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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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October 29, 2014

Viehbacher Out at Sanofi

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Posted by Derek

The talk of Chris Viehbacher being in trouble with Sanofi's board of directors was accurate: he's been dismissed. It was a unanimous vote, and the chairman cited a lack of trust and a "solitary management style" as factors. (This after a statement yesterday by Viehbacher that CEO succession wasn't on the board's agenda - they really weren't communicating, it appears).

They must have really wanted him out of there before he made any more solitary moves, though, because no replacement has been lined up yet. But if the board brings up a more clubbable Frenchman from inside the company, that probably won't go down well with the investment community, who seem to have been OK with Viehbacher for the most part. Look for some top-level people at other companies to be taking some sudden vacation days over the next few weeks. The company's partners, Regeneron in particular, will be hoping that the search is short.

Update: Matthew Herper says that this is a bad idea.

Comments (28) + TrackBacks (0) | Category: Business and Markets

October 28, 2014

Rumblings About AstraZeneca and Antibiotics

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Posted by Derek

Well, let's get the rest of today's bad news out there. There are persistent reports that AstraZeneca is going to be getting rid of the rest of its antibiotics research. David Shlaes' blog is the source of this one, and he may well have some information from people who know. The company's response has not been encouraging, either. Here's what they told Ed Silverman at Pharmalot:

". . .we have previously said on a number of occasions that we would take an opportunity-driven approach in our non-core therapeutic areas of infection and neuroscience,” she continues. “This means we would focus our resources on the core therapeutic areas and look for opportunities to maximize the value of our pipeline infection and neuroscience."

Oh, dear. When they start talking about opportunities and maximizing value, it's generally a very bad sign. Sauve qui peut is the usual reaction to this sort of statement, and I can't say that it would be inappropriate.

Comments (17) + TrackBacks (0) | Category: Business and Markets | Infectious Diseases

Amgen Cuts Harder

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Posted by Derek

Not good news. Amgen has announced that it's not just cutting 12 to 15% of its employees - it's going to cut 20% of them. So that means over a thousand new layoffs, on top of the ones that have already been put in the hopper. No details yet, that I know of, about where these cuts will take place, but the number of Amgen sites is already fewer than it used to be, so that certainly narrows it down.

As with the previous announcement, this one has sent the company's stock straight up. And hey, they're buying back more shares, too. So there is that.

Comments (31) + TrackBacks (0) | Category: Business and Markets

October 27, 2014

Sanofi - Trouble At the Top?

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Posted by Derek

There are reports that Sanofi's CEO, Chris Viehbacher, is in trouble with the company's board of directors. The reasons are various, ranging from his move to Boston, through the state of the company's oncology portfolio, all the way to his outspokenness, which is not very French. (That last quality has been noted here as well, several times. All of this may just be rumor-mongering, or it could be someone else's boardroom politics. But you can bet that people inside Sanofi are watching and wondering.

Update: definitely not just rumors. Via John Carroll at FierceBiotech, here's a letter that Viehbacher sent to Sanofi's board in September, outlining reasons why they shouldn't replace him. Note that the only reason we're seeing this is presumably it's been leaked by someone who wants him replaced. . .

Comments (22) + TrackBacks (0) | Category: Business and Markets

Sarepta's Duchenne Therapy Is A Lot Further Away

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Posted by Derek

I wrote here about Sarepta, a small company having plenty of difficulty getting a therapy for Duchenne muscular dystrophy through the FDA. At that point, the problem was the accelerated-approval pathway, but things have now gotten a good deal worse.

Following a meeting with regulators in September, the biotech spelled out a new set of data that the FDA is looking for in the application, and the biotech says it will have to delay filing--another dramatic turning point for the company this year, which saw its shares plunge 30% on the news this morning.

Sarepta shares have been on a roller coaster ride over the past two years as the company was forced repeatedly to move the goal lines on a prospective approval for the drug, which so far has registered promising data from a tiny study involving only a dozen boys. The biotech today spelled out regulators' demands for imaging and longterm results as well as more safety data, all of which will stall the company until at least mid-2015--or longer.

To make matters worse, the CEO has been telling investors that the agency was much more favorable, and in fact was strongly considering an early approval for the drug even before any Phase III results came in. Those investors are deeply unhappy now, and the parents of the potential patients even more so. This whole situation is a terrible mess, and honestly, it looks as if it could have been avoided. From outside, Sarepta seems to have been trying to make far too much of a single small study (12 boys, and the data only looked good when you excluded two of them). You have to provide convincing data in this business, and that takes time and costs money. Trying to take shortcuts is a low-percentage move.

Comments (3) + TrackBacks (0) | Category: Business and Markets | Clinical Trials

October 22, 2014

Roche Rebuilds

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Posted by Derek

Roche has announced ambitious plans for new buildings at its home base in Basel:

They're building a new home for John Reed and Roche's pRED research group in Basel – and the pharma giant is thinking big. Roche said today that it is committing $1.8 billion to build a new research center in Switzerland which will encompass 4 new office/lab buildings that will house 1,900 R&D staffers.

The first step of the process will involve construction of an in vivo center for animal research, slated for completion in 2018. And Roche plans to clear away older buildings to make way for a new office tower as part of a wider building plan that will cost $3.2 billion.

I saw the current new Roche office tower when I was in Basel recently - it's hard to miss - and I can't say that it's much of an ornament to the skyline. (People told me that it had originally been planned as more of an architectural statement, but that all that had been scaled back because of the cost, which seemed quite believably Swiss).

Comments (31) + TrackBacks (0) | Category: Business and Markets

October 16, 2014

What's The Going Rate These Days?

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Posted by Derek

Time to break out the pseudonyms for the comments section. I've had a couple of people asking (on both sides of the process) what the starting salaries for medicinal chemists are running in the Boston/Cambridge area. It's been a while since this was much of a topic, sad to say, but there is some hiring going on these days, and people are trying to get a feel for what the going rates are. Companies want to make sure that they're making competitive-but-not-too-generous offers, and applicants want to make sure that they're getting a reasonable one, too, naturally.

So anyone with actual data is invited to leave it in the comments section, under whatever name you like. Reports from outside the Boston/Cambridge area (and at other experience levels) are certainly welcome, too, because the same issues apply in other places as well.

Comments (127) + TrackBacks (0) | Category: Business and Markets | How To Get a Pharma Job

October 7, 2014

German Pharma, Or What's Left of It

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Posted by Derek

Busy day around here on the frontiers of science, so I haven't had a chance to get a post up. A reader did send along this article from the Frankfurter Allgemeine Zeitung, the heavyweight German newspaper known as the "Fahts" (FAZ). (The Chrome browser will run Google's auto-translate past it if you ask, and it comes out sort of coherent).

What they're asking is: how and why did the German pharmaceutical industry decline so much? Parts have been sold off (as with Hoechst and BASF), and some remaining players have merged (as with Bayer and Schering AG). There's still Boehringer and Merck (Darmstadt), but they're fairly far down the rankings in size and drug R&D expenditure. And you don't have to compare things just to the US: all this has taken place while the folks just down up the river (Novartis and Roche) have looked much stronger. The article is blaming "Wankelmut" (vacillation, fickleness) at the strategic level for much of this, especially regarding the role of an industrial chemicals division versus a pharma one.

There's something to that. Bayer was urged for years and years by analysts to break up the company, and resisted. Until recently - but now they're going to do it. Meanwhile, the other big German chemistry conglomerates did just that, but divested their pharma ends off to other companies (and countries) rather than spinning them out on their own. And there's not much of a German startup/biotech sector backstopping any of this, either. The successes of Amgen, Biogen, Genentech et al. have not happened in Germany - for the most part, players there stay where they are. The big firms stay the big firms, and no one joins their ranks.

And that's what strikes me about many economies in general, as compared to the US. We have more turmoil. It's not always a good thing, but we're also had a lot of science and technology-based companies come out of nowhere to become world leaders. And you can't do that without shaking things around. Is it partly an aversion to that sort of disruption that's led to the current state of affairs, or is this mistaking symptoms for causes? (I mean, the Swiss are hardly known for wild swings in their business sectors, but Swiss pharma has done fine). Thoughts?

Comments (30) + TrackBacks (0) | Category: Business and Markets | Drug Industry History

October 6, 2014

Sunesis Fails with Vosaroxin

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Posted by Derek

When last heard from, Sunesis was trying to get some last compounds through clinical trials, having cut everything else possible along the way (and having sold more shares to raise cash).

Their lead molecule has been vosaroxin (also known as voreloxin and SNS-595), a quinolone which has been in trials for leukemia. Unfortunately, the company said today that the Phase III trial failed to meet its primary endpoint (and the stock's behavior reflects that, thoroughly). The company's trying to make what it can out of secondary endpoints and possible effects in older patients, but the market doesn't seem to be buying it.

Comments (13) + TrackBacks (0) | Category: Business and Markets | Clinical Trials

September 29, 2014

The Case of Northwest Biotherapeutics

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Posted by Derek

There have been a lot of strong words exchanged about Northwest Biotherapeutics (NWBO), a small Maryland-based company developing a brain cancer vaccine. Over at Fierce Biotech, they're wondering why this program was picked by the UK authorities as their first official "Promising Innovative Medicine", given the scarcity of data (and the dismal track record of dendritic vaccines in the field).

Adam Feuerstein has said a bunch of similar things, vigorously, at TheStreet.com over the last few months as well. He's been especially skeptical of the company's own vigorous PR efforts, and in general tends to be unenthusiastic about small go-it-alone oncology programs. The Feuerstein-Ratain rule, that small-cap cancer trials fail, has been hard to refute.

Well, just the other day Washington Post columnist Steven Pearlstein waded into this story with a piece about how evil short-sellers are hurting promising little biotech companies. That's pretty much the tone of the whole thing, and he uses Feuerstein and NWBO as his prime example, with not-quite-stated allegations of collusion with short-sellers.

My belief is that this is a load of crap, from someone who doesn't understand very much about how the stock market works. Small companies that have been unable to interest anyone else in their technologies have a difficult time of it, to be sure. But we don't need to go to conspiracy theories to explain this. There are indeed short-selling investors who are trying to drive stocks down, but they are absolutely overwhelmed in number by the number of people who are trying to drive stocks up. That's what a stock market is: differences of opinion, held strongly enough for money to be put down on them.

If you look at Feuerstein's most recent column on NWBO, you find that only one other company has even applied for the "Promising Innovative Medicine" designation (and that application is in process). So this is not some incredible milestone. And you also find a lot of useful information on the company's debt structure, the exact sort of thing that an investor in the company should be interested in. Will you get these details by reading press releases from Northwest Biotherapeutics? You will not. You will get them from people who are willing to scrutinize a company, its operations, and its pipeline in detail.

Does Steven Pearlstein think that these details about NWBO's debt deal are false? He should say so. But he also talks about short-sellers crippling Dendreon, which ignores completely the fact that what's crippled Dendreon is that their vaccine doesn't work very well. Wonderful drugs don't get buried by short-sellers. Drugs get buried by data.

Update: TheStreet.com is now seeking a retraction from Pearlstein. One of the key sentences is "Mr. Pearlstein -- who said he knew nothing about biotech or medicine . . ." Pretty much had that part figured out already. The letter to the Post goes on to claim a number of other serious deficiencies with Pearlstein's reporting. It's going to be interesting to see where this leads. . .

Comments (42) + TrackBacks (0) | Category: Business and Markets | Cancer | Clinical Trials

September 23, 2014

The Stock Buybacks Roll On

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Posted by Derek

We've had a couple of vigorous discussions about share buyback programs around here, but for those who'd like some more, let me recommend this comment thread over at Marginal Revolution. The starting point was this article in the Financial Times.

One of the interesting points made is that management may well prefer buybacks to dividends because they tend to hold options. The tax treatment of the two has become more similar since 2003, but buybacks have increased, so taxes alone don't seem to be the key factor. But if you pay a dividend, it's out the door, whereas if you prop up the stock price, your future option transactions are disproportionately affected. (Balancing that, the stock price should, in theory, reflect expected future dividends, but this is one of the points that's argued in the comments thread).

And as mentioned here before, I think that another big factor in approving buyback programs is that no one has ever been fired for doing it. Whereas spending that money on something turned out not to work - people have lost their CEO positions for that sort of thing, so who needs it?

Comments (10) + TrackBacks (0) | Category: Business and Markets

September 22, 2014

Merck KgaA Buys Sigma-Aldrich

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Posted by Derek

Well, I didn't see this one coming: Merck KGaA (Merck-Darmstadt) is buying Sigma-Aldrich. So that's Merck/Millipore/Sigma-Aldrich, which will be a big life sciences company indeed. It's a $17 billion dollar deal, which goes off at at 37% premium to SIAL's close on Friday. Doesn't look much like any news of this offer leaked out, either, since the company's stock went down on Friday, and I don't see anything particularly weird in the options activity, either.

Merck KGaA has had a rough time of it recently trying to be a biotech company - perhaps they've decided that there's more stability in services?

Comments (16) + TrackBacks (0) | Category: Business and Markets

Astex's Financial History

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Posted by Derek

I'm at the FBLD conference in Basel today through Wednesday, and I'll be blogging some of the things I hear there. This morning we had an overview from Harren Jhoti of Astex, looking back over the company's history (they were recently bought by Otsuka for about $900 million).

One of the most striking slides was not from the scientific side - it was a plot of the company's financial position over the years. They had several deals with larger companies over the years (GSK, Novartis, J&J among others), and you could see that these, in many cases, were very timely indeed. In fact, Jhoti said, the company was more than once in the position of running out of money within a few months.

I think that many small companies could show a similar slide - well, the ones that survive could. The others would show a graph, if there were anyone left to show it, where that line came down and crossed the X-axis, and that was that. You hear a lot about these little tech companies, especially social media and the liek, that just take off and soar ever higher, but that doesn't happen much in biopharma. You can go for years dodging disaster until something works, which can make it a tough sell to investors, since you can also go for years and have nothing that works at all.

Comments (3) + TrackBacks (0) | Category: Business and Markets

September 19, 2014

Peter Thiel's Uncomplimentary Views of Big Pharma

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Posted by Derek

See what you think of Peter Thiel's characterization of the drug industry in this piece for Technology Review. Thiel's a very intelligent guy, and his larger points about technology stalling out make uncomfortable reading, in the best sense. (The famous quote is "We wanted flying cars; instead we got 140 characters"). But take a look at this (emphasis added):

You have to think of companies like Microsoft or Oracle or Hewlett-Packard as fundamentally bets against technology. They keep throwing off profits as long as nothing changes. Microsoft was a technology company in the ’80s and ’90s; in this decade you invest because you’re betting on the world not changing. Pharma companies are bets against innovation because they’re mostly just figuring out ways to extend the lifetime of patents and block small companies. All these companies that start as technological companies become antitechnological in character. Whether the world changes or not might vary from company to company, but if it turns out that these antitechnology companies are going to be good investments, that’s quite bad for our society.

I'd be interested in hearing him revise and extend those remarks, as they say in Washington. My initial reaction was to sit down and write an angry refutation, but I'm having second thoughts. The point about larger companies becoming more cautious is certainly true, and I've complained here about drug companies turning to M&A and share buybacks instead of putting that money back into research. I'd say, though, that the big drug companies aren't so much anti-technology as they are indifferent to it (or as indifferent as they can afford to be).

Even that still sounds harsh - what I mean is that they'd much rather maximize what they have, as opposed to coming up with something else. Line extensions and patent strategies are the most obvious forms of this. Buying someone else's innovations comes next, because it still avoids the pain and uncertainty of coming up with your own. There's no big drug company that does only these things, but they all do them to some degree. Share buybacks are probably the most galling form of this, because that's money that could, in theory, be applied directly to R&D, but is instead being used to prop up the share price.

But Thiel mentions elsewhere in his interview that we could, for example, be finding cures for Alzheimer's, and we're not. Eli Lilly, though, is coming close to betting the company on the disease, taking one huge swing after another at it. Thiel's larger point stands, about how more of the money that's going into making newer, splashier ways to exchange cat pictures and one-liners over the mobile phone networks could perhaps be applied better (to Alzheimer's and other things). But it's not that the industry hasn't been beating away on these itself.

I worry that the Andy Grove fallacy might be making an appearance again, given Thiel's background (PayPal, Facebook, LinkedIn). That link has a lot more on that idea, but briefly, it's the tendency for some people from the computing/IT end of the tech world to ask what the problem is with biomedical research, because it doesn't improve like computing hardware does. It's a good day to reference the "No True Scotsman" fallacy, too: sometimes people seem to identify "technology" with computing, and if something doesn't double in speed and halve in cost every time you turn around, well, that's not "real" technology. At the very least, it's not living up to its potential, and there must be something wrong with it.

I also worry that Thiel adduces the Manhattan project, the interstate highway system, and the Apollo program as examples of the sort of thing he'd like to see more of. Not that I have anything against any of those - it's just that they're all engineering projects, rather than discovery ones. The interstate system, especially: we know how to build roads, so build bigger ones. The big leap there was the idea that we needed large, standardized ones across the whole country, with limited entrances and exits. (And that was born out of Eisenhower's experiences driving across the country as the road network formed, and seeing Germany's autobahns during the war).

But you can say similar things about Apollo: we know that rockets can exist, so build bigger ones that can take people to the moon and back. There were a huge number of challenges along the way, in concept, design, and execution, but the problem was fundamentally different than, say, curing Alzheimer's. We don't even know that Alzheimer's can be cured - we're just assuming that it can. I really tend to think it can be cured, myself, but since we don't even know what causes it, that's a bit of a leap of faith. We're still making fundamental "who knew?" type discoveries in biochemistry and molecular biology, of the sort that would totally derail most big engineering projects. The Manhattan project is the closest analog of the three mentioned, I'd say, because atomic physics was such a new field (and Oppenheimer had to make some massive changes in direction along the way because of that). But I've long felt that the Manhattan project is a poor model, since it's difficult to reproduce its "Throw unlimited amounts of money and talent at the problem" mode, not to mention the fight-for-the-survival-of-your-civilization aspect.

But all that said, I do have to congratulate Peter Thiel on putting his money down on his ideas, though his investment fund. One of things I'm happiest about in today's economy, actually, is the way that some of the internet billionaires are spending their money. Overall, I'd say that many of them agree with Thiel that we haven't discovered a lot of things that we could have, and they're trying to jump-start that. Good luck to them, and to us.

Comments (58) + TrackBacks (0) | Category: Business and Markets | General Scientific News | Who Discovers and Why

Prison Sentences in the GSK China Scandal

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Posted by Derek

The GSK/China bribery case has come to some sort of ending. The company has been fined the equivalent of nearly $500 million, and Mark Reilly, the former head of that part of their operations in China, has been sentenced to prison for "two to four years". No further details seem to be available about the sentence. There are so few particulars, in fact, that although several other people are reported to have also been sentenced, we don't know who they are or what prison terms they've received. China's press (and government, same difference) are working on the usual need-to-know basis, and they've decided that no one else needs to know.

Update: the latest report is that Reilly has been given a suspended sentence and has been deported back to the UK. Certainly beats time in the Chinese prison system.

Comments (17) + TrackBacks (0) | Category: Business and Markets | The Dark Side

September 16, 2014

Lilly Steps In for AstraZeneca's Secretase Inhibitor

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Posted by Derek

Today brings news of a deal with AstraZeneca to help develop AZ's beta-secretase inhibitor, AZD3293 (actually an Astex compound, developed through fragment-based methods). AZ has been getting out of CNS indications for some time now, so they really did need a partner here, and Lilly lost their own beta-secretase compound last year. So this move doesn't come as too much of a shock, but it does reaffirm Lilly's bet-the-ranch approach to Alzheimer's.

This compound was used by AZ in their defense against being taken over by Pfizer, but (as that link in the first paragraph shows), not everyone was buying their estimated chances of success (9%). Since the overall chances for success in Alzheimer's, historically, have ranged between zero and 1%, depending on what you call a success, I can see their point. But beta-secretase deserves to have another good shot taken at it, and we'll see what happens. It'll takes years, though, before we find out - Alzheimer's trials are painfully slow, like the disease itself.

Update: I've had mail asking what I mean by AZ "getting out of CNS indications", when they still have a CNS research area. That's true, but it's a lot different than it used to be. The company got rid of most of its own infrastructure, and is doing more of a virtual/collaborative approach. So no, in one sense they haven't exited the field at all. But a lot of its former CNS people (and indeed, whole research sites) certainly exited AstraZeneca.

Comments (29) + TrackBacks (0) | Category: Alzheimer's Disease | Business and Markets | Drug Development

Update on Alnylam (And the Direction of Things to Come)

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Posted by Derek

Here's a look from Technology Review at the resurgent fortunes of Alnylam and RNA interference (which I blogged about here).

But now Alnylam is testing a drug to treat (familial amyloid polyneuropathy) in advanced human trials. It’s the last hurdle before the company will seek regulatory approval to put the drug on the market. Although it’s too early to tell how well the drug will alleviate symptoms, it’s doing what the researchers hoped it would: it can decrease the production of the protein that causes FAP by more than 80 percent.

This could be just the beginning for RNAi. Alnylam has more than 11 drugs, including ones for hemophilia, hepatitis B, and even high cholesterol, in its development pipeline, and has three in human trials —progress that led the pharmaceutical company Sanofi to make a $700 million investment in the company last winter. Last month, the pharmaceutical giant Roche, an early Alnylam supporter that had given up on RNAi, reversed its opinion of the technology as well, announcing a $450 million deal to acquire the RNAi startup Santaris. All told, there are about 15 RNAi-based drugs in clinical trials from several research groups and companies.

“The world went from believing RNAi would change everything to thinking it wouldn’t work, to now thinking it will,” says Robert Langer, a professor at MIT, and one of Alnylam’s advisors.

Those Phase III results will be great to see - that's the real test of a technology like this one. A lot of less daring ideas have fallen over when exposed to that much of a reality check. If RNAi really has turned the corner, though, I think it could well be just the beginning of a change coming over the pharmaceutical industry. Biology might be riding over the hill, after an extended period of hearing hoofbeats and seeing distant clouds of dust.

There was a boom in this sort of thinking during the 1980s, in the early days of Genentech and Biogen (and others long gone, like Cetus). Proteins were going to conquer the world, with interferon often mentioned as the first example of what was sure to be a horde of new drugs. Then in the early 1990s there was a craze for antisense, which was going to remake the whole industry. Antibodies, though, were surely a big part of the advance scouting party - many people are still surprised when they see how many of the highest-grossing drugs are antibodies, even though they're often for smaller indications.

And the hype around RNA therapies did reach a pretty high level a few years ago, but this (as Langer's quote above says) was followed by a nasty pullback. If it really is heading for the big time, then we should all be ready for some other techniques to follow. Just as RNAi built on the knowledge gained during the struggle to realize antisense, you'd have to think that Moderna's mRNA therapy ideas have learned from the RNAi people, and that the attempts to do CRISPR-style gene editing in humans have the whole biologic therapy field to help them out. Science does indeed march on, and we might possibly be getting the hang of some of these things.

And as I warned in that last link, that means we're in for some good old creative destruction in this industry if that happens. Some small-molecule ideas are going to go right out the window, and following them (through a much larger window) could be the whole rare-disease business model that so many companies are following these days. Many of those rare diseases are just the sorts of things that could be attacked more usefully at their root cause via genomic-based therapies, so if those actually start to work, well. . .

This shouldn't be news to anyone who's following the field closely, but these things move slowly enough that they have a way of creeping up on you unawares. Come back in 25 years, and the therapeutic landscape might be a rather different-looking place.

Comments (18) + TrackBacks (0) | Category: Biological News | Business and Markets | Clinical Trials | Drug Development

September 12, 2014

Thiola, Retrophin, Martin Shkrell, Reddit, and More

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Posted by Derek

Well, it was not a dull evening around the In the Pipeline headquarters last night. I submitted a link to Reddit for my post yesterday about Retrophin and Thiola, and that blew up onto that site's front page. The Corante server melted under the impact, which isn't too surprising, since it's struggling at the best of times. (A site move really is coming, and no, I can't wait, either, at this point.)

But then, to my great surprise, Martin Shkreli (CEO of Retrophin) showed up in the Reddit thread, doing an impromptu AMA (Ask Me Anything), which I have to say takes quite a bit of aplomb (or perhaps foolhardiness - I don't think too many other CEOs of any publicly traded corporations would have done it). But not too long after that, the entire thread vanished off the front page, and off of r/News, the subreddit where I'd submitted it.

Then I got a message from one of the moderators of r/News, saying that I'd been banned from it, and going on to say that I would likely be banned from the site as a whole. After having been on Reddit for seven years, that took me by surprise. As best I can figure, the thread itself was reported to r/Spam by someone, and the automated system took over from there. Over the years, I've submitted links to my blog posts, and Reddit, or some parts of it, anyway, has been notoriously touchy about that. The last time I submitted such a link, though, was back in February (and before that, August of 2013), so I'm not exactly a human spam-bot. We'll see what happens. Update: I was banned for some hours, but I've been reinstated.

But back to Retrophin, Thiola, and Martin Shrkeli. The entire Reddit thread can still be read here, via a direct link, although it can't be found in r/News any more. If you look for a user named "martinshkreli", you can see where he gets into the fray (I'm "dblowe" on the site, or perhaps I was?). You'll note that he gives out his cell phone, office phone, and e-mail, which again is not your usual CEO move - you have to give him that, although it does seem a bit problematic from a regulatory/compliance angle. So what arguments does he make for the Thiola price increase?

From what I can see, they boil down to this: patients themselves aren't going to be paying this increased price - insurance companies are. And Retrophin is actually going to be working on new formulations for the drug, which no one has done previously. He seems to have implied that the previous company (Mission Pharmacal) was reluctant to raise the price and take the public outcry, and stated (correctly) that Mission was having trouble keeping the drug in supply. He claims that the current price is still "pretty low", and that he does not expect any pushback from the eventual payers. There was also quite a bit about the company's dedication to patients, their work on other rare diseases, and so on.

He and I didn't cross paths much in the thread. I tried asking a few direct questions, but they weren't picked up on, so my take on Shkreli's answers will show up here. He's correct that the drug's availability was erratic, and he may well be correct that its price was too low for a company to deal with it properly. But if so, that does make you wonder what Mission Pharmacal was up to, and how they were sourcing the material.

He's also correct that Retrophin is planning to work on new formulations of the drug. But when you look at the company's investor presentation about Thiola, all that comes under a slide marked "Distribution and Intellectual Property". The plan seems to be that they'll introduce 250mg and 500mg dosages, at which time they'll discontinue the current 100mg formulation. Later on, they'll try to introduce a time-release formulation, at which time they'll discontinue the 250mg and 500mg forms. You can argue that this is helping patients, but you can also argue that it's making it as difficult as possible for anyone else to show bioequivalence and enter the market as well, assuming that anyone wants to.

And as I mentioned yesterday, the company does seem to care about someone else entering the market. My questions to Shkreli about the "closed distribution" model mentioned on the company's slides went unanswered, but the only interpretation I can give them is that Retrophin plans to use the FDA's risk management system to deny any competitors access to their formulations, in order to try to keep themselves as the sole supplier of Thiola in perpetuity. Patents at least expire: regulatory rent-seeking is forever.

Also left out of Shkreli's comments on Reddit are the issues on the company's slide titled "Pharmacoeconomics", where it says (vis-a-vis the other drug for cystinuria, penicillamine):

Current pricing of Thiola® - $4,000 PPPY
– Penicillamine pricing- $80,000-$140,000
• Thiola could support a significant price increase

Personally, I think that's the main reason for Retrophin's interest. You'll note that the price hike takes Thiola's cost right up to the penicillamine region (the price of that one is another story all its own). But to a first approximation, that's business. I've defended some drug company pricing decisions on this site before (although not all of them), so what's different this time?

I've been thinking hard about that one, and here's what I have so far. I think that pricing power of this sort is a powerful weapon. That's the reason for the patent system - you get a monopoly on selling your invention, but it's for a fixed period only, and in return you disclose what your invention is so that others can learn from it. And I think that this sort of pricing power should be a reward for actually producing an invention. That's the incentive for going through all the work and expense, the (time-limited) pot of gold at the end of the rainbow. I have a much lower opinion of seeing someone ram through a big price increase just because, hey, they can. Thiola has nothing to do with the patent system - it's off patent. What this situation looks like to me is regulatory rent-seeking. Celgene seems to be doing that too, with thalidomide (as mentioned yesterday), which is why they're being taken to court. Retrophin is betting that Thiola just isn't a big enough deal for anyone to go to that trouble, once they tell them to buzz off by using Celgene's strategy.

Businesses can, though, charge what they think the market will bear, and Retrophin's contribution to cystinuria therapy so far is to have realized that the market will bear a lot more than people had realized. But in an actual market, it would be easier for someone else to come in and compete on price. What Retrophin is planning is to use regulatory loopholes to keep anyone else from doing so, with no time limit until someone at the FDA does something about it. Cloaking this in a lot of noble-sounding talk about being the company that really cares about cystinuria patients is a bit stomach-turning. In my opinion.

Comments (30) + TrackBacks (0) | Category: Business and Markets | Drug Prices | Why Everyone Loves Us

September 11, 2014

The Most Unconscionable Drug Price Hike I Have Yet Seen

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Posted by Derek

There's a drug called Thiola (tiopronin) that most people have never heard of. It's on my list of "smaller than aspirin" drugs, and I'd never heard of it until I put that one together. But thanks to a little company called Retrophin, we all get to hear about it now.

It's used to treat cystinuria, a rare disease that causes painful kidney complications, namely unusual kidney stones of pure cystine. And until recently, tiopronin (as a small, nearly forgotten drug for an orphan indication) was rather cheap. It was sold by a small company in Texas, Mission Pharmacal, until Retrophin bought the marketing rights earlier this year (a move complicated by the company's CEO, investor Martin Shkreli, who may have let the news of the deal leak on his Twitter account).

That link mentions part of Shkreli's business plan as "acquiring the rights to obsolete remedies Shkreli says can be put to new and lucrative purposes", and by gosh, that's certainly accurate. Retrophin is increasing the price of Thiola from $1.50 per pill to over $30 per pill. Because they can - they stated when they bought the drug that their first move would be to raise the price. New dosages are formulations are also mentioned, but the first thing is to jack the price up as high as it can be jacked. Note that patients take several pills per day. Shkreli is probably chortling at those Mission Pharmacal hicks who didn't realize what a gold mine they were sitting on.

Now, there have been somewhat similar cases in recent years. Colchicine's price went straight up, and (infamously) so did the progesterone formulation marketed as Makena. But in both those cases, the small companies involved took the compound back through the FDA, under an agency-approved program to get marketing exclusivity. I've argued here (see those last two links) that this idea has backfired several times, and that the benefit from the clinical re-evaluation and re-approval of these drugs has not been worth their vastly increased cost. I think that drug companies should be able to set the price of their drugs, because they have a lot of failures to make up for, but this FDA loophole gives people a chance to do minimal development at minimal risk and be handed a license to print money in return.

But this isn't even one of those cases. It's worse. Retrophin hasn't done any new trials, and they haven't had to. They've just bought someone else's old drug that they believed could be sold for twenty times its price, and have put that plan right into action. No development costs, no risks whatsoever - just slap a new sticker on it and put your hands over your ears. This is exactly the sort of thing that makes people go into fist-clenching rages about the drug industry, and with damn good reason. This one enrages me, and I do drug research for a living.

So thank you, Martin Shkreli. You've accelerated the progress of the giant hammer that's coming down on on all of us over drug pricing, and helped drag the reputation of the pharmaceutical industry even further into the swamp. But what the hell do you care, right? You're going to be raking in the cash. The only thing I can say about Shkreli and Retrophin is that they make the rest of the industry look good in comparison. Some comparison.

Update: There are some interesting IP aspects to this situation. As pointed out in the comments section, this compound has no exclusivity left and is off patent. So what's to stop someone else from filing an ANDA, showing bioequivalence, and competing on price (since there seems to be an awful lot of room in there)?

Simon Lackner on Twitter sent me to this presentation from Retrophin on their purchase of the Thiola license. In it, you can see that their plan for this: "Similar to Chenodal, Retrophin will move Thiola into closed distribution". Chenodal was the company's previous brainstorm of this sort, when they bought Manchester Pharmaceuticals, details of which can be seen on this presentation. What they say on that one is "Closed distribution system does not allow for generics to access product for bioequivalence study. ANDA filings are impossible unless generic company illegally penetrates specialty distributor. Recent Celgene v. Lannett case establishes precedent." So let's go back and take a look at Celgene v. Lannett.

That was a long-running dispute between the two companies over Lannett's desire to market a generic equivalent of Celgene's thalidomide. Lannett brought suit, accusing Celgene of using the drug's Risk Evaluation and Mitigation Strategy (REMS) improperly to deny potential competitors access to their product (which is needed to do a head-to-head comparison for an ANDA filing). As you can imagine, the REMS for thalidomide is pretty extensive and detailed! But there was no court decision in the case. The companies reached an out-of-court settlement before it went to trial in 2012, although I have to say that that Retrophin slide makes it sound like there's some sort of legal precedent that was set. There wasn't. The limits of REMS restrictions to deny access to a given drug are still an open question.

In late 2012, Acetelion and Apotex went at it over the same issue, this time over access to Tracleer (bosentan). The Federal Trade Commission filed an amicus brief, warning that companies could be abusing the REMS process to keep out competition. That case was also dismissed, though, after the two companies reached an out-of-court settlement of their own, removing another chance for a legal opinion on the subject.

But the issue is very much alive. Earlier this year, Mylan went after Celgene, also over thalidomide (and its follow-up, lenalidomide). Their complaint:

Celgene, a branded drug manufacturer, has used REMS as a pretext to prevent Mylan from acquiring the necessary samples to conduct bioequivalence studies, even after the FDA determined that Mylan’s safety protocols were acceptable to conduct those studies. In furtherance of its scheme to monopolize and restrain trade, Celgene implemented certain distribution restrictions that significantly limit drug product availability.

And this is the plan that Retrophin has in mind - they say so quite clearly in those two presentations linked above. What their presentations don't go into is that this strategy has been under constant legal attack. It also doesn't go into another issue: the use of REMS at all. Thalidomide, of course, is under all kinds of restrictions and has plenty of hideous risks to manage. Bosentan's not exactly powdered drink mix, either - patients require monthly liver function tests (risk of hepatoxicity) and monitoring of their hematocrit (risk of anemia). But what about Thiola/tiopronin? It's not under any risk management restrictions that I can see. Its side effects seem to be mainly diarrhea and nausea, which does not put it into the "This drug is so dangerous that we can't let any generic company get ahold of our pills" category. So how is Retrophin going to make this maneuver work?

Update: more on this issue here.

Comments (41) + TrackBacks (0) | Category: Business and Markets | Drug Prices | Why Everyone Loves Us

September 10, 2014

Clinical Trial Fraud

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Posted by Derek

Bizarre news from Evotec - see what you make of this press release:

Evotec AG was informed that US company Hyperion Therapeutics, Inc. ("Hyperion") is terminating the development of DiaPep277(R) for newly diagnosed Type 1 diabetes.

In a press release published by Hyperion on 08 September 2014 at market opening in the US, the company states that it has uncovered evidence that certain employees of Andromeda Biotech, Ltd. ("Andromeda"), which Hyperion acquired in June 2014, engaged in serious misconduct, involved with the trial data of DiaPep277. Hyperion announced that it will complete the DIA-AID 2 Phase 3 trial, but will terminate further development in DiaPep277.

Here's the Hyperion press release, and it details a terrible mess:

The company has uncovered evidence that certain employees of Andromeda Biotech, Ltd., which Hyperion acquired in June 2014, engaged in serious misconduct, including collusion with a third-party biostatistics firm in Israel to improperly receive un-blinded DIA-AID 1 trial data and to use such data in order to manipulate the analyses to obtain a favorable result. Additional evidence indicates that the biostatistics firm and certain Andromeda employees continued the improper practice of sharing and examining un-blinded data from the ongoing DIA-AID 2 trial. All of these acts were concealed from Hyperion and others.

The Company has suspended the Andromeda employees known to be involved, is notifying relevant regulatory authorities, and continues to investigate in order to explore its legal options. Hyperion employees were not involved in any of the improper conduct.

What a nightmare. All biomedical data are vulnerable to outright fraud, and it gives a person the shivers just thinking about it. I can only imagine the reactions of Hyperion's management when they heard about this, and Evotec's when Hyperion told them about it. What, exactly, the Andromeda people (and the third-party biostatistics people) thought they were getting out of this is an interesting question, too - did they hope to profit if the company announced positive results? That's my best guess, but I'm not sleazy enough (I hope) to think these things through properly.

Comments (17) + TrackBacks (0) | Category: Business and Markets | Clinical Trials | The Dark Side

September 9, 2014

Google's Calico Moves Into Reality

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Posted by Derek

Google's Calico venture, the company's out-there move into anti-aging therapy, has made the news by signing a deal with AbbVie (the company most of us will probably go on thinking of as Abbott). That moves them into the real world for sure, from the perspective of the rest of the drug industry, so it's worth taking another look at them. (It's also worth noting that Craig Venter is moving into this area, too, with a company called Human Longevity. Maybe as the tech zillionaires age we'll see a fair amount of this sort of thing).

On one level, I applaud Google's move. There's a lot of important work to be done in the general field of aging, and there are a lot of signs that human lifespan can be hacked, for want of a better word. The first thought some people have when they think of longer lifespan is that it could be an economic disaster. After all, a huge percentage of our healthcare money is already spent in the last years of life as it is - what if we make that period longer still? But it's not just sheer lifespan - aging is the motor behind a lot of diseases, making them more like to crop up and more severe when they do. The dream (which may be an unattainable one) is for longer human lifespans, in good health, without the years of painful decline that so many people experience. Even if we can't quite manage that, an improvement over the current state of things would be welcome. If people stay productive longer, and spend fewer resources on disabling conditions as they age, we can come out ahead on the deal rather than wondering how we could possibly afford it.

Google and AbbVie are both putting $250 million into starting a research site somewhere in the Bay area (and given the state of biotech out there, compared to a few years ago, it'll be a welcome addition). If things go well, each of them have also signed up to contribute as much as $500 million more to the joint venture, but we'll see if that ever materializes. What, though, are they going to be doing out there?

Details are still scarce, but FierceBiotechIT says that "a picture of an IT-enabled, omics-focused operation has emerged from media reports and early hiring at the startup". That sounds pretty believable, given Google's liking for (and ability to handle) huge piles of data. It also sounds like something that Larry Page and Sergey Brin would be into, given their past investments. But that still doesn't tell us much: any serious work in this area could be described in that fashion. We'll have to use up a bit more of our current lifespans before things get any clearer.

So I mentioned above that on one level I like this - what, you might be asking, is the other level on which I don't? My worry is what I like to call the Andy Grove Fallacy. I applied that term to Grove's "If we can improve microprocessors so much, what's holding you biotech people back"? line of argument. It's also a big part of the (in)famous "Can a Biologist Fix a Radio" article (PDF), which I find useful and infuriating in about equal proportions. The Andy Grove Fallacy is the confusion between man-made technology (like processor chips and radios) and biological systems. They're both complex, multifunctional, miniaturized, and made up of thousands and thousands of components, true. But the differences are more important than the similarities.

For one thing, human-designed objects are one hell of a lot easier for humans to figure out. With human-designed tech, we were around for all the early stages, and got to watch as we made all of it gradually more and more complicated. We know it inside out, because we discovered it and developed it, every bit. Living cells, well, not so much. The whole system is plunked right down in front of us, so the only thing we can do is reverse-engineer, and we most definitely don't have all the tools we need to do a good job of that. We don't even know what some of those tools might be yet. Totally unexpected things keep turning up as we look closer, and not just details that we somehow missed - I'm talking about huge important regulatory systems (like all the microRNA pathways) that we never even realized existed. No one's going to find anything like that in an Intel chip, of that we can be sure.

And that's because of the other big difference between human technology and biochemistry: evolution. We talk about human designs "evolving", but that's a very loose usage of the word. Real biological evolution is another thing entirely. It's not human, not at all, and it takes some time to get your head around that. Evolution doesn't do things the way that we would. It has no regard for our sensibilities whatsoever. It's a blind idiot tinkerer, with no shame and no sense of the bizarre, and it only asks two questions, over and over: "Did you live? Did you reproduce? Well, OK then." Living systems are full of all kinds of weird, tangled, hacked-together stuff, layer upon layer of it, doing things that we don't understand and can't do ourselves. There is no manual, no spec sheet, no diagram - unless we write it.

So people coming in from the world of things that humans built are in for a shock when they find out how little is known about biology. That's the shock that led to that Radio article, I think, and the sooner someone experiences it, the better. When Google's Larry Page is quoted saying things like this, though, I wonder if it's hit him yet:

One of the things I thought was amazing is that if you solve cancer, you’d add about three years to people’s average life expectancy. We think of solving cancer as this huge thing that’ll totally change the world. But when you really take a step back and look at it, yeah, there are many, many tragic cases of cancer, and it’s very, very sad, but in the aggregate, it’s not as big an advance as you might think."

The problem is, cancer - unrestrained cellular growth - is intimately tied up with aging. Part of that is statistical. If you live long enough, you will surely come down with some form of cancer, whether it's nasty enough to kill you or benign enough for you to die of something else. But another connection is deeper, because the sorts of processes that keep cells tied down so that they don't take off and try to conquer the world are exactly the ones, in many cases, that we're going to have to tinker with to extend our lifespans. There are a lot of tripwires out there, and many of them we don't even know about yet. I'd certainly assume that Larry Page's understanding of all this is deeper than gets conveyed in a magazine article, but he (and the other Google folks) will need to watch themselves as they go on. Hubris often gets rewarded in Silicon Valley - after all, it's made by humans, marketed to humans, and is rewarded by human investors. But in the biomedical field, hubris can sometimes attract lightning bolts like you would not believe.

Comments (25) + TrackBacks (0) | Category: Aging and Lifespan | Business and Markets

September 5, 2014

A VC Firm Touts Its Successes - And Its Failures

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Posted by Derek

Here's what sounds like a good idea from VC firm Index Ventures, from the latest issue of BioCentury (same one I referenced the other day). Like many others in the biopharma venture capital world, they're trying to run the "killer experiment" as soon as possible, to see which ideas for new companies look solid. Unlike the others, though, they're planning a web site where they will detail the successes - and the failures. Here's an example:

Founded in 2013, (Purple Pharmaceuticals) was started to identify small molecule inhibitors of proprotein convertase subtilisin/kexin type 9. Two mAbs against PCSK9 are already in Phase III testing to treat hypercholesterolemia with regulatory submissions expected this year: evolocumab from Amgen Inc. and alirocumab from partners Regeneron Pharmaceuticals Inc. and Sanofi.

Grainger said the antibodies have limitations, as they require high doses to suppress PCSK9 activity and once-weekly or once-monthly infusions. Thus a pill that could match the PCSK9 inhibition of the biologics could be “the holy grail” of lowering LDL cholesterol.

Purple began by trying to identify small molecules that were highly selective for PCSK9 over other proprotein convertases because, as Grainger noted, “PCSK9 is a member of a large family of enzymes that do some pretty critical things.”

The killer experiment, he said, “was to ask could we make a small molecule that was selective over these other proprotein convertases, and could we demonstrate that it would lower LDL cholesterol?”

After a year, Purple had identified some hits selective for PCSK9, but a conversation with researchers at the Genentech Inc. unit of Roche led to the realization that the virtual company would need to run a second experiment.

“We learned from that interaction with Genentech that they had also run a PCSK9 screening program the same way we had,” Grainger said. “They discovered that their hits, while preventing PCSK9 from cleaving an external substrate, did not prevent PCSK9 from cleaving itself.”

Purple learned that in vivo, PCSK9 is auto-activated by cleaving itself — meaning the only important interaction to inhibit is PCSK9 auto- activation, not interactions with external substrates.

Purple’s second experiment showed none of its small molecule hits that inhibited PCSK9 interaction with an external substrate also inhibited auto-activation.

“Therefore we were able to kill a project which had spent at that stage only about £300,000 over a year, only to discover at the critical moment that it didn’t have the profile that we wanted,” Grainger said. “We were able to terminate that without having created any infrastructure, without having spent a painful amount of money prosecuting the project.”

That story illustrates a number of points about drug discovery. First off, congratulations to those involved for being able to definitively test a hypothesis; that's the engine at the heart of all scientific research. And as they say, it was good to be able to do that without having spent too much money and time, because both of those have a way of getting a bit out of control as complication after complication gets uncovered. Investors start getting jumpy when you keep coming back to them saying "Well, you know, it turns out that. . . ", but you know, it often turns out that way.

The next thing this story shows is that when you see an obvious gap in the landscape that there may well be a good reason for it. PCSK9 antibodies are widely thought to be potential blockbusters; a huge battle is shaping up in that area. So why no small molecules, eh? That's the question that launched Purple, it seems, and it's a valid one. But it turns out to have a valid answer, one that others in the field had already discovered. I suspect that the people behind this effort were, at the same time they were characterizing their lead molecules, also beating all the bushes for the sort of information that they obtained from Genentech. Somebody must have tried small-molecule PCSK9 inhibitors, you'd think, so what happened? Were those projects abandoned for good reasons, or was there still some opportunity there that a new company could claim for itself?

There may well be more to this story, though, than the Index Ventures people are saying. Update: there is - see the end of this post. The autocatalytic cleavage of PCSK9 was already well-known - pretty much everything in the that protease family works that way. (The difference is that with PCSK9, the prodomain part of the protein stays on longer - details of its cleavage were worked out in 2006). And in this 2008 paper from Journal of Lipid Research, we find this:

Several approaches for inhibiting PCSK9 function are theoretically feasible. Because autocatalytic cleavage is required for the maturation of PCSK9, a small-molecule inhibitor of autocatalysis might be useful, provided that it was specific for PCSK9 processing and did not lead to a toxic accumulation of misfolded PCSK9. Small molecules that block the PCSK9-LDL receptor interactions would likely be efficacious, although designing inhibitors of protein-protein interactions is a tall order. Antisense approaches pioneered by Isis Pharmaceuticals (Carlsbad, CA) are well suited for liver targets, and studies in mice suggest that this approach is efficacious for PCSK9. Finally, there is considerable interest in developing antibody therapeutics to inhibit PCSK9-LDL receptor interactions.

Even more to the point is the paper that that JLR piece is commenting on. That one demonstrates, through studies of mutated PCSK9 proteins, that its catalytic activity does not seem to be necessary at all for its effects on LDL receptors (a result that had already been suggested in cell assays). Taken together, you'd come away with the strong impression that inhibiting PCSK9's catalytic activity, other than stopping it from turning itself into its active form, had a low probability of doing anything to cholesterol levels. And you'd come away with that impression in 2008, at the latest.

So Purple's idea was a longer shot than it appeared on the surface, not that the real information was exactly buried deep in the literature. They shouldn't have needed someone at Genentech to tell them that PCSK9's autocatalysis was the real target - I've never worked in the area at all, and I found this out in fifteen minutes on PubMed while riding in to work. They must have had more reason to think that an assay for PCSK9's exogenous activity would be worth running - either that, or this story has gotten garbled along the way.

But this example aside, I applaud the idea of making these early-stage calls public. And I agree with the Index Ventures folks that this should actually help academics and others unused to drug discovery to see what needs to be done to actually launch an idea out into the world. I look forward to seeing the web site - and perhaps to hearing a bit more about what really happened at Purple.

Update: David Grainger of Index Ventures has more in the comments, and says that there is indeed more to the story. He points out that mutations of PCSK9 were found that inhibited its autocatalytic activity (such as this one), and that work had appeared that suggested that molecules that inhibited only the autocatalytic activity could be useful. This is what Purple was seeking - the BioCentury piece makes things sound a bit different (see above), but the problem seems to have been that molecules that inhibited PCSK9's activity against other substrates turned out not to inhibit its activity against itself. If I'm interpreting this right, then, Genentech's contribution was to point out that the autocatalytic activity couldn't be modeled by looking at another substrate.

Comments (5) + TrackBacks (0) | Category: Business and Markets | Cardiovascular Disease | Drug Assays

August 25, 2014

InterMune Bought

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Posted by Derek

It has been a bizarre ride for InterMune, its employees, and its investors. But now it ends with Roche buying them for $8.3 billion dollars, a sum that would have brought incredulous stares a few years ago. The deal makes sense for Roche, and it will provide investors a rationale for years as they buy into small biopharma companies - trying to pick the next InterMune, you know.

Comments (7) + TrackBacks (0) | Category: Business and Markets

August 20, 2014

Did Pfizer Cut Back Some of Its Best Compounds?

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Posted by Derek

John LaMattina has a look at Pfizer's oncology portfolio, and what their relentless budget-cutting has been doing to it. The company is taking some criticism for having outlicensed two compounds (tremelimumab to AstraZeneca and neratinib to Puma) which seem to be performing very well after Pfizer ditched them. Here's LaMattina (a former Pfizer R&D head, for those who don't know):

Unfortunately, over 15 years of mergers and severe budget cuts, Pfizer has not been able to prosecute all of the compounds in its portfolio. Instead, it has had to make choices on which experimental medicines to keep and which to set aside. However, as I have stated before, these choices are filled with uncertainties as oftentimes the data in hand are far from complete. But in oncology, Pfizer seems to be especially snake-bit in the decisions it has made.

That goes for their internal compounds, too. As LaMattina goes one to say, palbociclib is supposed to be one of their better compounds, but it was shelved for several years due to more budget-cutting and the belief that the effort would be better spent elsewhere. It would be easy for an outside observer to whack away at the company and wonder how incompetent they could be to walk away from all these winners, but that really isn't fair. It's very hard in oncology to tell what's going to work out and what isn't - impossible, in fact, after compounds have progressed to a certain stage. The only way to be sure is to take these things on into the clinic and see, unfortunately (and there you have one of the reasons things are so expensive around here).

Pfizer brought up more interesting compounds than it later was able to develop. It's a good question to wonder what they could have done with these if they hadn't been pursuing their well-known merger strategy over these years, but we'll never know the answer to that one. The company got too big and spent too much money, and then tried to cure that by getting even bigger. Every one of those mergers was a big disruption, and you sometimes wonder how anyone kept their focus on developing anything. Some of its drug-development choices were disastrous and completely their fault (the Exubera inhaled-insulin fiasco, for example), but their decisions in their oncology portfolio, while retrospectively awful, were probably quite defensible at the time. But if they hadn't been occupied with all those upheavals over the last ten to fifteen years, they might have had a better chance on focusing on at least a few more of their own compounds.

Their last big merger was with Wyeth. If you take Pfizer's R&D budget and Wyeth's and add them, you don't get Pfizer's R&D post-merger. Not even close. Pfizer's R&D is smaller now than their budget was alone before the deal. Pyrrhus would have recognized the problem.

Comments (20) + TrackBacks (0) | Category: Business and Markets | Cancer | Drug Development | Drug Industry History

August 11, 2014

Med-Chem and Trucking, Together At Last

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Posted by Derek

One of my standard lines (in presentations or lab conversation), when referring to some research that just flat-out isn't working, is that I should chuck it all and go to truck-driving school just like my mother always wanted. (She actually didn't, in case you're wondering!)

The similarities between organic chemistry and truck driving may be closer than they appear, though. Try this blog post at the New York Times out. The title alone will send you right into crippling-STEM-shortage land: "The Trucking Industry Needs More Drivers. Maybe It Needs to Pay More."

Consider this: The American Trucking Associations has estimated that there was a shortage of 30,000 qualified drivers earlier this year, a number on track to rise to 200,000 over the next decade. Trucking companies are turning down business for want of workers.

Yet the idea that there is a huge shortage of truck drivers flies in the face of a jobless rate of more than 6 percent, not to mention Economics 101. The most basic of economic theories would suggest that when supply isn’t enough to meet demand, it’s because the price — in this case, truckers’ wages — is too low. Raise wages, and an ample supply of workers should follow.

But corporate America has become so parsimonious about paying workers outside the executive suite that meaningful wage increases may seem an unacceptable affront. In this environment, it may be easier to say “There is a shortage of skilled workers” than “We aren’t paying our workers enough,” even if, in economic terms, those come down to the same thing.

Considering the sorts of speeches that Lilly's John Lechleiter gives, this sounds familiar indeed. And the same things has come up in many of the "STEM shortage" discussions around here. A minor adjustment might be "We can't find people who will work for what we're paying our outsourced contractors", but the principle is pretty much the same.

Comments (20) + TrackBacks (0) | Category: Business and Markets

July 30, 2014

Amgen Cuts Hard

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Posted by Derek

Amgen cuts over 2,500 jobs. Amgen completely shuts down its big facilities in Washington state and Colorado. Amgen's stock goes up nearly 7% in one day, adding about five (corrected late-night mistake) billion dollars in market cap. And there you have it. That's the industry.

As this FierceBiotech piece says, Amgen's big shareholders have been unhappy with the way the company has been performing during the recent biotech bull market. This also puts the company in line with all the other big outfits who have been trimming staff and consolidating research sites in the past few years. It also puts them in line with all the companies who have been consolidating particularly in the Boston/Cambridge and San Francisco Bay areas - this Boston Globe article says that positions will actually be added in both of those Amgen locations. So no one can say that they're behind the times now.

And if you'd like to know more about just what state the industry is in, have a look at analyst Geoffrey Porges' take on Amgen's portfolio. It's too damn innovative, he says:

Over the last 10 years, the company has spent about $30 billion on R&D--including buyouts--but generated just $15 billion in cumulative revenue from the resulting drugs, he points out in a research note Friday. And, looking at Amgen's current pipeline, Porges doesn't see that ratio evening out any time soon.

That's because of Amgen's affinity for risk. Compared to its Big Biotech peers, the company has a pipeline particularly loaded with what Porges terms "breakthrough" assets: first-in-class agents with unproven targets and unknown safety profiles. At the moment, 80% of Amgen's pipeline is made up of such breakthrough therapies, according to Bernstein's numbers. . .That commitment to inherently risky science, coupled with a "quixotic" M&A track record, has saddled Amgen with a below-average return on invested capital over the past four years, Porges writes, suggesting "changes to the company's strategy and structure may be warranted."

To be fair, he's suggesting a change that puts the cash-cow parts of the company in a separate place from the risky parts, and he claims that the two resulting companies would have a higher combined market cap than Amgen as it currently exists. But for those people who feel that the still-profitable legacy drugs are there to pay for the risky R&D (which could become the legacy drugs of the future), this scheme may not sound very appealing. How the new company with all the risky programs might survive if it runs into trouble is apparently not Porges' department. Raising Amgen's market cap is, though. But consider it raised, as of today: an all-time high, as a matter of fact. All it took was a whacking big layoff and a string of site closures - why, success has been around the corner all this time.

Comments (48) + TrackBacks (0) | Category: Business and Markets

July 28, 2014

Targacept Comes Up Empty, Yet Again

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Posted by Derek

Targacept's attempt to salvage something by testing TC-5214 for overactive bladder has failed. John Carroll at FierceBiotech counts eight straight failed clinical trials from this company: a record? I don't see anyone beating that very easily, that's for sure. Nicotinic receptors have proven to be a very, very difficult field to work in, and I'm not sure that Targacept has anything left in their tank.

Comments (26) + TrackBacks (0) | Category: Business and Markets | Clinical Trials

July 25, 2014

The Antibiotic Gap: It's All of the Above

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Posted by Derek

Here's a business-section column at the New York Times on the problem of antibiotic drug discovery. To those of us following the industry, the problems of antibiotic drug discovery are big pieces of furniture that we've lived with all our lives; we hardly even notice if we bump into them again. You'd think that readers of the Times or other such outlets would have come across the topic a few times before, too, but there must always be a group for which it's new, no matter how many books and newspaper articles and magazine covers and TV segments are done on it. It's certainly important enough - there's no doubt that we really are going to be in big trouble if we don't keep up the arms race against the bacteria.

This piece takes the tack of "If drug discovery is actually doing OK, where are the new antibiotics?" Here's a key section:

Antibiotics face a daunting proposition. They are not only becoming more difficult to develop, but they are also not obviously profitable. Unlike, say, cancer drugs, which can be spectacularly expensive and may need to be taken for life, antibiotics do not command top dollar from hospitals. What’s more, they tend to be prescribed for only short periods of time.

Importantly, any new breakthrough antibiotic is likely to be jealously guarded by doctors and health officials for as long as possible, and used only as a drug of last resort to prevent bacteria from developing resistance. By the time it became a mass-market drug, companies fear, it could be already off patent and subject to competition from generics that would drive its price down.

Antibiotics are not the only drugs getting the cold shoulder, however. Research on treatments to combat H.I.V./AIDS is also drying up, according to the research at Yale, mostly because the cost and time required for development are increasing. Research into new cardiovascular therapies has mostly stuck to less risky “me too” drugs.

This mixes several different issues, unfortunately, and if a reader doesn't follow the drug industry (or medical research in general), then they may well not realize this. (And that's the most likely sort of reader for this article - people who do follow such things have heard all of this before). The reason that cardiovascular drug research seems to have waned is that we already have a pretty good arsenal of drugs for the most common cardiovascular conditions. There are a huge number of options for managing high blood pressure, for example, and they're mostly generic drugs by now. The same goes for lowering LDL: it's going to be hard to beat the statins, especially generic Lipitor. But there is a new class coming along targeting PCSK9 that is going to try to do just that. This is a very hot area of drug development (as the author of the Times column could have found without much effort), although the only reason it's so big is that PCSK9 is the only pathway known that could actually be more effective at lowering LDL than the statins. (How well it does that in the long term, and what the accompanying safety profile might be, are the subject of ongoing billion-dollar efforts). The point is, the barriers to entry in cardiovascular are, by now, rather high: a lot of good drugs are known that address a lot of the common problems. If you want to go after a new drug in the space, you need a new mechanism, like PCSK9 (and those are thin on the ground), or you need to find something that works against some of the unmet needs that people have already tried to fix and failed (such as stroke, a notorious swamp of drug development which has swallowed many large expeditions without a trace).

To be honest, HIV is a smaller-scale version of the same thing. The existing suite of therapies is large and diverse, and keeps the disease in check in huge numbers of patients. All sorts of other mechanisms have been tried as well, and found wanting in the development stage. If you want to find a new drug for HIV, you have a very high entry barrier again, because pretty most of the reasonable ways to attack the problem have already been tried. The focus now is on trying to "flush out" latent HIV from cells, which might actually lead to a cure. But no one knows yet if that's feasible, how well it will work when it's tried, or what the best way to do it might be. There were headlines on this just the other day.

The barriers to entry in the antibiotic field area similarly high, and that's what this article seems to have missed completely. All the known reasonable routes of antibiotic action have been thoroughly worked over by now. As mentioned here the other day, if you just start screening your million-compound libraries against bacteria to see what kills them, you will find a vast pile of stuff that will kill your own cells, too, which is not what you want, and once you've cleared those out, you will find a still-pretty-vast pile of compounds that work through mechanisms that we already have antibiotics targeting. Needles in haystacks have nothing on this.

In fact, a lot of not-so-reasonable routes have been worked over, too. I keep sending people to this article, which is now seven years old and talks about research efforts even older than that. It's the story of GlaxoSmithKline's exhaustive antibiotics research efforts, and it also tells you how many drugs they got out of it all in the end: zip. Not a thing. From what I can see, the folks who worked on this over the last fifteen or twenty years at AstraZeneca could easily write the same sort of article - they've published all kinds of things against a wide variety of bacterial targets, and I don't think any of it has led to an actual drug.

This brings up another thing mentioned in the Times column. Here's the quote:

This is particularly striking at a time when the pharmaceutical industry is unusually optimistic about the future of medical innovation. Dr. Mikael Dolsten, who oversees worldwide research and development at Pfizer, points out that if progress in the 15 years until 2010 or so looked sluggish, it was just because it takes time to figure out how to turn breakthroughs like the map of the human genome into new drugs.

Ah, but bacterial genomes were sequenced before the human one was (and they're more simple, at that). Keep in mind also that proof-of-concept for new targets can be easier to obtain in bacteria (if you manage to find any chemical matter, that is). I well recall talking with a bunch of people in 1997 who were poring over the sequence data for a human pathogen, fresh off the presses, and their optimism about all the targets that they were going to find in there, and the great new approaches they were going to be able to take. They tried it. None of it worked. Over and over, none of it worked. People had a head start in this area, genomically speaking, with an easier development path than many other therapeutic areas, and still nothing worked.

So while many large drug companies have exited antibiotic research over the years, not all of them did. But the ones that stayed have poured effort and money, over and over, down a large drain. Nothing has come out of the work. There are a number of smaller companies in the space as well, for whom even a small success would mean a lot, but they haven't been having an easy time of it, either.

Now, one thing the Times article gets right is that the financial incentives for new antibiotics are a different thing entirely than the rest of the drug discovery world. Getting one of these new approaches in LDL or HIV to work would at least be highly profitable - the PCSK9 competitors certainly are working on that basis. Alzheimer's is another good example of an area that has yielded no useful drugs whatsoever despite ferocious amounts of effort, but people keep at it because the first company to find a real Alzheimer's drug will be very well rewarded indeed. (The Times article says that this hasn't been researched enough, either, which makes me wonder what areas have been). But any great new antibiotic would be shelved for emergencies, and rightly so.

