Why have only a few European biotechs made it through the IPO window?

By Steve Dickman, CEO, CBT Advisors

Posted to Boston Biotech Watch and to the Partnering360 blog

If the recent falloff in biotech IPOs continues, then many European biotechs would seem to have missed the longest, widest IPO window in the history of the industry. Why did a few European biotechs manage to go public (on NASDAQ, Euronext and the London Stock Exchange) in this window when most others did not succeed or even try?

In recent advisory work for about a dozen companies at various stages of the IPO process, five of which went public, and at a panel discussion organized by your correspondent and the EBD Group on the topic of European biotechs having US IPOs at last month’s BioPharm America conference, I identified three major trends contributing to the paucity of European IPOs:

  • Lack of access to EU capital for EU companies;
  • Absence of interest from (US) crossover investors in EU companies (maybe because they were not asked to invest); and
  • The conservative attitude of European IPO investors.

Sorting out the reasons for this phenomenon is important because of the long-term implications for the biotech industry in Europe. I’ll circle back to that larger question after looking at the data on some representative European IPOs and examining the reasons more European biotechs have not made it to an IPO during this window.

In Table 1 below I put together a sampling of eight European biotech and life sciences companies that pulled off IPOs in 2013 and 2014, their locations, their IPO dates and the amount of capital they raised.

Performance of some IPOs by European biotechs.

Table 1: Performance of some IPOs by European biotechs. Bold: CBT Advisors clients

Some observations:

  • Companies came from several European countries.
  • They went public on several stock exchanges.
  • Some of them raised a considerable amount of money (though typically less if they went public in Europe).
  • Most of these are therapeutics companies (similar to the US IPO crop).
  • With one dramatic exception, the stocks have traded down.

By comparison, according to data from an industry insider we know, this group of European companies have raised about the same on average as US biotechs that have gone public on NASDAQ in 2013/14 – $68.5 million for these six vs. $64 million to $70 million in the comparable crop of US-based biotechs. The trading down tells me that, while investor interest was just as strong initially for the European biotechs as for their US counterparts, the European companies either did not have the news flow or (my hypothesis) they lacked the “true believers” in their stories that would have been required to keep prices up in the months after their IPO.

Venture investors like panelist Rafaèle Tordjman, a general partner with Paris-based VC fund Sofinnova Partners, recalled that there have always been such challenges for European companies. “Our portfolio company Movetis went public on Euronext at the same time [in 2009] and at the same stage as Ironwood Pharmaceuticals but the valuation was three times less!” To be fair, she continued in an email, Movetis, later acquired by Shire, owned only European rights to its gastroenterology product whereas Ironwood owned worldwide rights. But the valuation gap still seemed disproportionate.

What is striking is the number of US companies that have gone public on NASDAQ: About 70, by my count, versus just six European companies. According to OECD, in 2013 there were 2,954 “dedicated” biotechnology companies in the United States and 2,654 in Europe. “Dedicated” firms are those that devote at least 75% of their production of goods and services, or R&D, to biotechnology. Even if these numbers were off by a large amount based on different definitions or stages of biotechs, and even taking into account the superb performance of the US stock market across the board as compared with the market in recession-prone Europe, it would still seem that a number of envious European biotechs are looking across the pond and wondering why their star has not yet risen. Here are my three answers:

Lack of capital from local investors

Despite the huge increase in investment interest in biotech in the United States from both specialist biotech investors as well as generalists, the sector has not gained wide enough appeal yet among either category of European investors to provide sustained support for a European biotech industry on either US or European exchanges. On top of that, what has happened lately is a wave of specialist support for US biotechs, which have been able to go public without much generalist backing at all.

In part, the lack of support in Europe for European biotechs is in part a function of scarcity, said Philip Astley-Sparke, a Venture Partner at the top-tier Dutch VC fund Forbion. He also happens to be President, US, of UniQure, one of the successful US IPO candidates. “Historically, LSE biotech listings did not get done unless generalists were involved to a large degree. In the States, no generalists are required.  These UK generalists are unlikely to be diversifying into US biotech. Hence, a few UK biotech IPOs may get done and then a single disappointment sends the generalists running for cover. This makes the market less stable. By contrast, a few blow ups on NASDAQ is just noise.”

In any event, the total amounts raised by biotechs in both IPOs and follow-ons combined have turned up in Europe but they still lag US deals by a wide margin (Figure 1).

Biotech deal volumes (cumulative) 2004-2014: Europe lags

Figure 1: Europe lags in volume. Data courtesy Dealogic. Figure courtesy FT.

Some reasons vary country by country. Germany, in particular, has lain fallow for many years in the aftermath of the dot-com boom. German tech stocks have come roaring back but there has not been a single biotech IPO on the Frankfurt exchange. Only one Germany biotech company, Affimed Therapeutics, an antibody therapeutics company in Heidelberg, had a NASDAQ IPO in 2013-14. It raised $56 million.

In other European countries such as the Netherlands and Great Britain, there are quite a few high-quality biotech companies so windows might someday reopen. There are signs of a thaw in Switzerland, where both institutional and retail investors were burned by disappointing clinical results from companies like Addex and Cytos. On September 23, the day after the panel discussion took place, Zurich-area biotech Molecular Partners announced that it was filing for a blockbuster $134 million IPO by the end of the year on the Swiss exchange SIX.

But none of the European biotechs I know would be likely to choose an EU over a US IPO if current conditions prevail. If the wave of IPOs that hit NASDAQ were to later reach Europe’s shores after it hit NASDAQ, this would be about the time for it to happen, but, with the exception of that one big-ticket Swiss IPO attempt, there is little sign of a biotech boom on Euronext or other exchanges.

In fact, on October 21, just before this post went to press, Molecular Partners pulled its IPO due to “market conditions.” “Whenever Wall Street starts coughing, Europe gets pneumonia,” was how one European biotech industry insider characterized that reversal.

Missing crossover investors

For those who have not encountered them, crossover investors, mostly US-based, have been driving the surge in biotech investment for some time now. This is a big change from the 1990s and early 2000s, when many pre-IPO investors, including venture capitalists, were eager to “flip” their shares immediately post-IPO. That period ended abruptly in around 2003-2004. What has happened lately is really the opposite. Savvy crossover funds jam-packed with PhDs and MDs are getting in just before the IPO with the goal of getting a bite of the company at a better valuation than they would get at the IPO. The same investors then typically buy in the IPO, then hold for clinical data. That is, the US crossover investors are not investing in the biotech as a non-public entity in order to turn it into a public entity that is now liquid and “flippable” but rather to turn it into a public entity in which they can share in and reap the rewards for good data (once their lockups have come off and they are allowed to sell shares).

