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.
Showing posts with label biosimilars. Show all posts
Showing posts with label biosimilars. Show all posts
Wednesday, May 2, 2012
Tuesday, May 1, 2012
Back-seat driving AstraZeneca
Just for fun, here's some quick thoughts on how AZ can get back on track after the reign of CEO David Brennan, who announced his early retirement last week while being water boarded by the AZ BoD:
(btw: I really wanted to label Brennan's tenure as disastrous, but that's not fair. Compared to the return on the S&P 500 and PPH (a big pharma ETF) over Brennan's reign (Jan '06 to now), AZN was very bad, but not atrocious. Take a look:
During Brennan's tenure, (as of the day of Brennan's retirement announcement,) AZN was down 5.5%, vs +11.4% for the S&P and +6.8% for PPH. I expected the AZN relative performance to be much worse.
Comparable figures since the Astra-Zeneca merger in 1999:
AZN: -10.3% (total)
S&P: +8.2%
PPH: -14.4%
So, you could say that the AZN merger didn't destroy (relatively) as much value as the pharma industry did over the same time period, but I still can't bring myself to say that it was a worthwhile deal.
In case you're wondering, AZN is <5% of the composition of PPH.
Back to the backseat driving. Here's 8 ideas to get AZN back on track:
1. R&D strategy: go big, or go home. AZ's annual R&D spend is $4.5B, which is only ~40% of the amount AZ annually spends on SG&A. For all of AZN's problems, they still have $11B in cash on hand and throw off nearly $8B in annual operating cash flow. It is time for AZ to either double down on their R&D, or dismantle it.
Everyone knows AZ's pipeline is thin. If it is because the $4.5B of R&D is unproductive, shut down/shrink R&D.
For the last decade the trend in pharma has been to shrink R&D, but the only way that AZ is going to reverse their fate is swim against the tide and massively expand the R&D budget. This option is especially attractive to AZ because of the European R&D assets shuttered over the last decade, and now available for a song. For example, AZ could re-open Pfizer's former R&D facility at Sandwich, UK, attract a very talented team, and likely win government financial assistance in doing so.
There are two counter-arguments to "going big" in R&D - the fact that payoff from the increased R&D is years off, and the fact that EPS would take an immediate hit. I'd argue, though, that the benefit of the increased R&D investment would be felt pretty quickly, as much of the investment would be in downstream clinical development, and not necessarily in basic discovery.
As for EPS, yes, it would take a hit, though not as bad as the gross increase in R&D, as the tax authorities would be paying roughly a third of the gross increase. I'd also argue that perversely, the R&D spend would INCREASE the amount of economic value added annually by AZ, as you'd be replacing the meek interest income from the $11-19B cash on hand with (hopefully) dynamic returns from R&D.
2. Sell Iressa to NVS or another interested party. Iressa (EGFR inhibitor) probably never got enough corporate attention once it landed in regulatory limbo. There's still value to Iressa to to unlock, though, and I think NVS could make the most of the product amidst their other successful targeted cancer therapeutics. (Of which they lack an EGFR inhibitor.) I also think having a new set of eyes to look over Iressa's clinical results would be beneficial.
3. Focus the MedImmune/biotherapeutics group on biosimilars. The combined MEDI and Cambridge Antibody assets are formidable though underutilized engines, both in terms of capabilities and capacity. Why not leverage both in pursuit of biosimilars, as Pfizer is doing with some of their bio-production assets? This is an area where AZ could take the lead, based on their MEDI investment, and an area with a modest capital demand. It would certainly be cheaper to spend another $500M on additional MEDI R&D to develop saleable products than to spend $5-6B in capital to acquire Amylin - a good, though one-market (diabetes) company that doesn't match well with AZ's existing portfolio.
4. Seek more big-big partnering, as exemplfied by the deal with AMGN. (See "AMGN & AZN get creative.") Points #1 and #3 are all about refilling the product pipeline with internally developed "upside." Another route to the same outcome is to buy large chunks of upside to augment the weak AZ pipeline. Combining points 1, 3, and 4 would diversify the R&D risk for AZN and fatten the pipeline, with good cost control.
