The Death of Large PhRMA

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Two news items filtered out over the past several weeks that inspired me to write this blog.  I liked these stories since they agree with things I have been saying for the last several years.  Not only is the big pharma model no longer sustainable, but it is killing innovation and losing our invested money. 

IMS Health reported that US spending on pharmaceuticals rose an anemic 2.3% in 2010 – the second lowest annual increase in 55 years of data tracking. Major contributors to the slow growth rate included a lack of innovation with the meager supply of new drugs entering the market being unable to compensate for the large-selling drugs losing patent exclusivity and becoming generic. Other contributing factors included the economic recession and high unemployment causing some consumers to lose health insurance coverage.  Consumers turned to generics or simply chose to forgo medications altogether in many cases. Spending on generics rose over 27% while spending on branded drugs shrank by almost 1%. 

I spelled out the situation for antibiotics in a previous blog. The US antibiotic market has shrunk to only 25% of the global market. The Asia-Pacific countries (Japan excluded) now have greater antibiotic sales and market share than the US. This situation will only get worse with the FDA making development for the US market ever more difficult and expensive.

Around the same time as the IMS report became available, another report from Steve Burrill appeared.  I haven’t read the actual report – its even more expensive than my book!  But Burrill notes that the combined market cap of big pharma shrunk in the decade from 2000 to 2010 by around 50% or over $500 billion. This combined with the value of big pharma acquisitons of over $400 billion leads to a total loss of almost $1 trillion over the last decade. Big pharma is spending more and more on R&D and producing less and less.  Most of them have already abandoned R&D in antibiotics.  I am sure there is a good reason for people to invest in these companies – but I don’t know what it could be.

For antibiotics, and perhaps for other therapeutic areas, the next decade will be the era of the small company.  Companies like Forest, Cubist, Actelion and Shire will thrive.  Why?  Because they are small.  They are not weighed down with the large pharma bureaucracy, They have deep enough pockets that they can partner or even acquire biotech and therefore serve as the biotech exit driver of the future. They also have the opportunity to enter into more imaginative partnerships with biotech than most of their large pharma counterparts.  Finally, because they are small, their sales goals are also smaller.  Therefore, a company like Cubist can be thrilled with a drug with $200 million in peak year sales.  Such a compound would never even be considered by large pharma.  But if we want new antibiotics, especially ones active against the resistant strains we face today, companies need to think smaller.  They need to think about slower sales growth curves. But for small companies, this all makes good strategic and financial sense.

So – I say let Pfizer go to China.  They won’t be taking my money with them. 

Related articles

• Burrill: Pharma's M&A strategy has failed (fiercebiotech.com)

Nabriva announces positive results in a phase II ABSSSI trial

     Finally I have some good news to share.  On a personal note, I have been working with Nabriva since 2005, well before they were spun out of Novartis’ Sandoz in Vienna in January 2006.  I feel like their products are partly my children.  Nabriva recently announced the completion of their phase II clinical trial in acute bacterial skin and skin structure infections (ABSSSI, as the FDA now says).  This is the first such trial to be completed using the FDA designated guidelines as a template.  Their data, when fully made public, will allow a comparison of the proposed FDA early endpoints to ultimate clinical outcome for the first time.  (Hint – it might not be so straightforward).  If you can’t tell – I am very proud of their achievement.


BC-3781 is the first pleuromutilin antibiotic to be efficacious in humans.  Pleuromutilins were discovered around 1950 at Columbia University in New York.  A pleuromutilin was approved for use in animals around 1979.  In spite of many years of effort within many pharmaceutical c0mpanies, no one was able to identify a pleuromutilin that could be used systemically in humans prior to Nabriva’s program. This, by itself, is a remarkable achievement.  BC-3781 is, in fact, the second pleuromutilin Nabriva has studied in clinical trials. BC-3205 was studied in a number of phase I trials in an oral formulation, but BC-3781 was taken all the way through phase II trials.

