Pharma Success Factors: Doing the Right Work and Doing the Work Right

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I am traveling today, so posts will be light. BIO 2014 was a good conference this year. Numbers seem to be up and the business forum was bustling with activity. Earlier this week we had articles talking about the trends in biotech. These are my takeaways from the Erst & Young session at BIO.

But first lets review what has been going on for the past 12 months.

This are going well for the commercial leaders in the pharma industry. These leaders are designated as having more than $500k in revenue, which equals about 75% of the market cap for the industry.

For this group in the past year there was a 13% increase in revenue which about a 3-4 x growth rate and a resulting market performance up 74%. The investment community has helped fuel this growth with $9.4B investment into the community, spurning a new group of IPO’s who collectively raised up to $3.4B. The IPO market for the community continues to grow to near early 200’s levels, but there is no concern about another bubble, instead this is being classified as a boom for the industry. The IPO’s are driven by technology and market leaders, they are more mature companies the majority of which completing Phase II clinical trials before IPO.

One trend that was anticipated over this past year was an increased in activity of M&A and alliances. Pharma companies have been busy with transactions, but they have been focusing on looking at their own portfolios and making strategic directions. It is expected that there will be an increase in deals, over the past year. The buying capacity of the pharma industry has increased by 55% over the past year. However, they will face more competition for deals, and many of the bio companies they would have targeted are larger and more expensive now, which will complicate things.

Trends to watch in the next 12 months.

My two main takeaway points from BIO 2014 was that pharma will be doing the right work and doing the work right. And this is primarily in regards to addressing the value leakage in the product lifecycle. It is not enough to have a innovative idea any more that idea must demonstrate their eventual market value and efficient R&D process.

There are 4 main value levers that companies must hit to help ensure success in the changing investment landscape, increase probability of success, reduce capital invested, shorten development time, and increase sales.

Precision Medicine is one area where they anticipate value to be unlocked, addressing all of the value levers above.  Right now it is mostly confined to oncology with only has 8-12% of drugs in the pipeline using biomarkers.

Oncology drugs with a corresponding bio marker and a 53% success rate in getting through trials, as opposed to 23% for those drugs with out a marker identified.

Questions about reimbursement of diagnostic tests and medical interpretation (education of physicians, they need to know how to read the tests) are challenges still facing the precision medicine.

Adaptive Trials are also hitting on most of the value levels listed above.

An adaptive clinical trial is a clinical trial that evaluates patients’ reactions to a drug beginning early in a clinical trial and modifies the trial in accord with those findings. The adaptation process continues throughout the trial. Modifications may include dosage, sample size, drug undergoing trial, patient selection criteria and “cocktail” mix.

In some cases, trials have become an ongoing process that regularly adds and drops therapies and patient groups as more information is gained. The aim is to more quickly identify drugs that have a therapeutic effect and to zero in on patient populations for whom the drug is appropriate. A key modification is to adjust dosing levels.Traditionally, non-adverse patient reactions are not considered until a trial is completed

Adaptive trials provide better capital allocation freeing up capital that can be used in other areas, but currently only 20% of clinical trials involve some type of adaptive design.

These two major trends are expected to push pharma partnerships this next year. Primarily with CRO’s, health-tech companies, and obviously diagnostics companies.

What do you think about these trends, did the experts get the right?