Thursday, May 27, 2010
A young boy once asked his father, “Dad, how much does it cost to get married? His father replied, “I don't know son, I'm still paying.” This humorous exchange hit home relative to recent news articles concerning drug development investments in what some are calling the generics age. According to a recent report from IMS Health, patent expirations are setting the stage for a substantial increase in the availability of generic versions of drugs which will certainly result in a dip in R&D spending over the next few years. Although the report estimated that an emphasis on drug development investments in key chronic therapeutic areas may offset the trend, the report raises serious questions concerning innovation to support future growth of the pharmaceutical industry. Coincidently, data recently released by Thomson Reuters show biotech investments for clinical stage companies being substantially less than last year which could mean the end of several companies desperate for cash to fund their next key trial. Adding fuel to the fire was an analysis from biotech investment specialist Cynthia Roth-Robbins. A key point from her analysis involved the greater number of A-round investments in companies at the research stage versus more advanced clinical development programs. Considering that research-stage drugs will not achieve approval until the end of the decade if at all, a “perfect storm” scenario could develop and contribute to a significant gap in the availability of novel therapeutics.
Another important point from the Roth-Robbins analysis involved investors favoring companies with research / preclinical stage drugs over companies that are pursuing reduced risk strategies such as in-licensing approved drugs or reformulation / repositioning programs. While this may make sense from an investor perspective, i.e. potential bigger payoff from a cutting edge therapy versus an older drug with a perceived lower therapeutic and thus commercial value, the risk factor is something that should raise the eyebrows of both drug developers and their investors. Commentary from Jim Greenwood, President and CEO of the Biotechnology Industry Organization (BIO) during the group’s annual conference earlier this month provided a not so apparent focus point. Greenwood stated, "Investors are still willing to invest, but they want to see real results. They are looking for things that aren't just incremental improvements ... but real innovation." A key question from all of this is how do you achieve real innovation with lower risk and how much will it cost? An additional question, within the context of insurance reform is, who will and how much are they willing to pay for this innovation?
Consider the saga of the cancer vaccine Provenge from Dendreon. The controversy concerning the Provenge approval aside, many are now asking whether the treatment is worth the stated price of $93K. This price is considerably higher than anticipated. A news article in Xconomy summarized projections from analysts with a range of $40,000 to $75,000 per patient, with an average around $62,000. Dendreon spent about $1 billion developing the immunotherapy. Since Provenge will be covered by Medicare Part B, which reimburses the cost of any FDA-approved drug infusion or injection, taxpayers will foot much of the bill (for retirees). If Provenge were a pill, the drug would be covered by Medicare Part D’s new prescription drug coverage program, which makes patients pay at least part of the bill ($4,350 of the total treatment cost). This may explain why the price of Provenge was set higher than analysts expected. It seems that Dendreon’s commercial strategy included the assumption that most patients were Medicare recipients and not private insurance, and that the government’s own rules prevent Medicare from negotiating prices. So what if Provenge were a pill? Would the company have set a much lower price and if so, would it be worth the $1B invested?
While Provenge may not be the best analogy for drug development projects in terms of risk and value, it does bring up an important and yet over-looked facet of drug deals these days. A recent Ernst & Young report on the drug development investments should remind us that marketing approval is no longer the finish line for making a deal. Many deals now include the additional hurdle of reimbursement. Payers must be convinced of the therapeutic value of the drug requiring drug developers invest in pharmacoeconomic analysis. The outcome of this analysis can add a significant element of risk to a drug development program which again begs the question, who will and what we will they pay?
This question regarding who and how much will they pay, is relevant to not only investors and payers but to drug developers as well. Traditionally, investments are made based upon a novel technology that serves as the basis of a therapeutic to meet an unmet need in a key indication which has a clearly articulated development plan to support approval of the drug. However, as the attrition rates for development stage drugs increase, a more balanced approach to managing risk is warranted so that investors and drug developers are more likely to succeed in bringing a drug to market. It is quite possible and probable that the less risky drug achieves approval along with endorsement by payers for reimbursement. The company will also have a source of revenue to help pay bills while pursuing the more risky drug development program. Such an approach could comprise pursuing more than one indication for a single drug or utilizing the company development infrastructure to pursue a less risky development project alongside the lead, higher value program. Drug development companies that propose and achieve approval from investors to pursue high as well as low risk development programs stand a better chance to achieve success.
Provectus Pharmaceuticals is an example of a company pursuing two indications for its lead drug. The company is developing PV-10 (formulated for injection) for oncology indications as well as in topical formulation for several dermatological indications. PV-10 comprises Rose Bengal, a compound that has been in use for nearly thirty years by ophthalmologists to assess damage to the eye. Based upon the anti-proliferative / apoptotic activity of the drug, PV-10 selectively targets and destroys proliferating cancer cells without harm to surrounding healthy cells and tissue. For dermatology, the anti-proliferative effects of PV-10 appear to be efficacious for the treatment of psoriasis and related skin diseases.
Verva Pharmaceuticals has pursued a strategy of developing an old drug (VVP808 or methazolamide) as an insulin sensitizer with novel mode of action for the treatment of diabetes. Methazolamide was used to treat ocular hypertension associated with glaucoma. Verva has initiated clinical trial to validate research conducted at Australian-based Deakin University’s Metabolic Research Unit which developed and utilized a method for rapidly screening compounds with activity at key diabetes targets. The academic screening efforts identified methazolamide based upon an assay that validated the activity of the drug as an insulin sensitizer. As a follow on to the drug repositioning of methazolamide, Verva is also pursuing a higher risk program to identify next-generation molecules with similar characteristics to methazolamide.
Drug repositioning is a a common link between the development programs of Provectus and Verva via their efforts focused on old drugs that have established safety profiles and thus a higher probability of achieving approval for the pending indications. Such development programs represent great potential for the future prospects of the pharmaceutical industry, especially considering the aforementioned prediction of a drop in new drug approvals over the next five to ten years.
Dad, I heard that in some countries a man doesn't know his wife until he marries. His father replied, “that happens everywhere, son, everywhere!” In drug development, a company comes to really know the drug after the clinical program (aka, the marriage) has been consummated. Drug repositioning is one low-risk strategy that can be employed to better ensure that the marriage does not end in a costly divorce.
Robert Morrison, Ph.D. is Director, The Invotex Group, a specialty consulting firm that provides a range of financial and technical services to companies and academic institutions. Dr. Morrison’s practice focuses on issues associated with clinical development and intellectual property of pharmaceuticals and medical diagnostic applications.