The Big Red Biotech Blog

How are R&D Chiefs Graded in Big Pharma?

Sort answer. It's the Bottom Line, Stupid!

I guess that gives away the punch line.  Regardless, here's an interesting post on the topic from Stewart Lyman in this morning's Xconomy.  In it, he notes that the average tenure for a top R&D exec in pharma is only 7 years.  Think about that when comparind the average length of time it takes to get a drug on the market -- usually reported in 10-15 year range. It doesn't take a math major to figure out that the your average R&D head won't actually be around for new product he/she (mostly hes of course) starts in development. 

The post questions -- how do you really say who did the best job in getting a drug to market?  The R&D guy who started the project or the one who was in residence when it was approved to market?  Don't know.  Not easy to figure out.  Further, given that length of time, the main way an R&D head can make an impact now is to acquire drugs that can be launched on his (or her) watch. 

Brings us back to the punchline.  As R&D head, you are only as good as your company's revenue and stock performance --- regardless if you caused it or not. Just be in the chair at the right time. Sounds fanciful huh?

Maybe it makes sense if you buy into the premise of this Forbes article about CEO's and their lack of [people] management skills. In a recent survey, 160 CEOs and directors were polled with regard to CEO strengths and weaknesses.  It turns out that directors rank their CEOs as poor people managers.  It further indicates that the MOST important thing that CEOs were rated on by boards was their company's "accounting, operating or stock performance."  Not their ability to mentor, develop people, listen, resolve conflict, delegate ,etc.

It was how well the company performed on the bottom line.  Given that CEOs are only in their jobs about 8.4 years (and pharma even less), it's likely you have the same phenomenon going for you at the CEO level as you do for head of R&D.  The secret is being in the right place at the right time.

Posted by Bruce Lehr May 29th 2013.  

 

Surprise! Surprise! Big Biotech's Outdo Big Pharma on Several Measures

As reported in Fierce Biotech, Burrill & Co did an analysis comparing biotechs to pharma over the past 3 years.  Biotechs emerged as the winner on several key measures.  Companies in the Big Pharma camp included J&J, Pfizer, Novartis, Merck, Roche, Sanofi, Novo Nordisk, GSK, Bayer, Lilly, AZ, and BMS.  Under the biotech tent, we had Amgen, Biogen, Gilead, Celgene, Alexion, Regeneron. Shire, BioMarin, Elan and Onyx. 

Key findings as reported by Fierce for the past 3 years, included:

• Value of biotech group up 57% to 17.4% by pharma
• Net income for biotech's were up 23.8% compared to 1.1% for pharma (OUCH!)
• Revenue was up 40.6% in biotech versus 17% for big pharma.  Actual revenue was $48.6 B total vs $526.8 total. So pharma is still more than 10x larger in aggregate
• R&D spending went up 38.8% for biotech ($10.3 B) as compared to 11.7% for pharma ($76.3 B). Here pharma is only 7x in size.  Is that a good thing given their returns on R&D of late?

Biotech's are clearly offering better results for their investors at the moment but are they just smaller and at an earlier stage of hitting the "pharma wall".  Don't know. We'll find out.

Posted by Bruce Lehr Apr 17th 2013

Build Blockbusters One Block at a Time

Fierce Biotech reports that Novartis CEO, Joe Jimenez, says that the company will switch away from expecting single indication drugs to result in blockbuster status (i.e. > $1 B in annual sales).  Instead, Novartis will introduce drugs, gain approval as quickly as possible, and then extend the drug's indications -- perhaps in niche markets -- to cobble together its $1 B in annaul sales across all the indications.

In other words, they will continue to do what they have been doing in cancer fields for a long time. Just build em one block at a time.

Posted by Bruce Lehr Mar 4th 2013.

Baseball and New Drugs

I love baseball.  The actual game really and discussions around it.  I'm less into the statistics but they are a usual part of baseball discussions.  I'm even less into sabermetrics though I do acknowledge they provide another interesting way to look at the stats of the game and do have merit in potential decision making in the game.