It’s not that Europe has none of these deep-pocketed, risk-loving investors. Some have played quite strongly in the recent boom – some funds in Switzerland, Polar Capital in London and Omega Funds in London come to mind. But the diversity of the crossover investing sector, including mutual funds and some VC-like funds as well as traditional long-only hedge funds, and the sheer number of funds in the United States dominate the industry. Indeed, Omega has begun to invest more frequently out of its Boston office and considers itself more of a global investor. At least twenty US funds, some of them able to deploy many hundreds of millions of dollars in capital, have been extraordinarily active over the past two to three years.

There is no law preventing European management teams from pitching the same crossover investors that their US counterparts are pitching. But the logistical challenges are apparent. Ultimately, said Astley-Sparke, “a European company coming to the US has to be here a year in advance, doing non-deal road show work, getting in front of the crossover investors and preferably doing a crossover round. That [crossover round], in my experience, is almost a pre-requisite for being taken public by one of the larger banks.” Tordjman concurred that for Sofinnova’s portfolio company ProQR, a Netherlands-based therapeutics company focused on cystic fibrosis, the crossover round was very helpful.

Panelist Dan Grau, the President of UK-based Heptares Therapeutics, a highly regarded, still-private drug discovery and development company with management located in both London and Boston, concurred. “The pathway of doing a crossover financing to lead you to an IPO is clearly the preferred pathway,” he said. The caveat for companies, said Tordjman, is that in order to access all that capital in the United States, sometime companies have to make sacrifices in their valuation. “It’s an equilibrium,” she said. Lining up the preferences of existing investor against the valuation wishes of new investors requires careful thought and planning.

It will be a while before such a fund group can emerge in Europe. Some of the US-based crossover investors are part of decades-old fund families (e.g. Fidelity). Others among the seven thousand hedge funds in the United States are the specialists focusing specifically on pre-IPO biotech. It will almost certainly require a pretty large crop of European biotech IPOs that turn into long-term success stories for an investor pool like this to be replicated in Europe, if it ever is.

“What are you selling, the promise or the actuality?”

The final factor that is holding Europe back is more of a cultural one. US and European investors think they are buying different things and value companies accordingly. European investors want to see more data; US investors are more interested in the “sex and violence,” as Astley-Sparke put it in an email, that accompany earlier-stage companies. Grau summed it up nicely on the panel: “For US investors, there is a greater appetite for something that has potential and promise but may not have shown its data, may not have become actual yet. One doesn’t see exactly the same kind of fever on the European side, which sometimes be a bit more conservative in looking for the evidence in hand, especially for therapeutics, that you have crossed a risk threshold. So that is a potential dividing line. The reception we have as a Phase 1 stage clinical company with a substantial preclinical pipeline on Wall Street, whether we are talking to the buy side or the bankers, is very intense. They see the prospect of a very interesting data flow coming soon.”

US investors do occasionally invest in EU companies such as Innate Pharma and GenFit, both in France, says Otello Stampacchia, a Partner with Omega Funds. “Typically,” he says, “these investors need to see a clear value proposition (e.g. when there is more attractive pricing of assets in European companies) as well as a presence in a very topical space – immuno-oncology for Innate, NASH for GenFit.

What hangs in the balance for the European biotech industry is more than just the return rates for some biotech VCs or the valuations of a few biotech companies, as important as those aspects absolutely are for the readers of this blog. IPOs these days are financing events rather than exit opportunities. This is consistent with the “buy-and-hold” approach that most crossover investors are taking now with most therapeutics company shares they own. But then what is the endgame? For many companies developing exciting new therapeutics, that will be acquisition by existing biotech players. Biogen Idec found its high-flying dimethyl fumarate product Tecfidera in a European biotech. Amgen snapped up Micromet and BioVex, both of which moved part of their operations to the United States prior to acquisition. Amgen kept a research facility open in Munich but the companies otherwise were lost as sources for new ideas, entrepreneurs and capital in Europe. Other such examples are bound to follow.

As I see it, what is at stake is Europe’s ability to build IPOable companies and fund them beyond the first good dataset. What makes a place a good biotech hub is well-known to us in the biotech nexus of Boston: Durable, lasting sustainable companies generating products, revenues, returns, innovation, ecosystems and spinouts. If the companies are all getting acquired – nipped in the bud, so to speak – such an ecosystem does not arise. If Europe wants to have a sustainable biotech industry, it doesn’t want all the companies acquired, at least not before there is enough value in the company and its team that it can create spinoffs and get them funded. On the other hand, if I’m a VC shareholder, I want and need them to get acquired.

Panelist Sinclair Dunlop, the Founder and Managing Partner of Epidarex Capital, an Edinburgh-based VC fund, agreed that this is a challenge, but that the interests are actually aligned right now in favor of acquisition. “[As an investor], you have to make money. You’ve GOT to be able to deliver competitive financial returns to financial institutions that back the cluster in those locations. Only then have you got a shot at recycling capital and ultimately growing it. One thing we lack in certain parts of Europe is the generation of entrepreneurs who have made their mint and who are now back to recycle their cash. You don’t have that yet in enough parts of Europe.”

Meantime, Tordjman reported that DBV Technologies, a Paris-area Sofinnova portfolio company making protective immunotherapies against peanut allergies – largely a US market – had announced an hour before the panel began that it was taking the next logical step after it pulled off a successful 2012 Euronext IPO and, in September, 2014, obtained excellent Phase 2b data: it filed an F-1 with the SEC to go public (again) and have a dual listing on NASDAQ.

# # #

1 Comment

Filed under Uncategorized

Sure, Biotech is Hot. But Are Biotech IPOs a Good Investment?

A Guest Post to Boston Biotech Watch by Christoph Bieri, Managing Partner, Kurmann Partners*

This year will see an unprecedented number of biotech IPOs at a record high investment volume. But  is it wise to invest in them?

We tracked the performance of about 350 biotech and life sciences companies which listed on NASDAQ, NYSE, LSE/AIM and the Swiss Exchange SIX beginning in 2000.  As shown in Figure 1 below, we would divide those fourteen years into four distinct phases:

  • The years 2000 and 2001, which we call the “millennium vintage”
  • The years 2003 to 2007, the “post-millennium”
  • The years 2010 to 2012, the “post-Lehman”
  • The current period, the “13/14 boom”

Figure 1: Funds invested in biotech IPOs, cumulative, Jan. 1, 2000 - Oct. 9, 2014

 

We then tried to estimate the performance of each newly issued stock. Our model assumed that somebody invested at the IPO and held the shares until today, until the company was bought or until it went out of business. We calculated the gains or losses made under these assumptions, correcting for stock splits where applicable. Grouping the individual performance by the date of IPO in the above phases results in Figure 2:

Figure 2: Performance by vintage of biotech IPOs

 

You can read the bar graph top to bottom. The top blue bar represents the total of all amounts invested at the IPO. This is followed in light green with the total appreciation (or depreciation) of the share price until today (October, 2014) if the respective company is still listed. In case the company was sold, the next bar (in red or green) shows the profit or loss the initial investors made.  The next red bar reflects the total funds invested in those companies that later went bankrupt. The net of all of these changes is shown above as gain or loss in percentage of the total investments made.

