Tag: biotech



















Dietary Supplement Greatly Extends Worm Life Span

Dietary Supplement Greatly Extends Worm Life Span

Drug seems to mimic the biological effects of calorie restriction, letting worms live up to 70 percent longer.

A light micrograph of Caenorhabditis elegans, a soil-dwelling nematode often used in research.

The latest in a long line of longevity brews that prolong the lives of laboratory animals was described today in Nature: a natural molecule that extends life spans longer than any previous such agent, in some cases by as much as 70 percent.

“An internal fountain of youth,” is how lead investigator Jing Huang, a molecular biologist at the University of California, Los Angeles, described the compound, known as alpha-KG. In experiments on the roundworm Caenorhabditis elegans, she and her colleagues supplemented feedings with a handful of different chemicals involved in metabolism. The only one that had a significant effect on longevity was alpha-KG, which allowed worms to live about 25 days on average, compared with the typical 15 days. “It was an amazing hit,” Huang said.

Huang’s team was testing metabolic compounds in an effort to uncover the mechanism by which calorie restriction dramatically extends life spans in experimental animals, including C. elegans and mice. “Despite the fact that people have been studying it for decades, we still don’t really know at the molecular level how it happens,” said Matthew Gill, a biologist at the Scripps Research Institute in Jupiter, Florida, who was not involved in the new study.

Curbing Growth

Huang’s team learned that alpha-KG triggers several cellular processes that slow down metabolism. It curbs the activity of ATP, a molecule that transports energy inside a cell. It also decreases oxygen consumption and increases autophagy, a process in which the cell eats its own parts when food is in short supply. In other words, the alpha-KG seems to delay aging by switching the cell from growth mode to survival mode. This is thought to be how calorie restriction works as well, Huang said.

It’s far too soon to say whether alpha-KG will have any clinical use, said João Pedro de Magalhães, a biologist at the University of Liverpool who was not involved in the research. “There’s no evidence that this will work in mammals, much less in people,” he said.

But Huang has great hopes for the compound. She said that preliminary experiments in her lab suggest that alpha-KG will have similar effects on longevity in mice. “We are very excited about testing [it] in clinical trials” at some point in the future, she said. (Related: “The Secrets of Long Life.”)

Supplement Surprises

Still, it’s probably much too early to bet the house on alpha-KG, which is currently sold as a dietary supplement and sometimes marketed as a way to build muscles or boost athletic performance. The most important aspect of Huang’s study, according to Gill, is that it found a link between alpha-KG and ATP. By better understanding these molecular interactions, researchers might be able to find other compounds that also target ATP pathways and mimic alpha-KG’s effects. But, he added, that doesn’t mean alpha-KG itself “is necessarily going to be the thing that we all take to extend life span.”

Matt Kaeberlein
, a molecular biologist at the University of Washington in Seattle who was not involved in the work, agreed that the study doesn’t provide enough evidence to suggest anyone should start taking alpha-KG. The irony, he said, is that if the mechanism uncovered by Huang’s lab holds true in people, “those folks who are taking alpha-KG to promote muscle growth may actually be having the opposite effect.”

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The FDA Approval Process for Medical Devices

An Inherently Flawed System or a Valuable Pathway for Innovation?

Kyle M Fargen; Donald Frei; David Fiorella; Cameron G McDougall; Philip M Myers; Joshua A Hirsch; J Mocco

J NeuroIntervent Surg. 2013;5(4):269-275.


Medical devices, developed through physician and industry partnerships, have helped to revolutionize the treatment of disease spanning most medical disciplines. This includes such entities as deep brain stimulation implants for Parkinson’s disease, knee replacements for osteoarthritis, coil embolization technologies for intracranial aneurysms and implantable cardiac defibrillators for life-threatening arrhythmias. These remarkable products have undeniably led to increased patient longevity and improved quality of life. Such marvels of modern medicine, however, do not come without cost, to either the consumer or the manufacturer. Recent estimates suggest that the annual expenditures on medical devices in the USA approximates $95–150 billion, which represents almost one-half to three-quarters of the $200 billion spent on such devices across the world and about 6% of our total national health expenditures.[1, 2]

Development of new technologies requires considerable investment from companies in terms of research and development costs, manufacturing and marketing, as well as a rigorous approval process through the Food and Drug Administration (FDA). All-in-all, the price of innovation is monumental for those invested in advancing medicine through cutting edge technologies. Recently, there has been a push among lobbyists representing device manufacturers to streamline the lengthy FDA approval process,[3] arguing that the USA will lose its ability to compete globally due to the excessive costs and delays in obtaining FDA approval.

However, in direct contrast to any effort to ‘streamline’ the approval process, the oversight of device innovation and the approval process has been criticized recently due to several notable device ‘failures’ that have been linked to patient harm. These devices were approved for use through FDA humanitarian device exemption (HDE) or 510(k) processes, which do not require randomized controlled trial evidence demonstrating safety and effectiveness prior to approval.

Unfortunately, such failures are certainly not new. Between 2005 and 2009 nearly 700 voluntary recalls of devices occurred per year, and the vast majority of these were class II recalls, defined as technologies that could result in ‘temporary or medically reversible adverse health consequences’.[4] The failure of these processes to detect potentially harmful devices before their release onto the US market has led to a strong backlash, by both physicians and the public at large,[5]against the current regulatory processes in place through which such technologies are approved for use.

The specialty of neurointerventional surgery (also known as interventional neuroradiology or endovascular neurosurgery) is heavily leveraged to medical device development. In this article we will review some recent devices that have generated controversy, review the current FDA approval processes, discuss current issues being debated regarding these processes for new devices and offer further insight into the effect of experience in outcomes for new devices. Finally, we will review possible alternative pathways towards improving the safety and effectiveness of new devices through regulation that both encourages innovation among clinicians and industry and closely monitors new devices after their release.

