Paul Gilbert and his team at MedAvante have staked their professional and financial futures on a revolutionary way to bring mental health drugs to market. For nearly three years they went without a salary so that they could give the company a head start yet keep the equity for themselves.

The four-year-old firm has grown in the last year from 10 to 45 employees. It has impressive funding from two dozen angels and has expanded for the fourth time, moving from 3,400 square feet at Bear Tavern Road to 11,000 square feet of Class A space at American Metro Center. With three of the top 10 pharmaceutical firms as clients, MedAvante has successfully helped conduct clinical trials for mental health drugs. Global patents on its method are pending.

Getting any new drug through clinical trials and approved by the Food and Drug Administration is expensive, but calibrating the effectiveness of mental health drugs is particularly tough. Unlike other therapeutic areas that have objective end points (Is the patient alive or dead? The bone is how thick?), the end points of a clinical trial for a mental health drug are soft and subjective (How depressed is Mrs. Smith, more or less depressed?) "As a consequence, mental health trials are very difficult to do, and this is reflected in the failure rates," says Gilbert, who has boundless enthusiasm for MedAvante’s prospects.

Gilbert speaks with the confidence derived from having clambered over the stumbling block of dyslexia on his personal road to success: "The management team went nearly three years without taking a single dollar of salary. We `drew down’ our retirement, our college savings, and we put our kids into public schools. We suffered so much to get this far, there is no way we are not going to make this a successful business."

MedAvante has centralized one small element of the clinical trial for mental health drugs – the ratings. Psychologists and clinical therapists must interview and rate the mental state of each patient before, during, and after the drug is administered. All the raters are full-time MedAvante employees, and they conduct the interviews via videoconferences.

"MedAvante came up with a way to standardize a process that used to be scattershot," says Ernest Mario, one of the influential funders of MedAvante. Mario is now the chairman and CEO of Reliant Pharmaceuticals in Liberty Corner, and he formerly ran GlaxoSmithKline and Alza. "When clinicians are talking to someone about how they feel, it is hard to calibrate the results. MedAvante gives you as close to an apples-to-apples comparison as is possible in this difficult-to-quantify field."

"Our method will reduce a great amount of noise in the data," says Gilbert, "so pharmas will require far fewer patients in a successful trial – saving money, time, resources, and allowing them to get a drug to market sooner." How the new system will work:

Recruiting patients: The current practice is to employ one or two professionals at each of a hundred independent research sites to admit patients to a clinical trial for, for instance, depression, anxiety, schizophrenia, bipolar disorder, Parkinson’s, substance abuse, or Alzheimers. The clinicians doing the assessments of which patients should enter are not necessarily highly credentialed medical professionals, Gilbert says. "Often they have inadequate clinical training and experience."

Some of the sites are associated with medical centers, but most have to use advertising to get patients into clinical trials. These centers get paid by the number of patients they enroll, so it is economically advantageous for them to enroll as many patients as possible. "We have collected data showing that some enrolled patients don’t belong in the studies," says Gilbert.

Instead, MedAvante will set up teleconferencing facilities at each test site and take total control of how the interviews are done, using only its own experienced clinicians. Of MedAvante’s 29 expert centralized raters, 80 percent are PhD clinical psychologists. Because MedAvante will have no financial stake in how many patients are admitted, the number of unqualified patients will drop, he predicts: "By divorcing the assessment from the research site, we can prevent trials from failing when everyone knows the drug really works," says Gilbert.

Efficacy interviews: The current practice is that the patients in a Phase III clinical trial return to the research site to be interviewed on whether the drug is working. In these "double-blind" trials, nobody knows – not the patient or the test site or the interviewer – whether the patient is taking the new drug, an already approved drug that is known to work, or a placebo (a sugar pill).

But when the same clinicians do these interviews week after week, both parties develop "an expectancy bias" that can skew the results. Plus, the rater will presume the patient is getting better if he sees her for the eighth time. Meanwhile she has developed a "therapeutic alliance," and she is looking to please the rater. "Our studies show that, due to the therapeutic alliance, there is a placebo response on the sixth visit," says Gilbert.

