Replies to post #114707 on Biotech Values

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I’m surprised no one has commented on #msg-59909806. Has drug development really become twice as hard since the GAO published 2006 report (#msg-37325683), or is there some other explanation for these widely disparate datasets?

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Phase-Transition Probabilities in Drug Development

This chart shows the derivation of the 9% headline figure
in the BIO report discussed in #msg-59909806.



Source: http://insidebioia.files.wordpress.com/2011/02/bio-ceo-biomedtracker-bio-study-handout-final-2-15-2011.pdf (c/o biomaven on SI)

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Big Pharma Is Spending Less on Neuroscience

[This article is nominally about the European market, but it applies with equal force to the pharma industry in general.]

http://online.wsj.com/article/SB10001424052748704474804576222463927753954.html

›MARCH 27, 2011, 4:32 P.M. ET
By Sten Stovall

As drug companies shake up their research and development operations, the industry risks narrowing its focus to the most profitable areas, raising the prospect that some fields of medicine may be neglected, experts say.

Chief among these is neuroscience—research into disorders of the brain. Many companies, including U.K.-based AstraZeneca and GlaxoSmithKline PLC, French drug maker Sanofi-Aventis SA and U.S.-based Merck & Co., have recently scaled back their research into how the brain works and affects behavior.

While research into heart disease, cancer, diabetes, autoimmune and infectious diseases looks set to retain a high priority for Big Pharma, the fall in neuroscience research poses a serious threat to the development of new medicines for conditions such as schizophrenia, stroke, bipolar disorder, depression, anxiety and autism, specialists say.

Brain disorders represent 35% of the total disease burden in Europe, according to a report published in the European Neurological Review. But neuroscience is one of the least understood areas of biology, reflecting the fact that the brain is the most complicated organ in the body.

Drug companies have always had difficulty making money from neuroscience, "because researching the brain is a riskier enterprise, with lower successful hit rates and higher risks of failure than some other therapeutic areas," says David Nutt, professor of neuropsychopharmacology at Imperial College London and president-designate of the British Neuroscience Association.

Dr. Mary Baker, president of the European Federation of Neurological Associations, says the fall in European neuroscience investment has been dramatic. "One key reason is that there are few proven biomarkers in CNS [central nervous system] diseases, so it means expensive research for potentially little gain," she says. Biomarkers are biological measurements which can be used to assess progress in tackling disease.

But while companies are cutting back on R&D, the costs to society from mental disorders are enormous. According to information from the European College of Neuropsychopharmacology, mental disorders rank number one in the European Union in terms of direct and indirect health costs. In 2007, the most recent year for which figures are available, the total cost was estimated at €295 billion ($415 billion). Indirect costs, such as lost productivity, account for most of that figure.

Research by the Tufts Center for the Study of Drug Development in Boston, Mass., shows CNS drugs cost more and take longer to bring to market than other types of drugs. And only around 8% of CNS drugs that make it to clinical trials end up being approved, about half the average success rate for all new drugs [but this is still much better than the success rate in cancer—see #msg-59909806].

"Investors are demanding that drug companies now justify the billions of dollars they spend on research and development," according to Hakan Bjorklund, chief executive of privately held Nycomed of Switzerland. "It all has to do with R&D productivity," he told The Wall Street Journal.

Dr. Baker says the investment trend in neuroscience "is very worrying, given that populations in the developed world are living considerably longer, and aging means they develop more brain disease."

Dr. Susanne Sorensen, head of research at Britain's Alzheimer's Society, says the trend has an immediate impact on people suffering from neurological disorders.

"If Big Pharma withdraws from the basic science in this area, it also becomes less likely that they have the early clinical investigations, not to mention the larger clinical trials, which means British patients are excluded from taking part in these—and we know that patients who take part in clinical trials do better," she says.

"Neuroscience has largely been a burial ground for drug development," says Nigel Gaymond, chief executive of the U.K.'s BioIndustry Association, a lobby group for British biotechnology companies.

