Selected Developments in Biotechnology Law and the Biotechnology Industry

Abstract

Biotechnology Law ReportVol. 40, No. 2 News BriefsFree AccessSelected Developments in Biotechnology Law and the Biotechnology IndustryBy Steven J. ZweigBy Steven J. ZweigSteven J. Zweig is the Managing Editor of Biotechnology Law Report.Search for more papers by this authorPublished Online:30 Mar 2021https://doi.org/10.1089/blr.2021.29226.sjzAboutSectionsPDF/EPUB Permissions & CitationsPermissionsDownload CitationsTrack CitationsAdd to favorites Back To Publication ShareShare onFacebookTwitterLinked InRedditEmail SANA BIOTECHNOLOGY NASDAQ IPO POLE VAULTS EXPECATIONSIn a sign of investors' appetite for biotechnology, gene-therapy company Sana Biotechnology's February 4, 2021, initial public offering (IPO) exceeded initial pricing expectations by 40 percent. The Seattle-based company, co-founded two-and-a-half years ago (July 2018) by ex-Juno Therapeutics CFO Steve Harr, had originally announced a price of $25 per share for its debut. However, as interest in the IPO mounted, the stock went out at 40 percent higher, at $35 per share. That price proved to be an accurate reading of the market, since the shares peaked at $38.45 before closing at $35.10 per share. The IPO brought in $587.5 million. According to Reuters, it was the largest IP for a preclinical biotech company to date. Over the past two years pre-IPO, fueled by over $700 million in venture capital, Sana went from 37 full-time employees at end 2018 to 240 in late 2020, increasing six-fold in size in two years.SCOTTISH INDUSTRIAL BIOTECH COMPANIES EXCEED GROWTH EXPECTATIONSPharmaceutical biotechnology is, for most people, the “face” of biotechnology at present, given the high-profile role it's placed in developing COVID-19 vaccines in a previously unimaginably short time. But it's hardly the only facet of biotechnology: there's also agricultural biotechnology (discussed later in this News Briefs) and industrial biotechnology. Industrial biotechnology is generally the use of biotechnology to create materials and products traditionally created with fossil-fuel raw materials—such as plastics, which are conventionally manufactured from petroleum-derived substances. Biotechnology-based alternatives can simultaneously reduce such products' carbon footprint, reduce waste, increase recycling, and foster sustainability.With a rising environmental consciousness on the part of many governments and consumers, a number of nations are hosting and attempting to foster industrial biotechnology industries. One that appears to be doing well at this is Scotland, a nation long known for traditional industry. According to numbers released at its Industrial Biotechnology Innovation Centre's (IBioIC)1 annual conference, Scotland's 130 industrial biotechnology companies are generating £750 million, ahead of expectations. The industrial biotechnology sector in Scotland has been showing strong year-over-year growth: in 2012, revenue was only £189 million and there were only 24 companies in the sector. In 2013, Scotland's National Plan for Industrial Biotechnology had targeted £400 million in sector revenue by 2020 as its goal—meaning that the sector came close to doubling its target. As a result, the sector appears to be on a path to significantly exceed the National Plan's goal of £900 million in revenues in 2025.MEMORANDUM OF UNDERSTANDING BETWEEN USDA AND U.S. PUBLIC HEALTH SERVICE REGARDING REGULATION OF AGRICULTURAL BIOTECHNOLOGY; FDA TO RETAIN A ROLE WHILE THE USDA SHOULDERS GREATER RESPONSIBILITIESAnother significant non-pharma area of biotechnology is agricultural biotechnology, which is variously used to improve animal health, improve crop yield or otherwise boost farm production, and improve nutrition. As you can imagine, something that affects farms and consumers lies at the intersection of several regulatory jurisdictions.On January 19, 2021, the outgoing U.S. Secretary of Agriculture Sonny Perdue signed a Memorandum of Understanding (MOU) with the Assistant Secretary for Health (who is also head of the Public Health Service) Admiral Brett Giroir, M.D. to codify a regulatory role for the U.S. Department of Agriculture (USDA) in regard to agricultural and animal biotechnology. However, while USDA will have significant regulatory responsibilities under the MOU, the Food and Drug Administration (FDA) (which, like the Public Health Service is part of the Department of Health and Human Services) will continue to have its own substantial role in regulating agricultural biotechnology.The MOU transitions part of FDA's agricultural and animal biotechnology oversight to USDA. Under the framework envisioned by the MOU, USDA will safeguard both animal and human health through end-to-end oversight from pre-market review through post-market monitoring of food safety. As the same, however, FDA will retain its oversight of genetic engineering, including in the agricultural and animal husbandry space. The two agencies will therefore share concurrent overlapping jurisdiction. The MOU is the product of a year of discussions and negotiations between the agencies over the scope and coordination of their regulatory roles. The effort to rationalize and codify oversight, as well as the desire of two different major departments