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BioWorld's Biotechnology State of the Industry Report 2011


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From BioWorld Today, the most respected news source to the biotech industry's executive suite for more than 20 years, comes the most in-depth industry analysis! BioWorld's Biotechnology State of the Industry Report 2011 - a $299 value!

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BioWorld's Biotechnology State of the Industry Report 2011

  1. 1. 2011
  3. 3. The BioWorld® Biotechnology State of the Industry Report 2011Copyright © 2011BioWorld®AHC Media3525 Piedmont RoadBuilding Six, Suite 400Atlanta, GA 30305 U.S.A.All rights reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database orretrieval system, without the prior written permission of the publisher.ISBN 978-1-931107-79-2 The BioWorld® Biotechnology State of the Industry Report 2011 is published by AHC Media, a division of Thompson Media Group LLC, 3525 Piedmont Road, Building Six, Suite 400, Atlanta GA 30305 U.S.A. Opinions expressed are not necessarily those of the publication. Mention of products or services does not constitute endorsement. BioWorld is a trademark of AHC Media. (GST Registration Number R128870672) Executive Editor: Michael Harris. Managing Editor: Amanda Lanier. Managing Editor: Lynn Yoffee. Assistant Managing Editor: Jennifer Boggs. Senior Staff Writer: Karen Pihl-Carey. Staff Writers: Trista Morrison, Tom Wall. Washington Editor: Mari Serebrov. Science Editor: Anette Breindl. European Editor: Nuala Moran. Senior Vice President/Group Publisher: Donald R. Johnston. Director of Product Management: Jane Cazzorla. Marketing Manager: Sarah Cross. Account Representatives: Matt Hartzog, Chris Wiley, Scott Robinson. Customer Service: (800) 888-3912 or (404) 262-5476 Please visit our website: Follow us on Twitter: Please note: BioWorld has made every effort to ensure that the information in this report is accurate and up-to-date, but cannot be responsible for errors, inaccuracies or changes in the data. If the reader identifies any information that is incorrect or has changed, please notify BioWorld so that it can be corrected for future editions. Send an email to Managing Editor Amanda Lanier at Notice: This report is an information tool, and the user should make business decisions based on an independent investigation, verification and evaluation of this as well as other information relevant to the user’s business interest. BioWorld has gathered information for this work from many different sources and quotes information which has been gathered by other sources. Although BioWorld has taken reasonable steps to ensure the accuracy of this report, due to the tremendous amount of information, and the third-party control of some information, BioWorld cannot verify the accuracy of all infor- mation that it gathers and reports and thus does not warrant that the information is error-free. AS A RESULT, BIOWORLD DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OF FITNESS FOR A PARTICULAR PURPOSE.ii BioWorld® State of the Industry Report 2011
  4. 4. About BioWorld®BioWorld Today, biotechnology’s most respected news source, is read by industry professionals worldwide forits hard-hitting, objective news reporting. BioWorld Today is delivered by email every business morning, and alsois found exclusively online at The BioWorld Online website has been internationally recog-nized as the most comprehensive resource for strategic biotechnology news and information available today.In addition to original daily news reporting, BioWorld offers an extensive searchable database with more than20 years of biotechnology archives. This site is not only a great source for insightful, up-to-the-minute newscoverage, but a veritable library of information on the developments of the industry as well. With a quick search,BioWorld subscribers have instant access to a wealth of biotechnology market intelligence from every biotechhotspot around the globe.BioWorld does not post press releases, but rather uses information that is researched and written by the topbusiness and science reporters in the industry. With nearly 20 contributors across the globe, BioWorld coversnews on public companies and hard-to-find information on private companies. Our seasoned reporters get theinside scoop on what’s happening within the corporate walls, on regulatory issues in Washington and else-where, and on scientific breakthroughs worldwide. This news coverage of the biotechnology industry is 100percent original and available only at BioWorld.All of the BioWorld resources are available for easy online searching, including: • BioWorld Today – The daily biotechnology newspaper. • BioWorld International – The weekly monitor of global biotechnology developments. • BioWorld Insight – The weekly report on all market data and business trends in biotechnology. • BioScan: The Worldwide Biotech Industry Reporting Service – The most comprehensive directory of biotechnol- ogy companies available. • The BioWorld Executive Compensation Report – An annual report revealing executive compensation data at biotechnology companies in the U.S. • The BioWorld Private Company Directory: 1,200 Biotech Companies – And Opportunities – To Watch – An essen- tial business intelligence data resource that provides in-depth profiles of privately held firms and also includes a fully-maneuverable Excel file that can be manipulated for personal business uses. • BioWorld’s Innovations in Biotechnology 2010: Visionary Start-Ups and Revolutionary Science – A landmark compilation of start-up companies and scientific advances paving the way in emerging biotech markets. • The BioWorld Obesity Report: Tipping The Market Scales With Biotech & Med-Tech Regimens – An innovative report that will help tip the market scales in your favor with the business acumen on this market that can optimize your R&D and medical efforts in fighting the Battle of the Bulge. • BioWorld Today’s Advancing Vaccines: New Science, New Opportunities – A report that synthesizes the emerg- ing science behind vaccines, and how companies are using that science against our deadliest foes: pandem- ics, cancer and HIV. • BioWorld Industry Snapshots – An exclusive online product updated daily with market data, such as col- laborations, mergers, acquisitions, financings, market cap rankings and more. • BioWorld Perspectives – A free weekly e-zine that brings you unique perspectives on the trends and issues that are shaping the biotech industry. Sign up for free at® State of the Industry Report 2011 iii
  5. 5. • Medical Device Daily – The daily medical technology newspaper. Available every business morning via email, fax or online at • Medical Device Daily Perspectives – A free weekly e-zine offering unique viewpoints on developments within the medical technology industry. Sign up for free at more information on BioWorld, please contact:Donald R. Johnston, Sr. VP/Group PublisherBioWorld® TodayAHC Media3525 Piedmont RoadBuilding Six, Suite 400Atlanta, GA 30305 USAPhone: 404-262-5439E-mail: don.johnston@ahcmedia.comWebsite: www.bioworld.comFollow us on Twitter: BioWorld® State of the Industry Report 2011
  6. 6. Table of ContentsAnalysis 11Biotech ‘Just Deals With It’ in 2010 13Biotech’s IPO Rally Counters Tough Markets, R&D Setbacks 18Uncertainty Clouds Health Care Reform, FDA Approval Process 20Investments Rebounded, But European Biotechs Still Underfunded 23The Light Bulb Burns Bright in the Discovery Phase 26Financial Data 29Corporate Deals 1152010 Biotech M&As and Collaborations: ‘No Big Deal’ 117Biotech Product Development 241Report Card For Wall Street 299Stock Performance 311Restructurings 317Lawsuits 325BioWorld® State of the Industry Report 2011 v
  7. 7. vi BioWorld® State of the Industry Report 2011
  8. 8. List of TablesAnalysis 11Revenue of the Market-Leading Biotech Drugs in 2010 14Revenue of the Top Biotech Drugs, 2003-2010 17Financial Data 29Biotech Money Raised By Month In 2010: Jan. - Dec. 31Initial Public Offerings Of Biotechnology In 2010 32Biotechnology Follow-On Offerings In 2010 352010 Initial Public Offerings 442010 Follow-on Offerings 44Gross Proceeds of Biotech Public Stock Offerings 45Biotech Money Raised: 1997-2010 46Nasdaq Stock Index 47BioWorld Stock Index 2010 47Other Financings Of Public Biotech Companies In 2010 49 Venture Capital And Other Investments In Private 76Biotechnology Companies In 2010 76Milestone Payments From Corporate Partners in 2010 94Grants and Awards Given to Biotech Companies in 2010 101Corporate Deals 1152010-2009 M&As 1172009-2010 Biotech-Pharma Collaborations 1172009-2010 Biotech-Biotech Collaborations 1172010 Top 10 M&As 1182010 Top 10 Biotech-Pharma Collaborations 1192010 Top 10 Biotech-Biotech Collaborations 121Biotech Mergers And Acquisitions In 2010 123Biotechnology Company Deals With Pharmaceutical Companies In 2010 131Modified Deals Between Biotechs and Pharmas in 2010 159Terminated Deals Between Biotechs and Pharmas in 2010 167Manufacturing/Supply/Distribution Deals Between Biotechs and Pharmas in 2010 170Biotechnology Company Deals With Other Biotechnology Companies In 2010 179Biotech–Biotech Collaborations: Modified Agreements for 2010 205Biotech–Biotech Collaborations: Terminated Agreements in 2010 209Manufacturing, Marketing And Distribution Agreements Between Biotech Companies 211 in 2010 Collaborations Between Biotechnology Companies And Government/Nonprofit 216 Institutions In 2010Biotech Product Development 241Biotechnology Products Approved by the FDA in 2010 243Biotech Products: 1982-2010, A-Z 249FDA Actions on Pending Applications in 2010 273Licensing Applications Filed and Pending at FDA in 2010 277Recommendations by FDA Advisory Panels in 2010 282Overseas Approvals and Other Regulatory Actions in 2010 285Orphan Designations Granted in 2010 292BioWorld® State of the Industry Report 2011 vii
