The Big Red Biotech Blog

Novartis unveils long-term Growth Strategy in Dynamic Healthcare Environment

As published in PharmaNews.EU, Novartis presented its growth strategy in healthcare to the analysts last week.  CEO Joseph Jimenez stated "Novartis remains committed to the core strategy of focused diversification in high-growth healthcare segments.  We are leveraging our core competencies in scientific discovery and development to continue driving innovation, growth and productivity across the businesses."

Novartis unveils long-term strategy to grow in a dynamically changing healthcare environment.

 Novartis has four features to its plan to drive growth:

• Diversified holdings with leading businesses in growing healthcare segments - pharmaceuticals, eye care, generics, vaccines & diagnostics and consumer health
• By 2015, the pharmaceutical specialty and oncology portfolio is expected to account for 75 percent of sales
• Strengthen leadership in biosimilars and first-to-market launches to drive performance in Sandoz
• Meningococcal vaccines accelerating growth in vaccines business

Novartis expects to continue to invest in the innovative R&D at the high-end of the industry for the next five years - at least.  It also expects to strengthen its commercial position in the fast-growing BRIC countries. It's innovation position is enviable in this time of patent cliffs for many of its top competitors.  Novartis can boast:

• Pipeline contains 142 projects, with more than 35% in Phase III or beyond
• Planning 30 regulatory submissions in the next 2 years - by the end of 2012
• Leads the industry in NMEs with 55 in clinical development and enjoys 50% success rate in Phase II
• Industry leading vaccine pipeline featuring 17 vaccine candidates in various clinical stages - lead by flu and meningococcal vaccines
• Sandoz generics business enjoys a 50% share in regulated markets

Beyond this investment in R&D and emerging markets, Novartis also plans to cut costs in its supply chain, marketing, sales, and in procurement.  It also plans to create Centers of Excellence in Manufacturing with a goal of getting its capacity utilization rates up to 80%. Money that is saved will be reinvested in more innovation and growth.

 

Posted by Bruce Lehr November 23rd 2010.

Moody's Expresses a Negative Outlook on Pharma Industry

PharmaGossip (via WSJ) reports that Moody's in a new report is down on the near term prospects of the global pharma industry as a whole.  Acording to them, pharma is facing three very large hurdles: record patent expiry's, high regulatory hurdles to new drug approvals, and austerity measures around the world aimed at controlling durg prices and medical spending.

PharmaGossip: Who Will Make the First Pharma M&A Move? - WSJ.com.

The agency is predicting the industry will still continue to engage in M&A activity and will use more debt financing to do so -- even if this approach produces credit-rating consequences. It further notes that the pharma industry is still less leveraged on average than other industries. Finally, the report predicts that generics, consumer health, vaccines and emerging markets will be places Big Pharma looks to diversify into.  As I've mentioned several times previously in this blog, Roche refuses to follow this path except into emrging markets -- from my perspective to its credit.

 

Posted by Bruce Lehr November 22nd 2010.

Orphan Drugs are Safe in the Shire

Shire's CEO, Angus Russell, says that he is comfortable that the company's niche in orphan drugs is a safe place.  Shire has grown the share of revenues that orphan drugs occupy in its own portfolio from less than 5% to more than 30% in the past three years.

Russell is confident in the orphan business model as an alternative to the blockbuster model (which seems to be coming to an end as an option) will sustain Shire.  This is true even if larger competitors like GSK or Pfizer enter the orphan space - or Sanofi is successful in buying Genzyme.  That's because orphan drug status confers market exclusivity - 10 years in the EU and Japan and 12 years in the USA. 

Shire has been able to establish a position in Fabry's disease with its drug, Replagal, and in Gaucher's disease with Vpriv - successfully competing against Genzyme's Fabrazyme and Cerezyme respectively.  Of course, this is largely due to Genzyme stubbing its toe in a major way with the manufacture of both their products - which opened the door for Shire's entrance to these patients.

Russell also thinks the Big Pharma competitors will need to learn how to compete in the orphan markets which is not like competing in the larger global markets with their large patient populations.  Russell notes that 'we work with a very tiny, discreet patient population."  Selling orphan drugs is a very patient intimate selling and servicing process.  See WSJ.

In that process, there is safety with the Shire.

 

Posted by Bruce Lehr November 22nd 2010.

