Dr. Freeman announced that he would be sharing with the Board some of the conclusions of the President's Cancer Panel's explorations over the last 2 years. The Panel explored diverse topics, including socioeconomic status and its implications for cancer; relationships between culture and cancer; the Federal Trade Commission's cigarette test determining tar, nicotine, and carbon monoxide content; lung cancer; avoidable causes of cancer; the ramifications of the human genome project; AIDS neoplasms; progress against leukemia; and the "Information Superhighway."

Dr. Freeman highlighted the estimation that two-thirds of cancers are attributable to the behaviors of individuals—primarily smoking and inadequate/inappropriate diet—suggesting that more than half of cancers can be prevented. He indicated that this information provides a lead for activities that should be undertaken. For example, the Nation has taken a stance against tobacco use. The scientific community must maintain that stance wholeheartedly and support the efforts of the Department of Health and Human Services (DHHS), the Food and Drug Administration (FDA), and state and local jurisdictions that are acting to limit access to tobacco, particularly to young people. More important, the Panel feels that efforts to arm children with knowledge about smoking and health must be improved.

Dr. Freeman emphasized that it is essential to encourage actively future generations to take responsibility for their own health and well-being through health promoting behaviors and through the ability to assess the effects of their behaviors on their health. This recommendation is consistent with the recommendation of the President's Cancer Panel and the Subcommittee to Evaluate the National Cancer Advisory Program (SENCAP) report to apply the scientific knowledge that has been gained. Important first steps are the development of better health-based curricula for young people and the improvement of communication within the scientific community and among the American public to reinforce health-related lessons.

In addition, Dr. Freeman stated that training needs at all educational levels must be assessed to determine whether future researchers and physicians are being equipped with knowledge that will ignite the desire for a lifetime dedication to cancer research. Graduate level curricula must be structured to include the training necessary to respond to the evolving needs of basic, clinical, and population-based research.

Dr. Freeman noted that informatics as a tool is here to stay, and that research training must provide the skills needed to interface in tomorrow's world. Further, the Panel feels that the way in which health-related data is collected and provided must be reexamined to assure that baseline assumptions about needed data are consistent and valid. As more scientific knowledge is compiled, its implications and those of technology on health care and the welfare of individuals must be remembered. As the Panel has emphasized before, the National Cancer Institute (NCI) cannot afford to underestimate the impact of the rapid increases in genetic knowledge and other future scientific developments in many areas, including employment, insurance, and access to health care. The Panel maintains that the administration of genetic tests should be limited to the research arena until employers, insurers, and health care providers have a better understanding of its implications, and until the psycho-support necessary to cope with an adverse genetic finding becomes an integral part of the health care system.

Finally, Dr. Freeman stated that the Panel continues to assert that clinical research is the key support and backbone of the National Cancer Program. The Cancer Centers, Cooperative Groups, and other programs are the training grounds for future researchers, but they are also the arena in which research becomes standard treatment.

Dr. Freeman concluded that it is essential to educate all Americans about the value of clinical research and to cultivate new physicians and researchers.

Dr. Rimer thanked Dr. Freeman for his presentation. After determining that there were no questions or comments from the Board, Dr. Rimer introduced Dr. Richard Klausner, Director of the National Cancer Institute.

Dr. Klausner commended the staff of the NCI and other Federal employees for their good spirit and commitment during the Government furlough. Dr. Klausner recognized the impact of the furlough on individuals wanting to get their important work done, and the difficulties they continue to face in catching up with the enormous amount of work. Dr. Klausner added that, with the resolution of the furlough, the NIH received a generous increase in the budget of almost 5.8 percent.

Dr. Klausner then moved to a discussion of the important and exciting discoveries that have continued to increase our understanding of the fundamental nature of the cancer cell. He listed several discoveries that have occurred since the last NCAB meeting, including the full identification of the second breast cancer susceptibility gene, BRCA2, and the identification by Scott Kearn and colleagues at Johns Hopkins of the first specific susceptibility gene for pancreatic cancer, DCP-4, which is associated with more than 50 percent of pancreatic cancers.

Dr. Klausner announced that just last week, NCI-funded researchers from the Jefferson Cancer Center, led by Dr. Carlo Croce, identified a general cancer susceptibility gene called FHIT, or fragile site in histidine triad protein. This gene appears to be abnormal or lost in the majority of lung cancer cases, approximately 50 percent of stomach, esophageal, and colon cancer cases, and 30 to 40 percent of breast cancer cases, as well as in some ovarian and cervical cancer cases. The gene was first identified in an Italian American family in 1979 with inherited renal cell cancers; it is located at chromosome 3p14.2, the most fragile site in the human genome. The FHIT gene is highly expressed in epithelial cells that are directly exposed to the environment.

Dr. Klausner indicated that the FHIT gene was noted to be 70 percent identical to an enzyme, a diadenosine tetraphosphate asymmetric hydrolase, found in a simple fission yeast (Schizosaccharomyces). This enzyme may work by changing levels of a nucleotide, AP4A (adenosine tetraphosphate adenosine), which may be an intracellular signal that controls cellular responses to damage. Dr. Klausner explained that this is an exciting discovery, because the enzyme has known products in known metabolic pathways and may result in abnormal signalling because of specific changes that scientists may be able to alter.

Dr. Klausner emphasized that the engine of discovery keeps advancing and that early ideas about therapeutic maneuvers based on discoveries are beginning to develop. He explained that discovering a cancer predisposition gene means the beginning of understanding pathways, and the understanding of pathways will help produce specific ideas about how to intervene. Dr. Klausner indicated that molecular diagnostics holds great promise for detection of risk for diagnosis, stratification response to therapy and prognosis, and clinical trials. Extensive clinical trials systems using biologic correlations are demonstrating the utility of such approaches, and these will be a priority for many studies.

Dr. Klausner commented that examples of the use of molecular diagnostics abound. The recent identification of microsatellite instability and the recognition that mononucleotide "runs"--runs of the same DNA base--are the most sensitive measure of a type of DNA instability that characterizes many tumors are leading to clever new diagnostic approaches, at least in the laboratory. These approaches include the newly described sensitive and efficient detection of transformed cells in the urine for bladder cancer recently reported by Dr. David Sidranski.

Dr. Klausner announced that he has asked Dr. Arnold Levine from Princeton to oversee a working group, scheduled to meet soon for a weekend retreat, to advise the NCI on how it can best capitalize on the enormous potential of developmental diagnostics and stimulate the development and application of new technologies in this area. Dr. Klausner and Dr. Levine discussed the "information superhighway," and noted that, although molecular diagnostics is fairly primitive, it is time to take proactive steps to begin doing things that may now seem like science fiction.

Dr. Klausner explained that the NCI's priorities for this year and the future are twofold. They are (1) to use its budget, mechanisms, and the creativity of its community to maintain the engine of discovery, and (2) to assure that those discoveries benefit patients.

Dr. Klausner indicated that the NCI can work towards both of these goals through the judicious use of its budget. Dr. Klausner presented his first slide and explained that the NCI budget for fiscal year 1996 is $2,251,000,000. He noted that this year, for the first time, the NCI will be spending over $1B in the Research Project Grants (RPG) pool. Dr. Klausner stated that the Cancer Centers received an increase of approximately $11M, allowing the NCI to fund a variety of programs, including two special initiatives.

In one initiative, for which $3M to $6M have been set aside for administrative supplements, applications from all NCI Cancer Centers are being invited to propose the development of programs in cancer genetics, based upon the expertise and special characteristics of each of the Centers. The initiative has two aspects: one is to further basic research in this area, and the other is to establish programs in training and education aimed at genetic counseling. There are only 1,400 genetic counselors in this country, and few of them are specifically trained in oncology. The NCI is looking for creative proposals to either expand existing programs or to create new programs to train primary care practitioners, nurses, social workers, psychologists, and health care educators in cancer genetics.

The second initiative, for which $2M to $5M has been set aside for administrative supplements, involves asking the Cancer Centers to produce applications in the area of AIDS malignancies. Malignancies complicate the course of AIDS in approximately 30 percent of cases. This represents an important opportunity for the cancer program to learn about aggressive cancers in the setting of immune stimulation/immune deficiency, as well as those specifically associated with viral causes and viral progression.

Dr. Klausner indicated that $15M has been added to the Clinical Cooperative Groups budget line. Dr. Klausner explained that the NCI's clinical trials system is the backbone of its ability to translate discovery for the benefit of patients, and that this additional funding increases approaches for informatics, opportunities to do correlative studies, and the percentage of recommended funding.

The budget for intramural research is $405M, which represents 18 percent. Dr. Klausner explained that this figure is an accurate measure of what the intramural program spends, plus about $20M to $25M from additional contracts that are not at the intramural line. Dr. Klausner noted that much time has been spent establishing cost management principles and zero base budgeting. For the first time, the budgets of all of the laboratories and branches are using cost management principles. With these measures, real savings are seen in the intramural line compared with the previous real expenses.

Dr. Klausner referred to a new intramural program booklet that states the principles of the organization of the intramural program, defines principal investigators and lab chiefs and delineates their responsibilities for oversight and mentorship, and describes the expectations and criteria by which individuals will be reviewed. Dr. Klausner recommended that the Board read this booklet, which was reviewed by the Intramural Advisory Board.

Dr. Klausner discussed the NCI goal of dealing with core problems, including the lack of opportunity for individuals to do research as indicated by the low success rates, the low payline, and the lack of money available for investigator-initiated research. Dr. Klausner described the changes that have been made to free up money. Dr. Klausner's next slide showed the increases in paylines for 1996 compared with 1995. R01 Individual Investigator Initiated Grants moved from the 15th percentile to the 23rd percentile; P01 Program Project Grants moved from a priority score of 134 to 140; First Independent Research Support and Transition (FIRST) awards increased from the 27th percentile to the 30th percentile; the priority score for small grants moved from 180 to 200; and, finally, R21 Exploratory Grants moved from the 21st to the 25th percentile. Dr. Klausner added that these increases were based on prediction of the budgets for the next few years, and that it is hoped this range can be sustained. He acknowledged the sense of commitment on the part of the Congress to the NIH.

In addition to raising the payline, the NCI is working on situations in which paylines are not reached. Dr. Klausner recognized the difficulty of the amendment process for grants, especially when they are close to the payline and an amendment is likely ultimately to be funded. The long wait for funding is destabilizing and demoralizing to researchers and difficult for the study sections that have been overwhelmed with reviewing amendments rather than new grants. Dr. Klausner explained that this is a particular problem for patient-oriented research; those grants do not do well, relatively, on the first submission, although they do well on subsequent submissions. There is a large drop out of patient-oriented research proposals between the first submission and the subsequent submission, possibly because the investigators become discouraged, and because they are expected to generate income from seeing patients. Also, Dr. Klausner noted that it takes much effort to organize and submit a grant for patient-oriented research, and that the opportunity is lost by waiting a couple of years.