  9. 9. Report Card For Wall Street 299U.S. Public Offering Performance By Underwriter: Jan. 1 - Dec. 31, 2010 301U.S. Public Offering Performance By Underwriter: Jan. 1 - Dec. 31, 2010 303Lead Underwriter Performance on All U.S. Offerings: Jan. 1 - Dec. 31, 2010 305Lead Underwriter Performance on All U.S. Offerings: Jan. 1 - Dec. 31, 2010 306Underwriters’ Performance on IPOs: Jan. 1 - Dec. 31, 2010 307Underwriters’ Performance on IPOs: Jan. 1 - Dec. 31, 2010 308Underwriters’ Performance on IPOs: Jan. 1 - Dec. 31, 2010 309Stock Performance 3112010 U.S. Biotechnology Stock Report 3132010 British Biotechnology Stock Report 3152010 Canadian Biotechnology Stock Report 316Restructurings 317Biotech Restructurings, Scale-Backs, Bankruptcies 319Lawsuits 325Biotech Lawsuits: Jan. 1 - Dec. 31, 2010 327viii BioWorld® State of the Industry Report 2011
  10. 10. BioWorld® BIOTECHNOLOGY S TAT E O F T H E INDUSTRY REPORT 2 0 1 1BioWorld® State of the Industry Report 2011 9
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  12. 12. BioWorld® A N A LY S I SBioWorld® State of the Industry Report 2011 11
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  14. 14. State of the Industry: AnalysisBiotech ‘Just Deals With It’ in 2010By Michael J. HarrisExecutive Editor, Market Reports Recession begets lost revenue, begets exit-less strategy, Just as breaking up with a friend is almost painlessbegets displeased investors, begets downsizing, begets compared to the consequences of ending a marriage; it’s amore bad news down the line, until . . . catastrophe! Well, at lot easier to get out of a bad partnership than it is to negateleast in the automobile, housing and financial industries. the adverse cost of an incompatible acquisition. Some primary metrics in the biotechnology industry, This pharma trend-in-the-making will undoubtedlyparticularly number of deals and financing investments, take some steam out of the biotech exit strategy model, butwere officially down – but far from taking the market out of would not appear to have enough sway to critically dampenbalance or significance. down the prospects for biotechnology market growth, nor Biotechnology, with significant participation from big will it likely diminish biotech’s capacity to attract pharmapharma, embarked upon a unique biopartnering strategy suitors to contribute money and resources for its innovationlong ago that has endured through everything from biotech’s engine. The less-is-better attitude regarding M&A deals willindustry startup through the 21st century recession. And change the way things are done in the biopharma transactioneven though it may be undergoing a slight retooling in 2011 , milieu, but ultimately, the most practicable scenario thatas pharma vows to rely less on M&A as a coping strategy, that unfolds will that the M&A reticence will kindle and ignite abusiness relationship dynamic is still the keystone of both swell of activity in the less risky alternative of engaging inmarkets’ stability in the present economic environment. biopartnering transactions. Biopartnering is less an “I don’t need anyone else” An ongoing trend is observably unfolding in the market,strategy that is broadly employed in most other major as we have seen the acquisition, on average, of one large capmarkets, and more of a “let’s exploit the sum of our parts” biotech per year over the past few years and that theme hastactic. Deal-making in biotech remains almost exclusively legs, based on general industry buzz and projections thatuncopied in other markets, based not on competition of infer the futures of just about every biotech frontrunner totriumph over rivals, but on an undertaking to use the core be under big pharma M&A consideration. Market-leadingstrengths of all involved. biotechs such as Biogen Idec Inc., Human Genome Sciences Have you ever heard of Ford Motor Co. and General Inc., Amgen Inc. and Gilead Sciences Inc. seem to be onMotors Co. putting their too-big-to-fail heads together and someone’s list of most likely candidates to be acquired inproducing a product to wring market share in a competitive the current market environment. Those companies thatenvironment? Unlikely, as almost every market outside of are undergoing restructuring measures to identify anddrug development is a go-it-alone universe, rather than the cut back money-leaking aspects of their operations areelementary sum-of-our-parts model employed by biotech particularly attractive to the big pharmas that are still in theand pharma. biotechnology shopping mall. Wal-Mart and Target collaborating to market a better Biotechnology still has that sheen of innovation thatanything? Only in biotech! pharma is, at least, years away from mirroring. Although That’s how hundreds of the top-selling drugs were biopartnering is down, as shown by the data in the Dealsbrought to market, to millions of patients and by the billions chapter, in 2010 and market growth is not breaking recordsto investors. It is difficult to find a drug that has no deal in thus far in 2011 , the observable panic verifiably resides inits history. Looking at the BioWorld Top 25 Biotechnology pharma, not biotech. If biotech feels the need to worry aboutDrugs list for 2010, those 25 drugs split $84.292 billion in something, its speculative apprehension should focus on theprofit among partners, up from 2009 total of $76. 168 billion, potential of pharma to overreach in its endeavor to correct itsa 10.7 percent increase. And it is practical to consider that M&A appetite. In an effort to recover from its overindulgencenone of these therapeutics would be approved without the in biotech prix fixes, big pharma could refuse to pull theintervention of that business expedient. trigger on sound deals that might be advantageous, but would be considered “too soon” after the fallout from its M&A binge.As M&A is Out; Partnering Is in . . . Even More Even that scenario, which absolutely will not The new attitude of pharma that is guiding the senior marginalize the stride of biopartnering, is also not likelymarket to stop trying to be biotech and, instead, just try to to enduringly capsize the biopharma M&A model. Thatbe like biotech, is news that will reverberate throughout 2011 outlook is attributable to the broad industry professionaland influence industry behavior, activity and performance.BioWorld® State of the Industry Report 2011 13
  15. 15. acknowledgement and projections citing biotechnology as prognostications are, VCs still prefer biotech above all otherthe drug market of the immediate future. markets on a par with the all-the-rage high technology In gradual-to-overdrive progress since the turn of the market. Biotech’s cup may not be running over and it’scentury, biotech’s rise is slowly wresting revenue market not exactly a glass-half-full/half-empty parable, so let’sshare from pharma’s 100-year grip in the drug development just agree to acknowledge that biotechnology seems tomarket, but is taking over the pace of drug development at have weathered the economic storm and is navigating itsa breakneck pace. BioWorld data reveal that biopartnering aftermath are averaging more than one deal per day over most Usually, market leaders of the pack receiveof this 11-year-old century and that by mid-decade, more than acknowledgment, but biotech was founded to go againsthalf of the top 100 revenue-generating drugs will be biotech the grain of convention and has since been a risky market.products. That news implicates pharma’s current interest, But if you think about it, there has been nothing in its historyreliance and participation in the biotechnology market, to date – decisions, circumstances, misfortune, competition,as well as implying the practicality and probability of its etc. – that has appreciably affected the progress of biotech’sbiopartnering involvement going forward. maturation and value. Since 2010 was a flat-to-moderate Deals may be down, M&As may be in for a respite and growth market year in many essential biotech metrics andVC financing may be idling at a yellow-light intersection; was far from being the worst year, despite some cause-for-however, biotechnology drug revenue is on a decade-long concern issues that linger into 2011 , it’s practical to presumestreak of increasing value, the valve on its innovation spigot measured success in 2011 and assume market growthis