West Coast Editor

With about 400 products in either Phase II or Phase III trials, northern California's biotech industry faces big challenges and will have to deal with them soon, said Matthew Gardner, president of BayBio.

"It's going to be incredibly expensive to finance this pipeline," said Gardner, who held a briefing Tuesday on the San Francisco-based nonprofit association's report, IMPACT 2007. Biotech's "arrival here is really just beginning," Gardner told BioWorld Today.

The region - an area north of Santa Barbara to Sacramento - has yielded more than 390 approved products already, and the pipeline's depth, he said, "boggles the mind." Figuring out ways to pay for its advance offers riddles, as well. Gardner said companies will continue to make partnerships and pursue unconventional fund-raising methods, but must push also for federal funding, which has flattened in recent years.

Despite efforts at reform, the Sarbanes-Oxley Act "continues to be a point of pain for young companies," Gardner said, not only in terms of paperwork headaches, but in terms of cash. An official from the diagnostics firm XDx, of South San Francisco, noted at Tuesday's briefing that complying with the legislation cost his company an entire month of operating cash, Gardner said.

"No one is asking not to be regulated," he added. "The spirit [of Sarbanes-Oxley] is perfectly appropriate, and companies don't mind answering the questions. But in an industry like this, one size does not fit all." Under the act, early stage firms with no FDA-cleared products, if traded publicly, are treated the same as large companies with many marketed drugs.

Other problems ahead for the industry in northern California (as elsewhere) include keeping "human capital" and developing manufacturing capacity. Certain changes are long overdue, Gardner said.

"Could we develop a pilot program where California's state government and regulatory agencies talk to the FDA and EPA to coordinate electronic filings? It's crazy that many of these processes are still dependent on paper," he said. "We're not saying [the transition is] going to be easy, but it's also not easy to develop a cancer product that has to reach patients in 15 years."

Another possibility is altering tax laws beyond a research and development credit, Gardner said. "It's worth exploring. Hundreds of companies are a decade away from their first product, and they will never be able to apply a credit. They don't have any revenue."

The IMPACT 2007 report, viewable at BayBio's website (www.baybio.org), discusses policy as well as progress in specific disease areas. "We need to recognize the great run of success that Genentech and Gilead and some others have had, but there are hundreds of other companies coming through, and a number of them have had their first products approved in the last 12 months," Gardner said.

He cited the inhaled insulin product Exubera, developed by San Carlos, Calif.-based Nektar Therapeutics Inc., in a collaboration with Pfizer Inc., of New York.

"In personalized medicine, you can point to a number of different areas of innovation," adding genetic data to diagnostics capabilities and "massive computer power," Gardner said. Companies working in the space include not only XDx but such firms as South San Francisco-based Exelixis Inc. and Target Discovery Inc., of Palo Alto.

Across the board, biotech's work is "paying dividends. The cures are arriving. But we're going to need every tool available to move this pipeline forward. Everyone is depending on us to deliver."

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