News on trends and issues in the biopharm and pharmaceutical industry. Commentary on current events,clinical pipelines, facility expansions, competition, technology, legal and economic matters. M&A and licensing activity across the globe.
I am a Director of Research and Devopment for a leading supplier to biopharmaceutical producers. The views expressed are mine. I do not speak for any company or corporation.
Fierce Biotech today published the top 15 sites in the US for biotech venture capital in 2013. This according to figures from the National Venture Capital Association (NVCA) as compiled by Thomas Reuters. The findings are not terribly surprising in terms of the rankings -- except it might be a mild surprise that San Francisco outspent Boston/Cambridge on the VC front last year. Otherwise, the rankings look to make sense. Here is the summary below in terms of place, dollars and numbers of deals. The total dollars for the US was $4.5 B.
San Francisco - $1.15 B - 84 deals
Boston/Cambridge - $933.6 M - 84 deals
San Diego - $387.0 M - 36 deals
Washington DC - $319.6 M - 10 deals
Oakland, CA - $261.6 M - 20 deals
Seattle - $238.1 M - 13 deals
New York City - $135.1 M - 9 deals
Philadelphia - $133.4 M - 17 deals
Northern NJ - $131.8 M - 7 deals
Raleigh-Durham, NC - $118.4 M - 17 deals
One could argue that SF and Oakland shoudl be combined which would change the number one slot to $1.41 B and 104 deals providing further separation from Boston. Although, I'm also not sure why NYC, Northern Jersey and Philadelphia aren't either one enitity or perhaps two but not three.
Now for a few factoids. In the Pipeline notes this morning that San Francisco and Boston with their combined total of $2.08 B is greater than Europe's $1.9 B total VC investment for last year. Los Angeles, which ranked number 14 on the list, was only 1% of the total cash spent by US VC in 2013. And, I can't help but note that Denver's $51.8 M spent on VC, ranking it at number 12 in the US, falls well short of the $96 M the Denver Broncos have set aside for one, Peyton Manning. Although as the joke goes, maybe he had a better year.
Fierce Pharma just published its annual list of the top 10 drug companies by revenue -- though the list is compiled by using ALL of a given company's revenue and not just the portion derived from drug sales. In that respect, it is not completely "pure" when some of the bigger firms with multiple divisions like J&J or Pfizer are included. Though it must be said most of these companies have at least some revenue from other divisions. Without further comment, here's the 2013 list:
J&J - $71.3 B, 2012 - $67.2 B, Rank 2012 - 1
Novartis - $57.9 B, 2012 - $56.7 B, Rank 2012 - 3
Roche - $52.8 B, 2012 - $47.8 B, Rank 2012 - 4
Pfizer - $51.6 B, 2012 - $59.0 B, Rank 2012 - 2
Sanofi - $45.0 B, 2012 - $47.8 B, Rank 2012 - 6
GSK - $44.1 B, 2012 - $39.9 B, Rank 2012 - 7
Merck - $44.0 B, 2012 - $47.2 B, Rank 2012 - 5
Bayer - $26.0 B, 2012 - $24.3 B, Rank 2012 - 10
AZ - $25.7 B, 2012 - $27.9 B, Rank 2012 - 9
Lilly - $23.1 B, 2012 - $22.6 B, Rank 2012 - 11
There you have it. The ranking's are roughly the same as 2012 except Abbvie fell out after the company split (was 8th in 2012) and Lilly elevated a slot. You can also see that Pfizer and Merck lost ground in the rankings largely due to revenue losses from patent expirations of top drugs. Pfizer, Sanofi, Merck and AZ also suffered overall declines in revenue in 2013 although in some cases their ranking was unaffected by the decline.
Will Seattle Genetics' ADC drug, Adcetris, become a blockbuster (sales > $1B annually) over the next several years? Yes, say some analysts. But, in order to do so, it most certainly will have to be approved for additional indications for which it is currently being tested in clinical trials. As it stands, the drug achieved sales of $269 M for the last sales year.
