A day on from AstraZeneca’s announcement of 7,300 job cuts, the company was still keeping the UK in suspense with regard to a breakdown of the numbers. UK staff assembled for a meeting at 10 am on Thursday, but as of lunchtime there was still no confirmation of the  numbers , with the BBC’s Business Editor Robert Peston tweeting that it was “odd” that the drugmaker was giving “no public guidance” on the UK element of the job cuts. The expected UK losses are “not huge” — the general union GMB speculates 250 to 300, all from the R&D site in Alderley Park, Macclesfield — but other sources inform me that it could be considerably more than that. Either way, added to the company’s mooted worldwide R&D cull (2200 jobs), it very much reflects the endemic crisis plaguing pharma innovation in general.

And, globally, this is a major downsizing exercise, the third restructuring effort in five years (AZ is lighter by 21,600 global staff than it was in 2007). It also exacerbates the blow to UK R&D dealt by Pfizer’s announced closure of its Sandwich facility, just over a year ago to the day. And, coming just a day after disgraced former Royal Bank of Scotland boss Sir Fred Goodwin was belatedly stripped of his knighthood for leading RBS into financial collapse, some UK pharma bosses may be feeling a twinge of panic in light of the Royal Society of Chemistry’s Professor David Phillips’ reaction to the news: “There has to be some element of state intervention at this stage.” A few Twitter commentators wondered aloud about the former AZ head Sir Tom McKillop losing his knighthood too. Their tongues were firmly in their cheeks, but there is no getting away from the fact that this was a dark day for UK pharma.

Getting FDA approval on a brand name for vandetanib, AstraZeneca’s very first orphan drug, isn’t the only challenge the company has faced during launch. The size of the patient population eligible for Caprelsa is decidedly small, but ultimately fuzzy. “We don’t really know how many patients there are at any given time,” says Eric Vogel, executive director of oncology, at AstraZeneca. “In some reports its 1,000 [in the US], and the FDA thinks it may be 2,000 to 2,500.” Compounding the difficulties presented by a tiny patient population, relatively speaking, is the fact that not all medullary thyroid cancer patients would benefit from Caprelsa; the drug is indicated only for patients whose cancer “has progressed to the point where surgery is no longer an option.”

Vogel says the company is “learning as we go” during the launch. “We believe that roughly half of the patient population will end up in the major treatment centers around the country, but that the other half may or may not continue to be followed by the community endocrinologist or medical oncologist,” says Vogel. Traditional market research hasn’t uncovered a network of physicians treating medullary thyroid cancer, since Caprelsa represents the first pharmaceutical treatment option for those patients, says Vogel. “There are some things that we can do to find physicians that look like they might be treating [medullary thyroid cancer], but it’s an inexact science at this point.”

AstraZeneca signed an exclusive distribution deal with Biologics, an oncology management company and specialty pharmacy, last April. Biologics also distributes AstraZeneca’s Arimidex, as well as Novartis’ Afinitor, Gleevec and Tasigna, Bayer/Onyx’s Nexavar, Celgene’s Revlimid, BMS/Otsuka’s Sprycel, Pfizer’s Stutent, Merck’s Zolinza, Roche/Genentech’s Xeloda and others, according to an “in stock” list on the company’s website. The decision to partner with Biologics for distribution had to do with the size of the patient population, and the amount of support that patients using Caprelsa would need, says Vogel. “We’re pleased with the relationship. [Biologics] spends 45 minutes, on average, with each patient, according to the reports we get from them,” Vogel says. Biologics, for its part, provided a team of 10 nurse liaisons tasked with educating physicians about the drug, and easing the administrative burden on the physician’s practice, Dan Duffy, executive VP and general manager, oncology pharmacy services group, told PharmExec.

In addition to Biologics’ nurse liaisons, AstraZeneca has deployed “regional scientific managers” – physician and/or nurse-facing individuals, to “communicate to our HCP audience about risks associated with Caprelsa, the REMS programs and all of the precautions, as well as any questions they might have around the efficacy or safety of the product,” says Vogel. The REMS program has helped AstraZeneca identify customers, since physicians have to become certified through REMS before prescribing the drug. “Down the road, we may broaden our reach out to community oncologists, those who we’re already calling on with our sales forces for Faslodex,” says Vogel.

