BioInvestor

What's Happening in Research and Development?

BigPharma, the bulk of R&D spending is "organic." You can compare the R&D spend, quarter to quarter, to get a sense of the impact of a merger on the R&D spend. When you dig through the financials, you'll often find write downs associated with R&D expenditures from the target company in a merger.

I think a good measure of the effectiveness of R&D is simply to look at approvals for new molecular or biological entities for a given company and the revenue generation that such approvals garner.

Pharmaceutical Facts Investors Should Know

d_teller, there's so much to address in your post--a lot of isn't accurate!

First off, I am not talking about food or pet products; I am talking about branded drugs. For the most part, these are manufactured in the US or Canada. About 80% of active ingredients for drugs come from overseas; closer to 90% of intermediates or the chemical building blocks for those drugs are imported. A large percentage of "generic drugs," with the exception of those regulated by DEA, are imported. Pet food, toothpaste and macromolecules are a different issue.

Interestingly, major pharma has started to shut down manufacturing capacity. So, it's likely that, in the future, a greater percentage of active ingredients will be imported.

My guess is that when you state that the FDA and USDA aren't up to the moral challenge of their charters, you're just expressing a personal opinion without supporting evidence for the claim.

I don't understand the reference to AAOAC. Pharmaceutical companies or contract manufacturers create the quality requirements for intermediates or active ingredients, assuming there is nothing in the USP. If you meant to say AOAC, that professional body doesn't have any statutory authority. Analytical chemists in pharma tend to be members of the ACS rather than the AOAC. AOAC doesn’t set mandatory standards.

A blanket statement about carrying out GC-MS doesn't make sense. GC-MS isn't able to address all problems. There needs to be a scientific rational for testing; it doesn’t make sense to talk about GC-MS as a blanket approach to guard against “doping.”

I assume that you don't have evidence to support the claim of pharma companies "sequestered" natural treatments. If it’s a rant, that’s fine. If it’s meant to be serious, then the statement sounds like nonsense. I'd be interested in hearing any evidence to support some of the claims that were made. What exactly is a "systematic standards base"?

You have some (actually perhaps all!) of your facts wrong on the topic PMA lobbying group. You might have meant the PhRMA. The person who heads that association actually retired from the House and not the Senate. Rather than "torpedo" the Medicare Prescription Drug Bill, he actually worked to move the legislation through the House. He was a very strong supporter of the Bill.

Big Pharma Pipelines Failing to Meet Expectations

I’ll add a comment here. It’s an area that would be very, very easy for analysts to investigate: contact manufacturers, specifically companies that produce material for clinical trials, phases I and II. It takes very little investigation to discover that pilot plants—the plants that produce such material—are full. In fact, pilot plants in contract manufacturers haven’t been as full for over ten years. More significantly, perhaps, is that following a surge of investment in the late 90s, there is much more capacity in the industry today than there was ten or more years ago—by a factor of three or more. While a lot of this capacity in the outsourcing industry appears to be dedicated to emerging pharma, it’s significant in that many of these drugs find there way into the pipelines of major pharmaceutical companies. While the short term pipeline of major pharma looks bad, in the longer term, five plus years, I’d be a lot more sanguine about the recovery of the industry.

Pharmaceutical Facts Investors Should Know

Here are a few observations on the discussion. Reduction of the time to market is certainly a concern for pharma and elimination of candidates earlier is an inviting goal. The problem here is that, for all the discussion on the topic, not a lot seems to been done to accomplish this goal. Put another way, productivity in the field has dropped over the past few years. Productivity can be measured by a return on the investment as measured by marketed drugs.

Drug discovery is essentially a multi-variant problem that has to be approached in a linear fashion. The real value would be to work on technologies that extract much more information earlier. While rational drug design sounds inviting—and I am a fan—there are precious few examples of drugs brought to market that have really followed this approach.

The comment on DeCode Genetics is, at best, confusing. On a related topic, I had great hope for the knock-out mice companies. To date, at least, this area has been disappointing, but I remain hopeful. Identifying a gene is important, but that’s only a starting point: there are a few more steps involved—pretty complicated steps—before a drug can be produced. I don’t understand the reference to both Genentech and Amgen. For what it’s worth, both companies follow a similar drug discovery/development paradigm as the legacy pharmaceutical companies, albeit with macro instead of small molecules. However, interestingly, both companies have, in the past few years, introduced small molecules into the pipeline.

There’s no question that many drug candidates come from both government labs and academe. In fact, if you go back and look at the pipeline of BMS for the past fifteen or more years, the company has pretty much discovered nothing: academe and federal labs has been the friend of the company. It is, however, important not to overemphasize the role of government labs. They often get candidates off the blocks; the main expense in development, scale-up, etc. is carried out by the company which licensed the drug.

With regard to the comment on generics, I guess the poster is asking why big pharma just doesn’t lower the price to compete with generic competition. It is an appropriate marketing response; however, it seems that pharma companies what to compete on some form of differentiation—brandi... than on price. Legacy pharma sometimes enters into manufacturing agreements with companies that produce a generic version of a branded drug.

Regarding the equivalence of a generic to the original drug, it is true that they are not the “same.” They are similar. There are a few requirements, but the big issue is bioavailability, which has to be +/-20%. The drug—the active ingredient—has to match the impurity profile of the original. However, the synthetic route can be different, which isn’t a huge issue. The big problem for me is how the FDA handles the manufacture of generic versions of drugs, specifically, if these active ingredients are manufactured overseas. A lot of people are picking on China right now—sometimes unfairly. In the drug industry, the average time between FDA inspections of a US production facility is just over two years; it’s over thirty years in China. There’s an interesting presentation on the issue on the GAO website. I seldom need to take drugs, but, having read company inspection reports from overseas facilities, I insist on branded drugs—not only for me, but for my dogs!