Thursday, April 2, 2015

Antibiotic Executive Summary

       Back in 1985, my late business partner, Gerald Hirsch, Ph.D. biochemist, and I developed a theory describing a hypothetical antibiotic.  We established The Lithox Corporation to exploit this new technology.  We worked for 4 years to synthesize the molecule, but were unsuccessful, and we closed The Lithox Corporation in 1989. 

       I continued to work on this idea on my own, and 15 years later, I eventually succeeded through trial and error.  My 74th attempt yielded the correct synthetic method.  Here is a summary of my work.

                              A new chemical entity with antibiotic properties

I have discovered a new chemical entity with antibiotic properties that works by inhibiting the production of protein in bacteria.  This effectively stops the growth of the bacteria.

Since protein synthesis in bacteria is carried on outside of DNA, the compound does not target DNA synthesis or functions.  This means that the compound is non-mutagenic to bacteria, and that bacteria should not develop resistance to the compound as they do with antibiotics that target DNA. This is a significant characteristic of the compound.  Because human protein synthesis begins with a molecule differing from that of bacteria, the compound should not interfere with protein synthesis in humans, and therefore should have low toxicity to humans.

Because of the mutagenic properties of many existing antibiotics, bacterial resistance to their effects has developed.  More and more cases of antibiotic-resistant, flesh-eating bacteria (MSRA) are appearing in hospitals and doctors’ offices around the world, causing a significant risk to patients.  While some treatments for this problem currently exist, they can be difficult to administer, can be toxic to the human recipients, or patent protection has expired.  This NCE has the potential to solve these problems, and offer significant revenues to pharmaceutical companies.

Some of the applications for this antibacterial compound include human use for internal infections and external skin infections, veterinarian use—both in food animals and pets—and agricultural use to treat bacterial infections in plants.  It can also be used as a topical spray, and in wound coverings to prevent or treat bacterial infections, and many other uses where anti-bacterial capability is desired.

            The inventor, who already holds a number of patents, has developed a novel method to create the molecule, the compound has not been described in the scientific literature, and the antibacterial properties of the compound are unanticipated in the literature. All these factors combine to make the compound both novel and useful, each necessary for patentability.

            Initial testing has been completed in vitro on bacteria, including MRSA, and the results are good and as expected. The next stage would be wider in vitro tests, chemical characterization, and animal testing.  Patent filings would follow.

            The market potential, considering the wide variety of uses, is huge. My goal is to create an entity that subcontracts the necessary testing, files patents, and licenses the patents to various companies who will then complete the testing appropriate to their respective markets, and commercialize the compound.

Antibiotic Business Plan



    By Robert Bayless, inventor.

            Following positive Phase III test results for both a new anti-fungal and a new antibiotic, Pfizer, Inc. purchased a tiny company, Vicuron Pharmaceuticals, for $1.9 billion in the fourth quarter of 2005.  Pfizer could justify such a purchase premium because total world-wide antibiotic sales in the year 2000 exceeded $25 billion.  A single block-buster drug can generate $1 billion in sales in the first year, allowing large drug firms to recoup their investment immediately.

     Project Summary:  This project to create, patent and market the patent describing a new antibiotic needs a total investment of $5 million over five years to maximize the yield from the future patent(s). Identification, testing, and patent preparation should take four years, marketing of the patent to mid-level drug development firms should begin in year five. When a drug firm commits to a licensing deal, they normally pay up‑front money, and royalty payments in the range of 5 to 10% of total revenue continue for the life of the patent. If a joint venture between a major drug firm and the drug development firm is set up, participation in ownership by the original investors can result, and the opportunity to go public presents itself. Certainly, the joint venture vehicle increases the prospects of a greater return to the original investors when compared to a license or acquisition.