In contrast, MedAvante’s contract with a pharmaceutical firm will require that a different interviewer see the patient for each visit. Gilbert says this will be more objective. "The interviewer won’t know if it is the first visit or the last visit," says Gilbert. "We will have no economic incentive and no therapeutic alliance, so we can produce as objective and bias-free an assessment as possible."

The questions will be standard, but a good clinical interviewer knows how to probe and follow a line of inquiry, says Gilbert. If a person with schizophrenia says she is staying in seclusion, that may mean she is staying in her institutional room because she fears for her safety – or that she wants to remove herself from social interaction. "Without the clinically appropriate probing, the interviewer won’t find the insight gems that will produce an accurate assessment," says Gilbert.

Post market interviews. After the drug has passed its Phase III trial and is on the shelf, Phase IV trials can expand the indications for the drug. If it has been approved for depression, will it also work for some other condition, such as schizophrenia?

Also after the drug is on the market, doctors are supposed to report problems that their patients have, and the pharmaceutical companies are supposed to assemble and record these safety assessments in a timely fashion. (Just what gets counted as "timely" is the issue in the Vioxx dispute, and some say that Merck should have moved faster to report the aggregated problems with Vioxx.)

Gilbert says that the FDA suggested that MedAvante centralize these safety assessments. "If we do the safety assessments in the same standard fashion, we will have a better ability to pick up on problems."

The set up cost for videoconferencing: $8,500 per site, plus monthly connectivity charges, and it will be passed through to the pharma firms. That’s peanuts, says Gilbert, when you consider that pharmas spend $9 to $15 million on a trial, and half of the trials will fail.

"On 51 percent of the occasions in which an FDA approved anti-depressant or anxiety drug is used in a large clinical trial – it fails to show it is any more effective than the placebos," Gilbert warns. "This means that the pharmaceutical company may be `killing’ the next Prozac before it got its turn."

Won’t the local sites object to losing some of their business? "Some of the research sites will acknowledge that this is better science," says Gilbert. "From an ethical perspective, lowering the failure rate for a drug trial means that fewer people will have to be exposed to the placebo." Of 600 patients in a Phase III study for schizophrenia, for instance, 200 would receive only the placebo, and going without medication could constitute a serious problem.

"Other local sites will concede that they are concerned that they are giving up some revenues," says Gilbert. "But we are taking away only one of dozen activities: They will still take the medical history, dispense the medicine, get the informed consent, and measure the weight, and so on. MedAvante will put in the video conferencing facility and the connectivity and do the assessments, but everything else will remain the same."

If the local sites decline to participate with MedAvante, they lose the opportunity to do the follow-up studies, so Gilbert is confident they will go along with the MedAvante’s program.

Gilbert was not always so confident. He suffers from severe dyslexia and admits to being in the bottom of his class in the sixth grade.

He grew up in Manhattan, and where his father was CEO of an Englewood Cliffs-based irrigation company that sent irrigation systems to agricultural plantations around the world. One grandfather had been in the diamond business but died young, and the other had a successful apparel enterprise. "All we talked about at the dinner table was business," says Gilbert.

"My brother sailed through high school and college, while I spent my early academic career in the principal’s office. I learned Winston Churchill’s motto – never, never, never quit. In seventh grade (at the Dwight School in Manhattan), I began to work two or three times harder. I got a lot of tutoring to get past the issues with dyslexia, and my mother was so patient, she did hour after hour of drills."

Gilbert’s brother went off to Harvard and is now a Wall Street analyst. Gilbert majored in economics at Bowdoin, Class of 1986, and then earned his Harvard MBA. He worked at Booz Allen, Johnson & Johnson, Church & Dwight, and, most recently, Princeton eCom, where he was vice president of marketing and strategy.

He met his wife at a GMAT test preparation class for business school. She headed a division at Princeton Review. "She gave me an extra 10 minutes on the practice test and called my tutor twice a week to inquire how I was doing." A Wharton graduate with an MSW from Columbia, she and her husband live in Skillman and have two children. "One thing I hope to teach them is never ever quit.

Gilbert based his success on energetic enthusiasm, and he admits that this trait can be a hindrance. "We have presented to over 500 people across the pharmaceutical industry, and in three or four cases I have pushed a little too far. I have had to recalibrate. I have to accept the pace of innovation (pharmaceutical companies are notoriously late in innovation) and realize it is more important to win the long-term war."

