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A Step-by-Step Guide
So, you want to build a high rise. Maybe you’ve got a couple hundred million dollars burning a hole in your pocket and an acre or two of vacant land in Kakaako, and you’re wondering: How can I get in on the action? Right now, a half-dozen high rises are going up around town, and another handful getting ready to break ground. So, just in case you were thinking of adding your own giant condominium tower to the Honolulu skyline, we’ve made it easier for you by putting together this step-by-step guide.
The obvious approach would have been to follow the construction of a single high rise from beginning to end. Unfortunately, the typical high rise takes almost three years to build, and that’s not counting the many years it usually takes for permitting or design. But we didn’t want you to have to wait that long.
It turns out that, as part of its Ward Village development, the Howard Hughes Corp. has three high rises going up right now, all within a couple of blocks of one another, and all in different stages of construction. Waiea is almost complete; Anaha still has about six months to go; and Aeo is just coming out of the ground. That gave us a convenient way to telescope the process of high rise construction, dividing it into three stages. Along the way, we focus on parts of the construction that highlight just how much you’re going to have to depend on distant, often unseen partners to build your high rise.
COMING OUT OF THE GROUND
Before you start to build, you have to prepare the site. If you’re lucky, you start with bare dirt. More likely, you’ve got old structures to demolish, and pavement or old concrete slabs to remove. Even then, you’re probably not done. Much of Kakaako was built on low marshland. Aeo’s property, for example, was only a few feet above the water table. To gain a little elevation, the general contractor, Layton Construction, trucked in thousands of tons of gravel fill, then spent weeks compacting the ground so it would bear the enormous weight of the building. That also makes it possible for the backhoes to trench so you can bring in utilities from the street.
In a sense, though, construction starts with a soil scientist boring test holes in the ground. This is crucial, because your skyscraper is going to perch atop scores of narrow concrete piles that reach as far as 90 feet below the surface. These are augur-cast pi-lings, meaning they’re drilled into the ground with a powerful augur, then, the resulting holes pumped with concrete as the augur is removed. While the concrete is still wet, a cage made of reinforced steel bars – rebar – is lowered into the hole. Once the concrete cures, you’ve got a piling.
It’s the friction of the earth against the rough surface of these pilings that actually holds your skyscraper in place. That’s why you need so many. It’s also why the soil engineer is crucial. By studying the soil beneath the building, she calculates how much friction it will generate. That determines how deep you have to bore the holes for your piles. In some places, it might be 60 feet; in others, nearly 100 feet.
The deeper you have to dig, the more time it takes and the more concrete and steel you have to use. That all costs more money.
Once the pilings are in, they’re tied together by pile caps and grade beams. “Grade beams” is a misnomer, because they eventually lie below grade. Trenches are dug to expose the tops of the pilings, then lined with plywood or steel formwork, and filled with concrete and rebar. When the concrete sets, the formwork is removed and the trenches backfilled with gravel and dirt.
Pile caps are similar, but they tie together pilings that have been clustered to support major load-bearing features, like the elevator shaft or structural columns. Once the grade beams and pile caps are in place, the slab can be poured to tie the whole structure together.
Congratulations, your high rise has come out of the ground.
Congratulations, your high rise has come out of the ground. Thus begins the rhythm of construction. Floor after floor, formwork is built over the stubs of walls and structural columns. Rebar cages are fabricated and lowered into place. Utilities are led through conduits and ductwork. Then comes the slurry of concrete. The floors are poured, and the formwork filled, and the walls gradually rise, always with a toothsome row of rebar jutting out the top, ready to accommodate the next course of formwork and concrete. In fact, this is where it becomes clear that, although your high rise may ultimately look like it’s made of glass and steel, at heart, it’s a colossus of reinforced concrete.
One striking feature to most modern high rises is the engineering in the floors. They may look like simple slabs, but technology has evolved to make them thinner so you need less concrete and can have more headroom and more floor space to sell. You’re going to use the same method to strengthen your floors that they do at Anaha: post-tensioning.
Concrete is heavy and, when you pour a big slab, it tends to sag in the middle. This creates tension in the concrete and, while concrete is very good at handling pressure, it doesn’t take tension well. (That’s why concrete is always reinforced with steel.) To correct for sagging, hundreds of powerful cables are run through conduits in the floor and the concrete is poured over them. When the concrete is hard enough, jacks are used to pull the cables tight and the ends are secured to the edges of the floor. The effect is like a trampoline, with the post tensioning putting the concrete into compression instead of tension. In the old days, it used to take 14 days for the concrete to get hard enough. With modern concrete, the floors are ready in two to three days, greatly accelerating construction.
One key feature of high rise construction is the ability to pump concrete to the upper floors. That requires a massive pump and a giant, articulating boom to deliver the concrete to every point on the floor. The pump can stay on the ground, but the boom is attached to the pump by a large- gauge pipe that runs up the inside of what will eventually be the elevator shaft. That’s because the boom has to climb to keep up with construction. To accommodate that upward movement, it’s mounted on top of a self-climbing platform that also fits inside the elevator shaft. It’s a massive machine – 40 feet long, 12 feet wide and three stories tall – that uses hydraulics to hoist itself up tracks that are temporarily bolted to the walls of the elevator shaft. The construction crew often fit out the lower levels of this contraption with a microwave and bathrooms, using it like a temporary lunchroom, says Larry Schrenk, the director of construction in Hawaii for Howard Hughes. “On really big skyscrapers, they actually put in a Subway sandwich shop so the crew never has to come down.”