But that by itself is not enough to explain the shortage of those great new antibiotics. It's everything at once: the traditional approaches are played out and the genomic-revolution stuff has been tried, so the unpromising economics makes the search for yet another approach that much harder.

Note: be sure to see the comments for perspectives from others who've also done antibiotic research, including some who disagree. I don't think we'll find anyone who says it's easy, though, but you never know.

Comments (58) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History | Infectious Diseases

July 23, 2014

Neratinib Comes Through For Puma

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Posted by Derek

Yet another entry in the "Why do people keep investing in biopharma?" files. Take a look at the case of Puma Biotechnology. Their stock was as high as $140/share earlier in the year, and it gradually deflated to the high 50s/low 60s as time went on. But yesterday, after hours, they reported unexpectedly good Phase III results for neratinib in breast cancer, and as I write, they're at $228 or so, up about $167 per share.

It's another HER2/EGFR tyrosine kinase inhibitor (like Tykerb/lapatinib in the small molecule space, although neratinib is an irreversible inhibitor) and would be targeted at patients who are now taking Herceptin. Neratinib itself has not had a smooth path to this stage, though. Puma licensed the compound out from Pfizer, and took on the responsibility for all of the development. Pfizer ditched the compound a few years ago in a review of their oncology portfolio. I note that the two companies have reworked their licensing agreement on this news as well. Puma's entire business model is taking up oncology candidates that other companies have shed, and it certainly seems to have come through for them this time.

So chalk one up for irreversible kinase inhibitors, and (of course) for Puma. And for the patients who will be taking the drug, naturally, and lastly, for Puma's shareholders, who are having an excellent day indeed.

Comments (18) + TrackBacks (0) | Category: Business and Markets | Cancer | Clinical Trials

How Many Biopharma Employees Would Rather Be Working Somewhere Else?

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Posted by Derek

How many people working in the biopharma industry would jump to another company if they could? According to this survey, it's just over half: well above the average set by other industry sectors.

The usual reasons are cited, in part (pay, opportunity for advancement). But two factors that seemed unusually prominent in our industry were high stress levels and "difficult relations with supervisors and co-workers". I found that last one interesting, because (like all science and engineering fields) we do have a certain number of people in this business who can be described, as the old British music hall song has it, as "E's all right when you know 'im, but you've got to know 'im first". And there's the ever-present disconnect between the scientists and any non-science-background upper managers, a clash of worldviews if ever there was one.

I've worked in some situations where most people seemed satisfied, but I've probably spent more of my career in those other workplaces described by this survey. I well recall an employee survey many years ago, given out with pencil and paper, yet, where people were calling out to each other before the start with helpful questions like "Is "half-assed" hyphenated or not?" and "Do you capitalize "Moron" when you're talking about a specific one?"

Some of what this survey found, though, is surely pent-up demand. There have been fewer and fewer opportunities to change companies over the years, and it used to be a fairly frequent career move. So I'd guess that there are plenty of people who would be glad to jump if there were anywhere much to jump to.

Comments (21) + TrackBacks (0) | Category: Business and Markets

July 21, 2014

The Hep C Field Gets Nastier By the Minute

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Posted by Derek

What a mess there is in the hepatitis C world. Gilead is, famously, dominating the market with Sovaldi, whose price has set off all sorts of cost/benefit debates. The companies competing with them are scrambling to claim positions, and the Wall Street Journal says that AbbVie is really pulling out all the stops. Try this strategy on for size:

In a lawsuit filed in February, AbbVie noted it patented the idea of combining two of Gilead's drugs—Sovaldi and an experimental drug called ledipasvir, which Gilead plans to combine into one treatment—and is therefore entitled to monetary damages if Gilead brings the combination pill to market. Legally, AbbVie can't market Sovaldi or ledipasvir because it doesn't have the patents on the underlying compounds. But it is legal for companies to seek and obtain patents describing a particular "method of use" of products that don't belong to them.

Gilead disputes the claims of AbbVie and the other companies. A spokeswoman said Gilead believes it has the sole right to commercialize Sovaldi and products containing Sovaldi's active ingredient, known as sofosbuvir. An AbbVie spokeswoman said the company believes Gilead infringes its patents, and that it stands behind the validity and enforceability of those patents.

You don't see that very often, and it's a good thing. Gilead is, naturally, suing Abbvie over this as well, saying that Abbvie has knowing mispresented to the USPTO that they invented the Gilead therapies. I'm not sure how that's going to play out: Abbvie didn't have to invent the drugs to get a method-of-use patent on them. At the same time, I don't know what sort of enablement Abbvie's patent claims might have behind them, given that these are, well, Gilead's compounds. The company is apparently claiming that a "sophisticated computer model" allows them to make a case that these combinations would be the effective ones, but I really don't know if that's going to cut it (and in fact, I sort of hope it doesn't). But even though I'm not enough of a patent-law guy to say either way, I'm enough of one to say, with great confidence, that this is going to be a very expensive mess to sort out. Gilead's also in court with Merck (and was with Idenix before Merck bought them), and with Roche, and will probably be in court with everyone else before all this is over.

This whole situation reminds me of one of those wildlife documentaries set around a shrinking African watering hole. A lot of lucrative drugs have gone off patent over the last few years, and a lot of them are heading that way soon. So any new therapeutic area with a lot of commercial promise is going to get a lot of attention, and start a lot of fighting. Legal battles aren't cheap on the absolute scale, but on the relative scale of the potential profits, they are. So why not? Claim this, claim that, sue everybody. It might work; you never know. Meanwhile, we have a line forming on the right of ticked-off insurance companies and government health plans, complaining about the Hep C prices, and while they wait they can watch the companies involved throwing buckets of slop on each other and hitting everyone over the head with lawsuits. What a spectacle.

Comments (43) + TrackBacks (0) | Category: Business and Markets | Infectious Diseases | Patents and IP | Why Everyone Loves Us

Allergan Twists and Turns

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Posted by Derek

It's getting nasty over at Allergan. They're still trying to fight off a takeover attempt by Valeant, making the case that the company's R&D efforts are not a waste of money (which, only slightly simplified, is the Valeant position regarding every company they're taking over).

But Allergan's had a lot of trouble getting one of their drugs (Semprana) through the FDA. Semprana is an inhaled version of the classic dihydroergotamine therapy for migraine, and had been rejected last year when it was still known as Levadex. The recent further delay isn't helping Allergan make its case, and Valeant is using this news to peel off some more shareholders.

This morning comes word that Allergan is cutting back staff. That Fierce Biotech report says that it looks like a lot of the cuts will be hitting discovery R&D, which makes you wonder if Allergan will manage to escape Valeant's grip only by becoming what Valeant wanted to make them.

Comments (7) + TrackBacks (0) | Category: Business and Markets | Regulatory Affairs

July 15, 2014

The Prospects of an Academic Job

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Posted by Derek

Over the years, there have been more comments than anyone can count here on the often-grim employment picture for chemistry and biology employment in biopharma. Plenty of people here (myself included) can speak from experience. But we should also remember that the academic job market in the biomedical sciences is in awful shape, too, unfortunately. And since a disproportionate number of people start off grad school picturing themselves getting jobs in academia, a clear picture of what's going on is essential.

That's the point of this piece in Nature, in the Jobs section. The author, Jessica Polka (post-doc at Harvard Medical School) says that far too many of her colleagues don't have an accurate impression of the job market. She's created this graphic to get the point across. Some 16,000 students will start graduate school in biology in the US this fall. The best guess is that fewer than 10% of them will eventually become tenure-track faculty somewhere.

But at least half of them list that as their most preferred career path, which means that a lot of things are not going to work out as planned. Polka's right - the most people who understand this, and the earlier, the better.

Comments (40) + TrackBacks (0) | Category: Academia (vs. Industry) | Business and Markets

July 11, 2014

Employment Among New Chemistry PhDs

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Posted by Derek

Another dose of reality for the "Terrible STEM Shortage!" folks, courtesy of Slate. Here's what author Jordan Weissmann has to say:

With a little cleaning up, however, the federal data do tell a pretty clear story: The market for new Ph.D.s in the much obsessed-about STEM fields—science, technology, engineering, and math—is stagnant. Over the last 20 years, employment rates are either flat or down in each major discipline, from computer science to chemistry. It’s not what you’d expect given the way companies like Microsoft talk about talent shortages.

Why no, it isn't, is it? There seems to be something a bit off. Weissmann is working with data from the NIH NSF and their surveys of new doctorates in the sciences, and it shows several things. For one, the post-doc populations remain very high in every field, which isn't a good sign. The number of new doctorates who report being employed has not attained the levels seen in the late 1990s, for any field. And here's chemistry in particular:
employment.jpg
Not a very pretty picture, to be sure. It's true that the number of postdocs have been declining the last few years, but the slack seems to be picked up, more or less equally, by people who are getting jobs and people falling into the flat-out unemployed category. And remember, this is a snapshot of new doctorates, so the numbers for more experienced people are going to be different (but ugly in their own way, to judge from the waves of layoffs over the last few years). It's notable that the new chemistry doctorate holders who are unemployed have outnumbered the ones with non-postdoc jobs for the last few years, which may well be unprecedented.

Weissmann's figures for computer science doctorate and engineers are telling, too, and I refer you to the article for them. Neither group has made it back to its heights back in 2000 or so, although the 2011-2012 number have picked up a bit. Whether that's a blip or a real inflection point remains to be seen. It's safe to say, though, that none of these charts support the "Just can't find anybody to hire" narrative that you hear from so many companies.

Comments (43) + TrackBacks (0) | Category: Business and Markets

July 10, 2014

Biopharma Stock Events for the Rest of the Year

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Posted by Derek

We've had some big biopharma market events so far this year, but if you're wondering what's coming in the next few months, here's a handy rundown from Adam Feuerstein of what may be the top 14. There are a few regulatory events on there, but most of the list are highly anticipated clinical trial results, which is where the action is, for sure. That's what makes the sector so attractive to both legitimate investors and to cult-like lunatics alike. These people, many of whom would cross the street to avoid each other in the real world, come together to make a market - and anyone with enough nerve and a little cash can join right in.

Comments (1) + TrackBacks (0) | Category: Business and Markets

July 8, 2014

AbbVie and Shire, Quietly

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Posted by Derek

Pfizer's bid for AstraZeneca made headlines for weeks on both sides of the Atlantic. But there's another US drug company trying to buy a British one right now - AbbVie for Shire - and it's going on very quietly indeed.

Over at FierceBiotech, they're wondering why that should be so, after an article in the Telegraph. There are several reasons, some better than others. For one thing, the whole deal is a smaller affair than the Pfizer saga. Most importantly, it would involve fewer UK jobs, because Shire itself doesn't really have all that many employees in the UK (91% of them are elsewhere!) Some years ago, they reworked themselves into an Irish-domiciled company, anyway, for (you guessed it) tax purposes. But there's not much noise in Ireland about this deal, either.

Fewer politicians have an interest in what's going on. If names change on pieces of paper, and it hardly affects anyone in their constituencies, then they have other things to worry about. The financial reasons behind the deal are similar to Pfizer's - relatively generous corporate tax policies, but the principles behind those, and behind deals predicated on them, was never the primary political concern. You might have gotten a different impression from some of the speechmaking that went on during the Pfizer/AZ business, but that's what comes from listening to politicians, rather than watching their actions with the sound off. I recommend that technique; it improves the signal/noise immensely.

Comments (7) + TrackBacks (0) | Category: Business and Markets

June 30, 2014

The GSK-China Situation Gets Even Weirder

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Posted by Derek

OK, the GlaxoSmithKline/China business has officially crossed over into new territory. Over the weekend, the company confirmed reports that Mark Reilly, the GSK executive in the country who's been in the middle of this affair from the beginning, was the object of a blackmail attempt by unknown parties. (The story was broken by the Sunday Times, and it's behind a paywall, but it's been picked up by every major news outlet).

Someone shot extensive footage of Reilly alone with his Chinese girlfriend, and mailed the resulting file to higher-ups at the company. The connection between all this and the corruption allegations has not been made clear, but the footage apparently accompanied some of the emails accusing the company of bribery. We may never know quite what's going on here, but I'll bet it's very interesting indeed. More on surveillance in China here.

Update: an excellent overview from the BBC.

Comments (36) + TrackBacks (0) | Category: Business and Markets | The Dark Side

June 26, 2014

Alzheimer's Bonds

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Posted by Derek

I wrote a couple of years ago about Andrew Lo of MIT, and his idea for securitization of drug discovery. For those of you who aren't financial engineers, that means raising funds by issuing securities (bonds and the like), and that's something that (as far as I know) has never been used to fund any specific drug development project.

Now Pharmalot has an update in an interview with Lo (who's recently published a paper on the idea in Science Translational Medicine). In particular, he's talking about issuing "Alzheimer's bonds", to pick a disease with no real therapies, a huge need for something, and gigantic cost barriers to finding something. Lo's concerned that the risks are too high for any one company to take on (and Eli Lilly might agree with him eventually), and wants to have some sort of public/private partnership floating the bonds.

We would create a fund that issues bonds. But if the private sector isn’t incentivized on its own, maybe the public sector can be incentivized to participate along with some members of the private sector. I will explain. But let’s look at the costs for a moment. The direct cost of treating the disease – never mind home care and lost wages – to Medicare and Medicaid for 2014 is estimated at $150 billion. We did a calculation and asked ourselves what kind of rate of return can we expect? We came up with $38.4 billion over 13 years. . .

. . .Originally, I thought it could come from the private sector. We’d create a fund – a mega fund of private investors, such as hedge funds, pension, various institutional investors. The question we asked ourselves is will they get a decent rate of return over a 13-year period? The answer, which is based on a best guess, given the risks of development and 64 projects, and we believed the answer was ‘no.’ It wouldn’t be like cancer or orphan diseases. It’s just not going to work. I come from that world. I talked to funds, philanthropists, medical experts. We did a reality check to see if we were off base. And it sounded like it would be difficult to create a fund to develop real drugs and still give investors a reasonable rate of return – 15% to 20%.

He's now going around to organizations like the Alzheimer's Association to see if there's some interest in giving this a try. I think that it's going to be a hard sell, but I'd actually like to see it happen. The difficulty is that there's no way to do this just a little bit to see if it works: you have to do it on a large scale to have any hope of success at all, and it's a big leap. In fact, the situation reminds one of. . .the situation with any given Alzheimer's drug idea. The clinical course of the disease, as we understand it now, does not give you any options other than a big, long, expensive path through the clinic (which is why it's the perfect example of an area where all the risk is concentrated on the expensive late stages). Lo is in the position of trying to address the go-big-or-go-home problem of Alzheimer's research with a remedy that requires investors to go big or go home.

The hope is that you could learn enough along the way to change the risk equation in media res. There's an old science fiction story by A. E. van Vogt, "Far Centaurus", which featured (among other things - van Vogt stories generally had several kitchen sinks included) a multidecade suspended-animation expedition to Alpha Centauri. The crew arrive there to find the planets already covered with human-populated cities, settled by the faster-than-light spaceships that were invented in the interim. We don't need FTL to fix Alzheimer's (fortunately), but there could be advances that would speed up the later parts of Lo's fund. But will this particular expedition ever launch?

Comments (24) + TrackBacks (0) | Category: Alzheimer's Disease | Business and Markets | Clinical Trials | Drug Development

June 25, 2014

Zafgen's Epoxide Pays Its Way

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Posted by Derek

I've written here before about Zafgen, a small startup targeting obesity therapy with an unusual covalent epoxide drug candidate. Last fall they cleared Phase II, and now they're going public.

Bruce Booth, whose firm has been the VC muscle behind the company, has an overview of how things have worked here. It's a good read for anyone interested in where small drug companies come from and what they have to be able to do to be able to survive. Many of the readers here will be familiar with the scientific part of this kind of story (as am I), but the financial and managerial parts have to be handled right, too, and mistakes with any of them can sink the whole effort.

I'll bet that if you'd asked Bruce or his partners back in 2006 for the odds, "Nice big IPO" would have been pretty far down their list of possibilities for the company, even if you'd stipulated success for their drug candidate. MetAP2 (the compound's target, which is something they didn't realize back then) is an interesting enzyme, and obesity has always been an interesting field (although not always in a good way). And on the scientific end, I'm most interested to see how that compound fares as it goes on through Phase III. It's a structure that a lot of us would have crossed off the list about three seconds after seeing it, and anything that extends the bounds of what's feasible in drug discovery is worth keeping an eye on. We very much need for more things to be possible.

Comments (13) + TrackBacks (0) | Category: Business and Markets | Diabetes and Obesity | Drug Development

June 23, 2014

Go Home, Gaijin

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Posted by Derek

Too many foreigners in your drug company? Outsiders being put into positions of power and influence, threatening the entire firm's culture? That's the objection that many Takeda employees seem to have to the company's recent tendency (unusual in Japan, to say the least) of bringing in many non-Japanese hires at all levels. The Financial Times broke the story in the English-language press:

In a letter to Takeda Pharmaceutical, 110 former executives and individual investors questioned the company’s appointment of non-Japanese to several senior positions.

“The company’s globalisation is a wrong globalisation. It should be globalised as a Japanese company. However, from the top to the bottom ,there are hundreds of non-Japanese working in the company in Japan,” said Yujiro Hara, a former head of Takeda’s real estate subsidiary who represents the group.

“We say it was acquired by a foreign capital. We cannot accept it,” he added. “Three main executive positions, finance, HR and purchase, are taken by foreigners.”

This is not a large group, in terms of shares held, but they're certainly a vocal one, and they may well represent what some others are feeling. Japan is its own place, maybe more so than anywhere else in the high-tech industrialized world, and this is a fine example of it. Try to imagine a letter like this in the US!

Comments (28) + TrackBacks (0) | Category: Business and Markets

June 13, 2014

Rearrangements Inside Bristol-Myers Squibb

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Posted by Derek

I've heard from more than one source that BMS has been moving people around (and in some cases, out) in several departments recently. As a whole, the company has been doing quite well, but (as many have found out) that's no guarantee that you won't be re-orgged. From what I've heard, this isn't the major site-closing/therapeutic-area-dumping sort of stuff, but it does seem to be shaking up a lot of org charts.

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June 12, 2014

Valeant's Misleading Case

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Posted by Derek

Matthew Herper has excellent coverage here of Valeant's bid for Allergan, specifically Valeant's view of actual pharma R&D (which they, for the most part, don't bother to do). He's especially peeved (with reason) that the company is citing some of his own stories on the topic of R&D productivity to make its case, but in an underhanded way.

On page 9, which cites one of my stories, Valeant uses data from Richard Evans at Sovereign & Sector, LLC, that is available for purchase on the website hiddenpipeline.com. It takes one of several metrics Evans used to measure companies’ R&D productivity – their economic returns to R&D spending – and says that, for big companies, these are less than the cost of capital, which Allergan pegs at 10%.

OK. But by picking only the largest companies, Valeant gets to not include Allergan, which, like Novartis, has an 8% return on R&D by Evans’s numbers. Gilead and Celgene, have R&D returns of 21% and 32%, respectively, so bigger returns are not impossible. And by Evans’s methods, which include measures of patents and quality of research, Allergan has the fifth-best R&D in the industry. It’s not absurd to expect that it could do better, not worse, in the future. If Valeant is at war with inefficiency, shouldn’t it buy someone inefficient?

Valeant also has some pretty laughable figures on the number of drugs developed internally at big pharma companies. They claim that only four of the fifty best-selling drugs came up that way, which is just wrong:

Valeant aims to make drug research look bad by excluding drugs from its list. Any drug invented or developed at a company that went through a merger or did a co-marketing deal doesn’t get counted, nor does any drug invented at a company Valeant has decided is not “Big Pharma.”

This leads to absurdities like saying that the blood thinner Plavix was not invented at Sanofi or that the cancer drug Gleevec was not invented at Novartis because Novartis was called Ciba-Geigy at the time. The same thing happens with Lantus, the second-best-selling drug on the list, invented at Hoechst, which is now part of Sanofi, and Prevnar 13, the vaccine invented by Wyeth that is now part of Pfizer. By any definition, these drugs were “discovered, developed, and commercialized internally by ‘Big Pharma’.”

There are plenty of other examples - see Matt's post for more. Valeant's bid is not catching on (yet) because Allergan's investors are suspicious of them, and rightly so. Valeant, from what I can see, is basically a parasite on the research-driven drug industry, so to hear them going on about efficient R&D is a bit hard to take.

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Nutley Demolished

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Posted by Derek

For those who worked at, visited, or remember the Hoffman-LaRoche site in Nutley, here's what the end of the line looks like. After closing it as an R&D facility, the company is now putting five of the buildings on the market, and tearing down the rest. The remaining buildings look to be picked up by smaller biopharma, according to the article, and it'll be interesting to see who that might be. The rest of the property will probably be turned into office and retail space.

The first research site I ever worked at (Schering-Plough in Bloomfield, NJ) was torn down when the company moved everyone to Kenilworth. Many attempts were made to sell the labs to some other research organization, but no one wanted it. I believe that they also looked into donating it to Rutgers, but it was like giving someone a pet elephant (no thanks, just on the maintenance costs). So in the end, everything was demolished, and a Home Depot (and its parking lot) occupy a lot of that land now. And there are many other Phormer Pharma sites scattered around the US and Europe now (with New Jersey having a generous share of them).

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June 11, 2014

Valuing Biotech Startups

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Posted by Derek

Via Bruce Booth on Twitter, here's an in-depth look at the financing of small biotechs, compared to the financing of internet and IT-centric startups. As everyone knows, many of the latter companies are able to raise staggering amounts of money, far more than the best-funded biotech startups have ever seen. But the comparisons across financing rounds are quite instructive.

Biopharma startups raise more in each round in a steady and undramatic fashion (well, when there are more rounds of financing, but you know what I mean). The tech startups are more volatile, and show big money at first, followed by shakeouts later on. That makes sense. A small pharma company starts off with an idea that has enough data behind it (and enough potential) to bring in enough money to see if it can go any further. If it can, it raises more money to try to clear another (higher) bar, and so on. Tech startups often begin with a flashy idea that is much better suited to attract a lot of interest, and it's often the sort of idea that needs to be moved on quickly if it's going to work at all. So hopeful money floods in at the beginning, and the reality checks only come at a later stage.

There are sound financial reasons for things to work out this way, too - biopharma is a capital-intensive business, and failure rates are (of course) rather high:

The best biotech exit (IPOs and M&As) over the past 5 years by valuation (in this case pre-money at the time of IPO) has been Ironwood (unlikely name!) at $1B. If we look at M&A upfronts, Plexxikon tops the charts at $805M. The median 5x cash-on-cash M&A upfront exit, generally regarded as top decile return in biotech, has been $240M (average at $286M) since 2010. A few biotech IPOs of the 2013-14 vintage are currently above that level, although as discussed elsewhere on this blog, much of those are unrealized returns. Big picture, if I’m a Series A VC I come in knowing that I’ll likely be putting in $50M+ with my syndicate for an exit likely capped around $300M (can’t be too aggressive with my assumptions as a VC!)- as such, it doesn’t make sense to hold the companies at a carrying value much above cost if I want to target a 3x return for my fund knowing 7 out of 10 companies in my portfolio will go belly up.

Small tech companies have an even higher failure rate than biotech ones, but the valuations can get so insane for the successful exits (hundredfold or more) that putting in more money isn't a crazy strategy. There is no biotech equivalent to the sort of return that a Facebook, Über, Twitter or Paypal can provide.

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June 6, 2014

Sanofi's Feeling Just Wonderful

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Posted by Derek

Chris Viehbacher of Sanofi has an interview with reporters from Bloomberg, where he says some interesting things. Such as "Unlike everybody else, we feel we’ve got critical mass in all of our businesses" and ". . .at today’s prices I don’t see anything that I can acquire that strengthens our company and creates value for our shareholders." So that's good news, I'd have to say.

He also notes that the recent Pfizer/AstraZeneca tango might possibly be an indication that pharma investors are willing to wait rather than take the money and run. I hope that's right, but I don't see how human psychology has changed much. My fear is that AstraZeneca might have oversold their internal prospects in the process of fighting off Pfizer. It's not like their shareholders decided to turn down their desire for an immediate profit; it's that the company did a more thorough job of appealing to it. We'll see how well that works.

Viehbacher also says, about Sanofi, that "I am feeling great about what we have; I haven’t felt this great in years." Doesn't he know that saying things like this is tempting the gods? I swear, powerful deities are at this very moment reaching for their bottles of laxative and limbering up. You say these things, and next thing you know people in your phase III trials are starting to turn orange right in front of your eyes. It's just not safe.

But Viehbacher is not known for his restraint in interviews, as this 2012 example made clear. That one ended up with a luckless Sanofi PR person showing up at this site to try to explain things. Let's see how much luck they have spinning the Wrath of the Pharma Gods!

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June 4, 2014

Pharmalot Returns

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Posted by Derek

I'm glad to report that Ed Silverman has revived the Pharmalot blog, now at the Wall Street Journal. This is the third iteration, and I'm glad to see that it's as unkillable as it appears to be!

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May 29, 2014

How to Buy, Buy, Buy

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Posted by Derek

I really got a kick out of "The Seven Deadly Sins of Biotech Investing", sent to Adam Feuerstein by one of his readers. It's a sort of Screwtape Letters/Devil's Dictionary look at the sector, with gems of wisdom like this:

Find a good Internet message board to discuss how great an investment the biotech stock you just purchased really is. When spending time on this message board, be sure to read closely all posts from those who are the most vocal proponents of the biotech stock you own. These people demonstrate their commitment by never writing anything critical. No one wants to attend a church where the preacher has doubts. The best posters will write at length about how the science behind the biotech stock you own has no rival and will completely change the world we live in. Lucky for you the world does not know this yet; you are one of a select few!

No other part of the market seems to attract wildly devoted cultists like small biopharma stocks do; it's really something to see. And they must keep spawning, because many of them end up getting blown up, big-time, by their favorite stocks, only to be replaced by another cohort of true believers. This is one of the things that blows them up, by the way:

In the unlikely event that the biotech stock you just bought falls in value, it's a clear indication of an attack by the shorts. If this happens, check in with your favorite Internet message board. There, you will likely find a link to a negative article written by a reporter or blogger who is clearly getting paid to shill for the short-selling hedge funds. These are bad people trying to steal your shares without doing the proper DD you did. The best way to fight a coordinated short attack is to buy more shares of the biotech stock you just bought. Keep buying.

As Groucho Marx said while peddling Florida swampland in "The Cocoanuts", "You can get any kind of house you want - you can even get stucco!" (and to one side, "Boy, can you get stucko!")

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May 27, 2014

AstraZeneca Survives

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So Pfizer has officially called off their quest to acquire AstraZeneca. I didn't expect things to end like this - up until now, what Pfizer has wanted, Pfizer has gotten (well, except in the clinic). There may well have been other behind-the-scenes overtures that we never heard about being rejected over the years, but this is the first time I can remember someone actually fighting off an open Pfizer attempt.

Now comes the hard part. AstraZeneca's management did this by convincing their major shareholders that they'd be better off this way, and now they have to deliver. Delivering, though, is far from straightforward in this business. The worry is that AZ's prospects may have been oversold during the takeover defense, in which case reality may not be welcome when it shows up, as it will. Too many doses of it, and Pfizer may be back in six months, with an even lower bid. Let's hope not. AstraZeneca, over the years, has not always been an ornament of the R&D universe - for some years, they spent more money for fewer returns than anyone else. But they still didn't deserve what was in line to happen to them if the Pfizer deal went through.

Pfizer, for its part, still has the same tax problems it had before, and will presumably still be looking for ways to solve them. Getting results in the accounting department is still a lot easier than getting results in the lab, so I'd be surprised if the company doesn't come up with something else in that line.

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May 23, 2014

Two Looks At Drug Industry Productivity

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Posted by Derek

Matthew Herper has a really interesting story in Forbes on a new report that attempts to rank biopharma companies by their R&D abilities. Richard Evans of Sector and Sovereign Health (ex-Roche) has ranked companies not on their number of drugs, but on their early-stage innovation. He counts patents, for example, but not the later ones defending existing franchises, and he also looks to see how often these patents are cited by others. As for a company's portfolio, being early into a new therapeutic area counts for a lot more than following someone else, but at the same time, he's also trying to give points for companies that avoid "Not Invented Here" behavior (a tricky balance, I'd think). The full report can be purchased, but the parts that Herper have shared are intriguing.

Ranking the companies, he has (1) Bristol-Myers Squibb, (2) Celgene, (3) Vertex, (4) Gilead, and (5) Allergan. (Note that Allergan is currently being pursued by Valeant, who will, if they buy them, pursue their sworn vow to immediately gut the company's R&D). At the bottom of his table are (18) Novartis, (19) Regeneron, (20) Bayer, (21) Lilly, and (22) Alexion. (Note that Evans himself says that his analysis may be off for companies that have only launched one product in the ten years he's covering). I'm not sure what to make of this, to be honest, and I think what would give a better picture would be if the whole analysis were done again but only with the figures from about fifteen years ago to see if what's being measured really had an effect on the futures of the various companies. That would not be easy, but (as some of Herper's sources also say), without some kind of back-testing, it's hard to say if there's something valuable here.

You can tell that Evans himself almost certainly appreciates this issue from what he has to say about the current state of the industry and the methods used to evaluate it, so the lack of a retrospective analysis is interesting. Here's the sort of thing I mean:

Too often, Evans says, pharmaceutical executives instead use the industry’s low success rates as an argument that success is right around the corner. “A gambler that has lost everything he owned, just because he now has a strong hand doesn’t make him a good gambler,” Evans says. . .

True enough. Time and chance do indeed happeneth to them all, and many are the research organizations who've convinced themselves that they're good when they might just have been lucky. (Bad luck, on the other hand, while not everyone's favorite explanation, is still trotted out a lot more often. I suspect that AstraZeneca, during that bad period they've publicly analyzed, was sure that they were just having a bad run of the dice. After all, I'm sure that some of the higher-ups there thought that they were doing everything right, so what else could it be?)
Evans%20chart.jpg

But there's a particular chart from this report that I want to highlight. This one (in case that caption is too small) plots ten-year annualized net income returns against R&D spending, minus the cost of R&D capital. Everything has been adjusted for taxes and inflation. And that doesn't look too good, does it? These numbers would seem to line up with Bernard Munos' figures showing that industry productivity has been relatively constant, but only by constantly increased spending per successful drug. They also fit with this 2010 analysis from Morgan Stanley, where they warned that the returns on invested capital in pharma were way too high, considering the risks of failure.

So in case you thought, for some reason - food poisoning, concussion - that things had turned around, no such luck, apparently. That brings up this recent paper in Nature Reviews Drug Discovery, though, where several authors from Boston Consulting Group try to make the case that productivity is indeed improving. They're used peak sales as their measure of success, and they also believe that 2008 was the year when R&D spending started to get under control.
NRDD%20chart%201.jpg

Before 2008, the combined effects of declining value outputs and ever-increasing R&D spending drove a rapid decline in R&D productivity, with many analysts questioning whether the industry as a whole would be able to return its cost of capital on R&D spending. . .we have analysed the productivity ratio of aggregate peak sales relative to R&D spending in the preceding 4 years. From a low of 0.12 in 2008, this has more than doubled to 0.29 in 2013. Through multiple engagements with major companies, we have observed that at a relatively steady state of R&D spending across the value chain, a productivity ratio of between 0.25 and 0.35 is required for a drug developer to meet its cost of capital of ~9%. Put simply, a company spending $1 billion annually on R&D needs to generate — on average — new drug approvals with $250–350 million in peak sales every year. . . So, although not approaching the productivity ratios of the late 1990s and early 2000s, the industry moved back towards an acceptable productivity ratio overall in 2013.

I would like to hope that this is correct, but I'm really not sure. This recent improvement doesn't look like much, graphically, compared to the way that things used to be. There's also a real disagreement between these two analyses, which is apparent even though the BCG chart only goes back to 1994. Its take on the mid-1990s looks a lot better than the Evans one, and this is surely due (at least partly) to the peak-sales method of evaluation. Is that a better metric, or not? You got me. One problem with it (as the authors of this paper also admit) is that you have to use peak-sale estimates to arrive at the recent figures. So with that level of fuzz in the numbers, I don't know if their chart shows recent improvement at all (as they claim), or how much.

But even the BCG method would say that the industry has not been meeting its cost-of-capital needs for the last ten years or so, which is clearly not how you want to run things. If they're right, and the crawl out of the swamp has begun, then good. But I don't know why we should have managed to do that since 2008; I don't think all that much has changed. My fear is that their numbers show an improvement because of R&D cuts, in which case, we're likely going to pay for those in a few years with a smaller number of approved drugs - because, again, I don't think anyone's found any new formula to spend the money more wisely. We shall see.

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May 22, 2014

The Biggest Chemistry Employers - Guess

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Posted by Derek

According to Bruce Booth on Twitter, the largest single employer of R&D chemists in the world is now WuXi. They have >2500. And the number two company is their direct competitor ChemPartner, with 1300. Someone get in the time machine, fly back to about 1990, and try those figures out on them.

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May 21, 2014

Pfizer/AstraZeneca: The Arm-Wrestling Phase

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Posted by Derek

Don't forget - you can bet that the people at AstraZeneca aren't forgetting - that Pfizer still has until May 26th under UK securities law for their takeover offer. Today's Wall Street Journal reports that some institutional investors are pressuring AZ's board to accept the offer (or at least open negotiations), while others are standing with the company's management. (Here's a summary at FierceBiotech if you don't have WSJ access). My guess is that the current deal won't go through, but if there's any mis-step in AZ's turnaround plans during the rest of the year, Pfizer will be right back at the door.

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May 20, 2014

Perhaps Not Quite Technically Legal, Come to Think of It

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Posted by Derek

Now, wait - you're telling me that just because you're a doctor involved in the clinical trial of a small company's main drug, and you've found out that the trial has been halted by the FDA. . .you're saying that you can't actually unload all your stock on that information before the public announcement? What, I ask you, is this world coming to?

Well, that's what the two physicians in the story must be asking. They maintain that they had no idea that they couldn't do such a thing, that they really didn't know much about this "stock market" stuff, and so on. If that's true, then it's a wonderful example of the havoc that the Dunning-Kruger effect can bring. And considering that they avoided losing $34,000 and $11,000 (real but not life-ruining amounts, you'd figure), maybe they really are that clueless. Or were.

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May 19, 2014

AstraZeneca Says No Again

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Posted by Derek

Now what? Pfizer has upped its offer for AstraZeneca yet again, and up to the figure that they seem to have calculated would bring them to the negotiating table. But AZ has told them to buzz off yet again, sending their own shares down hard. That's because Pfizer also stated that they would not launch a hostile bid for the company and that the current offer was final, so there don't seem to many more options.

I'll be pretty surprised by this story if it ends this way. It's possible that Pfizer is planning on AstraZeneca's big shareholders putting pressure on the company before the May 26th deadline (mandated by UK law). Or they might turn around and try buying them again in the future, especially if anything goes a bit wrong with AZ's turnaround plans over the next few months. But for now, it looks like we have the first case I can recall of a Company That Has Fought Off Pfizer.

But as that article I linked to the other day details, Pfizer has to do something about its tax situation. So if it's not going to be the AstraZeneca acquisition (and we still have a few days on that one), then what? The last thing I expect them to do is just sit there.

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May 14, 2014

China Raises the Stakes in the GSK Scandal

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Posted by Derek

GSK's troubles in China have just gotten even more serious. The government has formally charged Mark Reilly, former head of the company's operations in China, of organizing and participating in a bribery scheme. This seems to have been a stronger step than people were expecting - we'll see what happens. Reilly's whereabouts do not seem to be clear to anyone - I would assume that he left China some time ago, but if he hasn't, then he's not leaving for some time to come.

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May 12, 2014

Pfizer's Shareholders and AstraZeneca's

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Posted by Derek

The Financial Times is out with an editorial denouncing Pfizer's attempted takeover of AstraZeneca. It's definitely worth a read for the case it makes. What's a drug company supposed to be doing, anyway?

But (the effect on British research) is not the only big question requiring discussion. Another is the extent to which the board of AstraZeneca – as it decides how to respond to the US group’s overtures – should be driven by the desires of its own shareholders.

One of the most troubling aspects of Pfizer’s bid is its lack of evident commercial logic. The choice of target and the form of consideration seem to be driven principally by the US group’s desire to re-domicile itself in the UK and shrug off certain burdensome American tax liabilities.

The deal will not obviously strengthen AstraZeneca in its pursuit of drug discoveries, or its ability to bring new life-saving compounds to market. Nor will it increase competition or sharpen innovation across the sector.

Pfizer’s dealmaking history is moreover a deeply dispiriting one. The group has a reputation for delivering returns to its investors not through creative management and groundbreaking research, but by the frequent execution of accountant-led, cost-crunching acquisitions.

Comments here to past posts on this deal have raised the same question, and it's a tough one. If the purpose of AstraZeneca (and Pfizer) is to deliver money to their shareholders, full stop, then the deal makes sense. It will deliver money - of that there seems little doubt. It will deliver that to Pfizer through finagling the tax laws (which the British government has written in the hopes that just these sorts of deals would happen, one would think), and it will deliver it to AstraZeneca's shareholders by paying them more than their stock was worth a few weeks ago. Money is money, and pecunia presumably non olet. If the discussion is supposed to end there, then there's not much to discuss.

Is that where it's supposed to end, though? The FT editorialists, not exactly a bunch that are unfamiliar with capitalism, don't think so:

The prevailing wisdom in the Anglo-Saxon world over the past 35 years has been that boards should simply respond to what they perceive their shareholders’ wishes to be. But this is incorrect.

Directors have wider responsibilities on which they should reflect before making any recommendation about a company’s future. Legally, their duties under the Companies Act are not simply to snap to attention when shareholders whistle. They are to advance the interest of the business as a whole over the long term.

Just as surely as it is in Pfizer's financial interest to swallow AstraZeneca, it would seem to be in AstraZeneca's long-term interests not to be swallowed by Pfizer. They are most certainly not the greatest drug company around, but they deserve a chance to see if they can work out of the pit that time, circumstance, and some of their own decisions have put them into. On a larger scale, Pfizer's history of acquisition has damaged the entire pharmaceutical industry's store of R&D ability and intellectual capital.

Some AZ shareholders may well decide that taking Pfizer's money and running is the right decision - after all, who's to say if the company is going to make any sort of comeback at all? Better to take the sure thing - many of these investors are managing funds themselves, and they have responsibilities to their own shareholders and customers. But at some point this reasoning breaks down, or at least reveals its limitations. If we're always going to take the sure thing, the money that can be realized right now, then most startup companies (to pick an extreme example) have no reason to exist. After all, they're just promising and hoping to deliver something eventually. Better to just close up shop, sell what's sellable, and return the money to the shareholders, right? Screw the future.

Somewhere in between these extremes lies the "right" answer, and we're all still figuring it out. It's not just the drug industry - you can see the same issues playing out with Amazon - the company barely makes any actual profit, and its investors are getting increasingly restless about that. Shareholders have rights, for sure - but do they have all the rights?

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May 7, 2014

Pfizer-AZ: Politics and Press Releases

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Posted by Derek

This saga is going to be running for a while; we might as well all resign ourselves to it. The latest seems to be that the British government is getting more visibly into the act. The Business Secretary, Vince Cable, has said that he's not going to let Pfizer use the UK as a tax haven. But why did the country's corporate tax laws change so favorably if they didn't want companies to use the place as a tax haven? Instead of this being a statement against the deal, I take this one as mere public relations. He has also promised to protect jobs in the country, and there the government has some leverage (since they're the ones who set those tax rates, and can set them again should they choose).

At the Prime Minister level, David Cameron has said that he's seeking more assurances from Pfizer. As Monday's post said, though, any new PfizerAstraZeneca, which would actually use the new name "Pfizer", as has been the custom, can make these promises by slashing jobs in the US and and Sweden. You'll note that the Swedish government is getting no assurances from Pfizer at all. They have no leverage, as far as I know: Sweden's corporate tax rate is 22% as opposed to the UK's 20%, and I believe that other costs are higher as well. If Pfizer repatriated its foreign earnings to the US, they'd pay even more (here's an excellent look at the company's complex tax situation, and its analysis fits the company's current moves perfectly:

Pfizer needs cash to pay dividends, pay down debt incurred for the Wyeth acquisition, buy back shares, and perhaps acquire more U.S. companies. At the same time, it is under pressure to shore up its after-tax earnings as patents on profitable drugs expire faster than they can be replaced. If there was ever a company that could use another tax holiday -- or generous transition rules to a territorial system -- Pfizer is it.

All of the talk from Pfizer's management about R&D this and synergy that is window dressing. It's taxes. Depressingly, this fits my oft-stated rule that most questions that are phrased in the form "I wonder how come they. . .?" turn out to be answered with the word "money". If you'd like to experience some of that managerial window dressing first hand, though, take yourself to PfizerUpdate.com, where the company has set up a handy web portal for all its press releases on the subject. You can even have them email you when a new one is posted. Or you can just bang yourself on the head with a hammer every so often, and eliminate the middleman. Your call.

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The Lessons of Intercept and NASH

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Posted by Derek

Over at LifeSciVC, Tom Hughes has a post about Intercept Pharmaceuticals and their wild ride with an FXR ligand for non-alcoholic steatohepatitis (NASH). Anyone who owned ICPT will recall that period vividly, since the positive news from the clinical trial sent the company's stock from an already-not-cheap $72/share to a where's-the-oxygen-tank peak of $445 in two days of bug-eyed trading. NASH is potentially a big market, and there's really nothing out there to treat it, so Intercept's investors (many of them apparently fresh converts to the cause) decided that the company was set to do very well for itself indeed.

Hughes points out that NASH is not an easy thing to get into, though. It's underserved for a reason - there are a lot of biological and mechanistic question marks, and the clinical trials are no stroll through the tulip beds, either . There's no way to be sure that you're having the desired effects without doing a series of liver biopsies on the patients, and even at that the FDA still has to issue some key regulatory guidance about whether these tissues markers will be sufficient for approval. His thesis is that it took a small company like Intercept to accept all these risks.

He's probably right, especially when you couple them with an uncertain market size - potentially large, but who knows for sure? It's a hard sell at a big company, where the feeling can be that if you're going to go to all that trouble, you might as well aim for a larger market while you're at it, and one with more clarity. Adding a few hundred million (maybe) to the sales figures of Leviathan Pharma might not get upper management all that excited, especially since so much stuff would have to get pioneered along the way. But adding a few hundred million to the revenues of a small company that has nothing else - now that's something worth suiting up for. All the talk about how small companies are so much more nimble and innovative (which is not always true, but certainly not all talk, either) might just come down to the old line about necessity being the mother of invention. Or Samuel Johnson's old line about when a man is to hanged in a fortnight that it concentrates his mind wonderfully - that one, too.

Intercept, for its part, has seen its stock fall back to the lowly $250-300 range, which probably isn't thrilling for the folks who bought in at $445. Actually, it fell back to that range almost immediately, then worked its way back over $400 again, and now back down to this, so there have been plenty of opportunities for hair loss among its investors. When the FDA issues its guidance in the NASH area, it will presumably go through another blast of frenzied trading, and good luck to whoever's in it (long or short) when that happens. And I haven't checked, but I'll bet that the options on this one would cost you plenty, too. From a safe distance, it should be quite a show.

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May 6, 2014

AstraZeneca: Don't Buy Us

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Posted by Derek

After Pfizer's less-than-wonderful earnings report yesterday, AstraZeneca is out today painting a picture of how great things will be if they don't get swallowed by them. John Carroll at FierceBiotech has the details, but I especially enjoyed his pithy comment on Twitter: "AZN made more promises today than I will ever see broken again."

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May 5, 2014

Fast Money, But What Direction Is It Going?

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Posted by Derek

If you're inclined to get your financial info from fast-talking analysts on cable news channels, you might want to give this blog post a read. The author points out several egregious mistakes that CNBC's "Fast Money" has made with biotech/pharma stocks by having traders giving out advice and forecasts despite apparently knowing very little about the sector at all:

Fast Money found a way to make itself infamous at the (ASCO) meeting last year when one of its traders, Jon Najarian (@optionmonster), mentioned on TV that Celsion (Nasdaq: CLSN) was his ASCO stock to watch. The problem with that prediction, and you barely have to be a biotech person to know this, is that Celsion is not only a very dubious company to begin with, but they had NO presence at that year’s meeting whatsoever. To stick with a baseball analogy, it would have been akin to predicting the Carolina Mudcats will make a run for the World Series. This literally became the meeting’s running joke. I saw people toasting it at social events, and heard stories of traders looking in jest for Celsion’s presentation at the poster section like something out of Where’s Waldo. . .

Trying to understand biology, medicine, and chemistry is a lot harder than reading stock market charts for reverse goose-steps, Cleesian leg-outs, or whatever the pattern is supposed to be.

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Pfizer/AstraZeneca: Asymmetric Cuts Look Likely

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Posted by Derek

So Pfizer is out today with some pretty bad financials, which are doubtless one reason for their determination to Go Out and Buy Somebody, whether they're an R&D powerhouse or not. They've also been reassuring the British government that they'll go ahead with the Cambridge research construction that AstraZeneca has begun, and that in general, they'll keep at least 20% of the R&D workforce in the country.

Problem is, if you look at those numbers, it means that someone is going to have to go, and these promises would tend to force the cuts more to this side of the Atlantic. Reuters has a detailed look at the issue, and it isn't fun reading:

John LaMattina, Pfizer's research chief from 2004 to 2007 and currently a senior partner at PureTech Ventures in Boston, agreed that the La Jolla cancer research jobs as well as neuroscience researchers in Cambridge, Massachusetts, were likely in jeopardy. He said Pfizer could also fold its U.S.-based immunology and respiratory research into existing AstraZeneca operations in Britain.

"If I was in any of these places, I'd worry about this deal going through," said LaMattina, , ,

. . .With Pfizer's promise to protect the UK research, jobs at AstraZeneca's oncology and neuroscience research centers near Boston and its MedImmune cancer research and development operation in Gaithersburg, Maryland, could also come under the cost-cutting knife.

It's just much easier to unload employees in the US than it is in most of Europe. And since the whole point of this proposed deal is to remake Pfizer in a more favorable British tax environment, the incentives are unfortunately quite strong to do just that.

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May 2, 2014

Some People at Pfizer Whose Fault This Isn't

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Posted by Derek

It's worth keeping in mind, as the Pfizer/AZ story develops, that there are some people that don't get mentioned who aren't enjoying this, either: the scientists in Pfizer's labs. As I've mentioned, I know folks there, and I know that there are (still) an awful lot of good scientists working there. And they, of course, have nothing to do with the corporate strategy. They're just along for the ride, strapped in with everyone else.

And in the employment situation we have in the industry today, what else can they do? You can't just up and quit your job because you don't like all the business decisions your company is making, not in this environment, and not when you're trying to pay the mortgage and not have to move your kids somewhere new in the middle of their schooling. At the same time, I know for a fact that Pfizer's decision to go after AstraZeneca not only dismays many people at AZ; it dismays a lot of people at Pfizer as well. But their jobs do not involve advising the CEO and the rest of the executive suite - they're working in med-chem, assay development, formulations, tox and all the rest of what many of the readers of this site do for a living. And there's nothing they can do about it.

It's a very painful situation. I've felt a bit of what they're feeling before, when companies I've worked for have done things that I thought were ill-advised. Sitting in the back of the bus and watching the driver take the wrong exit is intensely frustrating. I'm not trying to add to people's pain and by publicly whacking on their company - but at the same time, this is the biggest current event in the industry at the moment, and (for better or worse) it's a perfect illustration of the state that the industry's gotten itself into. (And the state that Pfizer's gotten itself into, for that matter).

So it's something that I'm going to comment on, and that I have to comment on. The whole point of having a blog like this is to talk about such issues, and to say what I think about them. What I have to say about Pfizer's strategy is very uncomplimentary. But Pfizer's strategy is not Pfizer's people, and for them (the overwhelming majority of them), I have sympathy, because this really isn't their fault.

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Allergan: "Golf-Course Deprived"

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Posted by Derek

Here's a good one for you. Valeant is well-known as an outfit that largely scorns R&D, and cuts it whenever they buy someone. They do mergers and acquisitions to get the fruits of someone else's research instead. You know, sort of a mini-Pfizer. (If anyone at Pfizer is offended by that comparison, they should take a longer look in the mirror).

Right now, Valeant is trying to acquire Allergan, and no doubt they're going to do to them what they've done to everyone else they've acquired. One of the wasteful things that Valeant CEO Michael Pearson has said that he wants to cut immediately is the outrageous perk of Allergan's own golf course. He's made mention of it several times, as an example of how out-of-control the spending is there. Only problem is, as Ed Silverman points out here, is that Allergan doesn't have a golf course.

At a recent luncheon with analysts, however, Pearson was pressed for further details on expenses he would slash if the Allergan deal comes to pass. According to analysts who attended, Pearson repeatedly pointed to Allergan’s golf course as an example.

“Have you been to their headquarters? Have you seen their golf course? Yeah, they have a golf course,” Pearson said, according to an investor note from BMO Capital Markets analyst David Maris, who wrote that the Valeant chief executive repeated this assertion more than once.

But the Allergan golf course will not be on the list of items to be slashed, after all. Why? Allergan, which is best known for the wrinkle fighter Botox, insists that it does not own a golf course.

“For the record, we do not have a golf course or any interest in a golf course,” an Allergan spokeswoman writes us. “We are golf-course deprived.” She adds that the drug maker received several calls after the meeting from analysts seeking to verify the information.

But hey, if there's not a golf course, Pearson will no doubt find something else to cut if the takeover does in fact go through. His McKinsey training has served him well, and his machete is sharp. The prospect has Allergan going around ringing doorbells, asking if someone else would be interested in buying them. Anyone but Valeant. I can see why.

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AstraZeneca Tell Pfizer to Buzz Off

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Posted by Derek

That's what I gather from this report, anyway. Reports had leaked out that Pfizer was going to make a higher offer for AZ shares, and that happened earlier this morning. But AstraZeneca's board has turned it down flat, saying that it undervalues the company and "is not an adequate basis" for further discussions.

You'd figure that Pfizer has been sounding out some large shareholders about an appropriate figure, so they have a rough idea of what it would take to win a hostile bid. I'd guess that they're still not ready to go that route, though, and since this latest offer isn't a huge advance on the first public one, they're probably going to come back with another one after they've let AZ's management bake in the sun for a little while. Unfortunately, I still can't come up with a reasonably probable way that leads to Pfizer just buzzing off as requested. They've run their numbers, they have an opportunity, and they know what they're willing to pay. What's going on now are their efforts to keep the deal from happening in the top end of their calculated range. But I have to think that what Pfizer is willing to pay is also high enough to get enough AstraZeneca shareholders to go along. I hope I'm wrong about that.

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May 1, 2014

Can Anything Stop Pfizer-AstraZeneca From Going Through?

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Posted by Derek

At FierceBiotech, John Carroll asks the question that's on a lot of drug-industry minds this week: can anything stop Pfizer's takeover of AstraZeneca?

There are a few possibilities, but overall, it comes down to how much money Pfizer wants to spend. If they open their wallet far enough, they can buy most anyone they want. As long as the UK's tax structure stays as it is, I think that they'll keep right on pitching. (Now, if another prime minister comes in whose government has a different view on corporate taxation, that could make Pfizer regret things, but they're clearly willing to take that chance). No, they did the same sort of thing to Wyeth, to Pharmacia-Upjohn, and to Warner-Lambert, without these sorts of tax considerations, so I don't see why they wouldn't do it to AstraZeneca, too. Well, short of not wanting to destroy another big drug company. But that's not on Carroll's list, and not on mine, because it sure isn't a consideration for Pfizer, is it?

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April 29, 2014

Concert's First Drug: Not So Great

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Posted by Derek

Concert Pharmaceuticals, famous among medicinal chemists as the apparent leaders in the "deuterated drug" strategy, has reported clinical trial results for their lead compound, CTP-499. Unfortunately, it missed its primary endpoint of improving albumin/creatinine ratios in patients. There are some signs that it might be doing some good, and some room to argue that this endpoint is not as good a choice as it seemed to be at the time, but overall, these are not good numbers.

And as this article in Xconomy shows, the initial read on these numbers actually hit last summer, while Concert was readying an IPO. They pulled it, realizing the effect that the results would have on their fund-raising abilities, and took the compound into a second 24-week round of testing, the results of which we're seeing now. Fortunately for Concert, another compound (CTP-354) showed enough promise in the interim to be the peg for their public offering, which went off in February (pretty much just in time, given what's happened in the biotech market since then).

It's a bit alarming to realize how much of a small company's fortunes depend on, well, fortune. Maybe that should be a capital-F Fortune, the blindfolded goddess depicted in allegorical paintings holding a large wheel on which people's standing rose and fell. You'd like to be able to control things, and you try to as much as possible, but a lot is riding on things that are outside of anyone's control whatsoever: what the results are, and what the scientific and financial weather is when they appear.

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April 28, 2014

Pfizer and AstraZeneca: What the Hell.

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Posted by Derek

What the hell is Ian Read thinking? Pfizer is apparently going hostile with their attempt to buy out AstraZeneca, all but ensuring that the deal, if it goes through, will take place at the highest price and in the messiest fashion that it possibly could. And for what? Update: Matthew Herper asks the same question, in detail.

This news developed over the weekend, with an article in the Financial Times as Pfizer's public shot across the bow. This morning, a press release from AZ gives their side of the story:

On 26 April 2014, Ian Read, Chairman and CEO of Pfizer, contacted Leif Johansson, the Chairman of AstraZeneca for the first time since January 2014. In this discussion, the Chairman of Pfizer did not make a specific proposal regarding an offer to acquire AstraZeneca, but nevertheless Pfizer requested that both companies issue a joint statement, prior to the market open on 28 April 2014, announcing that they had entered into discussions regarding a combination. The Board of AstraZeneca considered this request and concluded that, absent a specific and attractive proposal, it was not appropriate to engage in discussions with Pfizer.

The release says that the companies discussed a possible deal back in November, but that AstraZeneca's board concluded that Pfizer's proposal valued the company far too cheaply (not an uncommon conclusion for a board of directors to take, to be sure). So now we have a big public grab instead. Here are overviews from Reuters and the New York Times. As Reuters has it:

Pfizer's declaration turns up the heat under AstraZeneca Chief Executive Pascal Soriot, who has been in the job since October 2012 and who made clear last week he saw an independent future for the group, flagging spin-offs of two non-core units as one option to create more value.

Soriot has been credited with reviving AstraZeneca's previously thin pipeline of new drugs, which is badly needed to offset a wave of patent expiries on older drugs.

However, his overhaul - including an ambitious plan to move the company's research and corporate headquarters to Cambridge, England - is still a work in progress and he has also come under from some shareholders over executive pay.

That should give you some idea of the innate silliness of the business coverage of the pharma industry. It's 2014 - how can someone who's been CEO since 2012 revive an internal drug pipeline in that time frame? Neither Reuters nor the Times mentions something that Adam Feuerstein brought up on Twitter - that Pfizer has, potentially, all sorts of opportunities in the biotech/small pharma sector with that kind of money, but they're not having any. They'd rather buy another behemoth instead.

What is that? Both of those writeups go on to mention a hidden factor for this deal - taxes. Buying a non-US company would allow Pfizer to avoid repatriating a large amount of money (nearly $70 billion) from its foreign operations and exposing it to US taxes. Of course, if Pfizer wanted a substantial operation in the UK to put money into, they might have thought about not closing their large site in Sandwich back in 2011, but hey, that was all of three years ago, and who remembers such things? And not being an accountant, I can't tell you if they'd have been able to do that without running the cash past the US jurisdiction, anyway.

But that makes a person wonder what Pfizer would do with AZ if they got them. Take the drug pipeline, close down everything in the UK again, and just leave a corporate structure intact for the tax break? Stop that whole move-to-a-new-research-site-in-Cambridge idea before it gets any further? (After all, if Pfizer wanted to have a new research site there, they could have built one themselves when they vacated Sandwich). I hate to say it, but those seem like the most likely alternatives, especially given the company's past behavior in these situations. Pfizer's statement that the new company would be incorporated in Great Britain fits that view alarmingly well.

So there's the answer, perhaps, to the question I asked in the first paragraph. What the hell is Ian Read thinking? He's thinking about getting someone else's late-stage pipeline, because that's how Pfizer finds things to sell. He's thinking about working the tax laws to save the company billions of dollars, because Pfizer's innovations, in recent years, have mostly been financial ones. And he's thinking about ripping up yet another large patch of the drug industry in a continuing effort to keep Pfizer going, while causing vast disruption and loss of productivity along the way. Because that's what Pfizer does.

Update: Matthew Herper listened to Pfizer's conference call this morning, and here's what they plan to do with AZ's drugs if they get them.

A personal footnote: I've written a lot of fairly negative things about Pfizer over the years, since they have been very generous with the opportunities to do so. Every so often, people say to me "Well, you're never going to get a job with them, are you?", and I would just laugh. (The only time I might have been in the market for that, they were firing PhD chemists left and right, so it wasn't something that would have ever happened). I do know quite a few people who work at Pfizer, though - they have a lot of good people there, when you take them one at a time. But the corporation itself? No, I don't think they'd ever offer me a job. And what a relief that is.

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April 25, 2014

Ycombinator Gets Into Biotech

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Posted by Derek

Here's an article from Nature News on the startup incubator company Ycombinator moving into biotech funding. Those of you familiar with them will wonder a bit about this, because it's a space that they've avoided. But read on:

In 2008, Y Combinator founder Paul Graham wrote that funding biotechnology start-ups was too expensive. Why the change now?
Sam Altman: Six years ago, the starting costs for biotech firms would not work with our model: it took millions of dollars to get anywhere. But the landscape has changed. We’ve noticed, over the past year, more and more promising biotech firms asking about Y Combinator. I think there is a real trend for biotech start-ups looking more like software start-ups. In ten years it won’t even be unusual for a biotech firm to begin in the same way a software firm does, and we want to be on the leading edge of that trend. Given that we haven’t done this before, we don’t know a lot of people that have a background in it, so we were very lucky that Elizabeth agreed to help.

Elizabeth Iorns: I think the fundamental changes that are happening in the biotech space are like the changes that happened for software start-ups with the introduction of Amazon Web Services. You saw the economics completely shift. Previously, you needed significant investment in physical infrastructure to start a firm. Then all of a sudden you could just turn on servers. That same ability to access the entire technical infrastructure that’s required to start a biotech company is now also available with basically no investment. We see Science Exchange as an example of that platform, and you also see it with QB3 [a life-sciences incubator based at the University of California, San Francisco], which rents out lab bench space for less than US$1,000 per month. That means you can cheaply have access to laboratories, instruments and experts. That’s completely different than it has been at any other time for biotech firms.

I'm on the fence about this. I'm very much in favor of new funding mechanisms for biopharma research, and I'm very glad to see new organizations getting into it. My worry for the Ycombinator folks is that they may be coming into this with a bit too much of the weltanschauung of the tech sector, where companies that start off sounding like "Hey, kids, let's put on a show in the barn!" can turn into huge operations. (Two that Ycombinator has been in on, for example, are Dropbox and Airbnb, but plenty of other internet startups have had similarly small-scale origins).

I would very much like for biotech to work the same way, but my fear is that we're much more money-intensive, and that we have a much higher chance of expensive failure. There's a lot of criticism being thrown back and forth here, with people coming down hard on the Ycombinator stuff (naive, underfunded, etc.), and the folks there saying that they're being singled out mostly because they're not members of the club. Problem is, none of these complaints (from either side) are unfounded. I myself am not quite so sure about all these dramatic cost savings - all the work I've been in on has been, sooner or later, hideously expensive. But Ycombinator can pretty much shut everyone up, though, with something successful, and I think that they should go right ahead and try for it. I don't always enjoy being right.

Update: more from Wavefunction, who's fairly optimistic.

Correction: I'd originally written that Ethan Perlstein's Perlstein Labs had gotten funding from Ycombinator, but that's not accurate. He's worked with the Ycombinator-backed Science Exchange, but isn't being funded by them.

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April 22, 2014

Shuffling the Departments

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Posted by Derek

So word comes this morning of some big transactions between Novartis, GlaxoSmithKline, and Eli Lilly:

Novartis said it had agreed to buy GlaxoSmithKline's oncology products for $14.5 billion, while selling to GSK its vaccines, excluding flu, for $7.1 billion plus royalties and creating a joint venture with GSK in consumer healthcare.

Novartis also said it had agreed to sell its animal health arm to Eli Lilly for approximately $5.4 billion.

The global pharmaceuticals sector has seen a flurry of deal-making recently as large companies seek to focus on a small number of leading businesses, while smaller specialty and generic producers seek greater scale.

Coming right after that Pfizer/AZ news the other day, this makes a person wonder what else is in the works. What's not clear (in what I've seen so far) is how this will work - for example, is Novartis just buying the existing drugs and the pipeline, and incorporating those into its existing research? What happens then to all the people in GSK's oncology? And so on. We'll see what details emerge. Any info on this is welcome in the comments, as well as speculations on why GSK is giving up the whole oncology area.

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April 21, 2014

Pfizer Walks Again By Night

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Posted by Derek

So the Sunday Times came out with a story saying that Pfizer has attempted a bid for AstraZeneca. This is something of a surprise, at least for me. Pfizer has most certainly done things like this in the past, but I was under the impression that current CEO Ian Read had sworn off the practice. He's been talking for some time now about how the company needs to be the right size, to focus on drug discovery, and so on, and swallowing AZ just seems to be a return to old habits.