            Background:  Robert Bayless began researching new antibiotics to treat bacterial infections in 1983.  He and Dr. G.P. Hirsch, Ph.D., established The Lithox Corporation in 1985 to further refine this research.  After five years of work, they were unable to synthesize a stable product which could withstand the rigors of synthesis, purification, and analysis.  They did file, and were granted six U.S. patents disclosing the used of an amino acid as an antioxidant to treat various ailments.  In 2001, while continuing his study alone, Mr. Bayless discovered an original method of synthesis for a new antibiotic.   After considerable research and work, Mr. Bayless filed a series of Disclosure Documents, culminating in the 2014 disclosure (See Attachment “A”).  The disclosed products need to be synthesized and identified using a variety of standard analytical techniques, biological tests conducted both in vitro and in animals, and patent(s) filed describing such products and their uses.

The Industry:

            The U.S. pharmaceutical industry is in trouble.  World-wide branded pharmaceutical sales will exceed $706 billion in 2012.  Approximately 9% of patents expire each year, so that about $60 billion in protected revenues are lost each year to the generic market.  The generic market comprises about $67 billion in sales each year, with profit margins razor-thin compared to that of patent-protected drugs. Global animal pharmaceutical sales average about $14 billion per year, with large volumes and minuscule profits.  Therefore, the large drug firms actively seek patented products for human use that will insure a price-protected market for the future.

Target Markets:

            Primary target markets for a new antibiotic include:

1)    Internal use to treat bacterial infections in humans, including respiratory infections.

2)     External use to treat bacterial skin infections in humans.

3)     Inhalation use to treat bacterial lung infections in humans.

4)     Internal use to treat bacterial infections in food and non-food animals.

5)  External use to treat bacterial skin infections in food and non-food animals.

6)     Systemic use to treat bacterial infections in food and non-food plants.

7)   Topical sprays to treat bacterial infestations in food and non-food plants.

8)     Cleaning fluids and sprays to disinfect surfaces.

9)     Disinfection of foods and liquids, including water and blood.

10)   Use in wound coverings to prevent and treat bacterial infections.

Market Strategy:

            Bayless proposes to market patent(s) pending to mid-level drug development firms which have the resources to conduct the clinical trials and finance the F.D.A. regulatory process necessary to sell drugs in the United States.  Such firms refuse to sign Non-Disclosure Agreements in order to review new drug entities in the pre-patent stage because of their own on-going research may impinge on the new material.  A patent-pending designation allows the mid-level drug firms to look at the material without such concerns.  In addition, since it takes on average 12 years, and costs $24 million to bring a New Chemical Entity (NCE) to the preclinical/nonclinical patented stage, the drug firms can skip a large part of the time delay and uncertainty of the drug discovery process (See Attachment “C” for an in-depth discussion of the costs of drug discovery and development.)  The cost difference between the $24 million incurred on average by drug firms to develop a patented drug in-house and the cost of $5 million as outlined by this document constitutes the value-added available to investors in this plan.

            Patents are legal monopolies carved out of the capitalist system.  A U.S. patent provides up to 20 years of exclusive ownership of a given technological advance. European patents must be filed before U.S. patents issue in order to protect European rights.  The timing of patent filing is of great importance, and investors should consult patent counsel to fully understand the process.

Funding Proposal:

            In order to interest a major drug firm in a licensing deal, the following steps must be accomplished:
            (See Attachment “B” for complete Research Plan proposal)

Step I.  Prepare and file a Provisional U.S. Patent.  Bayless has already written               one, but it needs to be reviewed and edited by patent counsel before filing. 
Step II.  Synthesis of compounds, chemical identification, and biological testing.
             Once the Provisional Patent is filed, companies can be approached to                     subcontract the synthesis, analysis, and in vitro and in vivo animal                         testing necessary to support a patent filing. 
Step III.  File U.S. Patent application(s) based on the results. 
              Filing provides patent pending protection.                            
              Filing of foreign patents must occur before U.S. patent issues.
              Step II and Step III run concurrently.

Step IV.  Begin marketing patent(s) to mid-level drug development firms.


GlaxoSmithKline has agreed to buy all outstanding shares of Praecis Pharmaceuticals for $54.8 million. Praecis has an anticancer drug in development.

Genmab has entered into a worldwide agreement with GlaxoSmithKline to commercialize a human monoclonal antibody for treatment of leukemia.  Genmab received a license fee of $102 million, and GSK agreed to invest $357 million in Genmab.  Genmab also received tiered royalties on worldwide sales.