When the last floor is poured, the platform is disassembled and lowered to the ground by the crane.
So, your high rise has topped off.
The last floor (which is actually the roof) has been poured. The windows are all in. Now, it’s time to make the space livable. In some ways, this is the part of the process that most resembles the building of single-family homes.
To frame the interior walls, steel studs are bolted to brackets that have been attached to the ceilings and floors. Plumbers and electricians rough in the utilities. Then come the armies of drywall workers. The sheetrock is screwed to the studs. It’s mudded and sanded several times, then primed and painted. The ductwork is connected to the HVAC system. The hardwood floors are installed and the tile-work finished. Carpenters come to hang the cabinets in the kitchen so the appliances can be fitted into place and hooked up. It’s all very familiar to anyone who’s ever watched a house being built.
But there are still differences. For example, some of the penthouses at Waiea have a private swimming pool on the lanai. That calls for pool masons and specialty plumbing. Another example is the floor. Despite intensive efforts by the contractors to get the concrete even when they pour the floors, they’re rarely level. “You can’t imagine how it snowballs if you have a floor that’s even just an inch out of level,” says Howard Hughes’ Larry Schenk. “You’d be able to see that in each room. The lines where the walls or cabinets meet the floors would go up and down.”
That’s not acceptable, particularly if you’re building a high-end condo like Waiea. To remedy this problem, once the walls are in, gangs come through and fill the low spots with an easy flowing layer of mortar. The high spots get chiseled away. This takes place all over the building, because you can’t install the hardwood or the tile until the floors are absolutely level. “We literally spend millions of dollars just getting things back to flat,” Schenk says.
Sometimes there are special considerations. Howard Hughes wants Ward Village to be the largest LEED certified community in the country. That imposes restrictions on the construction process. For instance, the ductwork and blowers for the air-conditioning system are put in fairly early in the finishing process, but they all have to be sealed in plastic. If the ducts and gratings were left exposed, they would likely be filled with dust during the drywall installation. But your AC system will have to be dust-free if you want LEED status. So the plastic can’t come off the ductwork until the construction is almost done.
One other thing: If you’re building a luxury high rise, like Waiea or Anaha, your buyers will often want custom finishes. That means you’ll be working with boutique suppliers and will need a way to track and store the products they send you. In other words, you’re looking at coordinating with more supply chains. And you’ve got to make sure the right products end up in the right units. To ensure that happens, every unit has its own “bible” hanging on the door. This folder can run to several pages and lists specifications for all the finishes in that unit.
When you build your own high rise, you also have a “bible,” albeit a figurative one. It contains the building plans and architectural drawings; the spec sheets and supply lists; and the schedules, with their critical path analyses and Gantt charts. Nowadays, all this information is digital, credited in programs like AutoCad or Revit. If you were to print them all up, though, they would come to thousands and thousands of pages. Sadly, there’s no shorter way to explain how to build a high rise. So we’d like to close our little guidebook with an admonition you often see on products: “Some assembly required.”
Please see instructions before you begin.
UNDERSTANDING THE SUPPLY CHAIN
The Concrete World
Your concrete is part of a vast, international industry.
By volume, it’s the most traded man-made substance on Earth, yet it has a deceptively simple composition: gravel, sand and cement. The gravel and sand provide the strength; the cement binds them. Cement production involves baking a mixture of crushed limestone and clay at 1450˚C to produce quicklime, which is mixed with a few other ingredients to create a hard substance called clinker. The clinker is then blended with a small amount of gypsum and ground to a find powder: the famous Portland cement.
Although Hawaiian Cement is one of a handful of local companies that mix and sell concrete, it’s the only source of cement in the Islands. All its cement is from Asia Cement. This massive Taiwanese conglomerate delivers as many as 10 shiploads a year to the deep water port at Kalaeloa. Last year, that came to $23 million of cement.
Hawaiian Cement has a pretty sophisticated system to handle all that cement. When it’s unloading a bulk carrier, the fine powder is moved pneumatically, sucked like a fluid from the hold of the ship and pumped into a pair of, hemispheric storage tanks that tower over the docks.
From there, a computerized overhead pneumatic system allows the company’s drivers to load the trucks themselves. In boom times, as many as 90 trucks a day pass through the Kalaeloa facility.
Of course, by weight, concrete is mostly aggregate – gravel and sand.
Hawaii, despite its famous beaches, has a shortage of sand. Hawaiian Cement has to import that from British Columbia, where’s it’s quarried from ancient dunes beneath the spruce and fir forests. About three times a year, a bulk carrier brings in about 40,000 metric tons of sand; so much that it takes 50 trucks five days to cart all of it from Kalaeloa to the Halawa facility.