In addition to successes so far with Adcetris, SeaGen is adding to its own drug pipeline -- with 7 new molecules -- and has also started working with a new platform that employs a novel cytotoxic agent called pyrrolobenzodiazepine (PBD) dimer. The latter has been included in a new program aimed at CD33 (SGN-CD33A). The program also employs a new linker and a site specific conjugation technology. SeaGen hopes to parlay that into more technology agreements with the likes of Pfizer, AbbVie, Genentech, GSK, etc.
More deals equals more upfronts, milestones and royalties to keep fueling SeaGen growth. See Biopharma-reporter.
A new McKinsey report, written about in Fierce Biotech and In the Pipeline, is stirring the pot once more regarding pharma so-called mega-mergers by stating that these have worked to create shareholder value. Derek Lowe, in particular, questions this in his blog citing the disruption to R&D pipelines/their productivity, internal politics jockeying for position, downsizing, and plain drama in people's lives. He further cites John LaMattina's support for this view as a key exec who lived through Pfizer's acquisition of Wyeth. He also pulls out the argument that we'll never know what might have been produced by the separae entitites -- an opportunity cost as it were. I see this latter argument as more speculative and less compelling. It might have been worse too.
For their part, McKinsey says shareholder value was created as evidenced by higher EBITDA, higher ROIC and increasing economic profit -- two years post-merger. The analysis was done on 17 deals larger than $10 B. McKinsey suggested that these should be divided into two camps as well -- deals that were consolidations and deals that were aimed at growth creation. Not surprising to me, consolidations kicked off way higher economic profits two years -- post merger. C'mon though. It is only TWO YEARS. This is the pharma industry where normal investment horizons are 15 years or more. The consolidated deals largely paid off due to accelerated revenue (for some), reduction in COGS, reduced overhead (i.e. we fired staff), R&D consolidation and rationalization (i.e. we fired staff). In other words, the dreaded S-word kicked in, synergies, which meant we cut programs and staff to pay for the merger. It did pay in this time span though, with a 60% growth in economic profit.
On the flip side, the so-called growth oriented mergers actually caused a 3% decrease in economic profits over the two year window. They didn't have enough people to fire. But they did increase trading multiples by nearly 60% for the acquirer, or 20% relative to top 20 peers. The market rewarded the promise in these deals. Maybe the promise will deliver and maybe it won't -- but from my perspective this cohort is more interesting to watch over an expanded time frame more conducive to the actual operation of the pharma business. The consolidations actually caused a 5% drop in multiples. Whereas their excess returns were positive over a 3 year period they were ALL negative by year 5. That suggests to me that these may NOT be judged successful over a more appropriate time span. Growth platform deals are 100% positive (TRS = total shareholder return) over that same 5 year span.
So despite the headlines, I think the jury is still out. I don't think a pharma company's "success" is judged over two years.
It's official (sort of), Teva is on the public's short list of companies that are likely to be acquired. Rumors to this effect have driven the laggard stock up by more than 10% in the past few days. This comes on the heels of its rival Actavis buying up Forest Labs and amongst murmuring that Valeant is in the market to buy more assets on its way to a hoped for $150 B market capitalization. This is heady stuff.
For now, all we can really say about Teva is that it has a new turnaround CEO, it's talked about cost cutting to boost profitability, and obviously there are those in the investment and analyst community who are looking for it to be sold. So will it? See Fierce Pharma.
Helen Thomas, WSJ, today wrote about possible dangers coming if Big Pharma is going to cluster all its R&D spend around fairly few diseases. In doing so, she opines that they may have just traded developmental risk for marketing and thrid party payer risk.
Can everyone chase the same lead candidates? And do we need 33% of the R&D spend on inflammation and oncology applications that are only estimated to account for about 17% of te revenue in the market? On the surface that looks risky. Hep C and diabetes might also be two disease areas which have disproportionate activity given the size of the pie.
Yes, success breeds imitators but there's a limit as to how many can share. Too many sheep following the same path will likely result in some meeting the wolf's jaws along the way. See Fierce Biotech.
BioMarin has set the price for its newly approved drug Vimizim, a treatment for Moquito A syndrome, at $380,000 per year. At that price, it expects to garner about $500 M in annual sales and the drug clocks in with the 3rd highest overall drug price.