So I was really happy to see this morning's Xconomy post that compared evaluating baseball with the evaluating a drug development pipeline.  I thought many of the analogis held up pretty well -- you'll have to read it and decide for yourself. But one thing is correct in my view, we should continue to strive to find the best metrics to look at the success of drug development and open our minds toward doing this and operating in a fashion different than our historic past.  It is well pas that time.

Posted by Bruce Lehr Mar 1st 2013.  

Ooooh! This isn't Good for US Manufacturing Economy

Here's a sobering report from Xconomy on a new study out of MIT.  In it, MIT researchers claim that US manufacturers (150 in study from diverse industries) hit problems when they go to scale operations at full commercial level.  This leads them to seek foreign investors and set up foreign facilities. Wave bye-bye to some good jobs.

That's not good and is why there is beginning to be more clamoring for manufacturing supports in the US (i.e. tax credits and the like).  It would be nice to have the manufacturing base remain strong (US is still No. 1) bu there is a trend toward moving to Asia and other sites abroad. We need to nip it.

Posted by Bruce Lehr Feb 28th 2013.

 

 

High Drug Pricing Next Industry Challenge?

The good news from 2012 might be that more drugs were actually approved (39) than in the very recent past -- but the bad news is that many were VERY expensive.  Xconomy's Luke Timmerman did a nice piece summarizing this a couple of days ago.  It seems that many of the very high priced drugs are coming into the oncology and "rare disease" or orphan arenas.  Many of these drugs carry price tags into the serious 6 digits and are $300K or more annually.  Is this sustainable?  Are any of these products worth it?

Those are questions that the industry must face as healthcare systems around the world struggle with costs.  Individual patients oft times may have to struggle as well depending on what type of insurance coverage they carry.  And even in the industry, some players must worry that the action of their peers might be in danger of killing a golden goose if these prices are perceived publicly -- even by physicians -- as being out of line with reality. 

What's a drug worth?  One answer might be what the market is willing to pay.  But will that number change as government and other third party payers become budget constricted. Yes, is the obvious answer.  From a payers perspective, they want a price that they feel is commeasurate with the benefits that are received.  Same from a patient's perspective, I hope.  Do I feel I got my money's worth in terms of improved health or quality of life? 

There is no doubt that this issue will not go away. 

Posted by Bruce Lehr Feb 13th 2013.

Sigma-Aldrich is re-aligning its business segments

St. Louis life science company Sigma-Aldrich announced today that it is restructuring into three market-focused business units: Applied Markets, Research Markets and SAFC Commercial Markets.

Sigma-Aldrich is re-aligning its business segments and SAFC will be reamed the SAFC Commercial Markets Business Unit.

Gilles Cottier will continue to lead the SAFC business. This business will be renamed the SAFC Commercial Markets Business Unit and will continue to serve customers in the life science and electronic markets.

Company officials intend to provide more information about the structure, sales and growth prospects of each of the three business units early in 2013, according to a statement.

Posted by Bruce Lehr Nov 20th 2012.

Lemmings? Let's Think Inside the Box Instead

Here's a post from In the Pipeline this morning.  It deals with the myriad of big deal failures where Big Pharma has spent mucho grande buckos on early stage projects only to fall over quickly in the clinic (e.g BMS purchase of Inhibitex, Abbott hook-up with Reata, etc.).

Industry watcher, Raghuram Selveraju of Aegis Capital, comments that these failures result from Big Pharma execs being a "bunch of lemmings". He says they only license products in their comfort zones where they can deploy an existing sales force to doctors they already know, or against drug targets that everyone else in the industry has identified as "hot". Okay, maybe so.

His proposed solution?  Pharma should pursue incremental projects using the FDAs 505b2 pathway, develop biosimilars, or repurpose existing drugs.  They should also focus on niche or specialty areas. Avoid primary care products with long and expensive clinical trials and large commercial operations.