stripped open, and no matter how dire the financing dominance beyond that, on schedule. Revenue of the Market-Leading Biotech Drugs in 2010 Rank Drug name (maker) Indication 2010 Revenue 1 Avastin (Roche) Colorectal cancer, non-small-cell lung cancer $7,212M 2 Rituxan (Roche) Non-Hodgkin’s lymphoma, rheumatoid arthritis $7,077M 3 Humira (Abbott) Rheumatoid arthritis, psoriatic arthritis $6,548M 4 Herceptin (Roche) Breast cancer $6,045M 5 Lantus (Sanofi-Aventis) Types I and II diabetes $4,883M 6 Remicade (J&J) Crohn’s disease, ankylosing spondylitis, arthritis, ulcerative $4,610M colitis, rheumatoid arthritis, plaque psoriasis 7 Gleevec (Novartis) Chronic myelogenous leukemia, gastrointestinal stromal tumors $4,265M 8 Neulasta (Amgen) Infection associated with chemotherapy-induced neutropenia $3,558M 9 Enbrel (Amgen) Rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis, $3,534M plaque psoriasis 10 Copaxone (Teva) Multiple sclerosis $3,316M 11 Taxotere (Sanofi-Aventis) Breast cancer, non-small-cell lung cancer, prostate cancer, gastric $2,953M cancer, squamous cell carcinoma of the head and neck 12 Atripla (Gilead Sci) HIV $2,927M 13 Truvada (Gilead Sci) HIV $2,650M 14 Epogen (Amgen) Anemia $2,524M 15 Avonex (Biogen Idec) Multiple sclerosis $2,518M 16 Aranesp (Amgen) Anemia $2,486M 17 Rebif (Merck Serono) Multiple sclerosis $2,323M 18 Alimta (Lilly) Lung cancer $2,209M 19 Erbitux (Lilly) Colorectal cancer, head and neck cancer $2,192M 20 Humalog (Lilly) Diabetes $2,054M 21 Procrit/Eprex (J&J) Anemia $1,934M 22 Cialis (Lilly) Erectile dysfunction $1,699M 23 Betaseron (Bayer Sch) Multiple sclerosis $1,681M 24 Lucentis (Roche) Wet age-related macular degeneration, macular edema $1,621M following retinal vein occlusion 25 Tarceva (Roche) Pancreatic cancer, non-small-cell lung cancer $1,473M Source: BioWorld research.14 BioWorld® State of the Industry Report 2011
  16. 16. Biopartnering’s Impact and Value is Evident in The FDA has finally been given the authority to regulateDrug Revenues biosimilar versions of biotech brand drugs, but cannot Innovation may be where the drug development perform its legislated duties until the agency acquires thecycle begins, but commercialization is where it pays off. know-how to confidently determine just what constitutesNo matter how you look at it, big pharma’s imprint is all a biosimilar. The agency has the green light, but cannotover the final round of the process, with 18 of the top 25 find the pathway. In drug development, it seems to bedrugs bearing the names of pharma companies as the drug increasingly possible that it could take as long to enactdeveloper. relative legislation as it takes to develop a drug to market The drug is still the prize in biotech and the top- stage. Is it practical to think that the approval process forselling list of drugs in 2010 features 23 of the top revenue- each biosimilar submission will be addressed differently . . .generating drugs from the 2009 list, with only Roche’s sort of a personalized medicine approach to drug approval?Tamiflu and Amgen’s Neupogen dropping off and being But this may be rightfully so since biosimilars are slightlyreplaced by two other Roche products: Lucentis and modified versions of the drugs they aim to copy, unlikeTarceva. generics, which are exact duplicates. This difference will Each of the top four drugs, (Avastin, Rituxan, Humira likely be played out in patent wars as well as regulatoryand Herceptin) increased its revenue by more than $1 billion paths yet to be defined.over 2009 totals. All but three drugs (Enbrel, Aranesp andProcrit/Eprex) showed revenue increases compared to From the Bench: The ‘I’ Word Seeks to Offsettheir 2009 totals. the ‘P’ Word Considering its status as a pharmaceutical company, it An examination of the bench stage of R&D indicatesmay seem strange that Roche is poised to rule the biotech that the science of discovery is as vigorous as usual.drug list for the most of the present decade. The owner of Likewise, as usual, is that the bench is miles and years awayGenentech Inc. has five drugs on the top 25 list, including from the market.the top two, and three of the top four spots, and its Avastin The bench phase in the drug development cycleis projected to lead the pack through mid-decade on the is fueled by ideas, proof-of-concept and the dreadedway to becoming biotech’s first-ever $10 billion drug. designation of “potential.” In other words, it is as far from the market as an investor or R&D program can be . . . andWashington: Incredibly Busy, but no Finishing typically, much too far from commercialization to even thinkTouch about proffering the slightest guarantee of success. No one Some long-standing, critical things finally got done, is going to be persuaded into buying into a scientific paperbut did not get finalized. Do patent reform, biosimilars with the hope of overnight riches.and health care reform ring a bell? If not, there’ll be time in The potential of genomics research provided “first-time-2011(and perhaps beyond) to catch up on the relative, and ever” news of disease marker identification gene function inenduring, goings-on in those imperative market-bearing vital indication markets such as cancer on a consistent basis,issues. and even had revolutionary synthetic genomics success in Government flexed its muscle, flashed its badge and kick-starting the cellular cytoplasm process form man-madepounded its gavel on some of the industry’s most powerful genomes.companies on many occasions throughout the past year, The stage of biotechnology science discovery is muchdoling out verdicts, rejections, warnings and penalties more than concepts, but it is, even more than that, alsofor a host of proceedings, applications, shortcomings a lot less than a product. Although it may represent theand deceptions in matters involving manufacturing plant hardest sell in the drug development world, innovation atviolations, denial of obesity drug approval applications, the concept stage is, nonetheless, a powerful drug itself tounscrupulous marketing practices, patent infringement agencies, nonprofits and financiers with a vested interest inand more. particular disease indications and it even have occasional It was better to be a brand maker than a biogenerics appeal to patient investors with more altruistic or long-drugmaker, as 2010 proved to afford another year of market range pecuniary motives. The discovery phase continuedexclusivity, due to the omission of a successful conversion in 2010 to churn out bright ideas, present ground-breakingof biosimilars law into regulatory implementation. papers and display positive clinical results, not the leastThe law was passed, but the formula for biosimilar of which was the big news in CAPRISA 004 that produceddetermination remains muddled by matters of bureaucracy the historic evidence of a microbicide that showed efficacyand uncertainty, while patent-holding drug companies in helping to prevent sexual disease transmission. And notindefinitely reap market-share-as-usual profits, even just any sexual disease, rather HIV, a disease that has largelybeyond patent expirations in some cases. defied clinical therapeutic containment endeavors.BioWorld® State of the Industry Report 2011 15
  17. 17. Innovation has never been one of biotech’s character many of the previous years, that the biotech market mightflaws. Its Achilles’ heel is strictly on the clout-cash-and- be apt to regain some of its vim. At the least, there wereresources back end of the drug development process. But as enough indicators to show that the market definitely hadlong as biotech continues to produce a glut of innovation, as not lost its will to the protracted slump that has suffocatedit did in 2010, something will stick to the wall and attract the many of its constituent companies, damaged its fundingpartner with the corresponding interest, the philanthropist capacities and deflated a substantial amount of thewith the apposite passion, the investor with the considered European biotechnology market’s R&D energy.instinct – and if all else fails – the government agency As more evidence that deals have emerged to be thecharged with funding the most gifted undeveloped distinguishing dynamic that anchors the global market andresearch and the most talented researchers with nascent may be even be an intervening factor in the re-emergenceprograms. of the European market, the pharma industry is candidly And a couple of the year’s most prominent story lines – acknowledging the value of biopartnering and adoptingone involving unreliable data from longevity predictor gene the new model of less upfront “signing bonus” risk, withstudies and the other culminating with the implosion of a more deference to the milestone, or back-end-laden, pay-well-known autism study – reminded that biotechnology for-results deal model. This is a model that would make theresearch is also in the invalidation business, in which it European market less of a risk to edgy pharmas that haveidentifies and challenges dubious theories and refutable become very judicious in that market. An anticipation ofscience, ideally before