GAO re­port tracks the growth of an $89B drug R&D sec­tor as bio­phar­ma sales soared

Just how much does phar­ma re­al­ly pay for drug re­search and de­vel­op­ment, how does that ac­tu­al­ly stack up as a per­cent­age of sales and who cov­ers the bill for ba­sic drug re­search?

The US Gov­ern­ment Ac­count­abil­i­ty Of­fice (GAO) took that task on and came up with some in­trigu­ing num­bers that say a lot about the size of the R&D in­dus­try and some key un­der­ly­ing trends be­hind the spend. One fig­ure demon­strat­ing how per­son­al health­care spend­ing grew from 7% in the ’90s to 12%, al­most dou­bling in the process, al­so un­der­scores why drug pric­ing has be­come a hot po­lit­i­cal is­sue that shows no sign of wan­ing.

While check­ing a va­ri­ety of sources, the GAO re­searchers ze­roed in heav­i­ly on the num­ber crunch­ing done by the Na­tion­al Sci­ence Foun­da­tion on the R&D spend­ing re­port­ed by US phar­ma com­pa­nies and the US-based R&D done by over­seas com­pa­nies. Be­tween 2008 and 2014, when it had a full set of num­bers to look at, the hard dol­lars spent jumped from $82 bil­lion to $89 bil­lion, a hike of 8.5%.

This all was oc­cur­ring while com­bined phar­ma and biotech sales soared from $534 bil­lion in 2006 to $775 bil­lion in 2016 — a 45% in­crease. But it’s al­so im­por­tant to note that the biotech R&D num­bers col­lect­ed by the GAO gy­rat­ed rad­i­cal­ly from one year to the next, un­der­scor­ing just how hard it is to track the spend by a wide range of small­er, of­ten pri­vate, com­pa­nies.

So how does the R&D spend re­late to ad­ver­tis­ing and pro­mo­tion, a sub­ject that phar­ma crit­ics in par­tic­u­lar like to use to vex ex­ecs with? The re­port cites an es­ti­mate rang­ing from 11.5% to 14.2% for an av­er­age of 13% as the per­cent­age of sales re­served for R&D cost. Those fig­ures eas­i­ly dwarf the 7.6% spent on ad­ver­tis­ing tracked by Quin­tiles­IMS (now IQVIA), though the GAO notes that there are a va­ri­ety of fig­ures be­ing bat­ted around there.

There’s no ques­tion, says the GAO, that the NIH cov­ers the bulk of the tab for ba­sic re­search, with phar­ma clear­ly more in­ter­est­ed in de­vel­op­ment than pre­clin­i­cal work.

Bio­med­ical re­search took a def­i­nite hit in the pe­ri­od that the GAO cov­ered, with NIH fund­ing drop­ping 3.8%. The $26 bil­lion in re­al dol­lars spent in 2014 was a steep drop from the $32 bil­lion shelled out in 2010, un­der­scor­ing the rel­a­tive pauci­ty of fed­er­al cash that has stirred wide­spread calls to do bet­ter.

The NIH al­lo­cat­ed $13.6 bil­lion for ba­sic re­search in 2014, more than twice the $6.3 bil­lion re­port­ed by phar­ma com­pa­nies.

And as we’ve been track­ing, out­sourc­ing con­tin­ues to gain a grow­ing share of the R&D dol­lar. The gov­ern­ment re­port notes that while 25% of re­search was farmed out by phar­ma in 2008, that fig­ure grew to 35% in 2014.

Brent Saunders [Getty Photos]

UP­DAT­ED: Ab­b­Vie seals $63B deal to buy a trou­bled Al­ler­gan — spelling out $1B in R&D cuts

Brent Saunders has found his way out of the current fix he’s in at Allergan $AGN. He’s selling the company to AbbVie for $63 billion in the latest example of the hot M&A market in biopharma.

Endpoints News

Basic subscription required

Unlock this story instantly and join 53,500+ biopharma pros reading Endpoints daily — and it's free.

FDA re­jects Ac­er's rare dis­ease drug, asks for new tri­al — shares crater

Ac­er Ther­a­peu­tics’ bid to re­pur­pose celipro­lol — a be­ta-block­er on the mar­ket for hy­per­ten­sion — as a treat­ment for a rare, in­her­it­ed con­nec­tive tis­sue dis­or­der has hit a se­vere set­back. The New­ton, Mass­a­chu­setts-based com­pa­ny on Tues­day said the FDA re­ject­ed the drug and has asked for an­oth­er clin­i­cal tri­al.

The com­pa­ny’s shares $AC­ER cratered near­ly 77% to $4.47 in Tues­day morn­ing trad­ing.

Richard Gonzalez testifying in front of Senate Finance Committee, February 2019 [AP Images]

Ab­b­Vie's $63B buy­out spot­lights the re­turn of ma­jor M&A deals — de­spite the back­lash

Big time M&A is back. But for how long?

Over the past 18 months we’ve now seen three ma­jor buy­outs an­nounced: Take­da/Shire; Bris­tol-My­ers/Cel­gene and now Ab­b­Vie/Al­ler­gan. And with this lat­est deal it’s in­creas­ing­ly clear that the sharp fall from grace suf­fered by high-pro­file play­ers which have seen their share prices blast­ed has cre­at­ed an open­ing for the growth play­ers in big phar­ma to up their game — in sharp con­trast to the pop­u­lar bolt-on deals that have been dri­ving the growth strat­e­gy at No­var­tis, Mer­ck, Roche and oth­ers.

Endpoints News

Basic subscription required

Unlock this story instantly and join 53,500+ biopharma pros reading Endpoints daily — and it's free.