to keep their respective hands in, is a reflection of the ever-increasing importance of biotechnology to the nation's food supply.RAPIDLY GROWING ROLE AND OPPORTUNITY FOR OUTSOURCED BIOTECHNOLOGY SERVICESIndustry observers see an increasing need and opportunity for outsourced services in the biotechnology, especially in the pharmaceutical biotechnology space. The high demand for biologics, for example, creates a challenge for smaller pharmaceutical and biotechnology companies: they often lack the internal resources to speedily perform the complex R&D, testing, manufacturing, and even training/marketing involved in creating biologics and bringing them to market, especially while trying to navigate the regulatory process. As a result, there is an increasing demand for outsourced services from Contract Manufacturing Organizations (CMOs) and Contract Research Organizations (CROs), which can fill in gaps in in-house expertise and bring extra capacity online on short notice, without the lengthier process of in-house recruitment and onboarding of new staff—and also without incurring the overhead and management costs attendant upon staffing up. The value of outsourced services also lies in the fact that such resources are more readily and quickly scalable both up and down as need and finances dictate: since the entry of more companies into the biologics space, the expiration of patents, and the development of biosimilars create pricing and profit pressure on pharma/biotechnology companies, investors want to see nimbler organizations which avoid the high (comparatively) fixed costs of large in-house staffs.BIOTECHNOLOGY CONSULTANT THE SUBJECT OF CRIMINAL AND CIVIL ACTIONS BY FEDERAL AUTHORITIESOf course, there are downsides or risks to outsourcing expertise and capacity. In addition to issues of a reduction in institutional knowledge and the need for strong managerial and financial oversight of large and/or numerous contracts with outside vendors, there's the issue that outside resources' interests are not necessarily fully aligned with those of the hiring company, or that outside personnel might lack the “soft” (i.e., not paycheck-driven) motivation that comes from a shared corporate identity and culture. Usually, though, those issues manifest in comparatively subtle ways—e.g., a drag on efficiency that may prevent contract-services from fulfilling their full potential.Sometimes, though, the issue of a lack of loyalty manifests in a starker way: for example, in an outside consultant misappropriating secrets or information for his or her own benefit. That is evidently what happened with Mark Ahn, an Oregon-based consultant who was recently charged with two criminal counts of securities fraud by the U.S. Attorney's Office in Massachusetts, and who is also being sued civilly by the U.S. Securities Exchange Commission (SEC). (Contrary to many people's expectations, the SEC has no law enforcement powers and cannot bring criminal securities charges—all it can do is bring civil actions for monetary damages or bar an alleged bad actor from the industry, and it is left to the U.S. Attorney's Office or Justice Department to bring criminal charges when appropriate.2)Ahn is accused of having used confidential inside information about Cambridge, Massachusetts-based Dimension Therapeutics—information which he acquired while consulting with Abeona Therapeutics, a potential purchaser of Dimension, about a possible acquisition—to buy almost $40,000 of Dimension stock, stock which more than doubled in value when news of the company's acquisition when public. By investing using confidential knowledge of active interest in purchasing Dimension, Ahn made a $50,000 profit. However, in exchange for making $50,000 from insider trading, Ahn now faces up to 25 years in prison, monetary penalties or damages which could equal or exceed his profit, and a ban from being an officer or director of public companies.In case Ahn's potential punishment seems too harsh, it should be borne in mind that this is not Ahn's first securities-violation rodeo: four years ago, the SEC brought a case against him for defrauding investors in Galena BioPharma by writing over 100 strongly bullish articles about Galena without disclosing that the articles had been commissioned by the company (i.e., that they were in no way independent or neutral coverage).1 IBioIC is a Scotland-based organization supporting that country's industrial biotechnology industry: https://www.ibioic.com2 The author is well aware of this, since during his tenure at the New York Regional Office of the SEC, the most interesting case he had—a case involving NASA and the U.S. Navy, among other parties—was taken from him and referred to the Justice Department when the person under investigation pulled a gun on a potential witness, taking the matter out of the securities space and clearly into the criminal justice arena.FiguresReferencesRelatedDetails Volume 40Issue 2Apr 2021 InformationCopyright 2021, Mary Ann Liebert, Inc., publishersTo cite this article:By Steven J. Zweig.Selected Developments in Biotechnology Law and the Biotechnology Industry.Biotechnology Law Report.Apr 2021.69-71.http://doi.org/10.1089/blr.2021.29226.sjzPublished in Volume: 40 Issue 2: March 30, 2021Online Ahead of Print:March 4, 2021PDF download