Recent Device Failures

Adoption of new technologies is not without risk. While initial experience may demonstrate benefit, further experience or longitudinal measures may detect concept, design or manufacturing flaws that were not immediately evident. The most prominent of such devices is the ASR XL Acetabular System (DePuy, Johnson & Johnson, Warsaw, Indiana, USA), which was approved for use by the FDA through 510(k) clearance (described below) and introduced into the US market in 2005. This device has gained considerable negative media attention[6, 7]with numerous websites recruiting clients for plaintiff attorneys and over one million unique web pages produced after a Google search using the keywords ‘Depuy ASR hip recall’. The ASR featured a metal-on-metal acetabular cup design that was borrowed from a second device, the ASR Hip Resurfacing System, and fitted onto a predicate hip implant. Depuy applied for 510(k) clearance and the new device was deemed substantially equivalent to the prior hip implant without rigorous safety and effectiveness testing. Between 2005 and 2010, approximately 100 000 ASR Acetabular systems were implanted. By 2008 the FDA had received about 300 complaints regarding the device, most arising from patients who had had to undergo early revision surgery.[6]Recent studies have demonstrated an increased rate of implant dysfunction with need for revision surgery that far exceeds that of other hip replacement devices.[8, 9] In fact, results presented at the British Hip Society meeting in 2011 indicated a failure rate nearing 50% at 6 years, which is three times the rate of other devices (approximately 15% at 5 years).[8] Furthermore, elevated levels of blood chromium and cobalt were identified as a side effect of dysfunctional joints. Based on these data, a voluntary recall of the ASR devices was enacted in August 2010 after an estimated 100 000 ASR devices had been implanted (one-third in the USA) and 6 months after the company warned physicians of a high early failure rate.[6, 7] Examination of the dysfunctional implants after removal identified flaws inherent to the design.[10] It is possible that more rigorous safety testing prior to market release, or close post-market clinical follow-up, would have detected irregularities and prevented (or halted) the implantation of ASR devices.

A more familiar neurointerventional device recently drawing considerable negative attention is the Wingspan Stent System (Stryker, Kalamazoo, Michigan, USA), a stent designed for use with the Gateway PTA Balloon Catheter in the treatment of intracranial atherosclerotic disease. The stent was approved under a FDA HDE in 2005, based on a safety study conducted in 45 patients at 12 sites in Asia and Europe, for the treatment of intracranial atherosclerotic disease refractory to medical therapy in intracranial vessels with stenosis of ≥50%. Early retrospective analyses of outcomes performed by independent centers indicated both safety and efficacy with the Wingspan,[11] and many clinicians involved in stroke care were optimistic about how the system would fare in a randomized controlled trial of stroke prevention. The Stenting and Aggressive Medical Management for Preventing Recurrent stroke in Intracranial Stenosis trial (SAMMPRIS), the first randomized trial comparing best medical therapies to angioplasty and stenting, began enrolling its first patients in October 2008. However, enrollment for SAMMPRIS was halted prematurely in a report in September 2011 owing to a 30-day stroke rate of 14.7% in the angioplasty and stenting arm compared with 5.8% in the medical management arm.[12]These results have led a consumer advocacy group to seek the repeal of the Wingspan HDE and to criticize the FDA for the original approval.[13–15]However, these efforts are not without controversy as the patient population evaluated in SAMMPRIS was in some respects different from the population indicated on the patient HDE (who would only comprise a subset of the patients evaluated in SAMMPRIS), and the 1-year stroke rate of 20.2% was still perceived as a dramatic improvement over the 24.9% stroke rate demonstrated in the WASID[16] study for the HDE-approved population. Thus, while portrayed as ‘dangerous’ by groups such as Public Citizen, outcomes with Wingspan in SAMMPRIS were no different from those observed in the same patient cohort treated with conventional medical therapy. The true advance in the SAMMPRIS trial was an observation that was independent of the actual device in that aggressive medical management resulted in a primary event rate that was half the rate (12.2% over 1 year) expected on the basis of the WASID study (24.9%). So while no one debates that aggressive medical management is superior to angioplasty and stenting in the SAMMPRIS study population, this unexpected finding in no way indicates a breakdown of the regulatory process but merely reflects a tremendous advance in the medical management of the disease process.

A final example of a neurointerventional device not performing as anticipated is the Cerecyte coil (Micrus Endovascular, San Jose, California, USA), a specific type of detachable bioactive coil designed for the endovascular embolization of intracranial aneurysms. The Cerecyte coil contains a polyglycolic acid element within the wind of the coil, in contrast to traditional coils which are composed of bare platinum. The Cerecyte coil was approved for use in the USA via the 510(k) process in 2004. Early non-randomized studies suggested better results than bare platinum coils,[17–21]leading the device manufacturer to charge a premium for these coils as they were deemed superior to traditional coils. However, the Cerecyte Coil Trial, a company-sponsored randomized controlled trial comparing Cerecyte coils with bare platinum coils, demonstrated no benefit for Cerecyte over traditional coils.[22–24] Although it is unlikely that patients were physically harmed due to the use of this technology, the amount of money spent on premiums for what was eventually determined to be an equivalent product is substantial. This problem is not isolated to the Cerecyte coil; other devices such as the Matrix coil (Stryker)[25] were similarly charged at a premium for years, only to reveal no difference in primary outcomes in later definitive trials. This scenario represents an additional point of contention: unvalidated increases in financial expenditures following a market release without rigorous testing and post-market follow-up.


