is especially attractive because the company’s current facility will have to be replaced within twenty years. I don’t know what the company will eventually do, but there are good reasons for being wary. The offshore country is politically stable for the present, but the continuing rule of law is not guaranteed. The country does not have a long or substantial history of pharmaceutical manufacturing. What comfort level is there in protection of IP, or in a culture of safety and excellence, or in infrastructure support in the future? Although the return of contract pharmaceutical manufacturing to North American CMOs is a clear trend, no one expects it to turn into a tsunami. We still need to demonstrate our value every day to our clients. On the other hand, the flight in our industry to offshore manufacturing was an experiment of monumental proportions, and at this point an increasing number of sponsors are being motivated to look at their situation more critically. It is not surprising that many are taking the option of bringing their contract manufacturing back.

“Maximum return was the maxim to which we returned.” — Mohsin Hamid, novelist

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