The Big Red Biotech Blog

Will Biosimilars Drive Process Innovation?

Interesting hypothesis discussed in the Bioprocess Blog.  The author opines that biosimilars manufacturers will need to become experts in process and analytical development -- and in fact will drive the state-of-the-art.

Will Biosimilars Drive Process Innovation?.

The reason cited is that these manufacturers will need to produce molecules that are "highly similar" to a reference product and essentially will need to have a process that will deliver this prior to Phase I trials -- a standard not as dramatically imposed on innovative product producers.  

The key thought being "Without the ability to proceed rapidly through clinical development using a robust commercial manufacturing process, much of the economic and speed advantage of developing a biosimilar product will be lost." 

Therefore, it is argued these manufacturers will need to come up with innovative technologies to speed process and analytical development to deliver reliable scale up and cost-effective manufacturing.   

I'm not so sure.  Biosimilar producers can work with serviceable processes as long as they can get to market and produce.  They may not be optimized at introduction -- but if they are first to market -- I think they'll still make money.  And, they can then work on improvements to their processes after the fact just like innovators regularly do now.

However, being a process and analytical innovator will confer advantage and it would be a good business model to pursue to differentiate oneself competitively in the biosimilar arena.  It's somewhat counterintuitive to think about biosmilars producers being innovators -- but this idea certainly has its merit if they can pull it off. 

I don't think it is unreasonable for someone to try. I see some evidence now that some biosimilar producers are trying their "own" production systems to make their "similar product" and aren't necessarily trying to mimic what the "best guess" innovator process is -- if that doesn't really fit their experience and expertise.   Of course, many are also trying to mimic the "best guess" process too under the theory that it is most likely to match the innovator molecule. We'll see which works best.

Posted by Bruce Lehr Aug 29th 2012.

Capital Efficiency -- That's the Ticket for Biotechs

Another good post from Life Sci VC blog that speaks to the downside of raising too much equity for a biotech -- assuming the investors would actually like to recover on their investment. In looking at the top 10 financing rounds for biotechs in 2007, the following results were observed:

• 4 of 10 resulted in significant losses for investors
• 1 of 10 is sitting at or near cost
• 3 of 10 resulted in returns at or above 2x
• 2 of 10 can't be given a final score

The conclusion is that this sample of 10 is very close to what one would expect to see across investments in all of biotech -- as compared to actual return portfolio over the last 30 years (50% at a loss or return only cost, 35% made more than 2x their invested capital, 15% in process).

This seems counterintuitve if you believe biotechs with well-heeled funding are more likley to be successful.  The data says no -- it apparently doesn' t alter the spread of risk. If that is the case, then having adequate investment to operate but not too much to add more risk in terms of earning a return, i.e. being more equity efficient would seem to be the better strategy. So us investors should be seeking managment teams who efficiently use their capital rather than putting it into a huge warchest. That is --- if we want to earn a better return. 

I wonder if that idea will translate to R&D investments in pharma -- where sheer size is being reduced and presumably more thought being put into risk/return decisions with development programs.  And, in big pharma's current penchant for striking deals with much smaller upfronts and basing them on milestone payments.  That would seem to me to be somewhat more analogous to biotech raising less equity capital and using it more efficiently.  Will forcing companies to work with lower upfronts be more efficient and result in more success?  Hmm.

See more comments from In the Pipeline on this topic.

Posted by Bruce Lehr Aug 29th 2012.

 

Was Clint Talking to John about Alzheimer's?

The other shoe that analysts have been talking about for a while now dropped today when Eli Lilly revealed that its Alzheimer drug, solanezumab, missed both its primary endpoints in a Phase III trial. Lilly's Lechleiter had at one time been touting this as an example of the internal R&D pipeline drugs that Lilly is expecting to lead it out of the wilderness.

He had backed off solanezumab as having to be the "saviour" though in the past few months when it became apparent that the drug would be a long shot to achieve it's clinical targets.  This was largely apparent as Pfizer's similar drug bapineuzumab failed earlier this year.

Lechleiter is not giving up yet though as he said their analysis shows the drug may be showing a positive trend in slowing cognitive decline in patients with mild-to-moderate disease. We'll see about that John.

See Fierce Biotech, Pharmalot, and In the Pipeline.

Posted by Bruce Lehr Aug 24th 2012.

Orphan Drugs Represent Big Bucks

A new Thomas Reuters report shows Orphan drugs generated over $50 billion in 2011, and have the potential to generate as much lifetime revenue as drugs used for more common health conditions.

Rare Opportunities: Orphan Drugs & Big Bucks // Pharmalot.