 

Shame on Big Pharma Lack of Foresight: Results Massive Job Cuts

Here's a nice post from Mike Wokasch's Pharma Reform blog entitled Painful Pharmaceutical Industry Downsizing was Avoidable.  Certainly you'd have to be in a cave somewhere to be oblivious to the number of job cuts that have occurred in the pharma industry in the past couple years.  Here's the latest numbers that I saw posted in the Pharmalot blog.

You can see from these numbers that through October, the industry has lost more than 103,000 jobs. These numbers wouldn't include the 4800 cuts announced by Roche, the 4500 announced today by Bayer, and the additional 11,300 that Pfizer may now cut subsequent to the Wyeth merger.

The point of the Wokasch piece is that this should have been more foreseeable by Big Pharma management when times were better - that they should have done a better job recognizing the changes that were occurring in the industry and the environment and acted accordingly to modify their business model.  According to Wokasch, "Big Pharma executives could have and should have seen that their business model, product pipelines, and more importantly, their balance sheet projections were not sustainable in the evolving healthcare market that was becoming increasingly managed, more cost conscious,  and more demanding for innovation, clinically meaningful differentiation, and proof of value. I believe the current layoffs are in large part a result of Big Pharma mismanaging the cash they were generating over the past two decades."

The results of pursuing developing strategies that focused on small incremental improvements versus true innovation, driving sales of those products through large, expensive and wasteful marketing programs, not improving operational efficiencies, and expanding headcount unnecessarily is what we have today.  And, it is not the executives who necessarily pay the price, it is the front line employees who lose their job in the midst of an economy that is struggling to ignite.

Concludes Wokasch, "even without 20/20 hindsight, I believe the current situation was avoidable.  Had Big Pharma pursued innovation in the mid-1990’s rather than relying on “tweaking chemistry” just to get products to the market, managed their expenses when cash was plentiful, and had the foresight to begin adjusting their strategies and workforce for the evolving new healthcare market rather than trying to be the biggest Big Pharma you would not be seeing the layoffs we have been experiencing."

I think he's right.  The world is now going to change dramatically as a result of this slow move to shift their business model.  In a piece in The New Economy on pharma's stalled R&D model, Sam Isaly, managing partner at OrbiMed Advisors, expects employment in the 14 Big Pharma companies across the US, Europe and Japan to fall around 20 percent between 2009 and 2015. That means some 200,000 jobs will disappear across the drugs business.  In the 21st century, says Isaly, Big Pharma will primarily be a distribution business.  Sobering thought.

Posted by Bruce Lehr November 19th 2010.  

Bayer Latest to Cut Jobs

Bayer is the latest member of Big Pharma to admit that it must cut jobs to maintain any level of profitability.  The company will reduce staff by 4500 with 1700 of those coming in Germany.  The cuts are expected to save the company about $1 B annually when they are implemented.

And Now Bayer Is Cutting A Lot Of Jobs // Pharmalot.

Bayer says it has been forced into this position by familiar forces cited by other members of Big Pharma. Namely, the culprits are:

• Increased use of generics
• Rising R&D costs
• Healthcare reform (i.e. manage pricing)

All of these factors eat into margins and profitability, and with not enough new products coming through the pipeline, cuts are inevitable. Bayer also cited a new Moody's Investor Report that dourly predicts a negative outlook for the pharmaceutical industry over the next 10 years.

Isn't that cheery?   Though Bayer's spokesman did say the company planned to add back 2500 jobs in pharmerging markets - especially in Asia.

 

 

Posted by Bruce Lehr November 19th 2010.

Biogen Idec Begins to Unload Unwanted Parts of Pipeline

As its new CEO stated it would last week, Biogen Idec is beginning to unload molecules in its clinical pipeline that are not part of its core development strategy.  The first to go - lixivaptan - which will be returned to its partner Cardiokine. 

The pipeline restructuring when complete is expected to save BiogenIdec more than $300 M per year at which time the company will have exited 11 programs, and shed 650 workers, or 13% of its current workforce.

Speaking earlier this month, CEO George Scangos said: “We have been operating in too many therapeutic areas and haven't maximized our opportunities. We will now focus on a few areas where we can be among the best, and this starts with neurology.”  See in-Pharma Technologist.com.

Posted by Bruce Lehr November 16th 2010.

Is Big Pharma Patent Cliff Real?

According to Philly.com, YES it is.  Duh!

