text:
Category Archives
Book Recommendations |
Business and Markets
Posted by Derek
You may recall that when GlaxoSmithKline cut down the Research Triangle site, that "up to 450" employees were said to be transferred to a contract organization, Parexel. In many cases, these people were doing the same jobs, in the same buildings, but were now doing it for less money. (Something similar happened a few years back at Eli Lilly, in a deal with Covance).
Now comes word that up to 200 of those Parexel employees are being laid off anyway. So in the end, it bought them a few months on the way to the same destination. According to that story from local station WRAL, the CEO of Parexel had announced the cost-cutting efforts earlier this year, without going into details, under the name of the "Margin Acceleration Program".
So we can now add another one to the long list of euphemisms and doubletalk phrases used to describe the process of dumping hundreds of people out onto the sidewalk. And if you still work for Parexel, remember: you're working for a company that can use a term like "Margin Acceleration Program" and not crack the faintest vestige of a smile. Plan accordingly.
Comments (11)
+ TrackBacks (0) | Category: Business and Markets
I've been saying a lot of unkind things about Axovant, the insta-company that's taking a discarded GSK Alzheimer's candidate and running with it. But thanks to Adam Feuerstein, I have another company to roll my eyes about. They have a completely different Alzheimer's plan - they've taken a discarded Pfizer candidate and are running with it. The drug in question is azeliragon, formerly PF-04494700, targeting RAGE (the receptor for advanced glycation endpoints), and the company's press material about it includes a qualifying statement that you don't run across very often:
"Despite the 20mg/day dose being stopped by the DMC due to acute, reversible, concentration dependent cognitive worsening and the study being prematurely stopped for apparent futility, the study achieved its prespecified objective demonstrating a statistically significant 3.1 point different (p = 0.008) favoring azeliragon 5mg/day over placebo at 18 months in patients with mild to moderate AD."
That's in the ADASCog rating, but the overview goes on to say that "the study was not powered to show significant differences for global, functional, cognitive and behavioral secondary endpoints". Here are some publications on the trials themselves. Now, being generous, one could conclude that there's a chance for this to work - after all the 5mg/day numbers are, presumably, what they are. But at a 4x higher dose, big trial-ending trouble was seen, of just the sort that you can't have in Alzheimer's ("acute cognitive worsening"). And we have no idea where that kicks in between the two doses. This is a very, very tight window between what could be a good effect and what is certainly a very bad one, which is surely why Pfizer dropped the compound like it was giving off gamma rays and has not returned to it.
All Alzheimer's clinical candidates are longshots, by definition. But this one is a longshot longshot. I hope that people are only putting money into it that they can afford to lose, but I also hope that when I see elderly customers shuffling up to the lottery ticket register, and I think I'm wrong about that one, too.
So who are these people? The company is vTv Therapeutics (that's how they spell it), and they're heading for an IPO. The bio of their CEO, Stephen Holcombe, says that he brings "brings over 23 years of financial and managerial experience" to the table. Looking closer, though, that experience is with KPMG Peat Marwick, a cell phone company, and an e-commerce provider to the construction industry. Unless he's been hitting the books at night, and perhaps he has, one cannot guess that he knows anything about drug development. Their CSO is Carmen Valcarce, ex-Novo Nordisk. But the chairman of the board, that's the really interesting part: it's one Jeff Kindler, whom many will recognize as Pfizer's onetime CEO. And there are many ex-Pfizer employees who have opinions on how much he knows about drug development, for sure. His departure from the company was the subject of a truly bizarre article the next year, one that I think set off a lot of discontent among the non-executive-suite folks at the company.
So vTv is going to be interesting to watch. The Alzheimer's program isn't their only shot, as opposed to Axovant, I will give them that. But some of their other assets have been kicking around for a while, too, such as the ones from when the company was known as TransTech Pharma (like TTP339, a glucokinase activator). Azeliragon itself was originally a TransTech compound, licensed to Pfizer, but it boomeranged back to them after the Phase II results. The company has changed its name and rebranded itself as an Alzheimer's therapy play, and so off to the NASDAQ they go.
Comments (18)
+ TrackBacks (0) | Category: Alzheimer's Disease | Business and Markets
Word is this morning that Chemical and Engineering News has let at least 8 staff members go in a reorganization, including former editor-in-chief Maureen Rouhi. The magazine outsourced its advertising sales some months ago, rather than drumming these up internally, and what I'm hearing is that their projected ad revenues are way off since the changeover. I don't know if that's the main reason for these staff changes, but it certainly has to be a factor. . .
Comments (36)
+ TrackBacks (0) | Category: Business and Markets
You may recall that Sanofi basically threw its hands up in the air some time back about its entire oncology R&D efforts. Or, since they're so relentlessly French over there, perhaps it was the Gallic Shrug instead. Either one would fit - the company just wasn't seeming to get anywhere. So when that happens, what you do is you pay someone else to do it for you, and in this case, that would be Regeneron. The two companies announced a deal in immuno-oncology this week, and they are indeed paying:
Sanofi is committed to pay at least $1.8 billion in the rich deal, including a $640 million upfront, $750 million of the first $1 billion in costs to reach proof-of-concept data, half of the $650 million tab for developing the PD-1 drug REGN2810, with another $75 million being reallocated to this deal from another pact. The partnership also includes a special $325 million bonus milestone if they hit a high sales target.
There are two ways to look at this, and (at this point) a case can be made for either one. With all the money and effort being thrown around in this area, it's quite possible that Sanofi is late to the party here. On the other hand, it's a wide field, and there are surely surprises left in it, so this may be one of the "end of the beginning" situations instead. I lean a little more towards the latter, since I always have immunology filed away in my mind under "hideously complex with many key aspects unknown". But in that case, it's still true that Sanofi is, to some extent, hoping to get lucky in order to be a strong player in this area, and that's never a good thing to have as an explicit step in a business plan.
And while they would have been even further behind if they'd tried to catch up on their own, this deal does emphasize how much the company felt that their internal R&D had come up short. They let a lot of people go, took a lot of loss on the whole effort, and now they're reaching in for at least another billion dollars more. . .
Comments (8)
+ TrackBacks (0) | Category: Business and Markets | Cancer
As Bruce Booth noted on Twitter on Friday, the drop in Biogen's stock that day represents a loss of more money than all the venture capital funding in biopharma over the last four years. Here he is with more on the current funding boom, which is probably a bit different than it seems.
For one thing, the majority of the money has been provided by people other than than actual venture capitalists, and this money is going (quite disproportionately) to the larger players. (This makes figures on the "average funding" per company even more meaningless than usual). Booth is too nice a guy to say it in as many words, but the strong impression you get is that a lot of investors in this area are not willing (or able) to do the legwork of vetting and forming new companies themselves. Instead, they're very willing indeed to throw money at the big-name deals that others have already (implicitly) given the seal of approval to. It's a "me too" boom.
And as the post shows, it's really not leading to as many new companies as one would have expected - just richer ones. Is this a good thing? Probably not, to be honest. It is possible to throw too much money at an early-stage company, a (perhaps surprising) lesson that has been demonstrated numerous times. Big piles of cash make it easier to paper over problems that otherwise might get usefully addressed. Business plans that otherwise could have been stronger don't get the chance to improve, because hey, we've got the money anyway, so clearly things are fine.
Another problem is that the whole VC business is based on spreading around the risk. You fund a whole range of startups, in the full knowledge that most of them won't make it, and in the hope that the ones that do will more than make up for those losses. You know, kind of like drug development. But what about the people who aren't following that prescription, who are investing in early-stage biopharma, but in only a couple of the big ones? Those companies have (sad to say) pretty much the same chances of failure as everyone else. It's just that their failures are going to take a lot more money down with them.
So a lot of fresh money has flowed into biopharma, and not necessarily in an intelligent way. It could flow right back out again if something scares everyone - a couple of big unexpected clinical wipeouts, the threat of price controls, what have you. I can't blame people for taking the money that's on offer, but the punch bowl is not going to be refilled forever.
Comments (6)
+ TrackBacks (0) | Category: Business and Markets
If you're a Biogen shareholder, you don't need me coming along to tell you that this has been a bad week. The Alzheimer's antibody news was just the warmup for the company's earning numbers, which made no one happy.
So what's going on over there? Reality, I'd say. The drug industry is ferociously competitive, and no one's earnings are safe. Clinical trials are still coming in with about a 10% rate of success overall, which is the sort of risk level that would send a lot of other industries fleeing in terror. Time and chance happeneth to them all. (And no, I'm not religious at all, but a lot of Ecclesiastes is just good common sense).
So yeah, Biogen as I write this is down about $70 a share, a solid 18% whacking. By the month, by the year-to-date, by the previous year, you're probably not happy if you've been holding the shares. But over the last five years, even with today's debacle, Biogen has beaten all the indices savagely. The five-year NASDAQ is up about 126%, and the five-year S&P 500 is up 90%. Note: earlier figure was incorrect (typed something wrong into the database!), and these figures, as noted in the comments, do not reflect dividends. But then, they don't reflect taxes on those dividends, either. . . Biogen is up 485% over that span, and you know what? Hardly anything ever goes that well in this business for that long, on that large a scale. That's a terrific run.
So if you're a Biogen shareholder right now, sure, you're wondering about the company's earnings prospects, its pipeline, whether or not it's going to do some sort of acquisition (rumors are out there about Isis, and probably others). Worthy questions, and I don't know the answer to any of 'em. If you bought the company's stock back early this year on the basis of (say) those Phase I Alzheimer's results, well. . .you know what happens, most all the time, when you live by the sword, right? If you didn't, well, you do now. But if you've been a longer-term shareholder, you really don't have much to complain about.
Comments (12)
+ TrackBacks (0) | Category: Business and Markets
Good news out in San Diego: Lilly has announced that they're expanding their research site there, adding up to 130 positions with a focus on immunology.
The area really needs some of this. San Diego's biopharma scene has, by all accounts I've heard (and from what I've seen personally) been in decline over the last few years - relative decline at the very least, and probably on the absolute scale as well. There are a lot of excellent people out there, and a lot of good work being done. I hope that this is a sign of revival.
Readers who have worked in the NJ pharma world will be familiar with the big research campus in Summit. I go back far enough to remember it from my first round of job interviews, when it was still Ciba-Geigy. (I was on my post-doc in Germany at the time, and I'd already been asked if I would consider a job in Basel. I think my reasoning was that New Jersey was just about as much a foreign country to me, so they flew me back there for another round). Summit then became a Novartis site, but that one was eventually dwindling, as I recall, in favor of other locations. Schering-Plough picked it up in 2000 and put a good amount of money into it, but when Merck bought them, the site was closed completely in 2013.
Now Celgene has bought it, as part of their expansion over the last few years, and I'm sure that the town of Summit (and many other folks in New Jersey) are glad to hear it. The state's pharma industry has been in undeniable decline for some years now - something that would have been nearly unthinkable back when I was interviewing at Ciba-Geigy. I'm always glad to see a research campus being used for its intended purpose, rather than being bulldozed or just left empty, unsold, and unused. We have too many of those already!
Comments (22)
+ TrackBacks (0) | Category: Business and Markets | Drug Industry History
Chris Viehbacher, ex-Sanofi, has reappeared at a $2 billion dollar biotech fund.
Viehbacher is clear, though, that Gurnet will be founding companies as well as looking outside the red-hot fields like oncology. To find value these days, you have to look outside of the trendiest fields, he says. And you're also not going to find much in the way of innovation at huge companies like Sanofi.
"My conclusion is that you can't have truly disruptive thinking inside big organizations," says Viehbacher. "Everything about the way a big organization is designed is about eliminating disruption."
In Viehbacher's view, Big Pharma is still trying to act in the way the old movie studios once operated in Hollywood, with everyone from the stars to writers and stunt men all roped into one big group. Today, he says, movie studios move from project to project, and virtually everyone is a freelancer. In biopharma, he adds, value is found in specializing, and "fixed costs are your enemy."
He's right about that disruption problem at big companies, although he raised eyebrows when he said something similar while still employed at a big company. (Sanofi tried to put those comments in the ever-present "broader context" here). A large organization has its own momentum, but even if its magnitude is decent, its vector is pointed in the direction of keeping things the way that they are now. To be sure, that requires finding new drugs - it's a bit of a Red Queen's race in this business - but a lot of people would be fine if things just sort of rolled along without too many surprises or changes.
If that was ever a good fit for this industry, it isn't now. That makes it nerve-wracking to work in it, for sure, because if you feel that your job is really, truly safe then you're wrong. There are too many unpredictable events for that. I was involved in an interesting conversation the other day about investors in biopharma (and how passionately irrational some of the smaller ones can be), and we agreed that one reason for this is the large number of binary events: the clinical trial worked, or it didn't. The FDA approved your drug, or it didn't. You made your expected sales figures, or you didn't. And those are the expected ones, with dates on the calendar. There are plenty of what's-that-breaking-out-of-the-cloud-cover events, too. Trial stopped for efficacy! Trial stopped for tox! Early approval! Drug pulled from the market! It's like playing a board game with piles of real money (and with your career).
So Viehbacher's right on that point. But I part company with him on his earlier comments (basically, that if he was going to get anything innovative done at Sanofi, that he was going to have to go outside, because no one who wanted to innovate was working at a company like that in the first place). Even large companies have good people working at them - believe it or not! And some of them even have good ideas, too. But it can be harder for them to make headway in a large organization, he is right about that.
Comments (38)
+ TrackBacks (0) | Category: Business and Markets | Who Discovers and Why
A reader sent along this link to an article at the New York Review of Books on the relentless emphasis on STEM jobs. The viewpoint of its author, Andrew Hacker, was preordained: he's a political scientist who started a controversy about ten years ago with an editorial wondering if mathematical education (we're talking up to the level of algebra) is even necessary or desirable. So he's not going to be a big booster of any push into science or engineering.
But keeping those biases in mind, he does take a useful tour through what I see as the error at the other end of the spectrum. I'm not ready to say (along with Hacker) that gosh, hardly anyone needs algebra, let alone anything more advanced. But I'm also not ready to say that we've got a terrible shortage of anyone who does know such things. That link quotes Michael Teitelbaum, and the NYRB article is partly a review of his Falling Behind, which is a book-length attempt to demolish the whole "STEM shortage" idea. He also notes another book:
James Bach and Robert Werner's How to Secure Your H-1B Visa is written for both employers and the workers they hire. They are told that firms must "promise to pay any H-1B employee a competitive salary," which in theory means what's being offered "to others with similar experience and qualifications." At least, this is what the law says. But then there are figures compiled by Zoe Lofgren, who represents much of Silicon Valley in Congress, showing that H-1B workers average 57 percent of the salaries paid to Americans with comparable credentials.
Norman Matloff, a computer scientist at the University of California's Davis campus, provides some answers. The foreigners granted visas, he found, are typically single or unattached men, usually in their late twenties, who contract for six-year stints, knowing they will work long hours and live in cramped spaces. Being tied to their sponsoring firm, Matloff adds, they "dare not switch to another employer" and are thus "essentially immobile." For their part, Bach and Warner warn, "it may be risky for you to give notice to your current employer." Indeed, the perils include deportation if you can't quickly find another guarantor.
Here's Matloff's page on the subject, and his conclusions seem (to me) to ring unfortunately true. I can't come up with any other way to square the statements and actions of (to pick one example) John Lechleiter, CEO of Eli Lilly. So I'm in an uncomfortable position on this issue: I am pro free-trade, and philosophically I'm pro-immigration (especially the immigration of the sorts of talented, hard-working people that all these US companies want to bring in). That philosophical leaning of mine, though, is predicated on these people being able to pitch in to a growing economy, but not if they're just being used as a means to dump existing workers in favor of cheaper (and more disposable) replacements. And I hate sounding like a nativist anti-immigration yahoo, and I similarly hate sounding (at another end of the political spectrum) like some kind of black-bandanna-wearing anti-corporate agitator. (As mentioned above, I'm also not happy about finding myself in some agreement with some guy whose other positions include the idea that algebra should be dumped from schools as a useless burden). I look around, and wonder how I ended up here. Strange times.
Comments (64)
+ TrackBacks (0) | Category: Business and Markets
Bruce Booth has a long post on external R&D in biopharma. He's mostly talking about some of the newer ways to do that, rather than traditional deals and outsourcing. These include larger companies partnering with VC firms to launch smaller ones, large investments in the smaller players with specific rights to buy some of the successes, etc. But the larger players have to be able to keep their hands off:
That said, a number of large companies have also been attempting to do this on their own, without venture involvement at last initially; as far as I can tell, these have had limited "success" to date. GSK's experiment with Tempero Pharmaceuticals is a good example: founded around great science, the idea was to create a standalone biotech with its own governance that GSK could leverage for Th17 projects in the future. Unfortunately, although the research programs advanced, the company appears to have been unable to escape the gravitational pull of the GSK organization – accessing internal research infrastructure led to conformity, financial costs were all consolidated leading to compliance and internalization, and its employees were eventually just integrated back into GSK.
Then you have the corporate-backed venture capital operations that many companies have set up. People are arguing about the direct benefits that these investment groups provide, but there's little doubt that they help keep the whole ecosystem of small company formation going, and that's definitely worthwhile.
The various precompetitive consortia are another aspect. I've wondered how some of these are going, myself - there's not a lot of hard information yet for some of them. And finally, there are the attempts by several companies to set up their own "skunk works" type groups, apart from the main organization. To my eye, these have even more risk of being swallowed back up by the main company's organizational style and attitude than those officially launched companies (like the GSK example above). It's not just the drug industry - plenty of other sectors have seen attempts at "With us but not of us" branches (e.g., Saturn and GM), and it's very hard to do.
Bruce is looking on the bright side, though:
By bringing high doses of innovative creativity from the "periphery" – via the above-mentioned biotech experiments enabled by external innovation – a leadership team can inoculate their R&D organization's culture with different strains of thinking, different intellectual antigens to prime new ways of doing things. Simple strategic proximity and openness can afford real opportunities for this interaction if done at significant scale, where the "periphery" achieves a meaningful mindshare (and budgetary support) of the organization.
The "significant scale" part is a key, I'd say. I think that many of the failures in these approaches have been when a company wants to do something different, but not, you know, really all that different. Just different enough for Wall Street to like them again, or different enough so that you can go to the CEO (or the board) and tell them how innovative you've been in shaking things up. But if you're not unnerved and excited, wondering what's going to happen next, maybe hopeful and maybe somewhat scared, then thing haven't been shaken up. Those emotions, and the mental attitudes that go along with them, are part of the small-company secret sauce that you're trying to get ahold of. Without them, you haven't accomplished what you're trying to accomplish, but not everyone really wants them as much once they've started to experience them.
In order to capture the tangible and intangible value from external R&D models, organizations have to overcome a set of established, pervasive, and frequently corrosive mental models that prevent successful engagement in the ecosystem. These are challenging to unwind and impair many organizations today. . .
. . ."Protecting our interests". This is one of the most pernicious of mental models that renders many Pharma groups incapable of creative external R&D, and is based in the paranoia that everyone is out to screw you. Lawyers are paid to be conservative, think about every scenario, extract every protection possible, and create piles of paperwork. I'm convinced that Pharma's corporate deal lawyers suffocate more creative deals than they are able close – they are the ultimate "Deal Prevention Officer" inside of many companies.
The post goes on to list several more of these - go over and have a look, and if you work at (or have worked at) a large company, you'll recognize them. Getting around or over these, as Bruce says, is essential. But no one quite has a defined set of steps for doing that (despite many consultants who will sell you just such a list). In the worst organization, that paranoia mentioned above, that everyone is out to screw you, has infected the employees in their dealings with their own upper management. And if things have progressed that far, you're going to have trouble reinvigorating the R&D by any means whatsoever.
But for organizations that can make the leap, the sorts of models described in the post are definitely worth a look. It's too early, in most of the cases, to say how the returns are on them, but it's a good sign that several companies have taken serious attempts at doing things differently.
Comments (20)
+ TrackBacks (0) | Category: Business and Markets
I've heard from sources this morning that the folks at Bristol-Myers Squibb in Wallingford have received, out of the blue, one of those sudden sitewide meeting announcements that often portend big news. I'll leave the comments section of this post for updates from anyone with more info - I'll be out of communication for a while this morning at the ChemDraw event.
Update: OK, the press release has just come out. The company is going to open up a big new site in Cambridge, and here's the key part:
In Cambridge, Bristol-Myers Squibb scientists will focus on the company's ongoing discovery efforts in genetically defined diseases, molecular discovery technologies and discovery platform chemistry in state-of-the-art lab space. In addition to relocating up to 200 employees from its Wallingford, Conn. and Waltham, Mass. sites, and a limited number from its central New Jersey locations, the company expects to recruit scientists from the Cambridge area. As part of this transition, the Waltham site is expected to close in early 2018. The existing site in Wallingford will also close in early 2018 with up to 500 employees relocating to a new location in Connecticut.
Comments (93)
+ TrackBacks (0) | Category: Business and Markets
Is the recent upturn in drug approvals the real thing? Years of overall decline would have to be overcome, but it would be good news if the industry has, in fact, picked back up again. A new article in Nature Reviews Drug Discovery"the ratio of the first 7 years of revenue for all innovative launches in a given year to the corresponding portion of R&D investment over the previous 7 years". So that clears out the fourth-in-a-category stuff, and also uses a reasonable time horizon (which is the big problem with declaring a trend based on only one or two years' worth of drug launch data).
This measure shows that innovative drug approvals reached a peak in the mid-to-late 1990s, followed by a pretty steady decline, bottoming out around 2009-2011. And yes, they do see a slight rise since then, which is good to know. But there are a few factors to keep in mind: (1) this rise still only takes things back to levels that would have been considered awful before 2003 - if this trend is real, it's still got a ways to go. And (2), a good part of the rise in their chart is based on revenue forecasts. If you regard these as over-optimistic and tone them down, there's still a small rise, but only back to, say, 2006 levels.
It's also worth noting the authors' beliefs about where this increased productivity is coming from:
We estimate that ~45% of the productivity improvement comes from slowing growth of, and increasing rationalization in, pharmaceutical R&D spending, and that the remaining ~55% comes from the higher total revenue that is expected from new launches. However, we believe that the more significant driver is the slower growth in spending, as 70–90% of the revenue impact on productivity can be attributed to forecast exuberance, and only 10–30% to the actual increase in the number and quality of launches.
There's the problem with relying on forecast revenues - that 45/55 split is if things go perfectly on the 55 (revenue) side. To be fair, the cost-cutting they're talking about is not all just ax-the-R&D-department stuff. It can also include lower expenses from any increase in clinical success rates (the jury is still out on those). And the authors also make the point that individual therapeutic areas often drive overall figures like these - for example, some of the recent rise is due to the huge successes in anti-infectives, which largely means HCV.
So overall, "cautious optimism" is probably warranted. If the recent clinical successes in oncology translate as they should, the industry may well see the sort of turnaround that can't be explained away.
Comments (11)
+ TrackBacks (0) | Category: Business and Markets | Drug Industry History | Regulatory Affairs
When a drug company's New Drug Application runs into some sort of major issue, the FDA sends what's called a CRL, a Complete Response Letter. This details why the application was rejected and what can be done to fix the problem. And all this is, naturally of great interest to the company's investors.
But they can go mow their lawns. Most of the time, that's going to provide as much information as the company will divulge on its own. That's what I took away from this study in the BMJ (here's a summary at FierceBiotech). The authors (who are with the FDA) looked at the full text of dozens of CRLs (from 2008 to 2013) and compared what's in them to the press releases at the time. What results is a sort of regulatory Rashomon.
18% of the time, the companies issued no press release at all, although you would have to characterize a CRL as a "material event", wouldn't you? Another 21% of the time, though, press releases "did not match any statements from the letters", so that's the next best thing to not issuing anything at all. 32 of the CRLs from this period called for new clinical trials to be conducted, but 40% of the press releases never got around to mentioning that. And of the 7 CRLs that brought up a higher mortality in the drug treatment group, only one of the corresponding press releases noted that fact. In none of the 61 cases did the company involved release the complete text of the CRL.
So, to quote that noted philosopher Bullwinkle, if you're waiting for the companies to finish the story, you're going to have a long wait. There have been calls over the years to make CRLs public, and this study shows why that's not a bad idea. Since the authors themselves are from the FDA, and note that this proposal was recommended by the agency's own transparency task force in 2009.
At the very least, a summary of the CRL could be released by the agency in its own words - something that wouldn't disclose any proprietary details, but would at least tell everyone what's going on. Does the FDA need anyone else's permission to do this? The authors say that releasing the full texts "would likely require a change in FDA's regulations". (Does that make it a matter for Congress to take up?) Someone needs to, because the current system is just not right.
Comments (30)
+ TrackBacks (0) | Category: Business and Markets | Regulatory Affairs
Here's the latest RNAi dustup: Alnylam has filed a "trade secret misappropriation" lawsuit against Dicerna (thanks to a commenter here for mentioning this news). The real issue seems to be use of GalNAc conjugates for delivering siRNAs to the liver. Alnylam's president, Barry Greene says that "Alnylam has led the discovery and development of GalNAc conjugate technology for delivery of RNA therapeutics, including through technology we obtained from our $175 million Sirna Therapeutics acquisition in our 2014 transaction with Merck."
That's where it'll get complicated. The RNAi Blog notes this lawsuit is claiming that Dicerna hired some of Merck's laid-off RNA people after that 2014 deal with Alnylam, which is when Merck finally wrote off the last of their earlier investment in Sirna.
So this all may come down to what the Merck people knew when they went to Dicerna, whether they were bound by noncompete agreements or not, and what the legal status of the GalNac technology was at the time. Keep in mind that trade secrets are very different things than patents. If a trade secret holder did not take "reasonable protective measures", there may not be room for a misappropriation claim. (New Jersey has adopted a law based on the Uniform Trade Secrets Act, mentioned in that article, but although Massachusetts has not, its laws do have similar provisions on protection). We may not get to find out all the details - I'm guessing that this is one of those cases that's going to end in some sort of settlement - but this situation is worth keeping an eye on.
Comments (14)
+ TrackBacks (0) | Category: Business and Markets | Patents and IP
Hmm. FierceBiotech is reporting that AstraZeneca's head of R&D, Briggs Morrison, has made a very sudden, very unexpected exit. People seem to have heard about this only this morning, and are being taken by surprise. . .
While we're on the subject of market froth, take a look at what's going on today. Sage Therapeutics announced the results of a study in post-partum depression. (Note - these are not the same people as Sage Bionetworks out in Seattle; this is a small company in Cambridge). They used SAGE-547, a GABA-A allosteric modulator under development for epilepsy, and the treatment group seems to have shown a rapid improvement in their symptoms after a single dose. Actually, I shouldn't say "treatment group", because there was no placebo group. And there were four patients.
So I think you have to be of two minds about this. As that Forbes link shows, Sage is trying an interesting approach to CNS drug development - going after severe, almost completely unserved indications to see if they can get anything to happen at all. (SAGE-547 is being developed for severe status epilepticus, (in its worst form) basically continuous seizures, for which the only real treatment is medically-induced coma and cross your fingers). Update: to clarify, this is targeted at the most severe drug-resistant cases. This is a perfectly legitimate approach, and I actually have to applaud the company for being willing to charge into such difficult therapeutic areas.
But that doesn't mean that their stock should be jumping like a startled wood frog, which is what seems to be happening in the premarket right now. A four-patient open-label study in depression is not something to go wild about. To my mind, the proper response is "Gosh, that could be quite interesting. Go run a much larger placebo-controlled trial." That's really important in this area, because placebo responses in the entire antidepressant field are notoriously high, and can be difficult to overcome. I have no idea what a typical placebo response is in post-partum depression patients, but I would very much want to see those numbers before getting too excited.
To be honest, Sage probably shouldn't have press-released this study at all. I'm not running a small company - good thing, that - so it's easy for me to say that. But this is so small and so preliminary. The way this biopharma market is these days, it's just a big spray of gasoline on the bonfire - a sudden whoosh, a burst of light, and it's gone. It's a long way from a well-built heating system.
Update: the stock of another company with a GABA-based epilepsy candidate, Marinus Pharmaceuticals (MRNS), is going berserk today as well.
Comments (24)
+ TrackBacks (0) | Category: Business and Markets | The Central Nervous System
Update: the IPO went off at the top of its range, I am sorry to report. More here from FierceBiotech, and I agree with John Carroll's take.
I wrote just recently about Axovant and their plans to go public with an Alzheimer's therapy picked up on the cheap from GSK. Now here's a look from Adam Feuerstein at TheStreet.com at the whole situation, and it reeks even more than I'd thought.
20% of the company is being sold to the public, in an offering that's recently been scaled up to $250 million. And it's one of those friendly, welcoming deals, if you run in the right circles:
You with me so far? Hedge fund guy forms a company and subsidiary to buy an old Alzheimer's drug Glaxo didn't seem to want for $5 million. Six months later and without doing any clinical development at all, hedge fund guy sets terms for IPO of shell subsidiary which values the same old Alzheimer's drug at well over $1 billion.
It gets better. Perhaps sensing reluctance from outside investors to buy a minority stake in an old Alzheimer's drug Glaxo seemingly gave away for almost nothing, Ramaswamy gets two more hedge funds -- RA Capital and Visium Asset Management -- to "indicate an interest" in buying shares in the Axovant IPO valued at up to $150 million.
As inducement for their interest in the Axovant IPO, RA Capital and Visium are allowed to sell their shares (if they buy) after 90 days. The customary lock-up period for insiders in an IPO is 180 days.
The biotech bull market is a wonderful thing. . .
Indeed it is, if you're on the nice side of it. But if this IPO goes off well this week, I'm going to have to take it as a sign of undeniable craziness in the market. There really seems to be no reason for Axovant to be going public at this time and under these terms, other than the fact that there's a horde of people outside its door, jumping up and down and waving fistfuls of money. If that's your idea of a sustainable market, or if it just sounds like a fun time, then go ahead, I guess. Caveat bug-eyed, clueless emptor and all that.
Comments (10)
+ TrackBacks (0) | Category: Alzheimer's Disease | Business and Markets
You don't often see noncompete agreements invoked in the biopharma industry, but here's one. According to Pharmalot, Bristol-Myers Squibb is suing a former executive (David Berman) for taking a job with AstraZeneca. Berman was highly placed in BMS's immuno-oncology area, and this is such a competitive environment that they feel that his departure (for a competitor) could be damaging.
The lawsuit says that Berman was under an agreement not to do anything like that for a year should he leave BMS. He'd been promoted into his present job at the end of last year, and at the end of March, accepted a stock incentive plan that included the noncompete agreement. He resigned, though, on May 26, which must have been unwelcome news, and BMS got this one into the courts pretty quickly. (The request for an injunction (link at the Pharmalot article) is dated May 28. This should be interesting to watch. . .
Comments (24)
+ TrackBacks (0) | Category: Business and Markets | Cancer
It's the time for the ASCO meeting again, so everyone who follows oncology drug development will be busy catching up on the news. Bruce Booth has a good overview of things here, based on look at the abstracts submitted for the meeting. An analysis of the words mentioned in them shows some interesting features: the number one term is "HER2", and the number two is "PD1". These rise to the top by two rather different routes.
If you combine HER2 with other related targets (EGFR, HER3, etc.), that group is number one by a good margin, which is something to think about, considering how much work has already been done in this area. Something to think about, next time you see stories in the popular press about how this or that key to this or that cancer has been "figured out". Booth himself was struck by how much there apparently is left to do in this area, and by how many different people and organizations are doing it. I am, too - most everyone I know, if they went to their own oncology folks and said "Hey, I've got this idea for something in EGFR", would be given puzzled looks and asked if they didn't have any new ideas. (Keep in mind, though, that the "C" in ASCO is for "clinical", so this is all work that's well downstream of discovery).
Meanwhile, PD1 is part of the hot, hip, happening immuno-oncology world. I'm not making fun of it, either - it's hot and happening for a lot of very good reasons, like clinical trials that get stopped because of efficacy (not exactly something that oncologists are used to seeing). It's no surprise that everyone with a lab coat is piling into this area.
But that brings up the other point in Booth's post: what this means is that the risks in these popular areas are starting to flip over - less from the science, which has more and more backing, and more from the overcrowding. How do you differentiate your tyrosine kinase approach, or immuno-oncology approach, from everyone else's? That's a particularly fraught question in oncology, where the animal models are so nonpredictive and questions like this get settled in the clinic. If yours were the only organization developing one of these things, you could just blast away in a series of Phase IIa trials to find the best places to land, and you'd surely find some. But that's what everyone else is doing, too. What if several of you try to land on the same spot at the same time?
So that's why any proposal for a new oncology program has (or better have) an emphasis on how this one is going to be off the paths that everyone else is taking. If you're already in the clinic, you're going to be cranking away at the differentiation problem as best you can, with an eye on all the competition. But back in the early research stage, you have the chance to take care of that question early, and you'd better take it. That doesn't always work - there's competition in the early research stages, too, and some of those now-crowded areas were entered by people who didn't plan on them being quite so popular. But you do the best you can.
One classic way to go has been to target things that have little or no existing therapies - glioblastoma, pancreatic cancer, things like that. Anything that works half-decently against any of those will immediately set itself apart from the crowd, because the crowd has nothing. But going this route means that you've minimized your commercial risk at the cost of maximizing your scientific risk, because these diseases are underserved for a lot of really good reasons, and a lot of ideas just as plausible as yours have already bounced off of them with no effect at all.
So there's a bit of a conservation law at work here - if you dial down the risk on one side, you've probably dialed it up in the other. I supposed that there is a worst-of-both possibility: a long-shot attempt at doing something that well-known agents already do. That quadrant is lightly populated, or had better be. But the other remaining quadrant, the one where you have a really good shot at working against something that no one else is even trying, that's where the unicorns play. You don't get to visit that territory very often - and even when you think you are, you might find that you have company.
Comments (13)
+ TrackBacks (0) | Category: Business and Markets | Cancer | Clinical Trials | Drug Development
Remember back when AstraZeneca was fighting off Pfizer's ardent, tax-issue-resolving embrace a year ago? One of their weapons was a pitch to their own shareholders about what potential their own pipeline had, and how much of that would presumably go to waste should the deal go through. Even at the time, people thought that their estimates of what was to come might be a bit optimistic. But I can't really fault them, because if someone were trying to buy me, I'd probably be willing to say all kinds of things to keep it from happening, too.
Well, one of those pipeline assets has just taken a major hit. Brodulamab, targeted against the IL-17 receptor, was part of a 2012 deal between AstraZeneca and Amgen to develop inflammation therapies. Late last November, the companies announced some good clinical results in psoriasis.
But now Amgen has dropped the project, and hard.
The decision was based on events of suicidal ideation and behavior in the brodalumab program, which Amgen believes likely would necessitate restrictive labeling.
"During our preparation process for regulatory submissions, we came to believe that labeling requirements likely would limit the appropriate patient population for brodalumab," said Sean E. Harper, M.D., executive vice president of Research and Development at Amgen.
That really would be a show-stopper - psoriasis is a cruel disease, but suicide is worse. It's surprising, though, that an antibody would have this as a side effect (I'll bet it was surprising to Amgen and AZ, for sure). That's certainly a real side effect of some drugs (it was one of the big factors that scuppered rimonabant, and its competitor taranabant back when). But those were CNS agents, and that's the sort of thing you always look out for in a new CNS drug. What's an antibody to an interleukin receptor doing causing the same problem?
Well, IL-17 certainly has roles in the brain (those recent papers will lead you to others). And given how painfully little we know about what's going on up there, it's certainly possible that these pathways could lead to such a side effect - I mean, how do suicidal thoughts form, mechanistically? Right, it's a black box like all those questions are. But wouldn't brodulamab have to cross the blood-brain barrier for that to happen?
That's very unlikely for an antibody, but (as the various efforts targeting beta-amyloid show), not impossible, either. But if that's what's going on, what it is is hideous bad luck, because no one is looking for a CNS effect to stop a peripheral antibody target. And if it's somehow a peripheral mechanism, feeding back to the brain via who-knows-how, that's hideous bad luck, too. I hope that at some point we find out more about what's going on here, out of sheer scientific curiosity.
Comments (24)
+ TrackBacks (0) | Category: Business and Markets | The Central Nervous System | Toxicology
Rumors continue to fly around that Pfizer is going to ease its merger hunger and its foreign-cash tax woes by making an offer for GlaxoSmithKline. Lord, what a mess that will be if it happens. Problem is, I can't completely rule that out. I'm a very poor judge of huge pharma M&A deals, because most of them sound insane to me, prima facie, but a lot of them get done regardless of what I think.
For now, though, it seems just to be idle talk, perhaps driven by Wall Street types who dream of the monstrous, massive fees that such a large deal would bring. We'll see if anything more substantial comes of it. I sure hope not.
Comments (71)
+ TrackBacks (0) | Category: Business and Markets
To go along with the recent calls for Andrew Witty to step down at GSK, here's John LaMattina wondering if he's the right guy for the job as well:
. . .the bigger issue with Witty's stance is the direction that he is taking GSK. His company has a long and proud history of delivering new drugs to patients. Unfortunately, he has seemed to have lost his appetite for the difficult challenges faced in drug discovery. Sure, vaccines and consumer health care product are necessary and important. But so are new drugs for cancer, rare diseases, Alzheimer's disease, etc. For a major company like GSK to deemphasize this type of research, especially given all of its R&D experience and capabilities, will correspondingly decrease the amount of innovation devoted to curing these diseases. That's a shame.
He's referring to Witty's statements recently on drug pricing, and his calls to move GSK out of areas that depend on pricing power. I have long-term worries about this myself, but at the same time, if you come up with a really groundbreaking drug, you do indeed get to price it at what you think it's worth. That's your reward for taking on those substantial risks. (If you come out with a drug that makes your flu symptoms five per cent better for the last two days of the flu, on the other hand, you're not going to get many takers at $50k per course of treatment).
So if Witty is saying that the industry needs to be careful with its pricing, because we can't use that tool forever, for everything, I think he's right. But if he's saying that a fifty-thousand-dollar drug that saves the healthcare system a hundred thousand dollars is not a good deal, then that's harder to support. (You do, of course, have to make sure that the hundred thousand in savings are real!)
Comments (27)
+ TrackBacks (0) | Category: Business and Markets | Drug Prices
Now here's someone with optimism to burn, compost, and scatter to the winds. According to FierceBiotech, Vivek Ramaswamy has started a company called Axovant Pharmaceuticals, and their asset is a 5-HT6 antagonist from GSK. It goes back to the SmithKline days, when it was known as SB742457. It was in development for Alzheimer's, apparently going through at least five clinical trials of one sort or another (Phase I and II), before being shelved in 2012.
Ramaswamy picked it up for $5 million up front, with various payments back to GSK for milestones if it can get approved. But those are picayune - $35 million for US approval, for example. If Axovant can actually get a compound on the market for Alzheimer's, they'll make $35 million in the first twenty minutes. But as the Ephors of Sparta said to Phillip II. . ."If". Phase III is where Alzheimer's compounds have traditionally gone to die, and it's an expensive death indeed, given the size and length of the trial.
Axovant, for its part, has already filed for an IPO, valued at about $172 million. Optimism indeed, and a comment on the current state of the IPO market. It will be a matter of interest to see how this flies when the time comes. . .
Comments (31)
+ TrackBacks (0) | Category: Alzheimer's Disease | Business and Markets | Clinical Trials
So Eli Lilly is opening a research center in Cambridge (specializing in drug delivery). This prompts several questions.
Which big drug companies have not taken the Massachusetts Plunge, at least a little bit? (GSK and Roche don't have much of a presence, to pick two). What finally made Lilly decide that they were missing out, and what exactly do they feel that they're missing out on? Is putting a 50-head-count unit inside the magical environs of Kendall Square enough, especially when whatever they come up with is going to have to make it through the rest of Eli Lilly? And so on. . .
Comments (51)
+ TrackBacks (0) | Category: Business and Markets
Via FierceBiotech, here's an odd story about a small company you've probably never hears of, Symbiomix. They were launched just a couple of years ago, and are now heading into Phase III with an antibiotic. How, you ask, is that remotely possible?
Well, it's an antibiotic (secnidazole, a nitroimidazole) that's been sold in other countries for so many years that it's gone generic, but was never taken to the FDA over here. So that does speed things up. The company says that the compound has a real advantage in treating bacterial vaginosis (single-dose versus longer course of treatment), and plans to market it accordingly. What insurance companies will think about this as an advantage worth paying for it yet to be seen.
This looks like a one-shot regulatory arbitrage play. For some reason, this compound was never marketed here, so even though it's an older generic drug overseas, it gets to be turned into a New Drug here, with New Pricing. It's safe to say that no one is going to be holding their breath waiting to see if Symbiomix's Phase III trial goes as expected - of course it's going to go as expected. Everyone else has already done all that work. Symbiomix just gets to put together as much of a package as they need for the FDA, and then they can go try to make money with it.
It'll be worth watching to see if they do. I dislike regulatory arbitrage, as many posts around here have made clear. That's partly because, as someone who's spent all his time in new drug research, it feels to me like cheating, like pulling a fast one. Hah-hah, someone forgot to cross their fingers and stand on their right leg back in 1991, which means that I get to price my drug today as if I'd done the work of discovering it myself! Suckers! But this isn't quite as airtight a case as the odious ones of companies who pick some obscure one-supplier drug and ratchet the price up on it. There are alternatives to secnidazole out there - specifically metronidazole, one less methyl group at the cost of faster clearance and a few more pills. Symbiomix will be devoting as much time to figuring out their price point as they will to their clinical trial.
Comments (19)
+ TrackBacks (0) | Category: Business and Markets | Infectious Diseases | Regulatory Affairs
Here you are: a public call for the head of GlaxoSmithKline's CEO, Andrew Witty:
Witty, who's led Britain's largest drugmaker since 2008, is facing criticism for Glaxo's lagging share performance and a depleted pipeline of promising medicines. A bribery scandal in China that led to a $489 million fine last year and sluggish U.S. sales also eroded support.
"Mr. Witty is running out of time," said Stephen Bailey, a fund manager at Liontrust Asset Management Plc in London, which holds Glaxo shares. "He's either got to deliver in the next 12 months or step aside."
It has been rough over there recently, to say the least. Here's one analyst's take on what they should do:
Hampton should reinvest in research at Glaxo, which is failing to produce drugs capable of boosting earnings, said Laura Foll, a fund manager at Henderson Global Investors Ltd. in London, which owns about 7.6 million shares in Glaxo.
Profits are still tied to the aging asthma drug, Advair, while demand for two new respiratory medicines, Breo and Anoro, remains sluggish. The company is considering a spinoff of its HIV medicines, although it has few compounds capable of replacing them. Foll recommends cutting the dividend to fund research, a move some investors might resist.
Now, I like the sound of that very much. But I'll be surprised if anything like that happens. After all, the company says itself that "We are committed to using free cash flow to support increasing dividends, share repurchases or, where returns are more attractive, bolt-on acquisitions." Do you see anything in there about using any of the free cash flow to do more research of their own? A cynical investor might say that GSK got itself into the fix it's in now by all that R&D stuff, so why would you want them to do it even harder? But more seriously, Merck also tried to tell investors to stop pestering them while they're discovering drugs, and that didn't seem to last for long, either.
My guess is that if GSK were to pop up with an announcement that they're cutting the dividend and dialing back the share buybacks in order to do more R&D, the stock would get hammered, and a lot of high-level people would end up losing their jobs for having made such unpopular decisions. It's a shame.
Comments (83)
+ TrackBacks (0) | Category: Business and Markets
Readers might remember a small company called Catalyst Pharmaceuticals, who have had a business plan that goes something like this: take the known small molecule that's used for the rare disease Lambert-Eaton Myasthenic Syndrome LEMS, 3,4-diaminopyridine. Rebrand it as "Firdapse", and do the clinical work needed to get it officially recognized by the FDA (it's one of those therapies that's been grandfather in for many years). Oh, and charge a lot more than the current supplier, Jacobus Pharmaceuticals, who provide it for free. (It truly is a small market).
Well, that plan has been diverted somewhat. As mentioned in that 2013 post, Jacobus was planning a clinical trial of their own, and Catalyst was apparently taken by surprise when those results showed up last week in a poster presentation. Now no one's sure who will file with (or get approval from) the FDA first.
Jacobus Pharma decided to conduct a clinical trial of 3,4 Dap in LEMS and seek FDA approval as a way to stop Catalyst from profiting off LEMS patients with Firdapse, Laura Jacobus said in a 2013 interview. Laura runs the eponymously named drug company with her father David.
"Firdapse is not a new compound. It's the same drug we make. What Catalyst is doing is not the same as a company profiting from a new invention. What Catalyst is doing is making money off LEMS patients. They don't want to help LEMS patients, they just want to make money. If I worked for Catalyst, I wouldn't be able to sleep at night," said Laura Jacobus.
She has a point there about new inventions. As mentioned in those posts I linked to in the first paragraph, and in several others here over the years, many of these cases are unintended consequences that the FDA unleashed when it asked for older drugs to be put through the regulatory system. But that doesn't always have to be the case. Companies can buy up older approved drugs and just ram a new price home, because why not? That's what's been going on with Thiola, and this new piece at Pharmalot details a number of other recent cases.
Valeant, for example, seems to have a very predictable strategy: the day that they get the rights to an old drug, its price at least doubles, and can go up fivefold or more, depending on what they think the market will put up with. You sometimes hear companies like Catalyst talking about how now that the old drug under study has been taken under their regulatory and manufacturing wing, that it'll be so much better quality, and be so much better for the patient community. Valeant doesn't bother with any of that crap:
On Feb. 10, Valeant Pharmaceuticals International Inc. bought the rights to a pair of life-saving heart drugs. The same day, their list prices rose by 525% and 212%.
Neither of the drugs, Nitropress or Isuprel, was improved as a result of costly investment in lab work and human testing, Valeant said. Nor was manufacture of the medicines shifted to an expensive new plant. The big change: the drugs' ownership.
"Our duty is to our shareholders and to maximize the value" of the products that Valeant sells, said Laurie Little, a company spokeswoman. "Sometimes pricing comes into it, sometimes volume comes into it."
Pricing power should come to those who have earned it, as far as I'm concerned. Do the work, conduct the research, take the risk, and you should be able to reap the rewards. Take over a smaller company that (from your standpoint) is just too dumb to realize that they could have put the squeeze on by cranking the price up by a factor of five? That doesn't deserve so much of a reward. What I'd like to see is an easier path for generic competition in such cases. Let someone come in and compete on price, because there's clearly room for it.
Whenever I write about these cases, there are always a couple of comments to the effect that hey, that's the free market, dude - that's what you like, isn't it? But drugs are not generally sold under a free market system. No market in which a single supplier can raise the price by 525% overnight for no reason other than "Because we can" can be all that free, or all that much of a market, if by "market" we mean "competition between various firms for a share of the customers". The market-exclusivity incentives provided by the FDA (through deliberate action or through regulatory barriers) are strong ones, but they should be handed out with care. As it stands, I think it's too much of a reward, in these cases, for too little work.
