Big Phar­ma’s busi­ness mod­el is bro­ken; New drug OKs plunged this year, high­light­ing an ug­ly re­al­i­ty

End­points as­sess­es the big bio­phar­ma R&D sto­ries of the week, with a lit­tle added com­men­tary on what they mean for the in­dus­try.

  Big Phar­ma’s busi­ness mod­el is bro­ken, so change it

When your ac­coun­tant tells you the busi­ness you’re run­ning is un­sus­tain­able, it’s a good idea to pay very, very close at­ten­tion to the de­tails. So it is with Big Phar­ma and drug de­vel­op­ment, a game which the largest play­ers in the in­dus­try have not mas­tered. De­loitte reck­ons that an al­ready bad ROI just got worse for the top 12 phar­ma com­pa­nies, and there are no signs that the num­bers are go­ing to get any bet­ter. So maybe it’s time that these big out­fits re­think how they’re run­ning R&D. What are they good at? Why in­vest heav­i­ly in ear­ly-stage re­search? Are they bet­ter at de­vel­op­ment? Aside from a few rare ex­cep­tions, there’s lit­tle ev­i­dence that any­one in this league has thought through the long-term con­se­quences of a lack of pro­duc­tiv­i­ty. It’s time to start, and come up with some­thing bold and new. The old busi­ness mod­el, where you con­tin­u­al­ly hike the price of ag­ing ther­a­peu­tics, won’t cut it go­ing for­ward.

  New drug OKs plunged this year, high­light­ing an ug­ly re­al­i­ty

Speak­ing of poor pro­duc­tiv­i­ty, we’re see­ing one of the worst years in the past decade for new drug OKs, a fact high­light­ed in John Jenk­ins’ lat­est — and last — an­nu­al re­view as head of the Of­fice of New Drugs. When a year goes by and some of your biggest de­vel­op­ers whiff on new drug ap­provals, it adds to the pres­sure for some kind of fun­da­men­tal change. The FDA in part blamed its will­ing­ness to beef up 2015 num­bers with ac­cel­er­at­ed ap­provals ahead of their 2016 PDU­FA dates, but log­ic would in­di­cate that you could make that up with some snap­py de­ci­sions at the end of 2016, and we’re not see­ing a whole lot of that. In­ter­est­ing­ly, no one can pin this short­fall on reg­u­la­tors, who have en­gi­neered a sea change in the way many drugs are re­viewed. When you re­move one pos­si­ble el­e­ment from an equa­tion, it’s eas­i­er to gain some clar­i­ty on where the prob­lem is. And at the risk of re­peat­ing my­self, that prob­lem has come home to roost.

  Sarep­ta sparked a pay­er re­volt, and the FDA needs to pay at­ten­tion

There’s fresh ev­i­dence this week that quite a few pay­ers will do every­thing pos­si­ble to avoid pay­ing for Sarep­ta’s Ex­ondys 51. And why should they cov­er an ex­per­i­men­tal drug that was giv­en an ac­cel­er­at­ed ap­proval based on the opin­ion of a sin­gle FDA ex­ec­u­tive? The FDA set the stage for a pay­er re­volt and it should think through how it plans to han­dle fu­ture cas­es — which are cer­tain to come along. I’m not op­posed to ac­cel­er­at­ed ap­provals based on lit­tle ev­i­dence when the pa­tient pop­u­la­tion faces a slow death and there are no ap­proved ther­a­pies. And there are good rea­sons for mak­ing Ex­ondys 51 avail­able. A spe­cial ap­proval cat­e­go­ry for com­pas­sion­ate use makes sense. But there’s no rea­son why com­pa­nies should be al­lowed to make mon­ey on those ap­provals. If you want to make mon­ey on drugs, you have to es­tab­lish the safe­ty/ben­e­fit pro­file first. End of sto­ry.

  Maybe the odds will ac­tu­al­ly fa­vor New York’s big gam­ble on biotech

I’ve seen state ini­tia­tives aimed at spark­ing a biotech rev­o­lu­tion come, and I’ve seen them go, usu­al­ly af­ter fail­ing woe­ful­ly at cre­at­ing any­thing like the num­ber of jobs that were promised. (Hel­lo Flori­da, Cal­i­for­nia and Texas.) This week, New York, state and city, came up with more than a bil­lion dol­lars worth of in­cen­tives to do the same thing. And maybe, just maybe, it’s dif­fer­ent this time. It’s im­por­tant to re­call that Mass­a­chu­setts saw the birth of a mas­sive biotech hub af­ter lo­cal gov­ern­ments had gained the rep for be­ing hos­tile to new busi­ness­es. When it added in­cen­tives to fos­ter the in­dus­try, the growth in life sci­ences was al­ready well en­trenched, for rea­sons that had noth­ing to do with gov­ern­ment plan­ning. The changes in at­ti­tude and pol­i­cy made a pos­i­tive, sig­nif­i­cant im­prove­ment, but they did not cre­ate Kendall Square. What I’m hop­ing is that the ba­sic el­e­ments need­ed to cre­ate a biotech re­nais­sance are al­ready in place in New York. The sci­ence is out­stand­ing. There’s space and grow­ing streams of ven­ture cash. And there’s plen­ty of tal­ent avail­able in the coun­try to helm a fleet of star­tups. So, fin­gers crossed. A ri­val hub is just what the US needs to keep the juices flow­ing.