In their Phase II trial, Nabriva studied seriously ill patients with a variety of skin infections.  Patients with abscesses were required to have a large area of cellulitis around the abscess and even so, such abscesses were limited to 30% of the study population. 50% of the study population had cellulitis with an average area of over 160 sq cm.  Those with wound infection were also required to have cellulitis. All patients had at least two signs of systemic infection (e.g. fever, raised level of white blood cells, C-reactive protein or lymphadenopathy).  60% of treated patients had a pathogen isolated and almost 70% of those were MRSA.

     Following the recent FDA guidance, the early clinical response was assessed using a composite endpoint (cessation of spread of erythema with a lack of fever) at day 3:

83% of patients achieving this endpoint with 150 mg BC-3781

86% of patients achieving this endpoint with 100mg BC-3781

80% of patients achieving this endpoint with Vancomycin

     The results show that both doses of BC-3781 were comparable to Vancomycin in terms of clinical response at the primary end point, test-of-cure:

90% of the patients (54/60) treated with 100mg of BC-3781,

89% of the patients (48/54) treated with 150mg of BC-3781,

92% of the patients (47/51) treated with 1000mg of Vancomycin.

     The safety profile of 3781 was excellent.  BC-3781 has a bacterial spectrum which would include a broad spectrum of respiratory pathogens including atypicals and Legionella.  Therefore, 3781 would make a good choice for empiric monotherapy for community-acquired respiratory infection as well as skin infections.  Nabriva has plans to pursue both indications in Phase III trials.

     So – I offer my congratulations to Nabriva and to those of us who desire new antibiotics for our arsenal against resistant infections.

Related articles

• Nabriva Reports Positive Results From Phase II Trial Of Pleuromutilin Antibiotic BC-3781 In ABSSSI (medicalnewstoday.com)

Public-Private Partnerships for Antibiotics - by Brad Spellberg

David, you’ve written extensively over the years about the egress of industry from antibacterial discovery, research, and development.  Economic incentives are needed to bring industry back into the R&D game, and hopefully meaningful incentives will be passed in a strengthened Generating Antibiotic Incentives Now (GAIN) Act.  Meantime, another concept needs to be acted on.  In IDSA’s recently released policy paper (http://cid.oxfordjournals.org/content/52/suppl_5), non-profit public-private partnerships (PPP) are proposed as a means to complement for-profit industry.

The advantage PPPs would have from a public health perspective is the ability to prioritize R&D expenses on molecules that address a critical public need, irrespective of market size.  Thus, PPPs could fill a gap in the public health need by addressing molecules that are critically needed but simply not of sufficient profit value for for-profit companies to focus on.  In addition, because they would not need to maximize sales/profit, PPPs would be able to seek small market indications and more selectively market their drugs than for-profit companies, resulting in slower development of resistance and a longer effective lifespan of the drugs.  In this way, PPPs could converge society’s need to simultaneously promote antibiotic stewardship and promote new antibiotic development, two concepts that may be in conflict in the for-profit setting.

The singular issue regarding PPPs is how to fund them.  All companies, for-profit or non-profit, only exist if capital is available.  From where does the capital come in the PPP model? Public sources of capital could include direct appropriations (very difficult in the current environment, but still should be discussed), via grants or contracts from currently existing federal programs that already have annual appropriations, by philanthropic donation, or by an Antimicrobial Innovation and Conservation (AIC) fee, as discussed in IDSA’s newly released policy paper.  The AIC fee is particularly attractive because it would result in stable, long-term funding, and also because it is funded directly from sales of antibiotics, without draining existing appropriations or requiring new appropriations.

Private assets may come in the form of molecules or technology moved into the PPP from industry.  Industry’s motive to do this would be to “de-risk” their early stage molecules without having to financially support them through the riskiest stages of development.  The originating company would have “claw-back” rights, such that if the PPP successfully developed the molecules through phase II clinical trials, the originating company would have right of first refusal to partner back with the PPP in phase III.  The originating company would then fund the phase III trial and, if the molecules were approved, would manufacture and distribute the molecules using a revenue-sharing license from the PPP.  In this way, the PPP complements and has the potential to greatly assist the originating companies to reduce their up front R&D costs and de-risk their technology all the way through phase II trials.  Other forms of private capital could come in the form of milestone payments from industry attached to their molecules, as well as investment from VC into virtual start-up companies built to house individual technology either developed internally within the PPP, or in-licensed to the PPP from other sources (academic or industry).

