Is Pharma’s Perfect Storm Biotech’s Greatest Opportunity?

Numerous folks within pharma lament the existing difficulties and recall to a gilded period when smash hits supplied rivers of capital and supported development based activities – both R&D and marketing. But, could this present biotech’s biggest chance as a market?

We are all too knowledgeable about how the economics for huge pharma have altered in the last couple of years. Elements consist of:

patent expirations (existing and impending).

decreasing R&D performance (as determined by more dollars for less authorized items).

health care payor pressures as federal governments look for spending plan cuts in all locations.

the scarceness of future smash hits in the pipeline.

Biotech has frequently been recommended as a savior with the tip that a concentrated research design based upon deep insights, instead of large swimming pools of area knowledge and serendipity, would result in higher R&D efficiency. After over 30 years of attempting, there does not appear to be any definitive proof that biotech’s research method has had any more success. Yet, there is still trigger for hope, though for factors owned by need and economics instead of simply science.

Biotech’s by their nature begin (and frequently stay) as little, active business needing to find a specific niche within a much higher community. Like any little organism or business, you make it through by being great at a concentrated area or establishing specific niche competence. You merely do not have the resources to take on the huge players.

Thinking about the target audience, regardless of the top-line appearance of smash hits, biotech’s typically targeted specific niche indicators. While these might be little and at first just have sales capacity in the numerous countless dollars, that can still make a huge distinction to a little company. The formula for huge pharma is much harder as they need brand-new drugs, for development or to change patent expirations, to produce higher sales to move the performance needle. But some drugs which start of in specific niche (and even orphan) indicators, gain approval and after that broaden their market chance through label extension. Some examples consist of:

Amgen’s erythropoietin stimulating representative, or ESA, franchise, consisting of Epogen (likewise called epoetin) and Aranesp. Epogen was at first authorized in 1989 for anemia in clients with end phase kidney illness, offering $100 million in 1989. By 1997, the American Society of Clinical Oncology (ASCO) and American Society of Hematology (ASH) were thinking about a “proof based medical practice standard on using epoetin in cancer clients”. Since Amgen had certified non-chronic kidney applications to J&J (established as Procrit), they even more capitalized on growing use of Epogen in cancer anemia by establishing Aranesp, authorized in 2001. By 2010, Epogen and Aranesp had integrated sales of around $5 billion, from Amgen 2010 10K SEC filing.

Other orphan drugs can wind up being priced so highly that even these can cause hit status ultimately. An example is Genzyme’s Gaucher’s illness franchise and Cerezyme which has more than $1 billion in sales (and in no little part owning Sanofi-Aventis acquisition of Genzyme this year for $20 billion).

Another example of development through label-extension use consists of Cephalon’s drug for sleep conditions, Modafinil or Provigil (brand name). This was initially authorized by the FDA in 1998 for enhanced wakefulness in clients with narcolepsy. In 2004, this label was broadened for approval to “enhance wakefulness in clients with extreme drowsiness (ES) related to obstructive sleep apnea/ hypopnea syndrome (OSAHS) and shift work conditions (SWD)”. Provigil sales were $25 million 1999, the year of launch, and had grown to $1.12 billion by 2010. Nuvigil, a single-isomer solution of Provigil, was authorized in 2009 and established to extend the sleep condition franchise. This had 2010 sales of $186 million. Provigil and Nuvigil made up around 46% of overall Cephalon sales by 2010 (information from Cephalon 2010 SEC 10-K filings). Provigil’s development through the company’s earlier history offered a substantial cash flow bedrock to allow additional pipeline advancement. Remarkably, Teva is getting Cephalon for $6.8 billion. When one thinks about contribution to sales, and how its assisted pipeline development, Provigil has played a huge part in supporting this deal.

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