The Big Red Biotech Blog

Biotech IPOs are Extinct. Need New Partnering-Risk Sharing Models

Luke Timmerman wrote this nice piece in Xconomy today talking about how the biotech industry needs to get away from IPOs as a potential funding mechanism and work with new risk-sharing/partnering models. The article uses Plexxikon's experience as a case study of sorts.

Last week, Plexxikon agreed to be acquired by Daiichi Sankyo for $805 M upfront plus up to another $130 M in milestones. And they were able to accomplish this after having raised only $67 M in funding over the years to establish its technology. According to Plexxicon's CEO, Peter Hirth, the company had relatively few means of cashing out as the IPO market was dead to them -- certainly at this type of $900 M+ price. 

Timmerman's point?  If this was true of Plexxikon, a company with something of real value to sell, what are the prospects for other biotechs?  The answer slim and none when it comes to the old IPO model for cashing out. There will be no other Genentech's and Amgen's coming through this mechanism.

Rather, something like the Plexxikon model is more likely to take over. Namely, Plexxikon has established a means to gain an in depth understanding of the targets it pursues, crafts a drug to work with that target, and also develops a companion diagnostic to select those patients who are most likely to respond favorably to its new therapy. In other words, they really understand the biology of the disease and science they are pursuing.

Plexxikon was then able to take its science to partners to develop into therapies.  The deals generated cash flow and funded further development. Plexxikon had to give up some of the ownership of the projects but also gained partners to share the risk.  The company was then able to stick to its area of expertise which was drug discovery and development -- and didn't need to develo expertise in all the other functional areas and their associated costs.

"We'd rather own 20 percent of a given product, not vertically integrate, and license it away at a value inflection point," says Hirth, "the industry really needs to rethink itself.  Most of the people are living 20 years in the past, and don't realize that they need to change."

It's change or become extinct.

 

 

 

 

Posted by Bruce Lehr March 7th 2011.

 

 

Termeer Rises from Ashes to Pocket $221 million

As Fierce Biotech reports, Henri Termeer of Genzyme stands to rake in up to $221 M from the Genzyme deal with Sanofi.  This includes $145.9 M for his stock, plus $12.5 M for change of control specified in his contract, plus up to another $62.8 M if the CVRs from the Genzyme deal payout at their maximum value. 

Not a bad day's work and a far cry from being potentially ousted from the company by Carl Icahn only last year.  Quite a rise from adversity.

 

Posted by Bruce Lehr March 7th 2011.

Does a New Drug Cost $1.32 billion or $43 million?

There is a vigorous debate brewing on the "internets and blogs" at present resulting from differing viewpoints on the cost of new drug development.  This was spurred by a recent article published in the London School of Economics Journal called Biosocieties.  It puts drug development costs at $43 M for the median drug project.  This is pitted against PhRMA's published estimate of $1.32 billion.  So which is it?

Which estimate -- $43 million? 

 

 

 

                                                                                              Or $1.32 billion -- passes the smell test?

 

 

 

 

 

What's $977 M amongst friends anyway?  

It's this type of extreme position by both groups that seems to me to cloud the issue.  I don't know that I find either figure that credible when you get right down to it -- but on balance would opt for PhRMAs to be closer to the ballpark -- but still be way out in the extremes of the parking lot not in the stadium itself.  On the other hand, the Biosocieties author's might still be sitting home in the drive way warming up the car and listening to game on the radio.

See Fierce Biotech, Slate and In the Pipeline for lengthier (and more enlightening discourse on the issue).

Posted by Bruce Lehr March 7th 2011.

Big Pharma "We Have a Problem"

An article appearing in the NY Times today, and being amplified in PharmaGossip and Pharma Reform, re-emphasizes the mess the pharma industry is in as it hits the wall by on by (in no particular order):

• A spate of blockbuster drugs coming off patent
• A severe lack of new blockbusters coming through the pipeline
• Very much increased pricing pressure from 3rd party payers and governments
• Increased regulatory and government oversight resulting in fewer new approvals and an epidemic of manufacturing problems coming to light

According to a new Morgan Stanley report, "The operating environment for pharma is worsening rapidly."  And chiming in from the Center for the Study of Drug Development at Tufts is its director, Kenneth I. Kaitlin who cheerily adds, "This is panic time, this is truly panic time for the industry."  Other analysts say the industry became too dependent on the blockbuster model.  Now what?

