By Randall Osborne
SAN FRANCISCO For the cash-minded in biotechnology (and who isn't?), it all comes down to numbers: who got how much in the latest deal or in the most recent clinical trial's measure of statistical significance.
There wasn't much disagreement about the importance of numbers, in panels at the fifth annual International Biotech and Infotech Summit, held on the Laurel Heights campus of the University of California. Fittingly, the leading sponsor of the event was Nasdaq, where good news and bad news for biotechnology has come rather fast and furious in the form of numbers.
"The next revolution in biology is mathematics," Peter Farley, president and CEO of BIOwulf Inc. in Savannah, Ga., told the opening session of the first full day. "Biology and mathematics are going to be absolutely intertwined."
Farley's remarks came during a panel called "Taming the Torrent of Genomic Data: How Computer Science and Math Are Shaping a 'New Biology.'" Biotechnology veterans will remember Farley from the industry's early days, as co-founder in 1971 of Cetus Corp., which achieved a $1.25 billion market valuation before it was bought 20 years later by Emeryville, Calif.-based Chiron Corp.
Describing a period of "self-imposed exile" on an island off the coast of Georgia, Farley said he returned with an idea for his new venture, BIOwulf, based on the genius of widely acknowledged machine learning expert Vladimir Vapnik.
The genomics revolution produced too much for biotechnology to deal with, Farley said, and much data are "being discarded, thrown away, absolutely unused because we don't have the mathematical ability to analyze it properly. What has been known for years as background noise is pure gold."
Farley said researchers must "calculate in a higher dimensional space. We all know the fourth dimension is time, but once we get to the fifth dimension, other than a rock group in the 1960s, it gets a little fuzzy as to what we're talking about."
"I went to Vladimir and asked him for a list of anybody anywhere in the world that he felt had the mathematical capability to advance this field not just read his book and understand it, which is quite hard, because there are no words in it," Farley said. "He gave me a list of 24 names."
Farley has been recruiting from the list, and has 18 of 24 names as part of BIOwulf. "They come from all over the world," Farley said, except notably the U.S., which doesn't have much of a track record for turning out mathematicians. The largest group of researchers is headquartered in Berkeley, Calif., with more in New York, and Savannah, and a few in Europe "waiting for visas" as well as Australia, he said.
"The care and feeding of theoretical mathematicians is an art form," said Farley, adding that he was in charge of scores of molecular biologists at Cetus, and supervising them was "child's play" compared to what he's done with the new batch of employees. For them, Farley created what he calls "math_topia," a safe and comfortable environment where they can do their best work.
That work involves creating systems that will "optimize measurements of similarities" in a new dimension of examination, he said. "If you're just out there with standard conventional mathematical computing, you're going downhill," Farley said.
The conference, with about 250 registrants, offered even more about numbers, as in the session titled "New Approaches to Financing Biotechnology: Powerful Actions by Government, Universities and Industry."
Richard Hayes, senior principal investment officer of CalPERS, the largest public pension fund in the world and one of the larger biotechnology investors, said the fund is "looking for long-term returns. Essentially, what we're trying to do is earn returns north of 20 percent."
That can be a challenge in some industries, Hayes said.
"A lot of people don't understand biotechnology," he said. "The industry can scare off a lot of institutional investors who are looking for one- to two-year returns."
One big infusion of capital, such as that of the early 1990s, can put the industry in a financing slump for as long as five years, he added, and much of what the industry is doing requires continual patience to reap yields.
"I personally see [biotechnology] innovations as 10-year innovations, or 15-year innovations, and the typical private equity partnership is a 10-year fund," Hayes said. "There's a three-year investment period, and years four, five and six are the growth of the portfolio, and then the other years are the exit years. Essentially, what institutional investors tell venture capitalists is, 'You have three years to put up the money, but then we want to start getting the money back.'"
Meanwhile, companies that manage to get drugs approved face hurdles aplenty in getting them to patients and getting paid for them, thereby improving other numbers: the numbers of the balance sheet.
Binder: Make Sure Patients Can Get Drugs
That was the subject of a luncheon keynote speech by Gordon Binder, former chairman and CEO of Thousand Oaks, Calif.-based Amgen Inc. Retired from the company last year, Binder has started a Los Angeles-based venture capital firm with a group of associates.
But having the financial boost to push drugs toward the market won't help, if patients can't get their hands on the treatments, he said.
"Access is becoming increasingly difficult and increasingly important," Binder said, looking hearty and relaxed. He said it's "in no way automatic today that the patient is going to get the drug," because of insurance snags and reimbursement-related red tape.
In most industries, Binder said, "when sales grow, and markets increase, they create jobs, people make money, stock prices go up and everybody's really happy. [But] when the pharmaceutical [sector] grows, everybody is mad at us."
Government officials make speeches, along with HMO executives and hospital bigwigs, "all sorts of people are in a complaining mode about the fact that pharmaceutical costs are growing. If it were color television replacing black and white, or digital replacing analogue, or navigational devices going into automobiles or whatever, people say, that's progress, science marches on, and they pay. For some reason, people resent paying for better drugs, and we in the industry can't quite understand that."
Binder said his advice to the pharmaceutical industry "and, for that matter, to our nation," echoes computer magnate Bill Gates' recent advice to high school students. "He gave them 10 principles to guide their lives," Binder said. "Principle No. 1 was, 'The world is not fair. Get over it.'"
Viewed globally, the "so-called problem" of high pharmaceutical costs isn't a problem anyway, he said.
"What most of you probably don't know, and what the press never prints, is that we are not the leading country in spending the percentage of gross domestic product for pharmaceuticals," he added. "We aren't even in the top 30."
At 1.4 percent, such spending in the U.S. is higher than the UK, at 1.1 percent. Canada and Germany are both 1.3 percent. But Italy and France are both 1.5 percent, and Japan is 1.7 percent.
"We're just right in the middle, we're average," Binder said. "Perhaps some people should ask the question why don't we spend more on pharmaceuticals, almost as often as they ask why we spend too much."
Medicare drug benefits are being debated in Washington, and it's an issue Binder has worked on for several years, and continues to work on it as a part-time employee of Amgen. If the "one size fits all" model of government price control model is adopted, "I think that will stifle R&D, and we'll all live to regret it," he said.
Binder, however, told attendees he was optimistic such a model will not prevail. The summit concluded May 22.