Orasi Medical Inc., the University of Minnesota spin-off developing software to speed drug trials, is close to signing a deal to license its technology to one or more major pharmaceutical companies.
CEO Shawn Lyndon told MedCity News he expects to announce a deal in a month or so. Though Lyndon declined to specifically name companies, he suggested the 10 Big Pharma makers that serve on Orasi’s advisory board are likely choices, including Merck, Pfizer, Johnson & Johnson, Eli Lilly and GlaxoSmithKline.
“These are the people who can potentially be customers for Orasi,” said Mike Jerstad, a partner with PrairieGold Venture Partners in Sioux Falls, S.D., a major investor in the company.
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Orasi’s work in Alzheimer’s disease seems to be of particular interest to Big Pharma, who have struggled to develop a drug to treat the neurological disease despite investing billions of dollars in research and clinical development. The company’s advisory board includes top neurological experts at Big Pharma: Dr. David Henley, a member of Eli Lilly’s Alzheimer team; Dr. Husseini Manji, Global Therapeutic Head of Neuroscience for Johnson & Johnson; and Dr. Michael Gold, vice president of medcine development at GlaxoSmithKline overseeing the company’s Alzheimer drug efforts.
Orasi has been on a roll of late. Earlier this year, Red Herring magazine named Orasi to its list of the world’s top 100 private technology start-ups. The company recently closed a $3.5 million Series B round of financing from early stage venture capital firms like PrairieGold and CentreStone Ventures in Canada. Orasi will soon release the first results from a clinical study that used its software to measure the effect of three drugs on Alzheimer’s patients.
Spun out of the university in 2007, Orasi’s original focus was to develop the country’s first Food and Drug Administration-approved device to diagnose Alzheimer’s. The company created software that crunches data from magnetoencephalography (MEG), a relatively new imaging technique that measures small electromagnetic signals from electrical activity in the brain in real time. The idea was to scan the brain of a suspected Alzheimer’s patient and compare the data against an image library of healthy brain activity.
But Orasi soon shifted gears, realizing that its technology would be much more valuable to drug companies engaged in costly, high-risk clinical trials. Experts say the old model employed by Big Pharma–spending billions of dollars to develop a blockbuster drug that can recoup their investment and deliver big returns–no longer makes sense.
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Federal regulatory pressure and weak capital markets has made it difficult for pharma to develop breakthrough therapies, said Bill Brown, a former executive vice president and chief financial officer for MGI Pharma.
Currently, it costs, on average, more than $1 billion and takes more than seven years from the start of clinical trials to conduct the necessary studies and win approval to market a new drug in the United States, according to Tufts University’s Center for the Study of Drug Development (CSDD).
As a result, companies are looking to cut development costs (in part by conducting clinical trials in less expensive third world countries) and rolling out a broader array of drugs that can generate revenue sooner, said Brown, now an industry consultant.
Drug companies need that money. CSDD estimates that global sales of drugs with expiring patents from 2009 to 2012 will surpass $88 billion.
“Developers have made important progress in reducing R&D times, but because only three in 10 new drugs, on average, generate sufficient revenue to sustain R&D, pharmaceutical and biotech firms are under great and growing pressure to generate revenue to bring more products to market,” CSDD Director Kenneth I Kaitin said.
Lyndon said Orasi’s technology can help drug firms to determine earlier if their therapies are working by comparing the MEG scans of patients with neurological diseases to its image database of people with normal brain activity. (The company says it owns the largest commercial database of MEG scans and is the only provider of MEG biomarkers, the genetic clues scientists use to identify diseases.) That way, drug companies can determine whether or not to pursue a therapy rather than spend billions on a drug with a high likelihood of failure, he said.
For instance, Lyndon said, the software can help solve a major problem confounding the drug industry: the placebo effect. Recent data suggests the placebo effect’s growing power is wreaking havoc on clinical trials. Patients given a sugar pill start to demonstrate clinical improvements that match and sometimes outperform the real drug being tested.
Shifting Orasi’s strategy away from diagnosing Alzheimer’s to helping drug companies to treat the disease will allow the company to more quickly generate revenue and offer “the potential for an exit (sale) much sooner,” Jerstad of PrairieGold said.
“The timing is very good,” he said.