"We seem to have a systemic problem here" says Francis Collins, director of NIH.  The Pharma Reform blog dourly adds that the situation was decades in the making and will take decades to turn around.  It further adds, that the business model will need to be revamped to include changes along the following lines:

• Must increase operational efficiency - more productivity with less wasted cost
• Must become more responsive to healthcare market needs
• Must replace traditional sales and marketing with healthcare market embraced programs(more education/science)
• Need to be responsive to heathcare provider needs and patient well-being rather than driving solely toward Wall Street returns
• Need to provide clinically meaningful benefits over currently available therapies

All of this will require a major change in philosophy and operating models - returning more to science based approach to finding preventions, treatments and cures with much much much less focus on me-toos and trial and error matches of proposed therapies to putative disease targets.  The  industry needs to fix its "innovative core" and will be in trouble until it does.

 

 

 

 

Posted by Bruce Lehr March 7th 2011.

Samsung and Quintiles to Join Forces on Biosimilars

Reuters and Fierce Biotech report that Samsung will invest $264 M in a joint venture with Quintiles in Incheon, South Korea to pursue biosimilars.  The venture will build a new plant for their CMO that they expect to be able to bring into production by 2013. 

Samsung executive vice president Kim Tae Han said his company hopes to generate $1.8 B in revenue from biopharmaceuticals by 2020. Samsung says it will pursue other biotech deals in 2011 and will eventually try to produce its own drugs after gaining experience through this joint CMO venture.  

Late last year, the South Korean government stated its intention to invest in the biosimilars industry.  They set the goal of achieving 22% market share of a market estimated to be $14.5 B in 2015. The government plans to provide financial and institutional support for the industry, e.g. manufacturing facilities to support biotech.  It will also name biosimilars as a "core green" industry.  Korea expects this effort to add $2 B extra to GDP, $1 B to its exports, to create 120,000 new jobs and to spawn 5 globally competitive biosimilar companies.

Looks like the biosimilars charge is coming. Samsung is getting on board.  The US government better get its funding for the US biotech industry in place sooner rather than later.

 

 

Posted by Bruce Lehr Feb 26th 2011.

Is Big Pharma Strangling Biotech Startups in Their Cradles?

I commented on this story last week when it appeared in Xconomy-San Diego. 

PharmaGossip: Is Big Pharma Strangling Biotech Startups in Their Cradles? - The Atlantic.

I will stick with my gut reaction.  This is a fairly rational and expected response by Big Pharma companies suffering through their own trials and tibulations caused by expiring dugs patents and pipeline failures, i.e. they are laying off risk until a project looks more like a "sure thing" - though there never is such a thing.

I will take Kinsella at his word that the environment is getting even tougher out there and it is likely that this will reduce the amount of VC activity (also a rational response) and make biotech more dependent on more one-sided Big Pharma deals.  This implies Big Pharma as the new investment banks -- and also acting as the new Sheriff in town.

The only alternative might be more government investment in the area if they want to bolster the R&D efforts outside dependency on Big Pharma dollars.  Extension of R&D tax credits and grants anyone?

Posted by Bruce Lehr Feb 25th 2011.

Biotech Investing Analysis and Options. Looking for Next Payoff

In response to the pending Sanofi $20+ B acquisition of Genzyme, Seeking Alpha went back in (recent) time to analyze how the $47 B from the Roche/Genentech deal was invested back into biotech as a predictor of how Sanofi money can be expected to flow from Genzyme investors who get paid off.

The Roche/Genentech deal occurred in March 2009.  At the time, Seeking Alpha hypothesized investors would look for similar companies to Genentech in terms of size/liquidity - basically the 30 largest companies within NASDAQ biotech.

The companes were divided into three tiers: tier 1 - market cap > $10 B, tier 2 - market cap between $2 B and $10 B, and tier 3 - market cap < $2 B.  How did it turn out?  Did investors go to tier 1 as predicted.  In short, NO.  All 6 tier 1 companies actually underperfomed the NBI. 

