Want to start a fight? Step one: Of­fer up an es­ti­mate for what it costs to de­vel­op a new drug

There’s no bet­ter way to get a de­bate un­der­way in bio­phar­ma than com­ing up with a hard es­ti­mate for what it costs to de­vel­op a new drug. In­dus­try crit­ics like Pub­lic Cit­i­zen have de­light­ed in call­ing out de­vel­op­ers for what they see as in­flat­ed num­bers. Tufts came up with the most fre­quent­ly cit­ed fig­ure: tot­ting up at $2.6 bil­lion. And FDA com­mis­sion­er Scott Got­tlieb even re­cent­ly cit­ed the high cost of drug de­vel­op­ment, ty­ing it to high prices when he laid out a plan to help speed up R&D in the US.

So this week it’s no sur­prise that a new study led by OHSU’s Vinay Prasad — which came up with a new num­ber: $648 mil­lion, or $757 mil­lion if you in­clud­ed the cost of cap­i­tal — has been spot­light­ed for days on Twit­ter as the de­bate rages on.

In com­ing up with this num­ber, Prasad and Sham Mailankody sin­gled out 10 com­pa­nies that had de­vel­oped one new can­cer drug to see how much it cost on av­er­age to win an ap­proval and what that ap­proval would be worth. While the cost ranged wild­ly be­tween the high and the low, $157 mil­lion to close to $2 bil­lion, the me­di­an of $648 mil­lion while af­ter a me­di­an 4 years of mar­ket­ing “to­tal rev­enue from sales of these 10 drugs since ap­proval was $67.0 bil­lion com­pared with to­tal R&D spend­ing of $7.2 bil­lion.”

Prasad’s bot­tom line:

In a short pe­ri­od, de­vel­op­ment cost is more than re­couped, and some com­pa­nies boast more than a 10-fold high­er rev­enue than R&D spend­ing—a sum not seen in oth­er sec­tors of the econ­o­my.

BIO’s Jim Green­wood, who’s been lead­ing an in­dus­try ef­fort to un­der­score the ex­tra­or­di­nary risks of drug R&D, quick­ly fired back, say­ing the study’s au­thors were try­ing to grind a fa­mil­iar ax with the in­dus­try. The num­bers don’t ac­count for the huge cost of fail­ures across the board — and in­clud­ed the big sums paid in ac­quir­ing two of the drugs as part of the re­ward — sin­gling out com­pa­nies that had won an ap­proval. And when you nar­row it down to the nov­el ther­a­pies that were ap­proved, the hard cost was $900 mil­lion — which they didn’t see as all that far from the $1.4 bil­lion in hard costs cit­ed by Tufts.

Not­ed Green­wood:

This in­dus­try, un­like any oth­er in­dus­try, has tremen­dous un­cer­tain­ty sur­round­ing fu­ture re­ward from on­go­ing R&D. Fail­ures are the norm in biotech. Due to this sim­ple fact, in­vestors will not in­vest in R&D com­pa­nies if there is no com­pen­sat­ing up­side for the few wins achieved across their port­fo­lio.

Per­haps Scott Got­tlieb said it best this week when he looked over the es­ti­mates and said that it wasn’t un­usu­al to spend more than a bil­lion dol­lars on drug de­vel­op­ment.

So we can all (most­ly) agree that the risks are daunt­ing — even in on­col­o­gy, where the FDA has been mak­ing big strides in speed­ing ap­provals — costs are at the least rel­a­tive­ly high and re­wards can be spec­tac­u­lar, pres­sur­ing pay­ers of all stripes.

We can al­so agree that this is one de­bate that will sim­mer on for some time to come.


Im­age: Vinay Prasad The Wash­ing­ton Post

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.

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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.

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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.

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:

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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.

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.

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.

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.

Eye­ing a $500M peak sales pot, Almi­rall dou­bles down on le­brik­izum­ab as Der­mi­ra lines up PhI­II

With eyes on what it be­lieves is a $500 mil­lion peak rev­enue op­por­tu­ni­ty in Eu­rope, Barcelona-based Almi­rall has stepped up with $50 mil­lion in cash to take up the op­tion on Der­mi­ra’s IL-13 an­ti-in­flam­ma­to­ry drug le­brik­izum­ab just ahead of the start of Phase III. And there’s an­oth­er $30 mil­lion due as the late-stage pro­gram gets geared up.

That shouldn’t be long from now, as Der­mi­ra ex­pects to be­gin the late-stage tri­al work for atopic der­mati­tis be­fore the end of this year as it fol­lows a trail that ex­ecs in­sist leads to block­buster re­turns. Along the way, they’ll need to take on the 600-pound go­ril­la in atopic der­mati­tis: the IL-13/IL-4 drug Dupix­ent, from Re­gen­eron and Sanofi. Ri­vals al­so in­clude Leo Phar­ma, in its piv­otal with tralok­izum­ab, and Anap­tys­Bio in the hunt with a mid-stage pro­gram for etokimab, pre­vi­ous­ly re­ferred to as ANB020.