When considering device pathways to FDA approval, it may be helpful to first review the pathway to FDA approval for drugs. It is estimated that the average length of time from concept to market for investigational new drugs is about 12 years, which has increased significantly from just under 8 years in the 1960s, with an estimated total cost per drug of $800 million.[26]

The process can be divided into several stages: a research and development phase with preclinical testing (average 1–3 years), a clinical research and development period including phase I, II and III testing (average 5–10 years), and a new drug application FDA review with post-marketing surveillance (average 2 years). During this time period, drugs are tested in a sequential manner that incrementally increases patient risk while targeting a specific therapeutic goal.

Phase I studies are usually conducted in healthy volunteers to determine the side effect profile and relative safety of the medication as well as the route of metabolism. If phase I studies demonstrate an acceptable safety profile, phase II studies are undertaken that evaluate medication effectiveness. This phase aims to obtain preliminary data on whether the drug is effective against a target condition, usually through randomization of patients with the diagnosis of interest to varying drug doses, including a placebo group. Safety continues to be evaluate, and short-term side effects are studied. Patients’ responses to each dose are monitored and optimal dosing, based upon a risk-benefit ratio, is identified.

At the conclusion of phase II the FDA and drug development company meet to plan phase III studies. Phase III studies evaluate the new medication head-to-head with other standard treatments, with the goal of comparing the intrinsic effectiveness and safety of the new medication against alternative or standard-of care therapies. Phase III studies are frequently randomized controlled trials that compare the new medication with alternative therapies that are already accepted treatments for the given condition. Drugs that successfully navigate these three phases with satisfactory effectiveness and safety profiles are reviewed and approved for use. Following approval, post-marketing requirements and commitment studies (phase IV) are mandated in which the medication is monitored for safety, efficacy and alternative uses even after release onto the market.

In contrast, the regulatory process for medical devices is much shorter and, generally, less stringent and costly. It has been estimated that the time from concept to market for medical devices is 3–7 years, although no concrete data could be identified in the literature regarding time or cost. The Medical Device Amendments of 1976 to the Federal Food Drug and Cosmetic Act established the current FDA policies regarding medical device approval. Within this framework, many new regulated devices are catalogued as Class III, which is defined as a device that ‘supports or sustains human life or is of substantial importance in preventing impairment of human health or presents a potential, unreasonable risk of illness or injury’. Manufacturers may petition to have their device downgraded to Class I (low risk) or II (moderate risk) should the device harbor only minor differences from devices previously approved. All such devices placed into Class III are subject to premarket approval (PMA) requirements, while those that are classified as Class I or II are subject to less stringent requirements. Therefore, unlike the drug development pathway that mandates successful results in all three clinical phases to obtain new drug approval, the medical device pathway has separate fast-track routes of obtaining approval. These pathways are discussed in the sections that follow. Further information regarding medical device approval is available on the FDA website at http://www.FDA.gov/MedicalDevices.

Premarket Approval

Premarket approval (PMA) is the most stringent type of device marketing application required by the FDA and is required for new devices for which there is no existing equivalent or predicate (Class III devices). PMA approval is granted only if the FDA determines that the new device has sufficient scientific evidence demonstrating that the device is safe and effective for its intended use. Usually, Class I or Class II evidence (prospective data compared with historical controls or randomized clinical trials) are necessary to obtain PMA. In effect, a PMA acts as a license granted to the applicant for the sale and use of their product in the USA. PMA may be considered the ‘gold standard’ regulatory process through which devices are approved because these devices must have valid prospective scientific evidence supporting their benefit and safety. However, it should be emphasized that PMA approval can be achieved with Class II data (such as the Pipeline Embolization Device; ev3, Irvine, California, USA) without an active comparator. Evidence-based medicine specialists will point out that this raises significant potential limitations to the quality of the data regarding some PMA-approved devices. Additionally, there is no requirement for post-marketing surveillance studies to validate the pre-marketing experience.

Premarketing Notification

A Premarketing Notification (510(k)) is a fast-track process wherein applicants must demonstrate that the device to be marketed (moderate risk or Class II) is ‘substantially equivalent’ to a pre-existing legally-marketed device (predicate) in terms of safety and effectiveness. The predicate must have been approved either via PMA or 510(k); devices currently under review are not acceptable predicates. The 510(k) application to the FDA is required at least 90 days before marketing.

This process is usually used when manufacturers develop small iterations upon a previously approved device that are thought to improve effectiveness without compromising safety, allowing for expedited approval without costly and lengthy scientific studies confirming safety and effectiveness. Although this process allows for quick turnover of cutting edge technology from bench to bedside, it also introduces an element of risk should the equivalence assumption be invalid (eg, the Depuy ASR). Furthermore, as devices may be approved based on equivalence to devices now on the market that had 510(k) approval, it is possible that a device could be found equivalent to one approved years ago and that the prior device was deemed equivalent to one three decades ago, and so on, without any recent scientific evidence supporting the technology’s use.

The ‘de novo’ 510(k) process was initiated as part of the 1997 FDA Modernization Act and may be used when no predicate exists but there are substantial data to suggest the device does not carry high-risk (Class III) status. Most devices without a predicate are automatically classified as Class III. This process involves the submission of a 510(k) application, even though a predicate does not exist, resulting in a letter of non-substantial equivalence from the FDA. The manufacturer may then petition the FDA (‘de novo’ petition) to have the device reclassified to Class I or II by providing ample evidence that Class III status is not necessary.

Humanitarian Device Exemption (HDE)

The third means of approval is via a HDE application. It is important to note that neurointerventional surgery, as a specialty, features a relatively high number of HDE-approved devices. A Humanitarian Use Device (HUD) is a medical device designed to treat or diagnose a condition that affects <4000 individuals in the USA annually. In addition, the use of a HUD requires local institutional review board (IRB) approval and supervision. The HDE application is similar to the PMA application; however, the HDE is exempt from the PMA requirement of valid prospective scientific evidence arguing its effectiveness.