In lesser quantities, Hawaiian Cement imports other ingredients. Certain chemicals can be added to concrete to make it flow better, or cure faster or slower. Some federal contracts require the use of fly ash, a byproduct of burning coal, as a substitute for some of the cement in concrete. All of these products are made elsewhere, adding to the layers of people involved in building your high rise.
The only local ingredient in your concrete will be the gravel. At its Halawa facility, Hawaiian Cement quarries, crushes, and grades millions of tons of gravel a year. Since the aggregate is what gives concrete most of its strength, this local basalt is what ultimately holds your high rise up. And, in an industry that’s famously dirty (worldwide, cement production accounts for 7 percent of human-produced greenhouse gases), Hawaiian Cement runs a surprisingly green operation. Concrete, for example, is water intensive – both for mixing and for dust suppression – but Hawaiian Cement recycles non-potable irrigation water from a nearby farm. They also scrupulously monitor Halawa Stream to make sure runoff from the gravel yard doesn’t alter the pH of the water. They even accept old concrete, crushing it to recycle the aggregate.
Concrete has to be tested. It takes as much as 50,000 cubic yards of concrete to make a high rise. That means mixing thousands of batches of concrete. Because of subtle irregularities in the cement, no two batches are necessarily alike. But your concrete has to meet strict engineering standards. It’s particularly important that the concrete harden quickly to keep construction on schedule.
That requires testing, says Gavin Shiraki, sales manager for Hawaiian Cement’s Concrete and Aggregate Division. “The contractor has a third-party lab that checks the concrete on a daily basis,” Shiraki says. Hawaiian Cement conducts similar tests. For every batch of concrete, several samples are taken and formed into four-inch cylinders. Then, at intervals, those cylinders are crushed in a powerful press to measure their strength. Only when the concrete reaches its prescribed hardness can you remove the forms and jack stands and move on to the next floor. Before you complete your high rise, thousands of these little concrete cylinders will be crushed.
It Looks Like It’s All Glass
The dominant feature of a high rise is frequently its glass facade.
In fact, with a curtain wall, sometimes that’s all you can see. Not surprisingly, that makes glass one of the project’s larger budget items. “The glass contract for Anaha is about $30 million. That’s over 10 percent of the total cost of construction,” says Larry Schenk.
So, if you want to understand why building a high rise is so expensive and complicated, the glass is a good place to start.
When you build a single-family home, most of the key elements are available at your local hardware store. In fact, the house was probably designed around the specs of standard windows, doors and hardware. That’s not the case when you’re building a high rise. Each high rise is unique and everything is made to fit. Especially the glass. As Schenk points out, “None of the exterior glass of Anaha is off-the-shelf. It’s all custom.”
All that customization means that, to build your high rise, you have to deal with an elaborate, highly specialized supply chain.
First of all, the technical name for modern plate glass or window glass is “float glass.” The term refers to the manufacturing process. For most of the 20th century, plate glass was made by flattening a blob of molten silica sand and a few other ingredients between a pair of steel rollers. This technique was cheap and yielded a relatively smooth surface, but the resulting panes of glass still had to be polished on both sides to be truly transparent. This was time-consuming and expensive. Then, in the late 1950s, an Englishman named Alastair Pilkington devised a quicker, cheaper approach. Instead of using metal rollers, the molten glass was poured evenly onto a bath of molten tin, where, because of the two materials’ difference in density, it floated like oil on water. Because the glass spread evenly over the tin bath, it was perfectly smooth on both sides. The thickness could be controlled by modulating how quickly the molten glass was poured onto the tin, and how long it took to cool.
Acccording to Dennis Jean, the senior project manager for AGA, the glass contractor for Anaha, the float glass for the building is manufactured by a California company called Guardian Glass at its Kingsburg plant. Guardian adds a tinted reflective coating to the raw glass to make it more energy efficient. Sometimes, it also adds spandrels to make it opaque. Then, they ship the glass to the next company in the supply chain: Northwestern Industries in Yuma, Arizona.
At NWI, the glass is cut to size and fabricated into individual window units. Each unit is composed of two panes of quarter-inch glass, with a half inch of space between them, and enclosed around the edges with a polymer seal. Sometimes, argon gas is injected into the space for additional insulation. These finished units are then trucked to AGA’s plant in Livermore, California, where they’re fitted into custom-made aluminum frames, packed into custom crates called “bunks,” and shipped in containers to Hawaii.
That’s the easy part.
A key design feature of Anaha is the curved glass at all four corners of each floor. If your skyscraper is going to use curved glass, that adds another step to the supply chain. Instead of Yuma, the raw glass is shipped from the Guardian factory to Standard Bent Glass, a specialty glass fabricator in Pittsburgh. There, each pane is heated until it’s plastic enough to bend over special forms. Only after the glass conforms to the proper radius can they fabricate the individual, double-paned units. Those are then installed in their custom aluminum frames, crated and shipped to Honolulu.
Getting the glass here is only half the job. It still has to be installed. On site, AGA’s local glaziers are responsible for the custom-made mounting brackets and molding that hold the windows in place. They also install each window. For curtain walls – the kind where the entire surface of the building is glass – they bolt the windows to aluminum brackets that were embedded in the edge of each floor when the concrete was poured. In this system, the weight of the glass is carried entirely by the brackets. For “window glass,” the weight of the glass rests on top of the floor or a wall; the brackets merely hold it in place.
