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Biotech industry showing resilience despite challenging conditions

We found this of interest because it has benchmark statistics on the use of specialty injectables worldwide. Specialty is an international issue and has reached mainstream treatment for many chronic conditions including cancers, rheumatoid arthritis, blood disorders, etc.

World’s established centers of biotech activity reach aggregate profitability for first time

New York, 28 April 2010 – The global biotechnology industry was able to weather the continued worldwide economic turmoil and deliver a strong financial performance in 2009, with the world’s established biotech centers reaching profitability for the first time in history. However, the gap between the “haves” and “have nots” in the industry continued to widen in 2009, posing new challenges for emerging companies in accessing the capital needed for R&D. These and other findings were released today in Beyond borders: global biotechnology report 2010, Ernst & Young’s 24th annual report on the biotech industry.

“Biotech companies have long confounded predictions on their ability to survive difficult economic conditions and 2009 was no different,” said Glen Giovannetti, Ernst & Young’s Global Biotechnology Leader. “Companies will continue to face a challenging funding environment for the foreseeable future. The firms best poised for success are those that can seize the opportunities latent in the near-universal need for increased efficiency — from capital efficiency to new approaches to R&D and creative models for funding and partnering.”

Key financial results:

• Companies in the industry’s established biotech centers of the US, Europe, Canada and Australia had an aggregate net profit of US$3.7 billion in 2009, an improvement from the US$1.8 billion net loss in 2008 marking the first time ever that these markets have reached aggregate profitability. This improvement was driven by a dramatic increase in net profit in the US market due largely to the adoption of new cost-cutting and efficiency measures.
• Revenues of listed biotech companies fell by 9% to US$79.1 billion in 2009 from US$86.8 billion the prior year. The bulk of this decline was due to the exclusion of Genentech in 2009 as a result of its acquisition by large pharmaceutical company Roche. If Genentech is excluded from both years, industry revenues would have grown by 8%.
• Capital raised increased sharply in 2009. Companies in the US, Europe and Canada raised US$23.2 billion in 2009, a 42% increase compared to 2008. A significant portion of this capital was raised by a handful of established public companies in follow-on offerings, as access to capital for many companies remained scarce.
• Strategic alliance activity remained robust — in line with the record-breaking totals seen in the last couple of years. On the M&A side, with the exception of the Genentech transaction mentioned above, there were only three acquisitions larger than $US1 billion, due in part to several mega-mergers in big pharma, the buy side of most biotech deals.

“The European biotech community showed great fortitude in meeting the challenges of the economic downturn, with only a small reduction in the number of public companies,” said Jürg Zürcher, Ernst & Young’s Biotechnology Leader for Europe, Middle East, India and Africa. “With R&D funding essentially flat in 2009, European biotechs and their counterparts globally need to balance the need for cost cutting with ensuring they do not impair their ability to be drivers of innovation in the future.”

Adapting to the “new normal”

Biotech companies are now operating in a new normal, where access to capital will remain difficult. With less available capital, venture capitalists are being more selective and reserving funds for existing portfolio investments. Some funding is being directed to finance R&D assets or projects, with potentially faster returns, instead of starting new companies. IPO investors are primarily seeking more mature, de-risked investments, and IPOs are pricing below companies’ expectations. Other public funding is increasingly concentrated in a smaller number of companies. Big pharmaceutical companies still need to acquire promising products for their pipelines, but recent mega-mergers and efforts to exit therapeutic categories have reduced the number of potential buyers for any given biotech asset.

The biggest opportunities in this new normal will come from increasing efficiency: more efficient ways to fund innovation and achieve returns for investors, better outcomes for every dollar of health care spending, and more efficient R&D and operations at drug companies. The Beyond borders report identifies five guiding principles for biotech companies operating in the new normal:

• Seizing funding opportunities. Companies need to broaden the search for capital to include nontraditional (and non-dilutive) sources of funding. Many will need to reset valuation expectations for today’s markets and take funding when it is available.
• Boosting capital efficiency. Companies will need to use scarce capital efficiently. This includes designing studies and trials to “fail faster,” prioritize pipeline assets and work with third parties to unleash operational efficiencies.
• Focusing on reimbursement. The end goal in product development is no longer marketing approval but payor acceptance. Companies need to invest early in pharmacoeconomic analysis to inform R&D decisions.
• Collaborating creatively. The report identifies several innovative partnering structures. Companies’ use of creative partnering approaches could free them from turbulent public markets and give them much-needed resources.
• Developing differentiating assets. There are fewer potential buyers and they are distracted and have fewer resources. To attract partners, biotech firms need to demonstrate what truly differentiates their products or platforms.