Dr. Klausner indicated that the NCI initiated the process of Accelerated Executive Review (AER) to deal with these issues. If an individual is doing patient-oriented research, using the Nathan committee definition of the term, and is within 10 percentile points of the payline (i.e., up to the 33rd percentile), the Institute will send a letter requesting a five-page report responding point by point to the review. New data, either in press or published, can be submitted. Within 1 month, the executive committee will review the report and determine whether or not to fund these individuals. AER does not guarantee funding, but the accelerated mechanism sends the message that the NCI is interested in patient-oriented research, recognizes the problems, and is willing to be responsive to them.

Dr. Klausner announced that money has been set aside, based upon the number of grants predicted to be within this percentile, for AER to fund 40 to 50 percent of submitted proposals. However, if more grant proposals successfully respond to the concerns, "exceptions" money is available to fund more grants. Dr. Klausner emphasized that accelerated review is not just for patient-oriented research. AER applies to all unamended R01s, but R01s must be within 4 percentile points (i.e., up to the 27th percentile). Patient-oriented research only needs to be within 10 percentile points because of its particular problems and the need to send a strong message of support to individuals conducting this research.

Dr. Klausner noted that there have been productive discussions with professional societies, especially the American Society of Clinical Oncology (ASCO), about active mentorship of young individuals trying to do patient-oriented research. ASCO has been enthusiastic about helping these individuals respond to the AER. Dr. Klausner added that the NCI is also increasing the opportunities for training across many of the categories. He presented a slide showing that the total number of trainees funded by the NCI will go up from 1,666 to 1,733.

Dr. Klausner mentioned a proposal discussed at the Planning Subcommittee for a new honorific award, the Howard Temin award, aimed at attracting young M.D.s or Ph.D.s to a career in cancer research and giving them stable funding to bridge the critical period between leaving a mentored position and beginning an independent position. The NCI will begin with 10 5-year awards, covering up to $75,000 in salary and $50,000 for research expenses per year. Awardees must have completed 3 years of mentorship and can stay for up to 3 more years in a mentored lab, before moving to an independent position to complete their 5-year award. Dr. Klausner expressed the NCI's excitement about this award and noted that the Board would be voting on it. It is hoped that this portable award will give extraordinary young researchers the opportunity and incentive to move into or stay in the cancer field and help them embark on an independent career.

Dr. Klausner referred to the two priorities he announced earlier in his presentation. One was to create and maintain the opportunity for discovery, and the other was to ensure that discoveries are translated for the benefit of patients. This translation requires a successful clinical research system. Dr. Klausner explained that, in addition to providing increased funding for clinical research, dealing with the changes of the health care system in relation to opportunities to participate in clinical trials will be important. There is concern that, as patients move into managed care organizations which look to cost as the bottom line, the ability to accrue individuals to participate in clinical trials may be lost. Dr. Klausner acknowledged Dr. Robert Wittes and Ms. Mary McCabe for their efforts in creating opportunities and models for dealing with the relationship between the current provider-payer environment and the clinical research enterprise.

Dr. Klausner announced that, on March 4, he will be signing an agreement with the Department of Defense (DoD) to provide a model for providers and payers to understand their responsibility in ensuring that the clinical research and clinical trials systems remain healthy. The NCI-DoD agreement is a 3-year demonstration project to enable and enhance access to the NCI clinical trials system to all participants of the 8.3M member provider-payer system of the DoD. The DoD agrees to pay the clinical costs associated with being evaluated for eligibility and participating in NCI-sponsored Phase II and Phase III trials. Dr. Klausner explained that there are four definitions for NCI sponsorship: Cancer Therapy Evaluation Program (CTEP)-approved trials; trials going through the Cooperative Groups system; trials supported directly by NCI funds; and trials established, conducted, and monitored at the NCI Cancer Centers. Dr. Klausner indicated that patients from the DoD system are already being accrued into trials. The NCI is committed to providing the information gained from this demonstration project (concerning outcomes and the true cost of connecting a large payer-provider system to the NCI trial system) to the DoD participants and providers.

Dr. Klausner moved the discussion to the draft of the new bypass budget. The bypass budget, which is about 65 pages long and user friendly, explains what the NCI is and what it does, and describes new opportunities and investments. Dr. Klausner added that the bypass budget discusses the opportunity to transform clinical oncology fundamentally through cancer biology. Dr. Klausner asked the Board to comment on the bypass budget by March 4.

Dr. Rimer thanked Dr. Klausner for his presentation and welcomed any comments or questions from the Board. Dr. Philip Schein commented that the change in the paylines for clinical research and the expedited reviews are welcome additions that respond to the Board's concerns about the gradual demise of clinical research. Dr. Schein explained that because there is a delay between receipt of the returned grant and the need to respond to the various critiques, institutional directors of these programs will have to support the individual during that bridge period and must be aware that this mechanism to work in cooperation with the NCI is available. Dr. Schein asked Dr. Klausner what programs he is going to put in place to inform program directors that this mechanism is operational. Dr. Klausner responded that the NCI is advertising heavily by covering the issue in different journals, sending letters, speaking to professional societies, and putting information on the NCI HomePage. The NCI wants grantees to recognize this opportunity and use it. Dr. Klausner indicated that the NCI is open to any other ideas for communicating these changes.

Dr. Sydney Salmon asked whether the letter that goes to the applicant could provide information on the funding process and the rights of the applicant. Dr. Kalt answered that each eligible applicant is identified by program staff and receives a separate letter with the summary statement at the time the summary statement is mailed. Dr. Rimer commented that there will be mentoring so that applicants are given that message directly.

Dr. Boxer brought forth his concern that there has been a reduction in minorities receiving funding and noted that minority faculty decreased from three to one, a 66 percent drop. Dr. Kalt explained that the decrease reflects the fact that the NCI has not received investigator-initiated applications in that area.

Dr. Rimer thanked Dr. Klausner and introduced Ms. Dorothy Tisevich, the Legislative Liaison for the NCI, to give an update on current legislation.

Ms. Tisevich noted that she would be presenting a brief legislative update, which she supplemented with a more detailed handout.

Ms. Tisevich announced that the Senate Labor and Human Resources Committee, which is chaired by Senator Nancy Kassebaum, will begin its hearings on the NIH Revitalization on March 6 and 7. Dr. Harold Varmus, Director of the NIH, Dr. Klausner, and several other Institute directors will testify on panels looking at various diseases and areas of research. She stated that the House Appropriations Committee hearings for the NIH will begin late in March, will be interrupted by a 2-week spring recess, and then will begin again in mid-April. The dates and times are still tentative. Public witness testimony is beginning this week before the House Appropriations Subcommittee and will continue next week.

Ms. Tisevich indicated that there have been several requests from Capitol Hill for briefings on various NCI activities, including those related to prostate cancer, cancer information dissemination, the International Cancer Information Center, and boron neutron capture therapy.

Ms. Tisevich pointed out the list of congressional departures in the legislative update handout, noting that several key members of the authorizing, appropriations, and oversight committees are leaving, including Senator Kassebaum and Senator Mark Hatfield.

Ms. Tisevich commented that the furloughs are over and that the NCI is funded through September 30, 1996. The bill that was the vehicle for the funding action was the Commonwealth of Massachusetts's National Marine and Fishery Service Laboratory bill. She explained that the NIH was one of several programs that was singled out for funding, but there are still several agencies that face the possibility of furloughs on March 15, 1996, when the current continuing resolution expires.

Ms. Tisevich explained that, although no reauthorization (revitalization) bill has been enacted, it does not have an impact on the ability of the NIH to continue to function under the provisions of the PHS Act. She pointed out to the Board that from 1991 through 1993, the NCI was technically unauthorized but continued to function, and this may happen again if the reauthorization bill does not get enacted. Ms. Tisevich explained that the bill may not be enacted because there are many controversial provisions that may be added onto any bill that gets introduced by the Senate or the House.

Ms. Tisevich stated that there is information in the handout about some FDA reauthorization bills that have been introduced. Ms. Tisevich then discussed several hearings. Senator Kassebaum held hearings last week on FDA reauthorization and Representative Bill Aracus is holding hearings this week. Dr. David Kessler has testified. Dr. Bruce Chabner, the former Director of the Division of Cancer Treatment (DCT), testified before Senator Kassebaum last weekend and is scheduled to testify before Representative Aracus this week. Ms. Tisevich reported that one of the more controversial provisions about FDA reauthorization has been off-label use of drugs. FDA's position is that there should be some restrictions on the ability of drug companies to distribute literature about off-label indications. Ms. Tisevich informed the Board that she has copies of some of the testimony available for anyone who is interested.

Ms. Tisevich continued that there are four bills on the protection against genetic discrimination. Some of these bills prohibit providers from denying or canceling health insurance coverage or making changes to premiums or terms and conditions for coverage on the basis of genetic information, or even on the basis that an individual family member has requested genetic services. Some of the bills also protect the ability of researchers to use genetic information for research through confidentiality measures.

Ms. Tisevich explained that five bills currently introduced are dealing with biomedical research trust funds. These bills provide a vehicle for setting up a trust fund specifically for biomedical research through either additional taxes on tobacco products or check-offs on income tax returns. She noted that more information about these bills are provided in the legislative update.

Ms. Tisevich announced that Senators Hatfield and Kennedy introduced the Clinical Research Enhancement Act, which is directed towards the NIH and provides additional support for and directives to expand clinical research programs. This Act establishes a President's Clinical Research Advisory Panel through the Office of Science and Technology Policy. It requires an evaluation of the status of clinical research and the submission of periodic progress reports to the President. It is possible that some of these provisions might be included in an NIH reauthorization bill that may be introduced.

Ms. Tisevich noted that there was a question at the last NCAB meeting about antiemetics. She explained that there was an amendment offered that would deny coverage through Medicare of all uses of antiemetics. The vehicle for this was the Budget Reconciliation bill, which was vetoed. She informed the Board that those provisions have not gone anywhere and that, under current Medicare reimbursement procedures, it is possible that another version of Budget Reconciliation will again be introduced.

Ms. Tisevich welcomed questions from the Board.

Dr. Rimer thanked Ms. Tisevich for her succinct summary of many legislative activities and asked if there were any questions or comments. Ms. Deborah Mayer asked for an update on the latest summation information. Ms. Tisevich noted that there is a summary in the legislative update handout and mentioned that there have not been any hearings since the meeting.

Ms. Frances Visco asked for clarification on whether there are two genetic discrimination bills on the Hill. Ms. Tisevich confirmed that there are two, one by Congresswoman Louise Slaughter and the other by Congressman Clifford Stearns and Senator Hatfield.

