The Big Red Biotech Blog

May Recipe of Month

My daughter eats a lot of vegetarian items and many of these in some way, shape or form involve the use of squash - usually with fine results. With that in mind, I present Butternut Squash Quinoa Cranberry Salad.

• 1 cup of quinoa
• 2 cups vegetable broth
• 1 medium butternut squash peeled, diced in 1/4 in cubes
• 1/2 medium red onion diced
• 1/2 cup dried cranberries
• 1 sprig rosemary
• 2 tbsp olive oil
• 1 tbsp butter
• 1/2 tsp sea salt
• 1 tbsp cider vinegar

In sauce pan, bring quinoa and vegetable broth to a boil and then simmer for 25 min.  Remove from heat.

Preheat oven to 425 degrees.  Add all other ingredients except the vinegar to a baking dish.  Coat ingredients with olive oil, sea salt and butter.  Roast for 20 min. until the squash is soft. 

Remove from oven and add vinegar.  Serve baked squash mixture over quinoa.  Eat with mixed greens on side.

Posted by Bruce Lehr May 31st 2010.

Comparative Value Proof - New Drugs, Biosimilars & Generics

Last week, Mike Wokasch did two nice posts in his Pharma Reform blog dealing with the concept of "comparative value" for new drugs.  The first highlighted the concept and the second spoke to what it likely will mean to the design of clinical trials to prove value.

Mike explained that it used to be that earning regulatory approval was THE target for new drug programs. In today's environment, that may no longer be enough.  Today, not only does one need to gain regulatory approval one needs to be accepted by 3rd party payers (formularies, etc) as delivering comparative value over other options.  In fact, the 3rd party payer hurdle may become the more important as we move into more managed and cost conscious healthcare.  No longer can companies depend on getting a drug licensed for market by being "the same as" or "not worse than" a competitor's product and expect to also be a shoo-in for payer acceptance. 

Companies will need to show true differentiation from competitors, and - here's the big one - also prove that this differentiating characteristic has true value for patients and payers.  The differentiation has to be worth paying for!  Clinical trials will need to be designed to generate the data to prove this difference is real and valuable.

This change in "value of healthcare" is not confined to the US -- it is global.  The value assessment will clearly pit generic (and soon biosimilar) competitors against branded products, as well as sharpen need for branded products in same categories to prove their worth.  It can't be assumed that "me-toos" are marketable.

This competition may play out in different ways.  In India, we've already had some controversy surrounding the issuing (or not) of patents to drugs that can't meet this differentiation/comparative value hurdle. In that market, the India Pharmaceuticals Association has strongly challenged whether drugs showing only monor incremental improvement without clinical benefit are worthy of patents. No patent protection - due to unproven value - creates much greater competition with generic providers.  A similar situation could be expected to develop in US and EU markets where the "value is not there".  The "non-value discount" will be decreased patent protection perhaps and decreased formulary acceptance - certainly decreased acceptance at a price premium.

We are already seeing tangible evidence of this in the market.  Generics now account for more than 75% of the prescription volume as they've proven their worth in reducing drug prices dramatically - i.e. providing the value sought by 3rd party payers.  With the new healthcare reform law, providing a pathway for biosimilars in the US, coupled with existing pathways for biosimilars in EU and the emerging pharma markets - this will create additional pressure to show value with bio-drugs too.  Last week,Teva/Lonza announced they will begin trials with a competitive product (TL011)to Roche's Rituxan for the treatment of rheumatoid arthritis.  Their product, called MabThera, is targeted to gain approval as early as 2014.

Teva expects its joint venture with Lonza, established in January 2009, to help it establish a position in the forefront of the emerging biosimilars field by developing, manufacturing and marketing a portfolio of biosimilars. Thus, challenges to Rituxan's comparative value will eventually come from Teva's new product and this is just the beginning.

The stage is set for the pharmaceutical industry to increasingly establish the comparative value of new products and to effectively "prove its worth".

Posted by Bruce Lehr May 31st, 2010.

EU approvals for Amgen’s drug Prolia (denosumab)

Amgen received news today that its drug denosumab, branded Prolia, received its first approval in the EU for the treatment of osteoporosis in women and bone loss in men following hormonal therapy for prostate cancer.

EU approvals for Amgen’s osteo drug Prolia - Pharma Letter.

Prolia has been viewed as an important drug to the company's future earnings and this must be viewed as good news back in California.

Posted by Bruce Lehr May 28th 2010.

Big Ministry Meeting: Why are India Pharma Groups Selling to MNCs?

I saw this in thepharmaletter.  The India Ministry of Health is calling an emergency meeting of domestic pharmaceutical companies to discuss why there have be an increasing number of India producers selling out to foreign interests as embodied by MNCs. 

This comes in the wake of this week's sale of Piramal to Abbott, coupled by fairly recent sales of Ranbaxy to Daiichi Sankyo, Shantha Biotech to Sanofi-Aventis, and Dabur Pharma to Fresenius Kabi.  Why?

"The meeting is an attempt by the ministry to find out the reasons behind the trend and to initiate steps, if needed, to overcome the impact of such take-overs, sources told PharmBiz."

Perhaps I'm slower than most - BUT - could it be the $MONEY$?  Doh!   

Posted by Bruce Lehr May 28th 2010.