Key regional findings:

United States

• The US industry’s net income skyrocketed from about US$400 million in 2008 to a record US$3.7 billion in 2009. The improvement in industry profitability was driven by revenue growth, cost cutting and a change in the accounting rules for acquisitions. The 2009 figures exclude the net income of Genentech, which was acquired by Roche.
• Revenues of US public companies fell to US$56.6 billion in 2009, a 13% drop compared to 2008. When adjusting for the acquisition of Genentech, industry revenues would have instead increased by 9.5%, comparable to 2008 industry growth.
• The value of merger and acquisition (M&A) transactions involving US-based biotech companies (excluding the Roche-Genentech transaction) decreased by half in 2009 to a total of US$14.1 billion. Only three transactions had a value in excess of US$1 billion.
• Total US capital raised by the industry increased by 39% in 2009 to an aggregate of US$18.0 billion.
• Venture capital raised in the US reached US$4.6 billion in 2009 – the second-highest total in history, behind only the record US$5.5 billion raised in 2007.

Europe

• Revenues of European public biotechs grew 8% to €11.9 billion, well below the 17% growth seen in 2008.
• The combined net loss for biotechs in the region fell from €913 million in 2008 to only €288 million in 2009, driven by cost cutting, the elimination of unprofitable companies and strong net income growth at some large European biotechs.
• The value of M&A activity in Europe declined from €3.1 billion in 2008 to €1.8 billion in 2009
• Total funding for the European industry increased 48% in 2009, to €2.9 billion.
• Venture capital raised in Europe totaled €800 million, a 21% decrease from the previous year, and the lowest level since 2003.

Canada/Australia

• The Canadian biotechnology industry raised more than US$733 million in 2009, an increase of $US255 million.
• Revenues of the Australian publicly traded biotech industry reached US$3.72 billion, a 7% increase from 2008 but significantly lower than the 26% growth rate achieved in 2008.

About Ernst & Young’s Global Life Sciences Center
Ernst & Young’s Global Life Sciences Center brings together a worldwide team of professionals to help life sciences companies address their challenges at every stage of development. From the emerging biotech or medtech firm to the well-established, global pharmaceutical company, our industry teams bring deep experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify implications and develop points of view on relevant industry issues. Whether it’s forming innovative alliances, improving operations, new regulations or exploring new markets, we can give you a clear perspective on how to drive value in an increasingly complex, competitive and risk-driven environment. It’s how Ernst & Young makes a difference.
For more information, please visit www.ey.com/lifesciences or email globallifesciences.center@ey.com.

About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 144,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com

This news release has been issued by EYGM Limited, a member of the global Ernst & Young organization that also does not provide any services to clients.

Craig S. Stern, PharmD, MBA
President
Pro Pharma Pharmaceutical Consultants, Inc.

Norway conquers infections by cutting use of antibiotics

We found this article to be of particular interest, because it describes a program that actually works. We have advocated for a long time that drugs are not the answer to every problem, and too many drugs are harmful. Antibiotics are a case in point. This article was also referenced in our Pharmacy Benefit News, Issue 132.

BY MARTHA MENDOZA AND MARGIE MASON

ASSOCIATED PRESS

OSLO, Norway -- Aker University Hospital is a dingy place to heal. The floors are streaked and scratched. A light layer of dust coats the blood pressure monitors. A faint stench of urine and bleach wafts from a pile of soiled bedsheets dropped in a corner.

Look closer, however, at a microscopic level, and this place is pristine. There is no sign of a dangerous and contagious staph infection that killed tens of thousands of patients in the most sophisticated hospitals of Europe, North America and Asia last year, soaring virtually unchecked.

The reason: Norwegians stopped taking so many drugs.

Twenty-five years ago, Norwegians were also losing their lives to this bacteria. But Norway's public health system fought back with an aggressive program that made it the most infection-free country in the world. A key part of that program was cutting back severely on the use of antibiotics.

Now a spate of new studies from around the world prove that Norway's model can be replicated with extraordinary success, and public health experts are saying these deaths -- 19,000 in the U.S. each year alone, more than from AIDS -- are unnecessary.

``It's a very sad situation that in some places so many are dying from this, because we have shown here in Norway that Methicillin-resistant Staphylococcus aureus [MRSA] can be controlled, and with not too much effort,'' said Jan Hendrik-Binder, Oslo's MRSA medical advisor. ``But you have to take it seriously, you have to give it attention and you must not give up.''

The World Health Organization says antibiotic resistance is one of the leading public health threats on the planet. A six-month investigation by The Associated Press found overuse and misuse of medicines has led to mutations in once curable diseases like tuberculosis and malaria, making them harder and in some cases impossible to treat.

Now, in Norway's simple solution, there's a glimmer of hope.