As you can see, the millennium vintage did not perform well at all. In our (simplified) assessment, investors on average took a loss. According to our analysis, the best vintage was those companies that went public in the extremely risk-averse climate post the 2008 Lehman Brothers bankruptcy. As of today, those investments have almost doubled.

We admit that there are many caveats to our analysis. The biggest factor skewing this analysis is what we see as the current valuation inflation, which has had a disproportionate effect on those companies that listed in the post-Lehman phase (hence the big contribution of “share appreciations” to the net gain). Also, those companies which went public post-Lehman had less time to go out of business, so to speak. We may have missed stock splits (reverse or “real”) or some of the other tools which companies resort to when in dire straits. We did not account for cash pay-outs, and secondary offerings, non-dilutive funding or licensing transactions are also not included. But we think we still got a pretty clear picture.

Figure 3 puts the current climate into context. This chart shows IPOs on a time axis. The bubbles indicate the size of the initial offering in millions of US dollars. The y-axis gives the stock appreciation as of today (or until acquisition) on a logarithmic scale. Not surprisingly, the “cloud” of new IPOs of the 13/14 boom are still clustered around the 1x mark on the y-axis since they have not gained or lost much value in this short time. We can also see the diverse fate of the millennium vintage, when a similar IPO boom took place.

The IPO weather forecast: Clouds on the horizon?

 

Is the current frenzy just the “return to a healthy normal”, as some industry leaders say? Or is it “the folly of year 2000 all over again”, as some others state?  We don’t know.

Biotech always makes for exciting investments, in all shades of the word “exciting”. The combination of money, science and the potential to be part of something really new and important may be satisfying all by itself for some private investors. So there is the fun factor (if you can bear the potential losses). Those who intend to profit will spread their risk broadly and time their investments carefully.

# # #

*Kurmann Partners is an M&A and strategy advisory firm based in Basel, Switzerland, advising globally on mid-market transactions in the Pharma, Biotech and MedTech industries.

2 Comments

Filed under Biotech

Health IT: Will Europe catch the wave?

By Steve Dickman, CEO, CBT Advisors

The US health IT space is white hot. Europe lags far behind both in the number of companies and in the amount of money being invested. There have been very few (no?) exits. I was wondering if Europe will ever catch up and which companies and geographies are emerging winners. So I decided to survey a half-dozen Europe-based VC partners active in healthcare investing some of whom have taken their first tentative steps into health IT investing. Here’s what I found out.

But first the impressive US benchmarks: HealthITNews reported in mid-July that VC investment into health IT surpassed $1.8 billion just in the second quarter of 2014, double the amount that had been raised in the previous quarter. Investors have cashed in on exits from companies such as Castlight Health (NASDAQ IPO in 2014); Humedica (acquired by United Health for a reported several hundred million dollars in 2013); and Healthy Circles (acquired by Qualcomm Life in 2013 for an undisclosed amount).

This makes sense given the obvious drivers for health IT activity in the United States: the mandated shift to electronic medical records (EMRs); consumer interest in web and especially mobile health apps; the boom in analytics in all areas including health; and especially the multi-payer system, one that heavily involves employers. Castlight would not even exist without the employer aspect. Rock Health reported in its excellent midyear funding report published in late June that startups developing payer administration tools took in more VC money (over $200 million in the first half of 2014) than any other subsector within health IT.

A Europe of borders

Meanwhile, as much as Europe has dismantled many of the internal impediments to the single market (local currencies, border crossings), there are many barriers to developing solutions to Europe-wide healthcare challenges. These include:

  • Language barriers. Start a web site for a consumer-facing business and you will see your user base fracture unless you can communicate in at least three (or four!) languages.
  • Scaling challenges. Try to remedy the challenges inherent in the healthcare system and you will soon realize that there has been virtually no harmonization yet. Single payer systems are fine as long as you stay within them. If you try to work cross-border, then look out! As Antoine Papiernik, a managing partner at Sofinnova Partners in Paris put it, “Our European system is also messed up, but in a different way than in the US. It is the fact that [EU healthcare systems] are completely state controlled and operated that makes it difficult for a Health-IT play to get to scale as well as it could in the US.”
  • Missing incentives. When it comes to reducing inefficiencies and shifting responsibility and benefit to the consumer, the US healthcare system is a target rich environment. Similar incentives are hard to find in Europe, especially across borders. Consumers are less incentivized when they get cradle to grave healthcare financed by payments much lower than those in typical US health plans. Therefore, said Anne Portwich, a partner at LSP in the Netherlands, it is hard to imagine a consumer-focused company gaining VC financing in Europe, at least before it has huge traction (some promising examples will come up later). This is because “Something the consumer has to pay for him or herself, even 1 Euro per month, that is a completely different [and more challenging] dynamic and a different business model than what we are familiar with.”
  • Big data not yet “in.” Finally, a less obvious example. The larger business environment in the States has been largely penetrated by the type of thinking that favors “big data” and “analytics” as solutions to real problems. This way of thinking is years away in Europe, said Simon Meier, investment director at Roche Venture in Basel, Switzerland. Meier went part-time for a year in 2013 to work with a startup in big data and advertising so he observed this firsthand. Even sectors ripe for analytics such as retail and advertising have not yet been overhauled in Europe, he says. Therefore, Meier said, “our data scientists are still occupied in resolving issues or setting up infrastructure in areas from which US scientists have already moved on. There are plenty of markets in the European Union that have not even started thinking about data science. Compared to the US, applying data science to healthcare in Europe is going from a simple sailor knot to a Gordian knot.”

For all of these reasons, successful early-stage European health IT companies (see inset below) seem to be primarily single-country focused for now. Sometimes that leads to companies in different countries occupying similar niches, such as helping consumers improve sleep. Consumer-focused sleep-aiders we found include sleepio in the UK and iSommeil in France. Either app could be used in any country. Sleepio, which offers online sleep therapy, even prices its services in US dollars, so perhaps these apps’ reach is very broad. However, iSommeil’s sample language is all in French so I suspect that a majority of their readers are in French-speaking countries. Its app is available in the US iPhone app store but there are no reviews.

The bulk of Euro health IT activity that we turned up is in the UK, where a couple of active VCs (SEP, Albion) and some pioneering companies are mining turf (e.g. practice management software, EMRs) that has either already proven fertile in the States (despite the vastly different healthcare system) or that, though initially local or Europe-focused, may later turn out to be interesting for expansion. Those rounds have been on the small side, in keeping with the early stage of the companies and the low initial capital needs of software businesses. We’ll see if even more international VC funds begin to follow the pioneers in later rounds. Those international VCs, some of whom we reached, are certainly paying keen attention.

Withings' connected (and stylish) blood pressure monitor

Take your BP at home – in style

Breaking the mold

One company that breaks the mold is Withings, an Apple-like consumer products company based in France that started out selling an internet-connected scale added a blood-pressure cuff and is now branching out into a stylish wristwatch that doubles as a self-tracking device. 

