How San Diego Researchers Walk Through the ‘Valley of Death’

Wednesday, April 9, 2008 | Over the course of a six-month period in 2004, Chinese-born biochemist Yong Qian endured the agony of watching his friend, Ma Jinhui, lose 132 pounds and then die from stomach cancer.

Inspired by the death of his friend, Qian left his job at a San Diego nutrition company to research and develop a cure for the ailment that killed Jinhui. Like many scientists working in San Diego’s burgeoning biotechnology sector, Qian presented his mission to dozens of friends and family members, and asked them to invest in his research. Eventually he collected $318,000 dollars from a network of 28 people that he met at church, graduate school, and through his family, to rent out his own lab and begin the heralded task of curing cancer.

Three years after Qian started his research he is beginning to see intriguing results. His company, Biomedicure, which sprouted around his devotion to cure a disease that kills more than half a million Americans per year, has developed a drug that can be injected directly into a cancerous tumor, where it then kills and cuts away dead cancer cells.

“Like a pair of bioscissors,” Qian said, “this drug has the potential to allow a doctor to remove a cancerous tumor without surgery or radiotherapy.”

Qian’s drug, which he has titled Tumorase, has been injected into tumors on the bodies of more 100 mice infected with six different types of cancer including cancers of the breast, lung, prostate, colon, and melanoma. Out of the 135 solid tumors tested, 135 were eliminated, he says.

Now Qian is gearing up for the next step in bringing his product to market: receiving his new drug approval from the U.S. Food and Drug Administration to begin testing on humans in clinical trials. But these trials cost too much money for his friends, family, and fellow churchgoers to afford.

With this step comes Qian’s entrance into the ranks of thousands of San Diego-based researchers who are wading their way through the complex fundraising process required to get a product of their research through human clinical trials, a critical stage in commercializing a new drug, medical device, or therapeutic. Gathering the hundreds of millions of dollars necessary to get through clinical trials has been deemed the “valley of death” among scientists and investors who work in the biotech industry, because so many nascent companies fail to aggregate a sufficient amount of money, and die before emerging from the grueling journey.

Money collected during this stage is used to adjust toxicity levels, reduce side-effects, determine the appropriate dosage for humans, and perform all the other appropriate lab work completed during clinical trials. The results of these trials can have a tremendous affect on a company’s coffers: when tests come back positive investors want to sink more money into the project; when negative, investors can lose their appetite for risk.

While Qian begins his march through the valley, another researcher, Dr. Jackson Streeter, a former Navy flight surgeon, is reaching the finish line. Streeter’s product, called NeuroThera, a laser therapy tool designed to protect the brain during a stroke, is now in the final clinical phase of human trials. Streeter, who was the first medical doctor to become a pilot in the U.S. Navy Fighter Weapons School known as Top Gun, feels fortunate that the progress of his research wasn’t as thoroughly stymied by fundraising tribulations as others in his field.

“I didn’t live in the valley of death like some of the other companies out there,” said Streeter. “But for every investor I met that was interested, I probably met with 10 others that weren’t.”

Streeter added that with each successful phase of clinical trials, fundraising became easier. His company, PhotoThera, has raised more than $55 million dollars.

Similar to Qian, Streeter was prompted to begin his research on stroke due to the death of a friend. Streeter’s mentor, Dr. George Romano, a veteran flight surgeon, died of a stroke two days after retiring in 1997.

From lasers to drugs, hundreds of medical products are subjected to FDA’s approval process each year, and behind many of them lies a tale of a San Diego-based researcher turned entrepreneur struggling to raise enough money to complete his research and get through an approval process that can cost $800 million for drugs like Qian’s or $50 million to $100 million for medical devices like Streeter’s.

Given the diversity of products pitched to FDA every year, no path to commercialization is the same, but there is one common obstacle that all biotech companies face: raising money.