The company hopes new indications will be forthcoming, and is currently looking to Europe for the next Caprelsa launch. Laura Woodin, senior manager, corporate affairs, said in an email that Caprelsa is being evaluated in “more than 40 early-stage studies” and various tumor types, including pancreatic, glioblastoma (brain), biliary tract (liver duct), as well as two other forms of thyroid cancer, papillary and follicular. “We’re trying to take our learnings from the US and apply those to other markets,” says Vogel. In terms of a possible launch in the EU, Vogel says the patient population size across Europe is roughly the same as the US patient size, but right now, “it’s not efficient to commercialize [Caprelsa] country by country.” “We will commercialize it country by country as we get new indications, but we have to look at it more broadly by much larger markets” for now, says Vogel.

Caprelsa is currently under review with the European Medicines Agency (EMA) and Health Canada, according to Woodin.

Those two products – AstraZeneca’s Brilique (Brilinta in the US), a blood thinner, and Pharming’s Ruconest (Rhucin in the US) – were held up during FDA’s review process. Brilique (ticagrelor), AstraZeneca’s leading pipeline drug, was approved last December for patients in the EU with acute coronary syndromes, which includes a high risk of heart attack.

In the US, however, AstraZeneca received a complete response letter from FDA in December, addressing concerns about ticagrelor’s efficacy in American subjects, and requesting additional data from the company’s PLATO trials. AstraZeneca said in a reply to FDA that differences in efficacy across geographies were the result of interactions with high-dose aspirin. The company, and most analysts, expect ticagrelor to gain FDA approval this July. Brilique/Brilinta is a direct competitor of Sanofi-Aventis’ and Bristol-Myers Squibb’s Plavix, a blockbuster drug several times over, but Plavix faces patent expiration in the US next year, and has already gone off-patent in some European countries. Thomson Reuters Pharma put global sales of Brilique/Brilinta at $185 million in 2011, and an estimated $1 billion by 2014.

Pharming’s Ruconest/Rhucin, a drug extracted from the milk of transgenic rabbits, was approved in the European Economic Area (EEA) – which includes the EU plus Iceland, Liechtenstein and Norway – but FDA rejected its biologics license application in late February, citing insufficient clinical trial data. FDA did grant an orphan designation for the product. Pharming, a biopharma based in the Netherlands, developed Ruconest/Rhucin, a recombinant human C1 inhibitor, to treat a rare genetic disease called hereditary angioedema (HAE), which causes swelling. The drug is the company’s first to reach the commercial stage.

Marketing partners on Ruconest/Rhucin include Santarus in the US, Laboratorios del Dr. Esteve in Spain, Portugal, Greece and Andorra, and Swedish Orphan Biovitrum International (SOBI) for all other European companies. Saloni Shah, managing editor, drug information at Thomson Reuters, said in an email that Ruconest is an example of companies coming together to “offer new hope to HAE” patients. Approximately 1 in 30,000 people worldwide suffers from HAE, according to Pharming estimates.

The other three top new approvals singled out by Thomson Reuters include Forest Laboratories’ Teflaro, an injectable for bacterial pneumonia and infections; Halaven, a breast cancer drug from Eisai; and Kombiglyze XR, a combination pill for diabetes, from AstraZeneca and Bristol-Myers Squibb (BMS). Teflaro is expected to generate global sales of $514 million by 2015, and Halaven, a late stage drug for patients with metastatic breast cancer who have received at least two prior chemotherapy regimens, is expected to generate sales of $414.6 million by 2014, according to Thomson Reuters Pharma estimates.

AstraZeneca and BMS’s Kombiglyze XR, an extended-release drug combining saxagliptin, the active ingredient in AstraZeneca and BMS’s Onglyza, and metformin, the active ingredient in BMS’s Glucophage, is set to pull in close to half a billion dollars by 2015, according to Thomson Reuters Pharma. Shah said the drug “offers patients the ideal medication: a once-a-day oral tablet which combines two existing drugs, making disease management easier.”