GlaxoSmithKline, the U.K.'s biggest drug maker by sales and market capitalization, has reduced its discovery research in psychiatry and pain to focus on neurodegenerative and neuroinflammatory diseases such as dementia, multiple sclerosis and Parkinson's.

Explaining Glaxo's decision, Patrick Vallance, its chief of medicine R&D, told The Wall Street Journal that neuroscience research "is currently one of those of highest risk for the industry—the identification of targets, the animal models, the nature of experimental medicine and the development programs for these disease areas are amongst the least predictive and most costly of any area."

Dr. Vallance says big drug makers could be encouraged to stay more widely active in neuroscience R&D if they could share the risk of developing new drugs with government or publicly funded research institutions.

"Neurosciences research in many areas is very exciting but in some areas is not mature enough to make drug discovery efficient or effective today—which is why I believe that further investment is needed, and have argued the case for public-sector funding in this area," he says.

The sharing of data could also be promoted further, using alliances such as the Innovative Medicines Initiative in Brussels, which is developing projects between the pharmaceutical industry and academics with both corporate and European Union money, experts say.

"Big private-public partnerships are going to be needed to take research and health provision to the next level in treating these very devastating diseases," says Peter Hoengaard Andersen, who heads research at Danish CNS specialist-drug company Lundbeck A/S.

"It reflects the fact that society is deprioritizing, or downgrading, the CNS area despite the fact that psychiatry diseases are the most costly disease areas in Western societies," he adds.

Gaining better understanding of neurological diseases and their underlying dynamics will also be essential.

"The approach in how we research these diseases of the brain is going to have to change," says Dr. Hoengaard Andersen. "We need to get much better at identifying the subsectors of these degenerative diseases, because they're not one uniform disease," he says.

Big pharmaceutical companies' pullback in basic neuroscience research also reflects the fact they are not as good at initial discovery research as academic centers and biotech companies. So Big Pharma looks set to become even more reliant on academia and biotech for discovery and early drug development.

Chan Harjivan, who heads public-health analysis at international management consultant PRTM, says the trend over the past few years has been for major drug companies to look first at biotechs for acquisitions of drug candidates, but that pipeline has dried up. "Now they're reaching further back into universities and academia in general," says Mr. Harjivan.

Dr. Vallance of Glaxo agrees. "With the changing model of pharmaceutical companies, we anticipate a great proportion of our spend will be in collaboration with biotechs and academia," he says.

Professor Nutt says regulators and governments need to intervene to give drug makers incentives to resume research in neuroscience, such as co-financing arrangements and co-development programs, giving candidate mental-health drugs priority "fast tracking" regulatory assessments, and giving successful products longer patent protection.

"Neuroscience is taking the biggest hit at present. But 20 years ago antibiotics were abandoned, so we haven't had a new antibiotic in two decades and we're now facing this terrible problem of antibody resistance. That was a strategic mistake. This trend could have similar consequences," he warns.

Glaxo's Dr. Vallance is more sanguine about the prospects for neuroscience research. "As the science matures in a way that makes drug discovery and development more tractable and efficient, then we expect re-investment in the broader neuroscience field from GSK and others in the industry."‹

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Factoid: Of the total debt+equity capital raised by US biotech companies in 2010, only 0.4% was raised by the lowest quintile of companies.

Source: Ernst & Young (http://finance.yahoo.com/news/Despite-Renewed-Growth-in-prnews-696894244.html?x=0&.v=1 )

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Industry-Wide Pharma R&D Fell 3% in 2010

[It was the first-ever year-over-year decline in R&D spending for the industry as a whole. I hadn't previously seen the factoid cited below that drugs developed by Big Pharma in house have a 20% better chance of regulatory success than in-licensed drugs. See #msg-59909806 for related info.]

http://www.reuters.com/article/2011/06/26/pharmaceuticals-rd-idUSL6E7HO1BL20110626

›Sun Jun 26, 2011 7:00pm EDT
By Ben Hirschler

LONDON, June 27 (Reuters) - The global drug industry cut its research spending for the first time ever in 2010, after decades of relentless increases, and the pace of decline looks set to quicken this year.