The HDE carries this exemption because it could potentially take years just to enroll enough patients with a rare disease to obtain a power sufficient to demonstrate statistical effectiveness. However, data to support the HDE must demonstrate that there is a probable benefit to health from the use of the device and that the probable benefit outweighs the risk of injury or illness from the use of the device. Therefore, to allow for continued technological advancement and treatment of diseases of low prevalence, the HDE only requires demonstration of device safety with the assumption of device effectiveness. To keep manufacturers from profiting from devices that lack evidence supporting their effectiveness but allow for patients with rare disorders to receive continued treatment, the HDE mandates that manufacturers charge a price that covers manufacturing fees, research and development and other associated expenditures only.

If this value is more than $250, the HDE holder must provide the FDA with an independent certified accountant report or representative attestation indicating the reasons for the higher cost. An exception to this rule is an HUD designed to be used in pediatric populations and some devices used to treat both children and adults. Similar to the 510(k) process, this process helps to expedite approval for medical devices aimed at benefiting uncommon diseases, but also introduces an element of risk should the effectiveness assumption be invalid or become outdated with advancing alternative treatments.

Investigational Device Exemption (IDE)

An investigational device exemption (IDE) is required prior to evaluating investigational devices in a clinical study. Unlike other device pathways, an IDE requires local IRB approval, informed consent from all treated patients, labeling of the device for investigational use only and rigorous monitoring of the study. Investigational devices are dichotomized into two groups based on the potential for serious risk to health of subjects: significant risk devices and non-significant risk devices. Significant risk devices, given their inherent risk to patients, require both FDA and IRB approval before initiation of a clinical study, while non-significant risk devices require only IRB approval. The IDE process provides manufacturers of new devices a means to evaluate for device safety and effectiveness to support a PMA or 510(k) application.

Postmarket Device Reporting

All devices approved for market have mandatory manufacturer and facility reporting requirements. Most notably, manufacturers and the facility must report all device-related deaths, serious injuries and adverse events secondary to device failure or adverse events in which the device may have contributed. These include 30-day reports in which manufacturers have 30 days from time of event to report device-related deaths, serious injuries or malfunctions to the FDA (available athttp://www.FDA.gov/downloads/Safety/MedWatch/HowToReport/DownloadForms/UCM082728.pdf); 5-day reports which require manufacturers to report serious public health concerns stemming from device use to the FDA within 5 days of becoming aware of the concern; baseline reports which are for first-time adverse events; supplemental reports; and annual certifications. However, substantial criticism exists with this reporting process as no formal system is in place to ensure capture of all events. For the most part, the reporting process is dependent upon physicians reporting any events back to the company. It is probably fair to say that, currently, such reporting is sporadic at best.

The FDA may order manufacturers of certain Class II and Class III devices to establish tracking systems in which each individual device may be tracked to the patient in which it was used. This provision allows the FDA and manufacturer to locate and expeditiously remove those devices from the market that have been identified in postmarket reporting as potentially dangerous or defective (facilitating device recalls) or to notify treated patients of a potential health concern associated with device use. Generally, devices subject to such tracking provisions are those that are intended for implantation in the body for >1 year, those that may cause significant harm or death should the device malfunction, or those that are intended for use outside the treatment facility and are life-saving or life-sustaining.

The FDA may also order holders of a PMA or HDE to perform a 522 postmarket surveillance (522PMS) study to help assure continued safety and effectiveness after the device has been released on the market for a period of up to 36 months. The FDA has authority to require a 522PMS on any Class II or Class III device that meets one of the three tracking criteria (listed above) and/or is expected to have significant use in a pediatric population. The 522PMS is highly specific to the given device and may range from animal studies to randomized controlled trials. Frequently, a required 522PMS will involve active or enhanced surveillance studies where the incidence, distribution and trends of adverse events are actively or passively recorded and reported.

Growing Concerns About the Current FDA Approval Processes

There is a growing discussion in both the medical literature and in public commentary regarding potential faults in the FDA approval process for medical devices.

Most notably, the 510(k) and HDE processes have sparked considerable controversy due to the Depuy ASR and Wingspan System, as well as other devices, which were approved through ‘fast track’ routes lacking scientific evidence confirming device safety and effectiveness.

Safety concerns have been raised over the FDA’s 510(k) clearance process whereby devices demonstrated to be ‘substantially equivalent’ to previously approved devices, and therefore thought to share similar safety and benefit profiles, are approved for marketing without clinical trials. These concerns led the Institute of Medicine (IOM) to recommend eliminating the 510(k) process altogether in their July 2011 FDA-commissioned report.[27]

Within this report the IOM argues that the 35-year-old 510(k) process cannot ensure device safety or effectiveness because it lacks any means to do so; it can merely determine equivalence to a predicate device. The IOM therefore argues that the 510(k) process should be disbanded and a new forward-thinking process developed. Furthermore, the report argues for enhanced post-marketing surveillance monitoring of devices, a feature that 510(k) approval currently lacks. Unfortunately, the report does not deliver new blueprints for overhauling the system; it merely identifies that the 35-year-old 510(k) process is antiquated and no longer appropriate. The report does list a number of attributes that would be ideal for any new FDA approval system for Class II devices including evidence-based, fair, clear, self-improving, risk-based, and others.[28]This report has been met with praise[29] but also criticism, particularly from the medical device industry which argued that changes to regulation would slow technological innovation, cost jobs and harm patients.[30, 31]

An additional concern of this process revolves around the financial incentive for manufacturers to develop new devices via the 510(k) clearance process with only minor improvements. As stated by Curfman and Redberg in a commentary published in the New England Journal of Medicine: “Since regulatory approval hinges on claims of similarity to previously approved devices, the process may encourage the development of devices that provide only small improvements at higher cost than their predecessors. The trade-offs between incremental improvement and the additional costs and technical complexity of the required procedure are poorly understood and seldom investigated rigorously.”[29] As seen with the Cerecyte coils, the manufacturer was able to charge a premium due to purported superiority over traditional coils without any prospective evidence confirming superiority. When a prospective trial was performed, equivalence was confirmed but superiority was not, indicating that patients had been charged an increased cost for years for a device that was no more effective than its cheaper alternatives.