Glaxo Open Source Initiative May Mean 'Open Sesame' to New Malarial Drugs

Open Innovation is a term coined by Henry Chesbrough.  The concept essentially means that firms use external and internal ideas, and internal and external paths to market - effectively companies do not rely solely on their own research but incorporate processes or inventions from other entities.  Open Source gmeans sharing of that information between parties in the collaboration - in commercial situations normally donate their resulting patent rights, donate to a common pool, or grant unlimited licenses. Open  Source has been very important to the development of software and it remains to be seen how it will be adopted in drug development.

The WSJ reported that Glaxo will try a "linux" open-source approach to drug discovery to enable researchers to speed development of new drugs to combat malaria.  The company just made designs for 13,500 chemical compounds available to researchers worldwide. The type of "open source" sharing will hopefully allow researchers to develop drugs faster than Glaxo working on its own. The data was generated by screening GSK's library of 2 million compounds for those that inhibited Plasmodium falciparum, the malarial parasite.  According to GSK's press release, this is the first time a pharmaceutical company has made so many compounds available free of charge.

The approach isn't new but is one of the largest attempts by a big pharma member to enable open source methods.  Other open source efforts include those from the non-profit organization Tropical Disease Initiative, a similar program is operating from an organization in India called Open Source Drug Discovery (OSDD) that is aimed at combating tuberculosis, and Pfizer made compounds available to researchers at a non-profit called Drugs for Neglected Disease Initiative.

Open Source discovery relies heavily on so-called "Virtual Pharma" composed of volunteer researchers, and in particular bright young academics, web-enabled collaboration spaces, chemical, biological and medical databases, and computational and experimental software platforms.  This has been enabled greatly by enormous advances in computing power.  Normally these programs rely on assistance from goverments, IT giants or philanthropic foundations to supply computer help. 

In the case of the GSK effort, three websites are used in the project - two are government funded and one, Collaborative Drug Discovery Inc (CDD), is funded by the Bill and Melinda Gates Foundation. The OSDD project relies on help provided by HP, Sun, Infosys and Nobel-winner Medecine sans Frontieres - to develop drugs 'in silico".

This all adds up to a very low cost model - no patents, volunteer labor, powerful database mining and virtual drug design. Increases in computing power and improved computational tools will make these methods even more powerful in the future.  Future developments that are still needed, include more work on genomic insights into tropical disease (need more research here), and drug candidates will need to be made available for development and production under open-source licenses.

The model looks feasible and needs to be tested.  Then we may find that it is "Open Sesame" to new drugs for treatment of orphan tropical diseases - like malaria.  Wouldn't that be a rich reward?

Posted by Bruce Lehr May 27th 2010.

Who Will Grab Fastest Follower Slot in Pharma Market(s)?

I read a good post in the Innovate on Purpose blog entitled, "The Fastest Follower is the innovation winner".  The premise of the article is that many of the pioneer innovators fall by the wayside after opening up a market but that the Fastest Follower, but not all fast followers, are the ultimate winners.  The Late follower feels safe and fights over the table scraps left by the pioneer and Fastest Follower.

Fastest Followers always win because they "understand the markets a pioneer opens are more rich and robust than the pioneer does, and who can rapidly create and test business models and co-create with the customers in that market."

Moreover, the Fastest Followers have "better ability at trend spotting, better ideas based on customer needs, and better prototyping and customer interaction."

This got me to thinking.  The World pharma market is changing rapidly.  Companies are restructuring and reinventing their business models, expanding their geographic reach, coping with new price and regulatory rules, grappling with biosimilars and generics competition and trying to figure out how to collaborate better with peers and a variety of outside partners.

This leaves a lot of ground unwalked. There is an opportunity out there for a few companies to be Fast Followers and according to this concept -- the ultimate winners in the pharma race - at least in their preferred segments.

So which companies are positioned to be the next Fast Follwer?  Will it be an established large company with such a track record or will someone new emerge from the pack?  Will a new emergent be more possible now with the myriad of changes menitoned aboe that are taking place now?

Who do you think the Fast Followers will be?

Posted by Bruce Lehr May 27th 2010.  

Stop Picking on Genzyme! Slight Tip of the Cap for Lumizyme.

Ok, for a day or so I will not harp on the negatives associated with its recent manufacturing woes or battles in the boardroom.

Today, I'll provide a small acknowledgement of success with the word of FDA approval for Lumizyme (alglucosidase alpha) for the treatment of Pompe disease.

So from me and the Bambino.   

Posted by Bruce Lehr May 26th 2010.

Developing Nations Won't Solve Big Pharma's Growth Troubles

Here's a piece from the PharmaGossip blog authored by Hester Plumridge that describes troubles Big Pharma is still likely to encounter if it relies solely on sales from emerging markets to fill its revenue holes. 

PharmaGossip: Developing Nations Won't Solve Big Pharma's Growth Troubles.

The piece makes several salient points:

1. Many large pharma companies already have upt to 25% of their sales coming from emerging markets
2. Growing sales do not equate with growing profits.  Operating profits for many of the big guys in this region average 25-30% lower.
3. Margins are lower in these regions due to a variety of factors - lower government spending, necessity of having to use a direct sales force (i.e. bans on ad use), greater generic & local competition.
4. Language and regulator complexities

As noted in the piece, nothing about selling more in an emerging region fixes a broken pipeline nor adds innovation.  The sentiments expressed in this post are very similar to ones I reblogged from PharmaTech Talk on May 12th here.

Again, it is clear tha these markets will be important to future growth in the World pharmaceutical industry, but it is also increasingly likely that they will NOT make up for all the deficits that many companies in the industry have in their portfolios/models.