But the Bloomberg follow-up story on this scoop does mention how Read's answers to merger questions seems to have shifted a bit over the last year or two. The Sunday Times piece says that AZ is believed to have been unenthusiastic, and that talks are no longer continuing. But the whole thing makes a person think that Pfizer is hungry for a big deal again, and that means that no one is safe.

Update: more follow-up from the Guardian.

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April 15, 2014

Novartis Gets Out of RNAi

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Posted by Derek

Yesterday brought the sudden news that Novartis is pulling their RNA interference research work. The company is citing difficulties in development, and also the strategic point that not as many disease areas seem to be open to the use of the technique as they'd like. John LaMattina has more here - it's looking more and more like this may be a good field for smaller companies like Alnylam, but not something that's going to feed the beast at a company the size of Novartis (or Merck, who exited a while ago). If there's some sort of technology breakthrough, that could change - but you get the impression that Novartis was hoping for one before now.

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April 9, 2014

AstraZeneca's Cambridge Move

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Posted by Derek

Here's more on AstraZeneca's move to Cambridge (UK). They've set up an agreement with the Medical Research Council to have MRC people working "alongside" AZ people, although details seem pretty short on how that's going to happen in practice. Here's some of it, though:

Within the AstraZeneca MRC UK Centre for Lead Discovery, the academics will get access to more than 2 million compounds in AstraZeneca's library and have the use of high-tech screening equipment to study diseases and possible treatments.

Their research proposals will be assessed by the MRC, which will fund up to 15 projects a year and AstraZeneca will have the first option to license any resulting drug discovery programs.

I liked this part of the article as well:

Other large drugmakers have built research outposts in life science centers like Cambridge, Boston and San Francisco - but none have undertaken such a wholesale move of operations.

The strategy is not without risks, especially if the upheaval disrupts current research projects or results in key staff leaving the company. A smooth transition is seen as a key test for CEO Soriot as he tries to change the culture at AstraZeneca to put science at the center of its activities.

What was at the center of AZ's operations before?

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AstraZeneca's Cambridge Move

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Posted by Derek

Here's more on AstraZeneca's move to Cambridge (UK). They've set up an agreement with the Medical Research Council to have MRC people working "alongside" AZ people, although details seem pretty short on how that's going to happen in practice. Here's some of it, though:

Within the AstraZeneca MRC UK Centre for Lead Discovery, the academics will get access to more than 2 million compounds in AstraZeneca's library and have the use of high-tech screening equipment to study diseases and possible treatments.

Their research proposals will be assessed by the MRC, which will fund up to 15 projects a year and AstraZeneca will have the first option to license any resulting drug discovery programs.

I liked this part of the article as well:

Other large drugmakers have built research outposts in life science centers like Cambridge, Boston and San Francisco - but none have undertaken such a wholesale move of operations.

The strategy is not without risks, especially if the upheaval disrupts current research projects or results in key staff leaving the company. A smooth transition is seen as a key test for CEO Soriot as he tries to change the culture at AstraZeneca to put science at the center of its activities.

What was at the center of AZ's operations before?

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April 8, 2014

Biotech Boom, Biotech Bust?

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Posted by Derek

Here's a good one by Matthew Herper on "Three Misplaced Assumptions That Could End the Biotech Boom". Given the way the biotech stock index has been performing lately, with a horrendous March and April that's taken it into negative territory for the year to date, something definitely seems to be causing a change of mind.

I'll let you see what Herper's three assumptions are, but I can tell you already that they sound valid to me. I think that his points are particularly relevant to investors who may have been jumping on the stocks in the area without having a clear idea of what the industry is really like. As he says, ". . .investors should avoid thinking that the drug business has undergone a fundamental change in the past few years. It hasn’t." It's the same fun-filled thrill ride as ever!

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April 7, 2014

Outsourcing Everything

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Posted by Derek

Here's an article in Drug Discovery Today on "virtual pharmaceutical companies", and people who've been around the industry for some years must be stifling yawns already. That idea has been around a long time. The authors here defined a "VPC" as one that has a small managerial core, and outsources almost everything else:

The goal of a VPC is to reach fast proof of concept (PoC) at modest cost, which is enabled by the lack of expensive corporate infrastructure to be used for the project and by foregoing activities, such as synthesis optimization, which are unnecessary for the demonstration of PoC. . .The term ‘virtual’ refers to the business model of such a company based on the managerial core, which coordinates all activities with external providers, and on the lack of internal production or development facilities, rather than to the usage of the internet or electronic communication. Any service provider available on the market can be chosen for a project, because almost no internal investments in fixed assets are made.

And by necessity, such a company lives only to make deals with a bigger (non-virtual) company, one that can actually do the clinical trials, manufacturing, regulatory, sales and so on. There's another necessity - such a company has to get pretty nice chemical matter pretty quickly, it seems to me, in order to have something to develop. The longer you go digging through different chemical series and funny-looking SAR, all while doing it with outsourced chemistry and biology, the worse off you're going to be. If things are straightforward, it could work - but when things are straightforward, a lot of stuff can work. The point of having your own scientists (well, one big point) is for them to be able to react in real time to data and make their own decisions on where to go next. The better outsourcing people can do some of that, too, but their costs are not that big a savings, for that very reason. And it's never going to be as nimble as having your own researchers in-house. (If your own people aren't any more nimble than lower-priced contract workers, you have a different problem).

The people actually doing the managing have to be rather competent, too:

All these points suggest that the know-how and abilities of the members of the core management team are central to the success of a VPC, because they are the only ones with the full in-depth knowledge concerning the project. The managers must have strong industrial and academic networks, be decisive and unafraid to pull the plug on unpromising projects. They further need extensive expertise in drug development and clinical trial conduction, proven leadership and project management skills, entrepreneurial spirit and proficiency in handling suppliers. Of course, the crucial dependency on the skills of every single team member leaves little room for mistakes or incompetency, and the survival of a VPC might be endangered if one of its core members resigns unexpectedly

I think that the authors wanted to say "incompetence" rather than "incompetency" up there, but I believe that they're all native German speakers, so no problem. If that had come from some US-based consultants, I would have put it down to the same mental habit that makes people say "utilized" instead of "used". But the point is a good one: the smaller the organization, the less room there is to hide. A really large company can hol (and indeed, tends to accumulate) plenty of people who need the cover.

The paper goes on to detail several different ways that a VPC can work with a larger company. One of the ones I'm most curious about is the example furnished by Chorus and Eli Lilly. Chorus was founded from within Lilly as a do-everything-by-outsourcing team, and over the yeras, Lilly's made a number of glowing statements about how well they've worked out. I have, of course, no inside knowledge on the subject, but at the same time, many other large companies seem to have passed on the opportunity to do the same thing.

I continue to see the "VPC" model as a real option, but only in special situations. When there's a leg up on the chemistry and/or biology (a program abandoned by a larger company for business reasons, an older compound repurposed), then I think it can work. But trying it completely from the ground up seems problematic to me, but that could be because I've always worked in companies with in-house research. And it's true that even the stuff that's going on right down the hall doesn't work out all that often. One response to that is to say "Well, then, why not do the same thing more cheaply?" But another response is "If the odds are bad with your own people under your own roof, what are they when you contract everything out?"

Comments (28) + TrackBacks (0) | Category: Business and Markets | Drug Development

April 4, 2014

GSK Dismisses Employees in Bribery Scandal. Apparently.

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Posted by Derek

Someone is letting it be known that GlaxoSmithKline has fired some of its employees in China in relation to the long-running bribery scandal there. This is one of those times when it's worth asking the "Cui bono?" follow-up question. Is this some sort of semi-authorized release, designed to show other GSK employees that the company is serious? Or to demonstrate the same, publicly, to the Chinese authorities? Or is someone honestly just letting this information out on their own - and if so, why?

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April 3, 2014

Reality-Based Biotech Investing

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Posted by Derek

David Sable has some useful rules for investing biotech stocks (more here). On the surface, many of these may look more applicable to people who are managing larger amounts of money, because he's talking about what to do (and not do) when you're walking around the JP Morgan healthcare conference, and so on. But the lessons behind his advice are sound for everyone - for example:

". . .stop looking for code words, Groucho Marx eyebrow raising, or any other type of "body language" silliness from insiders."

The corollary to that is that if you're thinking about investing in a small company that acts as if it's doing this sort of thing, or has been touted to you on the basis of such, turn around and look somewhere else. (Even worse, if you find yourself working for a company like this, you'd better start making plans). This is a sign of what I think of as the "professional wrestling" school of investing - it's the world of the people who see the market as a titanic battle between Good and Evil, the Good being the people who own the wonderful company's stock, and the Evil, naturally, being the Evil Shorts and Paid Bashers. As with other forms of conspiratorial thinking, it's easy for someone with this attitude to dismiss good advice (if exposed to same) by saying that the person offering it is naive - not clued in, wised up, or verb-prepositioned in general. If you knew how the world really works, you'd realize that the recent moves in the stock are all so transparent - it's the money managers, you see, who are trying to shake the shares from the weak hands so they can accumulate it in front of the Big Announcement.

The world doesn't work that way, I think, or not at the retail market level, at any rate. It's not a show, and there's no script. Many people investing in small biotech stocks have a reality-TV view of the world, when reality would serve them far better.

Comments (9) + TrackBacks (0) | Category: Business and Markets

March 31, 2014

Where The Hot Drugs Come From: Somewhere Else

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Posted by Derek

Over at LifeSciVC, there's a useful look at how many drugs are coming into the larger companies via outside deals. As you might have guessed, the answer is "a lot". Looking at a Goldman Sachs list of "ten drugs that could transform the industry", Bruce Booth says:

By my quick review, it appears as though ~75% of these drugs originated at firms different from the company that owns them today (or owns most of the asset today) – either via in-licensing deal or via corporate acquisitions. Savvy business and corporate development strategies drove the bulk of the list. . .I suspect that in a review of the entire late stage industry pipeline, the imbalanced ratio of external:internal sourcing would largely be intact.

He has details on the ten drugs that Goldman is listing, and on the portfolios of several of the big outfits in the industry, and I think he's right. It would be very instructive to know what the failure rate, industry-wide, of inlicensed compounds like this might be. My guess is that it's still high, but not quite as high as the average for all programs. The inlicensed compounds have had, in theory, more than one set of eyes go over them, and someone had to reach into their wallet after seeing the data, so you'd think that they have to be in a little bit better shape. But a majority still surely fail, given that the industry's rate overall is close to 90% clinical failure (the math doesn't add up if you try to assume that the inlicensed failure rate is too low!)

Also of great interest is the "transformational" aspect. We can assume, I think, that most of the inlicensed compounds came from smaller companies - that's certainly how it looks on Bruce's list. This analysis suggested that smaller companies (and university-derived work) produced more innovative drugs than internal big-company programs, and these numbers might well be telling us the same thing.

This topic came up the last time I discussed a post from Bruce, and Bernard Munos suggested in 2009 that this might be the case as well. It's too simplistic to just say Small Companies Good, Big Companies Bad, because there are some real counterexamples to both of those assertions. But overall, averaged over the industry, there might be something to it.

Comments (26) + TrackBacks (0) | Category: Business and Markets | Drug Industry History

March 27, 2014

A Look Back at Big Pharma Stocks

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Posted by Derek

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Four years ago, I wrote about what I called "Big Pharma's Lost Decade" in the stock market. I thought it would be worth revisiting that, with some different time points.

At the top is the performance of those same big drug companies since I wrote that blog post. Note that Bristol-Myers Squibb has been the place to be during that period (lots of excitement around their oncology pipeline, for one thing). Pfizer has beaten the S&P index over that time as well. And they've done it while paying a higher dividend than the aggregate S&P, too, of course - I'd like to find a way to include dividends into charts like these for an even more real-world comparison. Everyone else is behind.

The next chart shows a ten-year time frame. Bristol-Myers Squibb is still on top, although you'll note that the overall gain is basically the same as the gain since 2010 (that is, it's all come since then). And now J&J is right behind them, and they're the only two whose stock prices have beaten the S&P index over this period. Note that Pfizer and Lilly are actually down from this time point.

Then we have performance since 2000, the twenty-first century chart. Since this was during the Crazy Years in the market, just about everyone is down when measured from here, except for J&J (which is at about the same gain as if you'd started in 2004). The most dramatic mover is Bristol Myers-Squibb - if you bought in at the start of that last chart, you're up 109%. If you bought in at the start of this one, you're down 21%.

And that brings us to the last chart, which is basically "Since I started working in the drug industry". I'd been on the case for about three months by the end of 1990, which is where this one starts. And there are many interesting things to note - first among them, what a big, big deal the latter half of the 1990s were in the stock market. And more specifically, what a big, big deal they were for Pfizer's stock. Holy mackerel, will you look at that chart - compared to the rest of the industry, Pfizer's stock was an absolute monster, and there you have a big driver for all of the company's merger-rific behavior during that period. It paid. Not so much in research results, of course, but it paid the shareholders, and it paid whoever had lots of PFE stock and options. (And it paid the firms on the Street who did the deals with them, too, but that's always the case for them). A really long-term Pfizer shareholder can't be upset at all with the company's performance versus the S&P over that time period. How many have held it, though?

But the other thing to note is J&J. There they are again - it's only in that first chart that they're lagging. Longer-term, they just keep banging away. That, one would have to assume, is at least partly because they've got all those other medical-related businesses keeping them grounded during the whole time. Back when I worked for Bayer, at the Wonder Drug Factory, analysts were forever banging on about how the company just had to, had to break up. Outdated conglomerate model, holding everyone back. So much hotness waiting to be released. But Bayer hasn't been holding up too badly, either, and Bernard Munos has some things to say about both them and J&J.

It is not a good idea (to "undiversify") because, at the moment, we do not have good tools to mitigate risk in drug R&D, which is a problem at the macroeconomic level, because capital does not flow to this industry as it should. Too many investors have been burned too badly and are now investing elsewhere or sitting on the fence, so we need to somehow get better at that. . .we've got to live with the situation where risk in the pharmaceutical industry cannot really be mitigated adequately. You can do portfolio management. Every company has done portfolio management. It has failed miserably across the board. That was supposed to protect everybody against patent cliffs, and everybody has fallen down patent cliffs, so clearly portfolio management has not worked.

Mind you, "undiversifying" is exactly what Pfizer is trying right now. They're not only trying to undo some of the gigantism of all those mergers, they're shedding whatever they have that is Not Pharma. So they're running that experiment for us, as they have some others over the years. . .

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March 19, 2014

Another Whack at the Stem Shortage Myth

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Posted by Derek

Over at The Atlantic, Michael Teitelbaum has another crack at demolishing the "STEM shortage" myth. Looking over actual employment data, he finds:

All have concluded that U.S. higher education produces far more science and engineering graduates annually than there are S&E job openings—the only disagreement is whether it is 100 percent or 200 percent more. Were there to be a genuine shortage at present, there would be evidence of employers raising wage offers to attract the scientists and engineers they want. But the evidence points in the other direction: Most studies report that real wages in many—but not all—science and engineering occupations have been flat or slow-growing, and unemployment as high or higher than in many comparably-skilled occupations.

Right on all counts. I have taken many, many cracks at this subject myself. Heck, I've even said so in pieces at The Atlantic's own web site. But the "critical shortage of scientists and engineers" idea just refuses to go back into its hole, no matter how many times it's hit on the head. In this article, Teitelbaum doesn't go into the reasons for this, but he's been clear about it in recent appearances:

So from where does the STEM hype stem? According to Teitelbaum — who has written a book on the subject, due out in March, titled “Falling Behind?: Boom, Bust and the Global Race for Scientific Talent” — some of it comes from the country’s longtime cycle of waxing and waning interest in science; attention seems to focus on science every 10 to 15 years before slacking off.

The only forces pushing the idea of STEM doom, he said, are those that have something to gain from it. Mostly those are STEM employers — the tech industry, for example — that want to pack the labor force with people to suppress wages, he said, as well as lobby for looser immigration laws so that they can bring in less expensive overseas workers. Joining the chorus are universities that want more funding for science programs, as well as immigration lawyers who see the potential for handling large numbers of work visas.

Those are, I'm sad to say, pretty much the same conclusions I've come to. I don't like sounding like a 1920s IWW organizer or something - it goes very much against my usual tendencies. And I continue to think that unionism in the sciences would be a bad idea. But drumming up cheap labor by pretending that there's a shortage of it is a bad idea, too.

As mentioned above, Teitelbaum has a book out on this subject - here it is. Next time you run across someone going on about scientist shortages, hit them over the head with it.

Comments (42) + TrackBacks (0) | Category: Business and Markets | Current Events

March 11, 2014

Always Insist on Error Bars

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Posted by Derek

That's the take-home of this post by Adam Feuerstein about La Jolla Pharmaceuticals and their kidney drug candidate GCS-100. It's a galectin inhibitor, and it's had a rough time in development. But investors in the company were cheered up a great deal by a recent press release, stating that the drug had shown positive effects.

But look closer. The company's bar-chart presentation looks reasonably good, albeit with a binary dose-response (the low dose looks like it worked; the high dose didn't). But scroll down on that page to see the data expressed as means with error bars. Oh dear. . .

Update: it's been mentioned in the comments that the data look better with standard error rather than standard deviations. Courtesy of a reader, here's the graph in that form. And it does look better, but not by all that much:
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Comments (39) + TrackBacks (0) | Category: Business and Markets | Clinical Trials

March 10, 2014

Startups vs. Big Pharma

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Posted by Derek

Bruce Booth has opened up the number of authors who will be posting at LiveSciVC, and there's an interesting post up on startups now from Atlas Ventures' Mike Gilman. Edit: nope, my mistake. This is Bruce Booth's! Here are some of his conclusions:

here’s a list of a few of the perceived advantages of Pharma R&D today:

Almost unlimited access to all the latest technologies across drug discovery, ADME, toxicology, and clinical development, including all the latest capital equipment, compound libraries, antibody approaches, etc
International reach to support global clinical and regulatory processes to fully enable drug development programs
Deep and insightful commercial input into the markets, the pulse of the practicing physician, and the payors on what’s the right product profile
Gigantic cash flow streams that provide 15-20% of the topline to support a largely “block grant” model of R&D (fixing R&D spend to the percentage of sales)
Decades of institutional memory providing the scar tissue around what works and what doesn’t (e.g., insight into project attrition at massive scale)
This is a solid list of advantages, and they all have real merit.

But like the biblical Goliath, whose size and strength appeared to the Israelites as great advantages, they are also the roots of Pharma’s disadvantages. All of these derive their value as inward and relatively insular forces. Institutional memory in particular can serve to either unlock better paths to innovation or to stifle those that want to explore new ways of doing things. Lipinski’s Rules, hERG liabilities, and other candidate guidelines derived from legacy “survivor bias”-style analyses are case examples of this tension – unfortunately the stifling aspects rather than the unlocking ones often triumph in big firms.

Further, these impressive corporate R&D “advantages” are of course the product of Big Pharma’s path-dependency: single blockbuster successes discovered in the ‘60s-70s led to early mergers in the ‘80-90s, and bigger mega-mergers in the late 90s-00s, to form the organizations of today. Bigger and bigger R&D budgets buying up more and more “things” in the quest for improved productivity. In a sense, the growth drivers underlying these mergers acted like the excessive hGH coming from Goliath’s pituitary – the scale and constant growth pressure was a product of a disease, not a design.

He makes the point earlier on that constraints on spending, while they may not feel like a good thing, may actually be one. More money and resources often leads to box-checking behavior and a feeling of "Since we can do this, we should". There's some institutional political stuff going on there, of course - if you've checked off all the boxes that everyone agrees are needed for success, and you still don't succeed, then it can't be your fault. Or anyone's. That's not to say that all failures have to be someone's fault, but this sort of thing obscures those times when there's actual blame to go around.

The post also goes into another related problem: if you have all these resources, that you've paid for (and are continuing to pay for to keep running), then if they're not being used, things look like they're being wasted. They probably are being wasted. So stuff gets shoveled on, to keep everything running at all times. It's certainly in the interest of the people in those areas to keep working (and to be seen to be keeping working). It's in the interest of the people who manage those areas, and of the ones who advocated for bringing in whatever process or technology. But these can be perverse incentives.

The main problem I have with the post is the opening analogy to the recent Mars mission launched by India. I have to salute the people behind the Mangalyaan mission - it's a real accomplishment, and if it works, India will be only the fourth nation (or group of nations) to reach Mars. But going on about how cheaply it was done compared to the simultaneous MAVEN mission from the US isn't a good comparison. Yes, the Indian mission is eight times cheaper. But it has one quarter the payload, and is targeted to last about half as long, and that's leaving out any consideration of the actual instrumental capabilities. It's also worth noting that the primary goal of the Mangalyaan mission is to demonstrate that India can pull it off; any data from Mars are (officially) secondary. I'd find the arguments about small and large Pharma more convincing without this comparison, to be honest.

But the larger point stands: if you had to start discovering drugs from scratch, knowing what's happened to other, larger organizations, are there things you would do differently? Emphasize more? Avoid altogether? A startup allows you to put these ideas into practice. Retrofitting them onto a larger, older company is nearly impossible.

Comments (28) + TrackBacks (0) | Category: Business and Markets | Drug Industry History

March 6, 2014

Biggest US Cities for Biopharma Funding, Versus Whole Continents.

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Posted by Derek

FierceBiotech has their roundup of the top areas of the US for venture capital funding in biopharma in 2013, and naturally, San Francisco and the Boston area are fighting it out for the top spot. But Oakland the the east Bay region are in a separate category, and if those are wrapped into the rest of SF, the whole Bay area wins out by a pretty good margin.

But, as was pointed out by Nick Taylor on Twitter, San Francisco (not even counting Oakland, etc.) and Boston together raised more biopharma VC funding than all of Europe put together.(See slide 10 here). SF raised $1.15 billion, and Boston $0.93, while all of Europe was about $1.9 billion.

And then there's the rest of the Bay area, San Diego, Seattle, NY/NJ/Philadelphia, the Research Triangle and everyone else. In medical research, the US is the startup capital of the world.

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March 4, 2014

Novartis's Stealthy Headcount Reductions

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Posted by Derek

Novartis has always been very, very quiet about their re-orgs and layoffs, to the point that when I and others write about them, we get hits from people at Novartis trying to find out what's going on. John Carroll at FierceBiotech has experience this as well, and he now has this story, from a reporter at the Swiss Tages-Anzeiger newspaper, that says that the company has actually eliminated between 3,000 and 4,000 jobs since last fall.

That comes to about a thousand in Europe (500 of them in Basel), 760 in the US (mostly in the sales force), and 400 during the closure of Horsham in the UK. My impression is that many of the others represent various manufacturing sites. Congratulations to the Zürich newspaper's Andreas Möckli for digging all this out - it could not have been easy. Here's my translation of the introductory paragraph:

It's a proven pattern for the drug company - Novartis is built up, worldwide, from various sites, but the whole extent of its actions are never communicated. While other companies inside (and outside) the industry announce their staff reductions with concrete numbers, Novartis is often content just confirming local media reports. At its Group level, the company has never announced any job cuts, even though jobs are lost in different locations. . .

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March 3, 2014

A Bit More Realism in Consulting

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Posted by Derek

That McKinsey piece I mentioned the other day, the one saying that big drug mergers have pretty much worked out just fine, has been pretty thoroughly torn apart in the comments section. A reader has sent along another report from one of their competitors in the high-priced consulting game, this overview from Deloitte.

Most readers won't find much in there that's new. But at least you won't find so many things in there that make you wonder what's in their water supply. And there are some non-rosy parts, for sure:

While, the U.S. Food and Drug Administration (FDA)
approved 39 new molecular entities in 2012, up from 31 in 2011 and the highest number since 199644 (Figure 4), a Deloitte United Kingdom Centre for Health Solutions analysis of the late-stage pipelines of the leading 12 life sciences companies indicates that R&D returns have been declining since 2010. Life sciences innovators are feeling the impact of rising costs and a decline in forecasted sales revenues driven by an age of austerity and the patent expirations of many blockbuster drugs. The cost of developing an asset from discovery to commercialization has increased by 18 per cent, from $1,094 million in 2010 to $1,290 million in 2013. Over the same time period, the forecasted peak sales (highest-value sales in a single year) of an asset have declined by over 40 percent, down from $816 million in 2010 to $466 million in 2013. Total forecast sales over the lifetime of a product have also declined since 2010 and, in 2013 are estimated to be $4.6 billion.

I don't know how much those estimates jump around under normal conditions, but those are certainly not good trends. The overall picture, while not relentlessly gloomy, is certainly not relentlessly happy. You can extract some combinations out of the report that sound good, though, sort of like those Hollywood movie-deal pitches - you know, "Ocean's 11. . .in space!". In this case, I think the pitch would be "Biosimilars. . .in China!".

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February 26, 2014

The Instructive Case of Galena Biopharma

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Posted by Derek

If you're in the mood for another reason why you should always be cautious about your biopharma investments, look no further than Galena Biopharma (GALE to its many clueless fans). I've been following this story over the last couple of weeks, and what a mess it is. Galena is a small company in Oregon with a few assets, including a cancer vaccine candidate. Its stock hovers in the low single digits, as is appropriate. But in December and January, it began to trade up, and up. From $2/share to $4. Then to $6, and then higher. And this on no particular news or change in the company's prospects, which for a stock like this is often a sign of "momentum" players getting involved. "Momentum" investing is a fancy name for "I'm buying this because it's going up", and the people who do this sort of thing are understandably anxious for you to buy some, too. They're also very, very unwilling to hear about anything that might cause the stock to go back down, because the proper direction for stocks, we must remember, is up. They only go down because of evil short bashers; everyone knows this.

Adam Feuerstein of TheStreet.com delivered a great big dose of that evil stuff (known to the rest of us as "reality") on February 12 with this article, which showed why the stock had been rising. The company was paying a PR firm to beat the drums for it, said drum-beating going as far as having people post multiple supposedly-independent articles on sites like Seeking Alpha under a list of pseudonyms.

An outfit called the "DreamTeam Group" was hired for the promotion. They run a stable of stock-touting web sites, full of wonderful tales about the companies that are paying them to say these wonderful things. And they spread the word on other sites (as above), and on Twitter, by e-mail and whatever means come to hand. If carrier pigeons come back into fashion, you can count on one fluttering down with a hot stock tip for you. And if you're greedy and stupid, you could see all this hype and convince yourself that a Great Opportunity is spawning right in front of you - why, all these people are buzzing about this hot little company, and money is right there for the taking. The only reason not to get in on a deal like this would be a lack of vision.

Galena's insiders do not lack vision. Indeed, they have proven beyond any doubt that money was in fact there for the taking. GALE peaked at nearly $8/share, but its directors and officers were unloading millions of dollars worth of shares into that market. And who could blame them? These are legal financial transactions between consenting adults, and if one set of those adults know what's going on and the other set doesn't, well, it's that kind of world, isn't it? A look at any jungle will show the larger predators eating the smaller ones, and God knows the Street isn't any different.

Yesterday GALE closed at about $4, and many of its "investors" are hopping mad about that, as a look at Feuerstein's mailbag will show. But here are some cynical people who figure that the company is actually worth about seventy-two cents a share. Reasonable observers can disagree about that figure. But if you want to argue that the company is cruelly undervalued at $4, you are probably not a reasonable observer. Or you bought at $7. Same thing.

Update: if you'd like to know why people are so skeptical of the prospects for Galena's vaccine, look no further than this comment. It's right on target.

Comments (64) + TrackBacks (0) | Category: Business and Markets | The Dark Side

February 25, 2014

InterMune Comes Through

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Posted by Derek

Back in 2010, I wrote about InterMune's drug for idiopathic pulmonary fibrosis, pirfenidone. The company's stock shot up on hopes that the compound would make it through the FDA, and then went straight back down when those proved ill-founded. The agency asked them for more data, and I wondered at the time if they'd be able to raise enough cash to generate it.

Well, they did, and the effort appears to have been worth it: the company says it met all its endpoints in Phase III, and is headed back to the FDA with what appears to be a solid story. Note that this press release, as opposed to the Pfizer one that I was mentioning earlier today, is full of data.

The company's stock has shot up, once again. If you've been an InterMune investor over the last few years, your fingernails are probably in bad shape and your combover is no longer plausible. The stock has had wild moves on rumors of takeovers (or lack of same) and anticipation of these clinical results. But good for them: they stuck with their compound, and it looks like it's paid off. And, just as a side note, good for people with fibrosis, too, eh?

Comments (4) + TrackBacks (0) | Category: Business and Markets | Clinical Trials

February 24, 2014

Big Drug Mergers: So They're OK, Right?

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Posted by Derek

Several people sent along this article from McKinsey Consulting, on "Why pharma megamergers work". They're looking (as you would expect) at shareholder value, shareholder value, and shareholder value as the main measurements of whether a deal "worked" or not. But John LaMattina, who lived through the Pfizer megamerger era and had a ringside seat, would like to differ with their analysis:

The disruption that the integration process causes is immeasurable. Winners and losers are created as a result of the leader selection process. Scars form as different research teams battle over which projects are superior to others. The angst even extends to one’s home life as people worry if their site will be closed and that they’ll be unemployed or, at best, be asked to uproot their families halfway across the country to a new research location. In such a situation, rumors are rife and speculation rampant. Focus that should be on science inevitably get diverted to one’s personal situation. This isn’t something that lasts just a few weeks. Often the integration process can take as much as a year.

The impact of these changes are not immediate. Rather, they take some years to become apparent. The Pfizer pipeline of experimental medicines, as published on its website, is about 60% of its peak about a decade ago, despite these acquisitions. Clearly, a company’s success isn’t assured by numbers, but one’s chances are enhanced by more R&D opportunities. I would argue these mergers have taken a toll on the R&D organization that wasn’t anticipated a decade ago.

Well, there have been naysayers along the way. "I think the Pfizer-Wyeth merger is a bad idea which will do bad things". "I'm deeply skeptical" is a comment from 2002. And here's 2008: "Pfizer is going to be having a rough time of it for years to come".

But here's where McKinsey's worldview comes in. Look at that last statement of mine, from 2008. If you just look at the stock since that date, well, I've been full of crap, haven't I? PFE has definitely outperformed the S&P 500 since the summer of 2008, and especially since mid-2011. There's your shareholder value right there, and what else is there in this life? But what might they have done, and what might the companies that they bought and pillaged have done, over the years? We'll never know. Things that don't happen, drugs that don't get discovered - they make no sound at all.

Comments (37) + TrackBacks (0) | Category: Business and Markets | Drug Industry History

February 13, 2014

Jobs, He Says

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Posted by Derek

If you want to hear the most perfectly conventional wisdom about STEM jobs, then come and pay heed to John Lechleiter, the CEO of Lilly. He's been giving speeches and writing op-eds for some time about the issue, and he has another one out in Forbes. It's the same one. It's always the same one:

Right now, there are over 600,000 unfilled manufacturing jobs in America.

Many employers are eager to hire. They’ve got capital set aside specifically to invest in expanding their workforce. And they have applicants — problem is, many of them simply don’t have the training and education needed to perform the work.

Largely to blame is the “STEM” skills gap, so-called after the core subjects of science, technology, engineering and math. It’s real and it’s growing. If we’re going to retain America’s greatest competitive advantage — our genius for innovation — we must inspire more kids to pursue STEM skills through education that’s engaging and effective.

It's hard to speak up against this without sounding like some sort of villain out of Charles Dickens. "Study science and math? Fah! Filling their heads with nonsense, I call it!". And I really can't argue against the idea that students should be taught these subjects, or against the idea that they certainly could be taught better than they are now. So why is Lechleiter going around saying that he's in favor of apple pie, over and over and over?

My guess is that this is only half the speech. Here's the other half, where he blames tax and immigration policy. Lilly, as is well known in the industry, has been shedding employees with relentless energy for many years now. They've offshored jobs, they've ditched whole departments and hired them back as lower-paid contractors, they've reduced head count in just about every way you can imagine short of launching people into space. But given the fix that the company's in, that's still not enough.

This history makes reading any of Lechleiter's editorials a bit hard to take. For example:

And just like other STEM-centric industries, biopharmaceutical firms face a scarcity of incoming talent. Nationally, private industry is expected to add about one million new STEM positions over the next decade. But there aren’t even enough qualified applicants to replace the Baby Boomers retiring right now.

How about the people who have been "retiring" from Eli Lilly over the past few years? How about the ones that are going to feel the recently-announced billion-dollar cutback in Lilly's R&D budget? They're going to do that without laying more people off? And that's after vast reductions have already taken place. In July 2004, the company had 45,835 employees. Now they say that they have "over 37,000", and keep in mind that they've added several thousand people just by acquisitions (i.e., not by creating new positions). So the total loss of jobs since 2004 is probably around 12,000.

And their CEO goes around talking about having trouble hiring people.

Comments (85) + TrackBacks (0) | Category: Business and Markets

February 11, 2014

Drug Discovery in India

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Posted by Derek

Molecular biologist Swapnika Ramu, a reader from India, sends along a worthwhile (and tough) question. She says that after her PhD (done in the US), her return to India has made her "less than optimistic" about the current state of drug discovery there. (Links in the below quote have been added by me, not her:

Firstly, there isn't much by way of new drug development in India. Secondly, as you have discussed many times on your blog. . .drug pricing in India remains highly contentious, especially with the recent patent disputes. Much of the public discourse descends into anti-big pharma rhetoric, and there is little to no reasoned debate about how such issues should be resolved. . .

I would like to hear your opinion on what model of drug discovery you think a developing nation like India should adopt, given the constraints of finance and a limited talent pool. Target-based drug discovery was the approach that my previous company adopted, and not surprisingly this turned out to be a very expensive strategy that ultimately offered very limited success. Clearly, India cannot keep depending upon Western pharma companies to do all the heavy lifting when it comes to developing new drugs, simply to produce generic versions for the Indian public. The fact that several patents are being challenged in Indian courts would make pharma skittish about the Indian market, which is even more of a concern if we do not have a strong drug discovery ecosystem of our own. Since there isn't a robust VC-based funding mechanism, what do you think would be a good approach to spurring innovative drug discovery in the Indian context?

Well, that is a hard one. My own opinion is that India only has a limited talent pool as compared to Western Europe or the US - the country still has a lot more trained chemists and biologists than most other places. It's true, though, that the numbers don't tell the story very well. The best people from India are very, very good, but there are (from what I can see) a lot of poorly trained ones with degrees that seem (at least to me) worth very little. Still, you've still got a really substantial number of real scientists, and I've no doubt that India could have several discovery-driven drug companies if the financing were easier to come by (and the IP situation a bit less murky - those two factors are surely related). Whether it would have those, or even should, is another question.

As has been clear for a while, the Big Pharma model has its problems. Several players are in danger of falling out of the ranks (Lilly, AstraZeneca), and I don't really see anyone rising up to replace them. The companies that have grown to that size in the last thirty years mostly seem to be biotech-driven (Amgen, Biogen, Genentech as was, etc.)

So is that the answer? Should Indian companies try to work more in that direction than in small molecule drugs? Problem is, the barriers to entry in biotech-derived drugs are higher, and that strategy perhaps plays less to the country's traditional strengths in chemistry. But in the same way that even less-developed countries are trying to skip over the landline era of telephones and go straight to wireless, maybe India should try skipping over small molecules. I do hate to write that, but it's not a completely crazy suggestion.

But biomolecule or small organic, to get a lot of small companies going in India (and you would need a lot, given the odds) you would need a VC culture, which isn't there yet. The alternative (and it's doubtless a real temptation for some officials) would be for the government to get involved to try to start something, but I would have very low hopes for that, especially given the well-known inefficiencies of the Indian bureaucracy.

Overall, I'm not sure if there's a way for most countries not to rely on foreign companies for most (or all) of the new drugs that come along. Honestly, the US is the only country in the world that might be able to get along with only its own home-discovered pharmacopeia, and it would still be a terrible strain to lose the European (and Japanese) discoveries. Even the likes of Japan, Switzerland, and Germany use, for the most part, drugs that were discovered outside their own countries.

And in the bigger picture, we might be looking at a good old Adam Smith-style case of comparative advantage. It sure isn't cheap to discover a new drug in Boston, San Francisco, Basel, etc., but compared to the expense of getting pharma research in Hyderabad up to speed, maybe it's not quite as bad as it looks. In the longer term, I think that India, China, and a few other countries will end up with more totally R&D-driven biomedical research companies of their own, because the opportunities are still coming along, discoveries are still being made, and there are entrepreneurial types who may well feel like taking their chances on them. But it could take a long longer than some people would like, particularly researchers (like Swapnika Ramu) who are there right now. The best hope I can offer is that Indian entrepreneurs should keep their eyes out for technologies and markets that are new enough (and unexplored enough) so that they're competing on a more level playing field. Trying to build your own Pfizer is a bad idea - heck, the people who built Pfizer seem to be experiencing buyer's remorse themselves.

Comments (30) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History | Who Discovers and Why

February 10, 2014

How the New BioPharma IPOs Have Been Doing

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Posted by Derek

Bruce Booth has an update on how all the recent biotech IPOs have been doing for their investors. Overall, pretty well - which is surely why the market still seems to be humming along, despite several predictions of a dip. Now, that word "investors" covers a lot of ground. You have founders, you have people involved in the various venture capital financing rounds, you have people who bought at the IPO price, and people who've bought in afterwards. These groups are going to have profoundly different returns, but in many cases, there's been something for people to be glad about all the way down the list. Here are some of Booth's conclusions:

Big winners are well represented. There are a number of very attractive “Top 10%” returns in this IPO window. Top decile in venture capital has historically been a >5x return across any sector, including tech. These are the 1 in 10 outcomes every VC would love to have, and any LP would love their managers to deliver.

The spread of outcomes is considerable. There are as many top decile outcomes as there are money-losing investments. There are a good number of companies that got public at valuations that are significant fractions of their total invested capital. These are clearly the laggards whose shareholders hope the public markets will somehow rescue over time.

Post-IPO performance has been a big contributor to returns. The returns into the pricing of most IPOs have been modest – but a majority of the offerings have traded up, a few of them even doubling or tripling since their offerings. . . It's clear to see many of the high flier IPOs have driven the bulk of their “on paper” returns in the after-market. The hope of course is many more biotechs will outperform in future post-IPO trading.

There's a lot more data over at Bruce's site. Those post-IPO performance numbers are, naturally, subject to constant revision every trading day, and no one's made any money at all until they've said "sell". But overall, this is probably better performance than a lot of people would have predicted.

Comments (3) + TrackBacks (0) | Category: Business and Markets

February 6, 2014

Crowdfunding Independent Research

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Posted by Derek

I've written about Ethan Perlstein's work here before, and now I note that the Wall Street Journalhas an article about his crowdfunding research model.

Ethan O. Perlstein for years followed a traditional path as a scientist. He earned a Ph.D. in molecular biology from Harvard, spent five years doing postdoctoral research at Princeton and led a team that published two papers on pharmacology.

But last year, Dr. Perlstein was turned down by 27 universities when he sought a tenure-track position to set up his own lab. Hundreds of candidates had applied for a small number of positions, the universities said, a situation made worse by cuts in federal research funding.. . .

. . .Still, Dr. Perlstein's approach is unusual because he isn't raising money to support a discrete project or product. "Ethan is doing basic research," said Jessica Richman, co-founder of Ubiome, a health and wellness startup that raised more than $350,000 through crowdfunding on a site called Indiegogo. "He is selling the idea that he is an independent scientist doing research."

Dr. Perlstein plans to launch his public appeal for Perlstein Lab this week on a site called AngelList. Perlstein Lab will focus on finding drugs to treat lysosomal storage diseases, in which cells fail to produce and recycle waste. The materials accumulate in cells and can cause a range of problems, including death.

Here's his profile page on AngelList, which seeks money from what the SEC calls "qualified" investors (high net worth individuals). I think that's probably a good idea - anyone who's done "angel" type investments before will have a more realistic idea of the chance of any return (you'd hope). Crowdfunding research, in general, is something that interests me a great deal, although it's easy to think of potential problems.

Comments (12) + TrackBacks (0) | Category: Business and Markets | General Scientific News

AstraZeneca Cutting Back - Some More

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Posted by Derek

AstraZeneca has announced that they're cutting back, yet again. 550 more jobs are being shed, but (unhelpfully) they're not saying what divisions of the company will shrink. More details as they arise - I would assume (or at least hope) that the folks working at AZ have more details, but you can't be sure of that, can you? This company and Eli Lilly continue to be in the worst shape among the big pharmas.

Comments (18) + TrackBacks (0) | Category: Business and Markets

February 4, 2014

Overqualified For the Job

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Posted by Derek

Here's an uncomfortable (but necessary) topic in the chemistry job market: a reader tells me that his company's search for someone with 2 to 5 years experience brought in (as you might expect) a flood of applications from people with much more than that (10 to 15 years). The problem is, the job (as it stands) isn't going to use most of the skills and knowledge that they've built up. It's a junior position, and they're not junior to anyone.

So here are the questions: is it OK to even apply for positions in this way? Is it (on the other end) appropriate to offer someone a "downgraded" position like this? Can it even work out if you do, or will the person taking the job not be able to fit into that role?

I'm not sure I have any good answers. My guess is that most people would have trouble fitting in this way, and that the situation would eventually result in a lot of discomfort on both sides. But on the other hand, a job is a job, and there aren't too many of them out there. On the gripping hand, though, (old science fiction reference there), less-experienced people need jobs, too, and shouldn't they be able to compete for the ones that they're best qualified for?

I've seen a variant of this situation, one that I most certainly do not recommend. At a company I know of, a person was hired into a Master's level position, and did fine. They eventually revealed, though, that they had had a PhD all along, and applied for a vacant position at that level. This strategy got them fired, though, for having lied on their original application (the company's position, which I can understand, was that if they didn't fire someone for this, how could they fire the next person who lied about something else?) In the end, people found this person a job at another smaller company in the area, so the exit wasn't as hard as it could have been, but it was still a mess.

But the questions above don't apply to stealth resumés - these are people who are being completely open about their overqualifications. So what to do?

Comments (77) + TrackBacks (0) | Category: Business and Markets

February 3, 2014

Novartis Does A Big, Quiet Reshuffle

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Posted by Derek

That AstraZeneca news about cutting back in India should be balanced against this report that Novartis is doing the opposite. It looks like the company is (A) telling everyone that their global head count will remain roughly the same, and (B) opening up a center in Hyderabad that can employ up to 8,000 people.

These jobs don't look like bench positions, though - more IT, clinical trial monitoring, HR and other office positions. But if both of those conditions hold, there's going to be a lot of reshuffling going on, from higher-wage areas to Hyderabad. Economically, it makes sense, as long as there aren't too many inefficiencies introduced along the way. And like every other arbitrage opportunity, it will go on until the price differential closes, which I hope, for everyone involved, is more a matter of wages going up as India's economy improves.

Comments (21) + TrackBacks (0) | Category: Business and Markets

January 31, 2014

How Not to Invest in Biopharma

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Posted by Derek

Did these people really take their life's savings and load them into a tiny biotech stock on the basis of a rumor? That's what these Provectus investors say, and they're writing to blame Adam Feuerstein when things went bad. If true, these are the investing equivalent of the "Hey, hold my beer and watch this!" stunts that win Darwin Awards. I can't even imagine.

Comments (16) + TrackBacks (0) | Category: Business and Markets

January 29, 2014

AstraZeneca Closes a Lab - In India This Time

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Posted by Derek

Now here's a story that you might not have expected to see a few years ago: AstraZeneca is closing a research site in Bangalore, with some of its functions (tropical disease work) to move back to the UK. I'm not sure what this says about Bangalore, tropical diseases, or AstraZeneca (who have plenty on their agenda), but it does have a dog-bites-man man-bites-dog feel to it, rightly or not. Edit: I apparently am confused about who is normally gnawing on whom.

Comments (24) + TrackBacks (0) | Category: Business and Markets

What STEM Shortage? Where? How?

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Posted by Derek

Most readers here know how brutal the employment situation is for chemists (especially those involved in drug discovery). Knowing that and seeing constant headlines about the crippling shortage of so-called STEM workers is always hard to take, but there's always the danger of extrapolating chemistry (especially organic chemistry) to science and engineering in general. Surely the electrical engineers are finding jobs, right?

Surely not. The number of employed electrical engineers in the US went down by 10% last year. And according to Ron Hira at the Rochester Institute of Technology, there's more:

The number of employed software developers, the largest IT occupation segment, increased by only 1.75%, to 1.1 million, a gain of 19,000. The unemployment rate for developers last year was 2.7%, which is still elevated, according to Hira.

Jobs for computer systems analysts increased by 35,000, to 534,000, an increase of 7%, but Hira said it is the most common H-1B occupation and that nearly all those gains went to H-1B visa holders. . .

. . .Claims of shortages of STEM (science, technology, engineering and math) workers "have no support in fact and no connection to reality, " Hira said. "The NASDAQ is at its record high in more than a decade, only at the height of the dot-com bubble was it higher." adding that hiring for electronics engineers should be booming.

There are plenty of other numbers that say the same thing: there is no shortage of scientists and engineers in this country. There may still be some specialties where it's hard to find good people, although I don't know what they are and I'd like to see proof of that first, but overall there is no STEM shortage. Unless, of course, you ask the head of PhRMA. Or Eli Lilly's CEO. Or Bayer. Or the schools that profit by driving more people into science and engineering studies. Or the President's Council of Advisors on Science and Technology. Or Accenture. Or Mark Zuckerberg.

We have a serious disconnect here. Is there a shortage of skilled labor, or just a shortage of really cheap skilled labor? Some of that disconnect may be on display later this afternoon, as David Harwell of the ACS Career Management and Development office starts taking questions live over at Reddit Science. Might be worth a look. . .

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January 22, 2014

Novartis Continues Closing and Rearranging

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Posted by Derek

Novartis says that it's cutting about 500 positions in Switzerland, in what they're saying are support and pharma development roles. They're also closing a plant in Suffern, NY. The company is famously tight-lipped about this sort of thing, so there really aren't any details on whether this is a continuation of last year's rearrangements or what. More information if any shows up!

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January 17, 2014

Abandoning the Chinese Drug Market

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Posted by Derek

Here's one of those stories that makes you wonder: one-off or beginning of a trend? A generic drug company, Actavis, has decided to get out of the Chinese market. Too much hassle for too little money, and that last part is something you don't hear about China all that often. (For centuries, entrepreneurs of all kinds have dreamed about "What if just one out of a thousand of them bought my stuff. . .")

“It is not a business friendly environment,” Bisaro said at the JPMorgan Chase & Co. health-care conference in San Francisco. “If we’re going to allocate capital, we’re going to do so where we can get the most amount of return for the least amount of risk. And China is just too risky.”

. . .Given Actavis’s small presence in China, “it wasn’t worth the aggravation, the frustration or the concern,” he said.

Bisaro said there doesn’t appear to be a level playing field, which makes it hard for companies to compete. “You need a certain consistency in application of rules, and I’m not certain China has achieved that consistency yet.”

Generic profit margins are lower, so you won't see the research-based drug companies coming to this conclusion any time soon. But neither is it impossible. Companies would hate to pass up the Chinese market, but there's a set point for everything.

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January 15, 2014

"We Had to Clear Out Some Chemists"

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Posted by Derek

Matthew Herper at Forbes got a phone interview in with Merck's Roger Perlmutter, and some interesting things came up:

Perlmutter has praised chemistry – the ability to synthesize new drug molecules, as one of Merck’s core strengths. Which is why rumors that he’s been laying off chemists came as a surprise. And the rumors are true.

“It is the case that we have a superb chemistry organization, and having coming back I’m impressed with the progress the chemistry organization has made in terms of the compositions of matter,” he says. In hepatitis C, in particular, he notes that molecule are 700 to 1,000 daltons, way bigger than the company would have previously considered using. But he says he needed to clear out some chemists to hire more biologists.

“The reality is, as every chemist knows, you need great biologists to identify where to focus and we need to strengthen our biology capabilities and that just requires a different kind of investment. and we need to make headroom — it’s kind of a zero sum game. I was not happy, I don’t want to fire people, but on the other hand I know we have to live within our means.”

It seems that he could drop the "kind of" in front of "zero sum game", if that's what's really going on (and it may well be). It's true that you can have the wrong balance of chemists to biologists, and you can have it in either direction. We can argue (and people do) about what the proper settings are, but I don't think that anyone would dispute that it's possible to go too far. Whether Merck's research organization was, in fact, that imbalanced is open to argument, too, of course.

But when I hear this sort of rationale, I can't help but think of Randall Jarrell's lines: "You can't break eggs without making an omelette / - That's what they tell the eggs."

Comments (67) + TrackBacks (0) | Category: Business and Markets

A Short Guide to the JP Morgan Conference

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Posted by Derek

The J. P. Morgan conference has been going on this week, with biopharma companies showing their wares to the investment community. Bruce Booth is out there (with many another venture capitalist), and you can tell from this post that he's been around that track before. I'm surprised he stopped at only ten white lies:

6. “We’ve got a ton of Pharma interest in this deal.” Translation: Our next meeting is actually with a Pharma company. Translation #2: You should have seen me work the room at the Pharma Reception last night.

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January 13, 2014

Alnylam Makes It (As Does RNAi?)

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Posted by Derek

I've written about Alnylam, one of the flagship RNA interference companies, a few times around here. A couple of years ago, I was wondering if they'd win the race to come up with results that would keep the doors open.

Well, if you haven't been keeping up with the news in this space, they made it. Sanofi has just bought a large stake in the company, on the strength of the recent clinical results with patisiran, an RNAi therapy for the rare disease transthyretin-mediated amyloidosis (ATTR). Alnylam has a lot on their schedule these days, and the Sanofi deal will provide a big boost towards getting clinical data on all these ideas. Congratulations to them, and to RNAi in general, which has had a lengthy (and often overhyped) growth phase, and now might be starting to realize its promise.

Update: more on the story here.

Comments (7) + TrackBacks (0) | Category: Business and Markets | Drug Development

January 6, 2014

The 2013 Drug Approvals: Not So Great?

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Posted by Derek

So we finished the year with 27 new drugs approved. Compared to the 39 approvals the year before, is that a reversion to the mean, a sudden downturn, a meaningless fluctuation, or what?

John Carroll seems to be in the "something to worry about" camp at FierceBiotech:

The wave of new drug approvals that had been building at the FDA has broken. According to the official tally of new drug and biologics approvals at the agency, the biopharma industry registered only 27 OKs for new entities in 2013--a sharp plunge from 2012's high of 39 that once again raises big questions about the productivity and sustainability of the world's multibillion-dollar R&D business.

After 2012 some experts boasted that the industry had turned a corner, with the agency boasting that it was outstripping the Europeans in the speed and number of new drug approvals. But for 2013 the numbers look a lot closer to the bleak average of 24 new approvals per year seen in the first decade of the millennium than the 35 per year projected by McKinsey through 2016.

And here's Bernard Munos at Forbes on the same topic. He thinks that looking at the industry as a monolith might be obscuring something:

Overall, 2013 was good or great for half of big pharma, and forgettable for the rest. Is this the beginning of a split in the group that has long dominated the industry? Some companies may counter that approval statistics is a lagging indicator that reflects past performance and not the promise of their pipelines. If one looks at FDA’s Breakthrough Designations, however, which is a leading indicator of pipeline quality, they tend to show the same picture, and cluster around the companies that have been most successful. . .Success seems to beget success, which suggests that today’s winners may also be tomorrow’s winners.

One thing remains worrisome: 11 new drugs per year — the average big pharma output for the last 5 years — is not enough to support these companies’ $370 billion of current sales, especially since only 3 or 4 will become blockbusters. The giddy promises to deliver 2 drugs per year consistently have not materialized, and there is no indication that they will. . .

(You can tell he's never gotten over Lilly's promise some years ago to deliver approvals on that schedule, and who could blame him)? As for me, I wish that I had some sort of crystal-ball insight to deliver, but I don't. Drug discovery (and thus NDA filings and approvals) seems to be such a statistically noisy process that it's hard to draw conclusions from a year or two of data. Let's watch what happens this year and see both what the numbers are and how the FDA and the companies involve try to interpret them. One thing to note already is how some people were ready to use the 2012 approvals as clear evidence that the industry was getting more productive - are the 2013 numbers such clear evidence in the other direction, or not?

Comments (26) + TrackBacks (0) | Category: Business and Markets | Regulatory Affairs

January 2, 2014

Grading the Drug Companies

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Posted by Derek

Here are Matthew Herper's grades for the big pharma/biotech companies in 2013. The bottom two companies will probably not come as a surprise to readers of this site (or to anyone who's been paying attention). Number One, while a reasonable pick, is one that you could have probably surprised folks with a few years ago. . .

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December 19, 2013

Bristol-Myers Squibb Exits Diabetes

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Posted by Derek

As the Wall Street Journal reported last night, Bristol-Myers Squibb is getting out of the diabetes business entirely, selling its collaboration with AstraZeneca back to AZ.

As part of the transaction, and subject to local consultation and legislation, Bristol-Myers Squibb and AstraZeneca anticipate that substantially all employees of Bristol-Myers Squibb dedicated to the diabetes business will be transferred to AstraZeneca. A number of R&D and manufacturing employees dedicated to diabetes will remain with Bristol-Myers Squibb to progress the diabetes portfolio and support the transition for these areas. Bristol-Myers Squibb will work closely with AstraZeneca to ensure a smooth transition.

What happens once that diabetes portfolio is "progressed"? I haven't heard details yet, and they may not even be available. Given the recent moves by BMS, though, this announcement shouldn't come as a huge surprise. It does say some interesting things about the positions of the two companies. BMS sees big opportunities in its oncology portfolio, and by comparison, the diabetes business looks slow-moving and too expensive for the return it offers. AstraZeneca, by contrast, needs all the help it can get. Actual drugs that are bringing in actual money, and whose patents are not expiring next Tuesday? Not bad.

Comments (21) + TrackBacks (0) | Category: Business and Markets | Diabetes and Obesity

December 17, 2013

A Look Under the VC Hood For 2013

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Posted by Derek

Here's an interesting year-end list - from Bruce Booth at Atlas Venture, it's the list of seed-stage biotech companies that they've funded this year. Unless you're a very, very close follower of the field, you'll never have heard of most (or all) of them, but all the biotech/small pharma companies you've heard of have been at this stage at some point.

What's also interesting is the upfront admission that only about half of these, at the most, are going anywhere, and (as Booth says) some of them are "already trending negative". In that business, if some of your bets aren't "trending negative", then you aren't making enough of them, because no one's good enough just to put money down on the winners.

Comments (1) + TrackBacks (0) | Category: Business and Markets

GlaxoSmithKline's New Sales Practices

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Posted by Derek

GSK has announced that they're going to change the way their sales and marketing organization does business, and how they compensate people in it. They're removing all individual numerical targets for their sales reps worldwide, for one thing, following up on changes they made to the system in the US a couple of years ago. I don't know how that's worked out here, in the real world, so I can't comment much on that one.

A big change, though, is that the company has announced that it:

". . .will move to end the practice of paying healthcare professionals to speak on its behalf, about its products or disease areas, to audiences who can prescribe or influence prescribing.

GSK will also stop providing financial support directly to individual healthcare professionals to attend medical conferences and instead will fund education for healthcare professionals through unsolicited, independent educational grant routes.

I think that this is a necessary part of getting the industry's image back, to the extent that this can be done. Here's a possibly useful rule of thumb: if the headline about you stopping something looks embarrassing all by itself ("GlaxoSmithKline to Stop Paying Doctors for Endorsements"), you probably shouldn't have been doing it in the first place.

The company says that they will continue to pay people for work on clinical trials and the like (and I don't see how anyone could do otherwise), but the speak-up-for-us-you-key-opinion-leaders stuff will not be missed. Or shouldn't be. But there's another part of the press release I found interesting:

The company has committed to disclose the payments it makes to healthcare professionals and already does so in several countries including the USA, Australia, UK, Japan and France in line with locally agreed government or industry association standards. GSK will continue to disclose the payments it makes for clinical research advisory activities and market research in these countries and will also continue to work towards transparency in other countries as industry associations or governments establish specific guidelines for disclosure.

Now, there's a country that's missing from that list. . .one where payments are not required to be disclosed and "locally agreed" standards might be a bit harder to get a handle on. Where could it be?

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A Year-End Review at Xconomy

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Posted by Derek

Here's another look back at biotech's state in 2013, from Luke Timmerman. He's using the well-known "hype cycle" to evaluate where various topic and companies stood: are they in the Peak of Inflated Expectations, the Trough of Disillusionment, the Slope of Enlightenment, or the Plateau of Productivity? (These always sound like locations out of John Bunyan to me, which is not altogether inappropriate).

I think he's right that the hottest area right now are the immunotherapies, which have been notching up some dramatic results. But much as I'd like them to, I don't think that they're going to be able to march through the rest of the oncology field in similar fashion. (And yes, I know that I'm asking to put small-molecule oncology out of business with a wish like that. Let's put it this way - if I get cancer, will I be glad that someone has a treatment for it, even if it wasn't from my own field?)

I also note that he has Moderna (and messenger RNA-based therapies in general) on the hype list. They made a big splash back in March, and since then things have been pretty quiet (as they probably should be - those guys have a lot of work to do). As I mentioned at the time, my natural wariness at this-changes-everything platforms is cut, in small proportions, with the knowledge that somethings these things do change everything. We'll see, but I'll bet we won't see in 2014.

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December 12, 2013

Eye of the Beholder Stuff

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Posted by Derek

I'm sure that many readers here will be interested to hear that (according to some outfit called CareerBliss.com) the happiest company in America to work for is. . .Pfizer. Probably makes you happy just to hear about it, doesn't it?

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Worst Biotech CEO Time

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Posted by Derek

I always enjoy this one: time to vote on Adam Feuerstein's "Worst Biotech CEO" awards for this year. There are, as is so often the case, some real stinkers on the list. Tough choices await.

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December 5, 2013

Drug Companies In Great Britain: Ease Up, Won't You?

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Posted by Derek

The tension between drug companies and regulatory agencies is constant. It would be there even if no one cared a bit what drugs cost, because you can talk about safety and efficacy without ever mentioning a price. But since we do care about drug prices, and are coming to care more about them with every passing month, the tension is higher than ever. The questions aren't just "Is this drug safe?" or "Is this drug efficacious", or even "Is this drug relatively safe compared to its level of efficacy". You get into the really hard ones like "Is this drug's level of efficacy worth its price?"

Great Britain's NICE is at the forefront of these arguments, and some of the largest drug companies have recently been arguing back. In a public letter, they're calling on the Prime Minister to do something about the way the NICE approves new compounds:

We all accept there are increasing pressures on NHS spending, but there is a prevailing myth that medicines are expensive. In fact, spend on medicines was less than 10pc of total NHS expenditure in 2011. Britain pays less for its medicines than almost anywhere else in Europe. Over £7bn has already been saved from the medicines bill. No other part of the NHS is saving the taxpayer money on such a scale.
Medicines should not just be seen as a cost. They are an investment and an essential part of improving patient outcomes. Yet, fewer than one in three medicines have been recommended by the National Institute for Health and Care Excellence (NICE) for use in the NHS in line with their licence since 2005. And the proportion of medicines refused by NICE is only increasing.

The last straw seems to have been a recently-announced "voluntary" agreement with drug companies to freeze the costs of supplying drugs to the National Health Service. That was voluntary, in the sense of there would be mandatory price cuts if they didn't comply. That kind of voluntary. In turn, the drug companies' letter also has a part that might be titled "And If You Don't. . ." It goes like this:

. . .At a time when there is fierce global competition to attract investment in life sciences, the commercial environment is critical. The Government must work harder to get this right. It’s important that the impact that our medicines have on saving and improving people’s lives, and the innovation, economic stimulus and jobs that they deliver, is valued.

The key part is the "fierce global competition" phrase. I'd translate that as "You know, we don't have to employ people in this country. There are other places to go." Mind you, at least as far as medicinal chemistry is concerned, most companies in the UK seem to have already made good on that threat, even before the threat was made. But there are plenty of other jobs besides med-chem. We'll see how the UK government reacts.

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December 2, 2013

Eisai Cuts Back

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Posted by Derek

Getting the week off to a bad start is this news from Eisai. They're stopping small-molecule work at their site in Andover, and (like everyone else, it seems) chopping med-chem at their UK site as well. Worldwide, it looks like a loss of 130 positions.

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November 26, 2013

The Freshness Index

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Posted by Derek

One way to look at a drug company's pipeline and portfolio is the "Freshness Index" - how much of its sales are coming from products approved within the past five years. Here's Bernard Munos earlier this year on this topic, where he shows that (too much) revenue lately has been coming from older products. At the time, the figures for the big companies started off with Novartis (19% "fresh" sales), GlaxoSmithKline (12%), J&J (11.8%) and Pfizer (10%).

I bring this up because there's a new look at the freshness index. This one has only products from 2010 or later, and year-to-date sales figures. Under those conditions, it's J&J in the lead (23.4% of sales), then Novartis (17.8%), and Novo Nordisk (13.6%). Now, Novo was not in Munos's list, so I can't say if there's been much of a change there or not, but I find the change in J&J's figures interesting. I don't think that's all due to new approvals - is it older stuff slipping off the list? The new list also has GSK down neat the bottom at 2.3% "fresh", which shows you how much the cutoffs matter to these assessments.