The 505b2 pathway basically calls for coming up with new formulations and dosing schedules for existing drugs.  Isn't that me-tooism being carried out to the max?  Can't I find a huge number of commentators who descry that strategy as one big reason that R&D returns have slumped to all-time lows?  Success is high but risk/reward is low.  Talk about a lemming strategy -- 505b2 seems like a poster child to me.

Posted by Bruce Lehr Oct 26th 2012.

 

Do Pay Attention to the Data Behind the Curtain

Today, GSK announced it will part the curtain that previously obscured access to data from clinical trials.  In a move aimed at boosting transparency, GSK has pledged to make its clinical trial results available on a public website.  It has already published summaries of 4500 trials.

Now in a further, and unprecedented move, GSK will also seek to publish the results of all its clinical studies -- regardless of results -- in peer-reviewed journals. It will also create a system where researchers can access anonymous patient level data from clinical trials. This will enable researchers to examine data more closely and to combine data across studies to conduct further research. 

This is great.  Transparency is always good in my view.  It's nice to have a summary but even better to be able to see the raw data so you can do independent analysis and draw your own conclusions -- which may differ from those in a summary.  This is a step forward in openess and will put pressure on other Big Pharma peers to follow suit.

See Fierce Biotech and In the Pipeline for more details.

Posted by Bruce Lehr Oct 11th 2012.

Times Tough or Rebounding for Biotechs?

I guess that depends if you read the Pharmalot version or the Fierce Biotech version of the recent study published by BDO.

Sooooooooo. Either we focus on Small biotech's decreased R&D spending, job cutting and dampening revenues, or on Big biotech's (> $50 M revenues) increase in R&D spending, hiring rebounds and rising revenues. 

Apparently, 90% of small biotechs reported losses in 2011 by an average of 12%, and decreased workforces by 3%. The industry as a whole though grew to $76 M from $62 M, and large biotech increased staff by 16%.

Twenty-four percent of Big guys raised equity capital while 64% of small biotech had to go that route as they had little cash from operations to rely upon. At years end, biotechs, on average, held 2.63 years worth of R&D spending in cash or liqud assets. And, a model employing virtual biotechs is gaining momentum.

Posted by Bruce Lehr Sep 25th 2012.

10 Pharmas Form Non-profit to TransCelerate Their Profits

Or is it to just stem their R&D losses which have continued to climb? 

Regardless, 10 Big Pharma companies announced they formed a new non-profit organization in August to speed up the R&D of new drugs and save some money. These include the big names like:

• Abbott
• AstraZeneca
• Boehringer Ingelheim
• Bristol-Myers Squibb
• Eli Lilly
• GlaxoSmithKline
• Johnson & Johnson
• Pfizer
• Roche
• Sanofi

10 Pharmas Unite To Combat R&D Woes // Pharmalot.

The 10 companies state the new organization's goal is to boost the quality of clinical trials and speed up the typically slow pace of drug development.  New paradigms they believe will lead to substantial cost savings. Specifically, the group has agreed to focus on five initial projects:

• Development of a shared user interface for investigator site portals
• Mutual recognition of study site qualification and training
• Development of risk-based site monitoring and standards
• Development of clinical data standards
• Establishment of a comparator drug supply model

These pre-competitive type projects are expected to improve efficiency and reduce costs leading to better returns on R&D investments.

The FDA is on board with the idea.  Said Janet Woodcock, FDA's chief of drug regulation, "We applaud the companies in TransCelerate BioPharma for joining forces to address a series of longstanding challenges in new drug development. This collaborative approach, utilizing the collective experience and resources of 10 leading drug companies and others to follow, has the promise to lead to new paradigms and cost savings in drug development, all of which would strengthen the industry and its ability to develop innovative and much-needed therapies for patients." 

Here. here. See Fierce Biotech and PharmaTech Talk for more.

Posted by Bruce Lehr Sep 24th 2012.

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.

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.