            Exelixis has entered into a worldwide agreement to develop cancer treatments with Bristol-Myers Squibb.  Exelixis received $60 million in cash, $20 million for each drug candidate selected by BMS, and royalties on worldwide sales.

            Altus Pharmaceuticals has entered into an agreement with Genetech to commercialize their version of human growth hormone.  Genetech paid $15 million upfront, as well as purchased $15 million of Altus’ stock.
Commercialization milestones trigger up to an additional $110 million in payments.

            Kosan Biosciences has established a worldwide license agreement with Pfizer for a drug to treat gastrointestinal diseases.  Kosan received $12.5 million upfront, and Pfizer will initiate a Phase I trial.  Kosan will receive $250 million if commercialization is successful, as well as royalties on worldwide sales.

            Astra Zeneca paid a $20 million milestone payment to Targacept following successful completion of clinical studies of a cognitive-enhancing drug.

MedImmune signed an agreement with Japan Tobacco with intent to develop a monoclonal antibody to treat lupus.  JT received upfront payments as well as royalties on marketed products.  MedImmune received exclusive development and marketing rights everywhere in the world except Japan.

            Crucell has signed a cross-licensing agreement with Merck allowing Merck to use Crucell’s technology in the vaccine field.  Crucell will receive access to Merck’s large-scale vaccine manufacturing technology.

            Albany Molecular Research has entered into a two year collaboration with Bristol-Myers Squibb.  Upfront payments, research funding, and milestone payments are included.

Attachment B: Research Plan


                                                              ATTACHMENT “B”


                                             RESEARCH PLAN FOR PATENT FILING

            U.S. Patent law establishes a blueprint for research aimed at patenting a new chemical compound with medicinal properties in humans.  The compound must be novel, which means that it must be chemically identified, and then a patent search, as well as a Chemical Abstract search, must show that no similar compound has been synthesized and characterized anywhere in the world in the last 150 years.  The specific tests to positively identify a given compound will vary according to the atomic signature of the compound, but general categories of compounds require similar tests.

A patentable compound must have demonstrable utility, which in the case of medicinal compounds, has been defined by court ruling to mean both successful in vitro tests and successful animal tests.  A  U.S. Appeals Court ruling [In re Brana 51 F.3d 1560 (Fed. Cir. 1995), 34 U.S.P.Q. 2d 1436] has established that reduction to practice for a medicinal compound occurs only after successful completion of appropriate animal tests, so any patent filing submitted without such data will fail on grounds of non-utility. Clinical trials showing utility in humans are not necessary to obtain a valid U.S. patent. 

There also exists the patent concept of broad versus narrow patents.  A broad patent is granted to a novel group of compounds in which a new area of chemical entities with novel properties has been discovered.  A narrow patent is granted where a new use for a known compound is sought.  Broad patents have more commercial value than narrow patents.  With broad patents, the rule is:  show three examples, and claim the world.  Therefore, a search for closely related compounds with biological activity is mandatory if a broad patent is desired.  Effectiveness against a range of organisms allows broad claims of utility against entire classes of organisms.

With these considerations in mind, a sequential course of action would include the following steps:

 Year One:

Set up the corporate structure to retain the rights to any patents filed by the corporate entity.    Retain a patent lawyer to review the provisional patent as already written by Bayless.  A prior art search of the drug discovery is the first step.  A provisional patent should then be filed, as revised by the attorney.  Provisional patents are used a place-holders.  If the actual patent filing goes beyond the provisional patent in scope, the Patent Office will disallow the broader claims, so the provisional patent should be as broad as possible.  Provisional patents are good for one year.  If the formal patent is not filed within the one year period, a second or third provisional patent can be filed, but the priority filing date of the first or second provisional patent is lost. 

Cost: $50,000.