But let's review the stats once again.  Four of the top 5 selling US drugs in 2009 will see their patents expire in 2011 or 2012

• Pfizer's $7.5 B Lipitor
• Bristol-Myers Squibb $5.6 B Plavix
• GSK's $4.7 B Advair Diskus
• AstraZeneca's $4.2 B Seroquel

States a report by Bernstein Research prepared in December 2009, 9 out of the top 10 drugs in the world will lose patent protection in the next 5 years, as will 18 of the top 20.  Patents expirations will occur on drugs that accounted for $92 M of the world's roughly $300 M in pharmaceutical sales in 2009 according to IMS Health.

As mentioned here many times before (see posts on R&D changes, Business Models, and Innovation), most of pharma is proceeding lemming like to adopt the same changes to battle patent losses.  These include:

• Cost cutting - i.e. headcount reduction
• Diversifying into nonprescripotion drugs
• Diversifying into animal health
• Expanding into so-called pharmerging markets - especially into BRIC countries

The cliff is coming and the response so far has been uninspiring.

I think the one with the inner-tube is Roche.

Posted by Bruce Lehr November 13th 2010.  

 

GSK Predicts More M&A Activity

GSK Chief Strategy Officer David Redfern says he expects to see more merger and acquisition activity in the pharma industry as big pharma tries to cope with lost product revenues from patent expirations and generic competition.  According to Redfern, as the pressure mounts more mergers will occur.

Additional factors favoring merger activity include many US pharma companies having big cash reserves that they will have difficulty repatriating and can use for M&A work. Redfern expects possible mergers of the Pfizer-Wyeth or Merck-Schering-Plough ilk, but also would expect to see mid-size companies acquired like Pfizer's buy up of King Pharmaceuticals. Redfern also would expect biotech's like Amgen and BiogenIdec to become more active as well  -- although they might be targets if a big pharma company wants to follow the mega-merger model.

Of course, GSK will remain above the fray. Since they have already experienced the worst of their patent cliff, GSK will likely stick to targeted purchases of smaller companies.  GSK also has plans to invest in the BRIC countries, but Redfern indicates that it is near impossible to find good opportunities with rising prices of companies seen in Brazil and Russia. See Business Standard and Fierce Biotech.

 

 

Posted by Bruce Lehr November 10th 2010.

Big Biotech to go the Way of the DoDo

Frederick Frank, the former vice chairman of Lehman Brothers, says Big Biotech is dead once Genzyme is successfully purchased by Sanofi and the few companies left like BiogenIdec meet a similar fate. According to Frank, no one else will ever rise "to fill their shoes".  The investment community is only interested in funding biotech through mid-level trials then they want to sell to earn their return.  See Fierce Biotech.

"You are not going to see a lot of new Amgens or Genentechs," he said. Only DoDos.

 

 Posted by Bruce Lehr November 9th 2010.

All that's Lilly that's Fit to Print

There were a couple of pieces of news on Eli Lilly that came out yesterday.  Firstly, Lilly announced that it has struck a deal to buy Avid Radiopharmaceuticals for up to $800 M - structured as a $300 M upfront plus milestones up to $500 M.  See Fierce Biotech.

Avid is a diagnostics company that has developed a new approach for the detection of Alzheimer's with its molecular imaging agent, Florbetapir F-18, used to detect amyloid plaques.  F-18 has been submitted to the FDA for approval.  F-18 allows plaques to be detected in living patients brains - something currently unavailable until after the patient's death - so a proven diagnostic for the living is considered a big step forward. Plaques viewed by Florbetapir may be visible for up to 10 years prior to symptoms developing and the test might be used to monitor disease progression as well.

Lilly just had its lead Alzheimer's therapeutic drug Semagacestat go down in phase III clinicals earlier in the year - so this purchase of a companion diagnostic signals strongly that it hasn't given up on the Alzheimer's area for investment and drug development. Lilly is still looking for the Alzheimer's home run. It has solanezumab, an antibody designed to disrupt amyloid clumps, as its replacement lead candidate to Semagacestat.  Phase III results are expected next year.

Lilly also has a BACE called LY2811376 in phase I.  BACE acts to inhibit B-secretase thought to be involved in B-amyloid formation. Thus, the diagnostic test acquired might serve as a useful companion to both these drugs either in diagnosing patients earlier for treatment or in monitoring disease progression or drug efficacy. See Seeking Alpha.

Fierce Biotech also reported that despite the possible excitment that an Avid Radiopharmaceuticals acquisition might engender, the rating agency Moody's Investors downgraded Lilly to A2 - halfway between Aaa and junk. Ouch! Basically, Moody's says Lilly has lost global competitive position through patent expirations, pipeline setbacks, and disappointing product launches of drugs that actually hit the market. The triple whammy. And, Lechleiter still refuses to buy anyone large enough to impress the analysts given the factors cited above.