Other drugs to keep an eye on, according to Thomson Reuters’ “The Ones to Watch” report, include Phase 3 treatments such as ArTiMist, a malaria drug developed by Star Medical and Eastland Medical Systems, ChimeriVax Dengue, a Sanofi Pasteur drug for dengue virus infection, and Merck’s V-212, for chickenpox and shingles, among others. The report, published in February, covered new drug approvals and pipeline candidates through then end of December, 2010.

MedImmune, the biologics shop bought by AstraZeneca (AZ) for a staggering $15 billion in 2007 promising one new drug a year for the foundering British firm, has made precious little news since the deal. But all of a sudden the post-Labor Day wires were crackling with MedImmune stories: its big new monoclonal antibody, motavizumab, for prevention of a common but serious respiratory virus in infants got shot down by FDA for the second time, while the SEC charged a hedge fund heavy and his buddy who just happens to be executive director of business development at Merck’s vaccine unit of insider trading around the AZ/MedImmune deal.

With neither story lending itself to happy spin, MedImmune made a lame effort to change the subject with what appeared to be a hasty pitch to PE (and, we presume, other rags) that caught our interest: Its new R&D strategy for copycat biologics will focus exclusively on so-called biosuperiors rather than biosimilars. Now, given that FDA has been authorized to define a regulatory pathway for generic versions of biologics only with the passage of the healthcare reform legislation, MedImmune’s bet on biosuperiors might be viewed as putting the marketing before the molecule, so to speak. Yet it’s a signal that the top pharmas are already deep into their plans for how to play in this largely notional market, albeit one that is estimated to reach $17 billion by 2017, according to Decision Resources.

Biosuperiors, aka “biobetters,” are to biosimilars what, say, Apple’s iPod Touch is to its iPod shuffle. Where a biosimilar will be a mere structural imitation of an Avastin or an Enbrel promising the same effect at a reduced price, a biobetter will possess some molecular or chemical modification or other that constitutes an improvement over the originator drug (and its biosimilar competitors). The enhancement may range from a longer half-life, allowing for less frequent dosing, to more potency or less toxicity. If these were small-molecule drugs, the gussied-up me-too version would be a branded product that had proved its specific advantage to FDA.

So why would MedImmune commit entirely to developing biosuperior antibodies? Unfortunately, we can only speculate, because the Virginia-based biotech told us it was “premature” to get into the weeds about the refocus.

Although little is known for certain about how the biosimilar market will develop, the one unambiguous feature is that copycat biologics are unlikely to cannibalize sales of the innovator product with the same bottomless appetite as small-molecule generics. The discounted price tag of a biosimilar is estimated to range from as little as 10 percent to as much as 50 percent off the branded drug. That’s more than chump change for products that may typically run $100,000 or more, but given the anticipated cost of manufacturing and marketing, the margins may not inspire sufficient awe to attract the kind of intense competition that would make substitution a no-brainer for doctors and consumers, who are expected to remain more than a little wary of the entire idea of copycat cancer drugs and the like for some time. Over the several years since the launch of growth-hormone Omnitrope, the first-ever FDA-approved biosimilar, the drug has managed to capture a mere 1 percent of the total market and make less than $4 million in annual sales, according to IMS Health.

After sizing up all the hurdles, MedImmune apparently came up with a sound economic rationale for taking the higher risk, higher reward route promised by value-added biobetters. And the risk will most definitely be higher, says Ernst & Young’s Global Biotechology Leader, Glen Giovannetti. “In order to support any claim of superiority, FDA is almost certain to require Phase 3 trials,” he says. “They may be smaller and faster than those for innovator drugs, but the investment will be greater—perhaps considerably so—than for a straightforward biosimilar.”

When asked for clarification, FDA gave a rather frosty reply. “The addition of a pathway for those biologics that do not intend to be ‘biosimilar’ but instead facilitate development of improvements to currently licensed products was not included in the legislation.”