5. Avoid the urge to make late-stage acquisitions to fill the pipeline. Congrats on the Ardea deal, but please don't think a string of acquisitions is the cure for what ails AZ. Any acquisition right now would represent paying full price, as every other pharma company is shopping hard for late stage products. AZ isn't big enough to outbid PFE, not specialized enough to win many niche acquisitions, and is too desperate at this point to NOT overpay sooner or later. Instead:
6. Climb the risk curve and make early (-er) product development partnerships. Whereas EVERY big pharma has the financial wherewithal to make a bid for a late-stage clinical candidate, many pharmas are too risk-averse to pursue partnering early programs. This represents an opportunity for a big pharma willing to take on more risk AND represents the best return on R&D dollars. Why spend $5-6B on an acquisition like Amylin or $1.2B on a late-stage deal like Ardea when AZN can probably sign and fund 10 early stage partnerships for a fraction of these amounts?
One other consideration: AZ's new CEO probably has 3-4 years to make an impact at AZ, which is enough time that a Phase I lead gained through partnership now can become an exciting Phase III product.
7. Recognize that there is a historically massive opportunity for AZ, and concurrently cut the dividend. There has never been a better time to be in the drug discovery & development business. Incomes are rising around the world while populations are aging. At the same time, medical knowledge has exploded over the last decade, and emerging technologies (e.g. in silica screening) are making drug discovery easier, less costly, and less risky.
It has been a long time since AZ or most any pharma was a growth stock, but with the context above, why wouldn't you want to transform AZ into a growth stock, and increase investment in R&D, as funded by reducing or eliminating the dividend? Yes, changing the dividend will set off alarms in the financial community, but better to do it proactively as part of a growth strategy than reactively once everything goes off patent.
8. Quit pretending that AZ decisions aren't heavily influenced by geography and political concerns by relocating corporate HQ to……….Dubai. AZ's HQ is in London. Except R&D, which is based in Sweden. And except UK R&D, based in NW England. And except biologics, based in Maryland. And except their biggest office in their biggest market, in Delaware.
Some tech companies see geography as a competitive necessity, such as the growing big pharma labs in Cambridge, MA (PFE, MRK, NVS….) AZ goes so far in the other direction, that you wonder if they are intentionally avoiding tech hotspots. UK R&D in Cheshire, UK instead of Oxbridge? Swedish R&D not near the Karolinska Institute? Weird.
You just know that decisions aren't made at AZ solely on their merits and without considering the geo-political ramifications. One way to negate this is to relocate corporate HQ to a "neutral" territory, and publicly commit that future UK & Swedish investment will be tied to leading academic locations. I'm not saying that AZ's weak R&D productivity is due to their location in NW England, but I believe that one way to boost the R&D productivity is to gain more exposure to leading labs in Oxbridge and the Karolinska. Watch AZ's R&D be reinvigorated.
Dubai is a silly answer to "what's a neutral country roughly equidistant to the UK and Sweden?" but I'm sure Dubai or other countries would provide a huge economic incentive to support the corporate relo. Not only would Dubai or others pay a bounty for the influx of meaningful jobs, but you could probably find a country that would be convinced to pay BIG $$$ so that AZ could become the cornerstone of their nascent pharma industry. If Boeing could relocate their corporate HQ from Seattle to Chicago, AZ sure could move to Dubai, or Singapore, or Bangalore.
(not to mention that there could be a substantial savings in corporate taxes for AZ.)
So there's my quick, under-informed ideas to get AZ back on track. Unfortunately, to make real backseat driving recommendations, you have to ignore certain realities, such as the holiness of the EPS expectations, and the tax advantages of filling the pipeline via acquisitions rather than increasing the R&D cash expense. But, you read this far, which means that there's some value in my backseat-driving recommendations…….
(btw: I really wanted to label Brennan's tenure as disastrous, but that's not fair. Compared to the return on the S&P 500 and PPH (a big pharma ETF) over Brennan's reign (Jan '06 to now), AZN was very bad, but not atrocious. Take a look:
During Brennan's tenure, (as of the day of Brennan's retirement announcement,) AZN was down 5.5%, vs +11.4% for the S&P and +6.8% for PPH. I expected the AZN relative performance to be much worse.
