In today’s difficult financial climate many small, start-up biotech and small specialty pharma companies are finding their traditional drug development programs unsustainable. Traditional programs often include the development of innovative drugs through the FDA’s 505(b)(1) NDA process targeting chronic diseases with a large, under -served population. Financial backing for such capital intensive programs, the 505(b)(1) requiring on average $1.4 billion, includes sources from venture capital, institutional funding, and larger pharmaceutical companies. Because the costs of drug development have risen dramatically in recent years, and because the sources of funding drug development have greatly diminished, small, start-up biotech and specialty pharma companies are realizing a challenge in obtaining the capital required to fund their innovative drug development programs.

While many small biotech and specialty pharma companies may have enough capital to support  their program for the next 12-18 months, the prospects of acquiring additional capital to support the program beyond the next 12-18 months is small to non-existent.  The sad fact is, while the company may see progress in the development of their drug in the next 18 months, when the 18 months are completed there will be no more capital and the doors of the company will be shut and their assets sold for pennies on the dollar.

One solution to the problem is to implement a drug development program with a diminished burn-rate and faster time to market. Such a program can be the 505(b)(2) NDA process. The 505(b)(2) is a type of abbreviated NDA that develops a new drug by somehow modifying an existing, approved drug. Unlike a generic drug (using the ANDA process where an NCE is exactly copied), the 505(b)(2) NDA is a modification of the 505(b)(1) NDA. The development program is abbreviated because existing information on safety and efficacy in the public domain is used for the 505(b)(2) NDA approval. Thus the 505(b)(2) usually involves neither non-clinical studies, nor the normal massive clinical studies associated with an NDA, but instead usually relies on relatively short and inexpensive bridging studies (bio and/or clinical endpoint studies) to relate the safety and efficacy of the new 505(b)(2) product to the related NDA product to which the bridge is made. Given the relatively low cost to bring a 505(b)(2) to market, and the two to three years of market protection that this strategy provides, low cost, fast to market drug development programs can now be targeted at something other than the traditional chronic, large indications. For example, more niche indications can now be targeted where a 505(b)(1) program would have made no business sense. Thus, the 505(b)(2) NDA can provide a shorter and less costly drug development program and therefore reduce the company’s burn rate and bring a profitable drug to market more rapidly. Such a program will enable the biotech/specialty pharma to survive during times of financial crisis. Further, there are many small to medium size distributors ready to market the 505(b)(2) drugs, and in some cases, ready to share in the development costs.

 As profits are made through the 505(b)(2) programs, and as the financial crisis eases, the capital required to fund the original 505(b)(1) programs may return, enabling the biotech to then pursue its original innovative 505(b)(1) drug program. Viewed in this way, the 505(b)(2) NDA program for biotech/specialty pharma can be regarded not only as a possible long-term strategy, but more importantly as an interim survival strategy for our current financial crisis.