The Big Red Biotech Blog

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.