About this Author
DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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December 29, 2004

Schedule Update

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Posted by Derek

Blogging will resume here on Monday night (EST), with a review of what the last twelve months have been like in my line of work. (After that I'll do something cheerful, promise!) In the meantime, I hope that all my readers have a safe New Year's Eve, and I encourage everyone, if they can, to donate to one of the tsunami relief funds out there. See you in a few days. . .

Comments (0) + TrackBacks (0) | Category: Blog Housekeeping

December 27, 2004

Back Under the Sheets For Me

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Posted by Derek

Well, some of my colleagues around the industry are at work this week, but I'm not. I've been out of touch for a few days, which suits me fine, and I'll likely be out of touch for a few more before work starts up again.

But I wanted to pass along a few links, courtesy of Medpundit: first off, a couple of good editorials on drug safety, from USA Today and the Wall Street Journal. Sensible stuff, which is thin on the ground these days.

Of course, there are real worries about drug safety - that's the problem; I can't just sit here and say the whole idea is ridiculous. Not when the FDA is sending letters like this (PDF) to AstraZeneca. I'm not sure how long for the world Crestor is, at least at its high dose. . .the drug industry may start off 2005 in the same way that we're ending 2004. Unfestively.

Comments (0) + TrackBacks (0) | Category: Toxicology

December 23, 2004

Holiday Blogging

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Posted by Derek

Just wanted everyone to know that I'll be on break until sometime early next week. I'll post a bit between Christmas and New Year's, but full Pipelining won't resume until January. There are several threads to pick up - the Lab of the Future post attracted some great comments, which I'll come back to, for one. And I've received a reply from Gary Becker on the subject of pharmaceutical patents - he's looking over the arguments made over here, and I hope to get his thoughts on them. Howard Simon of is also checking out the responses to the drug-optioning idea.

But for the next few days, I'll be occupied with many other important tasks: making cookies with my two children, wrapping presents, eating food of dubious nutritional value, etc. Merry Christmas (and whatever else) to everyone!

Comments (0) + TrackBacks (0) | Category: Blog Housekeeping

December 21, 2004

Optioning the Drug Portfolio

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Posted by Derek

Howard Simons of has a column today on the drug industry that I can't quite place: is it a stroke of genius, or is it the product of a diseased Wall Street mind? I'll lay it out here, and we'll see what the readership here thinks. He's not TheStreet's regular pharma industry guy, but he gives a competent review of the problems we face:

"First, let's remember this sector's importance to us as investors. The S&P Pharmaceutical index is the largest of the 132 index groups comprising the S&P 500. It accounts for 6.879% of the market's capitalization, so given the prevalence of indexation strategies, it is highly likely that you own these firms in one form or another. . . Second, the pharmaceutical industry is as much of an intellectual property business as software and entertainment are. Just as the first copy of a new operating system costs hundreds of millions of dollars to design and test and the second copy costs about 15 cents to stamp out on a CD, pharmaceutical firms have massive initial fixed costs and minuscule variable costs of production. While their products are not stolen and counterfeited as often as software or music, they face myriad global price controls, third-party payer policies and regulations. . .A third industrial parallel for the pharmaceutical industry can be found with natural resource exploration and production. Each winner has to pay for as many as 20 losers, a daunting proposition. It is a small wonder indeed why firms in this industry spend as much time as they do in wringing out the profits from their few winners and developing me-too drugs."

(I'd add that that "20 losers" figure is just the stuff that makes it into the clinic - if you go back to the preclinical world, the ratio is far worse. Of course, from a financial point of view, each of those clinical losers adds up to more money down the chute, but the total preclinical losses are nothing to ignore, either. That's where I've been spending money since 1989.)

Simons specializes in writing about options, and he has a put-and-call man's perspective. He points out that when you buy a drug stock, you're buying the present portfolio of marketed drugs (where all the profit comes from), which is a wasting asset due to patent considerations, and you're buying the potential revenue from the stuff in the research pipeline. That pipeline, from his perspective, is a portfolio of out-of-the-money call options.

And y'know, he's got a point. Both the options and the drug candidates have a good chance of ending up worthless, but can potentially pay off at many times their existing price. And if you're going to invest in either one, you're better off with a list of them spread across different situations, because you've got enough risk on your hands as it is. (I speak as a drug industry guy and as someone who's lost money in options trades - everyone who's ever traded options has watched some of their money evaporate at some point.)

