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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: derekb.lowe@gmail.com Twitter: Dereklowe

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August 27, 2013

Promise That Didn't Pan Out

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Posted by Derek

Luke Timmerman has a good piece on a drug (Bexxar) that looked useful, had a lot of time, effort, and money spent on it, but still never made any real headway. GSK has announced that they're ceasing production, and if there are headlines about that, I've missed them. Apparently there were only a few dozen people in the entire US who got the drug at all last year.

When you look at the whole story, there’s no single reason for failure. There were regulatory delays, manufacturing snafus, strong competition, reimbursement challenges, and issues around physician referral patterns.

If this story sounds familiar, it should—there are some striking similarities to what happened more recently with Dendreon’s sipuleucel-T (Provenge). If there’s a lesson here, it’s that cool science and hard medical evidence aren’t enough. When companies fail to understand the markets they are entering, the results can be quite ugly, especially as insurers tighten the screws on reimbursement. If more companies fail to pay proper attention to these issues, you can count on more promising drugs like Bexxar ending up on the industry scrap heap.

Comments (33) + TrackBacks (0) | Category: Business and Markets | Drug Development


COMMENTS

1. Anonymous on August 27, 2013 12:23 PM writes...

Let's see: marketing would have saved the world from two innovative products that in the end were not commercially viable.

Seven out of ten drugs launched between 2003 and 2008 failed to cover their development costs let alone return a profit to fund future R&D, pay for program failures, and return an acceptable dividend to stockholders. If marketers' assessments of profitable products are so great how does this happen? This is despite the fact that 65% of percent of approved drug are me-too type agents. So our crack marketing teams cannot even get the commercial projections right on me-too drugs. Marketing departments' clairvoyance is pretty much zero when it comes to the future profitability a first-in-class drug.

Much more disturbing is the fact that the dopes in marketing would have killed the following drugs: Tagamet, Tamoxifen, Prozac, Lipitor, Botox, Gleevec, Prilosec, Erythropoietin.... Society has to wonder how many wonder drugs were stillborn because of decisions made by pharmas' super talented gold-plated marketing departments. Of course these guys have excelled at running up $30.2 billion in marketing penalties and fines in the past 20 years. You know that is equivalent to 38 drugs not being discovered because that money went into a special black hole created by pharma marketing departments. We are not even accounting for the infinite amount of lost interest on that money as we must do in drug discovery. It is funny how that works.

Both Corixa and Dendreon did what biotech companies are supposed to do. They targeted awful diseases with cutting edge technology. They actually got products registered at the FDA, no small feat. This is supposed to be biotech's special gift to us all. That things did not work out in the marketplace, well who ever knows the worth of a frontier project a decade before it is launched, just ask the Prilosec, Gleevec and Tagamet scientists about marketing's great insights?

High risk is just high risk, no big payoff is ever guaranteed. Given the history of marketing guys getting it so wrong on innovative products, these are the last guys who should be consulted in the new drug invention business.

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2. Anonymous on August 27, 2013 12:37 PM writes...

@1: Is it any wonder? Those marketing guys are too busy fiddling with their Excel models and powerpoint presentations for management to spend any time talking to real doctors and patients!

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3. Biotechtranslated on August 27, 2013 2:21 PM writes...

@#2: I'd have to disagree with that statement. All product related commercial decisions are supported by a lot of primary market research.

I think the big problem with marketing is that it is nothing like science. With either biology or chemistry, you can often run enough experiments and collect enough data to have a high confidence in your conclusions.

On the business side, there are way to many variables (most of the interdependent) and the data you can collect on them is often just supportive, not something you can nail down a conclusion with.

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4. David E. Young MD on August 27, 2013 2:27 PM writes...

Considerable progress has been made in the treatment of low grade lymphomas over the last 10 years. Rituxan seems to be more useful than what we initially thought, and chemotherapy drugs such as Treanda are often very effective. It turns out that we have less need for Bexaar than what we thought we had. And then there are issues with narrow indication (might have had more use in intermediate grade lymphomas), high cost and perhaps a little difficult in implementing the drug administration since it is given in a nuclear medicine department rather than our office. I never saw the use for it.

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5. Anonymous on August 27, 2013 2:30 PM writes...

@3: Perhaps the marketers just don't ask the right questions? After all, this is often the case with R&D also...

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6. Cialisize Me ! on August 27, 2013 3:10 PM writes...

Conspiracy theory embedded in the piece--did you catch it?? Suggested that some oncologists wouldn't go with Bexxar since they couldn't give it in their clinics and thus could not charge for infusion chair time. Needed to administer it in radiation facility by other docs. Made it sound like in some cases Bexxar was far superior, but the remainder of the piece made it appear that the field just passed Bexxar up. C-M

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7. Biotechie on August 27, 2013 3:13 PM writes...

