October 22, 2020
Source: Forbes Czech Republic
BEING RICH AND HEALTHY IS BETTER THAN BEING POOR AND ILL. BEING HEALTHY AND GETTING RICH ON OTHERS’ HEALTH IS BEST. THE BUSINESS OF DEVELOPING AND MARKETING DRUGS IS A DRAMATIC AND VERY COSTLY ADVENTURE WITH A TINY CHANCE OF SUCCESS, AND NOT JUST DURING THE CORONAVIRUS ERA. STILL, IT IS ONLY LOGICAL THAT PETR KELLNER AND KAREL KOMÁREK ARE INVOLVED IN IT.
IF a proper narrative needs to include a love story, here is one. “Alois was my last and most cherished love,” recalls Hana Pískalová. The lady (72) is speaking about her husband, who died two years ago in a home for the elderly, in Český Brod, where the couple spent by far most of their seven years together. “And we were married for five years. Initially, I thought that we would each keep our surnames after the wedding, but Alois said that it would look odd if we had different names on our room door. So, I said yes – I was honored to be Pískalová,” she smiles.
When she describes the moments spent with a man who was 15 years her senior, the widow smiles often. Like when recounting how, during the initial days after meeting him, she would look about the room in the rehabilitation facility to see the doctor because the nurse was using that word. By ‘doctor’, the nurse meant her future husband, who modestly kept his education from her: Alois Pískala had a degree in chemistry and was a schoolmate of world-renowned Antonín Holý, whose discoveries have led to medicines still used today; thanks to them, hundreds of millions of crowns flow to the Czech Republic annually and Holý deservedly became a billionaire. His mate from chemistry school and a nonpareil experimenter, Pískala was close to reaching a similar ‘medicinal grail’, but he did not due to the circumstances described below. He died relatively poor in a home for the elderly in Český Brod and drugs that work on the basis of substances that he discovered earn billions of dollars to their manufacturers in America and Japan. The Czech Republic does not get a single crown from them.
“The contrast between Holý and Pískala could not be starker,” agrees Zdeněk Hostomský, director of the Institute of Organic Chemistry and Biochemistry of the Czech Academy of Sciences (“ÚOCHB”), the same institution that the legendary Holý headed in 1994–2002. “We sometimes mention the radically different destinies of the two men to budding scientists for educational purposes,” continues Hostomský. “Pískala’s fate is rather normal in science, whereas Holý was incredibly lucky in many respects and an exception in a sense. The vast majority of things in researching new medicines do not turn out great. It does not matter how much hard work, often continuing over the course of many decades, goes into a project. You may do everything with exquisite precision and putting in maximum effort and it still frequently does not lead to anything useful.”
Carrying a ring to Mordor might appear easier than bringing a new, officially approved drug to the market. The way from the discovery of a promising molecule is so arduous, long, fraught with uncertainty and, last but not least, so extremely costly that those who dare follow it may seem at first glance almost like naive fools. Yet their actions can be justified rationally. When recounting their motivations, it would be cynical to disregard altruism because aiming to help the sick plays a crucial role, especially for scientists. The same applies to their own curiosity and the desire to push the limits of human knowledge. With that said, it would be dishonest to hide the financial aspect, which is so attractive that it gives many the energy to embark on such a tremendously hazardous odyssey. To put it in figures: the development of a new drug takes on average 15 to 20 years and can cost well over two billion dollars, but in the event of a breakthrough, for the most serious and most frequent diseases the annual revenue can amount to 15 billion dollars. There is probably no other industry with such profits.
The slip of the tongue probably cannot be described as Freudian, which would mean one that betrays the speaker’s subconscious thoughts, but it sounds charming coming from Professor Radek Špíšek. The CEO of Sotio wants to say “léčba nádorů” (Czech for “the treatment of tumors”), but instead he says “léčba národů” (“the treatment of nations”). Both could be true, actually: if Sotio’s ambition were fulfilled, the treatment of tumors could save people in many nations because the company is focusing on the development of oncology treatments.