One thing both lists agree on, though, is Eli Lilly. They're at the bottom in both, showing 0.8% of their sales coming from anything approved since 2010. That can't be good, and it isn't. AstraZeneca, Pfizer, Merck, and Sanofi are all in the single digits as well. So's Roche, but their long-running Genentech-driven biotech products make up for that. AZ and Lilly don't exactly have that cushion.

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November 18, 2013

Cuts at Shire

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Posted by Derek

I'm hearing reports of re-organization and worse at Shire's UK R&D today (Basingstoke). There had been reports in the press earlier this month, but things seem to be underway. The medicinal chemistry situation in the UK is surely the worst it's been in living memory. . .

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November 14, 2013

Layoffs and Personal Finance

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Posted by Derek

A reader sent along a note about some of the recent layoffs we've been seeing across pharma/biotech companies. Different organizations have very different ways of handling things like stock units and options, and in a layoff one of the key variables is the vesting schedule. Remember, if you have compensation of this sort that hasn't vested, it isn't yours. It may show up in your statements (albeit under its own category), and you will have seen the announcements of it being awarded to you, but until this stuff vests that's all provisional.

I think that most people realize that part, although if you don't, it's going to come as a nasty surprise. What seems to have taken some people unaware recently, though, is that companies have different schedules for vesting the employer match contributions in 401(k) accounts. Some companies vest immediately, but those are probably not a majority. The rest follow different schedules, and if you are laid off, that unvested money is going to disappear unless the company specifically changes its mind about that.

Now that said, there's not much you can do about this, but it's worth knowing the real situation in advance so you can plan accordingly. Seeing money disappear from their retirement accounts was something of a shock to people in these recent layoffs, from what I'm told, making a bit situation just that much more painful.

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No More Stack Ranking at Microsoft

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Posted by Derek

The topic of "stack ranking" came up around here recently, so I wanted to pass on some news in this area. Microsoft, one of the most notorious practitioners, has apparently decided to stop. It's not clear to me just what they're replacing it with, but whatever system they're trying out could hardly be more demoralizing than what it's replacing. Drawing raises and bonuses out of a bingo cage would be preferable - at least then people wouldn't be at each other's throats.

Even if all members of a team performed well that year, the manager was required to designate a set percentage as underperformers — a practice that drew fire from employees. Many thought the system rewarded internal politicking, withholding of information and back-stabbing, rather than rewarding innovation or cooperation.

That review system has been blamed by some for causing Microsoft to fall behind other tech companies in the past decade in key areas such as mobile computing.

In an email to employees Tuesday, Lisa Brummel, Microsoft’s head of human resources, wrote that the new review process will now have “no more curve.”

“We will continue to invest in a generous rewards budget, but there will no longer be a predetermined targeted distribution,” she wrote. “Managers and leaders will have flexibility to allocate rewards in the manner that best reflects the performance of their teams and individuals, as long as they stay within their compensation budget.”

In addition, she wrote, there will be “no more ratings. This will let us focus on what matters — having a deeper understanding of the impact we’ve made and our opportunities to grow and improve.”

It's a constant struggle, figuring out how to reward people without providing perverse incentives. And it's a problem with a lot of range, too, when you consider how it applies to businesses, schools, welfare policy, and many other areas. It's probably a safe bet that there's no general solution, but that doesn't give people an excuse to stick with something that's worse than neutral. The "two man enter, one man leave" aspect of a rank-and-yank system is definitely that. (As a side issue, it also assumes that the rating process is accurate enough to make calls like this, which is very much debatable in many organizations). Maybe Microsoft will start a trend here. . .

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November 8, 2013

The Other Shoe Drops at Ariad

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Posted by Derek

Ever since Iclusig (ponatinib) (note: fixed that name as an update) ran into trouble with blood-cloting side effects, Ariad has had a huge uncertain cloud blocking out its sunlight. Now that the FDA has told them to take the drug off the market completely, it was clear what was going to happen. Happen it has: the company is laying off a large part of its workforce.

It's very much in doubt whether Iclusig will ever come back. Update: in Europe, the EMA has now said that Iclusig can remain on the market "with increased caution").And if it doesn't, it's very much in doubt whether Ariad will, or how long that might take. There's a large, mostly-completed building around the corner from me covered in blue-green glass that was going to be the home of a larger, more solvent Ariad, and no one knows what's going to happen to that, either. It's a rough business.

Update: turns out the blue-green glass one was going to be Aveo, which cratered earlier this year. Who's going to occupy that, one wonders? Ariad's is the less-complete large framework going up across from the (incongruous) Mormon church. That's a pretty large building, or will be, and you wonder who will end up in there. There are so many biopharma construction sites in this town that you need a guidebook.

Comments (23) + TrackBacks (0) | Category: Business and Markets | Cancer | Regulatory Affairs

Exiting Two Therapeutic Areas

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Posted by Derek

So Bristol-Myers Squibb did indeed re-org itself yesterday, with the loss of about 75 jobs (and the shifting around of 300 more, which will probably result in some job losses as well, since not everyone is going to be able to do that). And they announced that they're getting out of two therapeutic areas, diabetes and neuroscience.

Those would be for very different reasons. Neuro is famously difficult and specialized. There are huge opportunities there, but they're opportunities because no one's been able to do much with them, for a lot of good reasons. Some of the biggest tar pits of drug discovery are to be found there (Alzheimer's, chronic pain), and even the diseases for which we have some treatments are near-total black boxes, mechanistically (schizophrenia, epilepsy and seizures). The animal models are mysterious and often misleading, and the clinical trials for the biggest diseases in this area are well-known to be expensive and tricky to run. You've got your work cut out for you over here.

Meanwhile, the field of diabetes and metabolic disorders is better served. For type I diabetes, the main thing you can do, short of finding ever more precise ways of dosing insulin, is to figure out how to restore islet function and cure it, and that's where all the effort seems to be going. For type II diabetes, which is unfortunately a large market and getting larger all the time, there are a number of therapeutic options. And while there's probably room for still more, the field is getting undeniably a bit crowded. Add that to the very stringent cardiovascular safety requirements, and you're looking at a therapeutic that's not as attractive for new drug development as it was ten or fifteen years ago.

So I can see why a company would get out of these two areas, although it's also easy to think that it's a shame for this to happen. Neuroscience is in a particularly tough spot. The combination of uncertainly and big opportunities would tend to draw a lot of risk-taking startups to the area, but the massive clinical trials needed make it nearly impossible for a small company to get serious traction. So what we've been seeing are startups that, even more than other areas, are focused on getting to the point that a larger company will step in to pay the bills. That's not an abnormal business model, but it has its hazards, chief among them the temptation to run what trials you can with a primary goal of getting shiny numbers (and shiny funding) rather than finding out whether the drug has a more solid chance of working. Semi-delusional Phase II trials are a problem throughout the industry, but more so here.

Comments (58) + TrackBacks (0) | Category: Business and Markets | Diabetes and Obesity | Drug Development | The Central Nervous System

November 6, 2013

Now Novartis-Emeryville?

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Posted by Derek

Novartis, again. The company had already announced some cuts at their Emeryville site, but remarks in the comments section (and communicated to me directly) indicate that something even more serious is underway out there now.

More details as things become clearer. And that brings up another item: the Novartis Horsham closure earlier this week appears (again, by comments here and by personal communication) to have not been announced to the rest of the company at the time. A number of people around the organization seem to have heard about it through this site, which does not make a lot of sense to me. When I went with the blog post on this, I assumed that it was known at least inside Novartis, but apparently not.

That's something for companies to think about. This is 2013. People have phones and they have e-mail, and they've had them for a long time. Word gets out quickly. These things show up here, but they show up in other places, too, and will surely go on doing so. Leaving it to the grapevine when a press release could clear things up seems like an odd decision, but having never had to decide on a site closure myself, perhaps I'm missing something.

Update: here's the Boston Globe with an overview of what seems to be going on.

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BMS Reshuffling

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Posted by Derek

Damn it all, we just got through with Novartis closing down the Horsham site, and now I'm hearing, from several sources, that something is up at Bristol-Myers Squibb. Tomorrow and/or Friday, word has it, some sort of rearrangement is going to be announced, supposedly with loss of head count. Supposedly concentrated by therapeutic area, but who knows in these things? More details will surely be coming along.

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November 5, 2013

Novartis Closing Horsham

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Posted by Derek

The Novartis site at Horsham (UK) appears to be closing down. I heard night that there was to be a (rather sudden) meeting of all the managers there today, and now I'm getting word that they've been told that the entire site will be shuttered. The company had already been talking about "redeveloping" the site, but this would seem to come as a worst-case surprise. More details as they emerge.

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November 1, 2013

Bayer's Here to Tell You That There's a STEM Shortage

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Posted by Derek

So says Chemjobber today. He does a good job taking this apart, and it might not surprise you to find out that the company is actually able to find people when it offers a bit more money. It's like there was some kind of market or something.

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October 31, 2013

Merck's Aftermath

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Posted by Derek

So the picture that's emerging of Merck's drug discovery business after this round of cuts is confused, but some general trends seem to be present. West Point appears to have been very severely affected, with a large number of chemists shown the door, and reports tend to agree that bench chemists were disproportionately hit. The remaining department would seem to be top-heavy with managers.

Top-heavy, that is, unless the idea is that they're all going to be telling cheaper folks overseas what to make, that is. So is Merck going over to the Pfizer-style model? I regard this as unproven on this scale. In fact, I have an even lower opinion of it than that, but I'm sure that my distaste for the idea is affecting my perceptions, so I have to adjust accordingly. (Not everything you dislike is incorrect, just as not every person that's annoying is wrong).

But it's worth realizing that this is a very old idea. It's Taylorism, after Frederick Taylor, whose thinking was very influential in business circles about 100 years ago. (That Wikipedia article is written in a rather opinionated style, which the site has flagged, but it's a very interesting read and I recommend it). One of Taylor's themes was division of labor between the people thinking about the job and the people doing it, and a clearer statement of what Pfizer (and now Merck) are trying to do is hard to come by.

The problem is, we are not engaged in the kind of work that Taylorism and its descendants have been most successfully applied to. That, of course, is assembly line work, or any work flow that consists of defined, optimizable processes. R&D has proven. . .resistant to such thinking, to put it mildly. It's easy to convince yourself that drug discovery consists of and should be broken up into discrete assembly-line units, but somehow the cranks don't turn very smoothly when such systems are built. Bits and pieces of the process can be smoothed out and improved, but the whole thing still seems tangled, somehow.

In fact, if I can use an analogy from the post I put up earlier this morning, it reminds me of the onset of turbulence from a regime of laminar flow. If you model the kinds of work being done in some sort of hand-waving complexity space, up to a point, things run smoothly and go where they're supposed to. But as you start to add in key steps where the driving forces, the real engines of progress, are things that have to be invented afresh each time and are not well understood to start with, then you enter turbulence. The workflow become messy and unpredictable. If your Reynolds numbers are too high, no amount of polish and smoothing will stop you from seeing turbulent flow. If your industrial output depends too much on serendipity, on empiricism, and on mechanisms that are poorly understood, then no amount of managerial smoothing will make things predictable.

This, I think, is my biggest problem with the "Outsource the grunt work and leave the planning to the higher-ups" idea. It assumes that things work more smoothly than they really do in this business. I'm also reminded a bit of the Chilean "Project Cybersyn", which was to be a sort of control room where wise planners could direct the entire country's economy. One of the smaller reasons to regret the 1973 coup against Allende is that the chance was missed to watch this system bang up against reality. And I wonder what will happen as this latest drug discovery scheme runs into it, too.

Update: a Merck employee says in the comments that there hasn't been talk of more outsourcing, If that proves to be the case, then just apply the above comments to Pfizer.

Comments (98) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History | Life in the Drug Labs

October 30, 2013

Totaling Up a Job Search

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Posted by Derek

Here's well known chemistry blogger See Arr Oh totaling up the cost of a job hunt these days. Time does indeed equal money, with a few correction factors thrown in, and it all adds up to a lot of both of them.

But from what he tells me, he hasn't given up on the idea of a job doing drug discovery, hard path though that may be these days. I've had many interactions with him, though, and he does indeed know the field (and can obviously write about it, too). If anyone out there has a need for someone like that, I think he'd be very glad to hear about it. You could staff a productive department pretty quickly with the sorts of people who are available these days. . .

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October 28, 2013

Decision Time at Merck

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Posted by Derek

Actually, decision time was a little while back. But I've heard from more than one source that this week is when everyone in Merck's chemistry hears the details of the job cuts and rearrangements announced recently. Good luck to all concerned. . .

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October 22, 2013

Ariad in Limbo

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Posted by Derek

As feared, the recent trouble at Ariad has indeed put their plans to move into a new site on hold. The Boston Globe has the story here. I go past this construction site all the time - well, to be accurate, if you travel around Cambridge, you past a lot of construction sites, all the time. One would assume that if Ariad has to back out that someone else will find a use for the space. . .

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Size Doesn't Matter. Does Anything?

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Posted by Derek

There's a new paper in Nature Reviews Drug Discovery that tries to find out what factors about a company influence its research productivity. This is a worthy goal, but one that's absolutely mined with problems in gathering and interpreting the data. The biggest one is the high failure rate that afflicts everyone in the clinic: you could have a company that generates a lot of solid ideas, turns out good molecules, gets them into humans with alacrity, and still ends up looking like a failure because of mechanistic problems or unexpected toxicity. You can shorten those odds, for sure (or lengthen them!), but you can never really get away from that problem, or not yet.

The authors have a good data set to work from, though:

It is commonly thought that small companies have higher research and development (R&D) productivity compared with larger companies because they are less bureaucratic and more entrepreneurial. Indeed, some analysts have even proposed that large companies exit research altogether. The problem with this argument is that it has little empirical foundation. Several high-quality analyses comparing the track record of smaller biotechnology companies with established pharmaceutical companies have concluded that company size is not an indicator of success in terms of R&D productivity1, 2.

In the analysis presented here, we at The Boston Consulting Group examined 842 molecules over the past decade from 419 companies, and again found no correlation between company size and the likelihood of R&D success. But if size does not matter, what does?

Those 842 molecules cover the period 2002-2011, and of them, 205 made it to regulatory approval. (Side note: does this mean that the historical 90% failure rate no longer applies? Update: turns out that's the number of compounds that made it through Phase I, which sounds more like it). There were plenty of factors that seemed to have no discernable influence on success - company size, as mention, public versus private financing, most therapeutic area choices, market size for the proposed drug or indication, location in the US, Europe, or Asia, and so on. In all these cases, the size of the error bars leave one unable to reject the null hypothesis (variation due to chance alone).

What factors do look like more than chance? The far ends of the therapeutic area choice, for one (CNS versus infectious disease, and these two only). But all the other indicators are a bit fuzzier. Publications (and patents) per R&D dollar spent are a positive sign, as is the experience (time-in-office) of the R&D heads. A higher termination rate in preclinical and Phase I correlated with eventual success, although I wonder if that's also a partial proxy for desperation, companies with no other option but to push on and hope for the best (see below for more on this point). A bit weirdly, frequent mention of ROI and the phrase "decision making" actually correlated positively, too.

The authors interpret most or all of these as proxy measurements of "scientific acumen and good judgement", which is a bit problematic. It's very easy to fall into circular reasoning that way - you can tell that the companies that succeeded had good judgement, because their drugs succeeded, because of their good judgement. But I can see the point, which is what most of us already knew: that experience and intelligence are necessary in this business, but not quite sufficient. And they have some good points to make about something that would probably help:

A major obstacle that we see to achieving greater R&D productivity is the likelihood that many low-viability compounds are knowingly being progressed to advanced phases of development. We estimate that 90% of industry R&D expenditures now go into molecules that never reach the market. In this context, making the right decision on what to progress to late-stage clinical trials is paramount in driving productivity. Indeed, researchers from Pfizer recently published a powerful analysis showing that two-thirds of the company's Phase I assets that were progressed could have been predicted to be likely failures on the basis of available data3. We have seen similar data privately as part of our work with many other companies.

Why are so many such molecules being advanced across the industry? Here, a behavioural perspective could provide insight. There is a strong bias in most R&D organizations to engage in what we call 'progression-seeking' behaviour. Although it is common knowledge that most R&D projects will fail, when we talk to R&D teams in industry, most state that their asset is going to be one of the successes. Positive data tends to go unquestioned, whereas negative data is parsed, re-analysed, and, in many cases, explained away. Anecdotes of successful molecules saved from oblivion often feed this dynamic. Moreover, because it is uncertain which assets will fail, the temptation is to continue working on them. This reaction is not surprising when one considers that personal success for team members is often tied closely to project progression: it can affect job security, influence within the organization and the ability to pursue one's passion. In this organizational context, progression-seeking behaviour is entirely rational.

Indeed it is. The sunk-cost fallacy should also be added in there, the "We've come so far, we can't quit now" thinking that has (in retrospect) led so many people into the tar pit. But they're right, many places end up being built to check the boxes and make the targets, not necessarily to get drugs out the door. If your organization's incentives are misaligned, the result is similar to trying to drive a nail by hitting it from an angle instead of straight on: all that force, being used to mess things up.

Comments (30) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History

October 17, 2013

Cognitive Dissonance at Lilly

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Posted by Derek

If there is some chemistry hiring going on out there in the big pharma world, and more to come, Eli Lilly does not look like it's going to be joining that kind of party. The analysts following its stock are getting increasingly worked up:

As the analyst notes, there are two distinct schools of thought about Lilly's pipeline. One, represented by Tim Anderson at Bernstein, is that Lilly's broad pipeline of late-stage assets will rescue the company from the loss of patents on the company's top drugs. The bear view, though, is that more failures of high-profile programs--like the recent Phase III failure of ramucirumab for breast cancer or last year's fiasco with the solanezumab flop in Alzheimer's--will leave Lilly no way out except with a restructuring. And that would alter CEO John Lechleiter's long-term plan for staying the course with in-house research.

Lilly's position is simple: Everything is great.

One of the only bright spots is the continuing clinical success of their injectable GLP-1 agonist dulaglutide. Nothing had better happen to that one - it really does look like an advance in type II diabetes therapy. But even if everything goes according to plan with that one, things are going to be rough in Indianapolis.

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October 15, 2013

The Big Boston Biotech Boom

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Posted by Derek

After recent posts on how hot the biotech IPO market has been, and on how the Boston/Cambridge area has so many companies these days, here's the article that sits right in the Venn diagram intersection, from the Boston Globe. It ends on what I think is an accurately cautionary note:

Some biotech companies will surely deliver on the promise in their labs. But an entire industry is being rewarded in advance by investors. That’s going to disappoint a lot of people.

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Good News in Hiring, Maybe?

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Posted by Derek

I've heard from several sources that one of the large pharma companies is about to do something that none of them have been doing for a while now: hire some scientists. More concrete news should be out shortly, but the word is that a number of med-chem positions will be opening up. And when was the last time you heard that phrase?

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Where Are the Biopharma Clusters, Really?

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Posted by Derek

Here's a look at where the biopharma companies really congregate, courtesy of Luke Timmerman at Xconomy. There's also a revealing comparison to the situation ten years ago.

His cutoff is for a company to have at least $100 million in cash (and short term investments) on hand to fund its operations. Companies with less than that, he says, rarely end up making an impact without crossing that threshold along the way (and I'd agree with that assessment). The most notable thing about the list is the degree to which things have proliferated in the Boston/Cambridge area. It was already a strong list in 2003, but in 2013 it outdistances everyone. It's now a self-perpetuating effect, to a good degree: companies come here because there are a lot of investors and a lot of good people in the workforce, and people come here because there are a lot of companies, and so on.

The San Francisco Bay area was number one ten years ago, but although it's grown since 2003 (24 companies versus 19), the growth in Boston has outstripped it. San Diego's in similar shape, but on a smaller scale. Seattle is clearly the laggard of the list, small and getting smaller. And the NJ/NY area has one fewer on its roster than it did ten years ago, in a process that is not showing any obvious signs of reversing.

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October 8, 2013

Did the Biotech IPO Window Just Close?

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Posted by Derek

Way back when, in late August, I wrote a post wondering if there were perhaps too many small biopharma companies going public. That took no magic powers; everyone looking at the market has been wondering that. Well, today an awful lot of biotech stocks seem to be diving - is that the signal for everyone to get out of the water? If so, then (as usual) a lot of people would have preferred that it went off a bit less abruptly. People at the companies in the IPO queue for the next couple of weeks are going to be a bit irritable and distracted today, I think. . .

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Forecasting Drug Sales: Har, Har.

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Posted by Derek

You're running a drug company, and you have a new product coming out. How much of it do you expect to sell? That sounds like a simple question to answer, but it's anything but, as a new paper in Nature Reviews Drug Discovery (from people at McKinsey, no less) makes painfully clear.

Given the importance of forecasting, we set out to investigate three questions. First, how good have drug forecasts been historically? And, more specifically, how good have estimates from sell-side analysts been at predicting the future? Second, what type of error has typically been implicated in the misses? Third, is there any type of drug that has been historically more easy or difficult to forecast?

The answer to the first question is "Not very good at all". They looked at drug launches from 2002-2011, a period which furnished hundreds of sales forecasts to work from. Over 60% of the consensus forecasts were wrong by 40% or more. Stop and think about that for a minute - and if you're in the industry, stop and think about the times you've seen these predictions made inside your own company. Remember how polished the PowerPoint slides were? How high-up the person was presenting them? How confident their voice was as they showed the numbers? All for nothing. If these figures had honest error bars on them, they'd stretch up and down the height of any useful chart. I'm reminded of what Fred Schwed had to say in Where Are the Customers' Yachts about stock market forecasts: "Concerning these predictions, we are about to ask: 1. Are they pretty good? 2. Are they slightly good? 3. Are they any damn good at all? 4. How do they compare with tomorrow's weather prediction you read in the paper? 5. How do they compare with the tipster horse race services?".
Forecasts.png
As you can see from the figure, the distribution of errors is quite funny-looking. If you start from the left-hand lowball side, you think you're going to be looking at a rough Gaussian curve, but then wham - it drops off, until you get to the wildly overoptimistic bin, which shows you that there's a terribly long tail stretching into the we're-gonna-be-rich category. This chart says a lot about human psychology and our approach to risk, and nothing it says is very complimentary. In case you're wondering, CNS and cardiovascular drugs tended to be overestimated compared to the average, and oncology drugs tended to be underestimated. That latter group is likely due to an underestimation of the possibility of new indications being approved.

Now, those numbers are all derived from forecasts in the year before the drugs launched. But surely things get better once the products got out into the market? Well, there was a trend for lower errors, certainly, but the forecasts were still (for example) off by 40% five years after the launch. The authors also say that forecasts for later drugs in a particular class were no more accurate than the ones for the first-in-class compounds. All of this really, really makes a person want to ask if all that time and effort that goes into this process is doing anyone any good at all.

Writing at Forbes, David Shaywitz (who also draws some lessons here from Taleb's Antifragile) doesn't seem to think that it is, but he doesn't think that anyone is going to want to hear about it:

Unfortunately, the new McKinsey report is unlikely to matter very much. Company forecasters will say their own data are better, and will point to examples of forecasts that happen to get it right. They will emphasize the elaborate methodologies they use, and the powerful algorithms they employ (all real examples from my time in the industry). Consultants, too, will continue to insist they can do it better.

And indeed, one of the first comments that showed up to his piece was from someone who appears to be doing just that. In fact, rather than show any shame about these numbers, plenty of people will see them as a marketing opportunity. But why should anyone believe the pitch? I think that this conclusion from the NRDD paper is a lot closer to reality:

Beware the wisdom of the crowd. The 'consensus' consists of well-compensated, focused professionals who have many years of experience, and we have shown that the consensus is often wrong. There should be no comfort in having one's own forecast being close to the consensus, particularly when millions or billions of dollars are on the line in an investment decision or acquisition situation.

The folks at Popular Science should take note of this. McKinsey Consulting has apparently joined the "War on Expertise"!

Comments (32) + TrackBacks (0) | Category: Business and Markets | Drug Development

October 3, 2013

Astex Gets Bought - At a Higher Price?

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Posted by Derek

This could get interesting: the deal that would have Otsuka buying Astex might be unraveling a bit. Here's what an investment fund with a stake in the matter has to say about it:

We are one of Astex's largest shareholders, owning approximately 5% of the outstanding shares of the company. We believe the recently announced merger transaction with Otsuka Pharmaceutical significantly undervalues Astex and therefore we do not intend to tender our shares.

It seems clear to us from both analyst commentary and press reports in response to the announcement of the Otsuka transaction that many shareholders concur with our view of the valuation of Astex and perhaps share our concerns about both the timing of the auction process and the manner in which it was conducted. With regard to timing, Astex's recent report on August 28th of clinical data on SGI-110, the company's second-generation DNA methyltransferase inhibitor, suggested the promise of the drug. However, it is the clinical studies to be reported in December 2013 and in 2014 that could most definitively illustrate the value the drug will confer to Astex. The fact that Astex is trying to consummate the sale process before these data are available is inexplicable and disturbing. . .

They go on to say some very unkind things about the bidding process and the incentives for Astex's senior management. Now, these folks are, of course, trying to get the most that they possibly can for their Astex shares (that's their job). So they might be trying to get Otsuka to crank up their offer, and if they can recruit enough other large shareholders to the effort, they might be able to do it. We'll see if that talk of other people not liking the bid turns out to be real.

Thanks to @AndyBiotech on Twitter for the tip.

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October 2, 2013

Man, That's A Lot of New Public Companies

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Posted by Derek

Did you know that thirty-eight biotech companies have gone public this year? I knew there were a lot of them, but I didn't realize that the number was that high. The most recent one, Fate Therapeutics, didn't quite go off the way it was hoped to. At some point, the music has to stop, and what everyone seems to be wondering is whether that was the sound of a violin case closing or not. Do you feel like investing in the thirty-ninth IPO of the year? How about the forty-seventh? It's only October, you know, and that's always been a great month for the stock. . .oh, never mind.

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October 1, 2013

Merck Cuts Back. Way Back.

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Posted by Derek

I've been stuck underground on a stalled subway train, but the rumor that was passed on to me last night turns out to be true: Merck is doing some big, serious cuts. They're cutting back about 20% worldwide, and it's going to hit every part of the company. More details as they become available. . .

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September 27, 2013

A Phase III Failure at Eli Lilly. Yes, Again.

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Posted by Derek

In case you didn't see it yesterday, Eli Lilly had yet another nasty Phase III failure. This one was ramucirumab against breast cancer (one of the Imclone projects). This was (yet again) one of the compounds that's supposed to be shoring the company up as it continues to lose patent protection on its existing drugs, and it's losing a lot of that.

I'm not going to focus on this particular antibody, but rather a larger issue. Here it is, outlined by FierceBiotech:

The crucial late-stage failure--ramucirumab has been considered one of the pharma giant's top Phase III prospects--scuttles one of Eli Lilly's chief near-term hopes for a major new drug approval application. The failure also follows several years of poor trial outcomes for Lilly, which has a reputation for taking expensive and very risky chances when it comes to late-stage development. Its shares ($LLY) immediately dropped more than 5% on the news.

Lilly does indeed have that reputation - you'll get one if you spend as much time on big Alzheimer's projects as they have, among other things. And here's my question: are they doing things wrong over there, or doing them right?

I mean, we in the drug business catch a lot of flak (often, but not always, undeservedly) for ducking the really big challenges in favor of grabbing market share from each other's established drugs. Those really big challenges, though, come with really high failure rates, and it's not like the failure rates for even the supposedly easy stuff aren't terrifying. (That's a point many outside critics miss - there are no lay-ups in this business when it comes to developing new drugs, none whatsoever). But if you don't like 80 or 90 per cent failure, try 95 per cent. Or, to a roundoff error, one hundred per cent, because that's pretty much been the historical failure rate for Alzheimer's, minus one drug that doesn't do very much. Someone who hasn't been paying attention might look at the lack of drugs in such therapeutic areas and decide that it's because the industry hasn't bothered to do anything - too busy making artificial tanning creams, you know - but it's clear that company after company has taken swings at things like Alzheimer's and just totally missed.

Eli Lilly has been taking some pretty big cuts, but they've mostly just fanned out a lot of dust the last few years. Are they (1) working with too risky a portfolio? (If so, was it by design, or did they just end up this way through attrition of other projects?) Or are they (2) working with a list that has an more appropriate balance, but doing a lousy job of prosecuting it? (A mix of 1 and 2 is also possible, of course). Do we look at Lilly's situation and say "Well, at least I wouldn't have done that", or do we say "There but for the grace of God and a few biomarkers go I?"

And some critics of the industry would do well to observe this process. Here is a big company, spending huge amounts of time and effort on some really big diseases that have a lot of unmet medical need. And they're being driven into the ground like a tent peg by the results of it all.

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September 25, 2013

Sugammadex's Problems: Is the Merck/Schering-Plough Deal the Worst?

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Posted by Derek

That didn't take long. Just a few days after Roger Perlmutter at Merck had praised the team that developed Bridon (sugammadex), the FDA turned it down for the second time. The FDA seems to be worried about hypersensitivity reactions to the drug - that was the grounds on which they rejected it in 2008. Merck ran another study to address this, but the agency apparently is now concerned about how that trial was run. What we know, according to FiercePharma, is that they "needed to assess an inspection of a clinical trial site conducting the hypersensitivity study". Frustratingly for Merck, their application was approved in the EU back in that 2008 submission period.
Sugammadex_encaps_rocuronium.jpg
It's an odd compound, and it had a nomination in the "Ugliest Drug Candidate" competition I had here a while back. That's because it works by a very unusual mechanism. It's there to reverse the effects of rocuronium, a neuromuscular blockade agent used in anaesthesia. Sugammadex is a cyclodextrin derivative, a big cyclic polysaccharide of the sort that have been used to encapsulate many compounds in their central cavities. It's the mechanism behind the odor-controlling Febreze spray - interestingly, I've read that when that product was introduced, its original formulation failed in the market because it had no scent of its own, and consumers weren't ready for something with no smell that nonetheless decreased other odors). The illustration is from the Wikipedia article on sugammadex, and it shows very well how it's designed to bind rocuronium tightly in a way that it can no longer at at the acetylcholine receptor. Hats off to the Organon folks in Scotland who thought of this - pity that all of them must be long gone, isn't it?

You see, this is one of the drugs from Schering-Plough that Merck took up when they bought the company, but it was one of the compounds from Organon that Schering-Plough took up when they bought them. (How much patent life can this thing have left by now?) By the way, does anyone still remember the ridiculous setup by which Schering-Plough was supposed to be taking over Merck? Did all that maneuvering accomplish anything at all in the end? At any rate, Merck really doesn't seem to have gotten a lot out of the deal, and this latest rejection doesn't make it look any better. Not all of those problems were (or could have been) evident at the time, but enough of them were to make a person wonder. I'm willing to nominate it as "Most Pointless Big Pharma Merger", and would be glad to hear the case for other contenders.

Comments (29) + TrackBacks (0) | Category: Business and Markets | Clinical Trials | Pharmacokinetics | Regulatory Affairs | Toxicology

September 24, 2013

When Does a Biotech Press Release Constitute Fraud?

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Posted by Derek

What can you say in a press release about a clinical trial? "Darn near anything, apparently" will be the response from many people who've been seeing them over the years. But really, what can you say, legally? Is there some point where you've clearly crossed the line into fraud, or are all these things just varying interpretations of scientific data?

That uncomfortable question has been working its way through the court system in the person of W. Scott Harkonen, former CEO of Intermune. This case is back in the news thanks to a long article in the Washington Post (pointed out to me by a reader of this blog in the comments section here). Here's the background: Intermune was selling Actimmune (interferon gamma-1b) for two rare-disease indications, but wanted to break into the much larger market for idiopathic pulmonary fibrosis (IPF), for which there were basically no therapies at all.

Unfortunately, the trial didn't go the way that everyone had hoped. Here's the Washington Post's take on it, complete with quotation marks around the phrase "statistical significance":

In all, 330 patients were randomly assigned to get either interferon gamma-1b or placebo injections. Disease progression or death occurred in 46 percent of those on the drug and 52 percent of those on placebo. That was not a significant difference, statistically speaking. When only survival was considered, however, the drug looked better: 10 percent of people getting the drug died, compared with 17 percent of those on placebo. However, that difference wasn’t “statistically significant,” either.

Specifically, the so-called P value — a mathematical measure of the strength of the evidence that there’s a true difference between a treatment and placebo — was 0.08. It needs to be 0.05 or smaller to be considered “statistically significant” under the conventions of medical research.

Technically, the study was a bust, although the results leaned toward a benefit from interferon gamma-1b. Was there a group of patients in which the results tipped? Harkonen asked the statisticians to look.

It turns out that people with mild to moderate cases of the disease (as measured by lung function) had a dramatic difference in survival. Only 5 percent of those taking the drug died, compared with 16 percent of those on placebo. The P value was 0.004 — highly significant.

But there was a problem. This mild-to-moderate subgroup wasn’t one the researchers said they would analyze when they set up the study. Subdividing patients after the fact and looking for statistically significant results is a controversial practice. In its most extreme form, it’s scorned as “data dredging.” The term suggests that if you drag a net through a bunch of numbers enough times, you’ll come up with something significant sooner or later.

Yes indeed. In fact, the term suggests that because that's absolutely true, and it can be proven mathematically. If you take a large enough pile of clinical data, with enough variables, and break it down into enough subgroups, the odds get better and better than something will look significant simply by chance. You can say when you've done enough to have a 50% chance of that happening, or a 90% chance, or whatever cutoff you like. It isn't voodoo, although statistics are poorly understood enough to make it sound so if you've never had to think about the issues.

The situation Intermune found itself in is a tough one, but it's not uncommon. This is why clinical trial design is so critical. You want to run one that has the best chance of showing a clinically relevant effect, but you're not going to be able to cover every sort of patient and subgroup, either, because time and money get out of control very quickly at this point and can absolutely sink your whole effort. The "might have worked" result is a hard place to be.

Unfortunately, Harkonen does not seem to have reacted well to it. He personally wrote a press release with these headlines: “InterMune Announces Phase III Data Demonstrating Survival Benefit of Actimmune in IPF” and “Reduces Mortality by 70% in Patients with Mild to Moderate Disease.” If you read the rest of the text, it did mention that the study missed its primary endpoints, but there was no mention that the mild-to-moderate group was a post hoc analysis. He ended up charged with wire fraud, and was convicted. That conviction has been appealed (here's the appeals court ruling against him), and now there's talk of going to the Supreme Court, although I don't know if his legal team has asked for certiorari yet or not.

So, what's the line between protected free speech and fraud? The newspaper article mentions the recent United States v. Alvarez decision, which ended up overturning the "Stolen Valor Act" making it illegal to claim (falsely) to have military decorations. The Alvarez in question was an idiot who claimed, in his job on a water district board, to have won the Medal of Honor. Sure thing. But although I Am Not a Lawyer, this seems like a different case to me. One of the big points of contention in the Alvarez case was whether or not it was a defamation, and if so, who was being defamed, and how they were damaged. The Supreme Court was split up all over the place in their own opinions, with even justices that agreed with the majority disagreeing over what they were agreeing about.

This case seems more straightforward, at least to me. I think it's more a case of commercial speech. There's probably case law by the shelfload on this, and I may be totally wrong, but I would regard all press releases by publicly traded companies as commercial speech, simply due to their effects on the stock prices involved. If the case makes it to the Supreme Court, I'd expect it to be so that the justices can try to untangle that issue (as in this previous case, which the Court dodged due to a procedural matter).

Oh, one other thing, which doesn't necessarily bear on this case but is worth mentioning as an illustration of its issues. Intermune actually did go forward with another trial of Actimmune against mild-to-moderate IPF patients. And sure enough, it didn't work.

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September 20, 2013

Prosensa: One Duchenne Therapy Down

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Posted by Derek

In the post here the other day about Duchenne Muscular Dystrophy (DMD) I mentioned two other companies that are looking at transcriptional approaches: Prosensa (with GSK) and Sarepta. They've got antisense-driven exon-skipping mechanisms, rather than PTC's direct read-through one.

Well, Sarepta still does, anyway. Prosensa and GSK just announced clinical data on their agent, drisapersen, and it appears to have missed completely. The primary endpoint was a pretty direct one, total distance walked over six minutes, and they didn't make statistical significance versus placebo. This was over 48 weeks of treatment, and none of the secondary measures showed any signs either, from what I can see. I can't think of any way to spin this in any positive direction at all.

So drisapersen is presumably done. What does this say about Sarepta's candidate, eteplirsen? One the one hand, their major competitor has just been removed from the board. But on the other, their complete failure with such a closely related therapy can't help but raise doubts. I don't know enough about the differences between the two (PK?) to speculate, but it'll be interesting to see if Sarepta's stock zips up today, sells off, or (perhaps) fights to a draw between two groups of investors who are taking this news in very different ways.

That's the delirious fun of biotech investing. And that's just for the shareholders - you can imagine what it feels like to bet your whole company on this sort of thing. . .

Comments (4) + TrackBacks (0) | Category: Business and Markets | Clinical Trials | Drug Development

September 18, 2013

The Arguing Over PTC124 and Duchenne Muscular Dystrophy

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Posted by Derek

Does it matter how a drug works, if it works? PTC Therapeutics seems bent on giving everyone an answer to that question, because there sure seem to be a lot of questions about how ataluren (PTC124), their Duchenne Muscular Dystrophy (DMD) therapy, acts. This article at Nature Biotechnology does an excellent job explaining the details.

Premature "stop" codons in the DNA of DMD patients, particularly in the dystrophin gene, are widely thought to be one of the underlying problems in the disease. (The same mechanism is believed to operate in many other genetic-mutation-driven conditions as well. Ataluren is supposed to promote "read-through" of these to allow the needed protein to be produced anyway. That's not a crazy idea at all - there's been a lot of thought about ways to do that, and several aminoglycoside antibiotics have been shown to work through that mechanism. Of that class, gentamicin has been given several tries in the clinic, to ambiguous effect so far.

So screening for a better enhancer of stop codon read-through seems like it's worth a shot for a disease with so few therapeutic options. PTC did this using a firefly luciferase (Fluc) reporter assay. As with any assay, there are plenty of opportunities to get false positives and false negatives. Firefly luciferase, as a readout, suffers from instability under some conditions. And if its signal is going to wink out on its own, then a compound that stabilizes it will look like a hit in your assay system. Unfortunately, there's no particular market in humans for a compound that just stabilizes firefly luciferase.

That's where the argument is with ataluren. Papers have appeared from a team at the NIH detailing trouble with the FLuc readout. That second paper (open access) goes into great detail about the mechanism, and it's an interesting one. FLuc apparently catalyzes a reaction between PTC124 and ATP, to give a new mixed anhydride adduct that is a powerful inhibitor of the enzyme. The enzyme's normal mechanism involves a reaction between luciferin and ATP, and since luciferin actually looks like something you'd get in a discount small-molecule screening collection, you have to be alert to something like this happening. The inhibitor-FLuc complex keeps the enzyme from degrading, but the new PTC124-derived inhibitor itself is degraded by Coenzyme A - which is present in the assay mixture, too. The end result is more luciferase signal that you expect versus the controls, which looks like a hit from your reporter gene system - but isn't. PTC's scientists have replied to some of these criticisms here.

Just to add more logs to the fire, other groups have reported that PTC124 seems to be effective in restoring read-through for similar nonsense mutations in other genes entirely. But now there's another new paper, this one from a different group at Dundee, claiming that ataluren fails to work through its putative mechanism under a variety of conditions, which would seem to call these results into question as well. Gentamicin works for them, but not PTC124. Here's the new paper's take-away:

In 2007 a drug was developed called PTC124 (latterly known as Ataluren), which was reported to help the ribosome skip over the premature stop, restore production of functional protein, and thereby potentially treat these genetic diseases. In 2009, however, questions were raised about the initial discovery of this drug; PTC124 was shown to interfere with the assay used in its discovery in a way that might be mistaken for genuine activity. As doubts regarding PTC124's efficacy remain unresolved, here we conducted a thorough and systematic investigation of the proposed mechanism of action of PTC124 in a wide array of cell-based assays. We found no evidence of such translational read-through activity for PTC124, suggesting that its development may indeed have been a consequence of the choice of assay used in the drug discovery process.

Now this is a mess, and it's complicated still more by the not-so-impressive performance of PTC124 in the clinic. Here's the Nature Biotechnology article's summary:

In 2008, PTC secured an upfront payment of $100 million from Genzyme (now part of Paris-based Sanofi) in return for rights to the product outside the US and Canada. But the deal was terminated following lackluster data from a phase 2b trial in DMD. Subsequently, a phase 3 trial in cystic fibrosis also failed to reach statistical significance. Because the drug showed signs of efficacy in each indication, however, PTC pressed ahead. A phase 3 trial in DMD is now underway, and a second phase 3 trial in cystic fibrosis will commence shortly.

It should be noted that the read-through drug space has other players in it as well. Prosensa/GSK and Sarepta are in the clinic with competing antisense oligonucleotides targeting a particular exon/mutation combination, although this would probably taken them into other subpopulations of DMD patients than PTC is looking to treat.

If they were to see real efficacy, PTC could have the last laugh here. To get back to the first paragraph of this post, if a compound works, well, the big argument has just been won. The company has in vivo data to show that some gene function is being restored, as well they should (you don't advance a compound to the clinic just on the basis of in vitro assay numbers, no matter how they look). It could be that the compound is a false positive in the original assay but manages to work through some other mechanism, although no one knows what that might be.

But as you can see, opinion is very much divided about whether PTC124 works at all in the real clinical world. If it doesn't, then the various groups detailing trouble with the early assays will have a good case that this compound never should have gotten as far as it did.

Comments (26) + TrackBacks (0) | Category: Biological News | Business and Markets | Drug Assays | Drug Development

September 17, 2013

Surveying BioPharma Job Ads

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Posted by Derek

This is an interesting article in Nature Biotechnology that I'm trying to figure out whether I believe. It's a combination of interviews with managers across biopharma along with an analysis of open-position job ads from thousands of sources. What the authors are trying to do is figure out what sorts of skills employers in this field are looking for, and whether that's changed.

First, let's go to what they found, then we can start the arguing. The quantitative data from all those job postings is presumably pretty solid. The degree-required distribution shows that (weirdly) 14% of the posted openings require only high-school level education, which makes me wonder if those positions, whatever they are, really qualify as "jobs in the biopharma industry" as opposed to "jobs in the hauling stuff around" industry. Past that, half of the total openings are bachelor's-level. 12% ask for a graduate or professional degree (I think that they have master's and PhD in there together), and most of the rest were unspecified.

As for the skills listed as wanted, far and away the most mentioned was. . .chemistry. "Clinical research" runs a distant second. When they analyzed the names of the positions themselves, "Medical/clinical laboratory technician" was number one, with "Chemist" close behind. These are broad terms, which surely accounts for their dominance, but the number of positions using the word "Biologist" is still only about a third of those that say "Chemist".

Now the paper switches to what they learned from all those manager interviews. Here's where I start doing the Spock-eyebrow thing:

Hiring and workforce deployment trends were consistent across company sizes ranging from small (less than 25 employees) to large (over 1,000), but there was a surprising anecdotal finding that was supported across the interview set. Whereas historically, large companies have tended to invest in workforce training, and small companies have sought employees who were sufficiently trained to 'hit the ground running', the lean human capacity models practiced by large global pharmaceutical companies have resulted in a reluctance to hire untrained individuals by companies of all sizes. . .

. . .The introductory analysis highlights a common theme addressed by all interviewees and points to a clear shift in the industry's demand for talent away from the senior scientist positions that tend to be more highly specialized and narrowly focused, to a talent pool consisting of individuals who have interdisciplinary academic training with the ability to work broadly across multiple areas and in project teams where not everyone has to be an expert in everything. Specific skill sets desired among scientists, engineers, clinicians and management teams who work within the industry include strong communications skills that facilitate the translation of the science effectively to stakeholders, a commercial market-based mindset versus an academic mindset, the ability to apply skills to real world problems, comfort with big data management, the capacity to be creative and the willingness to push boundaries.

OK, let me blow a whistle at this point. All that stuff is hiring-manager-speak, straight from HR training slides. If you ever hear someone, an actual human out there in the wild, conversationally use the phrase "facilitate the translation of the science effectively to stakeholders", you should run. If there's no ready exit, well, I hope you've read a lot of those books about how to deal with zombies, 'cause they're finally going to come in handy. What I'm saying is that this stuff is what such people always tell you that they want, on paper. "The ability to apply skills to real-world problems"? You don't say! Trying to draw conclusions from these phrases is like analyzing the stuff written on the windshields of used cars.

I adduce this line from the article as evidence of cluelessness: "Hiring managers and industry leaders made little mention of gender differences or preferences in the interviews." Did they not? After endless hours of training to drive home the point that they can get fired for doing anything of the sort? Come on.

The article ends with three mushy calls for action. The first is to "further develop and increase the scope of public-private and industry-academic internships, cooperative fellowships, and training programs". Hard to find anyone who's going to take a strong stand against that one. The second is "to build a national life science certification program that includes deep dives into topics such as regulations, clinical trial design and process validation". I'm not so sure about that one. Who runs this, and who pays for it? Do you have to have one of their pieces of paper in order to get a job in those areas? Who gets to decide the curriculum?

But it's the final recommendation that's going to set some people off. It "focuses on the need to recognize the global nature of the industry and the need for strong cross-cultural fertilization and job mobility across national borders." And once again, I come to this topic as someone who actually favors immigration of smart, competent, well-trained people into the US. But I swear, there are a lot of people who seem bent on making me squirm as much as possible while holding that position, because I can't help but think that many of them hold it because they're looking for the cheapest technically qualified labor force that they can get. It's not like I like the look of some of the people on the other side of the issue, either, because just because it's bad policy to fiddle things to drive wages down, it's bad policy to rig the system to keep them high, too. I think that there should be a market for labor, and its price should move up and down, and be therefore somewhat self-correcting. No one should get a thumb on the scale. Yeah, I'm an idealist.

But this is the first time I've heard "cross-cultural fertilization" brought up as a reason, I have to say. Personally, I think that a reasonable amount of immigration is a good thing for American society (if only we could define "reasonable"), and that we should favor letting in people who are smart, competent, and hard-working. I'd like to have new citizens who want to be part of the economy, and who can appreciate the ideals that this country was founded on. "Cross-cultural fertilization" is a bit too nebulous for me. I worry that it's one of those feel-good diversity slogans designed to make anyone who complains about it sound like a Neanderthal. Maybe I'm showing my prejudice against Neanderthals by saying that, though. I should check with HR.

No, this survey is starting to sound a lot like that PriceWaterhouseCooper thing I wrote about here and here. "Gosh, we just can't seem to find anyone to hire!" Keep an eye on this sort of thing; we're going to see more of it.

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September 13, 2013

Value For the Money

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Posted by Derek

BioCentury always does a big issue for the fall, entitled "Back to School". They often use this as a state-of-biopharma platform, going into depth on what they see as the biggest issues that need to be addressed. This year, the September 2 issue, they're telling people (and not for the first time!) to get braced for higher standards for what health insurance is going to pay for:

Drug companies must start creating the case for value differentiation in discovery and then steadily build a body of evidence throughout the product development process.

Some drug developers have figured this out and have reshaped both their pipelines and development practices accordingly. But the number of me-too and purportedly me-better products still in the pipeline — coupled with the fact that drugs are still getting to Phase III and beyond without comparisons to relevant SOC (standard of care) or data on quality of life and other metrics that patients value — shows efforts in this department are still wanting.

For example, BioCentury’s BCIQ online database shows 54 compounds in active development that target VEGF or its receptors, not counting line extensions of approved VEGF and VEGF receptor inhibitors.

Even accounting for different variants of the receptor and its ligand and differences in delivery, formulation and dosing, it is highly unlikely that so many compounds could be differentiated sufficiently that physicians and patients would strongly prefer them to marketed alternatives — or that payers would be willing to reimburse them without restrictions.

. . .Back to School argues bio-industry must abandon efforts to block third-party assessments of value, and instead ramp up nascent efforts to be at the table where technology assessment takes place in the U.S., Europe and the rest of the world. Comparative effectiveness and cost effectiveness assessments will not be stopped. Industry can either contribute its expertise to improve the quality of the results, or stand by while others who may know less about both the drugs and the best ways to study them do the work based on their own priorities. Right now that priority is finding ways to avoid paying for new drugs.

Well put. But doing so is not going to be easy, or cheap. Differentiating new drug candidates in the clinic has often been left for later on in Phase III, and smaller companies often don't do much of it at all, figuring that'll be a job for their bigger partners when the time comes. The FDA "Breakthrough" designations can help here, because they explicitly encourage companies to show, as early as possible, why their compound stands out from the others. But as the Biocentury piece goes on to say, even then companies are going to have to be get ready to collect even more data on real-world outcomes, after the drug is approved, if they want to be able to persuade the various payers out there.

There's another issue here, too. Incremental innovation is just as much a part of the business (and the science) as are sudden leaps forward. There's room to wonder if the frequency of those sudden leaps (and the distance they cover) will go down if we don't get to take as many steps in the run-up to them. This is one of those issues that moves slowly enough to be effectively unprovable on any sort of reasonable financial or political time scale, but there are a lot of very real things out there that don't fit themselves to our calendars.

BioCentury recommends that (1) companies should work with regulatory agencies, insurance (both public and private), and patient groups to define just what constitutes real value for a given disease area, (2) they should immediately get to work with those payers who are already mandated to show improvements in their quality of care, (3) as mentioned above, whenever some government or international agency starts rating health care and medical technology advances, the industry had better be there, and (4) the drug industry had better change some of its traditional attitudes, and fast, because its pricing power is clearly diminishing.

As a drug-discovery guy, I don't spend as much time thinking about these issues as I do scientific ones. But if I'm discovering new things that no one wants, because no one needs them, that no one will then feel like paying for, all my work (and that of my colleagues) will be in vain. None of us can afford to keep our heads down these days.

Comments (20) + TrackBacks (0) | Category: Business and Markets | Drug Prices | Regulatory Affairs

September 11, 2013

Merck Does Something. Or Not. Maybe Something Else Instead.

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Posted by Derek

There's some Merck news today, via FiercePharma. First off, their R&D head Roger Perlmutter sat down with some of the most prominent analysts for a chat about the company's direction - and they came out with two completely different stories. Big changes? Minor ones? I wonder if people were taking away what they wanted to hear to confirm what they'd already decided Merck should be doing. Seamus Fernandez, for example, apparently came away saying that he thought a major R&D restructuring was inevitable, but that's what he thought before he sat down. This sort of thing is worth keeping in mind when you hear some Wall St. types (particularly on the "sell side") going on authoritatively about what's happening inside a given company.

The other news is that Merck is handing off one of their oncology programs (the WEE-1 kinase inhibitor MRK-1775) to AstraZeneca. If I were a mean person given to saying unkind things, I'd say that this drug is at least now going to get a lot more money spent on it, because that's what AZ has been famous for. But I'll stick with what John Carroll had to say on Twitter: "So if $MRK thought 1775 was any damn good, would they outlicense it to $AZN?"

Comments (19) + TrackBacks (0) | Category: Business and Markets | Cancer | Drug Development

September 5, 2013

Astex Gets Bought

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Posted by Derek

So Astex, one of the pioneers in fragment-based drug discovery, has been bought by Otsuka for their oncology portfolio. You don't hear people asking "What has all this fragment stuff accomplished?" as much as you used to, but here's another answer: an $886 million dollar buyout.

The president of Otsuka says that they're going to keep Astex's research the way it is:

"Astex's unique fragment-based drug discovery technology and clinical oncology research and development capabilities, born out of the passion of its researchers, exemplify our corporate mottos and belief in "Sozosei (Creativity) and Jissho (Proof through Execution). I would like Otsuka Pharmaceutical to continue to respect Astex's uniqueness and leverage it to bring further growth for Otsuka Pharmaceutical."

And the Japanese companies have, for the most part, been good at leaving things alone when they say they will. In the case of Astex's unusual set of skills, this seems like a smart move.

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September 4, 2013

Stack Ranking in Pharma: Bad Idea

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Posted by Derek

Steve Ballmer's departure from Microsoft, snidely remarked on here, has prompted any number of "What went wrong?" pieces to appear. One of the key documents, though, is from last year: Kurt Eichenwald's writeup in Vanity Fair. The editorial staff has helpfully illustrated it with a photo of Ballmer himself that's so characteristic of his style that it's liable to give ex-Microsofters the shivering flashbacks.

One of the common themes to all these articles is the company's use of "stack ranking", where you evaluate your direct reports and rank them top to bottom. The bottom performers get hammered, no matter how they might have done on some hypothetical absolute scale. If you happen to have a great group of high-performing people working for you - too bad. Some of them are going to be ranked at the imaginary bottom, and get punished for it. Here's Eichenwald:

At the center of the cultural problems was a management system called “stack ranking.” Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees. The system—also referred to as “the performance model,” “the bell curve,” or just “the employee review”—has, with certain variations over the years, worked like this: every unit was forced to declare a certain percentage of employees as top performers, then good performers, then average, then below average, then poor.

“If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, two people were going to get a great review, seven were going to get mediocre reviews, and one was going to get a terrible review,” said a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.”

. . .For that reason, executives said, a lot of Microsoft superstars did everything they could to avoid working alongside other top-notch developers, out of fear that they would be hurt in the rankings. And the reviews had real-world consequences: those at the top received bonuses and promotions; those at the bottom usually received no cash or were shown the door.

You can well imagine the sorts of behaviors this system promotes. A Microsoft engineer said in the article that "One of the most valuable things I learned was to give the appearance of being courteous while withholding just enough information from colleagues to ensure they didn’t get ahead of me on the rankings". What's even more dysfunctional about this system is that it was not officially acknowledged by the managers. Here's a former Microsoft employee writing in Slate:

Then I had to explain things to my reports. This illustrated another problem with the system: It destroyed trust between individual contributors and management, because the stack rank required that all lower-level managers systematically lie to their reports. Why? Because for years Microsoft did not admit the existence of the stack rank to nonmanagers. Knowledge of the process gradually leaked out, becoming a recurrent complaint on the much-loathed (by Microsoft) Mini-Microsoft blog, where a high-up Microsoft manager bitterly complained about organizational dysfunction and was joined in by a chorus of hundreds of employees. The stack rank finally made it into a Vanity Fair article in 2012, but for many years it was not common knowledge, inside or outside Microsoft. It was presented to the individual contributors as a system of objective assessment of “core competencies,” with each person being judged in isolation.

Why do I bring this up? Because many large drug companies persist in ranking-and-rating behaviors that are very nearly as stupid, and very nearly as destructive. And we've been doing it for years. At any rate, I've been complaining about it for years, and I'm certainly not alone. Rating people in research is notoriously difficult already, but rating them by jamming them into an artificial (and mathematically illiterate) template is even worse. If you want people to focus on stepping over each other, pit them against each other with a good, hard stack ranking system. If you'd like them to do something else with their time, you might want to rethink.

Comments (55) + TrackBacks (0) | Category: Business and Markets | Life in the Drug Labs

September 3, 2013

The Myth of the STEM Shortage, In Detail

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Posted by Derek

I see that the IEEE Spectrum has also come out saying that there is no shortage of scientists and engineers. I agree with him, as longtime readers will know. The market for people who do these things does not look like a market facing any kind of shortage:

What’s perhaps most perplexing about the claim of a STEM worker shortage is that many studies have directly contradicted it, including reports from Duke University, the Rochester Institute of Technology, the Alfred P. Sloan Foundation, and the Rand Corp. A 2004 Rand study, for example, stated that there was no evidence “that such shortages have existed at least since 1990, nor that they are on the horizon.”

That report argued that the best indicator of a shortfall would be a widespread rise in salaries throughout the STEM community. But the price of labor has not risen, as you would expect it to do if STEM workers were scarce. In computing and IT, wages have generally been stagnant for the past decade, according to the EPI and other analyses. And over the past 30 years, according to the Georgetown report, engineers’ and engineering technicians’ wages have grown the least of all STEM wages and also more slowly than those in non-STEM fields; while STEM workers as a group have seen wages rise 33 percent and non-STEM workers’ wages rose by 23 percent, engineering salaries grew by just 18 percent. The situation is even more grim for those who get a Ph.D. in science, math, or engineering. The Georgetown study states it succinctly: “At the highest levels of educational attainment, STEM wages are not competitive.”

Given all of the above, it is difficult to make a case that there has been, is, or will soon be a STEM labor shortage. . .

The article's author, Robert Charette, has done a lot of digging through the archives to trace the history of this whole idea. There's an entertaining sidebar with looming-shortage-of-science-and-engineering quotes going back to the 1930s. No era seems immune. (Thanks to another alert reader, I can add, though, that in 1972 an article in Science actually forecast an overabundance of PhD holders on the horizon. No one seems to have believed it then). And he also has what I think is a clear view of why this alarm keeps on being sounded:

Clearly, powerful forces must be at work to perpetuate the cycle. One is obvious: the bottom line. Companies would rather not pay STEM professionals high salaries with lavish benefits, offer them training on the job, or guarantee them decades of stable employment. So having an oversupply of workers, whether domestically educated or imported, is to their benefit. It gives employers a larger pool from which they can pick the “best and the brightest,” and it helps keep wages in check. No less an authority than Alan Greenspan, former chairman of the Federal Reserve, said as much when in 2007 he advocated boosting the number of skilled immigrants entering the United States so as to “suppress” the wages of their U.S. counterparts, which he considered too high.

The idea of a shortage also benefits the funding of all levels of education, so what's not to like?

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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

August 26, 2013

Amgen Buys Onyx

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Posted by Derek

So Amgen's bid for Onyx look like it's going through, and the reaction of John Carroll at FiercePharma was to tweet "Expect big layoffs soon". He took some flak for being such a downer, but he's right, as far as I can see. Amgen isn't buying Onyx for their research staff, or any of their people at all. As that Bloomberg story linked to above has it, "Amgen to Buy Onyx for $10.4 Billion to Gain Cancer Drug".

That's Kyprolis (carfilzomib), their proteasome inhibitor, and that's all they need from Onyx, who bought the compound anyway when they acquired Proteolix a few years ago. So since I don't want to be a downer either, especially on Monday morning, I'd be interested to see if anyone can make another case. . .

Comments (19) + TrackBacks (0) | Category: Business and Markets | Cancer

August 23, 2013

Options And Suchlike

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Posted by Derek

And after that mention of CEO pay, this sounds like a good time to link to this article from Nature Biotechnology. If you've ever been curious about why different companies pay out in stock options and/or restricted stock, this will satisfy your curiosity and more. A big part of the answer, you will not be surprised to hear, is the tax code, and if you're someone getting these kinds of compensation, you need to know some tax angles from your end, too.

And, of course, the type of award that works out best for the company doesn't always work out best for the grantee. Likewise, not every grantee will be best served by a single kind of award - it all depends on what you're trying to reward:

Although stock options continue to be a popular employee incentive device, in the past few years their advantages have been diminished through accounting and tax law changes, whereas their shortcomings have become more apparent in the biotech sector—in which a consistently growing stock price is far from assured, or even likely. As a consequence, biotech firms are moving away from an exclusive reliance on stock options and instead are using a mix of equity-based incentives, most commonly a combination of stock options and performance-based stock units.

From the perspective of a founder or other employee, the shift to a combination of stock options and some form of restricted stock or stock units should be welcome, making it less likely that the employee's awards will have no value at all. Unlike the corporate employer, an employee would prefer that restricted stock or stock units not be subject to performance conditions. . .

Definitely worth a look if you haven't thought about these details. After a good long stare, though, you may decide that the best course is to pay someone else to think about these things for you (!)

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What's a CEO Worth?

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Posted by Derek

In the case of Microsoft's Steve Ballmer, the stock market appears to be saying "About minus 18 billion dollars". As Alex Tabarrok notes here, that sort of puts average CEO compensation in perspective. . .do we have some bigwigs in this business who could do as much for their shareholders by following Ballmer's example?

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August 21, 2013

A Call For Merck to Cut R&D

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Posted by Derek

This is just what people working in R&D at Merck don't want to see. According to FiercePharma, a prominent analyst is urging the company to get its finances in line with its competitors. . .by cutting R&D.

Seamus Fernandez at Leerink Swann says that Merck should reduce their expenditures in that area by around a billion dollars, which is at least 8 times deeper than the new R&D head, Roger Perlmutter, has talked about. Here's the whole analysis, which includes this:

We believe a major restructuring at MRK is necessary; movement here likely would be well-received. As pressure builds on MRK mgmt to: (1) improve R&D productivity, (2) maintain top-tier operating margins, and (3) continue returning cash to shareholders, we believe a deep restructuring should be seriously considered in light of the relatively lackluster 2013 top-line performance, disappointing Ph III/ registrational pipeline evolution (odanacatib, suvorexant, Bridion U.S.), and overall industry challenges. We estimate that every $1B reduction of operating expenses would add $0.25/share to MRK's bottom line, and would bring MRK's absolute R&D spend closer to PFE's (MP) ~$6.5B but still be in line with several of its diversified competitors' spend at ~14% of sales. A 10% cut in overall operating expenses would equate to ~$2B of annual cost reductions.

