Source: George S. Mack of The Life Sciences Report (10/17/13)
Roughly a third of the world's population feels the burden of some type of brain, spinal cord or peripheral nerve disease: dementia, depression, compulsion, infection, trauma. Understanding the need for investment, awareness and public policy advocacy in finding solutions for these afflictions, Zack Lynch founded the Neurotechnology Industry Organization in 2006, and serves as its executive director. In this interview with The Life Sciences Report, Lynch makes a bullish case for a growing industry and discusses how he proposes to increase funding for neuroscience from both private and public sources, thereby increasing options for patients and opportunities for investors.
The Life Sciences Report: Zack, you founded the industry trade group, Neurotechnology Industry Organization (NIO) back in 2006, and now you have more than 100 member organizations, which have joined at different levels depending on revenue and type of organization. Your basic model is consistent with other trade organizations, such as the Biotechnology Industry Organization (NYSE:BIO) and the Pharmaceutical Research and Manufacturers of America (PhRMA). What is your mission?
Zack Lynch: NIO was formed to give the brain a voice. It is the first and only trade group that lobbies and advocates on behalf of organizations involved in neuroscience. That includes companies developing and marketing drugs, medical devices, cell-based therapeutics and diagnostics, as well as leading brain research institutes and patient advocacy groups from across the spectrum of neurological diseases, including psychiatric illnesses and nervous system injuries. Our mission is to accelerate the development of treatments for the nearly 2 billion (2B) people worldwide who currently suffer from a brain or nervous system illness, including more than 100 million (100M) Americans.
TLSR: That covers a lot of territory, and it sounds like an immense market for technology developers.
ZL: That's right. These diseases range from Alzheimer's disease to depression to autism, post-traumatic stress, epilepsy, traumatic brain injury, pain and many, many more. Beyond the untold human suffering, the economic burden of brain-related illnesses has reached more than $1 trillion (1T)/year in the U.S., and this number is going to skyrocket with the aging population, literally breaking our ability to pay for these diseases over the coming years. NIO exists to advance the agenda of the entire commercial neuroscience ecosystem, inclusive of all treatment options.
TLSR: How are you differentiated from those larger trade groups-BIO, PhRMA and others like them?
ZL: Unlike other trade associations, we are technology-agnostic and indication-centric, which allows us to be very nimble and precise in what we see as potential solutions to major problems in this critical sector.
"It's critical that companies have a unified voice in educating policymakers and healthcare leaders about the importance of neurotechnology and its positive impact on our society and economy."
Today, the $156B neurotechnology industry includes more than 800 companies worldwide, including large healthcare companies like Janssen Pharmaceuticals (a subsidiary of Johnson & Johnson [JNJ:NYSE]),Medtronic Inc. (MDT:NYSE), Roche Holding AG (RHHBY:OTCQX), General Electric Co. (GE:NYSE),Boston Scientific Corp. (BSX:NYSE), Stryker Corp. (SYK:NYSE) and St. Jude Medical Inc. (STJ:NYSE). These large pharmas and medtechs play pivotal roles in the industry, while companies more focused on neuroscience, like Biogen Idec Inc. (BIIB:NASDAQ), Shire Plc (SHPGY:NASDAQ; SHP:LSE),Cyberonics Inc. (CYBX:NASDAQ), Acorda Therapeutics Inc. (ACOR:NASDAQ), Acadia Pharmaceuticals Inc. (ACAD:NASDAQ), Natus Medical (BABY:NASDAQ), H. Lundbeck A/S (HLUKY:OTCPK; LUN:OMX) and Forest Laboratories Inc. (FRX:NYSE) are all sources of tremendous innovation, along with hundreds of other companies working on breakthrough treatments.
Moreover, the issues we address at NIO are critically important to the payers and insurance groups, likeUnitedHealthcare Group Inc. (UNH:NYSE), WellPoint Inc. (WLP:NYSE), Kaiser Foundation (private),Aetna Inc. (AET:NYSE ) and the like. Given the magnitude of the problems facing society with respect to brain-related illnesses, and an aging population with ever more brain diseases, it's critical that companies have a unified voice in educating policymakers and healthcare leaders about the importance of neurotechnology and its positive impact on our society and economy.
