Cash-equity equivalence for pharma.

Pfizer says they're looking for acquisitions around $4B. They've had a bit of success buying assets of that size, but that buyout space is becoming crowded - every big pharma would be happy to acquire meaningful but not humongous assets of that size to pave over their patent cliff.

But why is it that PFE or any other big pharma is willing to splash out billions for acquisitions when internal R&D budgets are under pressure? Here's why big pharmas have more incentive to buy innovation externally than fund it internally:

1. Risk/reward & timing: An investment in internal R&D might pay-off in ~5 years, whereas acquiring assets (particularly approved products) are a "sure thing." Until R&D becomes more predictable or higher reward, pharma will always be oriented to lower-risk, shorter term rewards.

2. Financial expectations: all big pharmas are sensitive to the almighty EPS (earnings per share.) An investment in internal R&D has a current cost to EPS and uncertain rewards, while an acquisition often has (understated) current costs and overstated future rewards. (Depending on synergy, more broad distribution, etc.)

3. Access to excellence: No offense to (internal) pharma researchers, but by buying assets, big pharma can buy from the top research efforts in the world. An acquisition likely has a tremendous concentration of focused expertise - be it in the target or disease of interest. Who knows more about diabetes, BMS, or Amylin, or who knows more about transgenic expression systems, Protalix or Pfizer? Internal R&D efforts can of course be high-quality, but most are very, very broad, and by definition somewhat dilute.

4. Internal inefficiencies. Pharmas have expensive structures and high legacy costs. Take another look at this chart from my February post "R&D Efficiency," indicating that pharma spends ~$5B in R&D per FDA approved drug.

In contrast, every biotech big or small is targeting a cost per drug approval in the hundred of millions, not billions, indicating their efficiency advantage. (As an example, Amylin - rumored as an acquisition target of BMS for ~$4B - probably spent between $500m and $750m in developing Bydureon, suggesting that they, if representative, are ~8X more efficient than BMS' historical internal efforts.


5. M&A accounting: this is the big one - our tax laws have a massive preference for equity-based M&A. Pfizer has ~$70B in cash on hand and generated an additional $20B in operating cash in 2011, while investing ~$10B in R&D (which includes cash payments to development partners, so this figure is not entirely internal R&D.) PFE has ~7.5B shares outstanding

Consider 2 scenarios for PFE:

-PFE increases cash R&D spending by $10B/year.

Financial result: EPS falls by about $1 per share.(-80%). (Assume $10B more in R&D is offset by $2.5B less (ballpark) in taxes.)

-PFE buys 2 companies (such as 2 x Amylin) for $5B in PFE stock. (Each.)

2 x Amylins would contribute ~$1.3B in new revenue (using 2011) figures, and while Amylin loses a small amount of money, Pfizer would likely assert that they would cut some overhead, and increase sales using PFE's sales force, eliminating the annual operating loss in the short term. Longer term, PFE grows sales (@ a profit margin in excess of 90%), and cuts Amylin overhead and R&D by $750M per year.

To fund the deal, PFE issues 442,000,000 new shares at current prices, or a roughly ~5% increase in shares outstanding, slightly diluting EPS in the near term. However, the acquired assets could  increase PFE's annual earnings by $1B roughly in the second year (assuming ~20% increase in revenues, with the costs detailed above, making the deal quickly accretive (=~12% EPS). Also: post-merger accounting may lead PFE to write-off half ($5B) of the M&A value as "goodwill." This is a hit to book (GAAP) earnings, but has, in effect, a cash benefit, as corporate taxes are reduced by the write-off of goodwill. End result: small near-term share dilution, medium term EPS increase due to the acquired assets and a lower tax bill, without spending much/any cash.

M&A is even more advantaged by the tax rules that reward share repurchases. If PFE repurchased $10B in stock (tax-free) instead of spending the same amount on R&D, EPS would be increased as the denominator shrinks.


My original goal was to calculate an equivalence between cash and equity ("$1 cash = $10 in equity spent in M&A," or something like that, but it seems that the ratio is more like $1 to infinity., advantage M&A.

With math like that, and the other advantages outlined above, it is almost surprising that Big Pharma does ANY internal R&D.

Transgenic (& biosimilar!) FDA approval!

Congrats to Protalix and Pfizer for receiving FDA approval for Elelyso, a drug to treat Gaucher's disease. The Protalix product will compete with the insanely expensive Genzyme product, Cerezyme.