I really hope that the poor physician uptake due to need to send to nuclear medicine dept rather than "making money on every patient that went through their infusion center" was only a minor factor in the failure. That makes this story so disturbing

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8. newnickname on August 27, 2013 4:47 PM writes...

@3 "I think the big problem with marketing is that it is nothing like science." ... except that they want you to think that it is very scientific. I used to read the news articles with the projections for some drugs and laugh out loud -- I mean wonder to myself -- about how they were coming up with their projections. Some numbers just flew in the face of disease / population statistics or even on the known performance of similar drugs with which they were supposed to compete.

Some of these numbers do come from in-house marketing departments. It's even funnier when the numbers come from some high paid Wall Street analyst who, after careful consideration and calculation, comes up with a prediction. But where does the Wall Street guy get his numbers? From the corporate marketing departments!

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9. Biotechtranslated on August 27, 2013 4:55 PM writes...

@7: You would be absolutely shocked at how much financial returns impact physicians' clinical decisions. I'm not saying they will give you a sub-standard therapy because they make a few more bucks, but if you give a physician two choices with equal (or nearly equal) clinical outcomes, they will choose the one that makes them more money every single time.

@8: I share your opinion of financial projections. As a former scientist, who had to defend to the death every scientific conclusion, having moved to the commercial side I am absolutely shocked at what some people consider "evidence". In some cases there is no choice, the data isn't available, but some people will confidently draw conclusion #1 when conclusion #2,#3 and #4 are equally valid based on the data.

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10. Anonymous on August 27, 2013 5:17 PM writes...

I have also seen managers push estimates back for "review" in order to come up with figures that increase ROI and thus justify their pet project. Happens all the time.

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11. David Young, MD on August 27, 2013 5:21 PM writes...

As a medical oncologist and speaking for myself and for my partners, I can assure everyone that we would not shy away from a helpful treatment just because it is not profitable to ourselves. If I had anyone over the years who might have benefited from Bexaar, first, I might have given them Zevalin instead, or it may have transpired that the hospital nuclear medicine department was more familiar with Zevalin, or the patient had a setting where Bexaar might not get pain for, or patients, who might have to pay 20 percent of the cost of Bexaar balked at the high price. All of these are valid reasons why Bexaar did not sell well. But it was not because oncologists wanted office treatment. Besides, many oncologists now work for hospitals where they make the same amount of salary regardless of where in the hospital the treatment is given.

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12. Esteban on August 27, 2013 9:38 PM writes...

@11: Thanks David for your perspective as a practicing oncologist. Nothing against the MDs working in pharma, but they don't inhabit the same vantage point and I found your views on Bexxar use (or lack thereof) insightful.

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13. newnickanme on August 27, 2013 9:42 PM writes...

I was thinking back to an old Pipeline column and someone (not me) told the story of how the scientists came up with R&D projections and timelines for management. Management was not happy with the timeline powerpoint but they used it anyway. They just changed the units from "Years" to "Months"!

It occurs to me that scientists can probably come up with reasonable estimates of the treatable pool based on population genetics (e.g., the known rate of occurrence of some relevant gene variant) and a lot of other reliable data. Marketing might not like "10^4" patients and just massage that to "10^6" or "10^7" as something they think is reasonable. As the MBAs seem to say, "If you don't like the numbers, make up some better ones!"

(... with sad and painful acknowledgement of Emma being told to make up some elemental analysis numbers.)

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14. Nick K on August 28, 2013 2:35 AM writes...

"Seven out of ten drugs launched between 2003 and 2008 failed to cover their development costs let alone return a profit to fund future R&D, pay for program failures, and return an acceptable dividend to stockholders."

If this statistic is correct, then Pharma is in even deeper trouble than ever.

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15. Nick K on August 28, 2013 2:36 AM writes...

"Seven out of ten drugs launched between 2003 and 2008 failed to cover their development costs let alone return a profit to fund future R&D, pay for program failures, and return an acceptable dividend to stockholders."

If this statistic is correct, then Pharma is in even deeper trouble than ever.

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16. Nick K on August 28, 2013 2:40 AM writes...

Apologies for the double post.

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17. TheScarletPimple on August 28, 2013 2:45 AM writes...

#1, you say "Seven out of ten drugs launched between 2003 and 2008 failed to cover their development costs let alone return a profit to fund future R&D, pay for program failures, and return an acceptable dividend to stockholders." Do you have a source for that figure? Can anyone else verify this? Just interested as it seems high to me but I have no information to either accept or reject it.