It’s worth noting that AstraZeneca is widely viewed as the most wobbly pharma giant, due to lose up to half of its profits over the next few years as a result of patent expirations. And MedImmune has already bailed on its promise of a drug a year. To compete with the presumed biosimilar big boys like Novartis, Merck, Pfizer, Teva, not to mention the Indian pharmas that are already selling knockoff biologics in the developing world, AZ has to move fast to make the most of MedImmune’s impressive antibody development and manufacturing assets.

“From the outside, all we can say is that a biosuperior strategy makes sense economically, in terms of being able to make a ‘cheaper but better’ pitch,” says Giovannetti. “But MedImmune may have other more technical reasons, such as the fact that they already are an originator biotech or they want to leverage their existing technology.”

Suffice to say, it will be entertaining, at the very least, to watch Big Pharma do battle over the biosimilar and biobetter (and biobest?) billions.

AstraZeneca suffered a serious setback at the start of July when the European General Court ruled that it had illegally prevented generic competition. The case dates back years, but the company – and many others in the industry – had been pinning their hopes on an appeal against a European Commission decision of June 2005 that the patent system had been misused to protect its anti-ulcer product Losec.

It isn’t just the confirmation of the €60 million fine that the Commission imposed at the time – although that is bad enough in cash-strapped times. Even more disconcerting are the broader implications for defending brand names.

As the Commission crowed triumphantly when the court issued its ruling, the judgement is significant for several reasons. It upholds the Commission’s decision on abuse of dominance in the pharmaceutical market. It also establishes that misuse of regulatory procedures, including the patent system, may constitute an infringement of EU competition rules.  The court rejected AstraZeneca’s claims that its conduct constituted normal competition and that it could be explained by errors or unauthorized behaviour by AstraZeneca’s patent agents.

The industry is still smarting from what it sees as the injustices in the Commission’s report just a year ago following the competition inquiry into the pharmaceutical sector, which threatened tough action against any attempts to stifle generic competition. Now Joaquín Almunia, the Commission Vice President who has taken over the competition policy portfolio from Neelie Kroes, is making clear he is
determined to keep up the pressure.

“Companies should not misuse the patent system and the system for authorization of medicines to extend the protection of their blockbuster products and delay the entry of generics into the market”, he said as the court judgement emerged. “Generic drugs benefit patients and governments that pay for medicines. I am determined to use competition rules whenever appropriate to fight such unfair and anticompetitive practices,” he went on.

The normally-reserved European Federation of Pharmaceutical Industries and Associations was provoked into a sharp response. EFPIA had intervened in the case because it was concerned that the Commission’s decision adopted a very narrow market definition in order to be able to demonstrate dominance. Now that this approach has been upheld by the court, EFPIA is even more concerned. The ruling “means that virtually any innovative product, even if introduced into a therapeutic area where other substitutable products can be prescribed to treat the same condition, risks being regarded as constituting its own relevant market, in which case the innovator will be assumed to be dominant”, it said in a terse statement. It went on to warn of “a chilling effect on pro-competitive commercial conduct and ultimately on innovation in Europe.”

As it that wasn’t enough bad news, just a few days later the Commission also announced that there had been a decrease in “potentially problematic patent settlements in the EU pharma sector”. In other words, brand name companies are increasingly being frightened off defending their patents in those borderline areas where the complexities of law and procedure leave scope for interpretation. The number of cases has halved, and the sums involved have dropped from more than € 200 million to less than € 1 million. “This would suggest an increased awareness of the industry of which settlement agreements might attract competition law scrutiny”, the Commission remarked, drily. It also made plain that it will “continue monitoring the sector”. It already has investigations underway into patent settlements, involving Servier and Lundbeck.

So how to respond? Two recent examples show some imagination. Among the brand name companies, Belgian biopharmaceuticals company UCB has just announced that it is reinforcing its IT teams to make better use of technology in developing treatments for patients. At a time when commodity products are becoming increasingly vulnerable to competition, UCB has made a virtue of pursuing the more elusive but potentially more profitable high-tech heights of medicines development. That still-vague concept of personalized medicine is opening up avenues that some companies are approaching on carefully-chosen fronts – and IT is becoming as central to the exploration as biochemistry.

