David Ho is renowned for his invention of the drug cocktail approach to treat AIDS, a method that has brought hope to AIDS patients around the world by extending their lives by a decade or more. But the rapid rate at which the AIDS virus mutates has led to some instances of drug resistance and necessitated a search for new treatments. Ho sees finding a cure for AIDS as his life's work and has continued to chip away at the problem.

TMB-355, which is given by subcutaneous injection, is a fourth- or fifth-line drug for AIDS patients who have become resistant to the drug cocktail. It passed through the hands of three companies before TaiMed Biologics bought it in 2007, and the patents are likely to be sold again in the future. TaiMed CEO James Chang says bluntly that the US$40 million (NT$1.4 billion) cost of large-scale Phase III trials will compel TaiMed to partner with a major international firm to further the drug's development in the American style. TaiMed estimates that within its first 10 years on the market, the drug could reach total sales of as much as US$2 billion.

Acquire then transfer

What is the US model of biotech and new drug development that Chang mentions? Basically, it is multiple transfers of patent rights, and adding value at every stage of the drug development process. One thing unusual about TMB-355 is that scientists of Chinese ethnicity have been involved in each of its three sales.

TMB-355 is a monoclonal antibody that can prevent the AIDS virus from binding to the CD4 receptor on normal T-cells, preventing further damage to the patient's immune system. Originally developed by Biogen, it was sold to Tanox in 1997. Tanox was founded by Chang Tse-wen, currently a researcher at the Academia Sinica's Genomics Research Center, and his ex-wife Nancy in Houston in 1986.

"Tanox completed TMB-355's Phase I clinical trials, determining safe doses, in early 2000," says James Chang, "but then made little further progress with it until 2004."

Nancy Chang made three trips to Taiwan to raise capital and seek government support, one each in 1999, 2002, and 2005. But the National Development Fund rejected her proposals, and her plans to have the company build a Taiwanese plant and itself manufacture the drug came to naught. Nonetheless, the struggling Tanox managed to complete Phase II clinical trials (which seek primarily to verify safe and effect dosages) for TMB-355-then known as TNX-355-and obtain FDA permission to proceed with further trials.

Then, in July 2007, the Legislative Yuan passed the Act for the Development of Biotech and New Pharmaceuticals Industry. Genentech announced that it was acquiring Tanox and its patents, including that to TNX-355, the following month. The outlook for the domestic biotech and new pharmaceuticals industries looked bright, and there were constant rumors that Genentech was planning a joint venture with a Taiwanese firm.

On the evening of September 12, 2007, the National Development Fund announced that it was taking a 40% stake in TaiMed Biologics, a company that would be formed the following day. TaiMed named former vice premier Tsai Ing-wen its first chair and TNX-355, acquired from Genentech for US$100 million, its first product. Ho, Academia Sinica president Wong Chi-huey, and Patrick Yang, Genentech's Taiwanese executive vice president, were all instrumental to the deal that got development of TNX-355 going again.

Chang says that 355 wasn't especially valuable to Genentech because AIDS medications aren't its core business. And, as Ho admitted at the press conference announcing TaiMed's formation, Genentech had no way of knowing whether 355 would be profitable. As he said, "If they had, they would have kept 355 for themselves." The simple logic of the market-that each participant seeks what it needs and what it benefits from-enabled TaiMed to acquire its first niche product.

Small company, big capital

But TaiMed has been redoing Phase II trials on 355 for the nearly two years since it acquired the drug. The reason is a change in the HIV treatment guidelines implemented at the end of 2007 by the US Department of Health and Human Services.

Chang explains that under the old regulations new drugs had only to demonstrate that they reduced the amount of HIV in the blood (viral load) to receive approval. When this resulted in a plethora of new drugs, the department decided that it was time for more stringent regulations. The new trial regime requires that new drugs reduce the viral load to under 50 copies per milliliter. While 355 has not had a problem meeting this standard, the new regulations have prolonged the testing process. TaiMed has spent the last two years carrying out the Phase IIb trials.