The whole contraption is fabulously complex. “For Anaha,” Jean says, “each glass panel has 147 different parts: brackets, bolts, screws, glass, etc.” Maybe more to the point, almost every one of those 5,000-plus panels is unique.
Onyx Has Its Own Specialists
If you want to build a high-end skyscraper, you have to include high-end finishes.
Each of those has its own supply chain, often with tentacles that reach around the globe. For example, the designers at Waiea wanted to use book-matched slabs of pink onyx to line the walls of the showers in several penthouse units. It turns out, though, there aren’t many sources for pink onyx. The giant slabs in Waiea came from an old, family-run quarry in Iran. But the trip from the mountains of Persia to Kakaako is circuitous. Bruce Kumove, whose company, BMK Construction, is responsible for the onyx, walks us through the process.
It starts with a man named Raoul Luciano, a Swiss stone expert who acts as a sort of third-party inspector and quality-control consultant. “This guy is the best,” Kumove says. “He did the stone at the new World Trade Center in New York and the stone for the Getty Museum. He’s been in the business for 35 years and has offices in London, New York, Los Angeles and Houston. This is all he does.”
Luciano’s main job was to make sure Waiea got onyx that would work for book-matching. That means taking a thick slab and slicing it into two thinner slabs, then opening them, like a book, so that the vein patterns in the onyx radiate symmetrically from the centerline. Onyx is quarried in giant blocks – in this case, with nine-foot faces – so it’s hard to assess the color on the inside. “Luciano hand-picked which blocks to use so they would mirror properly,” Kumove says.
Although the Iranian quarry had the best pink onyx, it wasn’t able to finish the stone to the standards Waiea required. “Once Luciano selected the blocks,” Kumove says, “they were put on 40-foot semi-trailers. They were so large that, if you were lucky, you could get three blocks to a trailer.” Then, the blocks were trucked through Turkey and Eastern Europe to Italy. It took six months to get the stone from the quarry in Iran to Italy.
Processing the marble took another eight months. The big blocks were cut into slabs using a gang-saw. This is a gigantic industrial device with a rack of evenly spaced saw blades at the top and a hydraulic lift at the bottom. It works by setting the onyx on the lift and hoisting it inexorably through the scything rack of saw blades, cutting the stone as clean as sliced bread. Then the slabs are carefully numbered so that adjacent slabs can be used for book-matching.
Cutting onyx is slow, but it’s not the only time-consuming process, Kumove says. “Onyx is a very unstable and brittle material. It cracks very easily because it’s full of cavities. So, once they cut the book-matched slabs, they have to fill the cavities with epoxy and polish it. They also apply a layer of epoxy and mesh to the backs of the slabs. That’s why onyx is such an expensive stone: it’s so difficult to work with. There’s also a lot of wastage. You might get 20 slabs out of a block, but 50 percent might be waste. And it takes a lot of time for all this to happen.”
Even after the onyx is crated and shipped, the international nature of the stone industry doesn’t end. “There aren’t a lot of people that understand how to deal with book-matched onyx,” Kumove says. “It takes experienced marble masons. To make sure the job is done right, we have a special crew that we built especially to handle these slabs. Most of them are Ukrainian.”
CHOREOGRAPHING THE WORKERS
The job of your general contractor is to organize all the different construction activities. Every subcontractor needs space and time for staging and loading. They need to be able to work without interference from other subcontractors. They have to be able to get supplies when and where they need them, so they need some of that scarce crane time.
And it’s not just the subs that need coordinating. As the contractor, you’ve got to deal with moving utilities, traffic stoppages and temporary structures to protect pedestrians. You’ve also got to respect the needs of your neighbors, some of whom may also be tenants.
For example, to make sure Pier 1’s and Nordstrom Rack’s stores would still be able to access their loading dock, Howard Hughes designed Anaha so the bottom level had enough vertical clearance for a semi-trailer to pull in under the building and do a three-point turn.
As each newly poured floor cures, work surges forward on the floors below. Each floor is divided into distinct areas, and crews rotate through them to do their work in the proper order. A gang comes through to mark the profiles of the non-load-bearing walls and permanent furnishings on the floors. Other gangs rough in the plumbing and electric. Still another gang comes through to install the windows. And all of this work reaches a crescendo after the glass goes in. Once the floor is weather proof, the finishing can begin.
TMT: Big Glass and the Changing Focus of Astronomy
See my interview with Solar Impulse pilots Bertrand Piccard and Andre Borschberg in Smithsonian’s Air & Space Magazine.
For centuries, people around the world knew that chewing on the bark of certain willow trees could ease the pain of a toothache or a migraine. By the mid-19th century, scientists in France and Germany had isolated the chemical, salicylic acid, responsible for willow bark’s analgesic and anti-inflammatory qualities, but it proved too harsh on the stomach to be of real medicinal value. Then, in 1897, a German chemist named Felix Hoffmann synthesized a purer, less irritating form of the natural compound. This new chemical, acetylsalicylic acid – better known as aspirin – became the best-selling drug of all time and is still the foundation of the multibillion-dollar corporation we now know as BayerAG. In a modest way, a similar story may be under way in Hawaii.