The other example that has provoked some gasps of admiration – at the very least at the chutzpah it demonstrates – comes from the other end of the industry spectrum. This is the establishment of a chair at the University of Leuven in Belgium, by none other than the European Generics Association. The chair, entitled “European policy towards generic medicines”, will study the generic medicines policy environment in European countries. Greg Perry, the EGA director general, was as triumphant as the Commission in his speech at the inauguration: “As is recognized by all policy makers and stakeholders in the pharmaceutical market, generic medicines offer equivalent medical treatments at lower costs for healthcare systems and patients”.

Which is where we came in.

Reflector

Crestor’s patent is not scheduled to expire until 2016. However, a group of generics firms had claimed that a substance patent (314) protecting one of the active ingredients in Crestor was invalid, and that other companies had the right to file abbreviated new drug applications for generic versions of the cholesterol treatment. AstraZeneca sued them when they filed the applications, and a judge agreed with AZ.

“We are pleased with the court’s decision upholding the validity and enforceability of the ‘314’ substance patent,” said David Brennan, AstraZeneca’s CEO. “The court’s decision reaffirms the strength of the intellectual property protecting Crestor.”

The defendants claimed that Shionogi Seiyaku Kabushiki Kaisha—the patents original owner—engaged in shady tactics to get approval from the US patent office.  The court, however, disagreed chalking any filing discrepancies up to clerical errors.

“The court is not persuaded that the evidence presented by defendants rises to the level of the clear and convincing evidence required to establish inequitable conduct,” said Judge Joseph Farnan, US District Court in Delaware.

“While in hindsight it may be attractive to construct a deliberate scheme of deceptive intent from the actions of these individuals given the success of Crestor in the marketplace, it is at least equally plausible from their testimony and the contemporaneous documentary evidence, that a scheme to defraud was the furthest thing from the minds of these individuals at the relevant time, and that their vision was limited to the overwhelming demands they faced daily in their severely understaffed department.”

The generics companies also argued that the patent should not stand because the substance could have been created by anyone. The judge disagreed, and stated “there was much skepticism in the industry concerning the safety of rosuvastatin and the court finds it telling that no other pharmaceutical companies attempted to create a comparable product despite research in the area and the economic incentives of entering an additional player in the statin market.”

Analysts predict that the generics firms will fight the decision, but none of the companies have made a public statement as of Wednesday afternoon.

Although Pfizer claimed the first and third spots on the league table, AZ emerged as the industry’s digital powerhouse with three brands in the top ten—Nexium, Crestor, and Symbicort—and four in the top 20.

While AZ maybe innovating online, L2 founder and NYU marketing professor Scott Galloway said that the industry as a whole disappoints. “Most brands offer obsolete technology, anemic content and scant social media programs.” Summing up the challenge facing pharma, PHD Network CEO Scott Hagedorn said, “Right now, there are millions of unregulated conversations taking place online regarding prescription drugs, from which the voice of pharmaceutical companies is mostly absent.

As a result of the feared impact of the patent expiry cliff, the decimation of branded sales by multi-sourced generics and the obstacles erected, especially by managed care in the US, to slow the uptake of branded pharmaceuticals where a generic in the same class is available, industry players have responded by diluting their reliance on the “small white pill” to embrace a hybrid model combining pharmaceuticals with diagnostics, a consumer health business, animal health and even generics.

This strategy at the very least diversifies revenue sources away from pure pharmaceuticals. While animal health and diagnostics should be relatively defensive, we suspect that consumer health and nutritionals could ultimately be even less immune from the economic cycle than pharmaceuticals. Diagnostics is also benefiting from strong product innovation with new components of growth in areas such as in vitro and molecular diagnostics.

In Europe, Novartis is the best diversified company with interests across all of the above segments including generics (Sandoz), followed by Sanofi-Aventis. Arguably this is the most defensive strategy if the historic research driven branded pharmaceutical model is broken.