Tier 2 companies did best.  More than 50% beat the NBI. Four of these showed triple digit gains, including: Alexion Pharmaceuticals (159%), Perrigo Company (239%), Shire plc (142%), and Warner Chilcott (241%). 

Tier 3 was next best with 50% besting the NBI.  Again 4 companies showed triple digit growth, including: BioMarin Pharmaceuticals (145%), Endo Pharmaceuticals (108%), Regeneron Pharmaceuticals (178%) and United Therapeutics Corp (114%). 

The autors conclude that Genzyme funds that are freed up will also tend to flow to the tier 2 companies this time around too. Fierce Biotech also published other analysts "guesses" as to where the money might flow.  The consensus is to midcap companies in very early stages of their growth trajectory. A few of the companies mentioned by name include: Biomarin Pharmaceuticals (see above), Alexion Pharmaceuticals (see above), Human Genome Sciences, and Dendreon.

 

 

 

 

Posted by Bruce Lehr Feb 19th 2011.

 

 

Schering-Plough Deal Good or Bad One for Merck?

Reuters writes that the final grade on the Merck-Schering-Plough mega-merger may depend on how the J&J and Merck arbitration hearing over Remicade concludes.  If Merck loses, then its stock will likely go down another 5-9% according to analysts.  What's more?  Remicade (and its follow on Simponi) and S-P's Vytorin (vorapaxar) were two of the three big reasons Merck bought S-P. Vytorin is already by the boards and should Merck also lose rights to Remicade and Simponi in Europe - it will make the S-P acquisition look like a real bust.

What looked like a "cheap" acquisition as mega-mergers go, at a multiple of 13 times sales (compared to 27 to 56 seen at the time), will now look and feel more expensive. The bloom will be off the rose.The arbitration result could come at anytime between now and the Spring. 

 

 

 

 

 

Posted by Bruce Lehr Feb 11th 2011.

Pharma Chiefs Throw in Towel on R&D

Boy, talk about pessimism.

This article from Fierce Biotech covering comments of CEO's from several major Big Pharma's had to be a real downer if you work in R&d in ANY of these companies.  A lot of doom and gloom about how R&D groups aren't earning a good ROI and that it's an end of an era.  Look at these comments [at London pharma conference] from CEOs of the likes of GSK, Lilly, Bayer,

I am absolutely convinced that this will be the last generation of R&D spending

The industry will not go forward another 10 years spending the money that it has been spending

Investors see us as investing large sums of money and .....hitting for the fences with less hope of being able to achieve a blockbuster

There is less belief on their [investors] part that we would make the sort of returns that make this sort of risk justifiable

There is real doubt about whether the sustainability model of pharma can be maintained with our current R&D productivity

Wow! Wouldn't that fire you up to go to work in Big Pharma on Monday morning? Might want to get that resume polished up.  Sounds like we will continue to have R&D restructuring and cost cutting.  What's not clear to me is what model will be our replacement.  It is clear to me that pharma needs innovative products coming from somewhere and it will not be able to save its way to prosperity. 

Comments like these though lead me to believe that Big Pharma will become a bunch of bankers backing outside product development and will also do a little sales/marketing on the side.  I have think company's like Roche -- that still are speaking about a commitment to R&D -- will prevail in this environment of R&D cutting.

Investors might like slashing R&D in this quarter and the next.  Let's see how thrilled they ar ein a couple more years if no products are coming to market in companies who take out the big knife on R&D. I guess you can fight for a new model and better productivity or you can throw in the towel.

 

Posted by Bruce Lehr Feb 11th 2011.

 

 

All Quiet on Genzyme Front

No news on Sanofi's expected aquisition of Genzyme in this week's earnings call. 

The call did show that Sanofi reported only a 0.5% increase in 4th Qtr sales up to $10.1 B and reported a net drop in profits by 64% due to a large restructuring charge that relieved them of thousands of sales people and R&D scientists.  Sanofi indicated the sales staff was no longer needed as they were losing business from their Taxotere, Plavix and Lovenox frachises to generics competitors. This trend is strong enough that Sanofi chose to revise its EPS estimates for 2011 down by 5-10%. 