Orphan drugs, typically for very small patient populations, hold all the top spots for highest priced drugs. The top 5 are listed below:
All of these drugs achieve sales between $500 M and $2 B annually which helps make the orphan drug area attractive now to biopharmaceutical companies. Not surprisngly, it also makes the companies themselves attractive targets for acquisition rumors as all 4 above have been prominently mentioned by various analysts and industry pundits. See Fierce Pharma.
Now that Actavis has hit the mark with its acquisition of Forest Labs, analysts have turned their attention to others in the generic space to see how they might respond. That means Mylan, Teva and Valeant come under more scrutiny -- and are subject to rumor.
Valeant in particular has a stated goal to grow from its current, roughly $49 B value, to a top 5 spot at $150 B or more in the next few years. It is known that Valeant has had Actavis in its sights in the recent past. Now, it might just wait for the Actavis-Forest deal to complete and then go after Actavis in its new bigger and better form? That's one scenorio. See Bloomberg.
Other analysts have a different scenario in mind. They say that Teva would make a much better target for Valeant's affection. Teva, at $39 B itself, would effectively double Valeant's size if it were to be acquired. Teva's biggest investor, Soros Fund Management, recently upped its holdings in the firm by 5.7 M shares at a cost $373 M. Teva hasn't been a particularly good performer in the past several years -- is Soros looking for a payout from a purchase of the company versus organic growth? That's a possibility isn't it? See Fierce Pharma.
Today, Eli Lilly had good news to share about the performance on its oncology drug, ramucirumab, for the treatment of non-small cell lung cancer. In ths study, the mAb was combined with chemotherapy and docetaxel. The positive results ae welcme news for Lilly as the company has been plagued by a string of late stage failures over the past several years -- at a time where it is also bleeding revenues from drugs coming off patent. Ramucirumab has also had posiive results with gastric cancers. Now we wait on wo aditional studies for liver and colorectal cancers. Those results will dtermine if Lilly has a home run on its hands or not -- analysts estimate peak sales in the $1.5-$2 B range if the drug passes muster. See Fierce Biotech.
The news today is that Actavis has acquired Forest Labs for $25 B. The combned company will have sales of nearly $15 B and both specialty pharma products and generic drugs. The acquisition of Forest will also bring a larger R&D component to the combined company -- assuming no further changes are made on that front going forward. Forest recently cut R&D's budget by $500 M, including many layoffs. See Fierce Biotech.
The Forest acquisition represents another example where a Carl Icahn owned pharma investment has paid off through a sale. In addition to owership in Forest, Icahn has previously owned stakes in ImClone Systems that sold to Eli Lilly for $6.3 B in 2008, and in Genzyme Corp that sold for $19.4 B to Sanofi in 2011. Icahn has also had holdings with Amylin Pharmaceuticals that sold to BMS for $5.1 B in 2012, and has been an investor with Biogen Idec whose price has tripled in the past year. See Bloomberg.
A couple weeks ago, I published a piece from the Economic Times quoting an IMS study that predicted that India's drug market growth would slow to high single digits and that India would slip in the overall world rankings in market size from 8th to 11th. Today's Economic Times article quotes a Deloitte study that predicts India's drug maket will grow by 14.4% through 2016, at which time it will reach $27 B in size.
Deloitte says that India's growth will be challenged by several factors. "The outcome of of new product patents, drug price control, poor regulatory enforcement, inadequate health care infrastructure, shortage of skilled workforce, increasing patient expectations, ever-changing technology, and quality management and conformance to global standards act as critical barriers in delivering products and services in a sustainable manner."
Nevertheless, India has some things going for it. Namely, it has 119 manufacturing plants approved by FDA -- more than any other country. It accounts for 10% of global pharma production. It makes more than 400 different APIs. Deloitte says India has the opportunity to garner as much as $40 B in sales with 46 US drugs comping of patent by 2015.
The injunction issued by a Delhi court this past week will not prevent Mylan and Biocon from selling their biosimilar versions of Herceptin. It will however prevent them from referring to their drugs as biosimilar versions of Herceptin. Mylan criticized the ex-parte proceedings orchestrated by Roche and indicated that they "were given no notice of tese proceedings, nor were they given an opportunity to be heard in this matter." A sort of Indian kangaroo court I suppose. Myland says it will continue to manufacture and market its drug, Hertraz.