Companies will still need to figure out how to bring innovative (value delivering) products to market regularly.

Posted by Bruce Lehr May 26th 2010.

Government Sets Rules for $1B in Therapeutic Discovery Credits or Grants

Let the games begin! Below is a link to the PharmTech Talk blog which itself provides links to goverment sites spelling out the guidelines for obtaining monies under the $1 B Therapeutic Discovery program.

PharmTech Talk » The US Treasury Shows R&D Scientists Some Love.

For those of you who'd like more of a summary, keep reading.  The points below were gleaned from articles by Steve Levy, Fierce Biotech and Stewart Lyman, Xconomy. 

Here we go with the highlights:

1. The program is NOT first come first serve. Applicants must get their information in betwwen June 21st and July 21st. The application is relatively simple and streamlined.
2. Separate applications must be made for each project for which a company is seeking money. 
3. Preliminary reviews of applications will occur by Septemeber 30th.
4. Initial credits or grants (for years 2009-2010) will be awarded by October 29, 2010.
5. All decisions are final.  There is no appeal on whether or not you receive an award or any dickering about its size.
6. There is a $5 M maximum award sixe per company, assuming a compnay can show it has $10 M worth of qualifying costs (50% match). 
7. The government will award a maximum of $1 B (at least that is story for now).

The goverment expects there to be 1200 applications filed.  BIO spokesperson, Ellen Dadisman said, "We expect the program to be heavily oversubscribed. I think that's an indication of its popularity and necessity."

Posted by Bruce Lehr May 25th 2010.

NIHer's Must Declare Financial $$$ Conflicts with Industry

As reported in ScienceInsider, the NIH has issued new rules requiring academic researchers to be more upfront about potential financial conflicts of interest they may have with industry sponsors of research, for example. Universities are also required to be more diligent in ferreting out and reporting such confflicts.

NIH Wants More (Not Total) Disclosure of Financial Conflicts - ScienceInsider.

The new rules come out of an ongoing probe by Sen. Charles Grassley of the Senate Finance Committee.  The Senator's committee recently uncovered several instances of researchers receiving both NIH funding and support from drug developers - but failing to properly disclose the relationship.

NIH Director, Francis Collins indicated that modern science requires collaboration between academics and industry but that such collaborations "need to preserve the public trust."  He further stated that "there clearly have been a few examples in the last few years that...could be perceived as coloring their judgment in projects they were involved in."  One prominent example is Charles Nemeroff, Emory University.

Under the new proposal, researchers who have a significant financial conflict (> $5000) need to report the situation to the university or institution employing them under the NIH grant.  This lowers the current threshhold from $10,000.   The researchers total holding must be reported on the university or institution website. Suspension or termination of funding to the University would be one penalty for non-compliance with new rules.

Full  disclosure of conflicts of interest - what a concept?  I endorse it!

Posted by Bruce Lehr May 24th 2010.

Queensland Government Lands Another One! Eli Lilly

As reported in Fierce Biotech, the goverment in Queensland, Australia has signed up Eli Lilly as a big contributor to its new venture fund.  Lilly will contribute $50 M to the fund, matched by $25 M in Queensland dollars, that is targetting a war chest of $250 M for VC biotech investments in the Asia-Pacific region.

The funding effort is meant to spur biotech development in Queensland as the goverment makes a big push. It is generally felt that the lack of venture funding has held back biotech development in Australia despite some leading science in the area.

Premier Anna Bligh explains that the government hopes to tap into a $20 B drug development industry in Australia by 2025. "This fund makes Queensland a key biotechnology hub in the Asia Pacific region."

Earlier this month,the Queensland government announced a $60 M deal with DSM to build and operate a new 70,000 sq ft, mammalian cell culture based CMO facility to support development and production of biotech drugs.

It looks like the government business development staff have been very busy.  This is following the Queensland biotechnology strategic plan 2005-2015 aimed at creating $4 B in revenues and 16,000 Queensland biotech jobs by 2025.

Posted by Bruce Lehr May 24th 2010.

It's All About FDA Transparency - Let the Sun Shine In

The FDA Transparency Task Force drafted 21 recommendations to increase the agency's transparency with regard to drug regulation - including providing more information on drug rejections, plant inspections, and safety and side effect information.  The agency is now in a 60 day period seeking public response.  See full report of the agency's intentions and actions to date in the New England Journal of Medicine.

Among the 21 recommendations are proposals to publish more information on drugs that are rejected by the agency including full text of agency response letters.  This is not only interesting to consumer groups but analysts and investors like to see full text to prevent company spin.

There is also a proposal to provide agency site inspections reports including site addresses and whether any Official Action, Voluntary action or No Action was indicated. The agency should share with the public the most common objectionable conditions or practices found in these inspections.

One of the more interesting proposals deals with Orphan drugs. This proposal suggests that when an orphan drug proposal is abandonned or terminated that the FDA indicate whether or not this was done for safety reasons. The agency is also asked to state whether or not the drug, if pursued, would represent an advance in patient treatment for this orphan disease in question. It is basically asking the agency to identify cases where the drug may have been dropped for business reasons and not safety. The agency could effectively encourage another firm to pick up the drug for development.

The FDA would also be asked to disclose relevant safety and effectiveness information on on investigational applications or for those seeking market application - if agency concludes it is in the public safety interest. This is particularly true if the agency believes this additional disclosure will help correct "misleading information about the product that is the subject of the application".

For full text of the Download FDA Transparency proposals.

