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Summary of the XIX FTF meeting

Summary of the XIX FTF meeting on "The future of drugs discovery"

Biology is becoming an Information Technology Industry

According to Andrew Hessel, Co-founder of the Pink Army Cooperative biotechnology firm, biology is becoming an Information Technology Industry. Hessel describes the evolution of Information Technology, referencing the invention of the transistor in 1947, the mainframe computer, the development of cheaper computers and the resulting democratization of information technology, the printer, and finally the 3-D printer. The sum of these advances have allowed for the manipulation of DNA via computer as opposed to the scientific laboratory. “Synthetic biology labs” that are defined by this technology are popping up all over the United States and the world and will serve as the next foundation for the study of viruses and cancer and the development of antibiotics, vaccines and therapies. With these advances, also comes the increased threat of bioterrorism and bio-hacking.

Potential of cell therapy

Bernat Soria, Director of the Stem Cell Department at the Andalusian Centre for Molecular Biology and Regenerative Medicine, discusses the potential of cell therapy drawing on the case of diabetes.

He begins by highlighting the example of bone marrow transplants, a form of cell therapy that has been used for the past 25 years. In the case of diabetes, stem cells can be manipulated to behave as insulin producing cells. When these cells are injected into a diabetic mouse, the blood glucose level drops. The case of humans, however, is much more complicated, and we are still far away from an effective treatment because we need cells that behave like adult human cells and because of the problem of auto-immune attacks.

Soria explores the application of cell therapy to the diabetes condition of Gang Green, noting that he has recently been able to inject the patient’s cells into the foot which serves to increase vascularization and eliminate the need for amputation. Clinical trials that assess which cell type and which combination of cell types are currently underway.

Soria closes by noting the costliness of cell therapy development, the complicated regulatory framework in Europe and the need for a sustainable business model that will allow for future developments.

The cost of Pharmaceutical Research and Development

According to Elvira Sanz, it’s very clear that we are not prepared to address the cost of Pharmaceutical Research and Development. Although the situation is slightly better in Europe than in the United States, healthcare is beginning to represent a worryingly high share of GDP in both regions. The pharmaceutical industry is investing more than any other industry in drug discovery.

We all agree that pharmaceutical R&D is changing, but what factors are driving this change? First, we know more about disease than we have ever known, but the more we know, the more aware we become of the number of unmet needs that need to be addressed. Expectations are increasing as we continually demand safer, more efficient, more cost effective medications. The public health agenda, which is affected by a range of different economic and political interests, is also another defining factor. Finally the venture capital cycle has been completely disrupted by the global financial crisis.

Based on this, what are the industry’s priorities?

· The industry believes that developing innovative drugs is essential, but we need to eliminate part of the risk in the drug development process.

· We need to make good decisions earlier. Based on our statistics, one out of every three drugs fails beyond Phase III. Our decision making process needs to be improved.

· Finally, we need to reduce the time involved in drug development. Lag time between phases accounts for close to 30% of the drug development process.

Perfect Storm

According to José María Fernandez-Sousa, CEO of the Zeltia Group, in the next 15-20 years, we could see a dramatic reduction of the approval of innovative medicines due to what we may call a “Perfect Storm.” This “Perfect Storm” is the result of the following three broad categories of problems:

· Regulators are taking longer and longer to approve new medicines, and as a result fewer numbers of innovative medicines are being approved.

· Governments are unwilling to pay for these medicines due to ever-increasing costs of healthcare.

· Pharmaceutical companies are becoming more conservative as it’s taking more and more money to produce new medicines whilst becoming more and more risky.

Twenty years ago it took between 11 and 13 years to produce a new drug and cost approximately US$300 million. Today in order to put a new drug on the market, it can take between 12 and 16 years and according to Big Pharma estimates can cost an average of US$1 billion.