 Lilly may need to pull a rabbit out of a hat or at least its pipeline for this perception to change.

 

 

 

 

Posted by Bruce Lehr November 9th 2010.

 

Biogen Restructures with Layoffs and Plant Consolidations

 

Biogen Idec announced a major restructuring today that includes layoffs, plant closings and consolidation, killing clinical programs, and management/sales force reorganization.  The company will become more focused.

Biogen Restructures And Lays Off 650 Workers // Pharmalot.

Major elements of the restructuring include:

• Layoffs of 13% of its workforce or 650 workers
• Closure of the San Diego, Wellesley and Waltham facilities
• Shut down of 11 clinical programs - including cardiovascular and oncology in San Diego site
• Elimination of the Rituxan oncology and RA sales force
• Consolidation of business development, venture development and corporate strategy management/functions

The plan is expected to save $300 M annually.  It will result in a restructuring charge of $115 M.  Wellsley and Waltham will lose about 80 employees and operatins will be consolidated at the Cambridge and Weston sites.  San Diego will lose about 300-325 jobs and the oncology and CVS programs. About 25% of the San Diego workforce will be offered jobs in either the Cambridge or RTP, NC sites. The new company will have 4,275 employees after cuts.

Biogen will retain its Tysabri, Avonex and Rituxan franchises - though Rituxan will be sold by Genentech's sales force.  New development will concentrate on neurology products like a new oral MS drug called BG-12 and a longer lasting pegylated-IFN to replace Avonex.  See Xconomy here and here.

 “The company will leverage its immunobiology, process development and biologics manufacturing expertise to target high-potential treatments for select disorders where there is a significant unmet need and where the drug candidate has the potential to be highly differentiated,” the company said.

Even though the company has only launched 1 drug in the past six years, it says it will launch 5 new drugs in the next five years.  We shall see.

Posted by Bruce Lehr November 3rd 2010.  

Roche's Sev Schwan States Plan to Compete vs Biosimilars

Here's a smattering of articles recapping comments by Roche CEO Severin Schwan with regard to his company's plans to compete against biosimilars as some of Roche's big biologic drugs start hitting patent expiration dates in next several years.

From the WSJ Health blog, Fierce Biotech, and the regular online WSJ.   The Roche counterattack plan has three pillars:

• Developing biobetters of existing Roche drugs
• Continuing to develop new innovative products
• Working with lawmakers/regulators to set bar high for copycat biologics

In other words, Roche will continue to compete in a manner focused on its core strengths and will not try to diversify into generics and biosimilars per se as many of its rivals have stated as their intention.

 

 

Posted by Bruce Lehr November 1st 2010.

 

Roche Breaks from the Herd

We seem to be able to count on Roche to pursue plans to differentiate itself from the herd.  Unlike many of its competitors who have stated an intention to pursue generics as diversification strategy (see previous post), Roche will remain true to its roots providing innovative medicines.  It plans to expand its historic franchise in oncology drugs to include new medicines in inflammation, CNS disease, and metabolic disorders.

Roche firmly rejects the idea of "diversifying" into generic drugs, consumer health or animal health.  Says CEO Severin Schwann, "A lot of people call it diversification. I call it giving up. Call me biased, but I really believe we have one of the best industry pipelines."  That's the spirit of leadership!

Roche still spends 21% of its revenues on R&D, and 57%of their current revenues come from oncology drugs.  The new shift to the three therapeutic areas mentioned above will require Roche to form some partnerships when it comes time to go to market - basically sales force deals to access physicians beyond its base of oncology specialists.

Says Schwann, "We go where science takes us."  He also talks about Roche retaining its faith in innovation - which already separates it from many of its following rivals. (See FT.com).

 

 

Posted by Bruce Lehr October 28th 2010.

 

Big Pharma Herd: Diversify, It's the Wave of the Future

InPharm reported on a Roland Berger (RB) Strategy Consultants survey of leading pharmaceutical company executive's views of the current business environment, their firm's business model, and implications for their future strategic response.  RB characterized "diversification" as the most popular intended response by surveyed companies and listed three ways to accomplish this - innovation, integrate and de-risk - with the latter two being most popular.

This is what I'm alluding to as the herd mentality in my headline - basically the majority are opting for the less differentiated strategy and avoiding the tougher innovation strategy - which is likely to be more valuable.  Let's look at the survey.  RB went to 25 companies, with more than 40% of WW revenues, including 7 of the top 10 companies, and interviewed 50 executives iincluding CEOs and board members.