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18. simpl on August 28, 2013 3:43 AM writes...

This looks like underpowered marketing, really. The excuses given would not apply in Britain or France, where radiology is centralised, but it seems that the product was not launched there.
It is a niche business, though - the big-pharma I work for has an I130 growth hormone analogue, but we sell the API before loading to a specialist radiology firm.

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19. simpl on August 28, 2013 3:58 AM writes...

re 18 correction of fact, it is loaded with Indium 111

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20. sreed on August 28, 2013 6:29 AM writes...

As a pharmacist when I see a new drug launch I often think "who the **** is going to buy that?" It's as if they haven't put any thought into their potential market in some cases.

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21. johnnyboy on August 28, 2013 7:36 AM writes...

I'm no defender of marketing departments, but I must say that all the bashing and piling on here seems a bit facile. I don't think anyone could have foreseen the difficulties that Bexxar faced. You are asking people to accurately predict the future, with no possibilities of mistakes. It does remind me of people taking research to task for not having cured cancer yet.

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22. Anonymous on August 28, 2013 7:42 AM writes...

The problem is not in market forecasts per se, but in believing they are - or ever could be - accurate.

This is because forecasts are usually defined by discrete numbers (assumptions), but should be expressed instead by probability distributions to account for the degree of uncertainty and thus manage expectations.

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23. A nonny Mouse on August 28, 2013 7:59 AM writes...

Wellcome marketing projected the sales for acyclovir were about $10m/yr as no one would admit to having herpes.

As for prostacyclin, the figure was in the billions as that was the pet project of the head of research at Wellcome, Sir John Vane.

Similarly, when we we looking at migraine, marketing put the total market at

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24. Anonymous on August 28, 2013 8:13 AM writes...

And here's the biggest F***-up of all time:

British Technology Group (BTG) chose not to apply for any patent for the discovery of monoclonal antibodies by Cesar Milstein at the Laboratory of Molecular biology - because they thought there would be "no market" for them.

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25. SAK on August 28, 2013 11:01 AM writes...

Keep in mind infusion clinics typically get reimbursed as ASP (average sales price) +6%. Depending on your discount/contract structure that could be substantially more than 6% positive margin. The more expensive the drug the higher absolute value of the >/= 6% markup. Not chump change on oncology or biologic RA agents.

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26. marcello on August 28, 2013 11:56 AM writes...

let's see when the similar decision is made about Provenge

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27. Steve Walker on August 28, 2013 12:00 PM writes...

The primary reason for poor adoption of these therapies was the regulatory hatchet job done on them by FDA after receipt of the initial applications for approval. In both cases, FDA deided that these safe and effectyive drugs didn't have enough evidence for approval, and delayed the availability of the drugs for years. instedea of being launched when they would have filled a clear unmet medical need, they were delayed to a point where they were launched after or at about the same time as competing drugs that entered the pipeline much later. FDA's effect on the success of cancer drugs, and on the prospects of extended life for cancer patients, is enormous, and when FDA fails to approve good cancer drugs in a timely fashion (a common problem), the adverse effects on patients and progress is devastating. It is nearly impossible for a sponsor to overcome the effect of an FDA hatchet job. Once done,it sticks.

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28. Anonymous on August 28, 2013 12:31 PM writes...

# 14 & 17 this is a quote from some literature source that escapes me. It would take me a couple hours to trace it, and I am not interested in spending the time doing that for a snarky comment on a blog site. However since I did not make this up, I am sure a clever Google search will kick it out, if you are really interested. Then the question becomes how did the authors arrive at these numbers and are they just making them up? You know that thing about liars and statistics.

I will say that these numbers did not surprise me. Back in 81-82 Lewis Sarett, the famous organic chemist who headed up Merck R&D in the 70s was out on the speakers' circuit talking about this very topic. He had a lot of time to kill having retired from Merck to Big Sky Country. He was very interested in the future pharmaceutical industry, so he did an analysis on the sustainability of the industry going forward. He presented some very disturbing data at least to me as I was only five years into my career after spending 12 years in school training to be a chemist. His data suggested that the entire industry was generating only 1 to 2 drugs a year that paid for all the R&D costs and returned enough of a profit to make the overall industry profitable. That meant that each of the big pharma companies would get on average about one make or break compound ever 15 years or so. He also noted that identifying the high margin drugs was becoming harder and much more expensive each year. He concluded that the industry as constituted at the time was not sustainable because the winners were not evenly distributed. In the future there would be many companies that would fail to make the survival cut-off, because they did not get their fair share of winner drugs.