Comments (54)
+ TrackBacks (0) | Category: Business and Markets | Drug Prices
Here's Ed Silverman Peter Loftus at Pharmalot, looking back at the Merck/Schering-Plough merger. It has not gone quite like the initial plan:
First, a little history. In November 2008, Schering-Plough Chief Executive Fred Hassan told analysts and investors gathered at the company's Kenilworth, N.J., headquarters it was developing "five stars" with big sales potential. They were: 1) rheumatoid-arthritis treatment golimumab (with Johnson & Johnson JNJ -1.50%), 2) the antipsychotic Saphris 3) Bridion 4) the anticlotting drug vorapaxar and 5) a hepatitis C treatment called boceprevir.
It was within weeks of Hassan's stargazing that Merck began courting Schering-Plough, leading to the Merck takeover in 2009. Merck touted the five stars among other Schering drugs, as well as the deal's potential for big cost cuts.
The five stars did make it to market (in the case of Bridion outside the U.S.). But none has significantly moved the needle for Merck, whose annual sales have fallen each year since 2011—to $42.2 billion last year—hurt by patent expirations for older drugs. . .
Well, a lot of people will tell you that this sort of salesmanship was Hassan's strong point. And drug development is, as we all have had chances to notice, unpredictable. But doesn't everyone sound so confident when they announce these mergers? Isn't the future just laid out there to be marched into and conquered? You don't hear anyone going on about how gosh, you just never know in this business, it might work out and it might not. No, the bold leadership of Company A has stepped up and seized the opportunities provided by Company B, and all manner of things will be well in consequence.
As Silverman Loftus shows, in the Merck/SP case, the bright spot has been Keytruda (pembrolizumab), which was considered to be a roundoff error in the deal compared to all those other big, promising compounds. It's not like Schering-Plough thought a lot of it, either (if they had, you can bet that Hassan would have put a sixth star up there immediately). Keytruda was originally from Organon, and when S-P bought them in 2007, it wasn't even mentioned in the press release or the articles written at the time.
So it's a pretty safe bet that Merck's management would have been nonplussed to hear that Keytruda would turn out to be the best thing that they got out of the deal. And they would probably have had to hold on to the back of a chair or something if you'd shown them what was in store for Fred Hassan's "five stars". As The Clash used to put it, the future is unwritten.
Comments (29)
+ TrackBacks (0) | Category: Business and Markets | Drug Industry History
The Wall Street Journal had an article on a new HDAC inhibitor from Shenzhen Chipscreen (full text here from The Australian). It's worth highlighting. Epidaza (chidamide) appears to be the first homegrown drug discovery and development effort to reach regulatory approval in China.
Their founder, Xian-Ping Lu, was working at Galderma before he went back to China in the early 2000s to start his own company. Chidamide is a start-to-finish compound for Chipscreen, and that puts China on a rather short list of countries that have demonstrated the ability to do that in small molecule drug development. You see claims for this sort of thing that don't quite hold up, but this certainly appears to be the real thing, and congratulations to them.
Some thoughts: first off, this would be the fourth (I think) histone deacetylase inhibitor to get regulatory approval somewhere. That class of compounds was a hot topic for development ten or twelve years ago (I was working on some then, not to any great effect). It's the first class of pharmacological agents deliberately targeting epigenetic signaling, and the complexities of that field have made things run slower than people were hoping. As this article in Nature Reviews Drug Discovery put it:
Oncology drug developers have long been interested in the role of HDACs, which can repress gene transcription by modulating chromatin structure, because altered expression of HDAC enzymes is often seen in tumours. HDAC inhibitors, the researchers hoped, could drive the re-expression of silenced genes, including those that encode tumour-suppressing proteins. However, the failure of multiple HDAC inhibitors to show activity in most cancer types, especially in solid tumours, has over the years led to an outbreak of 'HDAC inhibitor fatigue' in the research community — distinct from the physical fatigue many patients experience as a common side-effect of the drugs. "The wave of excitement surrounding this early class of epigenetic drugs has waned and been replaced by a wave of scepticism," says Jean-Pierre Issa of Temple University in Philadelphia, Pennsylvania, USA, who researches epigenetic mechanisms in cancer.
As these mechanisms get more worked out, the hope is that the HDAC compounds can get on a more sound footing, but for now, they're minor players in the oncology world. (I have no feel for how well chidamide compares to the other marketed compounds).
The second thought is whether Chipscreen plans to seek approval to market the drug anywhere outside China. I hope so - it would be good for Chipscreen and good for the global reputation of the Chinese drug industry. What would be good is if China becomes another market like the US, EU and Japan, where companies from each region get drugs approved in the others. There are (or can be) some slightly different requirements in each, and sometimes regulatory authorities will let something through in one that doesn't fly in the others, but the serious drugs end up in all of them and other markets (Canada, South America, Australia, Israel and so on) besides. (I'm excluding some of the no-efficacy-just-safety compounds from Japan from that category). What China does not need is to become a sort of regulatory backwater. The sheer size of the market there argues against that happening, but if the drug industry there continues to develop, the government could conceivably start tipping the scales towards China-discovered compounds. Getting chidamide out into the rest of the world would help to get things off to a good start.
The last thought comes from the statement in the article that the drug cost about $70 million to develop. That is indeed cheap, as little as ten per cent of what it would cost to do that in the US or the EU. And why is that? One's first thought is cost of labor, but although it can be cheaper to outsource some parts of drug research to China, it does not save you 90% by any means. Most of the money spent in a drug project is spent in the clinic, so my guess is that Chipscreen was able to get their clinical trials done for much less money than it would cost over here. Just how and where those savings came in, though, I couldn't tell you. If that's a real effect, though, and if those are real figures, then the Chinese companies would appear to have a huge cost advantage on the rest of their worldwide competition, which makes you wonder why it's taken until 2015 for the first locally-produced small molecule to show up. I should note as well that the other big multinational drug companies have not swarmed into the Chinese clinical trial space, not to the degree you'd expect if there were really 90% savings to be realized by doing so. This part will remain an open question for now.
But all of that aside, I'm glad to see Chipscreen make it through with their own compound. I'm glad to see any small company do that, Chinese or not, but their position as the first to do it in China is something that no one can take away from them. People have been waiting for it to happen, and here it is.
Comments (25)
+ TrackBacks (0) | Category: Business and Markets | Cancer | Drug Development
Since I've mentioned a recent book on academic drug discovery, I also wanted to highlight this article at Nature Biotechnology on university tech transfer offices (TTOs). The authors, mostly from a list of high-profile research universities (Oxford, Stanford, UCSF, University College London, Harvard et al.) and part of the Oxbridge Biotech Roundtable, have a lot of good advice for academic entrepreneurs who are going to have negotiate a pretty complex landscape.
First-time academic bioentrepreneurs frequently confront a deal-making process they do not completely understand, in part because final deal terms are often held confidential, making it difficult for outside observers to understand fair market terms. At the same time, bioentrepreneurs sometimes do not fully recognize how the interests of the TTO and university may diverge from their own. In fact, one postdoc we spoke to said, "Knowing what I know now about my university's licensing process, I might have considered a different university for my postdoc."
TTOs arguably benefit from information asymmetries in negotiations, whereas experienced bioentrepreneurs fear that disclosing details of prior deals could jeopardize their ongoing relationship with their TTO. Thus, they often stay silent on just how they got their asset outside the university walls.
Inexperienced faculty members, heading into lengthy negotiations in legal areas that they may not understand well, are certainly at a disadvantage. And what this article makes clear is that it's not just the slick operators from the biopharma business world that need to be watched out for, it's also the slick operators at the university itself. The interests of the institution and the interests of the inventor may well diverge, which is a particularly interesting situation when the inventor is an employee of said institution.
The article notes a number of differences between the US and the UK in these matters, a big one being the UK universities seem to expect a much larger equity stake in any spinout companies, but some fundamental advice is the same. Recognize everyone's own interests in the negotiations, and adjust your thinking accordingly. Get yourself the best and most experienced legal counsel you can find to look over the proposed IP and business arrangements. Remember that almost everything is negotiable, and a lot of it is renegotiable (but also remember that this means that you're going to have to flexible on some issues yourself). And get ready for everything to take longer and cost more money than you were prepared for at the start - it's worse than renovating a kitchen.
Update: see the comments section - the university equity numbers in this article are being disputed there.
Update #2: the authors are apparently working on correcting this issue, with new tables forthcoming.
Comments (25)
+ TrackBacks (0) | Category: Academia (vs. Industry) | Business and Markets
Last year I mentioned reports that the startup incubator Ycombinator was thinking of getting into the biopharma field. Here's a look at the current crop of potential companies.
One thing that stands out is that most of these seem to be focused on patient care or some sort of diagnostic. One exception is 20n, which is looking to engineer microbes to produce known pharmaceuticals or intermediates. That's not at all a crazy idea, but the example given on the site (acetaminophen) is not a particularly compelling example by itself, since it's extremely easy to make, from cheap precursors, on an industrial scale. And I'm not sure what to make of that "map of every chemical that can be made biologically". It's a nice graphic for the middle of the page, but there's no telling what it means. I like a lot of the ideas kicking around in the synthetic biology field, but I can't really say what 20n is up to yet.
The other one on the list I noticed is Atomwise, and I'll let them speak for themselves:
Medicines are getting more expensive to develop. These days, it takes about $1.8 billion and 15 years for a single new drug. Atomwise aims to change that by using supercomputers to predict, in advance, which potential medicines will work, and which won't. Our tools can tell the difference between great drug candidates and toxic ones, and discover new uses for old medicines.
Actually, what will speak for themselves are the results. If Atomwise can do this, at all, even poorly, then there are billions of dollars waiting out there for them to scoop up. But just the act of saying that you can do things like this makes me suspicious that they really can't do things like this. Here's a bit more:
Previous attempts haven't always met expectations. The techniques of the day were limited by the knowledge and computers available. Today, things are different. We have invented cutting-edge machine learning algorithms that are built specifically for the world's most powerful computers. We use one of the world's top supercomputers to analyze databases 1000 times larger than those used in the past. This lets us deliver what many others can't: precise and reliable medicinal predictions.
I could go on about this for a while, but in the end, these arguments are settled by data. Come on down and try it, guys. There's plenty of room, and plenty to work on, so let's see what you can get done. I'll be watching with interest, and so will others.
Update, from the comments: "Hello Everyone, I'm the CEO of Atomwise and a long-time semi-lurker here. (I'm the anonymous who keeps asking what it would take to convince people that in silico methods work.) I agree that the proof will come from data; that's one reason why we're doing a large-scale evaluation with Merck. Send me an email (email@example.com) and I'd be happy to present our data from previous prospective validation projects to you. Or, if you have some minimally proprietary data against which you'd like to evaluate our predictive capability, let's run the experiment. Best, Abraham Heifets"
Comments (33)
+ TrackBacks (0) | Category: Biological News | Business and Markets | In Silico
This does not seem to me like a great advance in intellectual property law: this Bloomberg article says that some large investors are using the patent challenge process for their own purposes:
Taking advantage of new rules created by Congress three years ago, hedge funds have increasingly been filing challenges to pharmaceutical patents. Some may be angling for payouts to drop their claims, while others are shorting the stock, betting that the manufacturers' shares will plummet.
Activist investor Kyle Bass sent a shudder through the drug industry earlier this year by embarking on a patent-challenging strategy. Now a New York hedge fund, Ferrum Ferro Capital LLC, has made an even more brazen move by seeking to invalidate an Allergan Inc. patent that has already been upheld in court. Neither investment firm has said whether it's betting against specific stocks.
I'm generally a lot more sympathetic to short-sellers than most people are. I've gone short myself at times (although not in recent years), and I think that the markets need people who are attuned to the downside. This, though, seems to be crossing a line. The challenge only costs $23,000 or so under the rules put in place in 2012, though, so it's a weapon just sitting there ready to be used. And it appears to be getting used about five times as much as the PTO expected. An investment fund didn't usually have the standing to challenge a patent in court, but now the door is open.
We'll see how much of a problem this turns out to be. The challenge system was loosened up in order to deal with yet another problem, patent trolling, where people use portfolios of overly-broad issued patents to shake down everyone within reach. And that's not a productive activity, either, but we may have to aim for a process that doesn't allow new shakedowns to arise in the place of the old ones.
Comments (29)
+ TrackBacks (0) | Category: Business and Markets | Patents and IP
John Caroll at FierceBiotech has more on those Biogen Idec cuts last week. It was only about 20 people in chemistry and neurology - although if you were one of the ones affected, you may well ask (to quote Austrian writer Peter Altenberg) "What's so only?" There were also cuts of about the same size last fall in departments like clinical operations and QC, and Carroll is hearing that there may be some more:
Another person close to the move last fall tells me that Chief Medical Officer Al Sandrock outlined plans to create a "Biogen Idec Version 4.0" at an offsite company meeting last spring. "They want a leaner team," says one source, looking to outsource more jobs. And staffers are wary that the efficiency focus will spur upcoming cuts, fearing more workers will face the ax later in the year.
What has people paying attention to these moves, which are certainly not on the scale of what's been happening at GSK, AstraZeneca, and other companies over the last two or three years, is that Biogen is in great shape right now. They have big-selling drugs early in their patent cycles in MS and hemophilia, and they're banging away on some other high-profile projects as we speak. Data are expected on Friday on their Alzheimer's antibody program, which looked pretty impressive last time anyone saw any data, in December - and that's impressive on the absolute scale, not on the relative scale of other Alzheimer's antibody programs.
So if a company like Biogen, with big sales and big prospects, whose stock continues to rollick along to all-time highs, can be tweaking their head count, shuffling responsibilities, adjusting their outsourcing and all the rest of it - well, that tells you what things are like on the business end of this industry. Plenty of other drug companies can only dream about being in Biogen's situation, but there they are, with both hands gripping the wheel, watching every dial and listening to every stray sound from the engine.
Comments (44)
+ TrackBacks (0) | Category: Business and Markets
Unfortunately, I have it from people who are definitely in a position to know that Biogen is laying off scientists this afternoon. A number of experienced chemists have been let go so far, and I'll put up more details as I learn them. This is particularly unexpected, considering that the company appears to be in terrific financial shape. . .
Update: the company says that this is a small layoff in chemistry and neurology, and that head count is not being reduced. From what little I've seen of the situation, though, it almost looks as if they're clearing out a lot of longtime employees and will then be replacing them with new ones, who are (presumably) cheaper. It's true that you have to check to make sure that you have the right people for your needs - and let people go if you don't - but there are a number of fine lines in this area.
Comments (32)
+ TrackBacks (0) | Category: Business and Markets
Enough depression for now. The last couple of posts have not been cheerful, because there's a lot of not-so-cheerful stuff out there in the business side of the industry. But I wanted to remind everyone (and myself) that we're actually getting some good things done around here. Take a look at oncology - it's starting to look like this could be the era when people, decades from now, will say that the corner was turned. Some of the results coming out of recent trials have been really eye-opening, both the small molecules and the biologics. And the recent focus on immune-based therapies has shown a lot of dramatic progress (which is also attracting a lot of dramatic investment money). We're just barely starting on these things, and on the combinations that need to be tried. Real progress is really being made.
That's just one therapeutic area, although it's a big one. There are others advancing as well. That's the frustrating part, in a way - coming into this field de novo, you'd look around and see so many opportunities that you wouldn't know where to start. But many of the existing businesses (and in some cases, existing business models) are having a heck of a time fitting in. Running an organization the size of a Merck or a Pfizer, with those expenses and those legacy commitments and that overhead, really is a beastly job. But no business is owed some sort of right to always exist in its present form. Business-wise, this is an ugly period. Scientifically, it's really quite good. Bridging those two, now - that's where all the clanging noises are coming from.
Comments (16)
+ TrackBacks (0) | Category: Business and Markets | Drug Industry History
Let's get the bad news out of the way first. Amgen's purchase of Onyx now has the widely expected sequel: they're closing down that site, and laying off 300 people.
Kyprolis is working out fine, and that's all Amgen wanted. The only surprise, sadly, is that it took them this long.
Comments (7)
+ TrackBacks (0) | Category: Business and Markets
This is not a happy column by John Carroll at FierceBiotech. But it's an accurate one. He references the period just a few years ago when Pfizer closed its Sandwich site in the UK and Roche closed Nutley, NJ, among other upheavals.
That period of intense Big Pharma turmoil, though, has failed to create a new normal that can offer investigators greater confidence that they'll be able to keep their jobs. And the disruption is continuing with a new wave of restructuring every bit as traumatic as the first tsunami of makeovers.
Honestly, I don't know anyone in this business, large company or small, that can say truthfully that they have great confidence in keeping their jobs. Certainly not with any time horizon as great as, say, four years, the time between the closures mentioned above and now. Turmoil is the new normal; Carroll's right about that. It's been this way for years now, to the point where we hardly notice it, except when another dramatic shakeup hits.
That's why I tend to lose patience with critics of the drug business, even though they may have other valid points, when they start going on about big, complacent pharma, drowsy and bulging with cash. It's hard to square that picture with the experience of actually working in this industry, when it feels like some sort of lunatic combination of a roller coaster and a demolition derby. If drug companies are such unstoppable money machines, how come everyone seems to be running around in Headless Poultry Mode?
Comments (54)
+ TrackBacks (0) | Category: Business and Markets | Drug Industry History
This isn't sounding so good, either. Shire is moving its Pennsylvania site, relocating people to the main campus in Lexington, Massachusetts, but now it appears that quite a few of them won't be making the trip:
The biotech filed a WARN letter with the state of Pennsylvania outlining plans to downsize its operations at its Chesterbrook, PA, campus by up to 600 staffers, but has yet to determine who will go to Massachusetts and who will face the ax.
The Shire letter, sent in late January by a company lawyer named Lawrence Borska, says that the company is starting to transfer jobs from its Chesterbrook, PA, facilities to the Lexington, MA, headquarters this month and will continue for the next year. An "anticipated mass layoff" is expected to begin in a matter of weeks.
More details as they come out, but generally speaking, a WARN letter is the real thing.
Comments (9)
+ TrackBacks (0) | Category: Business and Markets
Remember Merck buying Cubist? And the problems that immediately came up around the company's patent estate? Merck stuck to their decision, with lots of talk about how they were committed to it no matter what, but one always had to wonder what the sequel would be. Here's David Shlaes at the time:
This announcement is bittersweet for me. This clearly continues a string of good news for antibiotics and antibiotic R&D. It is further proof that large pharmaceutical companies now agree that antibiotics can provide a return on investment and that they are willing to put there money where there mouths are. The acquisition of Cubist will also bolster the appetite of investors beyond the excitement provided by Cubists own acquisitions of Optimer and Trius last year.
On the negative side, there are always the "synergies" that go along with these mergers. The Merck investment in their antibiotic R&D portfolio has been exceedingly modest over the last decade or so. Will this change or will Merck now go about ridding itself of the Cubist R&D organization to achieve its promised cost-savings? On the risk side, essentially all of Cubist's late stage antibiotics have come from external sources. Their own discovery organization has contributed little to the late stage pipeline. Merck's own discovery organization has provided only MK-7655 – a knock off or avibactam – and little else for many years. How Merck will deal with the two discovery groups is a matter of concern and remains a complete unknown at least to me.
Well, by golly, here come those synergies. The Boston Business Journal says that Merck is cutting Cubist's entire early-stage drug discovery staff, laying off all 120 of them. So anyone who thought that this might be about some sort of long-term commitment to antibiotic discovery, well, think again. This is about getting Cubist's existing drugs, back to some unspecified point in development, but the discovery work gets raked off into the compost pile. I would not be feeling good about the prospects for the whole Lexington site, given that a Merck spokesman is quoted talking about re-evaluating footprints, etc.
Very nice. It's true that Cubist's own efforts were not the driver for the Merck acquisition, nowhere near, but still. After the Schering-Plough merger, and now this treatment of Cubist, you have to wonder if Merck has decided to follow the 2000s-era Pfizer strategy of M&A. You know, the one that made them what they are today, and that's worked out so well for everyone.
Comments (63)
+ TrackBacks (0) | Category: Business and Markets | Infectious Diseases
Ibrutinib seems to be worth even more than everyone thought! As of this morning, AbbVie has won what was apparently a lively bidding war for Pharmacyclics, paying $21 billion for the company. Now that is a lot of money, and I'm not sure that I can made those numbers add up, but presumably there are people at AbbVie who are paid more than I am to figure such things out. (Adam Feuerstein sounds a bit stunned, too). Many news organizations had stories yesterday about how J&J was about to buy them, but if you're willing to pay enough money, you can horn in on any deal you like.
I would assume that the company is going to aggressively move the compound into clinical trials for as many plausible indications/combinations as possible - that's the main way I can see this working out. But as I said last week, this is what keeps people investing in biopharma: back in 2009, you could have had Pharmacyclics for $1 per share or less. Last night's offer was $261.25. David Shayvitz has a good history of ibrutinib here, and it's quite a story. Personally, I think that a lot of Pharmacyclics people are probably just relieved that they're not going to have to attend any more sessions to learn how to become geniuses.
Comments (42)
+ TrackBacks (0) | Category: Business and Markets | Cancer | Drug Development
Word came yesterday that AstraZeneca is spinning off its anti-infectives division into a separate subsidiary company. This does not appear to have been their first choice - they've been shopping these assets around for actual cash, but had no takers (at least, on their terms). Here's what they're telling the employees:
. . .We are creating a stand-alone subsidiary company, focused exclusively on the research and development of our early-stage antibiotic pipeline, including the novel gyrase inhibitor AZD0914, which is currently in Phase II for the treatment of gonorrhoea. AstraZeneca will invest $40 million in the new company. We anticipate that the new company will be led by and include staff from AstraZeneca's Innovative Medicines Unit. . .
. . .As already communicated to our employees, this new way of conducting small molecule antibiotic research and early-stage development will impact approximately 95 employees based in Waltham, MA. It is anticipated that some of the researchers impacted by the changes will take up roles in the new company, or in other parts of AstraZeneca. We are fully committed to supporting our people through the transition.
FierceBiotech has more, agreeing that this seems to have been something of a last resort for the company. But it probably could have been worse, too - better a "subsidiary company" than no company at all, if you're working there, I should think. We'll see how this goes in the coming months. My guess is that the gyrase inhibitor's fortunes will determine a lot of the story.
Comments (16)
+ TrackBacks (0) | Category: Business and Markets | Infectious Diseases
From the LifeSciVC blog, here's a revealing comparison of the amount of money going into startups in this business. This is why I tend to get worked up about the number of stock buyback plans among the big pharma players. It would seem that there is so much cash sloshing around on the balance sheets, compared to the amounts that are being raised to start new companies. Why so much?
In recent years, building up cash reserves has been a trend across all industries, though, so we might be seeing the pharma end of a big secular tendency.
It's also true that pharma companies have always tended to carry larger cash balances than companies in many other sectors. There are a lot of acquisitions in this business, both of individual drug or platform assets and of whole companies, and there's a constant threat of legal action, too. But the big companies have plenty of access to capital, too, which makes that a somewhat less compelling argument. Across different companies and different sectors, investors seem to value each dollar of cash a company is holding across a rather wide range, and the larger drug companies would seem to be toward the lower end of it. On the other hand, it's been argued that knowledge-based businesses (biopharma, IT, etc.) are in a different situation than many other industries, since it's difficult to directly hedge the risks involved in R&D. To make things worse, those risks aren't really correlated with the company's cash flow or other financial indicators: good news and bad news both can come out of a clear sky.
So it's not a surprise that pharma companies should have relatively hefty amounts of cash on hand. But this hefty? Last year saw even more reserves piled up, making many speculate that we're going to be seeing a lot of dealmaking this year. At some point, you'd figure that shareholders will ask for something to be done with all that money (although you'd have expected that to happen before now with Apple, to pick one whopping example).
But that focus on M&A might be part of the answer to the question. I'm riding, as I write this, on a railroad whose deficiencies in maintenance and upkeep have been made painfully, abundantly clear by the run of bad weather we've had in the Boston area. Over that same recent era, though, the same MBTA has opened up a new commuter rail line to the south of the city, tried to expand one of its surface lines into a whole new area (the Green Line to Somerville), and has been expanding tracks and stations on its outer rail lines (including a big project at the one I use). This despite massive amounts of debt on its own balance sheet. My take on this is that expansion is (and has been) more popular than upkeep, and easier to sell, both to customers and to politicians. Building out a new line is far more visible than fixing the switches and tracks on the old ones, even though the latter activity might be a better use of the money.
And M&A might have the same thing going for it in pharma, compared to either putting more money into a company's own R&D or seeding new companies. An acquisition has an immediate effect on the balance sheet, with (for the most part) clearly visible assets changing hands. We bought company X for their drug Y. That's much easier to explain to the investors than saying that we plowed a bunch of money into things that might or might not bear fruit ten or twelve years from now, even though that's a pretty good description of the whole business of drug research.
So that takes us back to the first paragraph: why don't big pharma companies take a bit of their excess cash and use it to grow the whole sector? Because they, and by extension, their investors, don't see that as a worthwhile thing to do. We can argue about that, and I'd argue that an amount of cash that the big companies would hardly even miss could make a huge difference, but it's not that the companies involved have never let it cross their minds. While there are some big company venture funds, they're never going to be as big as the balance sheets might suggest they could be. That money is for signaling, not for investing.
Comments (18)
+ TrackBacks (0) | Category: Business and Markets
Merck/Serono (Merck KGaA of Darmstadt) is apparently cutting back in Billerica, their US research site. According to FierceBiotech, though, they're not saying by how much:
"a limited number of discovery positions have been impacted in our research organization. We are working to re-assign as many of those positions as possible in the organization as we drive all of our research efforts forward."
. . .the company declined to say just how many staffers are involved in the reorganization, though a spokesman did say the cutbacks are focused in their Billerica facility near Boston.
The company has been having its problems over the last few years, as that link details. Billerica and Damstadt are the main R&D sites, after they closed down the Serono site in Switzerland.
Sanofi's CEO hunt has ended, and the roue de la fortune has pointed to Bayer's Olivier Brandicourt. (I'm tempted to keep dropping French phrases every couple of lines, but I figure that no one will stand for it, so you can work them in mentally as appropriate). But before his two years at Bayer, Brandicourt had many years at Pfizer, so that might be a more appropriate pedigree to cite.
That history has some interesting chapters, such as overseeing the launch of Exubera, the inhaled insulin product whose effect was a bit more like the launch of an N-1. Exubera was, at least to an outsider, an absolutely hair-frizzing example of wrongheaded groupthink, a completely avoidable debacle from an organization poisoned by breathing its own fumes. This will make the recent Sanofi connection with Mannkind's inhaled insulin product fun to watch. I think that Mannkind's work in this area is the sort of thing that Don Quixote might have done if you'd given him a few billion dollars to work with, and that many of their investors need to adjust the dosages of their non-insulin medications. But we'll see what Brandicourt makes of it all. He has a lot on his agenda at Sanofi, and people will be wondering if (1) he can do the job, (2) if anyone can do the job, and (3) whether Sanofi's board of directors will let anyone do the job.
Comments (11)
+ TrackBacks (0) | Category: Business and Markets | Diabetes and Obesity
According to FierceBiotech, Boehinger is cutting staff in Ridgefield, CT. They are, they say, "in the process of rebalancing its workforce in the U.S. to put the company in the best position for future growth". You won't find many sentences that says "layoffs" more than that one. I haven't heard from any of my chemistry contacts there, so I don't know how the R&D departments are faring in all this compared to sales, administration, and so on, but I'll post more details as they become known.
Comments (13)
+ TrackBacks (0) | Category: Business and Markets
According to Fierce Pharma, AstraZeneca is having trouble unloading its anti-infectives division. Part of the problem seems to be that they're trying to spin out the whole package at once:
The pharma giant also specifically sought out venture groups that had been investing in anti-infectives in an effort to find a buyer for the Waltham, MA-based group. "The assets had little (if any) differentiation and were late to the market and the economics didn't make sense," the executive added.
Another player in the field says he took an early look at AstraZeneca's proposition. "The challenge was that they wanted to spin out the whole pipeline plus a 20-person team," he said. "The pipeline had a couple of interesting assets but they wanted to get paid for the uninteresting assets as well."
The article says that people believe that AZ is getting close to making some sort of decision, since the whole process has been going on for longer than they wanted. I wonder how many of that 20-person team still remains?
...continue reading.
Comments (13)
+ TrackBacks (0) | Category: Business and Markets | Infectious Diseases
I got a kick out of this FierceBiotech story on Pfizer and Ian Read, based on this talk with him.
Pfizer probably won't be building up the innovative side of the business by scooping up a bunch of biotechs. "[I]t's difficult to pick winners," Read acknowledges. Plus, as much as Pfizer tries to be investor-friendly, "small biotechs don't rate Pfizer very highly."
"[M]aybe that's because we don't pay enough," Read added.
There's no indication of what expression he had on his face when he advanced that theory, unfortunately. But maybe it's because the biotechs themselves (and their investors) don't like seeing their companies filleted like fish and a marketable chunk turned into sushi, with everything else dumped into a grimy bucket and thrown over the side? Just a thought.
Comments (29)
+ TrackBacks (0) | Category: Business and Markets
If the biopharma world is awash with startup money, just where is it all going? That's the subject of this post over at LifeSciVC, quoting a report from the BIO industry group. It covers the 2004-2013 period, so it's missed the most recent boom year. 2013 was already the best year in the survey, and last year would have beaten it in turn, but there's a lot of useful information to be had.
For one, venture capital has been, as you'd hope, very much biased towards new therapies, as opposed to improvements on existing ones (at least an 80/20 split). VC funding for the latter was up a bit in 2005 and 2006, but has been declining, as a percent of the whole, ever since, and was at its lowest level in the whole survey in recent years. And of that great majority that's going towards new projects, the great majority of that is for ideas in the early stages, which again is as it should be. "Early stages" is here defined as maybe all the way up to Phase I, which may not seem so early to people in discovery R&D, but in terms of the money involved is just the opening curtain. But there's still plenty of activity for outfits that have no clinical data yet - if you have a strong enough story, you can get someone interested.
One other thing to note is that biologics, as opposed to small molecules, have been notably increasing their share of the money. That parallels what's been happening in the lists of the top-selling drugs, and people noting that second trend has led to the first one.
It's going to be interesting to see where the startup classes of the 2010s end up. We won't know for years, but you wonder if the success rates will be different from the historical ones, or if the exit points will be for the ones that make it. While I was workin on my talk to the computational folks, I would come across ten- and fifteen-year-old articles about lists of companies in the space, and when you look over these things, you see that some of them are still around, some have been acquired, and some have just faded out. But those first two categories split up on closer inspection. The ones that have been acquired can be differentiated into "acquired for a good price because they had something that someone else really wanted to buy", and "acquired in a fire sale because they were going down". Even the companies that are still around fall into "Still around because they got something to work and stayed on their feet" and "Still around, inexplicably, even though nothing's really worked and nobody has wanted to buy them". Only the last category, the out of money, out of time, and out of options ones, are more homogeneous.
My guess is that the companies formed before things got really hot will have a somewhat higher survival rate than the ones from 2014 and this year. Some of the earlier ones had been waiting for longer than usual before getting off the ground, which was painful, but might have firmed things up for them more than the some of the companies jumping into the hot, happening scene later on. That's especially true for later-stage companies that have gone all the way to IPOs. In retrospect, that's one of the ways that I think you can tell where the peak was, by going back and looking at when the companies going public stopped taking off quite so vigorously as the market started to get saturated. That in turn can set off a rush for the remaining funding, making the last phase of a bull market in new companies rather chaotic. I have, of course, no idea where we are now. These things look so clear in hindsight, but while they're going on, well. . .
Comments (7)
+ TrackBacks (0) | Category: Business and Markets | Drug Industry History
As foretold by a comment around here the other day, Sanofi seems to indeed have had the dreaded mandatory-attendance business meeting today, and I'm hearing from people who are in a position to know that layoffs have been announced internally. More details as they come out - I don't think that the company said anything externally yet. Interesting that they feel that this needs to be done even before (or especially before?) naming a new CEO.
Update: here's more from FierceBiotech.
Comments (31)
+ TrackBacks (0) | Category: Business and Markets
Crowdfunding is a hot idea in small biopharma, but a lot of people don't quite know what to make of it. I've written about some academic examples of it, and I think that's a good use of the idea. People can donate in the expectation that they're helping along a research project, not because they're looking for a big return on their money.
But what about a small biopharma company trying it? John Carroll at FierceBiotech has an example, and he's skeptical. In this environment, especially, with so much money sloshing into the sector, I would also be worried. If your idea can't attract any financing other than what you can round up from people who don't know anything about the field - which is, unfortunately, a good description in this case - then there might be something wrong with it. At the very least, people are telling you that your proposal is premature.
That this example is a stem cell play seems appropriate. This is a very interesting, very challenging field of research, and the general public knows squat about it. Other than it's going to be a source of miracle cures real soon now, that is. Crowdfunding in this area is not a good sign.
Via Matthew Herper on Twitter, I see that the Telegraph has this insight into Pfizer's corporate culture, or at least its upper reaches. CEO Ian Read apparently keeps a special coin in his pocket - on one side, it says "Straight Talk", and on the other side, it says "Own It".
Mr Read said the coin. . .was part of a "cultural change" at Pfizer.
"I believe strongly that everybody in the company needs to have a sense of ownership, hence "own it", and to own it we need to have the ability to do straight talk," said Mr Read.
Well, that's nice. Personally, this sort of thing drives me insane. Where to start? The short, pithy slogans that are supposed to reduce the complexities of running a giant R&D operation down to crunchy little sound bites? The idea that saying "Straight talk" (or having a coin that says it, even better) is what you need to actually elicit straight talk, or produce some yourself? The idea that promulgating any such slogan, about anything, is the way to realize any particular goal? Or the idea that when the CEO says that the culture of the company has changed, that it's really changed? Or that the CEO can change it at all, particularly by carrying around a slogan-bearing talisman in his pocket?
Keep the slogans to yourself. Burn the information packets. Compost the posters. Put all the funny-shaped paperweights and desk thingies in a landfill. Then do the things that you think need to be done, and let everyone see you doing them. Do that every day. Get a reputation for doing it. Don't go on to everyone about what you do, or how you do it: spend that time and energy performing. Five minutes of jargon-free, buzzword-depleted unlawyered straight talk to the employees would be worth fifty New Culture Campaign rollouts. And who knows how many of those damned coins.
Comments (65)
+ TrackBacks (0) | Category: Business and Markets
Have you noticed that Sanofi hasn't named a replacement yet for their ousted CEO Chris Viehbacher? It doesn't seem to be for lack of trying. Stories have come out over the last few months about various people who have been said to have been under consideration, but. . .nothing. This story from Reuters says that the problem is that people don't really understand what happened to Viehbacher - which presumably makes it harder for them to figure out how to keep it from happening to them.
"The trouble with finding a successor hinges on the fact that we don't know the real reason he was fired, and because a lot of people are asking themselves questions about the subject," said an industry insider who has spoken to some potential candidates.
"The very low pay-off he received only reinforces the idea that the reasons he was fired are not the ones that have been talked about."
Well, I'm out of the running, at least. My French is pretty awful. But if you're fluent, and don't mind stepping into a darkened room that someone else recently disappeared from, the opportunity still awaits.
Comments (38)
+ TrackBacks (0) | Category: Business and Markets
Flex Pharmaceuticals went public the other day, another in the string of IPOs in the biopharma world. This is also another Christopher Westphal company - he was a founder of Sirtris, about which much ink and many pixels (here and elsewhere) have been shed, and more recently founded Verastem (who also went public with alacrity). Before that he was working with GSK's venture capital operation, an association which ended rather suddenly in 2011.
So what does Flex have going for it? They have a therapy being tested for noctural leg cramps and other neuromuscular spasms. Fine. What is this therapy? It is a mixture of capsicum, ginger extract, and cinnamon extract, and that makes me think that if you added some fish sauce and some rice that you could probably serve it in a Thai restaurant. These are all regulated as food ingredients, and the company hopes to skip the normal IND requirements by treating the mixture as a dietary supplement.
This should be interesting to watch. It's certainly possible that these extracts could have medicinal effects - they're certainly all full of tasty natural products. And I appreciate that the the company is actually going to run clinical trials and prove efficacy, rather than go the usual dietary supplement route and just sell the stuff anyway. (Or sell some other stuff entirely and never mind the label!) No, this is how plant-extract-based medicine should be done, and while the temptation is to make fun of it (with a few more Thai restaurant jokes), I wish the Flex folks luck. It is possible to wish them well, though, and still wonder about a market in which they are able to raise $86 million dollars with apparent ease.
So we've been having an extraordinary bull market for new biopharma companies - just look at the number that have gone public the last few months. (The past two years have beaten the numbers put up in the previous ten!) And it's not just the new ones, either; the number of follow-on offerings has increasing dramatically, and why not? People are lining up to throw cash at this sector, and there are plenty of companies ready to receive some of it. Might as well go out there with a couple of laundry baskets while it's raining money. These weather fronts move on through eventually, y'know. Here's BioCentury's count of those secondary offerings, via AndyBiotech on Twitter.
But there are some gaps. Bruce Booth's blog is finding room to wonder about the early-stage companies. You don't just form a new biotech and go public, of course. The job of company formation has already taken place by then, and just how is that going under the present conditions? As he notes, VC firms have had many more exit opportunities recently, which is no bad thing. And those returns have brought in plenty of new money looking for something similar. With interest rates about as low as they can possibly be - and even lower, if you're buying Swiss bonds, some of which are currently at negative yields - a hot equity market is going to stand out even more than usual.
And that's what the numbers show. A lot of the money coming into the area is from funds that normally would be investing in later-stage public companies, not from traditional VC folks. Only about half the startup money, or perhaps even less, is coming from those groups-of-limited-partner operations. In fact, Booth wonders if classic VC firms have increased their presence much at all over the last few years. Newer figures may change that; we'll have to see.
He then asks "Who's getting all this cash, anyway?" He has figures showing that "the same number of private biotech companies got funded in venture rounds during the lean bunker-mode of 2009 as got funded in the bubblicious climate of 2014." And that's a surprise. You'd have thought that more companies would be taking off in this environment. But what's happening is that the same number of companies are just raising more money. In fact, as he puts it, there's a "staggering and glaring disconnect between the demand for innovation in biotech today and the formation of new startups to address that demand." Considering the number of companies that have been exiting the private-financing world and hitting the public markets, there seems to be a real vacuum forming behind them.
I hope that this is a temporary situation, that supply will rise to meet demand, and for that matter, that the supply of suppliers will rise as well. We need a variety of views and approaches in early stage R&D, and that goes for the firms that are creating companies as well. There is no one perfect way to do this stuff (if there were, it would have taken over the world by now). Worth keeping an eye on in the next year or two. Stock market conditions are going to play a big role, though - what if someone decides to start up a big new limited partnership, rounds up some people and some money, and launches just as the biotech market window starts closing? That shouldn't, in theory, matter as much to an early-stage outfit, but it'll have a big psychological effect at the very least.
Elizabeth Warren has come out with a proposal for what she's calling a "pharmaceutical swear jar". Once a drug company had been fined, this bill would earmark a percentage of their profits over a multiyear period for use in NIH funding. Like many of Warren's ideas, this one has a lot of populist appeal - but does it make any sense?
It actually reminds me of that "Take back the grant money in case of fraud" idea that I vacillated about earlier this week. That one, though, at least has the benefit of having a pretty direct connection between the people causing harm and some of the ones getting harmed. In this idea, the tie is pretty indirect - unless, of course, Warren is one of those people who believe that the drug industry mostly makes its money by ripping off NIH-funded discoveries. And she seems to be: she says that such companies are "generating enormous profits as a result of federal research investments". So she probably sees this as a perfectly logical quid pro quo. This idea makes it seem as if drug companies have harmed the NIH when they're fined for over-promotion of a drug or for manufacturing problems, but that connection doesn't exist.
Note: Elizabeth Warren is not alone in her belief. There are a number of people who passionately believe that the bulk of drug research is done with NIH money, and that drug companies exist just to skim off the cream. I never knew this before I started this blog, I have to tell you, and if you try this idea out on anyone who actually works in biopharma they stare at you as if you've lost your mind, but there it is. The topic has come up at length around here several times: try here, here, here, here, and here. And this is a nice perspective from a former director of the NIH.
In the same way that I was wondering about incentives (appropriate ones and perverse ones) in that grant money idea, it's worth looking at the incentives here. One good thing is that it wouldn't be the NIH, the interested party, bringing the accusations against pharma. In such situations, the potential for abuse, the moral hazard, is too high. You end up with problems like the ones seen with police department seizures of assets, or (in a less dramatic, but still pernicious way) with stoplight cameras. What's supposed to be a public service ends up as a revenue source.
But what this does remind me of are the various states that use lottery income to fund education. The trouble with that is that the education budget itself doesn't necessarily stay the same when such a system goes into effect. The lottery money gets sent in that direction, while some (or damn near all) of the money that was earmarked for education gets moved over to other worthy vote-getting projects. In the end, the education budget doesn't really go up. So one problem with this idea is that it might not end up providing much extra money to the NIH, in the end.
So where does the money go when a drug company is fined under the current system? Into the general fund, as far as I can tell. I don't think it goes right to the Department of Justice, the FDA, or the FTC (that would set up that moral hazard problem mentioned above). No, it seems to go right back into the big pile, to be divided up by the House during budget negotiations. Some of that money (although not a very large per cent) finds its way to the NIH as it is; the rest gets spread out to service on the debt, "entitlement" programs, defense, and so on. (Actually, those three categories alone are a pretty good proxy for the entire federal budget - the NIH, by contrast, gets less than one per cent of the total).
Warren's plan would earmark money, then, for one agency. My sense is that in general lawmakers are not keen on doing that. They'd rather fund the various parts of the government by dividing up a general fund, rather than by a maze of bespoke conduits from Source A to Recipient B. (As the lottery example shows, even when something like this is set up, money gets dragged back into that general fund anyway). And as distasteful as the budgetary process is, I have to agree with the current system. I think the potential for flexibility is worth more than the sense of fitness that one might get from knowing that some (more or less) appropriate source is funding some particular program. To pick a large example, it's not like Social Security or Medicare taxes all go off to some special place where they get spent only on Social Security or Medicare (much less, as some people apparently believe, that "their money" is going into "their account").
The current NIH budget is about $30 billion. Warren's proposal, by her own reckoning, would have increased the agency's budget by $6 billion a year over the last five years, but the last five years have also seen the biggest fines ever. Historically, that isn't the kind of cash that comes in all the time (although if Elizabeth Warren were in charge of the process, no doubt things would pick up). The agency's funding has been flat, and flat at a lower level than its peak during George W. Bush's first term, so I'm sure that they'd be glad of the money.
But if Congress wants to give more money to the NIH - and they could do worse, and often do - then they should give more money to the NIH the old-fashioned way: by voting on a budgetary resolution that does this. That way, the agency itself knows what's coming, and when it's showing up, and can figure out what best to do with the money. The "Pharma Swear Jar" idea seems to me to be a stunt, designed to make people feel better and to give Elizabeth Warren a chance to campaign on having helped to stick it to the big drug companies.
Comments (56)
+ TrackBacks (0) | Category: Business and Markets | Regulatory Affairs
Here's a report that GSK is cutting back severely in China - 1,000 workers during the first part of this year. Caixin.com seems to be first out with this story; others are quoting them. They refer to "sources close to the company", apparently employees who have already had word of the cutbacks. According to these sources, GSK has been experiencing a lot of difficulties in the country in the aftermath of the long, complex, and messy scandal of the past couple of years.
So this would be the Chinese component of GSK's overall restructuring, and they're apparently not alone:
Other foreign drug companies are trimming their number of employees in China. In November, the U.S. company Bristol-Myers Squibb started laying off around 1,000 workers, including around 10 senior managers, the 21st Century Business Herald newspaper reported, citing sources with knowledge of the matter.
It wasn't that long ago that these companies (and others) were ramping up spectacularly in China, which was going to be the big new frontier for the industry. That doesn't seem to be working out in quite the way everyone had anticipated. Some of this is just one part of some broader cutbacks, but some of it may well be a retrenchment of some Chinese dreams.
Update: the company is denying the Caixin report.
Comments (8)
+ TrackBacks (0) | Category: Business and Markets
This profile of Actavis CEO Brent Saunders (by Matthew Herper) makes interesting reading, if your definition of "interesting" is roomy enough to take in various shades of "unnerving" and "enraging". They're the company that saved Allergan from the clammy embrace of Valeant, but reading this, you'll wonder how big a difference it makes.
Saunders is being completely up front about some of the issues that many of us in the industry have been worrying about, but it's strange to hear these things out in the open:
Saunders insists that Actavis-Allergan is more than just a short-term trade. It's the springboard for a revolutionary new kind of drug company: "growth pharma," he calls it. Actavis-Allergan will have the scale in marketing and clinical trials of a global powerhouse like Eli Lilly or Bristol-Myers Squibb, but it will eschew the core mission of most drug companies–inventing drugs–preferring to buy them from universities or biotechs all the time. The new company will be the first big pharma that doesn't even pretend to invent medicines.
" The idea that to play in the big leagues you have to do drug discovery is really a fallacy," says Saunders. "You have to do research, you have to be committed to innovation. I strongly believe that, but discovery has not returned its cost of capital."
We have Fred Hassan to thank for Brent Saunders, and depending on your dealings with Hassan, this could give you a strong opinion about him pretty quickly. After coming up through Hassan during his time at Schering-Plough, Saunders became CEO at Bausch and Lomb, and ended up selling them to. . .Valeant. And Michael Pearson of Valeant did what he does: siphon out the gas from the tank, rummage through the glove compartment for loose change, and sell the rest for scrap. We also have Carl Icahn to thank for Saunders, since he next installed him as head of Forest Labs, shortly thereafter sold to Actavis. (And if the idea of a Hassan/Icahn hybrid doesn't give you pause, perhaps it should).
Within two weeks of becoming the CEO at Actavis, Saunders was involved in the Valeant/Allergan deal:
On July 30 Saunders called (Allergan CEO David) Pyott and offered to be a white knight. Over months of phone calls, he portrayed himself as the anti-Pearson, despite the fact that he agreed with much of Pearson's thesis on the drug business. No, Saunders told Pyott, he would not strip the company like Pearson. Allergan would continue to do crucial research on things like dry-eye drugs and successors to Botox. Yes, the business could stay largely intact. . .
For some values of "intact", that is. As Herper's article makes clear, so far in his career, Brent Saunders has been a deal-making guy. And if he were to turn around and sell the combined Actavis/Allergan to, say, Pfizer, that would not be out of character in the slightest. It's worth noting that the company's tax domicile is Irish, in case that sort of thing interests Pfizer (or some other large US-based company) at all.
My own hope is that the rest of the industry can prove that the "research is a waste of cash" idea is a delusion. The numbers over the last ten or fifteen years, unfortunately, make a case that it isn't a delusion prima facie, but that attitude doesn't have to be correct, either. Even if the largest drug companies have been having trouble with their own return on investment for R&D (and not all of them have), many of the smaller ones have been able to make it work. (On the other hand, it's worth keeping in mind that at that end of the market, the less unsuccessful examples just disappear, so you have to keep survivor bias in mind). But overall, we keep trying to get better at drug discovery, and there's no reason that we shouldn't be able to make it work if we can keep doing that. (If we don't get better, on the other hand, we are in fact doomed).
So my own take is what I would call "hard-headed optimism". There's nothing that says that we have to fail, but there's nothing that guarantees our success, either. The future is unwritten. If that future leaves the likes of Valeant and Actavis falling behind the R&D-driven companies, though, I will be quite happy.