The survey says:

• 65% characterized the industry as being in "strategic crisis"
• 67% see diverisification as the answer (I just want to say one word to you. Plastics! )
• 78% perceived generics to be the most important area for diversification (somebody ought to alert PhRMA!)
• This one blew me away.  Almost 50% expect anegative ROI on their current R&D investment and are losing faith in traditional patent-based protection
• The industry expects margins for innovative products to come under attack by goverment managed healthcare
• R&D will not bring required level of returns with companies outsourcing to cut costs

The prediction then was that the industry would become more diverse - ranging from highly focused innovative players to fully integrated healthcare conglomerates.  It seems most are opting for the conglomerate model at this juncture - and are focusing towards generics - I don't see how 65% of the industry can go that route and all survive. Now it's a race to see who can move to conglomerate status first to stake out a position that may be defendable before the herd comes charging along.

I'm reminded of the Ernst & Young Pharma 3.0 report earlier this year that addressed perceived changes the industry would need to make going forward and defined the challenge thusly,

The core of this industry has been innovation and it will stay innovation, but the bulk of the money and the effort has been in the innovation of the product pipeline. What we are seeing going forward is the need for innovation of the commercial model in order to be able to respond to the mega changes of healthcare reform globally.

The consultants say innovation of the business model. The bulk of the industry players prefers cost cutting and product innovation toward generics.  Where is the disconnect here among the herd?

 

Posted by Bruce Lehr October 26th 2010.

 

 

 

 

Welcome Back Sam the Sham and His Dineros

According to the WSJ, Sam Waksal is back with his partners at Kadmon Pharmaceuticals and their company is acquiring privately held Three Rivers Pharmaceutical LLC of Warrendale, PA for "more than $100 M."  Waksal is the defrocked former CEO at Imclone.

Kadmon focuses on high value drugs in the areas of oncology, infectious disease and immunology.  Kadmon has raised over $200 M in debt and equity and has big monied investors from Japan and China. Waksal is Kadmon's CEO. 

Three Rivers currently markets several products for hepatits C, including Infergen, Ribasphere, and RibaPak.  It also markets Amphotec for systemic fungal infections and can be used for certain cancers. Kadmon appears to want Three Rivers as a fully-integrated commercial company to serve as its launching pad. Three Rivers top executives will exit stage left in this acquisition.

Kadmon will keep Three Rivers' Warrendale headquarters and its manufacturing, distribution, commercial and admin operations.  Kadmon hopes to develop a new model for small biotech firms who may be leery of the venture capital markets.

Says Waksal, "I'm taking what we did at Imclone and bringing it to the next step to build a 21st century biotech company."  Of course when last seen at Imclone, Waksal was nailed for insider trading and exited stage right to a 5-year prison term. So I guess I can hardly wait to see what this looks like in a 21st century model.

Posted by Bruce Lehr October 26th 2010.

 

Internal Innovation Clusters

A few weeks ago, I added a couple posts dealing with innovation clusters.  One was motivated by a speech given by Lilly's CEO John Lechleiter.  In it, he was promoting the idea of our goverment to keep funding the development of innovation clusters as these seem to provide vibrancy and innovation to a given industry.

As a reminder, clusters are geographic concentrations of interconnected firms, and supporting or coordinating organizations. 

At the end of last week, I saw a nice post on the Innovate on Purpose blog dealing with what I've termed "internal innovation clusters"and the author terms the "network effect".  In his post, the author - Jeffrey Phillips - asserts that innovation is more successful when there is a critical mass or network effect in an industry or market - that sounds like a cluster to me. He says we ought to apply that same thinking to innovators in a firm.

The "lone innovator" is a myth according to him. Rather, companies need to create a critical mass of innovators who are networking with each other and sharing ideas and concepts - both within and outside the firm.  He also questions the common methodology employed by many firms of kicking off one or two small, isolated innovation efforts while the rest of the firm "stays focused" on the business. This makes innovation difficult as there are no other innovators in the firm to interact with or compare notes with. Additionally, there is no "internal competition" for the best ideas and no "synergistic" effects created by multiple teams innovating.

He argues that the creation of multiple innovation teams within an organization that exchange information with each other, and with other firms and markets, will create more and better innovation. That sounds like an "internal innovation cluster" to me.

Posted by Bruce Lehr October 11th 2010.

 

Antipsychotic Drugs - Side Effects May Include Lawsuits Too!