That is proof enough that this ambition is by no means modest, yet it still does not reveal the full picture. Headquartered in Prague’s Holešovice area, the company is part of PPF Group, which is owned by the wealthiest Czech Petr Kellner, and thanks to a financial footing, unusually solid for this country, its goal is to ‘foster’ the preparation from an initial or early stage to the final stage when it is included in a list of approved drugs. Nobody in the Czech Republic has ever achieved something like that, and if it became reality, the aforementioned scenario where a huge investment brings astronomical profits would come true. PPF’s investment in the project to date has exceeded five billion crowns, and if we see that, say, as Mount Sněžka (the tallest Czech mountain, since nobody in the Czech Republic or Central and Eastern Europe has ever invested so much money in the pharmaceutical industry), then the potential revenue would be a mountain reaching the Moon.
The problem is that Mount Sněžka remains the only real thing to date; not that the gigantic mountain could not exist – but, for the time being, it is covered by fog so thick that you can only presume it is there rather than at least see its contours. “Within PPF Group, we are quite often the target of jokes to the effect that we are Petr Kellner’s biggest philanthropy project,” Professor Špíšek laughs, slumping a little in his chair. The next moment, however, the ‘spring’ of responsibility makes him sit up straight. “Joking is nice, but truth be told, Sotio is not even remotely a philanthropy project. We are not doing research just for fun. We do everything in full seriousness, as you can tell from our progress.”
Sotio was founded in 2010 and Radek Špíšek likens the effort made to find a treatment for cancer to playing roulette because the likelihood that the bet on a certain substance will pay off is about five percent. The advantage of this type of roulette, however, is that you can put multiple balls in the roulette wheel to increase your chances of winning the jackpot, but you also have to pay for each ball separately. The diversification of the substances that Sotio is looking at in the hope of achieving success at least partially offsets the high risks. “We currently have five balls running around our roulette wheel,” says the CEO, adding that while you can add balls in, so can you remove some of them from the wheel, even though the wheel keeps on spinning. “It happened that a project into which big money had been invested was stopped because it was deemed unpromising. Of course, the owners of PPF have the final say, but they respect the opinion of Sotio’s experts for the most part.”
Since PPF’s business is diversified, the Group can afford to invest in conservative industries as well as riskier ventures that potentially involve much higher profits. “To me, Sotio is a fantastic company,” says Zdeněk Hostomský from ÚOCHB. “Unlike other firms that rely on external investors, who naturally keep asking and pushing for results, Sotio enjoys the luxury of a financial background thanks to which it does not have to prove, more or less artificially, anything all the time and can afford to employ top experts from around the world.”
Sotio has hired experts from 17 countries, and the company’s overall generosity is a stronger motivation than their salaries. Another motivating factor is that they do not necessarily have to move to Prague: the company has offices in America, the unmatched ‘Mecca’ of the pharmaceutical industry, and in Switzerland, which is Europe’s No.1 in this respect, as well as labs in China, whose vigor in the field of science is magnificent notwithstanding any feeling of animosity that the country may otherwise evoke. Sotio’s managers feel the need for even greater expansion into America, which is why the USD 11.5 million acquisition of the BOXR anti-tumor cell therapy platform was announced in late August; this should provide the launching pad for Sotio’s American flight.
To use the roulette comparison again, Karel Komárek, another one of the most prominent Czech billionaires, and his company, KKCG, believe in the success of a single ball in the roulette wheel. Together with his father, Komárek has invested CZK 100 million in the development of MitoTam, a substance that attacks the mitochondria of cancer cells. MitoTam is the brainchild of Professor Jiří Neužil who admits that the Komáreks’ support is crucial. Neužil confessed another thing about Karel Komárek Senior, the founder of KKCG: he commissioned a qualified estimate of the probability that the substance Neužil discovered through experiments would eventually turn into a registered drug, and the result was a 1 to 1,000 chance, that is to say 0.1 percent. Even so, Komárek Senior decided to financially back the project that carries a sliver of hope through Smart Brain in 2011; MitoTam has made noticeable progress since then. This is why Jiří Neužil bristles somewhat when he hears that the chances of getting an actual medication are still low: “We made it from a ratio of 1 to 1,000 to a ratio of 1 to 50, and that’s a huge leap!”
It is without a doubt a huge leap, yet it would be very rash to order Champagne just yet. However, Professor Neužil’s viewpoint illustrates faithfully how many potentially fatal obstacles a candidate medication has to overcome in order to become reality. It is like walking in a minefield, and even though it is exclusively experts who tread it, all the mines might explode at any moment.
