Replies to post #130966 on Biotech Values

[jq1234]

If there is going to be major pushback on pricing for oncology drugs, then the whole space is a no-brain short.

It is going to happen in next 5-10 years. There is no way this can continue, just like housing price a few years back.

http://www.kff.org/insurance/snapshot/OECD042111.cfm

[DewDiligence]

If there is going to be major pushback on pricing for oncology drugs, then the whole space is a no-brain short.

That’s the picture I'm painting, but I like to use a somewhat finer brush.

[DewDiligence]

This article from Matt Herper speaks to the exorbitant prices of
cancer drugs and how they are harder to justify than exorbitant
prices of drugs for rare genetic diseases, such as the ones sold
by Genzyme/SNY. Drugs in the latter group enable people who
would otherwise be doomed to live quasi-normal lives, but this
cannot be said of cancer drugs currently under development.

http://www.forbes.com/sites/matthewherper/2011/11/17/why-you-should-care-that-a-tiny-company-is-entering-the-ultra-rare-disease-market

›Why You Should Care That a Tiny Company Is Entering the Ultra-Rare Disease Market

By Matthew Herper,
11/17/2011 8:34AM

It’s impressive that Agios, of Cambridge, Mass., has raised a total of $261 million before its first experimental medicine has even begun testing in human beings. But the 70-person startup’s next step may be an important signal for the entire biotechnology business.

Most of Agios’ cash comes from its focus on how to fight cancer by attacking cell metabolism, the way cells use and regulate industry. Its scientific founders, all members of the prestigious National Academies of Science, include experts who helped discover the PI3 kinase mechanism that is a key drug target for companies like Merck and Pfizer.

Agios previously raised $33 million in venture capital from firms including ARCH Venture Partners, Flagship Ventures, and Third Rock Ventures for its anti-cancer efforts, and notched a deal with biotech giant Celgene that has resulted in another $150 million. All that was focused on its anti-cancer work.

But today the company is announcing an expansion in its scope and another $78 million from existing investors and several new ones, which the company says it cannot disclose but which are “three large, public investment funds.”

Its new focus: “inborn errors of metabolism,” the same kinds of rare diseases that helped make Genzyme into a biotech giant before it was bought up by Sanofi-Aventis for $20 billion, and which have provided a market for companies such as BioMarin and Shire.

These diseases are appealing to drug companies because, although they may only afflict only hundreds of people, governments and insurers are willing to pay prices upward of $200,000 per patient per year for medicines that effectively treat them.

Drugs for cancer seem to have hit a price ceiling of about $100,000 per patient per year. Yesterday, Incyte Pharmaceuticals announced that it would be charging just $7,000 a month ($84,000 a year) for its new pill against myelofibrosis, a rare malignancy that causes enlarged spleen.

Rare disease drugs have seen no such limits – one company, Alexion Pharmaceuticals, is charging $500,000 for the average patient. And as a result, Alexion and another rare disease company, Questcor Pharmaceuticals, have been the best-performing biotechs of recent memory. (All these prices, for both cancer drugs and rare diseases, are what governments insurers are charged; companies put programs in place to help individual patients afford medicines.)

Agios’ bet is that this trend will continue, and that the right rare disease drug can still maintain a high premium.

“The theme is looking for the right patient,” says Agios Chief Executive David Schenkein, known to biotech watchers for his stints at Takeda’s Millennium Pharmaceuticals unit and Roche’s Genentech division. “These are genetically predefined patients, so you know the right patients to go after right away.”

But won’t insurers start to push back? Schenkein predicts trouble only for medicines are high-priced where there is no way of identifying the right patients. “The pricing pressures, which are valid and real, are going to hit for the drugs that are $100,000 and most of the patients don’t benefit,” he says. “I think there will be a lot less pressure for the foreseeable future for drugs that are incredibly effective for the right patient. If you treat patients with a rare disease and they’re back at work or living at all, the health economics are much better.”

Agios also is likely, based on its existing competencies, to focus on making small molecules, not the expensive proteins that currently dominate the rare disease space. Its entry into the rare disease market is one more sign that these super-niche drugs continue to be on the rise. After all, more people have rare diseases than common ones.‹