In an article from the NY Times, really a corollary to a post I had a couple of days ago discussing whether "fines" for questionable behavior like off label marketing, the sad facts of how antipsycotic drugs have been cultivated and marketed are laid out. AND IT AIN'T PRETTY!

PharmaGossip: Antipsychotic Drugs - Side Effects May Include Lawsuits - NYTimes.com.

According to the Times, the new generation of antipsychotics has also become the single biggest target of the False Claims Act, a federal law once largely aimed at fraud among military contractors. Every major company selling the drugs — Bristol-Myers Squibb, Eli Lilly, Pfizer, AstraZeneca and Johnson & Johnson — has either settled recent government cases for hundreds of millions of dollars or is currently under investigation for possible health care fraud.  Wow! Ethical pharmaceutical industry, huh.

Well, at least we're cracking down and fining these companies for wrong doing. That must be working right? Well..........maybe not quite.  The industry continues to market antipsychotics aggressively, leading analysts to question how drugs approved by the Food and Drug Administration for about 1 percent of the population have become the pharmaceutical industry’s biggest sellers — despite recent crackdowns.

Lew Morris, chief counsel for the inspector general of the Department of Health and Human Services, says he is serious about bolstering government efforts to reform or punish drug makers for illegal sales of antipsychotics.  “The message we want to send to the industry is it’s not just the same-old, same-old,” he said in an interview.

Over the next year, the government is adding at least 15 prosecutors and 100 investigators to pursue health care fraud.  Since more than 1,000 False Claims Act lawsuits are still under way, most of them focused on health care and many on lucrative antipsychotic drugs, these new lawyers should have plenty to do for years, and years, and years.  Sadly. 

For that reason alone, critics say they think the industry still hasn’t gone far enough to change questionable practices.  I'd say so.

Posted by Bruce Lehr October 3rd 2010.

 

Big Pharma Absorbs $5 billion in fines! "The cost of doing business!"

Here's one from the excellent PharmaGossip blog that I must admit that I find to be sad and disturbing. This is a report of a study performed by The British Medical Journal and the Bureau of Investigative Journalism, City University, London

PharmaGossip: $5 billion in fines! "The cost of doing business!".

Effectively, we seem to have fostered a system whereby big pharma engages in fraud - usually off label marketing - as a standard business practice in order to hit market return expectations.  This would also include kickbacks and "entertainment" for physicians (KOLs) - a sum said to exceed $200 M in recent years.

In the last 2 years alone, 6 of the top 10 pharmaceutical companies have been fined for fraud in the US with a further 3 undergoing investigations. The total paid out has been $5 B in fines. (Of the top 10, only Roche remains untouched by US government).

Pharmaceutical fraud is one of the US’s top 3 “threats” says Sharon Ormsby from the FBI Financial Crimes Unit, because everyone is touched by these frauds (of the billions going into US healthcare, 3 - 10% is believed to be siphoned off into fraud — a large amount that could go to needy patients. Healthcare Reform anybody?

I would encourage you to follow the link and read the rest of the article for more in depth examples and discussion.  But it appears that we've institutionalized this behavior to an alarming degree and that it is in fact more cost effective for companies to just pay the fines and continue business as usual - as the proftis reaped far outweigh the financial penalties.

At the risk of moralizing further, I will refer readers back to a few other blog posts (see here and here) on related topics.  I do think we need to refresher course in focusing on patient welfare and getting back to the roots on which the industry was founded - which I firmly believe was NOT more profits at any cost.

Let's try to remember  that maximizing the "good" a  company does is related to greater profitability, equity and return on assets, and creates more shareholder value.  And it is the right thing to do!

 

 

 

Posted by Bruce Lehr October 2nd 2010.

 

 

Lilly's Lechleiter Sticks to His Guns

Eli Lilly CEO John Lechleiter, despite a big recent setback with Lilly's Alzheimer's drug semagacestat in phase III, and a loss of patent protection over the next 7 years of drugs that represent 74% of its revenues, is sticking to his conviction that the company will "go it alone and focus on internal R&D" according to an interview appearing in the NY Times.

Lechleiter is adamnant that Lilly can retool through reorganization and cost cutting, and can avoid mage-merger mania exhibited by some key Big Pharma competitors.  He plans to turn the company's attention toward development of treatments for Alzheimer's and cancer. He remains bullish on Lilly's internal R&D which has produced only one new drug, Effient, in the last 5 years and whose pipeline in many analysts view is lagging.  Lagging to the point that some are predicting Lilly revenues to fall from their high of $23 B in 2010 to only $18.6 B by 2015.  Lechleiter says they won't dip below $20 B even in their depths.