Perhaps some of you will have seen where his mind is going. Here's the pitch:

"The time has come for the pharmaceutical industry to securitize the options embedded in its product pipeline. Investors already own these options as a portfolio when they own the various stocks, so how much of a stretch is it to separate out each individual drug in the pipeline and sell it as a call warrant or option-embedded structured note to investors? The risk of each individual drug in the pipeline can then be confined to those seeking a portfolio of securities with very high risk but very high returns."

Never thought of that one, I have to say. It might fly - Simons points out that this is already how parts of the movie and petroleum exploration businesses work. A colleague of mine down the hall points out, though, that these industries are necessarily a bit more transparent than the drug industry. Would a drug company be able to provide enough information when a drug goes into Phase I, he wondered, for investors to make an informed decision?

It's a good point, but my reply was that many of the people investing in the industry already aren't all that much better informed. Actually, if you're buying small companies whose future is riding on one big approval, you're buying a single-candidate security anyway, and people make portfolios out of those. Each large drug company would transform itself, in the stock market, into a range of them with different maturity dates.

The other question is: just how much more money would we bring in by breaking out the portfolio this way? Presumably we could get more funding this way, but how much more? This plan would require more transparent bookkeeping to assign costs to the various development candidates, and investors would no doubt expect more regular updates on how things were going. You'd also have to figure out how these securities would pay off - when the drug gets approved? When the patent expires? (I sure wouldn't have wanted to be holding Vioxx warrants, that's for sure.) But there might be some real money to be made, and risk to be shared. We've got plenty of that to go around. . .

Comments (8) + TrackBacks (0) | Category: Business and Markets

No Drug Is An Island

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Posted by Derek

And now there's a warning about the antiinflammatory drug naproxyn. It's all over the news this morning, so you've seen the story already. I can only second what Sydney Smith over at Medpundit says:

"And if drugs like Vioxx and Celebrex cause heart disease and strokes because their biochemistry increases the likelihood of clotting, as many critics have suggested, then why would Naprosyn, which has a biochemistry detrimental to clotting, be riskier than Celebrex? Because the findings have all been based on small and insignificant numbers. The difference between 3% of people having a complication and 2% is clinically meaningless.

It's too bad that we've decided to exaggerate the risks of these drugs. If we keep it up, we won't be able to prescribe anything."

I'm not sure if the numbers are meaningless or not - if the trials are sufficiently large and well-designed, the statistical significance is there. But I am sure that if we breed an expectation of "no side effects, ever", that doctors are, indeed, not going to be able to prescribe anything. I sure won't be able to make anything that for them to prescribe.

If Drug X saves 10,000 lives a year, at the cost of killing 100 people a year who are susceptible to its side effects, what should we do? Look for alternatives, surely. Try to identify (in advance) those at risk, of course. Try to come up with a newer analog with an even better profile, naturally. Oh yeah, and sue the pharmaceutical company until they're flat on the ground. That, too.

Comments (1) + TrackBacks (0) | Category: Toxicology

December 19, 2004

Boarding Up the Windows

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Posted by Derek

In almost every story about Pfizer's disastrous Friday, you'll find a sentence with this phrase in it: ". . .the company says it has no plans to recall Celebrex. . ." But this statement, taken literally, is surely untrue.

Pfizer definitely does not want to recall Celebrex. They've been in the Red Queen's Race of the pharmaceutical world for a few years now - they have to run as fast as they can to stay in the same place. To me, none of the estimates of how many billion-dollar launches they need have ever seemed attainable, and their method of just going out and buying the biggest drugs they could find has never made sense. Losing Celebrex would put an ugly dent in their strategic plan, even in the eyes of people who believe in it.

Neither do I have enough data to hand (nor, for this kind of decision, enough expertise) to say whether Celebrex even should be recalled. But whether it should or not, I'd say the odds are better than even that it will be. Such is the climate.

And you can be sure that Pfizer has thought about it, about what they'd have to do and how they would do it. You can be sure that someone over in Groton or New London has that job, and you can be equally sure that they didn't get home very much over the weekend. There's a lengthy PowerPoint presentation ready by now that no one wants to deliver. Don't take Pfizer's word for it - there are plans, because there have to be.

Comments (1) + TrackBacks (0) | Category: Cardiovascular Disease

December 17, 2004

The FDA Weighs In

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Posted by Derek

This afternoon the FDA released a statement about the Celebrex news from this morning. This clears things up a bit, but it means that the agency (and Pfizer) have some very hard decisions to make.

There appears to have been a clear dose dependence in the elevated cardiovascular risks. At 400 mg b.i.d. (twice a day), the treatment group showed 3.4 times the risk of the placebo group. At 200 mg b.i.d., the risk was 2.5x. The average duration of treatment was 33 months - pretty substantial, but a lot of people take Celebrex for an extended period for pain relief.

