Is the pharmaceutical industry risk averse? 
Posted by Carlos on Oct 26, 2017

Simple question…is our industry risk averse?

Some would say, “Yes, absolutely.”

Look at psychiatric drugs, as an example. When the SSRIs were launched in the early 1990s, it was a new era in the treatment of depression and related conditions. Since then, our industry has largely moved away from psychiatry:

Richard Friedman, professor of clinical psychiatry at Weill Cornell Medical College in New York…says that the “risk averse” industry “all but shut down their brain research”, meaning there are few signs of real innovation from drug makers.

Friedman says the lack of interest in finding the next potentially groundbreaking medications is in part due to the difficulty of bringing psychotropic drugs to market. Testing is notoriously problematic and there have been questions about how well they perform compared with placebos.

“It really costs a lot of money,” Friedman explains of the development process. “It’s really hard to design, execute and get a positive clinical trial. [Drug companies] are so conservative. They have basically been making minor tweaks of existing drugs as soon as the patent runs out.”

Psychiatry is not the only therapeutic area where complex clinical development in a highly genericized makes product development a financial challenge. The lack of novel small molecule antibiotics is due to similar dynamics. 

Simultaneously, we also see our industry taking massive risks in other therapeutic areas. For instance, the first HIV vaccine efficacy trial in nearly 10 years is sponsored by Janssen/J&J. This vaccine candidate is moving forward on the basis of multiple earlier studies involving ~750 subjects.

Considering that this is an efficacy trial for a vaccine against a virus which mutates rapidly and often, we would definitely say this program is “risky.”

We recently pulled data from MedTrack in an attempt to answer this question.

 

Figure 1: Partnerships over time, by Stage of Development. Date for 2017 are as of October 26, 2017. Source: MedTrack

 

Figure 1 shows Partnerships as a function of time, by stage of development. Partnerships peaked in 2014, and have declined slightly since then.

 

Figure 2: Partnerships over time, as a Percentage of Total for each Year. Source: MedTrack.

 

A better way to look at these data is shown in Figure 2. From a percentage basis, 21% of Partnerships were for Preclinical candidates in 2012. This increased to 35% in 2015, dropping slightly to ~30% in 2017.

Partnerships for Marketed products shows the reverse trend, peaking at 38% in 2012, and dropping to 25-26% in 2016-2017.

This trend varies quite a bit when you drill down into specific therapeutic areas. For example, Preclinical Cardiovascular Partnerships were at 35% in 2012, but have dropped to 16% in 2016 (data not shown).

Conversely, Oncology Partnerships for Preclinical candidates have remained in the 33-35% range from 2012-2016 (data not shown), albeit with a much higher volume. From 2012-2016, there were 6x more Oncology Partnerships (1,334) than there were Cardiovascular Partnerships (214).

This is an admittedly crude analysis. We recognize that a “hot” therapeutic area or indication does not make partnering any easier if the drug candidate does not precisely match what the industry is looking for.

This has direct implications for companies planning to run an out-licensing process. Such companies are well advised to take a very deep look at the current and future landscape for a particular indication, noting where multinationals are executing deals and where investors are investing.

Most companies post on their partnering web sites precisely what they are looking for. And this information should be taken into account when planning an out-licensing program.

Taking this back even further, deeper pipeline and competitive analyses may have direct implications for companies planning Preclinical comparative studies.

For instance, if the market in a particular indication is moving towards high-margin biologics, does an oral small molecule still have a role to play? In which patient segments or sub-segments? Which Preclinical studies are needed to demonstrate this?

And The Answer Is…

So, is our industry risk-averse?

No.

In fact, we should be proud that we work in an industry that places such huge bets on candidates with tremendous uncertainty.

However, this is not a universal truth across the industry. Reimbursement and competitive forces logically shape in-licensing strategies.

Hence, companies looking to partner with these companies need to come prepared to demonstrate how their candidates match what the industry is looking for.

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