The fundraising process often begins when a researcher at a large company, university, or in Streeter’s case, a federal agency, realizes that a set of compounds or medical tool may have the potential to cure, or at least alleviate the symptoms of, a disease. In Streeter’s case a laser therapy technique being researched by the Navy to alleviate muscle strain in the necks of fighter pilots led to his interest in using a similar tool on the human brain that is in the midst of a stroke.

“A lot of the science comes out of a university, where researchers discover that a particular set of chemicals can turn off or turn on receptors for a disease, that is when interest begins and the potential to branch out and form your own company opens up,” said Jack Florio, of Tech Coast Angels, an organization that invests in early-stage biotech companies throughout the country. Tech Coast Angels receives hundreds of applications for funding from life science companies, including medical devices and related technology.

Biotech research at the university-level is often paid for by grants administered by the National Institutes of Health, or joint collaborations with larger biotech and pharmaceutical companies. In recent years the NIH has shied away from giving money to small start-up companies in the early stages of their research, making the funding landscape increasingly inhospitable for companies like Qian’s Biomedicure.

“A novice company has very little chance of successfully navigating the federal funding process,” said Joe Panetta, president and chief executive officer of Biocom, a trade association that represents local life science companies.

Compounding the funding dilemma is the fact that congressional allocations to the NIH have not kept up with inflation since they reached the $25 billion dollar mark in 2003. Between 1998 and 2003, Congress doubled NIH funding.

The recent slowdown in federal funding has forced small biotech companies to frequently turn toward private investors, particularly venture capitalists — a trend that Qian’s Biomedicure now embodies.

But the chances of a new drug making it through human clinical trials and eventually being commercialized are slim, hindering the possibility that venture capitalists who invest in these drugs will receive a short-term return. The drug approval process can take more than a decade, which doesn’t bode well for many venture capitalists who seek a return on their investment within two to three years.

As such, getting the money necessary for the completion of human clinical trials is the hardest part in the overall fundraising process.

Only one or two of every 10 compounds entering the human testing stage actually reach the market, according to Pedro Cuatrecasas, professor of pharmacology and medicine at the University of California, San Diego. In 2007, the FDA only approved 19 new drug applications, the fewest in almost a quarter century. In 2006, the FDA received 123 new drug applications.

Venture capitalists who invest in biotechnology have to bet on which companies will make it, and which will fall by the wayside, so they often don’t get involved with a company until it receives its approval to begin human clinical trials — the first glimmer of promise for many investors.

“The consequences of this are that early-stage research companies have very few, if any potential avenues to secure funding: the early-stage venture capital funding is not there, there is not a well established angel investor community in biotech, and small companies don’t have the opportunity to secure federal funding,” Panetta said.

Fortunately for Qian, he expects to receive permission to begin clinical trials in a little over a year, bringing him closer to the time-window during which venture capitalists typically want to invest.

“Venture capitalists usually don’t start paying attention to companies until they are within a year of going to the clinic,” said Jeff Stein president and chief executive officer of Trius therapeutics, and venture partner with Soffinova Ventures, a prominent venture capital firm that invests in biotech.

The number of small start-up companies looking for money like Qian’s is unknown, but according to Biocom there are more than 70 life science companies with cancer programs in Southern California.

“My guess would be that there are probably hundreds, one or two hundred cancer drug development companies at least, who are caught in the idea stage and are looking for funding,” said Zhu Shen, founder of Bioforesight, Inc., a life science consulting company based in San Diego.

Qian says that the progress Biomedicure has made in other areas may allow them to eventually engineer a cancer vaccine that can boost the human immune system’s ability to attack cancer cells systemically. He is focusing his attention on developing a cancer vaccine and gaining FDA’s permission to test Tumorase on humans.

“I am highly motivated,” Qian said. “I feel a deep burden to develop something to help all of the people that I know who are suffering from cancer.”

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(Correction: The original version of this story erroneously stated that Dr. Jackson Streeter is a former Navy Seal. We regret the error.)

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