MyTomorrows, based in the Netherlands, also offers something novel and very intriguing: an online platform that allows patients who have exhausted standard therapies to be treated with medicines not yet approved by regulatory authorities. Self- and angel-funded with $6 million, MyTomorrows already offers patients with an impressive list of diseases the opportunity to ask biotech companies directly for medications on a compassionate basis. If it gets over what are likely to be some very challenging regulatory hurdles, this one has real promise. 

But there are not many outliers like these and even fewer that have been financed by top VC firms. Furthermore, outside of the UK, VC activity in European health IT in general has been very limited. 

Will Mint be the solution? 

Thus it was with great interest that I noted the recent $6M Series A investment by two top-tier European VC firms, LSP and Seventure, in Mint Solutions, an early-stage company that originated in Iceland and has relocated to the Netherlands. 

As much a device as an IT play, Mint Solutions illustrates what is working about European health IT and at the same time why scaling will be hard. The challenge Mint addresses is errors that hospital personnel sometimes make in administering medication. Mint features a small bedside scanner (PICTURE?) that images the pills and confirms their identity before they are dosed. “The real challenge is the oral meds,” said Portwich, “not infusions. Mint has a scanner, a box with a drawer that comes out. First it does a 3D scan – shape, size, accompanying instructions. An algorithm verifies the identity of each pill. Then it gives a readout in a couple of seconds. It’s connected to the e-prescribing system. And it puts into the chart: ‘Mr. Miller got 2 ibuprofen and Lasix at 10am.’” 

Demand among Dutch hospitals – the company’s test market – is strong, said Portwich, spurring optimism that Mint’s solution, dubbed “MedEye,” can be marketed in other countries as well. A good review of MedEye and Mint Solutions appears here.

MedEye scanner

What’s next, a robot nurse? Don’t answer that…

In the “avoiding medical errors” market, though, the technology that has already taken hold in the United States is barcoding. This does not trouble Portwich. “We know that barcode scanning is widely used [in the States]. There is not yet 100% penetration but big hospitals have implemented it. But when you look at the long-term care facilities, that is a different story. Barcoding is not so well established there. So that could be our entry market.” 

Though LSP was early to discover Mint, to encourage co-founder Gauti Reynisson and his team to set up shop in the Netherlands rather than his native Iceland and to make a commitment to invest, Portwich recalled that, until Seventure came along, the search for a syndication partner was not so simple. “It felt like we are the only one” investing in health IT, she said. We spoke to IT investors and they said, ‘We only do software and this has a hardware component. They also said, ‘Oh, you are selling to hospitals – the sales cycle is too long.’ And our healthcare colleagues said, ‘Wait, but this is IT. We don’t do IT. We prefer medical devices.’” 

It helped that in 2012 LSP had set up a “health economics fund (HEF)” backed by two Dutch insurers, among other investors, in order to invest specifically in private healthcare companies with products close to market. In most cases, Portwich said, the HEF’s investments will go into traditional medical technology. 

Mint Solutions represents a type of company that Meier of Roche Venture says he is seeing increasingly often in the diagnostics space. To capture an opportunity, Meier says, “You have to number-crunch AND design a small device that does its job well. Both for the company and the investor, the small device is more the focus than the big data.” 

“Big time” IT and data plays in the healthcare space such as Foundation Medicine, in which Roche Venture invested, are still rare in Europe. “Look at Flatiron Health,” Meier said, an oncology-focused cloud-based data and analytics platform in which Google invested $100 million: “I have not seen anything similar in Europe.” 

Language barriers, fragmented markets, a pot of gold across the ocean: no wonder many European health IT entrepreneurs I know either have already moved or are thinking of moving to the States

I suppose the best that Europe can hope for besides outliers is that some of its best companies hit it big in the States and then return and offer their services in their home markets. But it will take a while before that starts to happen. 

# # #

This post originally appeared on The Healthcare Blog.

1 Comment

Filed under Health IT, Startup

This Therapy Could Treat Ebola – How to Get it to Those in Need?

A guest post to Boston Biotech Watch

By Paul Caron

What if there were a useful treatment for infection with Ebola, which can produce a life-threatening and frightening hemorrhagic fever, but no easy way to get the product to those in need?  A detailed search of the literature and consideration of the viral structure of the Ebola virus helped me uncover a potentially useful product that is far ahead of other proposed Ebola therapies in development that, based on animal data, is highly likely to have efficacy.

Yet there seems to be no simple way to provide this product on a compassionate basis to those in need. This post is an open request to anyone with knowledge of the situation to take action on this potential treatment before more lives are lost.

Ebola is associated with extremely high mortality, between 60% and 90%, and there is no effective treatment. Until recently, it has been possible to contain the spread of the virus and limit the total number of cases to a maximum of a few hundred per year. This year, containment has proven to be more difficult and the number of cases has swelled to over 1,200, including a number of health care workers.

Map of 2014 Ebola outbreak

Map courtesy of WHO

There is concern that the virus could easily be spread beyond the current region encompassing Sierra Leone, Liberia, and Guinea. Indeed there is already one case where an infected traveler flew to Nigeria and later succumbed to this virus. Travel restrictions are being put in place to try to keep the virus contained, but because infected individuals may be symptom-free for up to 21 days, this may not be enough to stop its spread.

The only treatment currently available is supportive replacement of fluids, electrolytes and blood. Broad spectrum antivirals such as ribavirin have proven to be ineffective. There are a number of therapies being specifically developed for Ebola including vaccines, monoclonal antibodies, antisense molecules, and small molecule inhibitors. However, these are all in early stages of development and can’t address the immediate need for an effective therapy.

Antiviral therapies that have proven highly effective for other viral infections often target viral proteins required for replication. Ebola contains an RNA-dependent RNA polymerase, a protein that is conserved among other related viruses including Marburg, parainfluenza, mumps, rabies, and RSV. This suggests that inhibitors that target the most conserved region of RNA-dependent RNA polymerase, the nucleotide binding domain, have high potential for activity against Ebola virus.

By reviewing relevant literature, I have uncovered recent experiments with one of these inhibitors, favipiravir (T-705), which have demonstrated that this product can inhibit the virus in cell culture as well as in mouse models of Ebola infection. Papers on this were published by two research groups (Antiviral Res. 2014 May;105:17-21; Antiviral Res. 2014 Apr;104:153-5). One example of favipiravir’s effectiveness is that a one week course of treatment of infected mice was able to prevent death in 100% of the mice. This treatment was 100% effective even when started six days after the initial infection, when the mice already had symptoms.

Favipiravir is currently in development for influenza (flu) infection by FujiFilm Pharmaceuticals/Medivector. It has completed Phase II clinical trials in hundreds of patients and has recently entered multinational pivotal Phase III trials funded by the US Department of Defense.  It was approved for pandemic stockpiling in Japan in May of this year.