  Biotech de­ja vu: That big R&D over­haul sto­ry isn’t go­ing away

R&D over­hauls are not a trend. They are a per­ma­nent con­di­tion, as Bris­tol-My­ers demon­strat­ed with its an­nounce­ment this week that it is rip­ping up its old struc­ture and cre­at­ing a new one. Jobs will end. Jobs will move. New jobs will be­come avail­able. And they’ll all be that much clos­er to the biggest hubs as the con­cen­tra­tion of R&D fire­pow­er con­tin­ues. I’ve been see­ing this move­ment play out for the past decade as Roche, Mer­ck, Pfiz­er and on and on all did the same thing. In some cas­es, com­pa­nies are in their sec­ond or third re­vamps. Job se­cu­ri­ty in R&D is over, un­for­tu­nate­ly. But it all makes biotech look all that much more ap­peal­ing. If you’re gam­bling every­thing on a project, it’s like­ly to be more fun and lu­cra­tive at a start­up. The tal­ent will con­tin­ue to head in­to biotech, and away from Big Bio­phar­ma. Where do you think that leads?

Part club, part guide, part land­lord: Arie Bellde­grun is blue­print­ing a string of be­spoke biotech com­plex­es in glob­al boom­towns — start­ing with Boston

The biotech industry is getting a landlord, unlike anything it’s ever known before.

Inspired by his recent experiences scrounging for space in Boston and the Bay Area, master biotech builder, investor, and global dealmaker Arie Belldegrun has organized a new venture to build a new, 250,000 square foot biopharma building in Boston’s Seaport district — home to Vertex and a number of up-and-coming biotech players.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

Novotech CRO Ex­pands Chi­na Team as Biotech De­mand for Clin­i­cal Tri­als In­creas­es up to 79%

An increase in demand of up to 79% for clinical trials in China has prompted Novotech the Asia-Pacific CRO to rapidly expand the China team, appointing expert local clinical executives to their Shanghai and Hong Kong offices. The company is planning to expand their team by 30% over the next quarter.

Novotech China has seen considerable demand recently which is borne out by research from GlobalData:
A global migration of clinical research is occurring from high-income countries to low and middle-income countries with emerging economies. Over the period 2017 to 2018, for example, the number of clinical trial sites opened by biotech companies in Asia-Pacific increased by 35% compared to 8% in the rest of the world, with growth as high as 79% in China.
Novotech CEO Dr John Moller said China offers the largest population in the world, rapid economic growth, and an increasing willingness by government to invest in research and development.
Novotech’s 23 years of experience working in the region means we are the ideal CRO partner for USA biotechs wanting to tap the research expertise and opportunities that China offers.
There are over 22,000 active investigators in Greater China, with about 5,000 investigators with experience on at least 3 studies (source GlobalData).

UP­DAT­ED: With loom­ing ‘apoc­a­lypse of drug re­sis­tance,’ Mer­ck’s com­bi­na­tion an­tibi­ot­ic scores FDA ap­proval on two fronts

Merck — one of the last large biopharmaceuticals companies in the beleaguered field of antibiotic drug development — on Wednesday said the FDA had sanctioned the approval of its combination antibacterial for the treatment of complicated urinary tract and intra-abdominal infections.

To curb the rise of drug-resistant bacteria and maintain the efficacy of the therapy, Recarbrio (and other antibacterials) — the drug must be used to treat or prevent infections that are proven or strongly suspected to be caused by susceptible gram-negative bacteria, Merck $MRK said.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

John McHutchison in 2012. Getty Images

The $1.1M good­bye: Gilead CSO John McHutchi­son is out as Daniel O’Day shakes up the se­nior team

Just a little more than a year after John McHutchison grabbed a promotion to become CSO at Gilead in the wake of Norbert Bischofberger’s exit, he’s out amid a shakeup of the senior team that is also triggering the departure of two other top execs.