The HDE approval process may not adequately require substantial proof of efficacy. Nevertheless, the majority of these concerns are addressed at individual devices, not at the fundamental principles of the HDE approval process. Concerns have arisen due to the recent SAMMPRIS results regarding the Wingspan System[13–15] as well as devices for other treatments such as deep brain stimulation in obsessive-compulsive disorder.[32]

Critics note the differing level of requirement for the introduction of drugs versus medical devices. Ironically, the FDA is being criticized at both ends of the spectrum while remaining substantially under-funded for the difficult tasks that it must oversee. On the one hand, there are concerns over the seemingly slow pace of introduction of new devices and drugs to the US medical market. Simultaneously, the FDA faces criticism for allowing drugs and devices to enter the market prematurely. Finally, some critics argue that the FDA and the Centers for Medicare and Medicaid Services (CMS), who are responsible for reimbursement for devices, play a critical role in the speed at which enrollment occurs in important randomized controlled trials based upon reimbursement patterns, and whether or not devices are reimbursed outside the context of a clinical trial. One example of this phenomenon is new acute ischemic stroke devices, which some argue are enrolling patients for randomized trials very slowly due to the fact that these devices are being reimbursed prematurely by CMS without Class 1 evidence supporting their use.[33, 34] In addition, poor coordination between the FDA and CMS with regard to physician reimbursement for FDA-approved devices (eg, foreign body retrievers with a stroke indication) further contributes to this issue. Finally, an inefficient FDA approval process is resulting in an increasing number of device manufacturers outsourcing their randomized trials to Europe or other countries in an effort to expedite accrual and trial completion. This fact may be a further indication that flaws inherent to the current FDA regulatory processes may be beginning to undermine the ability of the USA to remain competitive in the medical device industry.

The Role of Experience in Device Effectiveness and Safety

An important issue that has so far been left out of the FDA clearance debate is the role of operator experience in determining device safety and effectiveness. Most new medical technologies have a learning curve wherein clinicians receive initial training once the device is released for use and then subsequently improve with experience. Logically, practitioners using new devices are more likely to cause patient harm when first learning how to use the device than after proficiency has been obtained. The ‘learning curve’ effect plays a significant role in those devices that require new advanced skill sets and, through its effect on patient outcomes, may be a substantial contributor to the early results of mandated safety and effectiveness trials for devices. Recognition of this learning curve effect by the FDA has led to important FDA-manufacturer agreements regarding training for some new devices such as the Pipeline Embolization Device, wherein clinicians must undergo course training and then be supervised by a proctor for a designated number of cases before being able to use the device independently.

An excellent example of the learning curve effect comes from the Carotid Revascularization Endarterectomy versus Stenting Trial (CREST), a randomized trial comparing carotid endarterectomy to carotid angioplasty and stenting with the primary outcome of stroke, myocardial infarction or death.[35] Although carotid angioplasty and stenting was first described in 1994, significant improvements in device technology, such as distal embolic protection devices, were not widely available until the beginning of the 21st century. The fundamental goal of CREST was to compare a new and exciting technology—angioplasty and stenting (with which most clinicians having only limited experience)—with a tried and tested technique—carotid endarterectomy, a commonly-performed procedure introduced in the 1950s. CREST began enrolling patients in 2000 and finished in 2008, with 50% of total enrollment reached in 2006. The final results of the trial demonstrated statistical equivalence of stenting with endarterectomy for the primary outcome, with a higher risk of stroke in the stenting group and higher risk of myocardial infarction in the surgical group. Interestingly, the risk of major stroke or death in the stenting group was 2.5% over the period 2000 to 2005 (n=361) and <1% from 2006 to 2008 (n=770).[36] The substantial reduction in serious complications during this time period for the endovascular treatment arm is most likely secondary to improvements in technique from gained operator experience at the treatment centers, but may also be partly due to changes in enrollment criteria during the study period. The learning curve effect is well illustrated in this example because of the longevity of the trial, which provided ample time for operators to develop proficiency with the devices and techniques. Had the trial been halted before 2005, the results from stenting would have appeared worse than endarterectomy because operator experience was poor and complications were high. However, we now know that carotid stenting is a safe and effective option for patients with carotid stenosis because the trial allowed ample time for operators to become proficient and for associated technologies to be developed and widely implemented, with the lower complication rate towards the end of the trial nullifying the higher rate of poor outcomes at the beginning.

Expanding the concept of a learning curve effect to the approval process makes the situation even more complicated. Assuming this process occurs universally for most new technology, early trials evaluating the effectiveness of a new device are likely to overestimate complications and underestimate effectiveness because clinicians have limited experience with the device and are more prone to error. Consequently, early studies are likely to show no difference in outcomes (or potentially worse) compared with standard of care therapies. Studies performed years after approval of a device, after clinicians have gained experience with the technology and acquired proficiency, are more likely to report lower complication rates and a better safety profile. Extrapolating this argument further, one can predict how rigorous early testing of new technology, such as in a PMA, has a bias towards device rejection. Conversely, continued post-marketing monitoring of device safety and effectiveness in the years that follow approval is likely to show improved results as time progresses. Therefore, while early tests are crucial in detecting devices that are unsafe, post-marketing monitoring may be just as important in capturing the true risks and benefits of new technology.