If you read the rest, you'll see that the reasons Fernandez has for optimism are all on the financial side of the company: how much cash the company has on hand, its opportunities to do things like sell off animal health, sell off consumer care, and of course its opportunities to cut costs. There's absolutely nothing in there about the company doing better because of anything that's coming along in the pipeline. No, all that drug stuff is in the negative category: doubts about the big IMPROVE-IT trial in cardiovascular, competition for the existing drugs, regulatory uncertainties, and so on. Nothing but trouble.

At this point, it would be easy for me to get up on the lab bench and make a rabble-rousing speech about how short-sighted all this is, how Merck is a research-driven company, not some sort of bank or insurance operation, and so on. I'm tempted. But these points, while definitely not invalid, don't address whether Fernandez might be right about Merck's current situation. He knows as well as anyone that the only reason Merck got to be this size is by discovering and selling valuable medicines, and he knows that this is still the company's core business. Those ideas about selling off animal health and consumer products? Those are supposed to bring in more money to discover drugs. If Merck doesn't do that, they're toast; that's the engine of the whole company.

OK, so why cut R&D if that's the whole reason the company exists? Here's where we get down to it. Fernandez's take is that Merck is spending too much and getting too little back for it. He's not suggesting the of chopping most of the R&D department to make the bottom line suddenly bloom (for a while). This is more of a gas-mileage problem. In this view, Merck's engine is R&D, for sure, but that engine is burning too much fuel (money) while covering too little distance in the process. To stick with the engine analogy, does it really need twelve cylinders? Does it have to be as heavy and humungous as it is? After all, others are burning similar amounts of fuel (or less) and making more progress.

What Fernandez is saying to Roger Perlmutter, as I see it, is "Throw us a bone, Roger. Show that you seriously realize that things have been going wrong at Merck, and that you understand that the company's gotten in the habit of spending too much money. Show us in the only way that you can, because just telling us that you're going to do things better and smarter isn't enough. Everyone says that, no matter how dumb they are. Even if you really can follow through on that better/smarter stuff, no one will see the results of it for years. Show us something that we can see happening right now."

The question then is whether this sort of cutting and re-engineering can be done without disrupting Merck's R&D even more, and now that is a tough question, and I'm glad I'm not on the hook to provide an answer. The problem is, a company can cut back like this, but still keep the same inefficiencies and bad processes that got it into trouble in the first place. That's what happens when a company lops off a whole division: "We still suck, but now we suck on a smaller scale". It's doing the same not-so-good stuff as it always did, but in fewer areas, and might therefore be even less likely to make anything of it. A company can also cut back in ways that might, objectively, be the right thing to do, but nonetheless end up disorganizing and demoralizing the remaining workers so much that things end up worse than before in that way, too.

These are the downside risks of taking the cut-back-your-expenditures advice, and they're very real. Not taking the advice has real risks, too, naturally. Running a company that size, or its R&D department, is not a low-pressure job with easy decisions. We'll see which way Perlmutter goes, and how he makes his case. Keep in mind, too, that these issues do not apply only to Merck. Not at all.

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August 20, 2013

Too Many Biotech IPOs?

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Posted by Derek

It's worth noting, on the business end of things, that we seem to be in a boom period for biotech/small pharma IPOs. I don't think anyone saw that coming, but these things take on momentum of their own. Hardly anyone went public for a few years once the financial crisis hit in 2007/2008. Then last year there were eleven new public companies, the most in quite a while. This year, though, there have been 29 (according to this piece in FierceBiotech), with eight of them since just the end of June.

That's pretty lively. And while some of this can be explained as a holdover from companies that would have gone public earlier, under less trying conditions, you'd have to think that we're getting near the bottom of the sack by now. Whatever gets pulled up at this point has a greater likelihood of having all kinds of stuff stuck to it, and it might not be in good enough condition for your portfolio to consume it. Soon we'll probably be in the part of the cycle where good companies, who would have happily launched themselves into the market a few months before, get whipsawed by a closing IPO window. If you think of a large flock of birds wheeling around in the sky, unable to quite decide which tree to land on, or whether to land at all, you'll have a pretty good mental picture of the market.

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August 14, 2013

Now It's Novartis's Turn in China

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Posted by Derek

So reports FiercePharma, quoting a story in the 21st Century Business Herald and the Shanghai Daily. A former Novartis sales rep says that she was "ordered" to bribe doctors to meet sales quotas. As Tracy Staton at Fierce puts it:

With Chinese authorities actively looking for any suggestion of corruption or bribery, we're likely to see more whistleblowers come forward and officials investigations follow. Though no one wants to admit it, payments to doctors and hospitals have been commonplace in China for years. The BBC reported this week that bribes are "routinely paid" by big drugmakers in China, citing 5 pharma reps working in China. One of those reps, however, said such payments are "rare," and "only very few people" get money from pharma.

The government previously tolerated the practice--or encouraged it, even, by putting doctors on paltry salaries. Now, officials are targeting foreign drugmakers for it, perhaps to make examples of them, perhaps to twist their arms for lower prices. Probably both.

Comments (9) + TrackBacks (0) | Category: Business and Markets | The Dark Side

August 13, 2013

Sanofi in China

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Posted by Derek

Now Sanofi is tangled up in trouble in China. The last few days have brought news of a wide-ranging investigation into payments to hospitals and medical workers, similar to what GlaxoSmithKline has been accused of.

And I don't have much reason to doubt either story, because (as this BBC story details) payments of this sort are rife. I would also note that, according to the AP, the Chinese government "is investigating production costs at 60 Chinese and foreign pharmaceutical manufacturers, according to state media, possible as a prelude to revising state-imposed price caps on key medications."

A system where everyone is in violation of the law has a lot of advantages - if you're the government. Retribution, when it's needed, is always at hand, because all you have to do is threaten to enforce what's already on the books. And lest someone think that I'm just beating away at the Chinese situation, the same applies to the US (on what I hope is a lower level). Here's economist Tyler Cowen, from the Marginal Revolution blog, on that very subject:

Faced with the evidence of an non-intentional crime, most prosecutors, of course, would use their discretion and not threaten imprisonment. Evidence and discretion, however, are precisely the point. Today, no one is innocent and thus our freedom is maintained only by the high cost of evidence and the prosecutor’s discretion.

The GSK and Sanofi allegations are, of course, all about intentional acts. But prosecuting them is very much up to the discretion of the Chinese authorities. If they're trying to root out corruption in their health care system, more power to them, because that's a worthy cause. But if they're just putting the squeeze on people long enough to bargain with them, only to let things return to the status quo ante after concessions have been extracted, then I have another opinion. Cynically, that's just what I expect to happen. After all, one might need to charge these companies with bribery again at some point. The Chinese authorities - authorities in general, all over the world - are not in the habit of putting down useful weapons and walking away from them.

Comments (14) + TrackBacks (0) | Category: Business and Markets | The Dark Side

August 1, 2013

Merck Cuts Coming? Or Not?

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Posted by Derek

This has just shown up in the comments section, so I wanted to note it out here on the front page. The New Jersey state workforce directory lists Merck as notifying them that they plan to eliminate up to 113 jobs in Kenilworth, with an effective date of October 1.

I don't know what the follow-through is on notices like this, or the legal consequences thereof. And there's certainly nothing in there about what sorts of reductions these might be. But it's worth noting that the company has at least filed the paperwork - has anyone in Kenilworth heard more?

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July 30, 2013

Apparently, Ads Make Antihistamines Work Better

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Posted by Derek

This PNAS paper's title certainly caught my attention: "Advertisements impact the physiological efficacy of a branded drug". The authors, from the University of Chicago, are digging into the business end of the placebo effect. After giving a set of subjects a skin-test panel to common allergans, here's what happened:

We conducted two randomized clinical trials to measure the impact of direct-to-consumer advertising on the objective, physiological effect of Claritin (Merck & Co.), a leading antihistamine drug. A pilot study assessed the efficacy of Claritin across subjects exposed to advertisements for Claritin, advertisements for Zyrtec (McNeil), or control advertisements. . .Among subjects with allergies, the efficacy was the same across the three advertisement conditions, but among subjects without allergies, efficacy was significantly greater in the Claritin advertisements condition than in the Zyrtec advertisements condition.

The heterogeneity of the treatment effect based on the allergy status was discovered only ex post facto, so we conducted a follow- up trial to replicate these initial findings. To maximize statistical power, the follow-up trial used a larger sample, assigned subjects only to Claritin advertisements or Zyrtec advertisements, and block-randomized subjects based on their allergy status. In ad- dition, we elicited subjects’ beliefs about the efficacy of Claritin to examine whether any difference in impact of the advertisements across the two subpopulations is driven by the relative malleability of their beliefs. . .

This reminds me of the various experiences that people have had with blind taste testing of wines. In the follow-up trial, they used a histamine challenge in the skin test, which will give a red reaction no matter what you're allergic to. The effect repeated:

In the subpopulation without allergies, we find that the efficacy of Claritin at 120 min is substantially higher for subjects who were exposed to Claritin advertisements. Claritin advertisements have no significant impact on efficacy 60 min after the drug is taken. This pattern is consistent with the observed changes in the subjects’ beliefs. Exposure to Claritin advertisements in this subpopulation greatly increases the belief in the efficacy of Claritin. At the same time, the realized efficacy of Claritin at 120 min (but not at 60 min) is strongly correlated with the change in beliefs.
In the subpopulation with allergies, we find no relationship between exposure to Claritin advertisements and the change in beliefs. Moreover, the advertisements have no impact on the efficacy of Claritin at 120 min. We do find a curious negative impact of Claritin advertisements on Claritin’s efficacy at 60 min in this subpopulation, but this effect cannot be mediated by the (nonexistent) impact of advertisements on beliefs.

Oh, boy. I truly wonder why this experiment hasn't been run before, but look for a lot of follow-ups now that it's out. As the authors themselves detail, there are several unanswered questions that could be addressed: does seeing the Claritin advertisements make the Claritin work better, or does seeing the Zyrtec ads make Claritin work more poorly? Why does this seem to work only in people without specific allergies in the first place? What's the physiological pathway at work here, in any case?

Here's the big one: does direct-to-consumer advertising actually increase the efficacy of the drugs it advertises? That is, does the effect shown in this experiment translate to real-world conditions? For how many compounds is this the case, and in what therapeutic classes is the effect most likely to occur? Is there an actual economic or public health benefit to this effect, should it prove to be robust? If so, how large is compared to the money spent on the advertising itself? And if people internalize the idea that advertisements make a drug work better, will advertisements continue to do that at all?

Comments (20) + TrackBacks (0) | Category: Business and Markets | Clinical Trials

July 29, 2013

Pfizer Rearranges

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Posted by Derek

Ian Read at Pfizer has announced that the company will be divided into three parts. Here's the press release, and let's see what sense we can make of it:

Today, Pfizer is announcing plans to move forward to internally separate its commercial operations into three business segments, two of which will include Innovative business lines and a third which will include the Value business line. . .

One of the Innovative business segments. . .will generally include products across multiple therapeutic areas that are expected to have market exclusivity beyond 2015. The therapeutic areas include Inflammation and Immunology, CV/Metabolic, Neuroscience and Pain, Rare Diseases and Women's/Men's Health. . .the other Innovative business segment will include Vaccines, Oncology and Consumer Healthcare. . .The Value business segment. . .will include products that generate strong, consistent cash flow, and will be positioned to provide patients access to effective, lower-cost, high-value treatments. In addition to products that have lost market exclusivity, it will generally include mature, patent-protected products that are expected to lose exclusivity through 2015 in most major markets, biosimilars and current and future established products collaborations. . .

I'm not at all sure that I understand this yet. I can see why the "Value" business segment exists separately, although I think that it's unfortunately named. (You can either get the impression that the other two don't have value, or make the connection with "cheap/generic" as in some store's "Value Line" of products). But I'm not getting the distinction between the other two so well. It's not broken down by biologics/small molecules, or by specialty marketing/wider market, not from what I can see. And putting vaccines, oncology, and consumer health into one bunch sounds like a random draw of tiles out of a bag.

No doubt there will be many, many more explanations to come, and I look forward to seeing how many of them are coherent. For now, it looks like more uncertainly and disruption, which is not quite what Pfizer seems to need.

Note: for those of you wondering where the obvious Latin joke is, Chemjobber already got the Julius Caesar quote off on Twitter!

Comments (49) + TrackBacks (0) | Category: Business and Markets

July 25, 2013

Those Fortunate Onyx Option Traders

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Posted by Derek

Surprisingly, two people have come forward saying that they were among the people who bought options in Onyx Pharmaceuticals just before Amgen's bid for the company. This wildly profitable trade has attracted plenty of regulatory attention, and the SEC has already filed a civil lawsuit (and is hunting for defendants).

Dhia Jafar and Omar Nabulsi, both of Dubai, said a court-ordered freeze should be lifted on the $2.53 million profit that they made lawfully from buying Onyx call options in the last week of June, according to filings late Tuesday in U.S. District Court in Manhattan.

The defendants said that when they bought the call options, they had no material, non-public information that biotechnology company Amgen Inc was trying to buy its smaller rival for $10 billion, a hefty premium at the time.

Who knows? People do get lucky. And the fact that these two have come forward to defend their trades is unusual, and suggests that they think that they have a case to make. But I'll bet that not everyone who did that trade will be persuasive about their reasons.

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July 22, 2013

Update on the Bribery Scandal

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Posted by Derek

This Reuters story may be telling people everything they need to know in the first paragraph:

British drugmaker GlaxoSmithKline said on Monday some of its executives in China appeared to have broken the law in a bribery scandal, as it promised changes in its business model that would lower the cost of medicine in the country.

GSK is the latest in a string of multinationals to be targeted by Chinese authorities over alleged corruption, price-fixing and quality controls.

Chinese police visited the Shanghai office of another British drugmaker, AstraZeneca, a company spokeswoman said on Monday. They arrived on Friday and took away a sales representative for questioning, she said.

Will AstraZeneca cut its prices for China as well? In case some readers may think I'm drawing conclusions too quickly, well, the Reuters story draws them for you:

GSK's intention to cut the price of its medicines in China would be in line with how other foreign companies have responded to pressure from Beijing.

European food groups Nestle and Danone said they would cut infant milk formula prices in China after Beijing launched an inquiry into the industry.

"In China, when the government criticises people, they tend to bow down and apologise very quickly because they are scared of the authority of the central government to do tremendous harm to their business - whether it be for arresting executives very quickly or through auditing," said Shaun Rein, managing director of the Shanghai-based China Market Research Group.

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July 19, 2013

Salary Freeze at Lilly

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Posted by Derek

We now return to our regularly schedule program around here - or at least, Eli Lilly is now returning to theirs. The company announced that they're freezing salaries for most of the work force, in an attempt to save hundreds of millions of dollars in advance of their big patent expirations. Some bonuses will be reduced as well, they say, but that leaves a lot of room. Higher-ups don't look for increases in base pay as much as they look for bonuses, options, and restricted shares (although, to be fair, these are often awarded as a per cent of salary).

‘‘This action is necessary to withstand the impact of upcoming patent expirations and to support the launch of our large phase III pipeline,’’ Chief Executive Officer John Lechleiter, 59, said in a letter to employees today, a copy of which was obtained by Bloomberg. ‘‘The current situation requires us to take the appropriate action now to secure our company’s future. We can’t allow ourselves to let up and fail to make the tough choices.”

Lechleiter himself has not had a raise since 2010, it appears, although I'm not sure if his non-salary compensation follows the same trend. If anyone has the time to dig through the company's last few proxy statements, feel free, but actually figuring out what a chief executive is really paid is surprisingly difficult. (I remember an article a few years ago where several accountants and analysts were handed the same batch of SEC filings and all of them came out with different compensation numbers).

But there's not doubt that Lilly is in for it, something that has been clear for some time now. The company's attempts to shore up its clinical pipeline haven't gone well, and it looks like (more and more) they're putting a lot of their hopes on a success in Alzheimer's. If they see anything, that will definitely turn the whole situation around - between their diagnostic branch and a new therapeutic, they'll own the field, and a huge field it is. But the odds of this happening are quite low. The most likely outcome, it seems to me, is equivocal data that will be used to put pressure on the FDA, etc., to approve something, anything, for Alzheimer's.

It's worth remembering that it wasn't very long ago at all that the higher-ups at Lilly were telling everyone that all would be well, that they'd be cranking out two big new drugs a year by now. Hasn't happened. Since that 2010 article, they've had pretty much squat - well, Jentadueto, which is Boehringer Ingleheim's linagliptin, which Lilly is co-marketing, with metformin added. Earlier this year, they were talking up plans for five regulatory submissions in the near future, but that figure is off now that enzastaurin has already bombed in Phase III. Empagliflozin and ramucirumab are still very much alive, but will be entering crowded markets if they make it through. Dulaglutide is holding up well, though.

But will these be enough to keep Lilly from getting into trouble? That salary freeze is your answer: no, they will not. All the stops must be pulled out, and the ones after this will be even less enjoyable.

Comments (19) + TrackBacks (0) | Category: Business and Markets | Drug Development

Good Advice: Get Lost!

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Posted by Derek

I thought everyone could use something inspirational after the sorts of stories that have been in the news the last few days. Here's a piece at FierceBiotech on Regeneron, a company that's actually doing very well and expanding. And how have they done it?

Regeneron CEO Dr. Leonard "Len" Schleifer, who founded the company in 1988, says he takes pride in the fact that his team is known for doing "zero" acquisitions. All 11 drugs in the company's clinical-stage pipeline stem from in-house discoveries. He prefers a science-first approach to running a biotech company, hiring Yancopoulos to run R&D in 1989, and he endorsed a 2012 pay package for the chief scientist that was more than twice the size of his own compensation last year.

Scientists run Regeneron. Like Yancopoulos, Schleifer is an Ivy League academic scientist turned biotech executive. Regeneron gained early scientific credibility with a 1990 paper in the journal Science on cloning neurotrophin factor, a research area that was part of a partnership with industry giant Amgen. Schleifer has recruited three Nobel Prize-winning scientists to the board of directors, which is led by long-time company Chairman Dr. P. Roy Vagelos, who had a hand in discovering the first statin and delivering a breakthrough treatment for a parasitic cause of blindness to patients in Africa.

"I remember these people from Pfizer used to go around telling us, 'You know, blockbusters aren't discovered, they're made,' as though commercial people made the blockbuster," Schleifer said in an interview. "Well, get lost. Science, science, science--that's what this business is about."

I don't know about you, but that cheers me up. That kind of attitude always does!

Comments (10) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History

July 18, 2013

BMS Moving Jobs to Florida

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Posted by Derek

The state of Florida is press-releasing that Bristol-Myers Squibb is opening a "capability center" in the Tampa area, which will bring 579 jobs. What they're not saying - but what I hear through the grapevine - is that some of these jobs were formerly somewhere else. I don't know how many of the total are actually new positions.

They seem mostly to be support staff (I have to say, I have no clear picture of what a capability center actually is), and the affected people were notified late this afternoon. At least it opens in January, when a move to Tampa will be somewhat more tolerable. . .

Comments (11) + TrackBacks (0) | Category: Business and Markets

July 17, 2013

The GSK Jackpot

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Posted by Derek

Well, this got my attention: according to the Sunday Times, GlaxoSmithKline is preparing to hand out hefty bonus payments to scientists if they have a compound approved for sale. Hefty, in this context, means up to several million dollars. The earlier (and much smaller) payouts for milestones along the way will disappear, apparently, to be replaced by this jackpot.

The article says that "The company will determine who is entitled to share in the payout by judging which staff were key to its discovery and development", and won't that be fun? In Germany, the law is that inventors on a corporate patent do get a share of the profits, which can be quite lucrative, but it means that there are some very pointed exchanges about just who gets to be an inventor. The prospect of million-dollar bonuses will be very welcome, but will not bring the best in some people, either. (It's not clear to me, though, if these amounts are to be split up among people somehow, or if single individuals can possibly expect that much).

John LaMattina has some thoughts on this idea here. He's also wondering how to assign credit:

I am all for recognizing scientists in this way. After all, they must be successful in order for a company the size of GSK to have a sustaining pipeline. However, the drug R&D process is really a team effort and not driven by an individual. The inventor whose name is on the patent is generally the chemist or chemists who designed the molecule that had the necessary biological activity. Rarely, however, are chemists the major contributor to the program’s success. Oftentimes, it is a biologist who conceives the essence of the program by the scientific insight he or she might have. The discovery of Pfizer’s Xeljanz is such a case. There have been major classes of drugs that have been saved by toxicologists who ran insightful animal experiments to explain aberrant events in rats as was done by Merck with both the statins and proton-pump inhibitors – two of the biggest selling classes of drugs of all time.

On occasion, the key person in a drug program is the process chemist who has designed a synthesis of the drug that is amenable to the large scales of material needed to conduct clinical trials. Clinical trial design can also be crucial, particularly when studying a drug with a totally new mechanism of action. A faulty trial design can kill any program. Even a nurse involved in the testing of a drug can make the key discovery, as happened in Pfizer’s phase 1 program with Viagra, where the nurse monitoring the patients noticed that the drug was enhancing blood flow to an organ other than the heart. To paraphrase Hilary Clinton, it takes a village to discover and develop a drug.

You could end up with a situation where the battery is arguing with the drive shaft, both of whom are shouting at the fuel pump and refusing to speak to the tires, all because there was a reward for whichever one of them was the key to getting the car to go down the driveway.

There's another problem - getting a compound to go all the way to the market involves a lot of luck as well. No one likes to talk about that very much - it's in everyone's interest to show how it was really due to their hard work and intelligence - but equal amounts of hard work and brainpower go into projects that just don't make it. Those are necessary, but not sufficient. So if GSK is trying to put this up as an incentive, it's only partially coupled to factors that the people it's aimed at can influence.

And as LaMattina points out, the time delay in getting drugs approved is another factor. If I discover a great new compound today, I'll be lucky to see it on the market by, say, 2024 or so. I have no objection to someone paying me a million dollars on that date, but it won't have much to do with what I've been up to in the interim. And in many cases, some of the people you'd want to reward aren't even with the company by the time the drug makes it through, anyway. So while I cannot object to drug companies wanting to hand out big money to their scientists, I'm not sure what it will accomplish.

Comments (71) + TrackBacks (0) | Category: Business and Markets | Drug Development | Who Discovers and Why

July 15, 2013

The Red Queen's Race For Funding

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Posted by Derek

Using Michael Kinsley's definition of a gaffe, as when a politician or spokesman accidentally tells the truth, I think we can put this one firmly in that category. Novogen, a small Australian company that's been though some ups and downs (mostly downs) recently raised several million dollars to continue operations. But this line in the CEO's letter to shareholders is, well. . .

". . .we need the funds to create the news flow in order to achieve market appreciation so that we can progressively raise the funds to support ongoing news flow."

There must have been a better way to phrase that, something about "making the investment community aware of the company's potential", etc. But there you have it: they're raising money to create publicity so that they can raise more money for more publicity. Their recent failure with phenoxodiol was not completely unexpected, given that the compound had been in the clinic before without success.

Thanks to this writer at the Motley Fool for picking up on this.

Comments (6) + TrackBacks (0) | Category: Business and Markets

Aveo: The Rubble Continues to Bounce Around

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Posted by Derek

Aveo Pharmaceuticals has, you'd think, enough problems already. Their failed attempt to get tivozanib through the FDA crashed their stock and led to a large number of their staff being laid off. But now they disclose that they've received a subpoena in the SEC. Given the sort of thing that went on during the run-up to the approval hearing, this shouldn't be too much of a surprise:

After finding out that the FDA had suggested a year ago that Aveo's late-stage work should be supplemented with a new trial, surprised analysts began to demand some answers of their own. Those questions grew more pointed as class action lawsuits began to pile up after the stock had been eviscerated in the subsequent rout.

Weeks after the review process, Aveo responded by laying off 140 staffers, 62% of its staff, including the commercial team that had been brought in after CEO Tuan Ha-Ngoc began to confidently assure investors that the company could explain the OS data and win approval.

And as that FierceBiotech piece notes, it took the company a week to disclose the SEC's inquiry. At this point, why anyone is holding this stock is something of a mystery - you have to be a very risk-tolerant investor with some long-shot money to spare. Or (more likely) you're stuck with a lot of sunk-cost Aveo stock, bought in a more hopeful era, and although you've probably written it off by now, you figure what the heck, you might be able to get a little of the money back if you let it ride. Good luck with that.

Comments (2) + TrackBacks (0) | Category: Business and Markets

July 11, 2013

More From Warp Drive Bio (And Less From Aileron?)

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Posted by Derek

There hasn't been much news about Warp Drive Bio since their founding. And that founding was a bit of an unusual event all by itself, since the company was born with a Sanofi deal already in place (and an agreement for them to buy the company if targets were met). But now things seem to be happening. Greg Verdine, a founder, has announced that he's taking a three-year leave of absence from Harvard to become the company's CEO. They've also brought in some other big names, such as Julian Adams (Millennium/Infinity) to be on the board of directors.

The company has a very interesting research program: they're hoping to coax out cryptic natural products from bacteria and the like, molecules that aren't being found in regular screening efforts because the genes used in their biosynthetic pathways are rarely activated. Warp Drive's plan is to sequence heaps of prokaryotes, identify the biosynthesis genes, and activate them to produce rare and unusual natural products as drug candidates. (I'm reminded of this recent work on forcing fungi to produce odd products by messing with their epigenetic enzymes, although I'm not sure if that's what Warp Drive has in mind specifically). And the first part of that plan is what the company has been occupying itself with over the last few months:

“These are probably really just better molecules, and always were better,” he says. “The problems were that they took too long to discover and that one was often rediscovering the same things over and over again.”

Verdine explains the reason this happened is because many of the novel genes in the bacteria aren’t expressed, and remain “dark,” or turned off, and thus can’t be seen. By sequencing the microbes’ genetic material, however, Warp Drive can illuminate them, and find the roadmap needed to make a number of drugs.

“They’re there, hiding in plain sight,” Verdine says.

Over the past year and a half, Warp Drive has sequenced the entire genomes of more than 50,000 bacteria, most of which come from dirt. That library represents the largest collection of such data in existence, according to Verdine.

The entire genomes of 50,000 bacteria? I can well believe that this is the record. That is a lot of data, even considering that bacterial genomes don't run that large. My guess is that the rate-limiting step in all this is going to be a haystack problem. There are just so many things that one could potentially work on - how do you sort them out? Masses of funky natural product pathways (whose workings may not be transparent), producing masses of funky natural products, of unknown function: there's a lot to keep people busy here. But if there really is a dark-matter universe of natural products, it really could be worth exploring - the usual one certainly has been a good thing over the years, although (as noted above) it's been suffering from diminishing returns for a while.

But there's something else I wondered about when Warp Drive was founded: Verdine himself has been involved in founding several other companies, and there's another one going right here in Cambridge: Aileron Therapeutics, the flagship of the stapled-peptide business (an interesting and sometimes controversial field). How are they doing? They recently got their first compound through Phase I, after raising more money for that effort last year.

The thing is, I've heard from more than one person recently that all isn't well over there, that they're cutting back research. I don't know if that's the circle-the-wagons phase that many small companies go through when they're trying to take their first compound through the clinic, or a sign of something deeper. Anyone with knowledge, feel free to add it in the comments section. . .

Update: Prof. Verdine emails me to note that he's officially parted ways with Aileron since 2010, to avoid conflicts of interest with his other venture capital work. His lab has continued to investigate stapled peptides on their own, though.

Comments (14) + TrackBacks (0) | Category: Biological News | Business and Markets | Natural Products

July 10, 2013

Good Fortune Smiles On Someone's Onyx Option Trades

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Posted by Derek

This will be interesting to follow: the recent offer by Amgen for Onyx Pharmaceuticals (which happened while I was traveling, and didn't get a chance to write about) has had a financial sidelight: someone got very, very lucky with some nearly-expired call options.

On Thursday and Friday, traders enacted a few small-sized trades on Onyx call options - which give the buyer the right to buy the stock at a given price by a certain date - hoping to catch a share price rally by mid-July.

Onyx averaged 715 calls per day over the past 22 trading days, according to options analytics firm Trade Alert.

Call volume was notable on Friday, when a total of 1,561 calls changed hands, more than double the normal level, against 488 puts. On Thursday, traders exchanged 1,374 calls and 664 puts on Onyx, data from Trade Alert showed.

"This flow looks a bit suspect to me. It's possible the buyers knew of the deal and put that knowledge to work," said Trade Alert President Henry Schwartz. "The odds of turning a few hundred thousand dollars into millions overnight are very small, yet that's exactly what happened in Onyx options last week."

Specifically, some of these were July call options, worth a dollar or two on the Friday before the announcement, which started off Monday at about $30. That's just the sort of thing that speculative options traders dream about, and it's also just the sort of trade that the SEC likes to investigate. I wish good luck to whoever it is that has to explain this activity; they're going to need it in order to persuade anyone that good luck was all that was involved.

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

June 6, 2013

The Ax At Aveo

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Posted by Derek

The failure at the FDA of Aveo's kinase inhibitor tivozanib has had the expected fallout: the company has cut over half its employees.

I cannot resist linking to Adam Feuerstein's take on this news. If there's a case against his viewpoint, I'd be glad to link to that as well. But for now:

Aveo Oncology (AVEO_) fired 140 middle and lower-level employees -- 62 percent of its workforce -- on Tuesday in order to save money to pay the salaries and bonuses of its top executives who blew up the company, decimated shareholder value and are too cowardly to accept responsibility for their incompetence.

At Aveo, accountability starts at the bottom.

Comments (27) + TrackBacks (0) | Category: Business and Markets

June 4, 2013

AstraZeneca, As Expected, Pulls the Plug

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Posted by Derek

Late last year came word that the AstraZeneca/Rigel compound, fostamatinib, had failed to show any benefit versus AbbVie's Humira in the clinic. Now they've gritted their corporate teeth and declared failure, sending the whole program back to Rigel.

I've lost count of how many late-stage clinical wipeouts this makes for AZ, but it sure is a lot of them. The problem is, it's hard to say just how much of this is drug discovery itself (after all, we have brutal failure rates even when things are going well), how much of it is just random bad luck, or what might be due to something more fundamental about target and compound selection. At any rate, their CEO, Pascal Soriot, has a stark backdrop against which to perform. Odds are, things will pick up, just by random chance if by nothing else. But odds are, that may not be enough. . .

Comments (19) + TrackBacks (0) | Category: Business and Markets | Clinical Trials

May 28, 2013

Valeant Versus Genentech: Two Different Worlds

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Posted by Derek

Readers may recall the bracing worldview of Valeant CEO Mike Pearson. Here's another dose of it, courtesy of the Globe and Mail. Pearson, when he was brought in from McKinsey, knew just what he wanted to do:

Pearson’s next suggestion was even more daring: Cut research and development spending, the heart of most drug firms, to the bone. “We had a premise that most R&D didn’t give good return to shareholders,” says Pearson. Instead, the company should favour M&A over R&D, buying established treatments that made enough money to matter, but not enough to attract the interest of Big Pharma or generic drug makers. A drug that sold between $10 million and $200 million a year was ideal, and there were a lot of companies working in that range that Valeant could buy, slashing costs with every purchase. As for those promising drugs it had in development, Pearson said, Valeant should strike partnerships with major drug companies that would take them to market, paying Valeant royalties and fees.

It's not a bad strategy for a company that size, and it sure has worked out well for Valeant. But what if everyone tried to do the same thing? Who would actually discover those drugs for inlicensing? That's what David Shayvitz is wondering at Forbes. He contrasts the Valeant approach with what Art Levinson cultivated at Genentech:

While the industry has moved in this direction, it’s generally been slower and less dramatic than some had expected. In part, many companies may harbor unrealistic faith in their internal R&D programs. At the same time, I’ve heard some consultants cynically suggest that to the extent Big Pharma has any good will left, it’s due to its positioning as a science-driven enterprise. If research was slashed as dramatically as at Valeant, the industry’s optics would look even worse. (There’s also the non-trivial concern that if Valeant’s acquisition strategy were widely adopted, who would build the companies everyone intends to acquire?)

The contrasts between Levinson’s research nirvana and Pearson’s consultant nirvana (and scientific dystopia) could hardly be more striking, and frame two very different routes the industry could take. . .

I can't imagine the industry going all one way or all the other. There will always be people who hope that their great new ideas will make them (and their investors) rich. And as I mentioned in that link in the first paragraph, there's been talk for years about bigger companies going "virtual", and just handling the sales and regulatory parts, while licensing in all the rest. I've never been able to quite see that, either, because if one or more big outfits tried it, the cost of such deals would go straight up - wouldn't they? And as they did, the number would stop adding up. If everyone knows that you have to make deals or die, well, the price of deals has to increase.

But the case of Valeant is an interesting and disturbing one. Just think over that phrase, ". . .most R&D didn't give good return to the shareholders". You know, it probably hasn't. Some years ago, the Wall Street Journal estimated that the entire biotech industry, taken top to bottom across its history, had yet to show an actual profit. The Genentechs and Amgens were cancelled out, and more, by all the money that had flowed in never to be seen again. I would not be surprised if that were still the case.

So, to steal a line from Oscar Wilde (who was no stranger to that technique), is an R&D-driven startup the triumph of hope over experience? Small startups are the very definition of trying to live off returns of R&D, and most startups fail. The problem is, of course, that any Valeants out there need someone to do the risky research for there to be something for them to buy. An industry full of Mike Pearsons would be a room full of people all staring at each other in mounting perplexity and dismay.

Comments (32) + TrackBacks (0) | Category: Business and Markets | Drug Industry History

May 23, 2013

Another Look At Marketing Vs. R&D In Pharma

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Posted by Derek

FiercePharma has some good figures to back up my posts the other day on R&D spending versus marketing. I mentioned how many people, when they argue that drug companies spend more on marketing than they do on research, are taking the entire SG&A number, and how companies tend to not even break out their marketing numbers at all.

Well, the folks at Fierce had a recent article on marketing budgets in the business, and they take Pfizer's numbers as a test case. That's actually a really good example: Pfizer is known as a mighty marketing machine, and for a long time they had what must have been the biggest sales force in the industry. They also have a lower R&D spend than many of their peers, as a percentage of sales. So if you're looking for the sort of skewed priorities that critics are always complaining about, here's where you'd look.

Pfizer spent $622 million on advertising last year. Man, that's a lot of money. It's so much that it's not even one-tenth of their R&D budget. Ah, you say, but ads are only part of the story, and so they are. But while we don't have a good estimate on that for Pfizer, we do have one for the industry as a whole:

DTC spending is only part of the overall sales-and-marketing budget, of course. Detailing to doctors costs a pretty penny, and that's where drugmakers spend much of their sales budget. Consumer advertising spending dropped by 11.5% in 2012 to $3.47 billion. Marketing to physicians, according to a Johns Hopkins Bloomberg School of Public Health study, amounted to $27.7 billion in 2010; that same year, DTC spending was just over $4 billion.

That's a total for 2010 of more than $31 billion, the best guess-timate we can come up with on short notice. According to FierceBiotech's 2010 R&D spending report, the industry shelled out $67 billion on research that year--more than twice our quick-and-dirty marketing estimate.

So let's try for a Pfizer estimate then. If they stayed at roughly that ratio, then they would have spent seven times as much marketing to physicians as they did on advertising per se. That gives a rough number of $4.3 billion, plus that $622 million, for a nice round five billion dollars of marketing. That's still less than their R&D budget of $7.9 billion, folks, no small sum. (And as for that figure from a couple of years ago about how it only costs $43 million to find a new drug, spare me. Spare everyone. Pfizer is not allocating $7.9 billion dollars for fun, nor are they planning on producing 184 new drugs with that money at $43 million per, more's the pity.)

So let me take a stronger line: Big Pharma does not spend more on marketing than it does on R&D. This is a canard; it's not supported by the data. And let me reiterate a point that's been made here several times: no matter what the amount spent on marketing, it's supposed to bring in more money than is spent. That's the whole point of marketing. Even if the marketing budget was the same as the R&D, even if it were more, it still wouldn't get rid of that point: the money that's being spent in the labs is money that came in because of marketing. Companies aren't just hosing away billions of dollars on marketing because they enjoy it; they're doing it to bring in a profit (you know, that more-money-than-you-spend thing), and if some marketing strategy doesn't look like it's performing, it gets ditched. The response-time loop over there is a lot tighter than it is in research.

There. Now the next time this comes up, I'll have a post to point to, with the numbers, and with the links. It will do no good at all.

Note: I am not saying that every kind of drug company marketing is therefore good. Nor am I saying that I do not cringe and roll my eyes at some of it. And yes indeed, companies can and do cross lines that shouldn't be crossed when they get to selling their products too hard. Direct-to-consumer advertising, although it has brought in the money, has surely damaged the industry from other directions. All this is true. But the popular picture of big drug companies as huge advertising shops with little vestigial labs stuck to them: that isn't.

Comments (29) + TrackBacks (0) | Category: Business and Markets | Why Everyone Loves Us

May 21, 2013

Promoting STEM Education, Foolishly

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Posted by Derek

Here's a man who says what he thinks about getting students into STEM careers:

The United States spent more than US$3 billion last year across 209 federal programmes intended to lure young people into careers in science, technology, engineering and mathematics (STEM). The money goes on a plethora of schemes at school, undergraduate and postgraduate levels, all aimed at promoting science and technology, and raising standards of science education.

In a report published on 10 April, Congress’s Government Accountability Office (GAO) asked a few pointed questions about why so many potentially overlapping programmes coexist. The same day, the 2014 budget proposal of President Barack Obama’s administration suggested consolidating the programmes, but increasing funding.

What no one asked was whether these many activities actually benefit science and engineering, or society as a whole. My answer to both questions is an emphatic ‘no’.

And I think he's right about that. Whipping and driving people into science careers doesn't seem like a very good way to produce good scientists. In fact, it seems like an excellent way to produce a larger cohort of indifferent ones, which is exactly what we don't need. Or does that depend on the definition of "we"?

The dynamic at work here isn’t complicated. By cajoling more children to enter science and engineering — as the United Kingdom also does by rigging university-funding rules to provide more support for STEM than other subjects — the state increases STEM student numbers, floods the market with STEM graduates, reduces competition for their services and cuts their wages. And that suits the keenest proponents of STEM education programmes — industrial employers and their legion of lobbyists — absolutely fine.

And that takes us back to the subject of these two posts, on the oft-heard complaints of employers that they just can't seem to find qualified people any more. To which add, all too often, ". . .not at the salaries we'd prefer to pay them, anyway". Colin Macilwain, the author of this Nature piece I'm quoting from, seems to agree:

But the main backing for government intervention in STEM education has come from the business lobby. If I had a dollar for every time I’ve heard a businessman stand up and bemoan the alleged failure of the education system to produce the science and technology ‘skills’ that his company requires, I’d be a very rich man.

I have always struggled to recognize the picture these detractors paint. I find most recent science graduates to be positively bursting with both technical knowledge and enthusiasm.

If business people want to harness that enthusiasm, all they have to do is put their hands in their pockets and pay and train newly graduated scientists and engineers properly. It is much easier, of course, for the US National Association of Manufacturers and the British Confederation of British Industry to keep bleating that the state-run school- and university-education systems are ‘failing’.

This position, which was not my original one on this issue, is not universally loved. (The standard take on this issue, by contrast, has the advantage of both flattering and advancing the interests of employers and educators alike, and it's thus very politically attractive). I don't even have much affection for my own position on this, even though I've come to think it's accurate. As I've said before, it does feel odd for me, as a scientist, as someone who values education greatly, and as someone who's broadly pro-immigration, to be making these points. But there they are.

Update: be sure to check the comments section if this topic interests you - there are a number of good ones coming in, from several sides of this issue.

Comments (76) + TrackBacks (0) | Category: Business and Markets | Current Events

May 20, 2013

But Don't Drug Companies Spend More on Marketing?

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Posted by Derek

So drug companies may spend a lot on R&D, but they spend even more on marketing, right? I see the comments are already coming in to that effect on this morning's post on R&D expenditures as a percentage of revenues. Let's take a look at those other numbers, then.

We're talking SG&A, "sales, general, and administrative". That's the accounting category where all advertising, promotion and marketing ends up. Executive salaries go there, too, in case you're wondering. Interestingly, R&D expenses technically go there as well, but companies almost always break that out as a separate subcategory, with the rest as "Other SG&A". What most companies don't do is break out the S part separately: just how much they spend on marketing (and how, and where) is considering more information than they're willing to share with the world, and with their competition.

That means that when you see people talking about how Big Pharma spends X zillion dollars on marketing, you're almost certainly seeing an argument based on the whole SG&A number. Anything past that is a guess - and would turn out to be a lower number than the SG&A, anyway, which has some other stuff rolled into it. Most of the people who talk about Pharma's marketing expenditures are not interested in lower numbers, anyway, from what I can see.

So we'll use SG&A, because that's what we've got. Now, one of the things you find out quickly when you look at such figures is that they vary a lot, from industry to industry, and from company to company inside any given group. This is fertile ground for consultants, who go around telling companies that if they'll just hire them, they can tell them how to get their expenses down to what some of their competition can, which is an appealing prospect.
SG%26A.png
Here you see an illustration of that, taken from the web site of this consulting firm. Unfortunately, this sample doesn't include the "Pharmaceuticals" category, but "Biotechnology" is there, and you can see that SG&A as a percent of revenues run from about 20% to about 35%. That's definitely not one of the low SG&A industries (look at the airlines, for example), but there are a lot of other companies, in a lot of other industries, in that same range.

So, what do the SG&A expenditures look like for some big drug companies? By looking at 2012 financials, we find that Merck's are at 27% of revenues, Pfizer is at 33%, AstraZeneca is just over 31%, Bristol-Myers Squibb is at 28%, and Novartis is at 34% high enough that they're making special efforts to talk about bringing it down. Biogen's SG&A expenditures are 23% of revenues, Vertex's are 29%, Celgene's are 27%, and so on. I think that's a reasonable sample, and it's right in line with that chart's depiction of biotech.

What about other high-tech companies? I spent some time in the earlier post talking about their R&D spending, so here are some SG&A figures. Microsoft spends 25%, Google just under 20%, and IBM spends 21.5%. Amazon's expenditures are about 23%, and have been climbing. But many other tech companies come in lower: Hewlett-Packard's SG&A layouts are 11% of revenues, Intel's are 15%, Broadcom's are 9%, and Apple's are only 6.5%.

Now that's more like it, I can hear some people saying. "Why can't the drug companies get their marketing and administrative costs down? And besides, they spend more on that than they do on research!" If I had a dollar for every time that last phrase pops up, I could take the rest of the year off. So let's get down to what people are really interested in: sales/administrative costs versus R&D. Here comes a list (and note that some of the figures may be slightly off this morning's post - different financial sites break things down slightly differently):

Merck: SG&A 27%, R&D 17.3%
Pfizer: SG&A 33%, R&D 14.2%
AstraZeneca: SG&A 31.4%, R&D 15.1%
BMS: SG&A 28%, R$D 22%
Biogen: SG&A 23%, R&D 24%
Johnson & Johnson: SG&A 31%, R&D 12.5%

Well, now, isn't that enough? As you go to smaller companies, it looks better (and in fact, the categories flip around) but when you get too small, there aren't any revenues to measure against. But jut look at these people - almost all of them are spending more on sales and administration than they are on research, sometimes even a bit more than twice as much! Could any research-based company hold its head up with such figures to show?

Sure they could. Sit back and enjoy these numbers, by comparison:

Hewlett-Packard: SG&A 11%, R&D 2.6%.
IBM: SG&A 21.5%, R&D 5.7%.
Microsoft: SG&A 25%, R&D 13.3%.
3M: SG&A 20.4%, R&D 5.5%
Apple: SG&A 6.5%, R&D 2.2%.
GE: SG&A 25%, R&D 3.2%

Note that these companies, all of whom appear regularly on "Most Innovative" lists, spend anywhere from two to eight times their R&D budgets on sales and administration. I have yet to hear complaints about how this makes all their research into some sort of lie, or about how much more they could be doing if they weren't spending all that money on those non-reseach activities. You cannot find a drug company with a split between SG&A and research spending like there is for IBM, or GE, or 3M. I've tried. No research-driven drug company could survive if it tried to spend five or six times its R&D on things like sales and administration. It can't be done. So enough, already.

Note: the semiconductor companies, which were the only ones I could find with comparable R&D spending percentages to the drug industry, are also outliers in SG&A spending. Even Intel, the big dog of the sector, manages to spend slightly less on that category than it does on R&D, which is quite an accomplishment. The chipmakers really are off on their own planet, financially. But the closest things to them are the biopharma companies, in both departments.

Comments (28) + TrackBacks (0) | Category: Business and Markets | Drug Industry History

How Much Do Drug Companies Spend on R&D, Anyway?

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Posted by Derek

How much does Big Pharma spend on R&D, compared to what it takes in? This topic came up during a discussion here last week, when a recent article at The Atlantic referred to these expenditures as "only" 16 cents on the dollar, and I wanted to return to it.

One good source for such numbers is Booz, the huge consulting outfit, and their annual "Global Innovation 1000" survey. This is meant to be a comparison of companies that are actually trying to discover new products and bring them to market (as opposed to department stores, manufacturers of house-brand cat food, and other businesses whose operations consist of doing pretty much the same thing without much of an R&D budget). Even among these 1000 companies, the average R&D budget, as a per cent of sales, is between 1 and 1.5%, and has stayed in that range for years.

Different industries naturally have different averages. The "chemicals and energy" category in the Booz survey spends between 1 and 3% of its sales on R&D. Aerospace and defense companies tend to spend between 3 and 6 per cent. The big auto makers tend to spend between 3 and 7% of their sales on research, but those sales figures are so large that they still account for a reasonable hunk (16%) of all R&D expenditures. That pie, though, has two very large slices representing electronics/computers/semiconductors and biopharma/medical devices/diagnostics. Those two groups account for half of all the industrial R&D spending in the world.

And there are a lot of variations inside those industries as well. Apple, for example, spends only 2.2% of its sales on R&D, while Samsung and IBM come in around 6%. By comparison with another flagship high-tech sector, the internet-based companies, Amazon spends just over 6% itself, and Google is at a robust 13.6% of its sales. Microsoft is at 13% itself.

The semiconductor companies are where the money really gets plowed back into the labs, though. Here's a roundup of 2011 spending, where you can see a company like Intel, with forty billion dollars of sales, still putting 17% of that back into R&D. And the smaller firms are (as you might expect) doing even more. AMD spends 22% of its sales on R&D, and Broadcom spends 28%. These are people who, like Alice's Red Queen, have to run as fast as they can if they even want to stay in the same place.

Now we come to the drug industry. The first thing to note is that some of its biggest companies already have their spending set at Intel levels or above: Roche is over 19%, Merck is over 17%, and AstraZeneca is over 16%. The others are no slouches, either: Sanofi and GSK are above 14%, and Pfizer (with the biggest R&D spending drop of all the big pharma outfits, I should add) is at 13.5%. They, J&J, and Abbott drag the average down by only spending in the 11-to-14% range - I don't think that there's such a thing as a drug discovery company that spends in the single digits compared to revenue. If any of us tried to get away with Apple's R&D spending levels, we'd be eaten alive.

All this adds up to a lot: if you take the top 20 biggest industrial R&D spenders in the world, eight of them are drug companies. No other industrial sector has that many on the list, and a number of companies just missed making it. Lilly, for one, spent 23% of revenues on R&D, and BMS spend 22%, as did Biogen.

And those are the big companies. As with the chip makers, the smaller outfits have to push harder. Where I work, we spent about 50% of our revenues on R&D last year, and that's projected to go up. I think you'll find similar figures throughout biopharma. So you can see why I find it sort of puzzling that someone can complain about the drug industry as a whole "only" spending 16% of its revenues. Outside of semiconductors, nobody spends more

Comments (28) + TrackBacks (0) | Category: Business and Markets | Drug Industry History

May 14, 2013

Crowdfunding Research

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Posted by Derek

Crowdfunding academic research might be changing, from a near-stunt to an widely used method of filling gaps in a research group's money supply. At least, that's the impression this article at Nature Jobs gives:

The practice has exploded in recent years, especially as success rates for research-grant applications have fallen in many places. Although crowd-funding campaigns are no replacement for grants — they usually provide much smaller amounts of money, and basic research tends to be less popular with public donors than applied sciences or arts projects — they can be effective, especially if the appeals are poignant or personal, involving research into subjects such as disease treatments.

The article details several venues that have been used for this sort of fund-raising, including Indiegogo, Kickstarter, RocketHub, FundaGeek, and SciFund Challenge. I'd add Microryza to that list. And there's a lot of good advice for people thinking about trying it themselves, including how much money to try for (at least at first), the timelines one can expect, and how to get your message out to potential donors.

Overall, I'm in favor of this sort of thing, but there are some potential problems. This gives the general pubic a way to feel more connected to scientific research, and to understand more about what it's actually like, both of which are goals I feel a close connection to. But (as that quote above demonstrates), some kinds of research are going to be an easier sell than others. I worry about a slow (or maybe not so slow) race to the bottom, with lab heads overpromising what their research can deliver, exaggerating its importance to immediate human concerns, and overselling whatever results come out.

These problems have, of course, been noted. Ethan Perlstein, formerly of Princeton, used RocketHub for his crowdfunding experiment that I wrote about here. And he's written at Microryza with advice about how to get the word out to potential donors, but that very advice has prompted a worried response over at SciFund Challenge, where Jai Ranganathan had this to say:

His bottom line? The secret is to hustle, hustle, hustle during a crowdfunding campaign to get the word out and to get media attention. With all respect to Ethan, if all researchers running campaigns follow his advice, then that’s the end for science crowdfunding. And that would be a tragedy because science crowdfunding has the potential to solve one of the key problems of our time: the giant gap between science and society.

Up to a point, these two are talking about different things. Perlstein's advice is focused on how to run a successful crowdsourcing campaign (based on his own experience, which is one of the better guides we have so far), while Ranganathan is looking at crowdsourcing as part of something larger. Where they intersect, as he says, is that it's possible that we'll end up with a tragedy of the commons, where the strategy that's optimal for each individual's case turns out to be (very) suboptimal for everyone taken together. He's at pains to mention that Ethan Perlstein has himself done a great job with outreach to the public, but worries about those to follow:

Because, by only focusing on the mechanics of the campaign itself (and not talking about all of the necessary outreach), there lurks a danger that could sink science crowdfunding. Positive connections to an audience are important for crowdfunding success in any field, but they are especially important for scientists, since all we have to offer (basically) is a personal connection to the science. If scientists omit the outreach and just contact audiences when they want money, that will go a long way to poisoning the connections between science and the public. Science crowdfunding has barely gotten started and already I hear continuous complaints about audience exasperation with the nonstop fundraising appeals. The reason for this audience fatigue is that few scientists have done the necessary building of connections with an audience before they started banging the drum for cash. Imagine how poisonous the atmosphere will become if many more outreach-free scientists aggressively cold call (or cold e-mail or cold tweet) the universe about their fundraising pleas.

Now, when it comes to overpromising and overselling, a cynical observer might say that I've just described the current granting system. (And if we want even more of that sort of thing, all we have to do is pass a scheme like this one). But the general public will probably be a bit easier to fool than a review committee, at least, if you can find the right segment of the general public. Someone will probably buy your pitch, eventually, if you can throw away your pride long enough to keep on digging for them.

That same cynical observer might say that I've just described the way that we set up donations to charities, and indeed Ranganathan makes an analogy to NPR's fundraising appeals. That's the high end. The low end of the charitable-donation game is about as low as you can go - just run a search for the words "fake" and "charity" through Google News any day, any time, and you can find examples that will make you ashamed that you have the same number of chromosomes as the people you're reading about. (You probably do). Avoiding this state really is important, and I'm glad that people are raising the issue already.

What if, though, someone were to set up a science crowdfunding appeal, with hopes of generating something that could actually turn a profit, and portions of that to be turned over to the people who put up the original money? We have now arrived at the biopharma startup business, via a different road than usual. Angel investors, venture capital groups, shareholders in an IPO - all of these people are doing exactly that, at various levels of knowledge and participation. The pitch is not so much "Give us money for the good of science", but "Give us money, because here's our plan to make you even more". You will note that the scale of funds raised by the latter technique make those raised by the former look like a roundoff error, which fits in pretty well with what I take as normal human motivations.

But academic science projects have no such pitch to make. They'll have to appeal to altruism, to curiosity, to mood affiliation, and other nonpecuniary motivations. Done well, that can be a very good thing, and done poorly, it could be a disaster.

Comments (20) + TrackBacks (0) | Category: Academia (vs. Industry) | Business and Markets | General Scientific News

May 13, 2013

Astellas Closing the OSI and Perseid Sites?

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Posted by Derek

I've heard this morning that Astellas is closing the OSI site in Farmingdale, NY, and the Perseid Therapeutics site in Redwood City, CA. More details as I hear them (and check the comments section; people with more direct knowledge may be showing up in there).

Comments (12) + TrackBacks (0) | Category: Business and Markets

May 6, 2013

Ken Frazier at Merck: An Assessment

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Posted by Derek

Here's a fine profile of Merck's Ken Frazier at Forbes. Matthew Herper does a good job of showing the hole that Merck has been slowly sliding into over the past few years, and wonders if Frazier is going to be able to drag the company out of it:

But it is clear that Frazier still views himself through the prism of his lawyerly training–he has not yet grown into a commanding and decisive chief executive. He’s scrupulous about not making anyone else look bad–working almost too hard in interviews to be clear that Perlmutter’s predecessor was not fired–and seems to be afraid to be seen as making too many big changes. “I am a person who does not subscribe to the hero-CEO school of thought,” he says. His persona is the culmination of the careful lessons he learned from his long climb to the top and his masterful legal defense against the lawsuits related to the pain pill Vioxx, which saved Merck and got him the top job. In order to be a great leader, he’s going to have to unlearn them.

I don't subscribe much to the hero-CEO school, either, at least not for a company the size of Merck. But even for a huge company, I think a rotten CEO can do a lot more harm than a good one can help (there's some thermodynamic way to express that, I'm sure). Frazier is certainly not in that category, and I've enjoyed some of the things he's had to say in the past (although I've also wondered about the follow-through). I wonder, though: how much of what Merck needs is in Frazier's power to do anything about? Or any one person's?

Update: here's David Shaywitz at Forbes, wondering about similar issues and what biopharma CEOs can actually do about them.

Comments (14) + TrackBacks (0) | Category: Business and Markets

April 11, 2013

A Startup's Post-Mortem

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Posted by Derek

Here's an excellent look back by venture capitalist Bruce Booth at one of the companies his firm funded. But this isn't one of those we-exited-with-a-thirtyfold-return stories. On-Q-ity, a diagnostic play, has unfortunately just folded.

There were several reasons for this, but I'd guess that the ones below really, really didn't help:

. . .By mid-2010, only six months after the Series A came together, it was clear that the DNA repair biomarkers were going to be tough, as an early trial failed to reproduce the nice Kaplan-Meyer curves of the original academic work. By late 2010/early 2011, two more larger trials read out negatively so we decided to terminate that effort. But unfortunately those trials and the biomarker lab work required to support them consumed 60%+ of the capital in the Series A round.

Not much had gone into the CTC platform in that first year and so early in 2011 the company refocused exclusively on CTCs and streamlined the team, but the clock was ticking. As we dug in to the status of the CTC platform, it was very clear that lots more work needed to be done – the paper descriptions of what it was supposed to deliver didn’t map to the platform’s actual robustness (or lack thereof) at that time. Antibodies that were supposedly functional turned out not to work, and several other things like this. . .

This looks like yet another example of something that never worked as well in the real world as it did in the publications. Bruce himself has blogged about this problem, which shows you that it's lying in wait for everyone trying to make something out of new discoveries. I recommend the whole post, especially for anyone working at a small startup or thinking about doing so. It shows you some things to stay alert for, and there are many.

Comments (16) + TrackBacks (0) | Category: Business and Markets

April 8, 2013

Pursuing Other Interests, As They Say

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Posted by Derek

Sunday isn't usually a big day for announcements from big pharma companies. But yesterday is when Bristol-Myers Squibb let everyone know that their CSO, Elliott Sigal, is retiring. I wonder when he found out - Saturday night? More from FierceBiotech here.

Comments (4) + TrackBacks (0) | Category: Business and Markets

April 4, 2013

Regeneron Expands

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Posted by Derek

I feel as if there should be some good news around here on the hiring front, so when any becomes available I want to try to mention it. So here's some: Regeneron has announced today that they're expanding their site in Westchester (NY), adding another 300,000 square feet of lab and office space, and adding over 400 new jobs in a number of areas.

The fusion protein Eylea (aflibercept) has been doing very well for them since its approval in 2011. And they're very much in the hunt for PCSK9 therapies, which could provide a completely new LDL-lowering mechanism. (Here's some good background from John LaMattina on that - Sanofi and Regeneron are running one of those humungous cardiovascular Phase III trials as we speak, and the results of it (compared to the statin standard of care) are going to be extremely interesting). If those numbers come out well, Regeneron could be looking for even more room.

Comments (3) + TrackBacks (0) | Category: Business and Markets | Cardiovascular Disease

Bristol-Myers Squibb Closes Down the Amylin Site

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Posted by Derek

According to FierceBiotech, Amylin's La Jolla site is to be shut down. People have been getting let go from there for months now, ever since BMS bought them, but now everything must go. That's not what the San Diego region needs - another big closure - but here goes.

Comments (5) + TrackBacks (0) | Category: Business and Markets

March 28, 2013

Pfizer Tears It All Down

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Posted by Derek

Yeah, I know, that's a headlines that could have been used several times over the years. But this time, they mean it: the company is demolishing their former research headquarters off Eastern Point Road in Groton. And local officials and developers aren't happy at all:

Officials involved in the negotiations said last-minute obstacles thrown up by Pfizer after a major developer had offered to purchase the 750,000-square-foot complex known as Building 118 made it appear as though the pharmaceutical giant never had been serious about finding a buyer.

. . .(Developer Stu) Lichter echoed legislators' suspicions that Pfizer never really intended to sell the building, despite the fact that it will cost more to demolish the structure than it would have to sell it, even for a nominal price.

Lichter said Pfizer initially told him that the company had a schedule for demolition, but if a deal could be worked out within a certain timetable, officials would seriously consider an offer.

But, according to Lichter, Pfizer kept bringing up additional issues that would stall negotiations.

Guys, wrecking balls are what Pfizer does.

Comments (29) + TrackBacks (0) | Category: Business and Markets

March 26, 2013

The Wyeth/Elan Insider Trading Case Resolves

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Posted by Derek

You may remember this insider trading scandal from last year, involving a lead investigator for Wyeth/Elan's trials of bapineuzumab for Alzheimer's.

Here's the sequel. The hedge fund involved has agreed to pay $600 million dollars to settle the charges, although this does not get the manager himself off the hook (litigation in his case continues). Dr. Sidney Gilman, the investigator who leaked the information, has already been required to give back all his own gains, with interest and penalties.

Comments (6) + TrackBacks (0) | Category: Business and Markets | Clinical Trials | The Dark Side

March 21, 2013

AstraZeneca Makes a Deal With Moderna. Wait, Who?

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Posted by Derek

AstraZeneca has announced another 2300 job cuts, this time in sales and administration. That's not too much of a surprise, as the cuts announced recently in R&D make it clear that the company is determined to get smaller. But their overall R&D strategy is still unclear, other than "We can't go on like this", which is clear enough.

One interesting item has just come out, though. The company has done a deal with Moderna Therapeutics of Cambridge (US), a relatively new outfit that's trying something that (as far as I know) no one else has had the nerve to. Moderna is trying to use messenger RNAs as therapies, to stimulate the body's own cells to produce more of some desired protein product. This is the flip side of antisense and RNA interference, where you throw a wrench into the transcription/translation machinery to cut down on some protein. Moderna's trying to make the wheels spin in the other direction.

This is the sort of idea that makes me feel as if there are two people inhabiting my head. One side of me is very excited and interested to see if this approach will work, and the other side is very glad that I'm not one of the people being asked to do it. I've always thought that messing up or blocking some process was an easier task than making it do the right thing (only more so), and in this case, we haven't even reliably shown that blocking such RNA pathways is a good way to a therapy.

I also wonder about the disease areas that such a therapy would treat, and how amenable they are to the approach. The first one that occurs to a person is "Allow Type I diabetics to produce their own insulin", but if your islet cells have been disrupted or killed off, how is that going to work? Will other cell types recognize the mRNA-type molecules you're giving, and make some insulin themselves? If they do, what sort of physiological control will they be under? Beta-cells, after all, are involved in a lot of complicated signaling to tell them when to make insulin and when to lay off. I can also imagine this technique being used for a number of genetic disorders, where we know what the defective protein is and what it's supposed to be. But again, how does the mRNA get to the right tissues at the right time? Protein expression is under so many constraints and controls that it seems almost foolhardy to think that you could step in, dump some mRNA on the process, and get things to work the way that you want them to.

But all that said, there's no substitute for trying it out. And the people behind Moderna are not fools, either, so you can be sure that these questions (and many more) have crossed their minds already. (The company's press materials claim that they've addressed the cellular-specificity problem, for example). They've gotten a very favorable deal from AstraZeneca - admittedly a rather desperate company - but good enough that they must have a rather convincing story to tell with their internal data. This is the very picture of a high-risk, high-reward approach, and I wish them success with it. A lot of people will be watching very closely.