Favipiravir has not been advanced by FujiFilm for use in Ebola patients, because it lacks the resources and expertise, according to a company executive quoted in a Bloomberg News article that ran on July 17, 2014. But it is far ahead of other specific Ebola therapies under development. Given the animal data, I believe it to be highly likely that favipiravir will have efficacy in Ebola patients, especially if it could be given relatively early in the infection cycle. Sufficient drug supply for up to 1,000 patients in the planned influenza trial is likely already available. That is in addition to any material already being stockpiled for potential influenza pandemic use in Japan. Processes to produce more should be in place.

Hazard gear

(Photo: European Commission DG ECHO/Flickr/Creative Commons)

There are other precedents for using unapproved therapies in times of clinical emergencies, especially when the situation is life-threatening and there are no other acceptable therapies. Often these situations arise in oncology, where clinicians advocate to use promising therapies that are in development in critically ill patients. A recent example in antiviral therapy involved a cancer patient with an otherwise untreatable viral infection who was able to receive investigational drug brincidofovir from Chimerix, Inc., in North Carolina. The patient soon recovered.

While treating Ebola patients in Western Africa may not be the largest commercial opportunity associated with this molecule, I find it ethically challenging to have a molecule in hand that could prevent many of these patients from dying as well dramatically limit the spread of this disease and then not even attempt to test its efficacy. Drug supply for at least some patients should already exist; it has proven to be relatively safe in humans; and animal experiments indicate that it has a large potential to work. Quickly bringing this potential therapy to patients will demonstrate to the world what medicine in the 21st century should look like.

# # #

Paul Caron is a pharmaceutical industry consultant and founder of Integrated Profiling, LLC.  www.integratedprofiling.com. He can be reached at pcaron@cbtadvisors.com.

1 Comment

Filed under Uncategorized

Stealth mode the new sweet spot for some biotechs

By Steve Dickman, CEO, CBT Advisors and Sultan Meghji*

*Sultan Meghji is an entrepreneur and advisor in life sciences, financial services and high tech. He is based in St. Louis, Missouri.

In biotech’s early days, telling a story to a wide audience used to be part of the path to success. Founders would share a compelling early narrative to potential investors, reporters and just about anyone else who would listen. Nature papers were the coin of the realm. Molecular biologists with big dreams even became something of a cliché, memorialized in a joke one of us heard in the early 1990s from one of the scientific founders of Biogen. In the joke, a molecular biologist on his wedding night fails to consummate his marriage. A shocked friend asks the bride what happened and she says, “Oh, he just stood at the end of the bed all night telling me how great it was GOING to be.”

But far from shouting to the rooftops, lately it seems that more and more biotechs are pursuing a different approach. Instead of keeping their technology under wraps until a first financing happens, these companies go into what we call “permanent stealth mode.” The principle here seems to be, “Say no more publicly than necessary and even then, keep it vague.” Meantime, let your actions speak for you: Raise money. Sign partnerships with pharmaceutical companies. And then seemingly out of nowhere, hand consumers and investors a finished product or service.

Lately, we’ve seen some tech companies choose this path. Notably, the company that developed Siri was spun out of SRI International in such a way that Apple acquired it barely three months after the company’s voice recognition app was first offered in the App Store. That route is relatively new in IT and still fairly rare. It seems to be related to the fact that the competitive advantage held by some startups involves algorithms, which can be hard to protect using patents. But such an approach has been even rarer for biotech companies that, until recently, had to fight like rain forest vines for the light and nourishment that publicity could bring.

In this post, we’ll share some examples of three “deep stealth” life sciences companies that chose to stay on the stealthy side well beyond the timeframe of a typical startup: Moderna, Kadmon and Theranos. The first two are developing novel therapeutics and the third is a consumer diagnostics company. We will share what little we can find out about them; offer some analysis about what has motivated the companies to stay stealthy; and ask whether they represent the beginning of a trend and, if so, what that implies for the industry.

Moderna Therapeutics

In less than four years, Moderna has raised over $400 million. It has built a platform around RNA to trigger the production of protein drugs inside the bodies of patients, thus turning the body into a protein factory. We noted back in 2012 that Moderna’s approach turns the traditional dogma of biotech on its head: instead of manipulating the DNA in the lab and then producing proteins in cells or bacteria, then selling these proteins to the patient, Moderna instead takes messenger RNA, does some fancy chemical tricks to it and puts it into the body as RNA, letting the body’s own protein production machinery do the rest. We also noted that the company had chosen not to publish anything, even in scientific journals, leaving open the question of how the RNA would be stabilized and delivered (RNA in its native form is notoriously unstable not to mention subject to destruction by ubiquitous enzymes) and leaving the rest of us to wonder what the platform could really do and how it does it.

Then came a news bulletin: In 2013, Moderna struck a validating deal with AstraZeneca that included an unusually rich up-front payment: $240 million plus an additional $180 million in potential milestone payments. Then in January, 2014, it announced a deal with Alexion for $100 million up front and a $25 million equity investment plus undisclosed milestone and royalty payments. Yet even as of today, the company has put out but a single publication. Recently, the company spun out a subsidiary called Onkaido to focus on oncology. At the same time, its business strategy seems to be shifting. CEO Stephane Bancel told Xconomy in mid-June that it will become a holding company that spins out drug development companies and that “Moderna will most probably never develop and sell a drug.”

Kadmon Corporation

Kadmon, founded by Sam Waksal in 2009, has grown much larger than a typical privately held company ever does. Waksal is known both for founding ImClone in 1984 and for being convicted of securities fraud in 2003. Waksal’s work with ImClone eventually led to the approval and marketing of Erbitux, an early and influential targeted oncology therapy. ImClone was acquired by Lilly in 2008 for $6.5 billion.

Kadmon, which has been built mostly around acquisitions of later stage technologies, is not completely in stealth mode. It does have a web site that lists its clinical pipeline in some detail. Initially focused on oncology, liver disease and metabolic and cardiovascular disease, it now sells the hepatitis drug ribavirin. All of these pipeline products have been brought in by acquisition, beginning with the acquisition of Three Rivers Pharmaceuticals for more than $100 million in 2010, according to the Wall Street Journal. That company had products on the market at the time of acquisition, especially in hepatitis C. Bloomberg reported that Kadmon had reached $25 million in annual revenue by 2012 and was targeting $40 million to $60 million in 2013. Interviewed by Maria Bartiromo on CNBC in January, 2011, Waksal described a new paradigm for building a biotech company with a commercial arm that could serve as a “cash generating machine” so that “we don’t have to go to the [financial] markets to constantly raise money for drug development.”

The corollary to that is that, if it is funded by revenues, the company’s very exciting research does not have to be disclosed, even to venture capitalists and especially not to the public, in the context of fund-raising. At investor conferences, the company has described some fascinating RNA targeting technology that could represent a new generation of gene therapy. Waksal told Bloomberg in 2013 that Kadmon was considering a spinout of a gene therapy company and an oncology company focused on the Chinese market.