Comments (34)
+ TrackBacks (0) | Category: Business and Markets | Business and Markets | Drug Industry History
Constellation Pharmaceuticals of Cambridge, a big player in the epigenetics area, struck a deal with Genentech in 2012. And (faster than anyone thought), it's 2015 already, and the collaboration stage of that partnership has come to an end. Roche has picked up three targets from the work, and Constellation has quietly laid off a significant fraction of its staff.
Three years seems like a lot longer time at the beginning than it does at the end. In order to deliver on several simultaneous exploratory drug research projects in that time frame, you really have to watch every detail. That time will run through your fingers like sand if you don't pick your experiments and approaches carefully, and given the vagaries of early-stage research, no amount of care can sometimes make up for what reality has ready for you. Epigenetics is a very interesting field, but a wildly complicated one, with a lot of unknowns, so I hope that it works out in this case.
Genentech/Roche has the option to acquire Constellation by the end of the year, but that's clearly not a sure thing, so the company is preparing to go on alone if need be. The exit-by-acquisition has long been the most likely happy ending for a lot of VC-backed small biopharma companies (the mostly likely sad ending, of course, is a quiet unprofitable evaporation). There's always going public, too, but the Genentech deal would seem to have ruled that out as a possibility, and I don't think that in 2012 anyone could have guessed just how lively the biopharma IPO market would become. There are surely companies of Constellation's size and with their prospects who have floated stock by now, for better or worse, but Constellation will apparently not be among their number until at least late in 2016 (and who can say what conditions will be like by then?)
Moderna Therapeutics, the mRNA-based company, is staying busy. They've got so much work on their hands that they're spinning out different therapeutic units - for example, Valera, for infectious diseases and Onkaido in oncology.
And the Valera unit is part of a new deal with Merck, which brings in another $100 million in funding. That, as Luke Timmerman notes here, means that Moderna has raised over a billion dollars in the last four years or so, five hundred million of that in the last month. They must have an awfully impressive set of PowerPoint slides - that's a whalloping amount of cash for a technology that hasn't proven itself in the clinic yet.
But I can see where people are coming from. If Moderna's stuff does work out, the biologics market will be upended, and a lot of untouchable drug targets will suddenly come into play. Using artificial mRNAs to cause your body to make proteins on demand is an ambitious goal, but there must be some pretty eye-opening data coming along to get Merck, AstraZeneca, and many others to put up this much money this early.
Comments (25)
+ TrackBacks (0) | Category: Business and Markets | Infectious Diseases
Via Adam Feuerstein on Twitter, here's an odd story about what goes on at Pharmacyclics. CEO Bob Duggan is apparently encouraging the staff there to take a course in how to "become geniuses".
Duggan, 70, believes so deeply in Barrios' research that he has arranged for employees at Pharmacyclics to take a self-directed program to acquire the 24 genius traits. They might spend about one hour a week learning the characteristics — which include drive, courage and honesty — and complete the course of study over six months.
"It's not compulsory," he explained. "But it's offered to every individual here, and I don't know anyone who hasn't taken it."
He says that employees give rave reviews of the course material. They even share it with their families and friends.
I would be having a fit, personally. Duggan is a major donor to the Church of Scientology, and if you detect the same aroma coming off this stuff, you're right on target. A little Googling shows that this 24-habits-of-a-genius stuff overlaps with L. Ron Hubbard himself, back in the days when he was on roughly the same plane of existence as the rest of us. I would be very unhappy working for a Scientology enthusiast, but if extracurricular course work got added to the mix, I'd be out the door so fast you could hear the air clap behind me. Sheesh - I'd rather do a week of Six Sigma training, and there's not much that makes me say that.
Comments (17)
+ TrackBacks (0) | Category: Business and Markets
Well, folks, if you wonder where the price-cutting competition is in the drug industry, it's here. AbbVie is competing with Gilead in the (very lucrative) hepatitis C market, and since Gilead had already staked out a big position, AbbVie is undercutting them in the health insurance market.
Late last night, Express Scripts, a big prescription management company, announced that they were making AbbVie's cocktail their exclusive therapy for Hep C. This was done in return for substantial discounting, but it's not going to be without trade-offs:
While AbbVie's drug has proven effective in trials, it requires more pills than Gilead's drug and sometimes must be taken with another medication with unpleasant side effects. That means the Express Scripts deal is likely to stir controversy about whether the company's push to rein in rising drug prices is also limiting patients' treatment options.
So here we are, in the long-awaited era where billion-dollar therapies duke it out head-to-head. Adam Feuerstein is already out with a piece saying that this deal might rattle the biotech bull market:
After today, investors are no longer going to ask biotech executives, "What will you charge for your new drug?" Instead, the new question becomes: "What will Express Scripts -- or any other pharmacy benefit manager --- allow you to charge for your new drug?"
Let's see how we like it. Pricing power is not infinite, and never was, but some people are going to have to get used to that.
Update: as per the comments section, Feuerstein has updated his post (linked above) with comments from some investors who feel that the short-term nature of Hep C treatment makes this sort of deal more possible than it would be in some other areas (oncology, for example).
Comments (46)
+ TrackBacks (0) | Category: Business and Markets
Or as much of the inside as we're likely to have. Thanks to @AndyBiotech on Twitter, here's an SEC document detailing the negotiations between Merck and Cubist. It makes for interesting reading in general - you can see how a deal like this comes together, and all the places where it might have fallen apart - and you can also see that the Hospira patent fight was, in fact, very much on the minds of Merck's management. Emphasis added in the extracts below:
On October 16, 2014, Mr. Bonney called Mr. Frazier to discuss the Company Board's feedback in response to Parent's stated interest in a potential strategic transaction. . .Mr. Bonney informed Mr. Frazier that the Company would continue discussions with Parent only if Parent was prepared to move quickly, to propose consideration payable to stockholders of the Company in excess of $100.00 per Share, and to provide assurance that any definitive transaction document would not be conditioned on the outcome of, or include closing conditions based on the Company's litigation with Hospira or regulatory decisions about ceftolozane/tazobactam. Mr. Frazier responded that he needed to discuss these terms with Parent's senior management and consult Parent's Board of Directors (the "Parent Board").
. . .On October 23, 2014, Mr. Bonney and Mr. Frazier had two telephone conversations to discuss the potential business combination. . .Mr. Frazier described for Mr. Bonney certain of Parent's assumptions for the combined businesses and identified certain key areas for further due diligence that Parent would require before signing a definitive agreement, including long-term tax planning, the Company's pending litigation with Hospira, and the regulatory dialogue regarding ceftolozane/tazobactam. Mr. Frazier also indicated that Parent was prepared to offer between $95.00 and $100.00 per Share, with a portion of that price contingent on the outcome of the Hospira litigation. Mr. Frazier indicated that Parent was willing to accept certain regulatory risk in connection with the potential transaction, but was unwilling to assume all of the risk related to the outcome of the Hospira litigation. Mr. Bonney responded that the deal parameters laid out by Mr. Frazier did not meet each of the conditions set forth by the Company Board, but that he would review Parent's proposal with the Company Board.
On October 25, 2014, Mr. Bonney informed Mr. Frazier that the Special Committee had discussed Parent's most recent proposal and considered it inadequate with respect to both price and the proposed contingency associated with the outcome of the Hospira litigation. Mr. Bonney offered to facilitate a discussion between Parent and the Company's outside patent litigation counsel regarding the status of the Hospira litigation, subject to Parent first entering into an appropriate confidentiality agreement with the Company.
. . .On November 6, 2014, representatives of the Company, external patent litigation counsel to the Company, and representatives of Parent held a telephonic diligence meeting about the Hospira litigation, including the potential outcome and timing of a district court decision. The Company also presented to Parent language for a definitive agreement between the parties excluding conditionality regarding the outcome of the Hospira litigation or regulatory action related to ceftolozane/tazobactam.
The strong impression one gets is that Merck really wanted to do this deal, and was initially trying to avoid exposure to Cubist's patent issues. But in the end, the only way to do the acquisition was to put in language that excluded this as a deal-breaker. We don't know what that November 6th meeting concluded about the timing of the District Court's action, or the likelihood that Cubist would lose - maybe the coefficients in front of those two terms were wrongly estimated? Merck certainly knew that this was an issue, but it was, in the end, not enough to make Cubist undesirable. We'll see how that works out for them.
Comments (16)
+ TrackBacks (0) | Category: Business and Markets | Patents and IP
John LaMattina has a column at Forbes about the situation with Actavis and their Alzheimer's drug, Namenda (memantine). That situation is not a pretty one: the company has an extended-release form of the drug coming on, which they believe will be more convenient to dose. And that's fine - except that part of their strategy is to discontinue the original dosage form.
This is a larger-scale version of the sort of thing that I banged on Retrophin about earlier this year. Dropping useful drugs just so that your new formulation can rule the world seems to be a particularly nasty form of portfolio management, and LaMattina is absolutely right when he says that:
Discontinuation of Namenda in order to boost sales of the XR version reinforces all of the bad views that people have of the pharmaceutical industry and provides great fodder for its critics. Actavis has joined the "Big Pharma" club. It would be nice if it became part of the solution to Big Pharma's image woes, rather than adding to the problem.
Right now, the whole issue is in court, thanks to an injunction that prevents the company from following through on this strategy. Actavis has appealed, and a hearing took place earlier this week (more on this at Pharmalot). I would not mind seeing this tactic vanish from the earth, and if it takes the law to make it happen, then that's what we get. We'll get worse if this sort of thing continues.
Comments (51)
+ TrackBacks (0) | Category: Business and Markets | Regulatory Affairs
I always enjoy Adam Feuerstein's voting for Best and Worst CEO in the biotech industry. But just as number of people who've read Dante's Inferno far outnumber the ones who've read the Paradisio (I'm a halfway through the Purgatorio guy myself), I suspect that more people read and vote on the Worst CEO part. There are some truly worthy nominees in that category, and you will find it hard to choose among them.
Comments (2)
+ TrackBacks (0) | Category: Business and Markets
This probably isn't quite as embarrassing as it looks: the very day of Merck's bid for Cubist Pharmaceuticals, the company loses a patent case for protection of its flagship drug. Cubicin (daptomycin) is by far the main source of revenue at the company right now ($800 million last year, and continuing to climb), and as one might imagine, the generic companies would like some of that action as soon as possible. That's what the present case is about: four patents that take the drug's protection out to 2019 or 2020.
These were invalidated by a district court in Delaware, on the grounds that they do not actually represent new inventions. So as it stands, Hospira could take Cubicin generic in 2016. This can't be welcome news to Merck, since those extra years of revenue would go a long way towards paying off the entire cost of the acquisition. But the risk was known - in fact, the offer specifically states that an unfavorable decision in the case would not be a material event and would not derail things. It'll be appealed, for one thing, and enough legal skill will surely be applied to grind the gears past that 2016 date, no matter what the final decision is. You can't always count on a big drug company to be able to discover the drugs it needs (nor a small one, for that matter), but big companies tend to be pretty good at maximizing the revenues that they already have.
The other part of the deal is that Cubist has other antibiotics in development, which you can count on Merck also making the most out of. The main way that things can fall apart is if there's a combination of lost Cubicin revenue and some clinical failures among these new drugs. Embarrassment still awaits, as it does, potentially, for all of us in the business.
Update: not everyone agrees with this take, with some in the comments section citing this as a major Merck mistake.
Comments (34)
+ TrackBacks (0) | Category: Business and Markets | Infectious Diseases | Patents and IP
So Merck is buying Cubist, the specialty antibiotic company. There's been a lot of talk in the press over the years about how big drug companies have bailed out of antibiotic research because no money could be made in it, and this deal will probably set off more stories about how all that's changing, but that's really not the main part of the story. Cubist has been doing fine, with revenues of over $800 million, mostly from Cubicin (daptomycin), a ferocious-looking natural product that has one of the very new antibiotic mechanisms of recent years.
Here are a couple of posts on the problems of antibiotic drug discovery. It's no stroll through the garden, I can tell you from personal experience, and it's gotten harder and harder over the years. If you find something, you can do well with it, as Cubist has shown, but first find something that hasn't been found before, and we'll talk. That hasn't changed; nothing about antibiotic drug discovery has changed. It's just that Cubist has had some success, and Merck would like to appropriate that for its own pipeline.
Comments (38)
+ TrackBacks (0) | Category: Business and Markets | Infectious Diseases
I was reading this interesting commentary on the bizarre meltdown of The New Republic, when something struck me. Megan McArdle is talking here about how hard it can be to manage journalists:
Both journalists and non-journalists usually fail to understand just how weirdly different media companies are from other sorts of firms, which means they don't understand that experience with one side gives you virtually zero insight into how the other kind works. . .
. . .Prominent among the unique challenges of the media manager: the frequent tension between the actions that build your reputation and audience, and those that monetize it; the difficulty of getting creative types to produce great stuff on demand; the astonishing amount of autonomy that journalists need, because it's impossible to write hard guidelines, and too expensive to supervise long hours of reporting and typing; the fact that great writers are frequently terrible managers and editors, which screws up the normal management pyramid; the simultaneous need for speed and accuracy; the fact that media employment selects for a cluster of personality traits that resists closer management;. . .
All you have to do is substitute "scientist" or "researcher" for every mention of "journalist" or "writer" in there. Sounds pretty familiar, doesn't it?
Comments (18)
+ TrackBacks (0) | Category: Business and Markets | Life in the Drug Labs | Life in the Drug Labs
. . .is not very pleasant, according to this report. It never has been, but it's not getting any better. This should sound familiar to many people:
it is notoriously difficult to determine how many postdoctoral scholars there are, let alone what kind of training they are or should be receiving. The National Institutes of Health (NIH) and the National Science Foundation (NSF) define a postdoctoral scholar as "an individual who has received a doctoral degree (or equivalent) and is engaged in a temporary and defined period of mentored advanced training to enhance the professional skills and research independence needed to pursue his or her chosen career path" (Bravo & Olsen, 2007). Most postdoctoral "trainees" conduct research under the supervision of a single Principal Investigator (PI), and there are no explicit guidelines to determine what training a postdoc should receive or when this training is complete. In reality, postdoctoral research is often not a training period at all, but a time when experienced junior researchers contribute significantly to the goals of a PI's grant. There is no expectation of specific training, and no defined period in which the training takes place: "training" ends only when the postdoc takes another job.
To be fair, I don't see how any meaningful guidelines could be drawn up for what kinds of specific training would be needed. That's the problem with the postdoctoral world: you're a bäckfisch, more than a grad student who hasn't defended a dissertation, but less than someone with experience in an academic or industrial job. The situations postdocs find themselves in vary wildly; they almost have to vary wildly. You're also supposed to, as much as possible, be starting to make your own way, and that means very different things in different labs.
One disturbing point raised in this article is the possible rise in fraud and dishonest behavior in research labs as a result of the postdoctoral glut. The competition has gotten nasty, and desperate people will do desperate things. As the Nature News commentary puts it:
. . .a whopping 58% of scientists in the UK report said that they were aware of colleagues feeling tempted or under pressure to compromise on research integrity or standards. Asked whether they felt this way themselves, just 21% of scientists aged 35 or over said yes; strikingly, that figure shot up to one-third of those aged under 35.
Worth noting. And as Nature goes on to say, correctly, even though postdocs have complained about their situation forever, under the current conditions senior scientists really can't go on ignoring them. And they can't go on ignoring the fact that only a small number of their students and postdocs will, or can, go on to a similar academic career to their own. The lack of those prospects, and the denial of that lack in some quarters, is probably the root of the problem.
A related article is found here at Bloomberg - another worthy attempt to get across to people that there is no across-the-board shortage of qualified scientists and engineers. Good luck! Many have tried. Here's a particularly appropriate quote, in reference to the IT field:
"There's no evidence of any way, shape, or form that there's a shortage in the conventional sense," says Hal Salzman, a professor of planning and public policy at Rutgers University. "They may not be able to find them at the price they want. But I'm not sure that qualifies as a shortage, any more than my not being able to find a half-priced TV."
Oh yes indeed. But next week, and the week after, and the week after that we'll see more people talking about the terrible shortage of tech and science people. Bet on it.
Comments (83)
+ TrackBacks (0) | Category: Academia (vs. Industry) | Business and Markets
Whistleblower lawsuits are hard to interpret. Sometimes massive problems are uncovered, by the only people (insiders) who could uncover them. And sometimes it's a disgruntled employee looking for revenge, a payout, or both. So I don't know what to make of this one, but it's certainly worth keeping an eye on:
A new lawsuit claims the recently ousted CEO of Sanofi and other executives at the huge drugmaker conducted a scheme in violation of federal law to funnel tens of millions of dollars in kickbacks and other incentives to get the company's diabetes drugs prescribed and sold.
The whistleblower lawsuit also claims Sanofi CEO Christopher Viehbacher was fired by the company's board in October "in part, because Defendant Viehbacher was involved in the aforesaid illegal and/or fraudulent activity," which allegedly went on "over the course of many years."
Well, then. The sort of proof the plaintiff (a 13-year paralegal with the company) offers for these allegations will be very interesting to see. She claims that her review of several contracts (with Accenture and Deloitte) made it clear that they were part of a kickback scheme. Worryingly, Sanofi had already settled with the Justice Department two years ago over, well, another kickback scheme. So this is worth watching. At the very least, it has just complicated Chris Viehbacher's near-term employment prospects, I should think.
Comments (3)
+ TrackBacks (0) | Category: Business and Markets | Business and Markets | The Dark Side
Given today's bad news from GlaxoSmithKline, what an excellent time it is to revisit this infuriating McKinsey Consulting report on "Why pharma megamergers work", published earlier this year.
Uh-huh. That's the title. You thought that they disrupted the entire company, from top to bottom? Sowed fear and uncertainty? Hurt productivity? Au contraire. As the authors say, "These critiques have some merit but ignore larger points: megamergers have created significant value for shareholders, and some of these deals have been critical for the longer-term sustainability of acquirers." How do we know this? Why, by analyzing the returns for two to five years post-deal, that's how. This in an industry with ten-to-fifteen year timelines for new drugs to make it to market. That's McKinsey's idea of long-term value creation, apparently.
Comments (32)
+ TrackBacks (0) | Category: Business and Markets | Drug Industry History
Word is so far that about 900 R&D jobs are leaving GlaxoSmithKline's site in the Research Triangle Park. An "undisclosed number" will be offered positions back at the Philadelphia site, but no one seems to have any estimates on how many that will be. There's also word that one of the company's CRO partners, Parexel, will be running a unit at RTP and will hire "some" of the people who have been let go, but I have no more details on that yet, either.
But GlaxoSmithKline itself seems to have basically exited North Carolina, which is a damned shame. That site has a long history, and a lot of good work has been done there.
Update: Looks like there will be some cuts in Philadelphia, too, as well as at some other GSK locations outside the US. I'm hearing complaints that the information being presented is so vague as to make it hard to figure out what's going on (other than the broad take-home, which is that the company is getting significantly smaller).
Update: Here's as much as FierceBiotech has been able to get out of the company on the situation.
Update: More from WRAL. The company has filed a notice with the state that they are eliminating approximately 900 jobs (confirming the figure given here this morning). The letter also notes that up to 450 people could end up being employed by Paraxel, but no timetable is given on when that might ramp up, or under what conditions.
Update People in the comments section doubt the figures in the company's WARN letter to the state. Claims are being made that the numbers are actually going to have to be far higher, given the cuts that people in different areas are seeing with their own eyes. And internationally, the Singapore site is said to be gone, with others uncertain.
Update: Lisa Jarvis' piece at C&E News is here.
Comments (85)
+ TrackBacks (0) | Category: Business and Markets
When I last wrote about Puma Biotechnology and their irreversible kinase inhibitor neratinib, things were going great. The company had reported good Phase III data, taking investors by surprise, and the stock had shot up. An FDA filing was planned for just after the first of the year, and the future was bright.
The story has become complicated since then, as a lot of stories in our line of work have a tendency to do. Neratinib recently failed to beat Herceptin in a head-to-head trial (one Puma had downplayed, at least for that primary endpoint). And now comes more bad news: the company has been talking about changing its target patient population, and a recent meeting with the FDA looks to delay their regulatory filing for at least a year. (They need to address some preclinical carcinogenicity data).
So this is not exactly a home run just yet. Neratinib may well make it through fine after the delay. But if you bought the stock when it jumped back in the summer, you're flat now, and probably wondering if you're ready to be a long-term investor or not. . .
Comments (5)
+ TrackBacks (0) | Category: Business and Markets | Cancer | Regulatory Affairs
It's generally painful to go back a few years and look at the large-scale pronouncements of a drug company's upper management. Thanks to commenter Metamonad, we can, in light of tomorrow's GlaxoSmithKline re-org, step back to 2006:
At the time of the £107bn merger of Glaxo Wellcome and SmithKline Beecham in 2000, the architect of the deal, Glaxo's chief executive Sir Richard Sykes, spoke of creating the "Microsoft of the pharmaceuticals industry". Now Mr Garnier, previously the head of SmithKline and the man who became the chief executive of the merged company, believes ramping up investment in the research and development of new drugs is crucial to making this vision come true.
Mr Garnier said: "In terms of creating the Microsoft, this is a vision of the most R&D intensive company which I completely agree with. We have a chance to step away from the rest of our competition if we execute our plan well and we're now in a position to do so."
GSK is the second-largest drug company in the world, with a 7 per cent market share behind America's Pfizer at 11 per cent. Last week Mr Garnier's contract was extended by seven months to May 2008 so he could steer the group through a crucial year that will see the launch of several key medicines. They include Cervarix, a vaccine for cervical cancer, Tykerb, an oral treatment for breast cancer, and Eltrombopag, a blood clotting agent in the treatment of breast cancer.
These blockbuster drugs are set to bring in billions of dollars of extra revenue, enabling the company to pour large chunks into drug discovery from 2008, Mr Garnier said. This year the group is spending $4.4bn on developing new medicines, around 16 per cent of overall revenues, but the goal is to get that figure to the 20-25 per cent range over the next 10 years.
So how'd that work out? Tykerb has had a rough time of it in some clinical trials, and its revenues last year were about $340 million and falling. Ceravix brought in $270 million, down 37 per cent (although that drop was mostly due to trouble in the Japanese market). And eltrombopag, known as Promacta, was a brighter spot, with $307 million in revenues, up 46%. But you'll note that all three of these put together did not bring in a billion dollars of revenue in 2013, which would surely not have made anyone happy if you'd told them that in 2006.
And the R&D spend last year was 15% of overall revenues - less than the starting point in the above article, and nowhere in sight of that 20 to 25%. And with the company set to cut even more tomorrow, I think we can rule that out for the near future, too.
Comments (25)
+ TrackBacks (0) | Category: Business and Markets
Let's get this one out on the table: GSK is going to announce some big cuts on Wednesday. I've been hearing about this for some time, from various sources, but saw no point in writing about it that early. The company itself announced back in October that it had a new cost-cutting scheme on the way, but gave no details. But I note that Reuters has picked up the story, citing "sources familiar with the matter". So I'll cite some of those, too.
From what I'm hearing, the reorg is going to be worldwide, but very US-centric. And inside the US, the RTP site is likely to feel it harder than Philadelphia does. I hear different reports on that, but I don't like the sound of any of them. I hate to start out the week on this note, but I know that the GSK folks have been expecting bad news for some time now. Let's get it over with, and see what happens then.
Comments (87)
+ TrackBacks (0) | Category: Business and Markets
The Tufts Center for the Study of Drug Development has a new estimate for the cost of developing a new drug. Past estimates have been greeted with a range of reactions, not all of them favorable. In general, people who actually do drug R&D tend to find the Tufts numbers reasonably credible, and people who are upset with the industry's pricing structures tend to find them egregiously inflated.
Bruce Booth has an excellent breakdown of the latest iteration. Rather than do something similar, I'm going to refer people to his post. As he points out, there are three components to the Tufts numbers: the direct cost of developing a drug, the attrition rate (and paying for past failures), and the time/opportunity cost of the investment. Many of the disagreements about these estimates come from people who only want to talk about the first part. Unfortunately, if you actually want to use real money to develop a real drug, the other two come into play.
Bruce's analysis indicates that the Tufts assumptions for the second and third parts are probably pretty accurate, but he spends some time going into the direct cost section, since in recent years the proportion of orphan/small indication drugs has risen. But overall, his conclusion is that "If the Tufts estimate is off the mark for the entire industry, it doesn't appear off by a huge amount, and certainly not the order of magnitude implied by the critics." Considering that some of those critics have advanced numbers that are more than two orders of magnitude off, I think he's right.
Comments (19)
+ TrackBacks (0) | Category: Business and Markets | Drug Development
So AstraZeneca says that they're expecting "8 to 10 " approvals in 2015-2016. Has anyone ever done that? Even close? I take it that this whole press release is there to pump up investors and keep Pfizer from coming back and making another bid for them, but although the company does have a lot of stuff going on, this just seems wildly optimistic. What's the modern record for most drug approvals in one year? Two years?
Comments (17)
+ TrackBacks (0) | Category: Business and Markets | Regulatory Affairs
The Allergan / Valeant saga has come to an end, with Allergan fighting them off by doing a deal to be taken over by Actavis. No word yet on whether they'are going to let Allergan keep the invisible golf course.
Valeant is, of course, famously tight-fisted (which is why Allergan had no desire to be taken over by them), and the Actavis price was about six billion dollars higher than what Valeant said that they were willing to pay. One wonders if all six billion dollars were necessary to get them to go away, but Activis must have run their own numbers. If the deal turns out to be a success, it might cause people to look with suspicion on any future Valeant bids for other companies, though.
That Reuters story says that the combined companies expect to have an R&D budget of $1.7 billion. Allergan's current spending is around 1 billion (and falling), and Actavis' was 0.62 billion before its most recent acquisition, so we may have another M&A case of one plus one equaling about 1.8. Still, if it had been Valeant, one plus one would have equaled about 1.04, so there is that. Actavis does spend less on R&D as a percentage than Allergan does, though, so there is that.
The BBC has an article posted with the title "Pharmaceutical Industry Gets High on Fat Profits", so at least you know where that one's going. And it reads just as you'd expect - if you haven't had enough pharma-bashing recently, that'll provide you with all you need.
It contains a chart of marketing expenses, per company, provided by a firm called Global Data. First, the numbers. In this post, I noted that Pfizer spent $7.9 billion on R&D in 2012, and estimated (based on a more solid number of $0.6 billion on direct-to-consumer ad spending) that they'd spent around $5 billion on marketing. For 2013, Pfizer's R&D expenses were down to $6.5 billion (ugh), but Global Data has their marketing as $11 billion instead. I note from their earnings statement that Pfizer's entire "Selling, Informational, and Administrative" expense number was $14.2 billion, so Global Data has 77% of that as the marketing budget. That statement doesn't jibe with, say, Pharmaceutical Executive's annual "Industry Audit", which claims that marketing expenses are a "relatively low" portion of those sorts of overhead figures. No doubt the Global Data people have their own ways of calculating things, and I'd be glad to get more details.
But both R&D expenses and SG&A expenses are high in the entire health care sector. If you look at the ratio of total overhead (those two together) to sales, Pfizer last year comes out to overhead as about 40% of sales. And that's right at the median for the entire health care sector - that last link shows vividly that the ratios for the health care, financial, and IT sectors are way higher than other industries. (That's also addressed in this post).
But let me go from arguing the numbers to another point, one that I've made many, many times, and that is not addressed in the BBC piece at all. Let's just stick with Pfizer: they had $51.6 billion dollars of revenue last year. Even if they did spend $11 billion on marketing, the reason that they did so was the this marketing was supposed to bring in more than $11 billion dollars of revenue. Marketing is supposed to make money. If Pfizer had done no marketing whatsoever, they would, presumably, have brought in substantially less revenue.
And what would that have done to the R&D budget? The R&D/sales ratio is called "R&D intensity". Pfizer's ratio last year was 12.6% of sales. Apple's R&D/sales ratio, on the other hand, is a bit below 3% (which is, to be fair, surprisingly small). Google's ratio is 13.3%, and Microsoft's is 13.1. IBM is 6.2, and 3M is 5.6%, to give you some other big-tech comparisons.
So if Pfizer's marketing department pulled its weight, which it had better have done, then they brought in more than 11 billion dollars of that 51.6 figure. Let's assume that they only brought in 12 billion, and be really conservative about it. Without that, Pfizer's revenues are 39.6 billion. Are they still going to have an R&D budget of 6.5 billion with those sales, for an R&D/sales ratio of 16.4%? They are not. Hardly anyone can sustain that kind of R&D spending. Even if they stuck with the same ratio they have now, that would take Pfizer's R&D spend down to $5 billion, an 11% cut, which would be pretty unkind.
My point is that you can't just point at marketing expenses and start crying foul unless you understand what marketing expenses are, and what they're for. This point, though, seems largely ungraspable to the wider journalistic world.
Update: The folks at Global Data have written me, noting that (1) I had their name wrong (corrected), and that (2) they feel that the BBC piece does not represent their numbers correctly. Their numbers are "sales and marketing spend", not "marketing spend", and they've asked the BBC to correct the article. I'll be revisiting this topic shortly.
Comments (53)
+ TrackBacks (0) | Category: Business and Markets
What happens to drug companies after they get their first drug approved? A new paper coming out in Drug Discovery Today has an answer to that question: most of them never do it again.
Author Michael Kinch (Washington U.) has gone back through the records since the 1930s, and some interesting trends emerge. Up until the 1970s, the likelihood was that a company would go on to get a second approval, but then the odds began to go down. The reason is that in recent decades, nearly two-thirds of the companies that get their first approval go on to be acquired by someone else, and thus disappear from the list. It takes, on average, six to eight years for a second approval to come along after a company's first, and most companies aren't around long enough for that to happen any more.
Where will new drugs come from? Start-up companies are often dismantled following their acquisition, particularly if they are purchased by the subset of companies that market products but does not directly perform new drug discovery. This generally occurs within a year or two following acquisitions. From an optimistic standpoint, such turbidity recycles experienced personnel and allows them to join other organizations and begin afresh. Realistically, the dismantling of successful teams does not seem an efficient use of time or resources when viewed from a business or global public health perspective.
True, but I'm of two minds about that. I don't think that what happens to a lot of small companies (being shucked like ears of corn) is such a great thing, either. But it's worth remembering that for many of them, this was their business plan - to be acquired. The folks who put up the venture capital that went into these companies were hoping for just such an outcome, and the people working there were not, for the most part, taken by surprise.
Another thing to keep in mind is that a lot of economic activity looks wasteful from a calm, utilitarian perspective. That's Schumpeter's "creative destruction", which (never forget) really does involve destruction. The money obtained from these takeovers goes on to fund the next generation of small companies. It's a way of getting a return on capital inside a realistic amount of time. Imagine the thought experiment where we make it illegal for a small drug company to be acquired after its first drug approval: what happens then? My guess is that many fewer small companies get started, because a big part of the possible returns to the investors have now been closed off. (And perhaps we'd eventuallys see an article in Drug Discovery Today about the percentage of small companies who were only able to get their one drug on the market and could never follow up on it).
It would be interesting to know if this system has grown into such a form as drug discovery has gotten more difficult over the years - which is the main driving force, I'd say, for the likelihood of being taken over having risen. Are there perhaps more small companies being formed because this is such a likely outcome?
So yeah, the current system is wasteful and disruptive, but what are we comparing it to? I still can't come up with a better alternative - it's like Churchill's crack about democracy
Comments (24)
+ TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History
Everyone thinks of Novo Nordisk as a diabetes company (and that they are), but they're willing to use their expertise in related areas. And if you know a lot about insulin and blood sugar regulation, you may also end up knowing a fair amount about appetite and satiety signaling in the gut. The company has been developing a new dosage form of their Victoza (liraglutide) peptide drug for just that purpose, and it seems to be working in the clinic.
Liraglutide is a long-acting GLP-1 analog, and decreased appetite is already noted with compounds of this type. Novo is out with more Phase III data, and they look pretty strong. An FDA advisory panel meeting last month went very well, and they seem to be on target to head into the obesity market.
And it'll be interesting to watch what happens then. As an injectable, liraglutide isn't going to be something that people just take casually, but who knows, that might prompt better patient compliance and a bit more dedication to the other diet and exercise factors in weight loss, since you're already going to that much trouble. Obesity therapies have had a rough time in the market over the last few years, with Vivus, Orixigen, and Arena all struggling with their individual drugs. (All three of those stocks have fanatic followings, I might add, and I feel sure to hear from some of those folks just for having mentioned the companies). Will Novo's drug (renamed Saxenda for this market) have a better fate? (Some of that will depend, in the long run, on whether there are any problems with higher liraglutide doses, but so far, things look OK). And if it does, will it knock out one or more of the smaller players?
Comments (12)
+ TrackBacks (0) | Category: Business and Markets | Clinical Trials | Diabetes and Obesity
The talk of Chris Viehbacher being in trouble with Sanofi's board of directors was accurate: he's been dismissed. It was a unanimous vote, and the chairman cited a lack of trust and a "solitary management style" as factors. (This after a statement yesterday by Viehbacher that CEO succession wasn't on the board's agenda - they really weren't communicating, it appears).
They must have really wanted him out of there before he made any more solitary moves, though, because no replacement has been lined up yet. But if the board brings up a more clubbable Frenchman from inside the company, that probably won't go down well with the investment community, who seem to have been OK with Viehbacher for the most part. Look for some top-level people at other companies to be taking some sudden vacation days over the next few weeks. The company's partners, Regeneron in particular, will be hoping that the search is short.
Update: Matthew Herper says that this is a bad idea.
Comments (28)
+ TrackBacks (0) | Category: Business and Markets
Well, let's get the rest of today's bad news out there. There are persistent reports that AstraZeneca is going to be getting rid of the rest of its antibiotics research. David Shlaes' blog is the source of this one, and he may well have some information from people who know. The company's response has not been encouraging, either. Here's what they told Ed Silverman at Pharmalot:
". . .we have previously said on a number of occasions that we would take an opportunity-driven approach in our non-core therapeutic areas of infection and neuroscience," she continues. "This means we would focus our resources on the core therapeutic areas and look for opportunities to maximize the value of our pipeline infection and neuroscience."
Oh, dear. When they start talking about opportunities and maximizing value, it's generally a very bad sign. Sauve qui peut is the usual reaction to this sort of statement, and I can't say that it would be inappropriate.
Comments (17)
+ TrackBacks (0) | Category: Business and Markets | Infectious Diseases
Not good news. Amgen has announced that it's not just cutting 12 to 15% of its employees - it's going to cut 20% of them. So that means over a thousand new layoffs, on top of the ones that have already been put in the hopper. No details yet, that I know of, about where these cuts will take place, but the number of Amgen sites is already fewer than it used to be, so that certainly narrows it down.
As with the previous announcement, this one has sent the company's stock straight up. And hey, they're buying back more shares, too. So there is that.
There are reports that Sanofi's CEO, Chris Viehbacher, is in trouble with the company's board of directors. The reasons are various, ranging from his move to Boston, through the state of the company's oncology portfolio, all the way to his outspokenness, which is not very French. (That last quality has been noted here as well, several times. All of this may just be rumor-mongering, or it could be someone else's boardroom politics. But you can bet that people inside Sanofi are watching and wondering.
Update: definitely not just rumors. Via John Carroll at FierceBiotech, here's a letter that Viehbacher sent to Sanofi's board in September, outlining reasons why they shouldn't replace him. Note that the only reason we're seeing this is presumably it's been leaked by someone who wants him replaced. . .
Comments (22)
+ TrackBacks (0) | Category: Business and Markets
I wrote here about Sarepta, a small company having plenty of difficulty getting a therapy for Duchenne muscular dystrophy through the FDA. At that point, the problem was the accelerated-approval pathway, but things have now gotten a good deal worse.
Following a meeting with regulators in September, the biotech spelled out a new set of data that the FDA is looking for in the application, and the biotech says it will have to delay filing--another dramatic turning point for the company this year, which saw its shares plunge 30% on the news this morning.
Sarepta shares have been on a roller coaster ride over the past two years as the company was forced repeatedly to move the goal lines on a prospective approval for the drug, which so far has registered promising data from a tiny study involving only a dozen boys. The biotech today spelled out regulators' demands for imaging and longterm results as well as more safety data, all of which will stall the company until at least mid-2015--or longer.
To make matters worse, the CEO has been telling investors that the agency was much more favorable, and in fact was strongly considering an early approval for the drug even before any Phase III results came in. Those investors are deeply unhappy now, and the parents of the potential patients even more so. This whole situation is a terrible mess, and honestly, it looks as if it could have been avoided. From outside, Sarepta seems to have been trying to make far too much of a single small study (12 boys, and the data only looked good when you excluded two of them). You have to provide convincing data in this business, and that takes time and costs money. Trying to take shortcuts is a low-percentage move.
Comments (3)
+ TrackBacks (0) | Category: Business and Markets | Clinical Trials
Roche has announced ambitious plans for new buildings at its home base in Basel:
They're building a new home for John Reed and Roche's pRED research group in Basel – and the pharma giant is thinking big. Roche said today that it is committing $1.8 billion to build a new research center in Switzerland which will encompass 4 new office/lab buildings that will house 1,900 R&D staffers.
The first step of the process will involve construction of an in vivo center for animal research, slated for completion in 2018. And Roche plans to clear away older buildings to make way for a new office tower as part of a wider building plan that will cost $3.2 billion.
I saw the current new Roche office tower when I was in Basel recently - it's hard to miss - and I can't say that it's much of an ornament to the skyline. (People told me that it had originally been planned as more of an architectural statement, but that all that had been scaled back because of the cost, which seemed quite believably Swiss).
Time to break out the pseudonyms for the comments section. I've had a couple of people asking (on both sides of the process) what the starting salaries for medicinal chemists are running in the Boston/Cambridge area. It's been a while since this was much of a topic, sad to say, but there is some hiring going on these days, and people are trying to get a feel for what the going rates are. Companies want to make sure that they're making competitive-but-not-too-generous offers, and applicants want to make sure that they're getting a reasonable one, too, naturally.
So anyone with actual data is invited to leave it in the comments section, under whatever name you like. Reports from outside the Boston/Cambridge area (and at other experience levels) are certainly welcome, too, because the same issues apply in other places as well.
Comments (128)
+ TrackBacks (0) | Category: Business and Markets | How To Get a Pharma Job
Busy day around here on the frontiers of science, so I haven't had a chance to get a post up. A reader did send along this article from the Frankfurter Allgemeine Zeitung, the heavyweight German newspaper known as the "Fahts" (FAZ). (The Chrome browser will run Google's auto-translate past it if you ask, and it comes out sort of coherent).
What they're asking is: how and why did the German pharmaceutical industry decline so much? Parts have been sold off (as with Hoechst and BASF), and some remaining players have merged (as with Bayer and Schering AG). There's still Boehringer and Merck (Darmstadt), but they're fairly far down the rankings in size and drug R&D expenditure. And you don't have to compare things just to the US: all this has taken place while the folks just down up the river (Novartis and Roche) have looked much stronger. The article is blaming "Wankelmut" (vacillation, fickleness) at the strategic level for much of this, especially regarding the role of an industrial chemicals division versus a pharma one.
There's something to that. Bayer was urged for years and years by analysts to break up the company, and resisted. Until recently - but now they're going to do it. Meanwhile, the other big German chemistry conglomerates did just that, but divested their pharma ends off to other companies (and countries) rather than spinning them out on their own. And there's not much of a German startup/biotech sector backstopping any of this, either. The successes of Amgen, Biogen, Genentech et al. have not happened in Germany - for the most part, players there stay where they are. The big firms stay the big firms, and no one joins their ranks.
And that's what strikes me about many economies in general, as compared to the US. We have more turmoil. It's not always a good thing, but we're also had a lot of science and technology-based companies come out of nowhere to become world leaders. And you can't do that without shaking things around. Is it partly an aversion to that sort of disruption that's led to the current state of affairs, or is this mistaking symptoms for causes? (I mean, the Swiss are hardly known for wild swings in their business sectors, but Swiss pharma has done fine). Thoughts?
Comments (30)
+ TrackBacks (0) | Category: Business and Markets | Drug Industry History
When last heard from, Sunesis was trying to get some last compounds through clinical trials, having cut everything else possible along the way (and having sold more shares to raise cash).
Their lead molecule has been vosaroxin (also known as voreloxin and SNS-595), a quinolone which has been in trials for leukemia. Unfortunately, the company said today that the Phase III trial failed to meet its primary endpoint (and the stock's behavior reflects that, thoroughly). The company's trying to make what it can out of secondary endpoints and possible effects in older patients, but the market doesn't seem to be buying it.
Comments (13)
+ TrackBacks (0) | Category: Business and Markets | Clinical Trials
There have been a lot of strong words exchanged about Northwest Biotherapeutics (NWBO), a small Maryland-based company developing a brain cancer vaccine. Over at Fierce Biotech, they're wondering why this program was picked by the UK authorities as their first official "Promising Innovative Medicine", given the scarcity of data (and the dismal track record of dendritic vaccines in the field).
Adam Feuerstein has said a bunch of similar things, vigorously, at TheStreet.com over the last few months as well. He's been especially skeptical of the company's own vigorous PR efforts, and in general tends to be unenthusiastic about small go-it-alone oncology programs. The Feuerstein-Ratain rule, that small-cap cancer trials fail, has been hard to refute.
Well, just the other day Washington Post columnist Steven Pearlstein waded into this story with a piece about how evil short-sellers are hurting promising little biotech companies. That's pretty much the tone of the whole thing, and he uses Feuerstein and NWBO as his prime example, with not-quite-stated allegations of collusion with short-sellers.
My belief is that this is a load of crap, from someone who doesn't understand very much about how the stock market works. Small companies that have been unable to interest anyone else in their technologies have a difficult time of it, to be sure. But we don't need to go to conspiracy theories to explain this. There are indeed short-selling investors who are trying to drive stocks down, but they are absolutely overwhelmed in number by the number of people who are trying to drive stocks up. That's what a stock market is: differences of opinion, held strongly enough for money to be put down on them.
If you look at Feuerstein's most recent column on NWBO, you find that only one other company has even applied for the "Promising Innovative Medicine" designation (and that application is in process). So this is not some incredible milestone. And you also find a lot of useful information on the company's debt structure, the exact sort of thing that an investor in the company should be interested in. Will you get these details by reading press releases from Northwest Biotherapeutics? You will not. You will get them from people who are willing to scrutinize a company, its operations, and its pipeline in detail.
Does Steven Pearlstein think that these details about NWBO's debt deal are false? He should say so. But he also talks about short-sellers crippling Dendreon, which ignores completely the fact that what's crippled Dendreon is that their vaccine doesn't work very well. Wonderful drugs don't get buried by short-sellers. Drugs get buried by data.
Update: TheStreet.com is now seeking a retraction from Pearlstein. One of the key sentences is "Mr. Pearlstein -- who said he knew nothing about biotech or medicine . . ." Pretty much had that part figured out already. The letter to the Post goes on to claim a number of other serious deficiencies with Pearlstein's reporting. It's going to be interesting to see where this leads. . .
Comments (42)
+ TrackBacks (0) | Category: Business and Markets | Cancer | Clinical Trials
We've had a couple of vigorous discussions about share buyback programs around here, but for those who'd like some more, let me recommend this comment thread over at Marginal Revolution. The starting point was this article in the Financial Times.
One of the interesting points made is that management may well prefer buybacks to dividends because they tend to hold options. The tax treatment of the two has become more similar since 2003, but buybacks have increased, so taxes alone don't seem to be the key factor. But if you pay a dividend, it's out the door, whereas if you prop up the stock price, your future option transactions are disproportionately affected. (Balancing that, the stock price should, in theory, reflect expected future dividends, but this is one of the points that's argued in the comments thread).
And as mentioned here before, I think that another big factor in approving buyback programs is that no one has ever been fired for doing it. Whereas spending that money on something turned out not to work - people have lost their CEO positions for that sort of thing, so who needs it?
Comments (10)
+ TrackBacks (0) | Category: Business and Markets
Well, I didn't see this one coming: Merck KGaA (Merck-Darmstadt) is buying Sigma-Aldrich. So that's Merck/Millipore/Sigma-Aldrich, which will be a big life sciences company indeed. It's a $17 billion dollar deal, which goes off at at 37% premium to SIAL's close on Friday. Doesn't look much like any news of this offer leaked out, either, since the company's stock went down on Friday, and I don't see anything particularly weird in the options activity, either.
Merck KGaA has had a rough time of it recently trying to be a biotech company - perhaps they've decided that there's more stability in services?
Comments (16)
+ TrackBacks (0) | Category: Business and Markets
I'm at the FBLD conference in Basel today through Wednesday, and I'll be blogging some of the things I hear there. This morning we had an overview from Harren Jhoti of Astex, looking back over the company's history (they were recently bought by Otsuka for about $900 million).
One of the most striking slides was not from the scientific side - it was a plot of the company's financial position over the years. They had several deals with larger companies over the years (GSK, Novartis, J&J among others), and you could see that these, in many cases, were very timely indeed. In fact, Jhoti said, the company was more than once in the position of running out of money within a few months.
I think that many small companies could show a similar slide - well, the ones that survive could. The others would show a graph, if there were anyone left to show it, where that line came down and crossed the X-axis, and that was that. You hear a lot about these little tech companies, especially social media and the liek, that just take off and soar ever higher, but that doesn't happen much in biopharma. You can go for years dodging disaster until something works, which can make it a tough sell to investors, since you can also go for years and have nothing that works at all.
Comments (5)
+ TrackBacks (0) | Category: Business and Markets
See what you think of Peter Thiel's characterization of the drug industry in this piece for Technology Review. Thiel's a very intelligent guy, and his larger points about technology stalling out make uncomfortable reading, in the best sense. (The famous quote is "We wanted flying cars; instead we got 140 characters"). But take a look at this (emphasis added):
You have to think of companies like Microsoft or Oracle or Hewlett-Packard as fundamentally bets against technology. They keep throwing off profits as long as nothing changes. Microsoft was a technology company in the '80s and '90s; in this decade you invest because you're betting on the world not changing. Pharma companies are bets against innovation because they're mostly just figuring out ways to extend the lifetime of patents and block small companies. All these companies that start as technological companies become antitechnological in character. Whether the world changes or not might vary from company to company, but if it turns out that these antitechnology companies are going to be good investments, that's quite bad for our society.
I'd be interested in hearing him revise and extend those remarks, as they say in Washington. My initial reaction was to sit down and write an angry refutation, but I'm having second thoughts. The point about larger companies becoming more cautious is certainly true, and I've complained here about drug companies turning to M&A and share buybacks instead of putting that money back into research. I'd say, though, that the big drug companies aren't so much anti-technology as they are indifferent to it (or as indifferent as they can afford to be).
Even that still sounds harsh - what I mean is that they'd much rather maximize what they have, as opposed to coming up with something else. Line extensions and patent strategies are the most obvious forms of this. Buying someone else's innovations comes next, because it still avoids the pain and uncertainty of coming up with your own. There's no big drug company that does only these things, but they all do them to some degree. Share buybacks are probably the most galling form of this, because that's money that could, in theory, be applied directly to R&D, but is instead being used to prop up the share price.