There certainly exists a subset of newly-approved devices with inherent flaws that will continue to show inferior results regardless of advancements in proficiency (eg, the Depuy ASR). However, there are probably devices approved by the FDA with mediocre initial results that could show improvements in safety and effectiveness with time, and eventually become a standard of care therapy with profound benefits to patients with a particular condition.

Optimizing the FDA Approval Process

Recent and major device failures suggest a rationale for change within the FDA device approval framework. There has been surprisingly little argument from neurointerventional physicians regarding the PMA process and the need for rigorous testing demonstrating safety and effectiveness of new high-risk Class III devices. Furthermore, although the HDE process has limitations, the rarity of the diseases for which the devices are designed to treat makes obtaining effectiveness data impractical. In addition, it seems impractical to mandate that new devices with only small iterations upon previously-approved medical devices (ie, 510(k) approved devices) show robust effectiveness and safety data prior to approval. However, it is difficult to support the notion that merely being able to argue that a new device has ‘substantial equivalence’ to a predicate is an acceptable surrogate to actually having demonstrated it through clinical studies.

A potential solution to resolving the problems with the 510(k) and HDE processes does not necessarily lie in a complete overhaul of the system but, instead, lies in the realm of post-marketing monitoring and reporting. Mandatory post-marketing reporting of outcome, safety and complication data on new 510(k) or HDE devices by clinicians using newly-approved devices would provide an additional screening process by which 510(k) devices actually demonstrate equivalence and by which HDE devices actually demonstrate effectiveness. Essentially, this solution would make 522PMS mandatory for all newly-approved Class II or III devices, with most devices requiring active surveillance studies for recording and reporting of all adverse outcomes. As an example, it could be mandated that the first 1000 devices used (or implanted) after FDA approval are monitored closely for early and long-term outcomes. This would allow physicians to treat patients with new technology that they deem to be of benefit and allow manufacturers to continue to profit from their research and development by selling devices, while simultaneously providing a validation process for new technologies that can weed out those that are causing harm. This would not only allow patients to be treated with cutting edge technology but would continue to support technological innovation. If stringent post-marketing monitoring was performed for the Depuy ASR, it is certainly possible that an unacceptably high revision rate would have been detected much earlier and the device could have been removed from the market. Additionally, with mandated ongoing data accrual, it is not unreasonable to expect that the overall field would actually benefit as subsequent iterative advances would be based on valuable newly collected data rather than on anecdotal and marketing projections.

Limitations of mandated post-marketing monitoring for HDE and 510(k) devices largely appear to be related to the additional costs of data collection and data review. Unless strictly regulated, data provided by physicians or industry to the FDA would likely also contain an inherent bias. Strict guidelines for accurate, honest and clear reporting would be an essential element of any post-marketing amendment to the approval process. An adjudication procedure in which unbiased external experts review and evaluate clinical and outcome data in the post-marketing period may be necessary to ensure the quality of the post-marketing monitoring process.

The authors of this commentary are sensitive to the numerous burdens facing healthcare providers and medical device manufacturers. The Affordable Care Act produced legislative changes to healthcare greater than many US-based doctors have experienced in their professional lifetime. As part of the funding for the Affordable Care Act, device manufacturers have had a 2.3% tax imposed on the sale of their products.[37] Physicians have increased demands on their time with diminishing reimbursements. Mandating post-marketing monitoring has the potential to be perceived as an unfunded mandate. We propose it in the absence of an alternative to potential changes of a more draconian nature as could occur by a sensitive or reactive FDA. Neurointerventionists, like other medical specialists with practices closely tied to the availability, safety and effectiveness of cutting edge medical devices, should be involved in designing and refining such processes to ensure that the proposed post-marketing monitoring remains efficient and effective in capturing credible information.


Recent challenges with medical devices suggest a need to reform the FDA medical device approval process. Disbandment of the 510(k) process, as is being suggested by the IOM, with mandatory completion of safety and effectiveness trials before device approval for all new devices is impractical and may harm technological innovation and, indirectly, patients. Instead, measured consideration of mandatory post-marketing surveillance for all newly-approved HDE or 510(k) devices, such that safety and effectiveness data may be demonstrated and suspect devices be identified and removed from the market expeditiously, may provide a better solution to this problem. Although this approach would certainly add cost, mandatory post-marketing surveillance will continue to promote technological innovation and device profitability while ensuring patient safety, and provide a more reasonable alternative to mandatory expansive comparator-controlled pre-marketing requirements.


Dietary Supplement Greatly Extends Worm Life Span

Valuation – Pharma & Biotech




One of common challenges at the early stage of biotech ventures is to calculate realistic estimates of the value of technologies to bring investment for lengthy commercialization process. The valuation should adequately account for the novelty of discovery, market size and opportunity, time and cost of development and risk that the investor must bear on each phase of product development.









  • DISCOVERY ...% ...%
  • PRE-CLINICAL 9% 9%
  • PHASE 1 20% 20%
  • PHASE 2 29% 29%
  • PHASE 3 64% 64%


  • DISCOVERY ...% ...%
  • PRE-CLINICAL 45% 45%
  • PHASE 1 70% 70%
  • PHASE 2 45% 45%
  • PHASE 3 75% 75%








Putting a Price on Biotechnology

Putting a Price on Biotechnology

Many bioentrepreneurs incorrectly estimate the value of their technology by failing to account adequately for the cost, risk, and time inherent in product development.

Venture capitalists are often wary of investing in biotechnology because bioentrepreneurs seldom provide realistic estimates of the value of their technologies.

To evaluate accurately a new biotechnology, an entrepreneur must account for the future revenue from the final product, the cost and time needed to get the product to market, and the various risks faced along the way.

Entrepreneurs can approach the venture community with a more rational basis for investment by expressing a biotechnology in terms of risk-adjusted net present value (rNPV; see “Glossary”), as discussed here. Investments, milestone payments, clinical trial costs, and royalties on sales can then be compared directly using the common currency of rNPV.