In the meantime, there are not too many publications (none linked on the Kadmon web site) and the company has had to cope with multiple warnings from the FDA over its marketed products.

Theranos

Theranos has recently begun to emerge from stealth mode, although its technology is still secret. This June, 2014, Fortune cover story reported that the eleven-year-old company is valued at $9 billion and that, due to her share ownership, company founder Elizabeth Holmes, a Stanford dropout, is worth $4.5 billion on paper.

Theranos’ blood draw technology replaces traditional, slow, overpriced blood testing with pinprick-style small-volume blood tests. By working efficiently on tiny volumes, Theranos is both cutting prices by half or more as well as increasing efficiency by allowing for follow-up tests to be done right away, according to the Fortune article.

How Theranos does all this remains a secret. But this “black box” has not prevented the company from raising what Fortune reports to be more than $400 million nor from striking a distribution partnership with Walgreens, a partnership that extends beyond Walgreens’ 8200 US stores to its European pharmacy partner Alliance Boots. In parallel, the company is working with hospitals to offer its tests in what the CEO of UCSF Medical Center told Fortune is “the true transformation of healthcare.” (USA Today covered much of the same ground in its July 8, 2014, edition here.)

Theranos’ vast ambition, coupled with its lack of publications subjecting its methods to scientific scrutiny, has not gone unnoticed, especially by competitors. Fortune wrote:

‘The most frequent criticism is that Theranos is using purportedly breakthrough technology to perform tests that are relied on for life-and-death decisions without having first published any validation studies in peer-review journals. “I don’t know what they’re measuring, how they’re measuring it, and why they think they’re measuring it,” says Richard Bender, an oncologist who is also a medical affairs consultant for Quest Diagnostics, the largest independent diagnostic lab.’

Why advertise?

The clearest unifying attribute of Moderna, Kadmon and Theranos is “high confidence,” followed closely by “high ambition.” There is no other way to raise the billion-plus dollars these three have raised. There has to be some technical know-how to go along with the bravado. Otherwise multi-hundred-million-dollar partnerships with national pharmacy chains or big pharma companies just do not materialize. Activating a direct commercial channel (in the case of Theranos with Walgreens) or a high-credibility development partner such as Moderna’s partner AstraZeneca is at least a temporary substitute for a look under the hood.

But there is something else going on as well. Let’s call it “stealth as a business model.” All three of these companies seem to share the belief that they will be better off if no one knows what they really do or how they do it. Most notably, they depart significantly from the status quo of publishing and presenting the technologies in an open forum as the gold standard for credibility. This is so unusual in the history of biotech that it made us think about the question the other way around: why would you want to disclose anything about your new biotech company? Just raise the money, sign a partnership and get on with it!

We thought of a good five reasons why many companies share at least the basics of their technical approach. (One company whose chances we like, Heptares of London, UK, published a paper in Nature in 2008 more than a year before they raised their Series A round. That company published in Nature again in early July of this year, gaining credibility from Nature’s name and its peer review process – a more traditional pattern.)

A clue to understanding the trend is the presence or absence of venture capital (VC) money. Of the three companies we chose to examine, only Moderna has disclosed an investment by a traditional VC, Flagship Ventures. It’s fine to stay in stealth if you want to raise money from a single VC, or for that matter from a single VC syndicate. As long as you don’t need “buzz” in the form of news articles and conference hall chatter, you can just go achieve your objectives without sharing much about what you are doing. These days, most early-stage therapeutics investments are done by an initial syndicate that intends to fund the companies through major milestones such as Phase 2 data or partnerships. Therefore the need for buzz is less. Next stop, hedge funds, who couldn’t care less about buzz and whose analysts may in some cases be confident enough to make big-ticket investments decisions based on unpublished data.

So why publish and share at all? Let’s set out some reasons and see if we can shoot them down: 

  • Fund-raising. As described above, that point seems moot. Atlas Venture in Cambridge has a whole stable of early startups and they keep their technology under wraps for a while – maybe all the way to exit? Third Rock Ventures incubates companies for a year or more before hatching them nearly fully formed and typically not intending to raise more money until the IPO anyway. Why not go all the way in stealth?
  • Corporate partnerships. Roche will find out about you whether you publish or not. If your scientific founder is already known to the therapeutic area head, all the better. If not, maybe better to publish.
  • Clinical trial recruitment. This is usually handled by intermediaries such as clinical research organizations (CROs). Patients are usually tracked down actively. Companies don’t wait for the patients to be pulled in via news stories (though the stories don’t hurt).
  • Hiring. This would seem to be a big one, especially in hotly competitive geographies such as Cambridge or the Bay Area. But now that more and more “virtual drug development” companies are filing for IPO in Phase 2 with staffs of fewer than fifteen people – two of these have been CBT Advisors clients in 2014 and two more have been clients of our co-author – the point seems less relevant
  • Overcoming resistance in society to biotechnology. This may have been a factor at the dawn of the industry in the 1980s but now there seems to be much less resistance, even in traditionally conservative societies like Germany. A more nuanced understanding of advanced biotech seems to be emerging and there is strong demand globally for more biotech companies, not less.

When you think about it, publishing has some downsides too. Most threatening among these is that publishing what you are doing will arm your competition. Yes, your patents will be published anyway eighteen months after you file them. But competition has intensified in the era of the patent troll. Why advertise?

The strong implication of all of these arguments is that biotechs should stay stealthy whenever possible. If founding scientists are not required to publish in order to get tenure or to get the next grant, they should, like our examples here, take it to investors, take it to pharma, fund it to the hilt and don’t look back.

In one sense, this does hark back to the early days of biotech, when companies were able to raise considerably more money for technology platforms that were years away from generating tangible products. That model went away early in the last decade, in part because investors – both hedge funds and venture funds – began to apply financial analysis tools to product portfolios, sharply cutting the valuations and the ability to fund-raise for all but products that already existed. The shift into stealth mode seems to be going hand-in-hand with a shift in investor favor toward early funding of powerful platforms such as Moderna’s. Once again, a company able to raise significant amounts of capital can try out several different things and allow some of them to fail quietly without the market playing a role.

We just want to mention one tiny nagging doubt: much of the research that underpins these companies comes about under the auspices of US government funding, typically from the National Institutes of Health (NIH). But in the guidelines we found, there is no formal mechanism requiring disclosure once research is funded. It is not even required to be published. Nevertheless, it strikes us that sooner or later there may be a backlash to all this stealthiness.

And of course the longer term question remains: does having strong financing and a strong commercial channel replace independent peer review of the underlying technology?

In the meantime, we sincerely hope that all of these companies are successful. It would be an amazing day in healthcare if they were. And should that day come, we are imagining a moment when Hollywood decides to make the movie, akin to the way screenwriter Aaron Sorkin imagined the beginnings of Facebook in “The Social Network.” The big difference here is that the script writer will have an awful lot of liberty in shaping a story that no one has ever heard.

