Poll: Is Your Universe Shrinking or Expanding?

As we note in this post, the majority of industry dealmakers polled at a recent post-PSA dinner shindig agreed with the sentiment that there was not enough innovation in the biotech/pharma world to sustain its current size: in effect, your universe is contracting.

Sure those guys & gals are smart. But are they as smart as IN VIVO Blog readers (we'll ignore the overlap)? We pose the same question to you to glean the wisdom of crowds and settle the question once and for all--or at least until next year's PSA. So have at it:



(Email subscribers: click here to participate in the poll.)

image from flickr user sandy kemsley used under a creative commons license

In Vino Veritas: Truth from the Frazier Dinner at PSA

For the last several years of FDC/Windhover’s Pharmaceutical Strategic Alliances conference, Alan Frazier, the founding partner of the Frazier Healthcare Ventures group, has been hosting a first-night dinner for roughly 30 top business development executives, the majority from Big Pharma.

Given the dealmaking power in the room, it’s not a bad place to sample industry opinion. And so, before too much wine has been poured, the guests fill out a brief survey.

No surprise, perhaps, given the dinner guests, but this year’s crowd was uncharacteristically pessimistic about biotech. Sixty-nine percent felt that Big Pharma’s and Big Biotech’s acquisitions of smaller biotechs were overvalued; 82% felt that the recent decline in acquisition values of private biotechs (you can see a complete analysis of private-biotech acquisitions here) would only get worse; even bigger majorities felt that Big Pharma or Big Biotech would own rights to most of the industry’s late-stage assets (92% for small molecules; 84% for biologics).

The latter answer certainly makes sense given financing prospects for biotech: next to hedge funds, public biotechs without product-based cash flow are going to feel the most pain from the market meltdown, say the Frazier guests … and would thus be more willing to sell control of their key programs.

Not that any of this is particularly good news for pharma. Two-thirds of the dinner guests felt that pharma shouldn’t diversify into generics and OTCs, let alone devices or services – but should “focus on getting innovative drugs to market.” Problem is, nearly the same proportion—61%--felt that “the fundamental rate of innovation across the entire biotech/pharma ecosystem is incapable of sustaining the business at its current size.” [UPDATE: if you'd like to weigh in on the issue, see this post.]

See the issue? Pharmas should focus on innovation…but they don’t themselves have what they need – and what’s available from biotech ain’t worth the sticker price. And even if the economy forces biotechs into discount mode, there still isn’t enough to go around.

Lucky that Alan picked up the check.

Photo courtesy of Flickr user katiew through a creative commons license.

Lesson from the JPMorgan Conference: Exceptions That Prove the Rule

Look both ways before you cross The Street

Roger Longman's earlier post about biotech hype got us thinking about a few conversations we had and presentations we watched last week, the way the financial markets respond to--or don't respond to--the optimism of chief executives, and how sometimes that optimism turns out to be quite warranted.

For example it seems like every year we sit down at the St. Francis on Day One and listen to Celgene chairman/CEO Sol Barer, PhD, promise the world to the room chock-full of investors. This year that promise was more stratospheric growth for the company's blockbuster Revlimid, even in the face of competition from Millennium's Velcade.

And you know what we thought to ourselves this year when a once-again upbeat Barer suggested that "in many ways we are at the beginning of Revlimid's commercialization," then threw up a slide crammed with ongoing or planned studies of the blockbuster and guided that sales at the firm would jump to $1.8 billion from $1.4 billion? We thought well why the hell not? Celgene keeps delivering. Barer didn't even have to mention the company's acquisition of Pharmion to get investors excited; that deal, and Pharmion's products, barely registered during his spiel.

That said, skepticism has to be the default view when countered with the overwhelming optimism that characterizes the hype Roger wrote about last week. And in today's R&D and regulatory climate (the results of which we've well documented) it's relatively easy to be a skeptic. Technologies may be fascinating and drugs may be promising (we heard about our share of fascinating technologies and promising drugs last week, for sure), but in the end most technologies don't end up churning out dozens of drug candidates for one reason or another and most drug candidates themselves fail. That's simply just the way it is.

But then there are the Celgenes of the world. And maybe the Vertexes? We sat down with Vertex Pharmaceuticals CEO Joshua Boger, PhD, at the JP Morgan conference to talk about telaprevir (née VX-950), its leading HCV protease inhibitor. (We won't go into the specifics of the massive HCV opportunity here, but note we've covered the area pretty extensively in the past in this IN VIVO feature and this shorter piece on Vertex's landmark ex-US deal for telaprevir with J&J's Tibotec, among other pieces.)

Vertex's stock has been pummelled by Wall Street in recent months following the interim analyses of its first two large Phase IIb trials of telaprevir last November. Those trials have so far established telaprevir, which is further along than any other experimental direct antiviral in HCV, as a potential breakthrough therapy in HCV. The company's stock fell because even though the interim look suggested the drug would find a place in first line HCV therapy (SVR rate at 24 weeks was 61% in the first trial, 65% in the second), given the confidence Vertex displayed in the molecule's prospects--and the sheer size of that J&J deal--one could be forgiven for thinking telaprevir was going to do better. And then make you a sandwich and wash your car.

And then there are the concerns about the drug's thrice-a-day administration that we have heard from other observers, who suggest that even if Vertex is first to market by a couple years, HCV patients might wait for something more convenient. They've waited for years already, in some cases, why not another year or two?

Boger seemed weary of explaining the fallacy of this argument but gave it a go for us anyway. "There are a lot of amateur market opinions," he said, and people are confusing HCV treatment with HIV treatment: the latter is a chronic, for-the-rest-of-your-life regimen, but the former could be shortened to less than six months with the addition of telaprevir to existing interferon and ribavirin standard of care (currently a 48-week therapy). Vertex's critics "couldn't be more wrong," he said. "This isn't a chronic condition where you take the drugs forever--this is a cure."