For its part, Roche says it has taken this action to ensure the "safety and efficacy of the drugs, as bioequivalents of Herceptin. As the holder of the Herceptin trademark we have a duty to ensure tha if a company claims its product is a biosimilar of or similar to our innovator product trastuzumab, that this really is the case." Roche is seeking clarification as to whether the two rival products actually met the criteria for biosimilarity.
Bicon says, "This proceeding is an atempt by Roche to protect their market monopoly and prevent Indian patients from accessing a more afordable trastuzumab." Biocon did not say whether it would still launch its product this month as previously planned.
Influential Goldman analyst, Jami Rubin, says Teva should sell off some of its parts now that it is faced with its biggest drug, Copaxone, going generic. This is not new for Rubin. She has previously advised Pfizer's Ian Read, and J&J's Alex Gorsky to do the same. When Gorsky demurred, she recommended shareholders sell their holdings. She has also supported Merck and Novartis in their strategic reviews to split up their holdings.
Teva's stock has languished for the better part of the last two years and its current desire to cut $1 B out of R&D spending will go only so far say analysts. Rubin advocates for more. Call it the "anti-string of pearls" strategy as Teva undoes what it previously put together under Levin and others following its acquisition strategy for growth. Amazing how fast strategy can fall out of vogue, eh? See Fierce Biotech.
Instead of Sanofi simply relying on Regeneron and its pipeline to provide the behemoth a source of new drugs through collaboration over the next several years, let's just say they will buy out Regeneron (similar to Genzyme deal) and see what happens? No reason to wait until the last minute. See Fierce Biotech,
Last week, I reported IMS projections that India's overall market size and world ranking would decrease from number 8 to number 11 in the next couple years, largely based on slowed domestic growth rates. A new report by India Ratings & Research says that India's drug exports will be greater than its domestic sales by 2015. This is due to the relatively modest, 10.4%, growth rate internally as compared to a projected continued robust 22% rate for exports.
The report says that $92 billion in drug sales are expected to come off patent in the next few years which will continue to spawn opportunity for India's drug industry -- particularly for generics and biosimilars. India has the most US FDA approved facilities outside the US. This point may be obscured by the recent problems some India sites have been having but this report says they don't expect any material negative impact due the recent citations by FDA. Thw WHO and EU also have approved many drugs sold from India. See The Economic Times.
Gene-by-Gene will not challenge Myriad in court. The company, one of the first to offer direct to consumer gene tests for BRCA 1/2 stopped its offer in the face of a suit by Myriad seeking to enforce several of its patents -- not previously contested in the original Supreme Court decision last year. Gene-by-Gene now agrees to cease its offer of BRCA gene tests. This may be the first of many similar company decisions as Myriad has sued 4-5 other companies on similar grounds. Gene-by-Gene decided not to spend its time and money in court with Myriad and others are likely to conclude the same. See Patent Docs blog.
That didn't take long. Healthcare advocates in India decryed the Dehli Court's decision to grant an injunction to Roche blockng sale of Biocon's and Mylan's version of Roche's Herceptin while the court hears Roche's appeal later this month.
The advocacy group says Roche is only tryng to protect its monopoly in India. It furthers stated that Roche's actions prove its contention that MNCs in India want to penalize innovator Indian companies and use biosimilar guidelines to protect its own interests rather than really worry about safety and efficacy of proposed biosimilars.
A Biocon spokesman said, "We are confident that once we are heard by the court, this injunction placing certain limits on promotional activities will not stand."
For the record, Roche says that it is not trying to block the approval of these drugs but simply object to them being called biosimilar versions of Herceptin with what roche terms to be inadequate proof. See The Economic Times.
Roche surprised everyone when it dropped its patent application for Herceptin in India last year rather than be at risk of surrendering a compusory license in that market. It seemed to be surprised itself when two months later Biocon and Mylan announced they would be launching biosimilar versions, CanMab and Hertraz respectively, of Herceptin in February of 2014. Roche has recovered by filing suits to stop the launch.
