Nonprofit takes risk out of device development for Medtronic

For companies like Medtronic Inc. (NYSE:MDT), developing breakthrough technologies to treat untreatable diseases can be expensive and have little promise of financial returns.

The risk is high enough for — even companies as well-resourced as Fridley, Minn.-based Medtronic — that alternative funding sources are welcomed and highly sought after.

Last week, CHDI Foundation, a not-for-profit research organization, said it would “initially” pay up to 50 percent of clinical costs of a drug-device therapy being developed by Medtronic and Alnylam Pharmaceutical Inc. (NSDQ:ALNY) to treat Huntington’s disease. That translates into millions of dollars of free research support for the two companies.

“That’s a substantial amount of money from a not-for-profit,” Lothar Krinke, Medtronic’s vice president of research and business development for the company’s neuromodulation unit, told MedCity News. “But what’s most important to me is to have a third party endorsement … that we are moving in the right direction,” he said.

The unique, three-way partnership may foretell a future business model in which medical device makers and drug companies collaborate with outside organizations to cut costs and speed therapies to market.

It now takes an average of 15 years, and sometimes billions of dollars, to commercialize a drug in the United States, according to Tufts University‘s Center for the Study of Drug Development. With dozens of drug patents set to expire over the next few years, pharma companies are racing to replace the revenue that will be lost.

“Innovative approaches to drug development, including alliances and partnerships, may prove the best way to increase the rate at which the research-based drug industry brings new products to market,” CSDD said.

Advances in DNA research, including the creation of RNAi proteins that “turn on” and “shut off” certain genes that cause diseases like Huntington’s, have so far failed to translate into more medicines.

Between 1950 and 2008, the Food & Drug Administration approved 1,222 therapies, but the number of drug approvals have remained constant since 1990.

“The reason’s simple: Biotech hasn’t reduced the inherent risk in drug discovery and development,” according a recent report by PricewaterhouseCoopers.”Biotech companies don’t develop new medicines much more quickly or economically than pharma companies do.”

The average development times for technologies like RNAi actually are slightly longer than they are for regular drugs — 97.7 months versus 90.3 months — according to the report. Average development costs also are much the same — $1.24 billion vs. $1.32 billion. And the overall success rate for biotech drugs still is only 9.1 percent, compared with 6.7 percent for regular pharmaceuticals.

That’s why partnering with medical device firms could pay dividends for pharma. For one thing, experts say companies like Medtronic excel at efficiently managing clinical trials. But more importantly, Medtronic designs devices that can effectively deliver drugs to the body.

“In recent years, the number of protein-based pharmaceuticals reaching the marketplace has increased exponentially,” according to the Greystone Research consulting firm. “The clinical application of these drugs is limited by a lack of desirable attributes for adequate absorption or distribution. It therefore becomes critical to formulate these drugs into safe, stable and efficacious delivery systems.”

For example, Medtronic is working on an implantable infusion system that can deliver Alnylam’s RNAi therapy to the central nervous system. The companies hope the drug will spread well beyond the infusion site and reach areas of the brain affected by Huntington’s, a progressive, degenerative disease that causes brain cells to waste away. About 120,000 people suffer from the disease in the United States.

Under the 50-50 partnership, Medtronic will commercialize the therapy in the United States and Europe. In exchange for funding clinical development of the drug/device product to its launch, Alnylam will receive a proportional share of the profits in the United States, and royalties and milestone payments in Europe.

“These combination drug-device products, where the drug and device are clinically tested and approved as a single product entity, are becoming one of the fastest new drug categories,” Greystone said. “The growth of protein drug products is having a significant effect on the way drugs and devices are developed. Cooperation between device designers and drug developers is occurring much earlier in the drug development cycle, allowing device designs in many cases to be tailored to targets.”

But what makes the Medtronic/Alnylam partnership so interesting is the role of CHDI Foundation, a private not-for-profit organization that focuses on Huntington’s. Though the group solicits research proposals, it was CHDI that offered to help fund the Medtronic/Alnylam project, Krinke of Medtronic said.

That a not-for-profit group would subsidize the work of two for-profit corporations that have plenty of money might have been unthinkable, not so long ago. Medtronic alone spends about $1 billion a year on research and development.

“However, I’ve observed that the non-profit world folks are getting more aggressive in active funding,” Krinke said.”They are starting to change their minds — about funding corporate research. They want us to move faster and get new therapies that they care about. ‘We don’t care about where it comes from. We will put in the money to help.'”

The Michael J. Fox Foundation for Parkinson’s Research, which was founded by the veteran film and television actor last year spent $10.2 million on industry projects, according to its annual report. The foundation is working with 55 industry groups, including biotechnology and pharmaceutical companies.

“The greater goal of the Foundation’s ‘de-risking’ strategy is to create momentum and induce industry players to commit their own significant resources to pre-clinical and clinical Parkinson’s therapeutic development programs,” according to the annual report.

“We look for leverage everywhere,” said MJFF co-founder Debi Brooks. “That means identifying the projects where it’s a good bet that our investment of, say, a few hundred thousand dollars can create a tipping point and increase the odds of a company investing millions down the line.”

Medtronic officials say they welcome future support. “The door is open,” spokesman Brian Henry said.