Dr. Rimer opened the floor for identification of new business to be discussed during the second new business session on the following day. Dr. Dickersin announced that, in her subcommittee meeting the previous evening, it was suggested that the NCAB discuss restructuring its subcommittees. Dr. Rimer agreed that it is time to think about reinventing some of the subcommittees, noting that the NCAB is in the process of scheduling a Board retreat in June. It is hoped that by June, there will be new members with whom the structuring can be discussed.

Delegation of Authority

With no other new business, Dr. Rimer moved the discussion to delegation of authority. Dr. Kalt stated that under the special authorities of the Director of the NCI in the Public Health Service Act, there are a number of routine requests made of the Board to allow it to take administrative actions to facilitate the programs. He noted that there is a set of unique intramural training programs that the NCI runs; eight currently in existence are listed in the Board's agenda books.

There are also three administrative supplemental delegations of authority, which are listed as A, B, and C in the Board notebook. The first allows Dr. Klausner, as the Director of the NCI, to appoint 151 experts. This is a personnel classification in the Federal Government that allows people to be hired to work for the NCI for 1 to 5 years. The second provides the ability to appoint additional advisory committees or components of the private sector and State and local government officials to advise the Director with respect to his function. The third is used for each Board round to make administrative adjustments related to applications and to awards that are within defined budgetary limits.

Dr. Kalt explained that all of these delegations have been in effect and are being put on the table to allow the Board to comment and entertain a motion to continue them in the future. A motion to continue these delegations was made and unanimously approved. After asking for any further questions or comments, Dr. Rimer closed the session.

Dr. Rimer introduced Dr. John Glick, President of the American Society of Clinical Oncology, to discuss some of ASCO's activities.

Dr. Glick explained that he would be discussing some of ASCO's initiatives and the cooperative relationship it has developed with the NCI and other organizations.

Dr. Glick began by outlining the ASCO membership profile. He showed a slide indicating that ASCO is an organization of more than 10,000 members. It is growing at a rate of 6 to 8 percent a year. Fifteen percent of its membership is from abroad and Canada. Of the members who answered ASCO's survey, 35 percent are in academic medicine and 47 percent are in practice, including offices, hospitals, managed care organizations, and clinics. The majority of ASCO's members are in medical oncology and/or hematology, with 13 percent in radiation oncology, 6 percent in surgical oncology, 4 percent in pediatric oncology, and the remaining 3 percent in gynecologic oncology.

Next, Dr. Glick defined ASCO's mission and credo through a series of slides. ASCO's mission is "to improve the health and well-being of people with cancer," whether through research, education, or clinical care. ASCO's credo is to "do what's right for and in the best interest of people with cancer." This credo guides ASCO to decisions and priorities that are important for patients.

Dr. Glick then explained ASCO's goals. ASCO, a scientific and educational society, is responsible for the delivery of programs to and on behalf of its membership, and to the larger audience who attends its annual meetings. Dr. Glick noted that approximately 12,000 people attended last year's annual meeting. In the last 5 years, ASCO has expanded its goals and its programs. Dr. Glick presented more slides and explained that ASCO's advocacy programs are directed to educating outside groups about the needs of its membership and the needs of people with cancer. ASCO represents the needs of the academic oncology community across multidisciplinary and multispecialty lines. ASCO's initiatives are aimed primarily at advancing knowledge through clinical and patient-oriented research and the programs that accompany it. Also, ASCO is committed to basic research and increased funding for basic research, because this is where the generation of new ideas arise. But, Dr. Glick emphasized, its particular responsibility is in the area of clinical and patient-oriented research. ASCO's efforts are directed at improving the clinical practice of oncology. Dr. Glick stated that it is important for academic institutions and academic oncologists to recognize that the issues that affect practitioners in clinical oncology (reimbursement, coverage of patients in clinical trials, and off-label indications) also affect them. Similarly, the practice members of ASCO must have the tools of molecular biology and molecular genetics if they are going to practice oncology in the next generation. Greater than 80 percent of ASCO's members graduated from medical school more than 10 years ago, and some are not prepared to meet the challenges of modern biology. Thus, ASCO is dedicated to the training of future generations of cancer researchers and specialists.

Dr. Glick summarized ASCO's major priorities with several slides, noting that some of these priorities have been on its agenda for years, and others were reestablished and given its imprimatur at a strategic board retreat this past summer. First, it was decided that for ASCO's mission and credo to succeed, it was necessary to develop a partnership with the NCI and its leadership to achieve common goals. Dr. Glick commented that one of ASCO's greatest successes this year was the partnership it established with the NCI. The ASCO leadership and board met with Dr. Klausner within 2 weeks after he became Director of the NCI, and there was an immediate productive collegial dialogue. Dr. Klausner understood many of the needs of people with cancer, the needs for patient- oriented research, and the need for increased funding. Since this time, ASCO has accomplished more of its agenda than in many years previously.

Other key priorities are to increase funding for patient-oriented research and to improve training of clinical investigators. Dr. Glick cautioned that unless clinical investigators receive funding for their research and support for their training, they will be forced to see more patients to meet their salaries, and will be lost from research. Also, ASCO is placing an increasing emphasis on translational research in its scientific and education programs, while continuing its international and leadership role in the reporting of results from Phase II and Phase III clinical trials. At the ASCO meeting in May in Philadelphia, scientific and educational sessions will be integrated. Another ASCO priority is to expand its public policy activities on issues relevant to its mission and goals. Also, ASCO believes in promoting the reengineering of Phase III clinical trials, a goal discussed with the NCI.

Dr. Glick stated that for many years, ASCO has promoted insurance coverage for patients on approved clinical trials and for off-label uses of FDA-regulated products. He commented that ASCO clearly supports the NCI/DoD initiative. Other ASCO priorities include developing evidence-based clinical practice guidelines; establishing partnerships with patient advocacy organizations to achieve a common agenda; and developing referral guidelines for patient access to cancer specialists. Dr. Glick stated that it is important that people with cancer have access to cancer specialists and other appropriately trained health care professionals, and that ASCO is working with the American Cancer Society and other professional oncologic societies to develop these referral guidelines. Also, in May, ASCO is launching ASCO OnLine for its membership through the World Wide Web.

Dr. Glick announced that ASCO has a definition of patient-oriented research. This definition, which Dr. Glick suggested may be remarkably similar to the definition proposed by the Nathan Committee, is as follows: "Clinical investigation in oncology is hypothesis-driven research that employs measurements in whole patients or normal human subjects, in conjunction with laboratory measurements as appropriate, on the subjects of clinical biology, natural history, prevention, screening, diagnosis, therapy, or epidemiology of neoplastic disease."

Dr. Glick stated that ASCO has argued for years for increased funding for patient-oriented research. Dr. Glick added that in its relationship with the NCI, ASCO sends its position papers to the NCI far in advance of their publication. Dr. Glick also mentioned the AER review of grants, and that ASCO will work to publicize this unique opportunity for patient-oriented researchers to be funded.

Dr. Glick then moved to a slide about improving the training of clinical investigators. Dr. Glick commented that ASCO was pleased to see an increased funding from the NCI in the budget this year for training grants, K08s, and other awards. He noted that ASCO has a grant program of young investigator and career development awards, which will approach approximately $1.3M this year. Also, he announced that ASCO and the American Association for Cancer Research (AACR) are working together this summer to hold a 1-week clinical methods workshop for clinical investigators-in-training and junior faculty, with an outstanding group of speakers, workshops, and case studies. A training grant has been submitted to the NCI for support of this workshop. In addition, ASCO has a program of 100 merit awards for travel to the ASCO annual meeting for trainees whose papers are accepted to ASCO either as a poster or scientific session. Dr. Glick also noted that ASCO has a new associate membership category for young fellows in training from all disciplines.

Dr. Glick's next set of slides related to the development of evidence-based clinical practice guidelines, which are needed by patients, physicians, and the insurance industry. ASCO has made it a priority to prepare practice guidelines and technology assessments using evidence-based methodology to promote cost-effective, high-quality patient care. ASCO is using multidisciplinary expert panels with patient representatives, an increased budget, and full-time staff to develop up to four guidelines per year, as well as an expedited review by the ASCO board.

Dr. Glick then presented a slide listing the criteria for selection of topics for the evidence-based clinical practice guidelines. These criteria include the following: the disease or technology is common and the economic burden is high; the health condition is associated with high morbidity and/or high mortality; practice variations exist; and there is evidence available regarding the efficacy of relevant interventions.

The next slide showed the topics for the evidence-based clinical practice guidelines. The first topic included guidelines for the use of hematopoietic colony-stimulating factors (CSF), which were published in the Journal of Clinical Oncology in November 1994. Dr. Glick added that these guidelines have been widely accepted by Cancer Centers, the insurance industry, and other institutions. These guidelines are being updated on a yearly basis, and ASCO has just approved updating the CSF guidelines for use in acute myelogenous leukemia and for generation of progenitor peripheral blood stem cells.

Other guidelines, which will be published soon, are for the use of tumor markers in breast and colon cancer. Also to be provided are guidelines on the management of metastatic and locally unresectable nonsmall cell lung cancer; the economic burden for this type of lung cancer is high, and there is tremendous potential for practice variations. Also, ASCO has just formed panels for providing guidelines on the followup of patients with breast and colon cancer after local-regional treatment with or without adjuvant therapy. This panel will determine whether tests such as bone scans, blood work, and chest x-rays are needed, and whether they are cost effective. Dr. Glick continued that ASCO has just approved two guidelines, one for the management of metastatic prostate cancer and the other for the use of antiemetic therapy.

Dr. Glick's next slide showed some of ASCO's public policy statements. Dr. Glick stated that ASCO has taken an increasingly proactive role this year in its public policy statements through its Public Issues Committee. He indicated to the Board that the ASCO's position paper for funding for patient-oriented research is included in their NCAB meeting book. The paper will soon be published in the Journal of Clinical Oncology. Another policy is medical oncology for the general medicine trainee. Because there is more emphasis on primary care, ASCO felt there was the need for guidelines in this area.

Dr. Glick noted that ASCO has completed a study on the medical oncology workforce and the current status and recommendations for the future, which has major implications for patient care and for clinical research. It appears that the appropriate number of medical oncologists are being trained to function in a managed care environment. Also, although before this year ASCO did not have a major public policy statement on tobacco control, its policy now clearly labels tobacco as an addictive substance and, along with the FDA and the NCI, ASCO is in favor of banning all tobacco advertising. ASCO has recently approved a statement, which will be published soon, on the physician and unorthodox cancer therapies. Finally, Dr. Glick stated that ASCO's statement on genetic testing for cancer susceptibility will be released to the general public. In developing this policy statement, ASCO involved patient representatives and representatives in the genome project; Dr. Glick noted that although this is an example of an area where ASCO disagrees with the NCI leadership, it is disagreeing in a collegial and productive manner.