In its suit, Roche has charged that Biocon and Mylan did not do any clinical phase I or II trials to support their drugs claim of being biosimilar versions of Herceptin. They say there is no public record of these trials. They further sued the Drug Controller General of India (DCGI) for allowing a launch to proceed. Roche charges that neith company has followed India's guidelines for biosimilars, and the DCGI approved Bicon's trial designs even before guidelines were in place. They say that the drug regulators approval for biosimilars couldn't have come about so soon. Roche emphasizes that its suit is not a patent challenge, nor a challenge to the drugs approval. It is a challenge that the drugs are marketing themselves as biosimilar versions of Herceptin and Roche feels that this hasn't been properly established under India's biosimilar guidelines.
Herceptin sold more than $6 B in 2013. It has sales of only $21 M in India however as patient advocates claim that it is too expensive for the market. Roche did allow Emcure Pharmaceuticals to produce a licensed biosimilar for 15% lower sales price. Biocon and Mylan say they will market their drugs at a list price that is 25% less than Roche's. Roche is clearly trying to protect its IP and maket share. They appear to have been surprised by India's rapid approval of a biosimilar once its patent application was dropped. Roche is now trying to use the other legal avenues at its disposal to block the introduction of these "biosimilar" versions of Herceptin -- saying that they did not get approved by playing under existing rules.
The New Dehli High Court agrees to the point that is has issued an injunction blocking Bicon's and Mylan's launches until a hearing can take place later this month. This will be one to watch. The case shows to me that governments/countries will actively look to get biosimilars on the market to reduce healthcare costs, and that the regulatory environment for biosimilar approvals will need to be worked out over time through the courts as the innovators seek to protect their IP investment and market share from premature erosion. See FiercePharma, The Economic Times, and FirstWordPharma.
AbbVie announced that it will be building a $320 M manufacturing facility in Singapore to produce oncology and immunology products from its current pipeline. This will be its first manufactuirng site in Asia. It has R&D sites in Tokyo and Shanghai. The new plant is expected to come fully on line in 2019 and will add 250 workers. An AbbVie spokesman said the new plant will help "ensure geographic balance and continuity of product supply as well as increased capacity" for its biologics and small molecule drugs. Clearly this makes sense --- and may even be a bit late -- given the big economic shift toward Asian markets that will continue for decades. See PharmaTimes.
According to EP Vantage, 2014 will shape up to be a lesser year for blockbuster introductions than was seen in 2013. They project that only 3 drugs slated for 2014 launch will actually achieve > $1 B in annual sales by 2018. Reportedly, 10 such drugs hit the market last year that will break the $1 B barrier within 5 years -- monster launches included Biogen's Tecfidera ($5.1 B peak) and Gilead's Sovaldi ($7.4 B peak). One wild card lies in the mix however. It may be possible that Merck and BMS could get their PD-1 drugs to market in late 2014 and these are predicted to hit blockbuster status (peak > $5.6 B) -- for now they aren't part of the 2014 estimate. Neither are any of AbbVie's hepatitis C therapies which could also squeak into 2014.
The three projected blockbusters for 2014 mentioned in the report are:
GSK's combination COPD therapy called Anoro Ellipta
Lundbeck's depression disorder drug Brintellix
Celgene's psoriatic arthritis drug Apremilast
Combined these 3 will hit a peak hovering around $4.3 B -- much smaller than even individual drugs Tecfidera and Sovaldi cited above. See Fierce Biotech.
Big Pharma is fed up with the Indian government. India has been on a bit of a crusade the past few years against the high drug prices charged for treatments for cancer, HIV, diabetes and hepatitis that are deemed to be beyond the means of the local populace. The result has been the denial/overturn of patents and or issuing compulsory licenses to allow lower price producers into the Indian market. This disdain for IP has the Westen drug makers MAD. As such, their trade association, PhRMA, has petitioned the US Government to downgrade India to a "Priority Foreign Country" with regard to intellectual property. This is the lowest ranking occupied currently by only the Ukraine.