Now, Pfizer has stated that another trial at a similar dose has shown no indication of cardiovascular trouble, and that's true as far as it goes - it's a 400 mg trial, but the drug is dosed q.d. (once a day). How can 400 mg act so differently, taken all at once versus split up? My industry colleagues are already nodding their heads at the probable answer. The difference is coverage.

Coverage, as in how high the blood levels are, for how long - what pharmacologists call AUC (area under the curve) in a blood-level versus time plot. A single 400 mg dose of a typical drug will spike right up as it gets absorbed and hits the bloodstream in a big initial wave, then the line will decay down over several hours, eventually back to uselessly low levels. Ideally, that still works out to decent coverage of the drug's target for a once-a-day dose.

Taking that same drug twice a day at half the dose means that you never hit that maximum level you would in the first dosing regime, but you cover the target longer at pharmacologically active levels. Some drugs work better one way, some the other. And some drugs work differently all by themselves when they're dosed in those two kinds of regimens. It would appear that Celebrex is more worrisome when it covers its targets for longer continuous periods, rather than hitting higher levels but then going away. Perhaps in the latter case things have a chance to get back to normal before the next dose hits, but not in the multiple-dosing protocol.

If this is the case, it's going to be tough figuring out what to do. The FDA is already saying:

"Physicians should consider this evolving information in evaluating the risks and benefits of Celebrex in individual patients. FDA advises evaluating alternative therapy. At this time, if physicians determine that continued use is appropriate for individual patients, FDA advises the use of the lowest effective dose of Celebrex."

I won't mince words: to me, this looks like the first step to pulling the drug. At the very least, I think its use is going to be severely restricted. The fallout? I'll be intensely surprised if Novartis goes ahead with their planned launch of their own COX-2 drug, for one. And Pfizer is looking at some severe trouble, because they're so huge that they need a constant infusion of billion-dollar drugs just to stay where they are. I've never been able to figure out where those were supposed to come from. And I sure can't figure out how they can afford to lose one.

Comments (2) + TrackBacks (0) | Category: Cardiovascular Disease | Toxicology

Black Friday: One Damn Thing After Another

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Posted by Derek

And while we're on the subject, here's the latest example of bad news coming in great squawking flocks: AstraZeneca's Crestor is under suspicion, their new Exanta clotting drug is in major trouble, and now some terribly unimpressive clinical data comes out for Iressa in its ISEL trial.

Note that Tarceva, which I was blogging about a few days ago, would seem to have a big opportunity here. OSI's shareholders sure seem to think so. But I'm still not convinced that the two drugs are that different. We'll see as it goes into more general use. . .personally, if I were an OSI shareholder, I'd sell. Not the first time I've made the recommendation, come to think of it. . .

Update: Colby Cosh picks up on the "Black Friday" theme and adds some interesting comments on the terms under which Iressa came to the market in the first place.

(By the way, readers may have noticed I'm blogging this during the day today, which is a bit unusual. It's not going to be a regular feature, though - unfortunately for the blog and fortunately for me, the day job usually precludes it. But just for today, I feel like Glenn Reynolds. . .)

Comments (1) + TrackBacks (0) | Category: Cancer

The Other COX-2 Shoe Drops

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Posted by Derek

Here's the bad news from Pfizer, which has finally hit. I spoke about this possibility a few weeks ago, details here.

Comments (3) + TrackBacks (0) | Category: Toxicology

December 16, 2004

Lab of the Future!

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Posted by Derek

One of my colleagues at a former company used to speculate about what gadgets he really wanted in the lab. The only problem was that some of these came near to violating physical laws, and the ones that didn't needed. . .well, a bit of R&D work before they could be launched.

Take the "Molecular Weight Grabber." This, my friend explained, would be something that you dipped down into your crude reaction mixture and sloshed around - it'd be about the size of a magnetic stir bar retriever, for those of you in the field. And it would have a dial on the top of it that you could set to the desired molecular weight, and only things of that weight would stick to it. Then you pull it out, stick it into another flask, hit a button to release everything, and on to the next step.

That would be pretty useful, all right. I can vaguely imagine how a massively robust nanotechnology could actually produce something like that, too - molecular-size torsion balances to sort things out and so on. I imagine it would need a pretty robust power source to accomplish all that work and run back all that entropy, but that's something for the marketing guys to work out, right?

So here's my question: what other lab gizmos would you order if you could? I'll feature the best one in a future post. No thermodynamic impossibilities, please. A semi-plausible explanation of how your idea would work will help your chances, too. Leave 'em in the comments section and let's all get rich.