TLSR: You were also a co-founder of NeuroInsights, a market research and investment advisory firm focused on neurotechnology. Tell me about how that helped you come up with the idea to form NIO.
ZL: After four years of building up NeuroInsights, it became apparent to me, as well as to some of the venture capitalists in the space and some of the industry CEOs, that there was a missing component in our approach-public policy. Many of the companies had similar complaints about the lack of government funding to "bridge the valley of death" and regulatory transparency and efficiency, for example. We had no organization to support the global neurotechnology industry in its efforts to bring new treatments to market. That's why I founded NIO as a nonprofit.
TLSR: Certainly there are costs to administer NIO, but what is done with the bulk of the membership fees? How does NIO give value back to its members?
ZL: NIO has a three-part strategy for the industry: promotion, advocacy and support.
NIO promotes neurotechnology solutions as critical to national healthcare savings, national competitiveness, quality of life and human potential. We have several continuous campaigns that inform the public and elected officials about brain-related health problems and the benefits of neurotechnology.
On the advocacy front, we are active on a range of cross-industry issues-neurotech research and development as well as business development, with a special focus on favorable changes in the tax code, intellectual property issues, neuro ethics, public policy, reimbursement and patient advocacy. And we work with the other trade associations to make sure there's not a duplication of efforts, and to leverage their activities.
"Our mission is to accelerate the development of treatments for the nearly 2 billion people worldwide who currently suffer from a brain or nervous system illness."
Finally, we support the industry by providing business development services to our members. This includes bringing them reduced rates to attend industryinvestment and partnering events, as well as participation in our public policy tours up on Capitol Hill and other events throughout the year. For example, our members can go to scientific conferences, like theSociety for Neuroscience annual meeting, where we bring all the key players together.
NIO works on programs that can translate into billions of dollars for commercial neuroscience, and millions of dollars for a company's bottom line. Also, membership is critical to getting legislative initiatives organized and passed, as well as to organizing events that bring industry leaders together to accelerate innovation.
TLSR: You've done some interesting work in public policy. It takes a lot of firepower to get a proposed law introduced into Congress. Can you tell me about that process? Also, could you briefly tell me about some of the bills that NIO has been responsible for?
ZL: Introducing a bill takes energy and persistence. A long-term commitment is required when it comes to developing relationships in our nation's capital. It's important that our legislative ideas fit with the times, and that we find the right champions-people who can reach out to the right committees when it makes sense. We have a fantastic public policy partner in Daniel Ritter of the K&L Gates law firm, who's been with us since the founding of the organization. We have a team of more than 60 lobbyists helping us achieve our objectives up on Capitol Hill, with the Obama administration and, of course, at a variety of federal agencies.
Some of the projects we are working on include the National Neurotechnology Initiative Act (NNTI). This has been introduced into Congress twice, in both the House and the Senate. It is designed to increase private investment and accelerate the development of treatments that reach the market.
"We believe having a guaranteed market exclusivity period of 10 years would radically encourage the development of promising treatments that would otherwise not be developed."
The Neurodegenerative Drug Incentive Initiative Actis another piece of legislation that we're currently working on. Its aim is to create a guaranteed market exclusivity period of 10 years for disease-modifying therapies targeting neurodegenerative diseases like Alzheimer's disease. This proposed legislation is based on the historical precedent of the Orphan Drug Act.
Currently, many disease-modifying drugs in development will have less than five years of exclusivity when they get to market because of long development times. That short period of exclusivity means many investors and developers will abandon these important, disease-modifying approaches because there is not enough time for them to get a return on their investments. We believe having a guaranteed market exclusivity period of 10 years would radically encourage the development of promising treatments that would otherwise not be developed. It is a great solution to accelerate innovation, which is desperately needed in this area. The best part is that the legislation is budget-neutral.