# # #

3 Comments

Filed under Startup

Big Data in Drug Discovery and Healthcare: What is the Tipping Point?

By Steve Dickman, CEO, CBT Advisors

What good is big data for drug discovery? Not much, if you ask the pharmaceutical industry. The world’s drugmakers have other challenges right now and, with a few notable exceptions like PatientsLikeMe, neither consumer-driven nor patient-driven “big data” seems to be part of the solution.

Even in the apparently more data-driven field of healthcare services, big data keeps bumping up against regulatory and practical barriers. As I wrote earlier this month, a funny thing happened to 23andme on the way to its now-on-hold million-person database….

Mark Murcko, Feyi Olopade and Ajit Singh

Mark Murcko, Feyi Olopade and Ajit Singh (Image courtesy EBD Group)

A recent panel of experts argued that trends in big data will drive up its relevance and provide a navigable path toward greater utility both in pharma and in healthcare. The panelists at the workshop I put together for the 2014 Biotech Showcase in San Francisco last week hinted that the time will soon come when “big data” is as much a part of both drug discovery and healthcare as it is of financial forecasting  and choosing driving routes that minimize traffic.

Click here to watch the video of the panel or copy-paste the link:

http://www.partnering360.com/insight/showroom/id/445

The companies that presented are NuMedii, a venture-backed company that calls itself a “digital pharma company” tackling drug discovery itself; and CancerIQ, a data analytics company focusing on aggregating data on how cancer patients are treated and using it to upgrade the treatment that can be provided in different geographies and types of hospitals.

Joining the CEOs of NuMedii and CancerIQ were Ajit Singh, a venture capitalist with Artiman Ventures who taught electrical engineering and neuroscience at Princeton and then ran global businesses for Siemens in oncology and digital radiology; and Mark Murcko, the former chief technology officer of Vertex Pharmaceuticals who is now running a consulting firm and advising computer-powered drug discovery firms such as Schrodinger and Nimbus Discovery.

Due to these engaging and insightful speakers, this was a fascinating panel that delivered all sorts of hints about what looks like an upcoming turning point. Topics included (time stamps on video in parentheses):

  • What sort of venture investor would understand a big data company in healthcare, IT or life science? (10:10) and (12:45)
  • Where do big data startups go to even get their data given the high degree of regulation? (27:00) and (28:50)
  • How can innovative startups avoid being stopped cold by HIPAA? (21:30)
  • What will be the turning point at which the pharmaceutical industry sees big data as a driver of solutions rather than just noise? (32:40) and (38:00) and (52:20)
  • Is genomic data “big data”? (17:00)
  • How can “sparse data” be just as useful as “big data” in solving certain problems? (43:00)
  • How can newly industrialized countries like India and China contribute to models that might be useful in the United States and Europe? Will they “go first” in some sense in using big data? (44:30)
Gini Deshpande, Founder-CEO of NuMedii

Gini Deshpande, Founder-CEO of NuMedii (Image courtesy EBD Group)

Here is a more complete list of time stamps:

  • (2:00) Definition of Big Data “Things one can do at a large scale that cannot be done at a smaller one to extract new insights or create new forms of value in ways that change markets, organizations, the relationship between citizens and governments and more.” (From the 2013 book Big Data: A Revolution That Will Transform How We Live, Work and Think by Mayer-Schönberger and Cukier)
  • (3:00) Gini Deshpande self-introduction. “At NuMedii, we are a digital pharma company. We are focused on leveraging the vast amounts of life sciences big data that is out there and translating it into drugs with a higher probability of therapeutic and commercial success….We are a pharma company. We leverage the data and turn the data into drug candidates.”
  • (4:20) Mark Murcko self-introduction.
  • (5:10) Feyi Olopade self-introduction. “My co-founder is my mother. She is a nutty professor slash clinical oncologist slash MacArthur genius fellow. It was my mother’s vision to start using data and analytics to deliver more precision treatment and more precision risk assessment….We hope to democratize access to premium cancer care by helping providers deliver data-driven decisions.”
  • (6:35) Ajit Singh self-introduction
  • (7:45) In the world of healthcare, the analytics revolution has barely begun
  • (10:10) How NuMedii bridges the (large) gap between healthcare investors and IT investors
  • (12:45) How CancerIQ bridges the same gap
  • (14:35) Early days of analytics: Shared Medical Systems
  • (17:00) Why genomic data may not be big data
  • (20:35) How 23andme learned the hard way about regulation of medical data
  • (21:30) On overcoming HIPAA: a fascinating framework
  • (25:00) Why IT investing is easier: world of atoms vs. world of bits
  • (27:00) How CancerIQ gets its data
  • (28:50) How NuMedii gets its data
  • (32:40) Why pharma is still (mostly) focused on the drug candidates
  • (38:00) The importance of actionability
  • (41:00) Q&A: How to de-identify health data
  • (42:15) Cancer patients are very willing to share their (personal) information
  • (43:00) The best data may not be big data
  • (44:30) International big data in healthcare – will it take the lead? Case: India
  • (49:00) Case: China
  • (52:20) Why pharma does not yet trust “black box” models – they do not tell a story, says Murcko

# # #

1 Comment

Filed under Uncategorized

From a painful loss, a way to improve children’s care worldwide

Boston Biotech Watch guest post by Megan Krench*

A year ago, Boston-area medical device entrepreneur Sameer Sabir and his wife Nada Siddiqui received the most devastating news a parent could imagine: their infant daughter, Rehma, had passed away.

Rehma was at home with her nanny on January 14, 2013. In the late afternoon, emergency services responded to the home after a call that Rehma had suffered an apparent seizure. Rehma was rushed to Boston Children’s Hospital. Despite the staff’s enormous efforts to save her, Rehma passed away on January 16, 2013, two days after her first birthday.

Rehma  photo

Rehma passed away just days after her first birthday

As explained in the Boston Globe’s coverage, the nanny was charged with first-degree murder after the Office of the Chief Medical Examiner conducted an autopsy and ruled the death a homicide.

It is an understatement to say that this has been a difficult year for Sabir and Siddiqui. They are still very much in the midst of dealing with the profound consequences of the loss of their daughter. Yet, despite their grief, they have decided to take action in Rehma’s memory and help support a unique, new platform for medical education.

Not long after Rehma’s passing, Sabir and Siddiqui established The Rehma Fund for Children. Inspired by the care they experienced at Children’s Hospital, they describe the fund’s mission as supporting “charitable causes that help children and parents deal with the emotional trauma and stress of illness and hospitalization through easier access to more compassionate healthcare.”

The fund recently decided to support an innovative and powerful medical education resource that has the potential to make a positive difference for parents and physicians around the world. The program, OPENPediatrics or OPENPeds, is currently in beta testing. It was developed through a collaboration between Boston’s Children Hospital, the World Federation of Pediatric Intensive and Critical Care Societies, and Cambridge-based IBM labs.