Reactions are varied:

Scott Gottlieb, partner at Arcoda Capital and American Enterprise Institute Fellow, says "We should hav edone this a long time ago. The public deserves to see the agency's explanations for its decisions"

PhRMA official statement "Any proposal to to disclose information about medicines during the FDA review process should be carefully considered to ensure that the competitive development process remains intact to serve patients and the public health".

Of course, investors, analysts and competitors to name a few will be anxious to see this information. Joshua Sharfstein, the Task Force's Head, hastens to add that trade secret information will be withheld. He also notes that not all of the recommendations will be implmented and that some would require legislative action to be implemented.

References & More Information

Bloomberg.com Rejected drugs may may be disclosed by FDA for first time.

Boston.com FDA plan would share drug rejections.

WSJ - Health FDA to disclose more details on drug, food safety.

thepharmaletter FDA Transparency Task Force unveils draft proposals for more public disclosure relating to pharma

Fierce Biotech FDA proposes controversial release of complete response letters.

Biopharma Life FDA proposes far-reaching transparency initiative; public peek at industry R&D failures.

FDA Gov site FDA Transparency Task Force

FDA Transparency blog

 

 

Posted by Bruce Lehr May 23rd 2010.

 

 

 

 

 

 

 

 

Piramal finally falls to Abbott in India

Abbott has acquired for $3.7 B ($2.2 B upfront) the long-pursued Nicholas Piramal in India.  This gets Abbott into the exepcted to be very lucrative India market and also gives them a greater leg up in generics. They can also now lay claim to be the biggest pharmaceutical company in India (at least until the next purchase).  Both GSK and Sanofi have been rumored in the past to be pursuing Piramal. 

Now I suppose other MNCs may shift their attention to Ranbaxy or Dr. Reddy's Labs.  We'll just stay on the look out and see.

Posted by Bruce Lehr May 23rd 2010.

Is the "Big" in Big Pharma a value creator or a liability?

Mike Wokasch made this post to his Pharma Reform blog last week asking the question seen in the title of my blog post.  Mike concluded that bigger was not better.  He asked readers to mull over a list of negative consequences that might well result from increased size.

 
Most of these observations made sense to me.  Many have to do with changes or difficulties in communication, resource allocation, lines of responsibility, and strategic direction alignment.  As organizations get bigger, it does get more difficult to communicate effectively throughout - especially true in multi-divisional, multi-national, global companies.    The environment does get very complex for senior mangement to oversee and it does get harder to connect the guy on the "shop floor" to the corporate strategy ina way that is meaningful for everyone in their day to day activity.  Senior managers are also challenged with making right resource allocations (to the high return projects) across the business - usually without enough information to assess 'winners and losers' effectively.

Functional departments (with different leadership) tend to emerge and thus add a great deal of complexity to "Team" projects as there tends to be a balancing act that emerges between Team goals and individual functional department aims.  If the balance shifts in wrong direction, the project usually does not succeed. This is often a point where clear responsibility for projects is "not so clear" and the fingerpointing emerges or the strong project advocate needed to maintain focus in a large organization is absent.

Anyway, you can read Mike's post for more details. 

As so-called "mega-mergers" are one means by which Big Pharma is trying to compete at present, I was interested in learning what information might be out there to further substantiate or refute claim that "bigness" created value or decreased it.  So I did a literature search. What did the professional analysts, industry observers and participants have to say.  Here's what I found.

Amongst, academic and industry studies done on mega-mergers (> $5 B in assets), the consensus is that these don't add value.  These mergers at best tend to provide some short term cost savings - usually through rationalization of marketing, sales, R&D staff, etc. (see recent Pfizer-Wyeth plans to layoff 19,000)- but don't normally provide the innovation to reinvigorate the pipeline.  Evidence indicates that mergers of this sort don't provide long term sales benefits or any benefits beyond initial year's cost savings.

According to Charles Wheeler of Boston Consulting group, survival in pharma is innovation, "the day of hierarchal owning-it-all organizations are numbered".  Research is a critical mass business.  Once R&D is above critical mass, scale does not help - in fact it hurts by adding uneeded cost and further lowers the group's productivity/ROI. Analysts have concluded that "forcible merger of 2 big companies that lack innovation doesn't result in 1 company that now has it!"

Ironically, the big problem mega-mergers are trying to address are failures in their pipelines and the oncoming patent cliff.  This is almost a "Hail Mary" type attempt to put off the short-term (and many times severe) pain of an innovation gap in the product pipeline.   So how does a typical mega-merger proceed?  Usually, but cutting staff, increasing marketing/sales spend to boost existing sales, and cutting R&D.  Thus, it is a short-term approach that fails to address the issue it was trying to solve - i.e. close the innovation gap in the pipeline. Reducing R&D may actually go in the opposite direction. This may be particularly troublesome if the organization hangs on to the "block buster" strategy and starves out lesser drugs that would offer profitable sales opportunities but would not deliver blockbuster revenues in one fell swoop.

What's needed instead?  Here's a few recommendations for various experts - analysts and managers:

Look to investing in small to mid-size biotechs with 1 or more drugs deep into pipeline.  Currently, it's estimated that 40% of biotechs have less than 1 year's cash on hand.  Therefore it is a good time to buy if you are big pharma with the cash.  Instead of going mega-merger route - use cash to buy several biotech's.  This allows better diversification of the portfolio and spreads the risk.  It also directly addresses the pipeline dearth issue as you are specifically buying companies that have products near to market.  Ideally, you will select companies in product areas that focus on specific diseases of interest or build out drug classes you care about. Companies like Roche, GSK and Novartis have pursued this multiple biotech M&A model with some success.