Ultimately, the goal is to create PPPs that serve as long-standing public health entities, whose mission is to develop critically needed new antibiotics irrespective of market size.  The PPPs should become self-sustaining from royalty streams, milestone payments, grants, contracts, and any other potential funding source.  The PPPs would have at least three pathways for R&D and discovery: 1) the PPPs would conduct their own internal discovery programs to find their own technology, filling the void in this area left by exiting big pharma; 2) the PPPs would serve as ready access vehicles for translation of molecules from academia (offering far friendlier terms than traditional venture capital, as well as a goal of completing development to commercialization, rather than a short-term goal to build substantial value/wealth before cashing out prior to commercialization); or 3) transfer of IP from industry for the explicit purpose of de-risking molecules and reducing R&D costs but allowing industry claw-back rights as discussed above.

Finally, the PPP would hopefully provide more stable employment opportunities to retain scientific talent in this field, and could even begin to rebuild the talent base shattered by massive brain drain from antibacterial R&D as experts have been forced out of the field by the massive egress of industry from antibacterials.

We are at the beginning of exploring this concept.  PPPs may be a critical pathway to the long-term future of antibacterials.  We need political leaders to fund the PPP concept for antibacterial agents, and we need industry, academia, and philanthropy to draw together around the concept.

Antibiotics - World Health Day 2011

Tomorrow is designated World Health Day by the World Health Organization.  This year, appropriately, it targets antibiotic resistance.  WHO Director General Dr. Margaret Chan says,

 On this World Health Day, WHO is issuing a policy package to get everyone, especially governments and their drug regulatory systems, on the right track, with the right measures, quickly. Governments can make progress, working with health workers, pharmacists, civil society, patients, and industry. We all can plan and coordinate our response. We can expand surveillance efforts. We can improve drug regulatory and supply systems. We can foster improved use of medicines for human and animal health. We can actively prevent and control infections in health services and beyond. And, we must stimulate a robust pipeline for new antimicrobials, diagnostics and vaccines. 

Of course, number one on my own hit parade to fix the antibiotic pipeline is the FDA.  Clearly, companies will continue to abandon the area if the FDA follows its current course of releasing trial design guidelines that are infeasible. But number two on my hit parade is providing incentives designed to make it possible for biotech companies and academia to develop new antibiotics all the way to market if necessary.  We need incentives that will take the need for the deep pocket large pharmaceutical companies out of the equation since there are now so few that are actually pursuing new antibiotics either from a discovery or an in-licensing standpoint.

The perfect storm swirling around antibiotic R&D and incentives that might work to ameliorate the situation are discussed in an article that just appeared in the journal Nature today - Fix the Antibiotics Pipeline – by Matt Cooper and me. We recommend the push-pull package of incentives proposed by the London School of Economics which is currently being considered by the European Commission. In the LSE’s proposal, the push includes funds to support development.  We believe that this must include the expensive phase III trials required for registration.  This push essentially de-risks late stage development and makes the earlier funding well within the reach of venture capitalists and even some government grants like those obtained through NIH and BARDA. The pull would come from some guaranteed market such as a purchase of government stockpiles upon approval.  The size of this purchase would probably have to be several hundred million dollars spread over the first year or two post-launch.  Such an investment provides an immediately positive NPV, especially when combined with the push.  The pull will also help attract larger investors such as the large pharmaceutical companies and even possibly private equity investors into the mix. The availability of new, effective antibiotics to treat serious and deadly infections caused by highly resistant pathogens will save lives and will provide a significant economic benefit to governments therefore providing a rationale for the push-pull approach.