A researcher has made a scientific breakthrough that could be worth millions of dollars. To attract the investment needed to commercialize the biotechnology, the researcher must now convince venture capitalists and pharmaceutical companies of its potential. However, investors want to know what the biotechnology is worth today and will require evidence to substantiate this estimate.


The numbers game

Unfortunately, estimates of the value of a biotechnology are all too often clearly unrealistic. “Valuations” are typically made in the following (unrealistic) manner: “The market for our product is $2 billion per year, so if we capture only 10% of that market for 10 years, then the company is worth $2 billion today, less development costs.” Perhaps as a result, the venture capital community often judges a company on the basis of its management’s expertise rather than the underlying asset of real value—the biotechnology.

How, then, can we put a price tag on biotechnology? The best solution is to evaluate a biotechnology by estimating the rNPV. Using rNPV, researchers and potential investors can price the biotechnologies that they are considering selling, investing in, or acquiring. However, it should be noted that the management, science, and intellectual property surrounding a biotechnology must all be of the highest quality to interest the venture community; if any of these are seriously lacking, the biotechnology is effectively worthless.


Start at the end

The first place to start when valuing biotechnology is at the end—the projected revenue stream. The end product for most biotechnologies is a medicine, and the payoff is frequently the royalty due the biotechnology company paid from the estimated annual revenue of the product sold by a manufacturing and marketing partner (or sales of the product, if the company retains all rights). In general, annual revenues of a product are estimated using the current sales of drugs used to treat similar indications. As discussed previously1, the take-home percentage (typically divided between milestone payments and royalties on gross sales) due pre-market biotechnology developers is about 40% of gross product revenue (see “Parameters for biotechnology”).

To illustrate the rNPV method, we have created a hypothetical scenario: A company has developed Acmed, a potential treatment for asthma. The preclinical science and intellectual property are sound, and Acmed has passed initial testing in animals and is now ready to enter phase 1 trials. The company is seeking venture funding and partnering opportunities with multinational pharmaceutical companies, so what should they charge for Acmed today?

The annual market for asthma treatments is around $5.8 billion. To estimate Acmed’s market share, the product is compared with other asthma medications on the market. Competition within the asthma market is intense, and the anticipated market share for Acmed may be just 5%—a “moderate to small” share on the spectrum of market shares currently captured by pharmaceutical companies. The annual gross return of Acmed will therefore be about $290 million. Of this sum, 60% is reserved for the eventual marketing and manufacturing partner, and 5% is reserved as a royalty for the university that invented Acmed. This leaves 35%, or an annual return of about $100 million, as the royalty due the biotechnology company that develops Acmed through pre-market research and development stages.

Consultation with a patent attorney suggests that Acmed will be defended from competition for the next 18 years. The payoff for Acmed is, therefore, $100 million a year for 18 years minus the years that it takes to get the product to market. It should take eight years to carry out clinical trials and have the drug approved by the US Food and Drug Administration (FDA), and so Acmed’s potential payoff for the biotechnology company is $1 billion (see “Acmed Payoff”).

Although we have identified the theoretical payoff, the true value of Acmed is far less. Several factors consume the present value of the biotechnology in nibbles, bites, and chomps. Indeed, these factors can eat up the entire value of the biotechnology—leaving nothing for the biotechnology company or its investors. These three factors are the cost, risk, and time associated with drug development.

Factor 1—Cost

The cost of drug development can be estimated using industry standards2, 3, and any deviations from these standards must be justified. Acmed’s development incurs the costs associated with additional animal studies, clinical trials, and filings to the FDA. By comparing with clinical data from currently marketed asthma drugs, it is possible to estimate how many subjects will need to be enrolled in clinical trials. Clinical trials involving asthma inhalants such as Acmed are data-intensive because multiple tests are performed over a relatively extended time period, and the trials will be conducted in the United States, so the costs for each subject will be at the top end of the range.

Overhead costs vary considerably between companies, and the value of the technology will vary in parallel. The same situation arises in other walks of life: For example, if you can repair your own house, total repair costs are lower, and the house is effectively worth more to you than it would have been to an unskilled owner. However, in this example we have left out the “overheads” and estimate Acmed’s intrinsic value. The total cost of developing Acmed is $23 million (see “Acmed costs”).

Factor 2—Risk

It would be grossly inappropriate simply to subtract the costs from the payoff to estimate Acmed’s intrinsic value. Such a calculation would imply that each clinical trial was a guaranteed success. Instead, clinical drug development should be regarded as a series of high-risk wagers where success in the first wager (e.g., a phase 1 trial) allows a company to make additional wagers (e.g., phase 2 and 3 trials) before reaching the ultimate payoff (e.g., a marketed drug). A company may never see the payoff, but then the company may not have to pay for a phase 3 trial. Each wager is associated with an ante (the stake or sum wagered), such as the cost of each clinical trial. The key to determining the value of the wager series is to risk-adjust both the payoff and the ante (see “Risk adjustment”).

Acmed appears to be a typical pharmaceutical and is estimated to be associated with normal development risks. Each of Acmed’s costs are risk-adjusted by the risk inherent to each stage (see “Risk-adjusted Acmed costs”). These risk-adjusted costs are then subtracted from the risk-adjusted payoff. Acmed’s risk-adjusted costs are $8.9 million. Acmed’s risk-adjusted payoff is $200 million, and so if all sales and pre-market stages were completed instantaneously, the resultant risk-adjusted value of Acmed would be about $191 million.

Factor 3—Time

A company would rather have a dollar today than a dollar tomorrow because today’s dollar can be invested and earn a return, increasing its worth tomorrow. By the same argument, a dollar received tomorrow is worth less than a dollar received today. The net present value (NPV; see “Glossary”)—a standard finance equation—is what tomorrow’s cash flow would be worth today.