OPENPeds was conceived by Dr. Jeff Burns of Boston Children’s Hospital, whose team was responsible for Rehma’s care. Rehma was treated by experts in the pediatric intensive care unit (PICU) during her time at BCH. In spite of a global need for this kind of expertise, only a select number of PICUs exist. OPENPeds was designed to close this gap by offering an open-access, peer-reviewed, not-for-profit platform to facilitate collective knowledge exchange among pediatric care providers, especially those operating outside of the expertise of PICUs.

To ensure OPENPeds equips practitioners with the tools they need most, the curriculum is based on the results of a survey, completed by over four hundred pediatric critical care providers from fifty-four countries as well as on World Health Organization data on the leading causes of mortality in children.

In addition to this survey-based core curriculum, the Rehma Fund has contributed resources for a Non-Accidental Trauma Module. This module aims to increase quality of care for children who have been the victims of non-accidental trauma. In addition to providing expertise for those patients, the Rehma Fund and OPENPeds also aim to increase awareness of non-accidental trauma in hopes of preventing future injuries. They explained their decision in this video, which they posted last week on what would have been Rehma’s second birthday.

OPENPeds prides itself on high-quality content. The program has been working with physicians all over the world to generate material for the site. The purpose of this is twofold. First, OPENPeds aims to find doctors who are practicing experts in the field for which OPENPeds is developing content. For example, a physician from Boston Children’s Hospital likely would not have extensive experience with pediatric HIV or malaria. The other reason OPENPeds recruits doctors from around the world is to ensure this platform is truly being created for a global community, by a global community. “We recognize that we don’t have all the information, and we don’t want it to be a ‘West to the Rest’ concept,” OPENPeds’ Program Manager, Bridget Koryak, explains.

OPENPeds image of "virtual ventilator"

Interactive medical education: OPENPediatrics allows users to train on a “virtual ventilator” in a patient simulation. (Image courtesy OPENPeds)

The quality of information on OPENPeds is comparable to that found in peer-reviewed journals, but the content is presented in a more dynamic format. OPENPeds has worked closely with experts in Internet-based education technology from both MIT’s OpenCourseWare and the Harvard Graduate School of Education to apply a growing body of knowledge regarding how adults learn. One result is that much of the learning on OPENPeds is interactive. For example, users are challenged to actively apply their knowledge through interactive training modules. Physicians training on an OPENPeds “virtual ventilator” can see how their actions change simulated patients’ responses.

OPENPeds is a unique program, described by partner IBM as the “world’s first cloud-based global education technology platform,” but it will be complementing some existing companies in the digital medical education space. For example, physicians can already subscribe to a service called UpToDate to find comprehensive summaries of cutting-edge medical knowledge in a wide range of specialties, including general pediatrics and adult and pediatric emergency medicine. Two key differences between UpToDate and OPENPeds are format and access: unlike the interactive learning platform used by OPENPeds, UpToDate is primarily literature-based. And unlike OPENPeds’ open access, UpToDate is based on the more traditional paid subscription model.

One physician at a large teaching hospital said that OPENPeds is likely to be widely used, especially by trainees.  Up to Date provides incredibly comprehensive information, this physician said, but it sometimes provides too much information to quickly digest.

Upon learning about OPENPeds, Dr. Rodney Altman, Clinical Assistant Professor of Emergency Medicine (Department of Surgery) at Stanford University School of Medicine said, “Some physicians, especially those in rural hospitals, might treat pediatric patients but might not have a lot of experience or comfort in treating the full range of pediatric conditions. Those MDs might well find such a resource useful and might also be interested to see it extended to true, interactive telemedicine.”

Since its launch in September 2012, OPENPeds Beta has already reached over 1,000 users in 70 countries. During early planning, OPENPeds creators imagined this tool as a way to deliver cloud-based medical education to doctors in remote regions. The OPENPeds team was surprised to find strong domestic uptake. It was even being used by physicians in Boston. OPENPeds has turned out to benefit professionals at institutions ranging from rural hospitals in underserved communities to major regional centers. In this way, even before its official launch, OPENPeds is already serving as an equalizer. Regardless of a hospital’s size, location or resources, OPENPeds levels the playing field by giving everyone access to the same high-quality information.

The OPENPeds team is optimistic about the future, but well aware of the obstacles they face. One issue is connectivity. In order for OPENPeds to reach the wide global audience they have in mind, doctors in remote areas must be able to access the information. To get around this issue, the beta release of OPENPeds was a program that doctors could download once, and then update whenever connectivity permitted. However, user feedback has shown that hospital firewalls often prevent doctors from downloading information directly to their computers. Therefore, OPENPeds is switching to a cloud-based platform to circumvent issues with downloads, but the program will still offer a downloadable version for physicians with limited connectivity. Another obstacle is the language barrier. Modules in other languages are on the way, starting with Spanish. OPENPeds’ videos also have rolling transcripts to help physicians who are non-native English speakers.

OPENPeds has ambitious plans for 2014. The spring will see the release of OPENPeds version 1, along with the release of the non-accidental trauma module. OPENPeds plans to expand its content beyond just critical care to include other pediatric specialties, and will soon be launching both pediatric urology and additional pediatric nursing materials. It is also investigating the possibility of adding a feature that will allow users to directly contact an experienced physician in emergency situations.

As a high-quality, Harvard-affiliated program, OPENPeds could potentially spin off into a for-profit startup, but for the moment there are no plans to depart from its original mission to provide free content to pediatric care providers across the world.

In the rapidly expanding landscape of online learning tools for physicians, OPENPeds has several unique attributes so far not duplicated elsewhere: its focus on pediatrics; its lineup of top physicians as speakers and demonstrators; its incorporation of online learning techniques based on up-to-the-minute research about how adults learn; and its non-profit organizational model. By using both interactive techniques as well as highest-quality medical experts, OPENPeds has set itself apart from more conventional approaches to medical education. Given the subsidies and contributions (including those from the Rehma Fund) that make the platform free to users, and its focus on the typically not very lucrative specialty of pediatrics, it currently seems to have no private sector competitors. However, competition may soon be on the way. According to an article that appeared on January 15 on TechCrunch, 2013 saw $1.9 billion in VC funding for early stage healthcare software and app technology, a 39% increase over 2012.

The Rehma Fund will continue to raise funds and consider investing them into expanding the non-accidental trauma module, translating their content into other languages, and possibly creating other modules. Much will depend on the uptake of the initial release and anecdotes showing that it has indeed been an equalizer.

When Koryak was asked about the contribution of the Rehma Fund to OPENPeds, she replied, “It’s been fantastic working with them. When you work at Boston Children’s Hospital, you’re constantly exposed to different stories and many things that kind of touch you. But this one, particularly so.”

*Megan Krench is a PhD candidate in the Department of Brain and Cognitive Sciences at MIT, where she studies the genetics and biology of neurodegenerative diseases. Follow her on Twitter: @mkrench.

3 Comments

Filed under Uncategorized