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

 

Biosimilars Not Only Threat Facing Biopharma

As this piece from BioProcess Blog points out, biosimilar competition is only one hazard faced by biopharma producers of the world's top bio drugs. In addition to increased price competition, there are the unscrupulous drug counterfeiters (see recent Avastin issues).  There is also the possibility of compulsory licenses being invoked in places like India (see recent Nexavar case). 

Biosimilar Competition is Only One of Several Threats Facing Biopharma Blockbuster Drugs.

These type of developments led PhRMA President and CEO John Castellani recently to comment, "If countries begin to routinely use complusory licenses, we could see a 'race to the bottom' in which governments in the developing world walk awayfrom their responsibility to support research and innovation in public health. In the absence of investment made by our members, and the resulting research and development, there would be no generic medicines for the world's patients."

As we say in Oz, "Biosimilars, Counterfeits and Compulsory Licenses, Oh My!"

 

Posted by Bruce Lehr May 8th 2012.

Biotech Markets and Funding

Here's a good article by Bruce Booth of the Life Sci VC blog discussing the heyday of IPOs in the 1991-1994 span versus, the history of these deals to date, and the current investment environment.  What's the story?

IPOs of that era paid handsomely to the VC backers of the time.  The average step-up in valuation over the private invested capital was -- 4x.   There was a very low cost-of-capital provided by public equity investors in that period. Much lower than today.  For most of the past decade, step-ups on total invested capital have typically been only 1.5x or so.  Sadly, high capital intensity has been the signature of many of the past decade’s IPO stories.

The playing field has changed since then as investors realized over that time span that only a subset of the 1991-1994 IPO window have accrued real value over time.  Gilead, MedImmune and Vertex might be considered notable exceptions.  Most of the other IPOs have underperformed all the major indices.

 Booth instructs that there is a major flaw in the former IPO model that 3 main features:

• high capital intensity funding large portfolios, requiring serial public equity, with little focus on capital efficiency
• endless cycles of “rinse and repeat” anti-shareholder behaviors where new investors are recruited to fund the promise at the expense of existing shareholder dilution
• management teams too focused on “built-to-last” company survival vs shareholder value maximization, even when the best outcome for existing shareholders, and often patients, is to sell now and access the balance sheet resources of a bigger company

These flaws have led to IPOs a less attractive means of fudning.  As Booth says, if most IPOs trade down after their IPOs, why bother buying at the offering.  Seems rational.  So in the current environment, private backers are becoming more activist and push for strategies that maximize their return in these companies -- which includes the proposition of selling the company "realtively early" to big pharma players. This avoids the dilution problem described above if trying to go the long haul.  The old IPO model is gone.

In the current situation, one of the big change drivers is Big Pharma R&D productivity issues and their increasingly active M&A interests.  Big Pharma in recent weeks has tried to make deals for Human Genome Sciences, Amylin and Illumina -- but were thwarted by big shareholder interests. As described above, activist big shareholders are playing a larger role in trying to maximize their investments and have resisted these perceived "low ball" offers. With more buyers crowding into the market, the pressure to pay a premium is just going to go higher. That's a trend with which biotech investors are well attuned.  See Fierce Biotech. 

Posted by Bruce Lehr May 5th 2012

 

 

Good Article on Security of Virtual Biotechs

Here is a good article from Stewart Lyman at Xconomy (I find I like a lot of Stewart's articles) regarding the solidity and security of virtual biotechs. The article questions whether this is a model that we'd want to perpetuate as a dominant form. Why not?

The basic argument against this type of company has two main prongs.  The more serious of the two in my view is that these companies are often built on a research idea or premise that they acquired somewhere else (often academia) and don't have the wherewithal to confirm whether the science is sound. If these companies embark on a development program with the underlying science being bad, they are doomed to fail.  Stewart cites many cases where the literature is either flawed (retractions) or non-reproducible. See the Amgen and  Bayer studies on this issue.  Reproducibility was less than 11% for "landmark" cancer papers for example.