What makes this approval especially noteworthy is that Elelyso is produced in carrots, making it the first FDA-approved transgenic drug.

Transgenics have been in development for two decades, but the challenges of the science have been significant, as has been reluctance on the part of regulators and payers, as they wondered if transgenics could really be bio-identical.

Also interesting, but not noted in the article: Elelyso may have also broken ground as the first biosimilar approved by the FDA. In this case, the resulting molecule is the same, though the expression system is obviously very different. I wonder if we'll see biosimilar makers trying this backdoor approach as well.

Now that Protalix has burst both the transgenic and biosimilar dams, it will be interesting to see the industry response. For starters, I think we'll see Genzyme cutting their price on Cerezyme to match Protalix/Pfizer, in spite of all of their previous protestations that the current price of $200,000/year is justified.

Personally, I'm happy to see this transgenic enzyme for Gaucher's disease receive approval. Approximately 15 years ago I was mildly involved with a research team trying to do the same thing using tobacco as an expression system, with the same goal of a massive price reduction for Gaucher's patients. We never succeeded, for a variety of reasons, but I've always been hopeful that someone else would.

I admit it: I don't "get" the generics business.

On one hand, I see the appeal of the generics business - there's ALOT of profit to be made by undercutting traditional pharma companies in off-patent drugs. Who doesn't like the idea of winning 30% of pharm.'s revenue with an investment of 1% of pharm.'s revenue?

On the other hand, any generics company really has only one variable to compete on: cost. (Who wants to compete solely on cost? Not me.)

By definition, the generic chemicals manufactured are identical, so there is no competing on product performance, and presumably every generic company's cost to manufacturer a particular chemical is roughly the same (though the difference in labor costs between, say Dr. Reddy's in India, and Teva (Israel and USA) isn't insignificant.)

So why would one generic company pay a premium to acquire another, as Watson did to acquire Actavis last week? At 14X EBITDA, the deal doesn't work on a purely financial basis, unless the combined operating margin roughly doubles (requiring a $1.2B improvement in operating margin, on $8B in annual revenue. That ain't happening.)

Watson will be acquiring Actavis manufacturing assets, which adds a mild amount of strategic value, but it seems to me that the only two ways that this deal ends up being rewarding for Watson is 1) if success in the generics business is entirely based on scale, or 2) the greater fool theory takes hold.

So with generics M&A occurring roughly monthly and big boys like Pfizer stomping into generics, I need someone to correct me, or otherwise explain this industry to me, because I just don't see an investment rationale, or why risk capital would chase this industry, other than to lock-in a modest annual ROIA.

(And it's not like I'm the only one not questioning the wisdom of generics investment - Deutsche Bank is taking a ~$375M hit on their investment in Actavis, as a result of the Watson-Actavis deal.)

Help, anybody?



btw: I think the manufacturing challenges inherent in bio-similars makes this subset of the generics industry much different than the chemical generics discussed above.

ex-Pfizer R&D head vs. bank analyst on drug discovery strategy: who ya got?

Forbes magazine unintentionally hosted a good drug discovery strategy debate. It started with a prominent pharma industry bank analyst Jack Scannell critiquing therapeutic R&D productivity. His points: 1) targeted drug development has been less productive than other approaches, and 2) high-throughput R&D technologies really haven't been productive either.

John LaMattina, formerly Pfizer's head of R&D fired back, also in Forbes ("Analysts get it wrong again"), which attributes lower R&D productivity to.........pharma mergers and more demanding regulators and payors. (Never mind that increasing R&D productivity has been the rationale for much of the industry consolidation.)

Both make good points, though. HTS and genomic technologies have definitely under-delivered. But, while the industry in the early days of HTS and genomics truly WAS guilty of treating drug discovery as a numbers game, researchers have become much smarter more efficient in their use of these technologies. (Whereas some R&D centers initially built labs to maximize compounds screened per day ("100,000 per day capacity!"), most are using HTS (and other technologies) to more inexpensively examine smaller focused libraries.)

Note: neither side cites budgets (neither pharma nor NIH) as an inhibitor of R&D productivity.

Scannell says that the numbers don't lie - 33 of the 50 first in class drugs studied started from a phenotypic-centric philosophy, but LaMattina counters that this is explained by the lag inherent with tech adoption, and that a wave of targeted compounds is on the horizon.