But Thiel mentions elsewhere in his interview that we could, for example, be finding cures for Alzheimer's, and we're not. Eli Lilly, though, is coming close to betting the company on the disease, taking one huge swing after another at it. Thiel's larger point stands, about how more of the money that's going into making newer, splashier ways to exchange cat pictures and one-liners over the mobile phone networks could perhaps be applied better (to Alzheimer's and other things). But it's not that the industry hasn't been beating away on these itself.
I worry that the Andy Grove fallacy might be making an appearance again, given Thiel's background (PayPal, Facebook, LinkedIn). That link has a lot more on that idea, but briefly, it's the tendency for some people from the computing/IT end of the tech world to ask what the problem is with biomedical research, because it doesn't improve like computing hardware does. It's a good day to reference the "No True Scotsman" fallacy, too: sometimes people seem to identify "technology" with computing, and if something doesn't double in speed and halve in cost every time you turn around, well, that's not "real" technology. At the very least, it's not living up to its potential, and there must be something wrong with it.
I also worry that Thiel adduces the Manhattan project, the interstate highway system, and the Apollo program as examples of the sort of thing he'd like to see more of. Not that I have anything against any of those - it's just that they're all engineering projects, rather than discovery ones. The interstate system, especially: we know how to build roads, so build bigger ones. The big leap there was the idea that we needed large, standardized ones across the whole country, with limited entrances and exits. (And that was born out of Eisenhower's experiences driving across the country as the road network formed, and seeing Germany's autobahns during the war).
But you can say similar things about Apollo: we know that rockets can exist, so build bigger ones that can take people to the moon and back. There were a huge number of challenges along the way, in concept, design, and execution, but the problem was fundamentally different than, say, curing Alzheimer's. We don't even know that Alzheimer's can be cured - we're just assuming that it can. I really tend to think it can be cured, myself, but since we don't even know what causes it, that's a bit of a leap of faith. We're still making fundamental "who knew?" type discoveries in biochemistry and molecular biology, of the sort that would totally derail most big engineering projects. The Manhattan project is the closest analog of the three mentioned, I'd say, because atomic physics was such a new field (and Oppenheimer had to make some massive changes in direction along the way because of that). But I've long felt that the Manhattan project is a poor model, since it's difficult to reproduce its "Throw unlimited amounts of money and talent at the problem" mode, not to mention the fight-for-the-survival-of-your-civilization aspect.
But all that said, I do have to congratulate Peter Thiel on putting his money down on his ideas, though his investment fund. One of things I'm happiest about in today's economy, actually, is the way that some of the internet billionaires are spending their money. Overall, I'd say that many of them agree with Thiel that we haven't discovered a lot of things that we could have, and they're trying to jump-start that. Good luck to them, and to us.
Comments (58)
+ TrackBacks (0) | Category: Business and Markets | General Scientific News | Who Discovers and Why
The GSK/China bribery case has come to some sort of ending. The company has been fined the equivalent of nearly $500 million, and Mark Reilly, the former head of that part of their operations in China, has been sentenced to prison for "two to four years". No further details seem to be available about the sentence. There are so few particulars, in fact, that although several other people are reported to have also been sentenced, we don't know who they are or what prison terms they've received. China's press (and government, same difference) are working on the usual need-to-know basis, and they've decided that no one else needs to know.
Update: the latest report is that Reilly has been given a suspended sentence and has been deported back to the UK. Certainly beats time in the Chinese prison system.
Comments (17)
+ TrackBacks (0) | Category: Business and Markets | The Dark Side
Today brings news of a deal with AstraZeneca to help develop AZ's beta-secretase inhibitor, AZD3293 (actually an Astex compound, developed through fragment-based methods). AZ has been getting out of CNS indications for some time now, so they really did need a partner here, and Lilly lost their own beta-secretase compound last year. So this move doesn't come as too much of a shock, but it does reaffirm Lilly's bet-the-ranch approach to Alzheimer's.
This compound was used by AZ in their defense against being taken over by Pfizer, but (as that link in the first paragraph shows), not everyone was buying their estimated chances of success (9%). Since the overall chances for success in Alzheimer's, historically, have ranged between zero and 1%, depending on what you call a success, I can see their point. But beta-secretase deserves to have another good shot taken at it, and we'll see what happens. It'll takes years, though, before we find out - Alzheimer's trials are painfully slow, like the disease itself.
Update: I've had mail asking what I mean by AZ "getting out of CNS indications", when they still have a CNS research area. That's true, but it's a lot different than it used to be. The company got rid of most of its own infrastructure, and is doing more of a virtual/collaborative approach. So no, in one sense they haven't exited the field at all. But a lot of its former CNS people (and indeed, whole research sites) certainly exited AstraZeneca.
Comments (29)
+ TrackBacks (0) | Category: Alzheimer's Disease | Business and Markets | Drug Development
Here's a look from Technology Review at the resurgent fortunes of Alnylam and RNA interference (which I blogged about here).
But now Alnylam is testing a drug to treat (familial amyloid polyneuropathy) in advanced human trials. It's the last hurdle before the company will seek regulatory approval to put the drug on the market. Although it's too early to tell how well the drug will alleviate symptoms, it's doing what the researchers hoped it would: it can decrease the production of the protein that causes FAP by more than 80 percent.
This could be just the beginning for RNAi. Alnylam has more than 11 drugs, including ones for hemophilia, hepatitis B, and even high cholesterol, in its development pipeline, and has three in human trials —progress that led the pharmaceutical company Sanofi to make a $700 million investment in the company last winter. Last month, the pharmaceutical giant Roche, an early Alnylam supporter that had given up on RNAi, reversed its opinion of the technology as well, announcing a $450 million deal to acquire the RNAi startup Santaris. All told, there are about 15 RNAi-based drugs in clinical trials from several research groups and companies.
"The world went from believing RNAi would change everything to thinking it wouldn't work, to now thinking it will," says Robert Langer, a professor at MIT, and one of Alnylam's advisors.
Those Phase III results will be great to see - that's the real test of a technology like this one. A lot of less daring ideas have fallen over when exposed to that much of a reality check. If RNAi really has turned the corner, though, I think it could well be just the beginning of a change coming over the pharmaceutical industry. Biology might be riding over the hill, after an extended period of hearing hoofbeats and seeing distant clouds of dust.
There was a boom in this sort of thinking during the 1980s, in the early days of Genentech and Biogen (and others long gone, like Cetus). Proteins were going to conquer the world, with interferon often mentioned as the first example of what was sure to be a horde of new drugs. Then in the early 1990s there was a craze for antisense, which was going to remake the whole industry. Antibodies, though, were surely a big part of the advance scouting party - many people are still surprised when they see how many of the highest-grossing drugs are antibodies, even though they're often for smaller indications.
And the hype around RNA therapies did reach a pretty high level a few years ago, but this (as Langer's quote above says) was followed by a nasty pullback. If it really is heading for the big time, then we should all be ready for some other techniques to follow. Just as RNAi built on the knowledge gained during the struggle to realize antisense, you'd have to think that Moderna's mRNA therapy ideas have learned from the RNAi people, and that the attempts to do CRISPR-style gene editing in humans have the whole biologic therapy field to help them out. Science does indeed march on, and we might possibly be getting the hang of some of these things.
And as I warned in that last link, that means we're in for some good old creative destruction in this industry if that happens. Some small-molecule ideas are going to go right out the window, and following them (through a much larger window) could be the whole rare-disease business model that so many companies are following these days. Many of those rare diseases are just the sorts of things that could be attacked more usefully at their root cause via genomic-based therapies, so if those actually start to work, well. . .
This shouldn't be news to anyone who's following the field closely, but these things move slowly enough that they have a way of creeping up on you unawares. Come back in 25 years, and the therapeutic landscape might be a rather different-looking place.
Comments (18)
+ TrackBacks (0) | Category: Biological News | Business and Markets | Clinical Trials | Drug Development
Well, it was not a dull evening around the In the Pipeline headquarters last night. I submitted a link to Reddit for my post yesterday about Retrophin and Thiola, and that blew up onto that site's front page. The Corante server melted under the impact, which isn't too surprising, since it's struggling at the best of times. (A site move really is coming, and no, I can't wait, either, at this point.)
But then, to my great surprise, Martin Shkreli (CEO of Retrophin) showed up in the Reddit thread, doing an impromptu AMA (Ask Me Anything), which I have to say takes quite a bit of aplomb (or perhaps foolhardiness - I don't think too many other CEOs of any publicly traded corporations would have done it). But not too long after that, the entire thread vanished off the front page, and off of r/News, the subreddit where I'd submitted it.
Then I got a message from one of the moderators of r/News, saying that I'd been banned from it, and going on to say that I would likely be banned from the site as a whole. After having been on Reddit for seven years, that took me by surprise. As best I can figure, the thread itself was reported to r/Spam by someone, and the automated system took over from there. Over the years, I've submitted links to my blog posts, and Reddit, or some parts of it, anyway, has been notoriously touchy about that. The last time I submitted such a link, though, was back in February (and before that, August of 2013), so I'm not exactly a human spam-bot. We'll see what happens. Update: I was banned for some hours, but I've been reinstated.
But back to Retrophin, Thiola, and Martin Shrkeli. The entire Reddit thread can still be read here, via a direct link, although it can't be found in r/News any more. If you look for a user named "martinshkreli", you can see where he gets into the fray (I'm "dblowe" on the site, or perhaps I was?). You'll note that he gives out his cell phone, office phone, and e-mail, which again is not your usual CEO move - you have to give him that, although it does seem a bit problematic from a regulatory/compliance angle. So what arguments does he make for the Thiola price increase?
From what I can see, they boil down to this: patients themselves aren't going to be paying this increased price - insurance companies are. And Retrophin is actually going to be working on new formulations for the drug, which no one has done previously. He seems to have implied that the previous company (Mission Pharmacal) was reluctant to raise the price and take the public outcry, and stated (correctly) that Mission was having trouble keeping the drug in supply. He claims that the current price is still "pretty low", and that he does not expect any pushback from the eventual payers. There was also quite a bit about the company's dedication to patients, their work on other rare diseases, and so on.
He and I didn't cross paths much in the thread. I tried asking a few direct questions, but they weren't picked up on, so my take on Shkreli's answers will show up here. He's correct that the drug's availability was erratic, and he may well be correct that its price was too low for a company to deal with it properly. But if so, that does make you wonder what Mission Pharmacal was up to, and how they were sourcing the material.
He's also correct that Retrophin is planning to work on new formulations of the drug. But when you look at the company's investor presentation about Thiola, all that comes under a slide marked "Distribution and Intellectual Property". The plan seems to be that they'll introduce 250mg and 500mg dosages, at which time they'll discontinue the current 100mg formulation. Later on, they'll try to introduce a time-release formulation, at which time they'll discontinue the 250mg and 500mg forms. You can argue that this is helping patients, but you can also argue that it's making it as difficult as possible for anyone else to show bioequivalence and enter the market as well, assuming that anyone wants to.
And as I mentioned yesterday, the company does seem to care about someone else entering the market. My questions to Shkreli about the "closed distribution" model mentioned on the company's slides went unanswered, but the only interpretation I can give them is that Retrophin plans to use the FDA's risk management system to deny any competitors access to their formulations, in order to try to keep themselves as the sole supplier of Thiola in perpetuity. Patents at least expire: regulatory rent-seeking is forever.
Also left out of Shkreli's comments on Reddit are the issues on the company's slide titled "Pharmacoeconomics", where it says (vis-a-vis the other drug for cystinuria, penicillamine):
Current pricing of Thiola® - $4,000 PPPY
– Penicillamine pricing- $80,000-$140,000
• Thiola could support a significant price increase
Personally, I think that's the main reason for Retrophin's interest. You'll note that the price hike takes Thiola's cost right up to the penicillamine region (the price of that one is another story all its own). But to a first approximation, that's business. I've defended some drug company pricing decisions on this site before (although not all of them), so what's different this time?
I've been thinking hard about that one, and here's what I have so far. I think that pricing power of this sort is a powerful weapon. That's the reason for the patent system - you get a monopoly on selling your invention, but it's for a fixed period only, and in return you disclose what your invention is so that others can learn from it. And I think that this sort of pricing power should be a reward for actually producing an invention. That's the incentive for going through all the work and expense, the (time-limited) pot of gold at the end of the rainbow. I have a much lower opinion of seeing someone ram through a big price increase just because, hey, they can. Thiola has nothing to do with the patent system - it's off patent. What this situation looks like to me is regulatory rent-seeking. Celgene seems to be doing that too, with thalidomide (as mentioned yesterday), which is why they're being taken to court. Retrophin is betting that Thiola just isn't a big enough deal for anyone to go to that trouble, once they tell them to buzz off by using Celgene's strategy.
Businesses can, though, charge what they think the market will bear, and Retrophin's contribution to cystinuria therapy so far is to have realized that the market will bear a lot more than people had realized. But in an actual market, it would be easier for someone else to come in and compete on price. What Retrophin is planning is to use regulatory loopholes to keep anyone else from doing so, with no time limit until someone at the FDA does something about it. Cloaking this in a lot of noble-sounding talk about being the company that really cares about cystinuria patients is a bit stomach-turning. In my opinion.
Comments (30)
+ TrackBacks (0) | Category: Business and Markets | Drug Prices | Why Everyone Loves Us
There's a drug called Thiola (tiopronin) that most people have never heard of. It's on my list of "smaller than aspirin" drugs, and I'd never heard of it until I put that one together. But thanks to a little company called Retrophin, we all get to hear about it now.
It's used to treat cystinuria, a rare disease that causes painful kidney complications, namely unusual kidney stones of pure cystine. And until recently, tiopronin (as a small, nearly forgotten drug for an orphan indication) was rather cheap. It was sold by a small company in Texas, Mission Pharmacal, until Retrophin bought the marketing rights earlier this year (a move complicated by the company's CEO, investor Martin Shkreli, who may have let the news of the deal leak on his Twitter account).
That link mentions part of Shkreli's business plan as "acquiring the rights to obsolete remedies Shkreli says can be put to new and lucrative purposes", and by gosh, that's certainly accurate. Retrophin is increasing the price of Thiola from $1.50 per pill to over $30 per pill. Because they can - they stated when they bought the drug that their first move would be to raise the price. New dosages are formulations are also mentioned, but the first thing is to jack the price up as high as it can be jacked. Note that patients take several pills per day. Shkreli is probably chortling at those Mission Pharmacal hicks who didn't realize what a gold mine they were sitting on.
Now, there have been somewhat similar cases in recent years. Colchicine's price went straight up, and (infamously) so did the progesterone formulation marketed as Makena. But in both those cases, the small companies involved took the compound back through the FDA, under an agency-approved program to get marketing exclusivity. I've argued here (see those last two links) that this idea has backfired several times, and that the benefit from the clinical re-evaluation and re-approval of these drugs has not been worth their vastly increased cost. I think that drug companies should be able to set the price of their drugs, because they have a lot of failures to make up for, but this FDA loophole gives people a chance to do minimal development at minimal risk and be handed a license to print money in return.
But this isn't even one of those cases. It's worse. Retrophin hasn't done any new trials, and they haven't had to. They've just bought someone else's old drug that they believed could be sold for twenty times its price, and have put that plan right into action. No development costs, no risks whatsoever - just slap a new sticker on it and put your hands over your ears. This is exactly the sort of thing that makes people go into fist-clenching rages about the drug industry, and with damn good reason. This one enrages me, and I do drug research for a living.
So thank you, Martin Shkreli. You've accelerated the progress of the giant hammer that's coming down on on all of us over drug pricing, and helped drag the reputation of the pharmaceutical industry even further into the swamp. But what the hell do you care, right? You're going to be raking in the cash. The only thing I can say about Shkreli and Retrophin is that they make the rest of the industry look good in comparison. Some comparison.
Update: There are some interesting IP aspects to this situation. As pointed out in the comments section, this compound has no exclusivity left and is off patent. So what's to stop someone else from filing an ANDA, showing bioequivalence, and competing on price (since there seems to be an awful lot of room in there)?
Simon Lackner on Twitter sent me to this presentation from Retrophin on their purchase of the Thiola license. In it, you can see that their plan for this: "Similar to Chenodal, Retrophin will move Thiola into closed distribution". Chenodal was the company's previous brainstorm of this sort, when they bought Manchester Pharmaceuticals, details of which can be seen on this presentation. What they say on that one is "Closed distribution system does not allow for generics to access product for bioequivalence study. ANDA filings are impossible unless generic company illegally penetrates specialty distributor. Recent Celgene v. Lannett case establishes precedent." So let's go back and take a look at Celgene v. Lannett.
That was a long-running dispute between the two companies over Lannett's desire to market a generic equivalent of Celgene's thalidomide. Lannett brought suit, accusing Celgene of using the drug's Risk Evaluation and Mitigation Strategy (REMS) improperly to deny potential competitors access to their product (which is needed to do a head-to-head comparison for an ANDA filing). As you can imagine, the REMS for thalidomide is pretty extensive and detailed! But there was no court decision in the case. The companies reached an out-of-court settlement before it went to trial in 2012, although I have to say that that Retrophin slide makes it sound like there's some sort of legal precedent that was set. There wasn't. The limits of REMS restrictions to deny access to a given drug are still an open question.
In late 2012, Acetelion and Apotex went at it over the same issue, this time over access to Tracleer (bosentan). The Federal Trade Commission filed an amicus brief, warning that companies could be abusing the REMS process to keep out competition. That case was also dismissed, though, after the two companies reached an out-of-court settlement of their own, removing another chance for a legal opinion on the subject.
But the issue is very much alive. Earlier this year, Mylan went after Celgene, also over thalidomide (and its follow-up, lenalidomide). Their complaint:
Celgene, a branded drug manufacturer, has used REMS as a pretext to prevent Mylan from acquiring the necessary samples to conduct bioequivalence studies, even after the FDA determined that Mylan's safety protocols were acceptable to conduct those studies. In furtherance of its scheme to monopolize and restrain trade, Celgene implemented certain distribution restrictions that significantly limit drug product availability.
And this is the plan that Retrophin has in mind - they say so quite clearly in those two presentations linked above. What their presentations don't go into is that this strategy has been under constant legal attack. It also doesn't go into another issue: the use of REMS at all. Thalidomide, of course, is under all kinds of restrictions and has plenty of hideous risks to manage. Bosentan's not exactly powdered drink mix, either - patients require monthly liver function tests (risk of hepatoxicity) and monitoring of their hematocrit (risk of anemia). But what about Thiola/tiopronin? It's not under any risk management restrictions that I can see. Its side effects seem to be mainly diarrhea and nausea, which does not put it into the "This drug is so dangerous that we can't let any generic company get ahold of our pills" category. So how is Retrophin going to make this maneuver work?
Update: more on this issue here.
Comments (42)
+ TrackBacks (0) | Category: Business and Markets | Drug Prices | Why Everyone Loves Us
Bizarre news from Evotec - see what you make of this press release:
Evotec AG was informed that US company Hyperion Therapeutics, Inc. ("Hyperion") is terminating the development of DiaPep277(R) for newly diagnosed Type 1 diabetes.
In a press release published by Hyperion on 08 September 2014 at market opening in the US, the company states that it has uncovered evidence that certain employees of Andromeda Biotech, Ltd. ("Andromeda"), which Hyperion acquired in June 2014, engaged in serious misconduct, involved with the trial data of DiaPep277. Hyperion announced that it will complete the DIA-AID 2 Phase 3 trial, but will terminate further development in DiaPep277.
Here's the Hyperion press release, and it details a terrible mess:
The company has uncovered evidence that certain employees of Andromeda Biotech, Ltd., which Hyperion acquired in June 2014, engaged in serious misconduct, including collusion with a third-party biostatistics firm in Israel to improperly receive un-blinded DIA-AID 1 trial data and to use such data in order to manipulate the analyses to obtain a favorable result. Additional evidence indicates that the biostatistics firm and certain Andromeda employees continued the improper practice of sharing and examining un-blinded data from the ongoing DIA-AID 2 trial. All of these acts were concealed from Hyperion and others.
The Company has suspended the Andromeda employees known to be involved, is notifying relevant regulatory authorities, and continues to investigate in order to explore its legal options. Hyperion employees were not involved in any of the improper conduct.
What a nightmare. All biomedical data are vulnerable to outright fraud, and it gives a person the shivers just thinking about it. I can only imagine the reactions of Hyperion's management when they heard about this, and Evotec's when Hyperion told them about it. What, exactly, the Andromeda people (and the third-party biostatistics people) thought they were getting out of this is an interesting question, too - did they hope to profit if the company announced positive results? That's my best guess, but I'm not sleazy enough (I hope) to think these things through properly.
Comments (17)
+ TrackBacks (0) | Category: Business and Markets | Clinical Trials | The Dark Side
Google's Calico venture, the company's out-there move into anti-aging therapy, has made the news by signing a deal with AbbVie (the company most of us will probably go on thinking of as Abbott). That moves them into the real world for sure, from the perspective of the rest of the drug industry, so it's worth taking another look at them. (It's also worth noting that Craig Venter is moving into this area, too, with a company called Human Longevity. Maybe as the tech zillionaires age we'll see a fair amount of this sort of thing).
On one level, I applaud Google's move. There's a lot of important work to be done in the general field of aging, and there are a lot of signs that human lifespan can be hacked, for want of a better word. The first thought some people have when they think of longer lifespan is that it could be an economic disaster. After all, a huge percentage of our healthcare money is already spent in the last years of life as it is - what if we make that period longer still? But it's not just sheer lifespan - aging is the motor behind a lot of diseases, making them more like to crop up and more severe when they do. The dream (which may be an unattainable one) is for longer human lifespans, in good health, without the years of painful decline that so many people experience. Even if we can't quite manage that, an improvement over the current state of things would be welcome. If people stay productive longer, and spend fewer resources on disabling conditions as they age, we can come out ahead on the deal rather than wondering how we could possibly afford it.
Google and AbbVie are both putting $250 million into starting a research site somewhere in the Bay area (and given the state of biotech out there, compared to a few years ago, it'll be a welcome addition). If things go well, each of them have also signed up to contribute as much as $500 million more to the joint venture, but we'll see if that ever materializes. What, though, are they going to be doing out there?
Details are still scarce, but FierceBiotechIT says that "a picture of an IT-enabled, omics-focused operation has emerged from media reports and early hiring at the startup". That sounds pretty believable, given Google's liking for (and ability to handle) huge piles of data. It also sounds like something that Larry Page and Sergey Brin would be into, given their past investments. But that still doesn't tell us much: any serious work in this area could be described in that fashion. We'll have to use up a bit more of our current lifespans before things get any clearer.
So I mentioned above that on one level I like this - what, you might be asking, is the other level on which I don't? My worry is what I like to call the Andy Grove Fallacy. I applied that term to Grove's "If we can improve microprocessors so much, what's holding you biotech people back"? line of argument. It's also a big part of the (in)famous "Can a Biologist Fix a Radio" article (PDF), which I find useful and infuriating in about equal proportions. The Andy Grove Fallacy is the confusion between man-made technology (like processor chips and radios) and biological systems. They're both complex, multifunctional, miniaturized, and made up of thousands and thousands of components, true. But the differences are more important than the similarities.
For one thing, human-designed objects are one hell of a lot easier for humans to figure out. With human-designed tech, we were around for all the early stages, and got to watch as we made all of it gradually more and more complicated. We know it inside out, because we discovered it and developed it, every bit. Living cells, well, not so much. The whole system is plunked right down in front of us, so the only thing we can do is reverse-engineer, and we most definitely don't have all the tools we need to do a good job of that. We don't even know what some of those tools might be yet. Totally unexpected things keep turning up as we look closer, and not just details that we somehow missed - I'm talking about huge important regulatory systems (like all the microRNA pathways) that we never even realized existed. No one's going to find anything like that in an Intel chip, of that we can be sure.
And that's because of the other big difference between human technology and biochemistry: evolution. We talk about human designs "evolving", but that's a very loose usage of the word. Real biological evolution is another thing entirely. It's not human, not at all, and it takes some time to get your head around that. Evolution doesn't do things the way that we would. It has no regard for our sensibilities whatsoever. It's a blind idiot tinkerer, with no shame and no sense of the bizarre, and it only asks two questions, over and over: "Did you live? Did you reproduce? Well, OK then." Living systems are full of all kinds of weird, tangled, hacked-together stuff, layer upon layer of it, doing things that we don't understand and can't do ourselves. There is no manual, no spec sheet, no diagram - unless we write it.
So people coming in from the world of things that humans built are in for a shock when they find out how little is known about biology. That's the shock that led to that Radio article, I think, and the sooner someone experiences it, the better. When Google's Larry Page is quoted saying things like this, though, I wonder if it's hit him yet:
One of the things I thought was amazing is that if you solve cancer, you'd add about three years to people's average life expectancy. We think of solving cancer as this huge thing that'll totally change the world. But when you really take a step back and look at it, yeah, there are many, many tragic cases of cancer, and it's very, very sad, but in the aggregate, it's not as big an advance as you might think."
The problem is, cancer - unrestrained cellular growth - is intimately tied up with aging. Part of that is statistical. If you live long enough, you will surely come down with some form of cancer, whether it's nasty enough to kill you or benign enough for you to die of something else. But another connection is deeper, because the sorts of processes that keep cells tied down so that they don't take off and try to conquer the world are exactly the ones, in many cases, that we're going to have to tinker with to extend our lifespans. There are a lot of tripwires out there, and many of them we don't even know about yet. I'd certainly assume that Larry Page's understanding of all this is deeper than gets conveyed in a magazine article, but he (and the other Google folks) will need to watch themselves as they go on. Hubris often gets rewarded in Silicon Valley - after all, it's made by humans, marketed to humans, and is rewarded by human investors. But in the biomedical field, hubris can sometimes attract lightning bolts like you would not believe.
Comments (25)
+ TrackBacks (0) | Category: Aging and Lifespan | Business and Markets
Here's what sounds like a good idea from VC firm Index Ventures, from the latest issue of BioCentury (same one I referenced the other day). Like many others in the biopharma venture capital world, they're trying to run the "killer experiment" as soon as possible, to see which ideas for new companies look solid. Unlike the others, though, they're planning a web site where they will detail the successes - and the failures. Here's an example:
Founded in 2013, (Purple Pharmaceuticals) was started to identify small molecule inhibitors of proprotein convertase subtilisin/kexin type 9. Two mAbs against PCSK9 are already in Phase III testing to treat hypercholesterolemia with regulatory submissions expected this year: evolocumab from Amgen Inc. and alirocumab from partners Regeneron Pharmaceuticals Inc. and Sanofi.
Grainger said the antibodies have limitations, as they require high doses to suppress PCSK9 activity and once-weekly or once-monthly infusions. Thus a pill that could match the PCSK9 inhibition of the biologics could be "the holy grail" of lowering LDL cholesterol.
Purple began by trying to identify small molecules that were highly selective for PCSK9 over other proprotein convertases because, as Grainger noted, "PCSK9 is a member of a large family of enzymes that do some pretty critical things."
The killer experiment, he said, "was to ask could we make a small molecule that was selective over these other proprotein convertases, and could we demonstrate that it would lower LDL cholesterol?"
After a year, Purple had identified some hits selective for PCSK9, but a conversation with researchers at the Genentech Inc. unit of Roche led to the realization that the virtual company would need to run a second experiment.
"We learned from that interaction with Genentech that they had also run a PCSK9 screening program the same way we had," Grainger said. "They discovered that their hits, while preventing PCSK9 from cleaving an external substrate, did not prevent PCSK9 from cleaving itself."
Purple learned that in vivo, PCSK9 is auto-activated by cleaving itself — meaning the only important interaction to inhibit is PCSK9 auto- activation, not interactions with external substrates.
Purple's second experiment showed none of its small molecule hits that inhibited PCSK9 interaction with an external substrate also inhibited auto-activation.
"Therefore we were able to kill a project which had spent at that stage only about £300,000 over a year, only to discover at the critical moment that it didn't have the profile that we wanted," Grainger said. "We were able to terminate that without having created any infrastructure, without having spent a painful amount of money prosecuting the project."
That story illustrates a number of points about drug discovery. First off, congratulations to those involved for being able to definitively test a hypothesis; that's the engine at the heart of all scientific research. And as they say, it was good to be able to do that without having spent too much money and time, because both of those have a way of getting a bit out of control as complication after complication gets uncovered. Investors start getting jumpy when you keep coming back to them saying "Well, you know, it turns out that. . . ", but you know, it often turns out that way.
The next thing this story shows is that when you see an obvious gap in the landscape that there may well be a good reason for it. PCSK9 antibodies are widely thought to be potential blockbusters; a huge battle is shaping up in that area. So why no small molecules, eh? That's the question that launched Purple, it seems, and it's a valid one. But it turns out to have a valid answer, one that others in the field had already discovered. I suspect that the people behind this effort were, at the same time they were characterizing their lead molecules, also beating all the bushes for the sort of information that they obtained from Genentech. Somebody must have tried small-molecule PCSK9 inhibitors, you'd think, so what happened? Were those projects abandoned for good reasons, or was there still some opportunity there that a new company could claim for itself?
There may well be more to this story, though, than the Index Ventures people are saying. Update: there is - see the end of this post. The autocatalytic cleavage of PCSK9 was already well-known - pretty much everything in the that protease family works that way. (The difference is that with PCSK9, the prodomain part of the protein stays on longer - details of its cleavage were worked out in 2006). And in this 2008 paper from Journal of Lipid Research, we find this:
Several approaches for inhibiting PCSK9 function are theoretically feasible. Because autocatalytic cleavage is required for the maturation of PCSK9, a small-molecule inhibitor of autocatalysis might be useful, provided that it was specific for PCSK9 processing and did not lead to a toxic accumulation of misfolded PCSK9. Small molecules that block the PCSK9-LDL receptor interactions would likely be efficacious, although designing inhibitors of protein-protein interactions is a tall order. Antisense approaches pioneered by Isis Pharmaceuticals (Carlsbad, CA) are well suited for liver targets, and studies in mice suggest that this approach is efficacious for PCSK9. Finally, there is considerable interest in developing antibody therapeutics to inhibit PCSK9-LDL receptor interactions.
Even more to the point is the paper that that JLR piece is commenting on. That one demonstrates, through studies of mutated PCSK9 proteins, that its catalytic activity does not seem to be necessary at all for its effects on LDL receptors (a result that had already been suggested in cell assays). Taken together, you'd come away with the strong impression that inhibiting PCSK9's catalytic activity, other than stopping it from turning itself into its active form, had a low probability of doing anything to cholesterol levels. And you'd come away with that impression in 2008, at the latest.
So Purple's idea was a longer shot than it appeared on the surface, not that the real information was exactly buried deep in the literature. They shouldn't have needed someone at Genentech to tell them that PCSK9's autocatalysis was the real target - I've never worked in the area at all, and I found this out in fifteen minutes on PubMed while riding in to work. They must have had more reason to think that an assay for PCSK9's exogenous activity would be worth running - either that, or this story has gotten garbled along the way.
But this example aside, I applaud the idea of making these early-stage calls public. And I agree with the Index Ventures folks that this should actually help academics and others unused to drug discovery to see what needs to be done to actually launch an idea out into the world. I look forward to seeing the web site - and perhaps to hearing a bit more about what really happened at Purple.
Update: David Grainger of Index Ventures has more in the comments, and says that there is indeed more to the story. He points out that mutations of PCSK9 were found that inhibited its autocatalytic activity (such as this one), and that work had appeared that suggested that molecules that inhibited only the autocatalytic activity could be useful. This is what Purple was seeking - the BioCentury piece makes things sound a bit different (see above), but the problem seems to have been that molecules that inhibited PCSK9's activity against other substrates turned out not to inhibit its activity against itself. If I'm interpreting this right, then, Genentech's contribution was to point out that the autocatalytic activity couldn't be modeled by looking at another substrate.
Comments (6)
+ TrackBacks (0) | Category: Business and Markets | Cardiovascular Disease | Drug Assays
It has been a bizarre ride for InterMune, its employees, and its investors. But now it ends with Roche buying them for $8.3 billion dollars, a sum that would have brought incredulous stares a few years ago. The deal makes sense for Roche, and it will provide investors a rationale for years as they buy into small biopharma companies - trying to pick the next InterMune, you know.
John LaMattina has a look at Pfizer's oncology portfolio, and what their relentless budget-cutting has been doing to it. The company is taking some criticism for having outlicensed two compounds (tremelimumab to AstraZeneca and neratinib to Puma) which seem to be performing very well after Pfizer ditched them. Here's LaMattina (a former Pfizer R&D head, for those who don't know):
Unfortunately, over 15 years of mergers and severe budget cuts, Pfizer has not been able to prosecute all of the compounds in its portfolio. Instead, it has had to make choices on which experimental medicines to keep and which to set aside. However, as I have stated before, these choices are filled with uncertainties as oftentimes the data in hand are far from complete. But in oncology, Pfizer seems to be especially snake-bit in the decisions it has made.
That goes for their internal compounds, too. As LaMattina goes one to say, palbociclib is supposed to be one of their better compounds, but it was shelved for several years due to more budget-cutting and the belief that the effort would be better spent elsewhere. It would be easy for an outside observer to whack away at the company and wonder how incompetent they could be to walk away from all these winners, but that really isn't fair. It's very hard in oncology to tell what's going to work out and what isn't - impossible, in fact, after compounds have progressed to a certain stage. The only way to be sure is to take these things on into the clinic and see, unfortunately (and there you have one of the reasons things are so expensive around here).
Pfizer brought up more interesting compounds than it later was able to develop. It's a good question to wonder what they could have done with these if they hadn't been pursuing their well-known merger strategy over these years, but we'll never know the answer to that one. The company got too big and spent too much money, and then tried to cure that by getting even bigger. Every one of those mergers was a big disruption, and you sometimes wonder how anyone kept their focus on developing anything. Some of its drug-development choices were disastrous and completely their fault (the Exubera inhaled-insulin fiasco, for example), but their decisions in their oncology portfolio, while retrospectively awful, were probably quite defensible at the time. But if they hadn't been occupied with all those upheavals over the last ten to fifteen years, they might have had a better chance on focusing on at least a few more of their own compounds.
Their last big merger was with Wyeth. If you take Pfizer's R&D budget and Wyeth's and add them, you don't get Pfizer's R&D post-merger. Not even close. Pfizer's R&D is smaller now than their budget was alone before the deal. Pyrrhus would have recognized the problem.
Comments (20)
+ TrackBacks (0) | Category: Business and Markets | Cancer | Drug Development | Drug Industry History
One of my standard lines (in presentations or lab conversation), when referring to some research that just flat-out isn't working, is that I should chuck it all and go to truck-driving school just like my mother always wanted. (She actually didn't, in case you're wondering!)
The similarities between organic chemistry and truck driving may be closer than they appear, though. Try this blog post at the New York Times out. The title alone will send you right into crippling-STEM-shortage land: "The Trucking Industry Needs More Drivers. Maybe It Needs to Pay More."
Consider this: The American Trucking Associations has estimated that there was a shortage of 30,000 qualified drivers earlier this year, a number on track to rise to 200,000 over the next decade. Trucking companies are turning down business for want of workers.
Yet the idea that there is a huge shortage of truck drivers flies in the face of a jobless rate of more than 6 percent, not to mention Economics 101. The most basic of economic theories would suggest that when supply isn't enough to meet demand, it's because the price — in this case, truckers' wages — is too low. Raise wages, and an ample supply of workers should follow.
But corporate America has become so parsimonious about paying workers outside the executive suite that meaningful wage increases may seem an unacceptable affront. In this environment, it may be easier to say "There is a shortage of skilled workers" than "We aren't paying our workers enough," even if, in economic terms, those come down to the same thing.
Considering the sorts of speeches that Lilly's John Lechleiter gives, this sounds familiar indeed. And the same things has come up in many of the "STEM shortage" discussions around here. A minor adjustment might be "We can't find people who will work for what we're paying our outsourced contractors", but the principle is pretty much the same.
Amgen cuts over 2,500 jobs. Amgen completely shuts down its big facilities in Washington state and Colorado. Amgen's stock goes up nearly 7% in one day, adding about five (corrected late-night mistake) billion dollars in market cap. And there you have it. That's the industry.
As this FierceBiotech piece says, Amgen's big shareholders have been unhappy with the way the company has been performing during the recent biotech bull market. This also puts the company in line with all the other big outfits who have been trimming staff and consolidating research sites in the past few years. It also puts them in line with all the companies who have been consolidating particularly in the Boston/Cambridge and San Francisco Bay areas - this Boston Globe article says that positions will actually be added in both of those Amgen locations. So no one can say that they're behind the times now.
And if you'd like to know more about just what state the industry is in, have a look at analyst Geoffrey Porges' take on Amgen's portfolio. It's too damn innovative, he says:
Over the last 10 years, the company has spent about $30 billion on R&D--including buyouts--but generated just $15 billion in cumulative revenue from the resulting drugs, he points out in a research note Friday. And, looking at Amgen's current pipeline, Porges doesn't see that ratio evening out any time soon.
That's because of Amgen's affinity for risk. Compared to its Big Biotech peers, the company has a pipeline particularly loaded with what Porges terms "breakthrough" assets: first-in-class agents with unproven targets and unknown safety profiles. At the moment, 80% of Amgen's pipeline is made up of such breakthrough therapies, according to Bernstein's numbers. . .That commitment to inherently risky science, coupled with a "quixotic" M&A track record, has saddled Amgen with a below-average return on invested capital over the past four years, Porges writes, suggesting "changes to the company's strategy and structure may be warranted."
To be fair, he's suggesting a change that puts the cash-cow parts of the company in a separate place from the risky parts, and he claims that the two resulting companies would have a higher combined market cap than Amgen as it currently exists. But for those people who feel that the still-profitable legacy drugs are there to pay for the risky R&D (which could become the legacy drugs of the future), this scheme may not sound very appealing. How the new company with all the risky programs might survive if it runs into trouble is apparently not Porges' department. Raising Amgen's market cap is, though. But consider it raised, as of today: an all-time high, as a matter of fact. All it took was a whacking big layoff and a string of site closures - why, success has been around the corner all this time.
Comments (48)
+ TrackBacks (0) | Category: Business and Markets
Targacept's attempt to salvage something by testing TC-5214 for overactive bladder has failed. John Carroll at FierceBiotech counts eight straight failed clinical trials from this company: a record? I don't see anyone beating that very easily, that's for sure. Nicotinic receptors have proven to be a very, very difficult field to work in, and I'm not sure that Targacept has anything left in their tank.
Comments (26)
+ TrackBacks (0) | Category: Business and Markets | Clinical Trials
Here's a business-section column at the New York Times on the problem of antibiotic drug discovery. To those of us following the industry, the problems of antibiotic drug discovery are big pieces of furniture that we've lived with all our lives; we hardly even notice if we bump into them again. You'd think that readers of the Times or other such outlets would have come across the topic a few times before, too, but there must always be a group for which it's new, no matter how many books and newspaper articles and magazine covers and TV segments are done on it. It's certainly important enough - there's no doubt that we really are going to be in big trouble if we don't keep up the arms race against the bacteria.
This piece takes the tack of "If drug discovery is actually doing OK, where are the new antibiotics?" Here's a key section:
Antibiotics face a daunting proposition. They are not only becoming more difficult to develop, but they are also not obviously profitable. Unlike, say, cancer drugs, which can be spectacularly expensive and may need to be taken for life, antibiotics do not command top dollar from hospitals. What's more, they tend to be prescribed for only short periods of time.
Importantly, any new breakthrough antibiotic is likely to be jealously guarded by doctors and health officials for as long as possible, and used only as a drug of last resort to prevent bacteria from developing resistance. By the time it became a mass-market drug, companies fear, it could be already off patent and subject to competition from generics that would drive its price down.
Antibiotics are not the only drugs getting the cold shoulder, however. Research on treatments to combat H.I.V./AIDS is also drying up, according to the research at Yale, mostly because the cost and time required for development are increasing. Research into new cardiovascular therapies has mostly stuck to less risky "me too" drugs.
This mixes several different issues, unfortunately, and if a reader doesn't follow the drug industry (or medical research in general), then they may well not realize this. (And that's the most likely sort of reader for this article - people who do follow such things have heard all of this before). The reason that cardiovascular drug research seems to have waned is that we already have a pretty good arsenal of drugs for the most common cardiovascular conditions. There are a huge number of options for managing high blood pressure, for example, and they're mostly generic drugs by now. The same goes for lowering LDL: it's going to be hard to beat the statins, especially generic Lipitor. But there is a new class coming along targeting PCSK9 that is going to try to do just that. This is a very hot area of drug development (as the author of the Times column could have found without much effort), although the only reason it's so big is that PCSK9 is the only pathway known that could actually be more effective at lowering LDL than the statins. (How well it does that in the long term, and what the accompanying safety profile might be, are the subject of ongoing billion-dollar efforts). The point is, the barriers to entry in cardiovascular are, by now, rather high: a lot of good drugs are known that address a lot of the common problems. If you want to go after a new drug in the space, you need a new mechanism, like PCSK9 (and those are thin on the ground), or you need to find something that works against some of the unmet needs that people have already tried to fix and failed (such as stroke, a notorious swamp of drug development which has swallowed many large expeditions without a trace).
To be honest, HIV is a smaller-scale version of the same thing. The existing suite of therapies is large and diverse, and keeps the disease in check in huge numbers of patients. All sorts of other mechanisms have been tried as well, and found wanting in the development stage. If you want to find a new drug for HIV, you have a very high entry barrier again, because pretty most of the reasonable ways to attack the problem have already been tried. The focus now is on trying to "flush out" latent HIV from cells, which might actually lead to a cure. But no one knows yet if that's feasible, how well it will work when it's tried, or what the best way to do it might be. There were headlines on this just the other day.
The barriers to entry in the antibiotic field area similarly high, and that's what this article seems to have missed completely. All the known reasonable routes of antibiotic action have been thoroughly worked over by now. As mentioned here the other day, if you just start screening your million-compound libraries against bacteria to see what kills them, you will find a vast pile of stuff that will kill your own cells, too, which is not what you want, and once you've cleared those out, you will find a still-pretty-vast pile of compounds that work through mechanisms that we already have antibiotics targeting. Needles in haystacks have nothing on this.
In fact, a lot of not-so-reasonable routes have been worked over, too. I keep sending people to this article, which is now seven years old and talks about research efforts even older than that. It's the story of GlaxoSmithKline's exhaustive antibiotics research efforts, and it also tells you how many drugs they got out of it all in the end: zip. Not a thing. From what I can see, the folks who worked on this over the last fifteen or twenty years at AstraZeneca could easily write the same sort of article - they've published all kinds of things against a wide variety of bacterial targets, and I don't think any of it has led to an actual drug.
This brings up another thing mentioned in the Times column. Here's the quote:
This is particularly striking at a time when the pharmaceutical industry is unusually optimistic about the future of medical innovation. Dr. Mikael Dolsten, who oversees worldwide research and development at Pfizer, points out that if progress in the 15 years until 2010 or so looked sluggish, it was just because it takes time to figure out how to turn breakthroughs like the map of the human genome into new drugs.
Ah, but bacterial genomes were sequenced before the human one was (and they're more simple, at that). Keep in mind also that proof-of-concept for new targets can be easier to obtain in bacteria (if you manage to find any chemical matter, that is). I well recall talking with a bunch of people in 1997 who were poring over the sequence data for a human pathogen, fresh off the presses, and their optimism about all the targets that they were going to find in there, and the great new approaches they were going to be able to take. They tried it. None of it worked. Over and over, none of it worked. People had a head start in this area, genomically speaking, with an easier development path than many other therapeutic areas, and still nothing worked.
So while many large drug companies have exited antibiotic research over the years, not all of them did. But the ones that stayed have poured effort and money, over and over, down a large drain. Nothing has come out of the work. There are a number of smaller companies in the space as well, for whom even a small success would mean a lot, but they haven't been having an easy time of it, either.
Now, one thing the Times article gets right is that the financial incentives for new antibiotics are a different thing entirely than the rest of the drug discovery world. Getting one of these new approaches in LDL or HIV to work would at least be highly profitable - the PCSK9 competitors certainly are working on that basis. Alzheimer's is another good example of an area that has yielded no useful drugs whatsoever despite ferocious amounts of effort, but people keep at it because the first company to find a real Alzheimer's drug will be very well rewarded indeed. (The Times article says that this hasn't been researched enough, either, which makes me wonder what areas have been). But any great new antibiotic would be shelved for emergencies, and rightly so.
But that by itself is not enough to explain the shortage of those great new antibiotics. It's everything at once: the traditional approaches are played out and the genomic-revolution stuff has been tried, so the unpromising economics makes the search for yet another approach that much harder.
Note: be sure to see the comments for perspectives from others who've also done antibiotic research, including some who disagree. I don't think we'll find anyone who says it's easy, though, but you never know.
Comments (58)
+ TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History | Infectious Diseases
Yet another entry in the "Why do people keep investing in biopharma?" files. Take a look at the case of Puma Biotechnology. Their stock was as high as $140/share earlier in the year, and it gradually deflated to the high 50s/low 60s as time went on. But yesterday, after hours, they reported unexpectedly good Phase III results for neratinib in breast cancer, and as I write, they're at $228 or so, up about $167 per share.
It's another HER2/EGFR tyrosine kinase inhibitor (like Tykerb/lapatinib in the small molecule space, although neratinib is an irreversible inhibitor) and would be targeted at patients who are now taking Herceptin. Neratinib itself has not had a smooth path to this stage, though. Puma licensed the compound out from Pfizer, and took on the responsibility for all of the development. Pfizer ditched the compound a few years ago in a review of their oncology portfolio. I note that the two companies have reworked their licensing agreement on this news as well. Puma's entire business model is taking up oncology candidates that other companies have shed, and it certainly seems to have come through for them this time.
So chalk one up for irreversible kinase inhibitors, and (of course) for Puma. And for the patients who will be taking the drug, naturally, and lastly, for Puma's shareholders, who are having an excellent day indeed.
Comments (18)
+ TrackBacks (0) | Category: Business and Markets | Cancer | Clinical Trials
How many people working in the biopharma industry would jump to another company if they could? According to this survey, it's just over half: well above the average set by other industry sectors.
The usual reasons are cited, in part (pay, opportunity for advancement). But two factors that seemed unusually prominent in our industry were high stress levels and "difficult relations with supervisors and co-workers". I found that last one interesting, because (like all science and engineering fields) we do have a certain number of people in this business who can be described, as the old British music hall song has it, as "E's all right when you know 'im, but you've got to know 'im first". And there's the ever-present disconnect between the scientists and any non-science-background upper managers, a clash of worldviews if ever there was one.
I've worked in some situations where most people seemed satisfied, but I've probably spent more of my career in those other workplaces described by this survey. I well recall an employee survey many years ago, given out with pencil and paper, yet, where people were calling out to each other before the start with helpful questions like "Is "half-assed" hyphenated or not?" and "Do you capitalize "Moron" when you're talking about a specific one?"
Some of what this survey found, though, is surely pent-up demand. There have been fewer and fewer opportunities to change companies over the years, and it used to be a fairly frequent career move. So I'd guess that there are plenty of people who would be glad to jump if there were anywhere much to jump to.