He predicted the industry would see a massive consolidation and in the end look a lot like the auto industry with a few massive drug companies. At that time only Park Davis and Warner Lambert had merged. Robins had the Dalkon shield liability and would eventually disappear into the bowls of American Home Products. Now this was before the era of block buster drugs (only Valium had become a billion dollar molecule) and drug pricing without limits was not then an option. Still it has played out pretty much how Sarett said it would. All four multibillion dollar mid-tier pharmas for whom I worked were sold and liquidated within the past 25 years. The only reason I managed to survive in this industry was because of the rise of the small molecule biotech industry. That phenomenon (and the initial lackadaisical shuttering of acquired R&D sites) masked what would have been a massive employment problem for drug discovery scientists in the 90s and early 2000s. This delayed career poison pill has kicked in the past five years. With the VCs coming to understand drug discovery is not IT, I expect biotech will never rematerialize in the form it took in the late 80s and 90s.

For me Sarett's forecast was for a career killing Tsunami that I just managed to out run prior to my retirement. I cannot say I was not warned by none other than Lewis Sarett. If you are interested in the analysis of the pharma industry coming out of the down time of the 70s look at:

Committee on Technology and International Economic and Trade Issues of the Office of the Foreign Secretary, Commission on Engineering and Technical Systems, National Research Council (1983) The Competitive Status of the U.S. Pharmaceutical Industry: The Influences of Technology in Determining International Industrial Competitive Advantage. National Academies Press, Washington, D.C.

De Stevens, George (1976) Progress in Drug Research, Volume 20. ed. Jucker, Enest, Birkhauser Verlag, p.181

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29. Doug Steinman on August 28, 2013 2:13 PM writes...

Perhaps it is a comprehension problem. The marketing people don't understand the science behind the drug and that affects the way they try to market it. In turn, the scientists don't understand marketing so they may have an inflated view of how marketable their drug is. The end result is what happened here. The drug, while effective, was not effectively marketed and maybe it could not be. It seems to me that if there had been honest and effective communication between the scientists and the marketing people the outcome might have been different.

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30. davide young MD on August 28, 2013 2:58 PM writes...

Regarding #25. Yes, that is true, but keep in mind, the average sales price can be way off the true sales price. We have a fairly big practice and can get a couple percentage points taken off our costs. But for several years now our best acquisition price for Carboplatin is more than what Medicare feels the cost of Carboplatin... so we lose about 1 or 2 percent each time we give Carboplatin. But yes, there are other drugs that we make a 8 percent profit so it does even out.

Keep in mind that most hospitals in the US purchase chemotherapy drugs 30 percent less than private oncologists do. A large Eastern hospital made a 63 million dollar profit in their oncology program last year. Plus they get paid a "facility fee" that we don't.

A rural oncologist, however, may make no profit on chemotherapy, not being able to purchase at any discount at all. It seems to me that there should be something done to level the playing field. Make the drug costs one price period.

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31. newnickname on August 28, 2013 11:38 PM writes...

@29 "It seems to me that if there had been honest and effective communication between the scientists and the marketing people ..."

IF! "Honest MBA" is almost an oxymoron.

Speaking for myself, borne out of actual and specific experiences, I no longer expect HONEST communication from 'marketing' (investment development, pre-drug deal making and many other related 'marketing') people.

Since they are managerial level in most biotechs, you can talk until you are blue-in-the-face and pink-in-the-slip or just give up and complain on forums and blogs.

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32. Nick K on August 29, 2013 12:16 AM writes...

#28: Thank you for this post. Very sobering reading indeed. Thousands of organic chemists must wish they had known about Sarett's analysis of Pharma before committing themselves to a career in this industry.

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33. SAR Screener on August 30, 2013 3:15 AM writes...

"30. davide young MD on August 28, 2013 2:58 PM writes...

Regarding #25. Yes, that is true, but keep in mind, the average sales price can be way off the true sales price. We have a fairly big practice and can get a couple percentage points taken off our costs. But for several years now our best acquisition price for Carboplatin is more than what Medicare feels the cost of Carboplatin... so we lose about 1 or 2 percent each time we give Carboplatin. But yes, there are other drugs that we make a 8 percent profit so it does even out.

Keep in mind that most hospitals in the US purchase chemotherapy drugs 30 percent less than private oncologists do. A large Eastern hospital made a 63 million dollar profit in their oncology program last year. Plus they get paid a "facility fee" that we don't.

A rural oncologist, however, may make no profit on chemotherapy, not being able to purchase at any discount at all. It seems to me that there should be something done to level the playing field. Make the drug costs one price period."

It's called the NHS - you guys should give it a go.

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