The biopharma industry is having a Jerry McGuire moment.
I’m referring to the scene when Jerry is on the phone with Rod Tidwell and they are shouting, “Show me the money!”
Last year, the Wall Street Journal reported that $268 billion in pharmaceutical mergers and acquisitions were announced globally. That’s double the volume of the previous year.
The M&A market is hot again this year as big pharma companies look for the next break-out drug and ways to diversify their portfolios.
At the same time, biopharmas are racking up huge debts as they launch new products into competitive markets. With the FDA’s surge of 44 new agent approvals last year, significant commercialization costs are now being amplified by new post-marketing safety requirements, such as long-term cardiovascular outcomes studies for diabetes treatments, as well as enhanced post-marketing safety surveillance activities.
The Tufts Center in Boston estimates that it costs a whopping $2.6 billion to develop and launch a new pharmaceutical. No wonder this can be referred to as “The Valley of Debt.”
A couple more interesting financial factoids impacting pharma:
- Therapeutic costs are escalating for a host of diseases, especially for medications to treat rare disorders – some of which cost up to $300,000 per course of therapy. R&D expenses for these treatments also are increasing, but there are a couple interesting initiatives that could help. 21st Century Cures seeks to accelerate the discovery, development and delivery of promising new treatments and cures for patients. While still in the development stage, there is hope that this effort will either be approved as a freestanding bill or become part of PDUFA VI, and build on the incentives for development of treatments aimed at rare diseases that are already contained in the FDASIA/PDUFA V provisions. Crowd-funding and venture philanthropy received a significant boost last fall when the Cystic Fibrosis Foundation sold the rights that it held in Vertex Pharmaceuticals’ Kalydeco, the first drug to treat the underlying genetic abnormality in cystic fibrosis, for $3.3 billion. The concept that patient advocacy groups and pharma companies can collaborate for the betterment of disease sufferers is very encouraging.
- The FDA approved the first biosimilar this past March—the generic version of Amgen’s Neupogen ($1.2 billion in sales in 2014)—a therapy to increase cancer patients’ white blood cell counts and fight infections. Since biologics are manufactured from living organisms, they cannot be exactly copied, so the production of biosimilars is inherently much more complex and therefore prone to potential errors than traditional small molecule generics. We can expect to see much more FDA scrutiny of biosimilars, such as increased post-approval safety monitoring, and for consideration of “interchangeability.” We also can expect to see much smaller savings than with small molecule generic drugs.
Next week, we’ll take a look at trends around therapy and device approvals. For more information about today’s financial trends impacting pharma, download our eBook, "The Pharm-ers Almanac."
Authored By: Tim Franson, M.D., Chief Medical Officer at YourEncore; former VP Global Regulatory Affairs & Patient Safety, Eli Lilly and Company. Tim.Franson@yourencore.com