Many of Lilly's European competitors are projected to cut R&D spending by as much as 40% in the coming years.  Lilly plan to increase internal R&D spending. Lilly already has the industry's highest ratio of research to revenue - 19.8% - so they are used to bucking the trend.

"We're trying to be realistic," said Lechleiter, "while maintaining a sense of optimism" Or perhaps, whistling in the dark.

Posted by Bruce Lehr October 1st 2010.

  

 

Sanofi Continues to Change R&D Model to Drive Innovation

Sanofi continues to morph its R&D footprint in an effort to become more focused, nimble and innovative.  As reported in Fierce Biotech, Sanofi will sell two R&D sites to CRO partner Covance in a 10 year, $2.2 B pact.  Covance will assume ownership of Sanofi's Porcheville, France and Alnwick, UK sites at a price of $25 M.  Sanofi will handle an important part of Sanofi's development pipeline.

"A key strategy for Sanofi-Aventis is to transform its R&D model and discover new medicines through the use of novel technologies and innovative partnerships," declared Sanofi R&D chief Marc Cluzel.  Covance also anounced the continuation and expansion of a similar deal with Eli Lilly today (see Outsourcing Pharma.com).

For Sanofi, this is a continuation of a flurry of activity that it has engaged in this year to reshape its R&D model. Other deals (in no particular order) announced this year include:

• A new R&D center is being built in China to support development of cures for diseases more  common to that area (here)
• Sanofi will join the Massachuesetts Life Science Center to expand its partnering and licensing activies (here)
• Sanofi and Aviesan - essentially a consortium of universities and private institutes in France - formed a research pact to develop therapies in focused disease areas (here)
• Last week the purchase of VaxDesign and its novel, rapid in vitro screening methodology to help select the best preclinical candidates to enter the pipeline (here)

It looks like they're serious and have really gotten busy in the past year and it's not over yet.  We still have a potential Genzyme acquisition looming on the horizon.  

Posted by Bruce Lehr September 30th 2010.

 

 

"Give Me More Drugs, More Revenue by 2014" says Lilly

With revenue gaps looming when Lilly's best selling antipsychotic, Zyprexa, loses market exclusivity in October 2011, and its one-time projected mega-blockbuster Alzheimer's drug, semagacestat, failed in phase III, the company is turning to licensing to fill the hole. See WSJ Health blog report.

Lilly's president of R&D, Jan Lundberg, stated the company is "particularly interested in late-stage opportunities that can be revenue-generating in 2014." No pressure or anything. Lilly has already been busy this year, acquiring Alnara Pharmaceuticals pancreatric-enzyme replacment therapy, and co-promoting Kowa Pharmaceuticals cholestrol drug, Livalo.

Lundberg says Lilly has already examined over 1000 deal opportunties in 2010 but only "a handful" resulted in anything.  That would equate to a 0.5% close rate.  Lilly is looking to bolster its holdings in cancer, diabetes, and neurological therapies.

Previously this year, Lilly CEO John Lechleiter had been particularly bullish on the Lilly pipeline and indicated they wouldn't be in any large scale buying mode to escape the patent cliff.  However, internal programs are still years from getting on the market in most cases and mega-failures like semagacestat (which actually made patients worse) has no doubt caused Plan B to kick in.

Posted by Bruce Lehr September 28th 2010.

Can't Anybody Here Play this Game?

With sincere apologies to Casey Stengel, recent manufacturing failures in pharma industry make this question every bit as pertinent as when it was formulated about the 1962 Mets.

Genzyme. J&J's McNeil. Abbott. Amgen. Not exactly neophytes to the manufacturing and quality control of critical products serving the healthcare market.  Yet all have experienced problems in their manufacturing resulting in recalls, and in some cases shortages, and illness.

What's more? Many of these instances have been marked by a seemingly leisurely attitude in senior management toward getting to the bottom of the issues.  Or worse, lack of transparency in dealing with the problem with the patient base - lack of availability information, dealyed or phantom recalls, and stonewalling regulators.

Results? Loss of consumer confidence or anger among patients who are without their needed medications.  Plant closings and job losses for those employees. Senior management resignations (albeit too little too late).  Proxy fights. Consent Decrees.  And even an acquisition attempt (which could go hostile) in play.