The second argument is because the companies are virtual, they don't contribute to the development of vibrant biotech clusters. Clusters help sustain an ecosystem by providing a steady labor pool and a critical mass of intellectual power and innovation. Leading biotech clusters continue to draw investment in places like Boston, San Francisco and San Diego. Virtual companies -- are well -- virtual. They don't provide a lot of infrastructure and contribution to clusters.

The main reason virtual biotechs are popular of course is that they reduce the capital needs of the company.  The company really then focuses on a good management team and hopefully a good molecule/technology. But if the quality of the latter is compromised, that's where the idea falls apart. And of course, these companies are really just building a project to be sold.

Posted by Bruce Lehr May 4th 2012.

New Drug Development Financing Tool?

Andrew Lo, an MIT finance engineering professor, when he floated idea of funding new drug development with CDOs -- collateralized drug obligations.  The CDOs would be able to invest in a series of drug development projects that would pay returns if they resulted in successful treatments reaching the market.

The idea would be for investors to put up $50 B to $100 B to fund 150 drug projects over 10 years.  Hopefully, this would be another funding mechanism and would relieve pressure on getting all the funding from government sources, weakened VC networks and Big Pharma itself.

Naysayers may point out that the CDO concept didn't work out too well for housing and mortgages -- but Lo counters that he forsees a big funding gap for drugs in the coming years and that this would mean a drop in new treatments. 

Lo says, "If there's a cancer bubble, I can live with that."  I don't know if CDOs are viable but I like the novel thinking to bring an idea like that to the table for consideration. See Fierce Biotech.

Posted by Bruce Lehr May 4th 2012.  

Tufts Report on Academic-Biopharm Partnerships

A new Tufts Center for the Study of Drug Development study shows academic medical center (AMC) and biotech partnerships are increasingly important to basic research and developing new medicines. The study looked at 3000 grants to AMCs from 450 biopharm sponsors through 22 medical schools. Their conclusion is that the nature of these partnerships is continuing to evolve and that they have not yet reached their full potential.

The report looks at 12 primary partnership models of AMC-biopharm collaboration. There is a shift occuring toward more risk- and resource-sharing models rather than the more traditional unrestricted research or fee for service models of the recent past.  Rather a range of partnership models is arising from corporate venture funds to pre-competitive research centers to academic drug discovery centers.

The report concludes that in the face of an increasingly challenging R&D environment (often discussd here) and overall global competition, we are likely to see the continued proliferation of AMC-biopharm partnerships.

See full report. Download Tufts AMC-biopharm R&D study

Posted by Bruce Lehr Apr 30th 2012.  

Merck Less Bullish on Biosimilars?

Merck BioVentures, the biosimilars endeavor set up by Merck & Co. in late 2008, is being subsumed into the biologics and vaccines division of Merck Research Laboratories. Mike Kamarck, who has led BioVentures since 2010, has left the company.

The IN VIVO Blog: Merck Says Goodbye to Independent Biosimilars Unit.

Biosimilars may indeed be a new kind of innovation, one that brand-focused biologics companies would be foolish to discount and one that many seem to be tripping over themselves to embrace (see Amgen/Watson, Baxter/Momenta, Biogen/Samsung).

Merck's move to reduce its BioVentures group at least in stature seems to raise doubts on its attitudes toward biosimilars and is at odds with the bullish attitude of groups like Novartis' Sandoz unit, which just this week predicted incredible growth for its own biosimilars business. That said, it’s hard to say whether this retrenchment will be part of the long-term learning process or bigger strategic shift, as the whole field is in the midst of an evolution and successful business models have yet to fully materialize.

Posted by Bruce Lehr Apr 27th 2012.

Bio Drug World is a Changin'

Nothing Earth-shattering here by any means, but a couple interesting reads in the blogs by Derek Lowe (via Matthew Herper) and an article by Luke Timmerman dealing with CHANGE in the world of drug development and commercialization.

