Tuesday, June 10, 2014

Pharma Disruption Watch

I have to admit to maybe being a little unsure about the "Dpharm: Disruptive Innovations to Advance Clinical Trials" conference.  A more cynical man than I might look at the high entry price, the posh venue, and the perhaps-somewhat-predictable list of long-time pharma insiders presenting and think: is this really the group that is going to change the status quo in clinical trials, or is this the group that created the status quo?

So last year, looking at the announced conference chairmen, I asked on Twitter:


I wasn't really expecting an answer, and I certainly didn't get one. The conference bills itself as a "TED-style event". The hallmark of the TED style, of course, is a spotlighted guru on stage and an audience whose role is strictly limited to nodding and clapping. Impertinent questions don't really fit that model.

But anyway. With this year's chairs announced, I was still curious to see how the face of disruption had changed in the past 12 months:

Dpharm: the 2014 Edition


Three returning chairs, two departing, and one new. Has the face of Dpharm been disrupted? To go back to my original question:

  • Big Pharma: last year, 1 out of the 5 co-chairs was a token non-pharma addition. He's gone, and this year features a pure 100% Big Pharma composition.
  • White males: Last year's 5/5 white males is down to 3/4. with one non-white and one female (who coincidentally happen to be the same person) addition.
  • In suits: Here, finally, we see some radical disruption: the staid, black and white, suited head shots have been replaced by colorful, half-body action photos that practically scream, "Look, I am giving a presentation!"

We can look back with pride. 2014: the year we disrupted the necktie.

The conference says "radical thinkers are especially welcomed" and considers itself comprised of "out of the box thinkers". Looking at this year's lineup, I'll humbly suggest that if we want radical, out of the box thinking, we need to - at least occasionally - stop rummaging through the same Big Pharma Box.

Tuesday, March 18, 2014

These Words Have (Temporarily) Relocated

Near the end of last year, I had the bright idea of starting a second blog, Placebo Lead-In, to capture a lot of smaller items that I found interesting but wasn't going to work up into a full-blown, 1000 word post.

According to Murphy’s Law, or the Law of Unintended Consequences, or the Law of Biting Off More Than You Can Chew, or some such similar iron rule of the universe, what happened next should have been predictable.

First, my team at CAHG Trials launched a new blog, First Patient In. FPI is dedicated to an open discussion of patient recruitment ideas, and I’m extremely proud of what we've published so far.

Next, I was invited to be a guest blogger for the upcoming Partnerships in Clinical Trials Conference.

Suddenly, I've gone from 1 blog to 4. And while my writing output appears to have increased, it definitely hasn't quadrupled. So this blog has been quiet for a bit too long as a result.

The good news is that the situation is temporary - Partnerships will actually happen at the end of this month. (If you’re going: drop me a line and let’s meet. If you’re not: you really should come and join us!) My contributions to FPI will settle into a monthly post, as I have a fascinating and clever team to handle most of the content.

In case you've missed it, then, here is a brief summary of my posts elsewhere over the past 2 months.

First Patient In


Partnerships in Clinical Trials



Please take a look, and I will see you back here soon.

[Photo credit: detour sign via Flikr user crossley]

Sunday, January 12, 2014

Megafund versus Megalosaurus: Funding Drug Development


This new 10-minute TEDMED talk is getting quite a bit of attention:


 (if embedded video does not work, try the TED site itself.)

In it, Roger Stein claims to have created an approach to advancing drugs through clinical trials that will "fundamentally change the way research for cancer and lots of other things gets done".

Because the costs of bringing a drug to market are so high, time from discovery to marketing is so long, and the chances of success of any individual drug are so grim, betting on any individual drug is foolish, according to Stein. Instead, risks for a large number of potential assets should be pooled, with the eventual winners paying for the losers.

