Observations from JPM 2013 
Posted by Carlos on Jan 22, 2013

Lacerta Bio, along with approximately 10,000 other life science investors, executives, consultants, service providers, hangers-on, and many others, congregated in San Francisco for a variety of conferences, including the JP Morgan Healthcare Conference, the EBD Biotech Showcase, OneMed Place, and other conferences.

We spent the bulk of our time at the “speed dating” meetings at the EBD Biotech Showcase. However, we also attended a variety of meetings and receptions all around Union Square.

Here are a few of the items we took away from what is one of the most dynamic weeks on the calendar:

Shift to the left: For several years, sales and marketing companies focused their licensing efforts on commercial assets, such as brands which Big Pharma is no longer interested in. Two things we repeatedly heard about this model while in San Francisco:

  1. Good, commercial assets are harder and harder to come by, and
  2. Some Big Pharma companies are less willing to let aged brands go, for a variety of reasons

As a result, several “commercial only” companies are now willing to look at Phase III assets. This raises a number of questions for these companies, i.e., What does “Phase III” actually mean? By Phase III, do we mean entering Phase III? Completed one trial? Second trial? About to file?

Early-stage $ remains challenging: Yes, raising venture funding remains a challenge. However, there are signs that some (limited) purse strings are loosening, especially from the Big Pharma perspective. Bruce Booth has an excellent summary of this trend, and we hope it continues.

Risk Sharing: Risk sharing is now the de facto standard in early stage development, and many of the people we met with agreed on this point. We’re certainly having more discussions with prospective partners (on behalf of our clients) to consider option-based agreements in order to advance assets to the point where a full “traditional” licensing agreement makes sense for both parties.

Niches & Orphans: These were two words that we heard again and again. Many companies want to stay away from the traditional big markets (read, big marketing spend) and into niches (presumably where marketing spend is much lower) and orphan diseases (where pricing is favorable AND where marketing spend is lower).

What strikes us about some of these “seekers” is that they are looking for opportunities without either a well-defined search process and/or a clear idea of what they are looking for. Can we really discuss an orphan oncology indication in the same context as an orphan enzyme deficiency disease? Can a company really commercialize in both areas equally well? Frankly, we find some of this lack of vision and planning surprising. We think a better approach would be to spend some time ironing out a strategy (albeit one that has flexibility and room for opportunism) before executing a highly tactical search process. The challenges of orphan drug development (i.e., recruitment challenges, pricing resistance) have been well documented elsewhere.

Obama Who?: Last year there was a lot of talk around ObamaCare…who would be covered? How much would it cost? With the election now over, we heard little chatter about ObamaCare and related issues. However, there is no getting around the fact that pricing pressures will grow, especially in Europe. But the pressure it not coming just from the governments and insurers. Individual hospitals are making the decision not to prescribe expensive medications. More than ever, companies developing innovative pharmacologies with a potential benefit over standard of care need to carefully look at their clinical trial designs and their pricing strategies, else run the risk of leaving a valuable product on the shelf due to pricing issues.

Outlook for 2013: So what will 2013 bring? That’s always hard to predict. But flying back to New York (and exchanging business cards along the way), we concluded that the beginning of 2013 looks very much like the beginning of 2012 did:

  • Big pharma’s continued desire for near-term revenue growth, counterbalanced with increased willingness to enter into early-stage deals
  • More risk-sharing, option-based licensing deals
  • More commercial companies picking over a decreasing basket of good assets

 

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