The Herper/Lowe, piece to a degree, laments that the heads of drug companies may not value the "human capital, i.e. scientists" involved in the drug discovery process.  And as the economic gap widens between the number of new drug approvals (bringing in much needed revenue) and the high cost of developing and marketing new drugs -- well at present it looks like R&D scientists are paying for it with their jobs. The observation is made that maybe this isn't the best strategy to employ in a research/discovery driven business.  Nevertheless, there is also a hard economic reality and SOMETHING different clearly has to be done -- as the current model isn't sustainable any longer.

The Timmerman piece talks about some of the changes that are taking place on the commercialization of drugs that contributes to lower sales and higher costs - exacerbating a potential need to cut R&D staff (though that response is a choice).  On the comercialization side, it is not good enough to just get your drug to the market anymore.  You actually need to show it meets an unmet need and quite frankly works better than exisiting alternatives -- otherwise me, you, the insurance companies and the government don't want to pay for it. The whole concept of "comparative effectiveness" is bringing a new discipline to drug development -- and sets a higher bar too.

The two articles demonstate the World has changed.  An for an industry to survive in response to meaningful change -- it has to adapt or head for extinction (in this case layoffs or ceasing to exist as an independent business).  It has always been thus.  Just not in the (bio)pharma industry up till now.

Posted by Bruce Lehr Apr 2nd 2012.

 

Acquire, Acquire, Acquire......No, Divest, Divest, Divest

The tide has officially no turned it seems.  Over the past decade (or more) Big Pharma wanted to get BIGGER and BIGGER through mergers and acquisitions.  Now, as pipelines dwindle, patent cliffs are reached, and revenue holes develop --- its time to turn the ocean liner many pharma companies have become to get smaller smaller smaller and fast.

Abbott officially kicked off the activity with its break up into a diagnostic and pharma company (now called AbbVie).  Reports are now circulating that Pfizer's Ian Read wants to to begin his break up plan first discussed way back in March of last year.  See In the Pipeline and Bloomberg for more.

In general, the market has thus far rewarded Pfizer's stock price for this proposed move, and the closer it seems to reality the more the investors seem to like it.  Analysts seem more torn on the long-term (not short term) wisdom of such a move as Pfizer's portfolio does appear to provide some diversification protection and one could argue that the non-pharma businesses are doing better than the "core pharma" property that Read wants to invest in.

Needless to say, in a monkey see monkey do world, if two very large players decide to follow this path, many more lemmings are sure to follow.

Posted by Bruce Lehr Mar 29th 2012.

Which Pharma Spent The Most R&D On Each Drug?

Pharmalot just published (via Forbes) an analysis of Big Pharma R&D spending for period 1997-2011.  The data was provided by InnoThink Center For Research In Biomedical Innovation and Thomson Reuters Fundamentals via FactSet Research Systems.

Which Pharma Spent The Most R&D On Each Drug? // Pharmalot.

From this, one could calculate the dollars spent on R&D/new drug approved for each company concerned.  The link above provides a Table of the results for 12 Big Pharma (biotech).  Amgen, it turns out spent the least at $3.7 B per new drug (11) approved during this period.  AstraZeneca, it turns out spent the most at $11.8 B per new drug (5) approved during this period - OUCH!  This coupled with products reaching the patent cliff helps explain why the latter is experiencing really tough times now and cut over 30,000 jobs during the period.

Even $3.7 B per drug at Amgen seems like an astronomical amount of money.  It's no wonder the industry it trying to rethink its business and R&D model.  Clearly something better change when you are spending$3.7 B to $11.8 B PER DRUG.

One can't help but think to some degree this "ranking" over the period has a little to do with luck as well given some of the vaguaries in the approval process and perhaps timing of some projects relative to submission dates in this period.  I'm not certain you can state one company has any better development model than any other based on this data.  You can say Amgen made out slightly better than its peers for the period -- but who's to say that will hold up over the next period?  We're going to have to track some of these "new models" at companies like Novartis, GSK and Sanofi to see if they really see improvements.

Posted by Bruce Lehr Feb 10th 2012.

SEE some more commentary on this subject from In the Pipeline.