While in other industries, product prices rise gradually with inflation, in the pharmaceutical industry, product prices decline over time. Moreover, lag times between clinical trials are increasing with periods that are sometimes as long as one year between Phase I and Phase II and Phase II and Phase III.

Governments now are more and more reluctant to finance healthcare expenses. People live longer thanks to medicine and because of that healthcare expenses are becoming higher and higher. Perhaps for this reason, governments are taking longer and longer to give prices to approved medicines, and certain countries are delaying the payments for those medicines.

The Role of Startups as a Source of R&D and Innovation

In the panel “The Role of Startups as a Source of R&D and Innovation,” an Angel Investor, an Entrepreneur and a Philanthropist. Esther Dyson, begins by noting the range of start-ups that can address the issue of innovation in drug discovery.

When asked “What is the role of start-ups as a source of Research and Development in the drug space,” Michael Moradi, Co-Founder and CEO of Sensulin, notes that the model is changing and that previously the majority of Food and Drug Administration-approved drugs were developed in university laboratories or in start-up environments, many of which have now become large pharmaceutical companies. According to Moradi, today some of the best drug development research is carried out in academic laboratories that draw on federal and state government grant money as well as the support from private foundations. Clinical studies are then later financed by Venture Capital Funds and Angel Investors, and biotech entrepreneurs may then go on to partner with pharmaceutical companies or build their own sales force.

Speaking from the point of view of the investor, Richard Kivel, Senior Manager at Bridgewater Associates, notes that increasing amounts of money are being invested in life science, however, more and more capital is being directed towards later stage deals. In 2011 only 125 of the 450 biotech investment deals financed first stage research. Kivel goes on to stress the importance of “subsidies” awarded by government, private foundations and disease associations that can support early stage research, adding that Venture Capital Funds who typically work in ten year installments have to make “big,” long term “bets” and continue to “play” or otherwise will be diluted by future investors.

Speaking from the point of view of the large pharmaceutical company, Patrick Flochel, Global Pharmaceutical Sector Leader at Ernst & Young, notes that in the past year $40 billion in revenues have disappeared due to loss of exclusivity and expiration of government price controls. Due to this, pharmaceutical companies have to limit the risk they take in their investments, and the resources these companies have to invest in innovation are decreasing. The “firepower” of the 28 largest biotechnology and pharmaceutical companies decreased by 30% between 2006 and 2011. As part of their efforts to limit risk, pharmaceutical companies invest less in upfront payments. In addition, most pharmaceutical companies now call themselves healthcare companies because they are part of the healthcare system and they have to contribute to the healthcare system while at the same time satisfying their financial market investors who tend not to be big supporters of R&D investments.

Labor market flexibility

Dr. Dan Finn, Professor of Social Inclusion at the University of Portsmouth, discusses the role of labor market flexibility in employment creation. Rapid increases in unemployment are often followed by increases in long term, structural unemployment. Prolonged unemployment as a young person has scaring effects and can have negative implications for a worker’s earning possibilities later in life.

Reforms in countries with rigid labor market arrangements have created dualism problems, which is characteristic of the Spanish situation. It isn’t just about the immediate slump, declining demand, and the banking crisis, there are also underlying trends around ageing populations and changing forms of the family that will merit attention.

Spain should consider smart regulation and re-regulation rather than simple de-regulation. Possible approaches include changing the terms of the unemployment benefits, providing services that are specifically designed to get workers back into the workforce rather than just subsidies for living expenses, and allowing private sector and non-profit organizations to compete with government institutions in the delivery of benefits.

Relationship between aggregate demand and structural problems in the Spanish crisis.

Dr. Tyler Cowen, Holbert Harris Professor of Economics at George Mason University, discusses the relationship between aggregate demand and structural problems in the Spanish economic crisis. When there is a shortfall in aggregate demand all unemployment problems are made worse, and when unemployment is high structural and cyclical problems interact. Wages are sticky, and as a result companies must fire workers. Spain is suffering from the aggregate demand problem in addition to other structural problems, which are in turn made worse by the aggregate demand problem.