Comments (21)
+ TrackBacks (0) | Category: Business and Markets
What a mess there is in the hepatitis C world. Gilead is, famously, dominating the market with Sovaldi, whose price has set off all sorts of cost/benefit debates. The companies competing with them are scrambling to claim positions, and the Wall Street Journal says that AbbVie is really pulling out all the stops. Try this strategy on for size:
In a lawsuit filed in February, AbbVie noted it patented the idea of combining two of Gilead's drugs—Sovaldi and an experimental drug called ledipasvir, which Gilead plans to combine into one treatment—and is therefore entitled to monetary damages if Gilead brings the combination pill to market. Legally, AbbVie can't market Sovaldi or ledipasvir because it doesn't have the patents on the underlying compounds. But it is legal for companies to seek and obtain patents describing a particular "method of use" of products that don't belong to them.
Gilead disputes the claims of AbbVie and the other companies. A spokeswoman said Gilead believes it has the sole right to commercialize Sovaldi and products containing Sovaldi's active ingredient, known as sofosbuvir. An AbbVie spokeswoman said the company believes Gilead infringes its patents, and that it stands behind the validity and enforceability of those patents.
You don't see that very often, and it's a good thing. Gilead is, naturally, suing Abbvie over this as well, saying that Abbvie has knowing mispresented to the USPTO that they invented the Gilead therapies. I'm not sure how that's going to play out: Abbvie didn't have to invent the drugs to get a method-of-use patent on them. At the same time, I don't know what sort of enablement Abbvie's patent claims might have behind them, given that these are, well, Gilead's compounds. The company is apparently claiming that a "sophisticated computer model" allows them to make a case that these combinations would be the effective ones, but I really don't know if that's going to cut it (and in fact, I sort of hope it doesn't). But even though I'm not enough of a patent-law guy to say either way, I'm enough of one to say, with great confidence, that this is going to be a very expensive mess to sort out. Gilead's also in court with Merck (and was with Idenix before Merck bought them), and with Roche, and will probably be in court with everyone else before all this is over.
This whole situation reminds me of one of those wildlife documentaries set around a shrinking African watering hole. A lot of lucrative drugs have gone off patent over the last few years, and a lot of them are heading that way soon. So any new therapeutic area with a lot of commercial promise is going to get a lot of attention, and start a lot of fighting. Legal battles aren't cheap on the absolute scale, but on the relative scale of the potential profits, they are. So why not? Claim this, claim that, sue everybody. It might work; you never know. Meanwhile, we have a line forming on the right of ticked-off insurance companies and government health plans, complaining about the Hep C prices, and while they wait they can watch the companies involved throwing buckets of slop on each other and hitting everyone over the head with lawsuits. What a spectacle.
Comments (43)
+ TrackBacks (0) | Category: Business and Markets | Infectious Diseases | Patents and IP | Why Everyone Loves Us
It's getting nasty over at Allergan. They're still trying to fight off a takeover attempt by Valeant, making the case that the company's R&D efforts are not a waste of money (which, only slightly simplified, is the Valeant position regarding every company they're taking over).
But Allergan's had a lot of trouble getting one of their drugs (Semprana) through the FDA. Semprana is an inhaled version of the classic dihydroergotamine therapy for migraine, and had been rejected last year when it was still known as Levadex. The recent further delay isn't helping Allergan make its case, and Valeant is using this news to peel off some more shareholders.
This morning comes word that Allergan is cutting back staff. That Fierce Biotech report says that it looks like a lot of the cuts will be hitting discovery R&D, which makes you wonder if Allergan will manage to escape Valeant's grip only by becoming what Valeant wanted to make them.
Comments (7)
+ TrackBacks (0) | Category: Business and Markets | Regulatory Affairs
Over the years, there have been more comments than anyone can count here on the often-grim employment picture for chemistry and biology employment in biopharma. Plenty of people here (myself included) can speak from experience. But we should also remember that the academic job market in the biomedical sciences is in awful shape, too, unfortunately. And since a disproportionate number of people start off grad school picturing themselves getting jobs in academia, a clear picture of what's going on is essential.
That's the point of this piece in Nature, in the Jobs section. The author, Jessica Polka (post-doc at Harvard Medical School) says that far too many of her colleagues don't have an accurate impression of the job market. She's created this graphic to get the point across. Some 16,000 students will start graduate school in biology in the US this fall. The best guess is that fewer than 10% of them will eventually become tenure-track faculty somewhere.
But at least half of them list that as their most preferred career path, which means that a lot of things are not going to work out as planned. Polka's right - the most people who understand this, and the earlier, the better.
Comments (40)
+ TrackBacks (0) | Category: Academia (vs. Industry) | Business and Markets
Another dose of reality for the "Terrible STEM Shortage!" folks, courtesy of Slate. Here's what author Jordan Weissmann has to say:
With a little cleaning up, however, the federal data do tell a pretty clear story: The market for new Ph.D.s in the much obsessed-about STEM fields—science, technology, engineering, and math—is stagnant. Over the last 20 years, employment rates are either flat or down in each major discipline, from computer science to chemistry. It's not what you'd expect given the way companies like Microsoft talk about talent shortages.
Why no, it isn't, is it? There seems to be something a bit off. Weissmann is working with data from the NIH NSF and their surveys of new doctorates in the sciences, and it shows several things. For one, the post-doc populations remain very high in every field, which isn't a good sign. The number of new doctorates who report being employed has not attained the levels seen in the late 1990s, for any field. And here's chemistry in particular:
Not a very pretty picture, to be sure. It's true that the number of postdocs have been declining the last few years, but the slack seems to be picked up, more or less equally, by people who are getting jobs and people falling into the flat-out unemployed category. And remember, this is a snapshot of new doctorates, so the numbers for more experienced people are going to be different (but ugly in their own way, to judge from the waves of layoffs over the last few years). It's notable that the new chemistry doctorate holders who are unemployed have outnumbered the ones with non-postdoc jobs for the last few years, which may well be unprecedented.
Weissmann's figures for computer science doctorate and engineers are telling, too, and I refer you to the article for them. Neither group has made it back to its heights back in 2000 or so, although the 2011-2012 number have picked up a bit. Whether that's a blip or a real inflection point remains to be seen. It's safe to say, though, that none of these charts support the "Just can't find anybody to hire" narrative that you hear from so many companies.
Comments (43)
+ TrackBacks (0) | Category: Business and Markets
We've had some big biopharma market events so far this year, but if you're wondering what's coming in the next few months, here's a handy rundown from Adam Feuerstein of what may be the top 14. There are a few regulatory events on there, but most of the list are highly anticipated clinical trial results, which is where the action is, for sure. That's what makes the sector so attractive to both legitimate investors and to cult-like lunatics alike. These people, many of whom would cross the street to avoid each other in the real world, come together to make a market - and anyone with enough nerve and a little cash can join right in.
Comments (1)
+ TrackBacks (0) | Category: Business and Markets
Pfizer's bid for AstraZeneca made headlines for weeks on both sides of the Atlantic. But there's another US drug company trying to buy a British one right now - AbbVie for Shire - and it's going on very quietly indeed.
Over at FierceBiotech, they're wondering why that should be so, after an article in the Telegraph. There are several reasons, some better than others. For one thing, the whole deal is a smaller affair than the Pfizer saga. Most importantly, it would involve fewer UK jobs, because Shire itself doesn't really have all that many employees in the UK (91% of them are elsewhere!) Some years ago, they reworked themselves into an Irish-domiciled company, anyway, for (you guessed it) tax purposes. But there's not much noise in Ireland about this deal, either.
Fewer politicians have an interest in what's going on. If names change on pieces of paper, and it hardly affects anyone in their constituencies, then they have other things to worry about. The financial reasons behind the deal are similar to Pfizer's - relatively generous corporate tax policies, but the principles behind those, and behind deals predicated on them, was never the primary political concern. You might have gotten a different impression from some of the speechmaking that went on during the Pfizer/AZ business, but that's what comes from listening to politicians, rather than watching their actions with the sound off. I recommend that technique; it improves the signal/noise immensely.
OK, the GlaxoSmithKline/China business has officially crossed over into new territory. Over the weekend, the company confirmed reports that Mark Reilly, the GSK executive in the country who's been in the middle of this affair from the beginning, was the object of a blackmail attempt by unknown parties. (The story was broken by the Sunday Times, and it's behind a paywall, but it's been picked up by every major news outlet).
Someone shot extensive footage of Reilly alone with his Chinese girlfriend, and mailed the resulting file to higher-ups at the company. The connection between all this and the corruption allegations has not been made clear, but the footage apparently accompanied some of the emails accusing the company of bribery. We may never know quite what's going on here, but I'll bet it's very interesting indeed. More on surveillance in China here.
Update: an excellent overview from the BBC.
Comments (36)
+ TrackBacks (0) | Category: Business and Markets | The Dark Side
I wrote a couple of years ago about Andrew Lo of MIT, and his idea for securitization of drug discovery. For those of you who aren't financial engineers, that means raising funds by issuing securities (bonds and the like), and that's something that (as far as I know) has never been used to fund any specific drug development project.
Now Pharmalot has an update in an interview with Lo (who's recently published a paper on the idea in Science Translational Medicine). In particular, he's talking about issuing "Alzheimer's bonds", to pick a disease with no real therapies, a huge need for something, and gigantic cost barriers to finding something. Lo's concerned that the risks are too high for any one company to take on (and Eli Lilly might agree with him eventually), and wants to have some sort of public/private partnership floating the bonds.
We would create a fund that issues bonds. But if the private sector isn't incentivized on its own, maybe the public sector can be incentivized to participate along with some members of the private sector. I will explain. But let's look at the costs for a moment. The direct cost of treating the disease – never mind home care and lost wages – to Medicare and Medicaid for 2014 is estimated at $150 billion. We did a calculation and asked ourselves what kind of rate of return can we expect? We came up with $38.4 billion over 13 years. . .
. . .Originally, I thought it could come from the private sector. We'd create a fund – a mega fund of private investors, such as hedge funds, pension, various institutional investors. The question we asked ourselves is will they get a decent rate of return over a 13-year period? The answer, which is based on a best guess, given the risks of development and 64 projects, and we believed the answer was 'no.' It wouldn't be like cancer or orphan diseases. It's just not going to work. I come from that world. I talked to funds, philanthropists, medical experts. We did a reality check to see if we were off base. And it sounded like it would be difficult to create a fund to develop real drugs and still give investors a reasonable rate of return – 15% to 20%.
He's now going around to organizations like the Alzheimer's Association to see if there's some interest in giving this a try. I think that it's going to be a hard sell, but I'd actually like to see it happen. The difficulty is that there's no way to do this just a little bit to see if it works: you have to do it on a large scale to have any hope of success at all, and it's a big leap. In fact, the situation reminds one of. . .the situation with any given Alzheimer's drug idea. The clinical course of the disease, as we understand it now, does not give you any options other than a big, long, expensive path through the clinic (which is why it's the perfect example of an area where all the risk is concentrated on the expensive late stages). Lo is in the position of trying to address the go-big-or-go-home problem of Alzheimer's research with a remedy that requires investors to go big or go home.
The hope is that you could learn enough along the way to change the risk equation in media res. There's an old science fiction story by A. E. van Vogt, "Far Centaurus", which featured (among other things - van Vogt stories generally had several kitchen sinks included) a multidecade suspended-animation expedition to Alpha Centauri. The crew arrive there to find the planets already covered with human-populated cities, settled by the faster-than-light spaceships that were invented in the interim. We don't need FTL to fix Alzheimer's (fortunately), but there could be advances that would speed up the later parts of Lo's fund. But will this particular expedition ever launch?
Comments (24)
+ TrackBacks (0) | Category: Alzheimer's Disease | Business and Markets | Clinical Trials | Drug Development
I've written here before about Zafgen, a small startup targeting obesity therapy with an unusual covalent epoxide drug candidate. Last fall they cleared Phase II, and now they're going public.
Bruce Booth, whose firm has been the VC muscle behind the company, has an overview of how things have worked here. It's a good read for anyone interested in where small drug companies come from and what they have to be able to do to be able to survive. Many of the readers here will be familiar with the scientific part of this kind of story (as am I), but the financial and managerial parts have to be handled right, too, and mistakes with any of them can sink the whole effort.
I'll bet that if you'd asked Bruce or his partners back in 2006 for the odds, "Nice big IPO" would have been pretty far down their list of possibilities for the company, even if you'd stipulated success for their drug candidate. MetAP2 (the compound's target, which is something they didn't realize back then) is an interesting enzyme, and obesity has always been an interesting field (although not always in a good way). And on the scientific end, I'm most interested to see how that compound fares as it goes on through Phase III. It's a structure that a lot of us would have crossed off the list about three seconds after seeing it, and anything that extends the bounds of what's feasible in drug discovery is worth keeping an eye on. We very much need for more things to be possible.
Comments (13)
+ TrackBacks (0) | Category: Business and Markets | Diabetes and Obesity | Drug Development
Too many foreigners in your drug company? Outsiders being put into positions of power and influence, threatening the entire firm's culture? That's the objection that many Takeda employees seem to have to the company's recent tendency (unusual in Japan, to say the least) of bringing in many non-Japanese hires at all levels. The Financial Times broke the story in the English-language press:
In a letter to Takeda Pharmaceutical, 110 former executives and individual investors questioned the company's appointment of non-Japanese to several senior positions.
"The company's globalisation is a wrong globalisation. It should be globalised as a Japanese company. However, from the top to the bottom ,there are hundreds of non-Japanese working in the company in Japan," said Yujiro Hara, a former head of Takeda's real estate subsidiary who represents the group.
"We say it was acquired by a foreign capital. We cannot accept it," he added. "Three main executive positions, finance, HR and purchase, are taken by foreigners."
This is not a large group, in terms of shares held, but they're certainly a vocal one, and they may well represent what some others are feeling. Japan is its own place, maybe more so than anywhere else in the high-tech industrialized world, and this is a fine example of it. Try to imagine a letter like this in the US!
I've heard from more than one source that BMS has been moving people around (and in some cases, out) in several departments recently. As a whole, the company has been doing quite well, but (as many have found out) that's no guarantee that you won't be re-orgged. From what I've heard, this isn't the major site-closing/therapeutic-area-dumping sort of stuff, but it does seem to be shaking up a lot of org charts.
Matthew Herper has excellent coverage here of Valeant's bid for Allergan, specifically Valeant's view of actual pharma R&D (which they, for the most part, don't bother to do). He's especially peeved (with reason) that the company is citing some of his own stories on the topic of R&D productivity to make its case, but in an underhanded way.
On page 9, which cites one of my stories, Valeant uses data from Richard Evans at Sovereign & Sector, LLC, that is available for purchase on the website hiddenpipeline.com. It takes one of several metrics Evans used to measure companies' R&D productivity – their economic returns to R&D spending – and says that, for big companies, these are less than the cost of capital, which Allergan pegs at 10%.
OK. But by picking only the largest companies, Valeant gets to not include Allergan, which, like Novartis, has an 8% return on R&D by Evans's numbers. Gilead and Celgene, have R&D returns of 21% and 32%, respectively, so bigger returns are not impossible. And by Evans's methods, which include measures of patents and quality of research, Allergan has the fifth-best R&D in the industry. It's not absurd to expect that it could do better, not worse, in the future. If Valeant is at war with inefficiency, shouldn't it buy someone inefficient?
Valeant also has some pretty laughable figures on the number of drugs developed internally at big pharma companies. They claim that only four of the fifty best-selling drugs came up that way, which is just wrong:
Valeant aims to make drug research look bad by excluding drugs from its list. Any drug invented or developed at a company that went through a merger or did a co-marketing deal doesn't get counted, nor does any drug invented at a company Valeant has decided is not "Big Pharma."
This leads to absurdities like saying that the blood thinner Plavix was not invented at Sanofi or that the cancer drug Gleevec was not invented at Novartis because Novartis was called Ciba-Geigy at the time. The same thing happens with Lantus, the second-best-selling drug on the list, invented at Hoechst, which is now part of Sanofi, and Prevnar 13, the vaccine invented by Wyeth that is now part of Pfizer. By any definition, these drugs were "discovered, developed, and commercialized internally by 'Big Pharma'."
There are plenty of other examples - see Matt's post for more. Valeant's bid is not catching on (yet) because Allergan's investors are suspicious of them, and rightly so. Valeant, from what I can see, is basically a parasite on the research-driven drug industry, so to hear them going on about efficient R&D is a bit hard to take.
For those who worked at, visited, or remember the Hoffman-LaRoche site in Nutley, here's what the end of the line looks like. After closing it as an R&D facility, the company is now putting five of the buildings on the market, and tearing down the rest. The remaining buildings look to be picked up by smaller biopharma, according to the article, and it'll be interesting to see who that might be. The rest of the property will probably be turned into office and retail space.
The first research site I ever worked at (Schering-Plough in Bloomfield, NJ) was torn down when the company moved everyone to Kenilworth. Many attempts were made to sell the labs to some other research organization, but no one wanted it. I believe that they also looked into donating it to Rutgers, but it was like giving someone a pet elephant (no thanks, just on the maintenance costs). So in the end, everything was demolished, and a Home Depot (and its parking lot) occupy a lot of that land now. And there are many other Phormer Pharma sites scattered around the US and Europe now (with New Jersey having a generous share of them).
Via Bruce Booth on Twitter, here's an in-depth look at the financing of small biotechs, compared to the financing of internet and IT-centric startups. As everyone knows, many of the latter companies are able to raise staggering amounts of money, far more than the best-funded biotech startups have ever seen. But the comparisons across financing rounds are quite instructive.
Biopharma startups raise more in each round in a steady and undramatic fashion (well, when there are more rounds of financing, but you know what I mean). The tech startups are more volatile, and show big money at first, followed by shakeouts later on. That makes sense. A small pharma company starts off with an idea that has enough data behind it (and enough potential) to bring in enough money to see if it can go any further. If it can, it raises more money to try to clear another (higher) bar, and so on. Tech startups often begin with a flashy idea that is much better suited to attract a lot of interest, and it's often the sort of idea that needs to be moved on quickly if it's going to work at all. So hopeful money floods in at the beginning, and the reality checks only come at a later stage.
There are sound financial reasons for things to work out this way, too - biopharma is a capital-intensive business, and failure rates are (of course) rather high:
The best biotech exit (IPOs and M&As) over the past 5 years by valuation (in this case pre-money at the time of IPO) has been Ironwood (unlikely name!) at $1B. If we look at M&A upfronts, Plexxikon tops the charts at $805M. The median 5x cash-on-cash M&A upfront exit, generally regarded as top decile return in biotech, has been $240M (average at $286M) since 2010. A few biotech IPOs of the 2013-14 vintage are currently above that level, although as discussed elsewhere on this blog, much of those are unrealized returns. Big picture, if I'm a Series A VC I come in knowing that I'll likely be putting in $50M+ with my syndicate for an exit likely capped around $300M (can't be too aggressive with my assumptions as a VC!)- as such, it doesn't make sense to hold the companies at a carrying value much above cost if I want to target a 3x return for my fund knowing 7 out of 10 companies in my portfolio will go belly up.
Small tech companies have an even higher failure rate than biotech ones, but the valuations can get so insane for the successful exits (hundredfold or more) that putting in more money isn't a crazy strategy. There is no biotech equivalent to the sort of return that a Facebook, Über, Twitter or Paypal can provide.
Chris Viehbacher of Sanofi has an interview with reporters from Bloomberg, where he says some interesting things. Such as "Unlike everybody else, we feel we've got critical mass in all of our businesses" and ". . .at today's prices I don't see anything that I can acquire that strengthens our company and creates value for our shareholders." So that's good news, I'd have to say.
He also notes that the recent Pfizer/AstraZeneca tango might possibly be an indication that pharma investors are willing to wait rather than take the money and run. I hope that's right, but I don't see how human psychology has changed much. My fear is that AstraZeneca might have oversold their internal prospects in the process of fighting off Pfizer. It's not like their shareholders decided to turn down their desire for an immediate profit; it's that the company did a more thorough job of appealing to it. We'll see how well that works.
Viehbacher also says, about Sanofi, that "I am feeling great about what we have; I haven't felt this great in years." Doesn't he know that saying things like this is tempting the gods? I swear, powerful deities are at this very moment reaching for their bottles of laxative and limbering up. You say these things, and next thing you know people in your phase III trials are starting to turn orange right in front of your eyes. It's just not safe.
But Viehbacher is not known for his restraint in interviews, as this 2012 example made clear. That one ended up with a luckless Sanofi PR person showing up at this site to try to explain things. Let's see how much luck they have spinning the Wrath of the Pharma Gods!
I'm glad to report that Ed Silverman has revived the Pharmalot blog, now at the Wall Street Journal. This is the third iteration, and I'm glad to see that it's as unkillable as it appears to be!
I really got a kick out of "The Seven Deadly Sins of Biotech Investing", sent to Adam Feuerstein by one of his readers. It's a sort of Screwtape Letters/Devil's Dictionary look at the sector, with gems of wisdom like this:
Find a good Internet message board to discuss how great an investment the biotech stock you just purchased really is. When spending time on this message board, be sure to read closely all posts from those who are the most vocal proponents of the biotech stock you own. These people demonstrate their commitment by never writing anything critical. No one wants to attend a church where the preacher has doubts. The best posters will write at length about how the science behind the biotech stock you own has no rival and will completely change the world we live in. Lucky for you the world does not know this yet; you are one of a select few!
No other part of the market seems to attract wildly devoted cultists like small biopharma stocks do; it's really something to see. And they must keep spawning, because many of them end up getting blown up, big-time, by their favorite stocks, only to be replaced by another cohort of true believers. This is one of the things that blows them up, by the way:
In the unlikely event that the biotech stock you just bought falls in value, it's a clear indication of an attack by the shorts. If this happens, check in with your favorite Internet message board. There, you will likely find a link to a negative article written by a reporter or blogger who is clearly getting paid to shill for the short-selling hedge funds. These are bad people trying to steal your shares without doing the proper DD you did. The best way to fight a coordinated short attack is to buy more shares of the biotech stock you just bought. Keep buying.
As Groucho Marx said while peddling Florida swampland in "The Cocoanuts", "You can get any kind of house you want - you can even get stucco!" (and to one side, "Boy, can you get stucko!")
So Pfizer has officially called off their quest to acquire AstraZeneca. I didn't expect things to end like this - up until now, what Pfizer has wanted, Pfizer has gotten (well, except in the clinic). There may well have been other behind-the-scenes overtures that we never heard about being rejected over the years, but this is the first time I can remember someone actually fighting off an open Pfizer attempt.
Now comes the hard part. AstraZeneca's management did this by convincing their major shareholders that they'd be better off this way, and now they have to deliver. Delivering, though, is far from straightforward in this business. The worry is that AZ's prospects may have been oversold during the takeover defense, in which case reality may not be welcome when it shows up, as it will. Too many doses of it, and Pfizer may be back in six months, with an even lower bid. Let's hope not. AstraZeneca, over the years, has not always been an ornament of the R&D universe - for some years, they spent more money for fewer returns than anyone else. But they still didn't deserve what was in line to happen to them if the Pfizer deal went through.
Pfizer, for its part, still has the same tax problems it had before, and will presumably still be looking for ways to solve them. Getting results in the accounting department is still a lot easier than getting results in the lab, so I'd be surprised if the company doesn't come up with something else in that line.
Comments (15)
+ TrackBacks (0) | Category: Business and Markets
Matthew Herper has a really interesting story in Forbes on a new report that attempts to rank biopharma companies by their R&D abilities. Richard Evans of Sector and Sovereign Health (ex-Roche) has ranked companies not on their number of drugs, but on their early-stage innovation. He counts patents, for example, but not the later ones defending existing franchises, and he also looks to see how often these patents are cited by others. As for a company's portfolio, being early into a new therapeutic area counts for a lot more than following someone else, but at the same time, he's also trying to give points for companies that avoid "Not Invented Here" behavior (a tricky balance, I'd think). The full report can be purchased, but the parts that Herper have shared are intriguing.
Ranking the companies, he has (1) Bristol-Myers Squibb, (2) Celgene, (3) Vertex, (4) Gilead, and (5) Allergan. (Note that Allergan is currently being pursued by Valeant, who will, if they buy them, pursue their sworn vow to immediately gut the company's R&D). At the bottom of his table are (18) Novartis, (19) Regeneron, (20) Bayer, (21) Lilly, and (22) Alexion. (Note that Evans himself says that his analysis may be off for companies that have only launched one product in the ten years he's covering). I'm not sure what to make of this, to be honest, and I think what would give a better picture would be if the whole analysis were done again but only with the figures from about fifteen years ago to see if what's being measured really had an effect on the futures of the various companies. That would not be easy, but (as some of Herper's sources also say), without some kind of back-testing, it's hard to say if there's something valuable here.
You can tell that Evans himself almost certainly appreciates this issue from what he has to say about the current state of the industry and the methods used to evaluate it, so the lack of a retrospective analysis is interesting. Here's the sort of thing I mean:
Too often, Evans says, pharmaceutical executives instead use the industry's low success rates as an argument that success is right around the corner. "A gambler that has lost everything he owned, just because he now has a strong hand doesn't make him a good gambler," Evans says. . .
True enough. Time and chance do indeed happeneth to them all, and many are the research organizations who've convinced themselves that they're good when they might just have been lucky. (Bad luck, on the other hand, while not everyone's favorite explanation, is still trotted out a lot more often. I suspect that AstraZeneca, during that bad period they've publicly analyzed, was sure that they were just having a bad run of the dice. After all, I'm sure that some of the higher-ups there thought that they were doing everything right, so what else could it be?)
But there's a particular chart from this report that I want to highlight. This one (in case that caption is too small) plots ten-year annualized net income returns against R&D spending, minus the cost of R&D capital. Everything has been adjusted for taxes and inflation. And that doesn't look too good, does it? These numbers would seem to line up with Bernard Munos' figures showing that industry productivity has been relatively constant, but only by constantly increased spending per successful drug. They also fit with this 2010 analysis from Morgan Stanley, where they warned that the returns on invested capital in pharma were way too high, considering the risks of failure.
So in case you thought, for some reason - food poisoning, concussion - that things had turned around, no such luck, apparently. That brings up this recent paper in Nature Reviews Drug Discovery, though, where several authors from Boston Consulting Group try to make the case that productivity is indeed improving. They're used peak sales as their measure of success, and they also believe that 2008 was the year when R&D spending started to get under control.
Before 2008, the combined effects of declining value outputs and ever-increasing R&D spending drove a rapid decline in R&D productivity, with many analysts questioning whether the industry as a whole would be able to return its cost of capital on R&D spending. . .we have analysed the productivity ratio of aggregate peak sales relative to R&D spending in the preceding 4 years. From a low of 0.12 in 2008, this has more than doubled to 0.29 in 2013. Through multiple engagements with major companies, we have observed that at a relatively steady state of R&D spending across the value chain, a productivity ratio of between 0.25 and 0.35 is required for a drug developer to meet its cost of capital of ~9%. Put simply, a company spending $1 billion annually on R&D needs to generate — on average — new drug approvals with $250–350 million in peak sales every year. . . So, although not approaching the productivity ratios of the late 1990s and early 2000s, the industry moved back towards an acceptable productivity ratio overall in 2013.
Before 2008, the combined effects of declining value outputs and ever-increasing R&D spending drove a rapid decline in R&D productivity, with many analysts questioning whether the industry as a whole would be able to return its cost of capital on R&D spending. . .we have analysed the productivity ratio of aggregate peak sales relative to R&D spending in the preceding 4 years. From a low of 0.12 in 2008, this has more than doubled to 0.29 in 2013. Through multiple engagements with major companies, we have observed that at a relatively steady state of R&D spending across the value chain, a productivity ratio of between 0.25 and 0.35 is required for a drug developer to meet its cost of capital of ~9%. Put simply, a company spending $1 billion annually on R&D needs to generate — on average — new drug approvals with $250–350 million in peak sales every year. . . So, although not approaching the productivity ratios of the late 1990s and early 2000s, the industry moved back towards an acceptable productivity ratio overall in 2013.
I would like to hope that this is correct, but I'm really not sure. This recent improvement doesn't look like much, graphically, compared to the way that things used to be. There's also a real disagreement between these two analyses, which is apparent even though the BCG chart only goes back to 1994. Its take on the mid-1990s looks a lot better than the Evans one, and this is surely due (at least partly) to the peak-sales method of evaluation. Is that a better metric, or not? You got me. One problem with it (as the authors of this paper also admit) is that you have to use peak-sale estimates to arrive at the recent figures. So with that level of fuzz in the numbers, I don't know if their chart shows recent improvement at all (as they claim), or how much.
But even the BCG method would say that the industry has not been meeting its cost-of-capital needs for the last ten years or so, which is clearly not how you want to run things. If they're right, and the crawl out of the swamp has begun, then good. But I don't know why we should have managed to do that since 2008; I don't think all that much has changed. My fear is that their numbers show an improvement because of R&D cuts, in which case, we're likely going to pay for those in a few years with a smaller number of approved drugs - because, again, I don't think anyone's found any new formula to spend the money more wisely. We shall see.
Comments (28)
+ TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History
According to Bruce Booth on Twitter, the largest single employer of R&D chemists in the world is now WuXi. They have >2500. And the number two company is their direct competitor ChemPartner, with 1300. Someone get in the time machine, fly back to about 1990, and try those figures out on them.
Comments (27)
+ TrackBacks (0) | Category: Business and Markets
Don't forget - you can bet that the people at AstraZeneca aren't forgetting - that Pfizer still has until May 26th under UK securities law for their takeover offer. Today's Wall Street Journal reports that some institutional investors are pressuring AZ's board to accept the offer (or at least open negotiations), while others are standing with the company's management. (Here's a summary at FierceBiotech if you don't have WSJ access). My guess is that the current deal won't go through, but if there's any mis-step in AZ's turnaround plans during the rest of the year, Pfizer will be right back at the door.
Now, wait - you're telling me that just because you're a doctor involved in the clinical trial of a small company's main drug, and you've found out that the trial has been halted by the FDA. . .you're saying that you can't actually unload all your stock on that information before the public announcement? What, I ask you, is this world coming to?
Well, that's what the two physicians in the story must be asking. They maintain that they had no idea that they couldn't do such a thing, that they really didn't know much about this "stock market" stuff, and so on. If that's true, then it's a wonderful example of the havoc that the Dunning-Kruger effect can bring. And considering that they avoided losing $34,000 and $11,000 (real but not life-ruining amounts, you'd figure), maybe they really are that clueless. Or were.
Comments (19)
+ TrackBacks (0) | Category: Business and Markets
Now what? Pfizer has upped its offer for AstraZeneca yet again, and up to the figure that they seem to have calculated would bring them to the negotiating table. But AZ has told them to buzz off yet again, sending their own shares down hard. That's because Pfizer also stated that they would not launch a hostile bid for the company and that the current offer was final, so there don't seem to many more options.
I'll be pretty surprised by this story if it ends this way. It's possible that Pfizer is planning on AstraZeneca's big shareholders putting pressure on the company before the May 26th deadline (mandated by UK law). Or they might turn around and try buying them again in the future, especially if anything goes a bit wrong with AZ's turnaround plans over the next few months. But for now, it looks like we have the first case I can recall of a Company That Has Fought Off Pfizer.
But as that article I linked to the other day details, Pfizer has to do something about its tax situation. So if it's not going to be the AstraZeneca acquisition (and we still have a few days on that one), then what? The last thing I expect them to do is just sit there.
GSK's troubles in China have just gotten even more serious. The government has formally charged Mark Reilly, former head of the company's operations in China, of organizing and participating in a bribery scheme. This seems to have been a stronger step than people were expecting - we'll see what happens. Reilly's whereabouts do not seem to be clear to anyone - I would assume that he left China some time ago, but if he hasn't, then he's not leaving for some time to come.
Comments (11)
+ TrackBacks (0) | Category: Business and Markets | The Dark Side
The Financial Times is out with an editorial denouncing Pfizer's attempted takeover of AstraZeneca. It's definitely worth a read for the case it makes. What's a drug company supposed to be doing, anyway?
But (the effect on British research) is not the only big question requiring discussion. Another is the extent to which the board of AstraZeneca – as it decides how to respond to the US group's overtures – should be driven by the desires of its own shareholders.
One of the most troubling aspects of Pfizer's bid is its lack of evident commercial logic. The choice of target and the form of consideration seem to be driven principally by the US group's desire to re-domicile itself in the UK and shrug off certain burdensome American tax liabilities.
The deal will not obviously strengthen AstraZeneca in its pursuit of drug discoveries, or its ability to bring new life-saving compounds to market. Nor will it increase competition or sharpen innovation across the sector.
Pfizer's dealmaking history is moreover a deeply dispiriting one. The group has a reputation for delivering returns to its investors not through creative management and groundbreaking research, but by the frequent execution of accountant-led, cost-crunching acquisitions.
Comments here to past posts on this deal have raised the same question, and it's a tough one. If the purpose of AstraZeneca (and Pfizer) is to deliver money to their shareholders, full stop, then the deal makes sense. It will deliver money - of that there seems little doubt. It will deliver that to Pfizer through finagling the tax laws (which the British government has written in the hopes that just these sorts of deals would happen, one would think), and it will deliver it to AstraZeneca's shareholders by paying them more than their stock was worth a few weeks ago. Money is money, and pecunia presumably non olet. If the discussion is supposed to end there, then there's not much to discuss.
Is that where it's supposed to end, though? The FT editorialists, not exactly a bunch that are unfamiliar with capitalism, don't think so:
The prevailing wisdom in the Anglo-Saxon world over the past 35 years has been that boards should simply respond to what they perceive their shareholders' wishes to be. But this is incorrect.
Directors have wider responsibilities on which they should reflect before making any recommendation about a company's future. Legally, their duties under the Companies Act are not simply to snap to attention when shareholders whistle. They are to advance the interest of the business as a whole over the long term.
Just as surely as it is in Pfizer's financial interest to swallow AstraZeneca, it would seem to be in AstraZeneca's long-term interests not to be swallowed by Pfizer. They are most certainly not the greatest drug company around, but they deserve a chance to see if they can work out of the pit that time, circumstance, and some of their own decisions have put them into. On a larger scale, Pfizer's history of acquisition has damaged the entire pharmaceutical industry's store of R&D ability and intellectual capital.
Some AZ shareholders may well decide that taking Pfizer's money and running is the right decision - after all, who's to say if the company is going to make any sort of comeback at all? Better to take the sure thing - many of these investors are managing funds themselves, and they have responsibilities to their own shareholders and customers. But at some point this reasoning breaks down, or at least reveals its limitations. If we're always going to take the sure thing, the money that can be realized right now, then most startup companies (to pick an extreme example) have no reason to exist. After all, they're just promising and hoping to deliver something eventually. Better to just close up shop, sell what's sellable, and return the money to the shareholders, right? Screw the future.
Somewhere in between these extremes lies the "right" answer, and we're all still figuring it out. It's not just the drug industry - you can see the same issues playing out with Amazon - the company barely makes any actual profit, and its investors are getting increasingly restless about that. Shareholders have rights, for sure - but do they have all the rights?
This saga is going to be running for a while; we might as well all resign ourselves to it. The latest seems to be that the British government is getting more visibly into the act. The Business Secretary, Vince Cable, has said that he's not going to let Pfizer use the UK as a tax haven. But why did the country's corporate tax laws change so favorably if they didn't want companies to use the place as a tax haven? Instead of this being a statement against the deal, I take this one as mere public relations. He has also promised to protect jobs in the country, and there the government has some leverage (since they're the ones who set those tax rates, and can set them again should they choose).
At the Prime Minister level, David Cameron has said that he's seeking more assurances from Pfizer. As Monday's post said, though, any new PfizerAstraZeneca, which would actually use the new name "Pfizer", as has been the custom, can make these promises by slashing jobs in the US and and Sweden. You'll note that the Swedish government is getting no assurances from Pfizer at all. They have no leverage, as far as I know: Sweden's corporate tax rate is 22% as opposed to the UK's 20%, and I believe that other costs are higher as well. If Pfizer repatriated its foreign earnings to the US, they'd pay even more (here's an excellent look at the company's complex tax situation, and its analysis fits the company's current moves perfectly:
Pfizer needs cash to pay dividends, pay down debt incurred for the Wyeth acquisition, buy back shares, and perhaps acquire more U.S. companies. At the same time, it is under pressure to shore up its after-tax earnings as patents on profitable drugs expire faster than they can be replaced. If there was ever a company that could use another tax holiday -- or generous transition rules to a territorial system -- Pfizer is it.
All of the talk from Pfizer's management about R&D this and synergy that is window dressing. It's taxes. Depressingly, this fits my oft-stated rule that most questions that are phrased in the form "I wonder how come they. . .?" turn out to be answered with the word "money". If you'd like to experience some of that managerial window dressing first hand, though, take yourself to PfizerUpdate.com, where the company has set up a handy web portal for all its press releases on the subject. You can even have them email you when a new one is posted. Or you can just bang yourself on the head with a hammer every so often, and eliminate the middleman. Your call.
Comments (33)
+ TrackBacks (0) | Category: Business and Markets
Over at LifeSciVC, Tom Hughes has a post about Intercept Pharmaceuticals and their wild ride with an FXR ligand for non-alcoholic steatohepatitis (NASH). Anyone who owned ICPT will recall that period vividly, since the positive news from the clinical trial sent the company's stock from an already-not-cheap $72/share to a where's-the-oxygen-tank peak of $445 in two days of bug-eyed trading. NASH is potentially a big market, and there's really nothing out there to treat it, so Intercept's investors (many of them apparently fresh converts to the cause) decided that the company was set to do very well for itself indeed.
Hughes points out that NASH is not an easy thing to get into, though. It's underserved for a reason - there are a lot of biological and mechanistic question marks, and the clinical trials are no stroll through the tulip beds, either . There's no way to be sure that you're having the desired effects without doing a series of liver biopsies on the patients, and even at that the FDA still has to issue some key regulatory guidance about whether these tissues markers will be sufficient for approval. His thesis is that it took a small company like Intercept to accept all these risks.
He's probably right, especially when you couple them with an uncertain market size - potentially large, but who knows for sure? It's a hard sell at a big company, where the feeling can be that if you're going to go to all that trouble, you might as well aim for a larger market while you're at it, and one with more clarity. Adding a few hundred million (maybe) to the sales figures of Leviathan Pharma might not get upper management all that excited, especially since so much stuff would have to get pioneered along the way. But adding a few hundred million to the revenues of a small company that has nothing else - now that's something worth suiting up for. All the talk about how small companies are so much more nimble and innovative (which is not always true, but certainly not all talk, either) might just come down to the old line about necessity being the mother of invention. Or Samuel Johnson's old line about when a man is to hanged in a fortnight that it concentrates his mind wonderfully - that one, too.
Intercept, for its part, has seen its stock fall back to the lowly $250-300 range, which probably isn't thrilling for the folks who bought in at $445. Actually, it fell back to that range almost immediately, then worked its way back over $400 again, and now back down to this, so there have been plenty of opportunities for hair loss among its investors. When the FDA issues its guidance in the NASH area, it will presumably go through another blast of frenzied trading, and good luck to whoever's in it (long or short) when that happens. And I haven't checked, but I'll bet that the options on this one would cost you plenty, too. From a safe distance, it should be quite a show.
Comments (5)
+ TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Development
After Pfizer's less-than-wonderful earnings report yesterday, AstraZeneca is out today painting a picture of how great things will be if they don't get swallowed by them. John Carroll at FierceBiotech has the details, but I especially enjoyed his pithy comment on Twitter: "AZN made more promises today than I will ever see broken again."
If you're inclined to get your financial info from fast-talking analysts on cable news channels, you might want to give this blog post a read. The author points out several egregious mistakes that CNBC's "Fast Money" has made with biotech/pharma stocks by having traders giving out advice and forecasts despite apparently knowing very little about the sector at all:
Fast Money found a way to make itself infamous at the (ASCO) meeting last year when one of its traders, Jon Najarian (@optionmonster), mentioned on TV that Celsion (Nasdaq: CLSN) was his ASCO stock to watch. The problem with that prediction, and you barely have to be a biotech person to know this, is that Celsion is not only a very dubious company to begin with, but they had NO presence at that year's meeting whatsoever. To stick with a baseball analogy, it would have been akin to predicting the Carolina Mudcats will make a run for the World Series. This literally became the meeting's running joke. I saw people toasting it at social events, and heard stories of traders looking in jest for Celsion's presentation at the poster section like something out of Where's Waldo. . .
Trying to understand biology, medicine, and chemistry is a lot harder than reading stock market charts for reverse goose-steps, Cleesian leg-outs, or whatever the pattern is supposed to be.
So Pfizer is out today with some pretty bad financials, which are doubtless one reason for their determination to Go Out and Buy Somebody, whether they're an R&D powerhouse or not. They've also been reassuring the British government that they'll go ahead with the Cambridge research construction that AstraZeneca has begun, and that in general, they'll keep at least 20% of the R&D workforce in the country.
Problem is, if you look at those numbers, it means that someone is going to have to go, and these promises would tend to force the cuts more to this side of the Atlantic. Reuters has a detailed look at the issue, and it isn't fun reading:
John LaMattina, Pfizer's research chief from 2004 to 2007 and currently a senior partner at PureTech Ventures in Boston, agreed that the La Jolla cancer research jobs as well as neuroscience researchers in Cambridge, Massachusetts, were likely in jeopardy. He said Pfizer could also fold its U.S.-based immunology and respiratory research into existing AstraZeneca operations in Britain.
"If I was in any of these places, I'd worry about this deal going through," said LaMattina, , ,
. . .With Pfizer's promise to protect the UK research, jobs at AstraZeneca's oncology and neuroscience research centers near Boston and its MedImmune cancer research and development operation in Gaithersburg, Maryland, could also come under the cost-cutting knife.
It's just much easier to unload employees in the US than it is in most of Europe. And since the whole point of this proposed deal is to remake Pfizer in a more favorable British tax environment, the incentives are unfortunately quite strong to do just that.
It's worth keeping in mind, as the Pfizer/AZ story develops, that there are some people that don't get mentioned who aren't enjoying this, either: the scientists in Pfizer's labs. As I've mentioned, I know folks there, and I know that there are (still) an awful lot of good scientists working there. And they, of course, have nothing to do with the corporate strategy. They're just along for the ride, strapped in with everyone else.
And in the employment situation we have in the industry today, what else can they do? You can't just up and quit your job because you don't like all the business decisions your company is making, not in this environment, and not when you're trying to pay the mortgage and not have to move your kids somewhere new in the middle of their schooling. At the same time, I know for a fact that Pfizer's decision to go after AstraZeneca not only dismays many people at AZ; it dismays a lot of people at Pfizer as well. But their jobs do not involve advising the CEO and the rest of the executive suite - they're working in med-chem, assay development, formulations, tox and all the rest of what many of the readers of this site do for a living. And there's nothing they can do about it.
It's a very painful situation. I've felt a bit of what they're feeling before, when companies I've worked for have done things that I thought were ill-advised. Sitting in the back of the bus and watching the driver take the wrong exit is intensely frustrating. I'm not trying to add to people's pain and by publicly whacking on their company - but at the same time, this is the biggest current event in the industry at the moment, and (for better or worse) it's a perfect illustration of the state that the industry's gotten itself into. (And the state that Pfizer's gotten itself into, for that matter).
So it's something that I'm going to comment on, and that I have to comment on. The whole point of having a blog like this is to talk about such issues, and to say what I think about them. What I have to say about Pfizer's strategy is very uncomplimentary. But Pfizer's strategy is not Pfizer's people, and for them (the overwhelming majority of them), I have sympathy, because this really isn't their fault.
Comments (49)
+ TrackBacks (0) | Category: Business and Markets
Here's a good one for you. Valeant is well-known as an outfit that largely scorns R&D, and cuts it whenever they buy someone. They do mergers and acquisitions to get the fruits of someone else's research instead. You know, sort of a mini-Pfizer. (If anyone at Pfizer is offended by that comparison, they should take a longer look in the mirror).
Right now, Valeant is trying to acquire Allergan, and no doubt they're going to do to them what they've done to everyone else they've acquired. One of the wasteful things that Valeant CEO Michael Pearson has said that he wants to cut immediately is the outrageous perk of Allergan's own golf course. He's made mention of it several times, as an example of how out-of-control the spending is there. Only problem is, as Ed Silverman points out here, is that Allergan doesn't have a golf course.
At a recent luncheon with analysts, however, Pearson was pressed for further details on expenses he would slash if the Allergan deal comes to pass. According to analysts who attended, Pearson repeatedly pointed to Allergan's golf course as an example.
"Have you been to their headquarters? Have you seen their golf course? Yeah, they have a golf course," Pearson said, according to an investor note from BMO Capital Markets analyst David Maris, who wrote that the Valeant chief executive repeated this assertion more than once.
But the Allergan golf course will not be on the list of items to be slashed, after all. Why? Allergan, which is best known for the wrinkle fighter Botox, insists that it does not own a golf course.
"For the record, we do not have a golf course or any interest in a golf course," an Allergan spokeswoman writes us. "We are golf-course deprived." She adds that the drug maker received several calls after the meeting from analysts seeking to verify the information.
But hey, if there's not a golf course, Pearson will no doubt find something else to cut if the takeover does in fact go through. His McKinsey training has served him well, and his machete is sharp. The prospect has Allergan going around ringing doorbells, asking if someone else would be interested in buying them. Anyone but Valeant. I can see why.
That's what I gather from this report, anyway. Reports had leaked out that Pfizer was going to make a higher offer for AZ shares, and that happened earlier this morning. But AstraZeneca's board has turned it down flat, saying that it undervalues the company and "is not an adequate basis" for further discussions.
You'd figure that Pfizer has been sounding out some large shareholders about an appropriate figure, so they have a rough idea of what it would take to win a hostile bid. I'd guess that they're still not ready to go that route, though, and since this latest offer isn't a huge advance on the first public one, they're probably going to come back with another one after they've let AZ's management bake in the sun for a little while. Unfortunately, I still can't come up with a reasonably probable way that leads to Pfizer just buzzing off as requested. They've run their numbers, they have an opportunity, and they know what they're willing to pay. What's going on now are their efforts to keep the deal from happening in the top end of their calculated range. But I have to think that what Pfizer is willing to pay is also high enough to get enough AstraZeneca shareholders to go along. I hope I'm wrong about that.
At FierceBiotech, John Carroll asks the question that's on a lot of drug-industry minds this week: can anything stop Pfizer's takeover of AstraZeneca?
There are a few possibilities, but overall, it comes down to how much money Pfizer wants to spend. If they open their wallet far enough, they can buy most anyone they want. As long as the UK's tax structure stays as it is, I think that they'll keep right on pitching. (Now, if another prime minister comes in whose government has a different view on corporate taxation, that could make Pfizer regret things, but they're clearly willing to take that chance). No, they did the same sort of thing to Wyeth, to Pharmacia-Upjohn, and to Warner-Lambert, without these sorts of tax considerations, so I don't see why they wouldn't do it to AstraZeneca, too. Well, short of not wanting to destroy another big drug company. But that's not on Carroll's list, and not on mine, because it sure isn't a consideration for Pfizer, is it?
Comments (30)
+ TrackBacks (0) | Category: Business and Markets
Concert Pharmaceuticals, famous among medicinal chemists as the apparent leaders in the "deuterated drug" strategy, has reported clinical trial results for their lead compound, CTP-499. Unfortunately, it missed its primary endpoint of improving albumin/creatinine ratios in patients. There are some signs that it might be doing some good, and some room to argue that this endpoint is not as good a choice as it seemed to be at the time, but overall, these are not good numbers.