Walking in a minefield? It might be a better idea to leave metaphors to Radek Špíšek – he is great at them. Following the roulette comparison, the head of Sotio has another one: “We’ve taken several preparations through the Death Valley.” Špíšek uses the Western simile to say that the scientists in the company he leads managed to take a substance from preclinical trials to testing on humans. That alone is a sort of triumph – for example, if at the preclinical stage a preparation shows a positive effect on mice but not on dogs, then a saga into which millions of dollars were invested cannot continue. The preclinical stage includes laboratory research; and it is only following a drastic selection among the discovered substances, that patients join the game.
Clinical trials are divided into three phases. The initial phase determines how much of the substance can be administered without it being toxic for the body – small doses are gradually increased until the suitable limit is determined. MitoTam, the Komárek family’s hopeful project, has already passed this stage and the discoverer of the substance, Jiří Neužil, notes that phase I took place in the Czech Republic, which is unique: “The testing took place at the General University Hospital in Prague, but it was difficult to find oncologists who would do it. They do this basically in addition to their own job, since there is no experimental oncology treatment facility dedicated to such testing in the Czech Republic. At this point, phase I for MitoTam is being impartially evaluated and it should be clear within a few months whether phase II will be undertaken.”
RLI-15, the substance that the world talks about the most in connection with Sotio, is in phase I too. Simply put, RLI-15 significantly multiplies the immune reaction to tumor cells in the lungs, kidneys, breasts, skin and pancreas, and the magnitude of hopes that it elicits is illustrated by the fact that the trials are carried out at four of the most prestigious oncology centers on the planet where, according to Špíšek, competitors’ preparations are waiting in queues to be tested. “RLI-15 is our flagship and a textbook example of the business model that we want Sotio to work on,” the CEO says. “We got the substance at an early stage of development through the acquisition of French-based Cytune Pharma, which we are in charge of. We overcame several critical periods with RLI-15, and based on the promising ongoing results of testing on patients, we are currently holding negotiations with other companies that could help us with investments to use the potential of the substance in exchange for, say, 30 percent of the rights to the resultant treatment, if any. We would like to launch phase II of RLI-15 clinical trial in the first quarter of the next year.”
Phase II verifies whether the substance is efficient against the disease. For example, 200 patients are divided into three groups depending on their oncology diagnosis and, three years later, it is examined if the people – and in which group – lived longer or if the tumor has diminished. Since the very beginning, Sotio’s portfolio has also included cellular therapy programs based on dendritic cells for the treatment of lung and ovarian cancer; phase II has been completed with positive results and the possibility of proceeding into final phase III is currently being analyzed; this phase involves costs in the order of hundreds of millions of dollars.
The final phase must demonstrate statistically that the preparation increases the patients’ life expectancy – the threshold is set at 20 percent in oncology. The testing usually involves 1,200 to 1,500 people from all over the Western world; the medication is administered against placebo or standard treatment, and even the doctors are not allowed to know which patient gets what. The testing on one patient can cost as much as 200,000 dollars and the results of the double-blind trial are analyzed after four to five years – if the 20 percent threshold is achieved, the regulatory authority issues a license for use in treatment and the company with the approved drug can enjoy a ‘harvest’.
Aside from the massive amounts invested in the testing, time is another factor that determines if the company will have cause to celebrate. Both preclinical and clinical trials take seven to ten years and patent protection of substances is on average 20 years. When this period expires, it is up for grabs for the manufacturers of generic treatments – Zentiva is a well-established Czech player in this field – and they can trade in them and/or modify and improve them. As a result, the original manufacturer’s profits diminish dramatically.
This greatly affects the price of medications. There is understandable pressure in the sense that medications should be as easily available as possible for ethical reasons; at the opposite end, there are the no less understandable interests of the companies that have poured billions of dollars into their enormously difficult development and are now rightfully getting ready to reap the fruit of their gargantuan effort. A fairly recent example of this perennial conflict came from Gilead, a US-based company that builds on the foundations laid by Professor Holý’s discoveries and that the world pins its hope upon in connection with Remdesivir, a treatment for severe forms of the coronavirus infection. Martin Tolar, a Czech neurologist and the founder of Alzheon, an American biotech business that is developing a promising treatment for Alzheimer’s disease, commented on the disputes regarding the price of Remdesivir for the April issue of Forbes: “Everybody is looking up at Gilead, hoping that it will save the whole world, but it has recently stained its reputation among Americans because it looks just like any other pharmaceutical company that only wants to make profits on the treatment.” However, Tolar admitted immediately that this is a logical step on Gilead’s part.