The compound annual growth rate (CAGR) of the orphan drug market between 2001 and 2010 was 25.8 percent, compared to 20.1 percent for a matched control group of non-orphan drugs. According to the  Reuters report, “this data, combined with the increasing number of orphan drug approvals, suggests that the CAGR of launched orphan drugs will outshine that of the non-orphan control drugs over the next 30 years.”

The data shows that trials focused on orphan drugs are significantly shorter and have a quicker review time than trials involving non-orphan drugs, and the report points to other positive factors, including favorable reimbursement, fewer hurdles to approval, lower marketing costs, and faster uptake. See PharmaTech Talk.

Look for more orphans at a pharmacy near you.

Primer on VC Operations

Here is a good article from Xconomy, written by Dennis Purcell who's served as a Senior Managing Partner of Aisling Capital’s Fund I, II and Fund III, on how VC firms do their thing. It's a good look at the process from an inside point of view, and gives you a better idea as to what information is used to make investment decisions by the VC.

It also give you and idea as to the size of their funnel and how many deals they can actually handle per year.  It's interesting to see what decision criteria are used and who ultimately makes decisions. Of course, a primary concern is how can the deal provide necessary cash/return for the investors which has become increasingly challenging -- especially when you don't want to kill off the company in the process.

A good primer.

Posted by Bruce Lehr Aug 24th 2012

Are Stock Buy Backs Pharma's Best Investment Strategy?

Bruce Booth published a nice analysis in his Life Sci VC blog a couple days ago, where he looked at the amount of money the top 15 big pharma companies spent in the past two years on buying back their own stock. Any guesses as to his tally? 

Would you believe $75 B -- yes with a big B - in past two years?  J&J leads the pack with $14.3 B and it trails down to Lilly's mere $420 M in 15th place.  How does that $75 B compare with other investments in biopharma sector?

• It’s bigger than the NIH budget for both 2011-2012 by nearly 25%. 
• It’s 4.5x bigger than all of the private venture-backed M&A that occurred in the past 18 months – and that involved over 70 biotech companies. 
• It’s 12x bigger than the sum total of venture dollars invested in biotech in that period. 
• Its nearly 80x bigger than all the capital raised by fifteen biotech IPOs during that period. 

That's big.  It's long been debated whether stock buy backs provide the best return.  Many think buy backs are a sign that a management/board has run out of ideas as to where to invest.  Not usually a good thing. Companies will not stay healthy unless they can continue to grow their sales and profits.  Buy backs generally provide a (somewhat unpredictable) increase in price per share in short term -- but the street and investors seem to like this. 

However, a short term bump may not compensate investors at all for long term gains they could have had if the money was better invested in higher return projects.  The pharma industry has traditionally been fueled by innovation and R&D spending.   R&D returns haven't been so great in the past decade (across the industry) so aren't as in vogue right now.  Regardless, it is difficult for me to see how pharma companies will heat up their revenue and profit growth without more new products -- that normally come from R&D efforts.

I had a boss who used to say you can tell a company's strategy by how it chooses to spend its money.  Are stock buy backs pharma's growth strategy?  Is that the best they can do with piles of cash? 

This one resonates with a few commentators. See more at In the Pipeline and Fierce Biotech.

Posted by Bruce Lehr Aug 24th 2012.

Pharma Spending On Outcomes Research Rises

Pharmalot published a recent surveyconducted by Cutting Edge that looks at how much and how money is being spent by pharma companies on outcome research.  It used to be getting approved was enough. Now companies need to show their product actually does something better for patients in order to increase their chances of third parties paying for the treatments. 

Pharma Spending On Outcomes Research Rises // Pharmalot.

At the 50 largest drugmakers, spending levels average $7.5 million on outcomes research.  In the US, for instance, economics and outcomes research is typically being used to support 10 brands, although the 20 largest drugmakers are supporting nearly 20 brands, and the average spending per brand was $493,000.  Budget changes among all companies compared with 2011 rose 42 percent, but among those who are clearly spending more, increases rose by 66 percent, on average. Small drugmakers report the largest increases at 79 percent.

What happens if you don't do outcomes research well and don't get good third party uptake?  Looking at drugs like Dendreon's Provenge or HGS Benlysta might give some insight.............

Posted by Bruce Lehr Aug 24th 2012.

Big Red Biotech Blog

 

The Myriad Decision

I was off the end of last week so missed the Myriad decision.  As most expected, the appeals court affirmed their earlier decision that isolated DNA was patent eligible (not necessarily would receive a patent however -- note the distinction). 