And as this article in Xconomy shows, the initial read on these numbers actually hit last summer, while Concert was readying an IPO. They pulled it, realizing the effect that the results would have on their fund-raising abilities, and took the compound into a second 24-week round of testing, the results of which we're seeing now. Fortunately for Concert, another compound (CTP-354) showed enough promise in the interim to be the peg for their public offering, which went off in February (pretty much just in time, given what's happened in the biotech market since then).
It's a bit alarming to realize how much of a small company's fortunes depend on, well, fortune. Maybe that should be a capital-F Fortune, the blindfolded goddess depicted in allegorical paintings holding a large wheel on which people's standing rose and fell. You'd like to be able to control things, and you try to as much as possible, but a lot is riding on things that are outside of anyone's control whatsoever: what the results are, and what the scientific and financial weather is when they appear.
Comments (15)
+ TrackBacks (0) | Category: Business and Markets | Clinical Trials
What the hell is Ian Read thinking? Pfizer is apparently going hostile with their attempt to buy out AstraZeneca, all but ensuring that the deal, if it goes through, will take place at the highest price and in the messiest fashion that it possibly could. And for what? Update: Matthew Herper asks the same question, in detail.
This news developed over the weekend, with an article in the Financial Times as Pfizer's public shot across the bow. This morning, a press release from AZ gives their side of the story:
On 26 April 2014, Ian Read, Chairman and CEO of Pfizer, contacted Leif Johansson, the Chairman of AstraZeneca for the first time since January 2014. In this discussion, the Chairman of Pfizer did not make a specific proposal regarding an offer to acquire AstraZeneca, but nevertheless Pfizer requested that both companies issue a joint statement, prior to the market open on 28 April 2014, announcing that they had entered into discussions regarding a combination. The Board of AstraZeneca considered this request and concluded that, absent a specific and attractive proposal, it was not appropriate to engage in discussions with Pfizer.
The release says that the companies discussed a possible deal back in November, but that AstraZeneca's board concluded that Pfizer's proposal valued the company far too cheaply (not an uncommon conclusion for a board of directors to take, to be sure). So now we have a big public grab instead. Here are overviews from Reuters and the New York Times. As Reuters has it:
Pfizer's declaration turns up the heat under AstraZeneca Chief Executive Pascal Soriot, who has been in the job since October 2012 and who made clear last week he saw an independent future for the group, flagging spin-offs of two non-core units as one option to create more value.
Soriot has been credited with reviving AstraZeneca's previously thin pipeline of new drugs, which is badly needed to offset a wave of patent expiries on older drugs.
However, his overhaul - including an ambitious plan to move the company's research and corporate headquarters to Cambridge, England - is still a work in progress and he has also come under from some shareholders over executive pay.
That should give you some idea of the innate silliness of the business coverage of the pharma industry. It's 2014 - how can someone who's been CEO since 2012 revive an internal drug pipeline in that time frame? Neither Reuters nor the Times mentions something that Adam Feuerstein brought up on Twitter - that Pfizer has, potentially, all sorts of opportunities in the biotech/small pharma sector with that kind of money, but they're not having any. They'd rather buy another behemoth instead.
What is that? Both of those writeups go on to mention a hidden factor for this deal - taxes. Buying a non-US company would allow Pfizer to avoid repatriating a large amount of money (nearly $70 billion) from its foreign operations and exposing it to US taxes. Of course, if Pfizer wanted a substantial operation in the UK to put money into, they might have thought about not closing their large site in Sandwich back in 2011, but hey, that was all of three years ago, and who remembers such things? And not being an accountant, I can't tell you if they'd have been able to do that without running the cash past the US jurisdiction, anyway.
But that makes a person wonder what Pfizer would do with AZ if they got them. Take the drug pipeline, close down everything in the UK again, and just leave a corporate structure intact for the tax break? Stop that whole move-to-a-new-research-site-in-Cambridge idea before it gets any further? (After all, if Pfizer wanted to have a new research site there, they could have built one themselves when they vacated Sandwich). I hate to say it, but those seem like the most likely alternatives, especially given the company's past behavior in these situations. Pfizer's statement that the new company would be incorporated in Great Britain fits that view alarmingly well.
So there's the answer, perhaps, to the question I asked in the first paragraph. What the hell is Ian Read thinking? He's thinking about getting someone else's late-stage pipeline, because that's how Pfizer finds things to sell. He's thinking about working the tax laws to save the company billions of dollars, because Pfizer's innovations, in recent years, have mostly been financial ones. And he's thinking about ripping up yet another large patch of the drug industry in a continuing effort to keep Pfizer going, while causing vast disruption and loss of productivity along the way. Because that's what Pfizer does.
Update: Matthew Herper listened to Pfizer's conference call this morning, and here's what they plan to do with AZ's drugs if they get them.
A personal footnote: I've written a lot of fairly negative things about Pfizer over the years, since they have been very generous with the opportunities to do so. Every so often, people say to me "Well, you're never going to get a job with them, are you?", and I would just laugh. (The only time I might have been in the market for that, they were firing PhD chemists left and right, so it wasn't something that would have ever happened). I do know quite a few people who work at Pfizer, though - they have a lot of good people there, when you take them one at a time. But the corporation itself? No, I don't think they'd ever offer me a job. And what a relief that is.
Comments (76)
+ TrackBacks (0) | Category: Business and Markets
Here's an article from Nature News on the startup incubator company Ycombinator moving into biotech funding. Those of you familiar with them will wonder a bit about this, because it's a space that they've avoided. But read on:
In 2008, Y Combinator founder Paul Graham wrote that funding biotechnology start-ups was too expensive. Why the change now?
Sam Altman: Six years ago, the starting costs for biotech firms would not work with our model: it took millions of dollars to get anywhere. But the landscape has changed. We've noticed, over the past year, more and more promising biotech firms asking about Y Combinator. I think there is a real trend for biotech start-ups looking more like software start-ups. In ten years it won't even be unusual for a biotech firm to begin in the same way a software firm does, and we want to be on the leading edge of that trend. Given that we haven't done this before, we don't know a lot of people that have a background in it, so we were very lucky that Elizabeth agreed to help.
Elizabeth Iorns: I think the fundamental changes that are happening in the biotech space are like the changes that happened for software start-ups with the introduction of Amazon Web Services. You saw the economics completely shift. Previously, you needed significant investment in physical infrastructure to start a firm. Then all of a sudden you could just turn on servers. That same ability to access the entire technical infrastructure that's required to start a biotech company is now also available with basically no investment. We see Science Exchange as an example of that platform, and you also see it with QB3 [a life-sciences incubator based at the University of California, San Francisco], which rents out lab bench space for less than US$1,000 per month. That means you can cheaply have access to laboratories, instruments and experts. That's completely different than it has been at any other time for biotech firms.
I'm on the fence about this. I'm very much in favor of new funding mechanisms for biopharma research, and I'm very glad to see new organizations getting into it. My worry for the Ycombinator folks is that they may be coming into this with a bit too much of the weltanschauung of the tech sector, where companies that start off sounding like "Hey, kids, let's put on a show in the barn!" can turn into huge operations. (Two that Ycombinator has been in on, for example, are Dropbox and Airbnb, but plenty of other internet startups have had similarly small-scale origins).
I would very much like for biotech to work the same way, but my fear is that we're much more money-intensive, and that we have a much higher chance of expensive failure. There's a lot of criticism being thrown back and forth here, with people coming down hard on the Ycombinator stuff (naive, underfunded, etc.), and the folks there saying that they're being singled out mostly because they're not members of the club. Problem is, none of these complaints (from either side) are unfounded. I myself am not quite so sure about all these dramatic cost savings - all the work I've been in on has been, sooner or later, hideously expensive. But Ycombinator can pretty much shut everyone up, though, with something successful, and I think that they should go right ahead and try for it. I don't always enjoy being right.
Update: more from Wavefunction, who's fairly optimistic.
Correction: I'd originally written that Ethan Perlstein's Perlstein Labs had gotten funding from Ycombinator, but that's not accurate. He's worked with the Ycombinator-backed Science Exchange, but isn't being funded by them.
So word comes this morning of some big transactions between Novartis, GlaxoSmithKline, and Eli Lilly:
Novartis said it had agreed to buy GlaxoSmithKline's oncology products for $14.5 billion, while selling to GSK its vaccines, excluding flu, for $7.1 billion plus royalties and creating a joint venture with GSK in consumer healthcare.
Novartis also said it had agreed to sell its animal health arm to Eli Lilly for approximately $5.4 billion.
The global pharmaceuticals sector has seen a flurry of deal-making recently as large companies seek to focus on a small number of leading businesses, while smaller specialty and generic producers seek greater scale.
Coming right after that Pfizer/AZ news the other day, this makes a person wonder what else is in the works. What's not clear (in what I've seen so far) is how this will work - for example, is Novartis just buying the existing drugs and the pipeline, and incorporating those into its existing research? What happens then to all the people in GSK's oncology? And so on. We'll see what details emerge. Any info on this is welcome in the comments, as well as speculations on why GSK is giving up the whole oncology area.
So the Sunday Times came out with a story saying that Pfizer has attempted a bid for AstraZeneca. This is something of a surprise, at least for me. Pfizer has most certainly done things like this in the past, but I was under the impression that current CEO Ian Read had sworn off the practice. He's been talking for some time now about how the company needs to be the right size, to focus on drug discovery, and so on, and swallowing AZ just seems to be a return to old habits.
But the Bloomberg follow-up story on this scoop does mention how Read's answers to merger questions seems to have shifted a bit over the last year or two. The Sunday Times piece says that AZ is believed to have been unenthusiastic, and that talks are no longer continuing. But the whole thing makes a person think that Pfizer is hungry for a big deal again, and that means that no one is safe.
Update: more follow-up from the Guardian.
Comments (34)
+ TrackBacks (0) | Category: Business and Markets
Yesterday brought the sudden news that Novartis is pulling their RNA interference research work. The company is citing difficulties in development, and also the strategic point that not as many disease areas seem to be open to the use of the technique as they'd like. John LaMattina has more here - it's looking more and more like this may be a good field for smaller companies like Alnylam, but not something that's going to feed the beast at a company the size of Novartis (or Merck, who exited a while ago). If there's some sort of technology breakthrough, that could change - but you get the impression that Novartis was hoping for one before now.
Here's more on AstraZeneca's move to Cambridge (UK). They've set up an agreement with the Medical Research Council to have MRC people working "alongside" AZ people, although details seem pretty short on how that's going to happen in practice. Here's some of it, though:
Within the AstraZeneca MRC UK Centre for Lead Discovery, the academics will get access to more than 2 million compounds in AstraZeneca's library and have the use of high-tech screening equipment to study diseases and possible treatments.
Their research proposals will be assessed by the MRC, which will fund up to 15 projects a year and AstraZeneca will have the first option to license any resulting drug discovery programs.
I liked this part of the article as well:
Other large drugmakers have built research outposts in life science centers like Cambridge, Boston and San Francisco - but none have undertaken such a wholesale move of operations.
The strategy is not without risks, especially if the upheaval disrupts current research projects or results in key staff leaving the company. A smooth transition is seen as a key test for CEO Soriot as he tries to change the culture at AstraZeneca to put science at the center of its activities.
What was at the center of AZ's operations before?
Comments (29)
+ TrackBacks (0) | Category: Business and Markets | Business and Markets
Here's a good one by Matthew Herper on "Three Misplaced Assumptions That Could End the Biotech Boom". Given the way the biotech stock index has been performing lately, with a horrendous March and April that's taken it into negative territory for the year to date, something definitely seems to be causing a change of mind.
I'll let you see what Herper's three assumptions are, but I can tell you already that they sound valid to me. I think that his points are particularly relevant to investors who may have been jumping on the stocks in the area without having a clear idea of what the industry is really like. As he says, ". . .investors should avoid thinking that the drug business has undergone a fundamental change in the past few years. It hasn't." It's the same fun-filled thrill ride as ever!
Here's an article in Drug Discovery Today on "virtual pharmaceutical companies", and people who've been around the industry for some years must be stifling yawns already. That idea has been around a long time. The authors here defined a "VPC" as one that has a small managerial core, and outsources almost everything else:
The goal of a VPC is to reach fast proof of concept (PoC) at modest cost, which is enabled by the lack of expensive corporate infrastructure to be used for the project and by foregoing activities, such as synthesis optimization, which are unnecessary for the demonstration of PoC. . .The term 'virtual' refers to the business model of such a company based on the managerial core, which coordinates all activities with external providers, and on the lack of internal production or development facilities, rather than to the usage of the internet or electronic communication. Any service provider available on the market can be chosen for a project, because almost no internal investments in fixed assets are made.
And by necessity, such a company lives only to make deals with a bigger (non-virtual) company, one that can actually do the clinical trials, manufacturing, regulatory, sales and so on. There's another necessity - such a company has to get pretty nice chemical matter pretty quickly, it seems to me, in order to have something to develop. The longer you go digging through different chemical series and funny-looking SAR, all while doing it with outsourced chemistry and biology, the worse off you're going to be. If things are straightforward, it could work - but when things are straightforward, a lot of stuff can work. The point of having your own scientists (well, one big point) is for them to be able to react in real time to data and make their own decisions on where to go next. The better outsourcing people can do some of that, too, but their costs are not that big a savings, for that very reason. And it's never going to be as nimble as having your own researchers in-house. (If your own people aren't any more nimble than lower-priced contract workers, you have a different problem).
The people actually doing the managing have to be rather competent, too:
All these points suggest that the know-how and abilities of the members of the core management team are central to the success of a VPC, because they are the only ones with the full in-depth knowledge concerning the project. The managers must have strong industrial and academic networks, be decisive and unafraid to pull the plug on unpromising projects. They further need extensive expertise in drug development and clinical trial conduction, proven leadership and project management skills, entrepreneurial spirit and proficiency in handling suppliers. Of course, the crucial dependency on the skills of every single team member leaves little room for mistakes or incompetency, and the survival of a VPC might be endangered if one of its core members resigns unexpectedly
I think that the authors wanted to say "incompetence" rather than "incompetency" up there, but I believe that they're all native German speakers, so no problem. If that had come from some US-based consultants, I would have put it down to the same mental habit that makes people say "utilized" instead of "used". But the point is a good one: the smaller the organization, the less room there is to hide. A really large company can hol (and indeed, tends to accumulate) plenty of people who need the cover.
The paper goes on to detail several different ways that a VPC can work with a larger company. One of the ones I'm most curious about is the example furnished by Chorus and Eli Lilly. Chorus was founded from within Lilly as a do-everything-by-outsourcing team, and over the yeras, Lilly's made a number of glowing statements about how well they've worked out. I have, of course, no inside knowledge on the subject, but at the same time, many other large companies seem to have passed on the opportunity to do the same thing.
I continue to see the "VPC" model as a real option, but only in special situations. When there's a leg up on the chemistry and/or biology (a program abandoned by a larger company for business reasons, an older compound repurposed), then I think it can work. But trying it completely from the ground up seems problematic to me, but that could be because I've always worked in companies with in-house research. And it's true that even the stuff that's going on right down the hall doesn't work out all that often. One response to that is to say "Well, then, why not do the same thing more cheaply?" But another response is "If the odds are bad with your own people under your own roof, what are they when you contract everything out?"
Comments (28)
+ TrackBacks (0) | Category: Business and Markets | Drug Development
Someone is letting it be known that GlaxoSmithKline has fired some of its employees in China in relation to the long-running bribery scandal there. This is one of those times when it's worth asking the "Cui bono?" follow-up question. Is this some sort of semi-authorized release, designed to show other GSK employees that the company is serious? Or to demonstrate the same, publicly, to the Chinese authorities? Or is someone honestly just letting this information out on their own - and if so, why?
David Sable has some useful rules for investing biotech stocks (more here). On the surface, many of these may look more applicable to people who are managing larger amounts of money, because he's talking about what to do (and not do) when you're walking around the JP Morgan healthcare conference, and so on. But the lessons behind his advice are sound for everyone - for example:
". . .stop looking for code words, Groucho Marx eyebrow raising, or any other type of "body language" silliness from insiders."
The corollary to that is that if you're thinking about investing in a small company that acts as if it's doing this sort of thing, or has been touted to you on the basis of such, turn around and look somewhere else. (Even worse, if you find yourself working for a company like this, you'd better start making plans). This is a sign of what I think of as the "professional wrestling" school of investing - it's the world of the people who see the market as a titanic battle between Good and Evil, the Good being the people who own the wonderful company's stock, and the Evil, naturally, being the Evil Shorts and Paid Bashers. As with other forms of conspiratorial thinking, it's easy for someone with this attitude to dismiss good advice (if exposed to same) by saying that the person offering it is naive - not clued in, wised up, or verb-prepositioned in general. If you knew how the world really works, you'd realize that the recent moves in the stock are all so transparent - it's the money managers, you see, who are trying to shake the shares from the weak hands so they can accumulate it in front of the Big Announcement.
The world doesn't work that way, I think, or not at the retail market level, at any rate. It's not a show, and there's no script. Many people investing in small biotech stocks have a reality-TV view of the world, when reality would serve them far better.
Over at LifeSciVC, there's a useful look at how many drugs are coming into the larger companies via outside deals. As you might have guessed, the answer is "a lot". Looking at a Goldman Sachs list of "ten drugs that could transform the industry", Bruce Booth says:
By my quick review, it appears as though ~75% of these drugs originated at firms different from the company that owns them today (or owns most of the asset today) – either via in-licensing deal or via corporate acquisitions. Savvy business and corporate development strategies drove the bulk of the list. . .I suspect that in a review of the entire late stage industry pipeline, the imbalanced ratio of external:internal sourcing would largely be intact.
He has details on the ten drugs that Goldman is listing, and on the portfolios of several of the big outfits in the industry, and I think he's right. It would be very instructive to know what the failure rate, industry-wide, of inlicensed compounds like this might be. My guess is that it's still high, but not quite as high as the average for all programs. The inlicensed compounds have had, in theory, more than one set of eyes go over them, and someone had to reach into their wallet after seeing the data, so you'd think that they have to be in a little bit better shape. But a majority still surely fail, given that the industry's rate overall is close to 90% clinical failure (the math doesn't add up if you try to assume that the inlicensed failure rate is too low!)
Also of great interest is the "transformational" aspect. We can assume, I think, that most of the inlicensed compounds came from smaller companies - that's certainly how it looks on Bruce's list. This analysis suggested that smaller companies (and university-derived work) produced more innovative drugs than internal big-company programs, and these numbers might well be telling us the same thing.
This topic came up the last time I discussed a post from Bruce, and Bernard Munos suggested in 2009 that this might be the case as well. It's too simplistic to just say Small Companies Good, Big Companies Bad, because there are some real counterexamples to both of those assertions. But overall, averaged over the industry, there might be something to it.
Comments (26)
+ TrackBacks (0) | Category: Business and Markets | Drug Industry History
Four years ago, I wrote about what I called "Big Pharma's Lost Decade" in the stock market. I thought it would be worth revisiting that, with some different time points.
At the top is the performance of those same big drug companies since I wrote that blog post. Note that Bristol-Myers Squibb has been the place to be during that period (lots of excitement around their oncology pipeline, for one thing). Pfizer has beaten the S&P index over that time as well. And they've done it while paying a higher dividend than the aggregate S&P, too, of course - I'd like to find a way to include dividends into charts like these for an even more real-world comparison. Everyone else is behind.
The next chart shows a ten-year time frame. Bristol-Myers Squibb is still on top, although you'll note that the overall gain is basically the same as the gain since 2010 (that is, it's all come since then). And now J&J is right behind them, and they're the only two whose stock prices have beaten the S&P index over this period. Note that Pfizer and Lilly are actually down from this time point.
Then we have performance since 2000, the twenty-first century chart. Since this was during the Crazy Years in the market, just about everyone is down when measured from here, except for J&J (which is at about the same gain as if you'd started in 2004). The most dramatic mover is Bristol Myers-Squibb - if you bought in at the start of that last chart, you're up 109%. If you bought in at the start of this one, you're down 21%.
And that brings us to the last chart, which is basically "Since I started working in the drug industry". I'd been on the case for about three months by the end of 1990, which is where this one starts. And there are many interesting things to note - first among them, what a big, big deal the latter half of the 1990s were in the stock market. And more specifically, what a big, big deal they were for Pfizer's stock. Holy mackerel, will you look at that chart - compared to the rest of the industry, Pfizer's stock was an absolute monster, and there you have a big driver for all of the company's merger-rific behavior during that period. It paid. Not so much in research results, of course, but it paid the shareholders, and it paid whoever had lots of PFE stock and options. (And it paid the firms on the Street who did the deals with them, too, but that's always the case for them). A really long-term Pfizer shareholder can't be upset at all with the company's performance versus the S&P over that time period. How many have held it, though?
But the other thing to note is J&J. There they are again - it's only in that first chart that they're lagging. Longer-term, they just keep banging away. That, one would have to assume, is at least partly because they've got all those other medical-related businesses keeping them grounded during the whole time. Back when I worked for Bayer, at the Wonder Drug Factory, analysts were forever banging on about how the company just had to, had to break up. Outdated conglomerate model, holding everyone back. So much hotness waiting to be released. But Bayer hasn't been holding up too badly, either, and Bernard Munos has some things to say about both them and J&J.
It is not a good idea (to "undiversify") because, at the moment, we do not have good tools to mitigate risk in drug R&D, which is a problem at the macroeconomic level, because capital does not flow to this industry as it should. Too many investors have been burned too badly and are now investing elsewhere or sitting on the fence, so we need to somehow get better at that. . .we've got to live with the situation where risk in the pharmaceutical industry cannot really be mitigated adequately. You can do portfolio management. Every company has done portfolio management. It has failed miserably across the board. That was supposed to protect everybody against patent cliffs, and everybody has fallen down patent cliffs, so clearly portfolio management has not worked.
Mind you, "undiversifying" is exactly what Pfizer is trying right now. They're not only trying to undo some of the gigantism of all those mergers, they're shedding whatever they have that is Not Pharma. So they're running that experiment for us, as they have some others over the years. . .
Comments (14)
+ TrackBacks (0) | Category: Business and Markets
Over at The Atlantic, Michael Teitelbaum has another crack at demolishing the "STEM shortage" myth. Looking over actual employment data, he finds:
All have concluded that U.S. higher education produces far more science and engineering graduates annually than there are S&E job openings—the only disagreement is whether it is 100 percent or 200 percent more. Were there to be a genuine shortage at present, there would be evidence of employers raising wage offers to attract the scientists and engineers they want. But the evidence points in the other direction: Most studies report that real wages in many—but not all—science and engineering occupations have been flat or slow-growing, and unemployment as high or higher than in many comparably-skilled occupations.
Right on all counts. I have taken many, many cracks at this subject myself. Heck, I've even said so in pieces at The Atlantic's own web site. But the "critical shortage of scientists and engineers" idea just refuses to go back into its hole, no matter how many times it's hit on the head. In this article, Teitelbaum doesn't go into the reasons for this, but he's been clear about it in recent appearances:
So from where does the STEM hype stem? According to Teitelbaum — who has written a book on the subject, due out in March, titled "Falling Behind?: Boom, Bust and the Global Race for Scientific Talent" — some of it comes from the country's longtime cycle of waxing and waning interest in science; attention seems to focus on science every 10 to 15 years before slacking off.
The only forces pushing the idea of STEM doom, he said, are those that have something to gain from it. Mostly those are STEM employers — the tech industry, for example — that want to pack the labor force with people to suppress wages, he said, as well as lobby for looser immigration laws so that they can bring in less expensive overseas workers. Joining the chorus are universities that want more funding for science programs, as well as immigration lawyers who see the potential for handling large numbers of work visas.
Those are, I'm sad to say, pretty much the same conclusions I've come to. I don't like sounding like a 1920s IWW organizer or something - it goes very much against my usual tendencies. And I continue to think that unionism in the sciences would be a bad idea. But drumming up cheap labor by pretending that there's a shortage of it is a bad idea, too.
As mentioned above, Teitelbaum has a book out on this subject - here it is. Next time you run across someone going on about scientist shortages, hit them over the head with it.
Comments (42)
+ TrackBacks (0) | Category: Business and Markets | Current Events
That's the take-home of this post by Adam Feuerstein about La Jolla Pharmaceuticals and their kidney drug candidate GCS-100. It's a galectin inhibitor, and it's had a rough time in development. But investors in the company were cheered up a great deal by a recent press release, stating that the drug had shown positive effects.
But look closer. The company's bar-chart presentation looks reasonably good, albeit with a binary dose-response (the low dose looks like it worked; the high dose didn't). But scroll down on that page to see the data expressed as means with error bars. Oh dear. . .
Update: it's been mentioned in the comments that the data look better with standard error rather than standard deviations. Courtesy of a reader, here's the graph in that form. And it does look better, but not by all that much:
Comments (39)
+ TrackBacks (0) | Category: Business and Markets | Clinical Trials
Bruce Booth has opened up the number of authors who will be posting at LiveSciVC, and there's an interesting post up on startups now from Atlas Ventures' Mike Gilman. Edit: nope, my mistake. This is Bruce Booth's! Here are some of his conclusions:
here's a list of a few of the perceived advantages of Pharma R&D today:
Almost unlimited access to all the latest technologies across drug discovery, ADME, toxicology, and clinical development, including all the latest capital equipment, compound libraries, antibody approaches, etc
International reach to support global clinical and regulatory processes to fully enable drug development programs
Deep and insightful commercial input into the markets, the pulse of the practicing physician, and the payors on what's the right product profile
Gigantic cash flow streams that provide 15-20% of the topline to support a largely "block grant" model of R&D (fixing R&D spend to the percentage of sales)
Decades of institutional memory providing the scar tissue around what works and what doesn't (e.g., insight into project attrition at massive scale)
This is a solid list of advantages, and they all have real merit.
But like the biblical Goliath, whose size and strength appeared to the Israelites as great advantages, they are also the roots of Pharma's disadvantages. All of these derive their value as inward and relatively insular forces. Institutional memory in particular can serve to either unlock better paths to innovation or to stifle those that want to explore new ways of doing things. Lipinski's Rules, hERG liabilities, and other candidate guidelines derived from legacy "survivor bias"-style analyses are case examples of this tension – unfortunately the stifling aspects rather than the unlocking ones often triumph in big firms.
Further, these impressive corporate R&D "advantages" are of course the product of Big Pharma's path-dependency: single blockbuster successes discovered in the '60s-70s led to early mergers in the '80-90s, and bigger mega-mergers in the late 90s-00s, to form the organizations of today. Bigger and bigger R&D budgets buying up more and more "things" in the quest for improved productivity. In a sense, the growth drivers underlying these mergers acted like the excessive hGH coming from Goliath's pituitary – the scale and constant growth pressure was a product of a disease, not a design.
He makes the point earlier on that constraints on spending, while they may not feel like a good thing, may actually be one. More money and resources often leads to box-checking behavior and a feeling of "Since we can do this, we should". There's some institutional political stuff going on there, of course - if you've checked off all the boxes that everyone agrees are needed for success, and you still don't succeed, then it can't be your fault. Or anyone's. That's not to say that all failures have to be someone's fault, but this sort of thing obscures those times when there's actual blame to go around.
The post also goes into another related problem: if you have all these resources, that you've paid for (and are continuing to pay for to keep running), then if they're not being used, things look like they're being wasted. They probably are being wasted. So stuff gets shoveled on, to keep everything running at all times. It's certainly in the interest of the people in those areas to keep working (and to be seen to be keeping working). It's in the interest of the people who manage those areas, and of the ones who advocated for bringing in whatever process or technology. But these can be perverse incentives.
The main problem I have with the post is the opening analogy to the recent Mars mission launched by India. I have to salute the people behind the Mangalyaan mission - it's a real accomplishment, and if it works, India will be only the fourth nation (or group of nations) to reach Mars. But going on about how cheaply it was done compared to the simultaneous MAVEN mission from the US isn't a good comparison. Yes, the Indian mission is eight times cheaper. But it has one quarter the payload, and is targeted to last about half as long, and that's leaving out any consideration of the actual instrumental capabilities. It's also worth noting that the primary goal of the Mangalyaan mission is to demonstrate that India can pull it off; any data from Mars are (officially) secondary. I'd find the arguments about small and large Pharma more convincing without this comparison, to be honest.
But the larger point stands: if you had to start discovering drugs from scratch, knowing what's happened to other, larger organizations, are there things you would do differently? Emphasize more? Avoid altogether? A startup allows you to put these ideas into practice. Retrofitting them onto a larger, older company is nearly impossible.
Comments (28)
+ TrackBacks (0) | Category: Business and Markets | Drug Industry History
FierceBiotech has their roundup of the top areas of the US for venture capital funding in biopharma in 2013, and naturally, San Francisco and the Boston area are fighting it out for the top spot. But Oakland the the east Bay region are in a separate category, and if those are wrapped into the rest of SF, the whole Bay area wins out by a pretty good margin.
But, as was pointed out by Nick Taylor on Twitter, San Francisco (not even counting Oakland, etc.) and Boston together raised more biopharma VC funding than all of Europe put together.(See slide 10 here). SF raised $1.15 billion, and Boston $0.93, while all of Europe was about $1.9 billion.
And then there's the rest of the Bay area, San Diego, Seattle, NY/NJ/Philadelphia, the Research Triangle and everyone else. In medical research, the US is the startup capital of the world.
Novartis has always been very, very quiet about their re-orgs and layoffs, to the point that when I and others write about them, we get hits from people at Novartis trying to find out what's going on. John Carroll at FierceBiotech has experience this as well, and he now has this story, from a reporter at the Swiss Tages-Anzeiger newspaper, that says that the company has actually eliminated between 3,000 and 4,000 jobs since last fall.
That comes to about a thousand in Europe (500 of them in Basel), 760 in the US (mostly in the sales force), and 400 during the closure of Horsham in the UK. My impression is that many of the others represent various manufacturing sites. Congratulations to the Zürich newspaper's Andreas Möckli for digging all this out - it could not have been easy. Here's my translation of the introductory paragraph:
It's a proven pattern for the drug company - Novartis is built up, worldwide, from various sites, but the whole extent of its actions are never communicated. While other companies inside (and outside) the industry announce their staff reductions with concrete numbers, Novartis is often content just confirming local media reports. At its Group level, the company has never announced any job cuts, even though jobs are lost in different locations. . .
That McKinsey piece I mentioned the other day, the one saying that big drug mergers have pretty much worked out just fine, has been pretty thoroughly torn apart in the comments section. A reader has sent along another report from one of their competitors in the high-priced consulting game, this overview from Deloitte.
Most readers won't find much in there that's new. But at least you won't find so many things in there that make you wonder what's in their water supply. And there are some non-rosy parts, for sure:
While, the U.S. Food and Drug Administration (FDA)
approved 39 new molecular entities in 2012, up from 31 in 2011 and the highest number since 199644 (Figure 4), a Deloitte United Kingdom Centre for Health Solutions analysis of the late-stage pipelines of the leading 12 life sciences companies indicates that R&D returns have been declining since 2010. Life sciences innovators are feeling the impact of rising costs and a decline in forecasted sales revenues driven by an age of austerity and the patent expirations of many blockbuster drugs. The cost of developing an asset from discovery to commercialization has increased by 18 per cent, from $1,094 million in 2010 to $1,290 million in 2013. Over the same time period, the forecasted peak sales (highest-value sales in a single year) of an asset have declined by over 40 percent, down from $816 million in 2010 to $466 million in 2013. Total forecast sales over the lifetime of a product have also declined since 2010 and, in 2013 are estimated to be $4.6 billion.
I don't know how much those estimates jump around under normal conditions, but those are certainly not good trends. The overall picture, while not relentlessly gloomy, is certainly not relentlessly happy. You can extract some combinations out of the report that sound good, though, sort of like those Hollywood movie-deal pitches - you know, "Ocean's 11. . .in space!". In this case, I think the pitch would be "Biosimilars. . .in China!".
If you're in the mood for another reason why you should always be cautious about your biopharma investments, look no further than Galena Biopharma (GALE to its many clueless fans). I've been following this story over the last couple of weeks, and what a mess it is. Galena is a small company in Oregon with a few assets, including a cancer vaccine candidate. Its stock hovers in the low single digits, as is appropriate. But in December and January, it began to trade up, and up. From $2/share to $4. Then to $6, and then higher. And this on no particular news or change in the company's prospects, which for a stock like this is often a sign of "momentum" players getting involved. "Momentum" investing is a fancy name for "I'm buying this because it's going up", and the people who do this sort of thing are understandably anxious for you to buy some, too. They're also very, very unwilling to hear about anything that might cause the stock to go back down, because the proper direction for stocks, we must remember, is up. They only go down because of evil short bashers; everyone knows this.
Adam Feuerstein of TheStreet.com delivered a great big dose of that evil stuff (known to the rest of us as "reality") on February 12 with this article, which showed why the stock had been rising. The company was paying a PR firm to beat the drums for it, said drum-beating going as far as having people post multiple supposedly-independent articles on sites like Seeking Alpha under a list of pseudonyms.
An outfit called the "DreamTeam Group" was hired for the promotion. They run a stable of stock-touting web sites, full of wonderful tales about the companies that are paying them to say these wonderful things. And they spread the word on other sites (as above), and on Twitter, by e-mail and whatever means come to hand. If carrier pigeons come back into fashion, you can count on one fluttering down with a hot stock tip for you. And if you're greedy and stupid, you could see all this hype and convince yourself that a Great Opportunity is spawning right in front of you - why, all these people are buzzing about this hot little company, and money is right there for the taking. The only reason not to get in on a deal like this would be a lack of vision.
Galena's insiders do not lack vision. Indeed, they have proven beyond any doubt that money was in fact there for the taking. GALE peaked at nearly $8/share, but its directors and officers were unloading millions of dollars worth of shares into that market. And who could blame them? These are legal financial transactions between consenting adults, and if one set of those adults know what's going on and the other set doesn't, well, it's that kind of world, isn't it? A look at any jungle will show the larger predators eating the smaller ones, and God knows the Street isn't any different.
Yesterday GALE closed at about $4, and many of its "investors" are hopping mad about that, as a look at Feuerstein's mailbag will show. But here are some cynical people who figure that the company is actually worth about seventy-two cents a share. Reasonable observers can disagree about that figure. But if you want to argue that the company is cruelly undervalued at $4, you are probably not a reasonable observer. Or you bought at $7. Same thing.
Update: if you'd like to know why people are so skeptical of the prospects for Galena's vaccine, look no further than this comment. It's right on target.
Comments (64)
+ TrackBacks (0) | Category: Business and Markets | The Dark Side
Back in 2010, I wrote about InterMune's drug for idiopathic pulmonary fibrosis, pirfenidone. The company's stock shot up on hopes that the compound would make it through the FDA, and then went straight back down when those proved ill-founded. The agency asked them for more data, and I wondered at the time if they'd be able to raise enough cash to generate it.
Well, they did, and the effort appears to have been worth it: the company says it met all its endpoints in Phase III, and is headed back to the FDA with what appears to be a solid story. Note that this press release, as opposed to the Pfizer one that I was mentioning earlier today, is full of data.
The company's stock has shot up, once again. If you've been an InterMune investor over the last few years, your fingernails are probably in bad shape and your combover is no longer plausible. The stock has had wild moves on rumors of takeovers (or lack of same) and anticipation of these clinical results. But good for them: they stuck with their compound, and it looks like it's paid off. And, just as a side note, good for people with fibrosis, too, eh?
Comments (4)
+ TrackBacks (0) | Category: Business and Markets | Clinical Trials
Several people sent along this article from McKinsey Consulting, on "Why pharma megamergers work". They're looking (as you would expect) at shareholder value, shareholder value, and shareholder value as the main measurements of whether a deal "worked" or not. But John LaMattina, who lived through the Pfizer megamerger era and had a ringside seat, would like to differ with their analysis:
The disruption that the integration process causes is immeasurable. Winners and losers are created as a result of the leader selection process. Scars form as different research teams battle over which projects are superior to others. The angst even extends to one's home life as people worry if their site will be closed and that they'll be unemployed or, at best, be asked to uproot their families halfway across the country to a new research location. In such a situation, rumors are rife and speculation rampant. Focus that should be on science inevitably get diverted to one's personal situation. This isn't something that lasts just a few weeks. Often the integration process can take as much as a year.
The impact of these changes are not immediate. Rather, they take some years to become apparent. The Pfizer pipeline of experimental medicines, as published on its website, is about 60% of its peak about a decade ago, despite these acquisitions. Clearly, a company's success isn't assured by numbers, but one's chances are enhanced by more R&D opportunities. I would argue these mergers have taken a toll on the R&D organization that wasn't anticipated a decade ago.
Well, there have been naysayers along the way. "I think the Pfizer-Wyeth merger is a bad idea which will do bad things". "I'm deeply skeptical" is a comment from 2002. And here's 2008: "Pfizer is going to be having a rough time of it for years to come".
But here's where McKinsey's worldview comes in. Look at that last statement of mine, from 2008. If you just look at the stock since that date, well, I've been full of crap, haven't I? PFE has definitely outperformed the S&P 500 since the summer of 2008, and especially since mid-2011. There's your shareholder value right there, and what else is there in this life? But what might they have done, and what might the companies that they bought and pillaged have done, over the years? We'll never know. Things that don't happen, drugs that don't get discovered - they make no sound at all.
Comments (39)
+ TrackBacks (0) | Category: Business and Markets | Drug Industry History
If you want to hear the most perfectly conventional wisdom about STEM jobs, then come and pay heed to John Lechleiter, the CEO of Lilly. He's been giving speeches and writing op-eds for some time about the issue, and he has another one out in Forbes. It's the same one. It's always the same one:
Right now, there are over 600,000 unfilled manufacturing jobs in America.
Many employers are eager to hire. They've got capital set aside specifically to invest in expanding their workforce. And they have applicants — problem is, many of them simply don't have the training and education needed to perform the work.
Largely to blame is the "STEM" skills gap, so-called after the core subjects of science, technology, engineering and math. It's real and it's growing. If we're going to retain America's greatest competitive advantage — our genius for innovation — we must inspire more kids to pursue STEM skills through education that's engaging and effective.
It's hard to speak up against this without sounding like some sort of villain out of Charles Dickens. "Study science and math? Fah! Filling their heads with nonsense, I call it!". And I really can't argue against the idea that students should be taught these subjects, or against the idea that they certainly could be taught better than they are now. So why is Lechleiter going around saying that he's in favor of apple pie, over and over and over?
My guess is that this is only half the speech. Here's the other half, where he blames tax and immigration policy. Lilly, as is well known in the industry, has been shedding employees with relentless energy for many years now. They've offshored jobs, they've ditched whole departments and hired them back as lower-paid contractors, they've reduced head count in just about every way you can imagine short of launching people into space. But given the fix that the company's in, that's still not enough.
This history makes reading any of Lechleiter's editorials a bit hard to take. For example:
And just like other STEM-centric industries, biopharmaceutical firms face a scarcity of incoming talent. Nationally, private industry is expected to add about one million new STEM positions over the next decade. But there aren't even enough qualified applicants to replace the Baby Boomers retiring right now.
How about the people who have been "retiring" from Eli Lilly over the past few years? How about the ones that are going to feel the recently-announced billion-dollar cutback in Lilly's R&D budget? They're going to do that without laying more people off? And that's after vast reductions have already taken place. In July 2004, the company had 45,835 employees. Now they say that they have "over 37,000", and keep in mind that they've added several thousand people just by acquisitions (i.e., not by creating new positions). So the total loss of jobs since 2004 is probably around 12,000.
And their CEO goes around talking about having trouble hiring people.
Molecular biologist Swapnika Ramu, a reader from India, sends along a worthwhile (and tough) question. She says that after her PhD (done in the US), her return to India has made her "less than optimistic" about the current state of drug discovery there. (Links in the below quote have been added by me, not her:
Firstly, there isn't much by way of new drug development in India. Secondly, as you have discussed many times on your blog. . .drug pricing in India remains highly contentious, especially with the recent patent disputes. Much of the public discourse descends into anti-big pharma rhetoric, and there is little to no reasoned debate about how such issues should be resolved. . .
I would like to hear your opinion on what model of drug discovery you think a developing nation like India should adopt, given the constraints of finance and a limited talent pool. Target-based drug discovery was the approach that my previous company adopted, and not surprisingly this turned out to be a very expensive strategy that ultimately offered very limited success. Clearly, India cannot keep depending upon Western pharma companies to do all the heavy lifting when it comes to developing new drugs, simply to produce generic versions for the Indian public. The fact that several patents are being challenged in Indian courts would make pharma skittish about the Indian market, which is even more of a concern if we do not have a strong drug discovery ecosystem of our own. Since there isn't a robust VC-based funding mechanism, what do you think would be a good approach to spurring innovative drug discovery in the Indian context?
Well, that is a hard one. My own opinion is that India only has a limited talent pool as compared to Western Europe or the US - the country still has a lot more trained chemists and biologists than most other places. It's true, though, that the numbers don't tell the story very well. The best people from India are very, very good, but there are (from what I can see) a lot of poorly trained ones with degrees that seem (at least to me) worth very little. Still, you've still got a really substantial number of real scientists, and I've no doubt that India could have several discovery-driven drug companies if the financing were easier to come by (and the IP situation a bit less murky - those two factors are surely related). Whether it would have those, or even should, is another question.
As has been clear for a while, the Big Pharma model has its problems. Several players are in danger of falling out of the ranks (Lilly, AstraZeneca), and I don't really see anyone rising up to replace them. The companies that have grown to that size in the last thirty years mostly seem to be biotech-driven (Amgen, Biogen, Genentech as was, etc.)
So is that the answer? Should Indian companies try to work more in that direction than in small molecule drugs? Problem is, the barriers to entry in biotech-derived drugs are higher, and that strategy perhaps plays less to the country's traditional strengths in chemistry. But in the same way that even less-developed countries are trying to skip over the landline era of telephones and go straight to wireless, maybe India should try skipping over small molecules. I do hate to write that, but it's not a completely crazy suggestion.
But biomolecule or small organic, to get a lot of small companies going in India (and you would need a lot, given the odds) you would need a VC culture, which isn't there yet. The alternative (and it's doubtless a real temptation for some officials) would be for the government to get involved to try to start something, but I would have very low hopes for that, especially given the well-known inefficiencies of the Indian bureaucracy.
Overall, I'm not sure if there's a way for most countries not to rely on foreign companies for most (or all) of the new drugs that come along. Honestly, the US is the only country in the world that might be able to get along with only its own home-discovered pharmacopeia, and it would still be a terrible strain to lose the European (and Japanese) discoveries. Even the likes of Japan, Switzerland, and Germany use, for the most part, drugs that were discovered outside their own countries.
And in the bigger picture, we might be looking at a good old Adam Smith-style case of comparative advantage. It sure isn't cheap to discover a new drug in Boston, San Francisco, Basel, etc., but compared to the expense of getting pharma research in Hyderabad up to speed, maybe it's not quite as bad as it looks. In the longer term, I think that India, China, and a few other countries will end up with more totally R&D-driven biomedical research companies of their own, because the opportunities are still coming along, discoveries are still being made, and there are entrepreneurial types who may well feel like taking their chances on them. But it could take a long longer than some people would like, particularly researchers (like Swapnika Ramu) who are there right now. The best hope I can offer is that Indian entrepreneurs should keep their eyes out for technologies and markets that are new enough (and unexplored enough) so that they're competing on a more level playing field. Trying to build your own Pfizer is a bad idea - heck, the people who built Pfizer seem to be experiencing buyer's remorse themselves.
Comments (30)
+ TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History | Who Discovers and Why
Bruce Booth has an update on how all the recent biotech IPOs have been doing for their investors. Overall, pretty well - which is surely why the market still seems to be humming along, despite several predictions of a dip. Now, that word "investors" covers a lot of ground. You have founders, you have people involved in the various venture capital financing rounds, you have people who bought at the IPO price, and people who've bought in afterwards. These groups are going to have profoundly different returns, but in many cases, there's been something for people to be glad about all the way down the list. Here are some of Booth's conclusions:
Big winners are well represented. There are a number of very attractive "Top 10%" returns in this IPO window. Top decile in venture capital has historically been a >5x return across any sector, including tech. These are the 1 in 10 outcomes every VC would love to have, and any LP would love their managers to deliver.
The spread of outcomes is considerable. There are as many top decile outcomes as there are money-losing investments. There are a good number of companies that got public at valuations that are significant fractions of their total invested capital. These are clearly the laggards whose shareholders hope the public markets will somehow rescue over time.
Post-IPO performance has been a big contributor to returns. The returns into the pricing of most IPOs have been modest – but a majority of the offerings have traded up, a few of them even doubling or tripling since their offerings. . . It's clear to see many of the high flier IPOs have driven the bulk of their "on paper" returns in the after-market. The hope of course is many more biotechs will outperform in future post-IPO trading.
There's a lot more data over at Bruce's site. Those post-IPO performance numbers are, naturally, subject to constant revision every trading day, and no one's made any money at all until they've said "sell". But overall, this is probably better performance than a lot of people would have predicted.
Comments (3)
+ TrackBacks (0) | Category: Business and Markets
I've written about Ethan Perlstein's work here before, and now I note that the Wall Street Journalhas an article about his crowdfunding research model.
Ethan O. Perlstein for years followed a traditional path as a scientist. He earned a Ph.D. in molecular biology from Harvard, spent five years doing postdoctoral research at Princeton and led a team that published two papers on pharmacology.
But last year, Dr. Perlstein was turned down by 27 universities when he sought a tenure-track position to set up his own lab. Hundreds of candidates had applied for a small number of positions, the universities said, a situation made worse by cuts in federal research funding.. . .
. . .Still, Dr. Perlstein's approach is unusual because he isn't raising money to support a discrete project or product. "Ethan is doing basic research," said Jessica Richman, co-founder of Ubiome, a health and wellness startup that raised more than $350,000 through crowdfunding on a site called Indiegogo. "He is selling the idea that he is an independent scientist doing research."
Dr. Perlstein plans to launch his public appeal for Perlstein Lab this week on a site called AngelList. Perlstein Lab will focus on finding drugs to treat lysosomal storage diseases, in which cells fail to produce and recycle waste. The materials accumulate in cells and can cause a range of problems, including death.
Here's his profile page on AngelList, which seeks money from what the SEC calls "qualified" investors (high net worth individuals). I think that's probably a good idea - anyone who's done "angel" type investments before will have a more realistic idea of the chance of any return (you'd hope). Crowdfunding research, in general, is something that interests me a great deal, although it's easy to think of potential problems.
Comments (12)
+ TrackBacks (0) | Category: Business and Markets | General Scientific News
AstraZeneca has announced that they're cutting back, yet again. 550 more jobs are being shed, but (unhelpfully) they're not saying what divisions of the company will shrink. More details as they arise - I would assume (or at least hope) that the folks working at AZ have more details, but you can't be sure of that, can you? This company and Eli Lilly continue to be in the worst shape among the big pharmas.
Here's an uncomfortable (but necessary) topic in the chemistry job market: a reader tells me that his company's search for someone with 2 to 5 years experience brought in (as you might expect) a flood of applications from people with much more than that (10 to 15 years). The problem is, the job (as it stands) isn't going to use most of the skills and knowledge that they've built up. It's a junior position, and they're not junior to anyone.
So here are the questions: is it OK to even apply for positions in this way? Is it (on the other end) appropriate to offer someone a "downgraded" position like this? Can it even work out if you do, or will the person taking the job not be able to fit into that role?