Comments (15) + TrackBacks (0) | Category: Life in the Drug Labs

December 15, 2004


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Posted by Derek

I've been meaning to get around to the Ukrainian dioxin-poisoning story, and now's the time. Dioxin is, as most everyone should know by know, seriously overrated as a human poison. It's had a reputation as a scary supertoxin, though, and that's my answer to why it seems to have been used in this case: because someone was an idiot. As a tool for assassination, dioxin is the sort of thing that Wile E. Coyote would have used on the Roadrunner.

Which means the Russian KGB probably wasn't involved, because those guys know about toxins. Whatever else you can say about them, they're professionals. Trying to kill someone with dioxin is silly on several levels - for one thing, it's not very acutely toxic at all. What risks it poses are for chloracne (as we've seen) and some increase in long-term cancer rates. It's also very easy to detect analytically, if you think to look for it. Chlorinated aromatic compounds have a long lifetime in the body and a very distinct signature in a mass spectrometer.

Much of what's known about high dioxin exposure in humans comes from the 1976 chemical plant explosion in Seveso, Italy, which exposed thousands of people. While there were hundreds of cases of chloracne, there were no fatalities and no apparent birth defects in pregnant women. The compound's overall risk to human health is still being debated, mainly because the long-term data are so close to the noise level. For some details on dioxin's toxicity (from a scathingly sceptical perspective) see JunkScience's take here. For livelier, not to say near-hysterical takes on the subject, just Google the word "dioxin" and brace yourself for a flood of invective from various environmental sites

For more on the Ukrainian angle, I'd suggest reading Blogs for Industry - they've got several long posts, and a good perspective on some of the other commentary floating around.

Comments (17) + TrackBacks (0) | Category: Toxicology

December 14, 2004

The Coming Oncology

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Posted by Derek

I've had a number of comments on my post below about the changing cancer market, and they deserve some follow-up. One very good point that was made is that this change is really a race between several factors: the narrowing of individual markets as we find out the reasons for efficacy could be balanced out by the ease that this could bring to the design of clinical trials. After all, it should be easy to get good data if you have a clearer idea of which patients are most likely to respond. (Every major drug company is plowing money into biomarker research for just this reason.)

But if you design your trial on the basis of a specific biomarker, I assume that you'll get a specific approval based on that, too. You're trading larger market potential for a higher clinical and regulatory success rate - and believe me, I'm far from suggesting that that's a bad trade. But it'll be an interesting decision in some cases. In the short term, I would expect to see some companies forgoing the use of narrow biomarker-driven trials in an attempt to go for the bigger money. But as the everyone-prescribes-for-everything model for the oncology market breaks down, that'll become less and less of an option.

How many years is that breakdown going to take? It's hard to say. Some areas are going to be way ahead of the rest of the field - for example, it might be happening right in front of us with Iressa, but in other markets we don't have a clue. In general, I'd say that twenty years will see the transformation well underway, but I could be off in either direction. Along the way, there are going to be some nasty surprises for the companies involved as they find that their existing or in-development drugs have suddenly contracted to much smaller roles.

Another thing to think about is how many new drugs we're going to need, versus combinations of existing ones. You'd think that the latter option would cover a lot of ground, but I think that the emergence of resistant tumor lines will keep everyone searching for new compounds. Oncology could end up looking a bit like anti-infectives, although the big difference is the individual occurrence of resistant tumors, rather than the far more challenging spread of resistant organisms.

So you'll end up with courses of treatment that look like this: sequence the patient and a sample of their cancerous cells, which will suggest the first-line therapy. Then if that doesn't knock everything down, you move to the next ones on the list (which will look slightly different under each of those first options), and switch to that, keeping an eye out over the next few years for the need to switch to a third agent or combination, and so on.

How will drug companies deal with these changes? A colleague of mine suggested that the larger outfits will probably fare better, because they'll be able to hold a portfolio of cancer drugs that will add up to something. The risk of changing market sizes will be spread out across several agents. Smaller companies may have to explicitly target smaller markets, which you'd think would lead to fewer stock-market skyrockets like Imclone and OSI. These would also seem to be good candidates for in-licensing from the bigger companies looking to fill gaps in their holdings.

Comments (12) + TrackBacks (0) | Category: Cancer

December 13, 2004

Fixing the Drug Industry?

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Posted by Derek

I had a post ready to go tonight, but we'll roll that one over to tomorrow. I'd suggest that if you're interested in patents and their place in the drug industry (and hey, who isn't, right? Uh, right?) that you trot over to the new Becker/Posner blog for a discussion of the topic. (Permalinks are here and here.)