In addition to scientists and physicians who have the key responsibility of seeking suitable patients for clinical trials, Sotio also has a team of lawyers and other experts in charge of patent protection and, generally, protection from the theft of intellectual property. Charles University’s Associate Professor Jan Konvalinka commented on the issue, which is a hot topic not only for Gilead, although he spoke primarily about the company: “During the course of extremely strictly controlled testing, no information may leak out since we are talking about strategic information that affects stock exchange indices and changes the price of shares by billions of dollars. If such information leaked out, two things would happen. First, the person who disclosed it would most likely be imprisoned for tampering with the stock market. Second, the authority that makes the decision on whether the medicine will be recognized and approved for use would not approve the clinical trial at all due to the leak of information and the trial would have to start all over again.” Tomáš Cihlář, a Czech virologist and the Vice President of Gilead whose team invented Remdesivir, agrees with Konvalinka: “As far as the effect on share prices and stock exchange is concerned, a leak of information is really dangerous because many analysts are speculating and seeking all sorts of information. This is why we have to be extremely careful.”
Gilead was criticized five years ago for an allegedly overpriced pill for the treatment of type C jaundice, which was to cost up to one thousand dollars. “Erudite talks about pricing are not my job in the company. In this case, it was taken into consideration that if viral hepatitis is not treated and cured, the patient’s liver will probably fail over time and they will need a transplant. That is much costlier – over half a million dollars per patient. If you have a treatment that will help you prevent the need for transplant, you will save the healthcare system a lot of money. This factor is partially reflected in the price of such preparations, although – let me point out once again – I don’t know exactly how pricing is done,” Cihlář said on the matter.
There is one more aspect reflected in the final price of medications that has to be mentioned. Both Sotio’s Radek Špíšek and ÚOCHB’s Zdeněk Hostomský speak about it, and their statements are so alike that the following quote could be considered as unanimous: “Since just a very small percentage of the tested substances reaches approved production, the price of the successful ones must also include the failed projects; they have to be paid for in this way.”
Kellner’s Sotio is exceptional in how comprehensibly it intends to ‘cultivate’ the substance from the (almost) very beginning all the way to distribution. This approach is uncommon in the world, let alone in the Czech Republic. The Institute led by Doctor Hostomský is singularly wealthy among the domestic scientific institutions because it monetizes intellectual property. The discoveries of its scientists – who participate financially in the profits – are patented with scrupulous care and are usually offered to international pharmaceutical giants (since there are no such companies in the Czech Republic, this should silence politicians’ complaints to the effect that the money exits the country). Those companies are willing and able to spend one to two billion dollars on the subsequent development, which remains extremely risky; in exchange, ÚOCHB usually retains small percentages of the potential profits. In the most famous case of the substance invented by Antonín Holý, this is 1.5 percent, which nets the Institute 60 to 80 million dollars a year. “The furthest we progress in our research is testing on monkeys; so far, we haven’t gone beyond that,” Hostomský says.
The ‘so far’ in his utterance is critical. Receiving 80 million a year is great, but the possibility of earning a high multiple of that is irresistible. That could happen if ÚOCHB proceeded to human clinical trials. Thanks to the licensing fees, this step could be undertaken in financial terms, but under the legislation in force, a public research institution may only use any funds it earns for the development of its own research. In other words, it must not conduct business with the funds. Among other things, the Institute is subject to the Public Procurement Act, so that it has to run a tendering procedure for every single apparatus it acquires, and this takes an enormous amount of time – as long as a year. Solving the problem is on Hostomský’s agenda. One possibility would be to establish an incorporated company; another would be the new legal option of founding a ‘registered institute’, a quasi-private entity under the auspices of ÚOCHB through which it would be possible to tap the competitive environment of the pharmaceutical business that promises billions of dollars.