India is currently on the Priority Watch List and is joined there by the likes of China, Indonesia, Pakistan, Russia, Thailand and Argentina. You can see many of these are among the fastest growing emerging markets -- particularly with regard to pharma. No doubt there are strong economic motives in play here. The Western pharma companies have fallen on harder times with regard to R&D ROI and feel they have spent signficantly to get new drugs to market. They don't want that investment diminshed by lack of patent protection in emerging markets. This is especially true in my view as they looked at these more "virgin" markets as potential sites to make up for their current sales shortfalls. Now the emerging markets, particularly India, are not playing so nice. See The Economic Times and Fierce Pharma.
Merck announced today that it will partner with 3 different large pharma companies to test its MK-3475 cancer immunotherapy with other durg combinations aimed at a variety of cancers. Merck will team with Pfizer on its drugs Inlyta and PF-2566 for multiple cancers. It pairs with Incyte and its drug INCB24360 against non-small cell lung cancer. And with Amgen and its anti-cancer virus talimogene laherparepvec. Merck will also look at 20 additional cancer applications through its own in-house R&D effort. This is a very hot target (PD-1) according to analysts and Merck is turning up its focus to try to win the race to the first therapies. BMS and Roche are te main competitors at this juncture with BMS seen as the leader in te field. See Fierce Biotech.
NIH's Francis Collins says they will be partnering with 8 drug makers in a $230 M effort to look for biomarkers and to define drug pathways for Alzheimer's, diabetes, rheumatoid arthritis and lupus. The 8 durg companies participating include: AbbVie, Biogen Idec, Bristol-Myers Squibb, Eli Lilly, GlaxoSmithKline, Johnson & Johnson, Sanofi and Takeda. Roche dropped out late in the game when schizoprenia was dropped from the initiative. Amgen dropped out as they have their own such program for diseases they are interested in, and purchased deCODE in 2012 to lead that effort.
Once again, it is a BIG idea along the lines of its Translational Medicine initiative that Collins and the NIH is spearheading. It's an attempt to tackle big issues with more resources than can be mustered by single entities. The goal is to create a sort of "Google Maps of human disease" and then clear the way for each company to try to exploit the uncovered joint information by producing drugs as fast as possible -- the incentive being first to market. NIH believes that it has developed a balanced system that maximizes the potential of each player involved. See Fierce Biotech and Bloomberg.
A new report from IMS Health projects that India will slip from the 8th largest pharma market as projected last year, to only the 11th largest as projected in 2013. IMS says this is due to challenging economic conditions in India that has slowed growth rates, and the fact tha India's currency has slipped against the dollar which in itself lowers revenue projections. IMS also says that China Russia, and Brazil continue to project strong gowth. See The Economic Times.
I also noticed a report this morning in Fierce Pharma that states Gilead is in talks with multiple Indian pharma companies to allow them to make a generic version of its hepatitis C drug, Sovaldi, for the India market. This suggests that Gilead doesn't want its drug patents to fall victim to a compulsory license in that country -- like other Western manufacturers have faced this past year. Gilead instead will offer licenses to 4 or 5 competitors to make generic versions of Sovaldi. This should greatly decrease the price $2000 vs $84000 per 12 week course, and make drug much more available in India. Gilead will collect licensing fees and royalties from those who license. This seems to be a smart way to control patent issues around the drug, and to maximize revenues in India while at the same time being PR friendly. It also seems to me that it will potentially drive down revenues of new drugs in the short term (may increase in longer term through market expansion) in India and add fuel to India's drop in the overall market size rankings as noted above.
Merck announcd today that it consummated a second deal with Ablynx that could earn the latter up to 1.7 B euros after milestones and commercialization. The deal calls for Merck to pay 20 M euros upfront and provide up to 10.7 M euros in R&D funding over the next year to Ablynx in exchange for access to their nanobodies technology. The research will be directed to predetermined targets that control immunomodulating functions as potential cancer therapies - an area of Merck focus and strength.
Ablynx is responsible for helping with discovery and Merck will be responsible for development, manufacturing and commercialization. This second deal comes n the heels of a 2012 pact between the two aimed at ion channel elements important to neurological diseases, and others like hypertension, diabetes and cancers. The current deal will allow Merck to build on its early clinical success with MK-3475 a seemingly potent cancer immunomodulator. See Fierce Biotech and FirstWordPharma.