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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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February 9, 2011

Fanapt: Not Paying Out

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Posted by Derek

Poker players in the audience may remember the old story of the guy who lost three cars over the years by drawing to try to fill inside straights - the first two when he came up empty, and the last time when he made his hand. You can have the same experience in drug development, too, for higher stakes.

Remember Fanapt (iloperidone)? That's the antipsychotic compound that bounced around from company to company during the 1990s, and nearly sank Vanda Pharmaceuticals a few years ago when the FDA gave them a "Not Approvable" letter. I predicted at the time that we'd never hear from them again, but to my surprise (and to Vanda's, I'd guess), the FDA reversed itself and let the compound through in 2009.

Novartis signed up to market the drug, and it was launched early last year. Some analysts predicted about $100 million in sales, growing to two or three times that number - not a blockbuster, but very welcome indeed for Vanda (and for earlier developer Titan, who still retained some rights). And now, reports Adam Feuerstein, we have the full-year numbers: $31 million, most of which appears to have been initial inventory stocking. Not good.

I've already tried to teach my kids not to draw to the inside straight. The more advanced player needs to try to work out if the pot offers a payout consistent with the risks, and to figure out what the chances of that payout might be, even if the hand comes through. . .

Comments (10) + TrackBacks (0) | Category: Business and Markets | The Central Nervous System


1. Industry GUy on February 9, 2011 11:00 AM writes...

Ahhh Derek...I miss you and the gang from our old wonder drug company poker games......

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2. AR on February 9, 2011 11:19 AM writes...

Ha! I remember Abbott's asthma drug, Zileuton. $450 million to NDA launch - $13,000 the first month of sales. Compliance was an issue - you had to eat lunch sized, grams per day, quantities.

Still on the market 14 years post approval, but I wondered if it earned back R&D costs.

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3. NoDrugsNoJobs on February 9, 2011 11:40 AM writes...

I think the Vanda story shows just what we are really up against and why our industry is in deep doo-doo. How many biotech companies actually get a drug to market? Each of these unsuccessful companies swallows millions if not hundreds of millions in capital with no revenue - all lost money. The justification, as Derek elegantly points out, is that the belief that the return on the occasional winner would justify all the losers. We are increasingly seeing that not only are there fewer and fewer winners due to a number of reasons but that many of the winners are no longer paying back. The guys who invest their money in our industry are not stupid - you only need to take a look at the price to earnings ratio of major pharmaceutical companies - they are lower than the companies that sell baby diapers and corn starch. Its understandable to bet real money on a long shot if that long shot will pay off but when it stops paying off, well - lets just say that we see the attrition that we are already seeing. To me, its very sad because I know that overtime, these incremental changes and advances add up to real improvements but its hard to justify that this generation should make sacrifices in resources for the next when we seem hell bent on handing them nothing but debt and a dismal outlook. If the World War 2 generation was the greatest than I reckon we are the least.

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4. quintus on February 9, 2011 12:16 PM writes...

I can't really comment on the iloperidone story, but if you all just knew!!!!!
But I guess people here will know what I can't say!

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5. MTK on February 9, 2011 12:34 PM writes...


"How many biotech/big pharma companies actually get a drug to market? Each of these unsuccessful companies/projects swallows millions if not hundreds of millions in capital with no revenue - all lost money."


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6. petros on February 10, 2011 4:01 AM writes...

Ah yes I remeber zileuton. At the time it was approved every signifcant pharma company had a 5-LO inhibitor program. However, despite requiring dosing at 800 mg qid and needing liver function monitoring, zileuton is still the only 5-LO inhibitor to be approved.

A CR form is now available that provides bid dosing. But 2009 sales were only $18 million.

It is doubtful whether Zyflo has generated total sales in excess of the cost of bringing it to market 15 years ago

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7. Hap on February 10, 2011 2:25 PM writes...

I don't understand the poker story. The first two, well, he bet and lost, so the money is gone. The third time, though, unless he splits the pot, he gets his investment back plus winnings - even though it might not have been worth the risk, it should have been a positive payout anyway. What am I missing?

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8. Dr. Demented on February 11, 2011 4:40 PM writes...

You can make your hand and still lose in poker. A straight will lose to a flush, a full house, 4 of a kind, and a straight flush. Just because you make your hand doesn't mean you win the pot!

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9. Rich Rostrom on February 12, 2011 2:04 AM writes...

What Dr. Demented said. The most dangerous hand to have in poker is a strong hand that is second-best. If you ever watch the tournaments on TV, you'll see that players take their biggest losses when they make a strong hand that doesn't win.

And I have seen several top players asked "What was the best play you ever made?" The answer was always: "When I folded a strong hand that would have lost." It's the hardest move to make.

The natural instinct is to bet heavily on the strong hand. This is especially true if it was a "drawing hand" that one made. When one has paid for the opportunity to draw a card and one then gets the card needed, making what one expected to be a winning hand, it's really hard to see past that expectation to how it could be a losing hand. It's also hard to write off the money one has already put in the pot.

In the case of drug development - one bets the cost of development, in hopes of getting FDA approval, after which one invests the cost of taking the drug to market. The more money that has been invested in a project, the greater the feeling that one must keep on.

But a cold-eyed realist would re-evaluate at every step, comparing the expected additional cost to the expected return.

Vanda's danger is that FDA approval could lead them to greater investment, which could all be lost if the market doesn't buy the product.

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10. Hap on February 13, 2011 10:56 PM writes...

OK. That makes sense - I wasn't thinking of a better hand being out there.

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