Once the provisional patent is filed, a preclinical drug discovery company that specializes in synthesis and testing of compounds will be located and hired (See Southern Research Institute at end for example).   An NDA should be signed by the companies selected, but the provisional patent does not have to be shared with them until after a deal is signed.  Once the legal requirements are in place, synthesis of active ingredients will be conducted with the original compound as well as its analogs, as selected by Bayless.  Following synthesis, precipitation and/or freeze-drying, the purification of active ingredients will occur.  Synthesis of compounds will be an on-going process that may require two to four years to complete.  Any subsequent in vitro and animal testing will have to be done with a fully characterized active compound.  Thus this step is first.  Research is not a linear process, but a series of hop-scotch steps forward and back and sideways, so it is hard to forecast how long is long enough.         
            Cost:  $950,000.

Year Two:     

            Biological testing should begin.  As compounds are synthesized, they should be tested in vitro against a range of micro-organisms in order to select metabolically active compounds for further review.         A biological testing lab will have to be selected and hired to conduct such tests.  (See Accugen Labs for example at end)   Here again, the extent of in vitro testing necessary to evaluate synthesized compounds is difficult to forecast at this time.  The obvious endpoint is when sufficient testing is completed to support a broad patent.  The patent attorney should have input here.


1.     Tests of synthesized compounds should be run to identify which of
them possess inhibitory properties.  Growth Inhibition Curves in liquid media against a range of bacteria will accomplish this task.

2.     Toxicity screens of active compounds in yeast will reveal toxicity profiles and provide the Therapeutic Index on each candidate, and allow the selection those that are both active and non-toxic.

3.     Additional tests, including Minimum Inhibitory Concentration determinations as well as Growth Inhibition Curves in liquid media, and Zone of Inhibition tests using solid media against a range of pathogenic Gram-positive and Gram-negative organisms, both aerobic and non-aerobic, will establish which compounds are worth the time and expense of further characterization.
     Cost:  $1,000,000.

Year Three:

            Compounds which have in vitro activity against bacteria, and a satisfactory Therapeutic Index, will then be fully characterized by an Analytical Chemist.  The same lab that does the synthesis may perform the characterization, or a different lab may be selected.


            Once the activity and toxicity profiles of active compounds have been established, chemical characterization should occur.  By following this sequence, only active compounds go through the expense of lab identification.  Following identification, a Chemical Abstract search by the patent attorney will confirm the novelty of the group of compounds.  Typical tests for this group of compounds include:

1.     Ultraviolet spectroscopy with water as solvent.

2.     Paper chromatography,
      using the ascending technique with propanol-ethanol-water (40:40:20).

3.     Various forms of spectroscopy to determine the molecular composition of the compounds.

4.     Nuclear magnetic resonance to determine the structure of the compounds.

5.   Mass spectrometry for detection and identification of components.

                  Cost:  $1.000,000.

Year Four:

                  Once the compounds have been synthesized, tested in vitro, and fully characterized, they should be tested in animals to provide evidenced for utility.  An animal testing facility will have to be located to conduct such testing.  (See Idexx Bioresearch for example at end).


Animal models for human disease exist, and appropriate animals should be selected to demonstrate the ability of the compounds to prevent death from pathogenic bacteria. Typically, animal testing first involves establishing dosing levels, and then challenging the animal with pathogenic bacteria while providing the drug to see if the animal survives. 


 1.   Determine maximum tolerated oral dose in the selected animal models.

2.     Perform Staphylococcus aureus (MRSA) and Escherichia coli (diarrhea) challenge test in mouse and rabbit, and Francisella tularensis (Tularemia) and Pasteurella mutocida (cholera) tests in rabbits.  Dogs, cats, and pigs are also candidates for testing.


3.    Inhibition screening on at least three normal human cell lines to provide          a Therapeutic Index for human cells.                                                           
          4.    Inhibition screening on lung, breast, and prostate human tumor cell lines.

5.     Inhibition tests on at least three species of protists in liquid media.

          6.   Inhibition tests on Canine Distemper, Measles, and Ebola viruses in vitro.

                  Cost:  $1,000,000.

Year Five:

      Patent Filing.

Once the various synthesis, purification, analytical and biological techniques are completed, U.S. patent(s) must be filed.  Estimated time to completion from the provisional filing: four years.  PCT patent(s) must be filed within one year of a U.S. patent application.