What else?  Collaborate with other big guys.  Companies like Merck/AZ and GSK/Pfizer have formed joint ventures to combine their assets in a specific therapeutic area - the former two with oncology programs, and the latter two combining their HIV programs. This allows both companies to rationalize their pipeline, make better resource allocation decisions, and to spread scientific and financial risk. 

 This type of pipeline rationalization further helps by cutting number of overlapping "me-too" drugs going to market that don't have clear competitive patient advantages.  These are finding it increasingly difficult to get reimbursement approval anyway. This type of resource sharing does help with risk management and predictability of returns. By saving these resources with more efficient development, companies can divert this spending to address commercialization and regulatory issues - which are increasingly important to commercial success.

Need any more convincing?  Datamonitor recently completed study of mega-merger activity from period 1995-2008.  They found M&A activity followed one of 3 strategies.

1. Buying growth
2. Buying Scale
3. Organic growth with some bolt on acquisitions

Merger results fell into too general classes they could identify - 1) Small and fast or 2) Big & flat. Basically, companies that made acquisitions for sales growth fared better.  These generally targetted smaller companies at an earlier stage - example cited include J&J acquisition of Centocor, Abbott acquisition of Knoll, and Roche acquisition of Genentech - all of which delivered mAb therapeutics to the acquirer and resulted in fast sales growth.  These were done early on and helped to deliver the faster growth.  Companies like Lilly purchase of Imclone and AZ purchase of Medimmune can be expected to deliver more medium growth.

Big and flat poster children include: Pfizer-Wyeth, Merck-Schering/Plough, and Abbott-Solvay.  The former two in particular talk about motivations for the merger as cost savings.  But both have particularly high exposure to the patent cliff and also face competition from generics/biosimilars.  Both are predicting flat to negative sales growth but are banking on increasing operating profits through savings.  Many analysts feel this does not bode well for future success.

  It's interesting that Pfizer has been down this path multiple times. They now have participated in 3 of the top 5 pharma mergers of all time - Pfizer-Warner/Lambert (1st), Pfizer-Pharmacia (5th), Pfizer-Wyeth (4th).  The W/L merger did provide help with Lipitor (statins).  Pharmacia has not been a success and it remains to be seen what will go on with Wyeth but many observers see that more similarly to Pharmacia. They're hoping that Pfizer will spend some its money on new drugs with biotechs before all the good candidates are gone.

The experts say to eschew the mega-merger for other models.  Work on increasing innovation at lower cost.  Look to small and mid-size biotechs for partners and acquisitions - especially when they're cash strapped. Big Guys should look for ways to pool resources on projects/programs to leverage organizational talents and diversify scientific/financial risk.  Develop full portfolio of products that include generics and biosimilars. The industry is changing.  The companies in it need to change.  Being biggest isn't synonymous with being best.  "Big" in this context is a liability on balance.

References:

Nature Biotech (2000) Are mega mergers good medicine for the pharmaceutical industry?

Pharma Focus Asia (2009) Mega-mergers: Are they turning pharma companies into zombies? (Love title)

Seeking Alpha (2009) Are mega mergers good for business?

Bloomsberg Business Week (2009) Mega-mergers can't cure the pharmaceutical industry

BIO (2010) Big pharma mega mergers 1995-2014: A 20-year perspective on how M&A has shaped leading pharmaceutical companies.

Posted by Bruce Lehr May 23rd 2010.

 

Let's Recap Public-Private R&D Collaborations

This is a favorite topic of mine.  I'm a big believer that private-public institution collaborations are good for both areas. Each has unique skills and perspectives to bring to these arrangments and the ones that work well are enriching for both parties on a number of levels.  Fortunately, there have been quite a number of these collaborations announced in past few months.  So let's recap for those who'd like to keep score.

Sanofi-Aventis announced its collaboration with Aviesan a consortium of public private research partners in France.

Genentech announced an agreement with UCSF to collaborate on neurodegenerative disease research.

The Italian Institute of Technology's Drug Discovery and Development (D3) Unit opened with an announcment that Roche and other pharma companies will be collaborating on new drugs.

The Open Source Drug Discovery project is combining efforts of top researchers, students and IT giants to find new therapies to combat TB.

Then in early may Sanofi-Aventis announced that it would be joining the Massachuesetts Life Science Center that will give it early access to new drug therapies.

Pfizer and Washington University announced a new 5 yr agreement where the Univeristy will look at up to 500 Pfizer compounds to determine if they can find new applications as reported in Fierce Biotech.

Finally, Bayer announced it will be moving into the Biotech Innovation Center near UCSF's Mission Bay Campus. This will be a collaboration with university researchers to look a indications in hematology, cardiology, oncology and women's health.

 Many of these new relationships seem to be in response to the R&D issues we've seen in Big Pharma. I think companies are trying newer approaches and largely are being met with open arms by public institutions who welcome the research investment and job creation.   

It is good potentially for both parties and hopefully will lead to significant new treatments for patients.

Posted by Bruce Lehr May 19th 2010.

More M&A as big pharma struggles to innovate sufficiently

I check something like 200 RSS feeds a day from various publications and blogs.  In the past several weeks there have been a lot of articles on changing pharma markets, new R&D directions, patent cliffs, paradigm shifts (not really in most cases), and evolving business models to meet industry changes.  I've probably written 10 posts since March on changes in R&D. 