This is tough analysis to choose a side on - I think the phenotypic approach has been the benefit of low-hanging fruit (i.e. development to date has benefitted from easy molecules, but there aren't nearly as many easy ones left), while the targeted approach just has an inherent intellectual appeal. ("If we know what causes disease "X," why not just target it?")

(That being said, one of the more significant tech flops of the last decade or so has been "Rational Drug Design.")

I'd also nominate one other reason for low R&D productivity not mentioned by Scannell or LaMattina: organization structure. Innovation becomes the exception and not the rule as organizations grow bigger, while risk tolerance seems to decline. That bigger organizations stifle drug development is reinforced by the notion that many of the successful therapeutic programs were once considered UNsuccessful programs, as LaMattina's story of the invention of Viagra indicates. Another reinforcing story is that of Gleevec's development from Daniel Vasella's book: only the singular efforts, passion,  and strength of Dr. Brian Druker kept a Novartis committee from killing off the lead that became known as Gleevec.

Let's hope that pharma R&D rises soon, whether because pharma mergers have slowed, or because productivity is catching up with the technology.

biotech as fantasy baseball

Luke TImmerman @ Xconomy compares bio-pharma to fantasy baseball in an interesting way. Since baseball DOES explain life (and vice versa), here's a few more bio-baseball analogies:

Bryce Harper = Intrexon. Harper - an outfield prospect for the Washington Nats - is arguably the game's greatest prospect, though it has cost a huge amount of money to sign and develop Harper to this point. Likewise, Intrexon, with great prospects in synthetic biology, has required a huge amount of capital investment to date. Both Harper and Intrexon are anticipated to be very productive, but neither is assured of being a net positive.

C.C. Sabathia = Genentech. Sabathia in Cleveland and Genentech on their own had prodigous success, but both have joined much larger 'empires' in the last few years in the form of the NY Yankees and Roche, respectively. Both Sabathia and Genentech have carried on their success in their new uniforms.

Jamie Moyer = GPCR research. Ancient by current standards, both Moyer (49 years old, and new starting pitcher for the Colorado Rockies) and GPCR research keep delivering.

A-Rod = Pfizer. Both are cash-rich giants of their respective industries, and based in NYC, but both have delivered only marginal results over the last few years, perhaps getting by on reputation.

David Freese = Biogen. Both are known for two big hits in particular (Freese in the 2011 World Series, Biogen with Tysrabi and Rituxan). Both really need to deliver in 2012 in order to stay in the big leagues.

Andrew Friedman = _________ (position open.) Friedman, the creative and successful General Manager of the resource-poor Tampa Bay Rays has through innovation and smart deals made Tampa competitive with teams with payrolls twice their size. Bio-pharma badly needs a few Andrew Friedmans to adopt innovative business models and generate R&D success far beyond what a meager budget might suggest.

Average college baseball player = average RX or DX IP from an academic center. Both are really, really, really far from major league success. The only difference is that the college ballplayer knows it.

Interesting new research

1) A sign of research advances to come: a research team used DNA sequencing to find effective uses of approved cancer drugs in new cancer applications.

Study details
target disease indication: colon, lung. (CRC & NSCLC)
core technology: exome sequencing
genes of interest: RET and ALK.
Nutshell: Nexavar, Sutent, and Calpresa ("N,S&C") are each multi-kinase inhibitors approved for other cancers, but they happen to also inhibit RET in addition to their effectiveness against other primary targets (VEGFR). The researchers - backed by Foundation Medicine - found unexpected RET fusion genes in a small subset of samples, and found N,S&C effective in vitro against the cancers with RET expression. The kicker is that neither of the diseases in this study are approved applications for N,S or C. The problem is that the RET or ALK incidence was in only ~2% of the ~600 samples studied.

(Presumably the ALK findings would similarly advance the cause of PFE's Xalkori, and ALK inhibitor.)

This is the type of personalized medicine progress that we've been on the cusp of for awhile, so it is nice to see the promise of personalized medicine become tangible. I expect that we'll see many more studies like this just this year, and each one will advance treatments (and the market for therapeutics) by a tiny bit (in other words, bunt singles, not home runs), but that collectively they'll add up to a big impact, if clinicians can keep all of the findings straight, and if the FDA can fast-track approval for these minor extensions to existing drug approvals. If so, the makers of N,S&C just got a little more valuable and outcomes for patients with CRC or NSCLC just got a little better.