Fiscal policy and monetary policy provide potential remedies. Fiscal policy approaches have a limited effectiveness as modern economies cannot increase their spending rapidly enough to have a meaningful impact. Monetary policy offers another potential remedy, but part of Spain’s problem is its position in the Euro Zone. The Euro Zone imposes the same monetary policy on high productivity countries that it imposes on low productivity countries. A looser monetary policy for low productivity countries would make their wage stickiness problems less severe. Countries could get people back to work by inflating rather than lowering nominal wages. A higher rate of inflation would also lower the value of the outstanding debt thereby decreasing the debt overhang problem. In addition, monetary policy would allow the banks to be bailed out quickly without having to go through a series of rounds of self-defeating austerity.

Summary of the XVIII FTF meeting on "Unemployment in Developed Economies"

Video summary of the XVIII FTF meeting on "Unemployment in Developed Economies" on May 31st – June 1st 2012

Human capital development across Europe

The reality is that we are in a value driven economy which requires highly skilled workers, increased productivity and automation. Europe should expect a rise in 18 million highly skilled jobs combined with a drop of 11 million low skilled jobs. According to the European Commission there will be up to 700,000 IT workers in Europe in 2015.

Despite this trend, companies continue to cut investment in training. According to Accenture, 80% of employers report freezing or reducing training spending, while almost half of these businesses report skills shortages. The statistics for Spain are disconcerting. According to the OECD and the European Foundation for the Improvement of Living and Working Conditions, only 15% of workers have received training from their employer over the last year compared with between 40 and 50% in the Netherlands and Nordic countries.

The role of entrepreneurship in job creation

According to NESTA, high growth firms, termed “gazelles” represent 6% of the market in Spain but are responsible for 45% of the jobs created. Kauffman Foundation research has demonstrated the firms under 5 years old were responsible for nearly all new net job creation in the United States between 1980 and 2005. According the OECD the average age of entrepreneurs in Europe is over 40.

In the discussion around how to create high growth firms has put a lot of emphasis on entrepreneurial ecosystems. It is important to understand that the entrepreneurial ecosystems in Silicon Valley and Cambridge University came about over time and were more the bottom up result of supportive networks of individuals than top down creation of incubators and infrastructure.

The role of national competitiveness in job creation

Dr. Joel Kurtzman, the Managing Director at the Kurtzman Group, discusses the role of national competitiveness in job creation. He begins by distinguishing between economic growth and national competitiveness, noting that according to the World Economic Forum, the most competitive countries have the lowest GDP growth rates. Other institutional factors that determine competitiveness include corruption, the legal system, economic policy, accounting standards, education, tax policy, and labor force flexibility. In these areas, Spanish institutions appear to be generally competitive.

However in terms of access to capital, Spain ranked only 34 th amongst surveyed countries. Typically, in countries with greater access to capital banks play a smaller role in the financial sector. Due to cumbersome processes, concentrated sources of capital, and onerous lending terms, banks by nature restrict capital flow. Venture capital and private equity firms, on the other hand, offer a variety of products and combinations of debt and equity. To put this in perspective, banks in the US are equal to 60% of GDP compared to 110% in Europe. Based on this Kurtzman believes that analysts should be focused on restructuring the Spanish financial system rather than restructuring the labor market structure. .

Investors in Social Tech

During the second day of the meeting of the Future Trends Forum was held a session devoted exclusively to investors, who under the moderation of Richard Kivel, Chairman and President at MIT Enterprise Forum and patron of the Bankinter Innovation Foundation, discussed the elements of the investment in the new possibilities offered by social technologies. Eden Shochat, Director of Genesis Partners, offered us the vision of investors on these technologies and Tan Tinglan, Director of the National Research Foundation of Singapore offered the keys to create a successful business on the basis of social technologies.