Dr. Glick's last slide related to ASCO partnerships with patient advocacy organizations to achieve a common agenda. Working with these organizations is a priority of the ASCO's President and Executive Vice President, because it is the patients and their families who are most affected by cancer and cancer research. ASCO has already met with the Cancer Leadership Council, as well as some of the leaders of other patient advocacy organizations. Patient advocates are voting members of key ASCO committees, including the education and program committees, as well as of practice guideline expert panels and public policy subcommittees. ASCO membership for leaders of patient advocacy organization has been implemented and invitations have been sent. It is important that they become members of ASCO and that ASCO becomes members of their organizations. Various education programs at the annual meetings, which are of interest to the patient advocates and to ASCO physicians, include sessions on patient-physician communication, spirituality, and genetic issues related to genetic susceptibility testing. ASCO will have a patient advocacy kiosk and exhibit booth at its annual meeting.

In summary, Dr. Glick expressed that it has been an extraordinarily active 9 months since he became ASCO President, and the board of ASCO is strongly behind the initiatives discussed today. Dr. Glick emphasized that ASCO has established relationships with other professional societies, patient advocacy organizations, the NIH, and the NCI to achieve a common agenda.

Dr. Rimer thanked Dr. Glick and asked for comments or questions from the Board.

Dr. Ellen Sigal complimented Dr. Glick and ASCO on its complicated and exciting agenda, and then asked how ASCO is working with managed care providers and insurance companies in developing guidelines for treatment. Dr. Glick answered that ASCO's expert panels are developing guidelines without representatives from managed care organizations or insurers to remain free of any conflict of interest, although these groups have encouraged ASCO and other professional societies to produce the guidelines. Dr. Glick indicated that the managed care organizations adopted its CSF guidelines, which may mean that they also will be supportive of ASCO's other evidence-based guidelines.

Dr. Schein voiced his concern that guidelines can become a set of restrictive regulatory documents. He recognized that for many diseases, state-of-the-art treatment is unsatisfactory; thus, it may be impossible to define a suitable set of guidelines for a specific disease state. Dr. Schein cautioned that guidelines must be prepared carefully so as not to be too restrictive, stifling investigators and discovery at a time when discovery is so important. Dr. Glick agreed with Dr. Schein, and explained that the charge to the guideline panels is to implement clinical patient-oriented research into the guidelines, ensure that a mechanism is in place for updating the guidelines every year based on the current research, and use the evidence-based methodology. For example, although many have urged ASCO to develop a guideline on the use of stem cell or marrow transplantation in breast cancer, the evidence is simply not there and ASCO has therefore chosen not to provide that guideline. Also, mechanisms are in place to do a full, large-scale evaluation of each guideline every 3 years.

Dr. Klausner added that his relationship with Dr. Glick, as well as the NCI's relationship with the ASCO leadership, is productive and enjoyable. They are discussing many of the initiatives to ensure that programs are implemented in a way that makes sense to academic medicine and to medical practice.

Dr. Salmon inquired whether there are any plans for ASCO to disseminate the guidelines to managed care organizations through means other than publication in a journal. He noted that in the medical curricula of many medical schools, there is not an organized, coordinated block in education and oncology. Because primary care practitioners are given increasing responsibility with cancer patients, often determining whether they should be referred for treatment, this is of increasing importance. Dr. Glick agreed that it is a terrific idea to send the guidelines to all the insurance companies and managed care organizations. Dr. Stacy Beckhart from ASCO added that ASCO is working with its legal counsel to implement that idea. As a major medical specialty society, there are some limitations about what ASCO can do with respect to "reinforcement" of the guidelines.

Dr. Dickersin asked Dr. Glick to describe briefly how ASCO identifies patient representatives. Her concern is that these representatives be associated with constituencies so that there can be an exchange of information. Dr. Glick explained that ASCO has approached some of the patient advocacy organizations and asked them to nominate representatives to serve on the expert guideline panels. He noted that there is a patient representative on ASCO OnLine.

Ms. Mayer asked what type of collaborations exist or will be planned for other groups that are developing guidelines, such as the National Comprehensive Cancer Network (NCCN). Dr. Glick indicated that ASCO does not have a liaison with NCCN, but when ASCO plans to develop a guideline, it speaks to those professional societies the guideline may affect and asks them if they wish to send a liaison member to the expert panel.

Dr. Rimer thanked Dr. Glick, adding that ASCO's statements on tobacco control and genetic susceptibility are going to be very important, and that the statement on genetic susceptibility in particular will generate a lot of healthy debate.

Dr. Rimer announced that outgoing members would now be acknowledged by the Board. Although time did not permit the acknowledgement of each individual's contributions, Dr. Rimer recognized the fact that each outgoing member made unique contributions, and that she has enjoyed working with all of them. Dr. Rimer then called each of them to the podium, beginning with Dr. Becker.

Dr. Becker noted that as a participant of the NCAB, he has been privileged to hear the revelation of many scholarly works, and he hoped that the NCAB would continue to eliminate fruitless processing by pursuing its actions, demanding responses, and determining whether its recommendations have been fulfilled. Dr. Becker emphasized the importance of proactively guiding policy in the use of valuable funds. Dr. Becker stated that he found the dedication of many members of the NCAB, as well as many members of the NCI staff, scientists, and clinicians, impressive.

Dr. Rimer then called on Dr. Kenneth Chan. Dr. Chan thanked Dr. Rimer, Dr. Klausner, and members of the Board for their kind recognition. He expressed his gratitude to all of his colleagues for their assistance and thoughtful discussion and exchange of ideas during the past 5 years. Dr. Chan expressed particular gratitude to the late Dr. Howard Temin, who was an excellent coach with regard to Board activities and devoted to cancer research. Dr. Chan added that the establishment of the Howard Temin Award is in high accord with this recognition. Dr. Chan expressed his hope that more scientists from other minority groups will serve on the Board in the future, and that he will not be the last one from Asiatic origin. Also, Dr. Chan reminded the Board that it was established by the National Cancer Act as part of the effort to wage the war on cancer. The nation and public entrusts the Board to use the tax dollars to help this country to eradicate cancer. He noted that much progress in understanding the cause of cancer has been made. Although many genes have been identified that relate to the cause of cancer, there is another factor— smoking—that kills over one-third of the half-million Americans who die from cancer every year. However, the country has failed to reduce the mortality caused by smoking. Difficult tasks ahead include working with the legislature to regulate sales of tobacco products and convincing young people to give up smoking.

Dr. Rimer thanked Dr. Chan and recognized Ms. Marlene Malek, noting that she has been particularly grateful for Ms. Malek's help in the area of cancer control. Dr. Rimer announced that Ms. Malek will continue to work with the Board on the summit on women and tobacco. Ms. Malek expressed that it has been an honor for her to work with such outstanding and dedicated individuals on the Board and the staff at the NCI. She assured the Board that she will continue to help wherever she can in the fight against cancer.

Dr. Rimer announced Ms. Mayer, acknowledging Ms. Mayer's concerns about mentoring new Board members. Ms. Mayer thanked the Board and assured them she would continue to help bring new members onto the Board.

Finally, Dr. Rimer acknowledged Dr. Salmon. Dr. Salmon stated that it has been a pleasure for him to serve on the Board, and that the service has had both high points and low points. Some of the low points were times when the advisory function of the Board was either ignored or not sought; high points were seeing the reorganization of the NCI under new leadership, and a new open approach wherein the advisory function of the Board will be given high emphasis. Dr. Salmon echoed the comments of the others that the NCI staff has been extremely supportive, working under sometimes difficult circumstances, especially this past year.

Dr. Klausner noted that he has appreciated the outgoing members' advice and will continue to seek it. On behalf of the NCI and the entire nation's efforts against cancer, Dr. Klausner acknowledged the enormous amount of work that the members had done. Dr. Rimer indicated that because there are no new appointments yet, the outgoing members may have to return for the May NCAB meeting. She hoped to let them know the status as soon as possible.

Dr. Rimer noted that the role of the biotechnology industry in the National Cancer Program is an area that was identified by the Board as extremely important and worthy of its attention. She explained that the presentations on this topic would help the Board evaluate both how it can collaborate with the biotechnology industry and where it needs only to be an informed observer of the industry. Dr. Rimer then turned the session over to Dr. Schein.

Dr. Schein thanked the invited speakers for taking the time to present to the NCAB. He noted that this is one of the few instances where the Board has devoted a significant portion of its agenda to a nonacademic subset of the private sector, specifically the emerging pharmaceutical/ biotechnology industry. This is, in part, a reflection of how far this industry has progressed during the past decade, as well as its current and future importance as a resource to the National Cancer Program. Dr. Schein explained that there are well founded expectations that many of the future developments in cancer risk assessment, diagnosis, and therapy will find their origins and undergo development under the sponsorship of the biotechnology industry, perhaps in cooperation with academic centers of medicine and science, as well as with the NCI.

Dr. Schein commented that the process of taking a research concept and merging it into a deliverable diagnostic modality or treatment for the general public is a daunting exercise. In the process, the industry must commit the investment of vast budgets and many years of risk-laden development in an effort to achieve regulatory approval and commercialization. Although some of the early biotechnology companies have now matured to the point of integration and self-sufficiency, the majority will not reach the stage of profitability for quite some time.

Dr. Schein noted that in view of the almost explosive growth of the biotechnology industry and its anticipated importance for both the medical and economic health of the country, serious questions are being raised as to whether the current level of effort can be sustained. Small companies face the same challenges as their larger and more established counterparts, but without the resources that allow them to respond effectively to the delays and setbacks that are a part of the development process. As a consequence, there is concern that many of the newly created resources may soon be lost through either attrition or acquisition.

Dr. Schein stated that approximately 50 percent of small companies have inadequate cash reserves to allow them to survive beyond 2 years. Therefore, some of these small companies have had to change their mission from striving for full integration to serving as a seedbed of innovation, feeding their discoveries into the larger, more established pharmaceutical companies that have the required staying power. However, these arrangements required for survival have caused many small companies to become increasingly dependent on the priorities of their larger corporate partners and, perhaps, to lose their ability to innovate. In addition, although consolidation is a major theme, the headquarters of the acquirer is frequently based in Europe. One concern is that the resources to invent and produce a new drug whose development is supported by American taxpayers and investors is increasingly under the control of foreign corporations.

Dr. Schein announced that an outstanding group of experts in their respective fields have been invited to speak to the Board to provide insights on the many issues and challenges that face the biotechnology industry. Dr. Schein stated that he would briefly introduce each of the speakers before proceeding with the presentations.