He says he has established a workplace culture, "a meritocracy of ideas," and attributes this to not having a very big ego, the result of the dyslexia. "I grew up saying it is better to win with others than to fight it alone," says Gilbert. "Everyone’s office is exactly the same size. The quality of the idea is important, not the individual. None of is as smart as all of us. We are in it together." All employees get stock options, and those who did not perform have been removed.

The trio who started the firm – Amy Ellis, Livingston Johnson, and Gilbert – needed that certitude to bolster their spirits during the early years. The company was incubated in the offices of one of its investors, Carter Sednaoui of Accel Partners at Palmer Square. Before moving to Bear Tavern Road and then to American Metro Center, its first real office was in Research Park, and all along the way it encountered resistance from change-averse pharma firms.

"Some said, `Great idea but how do you know you are the team to do it?’" reports Gilbert. Others said, `Come back in three years,’ or `You need more proof points.’ And then there were the spouses who said, `You are out of your minds.’"

What helped, in addition to the strength of their conviction, was their list of investors, 24 men and women who have run major organizations, including a former vice chairman of Merrill Lynch (Launnie Steffens), two former top executives of Bristol-Myers Squibb (Kenneth Weg and Sam Barker), the retired president of Commodities Corporation (Roch Hillenbrand), and a former executive vice president of Summit Bank (Steve Paneyko).

Though the company at first wanted to service all clinical trials, it found its niche in mental health drugs, otherwise known as central nervous system (CNS) therapies, two years ago.

The investors expect to be able to cash out by the year 2010, but, says Gilbert, that is not the mission: The mission is to change the way all mental health drugs come to market.

Though about one in five Americans suffer from a diagnosable mental disorder in a given year, pharmaceutical firms can no longer afford to invest $800 million to bring a drug from lab to market, says Gilbert, quoting researchers at Tufts. Some say the real cost is double that, when you include the cost of capital.

"If we execute right, we will change for the better the lives of millions of people suffering from mental health disorders, their families and caregivers," says Gilbert. "You can see by the world-class advisors and investors that have come together behind MedAvante that we have an opportunity to build something enduring.

Says Gilbert: "People believe that this team has the heart to do whatever it takes. In five years we expect to have accomplished our mission." – Barbara Fox

MedAvante Inc., 100 American Metro Boulevard, Suite 106, Hamilton 08619; 609-528-9400; fax, 609-528-9401. Paul Gilbert, CEO.

A Second Opinion

Jeffrey T. Apter, psychiatrist and president of Princeton Medical Institute on Bunn Drive, focuses on clinical trials for mental health drugs, and he questions whether the pharmaceutical companies will switch to the MedAvante system. He prefers to do his own patient interviews and does not like to see different parts of the clinical trial separated from one another.

"We appreciate that MedAvante is trying to reduce the placebo response rate," says Apter. "But the more work that gets farmed out to different vendors, the more detached the patient may get from the research site. In the real world, we as investigators would prefer to work directly with the patients."

Apter, who went to medical school in Johannesburg and did his psychiatry residency at Washington University, is a thought leader in psychiatric research and has been involved in many of the pivotal studies on central nervous system (CNS) compounds for depression, Alzheimer’s, and anxiety disorders.

Apter questions whether patient retention will be as strong with videoconferencing interviews. Onsite doctors need to have some relationship with the patients in order to keep them in the study. "It’s a tightrope we walk all the time," says Apter.

Under the MedAvante system the on-site doctors will continue to have some contact with the patient, but that will be reduced, because they will no longer do the ratings. "Doing the rating scale enables the onsite physician to get a better assessment of how the patient is progressing, evaluate mental and physical well being, monitor side effects, and check for any deterioration," says Apter.

Part of the advantage, for the patient, of being in a study is the contact with the doctor at the study site, Apter points out. That contact continues after the study closes. "Because the patient has been with us during the study, I feel an ethical responsibility to offer after-care for three months after the study at no charge," he says. "A centralized rating service has no tie-in to the patient."

Princeton Medical Institute, 256 Bunn Drive, Woodlands Professional Building, Suite 6, Princeton 08540; 609-921-3555; fax, 609-921-3620. Jeffrey T. Apter MD, president.

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