I'm not sure I have any good answers. My guess is that most people would have trouble fitting in this way, and that the situation would eventually result in a lot of discomfort on both sides. But on the other hand, a job is a job, and there aren't too many of them out there. On the gripping hand, though, (old science fiction reference there), less-experienced people need jobs, too, and shouldn't they be able to compete for the ones that they're best qualified for?
I've seen a variant of this situation, one that I most certainly do not recommend. At a company I know of, a person was hired into a Master's level position, and did fine. They eventually revealed, though, that they had had a PhD all along, and applied for a vacant position at that level. This strategy got them fired, though, for having lied on their original application (the company's position, which I can understand, was that if they didn't fire someone for this, how could they fire the next person who lied about something else?) In the end, people found this person a job at another smaller company in the area, so the exit wasn't as hard as it could have been, but it was still a mess.
But the questions above don't apply to stealth resumés - these are people who are being completely open about their overqualifications. So what to do?
Comments (77)
+ TrackBacks (0) | Category: Business and Markets
That AstraZeneca news about cutting back in India should be balanced against this report that Novartis is doing the opposite. It looks like the company is (A) telling everyone that their global head count will remain roughly the same, and (B) opening up a center in Hyderabad that can employ up to 8,000 people.
These jobs don't look like bench positions, though - more IT, clinical trial monitoring, HR and other office positions. But if both of those conditions hold, there's going to be a lot of reshuffling going on, from higher-wage areas to Hyderabad. Economically, it makes sense, as long as there aren't too many inefficiencies introduced along the way. And like every other arbitrage opportunity, it will go on until the price differential closes, which I hope, for everyone involved, is more a matter of wages going up as India's economy improves.
Did these people really take their life's savings and load them into a tiny biotech stock on the basis of a rumor? That's what these Provectus investors say, and they're writing to blame Adam Feuerstein when things went bad. If true, these are the investing equivalent of the "Hey, hold my beer and watch this!" stunts that win Darwin Awards. I can't even imagine.
Now here's a story that you might not have expected to see a few years ago: AstraZeneca is closing a research site in Bangalore, with some of its functions (tropical disease work) to move back to the UK. I'm not sure what this says about Bangalore, tropical diseases, or AstraZeneca (who have plenty on their agenda), but it does have a dog-bites-man man-bites-dog feel to it, rightly or not. Edit: I apparently am confused about who is normally gnawing on whom.
Comments (24)
+ TrackBacks (0) | Category: Business and Markets
Most readers here know how brutal the employment situation is for chemists (especially those involved in drug discovery). Knowing that and seeing constant headlines about the crippling shortage of so-called STEM workers is always hard to take, but there's always the danger of extrapolating chemistry (especially organic chemistry) to science and engineering in general. Surely the electrical engineers are finding jobs, right?
Surely not. The number of employed electrical engineers in the US went down by 10% last year. And according to Ron Hira at the Rochester Institute of Technology, there's more:
The number of employed software developers, the largest IT occupation segment, increased by only 1.75%, to 1.1 million, a gain of 19,000. The unemployment rate for developers last year was 2.7%, which is still elevated, according to Hira.
Jobs for computer systems analysts increased by 35,000, to 534,000, an increase of 7%, but Hira said it is the most common H-1B occupation and that nearly all those gains went to H-1B visa holders. . .
. . .Claims of shortages of STEM (science, technology, engineering and math) workers "have no support in fact and no connection to reality, " Hira said. "The NASDAQ is at its record high in more than a decade, only at the height of the dot-com bubble was it higher." adding that hiring for electronics engineers should be booming.
There are plenty of other numbers that say the same thing: there is no shortage of scientists and engineers in this country. There may still be some specialties where it's hard to find good people, although I don't know what they are and I'd like to see proof of that first, but overall there is no STEM shortage. Unless, of course, you ask the head of PhRMA. Or Eli Lilly's CEO. Or Bayer. Or the schools that profit by driving more people into science and engineering studies. Or the President's Council of Advisors on Science and Technology. Or Accenture. Or Mark Zuckerberg.
We have a serious disconnect here. Is there a shortage of skilled labor, or just a shortage of really cheap skilled labor? Some of that disconnect may be on display later this afternoon, as David Harwell of the ACS Career Management and Development office starts taking questions live over at Reddit Science. Might be worth a look. . .
Comments (50)
+ TrackBacks (0) | Category: Business and Markets
Novartis says that it's cutting about 500 positions in Switzerland, in what they're saying are support and pharma development roles. They're also closing a plant in Suffern, NY. The company is famously tight-lipped about this sort of thing, so there really aren't any details on whether this is a continuation of last year's rearrangements or what. More information if any shows up!
Here's one of those stories that makes you wonder: one-off or beginning of a trend? A generic drug company, Actavis, has decided to get out of the Chinese market. Too much hassle for too little money, and that last part is something you don't hear about China all that often. (For centuries, entrepreneurs of all kinds have dreamed about "What if just one out of a thousand of them bought my stuff. . .")
"It is not a business friendly environment," Bisaro said at the JPMorgan Chase & Co. health-care conference in San Francisco. "If we're going to allocate capital, we're going to do so where we can get the most amount of return for the least amount of risk. And China is just too risky."
. . .Given Actavis's small presence in China, "it wasn't worth the aggravation, the frustration or the concern," he said.
Bisaro said there doesn't appear to be a level playing field, which makes it hard for companies to compete. "You need a certain consistency in application of rules, and I'm not certain China has achieved that consistency yet."
Generic profit margins are lower, so you won't see the research-based drug companies coming to this conclusion any time soon. But neither is it impossible. Companies would hate to pass up the Chinese market, but there's a set point for everything.
Matthew Herper at Forbes got a phone interview in with Merck's Roger Perlmutter, and some interesting things came up:
Perlmutter has praised chemistry – the ability to synthesize new drug molecules, as one of Merck's core strengths. Which is why rumors that he's been laying off chemists came as a surprise. And the rumors are true.
"It is the case that we have a superb chemistry organization, and having coming back I'm impressed with the progress the chemistry organization has made in terms of the compositions of matter," he says. In hepatitis C, in particular, he notes that molecule are 700 to 1,000 daltons, way bigger than the company would have previously considered using. But he says he needed to clear out some chemists to hire more biologists.
"The reality is, as every chemist knows, you need great biologists to identify where to focus and we need to strengthen our biology capabilities and that just requires a different kind of investment. and we need to make headroom — it's kind of a zero sum game. I was not happy, I don't want to fire people, but on the other hand I know we have to live within our means."
It seems that he could drop the "kind of" in front of "zero sum game", if that's what's really going on (and it may well be). It's true that you can have the wrong balance of chemists to biologists, and you can have it in either direction. We can argue (and people do) about what the proper settings are, but I don't think that anyone would dispute that it's possible to go too far. Whether Merck's research organization was, in fact, that imbalanced is open to argument, too, of course.
But when I hear this sort of rationale, I can't help but think of Randall Jarrell's lines: "You can't break eggs without making an omelette / - That's what they tell the eggs."
Comments (67)
+ TrackBacks (0) | Category: Business and Markets
The J. P. Morgan conference has been going on this week, with biopharma companies showing their wares to the investment community. Bruce Booth is out there (with many another venture capitalist), and you can tell from this post that he's been around that track before. I'm surprised he stopped at only ten white lies:
6. "We've got a ton of Pharma interest in this deal." Translation: Our next meeting is actually with a Pharma company. Translation #2: You should have seen me work the room at the Pharma Reception last night.
I've written about Alnylam, one of the flagship RNA interference companies, a few times around here. A couple of years ago, I was wondering if they'd win the race to come up with results that would keep the doors open.
Well, if you haven't been keeping up with the news in this space, they made it. Sanofi has just bought a large stake in the company, on the strength of the recent clinical results with patisiran, an RNAi therapy for the rare disease transthyretin-mediated amyloidosis (ATTR). Alnylam has a lot on their schedule these days, and the Sanofi deal will provide a big boost towards getting clinical data on all these ideas. Congratulations to them, and to RNAi in general, which has had a lengthy (and often overhyped) growth phase, and now might be starting to realize its promise.
Update: more on the story here.
Comments (7)
+ TrackBacks (0) | Category: Business and Markets | Drug Development
So we finished the year with 27 new drugs approved. Compared to the 39 approvals the year before, is that a reversion to the mean, a sudden downturn, a meaningless fluctuation, or what?
John Carroll seems to be in the "something to worry about" camp at FierceBiotech:
The wave of new drug approvals that had been building at the FDA has broken. According to the official tally of new drug and biologics approvals at the agency, the biopharma industry registered only 27 OKs for new entities in 2013--a sharp plunge from 2012's high of 39 that once again raises big questions about the productivity and sustainability of the world's multibillion-dollar R&D business.
After 2012 some experts boasted that the industry had turned a corner, with the agency boasting that it was outstripping the Europeans in the speed and number of new drug approvals. But for 2013 the numbers look a lot closer to the bleak average of 24 new approvals per year seen in the first decade of the millennium than the 35 per year projected by McKinsey through 2016.
And here's Bernard Munos at Forbes on the same topic. He thinks that looking at the industry as a monolith might be obscuring something:
Overall, 2013 was good or great for half of big pharma, and forgettable for the rest. Is this the beginning of a split in the group that has long dominated the industry? Some companies may counter that approval statistics is a lagging indicator that reflects past performance and not the promise of their pipelines. If one looks at FDA's Breakthrough Designations, however, which is a leading indicator of pipeline quality, they tend to show the same picture, and cluster around the companies that have been most successful. . .Success seems to beget success, which suggests that today's winners may also be tomorrow's winners.
One thing remains worrisome: 11 new drugs per year — the average big pharma output for the last 5 years — is not enough to support these companies' $370 billion of current sales, especially since only 3 or 4 will become blockbusters. The giddy promises to deliver 2 drugs per year consistently have not materialized, and there is no indication that they will. . .
(You can tell he's never gotten over Lilly's promise some years ago to deliver approvals on that schedule, and who could blame him)? As for me, I wish that I had some sort of crystal-ball insight to deliver, but I don't. Drug discovery (and thus NDA filings and approvals) seems to be such a statistically noisy process that it's hard to draw conclusions from a year or two of data. Let's watch what happens this year and see both what the numbers are and how the FDA and the companies involve try to interpret them. One thing to note already is how some people were ready to use the 2012 approvals as clear evidence that the industry was getting more productive - are the 2013 numbers such clear evidence in the other direction, or not?
Comments (26)
+ TrackBacks (0) | Category: Business and Markets | Regulatory Affairs
Here are Matthew Herper's grades for the big pharma/biotech companies in 2013. The bottom two companies will probably not come as a surprise to readers of this site (or to anyone who's been paying attention). Number One, while a reasonable pick, is one that you could have probably surprised folks with a few years ago. . .
As the Wall Street Journal reported last night, Bristol-Myers Squibb is getting out of the diabetes business entirely, selling its collaboration with AstraZeneca back to AZ.
As part of the transaction, and subject to local consultation and legislation, Bristol-Myers Squibb and AstraZeneca anticipate that substantially all employees of Bristol-Myers Squibb dedicated to the diabetes business will be transferred to AstraZeneca. A number of R&D and manufacturing employees dedicated to diabetes will remain with Bristol-Myers Squibb to progress the diabetes portfolio and support the transition for these areas. Bristol-Myers Squibb will work closely with AstraZeneca to ensure a smooth transition.
What happens once that diabetes portfolio is "progressed"? I haven't heard details yet, and they may not even be available. Given the recent moves by BMS, though, this announcement shouldn't come as a huge surprise. It does say some interesting things about the positions of the two companies. BMS sees big opportunities in its oncology portfolio, and by comparison, the diabetes business looks slow-moving and too expensive for the return it offers. AstraZeneca, by contrast, needs all the help it can get. Actual drugs that are bringing in actual money, and whose patents are not expiring next Tuesday? Not bad.
Comments (21)
+ TrackBacks (0) | Category: Business and Markets | Diabetes and Obesity
Here's an interesting year-end list - from Bruce Booth at Atlas Venture, it's the list of seed-stage biotech companies that they've funded this year. Unless you're a very, very close follower of the field, you'll never have heard of most (or all) of them, but all the biotech/small pharma companies you've heard of have been at this stage at some point.
What's also interesting is the upfront admission that only about half of these, at the most, are going anywhere, and (as Booth says) some of them are "already trending negative". In that business, if some of your bets aren't "trending negative", then you aren't making enough of them, because no one's good enough just to put money down on the winners.
GSK has announced that they're going to change the way their sales and marketing organization does business, and how they compensate people in it. They're removing all individual numerical targets for their sales reps worldwide, for one thing, following up on changes they made to the system in the US a couple of years ago. I don't know how that's worked out here, in the real world, so I can't comment much on that one.
A big change, though, is that the company has announced that it:
". . .will move to end the practice of paying healthcare professionals to speak on its behalf, about its products or disease areas, to audiences who can prescribe or influence prescribing.
GSK will also stop providing financial support directly to individual healthcare professionals to attend medical conferences and instead will fund education for healthcare professionals through unsolicited, independent educational grant routes.
I think that this is a necessary part of getting the industry's image back, to the extent that this can be done. Here's a possibly useful rule of thumb: if the headline about you stopping something looks embarrassing all by itself ("GlaxoSmithKline to Stop Paying Doctors for Endorsements"), you probably shouldn't have been doing it in the first place.
The company says that they will continue to pay people for work on clinical trials and the like (and I don't see how anyone could do otherwise), but the speak-up-for-us-you-key-opinion-leaders stuff will not be missed. Or shouldn't be. But there's another part of the press release I found interesting:
The company has committed to disclose the payments it makes to healthcare professionals and already does so in several countries including the USA, Australia, UK, Japan and France in line with locally agreed government or industry association standards. GSK will continue to disclose the payments it makes for clinical research advisory activities and market research in these countries and will also continue to work towards transparency in other countries as industry associations or governments establish specific guidelines for disclosure.
Now, there's a country that's missing from that list. . .one where payments are not required to be disclosed and "locally agreed" standards might be a bit harder to get a handle on. Where could it be?
Here's another look back at biotech's state in 2013, from Luke Timmerman. He's using the well-known "hype cycle" to evaluate where various topic and companies stood: are they in the Peak of Inflated Expectations, the Trough of Disillusionment, the Slope of Enlightenment, or the Plateau of Productivity? (These always sound like locations out of John Bunyan to me, which is not altogether inappropriate).
I think he's right that the hottest area right now are the immunotherapies, which have been notching up some dramatic results. But much as I'd like them to, I don't think that they're going to be able to march through the rest of the oncology field in similar fashion. (And yes, I know that I'm asking to put small-molecule oncology out of business with a wish like that. Let's put it this way - if I get cancer, will I be glad that someone has a treatment for it, even if it wasn't from my own field?)
I also note that he has Moderna (and messenger RNA-based therapies in general) on the hype list. They made a big splash back in March, and since then things have been pretty quiet (as they probably should be - those guys have a lot of work to do). As I mentioned at the time, my natural wariness at this-changes-everything platforms is cut, in small proportions, with the knowledge that somethings these things do change everything. We'll see, but I'll bet we won't see in 2014.
I'm sure that many readers here will be interested to hear that (according to some outfit called CareerBliss.com) the happiest company in America to work for is. . .Pfizer. Probably makes you happy just to hear about it, doesn't it?
I always enjoy this one: time to vote on Adam Feuerstein's "Worst Biotech CEO" awards for this year. There are, as is so often the case, some real stinkers on the list. Tough choices await.
The tension between drug companies and regulatory agencies is constant. It would be there even if no one cared a bit what drugs cost, because you can talk about safety and efficacy without ever mentioning a price. But since we do care about drug prices, and are coming to care more about them with every passing month, the tension is higher than ever. The questions aren't just "Is this drug safe?" or "Is this drug efficacious", or even "Is this drug relatively safe compared to its level of efficacy". You get into the really hard ones like "Is this drug's level of efficacy worth its price?"
Great Britain's NICE is at the forefront of these arguments, and some of the largest drug companies have recently been arguing back. In a public letter, they're calling on the Prime Minister to do something about the way the NICE approves new compounds:
We all accept there are increasing pressures on NHS spending, but there is a prevailing myth that medicines are expensive. In fact, spend on medicines was less than 10pc of total NHS expenditure in 2011. Britain pays less for its medicines than almost anywhere else in Europe. Over £7bn has already been saved from the medicines bill. No other part of the NHS is saving the taxpayer money on such a scale.
Medicines should not just be seen as a cost. They are an investment and an essential part of improving patient outcomes. Yet, fewer than one in three medicines have been recommended by the National Institute for Health and Care Excellence (NICE) for use in the NHS in line with their licence since 2005. And the proportion of medicines refused by NICE is only increasing.
The last straw seems to have been a recently-announced "voluntary" agreement with drug companies to freeze the costs of supplying drugs to the National Health Service. That was voluntary, in the sense of there would be mandatory price cuts if they didn't comply. That kind of voluntary. In turn, the drug companies' letter also has a part that might be titled "And If You Don't. . ." It goes like this:
. . .At a time when there is fierce global competition to attract investment in life sciences, the commercial environment is critical. The Government must work harder to get this right. It's important that the impact that our medicines have on saving and improving people's lives, and the innovation, economic stimulus and jobs that they deliver, is valued.
The key part is the "fierce global competition" phrase. I'd translate that as "You know, we don't have to employ people in this country. There are other places to go." Mind you, at least as far as medicinal chemistry is concerned, most companies in the UK seem to have already made good on that threat, even before the threat was made. But there are plenty of other jobs besides med-chem. We'll see how the UK government reacts.
Getting the week off to a bad start is this news from Eisai. They're stopping small-molecule work at their site in Andover, and (like everyone else, it seems) chopping med-chem at their UK site as well. Worldwide, it looks like a loss of 130 positions.
One way to look at a drug company's pipeline and portfolio is the "Freshness Index" - how much of its sales are coming from products approved within the past five years. Here's Bernard Munos earlier this year on this topic, where he shows that (too much) revenue lately has been coming from older products. At the time, the figures for the big companies started off with Novartis (19% "fresh" sales), GlaxoSmithKline (12%), J&J (11.8%) and Pfizer (10%).
I bring this up because there's a new look at the freshness index. This one has only products from 2010 or later, and year-to-date sales figures. Under those conditions, it's J&J in the lead (23.4% of sales), then Novartis (17.8%), and Novo Nordisk (13.6%). Now, Novo was not in Munos's list, so I can't say if there's been much of a change there or not, but I find the change in J&J's figures interesting. I don't think that's all due to new approvals - is it older stuff slipping off the list? The new list also has GSK down neat the bottom at 2.3% "fresh", which shows you how much the cutoffs matter to these assessments.
One thing both lists agree on, though, is Eli Lilly. They're at the bottom in both, showing 0.8% of their sales coming from anything approved since 2010. That can't be good, and it isn't. AstraZeneca, Pfizer, Merck, and Sanofi are all in the single digits as well. So's Roche, but their long-running Genentech-driven biotech products make up for that. AZ and Lilly don't exactly have that cushion.
I'm hearing reports of re-organization and worse at Shire's UK R&D today (Basingstoke). There had been reports in the press earlier this month, but things seem to be underway. The medicinal chemistry situation in the UK is surely the worst it's been in living memory. . .
A reader sent along a note about some of the recent layoffs we've been seeing across pharma/biotech companies. Different organizations have very different ways of handling things like stock units and options, and in a layoff one of the key variables is the vesting schedule. Remember, if you have compensation of this sort that hasn't vested, it isn't yours. It may show up in your statements (albeit under its own category), and you will have seen the announcements of it being awarded to you, but until this stuff vests that's all provisional.
I think that most people realize that part, although if you don't, it's going to come as a nasty surprise. What seems to have taken some people unaware recently, though, is that companies have different schedules for vesting the employer match contributions in 401(k) accounts. Some companies vest immediately, but those are probably not a majority. The rest follow different schedules, and if you are laid off, that unvested money is going to disappear unless the company specifically changes its mind about that.
Now that said, there's not much you can do about this, but it's worth knowing the real situation in advance so you can plan accordingly. Seeing money disappear from their retirement accounts was something of a shock to people in these recent layoffs, from what I'm told, making a bit situation just that much more painful.
The topic of "stack ranking" came up around here recently, so I wanted to pass on some news in this area. Microsoft, one of the most notorious practitioners, has apparently decided to stop. It's not clear to me just what they're replacing it with, but whatever system they're trying out could hardly be more demoralizing than what it's replacing. Drawing raises and bonuses out of a bingo cage would be preferable - at least then people wouldn't be at each other's throats.
Even if all members of a team performed well that year, the manager was required to designate a set percentage as underperformers — a practice that drew fire from employees. Many thought the system rewarded internal politicking, withholding of information and back-stabbing, rather than rewarding innovation or cooperation.
That review system has been blamed by some for causing Microsoft to fall behind other tech companies in the past decade in key areas such as mobile computing.
In an email to employees Tuesday, Lisa Brummel, Microsoft's head of human resources, wrote that the new review process will now have "no more curve."
"We will continue to invest in a generous rewards budget, but there will no longer be a predetermined targeted distribution," she wrote. "Managers and leaders will have flexibility to allocate rewards in the manner that best reflects the performance of their teams and individuals, as long as they stay within their compensation budget."
In addition, she wrote, there will be "no more ratings. This will let us focus on what matters — having a deeper understanding of the impact we've made and our opportunities to grow and improve."
It's a constant struggle, figuring out how to reward people without providing perverse incentives. And it's a problem with a lot of range, too, when you consider how it applies to businesses, schools, welfare policy, and many other areas. It's probably a safe bet that there's no general solution, but that doesn't give people an excuse to stick with something that's worse than neutral. The "two man enter, one man leave" aspect of a rank-and-yank system is definitely that. (As a side issue, it also assumes that the rating process is accurate enough to make calls like this, which is very much debatable in many organizations). Maybe Microsoft will start a trend here. . .
Comments (23)
+ TrackBacks (0) | Category: Business and Markets
Ever since Iclusig (ponatinib) (note: fixed that name as an update) ran into trouble with blood-cloting side effects, Ariad has had a huge uncertain cloud blocking out its sunlight. Now that the FDA has told them to take the drug off the market completely, it was clear what was going to happen. Happen it has: the company is laying off a large part of its workforce.
It's very much in doubt whether Iclusig will ever come back. Update: in Europe, the EMA has now said that Iclusig can remain on the market "with increased caution").And if it doesn't, it's very much in doubt whether Ariad will, or how long that might take. There's a large, mostly-completed building around the corner from me covered in blue-green glass that was going to be the home of a larger, more solvent Ariad, and no one knows what's going to happen to that, either. It's a rough business.
Update: turns out the blue-green glass one was going to be Aveo, which cratered earlier this year. Who's going to occupy that, one wonders? Ariad's is the less-complete large framework going up across from the (incongruous) Mormon church. That's a pretty large building, or will be, and you wonder who will end up in there. There are so many biopharma construction sites in this town that you need a guidebook.
Comments (23)
+ TrackBacks (0) | Category: Business and Markets | Cancer | Regulatory Affairs
So Bristol-Myers Squibb did indeed re-org itself yesterday, with the loss of about 75 jobs (and the shifting around of 300 more, which will probably result in some job losses as well, since not everyone is going to be able to do that). And they announced that they're getting out of two therapeutic areas, diabetes and neuroscience.
Those would be for very different reasons. Neuro is famously difficult and specialized. There are huge opportunities there, but they're opportunities because no one's been able to do much with them, for a lot of good reasons. Some of the biggest tar pits of drug discovery are to be found there (Alzheimer's, chronic pain), and even the diseases for which we have some treatments are near-total black boxes, mechanistically (schizophrenia, epilepsy and seizures). The animal models are mysterious and often misleading, and the clinical trials for the biggest diseases in this area are well-known to be expensive and tricky to run. You've got your work cut out for you over here.
Meanwhile, the field of diabetes and metabolic disorders is better served. For type I diabetes, the main thing you can do, short of finding ever more precise ways of dosing insulin, is to figure out how to restore islet function and cure it, and that's where all the effort seems to be going. For type II diabetes, which is unfortunately a large market and getting larger all the time, there are a number of therapeutic options. And while there's probably room for still more, the field is getting undeniably a bit crowded. Add that to the very stringent cardiovascular safety requirements, and you're looking at a therapeutic that's not as attractive for new drug development as it was ten or fifteen years ago.
So I can see why a company would get out of these two areas, although it's also easy to think that it's a shame for this to happen. Neuroscience is in a particularly tough spot. The combination of uncertainly and big opportunities would tend to draw a lot of risk-taking startups to the area, but the massive clinical trials needed make it nearly impossible for a small company to get serious traction. So what we've been seeing are startups that, even more than other areas, are focused on getting to the point that a larger company will step in to pay the bills. That's not an abnormal business model, but it has its hazards, chief among them the temptation to run what trials you can with a primary goal of getting shiny numbers (and shiny funding) rather than finding out whether the drug has a more solid chance of working. Semi-delusional Phase II trials are a problem throughout the industry, but more so here.
Comments (60)
+ TrackBacks (0) | Category: Business and Markets | Diabetes and Obesity | Drug Development | The Central Nervous System
Novartis, again. The company had already announced some cuts at their Emeryville site, but remarks in the comments section (and communicated to me directly) indicate that something even more serious is underway out there now.
More details as things become clearer. And that brings up another item: the Novartis Horsham closure earlier this week appears (again, by comments here and by personal communication) to have not been announced to the rest of the company at the time. A number of people around the organization seem to have heard about it through this site, which does not make a lot of sense to me. When I went with the blog post on this, I assumed that it was known at least inside Novartis, but apparently not.
That's something for companies to think about. This is 2013. People have phones and they have e-mail, and they've had them for a long time. Word gets out quickly. These things show up here, but they show up in other places, too, and will surely go on doing so. Leaving it to the grapevine when a press release could clear things up seems like an odd decision, but having never had to decide on a site closure myself, perhaps I'm missing something.
Update: here's the Boston Globe with an overview of what seems to be going on.
Damn it all, we just got through with Novartis closing down the Horsham site, and now I'm hearing, from several sources, that something is up at Bristol-Myers Squibb. Tomorrow and/or Friday, word has it, some sort of rearrangement is going to be announced, supposedly with loss of head count. Supposedly concentrated by therapeutic area, but who knows in these things? More details will surely be coming along.
The Novartis site at Horsham (UK) appears to be closing down. I heard night that there was to be a (rather sudden) meeting of all the managers there today, and now I'm getting word that they've been told that the entire site will be shuttered. The company had already been talking about "redeveloping" the site, but this would seem to come as a worst-case surprise. More details as they emerge.
Comments (70)
+ TrackBacks (0) | Category: Business and Markets
So says Chemjobber today. He does a good job taking this apart, and it might not surprise you to find out that the company is actually able to find people when it offers a bit more money. It's like there was some kind of market or something.
So the picture that's emerging of Merck's drug discovery business after this round of cuts is confused, but some general trends seem to be present. West Point appears to have been very severely affected, with a large number of chemists shown the door, and reports tend to agree that bench chemists were disproportionately hit. The remaining department would seem to be top-heavy with managers.
Top-heavy, that is, unless the idea is that they're all going to be telling cheaper folks overseas what to make, that is. So is Merck going over to the Pfizer-style model? I regard this as unproven on this scale. In fact, I have an even lower opinion of it than that, but I'm sure that my distaste for the idea is affecting my perceptions, so I have to adjust accordingly. (Not everything you dislike is incorrect, just as not every person that's annoying is wrong).
But it's worth realizing that this is a very old idea. It's Taylorism, after Frederick Taylor, whose thinking was very influential in business circles about 100 years ago. (That Wikipedia article is written in a rather opinionated style, which the site has flagged, but it's a very interesting read and I recommend it). One of Taylor's themes was division of labor between the people thinking about the job and the people doing it, and a clearer statement of what Pfizer (and now Merck) are trying to do is hard to come by.
The problem is, we are not engaged in the kind of work that Taylorism and its descendants have been most successfully applied to. That, of course, is assembly line work, or any work flow that consists of defined, optimizable processes. R&D has proven. . .resistant to such thinking, to put it mildly. It's easy to convince yourself that drug discovery consists of and should be broken up into discrete assembly-line units, but somehow the cranks don't turn very smoothly when such systems are built. Bits and pieces of the process can be smoothed out and improved, but the whole thing still seems tangled, somehow.
In fact, if I can use an analogy from the post I put up earlier this morning, it reminds me of the onset of turbulence from a regime of laminar flow. If you model the kinds of work being done in some sort of hand-waving complexity space, up to a point, things run smoothly and go where they're supposed to. But as you start to add in key steps where the driving forces, the real engines of progress, are things that have to be invented afresh each time and are not well understood to start with, then you enter turbulence. The workflow become messy and unpredictable. If your Reynolds numbers are too high, no amount of polish and smoothing will stop you from seeing turbulent flow. If your industrial output depends too much on serendipity, on empiricism, and on mechanisms that are poorly understood, then no amount of managerial smoothing will make things predictable.
This, I think, is my biggest problem with the "Outsource the grunt work and leave the planning to the higher-ups" idea. It assumes that things work more smoothly than they really do in this business. I'm also reminded a bit of the Chilean "Project Cybersyn", which was to be a sort of control room where wise planners could direct the entire country's economy. One of the smaller reasons to regret the 1973 coup against Allende is that the chance was missed to watch this system bang up against reality. And I wonder what will happen as this latest drug discovery scheme runs into it, too.
Update: a Merck employee says in the comments that there hasn't been talk of more outsourcing, If that proves to be the case, then just apply the above comments to Pfizer.
Comments (98)
+ TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History | Life in the Drug Labs
Here's well known chemistry blogger See Arr Oh totaling up the cost of a job hunt these days. Time does indeed equal money, with a few correction factors thrown in, and it all adds up to a lot of both of them.
But from what he tells me, he hasn't given up on the idea of a job doing drug discovery, hard path though that may be these days. I've had many interactions with him, though, and he does indeed know the field (and can obviously write about it, too). If anyone out there has a need for someone like that, I think he'd be very glad to hear about it. You could staff a productive department pretty quickly with the sorts of people who are available these days. . .
Actually, decision time was a little while back. But I've heard from more than one source that this week is when everyone in Merck's chemistry hears the details of the job cuts and rearrangements announced recently. Good luck to all concerned. . .
Comments (55)
+ TrackBacks (0) | Category: Business and Markets
As feared, the recent trouble at Ariad has indeed put their plans to move into a new site on hold. The Boston Globe has the story here. I go past this construction site all the time - well, to be accurate, if you travel around Cambridge, you past a lot of construction sites, all the time. One would assume that if Ariad has to back out that someone else will find a use for the space. . .
There's a new paper in Nature Reviews Drug Discovery that tries to find out what factors about a company influence its research productivity. This is a worthy goal, but one that's absolutely mined with problems in gathering and interpreting the data. The biggest one is the high failure rate that afflicts everyone in the clinic: you could have a company that generates a lot of solid ideas, turns out good molecules, gets them into humans with alacrity, and still ends up looking like a failure because of mechanistic problems or unexpected toxicity. You can shorten those odds, for sure (or lengthen them!), but you can never really get away from that problem, or not yet.
The authors have a good data set to work from, though:
It is commonly thought that small companies have higher research and development (R&D) productivity compared with larger companies because they are less bureaucratic and more entrepreneurial. Indeed, some analysts have even proposed that large companies exit research altogether. The problem with this argument is that it has little empirical foundation. Several high-quality analyses comparing the track record of smaller biotechnology companies with established pharmaceutical companies have concluded that company size is not an indicator of success in terms of R&D productivity1, 2.
In the analysis presented here, we at The Boston Consulting Group examined 842 molecules over the past decade from 419 companies, and again found no correlation between company size and the likelihood of R&D success. But if size does not matter, what does?
Those 842 molecules cover the period 2002-2011, and of them, 205 made it to regulatory approval. (Side note: does this mean that the historical 90% failure rate no longer applies? Update: turns out that's the number of compounds that made it through Phase I, which sounds more like it). There were plenty of factors that seemed to have no discernable influence on success - company size, as mention, public versus private financing, most therapeutic area choices, market size for the proposed drug or indication, location in the US, Europe, or Asia, and so on. In all these cases, the size of the error bars leave one unable to reject the null hypothesis (variation due to chance alone).
What factors do look like more than chance? The far ends of the therapeutic area choice, for one (CNS versus infectious disease, and these two only). But all the other indicators are a bit fuzzier. Publications (and patents) per R&D dollar spent are a positive sign, as is the experience (time-in-office) of the R&D heads. A higher termination rate in preclinical and Phase I correlated with eventual success, although I wonder if that's also a partial proxy for desperation, companies with no other option but to push on and hope for the best (see below for more on this point). A bit weirdly, frequent mention of ROI and the phrase "decision making" actually correlated positively, too.
The authors interpret most or all of these as proxy measurements of "scientific acumen and good judgement", which is a bit problematic. It's very easy to fall into circular reasoning that way - you can tell that the companies that succeeded had good judgement, because their drugs succeeded, because of their good judgement. But I can see the point, which is what most of us already knew: that experience and intelligence are necessary in this business, but not quite sufficient. And they have some good points to make about something that would probably help:
A major obstacle that we see to achieving greater R&D productivity is the likelihood that many low-viability compounds are knowingly being progressed to advanced phases of development. We estimate that 90% of industry R&D expenditures now go into molecules that never reach the market. In this context, making the right decision on what to progress to late-stage clinical trials is paramount in driving productivity. Indeed, researchers from Pfizer recently published a powerful analysis showing that two-thirds of the company's Phase I assets that were progressed could have been predicted to be likely failures on the basis of available data3. We have seen similar data privately as part of our work with many other companies.
Why are so many such molecules being advanced across the industry? Here, a behavioural perspective could provide insight. There is a strong bias in most R&D organizations to engage in what we call 'progression-seeking' behaviour. Although it is common knowledge that most R&D projects will fail, when we talk to R&D teams in industry, most state that their asset is going to be one of the successes. Positive data tends to go unquestioned, whereas negative data is parsed, re-analysed, and, in many cases, explained away. Anecdotes of successful molecules saved from oblivion often feed this dynamic. Moreover, because it is uncertain which assets will fail, the temptation is to continue working on them. This reaction is not surprising when one considers that personal success for team members is often tied closely to project progression: it can affect job security, influence within the organization and the ability to pursue one's passion. In this organizational context, progression-seeking behaviour is entirely rational.
Indeed it is. The sunk-cost fallacy should also be added in there, the "We've come so far, we can't quit now" thinking that has (in retrospect) led so many people into the tar pit. But they're right, many places end up being built to check the boxes and make the targets, not necessarily to get drugs out the door. If your organization's incentives are misaligned, the result is similar to trying to drive a nail by hitting it from an angle instead of straight on: all that force, being used to mess things up.
Comments (30)
+ TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History
If there is some chemistry hiring going on out there in the big pharma world, and more to come, Eli Lilly does not look like it's going to be joining that kind of party. The analysts following its stock are getting increasingly worked up:
As the analyst notes, there are two distinct schools of thought about Lilly's pipeline. One, represented by Tim Anderson at Bernstein, is that Lilly's broad pipeline of late-stage assets will rescue the company from the loss of patents on the company's top drugs. The bear view, though, is that more failures of high-profile programs--like the recent Phase III failure of ramucirumab for breast cancer or last year's fiasco with the solanezumab flop in Alzheimer's--will leave Lilly no way out except with a restructuring. And that would alter CEO John Lechleiter's long-term plan for staying the course with in-house research.
Lilly's position is simple: Everything is great.
One of the only bright spots is the continuing clinical success of their injectable GLP-1 agonist dulaglutide. Nothing had better happen to that one - it really does look like an advance in type II diabetes therapy. But even if everything goes according to plan with that one, things are going to be rough in Indianapolis.
After recent posts on how hot the biotech IPO market has been, and on how the Boston/Cambridge area has so many companies these days, here's the article that sits right in the Venn diagram intersection, from the Boston Globe. It ends on what I think is an accurately cautionary note:
Some biotech companies will surely deliver on the promise in their labs. But an entire industry is being rewarded in advance by investors. That's going to disappoint a lot of people.
I've heard from several sources that one of the large pharma companies is about to do something that none of them have been doing for a while now: hire some scientists. More concrete news should be out shortly, but the word is that a number of med-chem positions will be opening up. And when was the last time you heard that phrase?
Here's a look at where the biopharma companies really congregate, courtesy of Luke Timmerman at Xconomy. There's also a revealing comparison to the situation ten years ago.
His cutoff is for a company to have at least $100 million in cash (and short term investments) on hand to fund its operations. Companies with less than that, he says, rarely end up making an impact without crossing that threshold along the way (and I'd agree with that assessment). The most notable thing about the list is the degree to which things have proliferated in the Boston/Cambridge area. It was already a strong list in 2003, but in 2013 it outdistances everyone. It's now a self-perpetuating effect, to a good degree: companies come here because there are a lot of investors and a lot of good people in the workforce, and people come here because there are a lot of companies, and so on.
The San Francisco Bay area was number one ten years ago, but although it's grown since 2003 (24 companies versus 19), the growth in Boston has outstripped it. San Diego's in similar shape, but on a smaller scale. Seattle is clearly the laggard of the list, small and getting smaller. And the NJ/NY area has one fewer on its roster than it did ten years ago, in a process that is not showing any obvious signs of reversing.
Way back when, in late August, I wrote a post wondering if there were perhaps too many small biopharma companies going public. That took no magic powers; everyone looking at the market has been wondering that. Well, today an awful lot of biotech stocks seem to be diving - is that the signal for everyone to get out of the water? If so, then (as usual) a lot of people would have preferred that it went off a bit less abruptly. People at the companies in the IPO queue for the next couple of weeks are going to be a bit irritable and distracted today, I think. . .
Comments (4)
+ TrackBacks (0) | Category: Business and Markets
You're running a drug company, and you have a new product coming out. How much of it do you expect to sell? That sounds like a simple question to answer, but it's anything but, as a new paper in Nature Reviews Drug Discovery (from people at McKinsey, no less) makes painfully clear.
Given the importance of forecasting, we set out to investigate three questions. First, how good have drug forecasts been historically? And, more specifically, how good have estimates from sell-side analysts been at predicting the future? Second, what type of error has typically been implicated in the misses? Third, is there any type of drug that has been historically more easy or difficult to forecast?
The answer to the first question is "Not very good at all". They looked at drug launches from 2002-2011, a period which furnished hundreds of sales forecasts to work from. Over 60% of the consensus forecasts were wrong by 40% or more. Stop and think about that for a minute - and if you're in the industry, stop and think about the times you've seen these predictions made inside your own company. Remember how polished the PowerPoint slides were? How high-up the person was presenting them? How confident their voice was as they showed the numbers? All for nothing. If these figures had honest error bars on them, they'd stretch up and down the height of any useful chart. I'm reminded of what Fred Schwed had to say in Where Are the Customers' Yachts about stock market forecasts: "Concerning these predictions, we are about to ask: 1. Are they pretty good? 2. Are they slightly good? 3. Are they any damn good at all? 4. How do they compare with tomorrow's weather prediction you read in the paper? 5. How do they compare with the tipster horse race services?".
As you can see from the figure, the distribution of errors is quite funny-looking. If you start from the left-hand lowball side, you think you're going to be looking at a rough Gaussian curve, but then wham - it drops off, until you get to the wildly overoptimistic bin, which shows you that there's a terribly long tail stretching into the we're-gonna-be-rich category. This chart says a lot about human psychology and our approach to risk, and nothing it says is very complimentary. In case you're wondering, CNS and cardiovascular drugs tended to be overestimated compared to the average, and oncology drugs tended to be underestimated. That latter group is likely due to an underestimation of the possibility of new indications being approved.
Now, those numbers are all derived from forecasts in the year before the drugs launched. But surely things get better once the products got out into the market? Well, there was a trend for lower errors, certainly, but the forecasts were still (for example) off by 40% five years after the launch. The authors also say that forecasts for later drugs in a particular class were no more accurate than the ones for the first-in-class compounds. All of this really, really makes a person want to ask if all that time and effort that goes into this process is doing anyone any good at all.
Writing at Forbes, David Shaywitz (who also draws some lessons here from Taleb's Antifragile) doesn't seem to think that it is, but he doesn't think that anyone is going to want to hear about it:
Unfortunately, the new McKinsey report is unlikely to matter very much. Company forecasters will say their own data are better, and will point to examples of forecasts that happen to get it right. They will emphasize the elaborate methodologies they use, and the powerful algorithms they employ (all real examples from my time in the industry). Consultants, too, will continue to insist they can do it better.
And indeed, one of the first comments that showed up to his piece was from someone who appears to be doing just that. In fact, rather than show any shame about these numbers, plenty of people will see them as a marketing opportunity. But why should anyone believe the pitch? I think that this conclusion from the NRDD paper is a lot closer to reality:
Beware the wisdom of the crowd. The 'consensus' consists of well-compensated, focused professionals who have many years of experience, and we have shown that the consensus is often wrong. There should be no comfort in having one's own forecast being close to the consensus, particularly when millions or billions of dollars are on the line in an investment decision or acquisition situation.
The folks at Popular Science should take note of this. McKinsey Consulting has apparently joined the "War on Expertise"!
Comments (32)
+ TrackBacks (0) | Category: Business and Markets | Drug Development
This could get interesting: the deal that would have Otsuka buying Astex might be unraveling a bit. Here's what an investment fund with a stake in the matter has to say about it:
We are one of Astex's largest shareholders, owning approximately 5% of the outstanding shares of the company. We believe the recently announced merger transaction with Otsuka Pharmaceutical significantly undervalues Astex and therefore we do not intend to tender our shares.
It seems clear to us from both analyst commentary and press reports in response to the announcement of the Otsuka transaction that many shareholders concur with our view of the valuation of Astex and perhaps share our concerns about both the timing of the auction process and the manner in which it was conducted. With regard to timing, Astex's recent report on August 28th of clinical data on SGI-110, the company's second-generation DNA methyltransferase inhibitor, suggested the promise of the drug. However, it is the clinical studies to be reported in December 2013 and in 2014 that could most definitively illustrate the value the drug will confer to Astex. The fact that Astex is trying to consummate the sale process before these data are available is inexplicable and disturbing. . .
They go on to say some very unkind things about the bidding process and the incentives for Astex's senior management. Now, these folks are, of course, trying to get the most that they possibly can for their Astex shares (that's their job). So they might be trying to get Otsuka to crank up their offer, and if they can recruit enough other large shareholders to the effort, they might be able to do it. We'll see if that talk of other people not liking the bid turns out to be real.
Thanks to @AndyBiotech on Twitter for the tip.
Did you know that thirty-eight biotech companies have gone public this year? I knew there were a lot of them, but I didn't realize that the number was that high. The most recent one, Fate Therapeutics, didn't quite go off the way it was hoped to. At some point, the music has to stop, and what everyone seems to be wondering is whether that was the sound of a violin case closing or not. Do you feel like investing in the thirty-ninth IPO of the year? How about the forty-seventh? It's only October, you know, and that's always been a great month for the stock. . .oh, never mind.
I've been stuck underground on a stalled subway train, but the rumor that was passed on to me last night turns out to be true: Merck is doing some big, serious cuts. They're cutting back about 20% worldwide, and it's going to hit every part of the company. More details as they become available. . .
Comments (113)
+ TrackBacks (0) | Category: Business and Markets
In case you didn't see it yesterday, Eli Lilly had yet another nasty Phase III failure. This one was ramucirumab against breast cancer (one of the Imclone projects). This was (yet again) one of the compounds that's supposed to be shoring the company up as it continues to lose patent protection on its existing drugs, and it's losing a lot of that.
I'm not going to focus on this particular antibody, but rather a larger issue. Here it is, outlined by FierceBiotech:
The crucial late-stage failure--ramucirumab has been considered one of the pharma giant's top Phase III prospects--scuttles one of Eli Lilly's chief near-term hopes for a major new drug approval application. The failure also follows several years of poor trial outcomes for Lilly, which has a reputation for taking expensive and very risky chances when it comes to late-stage development. Its shares ($LLY) immediately dropped more than 5% on the news.
Lilly does indeed have that reputation - you'll get one if you spend as much time on big Alzheimer's projects as they have, among other things. And here's my question: are they doing things wrong over there, or doing them right?
I mean, we in the drug business catch a lot of flak (often, but not always, undeservedly) for ducking the really big challenges in favor of grabbing market share from each other's established drugs. Those really big challenges, though, come with really high failure rates, and it's not like the failure rates for even the supposedly easy stuff aren't terrifying. (That's a point many outside critics miss - there are no lay-ups in this business when it comes to developing new drugs, none whatsoever). But if you don't like 80 or 90 per cent failure, try 95 per cent. Or, to a roundoff error, one hundred per cent, because that's pretty much been the historical failure rate for Alzheimer's, minus one drug that doesn't do very much. Someone who hasn't been paying attention might look at the lack of drugs in such therapeutic areas and decide that it's because the industry hasn't bothered to do anything - too busy making artificial tanning creams, you know - but it's clear that company after company has taken swings at things like Alzheimer's and just totally missed.
Eli Lilly has been taking some pretty big cuts, but they've mostly just fanned out a lot of dust the last few years. Are they (1) working with too risky a portfolio? (If so, was it by design, or did they just end up this way through attrition of other projects?) Or are they (2) working with a list that has an more appropriate balance, but doing a lousy job of prosecuting it? (A mix of 1 and 2 is also possible, of course). Do we look at Lilly's situation and say "Well, at least I wouldn't have done that", or do we say "There but for the grace of God and a few biomarkers go I?"
And some critics of the industry would do well to observe this process. Here is a big company, spending huge amounts of time and effort on some really big diseases that have a lot of unmet medical need. And they're being driven into the ground like a tent peg by the results of it all.
That didn't take long. Just a few days after Roger Perlmutter at Merck had praised the team that developed Bridon (sugammadex), the FDA turned it down for the second time. The FDA seems to be worried about hypersensitivity reactions to the drug - that was the grounds on which they rejected it in 2008. Merck ran another study to address this, but the agency apparently is now concerned about how that trial was run. What we know, according to FiercePharma, is that they "needed to assess an inspection of a clinical trial site conducting the hypersensitivity study". Frustratingly for Merck, their application was approved in the EU back in that 2008 submission period.
It's an odd compound, and it had a nomination in the "Ugliest Drug Candidate" competition I had here a while back. That's because it works by a very unusual mechanism. It's there to reverse the effects of rocuronium, a neuromuscular blockade agent used in anaesthesia. Sugammadex is a cyclodextrin derivative, a big cyclic polysaccharide of the sort that have been used to encapsulate many compounds in their central cavities. It's the mechanism behind the odor-controlling Febreze spray - interestingly, I've read that when that product was introduced, its original formulation failed in the market because it had no scent of its own, and consumers weren't ready for something with no smell that nonetheless decreased other odors). The illustration is from the Wikipedia article on sugammadex, and it shows very well how it's designed to bind rocuronium tightly in a way that it can no longer at at the acetylcholine receptor. Hats off to the Organon folks in Scotland who thought of this - pity that all of them must be long gone, isn't it?