Gilead stated that McHutchison “has decided to step down” from the job as of August 2nd. And their SEC filing notes that he’ll be getting a $1.1 million check to settle up on his contract.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

Thomas Gajewski, David Steinberg. (CRI, Pyxis)

Bay­er, Long­wood back star re­searcher's deep dive in­to the tu­mor mi­croen­vi­ron­ment for new I/O tar­gets

From PD-1 targeting to the RAS pathway to the STING complex, Thomas Gajewski has spent the past two decades of his career decoding the various ways the immune system can be unleashed to defend against cancer. So when the University of Chicago professor comes around to putting all his findings into a new platform for finding new targets, VCs and pharma groups alike pay attention.

“He’s been studying T cells for 20 years, plus he’s one of the world’s leaders if not the world leader in the space,” David Steinberg, partner at Longwood Fund, said. “Furthermore, let me add he did a lot of the foundational research and also some of the seminal clinical trials in the existing set of I/O agents. He understands the space really well, he understands the current strengths, and I think he understood really well what was missing, so he knew where to look.”

Kamala Harris speaking yesterday at the Des Moines Register Iowa Presidential Candidate Forum [via Getty]

Who’s the tough­est on drug prices? A game of po­lit­i­cal one-up­man­ship is dri­ving the pol­i­cy de­bate in Wash­ing­ton

Earlier this week we got a look at Senator Kamala Harris’ position on drug prices. She’s proposing that HHS take an average price from single-payer systems like the UK, Germany and Canada — which leverage market access for lower prices — and use that to set the US price. Anything drug companies collect above that would be taxed at a rate of 100%.

And the rhetoric is scathing:
While families struggle to make it to the end of the month, pharmaceutical companies are turning record profits. They’re spending nearly as much on advertising as R&D. They’re manipulating their market power to hike prices on lifesaving generic drugs. They’re making twice the profit of the average industry in America and still increased drug prices by 10.5% over the past six months alone. Meanwhile, they are charging dramatically higher prices to American consumers.
That’s an escalation on Joe Biden’s plan, which includes drug importation from those cheaper markets as well as allowing Medicare to negotiate prices — something that virtually all Dems agree on now.

SJ Lee [File photo]

Go­ing in­side cells, Sung Joo Lee has sketched some big goals for his small — but glob­al — team of drug hunters

For a small biotech based in South Korea with a research arm in Cambridge, MA, Orum Therapeutics has sketched out some big goals aimed at developing antibodies for intracellular targets. And now they have a new $30 million round to push the work forward, aiming at a slate of currently undruggable quests.

Orum has been working on a platform tech out of Ajou University that relies on endocytosis to smuggle antibodies and their cargo inside a cell. They’ve published work in Nature that illustrates its preclinical potential in RAS mutations, and KRAS is on their list of targets. 

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

Astel­las buys in­to Fre­quen­cy's re­gen­er­a­tive med strat­e­gy with a $625M al­liance on hear­ing loss

The executive team at Frequency Therapeutics never oversold the results of their maiden Phase I/II study for a new drug to rectify hearing loss. It was, they said back in April, primarily about safety and tolerability, where their drug FX-322 performed as they had hoped. 

That early glimpse of efficacy everyone searches for in their first try on humans? 

(I)mprovements in hearing function, including audiometry and word scores, were observed in multiple FX-322 treated patients.

We don’t know exactly what that means. But whatever the details, Astellas found enough in the data to jump in with a sizable collaboration deal.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

H1 analy­sis: The high-stakes ta­ble in the biotech deals casi­no is pay­ing out some record-set­ting win­nings

For years the big trend among dealmakers at the major players has been centered on ratcheting down upfront payments in favor of bigger milestones. Better known as biobucks for some. But with the top 15 companies competing for the kind of “transformative” pacts that can whip up some excitement on Wall Street, with some big biotechs like Regeneron now weighing in as well, cash is king at the high stakes table.

We asked Chris Dokomajilar, the head of DealForma, to crunch the numbers for us, looking over the top 20 deals for the past decade and breaking it all down into the top alliances already created in 2019. Gilead has clearly tipped the scales in terms of the coin of the bio-realm, with its record-setting $5 billion upfront to tie up to Galapagos’ entire pipeline.

Dokomajilar notes:

We’re going to need a ‘three comma club’ for the deals with over $1 billion in total upfront cash and equity. The $100 million-plus club is getting crowded at 164 deals in the last decade with new deals being added towards the top of the chart. 2019 already has 14 deals with at least $100 million in upfront cash and equity for a total year-to-date of over $9 billion. That beats last year’s $8 billion and sets a record.

Add upfronts and equity payments and you get $11.5 billion for the year, just shy of last year’s record-setting $11.8 billion.

Endpoints Premium

Premium subscription required

Unlock this article along with other benefits by subscribing to one of our paid plans.