UP­DAT­ED: In sur­prise switch, Bris­tol-My­ers is sell­ing off block­buster Ote­zla, promis­ing to com­plete Cel­gene ac­qui­si­tion — just lat­er

Apart from revealing its checkpoint inhibitor Opdivo blew a big liver cancer study on Monday, Bristol-Myers Squibb said its plans to swallow Celgene will require the sale of blockbuster psoriasis treatment Otezla to keep the Federal Trade Commission (FTC) at bay.

The announcement — which has potentially delayed the completion of the takeover to early 2020 — irked investors, triggering the New York-based drugmaker’s shares to tumble Monday morning in premarket trading.

Celgene’s Otezla, approved in 2014 for psoriasis and psoriatic arthritis, is a rising star. It generated global sales of $1.6 billion last year, up from the nearly $1.3 billion in 2017. Apart from the partial overlap of Bristol-Myers injectable Orencia, the company’s rival oral TYK2 psoriasis drug is in late-stage development, after the firm posted encouraging mid-stage data on the drug, BMS-986165, last fall. With Monday’s decision, it appears Bristol-Myers is favoring its experimental drug, and discounting Otezla’s future.

The move blindsided some analysts. Credit Suisse’s Vamil Divan noted just days ago:

Endpoints News

Basic subscription required

Unlock this story instantly and join 53,500+ biopharma pros reading Endpoints daily — and it's free.

Novotech CEO Dr. John Moller

Novotech CRO Award­ed Frost & Sul­li­van Best Biotech CRO Asia-Pa­cif­ic 2019

Known in the in­dus­try as the Asia-Pa­cif­ic CRO, Novotech is now lead CRO ser­vices provider for the grow­ing num­ber of in­ter­na­tion­al biotechs se­lect­ing the re­gion for their stud­ies.

Re­flect­ing this Asia-Pa­cif­ic growth, Novotech staff num­bers are up 20% since De­cem­ber 2018 to 600 in-house clin­i­cal re­search peo­ple across a full range of ser­vices, across the re­gion.

Novotech’s ca­pa­bil­i­ties have been rec­og­nized by an­a­lysts like Frost & Sul­li­van, most re­cent­ly with the pres­ti­gious Asia-Pa­cif­ic CRO Biotech of the year award for best prac­tices in clin­i­cal re­search for biotechs for the fifth year. See oth­er awards here.

SQZ, Ery­tech kick off $57M cell ther­a­py part­ner­ship; Jean-Paul Kress lands new CEO gig at Mor­phoSys

→ In a mar­riage of two tech­nolo­gies meant to make cell ther­a­pies more pow­er­ful, SQZ Biotech is team­ing up with France’s Ery­tech Phar­ma for a col­lab­o­ra­tion, with $57 mil­lion re­served for the first project and $50 mil­lion for each sub­se­quent ap­proval (prod­uct or in­di­ca­tion). Hav­ing ac­cess to Ery­tech’s method of fash­ion­ing ther­a­peu­tics from red blood cells, the Cam­bridge, MA-based com­pa­ny said, will am­pli­fy SQZ’s cell en­gi­neer­ing ca­pa­bil­i­ties and al­low them to de­vleop a new class of im­munomod­u­la­to­ry ther­a­pies. Its own tech — so far ap­plied in can­cer but al­so has po­ten­tial in di­a­betes — tem­po­rary dis­rupts the cell mem­brane by squeez­ing the cell, thus cre­at­ing a brief win­dow for tar­get ma­te­ri­als such as anti­gens to en­ter.

Tasly Bio­phar­ma pitch­es long-await­ed IPO — will it trig­ger an­oth­er $1B gold rush on HKEX?

In the run up to the Hong Kong stock ex­change’s an­tic­i­pat­ed rule change — open­ing the door for Chi­nese pre-rev­enue biotechs to go pub­lic clos­er to home — more than a year ago, Tasly Bio­phar­ma was one of the big play­ers whose ru­mored in­ter­est helped stoke en­thu­si­asm for the new list­ing venue. The com­pa­ny has since kept the drum­roll rum­bling in the back­ground, rais­ing a pre-IPO round and con­vinc­ing part­ner Trans­gene to swap own­er­ship in a joint ven­ture for eq­ui­ty. Now the oth­er shoe has fi­nal­ly dropped as ex­ecs out­line plans for a pipeline dom­i­nat­ed by car­dio­vas­cu­lar drugs.

Suf­fer­ing No­var­tis part­ner Cona­tus grabs the ax and packs it in on NASH af­ter a se­ries of set­backs

The NASH par­ty is over at No­var­tis-backed Cona­tus. And this time they’re turn­ing off the lights.

More than 2 years af­ter No­var­tis sur­prised the biotech in­vest­ment com­mu­ni­ty with its $50 mil­lion up­front and promise of R&D sup­port to part­ner with the lit­tle biotech on NASH — ig­nit­ing a light­ning strike for the share price — Cona­tus $CNAT is back with the lat­est bit­ter tale to tell about em­ri­c­as­an, which once in­spired con­fi­dence at the phar­ma gi­ant.

With 4 more biotech IPOs due to wrap up Q2, how is the class of 2019 far­ing?

With 22 biotech IPOs on the books and four more set to price in the last week of June, in­vest­ment ad­vis­er Re­nais­sance Cap­i­tal has tak­en the pulse of the re­cent rush.

By the IPO ex­perts’ count, 25 out of 32 health­care of­fer­ings this year have been from biotechs — dif­fer­ing slight­ly from Brad Lon­car’s tal­ly — and the over­all pic­ture is one of un­der­per­for­mance. While they av­er­aged a first-day re­turn of 9.0%, col­lec­tive­ly they have trad­ed down to a 5.9% re­turn. Turn­ing Point $TP­TX and Cor­texyme $CRTX emerged on top at the half-year mark, ris­ing 135% and 109% re­spec­tive­ly.