Like most things. It would appear that this would come down to fundamentals.  Companies need to go back to spring training and work on basics of attention to detail, institution and adherence to strong quality systems - but even more importantly a return to responsibility, forthrightness and a commitment to ethics at the top.  These are ethical businesses correct?

Posted by Bruce Lehr September 27th 2010.

Lilly's Leichleiter Promotes Innovation

The Indy Star reported comments by Lilly CEO John Leichleiter speaking at a conference in Washington DC sponsored by The Brookings Institute. He praised Federal efforts to support regional innovation clusters in the life sciences arena.  He said such policies "can unleash America's true capacity for innovation".

Clusters are geographic concentrations of interconnected firms, and supporting or coordinating organizations. Silicon Valley is the most famous example in the US. The Brookings Institution, a nonprofit think tank, contends that clusters produce lasting value in economies.   According to the Insitute, the US has lagged in supporting clusters as compared to other nations but is catching up.

"We know that when you get businesses, government, academia and nonprofits together in one place, pulling toward similar goals, good things happen," Commerce Secretary Gary Locke told the forum.

Michael Porter has published extensively on clusters. According to him, clusters arise because they increase the productivity with which companies can compete. The development and upgrading of clusters is an important agenda for governments, companies, and other institutions. Cluster development initiatives are an important new direction in economic policy.  The Cluster Mapping project at Harvard will identify and map all US clusters for the government to aid policy formulation and support.

Porter explains how clusters affect competition in three broad ways: first, by increasing the productivity of companies based in the area; second, by driving the direction and pace of innovation; and third, by stimulating the formation of new businesses within the cluster.

Geographic, cultural, and institutional proximity provides companies with special access, closer relationships, better information, powerful incentives, and other advantages that are difficult to tap from a distance. The more complex, knowledge-based, and dynamic the world economy becomes, the more this is true.

Clusters represent a new way of thinking about national, state, and local economies, and they necessitate new roles for companies, government, and other institutions in enhancing competitiveness.

Posted by Bruce Lehr September 24th 2010.

Value Focused Commercial Model = Opportunity Knocking

The following link is to the Outsourcing-Pharma.com website.  It provides access to an interview with Quintiles VP, Jim Featherstone. 

Biopharma needs value focused commercial model, says Quintiles.

In the interview, Featherstone points out that the increased pressures on R&D, manufacturing and clinical trials in the pharma industry - actually represent opportunties for commercial outsourcng partners.  The challenge is for these outsourcing entities to provide more value throughout the value-chain.   Not just traditional products and services, but enhanced offerings like better communication/ education with patients, payers and regulators.  Service providers can offer the in-house expertise and experience in these areas that their clients may lack in either experience or manpower.

It's a new model of a full-service supplier that is trying to provide more integrated end-to-end solutions throughout the process.  I think many vendors are seeing that partnering opportunities -- and commercial success -- ultimately depend upon their ability to provide this level of integration with their customer base.

When opportunity knocks, someone needs to step up and answer the door.

 

 

 

Posted by Bruce Lehr September 22nd 2010.

A One-Size-Fits-All License Agreement: The Holy Grail of Tech Transfer?

Anyone who has ever tried to negotiate an agreement with a University tech transfer office knows that it can be more than a little challenging.  The perception I often have is that they are very very much over-valuing a technology that is no where near commercialization and want top dollar without appropriate commeasurate assumption of risk.

Then too, due to their sources of funding, ex. Federal or State funds, there can be significant disclosure issues with regard to say publishing that may be required to further throw sand in the works. Negotiations around these terms can seem endless and life seems to repeat itself over and over in each new tech transfer situation like a perverse rerun of "Groundhog's Day".

A One-Size-Fits-All License Agreement: The Holy Grail of Tech Transfer?.

That's where I was excited to see this article about The University of North Carolina's (one of my Alma Maters) attempt at putting together a universal, express licensing agreement!  What a concept!  Go TarHeels!

“Where we hope to gain is that if we get a lot of companies started, more of them will be successful and have more products on the market, so we’ll be more successful,”  said Cathy Innes, director of the Office of Technology Development at the University of North Carolina at Chapel Hill.. “This university has been very consistent in its messaging [that] we’re not just trying to maximize cash. We need to get more things in the pipeline.”

Oh, shouldn't it be the case that we're all similarly motivated to move into the pipeline and drive a commercial success.  Afterall, If it were done when 'tis done, then 'twere well. It were done quickly!

 

 

 

 

 

Posted by Bruce Lehr September 21st 2010.