To do this, Stein proposes what he calls a "megafund" - a large collection of assets (candidate therapies). Through some modeling and simulations, Stein suggests some of the qualities of an ideal megafund: it would need in the neighborhood of $3-15 billion to acquire and manage 80-150 drugs. A fund of this size and with these assets would be able to provide an equity yield of about 12%, which would be "right in the investment sweet spot of pension funds and 401(k) plans".

Here's what I find striking about those numbers: let's compare Stein's Megafund to everyone's favorite Megalosaurus, the old-fashioned Big Pharma dinosaur sometimes known as Pfizer:


Megafund
(Stein)
Megalosaurus
(Pfizer)
Funding
$3-15 billion
$9 billion estimated 2013 R&D spend
Assets
80-150
81 (in pipeline, plus many more in preclinical)
Return on Equity
12% (estimated)
9.2% (last 10 years) to 13.2% (last 5)
Since Pfizer's a dinosaur, it can't possibly compete with
the sleek, modern Megafund, right? Right?

These numbers look remarkably similar. Pfizer - and a number of its peers - are spending Megafund-sized budget each year to shepherd through a Megafund-sized number of compounds. (Note many of Pfizer's peers have substantially fewer drugs in their published pipelines, but they own many times more compounds - the pipeline is just the drugs what they've elected to file an IND on.)

What am I missing here? I understand that a fund is not a company, and there may be some benefits to decoupling asset management decisions from actual operations, but this won't be a tremendous gain, and would presumably be at least partially offset by increased transaction costs (Megafund has to source, contract, manage, and audit vendors to design and run all its trials, after all, and I don't know why I'd think it could do that any more cheaply than Big Pharma can). And having a giant drug pipeline's go/no go decisions made by "financial engineers" rather than pharma industry folks would seem like a scenario that's only really seen as an upgrade by the financial engineers themselves.

A tweet from V.S. Schulz pointed me to a post on Derek Lowe's In the Pipeline blog. which lead to a link to this paper by Stein and 2 others in Nature Biotechnology from a year and a half ago. The authors spend most of their time differentiating themselves from other structures in the technical, financial details rather than explaining why megafund would work better at finding new drugs. However, they definitely think this is qualitatively different from existing pharma companies, and offer a couple reasons. First,
[D]ebt financing can be structured to be more “patient” than private or public equity by specifying longer maturities; 10- to 20-year maturities are not atypical for corporate bonds. ... Such long horizons contrast sharply with the considerably shorter horizons of venture capitalists, and the even shorter quarterly earnings cycle and intra-daily price fluctuations faced by public companies.
I'm not sure where this line of though is coming from. Certainly all big pharma companies' plans extend decades into the future - there may be quarterly earnings reports to file, but that's a force exerted far more on sales and marketing teams than on drug development. The financing of pharmaceutical development is already extremely long term.

Even in the venture-backed world, Stein and team are wrong if they believe there is pervasive pressure to magically deliver drugs in record time. Investors and biotech management are both keenly aware of the tradeoffs between speed and regulatory success. Even this week's came-from-nowhere Cinderella story, Intercept Pharmaceuticals, was founded with venture money over a decade ago - these "longer maturities" are standard issue in biotech. We aren't making iPhone apps here, guys.

Second,
Although big pharma companies are central to the later stages of drug development and the marketing and distributing of approved drugs, they do not currently play as active a role at the riskier preclinical and early stages of development
Again, I'm unsure why this is supposed to be so. Of Pfizer's 81 pipeline compounds, 55 are in Phase 1 or 2 - a ratio that's pretty heavy on early, risky project, and that's not too different from industry as a whole. Pfizer does not publish data on the number of compounds it currently has undergoing preclinical testing, but there's no clear reason I can think of to assume it's a small number.

So, is Megafund truly a revolutionary idea, or is it basically a mathematical deck-chair-rearrangement for the "efficiencies of scale" behemoths we've already got?

[Image: the world's first known dino, Megalosaurus, via Wikipedia.]