Thursday, July 22, 2010

Why Avandia Threatens New Antibiotics

To continue on our theme of Avandia and antibiotics, I notice that the FDA has now put Avandia’s safety trial on hold while they sort out their own view of the risks and benefits of this study.  This all reminds me of a situation faced by Wyeth back in 2002.  At that time, Wyeth had just completed reviews of several therapeutic area, including an in depth review of anti-infectives including antibiotics.  While I initially thought that the entire idea to review anti-infectives was a way for management to find an excuse to cut the entire therapeutic area, I was later encouraged by the data we uncovered during our preparation for the review.  We were able to prove to ourselves, and, at least I thought, to management, that antibiotics were going to be an important part of Wyeth’s future in the pharmaceutical marketplace.  To come to that conclusion required months of work by 20 or so people including a consulting group digging through historical antibiotic sales data, determining the effect of generics on the antibiotic dollar volume marketplace (virtually nil), and examining our ability to overcome the scientific difficulties involved in discovering new antibiotics (e.g. tigecycline).  The result of that review was that we had certainly convinced ourselves that antibiotics was a worthwhile endeavor for a large pharmaceutical company like Wyeth.  And, the handshake I received from Wyeth’s CEO at the time, Bob Essner, led me to believe that he agreed with this conclusion.

But then, just 6 weeks after this big review, Wyeth was crushed by emerging data from the Women’s Health Initiative Study showing that Premarin, a $2B product for Wyeth, was associated with increased rates of cornonary disease, blood clotting and breast cancer in post-menopausal women.  These data were totally contrary to earlier studies and Wyeth’s entire marketing position for Premarin. Premarin sales and Wyeth stock values plummeted.  Of course, this followed on the heels of the fen-phen debacle where Wyeth ultimately paid $20B in legal fees and settlements over its diet drugs. 

Wyeth’s response?  What else?  Cut costs.  How?  Eliminate the infectious diseases therapeutic area. Almost 100 people were either fired or moved to other positions within the company.  A skeleton crew of 10 or so was left to support a couple of projects in clinical development.  The most important of those was tigecycline, which was finally launched in 2005 and is now selling almost $500 million per year.

J&J recently severely cut back on their antibiotics research effort after their failure to get ceftobiprole approved by either the FDA or the European regulators.  They are also in the midst of a severe manufacturing crisis affecting key generic products like Tyleonol.   This is also hitting their bottom line and their stock price.  Will antibiotics come back to J&J anytime soon?  I doubt it.

At GSK, Avandia was selling $3B per year in 2007.  Because of recurring safety concerns, sales are now hovering around $1.2B and falling.   GSK’s stock has fallen roughly 25% overall since the beginning of this year.  So, the Avandia scandal is not causing as big a hit on GSK’s bottom line as the Premarin results did for Wyeth.  But, given large pharma’s constant ambivalence towards antibiotics, there is always the possibility that GSK will react the same way as Wyeth and J&J.   While I believe that GSK has come to believe that the antibiotics marketplace is a reasonable one, I think that of all their therapeutic areas, antibiotics remains at high risk within this large behemoth company.  The same is probably true of other large pharma companies as well.

Avandia and the fate of products like Avandia threaten our access to new antibiotics because they cause large pharmaceutical companies to reconsider their priorities in terms of return on investment.  When these giants need to cut costs, public health considerations like the need for new antibiotics are frequently not their first consideration.  Nor should they be.  These companies exist to provide a return for their shareholders, not to provide for public health.  When these two needs intersect, both the company and public health benefit.  In the case of antibiotics, it seems that there is more likely to be a fork in the road than an intersection. 

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