Generic analysis of FDA regulatory improvements and biotech investment outlook

sales and marketing becomes more efficient as commercial campaigns only need to target those physicians seeing specific subsets of patients; Regulatory Authorities evaluate the risk-benefit of new therapeutics on specific subgroups of patients that are known to be suffering from a specific sub-type of diseases, and can thus require fewer patients and shorter timelines in clinical programs, ultimately lowering the risks and costs of the approval pathway for developers of new therapeutics; and Investors can expect to see improving returns as the risk/reward equation of drug development is shifted significantly as a result of shortened timelines, smaller clinical trials, improved probabilities of success, and reduced risks at the clinical, regulatory, and commercial levels. Second, the biopharmaceuticals sector is an improving regulatory environment in the U.S., helping set the stage for a positive investment cycle. There is strong evidence that over the last decade the FDA has been working to improve the drug approval process in the U.S. in tangible ways that benefit biopharmaceutical companies and reduce the risk for their investors. Although the path to regulatory approval for product programs has not been made easy by any standard, the FDA has made strides in making the process more predictable and streamlined. Some of the most significant improvements have been in therapeutic areas where there is a high level of unmet medical need. For example, the U.S. Food and Drug Administration (“FDA”) is demonstrating clear interest in working more constructively with industry to bring new safe and effective therapeutics to market that target diseases that have potentially large cost burdens on the healthcare system (e.g., oncology). Additionally, the FDA has also improved the way that they communicate and interact with sponsors of new products, by creating set administrative procedures and timelines that they are required to meet through legislation like the Prescription Drug User Fee Act (“PDUFA”) and the FDA Modernization Act. The FDA has implemented other initiatives that attempt to clarify requirements and shorten regulatory timelines for certain types of therapeutic products that they view as highest priority. These initiatives include programs to grant special designations, including Breakthrough Therapy, Accelerated Approval, and Priority Review, which can cut significant time out of the standard approval process. The impact of these and other programs has become apparent in the number of new drug approvals (“NDAs”) by FDA in both 2011 (0 NDAs) and 2012 (39 NDAs), which trended higher compared to the previous six years and versus historic averages.” Overall, these initiatives and others, both in the U.S. and in other markets (e.g., E.U. and Japan), have made the regulatory environment more favorable for investors in the biopharmaceutical sector, and have reduced some of the uncertainty in a critical part of drug development. A third factor supporting the positive investment thesis in biopharmaceuticals is the interplay of favorable conditions in the capital markets and the strategic needs of the large and mid-sized companies in the sector. These dynamics should create a positive financing and exit environment for biopharmaceutical companies for the foreseeable future, and the Fund Manager expect them to contribute to improving venture returns. The aforementioned contraction in the number of active firms and capital flows into healthcare technology venture funds has significantly reduced the level of competition between firms. At the same time, large and mid-sized biopharmaceutical companies have become increasingly dependent on 78 Food and Drug Administration. Center For Drug Evaluation and Research 36 CONTROL NUMBER 257 - CONFIDENTIAL HOUSE_OVERSIGHT_024047