The above estimates on EPS does NOT include any possible beneficial effects that a Genzyme acquisition might provide.  This speaks volumes as to the need Sanofi has to make a Genzyme-type deal a reality to get back into growth mode in the short-term.

Sanofi CEO Chris Viehbacher said talks with Genzyme are proceeding on its expected timeline.  He told reporters and analysts "we'll keep you posted" when there is something to report.  See WSJ here and here.

 

 

 

 

Posted by Bruce Lehr Feb 10th 2011.

FT Chimes In on State of Pharma Industry

Here's a Financial Times piece that is fairly critical of the pharma industry that is likley appearing now in response to Pfizer's recent decision to cut back it R&D in Sandwich, UK and in Groton, CT.   It starts by remembering Merck and J&J in their more "glory years" period where both were very highly regarded from a business and ethical point of view.

PharmaGossip: Now the FT chimes in as well.

It then talks about how Big Pharma has changed to become less patient and more financially focused with negative consequences as a result. Some of these being the industry's seeming fascination with me-too drugs, drugs for minor ailments of the rich countries versus more glarign medical needs of developing nations, focus on marketing over development -- all of which appears to have driven the industry to be less successful and more reviled by the public - the sterling image of yesteryear being despoiled. The Times article claims the industry's response to these woes is to increase lobbying efforts to delay further sales/profits erosion.

The article concludes with this thought:

"When an industry is broken, the best business strategy may be to manage its decline." 

Ouch!  Let's resolve that we're not there yet, and with some retooling of the development model and government support with tax policy can spur innovation -- so that the indsutry can recapture its momentum and restore some of it lost luster.

Posted by Bruce Lehr Feb 9th 2011.

Informex 2011: Tracking the Fortunes of Chemically Synthesized APIs

This article from the PharmaTech Talk blog comes to us from this year's Informex meeting in Charlotte, NC. It summarizes the pressures faced by US small molecule API manufacturers in a rapidly competitive and shifting environment.

PharmTech Talk » Informex 2011: Tracking the Fortunes of Chemically Synthesized APIs.

The gist?  Big Pharma is increasingly consolidating its vendor base.  It is looking to outsource more of its operations to gain flexibility. It is looking to both cut costs and to access emerging markets -- and can do so in one fell swoop by establishing more relationships with manufacturers in places like India and China.

Couple this with the issues Big Pharma is having with its dwindling pipeline, patent cliffs and recognition that large molecules, rather than small , are the more vigorous growth engines of the future -- you have a strong movement toward non-US API manufacturers.

Again, this is another reason, the US goverment needs to get behind our biotech industry to maintain its growth and prosperity so we can further develop a sustainable leadership position.  There are not that many industries where we still have clear leadership and it would be a monstrous mistake to let this one go too.

Posted by Bruce Lehr Feb 8th 2011.

Pfizer and Merck Take Opposite Tack on R&D vs EPS

The WSJ notes that Pfizer and Merck, the number one and number two sized Big Pharmas in the world, took different tacks when confronted with prospect of cutting R&D or maintaining EPS for the coming year. Pfizer cut R&D.  Merck cut its future earnings estimates.  Let's take a look.

Pfizer reduced R&D so that it will spend approximately $6.5 to $7 B in 2012 vs the $9.3 B it spent in 2010.  That necessitated closing its Kent facility and cutting heavily at its Groton site.  It also cut several programs to "focus" its R&D efforts on a lesser number of programs. The market gave Pfizer a short-term reward by raising its stock price about 4% since the Tuesday announcement.

Merck on the other hand reduced its EPS estimate from $3.82 to a range of $3.65-$3.76.  It plans to up the R&D budget from $8.1 B in 2010 to $8.5 B in 2011.  Merck's CEO Ken Frazier said he "wouldn't make deeper cuts" as it woudl jeopardize Merck's future development.  The market promptly responded to this long-term strategy (like pharma and investing is supposed to be) by chopping Merck's stock by 3.3%.