Comments (37) + TrackBacks (0) | Category: Biological News | Business and Markets | Drug Development

March 19, 2013

Affymax In Trouble

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Posted by Derek

Affymax has had a long history, and it's rarely been dull. The company was founded in 1988, back in the very earliest flush of the Combichem era, and in its early years it (along with Pharmacopeia) was what people thought of when they thought of that whole approach. Huge compound libraries produced (as much as possible) by robotics, equally huge screening efforts to deal with all those compounds - this stuff is familiar to us now (all too familiar, in many cases), but it was new then. If you weren't around for it, you'll have to take the word of those who were that it could all be rather exciting and scary at first: what if the answer really was to crank out huge piles of amides, sulfonamides, substituted piperazines, aminotriazines, oligopeptides, and all the other "build-that-compound-count-now!" classes? No one could say for sure that it wasn't. Not yet.

Glaxo bought Affymax back in 1995, about the time they were buying Wellcome, which makes it seem like a long time ago, and perhaps it was. At any rate, they kept the combichem/screening technology and spun a new version of Affymax back out in 2001 to a syndicate of investors. For the past twelve years, that Affymax has been in the drug discovery and development business on its own.

And as this page shows, the story through most of those years has been peginesatide (brand name Omontys, although it was known as Hematide for a while as well). This is synthetic peptide (with some unnatural amino acids in it, and a polyethylene glycol tail) that mimics erythropoetin. What with its cyclic nature (a couple of disulfide bonds), the unnatural residues, and the PEGylation, it's a perfect example of what you often have to do to make an oligopeptide into a drug.

But for quite a while there, no one was sure whether this one was going to be a drug or not. Affymax had partnered with Takeda along the way, and in 2010 the companies announced some disturbing clinical data in kidney patients. While Omontys did seem to help with anemia, it also seemed to have a worse safety profile than Amgen's EPO, the existing competition. The big worry was cardiovascular trouble (which had also been a problem with EPO itself and all the other attempted competition in that field). A period of wranging ensued, with a lot of work on the clinical data and a lot of back-and-forthing with the FDA. In the end, the drug was actually approved one year ago, albeit with a black-box warning about cardiovascular safety.

But over the last year, about 25,000 patients got the drug, and unfortunately, 19 of them had serious anaphylactic reactions to it within the first half hour of exposure. Three patients died as a result, and some others nearly did. That is also exactly what one worries about with a synthetic peptide derivative: it's close enough to the real protein to do its job, but it's different enough to set off the occasional immune response, and the immune system can be very serious business indeed. Allergic responses had been noted in the clinical trials, but I think that if you'd taken bets last March, people would have picked the cardiovascular effects as the likely nemesis, not anaphylaxis. But that's not how it's worked out.

Takeda and Affymax voluntarily recalled the drug last month. And that looked like it might be all for the company, because this has been their main chance for some years now. Sure enough, the announcement has come that most of the employees are being let go. And it includes this language, which is the financial correlate of Cheyne-Stokes breathing:

The company also announced that it will retain a bank to evaluate strategic alternatives for the organization, including the sale of the company or its assets, or a corporate merger. The company is considering all possible alternatives, including further restructuring activities, wind-down of operations or even bankruptcy proceedings.

I'm sorry to hear it. Drug development is very hard indeed.

Comments (11) + TrackBacks (0) | Category: Business and Markets | Cardiovascular Disease | Drug Development | Drug Industry History | Toxicology

March 18, 2013

AstraZeneca Site Closings - And Openings

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Posted by Derek

I started hearing word Friday that it looked like some AstraZeneca sites were preparing for some sort of big announcement or meeting, but I didn't want to run with the news in case it turned out to to be nothing. Well, it wasn't nothing. The company is restructuring R&D:

. . .Under the plans, AstraZeneca's small molecule and biologics R&D activities will be concentrated in three strategic centres: Cambridge, UK; Gaithersburg, US; and Mölndal, Sweden. The proposals are expected to be fully implemented by 2016.

Cambridge, UK: AstraZeneca will invest around $500 million to establish a new, purpose-built facility in Cambridge, a world-renowned centre for life sciences innovation with strong links to globally important research institutions in London. Consolidating the company's UK-based small molecule and biologics research and development at a new centre will build on AstraZeneca's world-leading protein engineering capabilities already based in the city. Cambridge will also become AstraZeneca's new global corporate headquarters.

Gaithersburg, Maryland, US: The site of MedImmune's headquarters and the primary location for AstraZeneca's biologics activities, Gaithersburg will also become home to much of the company's US-based Global Medicines Development activities for small and large molecules and will accommodate some global marketing and US specialty care commercial functions.

Mölndal, Sweden: AstraZeneca's site in Mölndal, near Gothenburg, will continue to be a global centre for research and development, with a primary focus on small molecules.

The three strategic sites will be supported by other existing AstraZeneca facilities around the world, including Boston, Massachusetts, US which will continue to be a centre for research and development, with a primary focus on small molecules.

But that means that some other sites are getting hit. Specifically, Alderley Park in the UK will no longer be an R&D site. The company says that "1,600 roles" will migrate from the site, but it says nothing about people. Alderley Park, which is up to the south of Manchester, is a stiff drive from Cambridge; no one could possible haul 160 miles each way on the M6 every day of the week. AZ's Paddington office in London will also be closing. In the US, 1,200 "roles" will be leaving Wilmington, as the Global Medicines Development group relocates.

So there's a lot that's unclear about this announcement. What happens to the people who are now employed at Alderley Park? How is the company going to staff its new Cambridge (UK) site? And what's the real role of the Waltham (Massachusetts) R&D site in this new arrangement? That one's already gone through a lot of shakeups over the last couple of years. More details as they become known.

Update: FiercePharma says that this comes down to a loss of 650 jobs in the US. No more details on how the UK moves will work, though.

Comments (63) + TrackBacks (0) | Category: Business and Markets

GlaxoSmithKline's CEO on the Price of New Drugs

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Posted by Derek

Well, GlaxoSmithKline CEO Andrew Witty has made things interesting. Here he is at a recent conference in London when the topic of drug pricing came up:

. . . Witty said the $1 billion price tag was "one of the great myths of the industry", since it was an average figure that includes money spent on drugs that ultimately fail.

In the case of GSK, a major revamp in the way research is conducted means the rate of return on R&D investment has increased by about 30 percent in the past three or four years because fewer drugs have flopped in late-stage testing, he said.

"If you stop failing so often you massively reduce the cost of drug development ... it's why we are beginning to be able to price lower," Witty said.

"It's entirely achievable that we can improve the efficiency of the industry and pass that forward in terms of reduced prices."

I have a feeling that I'm going to be hearing "great myths of the industry" in my email for some time, thanks to this speech, so I'd like to thank Andrew Witty for that. But here's what he's trying to get across: if you start research on for a new drug, name a clinical candidate, take it to human trials and are lucky enough to have it work, then get it approved by the FDA, you will not have spent one billion dollars to get there. That, though, is the figure for a single run-through when everything works. If, on the other hand, you are actually running a drug company, with many compounds in development, and after a decade or so you total up all the money you've spent, versus the number of drugs you got onto the market, well, then you may well average a billion dollars per drug. That's because so many of them wipe out in the clinic; the money gets spent and you get no return at all.

That's the analysis that Matthew Herper did here (blogged about here), and that same Reuters article makes reference to a similar study done by Deloitte (and Thomson Reuters!) that found that the average cost of a new drug is indeed about $1.1 billion when you have to pay for the failures.

And believe me, we have to pay for them. A lottery ticket may only cost a dollar, but by the time you've won a million dollars playing the lottery, you will have bought a lot of losing tickets. In fact, you'll have bought far more than a million dollar's worth, or no state would run a lottery, but that's a negative-expectations game, while drug research (like any business) is supposed to be positive-expectations. Is it? Just barely, according to that same Deloitte study:

In effect, the industry is treading water in the fight to deliver better returns on the billions of dollars ploughed into the hunt for new drugs each year.

With an average internal rate of return (IRR) from R&D in 2012 of 7.2 percent - against 7.7 percent and 10.5 percent in the two preceding years - Big Pharma is barely covering its average cost of capital, estimated at around 7 percent.

Keep that in mind next time you hear about how wonderfully profitable the drug business is. And those are still better numbers than Morgan Stanley had a couple of years before, when they estimated that our internal returns probably weren't keeping up with our cost of capital at all. (Mind you, it seems that their analysis may have been a bit off, since they used their figures to recommend an "Overweight" on AstraZeneca shares, a decision that looked smart for a few months, but one that a person by now would have regretted deeply).

But back to Andrew Witty. What he's trying to say is that it doesn't have to cost a billion dollars per drug, if you don't fail so often, and he's claiming that GSK is starting to fail less often. True, or not? The people I know at the company aren't exactly breaking out the party hats, for what that's worth, and it looks like the company's might have to add the entire Sirtris investment to the "sunk cost" pile. Overall, I think it's too soon to call any corners as having been turned, even if GSK does turn out to have been doing better. Companies can have runs of good fortune and bad, and the history of the industry is absolutely littered with the press releases of companies who say that they've Turned A New Page of Success and will now be cranking out the wonder drugs like nobody's business. If they keep it up, GSK will have plenty of chances to tell us all about it.

Now, one last topic. What about Witty's statement that this new trend to success will allow drug prices themselves to come down? That's worth thinking about all by itself, on several levels - here are my thoughts, in no particular order:

(1) To a first approximation, that's true. If you're selling widgets, your costs go down, you can cut prices, and you can presumably sell more widgets. But as mentioned above, I'm not yet convinced that GSK's costs are truly coming down yet. And see point three below, because GSK and the rest of us in this business are not, in fact, selling widgets.

(2) Even if costs are coming down, counterbalancing that are several other long-term trends, such as the low-hanging fruit problem. As we move into harder and harder sorts of targets and disease areas, I would assume that the success rate of drugs in the clinic will be hard pressed to improve. This is partly a portfolio management problem, and can be ameliorated and hedged against to some degree, but it is, I think, a long-term concern, unless we start to make some intellectual headway on these topics, and speed the day. On the other side of this balance are the various efforts to rationalize clinical trials and so on.

(3) A larger factor is that the market for innovative drugs is not very sensitive to price. This is a vast topic, covered at vast length in many places, but it comes down to there being (relatively) few entrants in any new therapeutic space, and to people, and governments, and insurance companies, being willing to spend relatively high amounts of money for human health. (The addition of governments into that list means also that various price-fixing schemes distort the market in all kinds of interesting ways as well). At any rate, price mechanisms don't work like classical econ-textbook widgets in the drug business.

So I'm not sure, really, how this will play out. GSK has only modest incentives to lower the prices of its drugs. Such a move won't, in many markets, allow them to sell more drugs to make up the difference on volume. And actually, the company will probably be able to offset some of the loss via the political capital that comes from talking about any such price changes. We might be seeing just that effect with Witty's speech.

Comments (30) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Prices

March 12, 2013

Is GSK Up to Something Else, Too?

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Posted by Derek

The news about Sirtris prompts me to mention something else that I've been hearing about over the last few days. More than one source has told me that GlaxoSmithKline is thinking about doing some other rearranging/staff cutting, but I don't have enough detail beyond that to elaborate. I wonder if today's Sirtris announcement is part of such a move? At any rate, one of the places where these stories seem to be going around the most, naturally, is inside GSK itself. We'll see if any more announcements come in the near future.

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Sirtis Gets Shut Down in Cambridge

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Posted by Derek

Just heard rumors of this earlier this morning, and the rumors are true: GSK is shutting down the Sirtris operation in Cambridge. FierceBiotech has the goods:

GlaxoSmithKline has decided to shutter Sirtris's office in Cambridge, MA, opting to fully integrate their research work now underway into the giant pharma company's R&D operations. A spokesperson for GSK tells FierceBiotech that about 60 staffers currently work at the site in Cambridge, and an yet undetermined number will be given a chance to relocate to the Philadelphia area.

More details as I hear them. I didn't expect this to be Sirtris day around here, but you never know, do you?

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March 8, 2013

Biopharma Startups in India and China - Do They Exist?

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Posted by Derek

So we all know about the amount of biopharma investment going into places like China and India - right? But it's important to keep the categories straight. There's manufacturing, which is its own thing, and there are service organizations, which are a very large part of the market. But neither of those are doing their own R&D. What part of the investment in these countries is going to what we'd think of as traditional venture capital and local research?

There's an article in Nature Biotechnology that tries to answer this question (and it's not an easy one). Here's the take-away:

. . .data on sources of venture capital (VC) that are supporting such innovative biotech startups are unclear because existing investment metrics include not only innovative enterprises but also manufacturing or service firms lacking R&D capability. The quality of published data is also poor, with only one study on healthcare VC activity in China providing data for a single quarter in 2008
and it does not separate innovative ventures. Here, we present a data set of life sciences VC in emerging markets to inform government innovation policy and VC investment strategy. Our data suggest that life sciences VC activity is low in the emerging economies we studied, despite growing levels of activity in that sector and in those regions.

The authors are basing their conclusions (on China, India, Brazil, and South Africa) largely on their own fieldwork, rather than relying on what's in the press, which is probably a wise decision. They found 116 firms backed by 148 financing deals, which may sound like a lot, but the total amounts aren't too impressive yet. Their estimate is that since 2000, about $1.7 billion has been invested, which (by comparison) would be considered a strong quarterly figure in the US. Most of these firms (about 70) are Chinese, and most of the rest are Indian (Brazil and South Africa are round-off errors). The outfits doing the fund-raising are also quite concentrated; there are some big players in both countries, and there's a scattering of everybody else. A lot of the money is from home as well. The great majority of these firms, as it turns out, are targeting oncology (a full 90% of the Chinese ones, for example).

So what are we to make of all this? These numbers are about as good as anyone is going to see, but they're probably still incomplete. At any rate, it seems clear that the amount of money going into new biopharma companies in these countries is still very tiny by industry standards. There are surely several reasons for this - lack of a "startup culture" being a big (albeit vague) one. That covers a lot of ground, including physical infrastructure and fewer experienced investors. It's not like India and China have a long history of funding small new medical research firms - it takes a while to get the hang of it, for sure (assuming that anyone ever does!)

One possibility is that the innovative research being done in these countries is being done more inside the walls of the large international firms that have set up shops there. What I think people have been waiting to see is whether these will eventually lead to more smaller companies spinning out. And then there's the other source of many startups in the US and Europe, academic labs. My impression has been that the academic research culture is very different in China and India from what we're used to in the US, and this is surely having an effect on the whole venture-capital-based world there, too. Eventually, though, the combination of the universities and the talent pool from the larger companies might cause something to happen.

But since no one's quite sure how to make a Boston/Cambridge or San Francisco Bay, it's hard to say what these countries should be doing differently, or whether any such recommendations would even be feasible. Efforts in the developing parts of Asia to make such things happen by fiat have not gone well - does anyone remember Malaysia's big push into the area? Here's a 2003 story on it - "Biovalley" was going to be the next big thing. Just a few years later, it was clear that it wasn't quite working out, and current information is rather hard to come by. India and China (and their investors) surely don't want to go through that experience. Letting things develop on their own, without too much over-targeted encouragement, might be the best course.

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March 7, 2013

Peter Kim Retires From Merck

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Posted by Derek

The question now is, should the verb "retires" have quotation marks around it or not? Roger Perlmutter (ex-Amgen) will take over from him. Here's the Reuters story - more details when and if any emerge.

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March 5, 2013

TauRx's Funding Is Odd

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Posted by Derek

I still get inquiries about TauRx and their work on Alzheimer's. There's an awful lot of pent-up demand in that field, and it's getting worse every year. The latest is that the company has ten million more dollars in a follow-on investment option from the Dundee Corporation of Toronto.

Who they? That's what I wondered, too, and the press release occasions more questions than it answers:

Dundee Corporation is a Canadian independent publicly traded asset management company listed on the Toronto Stock Exchange (“TSX”) under the symbol “DC.A”. Asset management activities are focused in the areas of the corporation’s core competencies and include resources, real estate and infrastructure, and more recently, the agriculture sector.

What, then, are they doing investing in biopharma? You can lose your shirt over here, guys, and you can most especially lose it in Alzheimer's. TauRx also has major funding from the Genting Burhad group. And you may well ask "Who they?", too, because they're a large Malaysian company whose core business is casinos and resorts. Now, they're also into cruise ships, and oil and gas, and power generation and (perforce) real estate, but biotech would seem to be rather far down the list.

This is a. . .unique funding setup for a biopharma company. I have to think that there's a reason for it, but I'm not quite sure what the reason is. Speculation, anyone? Thanks to John Carroll of FierceBiotech on Twitter, who doesn't understand what's going on, either.

Comments (16) + TrackBacks (0) | Category: Alzheimer's Disease | Business and Markets

What Really Makes a Biopharma Hub?

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Posted by Derek

Luke Timmerman at Xconomy has a good post on biotech research hubs. A recent survey set him off, not because it ranked the Boston area #1 (a reasonable assessment, and not just because I live here), but because it ranked San Diego #2.

It's not that he has anything against San Diego (nor do I). But it does not outrank the San Francisco Bay area as a biopharma hub, not in any way that I can think of. Luke goes into the details, and shows how this latest survey went off the rails. But he's also calling for someone to come up with a better one, and he has a very realistic list of criteria that should be used.

So what's the harm? San Diego (and Raleigh-Durham, etc.) get to feel good when they finish high in such surveys, and why not? Well, the temptation might be to think that you already have what you need to succeed - heck, that you've already succeeded. But San Diego, for example, could use help in the local venture capital environment, and (as Luke points out) could also use some help even in things like its airport connections. Complacency is not your friend.

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February 15, 2013

Pfizer's Covx Closing?

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Posted by Derek

A Friday night blog entry is a rare event around here, but I've had a report that Pfizer has been closing down their Covx unit in San Diego today. It is (or was) the peptide therapeutic part of the company. This makes this part of the Pfizer web site a bit. . .inoperative:

CovX and Rinat are two biotechnology companies acquired by Pfizer that are currently operating as independent units within Worldwide R&D. This operating model allows CovX and Rinat to maintain their unique cultures and scientific approaches while having full access to Pfizer's world-class capabilities and resources.

So much for that. Can anyone confirm the report?

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February 14, 2013

How Can There Be a Shortage of Scientists And An Excess At The Same Time/

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Posted by Derek

I wanted to come back to the topic of whether we have (1) too many unemployed (or underemployed) scientists and technology people in the US, or (2) a critical shortage of qualified people that's leading companies to complain that they can't fill positions. Can we really have both at the same time? All this bears on (3): should we revise the visa rules to let in more technically qualified immigrants?

The other day I wrote about a PriceWaterhouseCooper (PwC as they would have it) report on this very issue. I'll pick up where that post left off. One thing to notice about the PwC report is that it's aimed at HR departments, and it tells them some of the things they want to hear - that they're important, that they're unappreciated, and that they have a crucial role to play in today's hiring environment. This is not just flattery; this is advertising - aspirational advertising, to be more accurate. That's the technique (used since forever) of pitching an ad to a slightly more elevated group (socioeconomically) than the one it's actually aimed at. Think of mail-order catalogues and credit-card offers; that's where you see this in the crudest form. The idea is to make the recipients think "Wow, they must think I'm one of those people", or (even better) "Wow, I must really be one of those people". That is, the sort of people who shop for this pricey merchandise, or who think nothing of paying the annual fee for a MatteBlackAnodizedPlatinum Card, what have you, because that's the high-end life they lead.

What's PwC selling, then? Why, consulting services to all these HR departments, to help them navigate their extremely important, critical-like-never-before jobs in this extraordinary environment. The HR people have their morale improved, PwC gets some new accounts, and everyone's happy. But the report is still a pure example of the "critical lack of good candidates" idea, being put to more immediate use by a company that sees an opportunity to trade on what's saturating the air right now.

But how can there be a shortage and an excess at the same time? Part of the answer might be found in the work of Peter Cappelli of the Wharton School at Penn. A reader sent that link along to me the other day, and it's well worth a look. Cappelli is the author of Why Good People Can't Get Jobs, and his take is that employers are largely to blame for this situation:

. . .Today’s CEOs regularly blame schools and colleges for their difficulties in finding adequately prepared employees. The complaint shows up in survey after survey, as Cappelli shows in his book, and it is substantially more common among American employers than their peers in most other developed and developing economies.

But do these surveys “show that the United States is among the world leaders in skills gaps,” Cappelli asks, “or simply in employer whining and easy media acceptance of employer complaints?”

He thinks a body of lesser-reported studies contains the answer. “If you look at the studies of hiring managers and what they want, they’re not complaining about academic skills,” Cappelli says. “You hear the business spokespeople saying this, but the actual hiring managers are not saying this now. And in fact they’ve never, in modern times, said that.”

And Cappelli also has pointed out that this view of the world is appealing to several constituencies at the same time, among them, people who advocate school reform and changes in research funding, social reformers of several different kinds, and employers who would rather place the blame for some of their problems on outside factors. There's a reason this idea keeps circulating around - there are a lot of extraneous reasons to keep believing it.

He goes on to decry what he calls the "Home Depot" approach to hiring:

In a 2011 op-ed article for The Wall Street Journal, Cappelli remarked on a telling statistic from the Silicon Valley tech boom of the 1990s: only 10 percent of the people in IT jobs had IT-related degrees. But a lot of the same people would probably have a hard time landing similar jobs today, because employers have increasingly adopted what Cappelli calls “a Home Depot view of the hiring process, in which filling a job vacancy is seen as akin to replacing a part in a washing machine.

“We go down to the store to get that part,” he explains, “and once we find it, we put it in place and get the machine going again. Like a replacement part, job requirements have very precise specifications. Job candidates must fit them perfectly or the job won’t be filled and business can’t operate.”

He lays some of the blame for this on software-based hiring practices, the CV-scanning programs that look for the keywords that supposedly have to be present for a candidate to be considered. (Many readers here may have run into this problem; chemistry and its associated disciplines are an unfortunately good fit for this approach). And here's where some sympathy for the HR people might be appropriate: these sorts of "solutions" are often used when there aren't enough people (or enough time, or money) to do a good job of screening applicants. That's not to say that there probably aren't some HR people who truly believe that this is the best way to do things, but some of them also have their backs to their own walls.

There's another part of that article on Cappelli that takes us to the H1B visa issue:

When there are three or four job-seekers for every vacancy—and some postings draw applicants by the hundred—firms have an understandable incentive to wait for a dream candidate to show up. And ideally, a dream candidate who expresses a low salary requirement.

In (a recent) Manpower survey, 11 percent of the employers reporting skill shortages chalked it up to applicants unwilling to accept job offers at the wages companies were willing to pay.

I have the impression that much of the push to open up the technical-worker visas is coming from Silicon Valley and the IT world in general. (Someone correct me if I'm wrong). And it's also my impression that there are already a lot of people in that job market looking for work - again, if I'm mistaken about this, I'll revise this post. So one (not very charitable) explanation for a drive to bring in more job candidates from abroad is that they will be cheaper to hire, and that employers will have more leverage over them because of their visa situation. Plausible, or not? Update: apparently all too plausible - see this New York Times piece.

Now, it pains me to write that sort of thing, because we could head right off into the whole immigration-reform swamp, which is concerned with a lot of issues that are peripheral to this discussion. (Undocumented workers from Central America, for example, are not a big factor in IT or chemistry hiring). And I think that the US should indeed admit immigrants, that doing so has been one of the big factors in making us the nation we are (the good parts, I mean), and that if we're going to let people in, that we should strongly, strongly bias the process towards smart, entrepreneurial, hard-working ones. So I have a natural sympathy towards the idea of bringing in technically and scientifically trained people.

But not to use them as a source of cheap labor that can be leaned on because of their immigrant status. I don't like that idea much at all, not for what it does to the people who are already here, and not for what it does to the ones who would come here looking for something better, either. And this illustrates the tangle of mixed motives, declared and otherwise, that this whole issue is stuck in. The real reasons people advocate the positions they do in this area can be hard to work out, and that has the nasty side effect of giving everyone plenty of opportunities to accuse others of acting in bad faith, etc. It's a mess.

So, in the same way that I tried to dig into the motives of PhRMA the other day, one can try to look at motivations here. Employers, in fact, could well have an interest in keeping the whole "We can't find good people" line of thinking alive, which is something I mentioned when I brought up the PriceWaterhouseCoopers report. It gives upper management someone else to blame, and in some cases it can be used to keep wages down. As I've said here before, the idea that companies here in the US will hire workers here if they're forced to is, I think, a fantasy. They'll keep those positions open and complain about it instead.

And although this is a particular problem for Silicon Valley and that industry, biopharma is not immune. Not at all.

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February 12, 2013

Pfizer Slowly Shrinks in Groton

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Posted by Derek

Here's the story, from Lee Howard of The Day, who's covered the company for years.

Pfizer had 4,500 employees - mostly scientists - at its Groton and New London campuses two years ago, when the New York-based company announced a major downsizing that would cut the local workforce to slightly less than 3,400. By June of last year, Pfizer reported that reductions were well under way, with about 3,700 employees remaining on the Groton campus.

Pfizer's response to a request last week for an update on the local jobs number initially indicated there were now slightly fewer than 3,150 Pfizer employees at the company's consolidated site in Groton - 250 fewer than had been anticipated when the local downsizing was announced. The company later amended the number, however, saying the initial report had neglected to count some personnel, and Pfizer gave a new census of about 3,300 employees, only a hundred less than what had been projected.

There were as many as 6,000 employees at one point, but it's been a long and bouncy ride since those days. The article says that Pfizer has been trying to find buyers for a number of vacant buildings (with, in this market and in that region, little success). Part of the Groton reduction is the move of the drug discovery people up to Cambridge. I go past the new building, still in construction, fairly often - it's right down the street from a gigantic hole in the ground that will be an expansion of the Novartis site. All of this construction recalls Levi Strauss getting rich during the California gold rush - not by doing anything so chancy as panning for gold, but by selling trousers to those who did. I've been in Cambridge for over five years now, and I have never yet traveled across it without going past some sort of academic/scientific construction site.

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February 7, 2013

Addex Cuts Back: An Old Story, Told Again

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Posted by Derek

Addex Therapeutics has been trying to develop allosteric modulators as drugs. That's a worthy goal (albeit a tough one) - "allosteric" is a term that covers an awful lot of ground. The basic definition is a site that affects the activity of its protein, but is separate from the active or ligand-binding site itself. All sorts of regulatory sites, cofactors, protein-protein interaction motifs, and who knows what else can fit into that definition. It's safe to say that allosteric mechanisms account for a significant number of head-scratching assay results, but unraveling them can be quite a challenge.

It's proving to be one for Addex. They've announced that they're going to focus on a few clinical programs, targeting orphan diseases in the major markets, and to do that, well. . .:

In executing this strategy and to maximize potential clinical success in at least two programs over the next 12 months, the company will reduce its overall cost structure, particularly around its early-stage discovery efforts, while maintaining its core competency and expertise in allosteric modulation. The result will be a development-focused company with a year cash runway. In addition, the company will seek to increase its cash position through non-dilutive partnerships by monetizing its platform capability as well as current discovery programs via licensing and strategic transactions.

That is the sound of the hatches being battened down. And that noise can be heard pretty often in the small-company part of the drug business. Too often, it comes down to "We can advance this compound in the clinic, enough to try to get more money from someone, or we can continue to do discovery research. But not both. Not now." Some companies have gone through this cycles several times, laying off scientists and then eventually hiring people back (sometimes some of the same people) when the money starts flowing again. But in the majority of these cases, I'd say that this turns out to be the beginning of the end. The failure rates in the clinic see to that - if you have to have your compounds work there, the very next ones you have, the only things you have on hand in order to survive, then the odds are not with you.

But that's what every small biopharma company faces: something has to work, or the money will run out. A lot of the managing of such an outfit consists of working out strategies to keep things going long enough. You can start from a better position than usual, if that's an option. You can pursue deals with larger companies early on, if you actually have something that someone might want (but you won't get as good a deal as you would have later, if what you're partnering actually works out). You can beat all sorts of bushes to raise cash, and try all sorts of techniques to keep it from being spent so quickly, or on the wrong things (as much as you can tell what those are).

But eventually, something has to work, or the music stops. Ditching everything except the clinical candidates is one of the last resorts, so I wish Addex good luck, which they (and all of us) will need.

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February 6, 2013

Trouble Hiring Whom, Exactly?

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Posted by Derek

Here's a report on employment in the biopharma industry that will cause some pretty strong emotions in those of us who (still) work there. PriceWaterhouseCoopers (PwC), in their annual CEO survey finds (here's the good news) that:

Nearly three-quarters (72 percent) of executives said their organizations are looking to increase R&D capacity over the next 12 months, and six in 10 intend to increase investments over the next three years to create a more skilled workforce.

So far, so good. But would you like to know what the executives said was one of the biggest problem in doing all this? Honestly, you'll never guess:

The knowledge-intensive pharmaceutical industry had the highest reported difficulty in hiring top talent of the 19 industries featured in PwC's 2012 Global CEO Survey. CEOs identified talent gaps as one of the biggest threats to future growth prospects.

Research conducted by HRI, including a survey of human resource and R&D executives at U.S. biopharmaceutical companies found (that) fifty-one percent of industry executives report that hiring has become increasingly difficult and only 28 percent feel very confident they will have access to top talent.

Well, now. One's first impulse is to refer, with deep feeling, to bovine waste products, but one mustn't jump to conclusions about whether the industry might just possibly have heaved too many people over the side over the last ten years or so. As Pharmalot points out, the people that are allegedly being sought are not always the ones that have already been ditched:

Of course, the workplace is not stagnant and the demand for certain skills is always evolving. Seen this way, the data suggest that pharma execs may want the sort of talent that is not on the sidelines or simply clamoring for a different opportunity. For instance, 34 percent say that developing and managing outside partnerships is the most important skill being sought among scientists. . .

Now, that one I can believe. An uncharitable summary of many of those outside partnership managerial positions would be "Keep track of what all the cheap overseas contract workers are doing". And there is indeed a demand for that relatively thankless task. Another task that appears to be strongly in demand is for scientists who can deal with regulatory affairs. Fine. But what about actual research, not actually in China or beyond? There are possibilities, but things still don't look so good if you're a chemist. Pharmalot again:

As for job growth among scientists, not surprisingly there is only a 4 percent increase forecast for chemists, who were thrown overboard in large masses in recent years, and 13 percent for microbiologists. Conversely, a 62 percent boost is predicted for biomedical engineers and 36 percent for medical scientists. Biochemists and biophysicists trail at 31 percent.

PwC seems to be taking a broad view of biopharma if "biomedical engineers" are the top category. That's a flexible-sounding category, but I'd guess medical devices, at the very least. "Medical scientists" is also the label on a rather large bin, and this gives only a fuzzy picture of where the hiring will supposedly be taking place.

Looking through the PwC material, you can tell that it's addressed largely to HR folks, trying to gear them up for all this talent-searching and position-filling. It spends, for example, some time sharing sympathy for the HR departments who don't, somehow, feel as if they're key parts of the organization on the front lines of discovery. (Which they aren't, usually, but that's another story). But there's some useful advice for them in there, too - see what you make of this:

Scientists want career paths that recognize and reward their passion and commitment to research, not just additional responsibilities. Too often, scientists are pushed out of what they do best – research -- and saddled with management chores that distract them.

Finally, senior executives must act as a powerful motivating force for their people. Companies with decades-long legacies have lost their edge due to repeated layoffs, wearing down the morale of scientific staff.

Ain't that the truth. But how many senior executives are in a position to act as a "powerful motivating force"? Well, OK, some of them have been, but with a negative sign in front, which isn't the idea. In many organizations, the sorts of behavior that the scientists would find motivating on the part of a top-level manager are often not the sorts of behavior that lead people into top managerial positions. So you get people who are, at the very least, rusty on those skills (if they ever had them in the first place). And that leads to things like (in my own experience, some years ago) hearing a high-level guy exhort various research teams while mispronouncing the names of some of their projects. Which neither bred confidence, nor raised morale.

Overall, I find this PwC report irritating, perhaps because of its HR-centric worldview. And the message of "Shortage of top talent!" is rather hard to take, no matter how you spin it. It also brings thoughts of the perennial "America's critical lack of scientists" headlines, which have only slightly abated. I'm waiting for someone to tie those two together into one annoying headline. . .

Note: I'll get back to that out-of-the-science-and-into-the-management topic again; it's come up here before, but it's an important one.

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February 5, 2013

Not Working Out So Well at Merck?

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Posted by Derek

Here's a rather grim analysis from the AP of Merck's current status. The company's stock was recently downgraded by two analysts after last Friday's earnings call didn't go very well (links added by me below):

Future sales of Vytorin, a controversial combination drug on sale since 2004 that includes Zocor, and prospects for a crucial experimental osteoporosis drug called odanacatib were thrown into question Friday as Merck announced its fourth-quarter results. Company executives made some cryptic comments, suggesting significant problems with both drugs. . .

Merck said Friday that it won't apply for approval of odanacatib, a new type of osteoporosis drug, until 2014 instead of by this June. Management said it was reviewing safety and efficacy data from one study and now won't apply for approval until they have longer-term data from an extension study.

Executives also said a committee monitoring its 18,000-patient study of Vytorin, called IMPROVE-IT, had requested a new interim analysis of patient data in March. The study is meant to determine whether Vytorin reduces risk of heart attack, stroke and death in heart disease patients — the ultimate purpose of cholesterol drugs — but Merck executives, grilled by analysts on a conference call, wouldn't say that they're confident the study will show that benefit.

I wouldn't, either, if I were in their shoes. The Vytorin story has been long and complex, and that complexity comes from two sources: the drug's unique mechanism of action (at least the ezetimibe part), and the uncertainties of human lipid handling and its relationship to cardiovascular outcomes. Honestly, these things could go any way at all, and the same goes for Merck's high-profile push in CETP. A lot of the company is riding on some very uncertain science.

But I wonder, as I was speculating on in that last link, if that isn't where the whole industry is these days. By now, we've attacked all the things that we believe we really know something solid about. What's left is often big, important, potentially very profitable. . .and risky enough to make you leave fingernail marks in the armrests of your chair. The higher up you sit, and the nicer the material that chair is made of, the more damage is being done to it.

Comments (14) + TrackBacks (0) | Category: Business and Markets | Clinical Trials

January 31, 2013

AstraZeneca's Nasty Numbers

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Posted by Derek

So everyone watching the pharma business has been hearing about how AstraZeneca has all kinds of problems - drug failures, big patent expirations, too much spending on too little output, one damn thing after another. Well, here's the evidence today. Everyone knew that numbers like these were coming, and here they are.

Sales will fall by a “mid- to high-single digit percentage” at constant exchange rates in 2013, the London- based company said today in a statement. Analysts had estimated a decline of about 3 percent, according to data compiled by Bloomberg. The company also said earnings fell for a fourth straight quarter and left the annual dividend unchanged. The stock fell the most in nine months.

And things will continue to be. . .challenging:

AstraZeneca has ended nine drug development programs since June 30, including selumetinib for solid tumors, AZD4017 for glaucoma and AZD9773 for severe sepsis, which were in mid-stage trials. In December, the company said fostamatinib, its experimental drug for rheumatoid arthritis, failed to show a benefit against AbbVie Inc. (ABBV)’s Humira in a mid-stage trial.

On the one hand, you want to get rid of such programs before they chew up still more time and money. But on the other hand, you do need something to sell. All this makes a person think that if you're a small company with an asset to sell, that you're going to want to give AZ a call. I think that they'll be ready to deal.

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

January 28, 2013

Time to Refill Your Prescription For Zxygjfb

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Posted by Derek

The brand names of drugs are famously odd. But they seem to be getting odder. That's the conclusion of a longtime reader, who sent this along:

I was recently perusing through the recent drug approval list and was struck by how strange the trade names have become. Perhaps it is a request from the FDA so that there are fewer prescription errors, but some of these are really bizarre and don't quite roll off the tongue. USAN names I can understand, but trade names, to me anyway, used to be much more polished (Viagra, Lipitor etc). Could it have to do with the fact that most of these are for cancer? I have a list below comparing trade names from 2004 to those from the past year or so.

2004:    Vidaza;   Avastin;  Sensipar;  Cymbalta;   Tarceva;   Certican;   Factive;   Sinseron;   Alimta;  Lyrica;  Exanta

2012:   Fulyzaq;  Bosulif;  Xeljanz;  Myrbetriq;  Juxtapid;  Iclusig;  Fycompa;  Zelboraf;   Xalkori;  Jakafi;  Pixuvri

He's got a point; some of those look like someone rested an elbow on the keyboard when they were filling out the form. I'd be willing to bet that the oncology connection is a real one - those drugs don't get mass-market advertising at all, so they don't have to be catchy. This Reuters article also notes the trend in cancer drugs, and brings up the need for novelty. Not only is it good to have a name that stands out in the memory, it's a legal requirement to have one that can't be easily confused with another drug. That goes for handwriting as well:

"Regulators want a lot of pen strokes up and down that provide a much more unique-looking name. It is more readable or interpretable if it has a lot of (Zs and Xs)," said Brannon Cashion, Addison Whitney's president.

Whether anyone can actually pronounce the name is of less concern.

That's for sure, when you're talking about things like Xgeva (edit: fixed this name to eliminate the extra "r" I put into it. Can anyone blame me for getting it wrong?). But that one's a good case in point: the generic name is denosumab. That's a good ol' USAN name, with the "-mab" suffix telling you that it's a monoclonal antibody. It's sold in the oncology market as Xgreva for bone-related cancer complications, but it's also prescribed for postmenopausal women to halt loss of bone tissue. There, the same drug goes under the much more consumer-friendly name of Prolia. Now, that's a blandly uplifting name if I've ever heard one, whereas Xgeva sounds like the name of an alien race in a cheap science fiction epic ("An Xgeva ship has been detected in the quadrant, Captain!").

Or, like its recent peers, it also sounds like an excellent Scrabble word, were it to be allowed, which it wouldn't. Me, my proudest moment was playing "axolotl" one time for seven letters. Come to think of it, Axolotl would make a perfectly good drug name under the current conditions. . .

Update: I notice that the comments are filling up with alternative definitions of some of these names, many of which (not all!) sound more sensible.

Comments (31) + TrackBacks (0) | Category: Business and Markets | Cancer

January 25, 2013

The Chemistry Jobs Market

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Posted by Derek

Here's the latest big picture, from Chemjobber. Note, though, that on Twitter he said that after writing this post he felt as if he could press KBr pellets with his jaws. That should give you some idea.

Comments (31) + TrackBacks (0) | Category: Business and Markets

January 24, 2013

Too Many Scientists: A "Pyramid Scheme"

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Posted by Derek

Chemistry World has really touched a lot of nerves with this editorial by economics professor Paula Stephan. It starts off with a look back to the beginnings of the NIH and NSF, Vannevar Bush's "Endless Frontier":

. . .a goal of government and, indirectly, universities and medical schools, was to build research capacity by training new researchers. It was also to conduct research. However, it was never Bush’s vision that training be married to research. . .

. . .It did not take long, however, for this to change. Faculty quickly learned to include graduate students and postdocs on grant proposals, and by the late 1960s PhD training, at least in certain fields, had become less about capacity building and more about the need to staff labs.

Staff them we have, and as Prof. Stephen points out, the resemblence to a pyramid scheme is uncomfortable. The whole thing can keep going as long as enough jobs exist, but if that ever tightens up, well. . .have a look around. Why do chemists-in-training (and other scientists) put up with the state of affairs?

Are students blind or ignorant to what awaits them? Several factors allow the system to continue. First, there has, at least until recently, been a ready supply of funds to support graduate students as research assistants. Second, factors other than money play a role in determining who chooses to become a scientist, and one factor in particular is a taste for science, an interest in finding things out. So dangle stipends and the prospect of a research career in front of star students who enjoy solving puzzles and it is not surprising that some keep right on coming, discounting the all-too-muted signals that all is not well on the job front. Overconfidence also plays a role: students in science persistently see themselves as better than the average student in their program – something that is statistically impossible.

I don't think the job signals are particularly muted, myself. What we do have are a lot of people who are interested in scientific research, would like to make careers of it, and find themselves having to go through the system as it is because there's no other one to go through.

Stephan's biggest recommendation is to try to decouple research from training: the best training is to do research, but you can do research without training new people all the time. This would require more permanent staff, as opposed to a steady stream of new students, and that's a proposal that's come up before. But even if we decide that this is what's needed, where are the incentives to do it? You'd have to go back to the source of the money, naturally, and fund people differently. Until something's done at that level, I don't see much change coming, in any direction.

Comments (32) + TrackBacks (0) | Category: Academia (vs. Industry) | Business and Markets | Graduate School

Daniel Vasella Steps Down at Novartis

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Posted by Derek

So Daniel Vasella, longtime chairman of Novartis, has announced that he's stepping down. (He'll be replaced by Joerg Reinhardt, ex-Bayer, who was at Novartis before that). Vasella's had a long run. People on the discovery side of the business will remember him especially for the decision to base the company's research in Cambridge, which has led to (or at the very least accelerated the process of) many of the other big companies putting up sites there as well. Novartis is one of the most successful large drug companies in the world, avoiding the ferocious patent expiration woes of Lilly and AstraZeneca, and avoiding the gigantic merger disruptions of many others.

That last part, though, is perhaps an accident. Novartis did buy a good-sized stake in Roche at one point, and has apparently made, in vain, several overtures over the years to the holders of Roche's voting shares (many of whom are named "Hoffman-LaRoche" and live in very nice parts of Switzerland). And Vasella did oversee the 1996 merger between Sandoz and Ciba-Geigy that created Novartis itself, and he wasn't averse to big acquisitions per se, as the 2006 deal to buy Chiron shows.

It's those very deals, though, that have some investors cheering his departure. Reading that article, which is written completely from the investment side of the universe, is quite interesting. Try this out:

“He’s associated with what we can safely say are pretty value-destructive acquisitions,” said Eleanor Taylor-Jolidon, who manages about 400 million Swiss francs at Union Bancaire Privee in Geneva, including Novartis shares. “Everybody’s hoping that there’s going to be a restructuring now. I hope there will be a restructuring.” . . .

. . .“The shares certainly reacted to the news,” Markus Manns, who manages a health-care fund that includes Novartis shares at Union Investment in Frankfurt, said in an interview. “People are hoping Novartis will sell the Roche stake or the vaccines unit and use the money for a share buyback.”

Oh yes indeed, that's what we're all hoping for, isn't it? A nice big share buyback? And a huge restructuring, one that will stir the pot from bottom to top and make everyone wonder if they'll have a job or where it might be? Speed the day!

No, don't. All this illustrates the different world views that people bring to this business. The investors are looking to maximize their returns - as they should - but those of us in research see the route to maximum returns as going through the labs. That's what you'd expect from us, of course, but are we wrong? A drug company is supposed to find and develop drugs, and how else are you to do that? The investment community might answer that differently: a public drug company, they'd say, is like any other public company. It is supposed to produce value for its shareholders. If it can do that by producing drugs, then great, everything's going according to plan - but if there are other more reliable ways to produce that value, then the company should (must, in fact) avail itself of them.

And there's the rub. Most methods of making a profit are more reliable than drug discovery. Our returns on invested capital for internal projects are worrisome. Even when things work, it's a very jumpy, jerky business, full of fits and starts, with everything new immediately turning into a ticking bomb of a wasting asset due to patent expiry. Some investors understand this and are willing to put up with it in the hopes of getting in on something big. Other investors just want the returns to be smoother and more predictable, and are impatient for the companies to do something to make that happen. And others just avoid us entirely.

Comments (18) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History

January 15, 2013

AstraZeneca Shakeup

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Posted by Derek

And while we're talking big pharma shakeups, I note that AstraZeneca's new CEO has rearranged the executive furniture pretty vigorously, ditching Martin Mackay. He was the R&D head, ex-Pfizer, and seems to have lasted about two years at AZ, whose well-known problems are going to make the higher positions pretty perilous for some time to come. And the middle positions. And all the others.

Comments (18) + TrackBacks (0) | Category: Business and Markets

A Big Change at Pfizer? Or Just a Rumor?

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Posted by Derek

What's going on with Pfizer? I have a few questions, and a rumor that I've heard and would like to float.

There's been all sorts of speculation about what Ian Read is going to do with the company. He's been dropping hints for months about splitting it up. And with Abbott recently doing just that, it's no surprise that there are people on Wall Street making the case for Pfizer following along (after all, think of the fees and commissions to be earned). As of this morning, there's fresh talk of all this, since Pfizer seems to be reorganizing its constituent parts, in a way that makes you think it could all break in two.

Now for the rumor, which more directly concerns the company's med-chem research. As everyone in the industry knows, Pfizer's moving towards an outsource-all-the-early-work model. "Drug designers" will occupy that new building I see going up here in Cambridge, and they will cogitate fiercely, pick up their phones, rattle their keyboards, turn on the video-conferencing software, and tell a bunch of chemists twelve time zones away what to make. Repeat as necessary.

But I've been hearing something else recently, even beyond this. Rumor has it that the company is contemplating getting out of all their in-house small molecule drug discovery, and putting most of the focus on biologics and the like. I have not verified this, but that's what I've heard. Now, I didn't know what to think when this came up, but perhaps it has something to do with the possibility of the company splitting up? The small-molecule stuff gets spun out on its own, as a different entity with a different name? Or would Pfizer split between pharma (in one company) and everything else (consumer, generics, etc.) in the other, in which case - if the story I've heard is true - then the small molecule stuff doesn't spin out, it just goes away.

I'd be interested in hearing thoughts on this - its plausibility, its likelihood, and whether anyone else has heard anything similar. I'm not sure I buy into the idea myself, but (as usual) crazier things have happened.

Comments (44) + TrackBacks (0) | Category: Business and Markets

January 3, 2013

Deal of the Year?

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Posted by Derek

The folks at InVivoBlog are taking votes for "Deal of the Year" in the biopharma space for 2012. There are three categories: M&A (featuring the likes of BMS/Inhibitek and DeCode/Amgen), alliances (such as U. Penn and Novartis), and exit/financing deals for early-stage companies (Warp Drive Bio, anyone?)

So, which of these were good ideas, and which were. . .well, the other kind of idea? I hope that the results show the entire range of voting, and not just the winners, so we can see what the crowd thinks.

Comments (2) + TrackBacks (0) | Category: Business and Markets

December 21, 2012

The Happiest Darn Drug Company in America

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Posted by Derek

I don't know how I've missed posting on this, but according to a recent survey, the "happiest company in America" is. . .wait for it; you'll never guess. . .Pfizer! Yep, the list apparently "honors the 50 companies that are most dedicated to cultivating happy work environments", and it's just hard to think of any large organization that's been more dedicated to that cause over the last few years than Pfizer. Right?

Comments (27) + TrackBacks (0) | Category: Business and Markets

December 18, 2012

Lilly's Two-Drugs-a-Year Prediction

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Posted by Derek

Drug research consultant Bernard Munos popped in the comments here the other day and mentioned this story from 2010 in the Indiana Business Journal. That's where we can find Eli Lilly's prediction that they were going to start producing two new drugs per year, starting in 2013. Since that year is nearly upon us, how's that looking?

Not too well. Back in 2010, Lilly's CEO (John Lechleiter) was talking up the company's plans to weather its big patent expirations, including that two-a-year forecast. Since then, the company has had a brutal string of late-stage clinical failures. In addition to the ones in that article, Lilly's had to withdraw Xigris, and results for edivoxetine are mixed. No wonder we're hearing so much about the not-too-impressive Alzheimer's drugs from them.

But, as I said here, what would I have done differently, were I to have had to misfortune of having to run Eli Lilly? I might not have placed such a big bet on Alzheimer's, but I probably would have found equally unprofitable ways to spend the money. (And in the end, the company deserves credit for taking on such an intractable disease - just no one tell Marcia Angell; she doesn't think anyone in the drug industry does any such thing).

About the only thing I'm sure of is that I wouldn't have gone around telling people that we were going to start launching two drugs a year. No one's ever been able to keep to that pace, not even in the best of times, and these sure aren't the best of times. It's tempting to think about telling the investors and the analysts that we're going to work as hard as we can, using our brains as much as we can, and we're going to launch what we're going to launch, when it's darn well ready to be launched. And past that, no predictions, OK? The only problem is, the stock market wouldn't stand for it. Ken Frazier at Merck tried something a bit like this, and it sure didn't seem to last long. Is happy talk what everyone would rather hear?

Comments (14) + TrackBacks (0) | Category: Business and Markets | Drug Development

December 7, 2012

Whitesides on Discovery and Development

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Posted by Derek

George Whitesides of Harvard has a good editorial in the journal Lab on a Chip. He's talking about the development of microassays, but goes on to generalize about the new technologies - how they're found, and how they're taken up (or not) by a wider audience (emphasis mine below):

Lab-on-a-chip (LoC) devices were originally conceived to be useful–that is, to solve problems. For problems in analysis or synthesis (or for other applications, such as growing cells or little animals) they would be tiny – the “microcircuits of the fluidic world.” They would manipulate small volumes of scarce samples, with low requirements for expensive space, reagents and waste. They would save cost and time. They would allow parallel operation. Sensible people would flock to use such devices.

Sensible and imaginative scientists have, in fact, flocked to develop such devices, or what were imagined to be such devices, but users have not yet flocked to solve problems with them. “Build it, and they will come” has not yet worked as a strategy in LoC technology, as it has, say, with microprocessors, organic polymers and gene sequencers. Why not? One answer might seem circular, but probably is not. It is that the devices that have been developed have been elegantly imagined, immensely stimulating in their requirements for new methods of fabrication, and remarkable in their demonstrations of microtechnology and fluid physics, but they have not solved problems that are otherwise insoluble. Although they may have helped the academic scientist to produce papers, they have not yet changed the world of those with practical problems in microscale analysis or manipulation.

Where is the disconnect? One underlying problem has been remarked upon by many people interested in new technology. Users of technology are fundamentally not interested in technology—they are interested in solving their own problems. They want technology to be simple and cheap and invisible. Developers of technology, especially in universities, are often fundamentally not interested in solving real problems—they are interested in the endlessly engaging activity of building and exercising new widgets. They want technology to be technically very cool. “Simple/cheap/invisible” and “technically cool” are not exclusive categories, but they are certainly not synonymous.

That is a constant and widespread phenomenon. There are people who want to be able to do things with stuff, and people who want stuff to do things for them, and the overlap between those two is not always apparent. What happens over time, though, in the best cases, is that the tinkerers come up with things that can be used by a wider audience to solve their own problems. Look no further than the personal computer industry for one of the biggest examples ever. If you didn't live through it, you might not realize how things went from "weird hobbyist thingies" to "neat gizmos if you have the money" to "essential parts of everyday life". Here's Whitesides again:

Here are three useful, homely, rules of thumb to remember in developing products.

• The ratio of money spent to invent something, to make the invention into a prototype product, to develop the prototype to the point where it can be manufactured, and to manufacture and sell it at a large scale is, very qualitatively, 1:10:100:1000. We university folks—the inventors at the beginning of the path leading to products—are cheap dates.

• You don't really know you have solved the problem for someone until they like your solution so much they're willing to pay you to use it. Writing a check is a very meaningful human interaction.

• If the science of something is still interesting, the “something” is probably not ready to be a product.

His second rule reminds me of Stephen King's statement on whether someone has any writing talent or not: "If you wrote something for which someone sent you a check, if you cashed the check and it didn't bounce, and if you then paid the light bill with the money, I consider you talented". It's also the measure of success in the drug industry - we are, after all, trying to make things that are useful enough that people will pay us money for them. If we don't come up with enough of those things, or if they don't bring in enough money to cover what it took to find them, then we are in trouble indeed.

More comments on the Whitesides piece here. For scientists (like me, and many readers of the blog), these points are all worth keeping in mind. Some of our biggest successes are things where our contributions are invisible to the end users. . .

Comments (24) + TrackBacks (0) | Category: Business and Markets | Who Discovers and Why

The Worst Biotech CEO?

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Posted by Derek

Adam Feuerstein at TheStreet.com has his yearly readers' pick for "Worst Biotech CEO". This year's winner is Jim Bianco of Cell Therapeutics, and there seems to be a good case:

Bianco, a longtime worst biotech CEO nominee, broke through this year and finally shoved his way into loser's circle by managing to engineer a 77% drop in his company's price despite finally winning European approval for the its lymphoma drug.

In many ways, TheStreet's biotechnology readers are (dis)honoring Bianco for a lifetime of investor bamboozlement and self-enrichment. The numbers that define Bianco's career as chief executive of Cell Therapeutics are stunning: Total losses of more than $1.7 billion, a 99.99999999% drop in the value of company shares and total compensation for him and his hand-picked team of executive cronies in the tens of millions of dollars.

Other than that, things have been going fine. Check the post for more, and to find out who the runners-up were. You can be sure that they're not thrilled to be on the list, either. . .

Comments (3) + TrackBacks (0) | Category: Business and Markets

December 5, 2012

Off-Label Promotion Is Legal, You Say?

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Posted by Derek

You'll have seen the headlines about off-label promotion of drugs by pharma companies. No, not the ones that decry it as a shady marketing technique, punishable by huge fines. I mean the ones about how a federal court has ruled that it's completely legal.

This came as a surprise, at least to me. The U. S. Court of Appeals, in United States v. Caronia ruled explicitly that "government cannot prosecute pharmaceutical manufacturers and their representatives under the (Food, Drug and Cosmetic Act) for speech promoting the lawful, off-label use of an FDA-approved drug." That does go up against the previous belief that if it's off-label, it isn't lawful. So how did the court get here, and what happens next?

The case concerns Alfred Caronia, a sales rep for Orphan Medical, who was prosecuted for off-label promotion of Xyrem (the sodium salt of gamma-hydroxybutyrate, GHB) in 2005. (The company has since been acquired by Jazz Pharmaceuticals of Dublin). He appealed his conviction on First Amendment grounds, and this argument seems to have rung the bell with the appeals court. Here's a writeup at the FDA Law Blog:

The Court explained that FDA’s construction of the FDCA legalizes the outcome of off-label use by doctors, but “prohibits the free flow of information that would inform that outcome.” The Second Circuit concluded that “the government’s prohibition of off-label promotion by pharmaceutical manufacturers ‘provides only ineffective or remote support for the government’s purpose.’”

There's some case law that backs up this decision, namely Sorrell v. IMS Health Inc.. The Supreme Court decision, for those of you who are truly hard-core about this stuff, is here. In that one, the court found that a Vermont law that restricted physicians from selling information on their prescription history violated the First Amendment as well. From this earlier post at the FDA Law Blog, it appears that a lot of the maneuvering during this latest case was about whether Sorrell applied here or not. That post also makes it clear that the FDA's own statements on the legality of off-label promotion are, to put it gently, unclear.

Well, this ruling certainly clears it up. For now. Here's the 82-page decision itself, with a vigorous dissent from the third judge on the appellate panel. But I can tell you that I'm not reading it yet. That's because I expect the FDA to try to take this to the Supreme Court, and it looks (to my non-lawyer eyes) like just the sort of thing they'd grant certiorari to. So I don't think this story is done - but for now, off-label promotion cannot be prosecuted.

And that's a big change indeed. This whole issue has been a black eye for the industry over the years, because (for one thing) the FDA made it clear, over and over, that it believed the practice was illegal, and that companies (and individuals) could be prosecuted for it. In that atmosphere, a company that went ahead was doing so in knowing violation of the rules as they were understood. No drug company, as far as I know, ever tried to make a First Amendment court case out of an FDA fine for off-label promotion (if anyone knows of any examples, send 'em along). Instead, they argued about whether it had happened or not, how much of it there really was, then paid the whacking fines, and then (likely as not) went out and did it some more. And they did it not because they were free-speech activists, but because that's where a lot of big money was to be found. Not the sort of thing that covers you with glory, for sure.

So it's not like this latest ruling is going to rehabilitate many reputations in the marketing departments. It's more like "Great! Turns out to be legal after all! Who knew?"

Comments (28) + TrackBacks (0) | Category: Business and Markets | Regulatory Affairs | Why Everyone Loves Us

December 3, 2012

Marcia Angell's Interview: I Just Can't

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Posted by Derek

I have tried to listen to this podcast with Marcia Angell, on drug companies and their research, but I cannot seem to make it all the way through. I start shouting at the screen, at the speakers, at the air itself. In case you're wondering about whether I'm overreacting, at one point she makes the claim that drug companies don't do much innovation, because most of our R&D budget is spent on clinical trials, and "everyone knows how to do a clinical trial". See what I mean?

Angell has many very strongly held opinions on the drug business. But her take on R&D has always seemed profoundly misguided to me. From what I can see, she thinks that identifying a drug target is the key step, and that everything after that is fairly easy, fairly cheap, and very, very profitable. This is not correct. Really, really, not correct. She (and those who share this worldview, such as her co-author) believe that innovation has fallen off in the industry, but that this has happened mostly by choice. Considering the various disastrously expensive failures the industry has gone through while trying to expand into new diseases, new indications, and new targets, I find this line of argument hard to take.

So, I see, does Alex Tabarrok. I very much enjoyed that post; it does some of the objecting for me, and illustrates why I have such a hard time dealing point-by-point with Angell and her ilk. The misconceptions are large, various, and ever-shifting. Her ideas about drug marketing costs, which Tabarrok especially singles out, are a perfect example (and see some of those other links to my old posts, where I make some similar arguments to his).

So no, I don't think that Angell has changed her opinions much. I sure haven't changed mine.

Comments (59) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History | Drug Prices | Why Everyone Loves Us

Fluorous Technologies Is No More

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Posted by Derek

Word comes that Fluorous is shutting down. The company had been trying for several years to make a go of it with its polyfluorinated materials, used for purification and reaction partitioning, but the commercial side of the business has apparently been struggling for a while. It's a tough market, and there hasn't, as far as I know, been what the software people would call a "killer app" for fluorous techniques - they're interested, often useful, but it's been hard to persuade enough people to take a crack at them.

The company is still taking orders for its remaining stock, and the link above will allow you to download their database of literature references for fluorous techniques, among other things. I wish the people involved the best, and I wish that things had worked out better.

Comments (7) + TrackBacks (0) | Category: Business and Markets | Chemical News

November 29, 2012

When Drug Launches Go Bad

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Posted by Derek

For those connoisseurs of things that have gone wrong, here's a list of the worst drug launches of recent years. And there are some rough ones in there, such as Benlysta, Provenge, and (of course) Makena. And from an aesthetic standpoint, it's hard not to think that if you name your drug Krystexxa that you deserve what you get. Read up and try to avoid being part of such a list yourself. . .

Comments (8) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History | Drug Prices

November 20, 2012

And Since We're Talking About Insider Trading

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Posted by Derek

Here's something from just this morning, a whopping large case on illegal trading in Wyeth and Elan stock. This one involves a hedge fund manager, Mathew Martoma, and (quite disturbingly), Dr. Sidney Gilman of the University of Michigan, who was the lead investigator on a very large bapineuzumab trial for Alzheimer's. His conduct appears, from the text of the complaint, to be completely inexcusable, just a total, raw tipoff of confidential information.

I blogged at the time about the trial results, not knowing, of course, that someone had been pre-warned and was trading 20 per cent of Elan's stock volume on the news (and at least ten per cent of Wyeth's). So I take back anything I said about insider trading cases becoming more small-time over the years; this case has jerked the average right back up.

Update: Adam Feuerstein on Twitter: "Gilman's presentation of bapi data at 2008 ICAD meeting was so poorly done. It was shockingly bad. Now we know why."

Comments (18) + TrackBacks (0) | Category: Alzheimer's Disease | Business and Markets | Clinical Trials | The Dark Side

Easy Money, Right?

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Posted by Derek

Public biopharma companies have to put in a lot of effort to safeguard sensitive information. Since we have so many big, important binary events in our business (clinical trial results, sales figures for individual drugs, and so on), you really have to keep that stuff from getting out and around.

Which means that there's also a strong incentive for such things to leak. One could do very well for one's self, if one were not so concerned with being forced to disgorge all of one's profits, and even spending one's time in the slammer. And those factors completely neglect one's sense of ethics, assuming that one has any. These concerns are brushed aside strictly on a risk basis, one understands:

John Lazorchak, 42, director of financial reporting at Celgene, regularly tipped others to nonpublic information on acquisitions, quarterly earnings results and regulatory news, according to a Federal Bureau of Investigation complaint filed yesterday in federal court in Newark, New Jersey.
Mark Cupo, 51, the director of accounting and reporting at Sanofi-Aventis, now known as Sanofi; and Mark Foldy, 42, a marketing executive at Stryker Corp., also were charged. Prosecutors said most of the profit went to Lawrence Grum, 48, and Michael Castelli, 48, who also tipped friends and family. The case involves two sets of high school friends and at least one witness who secretly recorded Grum for the FBI.

Oh, dear. The total profit, in this instance, is about $1.5 million, and standards vary, but even if I had ethical problems I wouldn't run such risks for a share of that amount. Or the full amount, either. But as this Bloomberg story details, insider trading seems to have become a rather more democratic activity over the years, and the amounts of money involved have changed accordingly. Perhaps the people involved are thinking that these sums are too small to be noticed, by the standards of Wall Street and the SEC, and that they'll have a better chance of getting away with the trades.

Not so. I knew someone once who was having a dispute with the IRS, and was (by my standards) insufficiently concerned about his situation. "I'm just a little guy", was the response, "they don't care about someone like me". What I told him was "Whales eat plankton, you know". In that spirit, that second link gives the grim details of a case involving an employee at Seattle Genetics, and it could serve as the template for many others like it. It's a sad story. Most of them are.