Comparable figures since the Astra-Zeneca merger in 1999:
AZN: -10.3% (total)
S&P: +8.2%
PPH: -14.4%
So, you could say that the AZN merger didn't destroy (relatively) as much value as the pharma industry did over the same time period, but I still can't bring myself to say that it was a worthwhile deal.
In case you're wondering, AZN is <5% of the composition of PPH.
Back to the backseat driving. Here's 8 ideas to get AZN back on track:
1. R&D strategy: go big, or go home. AZ's annual R&D spend is $4.5B, which is only ~40% of the amount AZ annually spends on SG&A. For all of AZN's problems, they still have $11B in cash on hand and throw off nearly $8B in annual operating cash flow. It is time for AZ to either double down on their R&D, or dismantle it.
Everyone knows AZ's pipeline is thin. If it is because the $4.5B of R&D is unproductive, shut down/shrink R&D.
For the last decade the trend in pharma has been to shrink R&D, but the only way that AZ is going to reverse their fate is swim against the tide and massively expand the R&D budget. This option is especially attractive to AZ because of the European R&D assets shuttered over the last decade, and now available for a song. For example, AZ could re-open Pfizer's former R&D facility at Sandwich, UK, attract a very talented team, and likely win government financial assistance in doing so.
There are two counter-arguments to "going big" in R&D - the fact that payoff from the increased R&D is years off, and the fact that EPS would take an immediate hit. I'd argue, though, that the benefit of the increased R&D investment would be felt pretty quickly, as much of the investment would be in downstream clinical development, and not necessarily in basic discovery.
As for EPS, yes, it would take a hit, though not as bad as the gross increase in R&D, as the tax authorities would be paying roughly a third of the gross increase. I'd also argue that perversely, the R&D spend would INCREASE the amount of economic value added annually by AZ, as you'd be replacing the meek interest income from the $11-19B cash on hand with (hopefully) dynamic returns from R&D.
2. Sell Iressa to NVS or another interested party. Iressa (EGFR inhibitor) probably never got enough corporate attention once it landed in regulatory limbo. There's still value to Iressa to to unlock, though, and I think NVS could make the most of the product amidst their other successful targeted cancer therapeutics. (Of which they lack an EGFR inhibitor.) I also think having a new set of eyes to look over Iressa's clinical results would be beneficial.
3. Focus the MedImmune/biotherapeutics group on biosimilars. The combined MEDI and Cambridge Antibody assets are formidable though underutilized engines, both in terms of capabilities and capacity. Why not leverage both in pursuit of biosimilars, as Pfizer is doing with some of their bio-production assets? This is an area where AZ could take the lead, based on their MEDI investment, and an area with a modest capital demand. It would certainly be cheaper to spend another $500M on additional MEDI R&D to develop saleable products than to spend $5-6B in capital to acquire Amylin - a good, though one-market (diabetes) company that doesn't match well with AZ's existing portfolio.
4. Seek more big-big partnering, as exemplfied by the deal with AMGN. (See "AMGN & AZN get creative.") Points #1 and #3 are all about refilling the product pipeline with internally developed "upside." Another route to the same outcome is to buy large chunks of upside to augment the weak AZ pipeline. Combining points 1, 3, and 4 would diversify the R&D risk for AZN and fatten the pipeline, with good cost control.
5. Avoid the urge to make late-stage acquisitions to fill the pipeline. Congrats on the Ardea deal, but please don't think a string of acquisitions is the cure for what ails AZ. Any acquisition right now would represent paying full price, as every other pharma company is shopping hard for late stage products. AZ isn't big enough to outbid PFE, not specialized enough to win many niche acquisitions, and is too desperate at this point to NOT overpay sooner or later. Instead:
6. Climb the risk curve and make early (-er) product development partnerships. Whereas EVERY big pharma has the financial wherewithal to make a bid for a late-stage clinical candidate, many pharmas are too risk-averse to pursue partnering early programs. This represents an opportunity for a big pharma willing to take on more risk AND represents the best return on R&D dollars. Why spend $5-6B on an acquisition like Amylin or $1.2B on a late-stage deal like Ardea when AZN can probably sign and fund 10 early stage partnerships for a fraction of these amounts?