Once the patent is filed, potential licensing partners can be contacted.  A marketing manager should be hired to lead this effort.  Mid-level drug development companies have the financial means to carry a drug candidate through the FDA process.  Once the FDA process is complete, licensing to major drug firms should occur.  Up-front money is usually paid at signing, with royalty payments as negotiated.  Joint ventures with major pharmaceutical companies should be investigated as a possible alternative.  Out-right sale is also possible, although licensing and subsequent royalties generally result in more money to investors over time.   
             Cost:  $1,000,000.


BIRMINGHAM, Ala. —Southern Research Institute conducts both contract research and basic research for clients, providing preclinical drug discovery, development, and clinical trial support services in cancer, infectious diseases, and CNS/neurological disease to pharmaceutical and biotechnology companies. Scientists conduct translational science to invent small molecules and advance them from the design stage to the clinic. Services available include medicinal chemistry, molecular biology, biochemistry, high-throughput screening and a full set of in-house GLP development services including toxicology, ADME/PK, animal models, formulations, and bioanalytical services.
About Southern Research
Southern Research Institute is a not-for-profit 501(c)(3) scientific research organization founded in 1941 that conducts preclinical drug discovery and development, advanced engineering research in materials, systems development, and environment and energy research. More than 550 scientific and engineering team members support clients and partners in the pharmaceutical, biotechnology, defense, aerospace, environmental and energy industries. Southern Research is headquartered in Birmingham, Ala., with facilities in Wilsonville, Ala., Frederick, Md., and Durham, NC and offices in Huntsville, Ala., New Orleans, La., and Washington, DC.

Accugen is a FDA registered, independent contract microbiology laboratory. We offer full microbiological testing and analyze products from a wide variety of industries. Our microbiological testing laboratory is comprised of a highly experienced team of microbiologists who are experts in testing ASTM, AOAC, AATCC, FDA, EPA, USDA, USP, CTFA, JIS, ISO and other methods of analysis. Our competent professionals have decades of experience in routine microbiological analysis, special microbiology, research microbiology, and a variety of other microbiological testing. We are considered leading authorities in microbial testing. Accugen has provided impeccable microbiological services to pharmaceutical, disinfectant, cosmetic, food, personal care, household, medical device, antimicrobial, paint, paper, plastic, textile and other miscellaneous industries. At Accugen, we understand the challenges presented by a changing market place and our goal is to maintain the cost effective and highest quality microbiological testing services.


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Attachment C: Drug Discovery Costs

                                                ATTACHMENT “C”

                 Drug Discovery and Development – Some Interesting Math
                                               By D.B. Laskings, Ph.D.  

As the personnel at most pharmaceutical and biotechnology companies should be aware, the cost, both time and money, for discovering and developing a novel therapeutic product is huge, with the estimates being over 12 years and $600 million, respectively. About half the time and most of the money is expended during late clinical phase development where extensive phase 3 clinical trials are conducted and the necessary manufacturing facilities are defined and put into place to support product launch after regulatory authority approval has been obtained. The $600 million guestimate includes the cost of the ‘losers’ (i.e., those drug candidates that enter the drug development process and ‘die’ before finishing). The cost for discovering and developing a single new therapeutic product (i.e., a ‘winner’) has been estimated to be around $120 million.

The total discovery and preclinical/nonclinical effort required to support one project for 12 years is about $24 million (see estimated breakdown below) or about 20% of the $120 million estimated for a single compound. The other $96 million, or 80% of the total, is expended on clinical trials and for establishing the API and drug product manufacturing processes and facilities.

Present estimates are that less than 1% of the compounds entering drug development successfully traverse the preclinical/nonclinical and clinical/manufacturing processes and have a marketing application submitted to a regulatory authority. About 90% of these ‘losers’ are identified during preclinical/nonclinical development with the primary reasons for stopping development being an unacceptable toxicology profile, undesirable pharmacokinetics or metabolism, or insufficient delivery to the site of pharmacologic action. Of the 10% that enter clinical trials, 9 out of 10 drug candidates ‘die’ because of insufficient efficacy in the proposed disease indication, unacceptable safety in humans, and/or undesirable pharmacokinetics or metabolism in humans.