ANTIBIOTICS MISSING

Dr. John Birger Haug shuffles down Aker's scuffed corridors, patting the pocket of his baggy white scrubs. ``My bible,'' the infectious disease specialist says, pulling out a little red Antibiotic Guide that details this country's impressive MRSA solution.

It's what's missing from this book -- an array of antibiotics -- that makes it so remarkable.

``There are times I must show these golden rules to our doctors and tell them they cannot prescribe something, but our patients do not suffer more and our nation, as a result, is mostly infection free,'' he says.

Norway's model is surprisingly straightforward.

• Norwegian doctors prescribe fewer antibiotics than any other country, so people do not have a chance to develop resistance to them.

• Patients with MRSA are isolated and medical staff who test positive stay home.

• Doctors track each case of MRSA by its individual strain, interviewing patients about where they've been and who they've been with, testing anyone who has been in contact with them.

``We don't throw antibiotics at every person with a fever,'' says Haug. ``We tell them to hang on, wait and see, and we give them a Tylenol to feel better.''

U.S. REACTION

Dr. John Jernigan at the U.S. Centers for Disease Control and Prevention said they incorporate some of Norway's solutions in varying degrees, and his agency ``requires hospitals to move the needle, to show improvement, and if they don't show improvement they need to do more.''

And if they don't?

``Nobody is accountable to our recommendations,'' he said, ``but I assume hospitals and institutions are interested in doing the right thing.''

Around the world, various medical providers have successfully adapted Norway's program with encouraging results. A medical center in Billings, Mont., cut MRSA infections by 89 percent by increasing screening, isolating patients and making all staff -- not just doctors -- responsible for increasing hygiene.

In 2001, the CDC approached a Veterans Affairs hospital in Pittsburgh about conducting a small test program. It started in one unit, and within four years, the entire hospital was screening everyone who came through the door for MRSA. The result: an 80 percent decrease in MRSA infections.

The program has now been expanded to all 153 VA hospitals, resulting in a 50 percent drop in MRSA bloodstream infections, said Dr. Robert Muder, chief of infectious diseases at the VA Pittsburgh Healthcare System.

``It's kind of a no-brainer,'' he said. ``You save people pain, you save people the work of taking care of them, you save money, you save lives and you can export what you learn to other hospital-acquired infections.''

``So, how do you pay for it?'' Muder asked. ``Well, we just don't pay for MRSA infections, that's all.''

Craig S. Stern, PharmD, MBA
President
Pro Pharma Pharmaceutical Consultants, Inc.

ONDCP Releases President Obama's 2010 National Drug Control Policy, APhA Referenced

The new 2010 National Drug Control Policy may affect all healthcare professionals—in other words, increase our work loads. Pharmacies may be required to increase and/or add to their record keeping. Pharmacists may be held legally and criminally responsible for additional issues. Non-licensed pharmacy personnel may be held to a higher standard; which as we all know is another way of saying increased salaries. Other healthcare providers and personnel may also be similarly affected.

We recommend that all healthcare professionals monitor developments in the new drug policy closely. Changes in all systems and procedures may be necessary and budgets may be adversely affected.

Source: APhA Legislative and Regulatory Update - May 19, 2010

On May 11, President Obama and Director R. Gil Kerlikowske of the Office of National Drug Control Policy (ONDCP) announced the release of the Obama Administration's first National Drug Control Strategy. The goal of the 2010 Strategy is to use a comprehensive approach to reduce drug use and its consequences through a balanced policy of prevention, treatment, recovery, enforcement, and international cooperation. The Strategy was developed with input from law enforcement, health care professionals and associations, drug treatment providers and corrections professionals, individuals in recovery, parents and support groups.

The Strategy focuses on the following key objectives:

• Strengthen efforts to prevent drug use in communities;
• Seek early intervention opportunities in health care;
• Integrate treatment for substance disorders into health care and expand support for recovery;
• Break the cycle of drug use, crime, delinquency, and incarceration;
• Disrupt domestic drug trafficking and production;
• Strengthen international partnerships; and
• Improve information for analysis, assessment, and local management.

APhA provided comments to ONDCP in September 2009 and is pleased that ONCDP referenced APhA and pharmacy in the report. Specifically, the following action steps are of interest of pharmacy:

• Educate physicians about opiate painkiller prescribing (page 30);
• Expand prescription drug monitoring programs and promote links among state systems and to electronic health records (APhA is referenced as a stakeholder to include in this process, page 31);
• Increase prescription return/take-back and disposal programs (community pharmacies are referenced, page 32);
• Assist states to address "doctor shopping" and "pill mills" (page 32);
• Drive illegal Internet pharmacies out of business (page 32);
• Crack down on rogue pain clinics that do not follow appropriate prescription practices (page 33); and
• Inform public health systems on implementation of needle exchange programs (page 40).