extensive time and resources are more brisk collaboration activity comes with the optimismcommitted to problematic research agendas. that more clinical successes will be the payoff. Europe has been under-productive in the clinic andBudget Cuts for Science’s Key Funding underfunded in the market for so long that risk hasAgencies Could’ve Been Worse become the four-letter word no one is willing to chance. The science R&D/funding arm of the U.S. government As the funding opportunities retract, it stands to reasondid not completely escape the budget-cutting swath of that in-house talent will be downsized and the ability tofederal legislation, walking away with some funding intact. compete for the best available external talent will severely The past-the-11th-hour budget deal agreement reached compromised. That is one principal consequence workingin April 2011 on Capitol Hill to keep the government from against that market now and looms to be a corollary effectshutting down included millions of dollars in funding cuts whenever that market would eventually begin to make afor several major science-funding agencies. However, that profoundly perceptible comeback move.chagrin is mitigated by the fact that the cuts affecting However, the public acknowledgement of a commitmenthealth science R&D were not as deep as initially proposed. by pharma to risk-averse biopartnering as the latest go-to The National Institutes of Health now faces a reduction dynamic that will be pursued to turn things around on theof $260 million, but that is markedly less than the $1 .6 continent, is at least a tactic that has a chance to provide anbillion figure that was earmarked for slashing in an earlier upside in a stalled market.bill that was passed by the House of Representatives. The Perhaps the biggest bad news from Europe was theDepartment of Energy’s Office of Science will undergo a spate of devastating late-stage clinical failures and new$20 million budget cut under the latest bill, compared to drug application rejections that hit that market. If that trendan $866 million reduction in the earlier House version (H.R. continues in 2011 in this already-precarious market, it would1), while the Centers for Disease Control and Prevention, be a crippling blow to any chance for a timely market-widenow faces a $730 million cut in funding, instead of the recovery in Europe.H.R. 1 amount of $1 .4 billion. None of the key agencies Baby steps are usually the first phase in any recovery,received their traditional budget increases, but the cuts so positive indicators such as Europe’s head start on theto their budgets that endow research grants and advance U.S. market in stem cell technology, clinical trial potentialinnovation started out as a threat of much more austerity. shown in under-addressed disease indications and a focus on orphan drug R&D opportunities, might not be primedIs the Sky Still Falling in Europe? to deliver the blockbuster success that the European Queue the soundbite: “This could be the year that biotechnology market most needs, but they may beEurope turns the corner, depending on a few factors such sufficient to attract enough funding, pharma deals andas . . .” clinical trial advances to persuade the chorus of Chicken For quite a few years, variations on that outlook have Little analysts and expert observers to once again don thebeen the most optimistic viewpoint to which most industry rose-colored glasses.analysts have been guardedly willing to commit. But wait! If You Innovate, They Will ComeIn 2010, there were actually indications, as there were in As far the whole market is evaluated, the menacing16 BioWorld® State of the Industry Report 2011
  18. 18. force of recession and its lingering repercussions and market can still lay claim to: having a prolific sciencelooming ramifications may have sank a number of engine that delivers more innovation than the investmentcompanies and careers and been a substantial part of or R&D markets can manage; being one of the top twobiotech’s story; however growth, profitability, innovation, or three most attractive destinations for venture capitalnew product successes and investor partiality buoyed investment throughout this century; riding a long-termquite a few more companies through the year than were market growth rate that surpassed pharma’s averagelost to the roughness of the pitching market. growth and achieved overall profitability in 2010; and is Despite some declining market indicators in 2010 that poised to incrementally dominate the top-selling drugby and large reflect the economic environment, rather list on its way to becoming the predominant face of drugthan the biotech industry itself, the global biotechnology development in the 21st century. Revenue of the Top Biotech Drugs, 2003-2010 Rank Drug name (maker) 2010 2009 2008 2007 2006 2005 2004 2003 1 Avastin (Roche) $7,212M $5,832M $4,479M $4,070M $2,380M $1,133M $545M (US) 2 Rituxan (Roche) $7,077M $5,705M $5,082M $5,467M $3,881M $1,831M $1,574M $1,489M 3 Humira (Abbott) $6,548M $5,488M $4,521M $3,064M $2,044M $1,400M $852M $246M 4 Herceptin (Roche) $6,045M $4,936M $4,394M $4,809M $3,150M $2,416M $1,591M $2,064M 5 Lantus (Sanofi-Aventis) $4,883M $3,080M $3,159M $3,160M $2,172M $1,476M $1,025M $400M (US) 6 Remicade (J&J) $4,610M $4,304M $3,748M $3,327M $3,014M $2,535M $2,145M $1,729M 7 Gleevec (Novartis) $4,265M $3,900M $3,700M $3,050M $2,554M $2,170M $1,634M $1,128M 8 Neulasta (Amgen) $3,558M $3,318M $3,000M $2,710M $2,288M $1,700M $1,300M 9 Enbrel (Amgen) $3,534M $3,871M $5,982M $5,275M $4,379M $3,673M $1,900M $1,300M 10 Copaxone (Teva) $3,316M $2,800M $2,262M $1,713M $1,414M $1,176M $936M $720M 11 Taxotere (Sanofi-Aventis) $2,953M $2,177M $2,622M $2,941M $2,284M $1,956M $1,747M $1,577M 12 Atripla (Gilead Sci) $2,927M $2,382M $1,570M $903M $206M 13 Truvada (Gilead Sci) $2,650M $2,490M $2,110M $1,589M $1,190M $568M $68M 14 Epogen (Amgen) $2,524M $2,569M $2,456M $2,489M $2,511M $2,455M $2,600M $2,400M 15 Avonex (Biogen Idec) $2,518M $2,323M $2,203M $1,870M $1,710M $1,540M $1,417M $1,168M 16 Aranesp (Amgen) $2,486M $2,652M $3,137M $3,614M $4,121M $3,273M $2,500M $1,600M 17 Rebif (Merck Serono) $2,323M $2,062M $1,668M $1,912M $1,452M $1,270M $1,091M $819M 18 Alimta (Lilly) $2,209M $1,706M $1,155M $854M $612M $463M 19 Erbitux (Lilly) $2,192M $1,594M $1,457M $1,430M $1,100M $413M $261M 20 Humalog (Lilly) $2,054M $1,959M $1,736M $1,475M $1,300M $1,198M $1,102M $1,021M 21 Procrit/Eprex (J&J) $1,934M $2,245M $2,460M $2,885M $3,180M $3,324M $3,589M $3,984M 22 Cialis (Lilly) $1,699M $1,559M $1,445M $1,144M $971M $747M $552M $203M 23 Betaseron (Bayer Sch) $1,681M $1,647M $1,439M $1,586M $1,311M $1,046M $941M $926M 24 Lucentis (Roche) $1,621M $1,342M $1,076M $1,110M $535M 25 Tarceva (Roche) $1,473M $1,461M $1,361M $1,189M $911M $434M NOTE: Some figures not originally reported in U.S. dollars. Exchange rates used for conversion were for that year. SOURCE: BioWorld research from company press releases and SEC filings. Companies and/or drugs not reporting drug sales in SEC documents may be excluded.BioWorld® State of the Industry Report 2011 17
  19. 19. Financings: A ‘Year in Transition’Biotech’s IPO Rally Counters Tough Markets, R&D SetbacksBy Jennifer BoggsAssistant Managing Editor With the realization that a rapid and painless economic so few buyers, it’s not really a market at all; it’s more of a club.”recovery was a mere pipe dream, 2010 brought biotech a In the year ahead, it will come down to whether themixed bag. While fundraising was up from 2009 – and the venture community can gain access to new money. Flemingindustry celebrated the creaking open of the initial public isn’t optimistic, but a few funds did manage to scrapeoffering (IPO) window – the year also was defined by a together some new cash last year. In fact, 2010 ended withnumber of surprising regulatory setbacks. reports that new firm Longwood Founders Management LLC But first, the good news. managed to raise $85 million in an inaugural fund, with the Overall, the industry managed to raise a healthy chunk aim of backing early stage innovation.of capital. BioWorld Insight reported public and privatefinancings totaling $19.3 billion for the year, up from the A Small [IPO] Window of Opportunity$17.6 billion in 2009, though that figure is still a far cry from Probably the best news of 2010 was the opening of the IPOthe $24.8 billion raised back in the pre-economic-meltdown window, following nearly two years of no IPO exits for biotech.year of 2007. BioWorld Insight reported that 19 biotechs priced on global “2010 wasn’t a horrible year, in terms of aggregate markets last year and, altogether, those offerings brought indollars,” said Glen Giovannetti, global biotechnology leader about $1 2 billion and averaged about $64 million per offering. .and Ernst & Young LLP. “But the trend continues of investors The downside was that nearly every company priced belowbeing very selective.” its anticipated range and most traded down after hitting the Private company financings were up slightly in 2010 – $4.5 market. A handful also ended up having to return to public orbillion vs. $4.3 billion in 2009. The largest venture rounds in private investors later in the year for additional capital, such as2010 included Reata Pharmaceuticals Inc., which added $78 AVEO Pharmaceuticals Inc., of Cambridge, Mass., which raised amillion in a Series G round aimed at giving the Irving, Texas- $61 million PIPE less than seven months after pricing an IPO atbased company enough runway to get its chronic kidney about a 35 percent discount to its target price.disease drug bardoxolone to the FDA. Redwood City, Calif.