Let's face it.  The industry is reaching a level of maturity where it is normal, in order to maintain the industry's health, for there to be a shake out period.  We can expect pharma and biotech to merge.  We can expect more merger and acquisition activity.  We can expect some smaller players to fail.  We can expect blurring of the lines between suppliers of generics, branded drugs, new biologics, and biosimilars - some of the larger firms will likely end up in ALL these markets. And, we'll see firms spread out all over the globe as all these pharmerging markets become attractive with their middle classes and more money to spend.

As I say, I think this is normal and there been a fair amount written about this.  Therefore, I'm a bit surprised to say I thought the report below from the PharmaGossip blog as reported out of Pharma Times was a bit depressing. 

PharmaGossip: PharmaTimes | More M&A as big pharma struggles to innovate sufficiently.

It seems to me that the 381 executives, who contributed to the survey being reported, were a bit pessimistic, might I say gloomy for my tastes - at least as reported here.   

I think I read this same study last week and did not get this same reaction.  It seems like there is a lot of negativity in this report about the patent cliff and pharma's inability (82%) to innovate to make up for it.  Can you get 82% of people to agree on anything?  Why this?

There's also a lot of hat hanging on "patent life extensions" (97% - must have all gone to same CEO school)and using the patent system as a competitive weapon.  Patents are part of your IP portfolio and to me it is fine to use as part of your competitive strategy - but don't making blocking patents your whole strategy!  I got that flavor form this piece.  Let's delay as long as we can - until we can buy somebody (70%) to distract the investors and analysts attention.

I found it mildly distrubing that the US patent system was held up in higher repute than the EU's as the US system was going to serve as a better competitive barrier.

No where in this piece do I see anything about developing new business practices, new ways of doing R&D, finding new molecules or indications, even extending to new indications with existing molecules - whatever happened to competing and winning in the market place?  Rather, we seem centered on patent life extensions through modest innovation, blocking generics/biosimilars through effective patent administration and buying your neighbor. 

Thus I became boggy & sad.

Posted by Bruce Lehr May 18th 2010.

Glaxo Plays Catch-Up to Rivals in Emerging Markets ‘Land Grab’

It is well established that IMS (and others) project that the largest pharma growth over the next 5 -10 years will occur in so-called pharmerging markets - particularly the BRIC countries.  In today's blog post from PharmaGossip below, GSK states it is playing catch up in the two plum markets China & Russia.

PharmaGossip: Glaxo Plays Catch-Up to Rivals in Emerging Markets ‘Land Grab’ - BusinessWeek.

Thus, it is racing rival companies like Novartis, Sanofi, and AstraZeneca to grab market position in these potentially lucrative countries. This doesn't seem to be an idle concern as GSK reports that its sales jumped by 50% in 2008 in emerging economies to about $4.4 billion.  The company is adding 30,000 sales reps in these areas to help fuel this growth.

GSK is not only entering these markets.  It s playing for market share by aggressively cutting pricing by 50% or more.  It's willing to sacrifice margins to gains shares of 50% or more. GSK management say it is critical to increase volumes at lower margins and is willing to do what it takes in terms of putting reps on the ground.

Abbas Hussain, president for emerging markets, says "You can't be half-pregnant in these markets. You either go for it, and realize you need huge portfolios, big scale, reach and distribution, and be willing to innovate, or you decide you're going to be a boutique player".

Let the land rush begin.

Posted by Bruce Lehr May 18th 2010.

Dance is Done - OSI Accepts Astellas Offer

As reported on BioSpace, OSI has agreed to Astellas latest increased offer for the company.  Under the terms of the offer, Astellas will increase its price to $57.50 per share, or a 55% premium over OSI's $37.02 closing price on February 26, 2010, the last trading day before Astellas initial tender offer.

The boards of directors of both companies have unanimously approved the combination. The all-cash transaction is valued at $4.0 billion on a fully diluted basis.

Astellas is now another important step closer to reaching its stated goal of being a leader in oncology and through this deal picks up OSI's Tarceva (erlotinib). OSI revenues were $428 M in in 2009 with $153 M in operating profit.

Time to tango on!

Posted by Bruce Lehr May 17th 2010.

Take Note Pharma - Betterness is Good Business

In the Harvard Business Review blog, Umair Hague, Director of the Havas Media Lab, writes a piece entitled, "Why Betterness is Good Business".

He argues that the bar has been raised for companies to be considered great.  Maximizing the "good" a  company does is related to greater profitability, equity and return on assets, and creates more shareholder value.

Top investors are using measures of 'betterness' to predict which companies will be more successful in the future -- social/ethical criteria like the KLD score.  In this way, investors can look for financial returns "plus". "Plus" returns make an investment choice less risky and more meaningful -- in line with the higher expectations that are developing every year among communities, society and investors.

To bolster his argument, Hague cites the annual Ethisphere Institute that identifies the most ethical companies and then test their performance. In 2008, the most ethical companies outperformed the S&P 500 by 40%, in 2009 and 2010 by 35%. The Mean Market Value Added of the top 100 Corporate Citizens is $36 B while the same figure for all other companies is less than $8 B.  In Businessweek's ranking of this same top 100 via their Total Financial Performance criteria -- sales growth, profit growth, and ROE -- the top 100 outperform by statistically significant 10.4 percentiles.