Both of them have an excellent understanding of the issues involved, commensurate with their reputations. Gary Becker leads off by examining several possible reforms, but has some reservations:

"To be sure, a patent system creates a tension between the effect that prices well above costs of production have in reducing the use of drugs by sick persons, and the effect of high prices in helping companies recoup their large R&D spending. This tension is the cause of the increasing attacks on drug companies as more blockbuster drugs have been introduced during the past couple of decades. So an important public policy question is whether we can do better than the present patent system? I believe we can improve how the system operates in many ways, but some suggestions are likely to make matters worse rather than better."

Richard Posner's suggestion is to actually shorten patent terms a bit. His reasoning:

"Against this it may be argued that the fact that the drug companies apparently do not have excess profits show they need every bit of patent protection they have. Not necessarily. Competition for a profit opportunity may transform expected profits into costs. Suppose the drug companies believe that the invention of some new drug will yield the successful inventor a $1 billion net profit. The prospect will induce heavy expenditures on being first (the aggregate expenditures may actually exceed $1 billion). The result is that none of the companies, or the industry as a whole, may have abnormal profits. Now suppose that as a result of a shortening of the patent term, the prospect for the successful inventor is for making only an $800 million profit. Less will be spent on the patent race. Yet consumers as a whole may be better off, because the investment saved may have greater value elsewhere in the economy. The entire patent “prize” goes to the firm that crosses the finish line first, and so a firm might spend a huge amount of money to beat its nearest rival by one day even though the value to the public of having the invention one day earlier might be negligible. This danger is greater, the bigger the prize. Shortening the patent term would reduce this potential waste by reducing the revenue from a patent; it would also reduce the transaction costs of licensing, because more inventions would be in the public domain."

My worry about this idea is that the prices of drugs discovered under this system would rise to make up the difference in the patent term, making the "prize" about the same size as before. Complaints about price-gouging would only increase, and I fear that we'd end up in worse shape than before.

I like a couple of Becker's suggestions better: he would like to consider the idea of offering prize money instead of patent protection for diseases with the greatest impact on public health (here's a detailed proposal, on which more later), and he's also in favor (PDF) of loosening the FDA's efficacy requirements and turning drugs out on to the market after proving safety.

Steve Postrel of SMU tried to persuade me of that last idea a couple of years ago, and I wasn't having any. But I'm slowly coming around to it, although my original objections are still somewhat in force - namely, that it could be an open invitation to snake-oil salesmen (which would only pollute the whole industry's reputation - I know, like it's so clean right now), and that any such regulatory change would have to be coupled with some kind of tort reform. Even with all the FDA-mandated testing we have now, the trial lawyers flense the flesh from our bones when anything goes wrong. See Exhibit A, over there in Rahway.

Comments (10) + TrackBacks (0) | Category: Patents and IP

December 12, 2004

Stocking Stuffers, of a Sort

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Posted by Derek

It seems to be the season for book recommendations in the blog world. If anyone's wondering what the favorites here are, let me recommend some classics of the scientist's trade:

First, Primo Levi's The Periodic Table. Levi was (famously) a survivor of Auschwitz, and wrote extraordinarily about that experience. But he was also a professional chemist, and in this unique memoir he lets various elements bring back incidents in his past. I'm not aware of another book like it.

Next, Oliver Sacks's memoir Uncle Tungsten. Sacks is famous, of course, as a neurologist and author, but he had an intense boyhood love affair with the field of chemistry. Anything by Sacks is worth reading if you're not familiar with him, though.

I can also recommend just about anything by Peter Medawar. The Nobel-winning immunologist was a graceful writer about science and other subjects - look for one of the essay collections. His takedown of Teilhard de Chardin is not to be missed, if you're into that sort of thing.

And on the subject of scientific essays, let me also recommend Freeman Dyson. He's getting up in years, but still very much with us, and I consider him to be my definition of scientific royalty.

Comments (2) + TrackBacks (0) | Category: Blog Housekeeping

December 10, 2004

An Economist Who Gets It

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Posted by Derek

Alex Tabarrok has finished up his short series on me-too drugs, and he's done a fine job of hitting the nail on the head. It's gratifying to see people from outside the field who really know what they're talking about:

"(Marcia) Angell is also skeptical that me-too drugs can have different effects in different people.  Frankly, I was shocked at this argument. Every clinical trial that has ever been run demonstrates that the same drugs have different effects in different people - it's hardly a surprise that different drugs have different effects.  And me-toos are different - different enough not to violate the patent on the innovator drug almost certainly means different enough to have different effects in some people.  My local supermarket carries at least a dozen different styles of peanut butter, a fact of which I approve, but Angell thinks two angiotensin-converting-enzyme (ACE) inhibitors may be one too many (p.90).  Give me a break. 