This decision evokes widely varying emotions and reasonable people certainly disagree. For the moment though, the decision largely leaves the last thirty years status quo intact and patents can be used to protect isolated gene sequences.  This of course makes the biotech industry and its investors happy.

But, we can all expect this to end up in the Supreme Court one more time for its final hearing. Until then, read some commentary and discussion on the case from In the Pipeline, Patent Docs blog and Pharmalot. 

Also, if you are on the side that wants the policy to change -- then you ought to be advocating through your elected Congressional leaders and not expect the Courts to change 30 years of established law.

Posted by Bruce Lehr Aug 20th 2012.

Emerging Markets Are No Panacea

This from Pharmalot.  Former Pfizer executive, Amal Naj, explains that multi-nationals likely can't rely on going to pharmerging markets to bail them out from their current revenue gaps. MNC's, he says, "have overestimated their ability to sell branded products in these markets" -- particularly at a price/profit premium.  

Emerging Markets Are No Panacea: Naj Explains // Pharmalot.

Factors cited by Naj that mitigate against MNCs making good profits include:

• Local generics producers selling at less than 50% of MNC prices in these markets
• MNCs and generics often use the exact same manufacturers in emerging markets which blunts any "increased quality" claims that MNCs can make
• MNCs competing with each other in these markets with generics
• Brand power is dissipating from factors cited above. Products are becoming commodities
• Government controls to force lower prices (and margins)
• Greater difficulty than expected in getting products registered in these markets
• Quality from local companies is gettig better and they are getting more efficient

The upshot?  Expect more and more competition from local competitors.  Even some big MNCs to withdraw from some markets due to depresssed prices and profit potentials.

I think that once competition for generics begins to be widespread -- there is a greater drive toward commoditization (which payers and consumers want).  That means not everyone will be able to compete profitably in every market and there will be withdrawal and consolidation.  It may also mean that a generic producer business model won't favor everyone.  Clearly, low cost producers are favored in such environments -- and not everyone can be THE low cost producer.

Posted by Bruce Lehr Aug 14th 2012

 

Biotech IPOs Beating Tech's Big Names

From Luke Timmerman, a tale that the 9 biotech IPOs so far in 2012 are not only doing better than expected but are actually leading more prominent Tech company IPOs from this year. From his post this morning:

Regular readers of this column [Xconomy's BioBeat] know that I’ve long been skeptical about how much appetite investors have for biotech IPOs. But I did notice some “modest signs of life” in the IPO market a few months ago, and was curious to follow up and see what has happened. By my count, there have been nine biotech IPOs so far this year, compared with 12 in all of 2011. That still says to me there’s limited demand from investors for new drugs, devices, and diagnostics. But of those nine companies that made it through the IPO gauntlet, six are trading above their IPO price and none have crashed.

So all is not lost in the Land of the Biotech IPO.

Posted by Bruce Lehr Aug 13th 2012.

More Opinions on Drug Development Costs and Innovation

The article on "innovation crisis myth", replete with its low estimates for drug development costs, that appeared in last weeks British Journal of Medicine sparked more than a little commentary from various quarters.  As an emotional issue, this one resonates well. 

Here is Derek Lowe's post on this In the Pipeline as well as today's response from the BMJ articles co-author Donald Light. Derek is a vocal critic of the low ball drug development cost estimates.  Dr. Light, as is his wont, sticks to his guns and repeats his claimed cost of $43 M for the "net, median corporate cost of Development". 

You can read both their points and decide who you think is closer to correct.  Despite the heavy qualification of what Dr. Light's figure purportedly represents, I still think he is way low (by a factor of 10). Though he likely is also correct about the $1.3 B industry figure as being grandly inflated -- which of course leads to a ripe ground for controversy. 

PhRMA also has a dog in this fight so I will link to their statement on the debate as well as comments from PharmTech Talk.

Posted by Bruce Lehr Aug 13th 2012.

Towards Pharmageddon?

More salvo's in the battle over whether the "innovation crisis" in pharma is due to inherent difficulties and costs in bringing new drugs to market or whether it is caused by pharma companies choosing to pursue more "sure thing" me-too products. 

The pharma shoots-too-low crowd, Donald Light from the University of Medicine of New Jersey and Joel Lexchin from York University in Toronto, opines in the most recent British Medical Journal that the situation has remained the same for 50 years. The incentives for drug development are wrong and have skewed the behaviour of the industry.

They claim more is spent on marketing (25 per cent of revenues) than on discovering new molecules (1.3 per cent). Drug industry claims that the cost of bringing a new drug to market is £1bn and is unsustainable are exaggerated, they claim. Research and development costs did rise substantially between 1995 and 2010 by $34.2bn (£21.9bn), they concluded, but revenues increased six times faster – by $200.4bn.