Twelve years ago, scientists at Cardax, a small biotech company nestled in the Manoa Innovation Center, synthesized a form of astaxanthin, a naturally occurring chemical found in shellfish and micro-algae and, like aspirin, a powerful anti-inflammatory. The natural form of astaxanthin is already a well-known dietary supplement – sometimes called a nutraceutical – believed by many to reduce the threat of heart disease. Kona-based Cyanotech, for instance, is a major manufacturer. But CDX085 – the latest in a suite of similar Cardax-patented compounds – is so much purer and more potent than natural astaxanthin, and the number of potential uses so much larger, that Cardax’s team believes it may become the next billion-dollar drug. They could be right.
Despite all this promise, Cardax’s path to success has been long and complicated and is far from over. Like so many startups in the life sciences in recent years, Cardax has been in a life-or-death struggle to find enough money to continue to operate. For the company to follow the traditional developmental route for startup drug companies, investors may have to pony up more than $100 million to conduct the expensive Phase-2 and Phase-3 clinical trials necessary for FDA approval of a pharmaceutical drug. So there are still many hurdles for Cardax.
But, last April, the German pharmaceutical giant BASF finally exercised a longstanding option to become the exclusive licensee of Cardax’s nutraceutical. Then, in October, Cardax announced it would use an arcane device called a reverse merger to go public. That succeeded in attracting millions of dollars in new investment for the company, setting in motion a plan to have a still unnamed nutraceutical product on the market by the end of 2014. So the company may finally have turned the corner.
All of which makes the ongoing saga of Cardax and its promising family of anti-inflammatory compounds a good introduction to the current state of biotechnology, venture capital and the evolving world of drug discovery.
To make sense of the Cardax story, you have to understand a little about inflammation. Almost all chronic diseases are inflammatory, including heart disease, osteoarthritis, diabetes and even some cancers. But inflammation itself isn’t a disease. It’s the body’s natural response to heal damaged tissue and defend against unknown pathogens. The redness and swelling associated with an infected cut or a case of strep throat is just the body’s attempt to isolate that infection and promote healing. In a tip of the hat to Celsus, the Roman encyclopedist, medical science still characterizes inflammation by the four cardinal signs: tumor, rubor, calor and dolor –swelling, redness, heat and pain. (The Greek physician Galen, no poet, added a fifth characteristic: “functio laesa” or loss of function.)
Inflammation may cause discomfort, but it’s an essential function of our immune system. There are two kinds of inflammation, though. Acute inflammation, despite the name, is the normal swelling and pain associated with minor infections. Physiologically, though, it’s astonishingly complex. When tissue cells are damaged, they release histamines and other chemical signals that mediate the body’s inflammatory response. This causes cytokines, small proteins in the bloodstream, to induce a dilation of the veins, bringing more blood to the injury. That makes an infected cut turn red. The dilated veins also become more porous, which allows plasma to leak through the vascular walls into the surrounding tissue. That causes swelling. Along with the plasma comes a flood of cells from the immune system called leukocytes, including bacteriophages that directly ingest bacteria, and enzymes that attack the structure of the pathogen. As the infection or injury abates, the body returns to normal. This type of acute inflammation is typically brief and effective.
But the inflammation associated with chronic disease is a different story. Rather than stem from a specific event, like a wound, chronic inflammation appears to be the result of the low-grade irritation of whole bodily systems, such as the cardiovascular system in the case of heart disease or the respiratory system in the case of asthma. Similarly, chronic inflammation isn’t a reaction to a specific pathogen; rather, it seems to arise from more or less permanent stimuli, such as smoking or chemicals in the environment. That may be why diseases associated with chronic inflammation are so much more prevalent today than in the past.
Modern medicine has done a good job dealing with the infections and communicable diseases that used to be the primary causes of death. In 1850, the life expectancy of an American at birth was only 38 years – largely because of the high level of infant mortality associated with childhood diseases. But, because of the advent of antibiotics and vaccinations in the 20th century, the average life expectancy today is over 74 years. As we’ve begun to live longer, though, chronic diseases have overtaken infections as the leading causes of death.
It’s unclear though, whether inflammation is a cause or an effect of chronic disease. “That depends,” says Deepak Bhatt, executive director of cardiovascular programs at Brigham and Women’s Hospital in Boston and a member of Cardax’s scientific advisory board. “For arthritis, I think it’s largely the cause of disease, because inflammation in the joints can cause pain, damage or even disfigurement in the joint space. In that case, an anti-inflammatory drug would be expected to directly influence the disease process. In cardiovascular disease, it’s a little less clear, but I think the majority of cardiovascular experts think there’s a causal relationship between inflammation and the disease, as opposed to inflammation being some kind of ‘innocent by-stander’ effect.
“My own feeling is it’s probably a little of both. There are cases where smoking or high cholesterol, for example, can damage the inner lining of the arteries – what we call the endothelium. That can certainly lead to inflammation in the arteries and the accumulation of plaque, which can cause heart attacks. But there are also people who are exposed to all those risk factors but exhibit no signs of inflammation or cardiovascular disease. So, sometimes inflammation may be the result of cardiovascular disease, and there are cases where inflammation is the primary bad actor.”