Comments (14) + TrackBacks (0) | Category: Business and Markets | The Dark Side

November 19, 2012

Small Molecules Slipping Off the List

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Posted by Derek

If you want to see the effects of (a) patent expirations on big-selling small molecules and (b) the lack of patent expiration effects on biologics (for now), take a look at the likely list of best-selling drugs of 2012. There are three small molecule therapies in the top ten: Advair, Crestor, and Lipitor, all of which are getting rather elderly. More show up below that point, but it's going to be hard to dislodge those antibodies from the upper reaches of the list. . .

Via Rich Apodaca's Twitter feed.

Comments (7) + TrackBacks (0) | Category: Business and Markets

The Novartis Pipeline

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Posted by Derek

This would seem to be inviting the wrath of the Drug Development Gods, and man, are they a testy bunch: "Novartis could produce 14 or more new big-selling 'blockbuster' drugs within five years . . ."

I'll certainly wish them luck on that, and it certainly seems true that Novartis research has been productive. But think back - how many press releases have you seen over the years where Drug Company A predicts X number of big product launches in the next Y years? And how many of those schedules have ever quite worked out? The most egregious examples of this take the form of claiming that your new strategy/platform/native genius/good looks have now allowed you to deliver these things on some sort of regular schedule. When you hear someone talking about how even though they haven't been able to do anything like it in the past, they're going to start unleashing a great new drug product launch every year (or every 18 months, what have you) from here on out, run.

Now, Novartis isn't talking like this, and they have a much better chance of delivering on this than most, but still. Might it not be better just to creep up on people with all those great new products in hand, rather than risk disappointment?

Comments (10) + TrackBacks (0) | Category: Business and Markets | Drug Development

November 16, 2012

That's Where The Money Is

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Posted by Derek

Continuing with some more short links for today, those of you who are interested in what small-stock operators can get up to will enjoy this one, from Adam Feuerstein. What should have been about a $50 million dollar infusion of cash for a small nutritional-supplement company turned into an $18 million dollar infusion of cash. Where, you ask, did the rest of the money go? Read the fine print, and remember, this sort of thing goes on a lot, although it's rarely quite so blatant as this cynical rip-off. Something to keep in mind when you hear about a distressed small company being "rescued".

Comments (7) + TrackBacks (0) | Category: Business and Markets

Your Press Release Has Already Been Written

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Posted by Derek

Alan Dove has it right here:

In a groundbreaking new study, scientists at Some University have discovered that a single molecule may drive people to perform that complex behavior we’ve all observed. Though other researchers consider the results of the small, poorly structured experiment misleading, a well-written press release ensures that their criticisms will be restricted to brief quotes buried near the bottoms of most news stories on the work, if they’re included at all.

There's more at the link, and believe me, you've seen releases that conform to this template so perfectly, it's eerie. I'm reminded of this famous BBC news report. . .

Comments (3) + TrackBacks (0) | Category: Business and Markets | The Scientific Literature

November 14, 2012

Budgets and Revenues

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Posted by Derek

Note: politics ahead. This will not be a regular feature around here, but when events warrant, it'll rear its scaly head.

BioCentury has an interesting piece this week on the growing budget impasse and its implications for both academic and industrial biomedical research. It's already widely known that the so-called "Fiscal Cliff", the budget sequestration process that will trigger if no better deal is reached, will perforce come after funding for both the NIH and the FDA. It's always tricky to figure out the impact of such spending cuts, due to the well-known "Washington Monument" tactic. (That refers to the way that if you try to cut the budget for, say, the Park Service, the first thing they'll do is close the Washington Monument. After all, you are having to save money, right? And if you can do it in a way that causes the most outrage and inconvenience, thus increasing the chance that your budget will be restored, well, why wouldn't you?)

So that means that I don't necessarily believe all the predictions for what sequestration would do to any given agency's budget. But there's no doubt that it would have a powerful effect. At the very least, current plans for increased services or expanded programs would immediately go into the freezer, and there would be layoffs and program cancellations on top of that. New NIH grants would surely be hit, and the approval process at the FDA would slow down. Budget sequestration would not mean The End of Science in America, but we'd feel it, all right.

The flip side of budget-cutting is raising revenue. And for that, we can (among many other places) turn back to the deals made with PhRMA when the Affordable Care Act (aka "Obamacare") was passed. Says BioCentury:

Many of the deficit reduction playbooks Congress and the White House will consult include recommendations to suck money out of the pharmaceutical industry. These include a number of proposals that were taken off the table in the PhRMA deal to support the Affordable Care Act.

Near the top of the list: Imposing rebates on drugs purchased under Medicare Part D by so-called “dual-eligibles,” individuals who are eligible for both Medicare and Medicaid.

The Obama administration’s proposed fiscal 2013 budget projected $135 billion in revenues over a decade from dual-eligibles rebates. The idea, which is anathema to PhRMA, was also endorsed by the National Commission on Fiscal Responsibility and Reform chaired by Alan Simpson, a former Republican senator from Wyoming, and Erskine Bowles, President Clinton’s chief of staff.

The White House is also likely to continue to press for reducing the exclusivity period for biologics to seven years from the 12 years established when Congress created a biosimilars pathway in the Affordable Care Act.

Some readers may recall that I predicted something like this. There's a quote from the head of a health-care consulting firm, who says that "Everything that was taken off the table is back", and I can't say that I'm surprised. The twelve-year exclusivity idea had already been on the block to be chopped; I assume that one way or another, it's a goner.

Here's another provision of the Affordable Care Act that could affect the pharma industry. Starting in 2014, health insurance plans will have a defined "minimum level of coverage", which will be determined state-by-state. Late last year, the Department of Health and Human Services said that it plans to require that "essential" will mean one drug in each therapeutic class, with that one drug to be determined by some process I can only imagine. That idea hasn't been popular, with either drug companies or patients, and one might expect to see it altered. But not without a huge amount of wrangling, that's for sure.

Comments (12) + TrackBacks (0) | Category: Business and Markets | Current Events | Regulatory Affairs

November 13, 2012

Nassim Taleb on Scientific Discovery

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Posted by Derek

There's an interesting article posted on Nassim Taleb's web site, titled "Understanding is a Poor Substitute for Convexity (Antifragility)". It was recommended to me by a friend, and I've been reading it over for its thoughts on how we do drug research. (This would appear to be an excerpt from, or summary of, some of the arguments in the new book Antifragile: Things That Gain from Disorder, which is coming out later this month).

Taleb, of course, is the author of The Black Swan and Fooled by Randomness, which (along with his opinions about the recent financial crises) have made him quite famous.

So this latest article is certainly worth reading, although much of it reads like the title, that is, written in fluent and magisterial Talebian. This blog post is being written partly for my own benefit, so that I make sure to go to the trouble of a translation into my own language and style. I've got my idiosyncracies, for sure, but I can at least understand my own stuff. (And, to be honest, a number of my blog posts are written in that spirit, of explaining things to myself in the process of explaining them to others).

Taleb starts off by comparing two different narratives of scientific discovery: luck versus planning. Any number of works contrast those two. I'd say that the classic examples of each (although Taleb doesn't reference them in this way) are the discovery of penicillin and the Manhattan Project. Not that I agree with either of those categorizations - Alexander Fleming, as it turns out, was an excellent microbiologist, very skilled and observant, and he always checked old culture dishes before throwing them out just to see what might turn up. And, it has to be added, he knew what something interesting might look like when he saw it, a clear example of Pasteur's quote about fortune and the prepared mind. On the other hand, the Manhattan Project was a tremendous feat of applied engineering, rather than scientific discovery per se. The moon landings, often used as a similar example, are also the exact sort of thing. The underlying principles of nuclear fission had been worked out; the question was how to purify uranium isotopes to the degree needed, and then how to bring a mass of the stuff together quickly and cleanly enough. These processes needed a tremendous amount of work (it wasn't obvious how to do either one, and multiple approaches were tried under pressure of time), but the laws of (say) gaseous diffusion were already known.

But when you look over the history of science, you see many more examples of fortunate discoveries than you see of planned ones. Here's Taleb:

The luck versus knowledge story is as follows. Ironically, we have vastly more evidence for results linked to luck than to those coming from the teleological, outside physics —even after discounting for the sensationalism. In some opaque and nonlinear fields, like medicine or engineering, the teleological exceptions are in the minority, such as a small number of designer drugs. This makes us live in the contradiction that we largely got here to where we are thanks to undirected chance, but we build research programs going forward based on direction and narratives. And, what is worse, we are fully conscious of the inconsistency.

"Opaque and nonlinear" just about sums up a lot of drug discovery and development, let me tell you. But Taleb goes on to say that "trial and error" is a misleading phrase, because it tends to make the two sound equivalent. What's needed is an asymmetry: the errors need to be as painless as possible, compared to the payoffs of the successes. The mathematical equivalent of this property is called convexity; a nonlinear convex function is one with larger gains than losses. (If they're equal, the function is linear). In research, this is what allows us to "harvest randomness", as the article puts it.

An example of such a process is biological evolution: most mutations are harmless and silent. Even the harmful ones will generally just kill off the one organism with the misfortune to bear them. But a successful mutation, one that enhances survival and reproduction, can spread widely. The payoff is much larger than the downside, and the mutations themselves come along for free, since some looseness is built into the replication process. It's a perfect situation for blind tinkering to pay off: the winners take over, and the losers disappear.

Taleb goes on to say that "optionality" is another key part of the process. We're under no obligation to follow up on any particular experiment; we can pick the one that worked best and toss the rest. This has its own complications, since we have our own biases and errors of judgment to contend with, as opposed to the straightforward questions of evolution ("Did you survive? Did you breed?"). But overall, it's an important advantage.

The article then introduces the "convexity bias", which is defined as the difference between a system with equal benefit and harm for trial and error (linear) and one where the upsides are higher (nonlinear). The greater the split between those two, the greater the convexity bias, and the more volatile the environment, the great the bias is as well. This is where Taleb introduces another term, "antifragile", for phenomena that have this convexity bias, because they're equipped to actually gain from disorder and volatility. (His background in financial options is apparent here). What I think of at this point is Maxwell's demon, extracting useful work from randomness by making decisions about which molecules to let through his gate. We scientists are, in this way of thinking, members of the same trade union as Maxwell's busy creature, since we're watching the chaos of experimental trials and natural phenomena and letting pass the results we find useful. (I think Taleb would enjoy that analogy). The demon is, in fact, optionality manifested and running around on two tiny legs.

Meanwhile, a more teleological (that is, aimed and coherent) approach is damaged under these same conditions. Uncertainty and randomness mess up the timelines and complicate the decision trees, and it just gets worse and worse as things go on. It is, by these terms, fragile.

Taleb ends up with seven rules that he suggests can guide decision making under these conditions. I'll add my own comments to these in the context of drug research.

(1) Under some conditions, you'd do better to improve the payoff ratio than to try to increase your knowledge about what you're looking for. One way to do that is to lower the cost-per-experiment, so that a relatively fixed payoff then is larger in comparison. The drug industry has realized this, naturally: our payoffs are (in most cases) somewhat out of our control, although the marketing department tries as hard as possible. But our costs per experiment range from "not cheap" to "potentially catastrophic" as you go from early research to Phase III. Everyone's been trying to bring down the costs of later-stage R&D for just these reasons.

(2) A corollary is that you're better off with as many trials as possible. Research payoffs, as Taleb points out, are very nonlinear indeed, with occasional huge winners accounting for a disproportionate share of the pool. If we can't predict these - and we can't - we need to make our nets as wide as possible. This one, too, is appreciated in the drug business, but it's a constant struggle on some scales. In the wide view, this is why the startup culture here in the US is so important, because it means that a wider variety of ideas are being tried out. And it's also, in my view, why so much M&A activity has been harmful to the intellectual ecosystem of our business - different approaches have been swallowed up, and they they disappear as companies decide, internally, on the winners.

And inside an individual company, portfolio management of this kind is appreciated, but there's a limit to how many projects you can keep going. Spread yourself too thin, and nothing will really have a chance of working. Staying close to that line - enough projects to pick up something, but not so many as to starve them all - is a full-time job.

(3) You need to keep your "optionality" as strong as possible over as long a time as possible - that is, you need to be able to hit a reset button and try something else. Taleb says that plans ". . .need to stay flexible with frequent ways out, and counter to intuition, be very short term, in order to properly capture the long term. Mathematically, five sequential one-year options are vastly more valuable than a single five-year option." I might add, though, that they're usually priced accordingly (and as Taleb himself well knows, looking for those moments when they're not priced quite correctly is another full-time job).

(4) This one is called "Nonnarrative Research", which means the practice of investing with people who have a history of being able to do this sort of thing, regardless of their specific plans. And "this sort of thing" generally means a lot of that third recommendation above, being able to switch plans quickly and opportunistically. The history of many startup companies will show that their eventual success often didn't bear as much relation to their initial business plan as you might think, which means that "sticking to a plan", as a standalone virtue, is overrated.

At any rate, the recommendation here is not to buy into the story just because it's a good story. I might draw the connection here with target-based drug discovery, which is all about good stories.

(5) Theory comes out of practice, rather than practice coming out of theory. Ex post facto histories, Taleb says, often work the story around to something that looks more sensible, but his claim is that in many fields, "tinkering" has led to more breakthroughs than attempts to lay down new theory. His reference is to this book, which I haven't read, but is now on my list.

(6) There's no built-in payoff for complexity (or for making things complex). "In academia," though, he says, "there is". Don't, in other words, be afraid of what look like simple technologies or innovations. They may, in fact, be valuable, but have been ignored because of this bias towards the trickier-looking stuff. What this reminds me of is what Philip Larkin said he learned by reading Thomas Hardy: never be afraid of the obvious.

(7) Don't be afraid of negative results, or paying for them. The whole idea of optionality is finding out what doesn't work, and ideally finding that out in great big swaths, so we can narrow down to where the things that actually work might be hiding. Finding new ways to generate negative results quickly and more cheaply, which can means new ways to recognize them earlier, is very valuable indeed.

Taleb finishes off by saying that people have criticized such proposals as the equivalent of buying lottery tickets. But lottery tickets, he notes, are terribly overpriced, because people are willing to overpay for a shot at a big payoff on long odds. But lotteries have a fixed upper bound, whereas R&D's upper bound is completely unknown. And Taleb gets back to his financial-crisis background by pointing out that the history of banking and finance points out the folly of betting against long shots ("What are the odds of this strategy suddenly going wrong?"), and that in this sense, research is a form of reverse banking.

Well, those of you out there who've heard the talk I've been giving in various venues (and in slightly different versions) the last few months may recognize that point, because I have a slide that basically says that drug research is the inverse of Wall Street. In finance, you try to lay off risk, hedge against it, amortize it, and go for the steady payoff strategies that (nonetheless) once in a while blow up spectacularly and terribly. Whereas in drug research, risk is the entire point of our business (a fact that makes some of the business-trained people very uncomfortable). We fail most of the time, but once in a while have a spectacular result in a good direction. Wall Street goes short risk; we have to go long.

I've been meaning to get my talk up on YouTube or the like; and this should force me to finally get that done. Perhaps this weekend, or over the Thanksgiving break, I can put it together. I think it fits in well with what Taleb has to say.

Comments (28) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History | Who Discovers and Why

November 9, 2012

The Supply of PhDs

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Posted by Derek

Check out this graph from a recent ACS Webinar, as reprinted by Chemjobber. It shows PhDs awarded in the US over a forty-year period. And while chemistry degrees have been running a bit high for a few years, which surely hasn't helped the employment situation, they're still in the same rough 2000 to 2400 per year range that they've been in since I got my own PhD in 1988. The bigger employment problem for chemists is surely demand; that's slumped much harder than any supply increase.

But will you look at the "Biomedical PhD" line! It had a mighty climb in the late 1980s and early 1990s, then leveled off for a few years. But starting in 2004, it has been making another strong, powerful ascent, and into a vicious job market, too. . .what's driving this? Any thoughts?

Comments (37) + TrackBacks (0) | Category: Business and Markets | Graduate School

November 8, 2012

Biotech Takeover Targets

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Posted by Derek

From the folks at FierceBiotech, here's a list of the "most frequently cited" takeover targets in the biotech sector. As John Carroll put it, the key seems to be: "targets that include either late-stage blockbuster candidates or some clearly defined new products on the market that can be had for $1 billion to $6 billion." I'll tell you that Onyx is number one on the list, but take a look at the rest and see if you agree. . .

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November 5, 2012

C&E News: No Smiley Face This Time

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Posted by Derek

For those who have been complaining that Chemical and Engineering News has been minimizing the employment situation for chemists, try this article. Note before you read: it's about as worrisome and depressing as it can be, and will absolutely give you the shakes whether you're currently employed or not. But for its subjects (and the other people in such situations) it's reality.

Comments (70) + TrackBacks (0) | Category: Business and Markets

October 26, 2012

"Basically, They're A Bunch of Lemmings"

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Posted by Derek

True, but that's unfair to lemmings. This is Raghuram Selveraju of Aegis Capital, talking about deal-making executives in the big pharma companies and the string of costly blowups so far this year. That link has the list, and it's quite an impressive string of fireballs.

“What all of these deals had in common was the desperation of big pharma, because its R&D productivity has been dropping and we’ve known that for a long time,” he said.

That desperation leads to the repetition of familiar mistakes which derive from the predictable thinking of too many business development executives at big pharma, Selveraju opined. First, when looking for licensing opportunities, pharmas very often seek out their comfort zone – a potential product for which they can deploy an existing sales force or promote to doctors they already know and communicate with. Also, to be confident in an experimental drug’s preclinical and clinical data, pharmas often want to go into areas where their competitors also have a compound as well as into validated targets.

“Basically, they’re a bunch of lemmings,” Selveraju said. “As soon as a target becomes hot, they all have to have a molecule in that space, hitting that target."

But who could blame them? Going out into areas that haven't been explored, or haven't worked out for others, can get you slaughtered, too (ask Eli Lilly about Alzheimer's). And when that happens, you have nowhere to hide. If everyone else was rushing into a given therapeutic area and it turns out to be a disaster, well, you yourself might be able to get by, because that's just one of those things, and it happened to everyone at the same time. It reminds me of something I saw years ago about investment managers. If you go out and buy a bunch of (say) IBM for your clients and it drops, people might say "Man, what's wrong with IBM?" But if you go out and buy a bunch of WhoZat, Inc., and it drops, people will ask what's wrong with you.

My own biases make me think that if the chances for failure are high both ways, then maybe you should go ahead and strike out for the unknown territory, because the payoff is larger if you succeed. Selveraju himself has a much more cautious (and perhaps outright dispiriting) recommendation:

What then is Selveraju’s prescription for better business development practices? It might disappoint those who want pharma to be in the vanguard of innovation. He recommends incremental innovation – using FDA’s 505b2 pathway to develop products with already defined efficacy and safety – as well as biosimilars and re-purposing. Pharma also should focus on niche and specialty indications, and largely eliminate primary care products and the large commercial operations that come with them.

That's cranking up the dial even more on the Bernard Munos strategy. Munos also recommends getting out of the big, expensive areas and going more for niche and specialty ones, but mainly because of the cost of the clinical trials (and the validation step inherent in them). Alzheimer's, for example, scores big on innovation, but very, very poorly on the risk/cost ratio, since it's going to take you years and years in huge clinical trials to see if you've got something.

But that "develop products with already defined efficacy and safety" line is Selveraju’s own, and doesn't that sound like loads of fun? Coming up with new formulations and dosing schedules of existing drugs is what a 505(b)(2) strategy amounts to, and it brings up thoughts of alternative careers - going off to trucking school and learning to drive the big rigs, for example. Actually, as a drug-discovery chemist, that's probably what I'd end up doing if everyone switched to that plan, since you certainly don't need people like me if you're five-oh-five-bee-twoing.

Comments (21) + TrackBacks (0) | Category: Business and Markets | Clinical Trials | Regulatory Affairs

October 18, 2012

Layoffs at Human Genome Sciences

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Posted by Derek

Like night follows day: GSK completes its acquisition of HGS, and the scythe begins to come down. The company had previously notified the state of Maryland that it was cutting 114 positions, and now it's saying that 97 more are disappearing. That Fierce Biotech post says that even more are on the way after the first of the year.

GSK had offered $13 a share for the company, which the company turned down as too low. They got $14.25 in the end, which is not the sort of premium that they'd been hoping for, I'm sure. Lower-than-expected Benlysta sales are the primary cause of all this trouble. Without that approval, the company would likely have disappeared (or contracted beyond recognition). With it, the company is disappearing, and contracting anyway. . .

Comments (9) + TrackBacks (0) | Category: Business and Markets

October 8, 2012

Targacept Cuts Way Back

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Posted by Derek

It hasn't been good over at Targacept. They had a big antidepressant failure a while back, and last month ended development of an ADHD drug, the nicotinic acetylcholine receptor ligand TC-5619.

They cut back staff back in the spring, and the CEO departed. Now the expected has happened: the company has apparently laid off everyone in research, and is conserving what cash it has to try to get something to the deal-making point. A sad, but familiar story in this business. . .sometimes companies come back after this point, and sometimes the event horizon turns out to have been passed.

Comments (5) + TrackBacks (0) | Category: Business and Markets | The Central Nervous System

October 5, 2012

Crowdfunding A CNS Project

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Posted by Derek

Ethan Perlstein at Princeton is the main author of this research on sertraline that I blogged about earlier this year. Now he's looking to crowdfund his next research project, on the neuronal effects of amphetamines. He's trying to raise $25,000 to do radiolabeling and electron microscopy studies, which would make this the largest crowdfunding experiment in the sciences so far (but still, I might add, small change compared to the sorts of grants that much of academia spends its time trying to line up).

What he's looking at is 2 to 3 months of work for one MS-level scientist. In this post he describes some of the reactions he's had to the idea so far, and lists the benefits that donors will receive, according to the amounts they contribute. That list is a real eye-opener, let me tell you - it's a different world we're entering, or trying to enter, at any rate. For example: "$100 or higher – You’ll get a hearty thanks in per­son, and the oppor­tu­nity to talk sci­ence over a round of beer or glass of wine at a NYC water­ing hole one night after work, or when you visit NYC within the next 6 months." Or how about this one: "$1,000 or higher – Attend up to 2 lab meet­ings dur­ing the project and 1 pub­li­ca­tion brain­storm­ing ses­sion at the end of the project. You will also receive access to a Google Doc dur­ing the man­u­script writ­ing stage. Sup­port­ers who con­tribute sub­stan­tially to the final man­u­script may receive co-authorship."

Needless to say, I'm going to watch this with great interest. The projects that can be funded at this level (with some expectation of producing something useful) are, perhaps, special cases, but it's the principle of the thing that intrigues me the most. That's why I'm also putting this one in the "Business and Markets" category, because asking for donations like this is a pure market activity. As a person with a pronounced free-market bias, I'm very much wondering how this will all play out. Thoughts?

Update: Wavefunction has a post on this here.

Comments (18) + TrackBacks (0) | Category: Business and Markets | The Central Nervous System

October 3, 2012

AstraZeneca Stops Buying Its Own Stock

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Posted by Derek

So after all the talking we've done around here about stock buybacks in the pharma world, it's worth noting that the new CEO of AstraZeneca has halted their program. Naturally, that has people talking about what they're going to use the money for otherwise - that is, what company they're going to buy. But it's interesting to see a public mention of the buyback program hitting the brakes like this. . .

Comments (2) + TrackBacks (0) | Category: Business and Markets

October 2, 2012

A Totally New Way to Finance Drug Discovery

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Posted by Derek

Now, here's a big idea. Thirty billion dollars worth of big idea. Andrew Lo, professor of finance at MIT (Sloan) and hedge fund manager, along with Jose-Maria Fernandez (Sloan) and Roget Stein (Sloan and Moody's) propose raising that much money for discovery-stage oncology research. But he's not running a fund-raising appeal for a charity; he wants to raise that money as an investment:

Here we propose a financial structure in which a large number of biomedical programs at various stages of development are funded by a single entity to substantially reduce the portfolio's risk. The portfolio entity can finance its activities by issuing debt, a critical advantage because a much larger pool of capital is available for investment in debt versus equity. By employing financial engineering techniques such as securitization, it can raise even greater amounts of more-patient capital. In a simulation using historical data for new molecular entities in oncology from 1990 to 2011, we find that megafunds of $5–15 billion may yield average investment returns of 8.9–11.4% for equity holders and 5–8% for 'research-backed obligation' holders, which are lower than typical venture-capital hurdle rates but attractive to pension funds, insurance companies and other large institutional investors.

Here's a Boston Globe story on the idea. Lo and his co-authors note the low productivity of drug research in recent years (which he doesn't seem to think is a scam!), and its increasing costs. At the same time, there have been many scientific advances in areas that you might have thought would have helped, but here's how he reconciles these trends:

Here we propose one explanation for this apparent inconsistency and a possible solution. Our proposed explanation is the trend of increasing risk and complexity in the biopharma industry. This trend can be attributed to at least two distinct sources: scientific advances and economic circumstances. That biomedicine is far more advanced today than even a decade ago is indisputable, but breakthroughs such as molecular biomarkers for certain diseases generate many new potential therapies to be investigated, each of which requires years of translational research at a cost of hundreds of millions of dollars and has a substantial likelihood of failure. Although such complexity offers new hope to the afflicted, it also presents an enormous number of uncertain prospects that must be triaged by researchers, biopharma business executives, investors, policymakers and regulators. . .the lengthy process of biomedical innovation is becoming increasingly complex, expensive, uncertain and fraught with conflicting profit-driven and nonpecuniary motivations and public-policy implications. Although other industries may share some of these characteristics, it is difficult to find another so heavily burdened by all of them.

Hard to argue with that. He then goes on to one of the same questions that's been discussed around here - the effect of the stock market on a drug company's behavior. If the quarter-by-quarter focus of most investors is inappropriate (or downright harmful) when applied to an R&D-driven company with timelines like the drug industry's, and if private equity doesn't have the cash to invest on that scale (or the willingness to take the expected returns even if things work out), what's left?

That's the idea here, to provide something that currently doesn't exist. The idea is to finance things via securitization:

Our approach involves two components: (i) creating large diversified portfolios—'megafunds' on the order of $5–30 billion—of biomedical projects at all stages of development; and (ii) structuring the financing for these portfolios as combinations of equity and securitized debt so as to access much larger sources of investment capital. These two components are inextricably intertwined: diversification within a single entity reduces risk to such an extent that the entity can raise assets by issuing both debt and equity, and the much larger capacity of debt markets makes this diversification possible for multi-billion-dollar portfolios of many expensive and highly risky projects.

These debt instruments will have longer time horizons, which can be tailored a number of different ways. Securitization can provide a whole range of different bonds to be issued, with different maturities and different levels of risk. The fund itself would earn its returns from the sale of whatever assets its funded projects generate - outright purchases by larger companies, milestone payments, royalties, whatever. With enough diversification, Lo et al. think that this could work, if some cost savings kick in as well:

Compared with the plethora of small pharmaceutical companies currently pursuing just one or two projects, these savings are especially important for a megafund. It is considerably harder to cull compounds efficiently in a small company because the livelihoods of the employees and management depend on the continued development of the company's few compounds—in these cases, development tends to continue until the money runs out. With a megafund, this conflict is greatly reduced—capital can be more efficiently allocated to projects that are likely to succeed, and failing projects and compounds can be abandoned rapidly. In fact, for megafunds that have invested in a sufficient number of early-stage projects, it may be worthwhile to build and operate shared facilities for conducting preclinical studies motivated by the megafund's projects. Such a 'preclinical incubator' could provide the megafund with valuable economies of scale as well as reduce duplicative costs in the industry.

Now, this idea is fascinating, but it raises several big questions. Readers with some knowledge of the financial markets will have noted that this whole securitization-and-repackaging process was one of the main engines of destruction during the recent financial crisis. (I continue to recommend Michael Lewis's The Big Short for details on this). Vast amounts of mortgage-backed securities were generated, and their risks were, it is fair to say, poorly evaluated. The paper explicitly addresses this problem, with suggestions on how to keep things from getting out of hand, but this is something that will have to be watched carefully. Securitization, the authors note, can almost be too efficient a way to raise capital.

The rest of the article is a detailed look at the idea through the lens of portfolio theory, along with some simulations of how it might have worked in the past. I strongly recommend that anyone who finds this idea interesting check out these details, but they're beyond the scope of an already-lengthy blog post. I note that Felix Salmon has looked at this from a financial writer's point of view. His take is that this is quite possibly a worthy idea, but he has doubts. For one thing, the proposed "megafund" might find it difficult to pay investors in its early years, and might be forced to make some bad decisions in order to do so. He's also skeptical that the training-set period used for Lo's simulations is representative of what we might expect in the future.

But Salmon's biggest objection is that the idea might well prove unworkable even to test. A smaller version of such a fund would lose many of its advantages; it has to start off large or not start at all. And he's not so sure that anyone can raise that kind of money for something that's as big a change as this would be. There is, in chemical terms, too high an activation barrier.

I'm still thinking about all this myself; there's a lot to think about. Take a look and see what occurs to you - I think that I can guarantee that you'll have some strong opinions, because this is one of those proposals that it's hard to be neutral about.

Update: Nature Reviews Drug Discovery weighs in with a detailed assessment. The article is cautiously optimistic, but wonders if more money will really do the trick.

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September 28, 2012

Pfizer's New Leaf

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Posted by Derek

Here's a piece by an industry consultant who's interacted with Pfizer a lot over the years. He says that they're really, truly going to change:

But buying companies, partners, and products never added up to a net gain in R&D productivity because the resulting behemoth lacked the key ingredient: integration. Like the industry in general, Pfizer’s acquisitions bought it little else but time. When its enormous R&D engine broke down after failing to produce an adequate pipeline, the company reflexively slashed research spending and staff. But something else happened along the way — a sea change for the company not only in organization but also in philosophy. Like China or the former Soviet Union renouncing past Maoist or Stalinist practices, Pfizer has now declared an end to its legendary imperialism in favor of a new, open and collaborative research model.

Let's just say, that as with many large companies, "open" and "collaborative" have not necessarily been the first words one associates with Pfizer's research strategy. My initial impulse is to discount this stuff as they-have-to-say-that pronouncements from the executive suite. But I'm a cynical person sometimes. If Pfizer really is going to change, theway to convince people (such as their potential collaborators) will be through deeds rather than words. We'll see.

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Elan's Discovery Efforts - What's Going On?

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Posted by Derek

Elan announced not long ago that they were going to spin off their drug discovery efforts into a separate entity, Neotope. But I've also heard that they've recently let go a large number of people in their discovery effort, and I haven't heard any talk of them being Neotoped - does anyone know what's going on over there?

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September 25, 2012

Pharmville: Good Grief, This Looks Awful

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Posted by Derek

A reader sent along a link to this, which appears to be a completely serious effort by Boehringer Ingelheim to make a Facebook game about drug discovery. My guess is that whatever it might teach anyone about drug R&D will be outweighed by what it'll teach them (incorrectly) about the amount of effort needed to do it. No remotely realistic game could ever have enough payoffs to keep people interested. We can only handle that sort of thing in real life; one expects more from one's entertainment.

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Sanofi Cuts Back in France

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Posted by Derek

Sanofi looks set to announce cutbacks and re-orgs in France:

In addition to Toulouse, research jobs could go in Montpellier, southern France, in addition to Strasbourg, eastern France, as well as Chilly and Vitry-sur-Seine near Paris.

A number of vaccines unit and support jobs could also be slashed as part of the reshuffle.

Chief Executive Chris Viehbacher, a German Canadian who is Sanofi's first non-French top manager, is now focusing on France as part of his drive to boost productivity in research labs company-wide after wielding the axe in other countries.

"The reality is that our research in France hasn't really come up with a new medicine in 20 years and therefore we have to take a much more productive approach to how we do this," he told analysts in July. "It is a reorganization within France. It's not externalizing research to other countries."

The company is regrouping its research operations around the world into regional hubs - such as Boston, where its rare disease unit Genzyme and cancer research labs are based - while shuttering other laboratories.

That's not going to be popular, given France's history of lively labor relations. But everywhere else in the Sanofi world has heard the swish of the ax, so it can't come as that much of a surprise, can it?

Update: well, here's the announcement itself. And maybe this is my first impression, but compared to what's gone on in other Sanofi sites (like Bridgewater), this one comes across like a shower of dandelion fluff. No reduction in the number of sites, no actual layoffs - just 900 positions to phase out, mostly via attrition, over the next two years. The Toulouse site is the only loose end; that one is the subject of a "working group" to figure out what it's going to do, but I see no actual language about closing it.

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September 20, 2012

Roche: Manhattan Instead of Cambridge

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Posted by Derek

When Roche announced that they were moving their remaining East Coast R&D out of Nutley (NJ), I (and others) thought that the Boston area was surely the front-running location. But we were wrong: they're moving to Manhattan. More specifically, it's Murray Hill, near the NYU Medical Center. Cue the speculation about NYC becoming a biotech R&D hub. . .

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Various Links Of Stuff

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Posted by Derek

Swamped with all sorts of stuff today - when science marches on, you have to make sure that it's not leaving its bootprints on your back. But I do have some interesting links:

The bluest of blue-sky brain research, funded by Paul Allen. Fascinating stuff, on several levels - here's a big publication that came out this week. I find the phenomenon of tech-billionaire funding for things like this, asteroid mining, low-cost orbital access and the like very encouraging. (And of course, the Gates Foundation is doing a lot in more earthbound pursuits).

The Wall Street Journal reveals what is apparently a rather ill-kept secret: most firms funded by venture capital fail. "Most", as in about 3 out of 4. That's a loose definition, though - as the article says, if you're talking total wipeout of capital, then that's about one third of them. If you're talking about failing to see the projected return in the projected time, well, that's over 90%. But it's all about the ones that succeed, just like the drug business.

The Royal Society of Chemistry, in a rather self-congratulatory press release, pledges money to help authors publish their work open-access in RSC journals. The UK government is putting money into this, but no one's sure if it'll be enough.

Do you want to make this compound? No? Neither do I. Especially not when they turn around and stick three more nitro groups onto it.

Comments (12) + TrackBacks (0) | Category: Business and Markets | The Central Nervous System | The Scientific Literature

September 18, 2012

Boehringer Ingelheim Closing Laval Site

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Posted by Derek

I've heard from more than one person with knowledge of the situation that BI has announced that they'll be closing their Laval site next March. Montreal's drug R&D culture has been taking some major hits the last few years, and this just piles on some more.

Update: the story is now out on the wires, and it looks like this is part of the company getting completely out of antivirals. 170 employees to be affected at Laval.

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September 5, 2012

Merck (Germany) Cuts Back

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Posted by Derek

If you haven't heard, Merck KGgA has announced that they're cutting over a thousand jobs in Germany. They'd already cut back hard in the Merck Serono end of the company, and now comes the rest. . .

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August 29, 2012

How Did the Big Deals of 2007 Work Out?

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Posted by Derek

Startup biopharma companies: they've gotta raise money, right? And the more money, the better, right? Not so right, according to this post by venture capitalist Bruce Booth. Companies need money, for sure, but above a certain threshold there's no correlation with success, either for the company's research portfolio or its early stage investors. (I might add that the same holds true for larger drug companies as well, for somewhat different reasons. Perhaps Pfizer's strategy over the last twenty years has had one (and maybe only one) net positive effect: it's proven that you cannot humungous your way to success in this business. And yes, since you ask, that's the last time I plan to use "humungous" as a verb for a while).

There's also a fascinating look back at FierceBiotech's 2007 "Top Deals", to see what became of the ten largest financing rounds on the list. Some of them have worked out, and some of them most definitely haven't: 4 of the ten were near-total losses. One's around break-even, two are "works in progress" but could come through, and three have provided at least 2x returns. (Read his post to attach names to these!) And as Booth shows, that's pretty much what you'd expect from the distribution over the entire biotech industry, including all the wild-eyed stuff and the riskiest small fry. Going with the biggest, most lucratively financed companies bought you, in this case, no extra security at all.

A note about those returns: one of the winners on the list is described as having paid out "modest 2x returns" to the investors. That's the sort of quote that inspires outrage among the clueless, because (of course) a 100% profit is rather above the market returns for the last five years. But the risk/reward ratio has not been repealed. You could have gotten those market returns by doing nothing, just by parking the cash in a couple of index funds and sitting back. Investing in startup companies requires a lot more work, because you're taking on a lot more risk.

It was not clear which of those ten big deals in 2007 would pay out, to put it mildly. In fact, if you take Booth's figures so far, an equal investment in each of the top seven companies on the list in 2007 would leave you looking at a slight net loss to date, and that includes one company that would have paid you back at about 3x to 4x. Number eight was the big winner on the list (5x, if you got out at the perfect peak, and good luck with that), and number 9 is the 2x return (while #10 is ongoing, but a likely loss). As any venture investor knows, you're looking at a significant risk of losing your entire investment whenever you back a startup, so you'd better (a) back more than one and (b) do an awful lot of thinking about which ones those are. This is a job for the deeply pocketed.

And when you think about it, a very similar situation obtains inside a given drug company. The big difference is that you don't have the option of not playing the game - something always has to be done. There are always projects going, some of which look more promising than others, some of which will cost more to prosecute than others, and some of which are aimed at different markets than others. You might be in a situation where there are several that look like they could be taken on, but your development organization can't handle so many. What to do? Partner something, park something that can wait (if anything can)?Or you might have the reverse problem, of not enough programs that look like they might work. Do you push the best of a bad lot forward and hope for the best? If not, do you still pay your development people even if they have nothing to develop right now, in the hopes that they soon will?

Which of these clinical programs of yours have the most risk? The biggest potential? Have you balanced those properly? You're sure to lose your entire investment on the majority - the great majority - of them, so choose as wisely as you can. The ones that make it through are going to have to pay for all the others, because if they don't, everyone's out of a job.

This whole process, of accumulating capital and risking it on new ventures, is important enough that we've named an entire economic system for it. It's a high-wire act. Too cautious, and you might not keep up enough to survive. Too risky, and you could lose too much. They do focus one's attention, such prospects, and the thought that other companies are out there trying to get a step on you helps keep you moving, too. It's not a pretty system, but it isn't supposed to be. It's supposed to work.

Comments (1) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History

August 23, 2012

Pharma: Geniuses or Con Men?

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Posted by Derek

So here's a comment to this morning's post on stock buybacks, referring both to it and my replies to Donald Light et al. last week. I've added links:

Did you not spend two entire posts last week telling readers how only pharma "knows" how to do drug research and that we should "trust" them and their business model. Now you seem to say that they are either incompetent or conmen looking for a quick buck. So what is it? Does pharma (as it exists today) have a good business model or are they conmen/charlatans out for money? Do they "know" what they are doing? Or are they faking competence?

False dichotomy. My posts on the Donald Light business were mostly to demonstrate that his ideas of how the drug industry works are wrong. I was not trying to prove that the industry itself is doing everything right.

That's because it most certainly isn't. But it is the only biopharma industry we have, and before someone comes along with a scheme to completely rework it, one should ask whether that's a good idea. In this very context, the following quote from Chesterton has been brought up, and it's very much worth keeping in mind:

In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, "I don't see the use of this; let us clear it away." To which the more intelligent type of reformer will do well to answer: "If you don't see the use of it, I certainly won't let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it."

This paradox rests on the most elementary common sense. The gate or fence did not grow there. It was not set up by somnambulists who built it in their sleep. It is highly improbable that it was put there by escaped lunatics who were for some reason loose in the street. Some person had some reason for thinking it would be a good thing for somebody. And until we know what the reason was, we really cannot judge whether the reason was reasonable. It is extremely probable that we have overlooked some whole aspect of the question, if something set up by human beings like ourselves seems to be entirely meaningless and mysterious. There are reformers who get over this difficulty by assuming that all their fathers were fools; but if that be so, we can only say that folly appears to be a hereditary disease. But the truth is that nobody has any business to destroy a social institution until he has really seen it as an historical institution. If he knows how it arose, and what purposes it was supposed to serve, he may really be able to say that they were bad purposes, that they have since become bad purposes, or that they are purposes which are no longer served. But if he simply stares at the thing as a senseless monstrosity that has somehow sprung up in his path, it is he and not the traditionalist who is suffering from an illusion.

The drug industry did not arise out of random processes; it looks the way it does now because of a long, long series of decisions. Because we live in a capitalist system, many of these decisions were made to answer the question "Which way would make more money?" That is not guaranteed to give you the best outcome. But neither is it, as some people seem to think, a guarantee of the worst one. Insofar as the need for new and effective drugs is coupled to the ability to make money by doing so, I think the engine works about as well as anything could. Where these interests decouple (tropical diseases, for one), we need some other means.

My problem with stock buybacks is that I think that executives are looking at that same question ("Which way would make more money?") and answering it incorrectly. But under current market conditions, there are many values of "wrong". In the long run, I think (as does Bruce Booth) that it would be more profitable, both for individual companies and for the industry as a whole, to invest more in research. In fact, I think that's the only thing that's going to get us out of the problems that we're in. We need to have more reliable, less expensive ways to discover and develop drugs, and if we're not going to find those by doing research on how to make them happen, then we must be waiting for aliens to land and tell us.

But that long run is uncertain, and may well be too long for many investors. Telling the shareholders that Eventually Things Will Be Better, We Think, Although We're Not Sure How Just Yet will not reassure them, especially in this market. Buying back shares, on the other hand, will.

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More on Pharma Stock Buybacks

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Posted by Derek

Bruce Booth has an excellent look at a topic we were discussing around here earlier this year: stock buybacks in biopharma. I didn't have a lot of good things to say about the concept. I understand that corporations have obligations to their shareholders, and I certainly understand that a stock buyback is about the least controversial thing a big company can do with its money. Paying shareholders through dividends has tax consequences. But you can't sit on a big pile of cash forever, and what are you supposed to do if you think that market returns will beat the return on investment in your own business?

That brings up another, larger question: if you truly believe that last part, how long do you think that situation will obtain? And how long are you willing to put up with it? If a business really, truly, can't deliver returns that could be realized through a reasonable investment strategy, then why is it in business to start with? (I've seen discussions among economists about this very point when applied to many small businesses).

Booth wonders about the use of capital, too:

In recent years, plowing it back into internal R&D hasn’t been the preferred option given pipeline productivity questions. Returning capital to shareholders via dividends has certainly been high on the list. Another, albeit indirect, way of paying shareholders is through share repurchases (stock buybacks), and it has also been quite popular. The expectation (or hope) with these indirect stock buybacks is that the stock will move upwards because the shares oustanding goes down (or at least the buybacks offset the dilution from the exercise of options).

But buybacks have a more mixed assessment in practice (links at his site - DBL) and are typically only a smart if a company is (a) under-valued and (b) has no better uses of capital. This latter point is where they draw my ire, especially given their scale in our industry and the many strategic alternatives.

Totaling up the buybacks gives you some humongous figures. One thing that I'm not quite sure about with these numbers is whether all these buybacks are actually followed through. You'd think there would be legal consequences if the discrepancy grosw too large, but I don't know the law on this topic. But taking the figures as we have them, you get this:

To appreciate the magnitude of these buybacks, it’s worth comparing them to other important financial values in the biopharma ecosystem. It’s bigger than the NIH budget for both 2011-2012 by nearly 25%. It’s 4.5x bigger than all of the private venture-backed M&A that occurred in the past 18 months – and that involved over 70 biotech companies. It’s 12x bigger than the sum total of venture dollars invested in biotech in that period. And it's nearly 80x bigger than all the capital raised by fifteen biotech IPOs during that period. This is a huge amount of capital washing into stock repurchases.

The problem is, as Booth goes on to show, is that there's no particular correlation (that anyone can see) between these buybacks and the performance of the stocks themselves. (You could always say that they'd have performed even worse without the buybacks, an unanswerable and untestable point). He's got some other suggestions for the money, and he's not even asking for all of it. Or half of it. Or a tenth. Five per cent of the buyback pool would totally alter the funding universe for early-stage companies and precompetitive consortia. In other words, potentially alter the future of the whole industry. But we're not doing that. We're buying our own shares. Tens of billions of dollars of our own shares, because we can't seem to think of anything better to do.

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August 9, 2012

Getting Drug Research Really, Really Wrong

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Posted by Derek

The British Medical Journal says that the "widely touted innovation crisis in pharmaceuticals is a myth". The British Medical Journal is wrong.

There, that's about as direct as I can make it. But allow me to go into more detail, because that's not the the only thing they're wrong about. This is a new article entitled "Pharmaceutical research and development: what do we get for all that money?", and it's by Joel Lexchin (York University) and Donald Light of UMDNJ. And that last name should be enough to tell you where this is all coming from, because Prof. Light is the man who's publicly attached his name to an estimate that developing a new drug costs about $43 million dollars.

I'm generally careful, when I bring up that figure around people who actually develop drugs, not to do so when they're in the middle of drinking coffee or working with anything fragile, because it always provokes startled expressions and sudden laughter. These posts go into some detail about how ludicrous that number is, but for now, I'll just note that it's hard to see how anyone who seriously advances that estimate can be taken seriously. But here we are again.

Light and Lexchin's article makes much of Bernard Munos' work (which we talked about here), which shows a relatively constant rate of new drug discovery. They should go back and look at his graph, because they might notice that the slope of the line in recent years has not kept up with the historical rate. And they completely leave out one of the other key points that Munos makes: that even if the rate of discovery were to have remained linear, the costs associated with it sure as hell haven't. No, it's all a conspiracy:

"Meanwhile, telling "innovation crisis" stories to politicians and the press serves as a ploy, a strategy to attract a range of government protections from free market, generic competition."

Ah, that must be why the industry has laid off thousands and thousands of people over the last few years: it's all a ploy to gain sympathy. We tell everyone else how hard it is to discover drugs, but when we're sure that there are no reporters or politicians around, we high-five each other at how successful our deception has been. Because that's our secret, according to Light and Lexchin. It's apparently not any harder to find something new and worthwhile, but we'd rather just sit on our rears and crank out "me-too" medications for the big bucks:

"This is the real innovation crisis: pharmaceutical research and development turns out mostly minor variations on existing drugs, and most new drugs are not superior on clinical measures. Although a steady stream of significantly superior drugs enlarges the medicine chest from which millions benefit, medicines have also produced an epidemic of serious adverse reactions that have added to national healthcare costs".

So let me get this straight: according to these folks, we mostly just make "minor variations", but the few really new drugs that come out aren't so great either, because of their "epidemic" of serious side effects. Let me advance an alternate set of explanations, one that I call, for lack of a better word, "reality". For one thing, "me-too" drugs are not identical, and their benefits are often overlooked by people who do not understand medicine. There are overcrowded therapeutic areas, but they're not common. The reason that some new drugs make only small advances on existing therapies is not because we like it that way, and it's especially not because we planned it that way. This happens because we try to make big advances, and we fail. Then we take what we can get.

No therapeutic area illustrates this better than oncology. Every new target in that field has come in with high hopes that this time we'll have something that really does the job. Angiogenesis inhibitors. Kinase inhibitors. Cell cycle disruptors. Microtubules, proteosomes, apoptosis, DNA repair, metabolic disruption of the Warburg effect. It goes on and on and on, and you know what? None of them work as well as we want them to. We take them into the clinic, give them to terrified people who have little hope left, and we watch as we provide with them, what? A few months of extra life? Was that what we were shooting for all along, do we grin and shake each others' hands when the results come in? "Another incremental advance! Rock and roll!"

Of course not. We're disappointed, and we're pissed off. But we don't know enough about cancer (yet) to do better, and cancer turns out to be a very hard condition to treat. It should also be noted that the financial incentives are there to discover something that really does pull people back from the edge of the grave, so you'd think that we money-grubbing, public-deceiving, expense-padding mercenaries might be attracted by that prospect. Apparently not.

The same goes for Alzheimer's disease. Just how much money has the industry spent over the last quarter of a century on Alzheimer's? I worked on it twenty years ago, and God knows that never came to anything. Look at the steady march, march, march of failure in the clinic - and keep in mind that these failures tend to come late in the game, during Phase III, and if you suggest to anyone in the business that you can run an Alzheimer's Phase III program and bring the whole thing in for $43 million dollars, you'll be invited to stop wasting everyone's time. Bapineuzumab's trials have surely cost several times that, and Pfizer/J&J are still pressing on. And before that you had Elan working on active immunization, which is still going on, and you have Lilly's other antibody, which is still going on, and Genentech's (which is still going on). No one has high hopes for any of these, but we're still burning piles of money to try to find something. And what about the secretase inhibitors? How much time and effort has gone into beta- and gamma-secretase? What did the folks at Lilly think when they took their inhibitor way into Phase III only to find out that it made Alzheimer's slightly worse instead of helping anyone? Didn't they realize that Professors Light and Lexchin were on to them? That they'd seen through the veil and figured out the real strategy of making tiny improvements on the existing drugs that attack the causes of Alzheimer's? What existing drugs to target the causes of Alzheimer are they talking about?

Honestly, I have trouble writing about this sort of thing, because I get too furious to be coherent. I've been doing this sort of work since 1989, and I have spent the great majority of my time working on diseases for which no good therapies existed. The rest of the time has been spent on new mechanisms, new classes of drugs that should (or should have) worked differently than the existing therapies. I cannot recall a time when I have worked on a real "me-too" drug of the sort of that Light and Lexchin seem to think the industry spends all its time on.

That's because of yet another factor they have not considered: simultaneous development. Take a look at that paragraph above, where I mentioned all those Alzheimer's therapies. Let's be wildly, crazily optimistic and pretend that bapineuzumab manages to eke out some sort of efficacy against Alzheimer's (which, by the way, would put it right into that "no real medical advance" category that Light and Lexchin make so much of). And let's throw caution out the third-floor window and pretend that Lilly's solanezumab actually does something, too. Not much - there's a limit to how optimistic a person can be without pharmacological assistance - but something, some actual efficacy. Now here's what you have to remember: according to people like the authors of this article, whichever of these antibodies that makes it though second is a "me-too" drug that offers only an incremental advance, if anything. Even though all this Alzheimer's work was started on a risk basis, in several different companies, with different antibodies developed in different ways, with no clue as to who (if anyone) might come out on top.

All right, now we get to another topic that articles like this latest one are simply not complete without. That's right, say it together: "Drug companies spend a lot more on marketing than they do on research!" Let's ignore, for the sake of argument, the large number of smaller companies that spend all of their money on R&D and none on marketing, because they have nothing to market yet. Let's even ignore the fact that over the years, the percentage of money being spent on drug R&D has actually been going up. No, let's instead go over this in a way that even professors at UMDNJ and York can understand it:

Company X spends, let's say, $10 a year on research. (We're lopping off a lot of zeros to make this easier). It has no revenues from selling drugs yet, and is burning through its cash while it tries to get its first on onto the market. It succeeds, and the new drug will bring in $100 dollars a year for the first two or three years, before the competition catches up with some of the incremental me-toos that everyone will switch to for mysterious reasons that apparently have nothing to do with anything working better. But I digress; let's get back to the key point. That $100 a year figure assumes that the company spends $30 a year on marketing (advertising, promotion, patient awareness, brand-building, all that stuff). If the company does not spend all that time and effort, the new drug will only bring in $60 a year, but that's pure profit. (We're going to ignore all the other costs, assuming that they're the same between the two cases).

So the company can bring in $60 dollars a year by doing no promotion, or it can bring in $70 a year after accounting for the expenses of marketing. The company will, of course, choose the latter. "But," you're saying, "what if all that marketing expense doesn't raise sales from $60 up to $100 a year?" Ah, then you are doing it wrong. The whole point, the raison d'etre of the marketing department is to bring in more money than they are spending. Marketing deals with the profitable side of the business; their job is to maximize those profits. If they spend more than those extra profits, well, it's time to fire them, isn't it?

R&D, on the other hand, is not the profitable side of the business. Far from it. We are black holes of finance: huge sums of money spiral in beyond our event horizons, emitting piteous cries and futile streams of braking radiation, and are never seen again. The point is, these are totally different parts of the company, doing totally different things. Complaining that the marketing budget is bigger than the R&D budget is like complaining that a car's passenger compartment is bigger than its gas tank, or that a ship's sail is bigger than its rudder.

OK, I've spend about enough time on this for one morning; I feel like I need a shower. Let's get on to the part where Light and Lexchin recommend what we should all be doing instead:

What can be done to change the business model of the pharmaceutical industry to focus on more cost effective, safer medicines? The first step should be to stop approving so many new drugs of little therapeutic value. . .We should also fully fund the EMA and other regulatory agencies with public funds, rather than relying on industry generated user fees, to end industry’s capture of its regulator. Finally, we should consider new ways of rewarding innovation directly, such as through the large cash prizes envisioned in US Senate Bill 1137, rather than through the high prices generated by patent protection. The bill proposes the collection of several billion dollars a year from all federal and non-federal health reimbursement and insurance programmes, and a committee would award prizes in proportion to how well new drugs fulfilled unmet clinical needs and constituted real therapeutic gains. Without patents new drugs are immediately open to generic competition, lowering prices, while at the same time innovators are rewarded quickly to innovate again. This approach would save countries billions in healthcare costs and produce real gains in people’s health.

One problem I have with this is that the health insurance industry would probably object to having "several billion dollars a year" collected from it. And that "several" would not mean "two or three", for sure. But even if we extract that cash somehow - an extraction that would surely raise health insurance costs as it got passed along - we now find ourselves depending on a committee that will determine the worth of each new drug. Will these people determine that when the drug is approved, or will they need to wait a few years to see how it does in the real world? If the drug under- or overperforms, does the reward get adjusted accordingly? How, exactly, do we decide how much a diabetes drug is worth compared to one for multiple sclerosis, or TB? What about a drug that doesn't help many people, but helps them tremendously, versus a drug that's taken by a lot of people, but has only milder improvements for them? What if a drug is worth a lot more to people in one demographic versus another? And what happens as various advocacy groups lobby to get their diseases moved further up the list of important ones that deserve higher prizes and more incentives?

These will have to be some very, very wise and prudent people on this committee. You certainly wouldn't want anyone who's ever been involved with the drug industry on there, no indeed. And you wouldn't want any politicians - why, they might use that influential position to do who knows what. No, you'd want honest, intelligent, reliable people, who know a tremendous amount about medical care and pharmaceuticals, but have no financial or personal interests involved. I'm sure there are plenty of them out there, somewhere. And when we find them, why stop with drugs? Why not set up committees to determine the true worth of the other vital things that people in this country need each day - food, transportation, consumer goods? Surely this model can be extended; it all sounds so rational. I doubt if anything like it has ever been tried before, and it's certainly a lot better than the grubby business of deciding prices and values based on what people will pay for things (what do they know, anyway, compared to a panel of dispassionate experts?)

Enough. I should mention that when Prof. Light's earlier figure for drug expense came out that I had a brief correspondence with him, and I invited him to come to this site and try out his reasoning on people who develop drugs for a living. Communication seemed to dry up after that, I have to report. But that offer is still open. Reading his publications makes me think that he (and his co-authors) have never actually spoken with anyone who does this work or has any actual experience with it. Come on down, I say! We're real people, just like you. OK, we're more evil, fine. But otherwise. . .

Comments (74) + TrackBacks (0) | Category: "Me Too" Drugs | Business and Markets | Cancer | Drug Development | Drug Industry History | Drug Prices | The Central Nervous System | Why Everyone Loves Us

August 1, 2012

Cuts at Bristol-Myers Squibb

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Posted by Derek

I'm told that BMS is cutting scientific staff today in New Jersey as they refocus some of their therapeutic areas. More details as I get them (or in the comments below).

Update: there are cuts in the metabolic disease area. The company apparently feels that traditional diabetes drug discovery has become a challenging area, both because it's become increasingly well-served and because the regulatory/clinical path has become much more difficult in recent years. . .

Update #2: the company has now confirmed that it has eliminated "fewer than 100" positions, but is giving no further details. In lieu of those, it has chosen, like so many other organizations, to inform the world that it ". . .is strategically evolving the company’s Research focus to ensure the delivery of a sustainable, innovative drug pipeline in areas of serious unmet medical need and potential commercial growth," and that it "is aligning and building internal capabilities. . ." In case you were wondering.

Comments (38) + TrackBacks (0) | Category: Business and Markets

July 20, 2012

Does Anyone Want to Invest in Pharma?

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Posted by Derek

Does anyone want to put money into the pharma/biotech industry? Let's widen that question: does anyone want to put money into R&D-driven industries in general? That question, which on first glance seems ludicrous, becomes more worryingly believable the longer you think about it. Consider this exchange between Eric Schmidt of Google and Peter Thiel. Thiel makes a pretty provocative statement about what Google is doing with its money:

PETER THIEL: …Google is a great company. It has 30,000 people, or 20,000, whatever the number is. They have pretty safe jobs. On the other hand, Google also has 30, 40, 50 billion in cash. It has no idea how to invest that money in technology effectively. So, it prefers getting zero percent interest from Mr. Bernanke, effectively the cash sort of gets burned away over time through inflation, because there are no ideas that Google has how to spend money.

That apparently didn't get answered to the moderator's satisfaction, so it came up again:

ADAM LASHINSKY: You have $50 billion at Google, why don’t you spend it on doing more in tech, or are you out of ideas? And I think Google does more than most companies. You’re trying to do things with self-driving cars and supposedly with asteroid mining, although maybe that’s just part of the propaganda ministry. And you’re doing more than Microsoft, or Apple, or a lot of these other companies. Amazon is the only one, in my mind, of the big tech companies that’s actually reinvesting all its money, that has enough of a vision of the future that they’re actually able to reinvest all their profits.

ERIC SCHMIDT: They make less profit than Google does.

PETER THIEL: But, if we’re living in an accelerating technological world, and you have zero percent interest rates in the background, you should be able to invest all of your money in things that will return it many times over, and the fact that you’re out of ideas, maybe it’s a political problem, the government has outlawed things. But, it still is a problem.

ADAM LASHINSKY: I’m going to go to the audience very soon, but I want you to have the opportunity to address your quality of investments, Eric.

ERIC SCHMIDT: I think I’ll just let his statement stand.

ADAM LASHINSKY: You don’t want to address the cash horde that your company does not have the creativity to spend, to invest?

ERIC SCHMIDT: What you discover in running these companies is that there are limits that are not cash. There are limits of recruiting, limits of real estate, regulatory limits as Peter points out. There are many, many such limits. And anything that we can do to reduce those limits is a good idea.

PETER THIEL: But, then the intellectually honest thing to do would be to say that Google is no longer a technology company, that it’s basically ‑‑ it’s a search engine. The search technology was developed a decade ago. It’s a bet that there will be no one else who will come up with a better search technology. So, you invest in Google, because you’re betting against technological innovation in search. And it’s like a bank that generates enormous cash flows every year, but you can’t issue a dividend, because the day you take that $30 billion and send it back to people you’re admitting that you’re no longer a technology company. That’s why Microsoft can’t return its money. That’s why all these companies are building up hordes of cash, because they don’t know what to do with it, but they don’t want to admit they’re no longer tech companies. . .

I agree with Alex Tabarrok; this sort of thing is disturbing food for thought. As his point about the reveal preferences of technology leaders, some possible bright exceptions are people like Elon Musk, who seems quite serious about his space program (and good for him). And I very much hope that Google's Schmidt and others are serious about thing like their asteroid-mining venture, and that it's not just the "propanganda ministry".

Closer to home, I got to thinking that if there were any sort of robust returns to be earned in biotech or pharma, that Google, Microsoft et al. would have probably taken a spare billion or so and funded some ventures in these areas. But they haven't. Keep in mind, these folks have money well in excess of what they seem to need to continue investing in their own business. They're presumably looking for something to do with it all, and the point about not being able to return it to the shareholders is a valid one, because (rightly or not) that's seen as an admission that they don't have any particularly good new ideas. (Of course, the fact that they're letting the cash pile up might also be interpreted that way, but issuing a dividend really nails it down).

There are many similarities between this situation and the discussion/argument we had around here about pharma companies buying back their own stock. The likes of Apple can plausibly claim that hey, their business is going so well that they really don't have to spend all those revenues on running it; their current spend is plenty to keep the good times rolling. But what drug company can say that? Everyone in this business is on a frantic treadmill, thanks to patent expirations above all. You'd think that taking money that could be spent on R&D (yours or someone else's) and using it to prop up the share price would be an unaffordable luxury. I know, I know - a public company has obligations to its shareholders. But in this business, perhaps one of those obligations is to explain to your current (and potential) shareholders just what sort of business this is, and what it requires. In a better world, you might end up with a better-informed and more realistic group of people holding your stock.

Unless - and I can't rule this out - the belief is that a completely honest look at the way things are in this business would scare off too many people from investing in it at all. It seems to have scared off Big Tech, with their massive piles of fallow cash. It's not like they have to become experts to invest over here; expertise can be hired. What if they went to some of the existing investment groups over here and asked them what they would be able to do with a billion dollars? Are there even a billion dollars worth of ideas out there right now?

Comments (48) + TrackBacks (0) | Category: Business and Markets

July 19, 2012

Quick Links

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Posted by Derek

I'm pressed for time this morning, so I wanted to put up a quick link to Adam Feuerstein's thoughts on media embargoes of scientific results (and how they're becoming increasingly useless).