Dr. Schein indicated that the first speaker would be Dr. Fred Craves, who earned his Ph.D. in pharmacology and experimental toxicology from the University of California in San Francisco. Dr. Craves founded several biotechnology companies, including Creative Biomolecules and Codon. He served as chairman and CEO of Codon at a time when it was acquired by the German pharmaceutical company, Schering AG. Berlex Biosciences was formed through the subsequent acquisition of Triton Biosciences. Dr. Schein explained that it was during this time that Berlex received FDA approval for fludarabine, a drug developed in cooperation with the NCI for therapy for chronic lymphocytic leukemia. In 1993, Dr. Craves left Schering AG and founded a private merchant banking firm, where he currently serves as chairman. Dr. Craves will address the contributions of the biotechnology industry to the National Cancer Program.

Dr. Schein announced the second speaker, Dr. Alan Goldhammer, the Director for Technical Affairs of the Biotechnology Industry Organization (BIO), who received his Ph.D. in biological chemistry from Indiana University. In his current position, Dr. Goldhammer serves as a direct liaison between the biotechnology industry and the FDA and has had several recent meetings with Dr. Kessler. Dr. Goldhammer will address the major issues under discussion in regard to FDA reform.

Dr. Schein noted that the third presenter would be Mr. Brian Poissant, a partner in the Pennie and Edmonds law firm, which is recognized for its expertise in pharmaceutical and biotechnology patent law. Dr. Schein commented that one of the areas of industry-academic interactions where there is considerable tension is the prevention of premature disclosure of proprietary information until after a patent has been submitted. A company is unlikely to provide the financial and other resources required to develop a product if the product does not remain proprietary for a long enough period to allow a return on investment.

Dr. Schein informed Board members that the fourth presenter would be Mr. Dennis Purcell, managing dire ctor of Life Sciences Investment Banking with Hambrecht and Quist, a leading Wall Street banking firm that supports the biotechnology industry. Mr. Purcell also has served on the Board of Directors of many technology companies and, as such, comes with a unique perspective as to the financial needs of an emerging company, as well as the probability of maintaining financial support for the large number of companies that have proliferated over the past decade. Dr. Schein commented on the long timeframes required to bring a product from discovery to full development and FDA submission. Companies require sufficient capital to sustain themselves through this protracted period. Dr. Schein noted that the capital markets have become increasingly worried about the prospects of small companies in the biotechnology sector, in part because of several highly visible product failures.

Dr. Schein then explained that many of the scientific discoveries under commercial development originated in academically-based laboratories. Although in the past academic institutions were relatively naive to the potential value of their research programs, many now have developed active offices of business development to seek commercial partners for their products. Dr. Schein indicated that a unique set of relationships needs to be managed when the responsibility for the future development of the product is transferred to the commercial organization. Dr. Schein then announced that the next speaker, Dr. Mitchell Sayare, chairman and CEO of Immunogen, is responsible for the development of several anticancer therapies that originated in laboratories at the Farber Center. Dr. Schein explained that Dr. Sayare is in a unique position to describe to the Board the nature of the alliances that can be formed and some of the management challenges faced by a CEO of a small biotechnology company.

Dr. Schein noted that next, Dr. Wittes, well known to the Board, would describe the nature of the collaborations that have been established between the NCI and the biotechnology industry, followed by a presentation by Dr. Tom Mays, who is Director of the NCI's Office of Technology Development. Dr. Mays will discuss the current thinking of the NCI in regard to the future of such alliances.

Dr. Schein expressed his hope that these presentation would provide the Board and the NCI with a broader perspective of the potential for the biotechnology sector to contribute to the National Cancer Program, as well as the environment in which these new and sometimes fragile companies attempt to work and grow. Dr. Schein then asked Dr. Craves to make his presentation.

Dr. Craves indicated that it is important to note the change in the definition of biotechnology. Biotechnology used to be defined as companies that work with molecular and cell biology, but today is defined as a diversity of technologies and practices that lead to innovation. All biotechnology companies today have common boundaries on startup and similarities related to the financing and development required to achieve sustainability.

Before presenting his first slide, Dr. Craves explained that he does not endorse any particular product or company through their inclusion on a slide. Dr. Craves then presented a slide showing what has happened in the formation of companies in the biotechnology industry in the last 25 years. He explained that the biotechnology industry began growing in the early 1970's. In 1993, there were fewer startups; then in 1994 and 1995, the industry picked up. Dr. Craves projected that there will be substantially more growth in 1996.

Dr. Craves noted that there are approximately 1,300 biotechnology companies, of which about 300 are public. Approximately 70 percent of the 1,300 companies are involved in health care, and the other 30 percent are involved in agricultural or environmental activities. Dr. Craves added that there are about 700 biotechnology companies in Europe as well.

Dr. Craves explained that Mr. Steve Burrill and his colleagues at Ernst and Young conduct a survey of the biotechnology industry each year and develop the Merck/Biotechnology Index, which he showed on a slide. An aggregate of the biotechnology industry, which is a consolidation of numbers for all of the public biotechnology companies, is compared with Merck, a company that is a good benchmark for innovation in research and development (R&D). Dr. Craves noted that the numbers on the slide are approximately one year old. For the new year, Dr. Craves stated that the revenues, R&D expenses, market cap, and employees in the biotechnology industry will increase. Specifically, revenues are expected to reach $13B in the ensuing year, and R&D expenses will be over $8B. Net income to decrease the loss and the market cap is up substantially. Dr. Craves added that there are now approximately 115,000 employees in the biotechnology industry. These employees are predominantly from academic and government laboratories, rather than from the major pharmaceutical companies.

Dr. Craves showed a slide depicting the diverse mix of business models in the biotechnology companies. He noted that few companies in the biotechnology sector have become fully vertically integrated; Amgen is the most obvious of these. Most of the management in the industry has been very pragmatic and creative about establishing alliances.

Dr. Craves presented a breakdown of the biotechnology companies into diagnostic companies, therapeutic companies, and service companies. He showed a slide describing a few diagnostic products that are in registration today. These products are all in vivo imaging agents for prostate cancer, bowel cancer, and lung cancer. Dr. Craves' next slide presented other unique approaches to cancer diagnostics. For example, NeoProbe, a company that is integrating both diagnostics and therapeutics, has a novel way of detecting metastases and then using a cellular therapy approach to address the possible treatment of those metastases. Dr. Craves presented a slide listing companies involved in the development of new diagnostic technologies for cancer, and emphasized the large amount of activity in the broad-based diagnostic and device sector.

Dr. Craves then turned to therapeutics, grouping them into many categories, including antibiotics, alkylating compounds, antimetabolites, photodynamic therapies, radio/chemosensitizers, and chemoprotectants. Dr. Craves showed a slide listing companies that are involved in formulation technologies to improve the therapeutic index of drugs that are reasonably well known and characterized, as well as more novel compounds. Dr. Craves' next slide on therapeutics showed companies that have looked at new ways to formulate drugs to deal with depositions in solid tumors, to decrease the toxicity of compounds, and to improve the local concentration at the site of the tumor. In another slide, Dr. Craves presented formulated drugs that have been characterized and determined to be very toxic without having this kind of a formulation. He also listed a few companies that are working on the antimetabolites.

Dr. Craves presented a slide listing companies involved in the management of adverse treatment sequelae, an area where there is a large amount of activity. Dr. Craves noted that this is the kind of work a major pharmaceutical company could have done but did not do. Dr. Craves explained that pilocarpine has been used medically since the 1890's. MGI Pharma had the courage to develop a new formulation and obtained approval of it for xerostomia resulting from radiation treatment for head and neck cancer.

Presenting several more slides, Dr. Craves showed examples of companies working on radio/chemosensitizers, radio/chemoprotectants, and photodynamic therapy. Dr. Craves emphasized that QLT PhotoTherapeutics, a Vancouver-based company, has the first approved product for photodynamic therapy. This company had to go through a complex process of getting approval for lasers as well as for the drug itself, and they are now expanding the label clearance for the use of this compound.

Dr. Craves noted that a number of small companies have identified product opportunities for the markets he described. These product opportunities, in which the major pharmaceutical companies do not invest research dollars, are probably in the $25M to $75M range. Dr. Craves explained that the biotechnology companies in this sector of the business provide a major service by using these reformulation technologies to improve therapeutic index.

Dr. Craves moved the discussion to biologics and showed a slide. He noted that, in terms of product sales, the most successful product that has been developed by the biotechnology sector is Neupogen, which was developed by Amgen. Amgen was established in 1982 and is now a Fortune 50 company. Dr. Craves reviewed slides listing the names of several other companies, including Chiron, Genentech, Viagen, IDEC, and Centocor, that are working with biological approaches to treating cancer. Dr. Craves added that therapeutic vaccines are still at an early stage of development, as are genetic therapies. He showed several slides listing some of the companies involved in this work.

Dr. Craves announced that he would briefly mention service companies. He showed a slide of one service company, Response Oncology, noting that there are several other companies or divisions of other companies that have been formed recently to deal with management of a particular kind of cancer. Dr. Craves stated that what is significant about these companies is that they form a system to synthesize and integrate the latest clinical practice and management of particular cancers. Dr. Craves predicted that there will be more cooperation between service companies, biotechnology companies who are developing the innovations, and health care providers.

Dr. Craves presented a series of slides illustrating the contributions that the biotechnology industry has made to approved products for cancer. He noted that although the industry is young, real products have been developed. Dr. Craves indicated that 20 to 25 percent of the products that are being sold by the biotechnology industry are directed towards cancer. He showed a few slides listing oncology products that are in Phase III clinical trials.

Dr. Craves presented more slides and suggested that a true evolution in drug discovery, based on new drug discovery tools, is being experienced. Drug discovery tools include genomics, combinatorial chemistry, high throughput screening, and information technology. Although these tools will be applied broadly, there will continue to be a disproportionate emphasis on cancer, the focus of most of these companies. Given the new tools available through genomics, Dr. Craves expressed that there is now an unprecedented opportunity to understand the molecular basis of cancer. The ability to diagnose, treat, and determine the appropriate treatment through prognosis is beginning to change dramatically. Dr. Craves also mentioned that the new combinatorial chemistries producing new molecular diversities will allow us to see the power of these technologies.

Dr. Craves' next set of slides explained that the high throughput screening process is being pioneered by many small companies that use process automation to screen very large numbers of compounds. Next, Dr. Craves showed a slide on information technology, which has become a central issue. The drug development process is an iterative one and, at various stages in the process, partnerships with major pharmaceutical companies can be made. Dr. Craves indicated that the amount of time and resources needed for the drug development process has been reduced, changing the way the industry thinks and plans. Companies budget their programs in terms of how many thousands of days between the time a target is identified and the time it enters the clinic.

Dr. Craves concluded that, collectively, the government, academia, and the private sector create a new national resource for providing the tools to develop a better solution to the problem of cancer.

Dr. Goldhammer explained that there is no question that the biotechnology industry has had a profound effect on the treatment of cancer over the past two decades. The ability to clone and produce human proteins, as well as prepare large amounts of monoclonal antibodies, is opening up new avenues for therapy. Advances of the genome project and improved diagnostics are just touching on where the country may be in another 10 years. Clearly, the ability to diagnose cancer and treat it at an earlier stage holds the promise for better patient outcome.