- And the IPO market became more uncertain as the yearbased Pearl Therapeutics Inc. also had success reaching out wore on. Fourth quarter IPOs seemed particularly harsh. Paloto new investor Vatera Healthcare Partners, which led a $69 Alto, Calif.-based Anacor Pharmaceuticals Inc. slashed itsmillion Series C round in October. offering price to $5 (from the hoped-for $16 to $18 range) and Breaking it down by round showed that 55 firms closed raised the number of shares from 4.7 million to 12 million. Anddesignated Series A financings in 2010. Total Series A funding San Diego-based specialty pharma firm Zogenix Inc. had hopedreached $774.7 million for the year. (Two companies did to sell 6 million shares priced between $12 and $14 each, butnot disclose amounts.) BioWorld Snapshots showed that 52 had to settle for pricing 14 million shares at a mere $4 each.firms raised a total of $1 . 1 billion in Series B rounds, while 30 But the rash of steeply discounted IPOs that ended 2010companies pulled in about $727.9 million in Series C funding left Forward Venture’s Fleming to believe that the windowfor the year. Eighteen firms closed Series D or later-stage is closing. “And as the window closes, strong companiesrounds, raising a total of $447. 1 million. step back. They can afford to wait,” he said. “It’s the weaker Yet, going forward, industry experts continue to expect companies that have no choice and end up being veryventure capital to contract, especially as many funds start to vulnerable to the monopolistic pricing.”reach – even exceed – their decade marks. So far in 2011 , similar stories are playing out. Four Stan Fleming, managing member at Forward Ventures, biotechs went public on Nasdaq in the first quarter – AcelRxsaid he thinks the venture community is in for a tough Pharmaceuticals Inc., Pacira Pharmaceuticals Inc., Endocyte2011 . “The overall macroenvironment is showing signs of Inc. and BG Medicine Inc. – and all slashed their offeringimprovement, but biotech is still locked in the depths of the prices by considerable margins. And Clarus Therapeuticsgreat recession. And, for the bio venture community, it’s more Inc. opted to postpone its IPO in February, citing unfavorablelike the great depression,” he said. market conditions. There’s less new money in the private market these days, As of March 31 , 13 firms have pending IPOs, and someleaving many syndicates to rely on inside rounds. And most of remain optimistic that the window will remain, thoughthe venture money remains in the hands of a few. “It’s a pretty perhaps not widely, open for additional firms to squeakinefficient market in the first place,” Fleming added. “But with through.18 BioWorld® State of the Industry Report 2011
  20. 20. “I think we’ll see a similar number of companies [price a positive recommendation by the European Committee forIPOs in 2011], but stronger companies,” said Jack Florio, an Medicinal Products for Human Use. InterMune’s stock priceinvestment banker at Brinson Patrick Securities. increased 179 percent over 2009. E&Y’s Giovannetti agreed. “It’s not going to be a bull rush,” Others weren’t so lucky. Another FDA surprise, thehe noted, but for companies in Phase II- or Phase III-stage rejection of once-weekly GLP-1 drug Bydureon (exenatide),development, with validating partnerships and a solid R&D sent shares of partners Amylin Pharmaceuticals Inc. andplan, the IPO will remain a possible exit. Alkermes Inc. falling. And the long-awaited obesity drugs For companies already established on the public markets, failed to get past the agency. Arena Pharmaceuticals Inc.,most were able to go to investors when they needed in 2010, which boasted only an early stage pipeline beyond obesitywith 72 follow-on offerings last year vs. 54 offerings in 2009. candidate lorcaserin, was one of the biggest decliners of theBut the amounts were more conservative. In 2010, follow-ons year, sinking about 52 percent.raised $5.6 billion and averaged $78. 1 million each, while Other decliners included Affymax Inc., which fell 73fewer offering in 2009 brought in $6.5 billion and averaged percent for the year, primarily due to disappointing safety$120.5 million each. data in its top-line results for anemia candidate Hematide, But in 2010, biotech also began embracing some of the the drug it was hoping to position against Thousand Oaks,financing vehicles that have been used for years in other Calif.-based Amgen’s Aranesp (darbepoetin alfa). RNAi firmindustries, Florio said. Brinson Patrick recorded 25 at-the- Alnylam Pharmaceuticals Inc. also declined last year – by 44market financings in 2010 compared to only nine the year percent – after Novartis AG declined a $100 million option tobefore. And equity credit lines continued to be a popular all of Alnylam’s targets under the firms’ collaboration, andflexible financing tool, with about a dozen of those in 2010. partner Roche AG announced in November that it planned to discontinue efforts in RNAi. Cambridge, Mass.-based AlnylamBiotech and Wall Street in 2010 also cut its staff by 25 percent in September. Stock activity in the always-volatile biotech industry hadits ups and downs in 2010. As a whole, the industry held its Industry Remains in Cost-Cutting Modeown. The AMEX Biotech Index jumped 37.7 percent over 2009, As in 2009, last year saw more than its share of dramaticwhile the Nasdaq Biotech Index gained 15 percent. Biotech restructurings, and those cuts left firms leaner and forcedheavyweights Celgene Corp. and Amgen Inc. remained fairly many to cut programs that either weren’t producing or weresteady, up 6 percent and down 3 percent, respectively. too long term. Gilead Sciences Inc. dropped 16 percent in 2010, while Basel, Switzerland-based Roche’s RNAi exit, whichBiogen Idec Inc.’s stock gained 25 percent over 2009. Genzyme resulted in a 6 percent workforce reduction – about 4,800Corp., coming off a disastrous 2009 on manufacturing employees – represented more than half of the roughlytroubles related to its leading enzyme replacement therapies, 7,600 jobs lost in 2010, according to BioWorld Snapshots. Thatrebounded in 2010, jumping 45 percent for the year due to figure compares to about 5, 100 jobs cut in 2009. While fewerSanofi-Aventis SA’s buyout bid. Cambridge, Mass.-based companies reported cutbacks in 2010 – 33 vs. 85 – biotechGenzyme and Paris-based Sanofi finally reached a $20. 1 executives still faced realizations that they would need tobillion deal, plus contingent value rights largely connected to concentrate resources on only the most advanced promisingthe success of multiple sclerosis candidate alemtuzumab, in candidates.February. South San Francisco-based Exelixis Inc., for instance, Unlike 2009, the big stock winners of 2010 weren’t easy dropped work on all of its internal programs except for XL184,to spot. In 2009, the industry had Human Genome Sciences a dual MET/VEGFR inhibitor that yielded stellar Phase II data.Inc., which saw its stock surge more than 1 ,000 percent on And Biogen Idec Inc., of Cambridge, Mass. said in Novemberpositive late-stage data for now-approved lupus drug Benlysta that it was moving out of the cardiovascular and oncology(belimumab), and Dendreon Corp., which soared following arenas to focus more efforts on its more lucrative franchises,approval of the first cancer vaccine Provenge (sipuleucel-T). including multiple sclerosis. Regulatory triumphs were harder to come by in 2010. Companies could continue to make cutbacks in 2011 ,In fact, drug approvals were down – 21 biologics license but it’s unlikely the wave of restructurings that plagued theapplication and new molecular entity approvals last year vs. industry over the past two years will continue. If 2010 taught26 in 2009 – though part of that was due to fewer companies the sector anything, it’s that capital efficiency should be afiling for approval in 2010. long-term strategy rather than a short-term solution. But the FDA stunned Wall Street in May by rejecting “It was a year in transition,” said Brinson Patrick’s Florio.InterMune Inc.’s idiopathic pulmonary fibrosis drug “In 2009, folks were scrambling to survive and just waitingpirfenidone, though the Brisbane, Calif.-based firm ended up for everything to get back to normal, but this is the newas one of the sector’s biggest gainers for the year, thanks to normal.”BioWorld® State of the Industry Report 2011 19