"We've conducted almost all of our clinical trials in the US because we intend to seek FDA approval," explains Chang. Both James and his older brother Michael Chang are old hands in the biotech industry: James held a senior position at Allergan Pharmaceuticals before coming to TaiMed and Michael is the co-founder of San Diego, California's Optimer Pharmaceuticals.

"We are project oriented," says the younger Chang, arguing against the notion that TaiMed is too small. "We hire based on how much we have to do." He says that the company's Taiwanese parent company, which is based in the Nankang Software Park, has eight employees who handle accounting, internal controls, and pre-planning for clinical trials. Its California subsidiary has an additional six, including virus experts and a specialist in FDA approval applications.

TaiMed's Phase IIb trials of 355 include some 80 participants and are already underway at 30 US hospitals. To meet the FDA requirement that study participants mirror the US population, TaiMed is also working with Taiwan University Hospital, Taipei Veterans General, China Medical University Hospital, Kaohsiung Medical University Chung-Ho Memorial Hospital, E-Da Hospital, and other local organizations on a clinical trial to be conducted in Taiwan on a projected 20-25 ethnic Chinese patients. The Taiwanese trial is expected to produce results by May 2010.

"Over the last two years, we've burned through two-thirds of our capital," says Chang. That is, since taking over 355's clinical trials, TaiMed has used at least NT$600 million out of its NT$1 billion registered paid-in capital. That doesn't include the US$40 million (NT$14 billion) Phase III clinical trials (which require at least one thousand participants) and the US$20 million it will take to put the drug into production and get it to market.

With regard to the next step in 355's development, Chang says, "No one has tens of millions of US dollars just lying around. So we'll take the Phase II results and either seek a partnership with a major pharmaceuticals makers, or sell the rights outright." He reveals that the company is already talking to Pfizer, GlaxoSmithKline, Roche, and Bristol-Myers Squibb (the number-one, -three, -five, and -11 drug makers worldwide by sales in 2007).

Doesn't anyone in Taiwan have enough capital to inject funds into the first biotech firm the government invested in following the passage of the Act for the Development of Biotech and New

Pharmaceuticals Industry?

"Even if the government invested up to its 40% legal ceiling, the remaining 60% would still have to come from the public," says Chang. He pauses. "But raising tens of millions of US dollars from the public is easier said than done." That's especially true in Taiwan, where the biotech and pharmaceuticals industry hasn't even existed for 10 years yet. Chang observes that there's also a significant difference between American and Taiwanese investors in terms of their thinking and attitudes.

"Drugs that make it into Phase II clinical trials have a success rate of about 50%," says Chang. "Americans see these drugs as having investment value, as being worth a roll of the dice. Look at American biotech company IPOs. Most don't even have products on the market yet!"

"On the other hand, Taiwanese tend to want to see your products and your revenues before they put up any money." In Chang's eyes, these differences are the result of differing investment cultures and notions of risk. He understands why so many domestic biotech firms feel they have to produce health foods and dietary supplements to balance the books, but says that TaiMed is currently focused entirely on producing new drugs for the treatment of contagious diseases and has no interest in developing sidelines.

Michael Chang points out that Taiwan's biotech industry not only lacks capital, it also lacks drug-development personnel. Drug development requires people able to evaluate drug safety, design clinical trials, manage chemistry manufacturing and controls (CMC), etc. Scientists who do basic research are no help here. "They don't even know where their research money has gone!" exclaims Chang. An R&D team working on a new drug at a typical major American pharmaceuticals firm has at least 20 drug developers, including three to five core PhD-level researchers earning about US$90,000 (NT$3 million) per year. "The lack of willingness to offer high salaries is another key issue," says James Chang.

TaiMed has a firm grasp on one rung of the biotechnology and drug-development ladder, and is climbing tenaciously upwards. But how should we feel when we begin hearing reports on the success of 355's Phase II trials? Proud? Or saddened that we'll soon be losing it?