Assuming that the 20/80 cost ratio for the discovery/preclinical/nonclinical and clinical/manufacturing processes is about right for the overall cost estimate ($600 million) for putting a single new therapeutic product on the market and that 100 candidates are needed to produce one ‘winner’, the preclinical/nonclinical cost for identifying 90% (90 of the 100) of the ‘losers’ is $120 million or $1.33 million each. To identify the 9 out 10 drug candidate ‘losers’ that enter clinical trials, $480 million or $53.3 million each is necessary.

If the discovery/preclinical/nonclinical effort could identify 95 out of 100 ‘losers’ (95% instead of 90%), thus allowing 1 out 5 candidates that enter clinical trials to be a ‘winner’, the overall cost of identifying a single new therapeutic product could be reduced to about $400 million ($126 million for discovery/preclinical/nonclinical and $266 million for clinical/manufacturing). If the discovery/preclinical/nonclinical effort identified 98% of the ‘losers’, the overall cost could be reduced to around $240 million or about twice of the cost estimated for developing a ‘winner’ without ‘losers’.

How can the discovery/preclinical/nonclinical identification of ‘losers’ be increased so that the overall cost of development can be reduced? The following are some thoughts and ideas on how to achieve this goal. While implementation of all these ‘ideas’ for each drug development project is neither justified nor warranted, some of them may useful for any given project and thus ‘save’ the drug candidate sponsor both time and money that can be utilized for the development of ‘winners’.

First, many discovery efforts are designed to identify novel compounds with the highest biological activity against a target, commonly a protein that is a receptor or an enzyme involved in a biochemical process and thought to be important in the mediation of a human disease or disorder. However, the active sites of targets are usually highly lipophilic and thus compounds with the ‘best’ ability to agonize or antagonize these targets are also highly lipophilic. Thus, in vitro assessments or HTS efforts will identify lipophilic compounds as being the most potent. However, for a lipophilic compound to reach the active site (i.e., the target) in an in vivo animal model or in human patients, the compound has to be transported in an aqueous environment (i.e., blood, extravascular fluids) from the site of administration to the target. Consequently, a compound with at least some hydrophilic properties (i.e., some aqueous solubility) may have somewhat less biological potency for a given target but may be a better candidate for in vivo mediation of a disease process because the compound can more effectively and in higher concentration be delivered to the site of action.

For drug discovery leads to become successful drug candidates and not to be one of 99 out of 100 ‘losers’, drug discovery groups first need to change the paradigm for selecting compounds from one based solely on biological potency to one that includes ‘delivery potential’. Many highly successful pharmaceutical companies have initiated this change by requiring NCE drug discovery leads to meet Lipinski’s Rules of Five, which uses chemical structure to estimate the delivery potential of compounds across membranes, before a lead can become a preclinical drug candidate. Thus, new drug candidates from these companies have at least some drug-like characteristics, which should improve both the preclinical and clinical success rates.

However, a primary goal for many smaller firms, who need to impress ‘investors’, is to initiate clinical trials as quickly as possible. Thus, a lead, either a NCE or a macromolecule, with the desired biological activity is ‘rushed through’ preclinical development where the minimal number of ‘standard’ toxicology studies are conducted and little or no data is obtained on other safety aspects, such as delivery, PK, and drug metabolism. Even in this ‘hurry’ environment, the lack of drug-like properties can ‘kill’ some candidates in preclinical development but a number still reach the clinic where they ‘die’, sometimes in phase 3 (to the dismay of ‘investors’ as demonstrated by the substantial drop in stock prices for a firm with a phase 3 ‘failure’) and after millions of dollars have already been expended. By slowing down the ‘rush’ process a little, say 6 months to a year, and carefully designing preclinical studies to be data productive for characterizing both the development attributes and demerits of a drug candidate, many of these ‘losers’ could be identified before reaching the clinic.