2) new class of anti-cholesterol drugs look tremendously effective. Anti-PSKC9 drugs from Amgen (Phase I) and Regeneron (P II) dramatically cut LDL by using a new way to interdict a known pathway. (The same one targeted by statins.) The AMGN drug is a biological delivered by monthly injection, which makes me wonder: what delivery method has higher effective compliance, a single monthly shot, or daily pills like Lipitor?

Given how early the findings are, though, I don't think we'll see either AMGN or REGN drug on the market until late 2016 at best.


(disclosure: I own a tiny amount of AMGN stock.)

India in the news (x2)

It seems like China makes news in the pharma industry about 10X as often as India, even crediting India for each appearance in the press with negative connotations, like both of this week's stories.

1) Pfizer and Biocon cancel their agreement to co-market biosimilar insulin produced by Biocon. This might be a case - as claimed in the press release - of Pfizer exiting non-core businesses in order to focus on their core branded pharmaceutical business, but if you're devoted to any kind of activity in biosimilars, insulin is a great place to start - it's a very large volume product, and currently served by basically a duopoly (Novo and Lilly.) Pfizer has some institutional knowledge in diabetes (remember the inhaled insulin introduced by Pfizer last decade?), so they must have understood the market opportunity. Pfizer wasn't shy when the agreement with Biocon was launched - it covered most of the world, and they've always been interested in huge markets needing a broad sales force. (As opposed to niche products.)

For Biocon, Pfizer would have provided big, big, big scale for their biosimilar insulin, and allowed the company to focus on manufacturing, rather than to start-up sales and distribution operations in America. Pfizer was a dream partner for Biocon, with their scale and the appeal to Biocon of learning sales & marketing from the best. I can't imagine that they pulled the plug unilaterally, or without trying to save the relationship.

As consolation for the cancellation, Biocon gets to keep a lot of cash from Pfizer (which would fund the development a pretty good US salesforce, though I imagine their next action will be to find another US partner to replace Pfizer.

I'm guessing that this news is a manifestation of strategy differences between former Pfizer CEO Jeff Kindler and his successor Ian Read finally reaching the surface. I don't buy the notion that strategic priorities 'just changed' and that while Pfizer's shifting strategy made biosimilar insulin unattractive, but all other biosimilars still of interest to Pfizer. (I think you're either "in," with Insulin as a cornerstone product for a biosimilars business, or you're "out" of biosimilars.)

The other interpretation that makes some sense is that Pfizer is re-evaluating their business with Indian and Indian companies, and less interested in becoming enmeshed in a country hostile to Pfizer's core business, as manifest by news story #2.....


2) India robs Bayer of Nexavar rights.

The only question here is if this should be called coercion with prejudice, or outright theft.

India's patent court ruled that because Bayer's Nexavar pricing put the drug so far out of reach of Indians, Bayer should be compelled to license Nexavar to an Indian generic drug maker.

India was quoted as saying "Thanks for all of that R&D and stuff, Bayer. We hope your millions invested in R&D pay-off in other countries, but not here, because we are going to free-ride on the rest of the world, as our country-wide economic mismanagement leaves us unable and unwilling to pay."

As a result, Nexavar will be manufactured and sold in India at ~1/35th of Bayer's proposed price.

Nexavar is definitely an expensive product, with a net benefit to cancer patients of about an additional six months survival time, but Bayer had suggested Nexavar pricing to India that was a fraction of "first world" pricing as a concession to India's economic status.

(Similarly, Novartis has been embroiled in similar discussions about Indian access to Gleevec, though no court finding in this case has occurred yet.)


At this point, what do you do if you're Bayer? You can either give in to India's theft, or you can close all operations in the country and presumably let Indian health suffer by not selling their medicines in the country.  (At which point the Indian generic manufacturer will start making Nexavar, without remitting royalties to Bayer.)

Neither is a good option, but after both Bayer was robbed, it is probably a matter of time before a big pharma company skips or ignores India. While I do not look forward to the poor health outcomes that would likely (temporarily) result in India should a pharma company skip India, I would like to see how India & Pharma could establish a constructive relationship one day, and foregoing India is probably the only step for pharma to take to reach those ends.