Overall expenditure on discovering and developing new medicines amounted to an estimated $68 billion last year, down nearly 3 percent on the $70 billion spent in both 2008 and 2009, according to Thomson Reuters data released on Monday.

The fall reflects a growing disillusionment with poor returns on pharmaceutical R&D. Disappointing research productivity is arguably the biggest single factor behind the declining valuations of the sector over the past decade.

"For the first time, drug companies are reducing costs in their R&D organisations and I believe we will see that trend continue," said Hans Poulsen, head of life sciences consulting at Thomson Reuters.

Traditionally, R&D laboratories have been largely immune to cost cutting but that has changed in the past year or so, and in recent months the pace of cutbacks has increased.

Pfizer , the world's biggest drugmaker, has taken the most dramatic steps under new Chief Executive Ian Read, with plans to slash around a quarter of its R&D budget over the next two years. Other companies have also made smaller cuts.

The winding back of research budgets represents a major change for an industry that has ploughed billions of dollars into the hunt for new drugs, often with little to show for it.

Since 2000, research investment by drug companies accounting for 80 percent of the industry's total R&D has increased by more 50 percent -- but output of new medicines has actually gone down.

Last year, 21 new molecular entities were launched on the global market, down from 26 in 2009, and only a third of those were from major drugmakers with annual research budgets of at least $2 billion, according to the 2011 Pharmaceutical R&D Factbook compiled by Thomson Reuters unit CMR International.

Between 2008 and 2010 there were 55 terminations of projects that had already reached the final Phase III stage of clinical testing, more than double the level of 2005-07, reflecting the growing difficulty of developing new drugs that are better than existing ones.

IN-LICENSING DILEMMA

Faced with the loss of exclusivity on more than 110 products in the key U.S. market between 2012 and 2014, the industry has stepped up its drive to buy in promising experimental medicines from small biotech companies.

But this in-licensing strategy, too, is facing difficulty, as drugs that originate inside Big Pharma companies actually have a 20 percent higher chance of making it to market [I hadn't seen this factoid mentioned previously], according to CMR figures.

Recently, some experts have suggested that productivity in drug research may be improving, as evidenced by progress with breakthrough medicines like GlaxoSmithKline's new drug Benlysta for lupus and Bristol-Myers Squibb's melanoma treatment Yervoy.

Poulsen, however, believes it is too early to judge.

"We could see an improvement but it may take four to six years before we can really say the trend has been reversed," he said.‹

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Clinical-trial factoids…

• Average cost to enroll one patient in a phase-3 trial: $26,000.

• Average number of tests performed on a patient in a clinical trial: 158 (as of 2005).

Source: Scott Gottlieb’s op-ed piece in the WSJ (http://online.wsj.com/article/SB10001424052970204466004577102151263615364.html ).

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R&D Spending* Per New Drug

The following is an edited version of the table from Matt Herper’s article
in Forbes (http://www.forbes.com/sites/matthewherper/2012/02/10/the-truly-staggering-cost-of-inventing-new-drugs ). The numbers are based on cumulative
results during the 15-year period from 1997-2011 inclusive; the table rankings
are in descending order of R&D productivity.

 
         Cumulative   # New  R&D Per 
        R&D Expenses  Drugs  New Drug 
 AMGN      $33B         9     $3.7B 
 NVS        84         21      4.0 
 BMY        46         11      4.2 
 MRK        67         16      4.2 
 ABT        36          8      4.5 
 LLY        50         11      4.6 
 JNJ        88         15      5.9 
 PFE       108         14      7.7 
 Roche‡     86         11      7.8 
 SNY        63          8      7.9 
 GSK        82         10      8.2 
 AZN        59          5     11.8

*Including the cost of failed programs.

‡Includes DNA’s new drugs licensed by Roche and a pro-rata share of DNA’s R&D while majority owned by Roche.