GSK’s strategy however has been to build the consumer health business through acquisition and investment in generating a differentiated clinical package for existing brands. More recently GSK has further diversified its product offering with the acquisition of private dermatology company Stiefel for $2.9bn, generating a new dermatology business operating under the Stiefel brand with total GSK derived dermatology sales post merger of around $1.5bn per annum.

Further on this theme, the acquisition of Schering-Plough has provided Merck & Co with a strong consumer health business. Similarly the acquisition of Wyeth by Pfizer bolsters the Animal Health business of Pfizer and added Consumer and Nutritionals businesses as well as vaccines. By 2012, this newfound emphasis is expected to dilute the enlarged company’s exposure to small molecule R&D from 90% (at end 2008) to 70% (by 2012), post the impact of the Lipitor expiry.

Overall, it would appear that those companies which have faced some of the biggest challenges to their branded Rx business have chosen to diversify. That said each of these companies has invested heavily in an effort to strengthen their investment in branded pharmaceutical R&D. Of the pharmaceutical majors, only AstraZeneca and Lilly offer a pure play branded ethical pharmaceutical investment, although BMS has recently IPO’ed its Mead Johnson consumer health business to focus more on branded Rx opportunities.

Nevertheless, even AstraZeneca, one of the key remaining proponents of the pharmaceutical research based model, has chosen to accelerate its diversification within ethical pharmaceuticals by acquiring Medimmune and CaT. Longer term these acquisitions should increase the contribution of sales from vaccines and biologics, which are less exposed to rapid genericization.

Looking to long-term profitability, it is clear that, with significantly higher operating margins associated with branded pharmaceuticals(~ 65% in the USA for example excluding R&D) compared to consumer health and generics, the pure play pharma companies will disproportionately benefit from successful R&D. That these companies largely suffer from lower ratings than their more diversified peers suggests that the market needs more evidence that high attrition rates in R&D can be reversed.

Dr Brian White

Much of the drive for this addition labor sculpting stems from AZ’s desire to streamline its R&D; the company will focus on fewer disease targets and expects to cut up to 3,500 jobs in that sector, which currently employs about 12,000.

But it’s not all bad news. Some jobs might survive via relocation, and because the company wants to expand its work in biologics, the net loss could end up in the 1,800 range. This should save AZ at least $1 billion a year, money they need for pipeline projects close to launch, such as the highly anticipated motavisumab, which aims to prevent respiratory syncytial virus (RSV). But that’s just the tip of the iceberg. AstraZeneca’s pipeline contains over 100 projects, about 30 percent of which were acquired by licensing, according to CEO David Brennan.

The company has not disclosed which disease areas it will leave behind during this streamlining process, but it’s unlikely they’ll drop ones diabetes (with seven compounds in the works and a rapidly growing patient population) or cancer.

According to the Times of London, GlaxoSmithKline is also expected to have unpleasant news for employees during Thursday’s release of its 4Q figures: They’ll be cutting 4,000 jobs, mostly in Europe and America. A similar bloodletting took place last February, when an estimated 6,000 got the axe. This is all part of Glaxo’s plan to save $2.7 billion by 2011.

Joe Jimenez

Novartis shocked investors on Tuesday morning when the Swiss-based firm announced that CEO Daniel Vasella would relinquish his post as CEO to Joe Jimenez while retaining his chairman of the board spot.

According to a release, this move has been in the works since 2008 and lead to the restructuring of its management team. The executive committee has decreased in size from 12 to nine members, and the company eliminated three senior positions, including chief operating officer, head corporate affairs, and head group quality/technical operations.

Jimenez is no stranger to the company. He’s served as pharmaceutical head for three years and held a laundry list of senior level positions at consumer companies, such as Heinz and Clorox. His previous pharma experience consists of a five-year tenure at AstraZeneca from 2002 to 2007.

While Vasella continues to draw a paycheck from Novartis three people are heading for different pastures. COO Joerg Reinhardt, a frontrunner for the CEO slot, is calling it a day; as are CFO Raymond Breu and Quality Group leader Andreas Rummelt.