You see, this is one of the drugs from Schering-Plough that Merck took up when they bought the company, but it was one of the compounds from Organon that Schering-Plough took up when they bought them. (How much patent life can this thing have left by now?) By the way, does anyone still remember the ridiculous setup by which Schering-Plough was supposed to be taking over Merck? Did all that maneuvering accomplish anything at all in the end? At any rate, Merck really doesn't seem to have gotten a lot out of the deal, and this latest rejection doesn't make it look any better. Not all of those problems were (or could have been) evident at the time, but enough of them were to make a person wonder. I'm willing to nominate it as "Most Pointless Big Pharma Merger", and would be glad to hear the case for other contenders.
Comments (29)
+ TrackBacks (0) | Category: Business and Markets | Clinical Trials | Pharmacokinetics | Regulatory Affairs | Toxicology
What can you say in a press release about a clinical trial? "Darn near anything, apparently" will be the response from many people who've been seeing them over the years. But really, what can you say, legally? Is there some point where you've clearly crossed the line into fraud, or are all these things just varying interpretations of scientific data?
That uncomfortable question has been working its way through the court system in the person of W. Scott Harkonen, former CEO of Intermune. This case is back in the news thanks to a long article in the Washington Post (pointed out to me by a reader of this blog in the comments section here). Here's the background: Intermune was selling Actimmune (interferon gamma-1b) for two rare-disease indications, but wanted to break into the much larger market for idiopathic pulmonary fibrosis (IPF), for which there were basically no therapies at all.
Unfortunately, the trial didn't go the way that everyone had hoped. Here's the Washington Post's take on it, complete with quotation marks around the phrase "statistical significance":
In all, 330 patients were randomly assigned to get either interferon gamma-1b or placebo injections. Disease progression or death occurred in 46 percent of those on the drug and 52 percent of those on placebo. That was not a significant difference, statistically speaking. When only survival was considered, however, the drug looked better: 10 percent of people getting the drug died, compared with 17 percent of those on placebo. However, that difference wasn't "statistically significant," either.
Specifically, the so-called P value — a mathematical measure of the strength of the evidence that there's a true difference between a treatment and placebo — was 0.08. It needs to be 0.05 or smaller to be considered "statistically significant" under the conventions of medical research.
Technically, the study was a bust, although the results leaned toward a benefit from interferon gamma-1b. Was there a group of patients in which the results tipped? Harkonen asked the statisticians to look.
It turns out that people with mild to moderate cases of the disease (as measured by lung function) had a dramatic difference in survival. Only 5 percent of those taking the drug died, compared with 16 percent of those on placebo. The P value was 0.004 — highly significant.
But there was a problem. This mild-to-moderate subgroup wasn't one the researchers said they would analyze when they set up the study. Subdividing patients after the fact and looking for statistically significant results is a controversial practice. In its most extreme form, it's scorned as "data dredging." The term suggests that if you drag a net through a bunch of numbers enough times, you'll come up with something significant sooner or later.
Yes indeed. In fact, the term suggests that because that's absolutely true, and it can be proven mathematically. If you take a large enough pile of clinical data, with enough variables, and break it down into enough subgroups, the odds get better and better than something will look significant simply by chance. You can say when you've done enough to have a 50% chance of that happening, or a 90% chance, or whatever cutoff you like. It isn't voodoo, although statistics are poorly understood enough to make it sound so if you've never had to think about the issues.
The situation Intermune found itself in is a tough one, but it's not uncommon. This is why clinical trial design is so critical. You want to run one that has the best chance of showing a clinically relevant effect, but you're not going to be able to cover every sort of patient and subgroup, either, because time and money get out of control very quickly at this point and can absolutely sink your whole effort. The "might have worked" result is a hard place to be.
Unfortunately, Harkonen does not seem to have reacted well to it. He personally wrote a press release with these headlines: "InterMune Announces Phase III Data Demonstrating Survival Benefit of Actimmune in IPF" and "Reduces Mortality by 70% in Patients with Mild to Moderate Disease." If you read the rest of the text, it did mention that the study missed its primary endpoints, but there was no mention that the mild-to-moderate group was a post hoc analysis. He ended up charged with wire fraud, and was convicted. That conviction has been appealed (here's the appeals court ruling against him), and now there's talk of going to the Supreme Court, although I don't know if his legal team has asked for certiorari yet or not.
So, what's the line between protected free speech and fraud? The newspaper article mentions the recent United States v. Alvarez decision, which ended up overturning the "Stolen Valor Act" making it illegal to claim (falsely) to have military decorations. The Alvarez in question was an idiot who claimed, in his job on a water district board, to have won the Medal of Honor. Sure thing. But although I Am Not a Lawyer, this seems like a different case to me. One of the big points of contention in the Alvarez case was whether or not it was a defamation, and if so, who was being defamed, and how they were damaged. The Supreme Court was split up all over the place in their own opinions, with even justices that agreed with the majority disagreeing over what they were agreeing about.
This case seems more straightforward, at least to me. I think it's more a case of commercial speech. There's probably case law by the shelfload on this, and I may be totally wrong, but I would regard all press releases by publicly traded companies as commercial speech, simply due to their effects on the stock prices involved. If the case makes it to the Supreme Court, I'd expect it to be so that the justices can try to untangle that issue (as in this previous case, which the Court dodged due to a procedural matter).
Oh, one other thing, which doesn't necessarily bear on this case but is worth mentioning as an illustration of its issues. Intermune actually did go forward with another trial of Actimmune against mild-to-moderate IPF patients. And sure enough, it didn't work.
In the post here the other day about Duchenne Muscular Dystrophy (DMD) I mentioned two other companies that are looking at transcriptional approaches: Prosensa (with GSK) and Sarepta. They've got antisense-driven exon-skipping mechanisms, rather than PTC's direct read-through one.
Well, Sarepta still does, anyway. Prosensa and GSK just announced clinical data on their agent, drisapersen, and it appears to have missed completely. The primary endpoint was a pretty direct one, total distance walked over six minutes, and they didn't make statistical significance versus placebo. This was over 48 weeks of treatment, and none of the secondary measures showed any signs either, from what I can see. I can't think of any way to spin this in any positive direction at all.
So drisapersen is presumably done. What does this say about Sarepta's candidate, eteplirsen? One the one hand, their major competitor has just been removed from the board. But on the other, their complete failure with such a closely related therapy can't help but raise doubts. I don't know enough about the differences between the two (PK?) to speculate, but it'll be interesting to see if Sarepta's stock zips up today, sells off, or (perhaps) fights to a draw between two groups of investors who are taking this news in very different ways.
That's the delirious fun of biotech investing. And that's just for the shareholders - you can imagine what it feels like to bet your whole company on this sort of thing. . .
Comments (4)
+ TrackBacks (0) | Category: Business and Markets | Clinical Trials | Drug Development
Does it matter how a drug works, if it works? PTC Therapeutics seems bent on giving everyone an answer to that question, because there sure seem to be a lot of questions about how ataluren (PTC124), their Duchenne Muscular Dystrophy (DMD) therapy, acts. This article at Nature Biotechnology does an excellent job explaining the details.
Premature "stop" codons in the DNA of DMD patients, particularly in the dystrophin gene, are widely thought to be one of the underlying problems in the disease. (The same mechanism is believed to operate in many other genetic-mutation-driven conditions as well. Ataluren is supposed to promote "read-through" of these to allow the needed protein to be produced anyway. That's not a crazy idea at all - there's been a lot of thought about ways to do that, and several aminoglycoside antibiotics have been shown to work through that mechanism. Of that class, gentamicin has been given several tries in the clinic, to ambiguous effect so far.
So screening for a better enhancer of stop codon read-through seems like it's worth a shot for a disease with so few therapeutic options. PTC did this using a firefly luciferase (Fluc) reporter assay. As with any assay, there are plenty of opportunities to get false positives and false negatives. Firefly luciferase, as a readout, suffers from instability under some conditions. And if its signal is going to wink out on its own, then a compound that stabilizes it will look like a hit in your assay system. Unfortunately, there's no particular market in humans for a compound that just stabilizes firefly luciferase.
That's where the argument is with ataluren. Papers have appeared from a team at the NIH detailing trouble with the FLuc readout. That second paper (open access) goes into great detail about the mechanism, and it's an interesting one. FLuc apparently catalyzes a reaction between PTC124 and ATP, to give a new mixed anhydride adduct that is a powerful inhibitor of the enzyme. The enzyme's normal mechanism involves a reaction between luciferin and ATP, and since luciferin actually looks like something you'd get in a discount small-molecule screening collection, you have to be alert to something like this happening. The inhibitor-FLuc complex keeps the enzyme from degrading, but the new PTC124-derived inhibitor itself is degraded by Coenzyme A - which is present in the assay mixture, too. The end result is more luciferase signal that you expect versus the controls, which looks like a hit from your reporter gene system - but isn't. PTC's scientists have replied to some of these criticisms here.
Just to add more logs to the fire, other groups have reported that PTC124 seems to be effective in restoring read-through for similar nonsense mutations in other genes entirely. But now there's another new paper, this one from a different group at Dundee, claiming that ataluren fails to work through its putative mechanism under a variety of conditions, which would seem to call these results into question as well. Gentamicin works for them, but not PTC124. Here's the new paper's take-away:
In 2007 a drug was developed called PTC124 (latterly known as Ataluren), which was reported to help the ribosome skip over the premature stop, restore production of functional protein, and thereby potentially treat these genetic diseases. In 2009, however, questions were raised about the initial discovery of this drug; PTC124 was shown to interfere with the assay used in its discovery in a way that might be mistaken for genuine activity. As doubts regarding PTC124's efficacy remain unresolved, here we conducted a thorough and systematic investigation of the proposed mechanism of action of PTC124 in a wide array of cell-based assays. We found no evidence of such translational read-through activity for PTC124, suggesting that its development may indeed have been a consequence of the choice of assay used in the drug discovery process.
Now this is a mess, and it's complicated still more by the not-so-impressive performance of PTC124 in the clinic. Here's the Nature Biotechnology article's summary:
In 2008, PTC secured an upfront payment of $100 million from Genzyme (now part of Paris-based Sanofi) in return for rights to the product outside the US and Canada. But the deal was terminated following lackluster data from a phase 2b trial in DMD. Subsequently, a phase 3 trial in cystic fibrosis also failed to reach statistical significance. Because the drug showed signs of efficacy in each indication, however, PTC pressed ahead. A phase 3 trial in DMD is now underway, and a second phase 3 trial in cystic fibrosis will commence shortly.
It should be noted that the read-through drug space has other players in it as well. Prosensa/GSK and Sarepta are in the clinic with competing antisense oligonucleotides targeting a particular exon/mutation combination, although this would probably taken them into other subpopulations of DMD patients than PTC is looking to treat.
If they were to see real efficacy, PTC could have the last laugh here. To get back to the first paragraph of this post, if a compound works, well, the big argument has just been won. The company has in vivo data to show that some gene function is being restored, as well they should (you don't advance a compound to the clinic just on the basis of in vitro assay numbers, no matter how they look). It could be that the compound is a false positive in the original assay but manages to work through some other mechanism, although no one knows what that might be.
But as you can see, opinion is very much divided about whether PTC124 works at all in the real clinical world. If it doesn't, then the various groups detailing trouble with the early assays will have a good case that this compound never should have gotten as far as it did.
Comments (28)
+ TrackBacks (0) | Category: Biological News | Business and Markets | Drug Assays | Drug Development
This is an interesting article in Nature Biotechnology that I'm trying to figure out whether I believe. It's a combination of interviews with managers across biopharma along with an analysis of open-position job ads from thousands of sources. What the authors are trying to do is figure out what sorts of skills employers in this field are looking for, and whether that's changed.
First, let's go to what they found, then we can start the arguing. The quantitative data from all those job postings is presumably pretty solid. The degree-required distribution shows that (weirdly) 14% of the posted openings require only high-school level education, which makes me wonder if those positions, whatever they are, really qualify as "jobs in the biopharma industry" as opposed to "jobs in the hauling stuff around" industry. Past that, half of the total openings are bachelor's-level. 12% ask for a graduate or professional degree (I think that they have master's and PhD in there together), and most of the rest were unspecified.
As for the skills listed as wanted, far and away the most mentioned was. . .chemistry. "Clinical research" runs a distant second. When they analyzed the names of the positions themselves, "Medical/clinical laboratory technician" was number one, with "Chemist" close behind. These are broad terms, which surely accounts for their dominance, but the number of positions using the word "Biologist" is still only about a third of those that say "Chemist".
Now the paper switches to what they learned from all those manager interviews. Here's where I start doing the Spock-eyebrow thing:
Hiring and workforce deployment trends were consistent across company sizes ranging from small (less than 25 employees) to large (over 1,000), but there was a surprising anecdotal finding that was supported across the interview set. Whereas historically, large companies have tended to invest in workforce training, and small companies have sought employees who were sufficiently trained to 'hit the ground running', the lean human capacity models practiced by large global pharmaceutical companies have resulted in a reluctance to hire untrained individuals by companies of all sizes. . .
. . .The introductory analysis highlights a common theme addressed by all interviewees and points to a clear shift in the industry's demand for talent away from the senior scientist positions that tend to be more highly specialized and narrowly focused, to a talent pool consisting of individuals who have interdisciplinary academic training with the ability to work broadly across multiple areas and in project teams where not everyone has to be an expert in everything. Specific skill sets desired among scientists, engineers, clinicians and management teams who work within the industry include strong communications skills that facilitate the translation of the science effectively to stakeholders, a commercial market-based mindset versus an academic mindset, the ability to apply skills to real world problems, comfort with big data management, the capacity to be creative and the willingness to push boundaries.
OK, let me blow a whistle at this point. All that stuff is hiring-manager-speak, straight from HR training slides. If you ever hear someone, an actual human out there in the wild, conversationally use the phrase "facilitate the translation of the science effectively to stakeholders", you should run. If there's no ready exit, well, I hope you've read a lot of those books about how to deal with zombies, 'cause they're finally going to come in handy. What I'm saying is that this stuff is what such people always tell you that they want, on paper. "The ability to apply skills to real-world problems"? You don't say! Trying to draw conclusions from these phrases is like analyzing the stuff written on the windshields of used cars.
I adduce this line from the article as evidence of cluelessness: "Hiring managers and industry leaders made little mention of gender differences or preferences in the interviews." Did they not? After endless hours of training to drive home the point that they can get fired for doing anything of the sort? Come on.
The article ends with three mushy calls for action. The first is to "further develop and increase the scope of public-private and industry-academic internships, cooperative fellowships, and training programs". Hard to find anyone who's going to take a strong stand against that one. The second is "to build a national life science certification program that includes deep dives into topics such as regulations, clinical trial design and process validation". I'm not so sure about that one. Who runs this, and who pays for it? Do you have to have one of their pieces of paper in order to get a job in those areas? Who gets to decide the curriculum?
But it's the final recommendation that's going to set some people off. It "focuses on the need to recognize the global nature of the industry and the need for strong cross-cultural fertilization and job mobility across national borders." And once again, I come to this topic as someone who actually favors immigration of smart, competent, well-trained people into the US. But I swear, there are a lot of people who seem bent on making me squirm as much as possible while holding that position, because I can't help but think that many of them hold it because they're looking for the cheapest technically qualified labor force that they can get. It's not like I like the look of some of the people on the other side of the issue, either, because just because it's bad policy to fiddle things to drive wages down, it's bad policy to rig the system to keep them high, too. I think that there should be a market for labor, and its price should move up and down, and be therefore somewhat self-correcting. No one should get a thumb on the scale. Yeah, I'm an idealist.
But this is the first time I've heard "cross-cultural fertilization" brought up as a reason, I have to say. Personally, I think that a reasonable amount of immigration is a good thing for American society (if only we could define "reasonable"), and that we should favor letting in people who are smart, competent, and hard-working. I'd like to have new citizens who want to be part of the economy, and who can appreciate the ideals that this country was founded on. "Cross-cultural fertilization" is a bit too nebulous for me. I worry that it's one of those feel-good diversity slogans designed to make anyone who complains about it sound like a Neanderthal. Maybe I'm showing my prejudice against Neanderthals by saying that, though. I should check with HR.
No, this survey is starting to sound a lot like that PriceWaterhouseCooper thing I wrote about here and here. "Gosh, we just can't seem to find anyone to hire!" Keep an eye on this sort of thing; we're going to see more of it.
BioCentury always does a big issue for the fall, entitled "Back to School". They often use this as a state-of-biopharma platform, going into depth on what they see as the biggest issues that need to be addressed. This year, the September 2 issue, they're telling people (and not for the first time!) to get braced for higher standards for what health insurance is going to pay for:
Drug companies must start creating the case for value differentiation in discovery and then steadily build a body of evidence throughout the product development process.
Some drug developers have figured this out and have reshaped both their pipelines and development practices accordingly. But the number of me-too and purportedly me-better products still in the pipeline — coupled with the fact that drugs are still getting to Phase III and beyond without comparisons to relevant SOC (standard of care) or data on quality of life and other metrics that patients value — shows efforts in this department are still wanting.
For example, BioCentury's BCIQ online database shows 54 compounds in active development that target VEGF or its receptors, not counting line extensions of approved VEGF and VEGF receptor inhibitors.
Even accounting for different variants of the receptor and its ligand and differences in delivery, formulation and dosing, it is highly unlikely that so many compounds could be differentiated sufficiently that physicians and patients would strongly prefer them to marketed alternatives — or that payers would be willing to reimburse them without restrictions.
. . .Back to School argues bio-industry must abandon efforts to block third-party assessments of value, and instead ramp up nascent efforts to be at the table where technology assessment takes place in the U.S., Europe and the rest of the world. Comparative effectiveness and cost effectiveness assessments will not be stopped. Industry can either contribute its expertise to improve the quality of the results, or stand by while others who may know less about both the drugs and the best ways to study them do the work based on their own priorities. Right now that priority is finding ways to avoid paying for new drugs.
Well put. But doing so is not going to be easy, or cheap. Differentiating new drug candidates in the clinic has often been left for later on in Phase III, and smaller companies often don't do much of it at all, figuring that'll be a job for their bigger partners when the time comes. The FDA "Breakthrough" designations can help here, because they explicitly encourage companies to show, as early as possible, why their compound stands out from the others. But as the Biocentury piece goes on to say, even then companies are going to have to be get ready to collect even more data on real-world outcomes, after the drug is approved, if they want to be able to persuade the various payers out there.
There's another issue here, too. Incremental innovation is just as much a part of the business (and the science) as are sudden leaps forward. There's room to wonder if the frequency of those sudden leaps (and the distance they cover) will go down if we don't get to take as many steps in the run-up to them. This is one of those issues that moves slowly enough to be effectively unprovable on any sort of reasonable financial or political time scale, but there are a lot of very real things out there that don't fit themselves to our calendars.
BioCentury recommends that (1) companies should work with regulatory agencies, insurance (both public and private), and patient groups to define just what constitutes real value for a given disease area, (2) they should immediately get to work with those payers who are already mandated to show improvements in their quality of care, (3) as mentioned above, whenever some government or international agency starts rating health care and medical technology advances, the industry had better be there, and (4) the drug industry had better change some of its traditional attitudes, and fast, because its pricing power is clearly diminishing.
As a drug-discovery guy, I don't spend as much time thinking about these issues as I do scientific ones. But if I'm discovering new things that no one wants, because no one needs them, that no one will then feel like paying for, all my work (and that of my colleagues) will be in vain. None of us can afford to keep our heads down these days.
Comments (20)
+ TrackBacks (0) | Category: Business and Markets | Drug Prices | Regulatory Affairs
There's some Merck news today, via FiercePharma. First off, their R&D head Roger Perlmutter sat down with some of the most prominent analysts for a chat about the company's direction - and they came out with two completely different stories. Big changes? Minor ones? I wonder if people were taking away what they wanted to hear to confirm what they'd already decided Merck should be doing. Seamus Fernandez, for example, apparently came away saying that he thought a major R&D restructuring was inevitable, but that's what he thought before he sat down. This sort of thing is worth keeping in mind when you hear some Wall St. types (particularly on the "sell side") going on authoritatively about what's happening inside a given company.
The other news is that Merck is handing off one of their oncology programs (the WEE-1 kinase inhibitor MRK-1775) to AstraZeneca. If I were a mean person given to saying unkind things, I'd say that this drug is at least now going to get a lot more money spent on it, because that's what AZ has been famous for. But I'll stick with what John Carroll had to say on Twitter: "So if $MRK thought 1775 was any damn good, would they outlicense it to $AZN?"
Comments (19)
+ TrackBacks (0) | Category: Business and Markets | Cancer | Drug Development
So Astex, one of the pioneers in fragment-based drug discovery, has been bought by Otsuka for their oncology portfolio. You don't hear people asking "What has all this fragment stuff accomplished?" as much as you used to, but here's another answer: an $886 million dollar buyout.
The president of Otsuka says that they're going to keep Astex's research the way it is:
"Astex's unique fragment-based drug discovery technology and clinical oncology research and development capabilities, born out of the passion of its researchers, exemplify our corporate mottos and belief in "Sozosei (Creativity) and Jissho (Proof through Execution). I would like Otsuka Pharmaceutical to continue to respect Astex's uniqueness and leverage it to bring further growth for Otsuka Pharmaceutical."
And the Japanese companies have, for the most part, been good at leaving things alone when they say they will. In the case of Astex's unusual set of skills, this seems like a smart move.
Steve Ballmer's departure from Microsoft, snidely remarked on here, has prompted any number of "What went wrong?" pieces to appear. One of the key documents, though, is from last year: Kurt Eichenwald's writeup in Vanity Fair. The editorial staff has helpfully illustrated it with a photo of Ballmer himself that's so characteristic of his style that it's liable to give ex-Microsofters the shivering flashbacks.
One of the common themes to all these articles is the company's use of "stack ranking", where you evaluate your direct reports and rank them top to bottom. The bottom performers get hammered, no matter how they might have done on some hypothetical absolute scale. If you happen to have a great group of high-performing people working for you - too bad. Some of them are going to be ranked at the imaginary bottom, and get punished for it. Here's Eichenwald:
At the center of the cultural problems was a management system called "stack ranking." Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees. The system—also referred to as "the performance model," "the bell curve," or just "the employee review"—has, with certain variations over the years, worked like this: every unit was forced to declare a certain percentage of employees as top performers, then good performers, then average, then below average, then poor.
"If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, two people were going to get a great review, seven were going to get mediocre reviews, and one was going to get a terrible review," said a former software developer. "It leads to employees focusing on competing with each other rather than competing with other companies."
. . .For that reason, executives said, a lot of Microsoft superstars did everything they could to avoid working alongside other top-notch developers, out of fear that they would be hurt in the rankings. And the reviews had real-world consequences: those at the top received bonuses and promotions; those at the bottom usually received no cash or were shown the door.
You can well imagine the sorts of behaviors this system promotes. A Microsoft engineer said in the article that "One of the most valuable things I learned was to give the appearance of being courteous while withholding just enough information from colleagues to ensure they didn't get ahead of me on the rankings". What's even more dysfunctional about this system is that it was not officially acknowledged by the managers. Here's a former Microsoft employee writing in Slate:
Then I had to explain things to my reports. This illustrated another problem with the system: It destroyed trust between individual contributors and management, because the stack rank required that all lower-level managers systematically lie to their reports. Why? Because for years Microsoft did not admit the existence of the stack rank to nonmanagers. Knowledge of the process gradually leaked out, becoming a recurrent complaint on the much-loathed (by Microsoft) Mini-Microsoft blog, where a high-up Microsoft manager bitterly complained about organizational dysfunction and was joined in by a chorus of hundreds of employees. The stack rank finally made it into a Vanity Fair article in 2012, but for many years it was not common knowledge, inside or outside Microsoft. It was presented to the individual contributors as a system of objective assessment of "core competencies," with each person being judged in isolation.
Why do I bring this up? Because many large drug companies persist in ranking-and-rating behaviors that are very nearly as stupid, and very nearly as destructive. And we've been doing it for years. At any rate, I've been complaining about it for years, and I'm certainly not alone. Rating people in research is notoriously difficult already, but rating them by jamming them into an artificial (and mathematically illiterate) template is even worse. If you want people to focus on stepping over each other, pit them against each other with a good, hard stack ranking system. If you'd like them to do something else with their time, you might want to rethink.
Comments (56)
+ TrackBacks (0) | Category: Business and Markets | Life in the Drug Labs
I see that the IEEE Spectrum has also come out saying that there is no shortage of scientists and engineers. I agree with him, as longtime readers will know. The market for people who do these things does not look like a market facing any kind of shortage:
What's perhaps most perplexing about the claim of a STEM worker shortage is that many studies have directly contradicted it, including reports from Duke University, the Rochester Institute of Technology, the Alfred P. Sloan Foundation, and the Rand Corp. A 2004 Rand study, for example, stated that there was no evidence "that such shortages have existed at least since 1990, nor that they are on the horizon."
That report argued that the best indicator of a shortfall would be a widespread rise in salaries throughout the STEM community. But the price of labor has not risen, as you would expect it to do if STEM workers were scarce. In computing and IT, wages have generally been stagnant for the past decade, according to the EPI and other analyses. And over the past 30 years, according to the Georgetown report, engineers' and engineering technicians' wages have grown the least of all STEM wages and also more slowly than those in non-STEM fields; while STEM workers as a group have seen wages rise 33 percent and non-STEM workers' wages rose by 23 percent, engineering salaries grew by just 18 percent. The situation is even more grim for those who get a Ph.D. in science, math, or engineering. The Georgetown study states it succinctly: "At the highest levels of educational attainment, STEM wages are not competitive."
Given all of the above, it is difficult to make a case that there has been, is, or will soon be a STEM labor shortage. . .
The article's author, Robert Charette, has done a lot of digging through the archives to trace the history of this whole idea. There's an entertaining sidebar with looming-shortage-of-science-and-engineering quotes going back to the 1930s. No era seems immune. (Thanks to another alert reader, I can add, though, that in 1972 an article in Science actually forecast an overabundance of PhD holders on the horizon. No one seems to have believed it then). And he also has what I think is a clear view of why this alarm keeps on being sounded:
Clearly, powerful forces must be at work to perpetuate the cycle. One is obvious: the bottom line. Companies would rather not pay STEM professionals high salaries with lavish benefits, offer them training on the job, or guarantee them decades of stable employment. So having an oversupply of workers, whether domestically educated or imported, is to their benefit. It gives employers a larger pool from which they can pick the "best and the brightest," and it helps keep wages in check. No less an authority than Alan Greenspan, former chairman of the Federal Reserve, said as much when in 2007 he advocated boosting the number of skilled immigrants entering the United States so as to "suppress" the wages of their U.S. counterparts, which he considered too high.
The idea of a shortage also benefits the funding of all levels of education, so what's not to like?
Comments (37)
+ TrackBacks (0) | Category: Business and Markets
Luke Timmerman has a good piece on a drug (Bexxar) that looked useful, had a lot of time, effort, and money spent on it, but still never made any real headway. GSK has announced that they're ceasing production, and if there are headlines about that, I've missed them. Apparently there were only a few dozen people in the entire US who got the drug at all last year.
When you look at the whole story, there's no single reason for failure. There were regulatory delays, manufacturing snafus, strong competition, reimbursement challenges, and issues around physician referral patterns.
If this story sounds familiar, it should—there are some striking similarities to what happened more recently with Dendreon's sipuleucel-T (Provenge). If there's a lesson here, it's that cool science and hard medical evidence aren't enough. When companies fail to understand the markets they are entering, the results can be quite ugly, especially as insurers tighten the screws on reimbursement. If more companies fail to pay proper attention to these issues, you can count on more promising drugs like Bexxar ending up on the industry scrap heap.
Comments (33)
+ TrackBacks (0) | Category: Business and Markets | Drug Development
So Amgen's bid for Onyx look like it's going through, and the reaction of John Carroll at FiercePharma was to tweet "Expect big layoffs soon". He took some flak for being such a downer, but he's right, as far as I can see. Amgen isn't buying Onyx for their research staff, or any of their people at all. As that Bloomberg story linked to above has it, "Amgen to Buy Onyx for $10.4 Billion to Gain Cancer Drug".
That's Kyprolis (carfilzomib), their proteasome inhibitor, and that's all they need from Onyx, who bought the compound anyway when they acquired Proteolix a few years ago. So since I don't want to be a downer either, especially on Monday morning, I'd be interested to see if anyone can make another case. . .
Comments (19)
+ TrackBacks (0) | Category: Business and Markets | Cancer
And after that mention of CEO pay, this sounds like a good time to link to this article from Nature Biotechnology. If you've ever been curious about why different companies pay out in stock options and/or restricted stock, this will satisfy your curiosity and more. A big part of the answer, you will not be surprised to hear, is the tax code, and if you're someone getting these kinds of compensation, you need to know some tax angles from your end, too.
And, of course, the type of award that works out best for the company doesn't always work out best for the grantee. Likewise, not every grantee will be best served by a single kind of award - it all depends on what you're trying to reward:
Although stock options continue to be a popular employee incentive device, in the past few years their advantages have been diminished through accounting and tax law changes, whereas their shortcomings have become more apparent in the biotech sector—in which a consistently growing stock price is far from assured, or even likely. As a consequence, biotech firms are moving away from an exclusive reliance on stock options and instead are using a mix of equity-based incentives, most commonly a combination of stock options and performance-based stock units.
From the perspective of a founder or other employee, the shift to a combination of stock options and some form of restricted stock or stock units should be welcome, making it less likely that the employee's awards will have no value at all. Unlike the corporate employer, an employee would prefer that restricted stock or stock units not be subject to performance conditions. . .
Definitely worth a look if you haven't thought about these details. After a good long stare, though, you may decide that the best course is to pay someone else to think about these things for you (!)
Definitely worth a look if you haven't thought about these details. After a good long stare, though, you may decide that the best course is to pay someone else to think about these things for you (!)
In the case of Microsoft's Steve Ballmer, the stock market appears to be saying "About minus 18 billion dollars". As Alex Tabarrok notes here, that sort of puts average CEO compensation in perspective. . .do we have some bigwigs in this business who could do as much for their shareholders by following Ballmer's example?
This is just what people working in R&D at Merck don't want to see. According to FiercePharma, a prominent analyst is urging the company to get its finances in line with its competitors. . .by cutting R&D.
Seamus Fernandez at Leerink Swann says that Merck should reduce their expenditures in that area by around a billion dollars, which is at least 8 times deeper than the new R&D head, Roger Perlmutter, has talked about. Here's the whole analysis, which includes this:
We believe a major restructuring at MRK is necessary; movement here likely would be well-received. As pressure builds on MRK mgmt to: (1) improve R&D productivity, (2) maintain top-tier operating margins, and (3) continue returning cash to shareholders, we believe a deep restructuring should be seriously considered in light of the relatively lackluster 2013 top-line performance, disappointing Ph III/ registrational pipeline evolution (odanacatib, suvorexant, Bridion U.S.), and overall industry challenges. We estimate that every $1B reduction of operating expenses would add $0.25/share to MRK's bottom line, and would bring MRK's absolute R&D spend closer to PFE's (MP) ~$6.5B but still be in line with several of its diversified competitors' spend at ~14% of sales. A 10% cut in overall operating expenses would equate to ~$2B of annual cost reductions.
If you read the rest, you'll see that the reasons Fernandez has for optimism are all on the financial side of the company: how much cash the company has on hand, its opportunities to do things like sell off animal health, sell off consumer care, and of course its opportunities to cut costs. There's absolutely nothing in there about the company doing better because of anything that's coming along in the pipeline. No, all that drug stuff is in the negative category: doubts about the big IMPROVE-IT trial in cardiovascular, competition for the existing drugs, regulatory uncertainties, and so on. Nothing but trouble.
At this point, it would be easy for me to get up on the lab bench and make a rabble-rousing speech about how short-sighted all this is, how Merck is a research-driven company, not some sort of bank or insurance operation, and so on. I'm tempted. But these points, while definitely not invalid, don't address whether Fernandez might be right about Merck's current situation. He knows as well as anyone that the only reason Merck got to be this size is by discovering and selling valuable medicines, and he knows that this is still the company's core business. Those ideas about selling off animal health and consumer products? Those are supposed to bring in more money to discover drugs. If Merck doesn't do that, they're toast; that's the engine of the whole company.
OK, so why cut R&D if that's the whole reason the company exists? Here's where we get down to it. Fernandez's take is that Merck is spending too much and getting too little back for it. He's not suggesting the of chopping most of the R&D department to make the bottom line suddenly bloom (for a while). This is more of a gas-mileage problem. In this view, Merck's engine is R&D, for sure, but that engine is burning too much fuel (money) while covering too little distance in the process. To stick with the engine analogy, does it really need twelve cylinders? Does it have to be as heavy and humungous as it is? After all, others are burning similar amounts of fuel (or less) and making more progress.
What Fernandez is saying to Roger Perlmutter, as I see it, is "Throw us a bone, Roger. Show that you seriously realize that things have been going wrong at Merck, and that you understand that the company's gotten in the habit of spending too much money. Show us in the only way that you can, because just telling us that you're going to do things better and smarter isn't enough. Everyone says that, no matter how dumb they are. Even if you really can follow through on that better/smarter stuff, no one will see the results of it for years. Show us something that we can see happening right now."
The question then is whether this sort of cutting and re-engineering can be done without disrupting Merck's R&D even more, and now that is a tough question, and I'm glad I'm not on the hook to provide an answer. The problem is, a company can cut back like this, but still keep the same inefficiencies and bad processes that got it into trouble in the first place. That's what happens when a company lops off a whole division: "We still suck, but now we suck on a smaller scale". It's doing the same not-so-good stuff as it always did, but in fewer areas, and might therefore be even less likely to make anything of it. A company can also cut back in ways that might, objectively, be the right thing to do, but nonetheless end up disorganizing and demoralizing the remaining workers so much that things end up worse than before in that way, too.
These are the downside risks of taking the cut-back-your-expenditures advice, and they're very real. Not taking the advice has real risks, too, naturally. Running a company that size, or its R&D department, is not a low-pressure job with easy decisions. We'll see which way Perlmutter goes, and how he makes his case. Keep in mind, too, that these issues do not apply only to Merck. Not at all.
Comments (60)
+ TrackBacks (0) | Category: Business and Markets
It's worth noting, on the business end of things, that we seem to be in a boom period for biotech/small pharma IPOs. I don't think anyone saw that coming, but these things take on momentum of their own. Hardly anyone went public for a few years once the financial crisis hit in 2007/2008. Then last year there were eleven new public companies, the most in quite a while. This year, though, there have been 29 (according to this piece in FierceBiotech), with eight of them since just the end of June.
That's pretty lively. And while some of this can be explained as a holdover from companies that would have gone public earlier, under less trying conditions, you'd have to think that we're getting near the bottom of the sack by now. Whatever gets pulled up at this point has a greater likelihood of having all kinds of stuff stuck to it, and it might not be in good enough condition for your portfolio to consume it. Soon we'll probably be in the part of the cycle where good companies, who would have happily launched themselves into the market a few months before, get whipsawed by a closing IPO window. If you think of a large flock of birds wheeling around in the sky, unable to quite decide which tree to land on, or whether to land at all, you'll have a pretty good mental picture of the market.
So reports FiercePharma, quoting a story in the 21st Century Business Herald and the Shanghai Daily. A former Novartis sales rep says that she was "ordered" to bribe doctors to meet sales quotas. As Tracy Staton at Fierce puts it:
With Chinese authorities actively looking for any suggestion of corruption or bribery, we're likely to see more whistleblowers come forward and officials investigations follow. Though no one wants to admit it, payments to doctors and hospitals have been commonplace in China for years. The BBC reported this week that bribes are "routinely paid" by big drugmakers in China, citing 5 pharma reps working in China. One of those reps, however, said such payments are "rare," and "only very few people" get money from pharma.
The government previously tolerated the practice--or encouraged it, even, by putting doctors on paltry salaries. Now, officials are targeting foreign drugmakers for it, perhaps to make examples of them, perhaps to twist their arms for lower prices. Probably both.
Comments (9)
+ TrackBacks (0) | Category: Business and Markets | The Dark Side
Now Sanofi is tangled up in trouble in China. The last few days have brought news of a wide-ranging investigation into payments to hospitals and medical workers, similar to what GlaxoSmithKline has been accused of.
And I don't have much reason to doubt either story, because (as this BBC story details) payments of this sort are rife. I would also note that, according to the AP, the Chinese government "is investigating production costs at 60 Chinese and foreign pharmaceutical manufacturers, according to state media, possible as a prelude to revising state-imposed price caps on key medications."
A system where everyone is in violation of the law has a lot of advantages - if you're the government. Retribution, when it's needed, is always at hand, because all you have to do is threaten to enforce what's already on the books. And lest someone think that I'm just beating away at the Chinese situation, the same applies to the US (on what I hope is a lower level). Here's economist Tyler Cowen, from the Marginal Revolution blog, on that very subject:
Faced with the evidence of an non-intentional crime, most prosecutors, of course, would use their discretion and not threaten imprisonment. Evidence and discretion, however, are precisely the point. Today, no one is innocent and thus our freedom is maintained only by the high cost of evidence and the prosecutor's discretion.
The GSK and Sanofi allegations are, of course, all about intentional acts. But prosecuting them is very much up to the discretion of the Chinese authorities. If they're trying to root out corruption in their health care system, more power to them, because that's a worthy cause. But if they're just putting the squeeze on people long enough to bargain with them, only to let things return to the status quo ante after concessions have been extracted, then I have another opinion. Cynically, that's just what I expect to happen. After all, one might need to charge these companies with bribery again at some point. The Chinese authorities - authorities in general, all over the world - are not in the habit of putting down useful weapons and walking away from them.
Comments (14)
+ TrackBacks (0) | Category: Business and Markets | The Dark Side
This has just shown up in the comments section, so I wanted to note it out here on the front page. The New Jersey state workforce directory lists Merck as notifying them that they plan to eliminate up to 113 jobs in Kenilworth, with an effective date of October 1.
I don't know what the follow-through is on notices like this, or the legal consequences thereof. And there's certainly nothing in there about what sorts of reductions these might be. But it's worth noting that the company has at least filed the paperwork - has anyone in Kenilworth heard more?
This PNAS paper's title certainly caught my attention: "Advertisements impact the physiological efficacy of a branded drug". The authors, from the University of Chicago, are digging into the business end of the placebo effect. After giving a set of subjects a skin-test panel to common allergans, here's what happened:
We conducted two randomized clinical trials to measure the impact of direct-to-consumer advertising on the objective, physiological effect of Claritin (Merck & Co.), a leading antihistamine drug. A pilot study assessed the efficacy of Claritin across subjects exposed to advertisements for Claritin, advertisements for Zyrtec (McNeil), or control advertisements. . .Among subjects with allergies, the efficacy was the same across the three advertisement conditions, but among subjects without allergies, efficacy was significantly greater in the Claritin advertisements condition than in the Zyrtec advertisements condition.
The heterogeneity of the treatment effect based on the allergy status was discovered only ex post facto, so we conducted a follow- up trial to replicate these initial findings. To maximize statistical power, the follow-up trial used a larger sample, assigned subjects only to Claritin advertisements or Zyrtec advertisements, and block-randomized subjects based on their allergy status. In ad- dition, we elicited subjects' beliefs about the efficacy of Claritin to examine whether any difference in impact of the advertisements across the two subpopulations is driven by the relative malleability of their beliefs. . .
This reminds me of the various experiences that people have had with blind taste testing of wines. In the follow-up trial, they used a histamine challenge in the skin test, which will give a red reaction no matter what you're allergic to. The effect repeated:
In the subpopulation without allergies, we find that the efficacy of Claritin at 120 min is substantially higher for subjects who were exposed to Claritin advertisements. Claritin advertisements have no significant impact on efficacy 60 min after the drug is taken. This pattern is consistent with the observed changes in the subjects' beliefs. Exposure to Claritin advertisements in this subpopulation greatly increases the belief in the efficacy of Claritin. At the same time, the realized efficacy of Claritin at 120 min (but not at 60 min) is strongly correlated with the change in beliefs.
In the subpopulation with allergies, we find no relationship between exposure to Claritin advertisements and the change in beliefs. Moreover, the advertisements have no impact on the efficacy of Claritin at 120 min. We do find a curious negative impact of Claritin advertisements on Claritin's efficacy at 60 min in this subpopulation, but this effect cannot be mediated by the (nonexistent) impact of advertisements on beliefs.
Oh, boy. I truly wonder why this experiment hasn't been run before, but look for a lot of follow-ups now that it's out. As the authors themselves detail, there are several unanswered questions that could be addressed: does seeing the Claritin advertisements make the Claritin work better, or does seeing the Zyrtec ads make Claritin work more poorly? Why does this seem to work only in people without specific allergies in the first place? What's the physiological pathway at work here, in any case?
Here's the big one: does direct-to-consumer advertising actually increase the efficacy of the drugs it advertises? That is, does the effect shown in this experiment translate to real-world conditions? For how many compounds is this the case, and in what therapeutic classes is the effect most likely to occur? Is there an actual economic or public health benefit to this effect, should it prove to be robust? If so, how large is compared to the money spent on the advertising itself? And if people internalize the idea that advertisements make a drug work better, will advertisements continue to do that at all?
Comments (20)
+ TrackBacks (0) | Category: Business and Markets | Clinical Trials
Ian Read at Pfizer has announced that the company will be divided into three parts. Here's the press release, and let's see what sense we can make of it:
Today, Pfizer is announcing plans to move forward to internally separate its commercial operations into three business segments, two of which will include Innovative business lines and a third which will include the Value business line. . .
One of the Innovative business segments. . .will generally include products across multiple therapeutic areas that are expected to have market exclusivity beyond 2015. The therapeutic areas include Inflammation and Immunology, CV/Metabolic, Neuroscience and Pain, Rare Diseases and Women's/Men's Health. . .the other Innovative business segment will include Vaccines, Oncology and Consumer Healthcare. . .The Value business segment. . .will include products that generate strong, consistent cash flow, and will be positioned to provide patients access to effective, lower-cost, high-value treatments. In addition to products that have lost market exclusivity, it will generally include mature, patent-protected products that are expected to lose exclusivity through 2015 in most major markets, biosimilars and current and future established products collaborations. . .
I'm not at all sure that I understand this yet. I can see why the "Value" business segment exists separately, although I think that it's unfortunately named. (You can either get the impression that the other two don't have value, or make the connection with "cheap/generic" as in some store's "Value Line" of products). But I'm not getting the distinction between the other two so well. It's not broken down by biologics/small molecules, or by specialty marketing/wider market, not from what I can see. And putting vaccines, oncology, and consumer health into one bunch sounds like a random draw of tiles out of a bag.
No doubt there will be many, many more explanations to come, and I look forward to seeing how many of them are coherent. For now, it looks like more uncertainly and disruption, which is not quite what Pfizer seems to need.
Note: for those of you wondering where the obvious Latin joke is, Chemjobber already got the Julius Caesar quote off on Twitter!
Surprisingly, two people have come forward saying that they were among the people who bought options in Onyx Pharmaceuticals just before Amgen's bid for the company. This wildly profitable trade has attracted plenty of regulatory attention, and the SEC has already filed a civil lawsuit (and is hunting for defendants).
Dhia Jafar and Omar Nabulsi, both of Dubai, said a court-ordered freeze should be lifted on the $2.53 million profit that they made lawfully from buying Onyx call options in the last week of June, according to filings late Tuesday in U.S. District Court in Manhattan.
The defendants said that when they bought the call options, they had no material, non-public information that biotechnology company Amgen Inc was trying to buy its smaller rival for $10 billion, a hefty premium at the time.
Who knows? People do get lucky. And the fact that these two have come forward to defend their trades is unusual, and suggests that they think that they have a case to make. But I'll bet that not everyone who did that trade will be persuasive about their reasons.
This Reuters story may be telling people everything they need to know in the first paragraph:
British drugmaker GlaxoSmithKline said on Monday some of its executives in China appeared to have broken the law in a bribery scandal, as it promised changes in its business model that would lower the cost of medicine in the country.
GSK is the latest in a string of multinationals to be targeted by Chinese authorities over alleged corruption, price-fixing and quality controls.
Chinese police visited the Shanghai office of another British drugmaker, AstraZeneca, a company spokeswoman said on Monday. They arrived on Friday and took away a sales representative for questioning, she said.
Will AstraZeneca cut its prices for China as well? In case some readers may think I'm drawing conclusions too quickly, well, the Reuters story draws them for you:
GSK's intention to cut the price of its medicines in China would be in line with how other foreign companies have responded to pressure from Beijing.
European food groups Nestle and Danone said they would cut infant milk formula prices in China after Beijing launched an inquiry into the industry.
"In China, when the government criticises people, they tend to bow down and apologise very quickly because they are scared of the authority of the central government to do tremendous harm to their business - whether it be for arresting executives very quickly or through auditing," said Shaun Rein, managing director of the Shanghai-based China Market Research Group.
We now return to our regularly schedule program around here - or at least, Eli Lilly is now returning to theirs. The company announced that they're freezing salaries for most of the work force, in an attempt to save hundreds of millions of dollars in advance of their big patent expirations. Some bonuses will be reduced as well, they say, but that leaves a lot of room. Higher-ups don't look for increases in base pay as much as they look for bonuses, options, and restricted shares (although, to be fair, these are often awarded as a per cent of salary).
''This action is necessary to withstand the impact of upcoming patent expirations and to support the launch of our large phase III pipeline,'' Chief Executive Officer John Lechleiter, 59, said in a letter to employees today, a copy of which was obtained by Bloomberg. ''The current situation requires us to take the appropriate action now to secure our company's future. We can't allow ourselves to let up and fail to make the tough choices."
Lechleiter himself has not had a raise since 2010, it appears, although I'm not sure if his non-salary compensation follows the same trend. If anyone has the time to dig through the company's last few proxy statements, feel free, but actually figuring out what a chief executive is really paid is surprisingly difficult. (I remember an article a few years ago where several accountants and analysts were handed the same batch of SEC filings and all of them came out with different compensation numbers).
But there's not doubt that Lilly is in for it, something that has been clear for some time now. The company's attempts to shore up its clinical pipeline haven't gone well, and it looks like (more and more) they're putting a lot of their hopes on a success in Alzheimer's. If they see anything, that will definitely turn the whole situation around - between their diagnostic branch and a new therapeutic, they'll own the field, and a huge field it is. But the odds of this happening are quite low. The most likely outcome, it seems to me, is equivocal data that will be used to put pressure on the FDA, etc., to approve something, anything, for Alzheimer's.
It's worth remembering that it wasn't very long ago at all that the higher-ups at Lilly were telling everyone that all would be well, that they'd be cranking out two big new drugs a year by now. Hasn't happened. Since that 2010 article, they've had pretty much squat - well, Jentadueto, which is Boehringer Ingleheim's linagliptin, which Lilly is co-marketing, with metformin added. Earlier this year, they were talking up plans for five regulatory submissions in the near future, but that figure is off now that enzastaurin has already bombed in Phase III. Empagliflozin and ramucirumab are still very much alive, but will be entering crowded markets if they make it through. Dulaglutide is holding up well, though.
But will these be enough to keep Lilly from getting into trouble? That salary freeze is your answer: no, they will not. All the stops must be pulled out, and the ones after this will be even less enjoyable.
I thought everyone could use something inspirational after the sorts of stories that have been in the news the last few days. Here's a piece at FierceBiotech on Regeneron, a company that's actually doing very well and expanding. And how have they done it?