These key developments are predicted to shape the coming 12 months for biotech. [© Regormark - Fotolia.com]
America didn’t fall off the fiscal cliff when the clock struck midnight on New Year’s Eve, yet 2013 still presents numerous additional challenges for the biopharma industry to overcome. Below is a list of some key biopharma developments likely to shape the coming 12 months:
BIOSIMILARS: FDA Should Finalize Draft Guidance
With President Obama’s Patient Protection and Affordable Care Act withstanding Supreme Court review last year (albeit by a single vote), there should be nothing stopping FDA from addressing the issues raised by industry and patient advocates, and finalizing its nearly-year-old draft guidance on developing and approving biosimilar drugs. One issue is interchangeability: How similar should biosimilars be to be designated as interchangeable with reference drugs? Another issue: Would biosimilars be approved for all indications on the reference product label, as is typical with small molecule drugs, or each indication individually? Also, how much of reference drugs’ names should be shared with biosimilars? The Alliance for Safe Biologic Medicines, whose members include novel drug developers, in November proposed a unique U.S. Adopted Name or “USAN” for biologic and biosimilar drugs, with “a common, shared root” and “distinct and differentiating suffixes,” according to Alliance chair Richard Dolinar, who argued in Food and Drug Policy Forum that a USAN would best facilitate accurate attribution of adverse events. Biosimilar advocates contend that unique names would discourage doctors from substituting lower-cost biosimilars for brand-name drugs.
FEDERAL AGENCIES: Sequestration Looms Despite Cliff Deal
The deal by which President Obama and Congress pulled the federal budget back from the “fiscal cliff” (officially the American Taxpayer Relief Act of 2012) didn’t eliminate the threat of across-the-board spending cuts for government agencies—it only postponed them to March 1. By then, Congress and Obama are supposed to finally hammer out how to cut at least $1.2 trillion over 10 years, as called for under the Budget Control Act of 2011. Agreement by then is uncertain at best. So is a response to the nation’s reaching its $16.3 trillion borrowing cap, and—more worrisome for biopharma—the spending extension agencies will need for FY 2013 after they run out of funds March 27. If nothing happens by then, sequestration would ensue. Budgets for NIH, FDA, NSF, and CDC face across-the-board 8.2% cuts. Since it took brinksmanship for officials to hammer out their fiscal cliff deal, there’s no reason to think a more substantive agreement will come together without deadline pressure.
FINANCING & FUNDING: Warmer Climate, but VCs Still Wary
A resolution to the political tug-of-war over the federal budget and agency funding can be expected to warm the long chilly climate for financing biopharma and other life sciences companies in the U.S., G. Steven Burrill, CEO of Burrill & Company, predicted late last month. He expects the industry to raise $100 billion in capital in 2013, “with financings heavily weighted to the large companies and to the use of debt.” Indeed debt financings accounted for about two-thirds ($56.8 billion) of the $86.5 billion raised in the first 11 months of 2012.
And venture capital firms remain wary. While five of the “Top 20 Venture Capital Firms” ranked by GEN last month were raising money for new funds—the most such activity since 2008—the sizes of those new funds have been reported to be either similar to or less than their current funds. That suggests that while firms may resume chasing capital in coming years, they won’t be looking to surpass themselves and each other doing so. “Angel, corporate venture, disease advocacy groups, and philanthropic organizations will fill the growing gap” for startups seeking capital, Burrill adds.
MERGERS & ACQUISITIONS: Look for More, and Larger, Deals
Burrill & Co. also predicts at least a 20% jump in the dollar volume of M&A activity in 2013 compared with 2012, driven by the continuing appetite by biopharma giants for medium-sized drug developers, especially those that are far along in clinical development of promising new drugs, and those with a presence in emerging markets—notably Latin America, the Middle East, and Southeast Asia. The firm also foresees a pharma or major biotech merger in 2013. Deloitte offered another key driver of M&A activity in its 2013 Global Life Sciences Outlook report: Profit margins are expected to shrink—to about 20% in 2013, compared with 27% in 2003 and about 25% in 2008, according to figures from Euler Hermes—thanks to higher R&D and regulatory expenses, as well as pressures by more nations to contain costs in their government-run or increasingly government-regulated healthcare systems. The decline “places significant pressure on making the right choices in R&D, especially late-stage clinical development to drive insights for product adoption, not just approval,” Deloitte observed.