Vertex hasn't seen a compliance issue in its clinical trials, Boger maintained, and even if it would be nice to have a protease inhibitor with twice-a-day or once-a-day administration, he said, it wouldn't be as a means to boost compliance. Rather it would be easier to combine a twice-a-day drug with other direct antivirals that could follow telaprevir to the market, such as an HCV polymerase inhibitor.

And as for patients waiting for a better drug, Boger bristled and chalked that up to wishful thinking from competitors. HCV is a case where a drug that makes the first leap in patient benefit will define future drugs' clinical and regulatory pathways, he said, plus take the lion's share of pent-up market demand that will never exist again. "I've never seen a field where the potential of being first to market is this big," Boger said.

Is that more hype? And has Vertex's own hype come back to bite it recently? Maybe, but that doesn't mean they won't succeed with telaprevir. We wouldn't bet against them.

The R&D Productivity Crisis: Is There a Bright Side?

Lots of interesting responses to our post on the historically bad year for new drug approvals this year.

One top R&D exec at a big pharma company focused on the last line: “Something needs to change.”

“It does and it is. If we can steer clear of major disruptions I am convinced that we can turn this round. A lot of change needs to happen, but directed at improving the process of choosing targets, getting them into man and to proof-of-concept quickly then streamlining a clumsy development engine.”

Another reader in a Big Pharma R&D organization writes somewhat less optimistically:

“I am sure everyone in the industry is thinking of ways to ‘innovate’ out of this situation and I believe the next year or two is going to be interesting for us all.”

And then there is this pragmatic response from the VC side:

“Depressing but very interesting. This shows why venture capitalists should leave it to the pharmas to try to get drugs approved!”

Speaking of depressing, we also received congratulations from a colleague at another publication for managing to work in a Philadelphia sports reference in a post about NME approval statistics. The depressing part is that it has been 25 years since a major Philly sports team won a championship. Yikes.

There is lot’s more to say about the state of R&D productivity. We have taken a deeper dive into the numbers on TheRPMReport.com, and coupled it with some of the observations of top industry executives at The RPM Report's FDA/CMS Summit.

There is one surprise: as bad as the past several years have been by all conventional measures of R&D output, there is a glimmer of hope. The optimistic view, that we are on the brink of an unprecedented flow of innovative new products—just might be right. (You do have to be a subscriber to The RPM Report to read our complete analysis, or sign up for a 30-day trial to get a taste of what you are missing.)

Please Note: our initial count of drug approvals in the IN VIVO Blog was off by one. It turns out there were 17 new molecular entity approvals, not 16—Fresenius Kabi’s hypovolemia agent Voluven (hydroxyethyl starch) was approved December 27.

Voluven was approved under the 505(b)(2) mechanism as equivalent to other blood volume enhancers, so it definitely does not add to our benchmark statistics (innovative commercial therapies, or ICTs). The extra NME also doesn’t change anything else in our analysis: 17 NMEs is still the lowest total since 1983, as is 19 novel molecules (NMEs plus novel biologics).

Voluven is nevertheless an interesting approval: it is the latest example of the emerging follow-on biologics pathway at FDA.

What’s that? You think there is no such pathway? Not so. Congress has yet to enact a legislative pathway for follow-on versions of biologics regulated under the Public Health Service Act. But for biologics that happen to be regulated under the FD&C Act (like human growth hormone, insulin, insulin-like growth factor, etc. etc.) follow-on approvals keep trickling out of the agency. Look for more on that topic as well, coming soon in The RPM Report.

How to Improve Drug Development? Fail Fast!

In this morning’s PSA panel on “Development Dilemmas and Opportunities,” Michael Clayman, MD, VP of Lilly Research Laboratories at Eli Lilly & Co., presented a unique option for optimizing clinical pipeline success. Perversely, it depends on failing fast. Clayman heads Lilly’s Chorus division, an organization that is trying to create a new model for drug development built on not reducing attrition but increasing the chances post-clinical proof of concept that a drug will make it to market. We took an in-depth look at Chorus in May in IN VIVO.

Clayman estimates that 90% of drugs in development will fail anyway, so why devote the time, the resources—the dollars—driving a product forward if it’s not going to make to market? The goal of his group: cut costs, and dramatically narrow the time to a decision point—typically proof of concept in man, what Clayman jokingly refered to today as “pull out your checkbook”—down to as little as twelve months.

It’s a goal Clayman claims Chorus is well on its way to achieving. To date, the company has shown that it can shave 12 to 18 months off the time it takes a drug to reach proof of concept and reduce the R&D dollar spend from $30 million to $3 million.

But, outside these metrics, there aren’t obvious ways to measure the group’s success. It’s not as if the company can use drug approvals as a measure, since the goal of Chorus isn’t to get drugs on the market, but to de-risk them as much as possible. Indeed, it’s an organizational tool to manage Lilly’s vast portfolio of drug products so that the bias is on the ultimate winners. And while nearly 80% of Lilly molecules might be pushed forward according to this program, to date the strategy has been applied to just 10.

According to Clayman, one critical component of the strategy is that Chorus is compound agnostic. No one on the 24-person team has a driving loyalty to a molecule that might sway him or her to push one project forward over another. The group also operates as an autonomous division within Lilly so that it is not hide-bound by the operational infrastructure of the larger organization. “Once a molecule is transferred to us, it’s no longer worked on by Lilly scientists. We outsource the experimentation,” he says.

That level of outsourcing is likely to be troubling to most other major pharmas. It seems unlikely that many outfits would be willing to adopt such a strategy unless there were significant proof that it improves R&D productivity. Until such time, expect the refrain to remain simply Lilly’s chorus.