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Michael Stocum, Innovadigm CEO, on Company s PGx Approach

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At A Glance

Name: Michael Stocum

Title: Innovadigm Oncology CEO and cofounder

Background: Senior director of business development and alliance management (2001 to present)

Education: North Carolina State University, Raleigh, NC, M.S., Technology Management — Biotechnology option, 1990-1992; B.S., Biochemistry & Microbiology (two degrees) with Genetics minor, 1984-1990; University of Wisconsin, Madison, WI — Excellence in Marketing Certificate, 1996-2001

Age: 38

Can you tell me a little about your company and your plans concerning therapeutics and diagnostics?

We’ve founded a company called Innovadigm Oncology, it’s a next-generation pharmaceutical company dedicated to the process of what we refer to as targeted clinical development. It involves using biomarkers and cutting-edge technology platforms to define patient populations most likely to respond to a specific drug. So in other words, instead of pursuing traditional trial approaches where we enroll based on past treatment regimens, site of original tumor and other clinical parameters, we’re also applying biomarkers in pathways that are related to tumors that they have and the drug’s mechanism of action.

Are you planning to stratify patients ahead of time?

Ultimately, yes. In other words, the end result is you’ll have a well-defined patient population, not just clinically, but also from an evidence-based standpoint defined by markers. Ideally it will only be one or two or three markers that comprise the diagnostic test by the time our compound is ready for the market. That’s the way that you would define the patient population. It’s analogous to something we already do today with estrogen receptor testing and Her2/neu testing, it’s simply applying that approach in a more rigorous and consistent manner to all of our development programs versus just a few selected agents.

When do you think this sort of approach will be up and running?

There are two ways to look at this. One can begin to identify most-likely responders for drugs that are already on the market. So examples of this include the profile that’s offered by Genomic Health and also there’s a profile that a lab called Response Genetics offers. And you also see things like the publications that were out last spring on Iressa, an EGFR inhibitor and the genetic markers that will help to identify the most likely patients to respond. Now, those are examples of biomarkers at various stages of development, I wouldn’t say today that every patient could easily be selected for Iressa based on a biomarker profile-that’s not available yet. It is probably three years down the road, before that’s widely available and then a few years after that widely adopted in clinical practice. However, if we’re developing compounds from the beginning with the intention of having a companion diagnostic, then timing will be a function of when the compounds come to market. The compounds we’re working on at Innovadigm are anywhere from three to five, maybe six years from market. I see both approaches happening with similar timeframes, governed by how quickly you can generate the data and how quickly you can get products registered.

Are you working only on cancer compounds?

Initially, yes. That’s the most receptive disease area for this approach, but there are certainly other disease areas where this approach can be beneficial. They’re usually complex diseases with unmet medical needs, diseases that have multiple clinical presentations, for example, metabolic syndrome where there are many different disease factors occurring at once. Those diseases lend themselves to a targeted clinical development approach, but it also makes them more complex to study biomarkers and drugs simultaneously.

What kind of barriers do you see in your market?

There’s always the momentum of the current way of doing things — that has to be overcome, the inertia. However, I think people are realizing that they can enhance the development of their compounds by taking these approaches, so that existing inertia is starting to melt away, slowly but surely. That’s one barrier.

The second barrier is the two industries that are critical to making this happen, the pharmaceutical industry and the diagnostic industry have very different operating models. Pharma is high-value, typically high-margin products. Diagnostics tend to be lower-margin products, for the most part, and diagnostic companies make their profits based on volume and the ownership of platforms in the clinical laboratories. So if you look at Roche, Bayer, Abbott, J&J, Ortho-Clinical Diagnostics, etc., those companies have large instruments that run lots of tests, and they’re placed in clinical labs around the world. So that footprint gives them their presence, whereas in the case of a medicine, it’s simply based on how many ‘scripts individual physicians will write and how these drugs land on formularies that drive the behavior of that marketplace. So you’ve got two different marketplaces that both have to work together to make this approach fruitful in the marketplace. Since they have different needs, you can see it’s a challenge to bring those partnerships together.

Do you have to contend with any regulatory issues?

It’s an open playing field without much precedent. Bringing companion products together to the market hasn’t been done frequently. So FDA is learning about this just like companies are learning about it, just like academia is learning about it. And I think the opportunity exists to thoughtfully put a process in place that enables more rapid development versus creating barriers. So, I think rather than barriers, I think of this as an opportunity for improvements to the development of companion products. If you look at what the FDA has put out recently in the way of guidance documents, their meeting and forums, and the draft documents that are open for comments, one can see the field is moving in a positive direction.

What sort of enticements are there for small and large drug companies?

A couple. If you look at the economics of drug discovery and development right now, they cannot fulfill the enormous amount of revenue that’s required to keep existing pharma companies going. We’re at an inflection point, if you will. We have to change how business is being conducted. I don’t have all the answers, but I do know that a process like targeted clinical development can improve the speed at which you can develop compounds, and it can also better define the markets, so that these compounds both come to market sooner, and then are widely adopted more quickly, thus increasing the overall value of these compounds. The approach can also reduce the attrition rates. You can’t be batting one for ten when you’re already in human development, and spending the kind of money you do when you’re in human development trials, and yet still expect to be profitable unless you’re getting enormous margin on the products that do make it through. And those enormous margins, I think we’d all agree are challenged at this point.

Do you have an estimate for the size of the theranostics market?

In general, no. This is an emerging market and it all depends on how many drugs and how many tests you want to put in the bucket of theranostics and companion products. Do you count Herceptin and Her2/neu testing in that lot? Maybe. Probably. What about other compounds? What’s going to happen when and if these Iressa markers become commercialized? Do you then move Iressa sales and their companion diagnostics sales into the theranostics bucket? Maybe. But not today. I think it’s difficult to project what it’s going to be. It’s obviously very substantial. I think if you take a step back from looking at the market for theranostics and instead look at the market for the compounds and biomarker targets that would come through together, that clearly is in the hundreds of millions to low billions in terms of opportunity for out-licensure of compounds, and to a lesser extent the smaller market of course, the out-licensure of diagnostic markers.

How many companies are there like your own?

I’ve only caught a couple that look to be similar, and they are usually focusing in on using pharmacogenetics exclusively — so DNA-based testing exclusively — or they’re companies that may take a refined approach to how they define the clinical population, but they’re narrowing themselves in terms of which biomarkers they might use. In other words, if it’s a drug targeting a novel different marker, they will test only that marker, they won’t go broader than that marker. I’m sure many, many people thought of this approach, many, many people are out there considering it, but it takes a fair bit of experience, it takes a fair bit of willingness to work across multiple types of markers in order to be broad enough to capture all the information. You need to reach a point where you can say, “Now I understand the pathway, now I understand what this drug is doing, now I can define the patient population.”

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