This vision is now taking clear contours, and not just in a legislative sense. ÚOCHB is discussing the purchase of a land lot in Prague, next to the Institute of Physiology and the Institute of Experimental Medicine of the Czech Academy of Sciences. IKEM is situated nearby too; this would provide the synergy for Hostomský & cie.’s plans for reaching human medicine with their research. The Institute for Transplantation Research, which should be built on the acquired land, should be up and running within two to three years, and it would likely rent labs until the building is completed. “That’s where we would move the most promising projects, and then sell them with a much higher value,” Hostomský plans.
With our excuses to Professor Špíšek, we will do without his metaphors this time and use our own instead: the development and marketing of treatments is like the ultimate hurdle race where many of the hurdles are hidden at the start; this is why only the true champions make it to the finish. A list and the nature of the hurdles were outlined in the preceding paragraphs; given the scope of the story, they obviously had to be simplified and distilled somewhat. The outlook for success in the health business can be described even more succinctly. In fact, it can be condensed into one brief sentence: you have to be downright lucky.
This adjective is not meant to devalue in any way the exhausting efforts invested in projects worth a lot of money; the projects involve so many unknowns that predicting a successful outcome is akin to telling fortune from coffee grounds, even though the most sophisticated science is involved. After all, the canonized story on this topic, whose hero is Antonín Holý, underscores this. Just about everything clicked almost miraculously for Holý. The potential of the molecule that he discovered was recognized by the Belgian physician Erik De Clercq, and John Martin, the head of research in American companies, was able to secure billions for investments. A popular joke in English refers to these men as the “Holy Trinity”, or the Father, the Son and the Holy Spirit. It’s difficult to say who is the Father, the Son and the Holy Spirit; what matters is that they found the Holy Grail of medicine. In addition – and this is another miracle – they perfectly hit the spot for the demand and the ethos of the era: the world was cringing in distress from the AIDS epidemic, and Tenofovir, which is the name of the key medication, worked for the scary disease (and it was also used during the recent development of Remdesivir because Gilead has it in its portfolio). All HIV positive patients still need Tenofovir today – unlike in the 1990s, they do not have to swallow handfuls of antibodies: all they need is a single pill that includes all the antibodies based on the specification of their disease, but Tenofovir has to be present in any of the combinations. From the viewpoint of pharmaceutical manufacturers, patients with AIDS are ideal customers: their medications keep them alive without curing them, so sales are always secured.
If Holý was amazingly and unlikely lucky (no offence intended) this does not mean that his schoolmate Alois Pískala was unlucky. No bad luck – a totally normal situation. He discovered 5-azacitidine and decitabine; then a leading biologist got involved too, as De Clercq was with Holý. His name was Peter A. Jones, but he arrived decades later, when Pískala was no longer active. Jones discovered a new mechanism of action for Pískala’s substances, and this became the foundation for what is known as epigenetic cancer therapy. Pískala had no idea that 5-azacitidine could literally revolutionize the treatment of certain types of blood cancer (in addition, cancer is a permanent threat, not a hot hit receiving massive attention as was the case with AIDS). As a result of this and other developments, Pískala did not get rich and the Czech Republic does not benefit either; medications based on 5-azacitidine earn billions for international companies. “On a purely hypothetical basis, if we were receiving 1.5 percent of the profit from Pískala’s substance, as is the case with Tenofovir, we would not get as much as we do thanks to Antonín Holý, but it would still be millions of dollars a year,” Zdeněk Hostomský admits.
The eyes of the Director of the Institute of Organic Chemistry and Biochemistry’s get misty; he is moved, remembering a symposium that they held two years ago on Alois Pískala’s work on academic soil. It was organized in honor of the chemist, who was celebrating his eighty-fifth birthday; he arrived in a wheelchair but intellectually at the top of his game, and he managed the give a difficult lecture with aplomb. “When we got back home, Alois said he was very tired but very happy; he took that as great appreciation of his work,” his wife recalls. Alois Pískala died two days after the lecture; his treatment makes others’ lives longer, even though he did not benefit financially from it at all. “I guess it was meant to be this way,” Hana Pískalová muses aloud. “Alois lived to see his life fulfilled. I mean, he would think of chemical formulas even during the night – they wouldn’t let him sleep.”
Sotio’s Professor Špíšek also admits that he does not sleep well. This is due to the stress and a sense of huge responsibility for a roulette where the right number may win – or it may not at all. It would be pointless to ask Radek Špíšek what he would consider a fulfilled life.