Second and possibly better yet, by carefully designing and conducting some preliminary, relatively not expensive (both in time and money) studies, the drug-like properties of a discovery lead or group of leads can be assessed. These developability assessment or lead optimization studies can quickly evaluate a number of key parameters to ascertain if a lead, or which compound from a group of leads, has the necessary attributes without major demerits to become a successful drug candidate. Attributes could include, but are not limited to:
  1. A solubility and stability profile that allows administration by the proposed clinical route and delivery to the site of action in sufficient concentration to mediate a disease process.
  2. A metabolism profile that is similar in proposed toxicology animal species and humans and does not cause the compound to be metabolically cleared from the body so rapidly that it does not have a chance to be an effective pharmacological agent.
  3. A pharmacokinetic profile that produces a desired plasma/serum concentration time profile so that the concentration and residence time of the compound at the active site are sufficient to effectively agonize or antagonize the target to produce the desired effect.
  4. An acute toxicity profile that does not produce adverse effects (or undesirable pharmacological activity in organ systems other than the target organ) at pharmacologically active doses and sufficiently higher so that an acceptable safety margin can be established.
A major demerit could be the lack of any of the above attributes. If only discovery leads with desirable drug-like properties, which are usually compound-specific and target-specific and need to be defined on a case by case basis, were allowed to enter preclinical development, the ‘losers’ could be identified early and if desired, other leads could be evaluated until a compound with the desired attributes was ‘discovered’.

Third, even the ‘best’ lead selection and optimization process will not uncover all the ‘losers’ and some will enter preclinical development. To maximize the potential of finding and ‘killing’ these ‘losers’ prior to the submission of an IND and the initiation of clinical trials, preclinical assessments, which include subchronic toxicology, safety pharmacology, genotoxicity, animal pharmacokinetics, and drug metabolism and ADME, need to be carefully designed and the results critically evaluated. Generic study protocols are available for each of these study types and can be (and should be since the regulatory agency requirements for a given study type will have already been incorporated) used as templates for the generation of drug candidate specific protocols

Since the majority of ‘losers’ are identified during preclinical development and a goal for reducing the overall time and cost of drug development is to increase the effectiveness of this ‘loser’ identification process, the charge of preclinical groups needs to be to design research studies that will uncover demerits and/or problems that were missed in earlier studies. The evaluation and further characterization of potential concerns (e.g., some CNS activity for a candidate being studied for a cardiovascular indication, extensive hepatic metabolism that may reduce systemic availability, substantial accumulation of drug-related material in non-target organs or tissues, induction or inhibition of enzymes involved in biochemical processes other than the desired pharmacology, toxicity in an organ system or tissue at doses only slightly higher than those required for pharmacologic activity) should also be a primary goal. Once the ‘drug candidate killing’ efforts of preclinical development groups are recognized as time and money saving activities and the members of these groups are appropriately acknowledged for their expertise’s in identifying ‘losers’, these researchers will employ their knowledge and experience for designing studies that not only meet regulatory agency requirements but also can more fully characterize the attributes and discovery the demerits of preclinical drug candidates.

Fourth, even the appropriate use of preclinical development to ‘kill’ drug candidates will not prevent some ‘losers’ from entering into clinical development. These ‘losers’ need to be discovered as quickly as possible and hopefully before the start of phase 3 studies. Clinical groups who are designing the phase 1 and 2 protocols should critically evaluate the preclinical results and use this information to add tests and evaluations (at appropriate times and with appropriate frequency) in human subjects/patients to as fully as possible explore the safety, pharmacokinetic, and efficacy characteristics of the drug candidate in the target species (i.e., the human). While these earlier clinical studies are on going, nonclinical studies are conducted to evaluate chronic toxicology, reproductive toxicity, carcinogenicity, and tissue distribution and disposition. As with the preclinical assessments, these nonclinical studies should be carefully designed with the goals of extending the knowledge on the safety of the drug candidates and of identifying ‘losers’.

