Is Pharma’s Perfect Storm Biotech’s Greatest Opportunity?

Lots of people inside pharma lament the present challenges and look back to a gilded era when blockbusters supplied rivers of money flow and supported development based activities – both R&D and advertising. And however, could this present biotech’s greatest opportunity as an industry?

We are all also familiar with how the economics for major pharma have changed in the last couple of years. Factors include things like:

patent expiries (current and imminent)
declining R&D productivity (as measured by extra dollars for fewer approved products)
healthcare payor pressures as governments search for spending budget cuts in all places
paucity of future blockbusters in the pipeline
Biotech has frequently been recommended as a saviour with the suggestion that a focused investigation style based on deep insights, rather than wide pools of area knowledge and serendipity, would lead to greater R&D productivity. Just after over 30 years of trying, there does not appear to be any conclusive proof that biotech’s research strategy has had any much more good results. But, there is nevertheless trigger for hope, although for motives driven by necessity and economics rather than just science.

Biotechs by their nature begin out (and typically stay) as compact, nimble firms obtaining to discover a niche inside a much greater ecosystem. As with any little organism or small business, you survive by getting actually good at a focused location or building niche expertise. You just do not have the resources to compete with the big players.

Thinking of target markets, in spite of the major-line attractiveness of blockbusters, biotechs normally target niche indications. Even though these could be modest and initially only have sales possible in the hundreds of millions of dollars, that can nevertheless make a large distinction to a compact corporation. The equation for big pharma is a lot tougher as they will need new drugs, for growth or to replace patent expiries, to create greater sales to move the functionality needle. And but some drugs which begin of in niche (or even orphan) indications, obtain approval and then widen their industry opportunity through label extension. Some examples include:

Amgen’s erythropoietin stimulating agent, or ESA, franchise, such as Epogen (also know as epoetin) and Aranesp. Epogen was initially approved in 1989 for anaemia in patients with end stage renal disease, selling $one hundred million in 1989. By 1997, the American Society of Clinical Oncology (ASCO) and American Society of Hematology (ASH) were considering an “evidence based clinical practice guideline on the use of epoetin in cancer sufferers”. Due to the fact Amgen had licensed non-chronic kidney applications to J&J (developed as Procrit), they additional capitalised on growing use of Epogen in cancer anaemia by creating Aranesp, approved in 2001. By 2010, Epogen and Aranesp had combined sales of around $five billion, from Amgen 2010 10K SEC filing.

Other orphan drugs can finish up becoming priced so richly that even these can lead to blockbuster status sooner or later. An instance is Genzyme’s Gauchers disease franchise and Cerezyme which has more than $1 billion in sales (and in no compact aspect driving Sanofi-Aventis acquisition of Genzyme this year for $20 billion).

A different example of development via label-extension use involves Cephalon’s drug for sleep disorders, Modafinil or Provigil (trade name). This was initially approved by the FDA in 1998 for improved wakefulness in individuals with narcolepsy. In 2004, this label was expanded for approval to “boost wakefulness in individuals with excessive sleepiness (ES) related with obstructive sleep apnea/ hypopnea syndrome (OSAHS) and shift function issues (SWD)”. Provigil sales had been $25 million 1999, the year of launch, and had grown to $1.12 billion by 2010. Nuvigil, a single-isomer formulation of Provigil, was authorized in 2009, and developed to extend the sleep disorder franchise. This had 2010 sales of $186 million. Provigil and Nuvigil comprised about 46% of total Cephalon sales by 2010 (information from Cephalon 2010 SEC ten-K filings). Provigil’s growth through the company’s earlier history supplied a significant cashflow bedrock to enable further pipeline improvement. Interestingly, Teva is acquiring Cephalon for $six.eight billion. When a single considers contribution to sales, and how its helped pipeline development, Provigil has played a significant portion in supporting this transaction.
Other things supporting a niche focus contain the rising hurdle with phase II failures. Reporting in Nature Critiques Drug Discovery, the Centre for Medicines Study discovered that “Phase II success prices for new development projects have fallen from 28% (2006-2007) to 18% (2008-2009)”. In his blog reviewing what’s behind the phase II failures, Derek Lowe (In the Pipeline) notes that four therapeutic places accounted for over 70% of the failures – cardiovascular, CNS, metabolic ailments (diabetes) and oncology. He recognises oncology and CNS as traditional high threat areas and diabetes is a challenging properly-served marketplace with higher existing regular of care (creating the efficacy barrier higher). Yet in cardiovascular, he suggests staying away from the big, clear plays:

…that’s exciting, considering the fact that that location has traditionally had a single of the improved trial results prices. Maybe that a single is also suffering from the standard of care becoming quite great (and frequently generic, or quickly to be). So yoursite.com -good results-rate mechanisms of the old days are well covered, leaving you to try your luck in the riskier suggestions, when nonetheless trying to beat some fairly fantastic (and pretty inexpensive) drugs…

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