Finally, it's important to recognize that small changes can actually make for important improvements.  What could be more me-too than a once-a-day pill replacing a twice-a-day pill?  Yet, to dismiss this change is to overlook the people factor.  A once-a-day regime that people stick to is much better than a twice-a-day regime that people fail to follow.  Forget the chemical structure the economics says a drug that people actually take is a better drug."

Comments (5) + TrackBacks (0) | Category: "Me Too" Drugs

December 9, 2004


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Posted by Derek

I took the opportunity, while moving to a new project, to clean up my office and files. This time I dug in pretty deeply, and heaved out about 30 pounds of stuff, some of it a good fifteen years old. Looking at the folders, I realized that they were for kinds of chemistry that I hadn't done since then and had no plans to do again. And even if I did, I'd want more current references than these, so out they went.

Good reference papers are a lot less costly to get, in man-hours, than they used to be. Searching manually through Chemical Abstracts meant that when you found something, you held on to it. Who knew if you could find it again? Now, with SciFinder and the like, you can plow through the literature like a nuclear-powered icebreaker. When you find the citation, you hit another button and the PDF hoses right up on your screen. It's like having magic powers, and not many who missed out on the bound-volume days will ever understand how strange it will always feel.

Still, I'm keeping some golden oldies. While my old palladium coupling references are historical artifacts, the ancient papers are still good in some of the slower-moving fields, things like Friedel-Crafts reactions. I still have the first technical paper I ever copied off, from my undergraduate days in 1981, and that one's staying. And the references that are in my PhD thesis are still in their own folder, which is turning a worrisome yellow around the edges.

Comments (2) + TrackBacks (0) | Category: The Scientific Literature

December 8, 2004

Follow Which Money Where?

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Posted by Derek

I'm glad that someone else had trouble figuring out what the big deal is with this New York Times article on FDA user fees. Over at Slate, Jack Shafer saves me a lot of effort with this excellent piece.

Comments (0) + TrackBacks (0) | Category: Blink ›

An Experiment in Progress?

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Posted by Derek

The BBC says that HIV-positive kids in New York are being given toxic drugs in the name of research. Can you believe them? Guess. (Thanks to Electrolite for the link.)

Comments (1) + TrackBacks (0) | Category: Blink ›

December 7, 2004

Check, Please

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Posted by Derek

Here's a post from back in the spring which goes into why I think that the cancer drug market is in the process of changing. As we figure out which patients will respond to which drug - which will happen, albeit slowly - the standard industry assumptions about market size will have to be rethought.

For now, we in the business can continue to assume that everyone will be given most everything for most everything. That's why Gleevec sells at the level it does - it's really an orphan drug which has benefited from the let's-give-it-a-shot mentalily more than anyone thought possible. The thing is, most of the people who've received the drug (and the other new agents) for totally different kinds of cancer than they're known to treat have wasted their time and hopes, and their insurance companies have wasted their money. It's true that this kind of clinical practice can lead to new treatments (there are always some surprises), but it leads to a lot of lost effort, too.

But as we move into the world where we know more about what we're doing, that's going to change (see that post linked above for details.) Cancer is going to slowly turn into a constellation of hundreds (thousands?) of orphan diseases, each of which will have its own particular preferred therapy. We won't need new drugs for all of them - many of these will be particular combinations of known agents - but we'll need a lot more than we have now. And the market size for each of them might be at least an order of magnitude smaller than we'd like.

That, naturally enough, will mean that the prices of these drugs will go up, because they're probably not going to be any cheaper to develop. So we'll have a lot of drugs, each of which can do great things for a small set of patients, and each of which will cost a heap. Doctors will have no problems with this, and patients will adapt to this world without many complaints. We'll adapt to it in the drug industry. But think about how this is going to look to an insurance company or HMO. . .

All of their cancer-patient customers will be taking highly expensive medications - different ones, true, but the bottom line will be the same. And they'll all have to stay on them for a long time, since we still don't know how to make cancer reliably go away very well - we can just keep it in check. How's that sound over on the insurance side of the street, guys? Guys?

(For those who are interested, I wrote a few other posts on the issue of cancer therapies (and their prices) back in the summer - try here and here if you haven't seen them.)