At the cellular level, chronic inflammation is the result of something called “oxidative stress,” the buildup of an excess of molecules called “reactive oxygen species.” These so- called “free radicals” are a normal product of the metabolism of cells. “Under healthy conditions, the body has ways to deal with free radicals,” says Cardax CEO David Watumull. “Some reactive oxygen species are even used by the immune system to attack and kill pathogens. But with chronic disease, an excess of free radicals begins to cause inflammation and, ultimately, cellular damage.”
This is what’s now thought to happen in athereosclerosis, a common form of cardiovascular disease. Oxidative stress causes inflammation of the cells lining the arteries, which induces the buildup of plaque. It’s plaque that causes heart attacks and strokes. Antioxidants like astaxanthin appear to provide a vehicle to remove free radicals from the cell, although the use of antioxidants to prevent disease is still controversial.
What makes Cardax’s compounds differ from other antioxidants is how efficiently they work. In highly magnified X-ray diffraction images of cell membranes, it’s possible to compare the antioxidant activity of Cardax’s compound with other antioxidants. In a 2007 paper in the journal Biochimica et Biophysica Acta, scientists reported that they found that, while other antioxidants damage the integrity of the membrane, or provide only a partial membrane spanning, CDX085 bridges the cell membrane completely, dramatically reducing the number of free radicals inside the cell. Just as important, CDX085 appears to be incorporated in the mitochondrial membrane, the most important site for free-radical production in the cell.
This might explain the unusual effectiveness of the Cardax compounds in animal studies. Although there are plenty of anti-inflammatory drugs available today, including some of the most profitable pharmaceuticals on the market, most of these compounds can be surprisingly toxic, especially when taken in high doses or for long periods of time, as is usual for chronic disease. That’s why the TV ads for pharmaceuticals, even blockbuster drugs like Lipitor or Viagra, can be so scary. On the other hand, in pre-clinical tests, the Cardax compounds appear to have had no side effects. In the industry lingo, they’ve shown “no known dose toxicity.” If that holds true in clinical trials on humans – and, given the long history of astaxanthin as a nutraceutical, there’s no reason to think it won’t – this new class of anti-inflammatory drugs could treat a wide range of diseases. That’s part of whyCardax looks so promising.
Then, of course, there’s the size of the potential market for Cardax compounds. CDX085 was patented as a treatment of cardiovascular disease – specifically, it reduces the level of triglycerides in the bloodstream, a precursor to heart disease – but CDX085’s sister compounds have been tweaked to treat osteoarthritis, diabetes, cognitive decline and other inflammatory diseases. These are all enormous markets. For example, in 2013, the pharmaceutical giant AbbVie (formerly Abbott Laboratories) sold more than $10 billion of Humira, a popular anti-inflammatory that originally targeted rheumatoid arthritis.
There’s also the nutraceutical market, which includes unregulated products like vitamins, enzymes and herbal remedies that are mostly sold over the counter. Nutraceuticals have some restrictions. Because they lack FDA approval, only limited claims can be made about their uses and efficacy. This makes them less lucrative than pharmaceuticals, which can make specific therapeutic claims. As Watumull points out, “If the FDA allows you to put ‘for pain associated with osteoarthritis,’ your market penetration will go way up.”
Nutraceuticals don’t have that option. But that doesn’t mean nutraceuticals are small potatoes, especially if they have a history of safe usage. “As a dietary supplement,” Watumull says, “we think the best comparison for Cardax is chondroitin/glucosamine, a nutraceutical commonly used to treat osteoarthritis. It’s marginally efficacious at best, but it still sells about $2 billion a year, because it’s safe. So, you have these enormous markets out there for safe anti-inflammatory drugs.”
As a pharmaceutical, he says, the numbers for the Cardax compounds are even more eye-opening. “We asked the members of our scientific advisory board, a panel of unpaid medical experts who serve as independent third-party advisors, ‘What percentage of your patients do you estimate would take this drug?’ We thought that something like 10 percent would be great; the smallest number anyone gave us was 90 percent. They told us, ‘You don’t understand how desperate we are for a safe, effective treatment.’ So, if you’re asking, ‘Who is the market for our compound?’ the answer is: Anybody who has an inflammatory problem.”
The question is: If Cardax is such a good bet, why aren’t they already a big success? The answer, as always, is money.
It’s expensive to be a biotech company. If you’re developing a new drug, those costs can stop a company in its track. For example, the natural next step for Cardax would be to subject its compounds to human clinical trials. But Phase-2 clinical trials, usually conducted on just a couple of hundred individuals, can cost as much as $20 million. Phase-3 trials, which can involve thousands of individuals, can bring those costs to more than $100 million.
“Big Pharma,” the giant pharmaceutical companies that have dominated drug development for the last hundred years, will often buy or invest in companies with promising Phase-3 drugs. The Phase-2 part of drug development, though, has traditionally been funded by venture capital, and the VC world is in flux.
“They just aren’t funding life sciences anymore,” Watumull says. “They used to fund pre-clinical trial companies and take them through clinical trials, but they stopped doing that about five years ago to any meaningful extent.” In part, he says, it’s because of the risk. But it’s also because of changes in their own incentives as VC funds have grown.