It seems likely that, here in the US, given the current political climate, such incentives will not be forthcoming in the near future.  That leaves us dependent on the European Commission to bail us out.  Further, the push-pull is not viable if the European regulatory agency, EMA, goes the way of the FDA.  In that case, even if one could provide a push-pull incentive, no new antibiotics will be approved since the trial designs required for registration will still be infeasible. I have to say that I never thought I would see the day when the world was depending on Europe to save us from the scourge of resistant bacteria we now face.  But here we are.

Related articles

• RAPatton: Resistance to antibiotics: The spread of superbugs | The Economist (economist.com)
• When The Drugs Don't Work (huffingtonpost.com)

FDA HAP/VAP Discussion March 30

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As I noted in my last blog, I did have a conversation with the FDA on March 30 regarding their draft guidance on trial design in HAP/VAP.  For my meeting, I constructed a series of talking points.  The FDA team asked me to submit the document to the docket which I did.  Because the submission has not yet appeared on regulations.gov, I reproduce it below. I tried to summarize key issues identified almost uniformly in the docket submissions and to provide solutions going forward.

•  NI Margin – as this becomes more relaxed – lots of good reasons to do this – everything else gets easier.
• Please provide numbers required for studies where mortality is lower than 20%.  (they provided an estimate which was, as expcted, staggering).
• APACHEII now underestimates mortality and scores higher than 15 will be required to assure mortality greater than 20%.
• Proscription against antibiotics – most commonly cited problem for infeasibility and probably unnecessary.  Also will exclude those patients you most want to include.
•  Mortality as an endpoint is insensitive and irrelevant to clinicians treating the disease.
• VAP is a disappearing disease – probably related to better care plus significant recent underreporting in the US under pressure from CMMS reimbursement guidelines.  Therefore, special consideration should be given to the fact that there is a small and shrinking population available for study even though the medical need in this population is greatest.  SEE J&J DOCKET SUBMISSION.
•   Inclusion of HCAP per Cubist?

SOLUTIONS

• 1.     Admit that diagnosis is difficult and a perfect rationale for the NI margin in this disease does not exist nor does a perfect AND feasible trial design and go on from there. Allow the use of endpoints - mortality, OR clinical outcome OR clinical outcome plus survival at 28 days as a composite.
• 2.     Allow the use of PK/PD measures to justify a margin for clinical benefit as determined by extrapolations to no therapy and/or comparing inappropriate to appropriate therapy.
• 3.     Increase the margins to something more reasonable – 15%.  Forget the odds ratio method constraint.
• 4.     Allow the use of up to 24 hours of an antibiotic at the time of enrollment.
• 5.      Discard the proscription against any antibiotic within the previous month.
• 6.     Consider the inclusion of HCAP patients where HAP/VAP pathogen is documented.

The FDA seemed receptive.  I think they were a little surprised by the extent of the response.  They wondered why the issue of feasibility was not discussed at the advisory committee almost two years ago.  I reminded them that it was, by Steve Barriere.  It is clear that on the one hand, they are driven to provide guidance by the IDSA, by industry and by congressional mandate.  But it is also clear that they are so removed from the industry they regulate and from medical practice that they do not understand what is feasible and what is not in today’s world of medicine and clinical trials. I would add that they seem to understand that not developing new antibiotics for Americans is a bad thing.  When I told them that for HAP/VAP I was advising my clients to go to Europe first, they cringed.  They said, tell them to talk to us.  We’re much more flexible in person than we are in our guidance – or words to that effect. In checking with friends involved in such discussions, it seems clear that this is not the case.  I think maybe the top management believes this is true, but on the ground at the team level, the guidance is the guidance.  That has always been my experience in any case.

On the one hand, I believe that the FDA agrees that issuing guidance with infeasible trial design requirements is at best counterproductive.  I think they feel like they made a mistake at least with HAP/VAP if not also with CABP.  Even though our discussion did not touch on the origins of their motivation for proposing specific design considerations, I think that the FDA may feel trapped between industry, IDSA and others on one side, and groups like Public Citizen and Tom Fleming along with the Grassley – Markey crowd on the other.