I would also mention that we have other things on the table. One is an idea to create transferable priority review vouchers for severe and neglected brain diseases. This kind of voucher is an incentive for companies to invest in new drugs and medical devices. The legislature would authorize the U.S. Food and Drug Administration (FDA) to award transferable priority review vouchers to sponsors or manufacturers of newly approved drugs, biologics or medical devices that target a neglected brain disease. The voucher is transferable and could be sold. It entitles the bearer to a priority review for another, completely unrelated product. The voucher allows a developer to jump to the front of the line, perhaps saving a year, or a year-and-a-half, in development time and costs. It's a real incentive, and it's another big idea to encourage investment.
TLSR: I know you're still a growing organization, Zack, but I counted only six venture capital (NYSE:VC) organizations that are members of NIO. Neurotechnology feels like a fertile area for the VC community, so why just six names here?
ZL: In this case, it's quality over quantity. The venture firms supporting NIO's work are dedicated expert investors in the neurotech space. Would we welcome more venture firms joining the cause? Yes, of course. But it is for them to decide whether they want to play a critical role in this solution. Depending on how a venture firm is structured, it may not necessarily be easy to have a line item for this kind of thing in the operating budget-not directly from the investment funds. But many venture firms are investing in the space, and they should become part of NIO as we grow.
TLSR: Neurobiology/neurotechnology is such a complex area. We're in an age now where it's very difficult to get lawmakers to understand the value of basic research that may not yield definitive therapies for decades. How do you tackle that problem?
ZL: It's really about persistence and long-term focus. These things don't happen overnight, but it is critical to bring the industry together, as well as to partner with other organizations that have influence on Capitol Hill and can reiterate the story about how basic scientific research is critical to our overall health as a nation, and to the biomedical economy at large.
TLSR: You have spoken frequently about the bottlenecks that hinder development of neuro-oriented therapies. Would you summarize those for me, and describe how the NNTI would ease these obstacles?
ZL: The NNTI was designed to increase private investment and accelerate development of treatments reaching the market. It would employ targeted increases in funding to improve federal research coordination and ease the bottlenecks that inhibit development of therapies for brain-related illnesses. The bill accomplishes these goals with less than 4% of the total federal neuroscience research budget, which is about $200M a year, and really reflects a balanced disease cost-to-research ratio. The four key bottlenecks that are slowing the development of treatments for brain diseases are targeted in the NNTI.
TLSR: Briefly, what are these bottlenecks?
ZL: The first is that federal agencies do not coordinate their neurotechnology research. The NNTI establishes a national coordination office within the Department of Health and Human Services to ensure that the National Institutes of Health (NIH), the Department of Defense and the Veterans Administration are working together and not duplicating efforts.
The second component of the legislation is focused on the 16 institutes within the NIH itself, where brain research is insufficiently coordinated. The NNTI fully funds and supports the NIH blueprint for neuroscience research and its ongoing inter-institute research efforts.
"The National Neurotechnology Initiative Act was designed to increase private investment and accelerate development of treatments reaching the market."
The third component is that the NIH itself has insufficient funding to help push treatment out of the labs and into development. So the NNTI employs additional Small Business Innovation Research and Small Business Technology Transfer funds. The small business innovation research grants are provided to entrepreneurial researchers trying to start companies to accelerate movement of treatments and ideas into the marketplace.
Last, the NNTI provides the FDA with funding for hiring and training neurotech experts. The technology is changing quickly-more rapidly than in other areas of science. It is important that the FDA have the resources it needs to keep up with innovation in neurotechnology, and that the agency can hire the right people to work with the very innovative technologies in development.
By removing these bottlenecks, we can increase the capital flowing toward companies that are developing treatments for brain diseases.
TLSR: When you put investors and entrepreneurs together at your conferences, is it common to see these introductions develop into relationships and investments?
ZL: Absolutely. We have brought more than 300 neurotech startups together with leading investors in the neurotech space, as well as with key business development members at major pharma, medtech and diagnostic players. Recently, representatives from Shire, Medtronic, GlaxoSmithKline (GSK:NYSE) andPfizer Inc. (PFE:NYSE) discussed their later-stage corporate partnering strategies at one of our meetings. They talked about how strategic alliances and licensing programs are being developed to mitigate some of the higher risks, especially those associated with earlier-stage programs. While they all agreed that there was need for new collaborative models, the companies have very different approaches in their execution, which is driven primarily by corporate objectives, current pipelines and some of their more recent experiences.