  21. 21. The View from WashingtonUncertainty Clouds Health Care Reform, FDA Approval ProcessBy Mari SerebrovWashington Editor From beginning to end, 2010 was riddled with uncertainty, and restrict substitution, which would set up a systemespecially in Washington, D.C. encouraging multiple competing brand biologics with no Take the Affordable Care Act (ACA), the health care reform competition from biogenerics.legislation passed last spring amid much fanfare among the Because of the iffyness of this regulatory latitude, someDemocrats in the 111th Congress. The law promised biotechs companies have continued following the old route, pursuinga biosimilar pathway with 12 years of exclusivity, a share of biologic license applications (BLAs) for their biosimilars,$1 billion in R&D tax credits and grants, and a bigger market rather than chasing down the new 351(k) pathway. Tevadue to expanded health insurance coverage. Pharmaceuticals, for instance, filed traditional BLAs for In exchange, biotechs would have to be more upfront two biosimilars, its granulocyte-colony stimulating factorabout conflicts of interest and cough up some of the $90 product and its Neupoval version of Amgen Inc.’s Neupogen.billion in taxes that would be levied against pharmaceutical Merck scrapped plans for MK-2578, a biosimilar tocompanies over a 10-year period. Amgen’s Aranesp, after the FDA said it would require trials From the outset, the voluminous law was punctuated evaluating the cardiovascular effects of the drug. But Merck,with question marks. Namely, could it survive a court battle? hoping the agency would be less rigorous in what it requiresToday, several states are challenging the constitutionality of from other biosimilar candidates, said it expected the newmandating health care coverage, the linchpin of the act, all abbreviated pathway to help it get its remaining portfolio ofthe way to the Supreme Court. If that part falls, the entire law biosimilars to market.could be rendered void because Congress didn’t include a The fact that Sandoz had to sue to get the agency to act onseverability clause. (Such a clause permits a part of a law, if its biosimilar growth hormone Omnitrope and consideringdeemed unconstitutional, to be removed while keeping all that the Office of Generic Drugs sat on abbreviated new drugother provisions intact.) applications (NDAs) for three generic versions of Sanofi- Regardless of what happens in the courts, the 112th Aventis SA’s blood thinner Lovenox (enoxaparin) for moreCongress, which has more of a Republican complexion, than five years, had industry experts predicting it would beis trying to undo various parts of the bill. Even President a long time before the FDA establishes a reliable, predictableBarack Obama has some changes he wants to make. In 351(k) pathway that applicants can use with some confidence.his 2012 budget request in February, the president called Last year, the FDA finally approved Momentafor cutting the exclusivity period for biosimilars to seven Pharmaceuticals Inc.’s generic Lovenox, which it developedyears and prohibiting “evergreening,” a process that would in partnership with Sandoz, the generic unit of Novartisallow brandmakers to tweak their products and receive AG. The agency said the approval process took so longan additional 12 years of exclusivity. Rep. Henry Waxman because it had to determine whether it had the authority to(D-Calif.) also has renewed his fight for shorter exclusivity. review a complex generic drug like Lovenox. It also had to develop criteria to demonstrate the generic’s “sameness” to the brand product, and it had to address potential heparinBiosimilars put into law, but not into practice contamination issues, after tainted products from China While the future of the 12-year exclusivity may be caused several doubt, the entire approval pathway for biosimilars isshrouded in uncertainty as industry waits to see how the FDAwill implement it. The problem is that the ACA doesn’t clearly ACA Raised More Issues than it Resolved in 2010map out a pathway; rather, it gives the FDA a destination and Meanwhile, other provisions of the ACA, should it survivesays, “Go find it.” the court challenges, could remain up in the air because of Thus, the agency is theoretically left with the discretion pressure to curb spiraling federal deficits. In the midtermto approve a biosimilar without any sort of clinical testing elections in November, Republicans swept the House andoutside of basic pharmacokinetic/pharmacodynamic gained seats in the Senate on a pledge to cut governmentstudies and declare it interchangeable with the reference spending.drug – even if it has undefined “minor differences” from the That pledge clouds the chances for getting programsoriginal. such as the Cures Acceleration Network (CAN) funded. However, it also could require strenuous clinical trials The ACA included $500 million in funding for the network,20 BioWorld® State of the Industry Report 2011
  22. 22. designed to speed development of therapies that might in a way that is efficient, predictable and well-coordinatednot otherwise be funded by the marketplace. The big within FDA,” PhRMA said.question now is whether the network will be funded by the Regulatory uncertainty also was reflected in the druggovernment. candidates the FDA rejected. Three widely anticipated Unable to pass a budget for fiscal 2011 , which started new weight loss therapies – Vivus Inc.’s Qnexa, Arenalast October, Congress has kept the government afloat for Pharmaceuticals Inc.’s Lorcaserin and Orexigen Therapeuticsmore than half a year on continuing resolutions (CRs) tied Inc.’s Contrave – were not approved. Instead, the agencyto 2010 spending levels. The CRs don’t include funding for issued complete response letters for Qnexa and Lorcaserin,new programs such as CAN. If the network eventually gets neither of which got the support of the Endocrinologic andbudgeted this year, the National Institutes of Health plans Metabolic Drugs Advisory roll it into its National Center for Advancing Translational More questions were raised when some notable drugsSciences that’s set to open Oct. 1 . were pulled from the market or had their availability severely Another ACA provision that could be undermined restricted: the weight loss drug Meridia, the diabetes drugbecause of funding is the Patient-Centered Outcomes Avandia and the painkillers Darvon and Darvocet.Research Institute, a nonprofit corporation tasked with The future of accelerated approvals also becameidentifying priorities for comparative-effectiveness research dubious as the FDA hardened its stance on the approvals(CER).The health care act mandated that $10 million be set in an effort to avoid potential future problems. The agencyaside in fiscal 2010 to fund the institute, $50 million in fiscal revisited several past accelerated approvals– Roche AG’s2011 and $150 million next year. Avastin for breast cancer, Pfizer Inc.’s Mylotarg for acute The institute became a reality in September when 19 myeloid leukemia and Shire plc’s ProAmatine for orthostaticboard members were named to serve staggered terms. But hypotension.continued funding remains an issue for the corporation In addition, it refused to consider Roche and Immunogencharged with carrying out CER – one of the most contentious Inc.’s trastuzumab-DM1 for accelerated approval, despitemeasures for industry in the health care reform law. the fact that it has shown activity in HER-2 positive breast Fearing that “comparative effectiveness” would cancer patients who have failed multiple courses of priortranslate to “cost effectiveness,” the Biotechnology Industry therapy.Organization fought hard to ensure the act specifically One of the issues the FDA cited with acceleratedprohibited the government from denying coverage solely on approvals was getting companies to come up with thethe basis of CER data. However, the trade group remained follow-up data to support the approval in a timely manner.concerned about how CER would be implemented over time. For instance, Mylotarg was approved in 2000, but Pfizer Some experts worried that CER would create a barrier (then Wyeth) didn’t start the confirmatory studies until 2004.that makes existing products in the marketplace far more In the case of Avastin, the FDA yanked the HER2-competitive while holding newer, more innovative products negative metastatic breast cancer indication becauseto tougher approval standards. four follow-up studies failed to demonstrate that the drug prolonged overall survival in breast cancer. They also didn’tFDA’s Half-Empty/Half-Full Performance confirm the magnitude of benefit originally observed in the Even without CER fully in force, the FDA’s approval randomized, multicenter, open-labeled E2100trial, whichprocess was unpredictable in 2010. Citing a drop in the showed a 52 percent increase in progression-free survivalnumber of applications, the agency approved 21 new in patients treated with Avastin.molecular entities last year, down from 25 in 2009 and 24 The FDA’s Risk Evaluation and Mitigation Strategyin 2008. Although the agency hit or surpassed its 90 percent (REMS) authority is one way the agency could forcePDUFA goal for timely reviews of standard NDAs/BLAs last companies to go to market with plans already in handyear, only 78 percent of priority NDAs/BLAs with 2010 PDUFA for following up on accelerated approvals. But with nodates were reviewed within six months. final REMS guidance from the FDA, and what appear to be That’s worrisome for the pharmaceutical industry, inconsistencies between the 2009 draft guidance and thewhich started negotiating the reauthorization of PDUFA law establishing REMS, drugmakers have been left withoutwith the FDA last year. Before the negotiations began on much user fees and performance requirements for the FDA, The ambiguities increased as the FDA moved towardthe Pharmaceutical Research and Manufacturers of America requiring REMS for classes of drugs last year. In addition to(PhRMA) identified timely review of new applications as a the growing number of REMS, numerous public commentscritical issue. on the draft guidance raised concerns about the costs and “It is essential that new drug reviews be accomplished time-consuming burdens for drugmakers, prescribers and pharmacies involved in implementing the programs.BioWorld® State of the Industry Report 2011 21