And I also wanted to note this odd bit of news: I'll bet you thought that fluorine, elemental gaseous fluorine, wasn't found in nature. Too reactive, right? But we're all wrong: it's found in tiny cavities in an unusually stinky mineral. And part (or all) of that smell is fluorine itself, which I'll bet that very few people have smelled in the lab. I hope not, anyway.

Comments (6) + TrackBacks (0) | Category: Business and Markets | Chemical News | The Scientific Literature

July 16, 2012

AstraZeneca Admits It Spent Too Much Money

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Posted by Derek

Looks like AstraZeneca's internal numbers agree with Matthew Herper's. The company was talking about its current R&D late last week, and this comment stands out:

Discovery head Mene Pangalos told reporters on Thursday that mistakes had been in the past by encouraging quantity over quality in early drug selection.

"If you looked at our output in terms of numbers of candidates entering the clinic, we were one of the most productive companies in the world, dollar for dollar. If you rated us by how many drugs we launched, we were one of the least successful," he said.

Yep, sending compounds to the clinic is easy - you just declare them to be Clinical Candidates, and the job is done. Getting them through the clinic, now, that's harder, because at that point you're encountering things that can't be rah-rah-ed. Viruses and bacteria, neurons and receptors and tumor cells, they don't care so much about your goals statement and your Corporate Commitment to Excellence. In the end, that's one of the things I like most about research: the real world has the last laugh.

The news aggregator Biospace has a particularly misleading headline on all this: "AstraZeneca Claims Neuroscience Shake-Up is Paying Off ; May Advance at Least 8 Drugs to Final Tests by 2015". I can't find anyone from AZ putting it in quite those terms, fortunately. That would be like saying that my decision, back in Boston, to cut costs by not filling my gas tank is paying off as I approach Philadelphia.

Comments (27) + TrackBacks (0) | Category: Business and Markets | Clinical Trials | Drug Development

July 9, 2012

Scientist Shortage? The Media Starts to Catch On.

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Posted by Derek

If you haven't seen it, there's an excellent article in the Washington Post by Brian Vastag on why the whole "America Faces Critical Shortage of Scientists!" thing is ridiculous. I hope it does some good - this idea gets repeated too often by people who have no idea of what they're talking about. Vastag hits a lot of important themes - layoffs in once-thriving sci/tech fields, the perverse incentives to churn out more PhDs and post-docs, and so on.

Chemjobber has good commentary on the article here, as does David Kroll. It's good to see a major media outlet pick up on what people in the field have been saying for some time, and going against the lazy America-falls-behind-in-science-race take.

Comments (97) + TrackBacks (0) | Category: Business and Markets

July 3, 2012

The GlaxoSmithKline Settlement

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Posted by Derek

You'll have heard that GlaxoSmithKline has paid out three billion dollars in a settlement on illegal marketing practices, misreporting of safety data, and other violations. Needless to say, GSK does not have a spare three billion lying around that's not being used for anything; they'd be a lot better off if they hadn't put themselves in this position.

What's hard to figure, though, is how much money the company made through these actions. There's a lot of talk, understandably, about how drug companies (and their executives) could be warned off such behavior, but if GSK realized, say, an extra $4 billion in the process of incurring their $3 billion dollar fine, it's going to be hard to make the case to some of those people. The settlement actually appears to be a bit less than some investors were expecting, and there may, in the end, be no way to have the magnitude of the potential fines do all the work of a deterrent.

Matthew Herper at Forbes notes that the company's current CEO, Andrew Witty, has issued an unusually forthright statement (by CEO standards) on the whole matter:

All of the actions predated the tenure of current GlaxoSmithKline chief executive Andrew Witty, who has been trying to improve the company’s reputation. He has pushed forward with efforts to develop medicines for poor nations, including a malaria vaccine that Glaxo is developing with the Bill & Melinda Gates Foundation. He has also taken steps to remove incentives that made pharma salespeople so overzealous, no longer tying compensation to how much of a drug they can sell. In a statement, he said that employees have been removed from positions as a result of the changes and that new provisions will allow the company to take back compensation from executives if they don’t adhere to the company’s standards.

Glaxo has done something else right, too: Witty actually managed, in the press release disclosing this settlement, something close to a full-throated apology. He said:

“Whilst these originate in a different era for the company, they cannot and will not be ignored. On behalf of GSK, I want to express our regret and reiterate that we have learnt from the mistakes that were made.”

That may not sound like much, but in the context of an industry that has almost never seen fit to apologize for anything it is a step in the right direction.

But I also wanted to mention by name two of the people who set this entire thing in motion. One of them is Blair Hamrick, and another is Greg Thorpe. These were GSK sales reps who grew concerned about illegal activity over ten years ago:

“Regardless of what company policy may be, my letters to human resources and my previous complaints of misconduct have been quashed. My 23-plus year career with this company has been trashed, and it is obvious I can no longer work with my district manager and friends/counterparts just because I have come forward with the truth, which could save the reputation of GSK and millions of dollars in fines,” wrote Thorpe, one of the whistleblowers on whose claims the feds based their allegations, in a January 2002 note to Glaxo officials. . .instead, though, Glaxo officials issued their own warnings to Thorpe about his willingness to be a team player and refused to address various violations of the False Claims Act, which he referred to specifically and repeatedly in numerous communications.

"Team player" is one of those phrases that should put a person on their guard. It can be used completely innocuously, but it can also be used to justify pretty much any behavior that the rest of a group is doing, and on no more basis than, well, the rest of the group is doing it. I reserve my admiration for those who need more justification than that for their actions.

There are some effects that I hope this GSK news will have: making someone think twice about getting caught when they're planning something that goes over the line, or (on the other side) shoring up the resolve of a person who's deciding not to go along with something that they've realized is wrong. The world tends to run short of both of those.

Comments (32) + TrackBacks (0) | Category: Business and Markets | Regulatory Affairs | The Dark Side

July 2, 2012

Starting a Chemical Business

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Posted by Derek

I wanted to highlight this latest post by Gaussling on starting a chemical business. (Here's an earlier one). In today's environment, I'm sure that this has crossed many people's minds, and this series has a lot of wisdom to offer on how to do it (and how not to). Not everything that looks like it should make money will do so:

The other big negative to selling proprietary reagents or processes is negotiating the terms and pricing. From the customers perspective, adopting your composition or process means that smack in the middle of their process train they have to manage a licensed technology with extra paper work and auditing. This is a big problem with catalysts. Many of the newer catalysts you see in the Aldrich or Strem catalogs are proprietary and must be used under a license agreement. Nothing stirs the creative juices like the desire to avoid paying royalities by finding white space in a patent or inventing a new process.

Having been involved in such license negotiations, I can say that you need to have a lawyer looking over your shoulder while you consider the terms and conditions. These agreements often entail upfront fees and a sliding scale of pricing based on usage. Some IP owners want a piece of your gross product sales resulting from the use of their technology. An annual audits may be expected as well. It’s like having raccoons in your picnic basket.

Indeed. I can tell you from my own experience, on the other side of the table, that few things will make your potential clients want to see your back more than asking for a percentage of the eventual profits. Fee-for-service is a lot easier to handle, but is of course less profitable.

And even then, pricing is tricky. Sometimes there's not much space in between "Who do these people think they are?" and "They're so cheap that there much be something wrong". My advice to anyone starting such a business is to be open to all sorts of different arrangements, to at least get your foot into as many doors as possible. Your potential clients will probably be a pretty variable bunch, and you'll need to be able to vary right along with them.

Comments (9) + TrackBacks (0) | Category: Business and Markets

June 28, 2012

Effects of the Health Care Law on Pharma

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Posted by Derek

Over at Forbes, Matthew Herper has some thoughts now that the major parts of the Affordable Care Act have been upheld. Among them is this on its effect on the pharma business:

Will the law actually benefit some drug companies? Many in the drug business have expressed regret about the decision to back the Affordable Care Act, even blaming former Pfizer chief Jeffrey Kindler, a Democrat, for having pushed a deal through. I think that some of this opposition is based on outdated thinking that says that even though the government already pays for a lion’s share of health care spending through Medicare and Medicaid, giving it even more control will eventually create price controls like in Europe.

This made sense when the industry made all of its money selling mass market pills such as Lipitor and Plavix, both now off-patent. But the model for many new cancer drugs (the biggest category in drug company pipelines) and for drugs for rare diseases is that the companies charge a price no individual can pay, and then try to get insurers and governments to pay for them. This is the basic strategy taken by companies like Alexion, Biomarin, and the Genzyme division of Sanofi, all of which charge hundreds of thousands of dollars per patient per year for there medicines. Getting more people insured is good for these companies. Right now Alexion and Biomarin are down, which makes little sense. Fundamentally, the success of the drug industry depends on inventing new medicines; at most, the law is neutral. . .

We'll see. I think that the high-price/low-patient-population strategy that Herper refers to will be up for revision at some point, and perhaps sooner than we expect. One of the selling points of the ACA/Obamacare was that it would (somehow) contain costs, and I still have a lot of trouble believing that it will do anything of the kind. If (when?) we find that we're still spending piles of money on health care, one of the more politically popular ways to cut costs (or at least look as if you're cutting costs) will be to go after therapies that cost six figures a year.

And this could get tricky, because any cancer drugs that are actually effective are likely to be so only for small populations (the people who have tumors that are driven by one treatable mutation, as opposed to a swarm of genomically unstable cells that can mutate their way out of attempts to shut them down). The more we learn about which drugs to give to which patients, the smaller the treatable population gets for any individual drug, and the higher the price. These lines have been heading for an intersection for some time now, and I don't see how the health care law will keep things from getting messy.

Comments (25) + TrackBacks (0) | Category: Business and Markets | Cancer | Regulatory Affairs

June 26, 2012

Roche Closes Nutley, Once Its US R&D Home

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Posted by Derek

Big news, and unfortunate news for the New Jersey end of the pharma business: Roche is closing down their entire site in Nutley. That's a loss of 1000 jobs, and an end to a research site that's been going since the 1930s and which was once a huge presence in the R&D world. The research is going to be picked up by Roche sites in Germany and Switzerland. The company says that it's going to open a smaller translational research center, though:

A location is being identified on the East Coast to focus on translational clinical research to support Roche US-based clinical trials and early development programs, support and maintain Roche interactions with the U.S. Food and Drug Administration (FDA), and enhance Roche's collaborations with US based partners, such as academic institutions and biotech companies. This new center is expected to host around 240 employees.

That sounds like a Boston/Cambridge deal to me, but we'll see. For now, we have a very large closing indeed.

Comments (54) + TrackBacks (0) | Category: Business and Markets

The Next Five Years in the Drug Industry

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Posted by Derek

Nature Reviews Drug Discovery has an article on the current state of drug development, looking at what's expected to be launched from 2012 to 2016. There's a lot of interesting information, but this is the sentence that brought me up short: "the global pipeline has stopped growing". The total number of known projects in the drug industry (preclinical to Phase III) now appears to have peaked in 2009, at just over 7700. It's now down to 7400, and the biggest declines are in the early stages, so the trend is going to continue for a while.

But before we all hit the panic button, it looks like this is a somewhat artificial decline, since it was based on an artificial peak. In 2006, the benchmark year for the 2007-2011 cohort of launched drugs, there were only about 6100 projects going. I'm not sure what led to the rise over the next three years after that, but we're still running higher. So while I can't say that it's healthy that the number of projects has been declining, we may be largely looking at some sort of artifact in the data. Worth keeping an eye on.

And the authors go on to say that this larger number of new projects, compared to the previous five-year period, should in fact lead to a slight rise in the number of new drugs approved, even if you assume that the success rates drop off a bit. They're guessing 30 to 35 launches per year, well above the post-2000 average. Peak sales for these new products, though, are probably not going to match the historical highs, so that needs to be taken into account.

More data: the coming cohort of new drugs is expected to be a bit more profitable, and a bit more heavily weighted towards small molecules rather than biologics. Two-thirds of the revenues from this coming group are expected to be from drugs that are already in some sort of partnership arrangement, and you'd have to think that this number will increase further for the later-blooming candidates. The go-it-alone blockbuster compound really does seem to be a relative rarity - the complexity and cost of large clinical trials, and the worldwide regulatory and marketing landscape have seen to that.

As for therapeutic area, oncology has the highest number of compounds in development (26% of them as of 2011). It's to the point that the authors wonder if there's an "oncology bubble" on the way, since there are between 2 and 3 compounds chasing each major oncology target. Personally, I think that these compounds are probably still varied enough to make places for themselves, considering the wildly heterogeneous nature of the market. But it's going to be a messy process, figuring out what compounds are useful for which cases.

So in the near term, overall, it looks like things are going to hold together. Past that five-year mark, though, predictions get fuzzier, and the ten-year situation is impossible to forecast at all. That, in fact, is going to be up to those of us doing early research. The shape we're in by that time will be determined, perhaps, by what we go out into the labs and do today. I have a tool compound to work up, to validate (I hope) an early assay, and another project to pay attention to this afternoon. 2022 is happening now.

Update: here are John LaMattina's thoughts on this analysis, asking about some things that may not have been taken into account.

Comments (16) + TrackBacks (0) | Category: Business and Markets | Drug Development

June 22, 2012

Merck's Madagascar Marketing Mess

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Posted by Derek

OK, it's time to haul the marketing guys back in again. Via Pharmalot, I see that Merck, in its capacity now as Merck Schering-Plough, is promoting Claritin via a tie-in with the kid's movie "Madagascar 3". That is certainly the first time I've ever heard of a drug company co-promoting with a children's movie (or, actually, any movie at all, although I've probably missed an example or two).

And if these reports are true, the promotion is rather extensive, in an eye-rolling cringe-inducing way:

". . .customized Madagascar 3 packaging for both types of Claritin; a “Free Movie Ticket Offer” promotion with a Claritin purchase at Walgreens; the Claritin Facebook page offers a free, downloadable Madagascar Inspired Circus Activity Guide and a Madagascar themed “Circus Stackers” game; eight activity guides for free download from Facebook, and product packaging that included “5 Free Stickers” of Madagascar characters.

Merck also initiated “Children’s Claritin Mom Crew” members to hold Madagascar-themed viewing parties. Mom Crew members are bloggers who have been selected by Merck to be product endorsers, the letter states. [The Public Health Advocacy Institute at Northeastern], in fact, says it ran a Google search using the terms “Claritin mom crew Madagascar.” Of the first 40 search results, 31 were unique accounts of Children’s Claritin Madagascar viewing parties held by Claritin Mom Crew members from across the country.

Well, I just did that same search, and believe me, it's no longer the case. The Pharmalot post is now the first search result, and most of the others are unfavorable publicity in the same vein. But there certainly are accounts from the (excuse me while I hold my nose) "Claritin Mom Crew" in the results, although I'm having a lot of trouble believing that these are real blog posts that emerged from spontaneous human action. This really smells like a planned campaign, with close attention paid to phrasing, linking, and other search engine optimization techniques. For one thing, I note that every mention of this thing is carefully capitalized, and there's even a standard Twitter hashtag.

But maybe my ideas of "spontaneous human action" need to be a bit broader. There's been a long-standing technique of spreading endorsements via compensated blog posts (money, coupons, discounts, affiliate percentages), and there are surely many here's-what-I-do-with-my-kids sites that exist partly (or wholly) to reap the benefits from all these promotions. I note that at least one of these blogs is now feeling the backlash from all the negative publicity in this case, and they're probably not alone. (Roll with it, I say - after all, think of all the extra traffic you're getting!)

But this whole promotion is a rotten idea, although I suppose that you'd have to be a marketing whiz for that not to at least cross your mind. How anyone could have planned it and launched it without realizing that this backfire reaction was exactly what would surely happen is beyond me. And sure, maybe they're going to sell some more children's Claritin, briefly. But how much more, compared to all the negative PR? Compared to headline after headline that makes Merck look like the sort of organization that has no problem using cartoon character tie-ins to sell histamine receptor antagonists to kids?

Hey, why not? After all, Merck - or at least their marketing department - clearly is the sort of organization that has no problem with that at all. Own it guys - stand up and be proud. I'm sure you can manage it.

Comments (54) + TrackBacks (0) | Category: Business and Markets | Why Everyone Loves Us

June 20, 2012

BS Your Way Partway to The Top

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Posted by Derek

If you're looking for the master list of business-speak cliches, look no further. That article has 89 of them, and if you can get to the end without shedding neurons from your frontal lobes, you're tougher than I am. (Note that the author of the piece recognizes this danger himself). It's a value-added, win-win paradigm shift, net-net, at the end of the day, sure to move the needle going forward. Dang. There go some of those neurons right now.

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June 14, 2012

Organic Synthesis: A Dead End For Graduate Students?

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Posted by Derek

Via ChemJobber, here's a quote from the National Research Council's Committee on Challenges in Chemistry Graduate Education. Their report has just come out, and I agree that this should be a key point for people to ponder:

Whitesides believes that the question should be asked whether PhD theses are narrow technical presentations for jobs that no longer exist. Should U.S. graduate students be doing organic synthesis if most organic synthesis is being done in China? “That’s not to say that these aren’t really important activities, but we need to connect our investment in graduate school with what’s actually needed to give jobs to students.”

It's worth remembering that Whitesides hasn't exactly been the biggest booster of traditional organic synthesis over the years, he does have a point. This may not be the right way to look at the situation, but if it hasn't crossed your mind, you haven't thought hard enough about the issues yet. I have a couple of quick responses:

1. There are all kinds of organic synthesis. I don't think that there's much point to the human-wave-attack style of making gigantic natural products, as I've said here several times. And if there's not much point to what's considered the highest level of total synthesis, then there must really not be much to the low levels of the field. Those are the papers I'd characterize as "Here's a molecule that no one much cares about, made in a way that you'd figure would probably work, using reactions everyone already knows". But there's more to the field than that; at least, there'd better be.

2. Prof. Whitesides is exaggerating to make a point. It's not like there's no organic synthesis being done in the U.S. A lot of the stuff that's moved to China (and India) is routine chemistry that's being outsourced because it's cheap (or has been cheap, anyway). As that changes, the costs go up, and we head towards a new equilibrium. It seems beyond doubt that there are fewer people doing industrial organic chemistry than there used to be in this country, but it's not like it's only found in China (or will be).

3. That said, he's absolutely right that people need to think about where the jobs are, lest chemistry (and some other sciences) go the way of some of the humanities graduate programs. If you go off and get a doctorate in English with a dissertation on minor 18th-century poets, you're mostly qualified to teach other people about minor 18th-century poets so they can go off and write dissertations of their own. (Actually, your own work would probably have concentrated on the relation of said poets to prevailing gender norms or something, in which case I really don't see the point). We do not want to teach people to do organic chemistry if the majority of them are going to have to seek jobs teaching other people to do organic chemistry.

4. Doing that - thinking about the larger economic and scientific context - is hard. The time it takes to get a degree means that the situation could well have changed by the time a person gets out of grad school, compared with the way things looked when they made the decision to go. But this has always been the case; that's life as we know it. People have to keep their eyes open and be intelligent and flexible, because there are potential dead ends everywhere. As hard as that advice is to follow, though, I still think it's better than any sort of scheme to allocate/ration people among different fields of study. My bias against central planning isn't just philosophical; I don't see how it can possibly work, and it is very, very likely to make the situation even worse.

I'm on the train, and can't download a 120-page PDF at the moment, but I'll have a look at the report and add more thoughts as they come up.

Comments (66) + TrackBacks (0) | Category: Business and Markets | Graduate School | Natural Products

June 11, 2012

China's Compulsory Licensing

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Posted by Derek

The Chinese government recently amended its intellectual property law to allow for compulsory licensing. Similar measures are on the books in many other companies, and it's allowed under international patent law (WIPO) in cases of emergency or threats to public health. India recently did this to Bayer's Nexavar. Thailand has used this provision more than once, and other countries (such as Brazil) have threatened it during negotiations with drug companies.

Pharmalot has more on the story, particularly with respect to Gilead and their dealings with the Chinese government over their HIV therapy Viread. As that piece says, China is particularly well suited (as is India) to follow through on such moves, since both countries have robust pharma manufacturing and generic drug business sectors.

I'm actually surprised that the Chinese government didn't have these provisions in place before, though. It's a useful negotiating tool, and I would expect them to avail themselves of everything available, since they are in such a good position to play hardball. Of course, they also have a huge amount of investment from multinational companies on the other side of such considerations - but they also have that huge market that the companies want access to. My guess is that last factor will, in the end, trump everything. There are many drugs, and many drug companies, but there's only one Chinese market. And the only way to that market is through China's one government, which means that companies (and not just drug companies) will continue to smile through gritted teeth and put up with pretty much anything.

Comments (11) + TrackBacks (0) | Category: Business and Markets | Patents and IP

Sunovion Layoffs?

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Posted by Derek

Unfortunately, I'm hearing talk of a big layoff at Sunovion (neé Sepracor). Anyone have any details? Their business has been in developing trouble for some time now. . .

Comments (9) + TrackBacks (0) | Category: Business and Markets

June 5, 2012

Merck Finds Its Phase II Candidates For Sale on the Internet

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Posted by Derek

Via Pharmalot, it appears that a former WuXi employee helped himself to samples of two Merck Phase II clinical candidates that were under evaluation. The samples were then offered for sale.

Here's a link to a Google Translate version of a Chinese news report. It looks like gram quantities were involved, along with NMR spectra, with the compounds being provided to a middleman. It's not clear who bought them from him, but the article gives the impression that someone did, was satisfied with the transaction, and wanted more. But in the meantime, Merck did pick up on an offer made by this middleman to sell one of the compounds online, and immediately went after him, which unraveled the whole scheme. (The machine translation is pretty rocky, but I did appreciate that an idiom came through: it mentions that having these valuable samples in an unlocked cabinet was like putting fish in front of a cat).

I would think that this kind of thing is just the nightmare that WuXi's management fears - and if it isn't, it should be. The cost advantage to doing business with them (and other offshore contract houses) is still real, but not as large as it used to be. Stories like this can close that price gap pretty quickly.

Comments (45) + TrackBacks (0) | Category: Business and Markets | Drug Development | The Dark Side

June 4, 2012

By Any Other Name

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Posted by Derek

Over at Xconomy, Luke Timmerman asks why any biopharma company would go to the trouble and expense of changing its name. There are several reasons (such as having chosen a lousy name to begin with), but he's right that most company names don't mean much before or after a change.

He also has a poll of some name changes, asking if they were upgrades or not. The first on his list is my nomination for the Worst Company Name: AbbVie, which is what Abbott decided to call its pharma business as it spins that out on its own. I just can't say enough bad things about that one -it's meaningless, for starters, and that double "b" looks like a misprint. The b/v consonant combination doesn't exactly roll off the tongue; the "Vie" is silly for a company not based in France (or at least selling something that's supposed to be French), and I've never been a fan of InterCapitalization. Other than that, I guess it's fine.

So here's a quick question: what's the biotech/pharma company out there with the worst name - well, other than AbbVie? Is there anyone who can beat them? Boring doesn't count. We're looking for actually harmful. Nominees?

Comments (66) + TrackBacks (0) | Category: Business and Markets | Drug Industry History

June 1, 2012

AstraZeneca "Braced For Change"

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Posted by Derek

Well, that's because things can't go on the way that they have been, as this Reuters piece makes clear:

For several years, AstraZeneca kept investors happy with a strategy of hefty dividend payments and share buybacks, but more recently key shareholders have grown restive about its failure to develop promising new medicines.

The group has suffered repeated drug development setbacks, stoking fears about its long-term prospects given a complete reliance on prescription medicines at a time when rivals have diversified.

I'm not so sure about how well their rivals have done with that diversification, if it even exists in many cases. AstraZeneca has discovered too few new drugs and spent far too much money doing so, and no amount of share buyback programs can help that. There are apparently two contradictory sets of recommendations: that AZ should aggressively buy someone, perhaps several companies, in an effort to make up for its own failures. But the other camp says that the company should shrink down to something viable, and thus make itself an attractive target for someone else to buy.

Both of those are, needless to say, business recommendations from Wall Street analysts. As such, they're answering the question "If I owned a lot of AstraZeneca stock, what would I want to the company to do to keep me from losing even more money?" (Never mind that the answer, in some of these cases, is "Don't own that stock; cut and run"). Another question, asked from a different perspective, is "What should use should be made of AstraZeneca's vast drug discovery and development resources? How can we make something different happen than what's been happening for the last ten years?" In other words, "How can this company discover more drugs?"

Those two viewpoints intersect if you believe that discovering more drugs would lead to a more profitable company. And that would follow, except for the nasty lead time of ten or twelve years. If someone at AZ waved a magic wand this afternoon and caused a host of future clinical successes to be made in the labs, and also magically caused their future development to go as smoothly as possible, then the company's bottom line would show the effects in. . .what, 2022 or so? Given that, the shorter-term Wall Street solutions will have a free hand. There isn't time for science to rescue this situation.

Comments (21) + TrackBacks (0) | Category: Business and Markets

May 30, 2012

Please Fund Them So They Can Fund Us

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Posted by Derek

ChemJobber catches a very odd situation, as reported in C&E News. An official at a large R&D organization testifies to Congress about the importance of research funding. No surprises, eh? But get this: it's a VP of Corporate Alliances at WuXi.

Although, actually, it makes perfect sense. The more research funding there is in the U.S., the more contracting work there might be for WuXi, to make those dollars stretch further. Sensible or not, though, it does look strange.

Comments (5) + TrackBacks (0) | Category: Business and Markets

May 29, 2012

GSK and Immune Response: Not Quite An Amicable Divorce

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Posted by Derek

Update: Immune Response Biopharma CEO David Buswell has left a detailed comment to this point, pointing out that it was his company that ended talks with GSK, and not the other way around. See here for the details.

GlaxoSmithKline has decided not to pursue further development of a potential vaccine therapy for multiple sclerosis, dumping former partner Immune Response BioPharma. We get that sort of headline all the time in this business - deals come, and deals go. What we don't get are press releases like these. The full unaltered text:

"Immune Response BioPharma, Inc. has the first MS Vaccine a first in class and best in class multiple sclerosis drug which restores deficient FOXP3+ T-Regs. GSK has no approved MS drug and probably will never have one they are busy wasting their shareholders money on HGSI and a Lupus drug with poor sales, we don't need them or to give away our blockbuster drug for MS to them which we believe will become treatment of choice" IRBP CEO Mr. Buswell

"IRBP values NeuroVax north of a billion dollar of annual sales once approved. We will find a solid partner or raise capital on our own, we don't need GSK which has zer0 experience in multiple sclerosis or auto-immune diseases. GSK is a joke and seems very ignorant on how multiple sclerosis drugs work and how to develop one, we gave them a chance to develop NeuroVax but their management appears to be very poor. We have decided to terminate any collaboration or development with GSK. GSK is a loser in the MS market and will continue to be a loser" IRBP CEO Mr. Buswell

Y'know, in his way, this CEO is a breath of fresh air. Everyone thinks these things in such situations, but not many people put them out on the PR wires. This release seems to have transcribed directly from Mr. Buswell's (no doubt heated) statements at the time, which I'm sure accounts for the take-a-breath grammar. I'll follow NeuroVax's progress with interest to see who has the last laugh this time. . .

Comments (47) + TrackBacks (0) | Category: Business and Markets | The Central Nervous System

May 22, 2012

The Counting of Beans

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Posted by Derek

This article from the Telegraph has nothing to say at all about the drug industry. But you might find it strangely familiar and appropriate, starting with the headline: Bloodless Bean Counters Rule Over Us:

You find this hollowing-out everywhere. In schools, the head who does not teach is now a familiar, indeed dominant figure. University vice-chancellors, instead of being dons who move from their subject into administration for a period of their lives, are now virtually lifelong managers, with hugely increased salaries to match. It is even commonplace for charities to be run by people with no commitment to the charity’s specific purpose, but proud possession of what they call the necessary “skill-sets”, such as corporate governance. . .

. . .These habits are now pervasive across industry and the public services. “Diversity” is always “celebrated”, but it never means diversity of thought. The people who tell you they are “passionate about” X or Y are usually the most bloodless ones in the outfit.

In such cultures, just as the experts, the professionals and the technicians bitterly resent the managerialists for neither understanding nor caring, so the managerialists secretly detest the professionals who, they believe, get in the way of their rationalisations. They are desperate to “let go” of such people. Very unhappy organisations result.

Or then again, perhaps you haven't encountered anything like this after a few years in the industry. What, after all, are the odds?

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

May 21, 2012

A Molecular Craigslist?

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Posted by Derek

Mat Todd at the University of Sydney (whose open-source drug discovery work on schistosomiasis I wrote about here) has an interesting chemical suggestion. His lab is also involved in antimalarial work (here's an update, for those interested, and I hope to post about this effort more specifically). He's wondering about whether there's room for a "Molecular Craigslist" for efforts like these:

Imagine there is a group somewhere with expertise in making these kinds of compounds, and who might want to make some analogs as part of a student project, in return for collaboration and co-authorship? What about a Uni lab which might be interested in making these compounds as part of an undergrad lab course?

Wouldn’t it be good if we could post the structure of a molecule somewhere and have people bid on providing it? i.e. anyone can bid – commercial suppliers, donators, students?

Is there anything like this? Well, databases like Zinc and Pubchem can help in identifying commercial suppliers and papers/patents where groups have made related compounds, but there’s no tendering process where people can post molecules they want. Science Exchange has, I think, commercial suppliers, but not a facility to allow people to donate (I may be wrong), or people to volunteer to make compounds (rather than be listed as generic suppliers. Presumably the same goes for eMolecules, and Molport?

Is there a niche here for a light client that permits the process I’m talking about? Paste your Smiles, post the molecule, specifying a purpose (optional), timeframe, amount, type of analytical data needed, and let the bidding commence?

The closest thing I can think of is Innocentive, which might be pretty close to what he's talking about. It's reasonably chemistry-focused as well. Any thoughts out there?

Comments (19) + TrackBacks (0) | Category: Academia (vs. Industry) | Business and Markets | Drug Development | Infectious Diseases

May 10, 2012

GSK Goes Hostile

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Posted by Derek

I mentioned the other day that Human Genome Sciences had turned down an offer from GSK, feeling that they could do better. Well, if they can, now's the time: GSK is now offering the same deal ($13/share) on the open market in a hostile takeover attempt. One of these companies is wrong about that price, and now I guess we'll find out which one of them it is. . .

Comments (6) + TrackBacks (0) | Category: Business and Markets

May 9, 2012

PhDs On Food Stamps?

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Posted by Derek

A number of people have sent me this article about the number of people with Master's and PhD degrees who are receiving food stamps. And while it's undeniable that the numbers have grown, I'd ask for everyone to keep their statistical glasses on. According to the chart at the end of the piece, the percentage of doctorate holders receiving assistance went from 0.05% in 2007 to 0.15% in 2010. (For MS/MA degree holders, it went from 0.5% to 1.3% over that same time).

So it can't be said that this is a widespread phenomenon. One would also want to see the numbers broken down by age cohort, and (especially) by field of study. The examples in the article are all history and English types. Also, if those figures are correct, the headline could have just as easily read "Master's Degree Holders Ten Times More Likely To Be On Food Stamps".

Honestly, the number I find most alarming in that chart is the total number of advanced degree holders. We went from 20 million in 2007 to 22 million in 2010 - two million more in only three years? The population of the country went from 301 million to 313 million during that time, so that's a pretty good crop of degree holders. Given what the economy has been like during that period, I'm surprised the food stamp figures aren't even higher.

Looking at advanced degrees as a percentage of the population, we have 4.3% in 1970, 7.2% in 1980, 8.8% in 1990, 8.6% in 2000 (a decrease I'm at a loss to explain), and 10.6% in 2009. Those figures don't quite add up with the ones in the food stamp article, but the trend certainly is in the same direction. We have figures in the growth in bachelor's degree or higher going back to 1940, and they show the relentless uptrend you'd expect.

So it shouldn't come as a surprise that well-educated people are participating more in some of the downsides that hit the rest of the population. Well-educated people are becoming more and more of the population.

Comments (20) + TrackBacks (0) | Category: Business and Markets | General Scientific News | Graduate School

May 4, 2012

Benlysta's Adventures In the Real World

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Posted by Derek

Benlysta got approved for lupus last year, as the first new drug in the field in decades. But as noted at the time, it didn't exactly blow the doors out at the FDA, nor in the clinic. Now it's having a rough time in Europe, which makes things interesting for both Human Genome Sciences and their partners at GlaxoSmithKline.

Both the British (NICE) and German (IQWiG) agencies responsible for assessing the cost/benefit of new drugs have recommended against Benlysta's use. This adds some drama to GSK's recent offer of $2.6 billion for HGSI, which the smaller company turned down out of hand. Their case for a higher bid seems to be based on the market potential of Benlysta, but the arguing has begun over how realistic those hopes are. This is the sort of issue that gets settled with a sales price - or perhaps, in this case, just an upper bound. . .

Comments (4) + TrackBacks (0) | Category: Business and Markets

GSK with AstraZeneca?

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Posted by Derek

Here's a Reuters headline for you: "GSK rejects idea of buying AstraZeneca".

In other news, Delta Airlines has rejected the idea of making its new fleet of long-range passenger jets out of bamboo and stale Fig Newton bars. There are also reports this morning that Burger King has rejected the idea of buying Birkenstock and cramming their sandals into buns in lieu of hamburger patties. More business news as it become available.

Comments (18) + TrackBacks (0) | Category: Business and Markets

May 3, 2012

The Biotech Class of the Early 90s

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Posted by Derek

Here's an excellent piece by venture capital guy Bruce Booth, looking back at the heady days of 1991-1994. I can tell you that they weren't so heady in Big Pharma, but there were a lot of startups coming along. Included are some really big names of today, but also a lot of outfits that no one even remembers any more. And how have investors fared? That depends:

Only a subset of the 1991-1994 IPO window have accrued real value over time. There were certainly a few big winners in there – Gilead probably being the biggest, up over 100x since its IPO in 1992. MedImmune also fared quite well with its $16B acquisition (though AZ is not thrilled about it now), and Vertex is up 10x.

But let’s take the prior two examples, Isis and Amylin, which represent “successful” 20-year old mid-cap biotechs. Both have gone from preclinical stage companies around their IPOs to having products launched or filed with the FDA. But they haven’t really created any shareholder value over 20 years. Isis today trades at $8 per share, but it went public at $10 per share. Amylin went out at $14, but closed on the end of its first day of trading in 1992 at $21 per share. It now trades at $25. So for 20 years, these companies (and many, many others in the 1991-1994 cohort) have underperformed not only all major equity indices, but also treasury bills, and consumed billions in equity capital. And recall that many more companies from this window, probably at least half, ended up dying long whimpering deaths like long-forgotten Autoimmune Inc and Alpha-Beta Technology.

And that's a big reason why you don't see so many big biotech/small pharma IPOs any more. The markets are a different place, twenty years on:

The current reality, shaped by a couple decades of lackluster performance, is that the public markets aren’t open for business in biotech. While they are much less tolerant of the value-destroying tactics of the past (which is a good thing), they have also set the bar so high as to discourage even great, innovative companies from considering it as a viable option. In this new world, the old company building models just don’t work: it’s hard to back a startup today with an investment thesis around “we’re building the next Gilead” – the capital markets are just so different.

Small companies have to act differently, raise money differently, and sell themselves differently these days. Stay private, do as much virtually/outsourced, sell out to Big Pharma earlier than before. . .it's worth another post or two to talk about some of those models, but the "Let's Have an IPO!" one isn't going to be on the list. Not for some time to come, anyway.

Comments (10) + TrackBacks (0) | Category: Business and Markets | Drug Industry History

April 30, 2012

AstraZeneca Shuffles the Top Cards

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Posted by Derek

So AstraZeneca's CEO is leaving. This wasn't necessary a voluntary move, but if it was, I don't blame him. I would have some serious thoughts about sticking around, too. (If reports of David Brennan's severance package have any truth in them, though, he'll have some time to figure out what to do next.)The company has major problems in its drug pipeline, has had major problems for a long time now, and no obvious fixes come to mind that won't take years of sustained effort.

Time for a reprise of this chart:
patent%20cliff.jpg


That's the revenue coming in from existing drugs, and there's not much that bids to replace it, either. Note, again, that Eli Lilly appears to be in a very similar fix. I would not expect things there to go smoothly over the next few years, either.

Comments (19) + TrackBacks (0) | Category: Business and Markets

April 25, 2012

Merck Serono Cuts Back

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Posted by Derek

In Geneva, the (former) headquarters of Serono. They're transferring some of the jobs, but at least 500 are gone - and the people holding them are being put out into what (from here) looks like a very unfriendly jobs market. . .

Comments (1) + TrackBacks (0) | Category: Business and Markets

April 24, 2012

AstraZeneca Buys Ardea. And Who Else?

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Posted by Derek

Since I've mentioned Ardea Pharmaceuticals and their gout drug RDEA594 (lesinurad) here a couple of times, I should note that AstraZeneca has decided to put up over a billion dollars to buy the entire company.

It's not surprising to see AZ getting the wallet out, considering the company's overall problems, which are also, naturally, the source of all the relentless cutbacks they've been announcing. I will not, however, endorse the following statement from the company's head of R&D:

"We’re building some momentum here in R&D,” Martin Mackay, head of research and development, said in a telephone interview today. “I would be disappointed if we didn’t announce further deals by the end of this year. We’ve taken our hits but we’re turning a corner.”

Comments (13) + TrackBacks (0) | Category: Business and Markets

April 13, 2012

More on the Federation of Independent Scientists: Journal Access

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Posted by Derek

Update: just to make things clear, this is only one aspect of the whole problem, but perhaps an easier one to tackle. More on the rest of the proposals to come!

Yesterday's post brought in a lot of welcome comment, and I want to follow up on the ideas in it. The first problem I wanted to tackle was journal access for entrepreneurs, the recently unemployed, and small shops. Here are some of the comments from the first post, consolidated:

A better bet would be to negotiate a group agreement with DeepDyve. "You can rent the article and view it at DeepDyve for 24 hours or more" for $1. The catch? No printing- you have to read it online (hence the renting not purchasing model).

Something like that might be necessary, because others pointed out that:

I like the idea of the journal access, HOWEVER, you'll pay handsomely for such access. It's no different than a large corp or large library. You have 300 people in your organization? You need to buy a group license.

And also:

OK, how you going to limit access? Is it just single, non-employed people who can get access? Perhaps you'd like to expand it to small companies? What size cut off? 10? 100? 500? Perhaps the mid-size biotechs should join up, and drop their own subscriptions. And maybe the smaller colleges?

And from "Mrs. McGreevy" herself, who kicked off the discussion:

Alternatively, if enough people think this is something the ACS should be doing, and start demanding it loudly and frequently, perhaps the ACS will get around to doing it. Maybe they don't know what to do, either. Cheaper access to ACS publications? That would be nice. Perhaps even negotiating group payment rates or even (*gasp*) subsidies for access to other publishers' papers? I wonder if that's even possible, but I'll bet the ACS hasn't even considered it up until now. Perhaps there wouldn't need to be an independent library if the ACS were willing to take on the job. We should ask them. (In fact, why stop at the ACS? Maybe the unemployed biologists would be willing to pony up some time, money and lobbying power as well.)

Another idea would be to subsidize journal access with website ads as well as membership dues. Perhaps start a paid online directory of consultants or CROs, sort of the Ye Olde Yellowe Pages model. Perhaps there could be a small fee for posting an RFP or a project up for bid, sort of a classified ad business model to help clients, CROs and consultants find each other. Various small fees for various small services ==> money for subsidized journal access.

OK, those are the journal thoughts so far (other than a number of people who agree that it's a major problem, as do I!) Any more ideas on this aspect to add to the pile? I'd never heard of DeepDyve myself, and they sound interesting: anyone have any experience with them, and is there anyone else in that market niche? We'll put together some action points after this round of ideas. . .

Comments (25) + TrackBacks (0) | Category: Business and Markets | The Scientific Literature

AstraZeneca Cuts Again

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Posted by Derek

I have word today that AstraZeneca has told the scientists at Reims that the French site will be closed by the end of the year, with oncology being "consolidated" in Alderley Park and the Boston area.

It's a good guess, given the patent situation the company's facing and the pipeline it has to deal with it, that this won't be the last announcement of its kind. . .

Comments (13) + TrackBacks (0) | Category: Business and Markets

April 12, 2012

A Federation of Independent Researchers?

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Posted by Derek

I've had an interesting e-mail from a reader who wants to be signed as "Mrs. McGreevy", and it's comprehensive enough that I'm going to reproduce it in full below.

As everyone but the editorial board of C&E News has noticed, jobs in chemistry are few and far between right now. I found your post on virtual biotechs inspiring, but it doesn't look like anyone has found a good solution for how to support these small firefly businesses until they find their wings, so to speak. Lots of editorials, lots of meetings, lots of rueful headshaking, no real road map forward for unemployed scientists.

I haven't seen this proposed anywhere else, so I'm asking you and your readership if this idea would fly:

What about a voluntary association of independent research scientists?

I'm thinking about charging a small membership fee (for non-profit administration and hard costs) and using group buying power for the practical real-world support a virtual biotech would need:

1. Group rates on health and life insurance.

How many would-be entrepreneurs are stuck in a job they hate because of the the health care plan, or even worse, are unemployed or underemployed and uninsurable, quietly draining their savings accounts and praying no one gets really sick? I have no idea how this would work across state lines, or if it is even possible,but would it hurt to find out? Is anyone else looking?

2. Group rates on access to journals and library services.

This is something I do know a bit about. My M.S. is in library science, and I worked in the Chemistry Library in a large research institution for years during grad school. What if there were one centralized virtual library to which unaffiliated researchers across the country could log in for ejournal access? What if one place could buy and house the print media that start-ups would need to access every so often, and provide a librarian to look things up-- it's not like everyone needs their own print copy of the Canada & US Drug Development Industry & Outsourcing Guide 2012 at $150 a pop. (But if 350 people paid $1 a year for a $350/yr online subscription . . . )

Yes, some of you could go to university libraries and look these things up and print off articles to read at home, but some of you can't. You're probably violating some sort of terms of service agreement the library and publisher worked out anyway. It's not like anyone is likely to bust you unless you print out stacks and stacks of papers, but still. It's one more hassle for a small company to deal with, and everyone will have to re-invent the wheel and waste time and energy negotiating access on their own.

3. How about an online community for support and networking-- places for blogs, reviews, questions, answers, exchanges of best practices, or even just encouragement for that gut-wrenching feeling of going out on your own as a new entrepreneur?

4. What sort of support for grantwriting is out there? Is there a hole that needs to be filled?

5. How about a place to advertise your consulting services or CRO, or even bid for a contract? Virtual RFP posting?

6. Would group buying power help negotiate rates with CROs? How about rates for HTS libraries, for those of you who haven't given up on it completely?

Is there a need for this sort of thing? Would anyone use it if it were available? How much would an unaffiliated researcher be willing to pay for the services? Does anyone out there have an idea of what sort of costs are involved, and what sort of critical mass it would take to achieve the group buying power needed to make this possible?

I'd be happy to spark a discussion on what a virtual biotech company needs besides a spare bedroom and a broadband connection, even if the consensus opinion is that the OP an ill-informed twit with an idea that will never fly. What do you need to get a virtual biotech started? How do we make it happen? There are thousands of unemployed lab scientists, and I refuse to believe that the only guy making a living these days from a small independently-funded lab is Bryan Cranston.

A very worthy topic indeed, and one whose time looks to have come. Thoughts on how to make such a thing happen?

Comments (59) + TrackBacks (0) | Category: Business and Markets | Drug Development | General Scientific News | The Scientific Literature

April 2, 2012

"Taking the Ax to the Scientists Is Probably a Mistake"

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Posted by Derek

So says Matthew Herper in Forbes, and I'm certainly not going to argue with him. His point is what he calls lack of appreciation for the human capital in drug discovery:

An ideal drug company would follow all sorts of crazy ideas in early research, with the goal of selecting those where there was a high probability of believing they would actually prove effective in clinical development. It would bulk up on scientists, and try to limit the number of large clinical trials it conducted to those where some kind of test — blood levels of some protein, perhaps — led researchers to think they had a high probability of success. (Novartis, the most successful company in terms of getting new drugs to market, has moved in this direction.) But the tendency of the shutdowns has been to shut laboratories, too. Look at Merck’s stance toward the old Organon labs or Pfizer’s decision to shut the Michigan labs where Lipitor was invented. Taking the ax to the scientists is probably a mistake.

There's always been a disconnect between the business end and the scientific end, but the stresses of the last few years have opened it up wider than ever. The business of making money from drug discovery has never been trickier (or more expensive), and the scientists themselves have never felt more threatened. I can see it in the comments here on this site, whenever the topic of layoffs or top-management incompetence comes up. There are a lot of hard feelings out there - and, really, given the way things have been going, why wouldn't there be?

But at the risk of collecting some thrown bricks myself, I see where the business people are coming from. Our current cost structures are unsustainable. And although I don't agree with the solution of laying everyone off, I don't know what I would do instead. For many companies, it would have been better to have started adjusting years ago, although there's hindsight bias to keep in mind when you think that way. Many companies did try to start adjusting years ago, only to be overwhelmed by even worse than they'd counted on. Then there are a few organizations that just look unfixable by any means anyone can think up.

But I think it's safe to say that relations between the two lobes of the drug R&D enterprise, the financial one and the scientific one, have probably never been worse. It's nothing that some success and hiring couldn't fix, but those are thin on the ground these days.

Comments (84) + TrackBacks (0) | Category: Business and Markets | Drug Industry History

March 30, 2012

Amylin on the Block

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Posted by Derek

So Amylin really seems to have turned down a multi-billion dollar offer from Bristol-Myers Squibb. Who's going to buy them, if not BMS? Here's FiercePharma with a roundup.

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March 29, 2012

Pfizer: Making the Case for a Breakup

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Posted by Derek

I would not like to count the number of times I've said bad things here about pharma mergers. The best of them, as far as I can see, have been not all that harmful, and the worst have been near-disasters. As the undisputed M&A kings of the industry over the last twenty years, I've been especially hard on Pfizer.

And now that great big financial wheel is turning. Huge mergers and acquisitions appear, finally, to be going out of favor. Since there are no longer reputations to be made, bold visions to be realized, and (don't forget) massive fees to be earned by implementing such moves, the latest word is: breaking up. Spinning off. Leaner, meaner, core businesses, unlocking value, more focus, back to what they do best . .you can write the Wall Street reports as well as I can. Goldman Sachs is out this week making the breathless case for Pfizer doing just this.

I suspect we're in for years of this sort of thing, with Abbott's spinoff of their pharma business now looks like the starter's pistol going off. (They named the new company AbbVie, which I hope they didn't pay someone too much to think up, the same time disappointing the legions of fans who wanted to see it named Costello). Get ready for a long cycle of devolution.

Comments (26) + TrackBacks (0) | Category: Business and Markets

March 27, 2012

Virtual Biotech, Like It or Not

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Posted by Derek

We've all been hearing for a while about "virtual biotechs". The term usually refers to a company with only a handful of employees and no real laboratory space of its own. All the work is contracted out. That means that what's left back at the tiny headquarters (which in a couple of cases is as small as one person's spare bedroom) is the IP. What else could it be? There's hardly any physical property at all. It's as pure a split as you can get between intellectual property (ideas, skills, actual patents) and everything else. Here's a 2010 look at the field in San Diego, and here's a more recent look from Xconomy. (I last wrote about the topic here).

Obviously, this gets easier to do earlier in the whole drug development process, where less money is involved. That said, there are difficulties at both ends. A large number of these stories seem to involve people who were at a larger company when it ran out of money, but still had some projects worth looking at. The rest of the cases seem to come out of academia. In other words, the ideas themselves (the key part of the whole business) were generated somewhere with more infrastructure and funding. Trying to get one of these off the ground otherwise would be a real bootstrapping problem.

And at the other end of the process, getting something all the way through the clinic like this also seems unlikely. The usual end point is licensing out to someone with more resources, as this piece from Xconomy makes clear:

In the meantime, one biotech model gaining traction is the single asset, infrastructure-lite, development model, which deploys modest amounts of capital to develop a single compound to an early clinical data package which can be partnered with pharma. The asset resides within an LLC, and following the license transaction, the LLC is wound down and distributes the upfront, milestone and royalty payments to the LLC members on a pro rata basis. The key to success in this model is choosing the appropriate asset/indication – one where it is possible to get to a clinical data package on limited capital. This approach excludes many molecules and indications often favored by biotech, and tends to drive towards clinical studies using biomarkers – directly in line with one of pharma’s favored strategies.

This is a much different model, of course, than the "We're going to have an IPO and become our own drug company!" one. But the chances of that happening have been dwindling over the years, and the current funding environment makes it harder than ever, Verastem aside. It's even a rough environment to get acquired in. So licensing is the more common path, and (as this FierceBiotech story says), that's bound to have an effect on the composition of the industry. People aren't holding on to assets for as long as they used to, and they're trying to get by with as little of their own money as they can. Will we end up with a "field of fireflies" model, with dozens, hundreds of tiny companies flickering on and off? What will the business look like after another ten years of this - better, or worse?

Comments (26) + TrackBacks (0) | Category: Business and Markets | Chemical News | Drug Development | Drug Industry History

March 21, 2012

Lilly Tries to Make It Up in China

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Posted by Derek

Eli Lilly is a drug company with a lot of problems - check out this chart for their patent expiration woes, which are probably the worst in the industry. But they're trying to make it up overseas, as this news shows:

CEO John Lechleiter wants Lilly to be the fastest-growing pharma company in China. To accomplish this goal, he will concentrate on diabetes and cancer over the next 5 years as the company introduces more than a dozen drugs to the market, according to a Bloomberg report.

The drugmaker has made major strides in China and has doubled its sales force there. Its efforts seem to have paid off: Sales in China grew 25% last year--that's faster than the industry average. And with diabetes rates rising there, Lilly might have an edge with its diabetes portfolio.

A lot of companies (and not just in the drug industry) are hoping for the Chinese market to save them, and in some cases, it'll happen. But since all our assets in pharma are wasting ones (patent expirations!), it doesn't do you much long-term good if you're not discovering new drugs quickly enough. Then again, "long term" has a different definition these days - "next couple of years" is probably about as good as any CEO in the business can hope for, and perhaps the China sales can cushion the blows a bit for Lilly. But I still think that it only moves them from "in hideous trouble" to "in very bad trouble".

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March 16, 2012

Merck's CALIBR Venture

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Posted by Derek

So the news is that Merck is now going to start its own nonprofit drug research institute in San Diego: CALIBR, the California Institute for Biomedical Research. It'll be run by Peter Schultz of Scripps, and they're planning to hire about 150 scientists (which is good news, anyway, since the biomedical employment picture out in the San Diego area has been grim).

Unlike the Centers for Therapeutic Innovation that Pfizer, a pharmaceutical company based in New York, has established in collaboration with specific academic medical centres around the country, Calibr will not be associated with any particular institution. (Schultz, however, will remain at Scripps.) Instead, academics from around the world can submit research proposals, which will then be reviewed by a scientific advisory board, says Kim. The institute itself will be overseen by a board of directors that includes venture capitalists. Calibr will not have a specific therapeutic focus.

Merck, meanwhile, will have the option of an exclusive licence on any proteins or small-molecule therapeutics to emerge. . .

They're putting up $90 million over the next 7 years, which isn't a huge amount. It's not clear if they have any other sources of funding - they say that they'll "access" such, but I have to wonder, since that would presumably complicate the IP for Merck. It's also not clear what they'll be working on out there; the press release is, well, a press release. The general thrust is translational research, a roomy category, and they'll be taking proposals from academic labs who would like to use their facilities and expertise.

So is this mainly a way for Merck to do more academic collaborations without the possible complications (for universities) of dealing directly with a drug company? Will it preferentially take on high-risk, high-reward projects? There's too little to go on yet. Worth watching with interest as it gets going - and if any readers find themselves interviewing there, please report back!

Comments (47) + TrackBacks (0) | Category: Academia (vs. Industry) | Business and Markets | Drug Development

March 13, 2012

Verastem's Chances

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Posted by Derek

Last fall, when Verastem announced their initial public offering, I wondered about how such an early-stage company (in such a speculative area) could plausibly offer stock. Now Nate Sadeghi-Nejad at TheStreet.com wonders the same thing:

Biotech companies with drugs in much later stages of clinical development find it difficult to go public today, yet here was Verastem, with nary a single patient exposed to any of its drugs, selling 5.5 million shares to the public at $10 per share.

Forty days later, the minimum time period allowed by law, sell-side analysts from all five of the investment banks which took Verastem public issued glowing reports with buy ratings and price targets 50% to 100% above the current share price.

Well, this sort of thing does happen. I mean, just because an investment bank makes money off an IPO doesn't mean that it isn't just a terrific place to put your money. Right? That's because they do lots of research on these things. Right? Well, as Sadeghi shows, that research assigned a Probability of Success of 30% to Verastem's plan of finding cancer-stem-cell specific therapeutics. This in an environment where the clinical failure rate is worse than 90%, and these guys haven't even been to the clinic yet. Their lead compound is salinomycin, an ionophore antibiotic which has been shown in vitro to target tumor stem cells.

Now, that's a perfectly respectable high-risk project to take on, because it has a lot of potential to go along with the risk. But a thirty per cent chance of success? There is no preclinical oncology program in the world with a thirty per cent chance of success. That figure is laughable.

I don't wish bad fortune to Verastem - I hope that their compound works. And I don't wish bad things for their investors, although I hope that they're braced for some. We need new modes of action in cancer drugs; we need for things to work. But we also need to be honest with ourselves and with investors. Investment banks are not going to do that for you, though.

Comments (23) + TrackBacks (0) | Category: Business and Markets | Cancer

March 9, 2012

Coaching For Success. Sure.

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Posted by Derek

As some of you know, I'm guest-blogging at The Atlantic this week and next. I think the readership here would enjoy the post I have up today, which draws on some drug-industry experiences of mine. . .

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Bad Day at AstraZeneca

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Posted by Derek

Apparently today is the day at AstraZeneca in Waltham. I'm hearing bits and pieces, but it looks like a substantial number of the research chemists there are being let go. Anyone with details, please add them to the comments.

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Are the Numbers Improving?

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Posted by Derek

Here are the results of a salary and job satisfaction survey from Pharma Manufacturing. It's not a pretty picture, by any means, but it seems to have gotten a bit less nasty. That's downstream of R&D, where many readers of this blog reside, but it's worth a look.

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March 8, 2012

Eroom's Law

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Posted by Derek

There's another "Troubles of Drug Discovery" piece in Nature Reviews Drug Discovery, but it's a good one. It introduces the concept of "Eroom's Law", and if you haven't had your coffee yet (don't drink it, myself, actually), that's "Moore's Law" spelled backwards. It refers, as you'd fear, to processes that are getting steadily slower and more difficult with time. You know, like getting drugs to market seems to be.

Eroom's Law indicates that powerful forces have outweighed scientific, technical and managerial improvements over the past 60 years, and/or that some of the improvements have been less 'improving' than commonly thought. The more positive anyone is about the past several decades of progress, the more negative they should be about the strength of countervailing forces. If someone is optimistic about the prospects for R&D today, they presumably believe the countervailing forces — whatever they are — are starting to abate, or that there has been a sudden and unprecedented acceleration in scientific, technological or managerial progress that will soon become visible in new drug approvals.

Here's the ugly trend (dollars are inflation-adjusted:
R%26D%20trend.png

I particularly enjoyed, in a grim way, this part:

However, readers of much of what has been written about R&D productivity in the drug industry might be left with the impression that Eroom's Law can simply be reversed by strategies such as greater management attention to factors such as project costs and speed of implementation, by reorganizing R&D structures into smaller focused units in some cases or larger units with superior economies of scale in others, by outsourcing to lower-cost countries, by adjusting management metrics and introducing R&D 'performance scorecards', or by somehow making scientists more 'entrepreneurial'. In our view, these changes might help at the margins but it feels as though most are not addressing the core of the productivity problem.

In the original paper, each of those comma-separated phrases is referenced to the papers that have proposed them, which is being rather scrupulously cruel. But I don't blame the authors, and I don't really disagree with their analysis, either. As they go on to say, investors don't seem to disagree, either. The cost-cutting that we're seeing everywhere, particularly cutbacks in research (see all that Sanofi stuff the other day!) are the clearest indicator. People are acting as if the return on pharmaceutical R&D is insufficient compared to the cost of capital, and if you think differently, well, now's a heck of a time to clean up as a contrarian.

Now, the companies (and CEOS) involved in this generally talk about how they're going to turn things around, how cutting their own research will put things on a better footing, how doing external deals will more than make up for it, and so on. But it's getting increasingly hard to believe that. We are heading, at speed, for a world in which fewer and fewer useful medicines are discovered, while more and more people want them.

The authors have four factors that they highlight which have gotten us into this fix, and all four of them are worth discussing (although not all in one post!) The first is what they call the "Better Than the Beatles" effect. That's what we face as we continue to compete against our greatest hits of the past. Take generic Lipitor, as a recent example. It's cheap, and it certainly seems to do the job it's prescribed for (lowering LDL). Between it and the other generic statins, you're going to have a rocky uphill climb if you want to bring a new LDL-lowering therapy to market (which is why not many people are trying to do that).

I think that this is insufficiently appreciated outside of the drug business. Nothing goes away unless it's well and truly superseded. Aspirin is still with is. Ibuprofen still sells like crazy. Blood pressure medicines are, in many cases, cheap as dirt, and the later types are inexorably headed that way. Every single drug that we discover is headed that way; patents are wasting assets, even patents on biologics, although those have been wasting more slowly (with the pace set to pick up). As this paper points out, very few other industries have this problem, or to this degree. (Even the entertainment industry, whose past productions do form a back catalog, has the desire for novelty on its side). But we're in the position of someone trying to come up with a better comb.

More on their other reasons in the next posts - there are some particularly good topics in there, and I don't want to mix everything together. . .

Comments (45) + TrackBacks (0) | Category: Business and Markets | Drug Industry History | Drug Prices

March 2, 2012

A Response From Sanofi

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Posted by Derek

The large number of comments on yesterday's post on Sanofi CEO Chris Viehbacher's relentless candid interview included a response from someone at the company itself. At least, I have to assume that it is indeed Jack Cox, Senior Director of Public Affairs and Media Relations (as his LinkedIn profile has it), since the name and position match up, and the IP address of the comment resolves to Sanofi-US. I wanted to highlight his response - in the interest of fairness - and the responses to it, without having everything buried in the triple-digit comments thread to the previous post. Says Mr. Cox:

Anyone who has followed Chris in recent months will have heard some variation of these comments, but within the broader context that unfortunately didn't make it into the Q&A you reference.

Chris has consistently said that his vision for Sanofi's R&D organization is one of open collaboration, in which our own researchers increasingly partner with external teams. This is consistent with a comment you've included: "We're not going to get out of research. We believe we do things will in research but we want to work with more outside companies, startup biotechs, with universities."

In an interview with Luke Timmerman published by Xconomy in January Chris explained how this is working in practice:

"In Cambridge, you've got all those things. Being the No. 1 life sciences employer in Boston is great, but we didn't want to just do the same thing we did everywhere else, having everybody inside our walls. So we created this concept of a hub. There's a core, with a lot of competencies that a big organization can bring, but the idea of a hub is that we can manage the relationships we have with everybody from Dana-Farber Cancer Institute to Harvard to MIT to the Joslin Diabetes Center to some of the biotechs we work with. And we put our own oncology research team in Cambridge. There's a whole ecosystem in Boston, and we feel integrated and at the center of it."

Seeking external expertise, particularly when it concerns emerging technologies, contributes to the creativity and innovation we have within. The key to our approach, however, is that we don't want to simply be investors, but true partners. Again, consider the broader context as shared with Luke:

"The Warp Drive Bio project is interesting because it demonstrates where we want to go. It was very much on the basis of saying we want to work with (Harvard University chemical biologist) Greg Verdine. Someone like that isn't going to come work for Big Pharma, but we liked the science he was doing. We have a strong interest and expertise in natural products, and he had a genomics screening tool.

We will contribute expertise. I don't want to be a venture capitalist, or have a venture fund, like some other companies do. But I want to actually partner, where we bring some of what we know, and combine it with what Warp Drive has. The fact that we are trying to bring people from Sanofi into the collaboration, at such an early stage of research, is unusual. The single factor for success will be whether you can take a company like Warp Drive, with a handful of people, and make it work with an organization of 110,000 people without smothering it."

I believe your readers will agree that in this case the context really matters. Relying on one incomplete source doesn't do justice to the overall approach Chris has been describing.

If you want to truly understand the vision Chris has for Sanofi's research organization, I invite you to catch one of his public speaking engagements in the Boston area.

Kind Regards,

Jack Cox
Sanofi US

One has to wonder if the main difference between the two interviews was that Viehbacher spent more time considering his replies to Xconomy. I take it that since there's been no attempt to deny the earlier quotes in MedCityNews, that they're authentic. And the problem is, even some of his less popular statements in that interview are not false. It really is harder to innovate in a big company compared to a smaller one, for example. But while not false, they're also not the sort of thing one would expect the CEO of a major drug company to just blurt out, either, especially considering the likely effects of such statements on his own company's morale. I believe, in fact, that some current and (recently) ex-Sanofi employees have comments to make on that issue.

Comments (64) + TrackBacks (0) | Category: Business and Markets | Life in the Drug Labs