Dr. Goldhammer explained that the techniques of biotechnology initially pioneered by the small venture capital-funded companies have now been embraced by the larger pharmaceutical industry. However, the marked difference in size and resources between a multinational pharmaceutical company and a start-up biotechnology company has profound implications for drug development. A biotechnology company measures its resources in terms of months rather than years. If a drug development project fails, the company may fail with it. Therefore, the time that a new therapeutic spends in the clinical development process is critical. The average time to move a product from bench to bedside in the 1970's was 5 to 7 years. Today, that average time has extended to 10 to 12 years.

The cost of drug development also has increased dramatically, from $70M in the 1970's to over $359M in the mid-1980's. Some experts are projecting that this cost is going to approach $1B by the turn of the century. During the past decade, the total cost to develop a new drug has increased by more than 8 percent per year above the general rate of inflation. The delay in approvals in the United States denies patients rapid access to needed therapies and increased cost of development drives up the price of end products.

Dr. Goldhammer explained that the focus of his presentation is twofold: How can interactions between the drug sponsors and the FDA be improved to optimize the clinical development process? And how can the dissemination of information to physicians be improved so that secondary uses of drugs can be delivered to the patients more quickly?

Dr. Goldhammer's first slide showed the timeline for the three phases of biotechnology drug development and how costs can escalate through these three phases. Dr. Goldhammer indicated that some of the data about the time spent in the three distinct phases of drug development were obtained from a study published in spring 1994 by researchers from Tufts University. Dr. Goldhammer added that a new study, which will be published shortly, demonstrated that the periods for preclinical and clinical drug development have stayed relatively constant, although the FDA review period has decreased. Dr. Goldhammer emphasized that the critical issue is how cost escalates through the clinical development process. The time that is spent in preclinical development, as well as the cost that the biotechnology company incurs, is minimal. The cost begins to escalate as the product enters the clinic. Efficacy trials require the enrollment of a large number of patients. As the biotechnology company begins to consider submitting an application to the FDA, it must consider construction of a manufacturing facility, which significantly adds to the cost. Once the Product License Application (PLA) is submitted to the FDA, the costs level off, because at this point the clinical trials and the manufacturing plant are completed.

Dr. Goldhammer then highlighted the fact that the review times at the FDA have been decreasing since the passage of the Prescription Drug User Fee Act in 1992. Both PhRMA, the trade association representing the pharmaceutical companies, and BIO worked with the FDA to draft review goals and establish a meaningful fee structure in which industry would provide $360M over 5 years to the FDA to augment its review capabilities. In return for these user fees, the FDA agreed to work towards review and action on new priority drugs, including all new cancer drugs, in 6 months. An action does not necessarily connote an approval; it could be a nonapprovable letter or a request for further studies. FDA has been given sufficient resources to meet these goals and, in the most recent report to Congress, the FDA Commissioner noted that the agreed-upon timelines are being met ahead of schedule. Thus, the end portion of the three-stage process is already being addressed.

Dr. Goldhammer explained that the cost and complexity of clinical trials—that is, work necessary to gather data prior to the submission of an approval application—has increased significantly. The costs of tests and related procedures per patient between 1989 and 1993 increased by 69 percent, 118 percent, and 51 percent for Phase I, Phase II, and Phase III clinical trials, respectively. This contributed significantly to the lengthening of the drug development process. It is this area that BIO chose to focus on in its initial approach to FDA reform. Last February, following 2 months of intensive consultation with its member companies, BIO issued a White Paper on principles for FDA reform. Dr. Goldhammer showed a slide listing identified areas of "excessive FDA regulation." Dr. Goldhammer noted that he would briefly review these areas and then discuss how each area may be addressed.

Dr. Goldhammer explained that the first problematic area is excessive regulation at the early stage clinical trial process, including the submission of Investigational New Drugs (INDs). Currently, over 60 percent of all Phase I INDs are filed by individual scientists at academic health centers. These investigations rarely lead to commercial therapies, and their consideration delays approval activities by FDA reviewers. The second area is needless submission of advertising and promotional materials prior to FDA approval. The third area is restrictions on the export of unapproved products to countries that have approved them and review of foreign labels for approved products being exported. The fourth is the requirement of prior FDA approval for minor manufacturing changes of well-characterized biotechnology products, even though prior approval is not required for traditional drugs, which is inconsistent regulatory policy. Another inconsistent regulatory policy is the requirement for both an Establishment License Application (ELA), which regulates the manufacturing process, and a PLA, which regulates and covers the efficacy for biotechnology products; this stands in marked contrast to the way that traditional drugs are regulated. Finally, the current regulations on lot release needlessly consume FDA resources, increase costs, and, in some cases, may delay patient access to biotechnology products. Some of these problems are based on antiquated regulations stemming from the Biologic Control Law, first passed in 1902.

Dr. Goldhammer indicated that the White Paper was distributed to the key policy makers in both the Administration and in Congress. Draft legislative language that would reduce the impediments towards drug development was drafted, and the FDA was engaged in dialogue to attempt administrative reforms of some of the outdated practices. Quarterly meetings with Commissioner Kessler have continued since last June in an effort to further streamline the FDA regulations.

The FDA announced two sets of key reforms—one last April and one last November. The FDA announced that well-characterized biotechnology therapeutics would be regulated in the same manner as conventional drugs. The ELA would no longer be required for these products. In addition, the requirement for manufacturers to submit a sample of each batch to FDA for certification was removed for this class of products. The FDA also announced an interim definition that covers only the therapeutic products of recombinant DNA or monoclonal antibody technology. The agency held a workshop in December to seek top scientific input towards refining and expanding this definition. Administrative rulemaking should be completed during the first half of this year to finalize this regulatory approach. Dr. Goldhammer expressed the hope that some of the diagnostics, as well as the vaccines that fit the definition of well-characterized, also would qualify for this path of regulatory release.

In addition, Dr. Goldhammer explained that changes in the manufacturing process for well-characterized biotechnology products would be streamlined. Manufacturers would no longer have to seek prior approval for most changes in the manner that is now required. This contrasts with the way that a drug manufacturer can implement a manufacturing change by simple implementation and notification to the FDA. Prior approval is not required.

Also, in November, FDA simplified the data package needed to begin a Phase I trial. Summaries of the preclinical data, rather than the entire package, would now be required. The FDA did this in response to the majority of industry-sponsored Phase I clinical trials moving to Europe, where clinical trials can begin with simple notification to the European regulatory bodies, instead of the more stringent type of data filings that are required by the FDA.

Legislation was introduced earlier this year to deal with the drug export issue. Dr. Goldhammer noted that drug exports are regulated as a result of a drafting error in the 1938 Food and Drug Cosmetic Act, banning the export of unapproved drugs. This was partially remedied several years ago with legislation permitting export to 21 listed countries, primarily those in Western Europe, Australia, Japan, New Zealand, and Canada. Today, the United States is the only country in the world that controls the shipment of unapproved drugs abroad. Dr. Goldhammer expressed that this is not a desirable policy and consumes FDA resources.

Broader FDA reform legislation was recently introduced by Senator Kassebaum. Several key principles advocated by BIO are in this bill, including the following three key provisions: relaxing FDA controls on the dissemination of peer-reviewed information; streamlining the approval of supplemental indications; and providing a framework for a collaborative approach to drug development. Companion legislation in the House is expected shortly. Dr. Goldhammer explained that there is a hearing today in the House Commerce Committee, and it is expected that legislation will be introduced concomitant with that hearing.

Dr. Goldhammer stated that each of the provisions has implications on both the development of new oncology drugs and the expansion of use of already approved drugs. The FDA has limited the dissemination of information from respected medical journals, textbooks, and the proceedings of major medical and scientific societies. These limitations sometimes deprive the medical community of easier access to important medical information, hurt patients, and do not advance public health.

Under current FDA guidelines, companies are prohibited from providing reprints of peer-reviewed articles unless the articles comport in every way with the approved product labeling. For instance, they may describe different doses than those approved by FDA; they may not contain as detailed a discussion of side effects; or they may describe a treatment of a different indication. Nevertheless, Dr. Goldhammer stated, physicians rely on peer-reviewed articles and other reputable scientific publications as an important source of information about medical advances. This is particularly acute in the oncology area, where many products are used outside of the FDA-approved indications. Dr. Goldhammer indicated that the FDA must recognize that the cost of conducting clinical trials for every cancer indication is prohibitive. Companies should be permitted to disseminate reprints of peer-reviewed articles and proceedings of scientific meetings to physicians regardless of whether those publications contain information about unapproved drugs or unapproved uses of approved drugs. The Kassebaum legislation addresses this matter.

Dr. Goldhammer noted that one major problem with the development of oncology drugs is that each new indication requires a separate clinical trial. It is often not clear how wide a range a drug will have. In the majority of cases, the drug sponsor pursues either the broadest indication or the one that is the most promising for that product, with the hope of adding follow-on indications afterwards. An example in the biotechnology industry has been alpha interferon, whose first indication was for hairy cell leukemia, which has a relatively small patient base. Since the time of first approval in 1983, six additional indications for both oncology and nononcology have been added to the label. Once the drug is approved by FDA, the physician can prescribe it for an off-label use. It is estimated that over half the current uses of anticancer drugs are for cancers other than those on the label. Supplementary indications are often slow to develop, because the original sponsor may not want to pursue a new trial, and the FDA may not give priority to follow-on indications.

In Senator Kassebaum's proposed legislation, there is a provision that would add new indications to the label, based on medical practice. If a drug is used for follow-on indications and the medical community recognizes this use as the standard of care, an additional indication can be added to the label following a petition to the FDA. There are some details to be worked out with respect to this provision, such as the length of time the product is in medical practice and the amount of data needed to demonstrate that the drug represents a new standard of care. However, it does address a real need for both patients and their physicians.

Dr. Goldhammer indicated that another area of focus is the improvement of the IND process. By streamlining certain activities, FDA can free up more review staff for interaction with sponsors during drug development. FDA should commit to a meeting with sponsors, in which clinical protocols are to be discussed, within 30 days of a request. Secondly, advice to sponsors should be made a part of the administrative record so that there is a firm understanding of the type of data required to support product approval. When a clinical trial is put "on hold," FDA should be obligated to inform the sponsor about what information is needed to get it "off hold." FDA has made a commitment to promptly review the data submitted to get a trial off hold, but if the sponsor does not know what the FDA's fundamental reasons for the hold are, it is difficult to address them. Dr. Goldhammer explained that BIO believes that there should be a firm timeframe for responses to the sponsor.