Towards Pharmageddon? The last (lost) decade .

They add that up to 80 per cent of drug spending is used by the industry on promotion. The authors call for licensing authorities around the world to stop approving new drugs of little therapeutic value. They suggest large cash prizes should be awarded for genuinely new therapeutic agents in lieu of patent protection.

In a second paper, researchers from the London School of Economics in the UK argue that drug manufacturers should be made to demonstrate that their products are superior to existing treatments before being granted a licence, rather than, as now, superior only to a placebo.  In other words, comparative effectiveness should be used to justify adding new drugs to the approved menu. 

With regard to magnitude of costs/profits, I believe the truth lies somewhere in between.  Drugs do cost a lot to discover and bring to market.  But drugmakers do spend on lot on marketing to justify me-too drugs -- and could channel some of this toward developing more novel therapies with better patient benefits. 

I suspect we will see a coorection as more regulatory and 3rd party payer incentives are put in place toward getting novel drugs to treat unserved diseases.  Economics is going to prevent us from continuing down the me-too route as these drugs increasingly will find it toughter to gain approval and to get reimbursement consideration. 

Do we really need 17 beta blockers or just one new Alzheimer's drug that actually works?

Posted by Bruce Lehr Aug 8th 2012.

KV Sinks Slowly into Oblivion

In July 9th post, I commented on KV's decision to sue FDA over the latter's non-enforcement of compounders competing with KV's Makena. I said it was only a matter of time before KV goes out of business.

KV sink .

We're one step closer now as KV filed for bankruptcy protection today. KV said the FDA's lax enforcement has prevented it from realizing its "full value" for Makena -- i.e. they couldn't charge $1500 per dose for a product that previously cost the patient $10.  So now they are left with $728 M in debts and only $237 M in assets.

Boo hoo-hoo.

Posted by Bruce Lehr Aug 6th 2012.

GPA Says Generics Saved Consumers Millions and Millions

A new report from IMS Health that is being touted by the Generic Pharmaceutical Association (GPA) claims that generic drugs saved US consumers more than $193 M in 2011 and more than $1 TRILLION over the last 10 years.

Generics Saved Consumers How Much Money? // Pharmalot.

Some more fun facts as to how generic drugs fared in the US over the past year:

• Savings from generics rose by 22% the most in a single year since 1998
• Savings from generics that hit the market since 2002 were $481 M in past 10 years
• Nearly 80% of the 4 billion prescriptions written last year were for generics
• BUT, the 20% of prescriptions for non-generics accounted for 73% of total cost of drugs

The surge in generics prescriptions was attributed to the increase in drugs coming off patent, such as Zyprexa (antipsychotic), Lipitor (cholesterol), and Concerta (ADHD).  IMS forecasts that generic utilization will reach 87% by 2015. 

Posted by Bruce Lehr Aug 2nd 2012.

New Pharma Facility News

A few tidbits on the wires yesterday about new pharma facilities.  Firstly, GE and iBio announced they are designing a new plant-cell based vaccine facility for a client pharma company. The identity of the client was not disclosed. However, iBio's own SEC filing shows that Brazil's Fiocruz/Bio-Manguinhosin is the only company who has a license at present to use iBio's plant cell based platform for vaccine work.

The iBioLaunch platform is touted by its promoters to have the potential to manufacture proteins that cannot be made in other systems, and could also significantly reduce the capital and operating costs associated with biotherapeutic production.

GE and iBio designing plant-cell based vaccine facility.

CMC announced that it will be buying Xoma's manufacturing facility in Berkeley, CA. The facility has 31,000 sq ft of space and 3 x 2750 L bioreactors.  CMC also has facilities in Denmark and Bothell, WA (acquired from Icos) to serve the biopharm industry. A CMC spokesman said that acquisition of a new facility in the Bay area was a big plus as many new start up companies are there in need of manufacturing help. The new facility doubles CMC's US capacity. See Xconomy.

Covidien has officially cut the ribbon on its new $45 million R&D facility in Shanghai, where it plans to employ more than 300 in new research efforts.  Covidien is just one of the latest western companies to open a new facility in China.

"China is a key market in our global strategy, and this investment is a reflection of our strategic initiatives," said Covidien CEO José E. Almeida in a statement. And Covidien--a device and pharma developer--boasted that the operation covers more than 100,000 square feet with 17 labs and surgical and simulation suites.  See Fierce Biotech.

Posted by Bruce Lehr Aug 2nd 2012.