If I had to place my bet right now, I'd say that the company that invest in R&D and innovation will do better in offering its shareholders a long-term ROI than one that continues to reduce its R&D efforts - especially to boost short-term EPS gains.  Where's the drive to innovation to meet unmet medical need in that?  I guess Pfizer CEO Mr. Read gets to stay in place another quarter.

 
Posted by Bruce Lehr Feb 3rd 2011.

Roche Weathers Tough Year - Looks to Pipeline in 2011

Roche had a tough 2010.  It reported its pharma sales were down 2% to CHF 37.05 billion.  The drop was led by Tamiflu which saw its sales plummet by 71% with the end of the flu pandemic. 

 

Roche weathers tough year and looks to pipeline for 2011 | InPharm.

Otherwise, the bright spot for Roche were its oncology sales.  This division's sales were up 7% and account for more than 50% of the total pharma revenues.  Despite sales decreases overall profits did increase by 4% year over year -- albeit took an 5% cut in R&D to help achieve that mark.

In looking at 2011, Roche advised that its blockbuster Avastin could see sales drop from CHF 9 billion to CHF 6-7 billion due to various regulatory rulings that will limit or stop its use in certain indications.  Roche is looking for other parts of its pipeline oncology portfolio to rise to the top in 2011.  It expects to seek approval for 3 key oncology drugs, namely RG7204 for melanoma, pertuzumab in combination with Herceptin of HER2+ breast cancer, and GDC-0449 for basal cell carcinoma. The three drugs are expect to boost sales to offset losses or slow downs in other areas.

 

Posted by Bruce Lehr Feb 3rd 2011.

A Fork in the Road for Pharmaceuticals

This post from WSJ via PharmaGossip.   It chronicles the problems popping up in Big Pharma now that we're on top of that nasty patent cliff - which turns out to be real afterall.

PharmaGossip: A Fork in the Road for Pharmaceuticals - WSJ.com.

The article outlines various approaches Big Pharma appears to be using to deal with the revenue gap and still deliver good EPS numbers for its shareholders.  These include:

• Cost-cutting, usually R&D, Sales & Marketing or both - didn't need them anyway
• Selling non-core businesses - like diagnostics (Ed. Note Wonder what will happen when companion diagnostics become all the rage in next couple years)
• Stock-buy backs - you can increase the numerator or decrease the denominator to boost EPS
• Buy another company's revenues, i.e. acquisition - usually at a high price for acquirer's shareholders
• Enter another business like vaccines or consumer health products

So what's an investor to do when evaluating the wisdom of these choices? I notice actually introducing innovative drugs to meet clear medical need is conspicuously missing from the above list - but I digress.

I can only pass on the advice of one of my favorite St. Louis philosphers - one Lawrence "Yogi" Berra.  When you come to a fork in the road? Take it!

 
Posted by Bruce Lehr Feb 2nd 2011.

Roche Swallows Bitter Pill - Cuts Taspoglutide

As reported in Fierce Biotech, Roche has decided to cut its losses and kill the taspoglutide development program.  The drug experienced a publicized late stage failure last year.  Roche's decision to cut the program leaves its development partner Ipsen with a 500 M euro bill for the costs of phase III development and trials. OUCH!  Ipsen may be tempted to engage in a last ditch effort to save the drug -- although analysts believe this to be unlikley.

 

Time for that spoonful of sugar.

Posted by Bruce Lehr Feb 1st 2011.

 

 

Everyone Wants to Adopt Orphan Drugs Now

From the Pharmalot, we have some interesting statistics regarding activity in the orphan drug arena.  As we know, The Orphan Drug Act encourages development of drugs for diseases with small markets.  It gives drugmakers seven years in which to sell a product without competition and sometimes tax incentives, too.

Orphan Drugs: More Designations, Fewer Approvals // Pharmalot.

With the advent of patent cliffs and revamping R&D groups in Big Pharma, as well as directional changes away from chasing so-called "blockbuster models", orphan and rare disease markets have become more in vogue. Several large pharma companies have launched specific initiatives in this sphere including Pfizer, GSK and Sanofi.

Now let's review the recent stats.  Last year, 323 requests went to the FDA for orphan status and 192 were awarded with that designation. There are now 2308 drugs designated as orphans. Designated n development and approved for sale are two different things it seems.  The FDA approved 14 orphan meds in 2010, 17 in 2009, which ar eboth below the peak year of 25 in 1996.