The kicker to India's decision is that the Indian court's ruling is legal under WTO rules. Other countries could copy India's approach and expropriate pharma IP at will. I highly doubt that the expropriation of Nexavar in India will be the last.

Xcovery blog revisited (state of targeted Rx)

About five years ago I started a blog dedicated to targeted therapeutics, especially kinases inhibitors. The blog was an outgrowth of Xcovery, the kinase discovery spin-out from the Scripps Research Institute that I started and served as EVP of Business Development. 

I was already tracking developments in biopharm so the blog was an outlet for some of basic analysis and a fun way to share my opinion and connect with others in the industry. 

One of the regular bits of analysis was tracking the performance of FDA approved targeted drugs. Just for fun, here's a five year update, with some analysis:

 

Of note:

• The 17 approved molecularly targeted drugs accounted for $27B in global sales in 2011. Think about that for a second, then consider that most of these drugs have been on the market for only 5-6 years, and their approved indications are still growing. Consider too that most have not been applied as combination therapies.

• Even the senior citizen of the group (Herceptin, approved in 1998), has seen prolonged growth, averaging 36% per year over the last five years.

• With 8 blockbusters and several more close and still growing (Tasigna, Sprycel, etc), almost all of the targeted drugs are either blockbusters, or well on their way. So much for the concern that targeting drugs might limit the market potential.

• The top 4 (Avastin, Herceptin, Gleevec, and Lucentis) have made a mockery of their projected sales ceilings and are still growing strongly.

• On the other hand, the only assets that appear to be underperforming expectations are Amgen’s Vectibix, GSK’s Tykerb, and Pfizer’s Torisel (specific sales data isn’t available for 2011, as Torisel is listed under “other oncology,” totaling ~$130M across several drugs.)

• Vectibix is still playing catch up to Erbitux, and Tykerb hasn’t gained much traction against the Roche juggernaut.

• I wonder what Amgen’s new CEO will do about Vectibix. It seems that there’s 2 choices: go big (invest in expanding trials for more indications and in comparison with Erbitux) or go home (sell the product to another biopharm.)

• 4 of the top 6 are Roche drugs, which means that they were discovered by Genentech. Hats off again to the DNA team in South San Francisco for their amazing science and productivity. I wonder if we will ever see any other drug discovery effort be so inventive and productive for a prolonged period.

• Also: I don’t think anyone is doubting the wisdom of Roche buying the piece of DNA that Roche didn’t own. I haven’t run the numbers, but I’d be shocked if the DNA acquisition wasn’t a resounding financial win for Roche.

• Unfortunately, OSI’s acquisition of Macugen was a tremendous dud.

• I am encouraged by the progress since my last analysis in 2006 – an average of two new approvals each year, with most new products addressing new targets or diseases, in contrast to the incremental “me too-ism” in other pharma areas like ED or cholesterol drugs.

A few sweeping generalizations:

• FDA approval and sales success seem to be connected to corporate resources. Small to mid-cap biotechs have been chasing targeted therapies for ~15 years without much output. (I’m talking about companies such as Exelixis, Vertex (pre-HepC), Ariad, etc., though I don’t mean to pick on specific companies.) With three exceptions (Onyx’s Nexavar, OSI’s Tarceva, and the former ImClone’s Erbitux), the targeted therapies have largely been developed in-house by “old” companies with multi-billion dollar market caps and the resources to match. (You could make the case that Amgen’s Vectibix came from a small targeted effort at Abgenix, but I suspect that it was Amgen’s resources that got Vectibix through FDA approval. Similarly, Sutent started at Sugen, but Pharmacia and Pfizer seemed to have provided the big push.)

• A gross generalization: the small to mid-caps tend to lack broad biological or disease-specific expertise, instead investing in target-specific expertise, or platform-specific expertise, thinking that broad expertise (ancillary to their target or disease of interest) is expensive overhead. I wonder if the results to date argue for the big pharma discovery model, or just reinforces the need for a broad portfolio to be successful in drug discovery and development.

