A recent study shows that for the past decade more than 80%
of the venture capital invested in therapeutics went toward “novel drug
R&D” as opposed to improvements on existing drugs (e.g., new formulations,
repurposing, drug delivery, etc. This post questions the wisdom of that
approach based on the time, risk, and cost of de novo drug discovery. After
extensive research on the repurposing space, we will discuss our theory on why
it hasn't attracted a greater percentage of the funding. We believe it is, more
than anything else, based of 4 common misperceptions about the viability of
drug repurposing.
I recently reviewed a white paper by David Thomas, CFA and
Chad Wessel of Bio Industry Analysis entitled Venture Funding of Therapeutic
Innovation A Comprehensive Look at a Decade of Venture Funding of Drug R&D,
published in February 2015 . In this excellent paper they covered a number of
different topics and trends, but for this article, I would like to focus on
one. They point out that over the past
ten years, nearly 80% of venture capital for therapeutics went toward “novel
drug R&D” as opposed to improvements on existing drugs (e.g.,
new formulations, repurposing, drug delivery, etc.
The percentage of de novo investments compared to
repurposing or reformulations would not surprise me if the group the study was
analyzing was the venture arm of large pharma. However, this is astounding to
me when you think of the financial rigor normally associated with the venture
community. De novo drug discovery is simply a bad bet. Here are the latest
metrics - $1.7 billion cost, 12 to 15 years, 1 in 10,000 compounds makes it and
only 1 in 3 compounds that are commercialized recover their original
investment.
Compare that with the far superior metrics for repurposing.
Because your universe of drug candidates is drugs already treating another
disease in humans, you eliminate or greatly reduce the safety and toxicity
component of the trial process. Since the drugs are already known you eliminate
the 4.5 years and $674 million on average for the discovery process. Now if you
can identify the best candidates with precision and supply the companion
diagnostics for safety, toxicity, efficacy and patient stratification you
can remove several years and hundreds of
$ millions compared to de novo.
There has got to be a reason that big pharma and this
universe of very savvy investors have largely ignored this seemingly superior
bet. In hearing the objections in the marketplace, my conclusion is that they
are operating under four misperceptions.
1. We can only get method of use patents and that is not
sufficient to provide us the period of exclusivity commensurate with this
sizable investment. A: We can argue the
composition of matter versus the method of use patent protection issue until
the cows come home, but let's just let the numbers do the talking: 1/4 of the
total drug marketplace is comprised of repurposed drugs. Examples of Repurposed Blockbusters –include:
-Tecfidera (Biogen) - Multiple
Sclerosis $2.91 Billion (2014)
-Rituxan (Biogen ) – Rheumatoid
Arthritis $1.2 Billion (2013)
-Viagra (Pfizer) – Erectile Dysfunction
$2.05 Billion (2008)
2. Generics prescribed off-label will limit our pricing
power and our market share potential. A:
this is simply not supported by the facts. A simple reformulation of a
repurposed drug will make it immune to
off-label prescribing. In the many examples of successful repurposed
drugs, the availability of a generic has had very limited impact on its pricing
or market share for the new indication. The pricing mechanisms in the market do
not distinguish between a de novo drug and a repurposed drug.
3. It costs “about the same” to take a repurposed drug
through the commercialization process as it does a de novo discovery. As shown
above, you simply eliminate much of the process (discovery, tox). Also the FDA
has recently approved the use of remote monitoring in running clinical trials
especially when it involves a repurposed drug. Estimates are as high as an 80%
reduction in clinical trials cost by fully implementing this approach. The more
precision you can provide in the areas of companion diagnostics for toxicity,
efficacy, and patient stratification, the faster and cheaper you can bring a
repurposed drug to market.
4. The approaches used in drug repurposing do not
provide enough precision and systematic repeatability in order for us to invest
in this strategy. This was true until
the introduction of a technique called high throughput knowledge screening.
It is a Big Data play on researching the research pioneered by a company called
CureHunter. By adding this final puzzle piece to the other advantages of
repurposing, it makes the investment thesis for repurposing even more
compelling.
The market is just beginning to embrace this considerable
risk/reward advantage, but it is not the giant pharmaceutical or bio tech
companies (although Celgene repositions their new drugs while still in the
clinical trials process for the original indication). Rather it is the smaller
nimble bio techs that develop a repurposed candidate, form a drug/disease
specific subsidiary, move the drug through phase 1 and limited phase 2 trials,
and then sell the subsidiary to a large pharmaceutical or bio tech company. It
will probably take a series of small company successes before the big players
start to pursue this strategy in earnest. Once that gate opens we will see a
resounding level of drug pipeline growth, more rapid drug introduction, more
favorable pricing and choices for the patients.
Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of healthcare companies. For more information about selling your healthcare company, visit our website MidMarket Capital
No comments:
Post a Comment