  23. 23. Law & Order: Washington - Government Gets An Impending Court Ruling and a Looming Pat-Tough on Drugs ent Reform Bill Have Blockbuster Implications REMS implementation also raised another question: How As if fears of criminal prosecutions, hefty fines andwould monetary fines be imposed for noncompliance?For debarment from federal programs and increased FDAinstance, if a pharmacy or prescriber failed to give a patient authority weren’t enough to worry about, industry alsothe required medication guide, could the drugmaker be fined saw the underlying foundation for several key biotech$250,000 for “every single” medication dispensed without patents seriously threatened in 2010.the guide? In a sweeping summary judgment against Myriad Aside from possible REMS penalties, biopharmaceuticals Genetics Inc., Judge Robert Sweet of the U.S. District Courtfaced a growing danger of criminal prosecution in 2010 as the for the Southern District of New York in Manhattan ruled thatDepartment of Justice (DOJ) stepped up investigations into off- the U.S. Patent and Trademark Office (PTO) had improperlylabel violations and fraud allegations. Drugmakers, including granted seven BRCA gene patents to Myriad because theyAllergan Inc., Novartis AG and AstraZeneca plc, were involved involved a law of nature. If allowed to stand, the decisionin eight of 10 of DOJ’s fraud-related settlements last year. could eliminate the validity of all gene patents. In addition, the government collected about $3. 1 billion Myriad appealed the case, brought in May 2009 by theunder the False Claims Act in fiscal 2010, with about 80 American Civil Liberties Union and a coalition of patients,percent of that coming from health care companies. Many of pathologists, genetic researchers and other scientists thatthe cases resulted from whistle-blower suits. argued gene patents stifle research and competition and To curb off-label promotion and kickbacks, government limit options for medical care.officials proposed using a statute that permits prosecutors The U.S. Court of Appeals for the Federal Circuit isto charge executives with a misdemeanor offense of not expected to rule on the appeal by early fall. But ultimately,acting as a responsible corporate officer if a company fails the issue appears to be destined for the U.S. Supremeto comply with misbranding rules. Court. To strengthen that club, the Department of Health and The ruling came as industry faced a steep patent cliffHuman Services’ Office of Inspector General proposed as patents on several blockbuster drugs began to expire.excluding culpable individuals from future participation Amid pipeline worries, drugmakers had to continue toin Medicare and Medicaid if their company violates off- contend with a long wait to get new patents through thelabel promotion rules. Such exclusion could effectively ban PTO, which struggled with a historic logjam created, incompany officials or staff from the health care industry. part, by Congress raiding patent fees for other purposes. Assigning responsibilities to corporate board members As it had in the past, Congress failed to deliver on itsin corporate integrity agreements could be another remedy. promise of patent reform. However, 2011 could be the year Along with the stepped-up investigations, a rash of the job gets done. The Senate overwhelmingly passed adrug safety issues and manufacturing problems, which led bill that would provide the first substantial reform to theto major recalls, especially at Johnson & Johnson subsidiary patent system in 60 years. Not only does it safeguard theMcNeil Consumer Healthcare, had some members of PTO’s funding, it also would switch the U.S. to a first-to-fileCongress calling for increased authority for the FDA. system, putting it in step with the rest of the world. As chairman of the House Oversight and Government A similar bill, with a few key differences, was introducedReform Committee last year, Rep. Edolphus Towns (D-N.Y.) in the House, but it remains to be seen whether the twoinsisted the FDA should have the authority to automatically chambers will work out their differences. In other words,recall suspect products, rather than having to persuade a the uncertainty continues.drugmaker to do a recall.22 BioWorld® State of the Industry Report 2011
  24. 24. The View from EuropeInvestments Rebounded, But European BiotechsStill UnderfundedBy Nuala MoranBioWorld International Correspondent After the capital-starved privations of the financial biotech (and the only one in the global top 10) into a distractingcrisis, the only way was up for the European biotechnology and very public conflict with the activist investor Elliottsector in 2010. Investment did rebound – venture capital Advisors. The bad news on almorexant followed the failureinvestment in France rose by 56 percent to �148 million four months earlier of clazosentan in a Phase III pivotal trial(US$208.5 million), for example, and there were seven initial in stroke, and the missing of the primary endpoint in a trialpublic offerings (IPO), compared to a mere one in 2009. designed to widen the label of Tracleer (bosentan) beyond But venture capital funding remains lower than before pulmonary arterial hypertension to idiopathic pulmonarythe credit crunch, and with the exception of Zealand Pharma fibrosis in March 2010.A/S, which raised $67.9 million, IPOs were for small amounts It’s clear at this point that the company will be likelyand did not represent exits for the investors. In other words, restructure and rethink its portfolio.the numbers flatter to deceive, with the sector as a whole Similarly, in Denmark the Phase III failure of zalutumumabremaining dramatically underfunded. forced the resignation of one of Europe’s most high profile Yet rising public investment in R&D – in many cases as biotech CEOs, Lisa Drakeman, with the inevitable corporatepart of government economic stimulus packages – means remodeling following in her wake. Santhera AS too, wasEurope’s science base is as strong and superior as ever. hit with a 43 percent fall in its share price when idebenone The most significant advance in 2010 was that the flopped in a Phase III study in Friedrich’s ataxia. And therepharma industry openly acknowledged that flexible, was a first set back for the Austrian vaccines companynimble and innovative biotech companies provide it with Intercell AG, when its Traveler’s diarrhea vaccine failed tothe best route to tapping this resource. The result was yet show significant effect in Phase III. That led to a reductionanother redrawing of biotech business models, to structure in headcount and a 40 percent cut in R&D funding at thecompanies for long-term collaborations with pharma, with Vienna-based company.the aim of an eventual trade sale. These examples highlight the all-or-nothing, binary nature of the whole biotech enterprise and underline that to date few European biotechs have built broad enoughTrial Failures Rock the Sector pipelines, or have deep enough pockets, to withstand a Overhanging this shift is the sector’s endless tango with product flop.risk. The CEO of Zealand Pharma, David Solomon, admittedthe IPO in November 2010 was “tricky” even though thecompany was presenting a relatively low-risk portfolio, with Success in the Clinic Builds Valuelixisenatide, its GLP-1 agonist, having reported success in With very few marketed products, success in the clinicthree Phase III trials in Type II diabetes and partnered with is by far the most important source of value, as evidencedSanofi-Aventis Group. by Zealand’s Pharma’s success in going public on the back The toll that risk takes was underlined by a number of of positive results in the lixisenatide Phase III studies.late-stage failures. In the UK these eviscerated the sector, Thrombogenics NV too, was boosted by two successfulwith three of the best-funded public companies putting up Phase III trials of microplasmin in treating vitreomacularfor sale signs as a result. adhesion, allowing it to raise �56 million in a placing to fund The gene therapy specialist Ark Therapeutics plc has the US and European launch of the product.regrouped and downsized following the European Medicines There were also earlier-stage advances in the clinic forAgency’s rejection of its glioma treatment Cerepro. But companies that are staking ground in new types of therapy,when Antisoma plc’s lead product AS1413 for treating acute such as stem cells. So, for example, after managing to staymyeloid leukemia and Renovo plc’s anti-scarring treatment afloat over five long years of negotiations with regulators onJuvista, failed in Phase III, both companies decided to call it a both sides of the Atlantic and dealing with repeated requestsday in March 2011 . for more preclinical data, ReNeuron plc finally got approval Another high-profile Phase III failure, of the insomnia for the first regulated trial of a fetal stem cell product. ReN001 ,treatment almorexant, has drawn Actelion, Europe’s largest a neuronal cell line, is currently being tested in a Phase I/IIBioWorld® State of the Industry Report 2011 23