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Alex Tabarrok on Me-Too Drugs

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Posted by Derek

Here's the first of a promised series of posts over at Marginal Revolution. I'll wait until the end before adding my comments.

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December 6, 2004

Tarceva Targets

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Posted by Derek

From Forbes, I find that CSFB has lowered its target price for OSI Pharmaceuticals, co-owner (with Genentech) of the new cancer therapy Tarceva. This is a HER1/HER2 compound (more the former than the latter), which makes it rather similar to AstraZeneca's Iressa.

Tarceva has lived in Iressa's shadow throughout its development, and OSI's stock has moved in response to market perceptions about how much better (or worse) their drug is in comparison. Here's a chart for the last year - take a look at that mighty jump in late April. That's when clinical results were announced that made Tarceva look like it would perform better than Iressa when it hit the market. As you see, people got a bit enthusiastic.

But check out that recent dip, which is a reponse to Genentech's attempt to inject some reality into the expectations of shareholders since the drug was launched last month. Their estimate for the number of Tarceva patients wasn't what the stock's cheerleaders wanted to hear, and it's not quite what OSI's been putting out, either. It's not often you see two companies disagreeing so publicly over their shared drug's profit potential.

There's pressure on the other end of the expectations game, too. The conclusions from a large Iressa clinical study, ISEL, will be released soon - AstraZeneca has said by the end of the year. It's widely thought that this one will make Iressa look a bit better than it does at present - that is to say, pretty much like Tarceva looks now. Quoth CSFB:

"We expect ISEL (Iressa Survival Evaluation in Lung Cancer) to meet its primary endpoint of survival," the research firm said. "A statistically significant result will reinforce existing physician impressions of the two drugs as clinically comparable--despite likely Wall Street squabbling over percentage differences in survival and inevitable differences in subset groups."

But, as mentioned in that last link, Morgan Stanley is sticking with the rosier view:

"The company made an effort to clarify what it considers a market misunderstanding. . .Management's comments were more in line with our thinking and contrary to what we believe were highly conservative comments by development partner, Genentech. . .We expect Tarceva's broad label will allow OSI and Genentech to market Tarceva to a broad patient population. . .we believe that the Street is underestimating the profitability of this drug to OSI."

Well, I'm not being paid to render an opinion - at least, not as much as those folks on the Street, anyway. But for what it's worth, I'm with CSFB on this one. (Some readers may recall that when OSI jumped back in April that I said that if I owned it "I'd have been knocking things over on my desk to get to my phone to sell. . .") In the end, I'm not sure how different these two drugs are going to be. It's a case of near-simultaneous development, the kind I was talking about the other day, and those don't always work out too well. And there's a longer-term problem which is going to affect the whole oncology market: I think that the days of being able to market all kinds of cancer therapies to everyone are beginning to disappear.

But whether Tarceva turns out to be different from Iressa or not, it's still probably not good news for Imclone, whose Erbitux targets the same pathways - just much more expensively, and perhaps not to much more benefit, if any. I took a pile of abuse back in April in that same post where I talked about selling OSI, advising IMCL shareholders to get out at $70. They should have. Hey, there's still time!

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December 5, 2004

Beg to Differ

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Posted by Derek

There was a comment to the "Some Perspective" post from last week that I wanted to address out here in a more public area. Said the reader:

"This industry (has) lost itself to profit. Every decision made was (a) business decision in every company. Employees are robots, have no creativity, and very little interest in science."

Well, I recognize when someone's been having a bad day. I have 'em myself. But with all due respect, I'm glad to say that this particular comment is wrong, from top to bottom. It's wrong in different parts for different reasons, though, and it's worth taking a minute to examine them.

Let's take the last part first. No one who works for me is an uncreative robot uninterested in science. Not for long, anyway. Either that attitude changes or (more likely) I find a way to shift them out of my lab or out of the company. I'm as interested in science as I am anything in the world, and while I don't expect everyone to go that far, I can't stand working with people who view their research job the same way they'd view working at the tuna packing plant.

Every research project has moments that make you respect the fact that you're working with something bigger than you are and more complicated than you understand. If you don't have those once in a while, you're not doing research. We all have to crank out a series of by-the-numbers compounds sometimes, sure, the good ol' methyl-ethyl-butyl-futyl. But if that's all you're doing, all the time, then you should be replaced by some sort of automated synthesizer as fast as possible.

Naturally, I also understand that many drug development projects don't have the time or the resources to pursue all the pure science questions that they could. There's pressure to produce results, and you sometimes have to be ruthless about what you pursue. But even on the main path of every project, you'll find enough reversals, strange results, and sudden breakthroughs to keep you sharp.