Responsibility yields advantage because it is effectively risk management against adverse future events. It is very positively correlated with financial performance as determined in a very large meta-analysis (see M. Orlitsky, F. Schmidt, and S. Rynes) of 52 studies with over 33,878 total observations.

Hague further explains that 538 institutional investors use social criteria when making decisions now that used to be only financial -- while managing assets totalling $2.71 trillion or 10% of the assets under management.

"Good Businesses" are not judged solely by better sales, profits, equity returns and sharholder value - these becoming old measures on their own.  Investors are increasingly asking  "So you made a profit - yawn - but did you also make an impact?"  This is what it takes to outperform today and tommorrow.

What about Big Pharma? Or little Pharma for that matter.

Aren't these companies founded on the ideals of delivering novel life-changing treatments to patients, transforming science into therapies, to serve patients, to deliver meaningful benefits to consumers, and to improve the quality of life?

How does this square with off-label marketing, physician payola schemes, manufacturing failures resulting in product shortages, contaminated or adulterated product, massive corporate lay-offs and outsourcing jobs elsewhere?

Sounds like we're starting to miss the mark, doesn't it?  AstraZeneca and Novo Nordisk were the only two Big Pharma companies to make the Ethisphere Institute top 100 for 2010.  I don't see any of the venerable US companies on this year's list. There ARE a lot of US companies on the list from other industries.  Hmmm.

At a time when the industry is looking to recreate itself, perhaps these companies can remind themselves of their mission/vision statements and take that to heart in the way they choose to operate their businesses in the future.  We'll be the better for it.

Posted by Bruce Lehr May 17th 2010.

Sources of New Product Innovation Big Pharma

Mike Wokasch had the following post in his Pharma Reform blog on a topic that has been discussed here often, namely the need to adopt new R&D models in Big Pharma.  Mike gives 5 concrete suggestions for how the relationship between big pharma and biotech needs to change to become more productive in the coming years.  These include changes in managing the science and in managing the business relationship -- and the expectations associated with both.

Posted by Bruce Lehr May 17th 2010.

Milestone: EU receives word of intent to file 1st stem cell based product

As reported in the BiopharmaLife blog, the European Medicines Agency (EMEA) has received word from a European manufacturer that it plans to submit an application for marketing authorization for a stem cell based product.  This is a 1st in the EU!

Normally, EMEA is tipped off by client companies approximately 4-6 months before the formal application is filed.  Thus, the formal filing should take place late in the year in 2010. As yet, the company's identity is a secret.

This may signal just the beginning of a series of filings.  To prepare, the EMEA has been meeting with pharma companies, US and Japan regulatory officials and academic experts in stem cell treatments.

Regenerative medicine may be beginning to make its appearance on a commercial stage and to get itself in position for initial use in treatments of cancers and damaged tissues.

Posted by Bruce Lehr May 15th 2010.

CHO Genome Sequencing Underway - How Close?

At April's Cell Culture Engineering (CCE) XII Conference, Dr. Bernhard Palsson, the Galetti Professor of Bioengineering at UCSD , and founder of bio companies like Cyntellect and Genomatica, did a talk on "CHO-mics". 

CHO-mics involves full genome sequencing of CHO with comparative sequence analysis. The idea is to unravel metobolic pathways and control of processes like glycosylation.  During the talk he indicated that his collaborators have looked at 626 metabolites, 709 reactions and 104 glycosylation genes (unpublished). 

However, the most interesting statement during the talk was that Dr. Palsson's group was collaborating with the Beijing Genome Institute to sequence CHO.  They expected to publish this information after assembly and annotation.  It was implied that the work could be completed within the next two years. 

The announcement raised some eyebrows. 

   

Posted by Bruce Lehr May 15th 2010.

Brief Biopharm & Cell engineering History - ECI's CCEXII

At ECI's recent April 2010 Cell Culture Engineering Conference XII in Banf, Dr. Thomas Seewoester, Amgen presented a talk on the history (progress) of cell engineering in the biopharm industry.  He noted that the indsutry had come from talking about - how can we successfully produce a mAB to a position where  overproduction (> 10 g/L) of a mAb is conceded to result in poor product quality.  He presented the following time line and major conference themes from 1998 to 2010.

Download Biopharm History CCEXII

Dr. Seewoester indicated the industry has turned its head to some other issues besides increasing titer.  Keys for success include more focus on time to clinic, providing operational flexibility, and creating process freedom to aid manufacturing. Product quality assessment is now more of a focal point than pure productivity in g/L.

Other speakers, like Dr. Brian Kelly, Genentech, agree that when titer reaches > 10 g/L other issues such as downstream purification effiency become more important. Downstream processing is an area that needs to improve - addressing issues like reduction of yield at harvest, deamidation, aggregation, and novel equipment needs.

Cost of Goods is in pretty good shape at < $100/g for many products. There is an opportunity now to pursue smaller markets, biosimilars and personalized medicine.

As the industry becomes more mature, there is a greater financial discipline that is required.  Asset utilization becomes very important. Creating flexible processes that will accomodate product innovation is also key - "don't lock manifacturing in box."

As Dr. Seewoester concluded, "A culture of innovation is hard to build and easy to lose."

"Don't judge each day by the harvest you reap, but by the seeds that you plant."  -- R.L. Stevenson

Posted by Bruce Lehr May 15th 2010.

 

 

 

Genzyme's Termeer on Road to Perdition?

Genzyme's CEO Henri Termeer is going on a road trip to see his top 30 shareholders over the next 30 days. You might ask why - but if so - have probably been living in a cave for the past 12 months.  Just in case you have, let's recount some of the events and circumstances that have inspired this trip.