Social Technologies in the Russian winter

Ilya Ponomarev, Chairman of Innovation and Venture Capital subcommittee in the State Duma (Russia) explains in the FTF meeting that in Russia they are not in an Arab Spring, but a Russian winter. Mr Ponomarev explains us that in Russia traditionally the population is divided into two: Half go to polling stations and participate in political life and the other half votes for the Communist candidate, whoever it is. That was the situation for the last 15 years or so, but this has started to change.
The Social Technologies help to develop this Russian winter, the social media in Russia is developing in a different way to many western societies. Russia is the world leader in total number of hours people spend on social networks - more than twice the amount of the average western European country. Facebook, by the way, is the third most popular social media platform in Russia. The first two are both Russian companies.

Social technologies in Business

Andreas Weigend, director of the Social Data Lab of Stanford University and former Chief Scientist at Amazon, speaks to us about the three basic rules to implement social technologies in business. These rules are include the interaction with consumers, the management of the influence through knowledge of the environment and situation, meeting the influencing consumers around you, and encouraging all the social tools, and success management, i.e. how to seize the new challenges posed by this deployment, such as data management, etc.

Topography of social technology

Robert Thomas spoke about the topography of social technology describing an organization's choice of which technologies to employ as a “political process.” Thomas's key points were as follows: social networks are changing continuously, the patterns of use of personal technology are age and geography-related, social technology is making it possible for all work activities to be online all the time, and as a result organizations have moved from a document centric approach, to a process centric approach, to an activity- centric approach. This will pose a challenge to the legitimacy of management in organizations as management decisions will be reviewed continuously, and discerning who is an expert will become increasingly difficult. At present we are far away from knowing how to manage a "networked organization."

Social Tecnologies with in Social Revolution

WadaH Khanfar, ex-CEO of Aljazzera, explains, coinciding with the first anniversary of the Tunisian revolution, as the use of social networks has collaborated, but provoked revolutions known as the Arab spring. WadaH Khanfar also explains to the JAzzera faced the challenge of the production of information from social networks, as they had to create a new process of assistance information that not only they did not know the origin of this information, but because they didn't know how to authenticate the veracity of such information. Currently, in the Jazzera is one of the main sources of information.

The next coolest thing on Social Technologies

Walter de Brower shares his experience as an entrepreneur in the area of mobile medicine. Making note of his belonging to the Baby Boomer generation, de Brower tells the story of Scanadu’s investment in mobile health. According to his analysis, “we are the last generation that will know so little about our health.” There are a number of new gadgets in the quantified self arena that operate via sensor to measure cholesterol, heart rate and stress levels. All of these devices will be main stream in tomorrow’s world. The market for auto diagnosis will be enormous, although the devices which are currently be being designed will be for recreational use and will not preclude doctors’ visits. All devices that we currently wear on the body will be worn in the body or will be ingestible. These devices will allow for knowledge of our changing health in real time and will facilitate a descentralization in medical care as ageing populations present too much to manage with the current healthcare infrastructure.

Anticipation of future social technologies

Menno Van Dijk, talks about the anticipation of future social technologies. After 22 years of experience in McKinsey provides three levels: forecasting, scenarios and uncertainties. In social technologies is very difficult to predict because they have a high level of complexity. For Menno, social technologies are not only connecting people but also involve the empowerment as an individual, where the virtual becomes real. In the future it would be more transparency and empowerment, as well as higher control and regulation.

Innovation in the HBS MBA program

Nitin Nohria, Dean of Harvard Business School, shared with us the innovations that aim to bring a prestigious and consolidated business school to the next level. Before introducing these innovations, Nitin explained to the audience what makes Harvard Business School different: the case method. This competitive advantage helps understand the changes that Nitin is planning for HBS. These innovations will apply not only to the curriculum but also to the infrastructure that supports it. Firstly, Nitin presented the field case method, an approach that will bring closer the academic world to the outside world. Secondly, he shared a pilot of a new architectural structure that should respond to the new educational needs of our society.