MOMENTA & MYRIAD: Patent Cases Head for Supreme Court
The Supreme Court in 2013 will hear one key patent case being closely watched in biopharma circles, and is expected to hear a second such case. Momenta Pharmaceuticals was stung in November when the United States Court of Appeals for the Federal Circuit (CAFC) rejected its request for an en banc rehearing of Momenta Pharmaceuticals vs. Amphastar Pharmaceuticals, where a three-judge CAFC panel held in August that Amphastar's use of Momenta's patented method for processing enoxaparin sodium injection was protected by the "safe harbor" from patent infringement under 35 U.S.C. sec. 271(e)(1). Momenta said it will ask the high court to review the case, which company president and CEO Craig Wheeler said in a statement “could have wide-ranging, negative effects on drug development” if CAFC’s decision were upheld. “It has potentially broader implications as to how far post-approval activities that are tied to record keeping requirements of the FDA that are necessary to maintain an approval, can be used as a shield for patent infringement under 271 (e)(1). That’s the basic issue,” William (Bill) Gaede, a partner in the law firm McDermott Will Emery’s Silicon Valley office, told GEN.
The court this year will also hear whether breast cancer susceptibility genes BRCA 1 and 2, if not all genes, are legally patentable. CAFC in August found Myriad Genetics’ gene composition-of-matter claims and methods of screening for cancer compounds patent-eligible—but not Myriad’s claims for its method of analyzing the genes for breast-cancer mutations. The decision reaffirmed the mixed ruling CAFC rendered a year earlier on Myriad’s seven BRCA-related patents—a partial win for Myriad and the U.S. Patent & Trademark Office, which are fighting a four-year-old patent challenge by 20 medical associations and individual doctors led by the Association for Molecular Pathology, and assisted by the American Civil Liberties Union and Public Patent Foundation.
OBESITY DRUGS: New Drugs Will Shake Up Category
The second of two obesity drugs approved last summer will ring up its first sales in 2013—Belviq (lorcaserin hydrochloride), made by Arena Pharmaceuticals and distributed by Japan’s Eisai. Belviq is expected to launch early this year, after winning Drug Enforcement Administration classification last month. The first prescriptions were written for Vivus’ Qsymia (phentermine and topiramate extended-release) in September. Both drugs were the first approved for obesity by FDA in more than a decade. Also this year, Orexigen Therapeutics plans to release interim data on a post-Phase III clinical trial assessing cardiovascular risks for experimental weight-loss drug Contrave. If interim results show less than a doubling of CV risks, the company will resubmit to FDA a New Drug Application to market Contrave through Takeda, which holds North American rights.
While demand is expected strong for the new obesity drugs, their sales success will depend on how readily insurers reimburse doctors who prescribe them. “I think one of the big questions is, to what degree are they going to generally try to keep utilization capped, vs. models where for certain patient groups—i.e., BMI of a certain level or concomitant disease areas—[payers] are going to put in place open access to sub-patient populations,” Rick Edmunds, senior partner and global health practice leader with Booz & Co., told GEN.
PATENT CLIFF: Generics Poised to Capture Most of Sales
Drugs with combined annual sales of no less than $29 billion will lose patent protection in 2013, according to EvaluatePharma, which says more than 70% of those sales will shift to generics. The cliff is only slightly steeper than in 2012, when $27 billion of sales were lost as branded-drug patents expired. The largest blockbuster set to fall off the cliff is Eli Lilly’s Cymbalta for anxiety and depression (about $4.2 billion in 2011; about $3.6 billion in Q1–Q3 2012). Patent-cliff losses in recent years have forced big biopharma to shift development to less profitable niche drugs targeting specific diseases, as well as consolidate, and slash costs by shrinking R&D and laying off 300,000 employees since 2000. “What we’re going to see over the next three years is going to have to be more business-model driven than budget-management driven,” Edmunds of Booz told GEN, adding that most senior executives he has spoken with “are getting to the place they’re saying, ‘We’ve done that, and maybe there’s more on the horizon, but what’s next?’ They recognize they’re not done yet. And they’re asking ‘What’s next?’ because they know they can’t keep going down that model.”