Buried
in a press
release (you have to download the press release from this link) dedicated to AZ’s progress on multiple fronts
is the most astounding piece of news to come out of big pharma in the last 50
years! AZ will take what is left of its
infectious diseases franchise (after the Entasis
spin-out) and create a separate business unit with its own profit and loss
sheet within AZ. This is very much the
way many large pharma companies handle their vaccine units. What this means in
practical terms is that the infectious diseases unit (now entirely clinical
development and marketing) can divest, spend money, license and purchase assets
as long as they can live within their budget as defined by sales of their
products. Those products right now are Merrem,
Zinforo and soon to be ceftazidime-avibactam (including royalties from North
American sales by Actavis). This is a
pretty good package with a great deal of upside. (What is bizarre is that this
income could have also supported the research that was just spun out as
Entasis. What was that all about)?
GSK
has a structure that is similar in that their centers of excellence in drug
discovery are self-contained units designed to take products through phase II
clinical development. These units have
all of the support functions within them to allow this to happen such that the
units are not dependent on the mother ship for these functions. But – they are
not separate business units. For certain
support activities (those that might be expensive) and to progress beyond phase
II, the corporate powers that be must approve and even take over. I have
criticized this in the past as being only a half-measure (see my book).
I am
totally excited by AZ’s plan since it is something I have pushed since my days
at Wyeth. This is something I have discussed in this blog
and in my book. It goes well beyond the
GSK structure and is a win-win approach.
It allows the company to keep its focus on other areas that appear to be
of higher priority for them (for reasons that continue to escape me). At the same time, the infectious disease
development group has the freedom to expand and contract as their own strategic
needs dictate. As long as the mother
ship leaves the infectious disease hands on the control stick, this should
allow us all to have a more clear path to the antibiotics we need while
allowing AZ to focus on its other businesses.
The
issue for the AZ Infection business unit will be how it will derive its support
functions. In particular, marketing will
be an issue. They will probably have to,
at least at first, rent AZ’s current sales force. On the other hand, as a totally separate
business unit, they should have the freedom to pick and choose contractors for
various critical activities such as manufacturing, formulation development,
toxicology, and even, eventually, sales.
My experience from the biotech side is that these are frequently done as
well and more cheaply by outside contractors as opposed to the stodgy and
conservative groups within big pharma.
Sometimes,
something really good can come out of a terrible situation. I hope for all of
our sakes that this is an example of such an outcome. After all of their contortions trying to rid
themselves of their excellent infectious disease research and development
group, AZ may have finally landed on the right solution.
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