• With rare exception (as in Pfizer’s Xalkori and Novartis’ Gleevec), the path to FDA approval has been arduous for these drugs. There are a number of targeted drug developers who hold out hope that their P2 or P3 results will be so clear and strong that their clinical trials will be stopped early and approved quickly. That’s definitely the exception, unfortunately, and even in the positive trials for targeted drugs, the data has tended to be good, not great. I suspect that is a function of the requirements of clinical trial design and comparison to first-line chemotherapies. As a result the “new” drugs are posting smallish survival benefits when compared to the “old” therapies, with no accounting for how certain patient segments have had dramatic benefits. (Thus starting the vicious circular argument that targeted therapies ought to have stratified patient populations in clinical trials, but stratifying patients shrinks the market potential for such drugs, bring the business viability of the targeted therapy into question.) It seems that the FDA could take the Xalkori experience and develop a novel process for rapid approval based on patient stratification without derailing or obviating more broad approval for the drug.

The $27B in revenue in this segment (likely to grow past $50B in 2014) has hopefully served to further de-risk pharma R&D in molecularly targeted therapeutics. Coupled with advancements in medicinal chemistry, we will hopefully see more and better targeted therapies in the future. 

R&D efficiency

Forbes' Matt Herper takes a look at the cost to develop a new drug, and now current estimates put that figure at $1B-$4B.

While the current estimate is newsworthy, folks at places like Tufts have been conducting this exercise for years, and the numbers are always eye-popping (and debatable.)

What makes this particular article interesting is how you can also use the analysis conducted by Herper to compare pharma productivity over the last 15 years. Take a look at the R&D productivity of the top 12 pharmas:

Here's my takeaways:

-There's two tiers of productivity in the analysis: the "productive" cluster (AMGN, NVS, BMS, MRK, ABT, and LLY) all cluster between $3.7B and $4.6B in cost per new drug, while the "less productive" ranged from $5.9B to 11.8B per drug. While half of the companies studied, the "productives" account for 66 of the 135 drugs (49%) these 12 companies introduced in the last 15 years. So you can't say that higher R&D productivity is also a factor of scale - the productive and less-productive companies produced roughly the same number of drugs. 

-The "less-productive" companies tend to be the product of mega-mergers. Each of these companies has done deals to one extent or another, but think of the "biggies" and you're generally thinking of the "less productive" group. Careful, though, when thinking about the time element here - MRK, for example, only did their big SGP acquisition in late 2009. This brings up the question: do mergers depress R&D productivity, or is it mostly companies with declining R&D productivity that have the urge to merge? (My guess: a bit of both, but considering that the 6 most productive companies are generally considered the least involved in the M&A game due to a bias towards internal efforts, it may be a moot point. M&A either distracts from focus, or results in sub-efficient R&D orgs.

(I'm being charitable to NVS, which is a product of a mega-merger (Sandoz and Ciba-Geigy), but that occurred in 1996 - prior to the analysis period. Either NVS did a much better job of integrating R&D, or it takes 15 years to overcome the M&A inefficiencies.)

-I think it would be appropriate to believe that these results also project future R&D efficiency and likely future stock performance.  (e.g. over the next 15 years, AMGN is likely to be much more productive than AZN.) The 15 year period (and $75B in R&D spend) should account for short-term spikes and likely demonstrates which companies have the best R&D people and organizations. I am especially impressed with Novartis (21 products over 15 years) and most disappointed by AstraZeneca (5 products over the same period.) Perhaps this reflects one company choosing easier/harder targets, but I think it more likely reflects capabilities.

-For all of the news and criticism, Pfizer's R&D isn't too bad. The criticism that failures like torcetrapib reflect diminished R&D productivity due to repeated mergers seems misplaced, as Pfizer was almost middle-of-the-pack in R&D efficiency over the last 15 years.

-You might expect that the broadest R&D portfolios would have the smoothest results (success in one area, say cancer, making up for failures in another, say neuroscience.) However, the more productive companies are to me the least broad. Rightly or wrongly, I think of BMS & AMGN biased towards cancer research, while GSK and JNJ are the most diversified. Does this mean that there is R&D value in specialization?

Any other insights to be gleaned from the Forbes analysis?

A couple of caveats to the analysis: 

-The best analysis would weight productivity with resulting product sales. (In other words: you'd accept lower R&D spending efficiency if the output were blockbusters.)

- I can't tell from the Forbes analysis exactly what is included in the figures. I suspect that Roche data includes historical Genentech R&D spending and output. I think DNA has been one of the most efficient AND effective R&D organizations, so I would be very curious to see DNA split out from pre-merger Roche.