In summary, to reduce the cost of drug development, the goal of drug development companies, particularly the discovery and preclinical/nonclinical groups in those organizations, should be on designing and conducting research studies that identify the development attributes and demerits of discovery leads and drug candidates. Determining that a compound or class of compounds has a non-drug-like characteristic (or more than one) should not be considered a negative but a positive. Modifying the chemical structure of the compound to remove or minimize the undesirable characteristic will produce an analogue with a better chance of successfully completing the drug development process. If structural modifications to generate candidates with drug-like attributes destroy or substantially reduce the pharmacological activity of the compound class, a successful drug candidate from that compound class would, in high probability, not have been possible. Either way the company is a winner, either by identifying a drug candidate with a better chance of success or finding the ‘losers’ before they drain the resources of the company.

Discovery/Preclinical/Nonclinical Estimated Costs

Estimated cost for a single laboratory of one scientist and two associates:
  • Scientist salary and benefits – $150,000 per year
  • Associate salary and benefits – $75,000 per year or $150,000 for two associates
  • Laboratory space and equipment – $150,000 per year
  • Management support – $50,000 per year
  • Total per laboratory – $500,000 per year
Four discovery laboratories (two pharmacology and two chemistry) devoting half time to a given project – $1 million per year. Estimated number of years required – 6 years (prior to selection of a preclinical drug candidate and during early preclinical evaluations).            
Total - $6 million.

Toxicology, drug metabolism and ADME, drug delivery and formulation development, bioanalytical chemistry preclinical/nonclinical laboratories. Four preclinical/nonclinical laboratories devoting half time to a given project – $1 million per year. Estimated number of years required – 6 years (after selection of the preclinical drug candidate until submission of a marketing application to a regulatory authority). 

Total – $6 million.

Support groups such as basic research (genomics, proteomics, molecular biology), analytical chemistry (structure determination and characterization for novel compounds), central computer group, animal care and maintenance, clinical chemistry and pathology, quality assurance unit, biostatistics, patent and intellectual property, project management, regulatory affairs, etc. Each support group expending $100,000 per year or $1 million per year for 10 support groups. Estimated number of years required – 12 years. Total - $12 million.

Corporate Structure


I bring $25 million in research value to the table.  I need $5 million and five years to file a broad patent.  First Step:  Set up a corporation with one hundred million shares of Class A voting stock, and one hundred million shares of Class B non-voting stock.

I get 60 million shares of Class A stock, and the original investors of $5 million split 20 million shares of Class A stock in proportion to their investment.  20 million shares of Class A stock, and all of the Class B stock, remain in the corporation.  Original investors of $5 million get 80% of after tax licensing, royalty, or out-right sale revenue, until they get 10x their investment value back.  I get 50 % of the remaining 20%, after taxes, until the original investors receive 10x their investment back, with 10% remaining in the corporation.

After original investors get their 10x back, they then participate in subsequent after tax licensing, royalty, or out-right sale revenues at a 20% rate, proportionally divided.  Once the original investors get their 10x back, I get 60% of any after tax licensing, royalty or out-right sale revenue, and the rest stays in the corporation for use by the corporation and/or distribution to Class B stockholders.  Any subsequent stock sale after the opening round involves Class B stock.

After setting up the corporate structure, the core people necessary to carry out the required tasks must be assembled.  These people include:

Two salaried people.  Myself as CEO of the corporation, is one.  A second person would be an administrative assistant to handle the office work.  Office space would be rented on a monthly basis.  All other work would be sub-contracted out on a fee-for-service basis. 

The necessary areas of focus:

A CPA firm to handle the money and bookkeeping.  All investor funds would go into an escrow account under the control of the CPA, who would disperse the funds as needed by the CEO.  This firm must be selected.

A pharmaceutical patent attorney.  Ki O of Dallas is highly qualified, and I choose him.

Business and contract law attorney to handle general business matters. 
This person needs to be recruited.

A marketing guru to handle the marketing of the patent to pharmaceutical candidates.   This person or firm must also be selected.

I also want to form an Advisory Board to provide seasoned advice in a structured environment.  Advisors would be included as the project proceeds.  Attendees to Advisory Board meetings would receive financial compensation for their time and expertise.