“Back in the 1980s and 1990s,” Watumull says, “the largest funds raised like $200 million. If you’re a VC, you collect 2 percent of that as your annual fee. That’s just $4 million a year for expenses.” Divvied up among all the fund partners, that’s not a lot of profit for such a risky investment. Thus, to get the high rate of return that investors and the VCs themselves expected, they had to gamble on early-stage companies. That used to be the essence of the VC model: If you invested in 10 startups, five would fail, three would break even or make a modest profit, but one or two would be home runs and generate the 15X or 20X yields that made venture-capital investment viable. It was a numbers game.
“But, if you have $4 billion under management,” Watumull says, “that 2 percent management fee is now $80 million a year. That’s without doing anything. So now, VCs are less interested in investing in small, early-stage companies like Cardax. Why take the risk? Most of the companies they invest in today are Phase-3 deals.”
Watumull doesn’t think this is sustainable. The VC model depends on the high returns provided by those high-risk startups. If you remove the riskiest investments, you also remove most of the reward, and the returns on the less risky investments just don’t justify the risk. He explains it this way: “A 7 percent upside for a successful company, against a 100 percent downside for a company that fails – that doesn’t work. The amount of risk the VCs perceived was just wrong. If you wait until a company’s in Phase-3 trials to invest, you have to put up at least $100 million, so there’s no way you can make 10 times or 20 times on that Phase-3 company. But you can still lose 100 percent of your investment.”
Watumull says this miscalculation is reflected in the recent financial performance of the major venture-capital funds. “Their returns have been mediocre at best over the past five years. That means VCs also haven’t been able to raise as much money. Now, it’s all going to private equity capital.”
Nevertheless, Cardax tried to get VC funding. Like executives at most promising startups, Watumull and his team traveled around the country, making pitches to dozens of VC firms. Cardax even had some success, attracting interest from Ivor Royce, an icon in the VC world whose own life science companies, Hybritech (bought by Eli Lilly and Co.) and especially IDEC (merged with Biogen), more or less created the San Diego biotech community, one of the largest in the country. But the VC model had already begun its decline.
“He really wanted to do a deal with us,” Watumull says. “He even gave us a term sheet, but he was unable to raise money for another VC fund. Here’s a guy who’d made literally hundreds and hundreds of millions of dollars in biotech, but he was unable to do it. That was two years of our time that we spent going in the direction that he wanted to go, but it didn’t lead to anything. That was very discouraging.”
Cardax is far from alone in its VC woes. In fact, it’s become a kind of parlor game among biotech company executives to try to explain the flaws and failures of the VC model. And, although there are signs of improvement, VC money remains tight.
Watumull cites Bill Hambrecht, the billionaire founder of Hambrecht & Quist, the investment bank that underwrote the IPOs of Apple Computer, Genentech, Adobe and Amazon: “I was at a meeting in New York where he gave the keynote speech, and he said, ‘If you’re a biotech company today and you are not already VC funded, the probability of you getting VC funding now is probably almost zero.’ ” That means biotech companies like Cardax aregoing to have to come up with a new mechanism to bring their drugs to market.
Historically, the exit strategy for most biotechs has been Big Pharma. A company like Cardax will come up with a good product, VCs will fund its early development, then a giant pharmaceutical company like Merck, Pfizer or GlaxoSmithKline will either buy the company outright or license its technology. Even when biotech companies go public, as more than 30 did last year, they tend to partner with one of the Big Pharma companies to market their product. So, Big Pharma has always been the ultimate cash cow for emerging biotechs.
But the view is different from Big Pharma’s perspective. The centerpiece of drug development for these big companies used to be their enormous research and development departments. Some of the larger companies employed tens of thousands of chemists, doctors and engineers in R&D, and for decades, these departments churned out incredibly successful drugs. Right up through the 1990s, Big Pharma was one of the most profitable industries in the country.
In the last decade or so, though, all that began to change. The R&D departments became increasingly bureaucratic and slow to develop new ideas; promising drugs that the companies invested hundreds of millions of dollars in failed in clinical trials; and, while the pipeline for new products became weaker and weaker, the patents on some of their most profitable drugs began to expire. Something had to change.
Many people, including Cardax’s David Watumull, blame Big Pharma’s woes on something called “targeted drug development.” Instead of developing drugs from promising compounds that already exist in nature – salicylic acid, astaxanthin, curare, etc. – targeted drug development looks at the molecular pathway of a disease or a medical condition, and uses sophisticated technology to invent artificial compounds that interfere with or enhance that pathway. For example, cholesterol is produced through the regular metabolic activity of certain cells in the liver. An enzyme called HMG-CoA reductase regulates the rate of cholesterol production by binding to specific receptors on the membranes of these liver cells. Lipitor, a popular statin used to reduce blood cholesterol, works by binding to that same cellular receptor, preventing the HMG-CoA enzyme from binding there and stimulating more cholesterol production.
In other words, instead of looking at the whole animal, targeted drug development focuses on the structures of single enzymes or proteins. The idea is to create small organic molecules that either stimulate or inhibit the function of the large biological molecules in some metabolic pathway. It’s all about understanding the architecture of these molecules.