Based on the stats, a given Company's reach may exceed its grasp when pursing orphan drugs -- but the opportunity to get a lock on a market for several years is apparently irresistable at a time when FDA scrutiny of new drugs is particularly high and drug development is so expensive.  Of course, when everyone pursues the same strategy some are destined to be disappointed as well - and the stats would seem to reveal that news.

Posted by Bruce Lehr Feb 1st 2011.

Speaking of Outsourcing R&D and Cost Cuts - We Give You Pfizer

Pfizer announced several moves today pertaining to its R&D groups in multiple facilities as it looks to trim $1.5 B from its previous R&D budget.  The cuts will result in layoffs of 2400 R&D employees and the closing of its Sandwich, Kent facility.  Pfizer also announced that several operations will be shifted from its Groton, CT site to Cambridge, MA -- about 1125 employees will be affected by the move. Pfizer will also stop several disease programs - including allergy and respiratory in Sandwick, antibacterials in Groton, regenerative medicine in Massachuesetts,  The programs may be totally disbanded or in some cases outsourced. Programs in neuroscience, CVS and metabolic diseases will be shifted to Massachuesetts as well.

The cutbacks were announced with Pfizer's latest earnings statement as the company faces huge expected revenue losses in the $9-10 B range with the expiration of its patents protecting Lipitor - the World's best selling drug. Talk about a patent cliff - better be a rock climber if you are working in R&D there.  For more see Pharmalot and Fierce Biotech. 

 

 

 

 

 

Posted by Bruce Lehr Feb 1st 2011.

Generics Companies Eyeball World Biologics Market

The WSJ  gives a good recap of the major generic producers and analysts views of the relative attractiveness of the emerging biosimilars market. World-wide sales of all biological drugs reached $130 billion in 2009, according IMS Health, and are expected to grow much faster than conventional drugs. The market is considered attractive due to the large number of big biologics coming off patent but is challenging from a regulatory/quality perspective to mimic the reference biologic - and pricing is uncertain at the moment.

In the U.S. and European market , biologics drugs with more than $60 billion in annual sales will lose patent protection by 2015, according to Datamonitor. Should the market develop as predicted,  biosimilar copies of these complex drugs alone could make up 50% of the expected $10 billion biosimilars market by 2016, according to Capgemini Consulting. The rest will come from simpler biosimilars of insulin and human growth hormone.

Patents due to expire soon are Roche's Rituxan (aka MabThera),  Remicade, co-marketed by Merck and J&J, and Amgen's and Pfizer's Enbrel. Each drug had more than $5 billion in annual peak sales.  Roche's Rituxan will expire in Europe in 2014.  Three generic players have started copies - Sandoz started midstage trials, following similar steps by U.S.-based Spectrum Pharmaceuticals, in early January and Israel-based Teva Pharmaceuticals last year.

Sandoz, with a roughly 50% market share, ahead of Teva and U.S.-based Hospira, expects the entire biosimilars business could reach more than $20 billion by 2020, up from a current $250 million.  Lonza, teaming up with Teva in its biosimilars venture, expects solid growth because patients, insurance companies and governments want drugs to be cheaper.

The generics companies base their argument on the high price of many complex biological medicines.  But some experts question the generics companies' pricing rationale, saying the current constraints could even force larger generic producers such as Sandoz or Teva to rethink their operating models. Much will depend on how the price of these drugs will develop. 

Prices for biosimilars could be just 30% lower than the prices of the originals, because only a couple of generics firms will compete against an original drug.  The main risk, analysts say, is that if prices don't come down much, original drug producers will be able to retain a large market share. On the other hand, if prices fall too fast, generics firms' margins could suffer.

Industry insiders are also concerned the market may need longer than expected to establish itself, as R&D for these complex drugs is difficult and costly. One of the difficulties with biosimilar of complex biological drugs is that, unlike simple-to-produce chemical generics, which are identical to the originator product, biosimilars aren't exact copies. The are produced in genetically engineered cells.  At best, a biosimilar can only be similar to the original protein - thus the name.  And, because biosimilars aren't identical copies, biotech and big pharma are looking to check the movement by raising bioequivalence and quality-control issues. 