One other consideration: AZ's new CEO probably has 3-4 years to make an impact at AZ, which is enough time that a Phase I lead gained through partnership now can become an exciting Phase III product.
7. Recognize that there is a historically massive opportunity for AZ, and concurrently cut the dividend. There has never been a better time to be in the drug discovery & development business. Incomes are rising around the world while populations are aging. At the same time, medical knowledge has exploded over the last decade, and emerging technologies (e.g. in silica screening) are making drug discovery easier, less costly, and less risky.
It has been a long time since AZ or most any pharma was a growth stock, but with the context above, why wouldn't you want to transform AZ into a growth stock, and increase investment in R&D, as funded by reducing or eliminating the dividend? Yes, changing the dividend will set off alarms in the financial community, but better to do it proactively as part of a growth strategy than reactively once everything goes off patent.
8. Quit pretending that AZ decisions aren't heavily influenced by geography and political concerns by relocating corporate HQ to……….Dubai. AZ's HQ is in London. Except R&D, which is based in Sweden. And except UK R&D, based in NW England. And except biologics, based in Maryland. And except their biggest office in their biggest market, in Delaware.
Some tech companies see geography as a competitive necessity, such as the growing big pharma labs in Cambridge, MA (PFE, MRK, NVS….) AZ goes so far in the other direction, that you wonder if they are intentionally avoiding tech hotspots. UK R&D in Cheshire, UK instead of Oxbridge? Swedish R&D not near the Karolinska Institute? Weird.
You just know that decisions aren't made at AZ solely on their merits and without considering the geo-political ramifications. One way to negate this is to relocate corporate HQ to a "neutral" territory, and publicly commit that future UK & Swedish investment will be tied to leading academic locations. I'm not saying that AZ's weak R&D productivity is due to their location in NW England, but I believe that one way to boost the R&D productivity is to gain more exposure to leading labs in Oxbridge and the Karolinska. Watch AZ's R&D be reinvigorated.
Dubai is a silly answer to "what's a neutral country roughly equidistant to the UK and Sweden?" but I'm sure Dubai or other countries would provide a huge economic incentive to support the corporate relo. Not only would Dubai or others pay a bounty for the influx of meaningful jobs, but you could probably find a country that would be convinced to pay BIG $$$ so that AZ could become the cornerstone of their nascent pharma industry. If Boeing could relocate their corporate HQ from Seattle to Chicago, AZ sure could move to Dubai, or Singapore, or Bangalore.
(not to mention that there could be a substantial savings in corporate taxes for AZ.)
So there's my quick, under-informed ideas to get AZ back on track. Unfortunately, to make real backseat driving recommendations, you have to ignore certain realities, such as the holiness of the EPS expectations, and the tax advantages of filling the pipeline via acquisitions rather than increasing the R&D cash expense. But, you read this far, which means that there's some value in my backseat-driving recommendations…….
Wednesday, March 14, 2012
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.
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.
Saturday, February 11, 2012
FDA on biosimilars
Great WSJ article today summarizing the FDA's new rules for biosimilars.
Included in the rules discussion is this list of the top 10 biologics:
Included in the rules discussion is this list of the top 10 biologics:
While I knew they were big sellers, I hadn't realized that the big 3 RA biologics accounted for $19.5B in annual sales. That's roughly equal to the GDP of the country of Bolivia. Total sales of biologics are greater than the annual economy of New Zealand. Keep in mind, this entire class of drugs did not exist until 1989. (I'm guessing that the first FDA approved recombinant biologic was Amgen's Epo, in 1989.)
As for the newly announced FDA regulations on biosimilars, they strike me as very fair - the regs acknowledge that the biosimilars have a lower regulatory burden than a "novel" (i.e. not biosimilar) drug, yet are not considered a typical generic. As opposed to chemical generics, biosimilars will need significant data to receive FDA approval, and will not be able to be marketed as exact copies.
Subscribe to:
Posts (Atom)