BIO also recommended initial steps to improving patient access to new therapies as part of transforming and renewing the FDA. Promotion of the public health, increased international competitiveness, and prompt revision of regulations are paramount goals for renewing the FDA. A renewed FDA can serve the needs of the patient community, general public, and stakeholders by focusing its mission on promoting the timely approval of safe new drugs, biologics, and devices.

Dr. Goldhammer then speculated on whether legislative reform will occur this year. He noted that discussions with the FDA to achieve a meaningful administrative reform are ongoing, and it is hoped that enacting some of the provisions mentioned in his presentation today will help streamline the process.

Mr. Poissant noted that the changes in the available modalities for the treatment of cancer have been phenomenal since he and Dr. Schein first met 10 years ago. He announced that he would discuss the issues facing a young biotechnology company in obtaining patents on their various discoveries, particularly in the context of three favorable changes that have taken place in the patent laws this past year. Mr. Poissant noted that he would also interrelate the patent issues to issues that face young biotechnology companies in raising money in the capital markets. It is becoming very important for companies to be advised and structured to be able to raise the money that they need to remain in business.

Mr. Poissant added that Dr. Schein sent him a provocative article by Dr. Steven Rosenberg of the NCI concerning the issue of secrecy in research, which appeared recently in the New England Journal of Medicine. One of the issues Dr. Rosenberg discussed was whether the patent system was detrimental to the overall good of cancer research because of the various secrecy requirements. Mr. Poissant explained that he would address this issue by interweaving it with the other issues he would be discussing today.

Mr. Poissant presented his first slide, which depicted a young biotechnology company and the various subject matters that they can seek to patent. These subject matters include genes, proteins, and processes. Mr. Poissant used the example of a young company that discovered a protein. The company would likely use screening techniques such as cDNA libraries and genomic DNA libraries, from which they discover the gene and the cDNA. The company would then put their discovery into a vector, then into a host cell, and then they would focus on the methods for making their recombinant products. Finally, the company would become involved in the various methods for using their new discoveries, such as diagnostics, drug screening, and therapy; gene therapy is the most prevalent. When the company presents its evidence to a patent lawyer, a decision must be made about what to patent. Although attempts sometimes are made to patent everything, often patents are obtained on the new proteins that have never been discovered before. Most frequently, patents are obtained on the genes and the vectors, as well as the recombinant methods used to produce them.

Mr. Poissant then drew attention to the three recent changes in the patent law and how they would affect the patent issues related to the example of a new company. First, Mr. Poissant stated, there was a clarification of the utility/enablement requirements. Starting around 1990, the patent office examiners began imposing a relatively high level of utility/enablement requirements. This meant that in a patent application, a large amount of data was required to demonstrate exactly what the product was supposed to do and that it, in fact, does what it is claimed to do. The level imposed was very difficult, almost requiring clinical data to show that the product was safe and efficacious. In the summer of 1995, the level of utility/enablement requirements was lowered significantly.

The second change was the recently passed biotechnology process patent legislation. This change occurred in response to a problem wherein the patent office would give a patent on a protein or on the gene that codes for the protein, but was reluctant to give patents on the recombinant production of the protein. The position of the patent office was that the recombinant production is known, and the fact that the protein is new or the gene itself is new does not entitle a biotechnology company to a patent on the process for making it. The new biotechnology process patent legislation states that if the product is new or if the starting material, namely the gene, is new, then presumptively the process for going from one to the other is also new. Thus, the patent office now will be issuing patents on the recombinant process. This legislation also covered gene therapy.

Finally, Mr. Poissant discussed the three recent General Agreement for Tariff and Trade (GATT) changes in the patent law. The first and most notorious is that the term of a patent, which used to be 17 years from the date of issue, is now going to be 20 years from the date of filing. This change gives rise to many considerations about when a company should file. The second major change is that the patent office now accepts provisional applications, which means that a company can file a patent application and get a priority date, but its 20-year clock does not start ticking until approximately a year later when a "real" application is filed. The third change relates to interference contests, which are mini-litigations in the patent office that determine who was the first to file or who is truly the first inventor. Before this change, foreign inventors were limited to their foreign priority date. For example, even though the inventor who filed in Japan did work in Japan before that date, in a priority contest, the Japanese inventor could not rely on that work to beat an American inventor. This change will be monumental when it comes to advising clients, particularly companies going public whose underwriters want to know exactly what is going to happen and who is going to win if there is a priority contest.

Mr. Poissant's next slide showed the patent law visualized as being a three-legged stool. The seat of the stool is the patentable subject matter. The three legs of the stool represent the three things required to obtain a patent. The first leg is the utility and enablement requirement, which means enough evidence must be presented to the patent office to convince them a subject matter does what is claimed and works for its intended purpose. The second leg is novelty, which requires that no one else has done it before by way of publication or public use. The third leg is nonobviousness, which means what has been done is sufficiently different from what has been done before.

Next, Mr. Poissant discussed each of the legs of the stool separately and tied them into both the recent changes in the patent law and certain issues relating to the ability to obtain public financing, as well as Dr. Rosenberg's secrecy issues.

Mr. Poissant began with a slide about the utility and enablement requirement. As he mentioned earlier, around 1990 the patent office started imposing a very strict utility requirement and began virtually to require human clinical data, particularly for the cancer utilities. This was a serious hurdle and caused delays to obtaining patents. Applicants often filed credible in vitro and animal data, but the patent office would reject them, claiming utility and enablement was not proven. The applicant had to keep refiling the application until human clinical data was eventually obtained, which was often 4 to 6 years later. The other alternative was not to file until the clinical data was obtained, leaving open the possibility of someone else filing first. Last summer, the standard was significantly changed to whether asserted utility would be considered credible by a person of ordinary skill in the art, in view of all of the evidence of record. Most importantly, the patent office no longer requires human clinical data. In vitro or animal data is sufficient, if it is reasonably correlated to asserted utility in humans.

Mr. Poissant continued that the lowering of the utility requirement has many practical advantages. Applications can be filed earlier in the process and patents can be obtained more quickly. One of the problems raised by Dr. Rosenberg was that people were not disclosing their data publicly because they wanted to keep it secret until the patents were filed. The lowering of the requirement may alleviate the secrecy concerns espoused by Dr. Rosenberg, and dissemination of information may occur more effectively. This requirement change also is fortunate for the biotechnology industry in view of the new GATT 20-year rule. Because the patent term now runs 20 years from the date that it is filed, 5 or 6 years would have had to be spent fighting with the patent office over whether the utility and enablement requirement had been satisfied.

Mr. Poissant noted that the new GATT 20-year rule raises an interesting situation. Should a company file only to get a priority date and get credibility in the capital market, or should it wait to file until it has significantly sufficient data? Once a company files, the 20-year clock starts running, and it is better to delay filing until close to commercial reality so that the 20-year patent period is as commensurate as possible with the period of commercialization. However, this can be a dangerous approach because someone else may file first. When all these considerations are weighed, a young biotechnology company often must file, because it is difficult to have credibility in a capital market without a patent application on file. One possible compromise could be the other GATT change, the provisional patent application, which allows the patent applicant to file but does not start the 20-year clock ticking. However, the company must file within a year to take advantage of that priority date. This provisional patent application is an important compromise that many young companies are now taking advantage of to get something on file for credibility, but not start the 20-year clock ticking immediately.

Mr. Poissant moved to his next slide, which related to novelty. He noted that Section 102 of the patent statute lists seven events, most involving publication or public use, that can take away a right to a patent. Research must be conducted to determine whether a claim has already been made. Although companies generally are already aware of what is going on and what has been published, patent lawyers search the Patent Cooperation Treaty (PCT) publications to find out what else is pending in the United States patent office. If someone files a patent in the United States, they have a year to file abroad, and they do this by filing in Washington with the PCT office. The advantage is that a company files in one place to get patent protection around the world; the disadvantage is that everyone can know, approximately 18 months after the fact, what is filed in the United States. Also, a company must be aware of the 18-month window, because although there may be no PCT publication out yet, there may be someone who is claiming the same discovery that they are. The company will not be aware of the claim until the patent office declares an interference. Then, a large amount of money must be spent in a priority contest in the patent office to determine who is truly the first inventor.

In these priority contests, the general rule as to who wins is the person that is the first to conceive the subject matter. Mr. Poissant referred back to his previous example, and posed the question: How does one conceive of a gene? A biotechnology company who has a protein and uses cDNA and genomic library screening to "fish out" the gene that codes for that protein has done a considerable amount of work. It is difficult, however, to determine when this company actually conceived of this gene. Once it is known that the protein exists, it is also known that the gene exists, although the specific gene may not be identified.

One of the first cases in Mr. Poissant's business—the Amgen versus Chugai case—resolved this issue by determining that one cannot conceive of a gene until the gene is both isolated and sequenced. This standard is know as "simultaneous conception and reduction to practice." Mr. Poissant referred back to Dr. Rosenberg's concerns about secrecy. The idea of simultaneous conception and reduction to practice, unlike the lowering of the utility standard, will have an adverse effect on the publishing of results. Now that the inventor is required to have the whole gene on file, they are not going to publish information about parts of the gene or various ways to look for it.

Next, Mr. Poissant addressed the effect of "expressed sequence tags," or ESTs, which are partial cDNA sequences that are synthesized from mRNA transcripts of unknown genes. Mr. Poissant commented that many companies are now getting these sequence tags and publishing them. In his judgement, publishing these ESTs will not have any effect on the ability to obtain the patents on the gene. Because ESTs are just partial sequences, they are not going to enable researchers to obtain the full gene.

Mr. Poissant showed his final slide to address two relatively straightforward issues on nonobviousness. The first related to obtaining patents on genes. Mr. Poissant explained that, for a while, the patent office would not give a patent on a gene just because the amino acid sequence or the peptide protein was known. This has been changed and overruled in "Re: Bell," which states that a patent on a gene can now be given unless the gene has been actually disclosed. Prior art must suggest the actual gene sequence and provide a reasonable expectation of successfully disclosing the gene. Mr. Poissant then discussed ESTs, which have no effect on the ability to get patents on the genes unless they are coupled with detailed information about how to use the EST to "fish out" the actual gene.

Finally, Mr. Poissant discussed the biotechnology process patent change that just took place. As he indicated earlier, the patent office had taken the position that even though the protein and the gene are patentable, the recombinant process of getting them is not patentable. Mr. Poissant explained that it may not seem important, because if you obtain a patent on the gene or the protein, others could still be prevented from making it recombinantly. However, as was seen in the Amgen versus Chugai case, this was important to foreign situations. Amgen had a patent on the host cells and the DNA, but not on the recombinant process. Chugai was making the erythropoietin off shore and bringing it into the United States; however, Amgen could not do anything about this because they did not have a process patent. Therefore, Amgen could not take advantage of the Biotechnology Process Patent Act, which says products made by patented processes abroad cannot be imported. The Biotechnology Process Patent Act allows biotechnology companies to get patents on recombinant processes, which is important for preventing others from infringing and making the proteins and using their DNA and genes abroad. Mr. Poissant added that patent laws promote secrecy to some extent. However, the rewards resulting from patent laws promote research.