TLSR: Why is information from this particular panel important to startup entrepreneurs?
ZL: It is very important for entrepreneurs to know, in real time, who they might be able to partner with and how they might be able to get funding to bring products to market. Last year, VCs put more than $1.2B to work into the neurotech space, in more than 160 deals. Many of these companies have been speakers at our conferences over the years. We feel like we're playing a very important role in bringing the community together on an annual and global basis, to help galvanize innovation in the sector.
TLSR: You co-founded NeuroInsights with your spouse, Casey Crawford Lynch. The two of you publish a newsletter, Neurotech Insights, and you co-author the firm's annual Neurotech Industry Report, an investment analysis of the global neurotech industry. I know you're not here today to give Buy, Sell or Hold recommendations, but I wonder if there are any small-growth company names that you think are interesting?
ZL: Sure, there are some interesting smaller companies that I can name.
Naurex Inc. (private) is developing a new type of antidepressant that appears to work much more quickly than current options and in very hard-to-treat populations.
Edge Therapeutics Inc. (private) is developing an exciting new implant to prevent complications of brain hemorrhage.
Akili Interactive Labs (private) is an emerging therapeutic neurogame developer that provides engaging software therapies for attention disorders and cognition improvement.
Cerecor Inc. (private) is working on an exciting pipeline of treatments out-licensed from shelved programs at other companies.
"NIO was formed to give the brain a voice."
Sound Pharmaceuticals Inc. is a private company doing some exciting clinical work on the development of drugs to prevent hearing loss, and also to restore hearing through regenerative means.
Amarantus BioScience Holdings Inc. (AMBS:OTCQB) acquired and is making progress on a very interesting diagnostic for Alzheimer's disease.
eNeura Therapeutics LLC (private) is developing an at-home transcranial magnetic stimulation device for treatment of migraine.
Supernus Pharmaceuticals Inc. (SUPN:NASDAQ) holds great promise. It has two products approved for epilepsy, with a phase 2 pipeline of additional products.
InSightec Ltd. (private) has launched a transcranial-focused ultrasound system that has been awarded the CE Mark for the treatment of neurological disorders including essential tremor, Parkinson's disease and neuropathic pain.
There are a lot more interesting companies in the neurotech space, but this should give you an idea of the wide variety of technologies on the horizon.
TLSR: This has been a pleasure. I also enjoyed meeting Casey Lynch, and I thank you both of you for the time.
ZL: Thank you, George.
Zack Lynch is the founder and executive director of the Neurotechnology Industry Organization (NIO), a global trade association representing companies involved in neuroscience, brain research institutes and patient advocacy groups. He spearheads annual meetings in Washington D.C. to advance the NIO agenda on Capitol Hill, including galvanizing support for the National Neurotechnology Initiative, a $1B piece of legislation aimed at accelerating translational neuroscience. He is the author of The Neuro Revolution: How Brain Science Is Changing our World, published by St. Martin's Press. Lynch also co-foundedNeuroInsights, a market research and investment advisory firm. He was the publisher of the investment newsletter, Neurotech Insights, and co-author of NeuroInsights 600-page annual investment analysis of the global neurotech industry. He also developed the NASDAQ NeuroInsights Neurotech Index, a stock tracking index for neuroscience companies, and was founder and CEO of HealthRally, a neurosoftware company focused on wellness motivation. Lynch serves on the advisory board of the McGovern Institute for Brain Research at MIT. He has bachelor's degrees in evolutionary biology and environmental science, and a master's degree in economic geography, all from UCLA.
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1) George S. Mack conducted this interview for The Life Sciences Report and provides services to The Life Sciences Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Life Sciences Report: None. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Zack Lynch: I or my family own shares of the following companies mentioned in this interview: Cyberonics Inc. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Janssen Pharmaceuticals, Cerecor Inc. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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