In June 2009, Genzyme was forced to close its Allston, MA manufacturing plant due to viral contamination in one of its bioreactors. Not just any contamination, a problem with its leading product Cerezyme costing them more than $500 M in sales. Oops!

No sooner were they up again (Nov 09), they were whacked again by what has been delicately termed as "trash" in some of their vials of product produced in the same plant. Double oops!

The FDA, not having nearly the sense of humor I do, instituted an enforcement action on the Allston plant and fined the company $175 M dollars in March 2010.  They also brought in a 3rd party group to oversee the production there for "an extended period". 

Then the Haverhill facility was hit by a fire in December costing the company another $7.5 M in equipment damages. The manufacturing issues have compromised Genzyme's ability to keep abreast of demand with their drugs for Gaucher's and Fabry's disease. The WSJ health blog has reported on these shortages and even reported case of one Fabry's patient who died of complications waiting on medication - although GZ disputes that the lack of medication was a direct cause.  Genzyme is expected to only be able to satisfy 30% of its Fabry needs in Qtr 3 this year.  The company may face another $300 M plus fine from FDA as a result next year. 

Needless to say, Termeer has fired several senior manufacturing people, brought in new blood, and moved others around to bring manufacturing under better control.  It has a new president of global manufacturing and a new senior vice president of global quality (not a moment too soon but maybe a few moments too late).  It will also be outsourcing some of its manufacturing operations.

Carl Icahn, one of the largest shareholders, has been involved in an active proxy challenge to seat his own board with the intention of forcing Termeer out.  Icahn is not alone in his criticism of Termeer among shareholders. Icahn is not a newby when it comes to forcing out executives in firms where he holds significant sway and he has plenty to work with here.

Think it can't get any worse can it?  Think again. Several groups of investors have lodged complaints with the SEC that several unnamed senior executives and board members took advantage of insider information to illegally sell some of their personal shares before bad news was announced to the public. Genzyme's board has appointed three independent directors to investigate the allegations (received in 9 letters since last August).  The company has also lined up independent counsel for the investigation.

In an attempt to shore things up a bit, Termeer announced that the company will buy back $2 B in its own stock. They will use debt financing to buy back the 1st billion this year and buy the 2nd billion in the following year.  Genzyme will also look to sell off up to 3 of its "non-core" business units in its genetics testing business, diagnostics products business, and its pharmaceutical intermediates business.

Several analysts have been less than "whelmed" and Genzyme stock has been downgraded to "underperform" by observers like Zacks.

This all brings us back to Henri's road trip.  Termeer will be out to convince these top 30 shareholders to let him keep his job.  No doubt, Icahn will be making a similar trip with the aim of seeing that he loses that job. The annual meeting is on June 16th. I'm sure Termeer is hoping to fare better with Icahn, than Paul Newman did with Tom Hanks.

Posted by Bruce Lehr March 14th 2010.

The cost of whistle blowing

Below is a post from PharamaGossip today that shows a Table of the settlements recovered by the Federal Goverment in Whistle Blower cases versus Pharmaceutical companies since 2001.  The total settlement amounts in the 17 cases depicted exceeds $6.3 B dollars.  If you also include the recent $2.3 B dollar settlement versus Pfizer in 2010, the total nears $9 B.  That's a lot of whistling!

PharmaGossip: The cost of whistle blowing. 

The New England Journal of Medicine also published a study on Whistle Blowing outlining the experiences of whistle blowers in 17 so-called Qui Tam litigations under the Federal False Claims Act (FCA). Under the FCA, whistle blowers (called relators under the law) may be awarded between 15 to 25% of the recovery in the case.  The total relator share is set by the government and divvied up among relators.  In these cases, individual relator shares ranged between $100,000 and $42 million - with a median of $3 M.

Despite the financial incentives, all whistle blowers reported non-financial reasons for getting involved in these cases.  Four main reasons were cited, personal integrity, protection of public safety (altruism), justice, and self-protection (against company retaliation).  The majority of whistle blowers indicated that any eventual financial award they saw did not compensate them for the time, stress and life disruption that came from blowing the whistle.  The main exception to this finding - came from the relatively few (only 4) whistle blowers who made their reports from outside the company being charged with wrong-doing.

The good news (sort of) was that 22 of 26 whistle blowers (despite any dissatifaction with personal trials and inadequacy of financial rewards) felt vindicated by a sense of ethical, psychological or spiritual rewards.

The authors of NEJM report finalize their article with several suggestions that could be undertaken by the government to support whistle blowers better thorugh the process.  This would be especially needed by those who lose their jobs, families, health, health insurance etc as a consequence of stepping forward.

It would seem that stronger protections could be put in place to support truth tellers. In this study, only 2 of 22 whistle blowers 'inside" remained employed in the pharmaceutical industry, while 4 outsiders remained in their jobs. The authors suggest that better protections might lead to more relators willing to step forward which in turn might have a greater deterrence effect on this type of fradulent behavior. 

Several industry blogs have suggested that the financial penalties incurred in these cases are too low versus the profits that the offending companies reap to have any lasting deterrent value.  The repeated instances of fraudulent behavior - particularly in times when market conditions are tough -- would seem to bear that observation out.

For now, the protections for whistle blowers in the FCA appear to be too weak to afford real protection -- these folks face a difficult choice in stepping forward.

Posted by Bruce Lehr May 13th 2010.