  25. 25. trial in stroke at Glasgow University Hospital in the UK. – reminiscent perhaps of waiting for VCs to hand out the Another example of European biotechs applying next tranche of cash in the old days.advances in molecular biology to get a handle on previously In the absence of other funding sources, Europeanuntreatable diseases include Prosensa Therapeutics BV, biotechs have no alternative but to go along with this.which advanced its exon skipping treatment for Duchenne’s As a result, they remain exposed to those convulsions ofmuscular dystrophy (DMD) into Phase III. Also, Trophos SA partnering – the big pharma pipeline review, or one pharmamoved a novel construct it has christened a ‘mitochondrial company being taken over by another – that are impossiblepore modulator’ into a pivotal trial in spinal muscular to plan for, and which make it more difficult for biotechs toatrophy. become self sustaining. So for example, when Roche gave back rights to theOrphan Drugs Increase in Strategic Importance cervical cancer vaccine TG4001 to Transgene in February European biotechs are increasingly looking to orphan 2011 , its share price fell from �15 to �12 – even though thedrugs as a lower-risk route through development. The Strasbourg-based company was getting the product backsignificance of this was underlined in a review of the state with full rights and a Phase IIb trial, paid for by Roche, fullyof play 10 years after the enactment of the European Union’s recruited and yet to report.orphan drugs legislation, which showed R&D relating to There was greater calamity in store for Italian biotechrare diseases increasing as a proportion of total research Philogen SpA in March 2011 , when a sudden change of heartfunding. Orphan drugs also are proving an important route by Bayer Schering Pharma over two antibody programs,for biotechs to tap into a new, non-dilutive source of funding forced the Milan-based biotech to pull a proposed IPO.from medical charities that exist to promote research intothe diseases they represent. Some Inspiration and Cheer for Investors But more potently, the move into rare diseases has Whatever the vagaries of pharma partners and theput European biotechs in a prime position to benefit from reverses of clinical development, a number of companiespharma’s newly kindled interest in the field, which has raised follow-on funding, either as a result of validationseen companies including Pfizer Inc., Novartis AG and of a technology elsewhere, or on the back of their ownGlaxoSmithKline plc form dedicated rare diseases units. progress. The most notable example of reflected glory wasAs a result, orphan drugs have formed the basis of more Transgene’s $181 million June 2010 fundraising, which wasout-licensing and collaboration deals, with Prosensa NV’s inspired by the FDA’s approval of Dendreon Corp’s Provenge$678 million agreement with GlaxoSmithKline for its exon- prostate cancer vaccine.skipping DMD treatment being a prime example. On the back of strong Phase IIb data Karo Bio AB was able to raise $80 million for the Phase III development ofA New Partnering Model eprotirome in familial hypercholesterolemia, while Ablynx While pharma has long recognized the contribution NV raised $68.3 million as it advanced its nanobodybiotech can make to its pipelines, in 2010 pharmaceutical antibody constructs further into the clinic. And Agennix AGexecutives finally came up with a partnering model with took in $105 million for an all-or-nothing bet on its immunewhich they are comfortable. These new model deals modulator talactoferrin, a recombinant version of lactoferrin,typically come with small up-front payments or an equity in treating non-small cell lung cancer.investment, R&D funding for the biotech to carry on doing There were two remarkable financing rounds for privatethe work, milestones, and an option for the pharma partner biotechs, with Symphogen AS raising $131 million in Januaryto in-license products at a later date. 2011 , while in March 2010 Archimedes Pharma Ltd. raised Underlying these deals is the fact that pharma is finally $96.9 million to pay for the commercialization of PecFent, aconfronting and dealing with the diseconomies of scale in its nasally-administered version of fentanyl for treating cancerresearch and development. It no longer wants to go out and breakthrough another company or product and bring it in house. The biggest source of inspiration for investors was This led to high value deals – Galapagos NV’s $374 Johnson & Johnson’s $2.4 billion purchase of Dutch vaccinesmillion osteoarthritis pact with Servier, or its chronic company Crucell NV. Another big ticket acquisition wasobstructive pulmonary disease deal with Roche at $400 Shire’s purchase of gastrointestinal diseases specialistmillion; Orexo AB and Johnson & Johnson’s $585 million Movetis NV for $565 million.collaboration on preclinical modulators; the Cellzome/GSK There was little hard cash changing hands for biotech/$655 million agreement in inflammatory diseases; or NicOx biotech M&A. BTG plc acquired Biocompatibles plc in an all-SA and Bausch and Lomb’s $179.5 million deal in glaucoma. share deal valued at $284.5 million. Biotie Therapies Corp.’s But despite the numbers, such deals can still leave all-share merger with Synosia Therapeutics Holding AG wasbiotech partners hanging on for the next milestone payment tagged at $120 million and Wilex AG picked up Heidelberg24 BioWorld® State of the Industry Report 2011
  26. 26. Pharma AG for $27 million in stock. The European Commission also is very sympathetic There was a rare – old fashioned cash exit for VC to biotechs, offering R&D funding through its Frameworkinvestors in RespiVert Ltd., which was acquired by Centocor Research program. However, the commission has struggledOrtho Biotech Inc. The terms were not disclosed, but to bring about promised regulatory reforms that areImperial Innovations plc, the technology transfer arm of important to the industry, such as improving the currentImperial College London realized $13.8 million from the sale costly and bureaucratic system for getting approvals forof its 13.4 percent stake in the company, for an investment clinical trials, and creating a single European patent.of $3.2 million. The other venture capital investors to cash Critically though, public investment in the science base,in were SV Life Sciences, Fidelity Biosciences and the largest and a desire to see this spawn companies, means that Europeshareholder, Advent Venture. continues to have good flow of start-ups. In 2010 some of these were able to put together impressive first rounds.Governments Maintain Support Syntaxin Ltd, for example, raised $28.6 million, and antibody Europe’s governments remain keen to nurture their start-up Crescendo Ltd. raised $7. 1 million.biotech sectors, and while supportive policies cannot The desired end of all this activity is of course, newmake up for a dearth of private investment for clinical therapies, and 2010 saw approval for three products. Thesedevelopment, they continue to be important in promoting are Archimedes Pharma’s PecFent , Pharming Group NV’sthe formation and development of new companies. Rhucin, a version of human C1 inhibitor produced in the milk This is best exemplified by France, where the government of transgenic rabbits for treating hereditary angioedemasold off shares in the state owned electricity company and and GW Pharma plc’s cannabis-based Sativex, for treatingis investing the money in science-based start-ups. Amongst spasticity caused by multiple sclerosis.other measures, it has set up a combined grant and loan These are all important products serving unmet medicalscheme that allows companies to raise significant sums needs. But they also serve as an important reminder thatagainst predetermined milestones. One beneficiary is NeoVacs at the end of the development pipeline one thing will giveSA, which has a $11 .2 million award for the development of an European biotech solidity and assurance, and that is havingantibody for treating rheumatoid arthritis in patients who marketed products.have become resistant to TNF-alpha products.BioWorld® State of the Industry Report 2011 25