Mr. Purcell informed the Board that 5 years ago this month he was diagnosed with chondrosarcoma and, as a former cancer patient, he was particularly gratified to speak at this meeting. Mr. Purcell explained that he was going to address the biotechnology industry from Wall Street's viewpoint, and provide an overview of how Wall Street sees the industry developing.

Mr. Purcell showed his first slide, noting that biotechnology is relatively new to Wall Street. In the 1980's, there were many questions about whether biotechnology would ever evolve into an industry. Since this time, the industry has come a long way. Mr. Purcell presented several slides showing that almost 9 out of 10 companies lost value in the stock market in 1994, then rebounded in 1995, when almost 8 out of 10 companies increased in value. Mr. Purcell commented that this volatility was risky for investors in the biotechnology sector. Consequently, many investors would not invest in the industry until they saw product approvals. Thus, companies such as Amgen, Genentech, and Biogen had flat stock prices until their products (Epogen, human growth hormone, and alpha interferon, respectively) were approved. Mr. Purcell informed the Board that of the 1,300 biotechnology companies in existence today, only 5 are profitable. Because many investors are interested in the later-stage companies, which include those 5 and perhaps another 25 or 30 companies, it is unknown what will happen to the remaining companies.

Mr. Purcell's next set of slides showed that many companies formed in the late 1980s will be coming to maturity over the next several years as they move products through clinical trials. The situation for some companies was bleak at this time last year because a number of negative trials put a damper on the industry. Mr. Purcell commented that the stock market punished those companies; the average loss after negative Phase III results was 51 percent. Likewise, almost half of all companies lost more than 50 percent of their value during the year. Signs indicating that the situation might improve began to appear. Mutual funds were abandoning the field, there were an increasing number of mergers, and there was increasing volume in the stock market in terms of numbers of shares that were traded. However, at this time last year, almost 50 percent of the companies had less than 2 years of cash left before they would go bankrupt.

Mr. Purcell noted that companies were relatively innovative, and presented a slide listing some biotechnology collaborations that were made with large pharmaceutical partners to try to stay alive. Interestingly, almost 70 percent of all biotechnology collaborations were with foreign pharmaceutical companies. Mr. Purcell's slides indicated that over the last 20 years, the NIH and other agencies have spent about $40B developing the industry and, at this time last year, were on the verge of trading it away. Mr. Purcell informed the Board that the situation improved on June 12 of this year, when the initial Phase III result of Cephalon caused stocks to explode. With several other positive Phase II or Phase III results announced towards the end of 1995, the stock market became enchanted again with biotechnology, and stocks went up by almost 200 percent on average.

Mr. Purcell showed another slide and explained that when companies announce good clinical trial results, they are able to raise money in the capital markets. In the last 10 days, for example, Gilead Sciences raised $150M, more money in an equity offering than any other biotechnology company existing today. Just 3 days ago, $160M was raised for BioChemPharm, the Canadian company that has 3TC approval. Therefore, Mr. Purcell noted, after either approvals or positive clinical trial results, Wall Street was willing to award those companies with relatively large amounts of money in terms of public offerings. However, it is still not known what will happen to the other 95 percent of the biotechnology universe.

Mr. Purcell explained that the biotechnology sector as it relates to Wall Street is influenced by a number of different factors. Market windows open up when there are a lot of product successes, when there is an optimistic environment, and when there is an absence of investment alternatives. Many investors are willing to take some risk in moving out of high technology, a hot sector of the economy for the last couple of years, and to look more at biotechnology companies. In fact, as the biotechnology companies stock prices went down, the risk/reward profile was more in synch with what investors were looking for. Mr. Purcell's slides showed that, consequently, the biotechnology industry had an astounding year. Biotechnology companies were up 80 percent, the leading industry segment as measured by Dow Jones in 1995.

Mr. Purcell's next slide demonstrated that, in 1995, $2B was raised in the public markets for biotechnology companies, which is roughly equivalent to the NCI's budget this year. Mr. Purcell noted that the average of initial public offerings (IPO's) in the capital markets and "follow on's" (money raised for companies that are already trading) roughly equals this $2B.

Mr. Purcell referred to the Merck-Biotechnology Comparison that Dr. Craves discussed in his presentation, noting that Merck has over a $75B market cap, with the biotechnology industry overall well below that figure. If the top few companies that Mr. Purcell discussed earlier—Amgen, Genentech, and Biogen—are removed, the rest of the biotechnology universe would trade at the same value as a midsized drug company.

Mr. Purcell explained that although there is still a long way to go, 1995 was a more positive year for biotechnology companies than 1994. In 1995, both public offerings and corporate collaborations almost doubled that of 1994. Mr. Purcell showed a slide indicating that there are 140 different collaborations between biotechnology companies and corporate partners. Mr. Purcell indicated with another slide that the interaction with large pharmaceutical companies was one of the interesting interplays with the biotechnology industry last year. Pharmaceutical companies today hold over $20B of cash on their balance sheets. Presenting more slides, Mr. Purcell noted that although they have a large number of drugs in the R&D pipeline, the bigger pharmaceutical companies are not convinced that they will have enough novel products and, therefore, are turning to biotechnology for these alliances.

Mr. Purcell commented on the difficulty that exists for a nonscientist or an investor on Wall Street to distinguish among all the alternatives in the biotechnology industry. There are 106 cancer products and 46 neurological products in the clinic. It will be a challenge for an average Wall Street investor to determine which of the 1,300 biotechnology companies may be one of the next profitable companies. Presenting more slides, Mr. Purcell noted that Wall Street has been disappointed in the slowness with which biotechnology companies responded to this difficult environment. Over the last year or two, the larger pharmaceutical companies have been more nimble than the smaller biotechnology companies. For example, in the space of 5 months, SmithKline Beecham completed four $1B dollar transactions and completely reformed the company, while the biotechnology industry as a whole was facing severe liquidity problems. Mr. Purcell explained that the biotechnology industry has stayed constant in terms of the number of mergers or acquisitions that have occurred in order to compete in the new environment.

Mr. Purcell concluded with his thoughts on what Wall Street would like to see to help the climate become more positive for investment. First, the cost of discovery needs to be decreased. Mr. Purcell explained that "all or nothing" bets based on the results of Phase III studies are too risky for the average investor. Second, there needs to be a way to increase the gain on success, through either R&D credits or a change in the capital gains rate. Third, the patent system needs further improvements. Finally, changes in the product liability laws are needed that would give investors more protection for products after they are on the market.

Dr. Sayare presented his first slide and explained that he will describe the characteristics of relationships and collaborations between academia and industry. He noted that the company he works for, Immunogen, will serve as an example when discussing the challenges a company faces that are different from those of academia. He will state his opinion about the value that both academia and industry derive from these collaborations, the value derived by U.S. taxpayers, and finally the evolution of relationships between academia and the biotechnology industry over time.

Dr. Sayare's next slide covered biotechnology in the United States. He noted that nowhere else in the world is there a biotechnology industry as robust as the one in this country. In his opinion, this results from the convergence of three factors: entrepreneurism, venture capital, and availability of Federally-funded, cutting-edge research within the academic community.

Dr. Sayare commented that Americans are among the most entrepreneurial of people in the world, and that entrepreneurism is an essential element of building a biotechnology company. Also, the United States has more venture capital than anywhere else in the world. There are venture capitalists who put money into biotechnology companies and make money on those investments, leading to even more venture capital investments in biotechnology. The most important element is the availability of cutting-edge research that is publicly funded, meaning that all taxpayers are invested in the biotech industry.

Dr. Sayare explained that the origin and culture of biotechnology is what distinguishes it from the pharmaceutical industry. Most biotechnology companies originated with technology at a university. Because of that direct connection with the university setting, biotechnology companies live in that culture. Dr. Sayare feels it is that culture that has attracted good people to do the cutting-edge research in biotechnology.

Dr. Sayare presented a slide and discussed the collaboration that Immunogen has with Dana- Farber Cancer Institute in Boston. Immunogen, which is in Cambridge, was founded in 1981 with a $3.5M investment on the part of two venture capital groups in Boston. The collaboration was based on a desire to use monoclonal antibodies to widen the therapeutic window of existing chemotherapeutics. Dana-Farber, then called Sydney Farber Cancer Institute, had just been taken over by Dr. Baruj Benacerraf. Dr. Benacerraf, Dr. Stuart Schlossman, and Dr. Lee Nadler put together a laboratory within the Dana-Farber Cancer Institute in which Immunogen's work was carried out. The research was funded for 5 years by Immunogen, whose first president was one of the venture capital investors. Twelve full-time staff were hired, six of whom had Ph.D's, to undertake this research at Dana-Farber, which involved connecting methotrexate and doxorubicin to monoclonal antibodies for delivery to cancer cells.

Dr. Sayare continued his discussion, explaining that Dr. Benacerraf insisted that the license agreement which underwrote the relationship between Immunogen and Dana-Farber be no longer than four pages. The relationship between Dana-Farber and Immunogen has been in existence for 15 years, and they now have a product that is in Phase III clinical studies. The technology platform that was developed at Dana-Farber by using the Immunogen money, however, was not doxorubicin or methotrexate attached to monoclonal antibodies, because these drugs are not toxic enough. Dr. Sayare explained that if a product can be delivered specifically to a tumor cell and nowhere else in the body, that product should be very toxic. Therefore, they developed a proprietary derivative of ricin, a potent plant toxin, that binds to and kills only the target cell to which the antibody is directed. The first such product, Oncolysin B, was developed for Non-Hodgkin's Lymphoma.

Immunogen also turned to the NCI, which provided a list of agents that had been screened and studied in the clinic. Immunogen developed the chemistries need to attach several of these agents to monoclonal antibodies. Several products, which are not immunogenic but are nearly as potent as the ricin derivatives, resulted from this effort.

Dr. Sayare emphasized that the initial $3.5M and an additional $6M that the company raised was used to fund basic research at Dana-Farber. This is almost $10M in total and does not include another $3M in Phase I and Phase II clinical studies that were undertaken at Dana-Farber, Immunogen's host institution. Dana-Farber did all of the early studies. Immunogen has had 24 different clinical protocols on its first product, Oncolysin B.

Dr. Sayare's next slide described the value derived by Dana-Farber from its collaboration with Immunogen. He noted that the biotechnology industry as a whole has funded academic research for about $1.5B annually, and referred the Board to David Blumenthal's article in the New England Journal of Medicine, which described the relationships between academia and the industry and the economic benefits derived from this close association. Dr. Sayare indicated that Immunogen files all the patents in its collaboration with Dana-Farber, and Dana-Farber is assigned all of the patents. Immunogen is the license