For additional information, read press statements, highlights, and the complete report on the 2010 Strategy Web site.

Craig S. Stern, PharmD, MBA
President
Pro Pharma Pharmaceutical Consultants, Inc.

Tit for Tat: CVS Caremark Kicks Walgreens Out of Its Network

Some of our clients have asked about the rationale for the Walgreens/CVS-Caremark issue. Clearly money is the primary rationale. However, the National Community Pharmacist Association (NCPA) is providing some other rationale from their viewpoint. We thought that you would find this of interest.

NCPA eNews Weekly | June 15, 2010

Two days after Walgreens announced that it would not participate in any future CVS Caremark network plans, CVS Caremark responded by terminating Walgreens' participation in all its network effective July 9. The giant chain pharmacy/PBM/ mail order conglomerate said it would drop Walgreens from its Medicare Part D network effective Jan. 1, 2011.

When Walgreens announced its decision June 7, it cited many of the same problems experienced by independent pharmacies and prompted NCPA 18 months ago to launch a campaign for a Federal Trade Commission investigation of CVS Caremark's business and patient privacy protection practices. Last November, CVS Caremark disclosed that it was under FTC investigation. In addition, 24 states are probing the company created by the merger of the pharmacy chain with a PBM/mail order firm. NCPA members have had a number of meetings with FTC officials about their experiences since the 2007 merger.

Those experiences largely mirror those cited by Walgreens:

CVS Caremark limits patient choice by requiring patients in Maintenance Choice and other plans to use CVS retail pharmacies or Caremark mail order facilities.

CVS Caremark provides little or no information when a CVS Caremark prescription drug plan is transferred to a different and differently-priced CVS Caremark pharmacy network, or when CVS Caremark acquires a new prescription drug plan as a client."

CVS Caremark reimbursement rates are unpredictable and payments for certain drugs often don't reflect the market."

"If a large, publicly traded chain with the clout of Walgreens finds the business practices of CVS Caremark untenable, then it's easy to understand how much greater the problems have been for independent community pharmacists and their patients," commented Joseph H. Harmison, PD, NCPA president. "The concerns expressed by Walgreens echo and further validate the concerns expressed by independent community pharmacists and their patients."

"Unfortunately, for most independent pharmacies, simply telling CVS Caremark 'no' isn't a viable business option," Harmison continued. "The evidence is piling up and hopefully corrective action will be taken that either erects substantial walls between CVS and Caremark or rescinds the merger so that the market can operate equitably without one company abusing the system for its enrichment at the expense of patients and fair competition among pharmacies."

Craig S. Stern, PharmD, MBA
President
Pro Pharma Pharmaceutical Consultants, Inc.

Health Insurance Answer Book, 9th edition

Check out the latest chapters, 9th edition is now available!

Eisai cuts Aricept prices to foster Asian sales

The PhRMA argument is that the US should pay for R&D in order to allow them to sell drugs at a discount in other countries. The opposing argument is that R&D is being done in other countries such that the US should not have to carry the load for the world. Of interest is the article below that indicates that PhRMA applies the same marketing economics to building markets in other countries that they do in the US. We expect that an international market for information will make the differences between prices in various countries more transparent and drive price concessions. The drug market is now very much international and must be viewed through a prism that is wider than the US experience.

Eisai has become the latest drugmaker to cut prices in an effort to push sales in emerging markets. On the heels of similar moves by GlaxoSmithKline and Sanofi-Aventis, the Japanese company is cutting prices on its Alzheimer's remedy Aricept in at least six Asian countries.

The idea is to ratchet up demand by opening the door to less prosperous patients, says Eisai's Yasushi Okada, who heads up operations in Asia, Oceania and the Middle East. "With the current prices, only a part of the wealthy people can afford to buy our products," Okada tells Bloomberg. "I want to increase the patient accessibility of the medicines in Asia."

Okada tells the news service that he expects growth in sales volume to outweigh the price cuts, delivering overall sales growth. And that's the aim of GSK and Sanofi as well. GSK has announced major price cuts in emerging markets, with prices tiered according to the target population.

In some GSK markets, prices will be less than two-thirds of those in Europe; in the 50 poorest nations, they'll be 25 percent of Western prices, Bloomberg points out. Meanwhile, Sanofi announced early this year that it would follow suit, cutting prices in Southeast Asia by as much as half.

Okada wouldn't say just how much Eisai plans to cut the price tags on Aricept. In the coming quarters, however, we'll be able to see how the cuts affect sales in those markets. For 2008, Aricept's global revenues amounted to $3 billion; the company loses patent protection in the U.S. in November, so it stands to lose revenues here to generic competition. All the more reason to grow sales in emerging markets.

Craig S. Stern, PharmD, MBA
President
Pro Pharma Pharmaceutical Consultants, Inc.