I fault industry for not being clear and vocal enough during numerous workshops and AIDAC meetings to make clear to the FDA what would and would not be feasible.  Industry has been too timid in their approach to the FDA in this regard. This is especially true when you consider the agency’s naïveté around considerations of feasibility.

Finally, I think it is time for industry to start to provide a new approach to trial design for consideration by the FDA. More on this in the future. 

Pfizer Update etc.

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OK.  I’m back and swamped.  But during my absence, several pieces of information have filtered in regarding Pfizer.  First, Bernstein Research reported that Pfizer was planning to reduce its overall revenue base from $67B to $35-40B by spinning off or selling much of its non-pharmaceutical portfolio including its animal health business.  The strategy seems to be a logical one to increase growth as a percentage of revenues.  The idea is that the pharmaceutical business core of Pfizer is the one that brings in most of its revenues.  Therefore, from a lower base of $35-40B, it is theoretically more likely that they would be able to grow the business by 5-10% annually. Of course, this still will require existing product sales to grow enormously plus the introduction of new blockbuster products to offset the loss of Lipitor. But at least the hurdle will be less daunting.

In terms of antibiotics, it seems that Pfizer wants to milk its cash cow franchise of piperacillin-tazobactam (Zosyn), linezolid (Zyvox), and tigecycline (Tygacil) as long as possible.  But the Zosyn patent has run out and generics are already creeping into the marketplace around the world.  Zyvox becomes generic in 2015 and it looks like Tygacil will start to go around 2015-2016.  Pfizer is probably currently spending something like 25% of product revenues to sell these antibiotics including the cost of the sales force and other marketing outlays.  According to the latest numbers from Pfizer, the 2010 sales from these three products totaled about $2.5B (4% of revenues) and falling. By the time Pfizer completes its spinoff/sale of non-pharma units, these revenues will have fallen further to say $2B.  This will represent just 5% of their projected total revenues at the point in time where they have completed their spinoff process.  This point in time will probably occur just when both Zyvox and Tygacil are getting ready to jump over the cliff.

Pfizer says that they are moving their antibiotic discovery to China.  I have finally been able to confirm that they do actually have an address in Shanghai and that they are hiring scientists.  But what does this mean exactly?  China does not have a tradition of antibiotic discovery.  They do not have the same sophistication of approach.  This new unit will require years to establish themselves.  They will require sophisticated and careful supervision in order to actually accomplish anything.  Is Pfizer planning to provide for this?  I see no evidence of that.  I can only suspect that this is more about getting a tax break in China or some other business oriented edge in Asia than about actually discovering and marketing new antibiotics.  To me, this move is essentially an abandonment of antibiotic discovery and development. 

Since Pfizer has essentially decided to get out of the antibiotic discovery business, they will rapidly lose their internal expertise to evaluate external products.  Therefore they will not be able to bring in products from outside the company or they will exercise poor judgment in their choices. Therefore, I suggest, plead, beg them to be smart and include their antibiotics franchise or even a portion of the franchise in their spinoff plans.  I would love to help make this happen.  I am sure that appropriate investors could be identified and that an acceptable royalty plan could be negotiated.

Two other quick updates –

I will be speaking to the FDA on the 30^th regarding their HAP/VAP Draft guideline.  For those of you who have sent me comments already – many thanks.  If anyone does want to send me additional comments that I can use to help the FDA improve their guideline, please send them on.

Along with my co-author, Matt Cooper, I will have a perspective appear in Nature in April – more later.

Related articles

• UPDATE 1-Pfizer reviewing possible divestitures, exec says (reuters.com)
• Pfizer antibacterial research moving to China (fiercebiotech.com)

Absence

I'm sorry to disappoint all of you out in antibiotic land - but I'll be on vacation (the "V" word as Bob Levy used to say at Wyeth) for about a week.  The next post will be towards March 25.

Have a great week.  I'll be thinking of you . ..