The EMA has so far approved 13 simpler biosimilar drugs. In the U.S., the FDA is currently working to establish how intensive testing for biosimilars needs to be and how the traditional three-phase drug-approval process can be abbreviated. A key concern is to make sure that biosimilar drugs are safe and effective.

It may cost too much time and money for a number of small to midsized generics manufacturers to survive in biosimilars production.  Specific processes, data, research and experience are needed to ensure that a biosimilar has the same profile, efficacy and safety as the originator product.  Some doctors and patients may be reluctant to use biosimilars as a new class of products with no track record in terms of safety and benefits.

Time will tell.  In the meantime, the Big 3 Generics producers and many other Big Pharma companies are not only eye-balling this market but have announced their intentions to enter.  Not too mention all the Asia Pacific competitors who are gearing up to serve local and global markets.

 

 

 

Posted by Bruce Lehr Jan 31st 2011.

BIO Supports Obama's Call for Biotech Innovation too!

As covered in the Patent Doc blog, like PhRMA, BIO issued a statement whole-heartedly supporting the President following his State of the Union address calling for support of innovation in biotechnology.  BIO emphasized that no American industry is in better position to be a World leader.

BIO called out several areas in which US biotechnology is poised and ready to support the President's agenda of building innovation with some help from Washington.

• Therapeutic Discovery Project (TDP). BIO urges that the TDP be extended to fund more R&D in small to mid-size biotechs to support development of more therapies across a range of diseases like cancer, Parkinson's and MS.
• Alternative Energy Sources.  The biotechnology industry provides the key technology to make advanced biofuels work to make more GREEN jobs in the US and to develop secure and sustainable energy sources.
• Regulations for Agriculture Biotechnology Products. Please review barriers to growth so solutions can be provided to help feed and clothe the world, support energy security, and reduce agricultural environmental impact. Safety and reviews of these products needs to be swifter to sustain growth.  

America is the World leader in biotech and will continue to be so with sustained investment -- and with support of the right goverment policies that encourage investment in biotech.

 

 

Posted by Bruce Lehr Jan 28th 2011.



2011 Pharma Forecast - Stronger Headwinds and Falling Prices

Big Pharma has been reporting Qtr 4 earning this week and makng its projections for 2011.  Earnings n Qtr 4 have been mixed in terms of hitting analysts expectations, but a more unamimous picture is emerging based on CEO comments for 2011.

The consensus seems to be one of increasing generics pressure, depressing effects from US healthcare reforms and price cuts from government controls. That leads to most CEOs pointing to the low end of the ranges they provide analysts for guidance on earnings in 2011. It's looking like flat to 3% increases in earnings are the consensus for now. See Reuters here and here.

 

 

 

 

 

Posted by Bruce Lehr Jan 27th 2011.

More on Data or Market Exclusivity

The Patent Doc blog provides another clear discussion explaining the debate on data versus market exclusivity resulting from the Patient Protection and Affordable Care Act and its provisions for follow on biologics.

What do we know for sure?  The PPACA says the FDA cannot accept an application for a follow-on biologic until 4 years after the reference drug.  The follow-on biologic cannot be approved until 12 years after the reference drug.   That apparently is clear.

What's not clear is the term "exclusivity" in the bill.  Innovator drug manufacturers and their Senator or Representative allies say that the bill clearly means that the innovator's data is to be held exclusive for 12 years after the reference product.  That means a follow-onproducer could not use the data before that time and therefore would not reach market until much later than 12 years after the reference product.

The follow-on manufacturers, payers and their Senator or Representative allies say the bill allows the data to be cited after four years and that the remaining 8 years gives the reference product market exclusivity.  Thus a follow on application could well be ready for approval when the 12 year market exclusivity period had expired for the reference product.  This will result in lower prices for patients and the Federal goverment.

The Patent Doc blog points out that if the intent is to get follow-on biologics on the market as quickly as possible then the latter argument makes most sense as to the policy.  However, if the latter path is pursued then the innovator may find it much more difficult to earn a return on their investment in creating the reference product -- which is a big problem.