Now let's take on the first part of the comment, about all those decisions being business decisions. You've got that right! But that's a bit like saying that all novels get written by people who write. The drug business is, yes indeed, a business. If we don't make money, we don't get to discover any drugs. It's that tension that makes it such a challenge, and it's the same tension that keeps us moving at a faster research pace than any similar academic efforts. We know that other hard-hearted businesses are coming to eat our lunch if we don't find something that someone wants to buy. Capitalism's brutal. That's what makes it work.

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December 2, 2004

Blurry Copies

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Posted by Derek

Via Tyler Cowen at Marginal Revolution, I came across this editorial by John Gapper in the Financial Times on me-too drugs. Its points will be familiar to readers of this blog:

"If there is one product that annoys people, it is the me-too drug. Pharmaceuticals companies should take advantage of the genetics revolution to find cures for intractable diseases such as cancer and cystic fibrosis, the critics moan. Instead, they spend billions trying to match the pills already made by others."

Ay-yep, that they do, and that we do, too. But this piece goes a bit further than usual, pointing out to Financial Times readers that:

". . .drugs can make it through clinical trials only for side-effects to be discovered when they are prescribed to millions of patients. If all drugs in each therapeutic class were identical, Celebrex would now be off the market along with Vioxx. In fact, one pill can turn out to be safer than another. Indeed, without going into details about Levitra and Viagra, their effects can also vary. . ."

The author goes on to point how how head-to-head trials of drugs are becoming more common, and how in the post-Vioxx world they're likely be even more widely conducted:

"From the perspective of drugs companies, this makes life trickier. Not only is the least safe drug in any class liable to be knocked out in the same way as Vioxx, but even safe ones will have to face off against each other to establish the best of all.

This may all sound terribly wasteful to a doctor, but it is the same thing that is good for consumers in other markets: open competition. The problem until now has not been too much of it, but too little. The last thing that a patient should want is a choice of only one drug. As the Vioxx withdrawal shows, me-too pills may inspire little affection, but they would be missed if they were not there."

Reading this, Tyler wonders:

"Why have me-too drugs been so prevalent? Are they an inefficient form of product mimicry? An artifact of bad patent or FDA policies? The long-run path to affordable medical care?"

I've talked about this before (see the category over on the right), but here's the short answer: that the first drug in a category proves that the mechanism is a viable one in the market. ACE inhibitors really do lower blood pressure, HMG CoA reductase inhibitors really do lower cholesterol, and so on, and to a degree that people are willing to pay for. That's a big hurdle, one that not every new first-in-class drug makes it over. There are numerous new-mechanism drugs that few people have heard of, because they didn't work well enough to attract a market. No me-toos follow them.

But when something takes off, later drugs in the category are attracted by the proven mechanism and sales potential. Then they try to go a bit better, to take market share - more convenient dosing, better efficacy, fewer side effects - whatever we can come up with. There are also situations like Vioxx and Celebrex, where the two drugs were developed at roughly the same time. In those cases, we don't know much about your competition while the development is going on. We just have to try to get to the market first and hope for the best.

So there's some product mimicry, but real mimicry is impossible. No two drugs are, or even can be, completely identical. That gives new ones a shot at being better, or at just being better in some situations, or, likewise, a shot at being worse in some (or all) of them, too. But not the same.

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December 1, 2004

Strangers on a Train

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Posted by Derek

Sean Carroll over at Preposterous Universe is one of those half-physics half-astronomy guys. He mentions that when he's on an airplane, the conversation takes a totally different turn depending on which field he claims. (Hint: people have some idea of what an astronomer does. . .) But Chad Orzel of Uncertain Principles hasn't been able to hide behind physics, because of the field's known ability to bring the cranks out from under chairs and behind curtains.

How does a medicinal chemist fare? Pretty well compared to those disciplines, actually. I've been afraid, at times, of inducing a rant about rapacious drug prices from total strangers, but that's never really happened. What I've found is that people are very interested in what I do, although they know almost nothing about it. I get a lot of questions - those experiences, in fact, are one of the things that started me blogging.

Now, introducing yourself as an organic chemist (which is also a fair statement) gives me a chance to reproduce Carroll's experience. That'll generally quiet people down very quickly, because odds are they've either never had a chemistry course or have less-than-fond memories of one. The most commone response is: "Organic chemistry! Man, I hated that!" But at least it doesn't breed cranks. . .what would they do, shove twenty-page syntheses of tetrodotoxin at you, with notes in green ink all around the margins?

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