Will Drug Repurposing Mean Healthy Profits?

Includes: CELG, MRK, PFE
by: Investment U

By Tony D’Altorio

In the past, global pharmaceutical companies have struggled to generate profits growth.

A slowdown in core developed markets has done the most damage. But increased government regulations, expiring patents on existing drugs and a lack of new blockbuster ones have all taken their toll too.

To combat such pitfalls, drug companies are moving aggressively into emerging markets. And they’re outsourcing much of their research and development to cut costs.

Additionally, some have adopted the saying “everything old is new again.” By finding new uses for old drugs, they recoup their investment before patents expire and low-cost generic versions launch.

In short, that drug repurposing looks into past trials to see if they treat anything else. These candidates failed in advanced clinical trials for non-safety related issues.

Pfizer and Viagra

Repurposing can work, as Merck (NYSE: MRK) found out with its finasteride, originally used to treat enlarged prostates. But in diluted form, it also works for male baldness.

But Pfizer (NYSE: PFE) has the most famous example so far, with its Viagra.

Generically known as sildenafil, researchers were developing it to treat high blood pressure in the 1990s when they discovered a “side effect.” That find helped define a new disease, giving birth to a new money-making sub-sector for the larger industry.

The original treatment ended up failing, yet Viagra did well all the same thanks to its other use.

Pfizer continued to extend the drug’s market. The company launched it in a different shape, color, dosage, price and brand name – Revatio – for pulmonary arterial hypertension.

Fortunately for Pfizer, recent drugs like Viagra have solid intellectual property rights. This allows developers to fund new trials and find new uses for their drugs.

At times, pharmaceuticals shelve tentative treatments due to scientific uncertainties or small potential markets. Then they forge deals with specialist companies to investigate alternative uses.

Pfizer, for one, forged a partnership with Biovista earlier this year.

Celgene… The Exception to The Rule

Some developers also look for new uses for long-used products. Already widely studied and tested, these drugs typically reduce risk of failure linked to safety concerns.

If they do that, they can still file for “use patents” and market exclusivity from regulators. In effect, some drug companies can monopolize drug compounds for years on end, making it harder for competition to experiment with them.

Of course, where there’s a will, there’s a way, as Celgene (Nasdaq: CELG) knows. It markets a version of thalidomide called Thalomid, a morning sickness treatment withdrawn a half century ago as it caused birth defects.

But Celgene won approval to sell it as a treatment for a leprosy side effect known as erythema nodosum leprosum (ENL). The disease’s rarity in developed countries gave little incentive for rival products.

Celgene won exclusivity from U.S. and European regulators in exchange for operating a tightly-controlled distribution system to ensure the drug wasn’t taken by pregnant women.

Now, it also has approval to use Thalomid to treat multiple myeloma (bone marrow cancer).

Unfortunately though, while Celgene is the exception, it’s hardly the rule.

The Future of Drug Repositioning

BioMarin (Nasdaq: BMRN) recently launched a high-priced version of amifampridine phosphate for the rare autoimmune disease Lambert Eaton myasthenic syndrome. It won regulatory approval and protection as an “orphan drug.”

But then it came under attack for trying to profit from a drug previously available in cheaper, older versions.

BioMarin countered that it was previously “a chemical, not a drug” that had been used experimentally but never properly tested. And, it added, the substance was often unavailable or made to inconsistent standards.

The company now has a $30 million bill so far to show the amount of work it did to bring the drug to market. This just goes to show that repositioning drugs is hardly the easy way, as many other companies will attest.

For companies to discover possible new uses for existing drugs, the government needs to support them more and change existing regulations. Because, without such changes, it will be difficult for pharmaceuticals to make old drugs new again.

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