Targeted drug development has been wildly successful in helping us understand how disease works at the cellular and molecular level. And, because it relies on sophisticated tools, like computer modeling and high-throughput screening techniques, this approach has also industrialized the drug-discovery process, making it faster and more efficient. But critics say targeted drug development has a fatal flaw: Because it’s focused so narrowly on a single gene or a single target on a specific protein, it fails to account for how a new drug will interact with the whole body or with other systems in the body.
The result, Watumull says, is an inevitable rash of side effects. “For chronic diseases, like osteoarthritis, you need systemic answers, systemic solutions.” That used to be a controversial opinion, but it’s increasingly common in the biotech world.
“Scientifically, targeted drug discovery is very elegant,” says Deepak Bhatt. “And it makes sense in an intuitive way. But ultimately, it may not be highest yielding approach to drug development anymore.”
Like Watumull, Bhatt thinks we don’t know enough about how drugs work in the body. “We do have a fairly refined understanding of the role some receptors play in the development of certain diseases. What we don’t have is a refined view of what targeting that particular receptor will do to the whole system. The problem is, by antagonizing one system, there might be counter-balancing effects in another system or a couple of other systems.” While Bhatt acknowledges that targeted drug design has produced important advances in the treatment and diagnosis of some diseases – notably for rare and genetic disorders – he basically agrees with Watumull: targeted drug design has hit a wall.
“The pattern of drug discovery that’s evolved over the past 10 to 15 years or so,” he says, “may no longer be that productive. There aren’t as many blockbuster discoveries as there once were. So, maybe the approach that Cardax is espousing is a good one. If compounds like astaxanthin already exist in nature, if they’re durable and there’s an evolutionary reason to conserve them, that could be an appealing way to screen for different drug therapies. Certainly, that type of compound might have real appeal to patients. Patients love the idea of natural treatments.”
Nevertheless, targeted development is still the dominant paradigm of drug discovery for Big Pharma. And that spills over into the VC world, where investors want to make sure the product they’re selling is attractive to the pharmaceutical companies that must ultimately buy it.
“These guys do tend to all run after the same stuff,” said former Cardax chief medical officer Fred Pashkow, not long before he died. “VCs get enamored with the same kinds of sexy science that Big Pharma does – things like RNA interference, which affects genomic translation, or personalized medicine. They’ve poured a ton of money into the genomics thing that really didn’t turn into any new drugs. There’s been a lot of chasing after big science projects in the VC world. In my judgment, the VC model has not been working for years.”
At Big Pharma companies, the response to the laggard pace of drug development has been to slash their own R&D departments. In the last five years, the industry has laid off more than 100,000 of the chemists, bio-engineers and medical doctors that it takes to run a modern drug-research program. Instead, Big Pharma is betting it can do better by buying companies that already have promising drugs in the pipeline. But, like the VC community, Big Pharma is mostly interested in products far down the development road. In effect, they’ve decided to pay more for their new drugs, but shift the risk of R&D to the small biotech companies.
Deepak Bhatt points out that this has major implications for how drugs are developed. “I think, in some respects, this is good for small companies like Cardax,” he says, “because it creates an opportunity that really wasn’t there before. That’s a plus. But these small companies now also have to take things a lot further than they had to in the past. In the past, many times they would just do very basic work on a compound, and Big Pharma would take over the R&D. Now, those larger companies really want data from further along in the research continuum before they decide to invest in a compound. For small companies, that requires you to have a different set of skills. You have to be able to build things.”
That’s the convoluted Catch-22 Cardax is in. It needs investors to pay for clinical trials, but it needs clinical trials to attract Big Pharma investment. It has what it feels is a low-risk product, but it still doesn’t match Big Pharma’s risk profile.
One Big Pharma executive, speaking on background, tried to explain why a company like Cardax still looks risky to Big Pharma: “You can’t always tell if a product is going to take off or not. It’s not simply a matter of being ‘first to market.’ Being first sometimes just means that your R&D costs are tremendous. While you’re blazing a trail through the regulatory and approval process, the FDA may get worried and say, ‘Increase the size of your study.’ If it’s a new target, they don’t know what the risks are, so they may make you the guinea pig. But a company that’s second or third or fourth to the market already knows the approval path. They can say, ‘We don’t have to do it the way Pfizer did it or the way Merck did. If the FDA made them start over and use a bigger study group, we can just start out that way.’ Similarly, if the bigger study group turned out not to be necessary, the FDA may not require it for the new company. That means their costs can be lower. For example, if you look at the statin market, Lipitor wasn’t first to the market; it was like fifth or sixth.”
But Watumull sees the risk/reward equation differently. “We’ve done a significant amount of animal studies that give us confidence that the clinical studies will be successful,” he says. “With target-based drug study, the risk is much higher. But the active drug in our compound is the same as in astaxanthin, so the probability of success is much higher than if the drug was coming in de novo. Certainly, using one or another of our compounds with animals, the efficacy has been very strong. That’s what gives everybody here confidence. But you don’t go from theory to human clinical trials without money, and the last few years it’s certainly been challenging finding enough capital coming in. That’s the main thing.”