History shows that generic producers in the non-biologic space don't produce innovative products typically in the absence of an innovator.  If no innovator - then no new drug. In the non-biologic space, innovators were given longer patent life under Hatch-Waxman to compensate for generics entry.  There is no such provision in PPACA.  A couple economic studies in the biologic and non-biologic space have concluded that a longer period of exclusivity for the innovator actually does lead to more drugs being produced and introduced to market - and results in patient benefits in terms of things like life-expectancy gains.

The Post conlcudes that there may be a need for a compromise and a modification of the exclusivity language in the law to accomodate both sides of the argument.  In the meantime, in the absence of clarification it is up to the FDA to sort out the policy -- thus the politicking now.

 

 

 

Posted by Bruce Lehr Jan 27th 2011.

 

Will This be "New Normal" Business Model for Biotech?

Xconomy published this article postulating a 'new normal' model for biotechs in this time of decreased venture funding.  The new model is based on several assumptions regarding the current state of funding and investment:

• Multi-hundred million dollar upfront payments to acquire early stage biotechs are going the way of the DoDo (despite BioVex pulling off trick this week with Amgen I'm inclined to agree. most deals seem to have upfronts in the 10's of millions range with backloaded milestones in the 100's of millions)
• Venture capital's easy exit strategy is blocked as a result decreasing the motivation for VC money to fund early stage biotechs
• Risk-sharing, earnouts, and CVRs will become the normal terms for these deals
• Pharma will attempt to fund more innovation at the University level - thus the spate of recent Big Pharma-University R&D deals

If these observations/assumptions are taken to be true, what is a sustainable business model that might emerge for new biotechs? 

The author proffers the "single-asset, infrastructure lite, development model" as one emerging trend. This model uses modest capital to develop a single compound to an early clinical package that can be partnered with Big Pharma. The model employs an LLC strructure.  The upfront royalty payments in the partnership are used to pay off the LLC members on a pro rata basis. The model only works if the right targets can be chosen to deliver the pre-clinical package attractive to Big Pharma -- thus de-risking the investment for them. This is only likley to work with certain molecules and is dependent on having biomarkers as surrogate endpoints in the clinic.

The model seems to be popular as the probability of an M&A exit is now less than 2% while a licensing activity for an attractive asset at an early clinical stage is in 30% to 50% range. This model is increasingly popular with investors and to founders/developers who might maintain undiluted equity ownership.

Posted by Bruce Lehr Jan 26th 2011.

PhRMA Backs Obama Pledge to Invest in Biomedical Research

PhRMA issued a statement today that supports President Obama's intent to invest in biomedical research delivered in last night's State of the Union address.  In part the PhRMA statement read:

"...The President recognized this crucial point tonight, as he stressed the need for investments in biomedical research.  The good news is that this important research is already taking place -- with more than $65 billion invested in R&D by the biopharmaceutical industry in 2009 alone. There is no doubt that innovation is a critical building block for growing the US economy. For this reason, it is important that the Administration and Congress view the biopharmaceutical research sector....as a national health and economic asset."

PhRMA went on to pledge its support in working with the Administration and members of Congress on solutions that would spur the US economy.

 

Posted by Bruce Lehr Jan 26th 2011.

Senators Reintroduce Pay-To-Delay Legislation

As reported in the Pharmalot blog, Senators Herb Kohl and Chuck Grassley have introduced legislation that would limit pay for delay deals.  The move comes after Congress failed to pass a bill last month, and several payer groups, ppharmacy and retail chains, the FTC and the CBO have called for more limits.  The FTC calls the deals anticompetitive and the CBO says the US government could save $2.7 B over 10 years with limits.

Senators Reintroduce Pay-To-Delay Legislation // Pharmalot.

Kohl and Grassley say it is wrong to continue to allow brand-name companies to pay generic providers to keep their products off the market thus costing consumers millions. They argue that in the past 4 years, 63 of 194 patent settlement deals had pay for delay provisions for the generic rival in the deal.  In 2009, there were 19 such deals so the trend is seen to be on the rise.

Posted by Bruce Lehr Jan 26th 2011.