Biomedical Engineering Reference
In-Depth Information
From the pers pective of a com pany looking for acce ss to
FP drug candidates, the mar ket is attra ctive for a numb er of
reasons. Developing drugs for indications treat ed by spe-
cialists (i.e., nonpri mary care physi cian indicat ions) keeps
sales, general and administ rative (S, G, and A) cost s down,
because there are fewer physici ans to target. Meda, a
Swedish specialty pharmac eutica l company, indicated that
“there is a big difference in the cost of market ing and sales
efforts to special ists and market ing them to general practi-
tioners in outpatient care .”
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Furth ermore, particula rly for
these mar kets, there are key physici ans that shape the
prescript ion trends of othe rs in the field, meanin g that it
is cheap er to get a new drug accepte d and pres cribed.
Moreover, we think less d irect-to-co nsumer market ing is
required for more serious, life-threat ening indicat ions (like
the indications being targeted by FP developers, such as
oncology) , further reducing marketin g spending. Targeting
these indicati ons is les s costly for drug market ers than
targeting prima ry care physician (PCP) market indicat ions
such as hyper tension , gastroe sophageal reflux, and h yper-
cholestero lemia, as ther e are fewer physi cians to market to.
Additiona lly, biol ogics including FPs tend to be premium
priced, with high reimbursement levels (particular ly for
serious and life-threateni ng condi tions). Th is mak es the
operating margin on such drugs even more attract ive.
However, from the perspective of th e FP developer, FPs can
be les s attractive t han o the r techn ologies, becau se of potentially
hig her associated op erating costs. N otably, R &D expend it ure
is likely to be high er because o f the n ove l an d unch arac terized
natu re of many FP structures and mech anisms of actio n.
Add itionally, settin g up manufacturing for novel pla tforms
can be costly, p articularly for biologics, particularly if manu-
facturing protocols are costly and complex. Althoug h cost of
goods sold (COGS) sp ending in early clinical trials is less
important for the FP developer until these drugs reach large-
scale (usually Phase III) clinical trials, C OGS remains a focus
fo r F P develo pers as licensees could potentially be put off by
potential licensing cand id ates t hat cos t a lot t o m anufacture.
However, the FP d ru g class becomes m ore attractive for
develop ers if th ey are ab le t o retain some of th e marketing
ri gh ts. In ad dition to m aking FPs attractive to l ice nsees, a small
patient pop ul ation and /o r a pop ul ation t reated by specialist
physicians also mak e it more likely that a small FP developer is
able to retain some marketing rights t o t heir drug. FP develop-
ers are a ddition ally more likely t o retain rig ht s i f (1) they
already h ave developed o th er dru gs (p articularly if it so me of
thes e are alread y on t he market), (2) t he new dru g is designed t o
treat the same in dic ation as drugs they already have on t he
market, and (3) competition from other biotech co mp etitors in
the m ark et is l ow : as t he number of th ese competito rs i ncreases,
the pro bability of mark eting right reten tion falls [45 ].
2.4.5 FPs Deal Analysis: We Beli eve FPs are an
Attracti ve Target for Multina tional Drug Compani es
We think there are two reasons for Big Pharma to buy into FP
program s. First, many drug comp anies are attem pting to
diversify away from wha t multinat ional pharmac eutica l
company GSK refers to as “white pill, weste rn market s”
model, becau se of low sales growth and subst antial gener ic
erosion risk. GSK itself has reduc ed exposure to this market
from 40% in 20 07 to 25% in 2010, and many Big Pharma
compani es have implemente d similar strat egies by investing
in area s such as biotech , consumer heal th, and vaccin es.
Biotech, which include s the FP market, is attract ive, becau se
of a longer exclusivity period for new biologics in the United
States, lower generic s com petition following patent expiry,
potential ly higher pri ces and reimbursement for biologic
drugs, and pote ntially better clini cal development succe ss
rates. A 2011 survey found that biot ech drugs had a
higher clini cal trial succe ss rate than small molecu le drugs
(26% vs. 14%) [44] .
The second reason why we think Big Ph arma compani es
form deal s over FPs is because they are already est ablished
in specific therapy areas, and they are looking for next-
generat ion drugs to replace curr ently mar keted drugs and/ or
ameliora te the risk of depend ing too heavily on a small
number of pipeline drugs they have in development for these
therapy area s. For example, GSK had a big type 2 diabetes
franchise with Avandia, however, following safety conce rns,
sales of this drug fell steepl y. There fore, the com pany's
partnershi p with HGS over albigl utide may give it an
opportuni ty to strengthen its positi on in this ther apy area.
Some FP developers /licensee s are also developing FPs as
direct successor s to current ly marketed drugs. For example,
Lilly is developing dulagluti de as a long-acti ng GLP- 1
agonist , which would be a com petitor to both the already
marketed GLP- 1 analog Byetta and the company's long-
acting Bye tta formul ation, Byd ureon. This sugges ts to us
that the primary drivers for these FP deals are (1) to
capitalize on already established sales and marketing net-
works plus knowledge on which parts of the market to target
or (2) to lineup replacement drugs following the loss of
exclusivity for marketed drugs, or replace other pipeline
drugs they are developing if data are less good with these
other pipeline drugs. It seems likely that the closer allied a
program is to the licensee's therapeutic focus, the less likely
a licensed-in FP programwill be dropped by the licensee as a
result of a strategic rethink, unless it generates weaker data
than other pipeline drugs in development.
In terms of deal structure, FPs have been successful in
securing relatively generous licensing deals with Big Phar-
ma/Big Biotech companies. Out of 43 FP programs we
analyzed, we found information suggesting that significant
collaborations had been formed by early-stage FP develop-
ers over the development of 11 of these FPs. Of these 11, 9
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http://www.meda.se/fileadmin/uploads/MEDA_Corporate/pdf/MEDA_
2010_Eng_webb.pdf
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