The amount that future money loses in value each year is termed the “discount rate”. Discount rates normally include many factors including risk. However, in the Acmed example, the discount rate is independent of R&D risk. We assume here that the discount rate is equivalent to the 20% internal rate of return generally expected by the primary sources of capital available to biotechnology companies—venture capitalists and large pharmaceutical companies1. Research and development (R&D) risk is accounted separately by development stage.

The effect of discounting can be dramatic. For example, if clinical trials began today, Acmed would not begin earning revenue for another nine years. Furthermore, the $1 billion in total revenue generated is spread out over 10 years (Acmed’s has only 18 years of blocking patent life remaining). Assuming a 20% discount rate, the NPV of Acmed’s payoff cash flow is only $117 million total (calculation not shown), and this is before any adjustment has been made for development risks. Because the payoff will not come for some time, the NPV of the money is much lower than one might have expected. Clearly, time is a significant factor when valuing biotechnology, especially when the brunt of clinical trial costs comes before revenue is generated. On the upside, the most expensive clinical trials take place later in development and so have significantly discounted NPV. In the case of Acmed, discounting reduces the pre-revenue costs of Acmed from $23 million to a present value of $12.6 million (calculation not shown).


To calculate the true present value of biotechnologies, revenue, cost, risk, and time must be combined into a single calculation of rNPV. In the rNPV equation, Equation (2), the present value of each risk-adjusted cost is subtracted from the present value of the risk-adjusted payoff to arrive at the rNPV of the biotechnology.

By adding together all of Acmed’s costs and risks and then discounting for time, the true rNPV is finally revealed. Today, Acmed is worth about $18 million (see “Acmed’s rNPV).


Estimates of rNPV can be useful in deal-making scenarios: For example, if a company wants to raise money from investors, how much of its equity is it fair to give away in return? If a pharmaceutical company wants to pay milestones and a royalty on sales, what should this royalty be? Both investments and milestone payments can be calculated simply by reducing each to the common currency of the rNPV.

For example, a venture capital company is willing to invest $9 million in Acmed. Today’s $9 million investment has an rNPV of $9 million, which is added to Acmed’s rNPV ($18 million) to yield a new rNPV of $27 million. The venture capital contribution represents a third of the assets of the now-capitalized project, so a fair value for the venture capital investment would be about 33% of Acmed. (Although we will not develop this method here, the equity must be increased to account for company overheads and anticipated equity dilutions.)

In a second scenario, a pharmaceutical company is willing to in-license Acmed for milestone payments of $5 million today, $10 million on entering phase 2, $15 million on entering phase 3, and a royalty on gross sales. Also, the pharmaceutical company will split Acmed’s remaining development costs. What would be a fair royalty?

By calculating the rNPV of each milestone and the clinical trial costs borne by the pharmaceutical company, the pharmaceutical company has made an investment with an rNPV of $15.9 million. In return, it would be fair to give the pharmaceutical company 68% of the $23.4 million rNPV of Acmed’s payoff. Acmed’s developers would retain 32% of the 35% R&D royalty on Acmed’s gross revenue—about an 11% royalty.

Selling price versus fair value

Using the rNPV, the inventor and investor can arrive at a realistic value of a biotechnology (see Fig. 1). By adopting an auditable valuation approach, biotechnology companies may be able to seek debt financing even at early R&D stages. However, as Steven Burrill, chief executive officer of Burrill & Company (San Francisco, CA) cautions:”Notwithstanding all the fancy math, the real way these tech companies are valued is based on comparables … the real value is determined on an arm’s-length negotiation.” Even so, knowing the underlying value of a biotechnology can be critical for getting the best deal from either side of the negotiation table. The same applies when buying or selling a house: You get the best deal when you know the house’s value based on an accurate appraisal. Likewise, you can set an advantageous price by knowing the fair value of the biotechnologies—the rNPV.


Figure 1: The value of biotechnology.

Figure 1 : The value of biotechnology.


Simplistic cash flows (in red), which include revenue and costs, present unrealistically high valuations for biotechnologies. A better representation is the net present value (NPV; in green), which discounts the revenue cash flow over time, but even the NPV overestimates the value of biotechnologies during all R&D stages. Risk is mitigated as biotechnologies progress through development. When this increasingly mitigated risk is taken into account, the risk-adjusted cash flow can be discounted to arrive at the risk-adjusted NPV (rNPV; in blue). The rNPV is an estimate of the fair price of a biotechnology. Note that rNPV coincides with NPV only once risk is mitigated.

© Amy Center

Note: A Microsoft Excel spreadsheet for calculating the rNPV is available as supplementary information.

The spreadsheet version accounts costs by calculating the risk-added costs rather than risk-adjusted costs. Risk-added costs are Ci/Ri; R0 is multiplied later to arrive at the risk-adjusted costs. This rearrangement of the equation yields the same rNPV.



We thank D. Constable of Hollister–Stier Laboratories (Spokane, WA), S. Litwin of the Fox Chase Cancer Center (Philadelphia, PA), M. Sanders of ProPharma Partners (Hayward, CA), S. Burrill of Burrill & Company (San Francisco, CA), and S. Trimbath and P. Wong of the Milken Institute (Santa Monica, CA), whose input was invaluable; we also thank J. Wadsack of the New Jersey Virtual Campus (Chatham, NJ) and J. Johnson (Moscow, ID), without whose support this publication would not have been possible.

Jeffrey J. Stewart1, Peter N. Allison1 & Ronald S. Johnson1

Jeffrey J. Stewart (e-mail: jjs@alumni.princeton.edu), Peter N. Allison, and Ronald S. Johnson are with the life sciences investment banking firm, BioGenetic Ventures (Bellevue, WA).



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