When Big Pharma Outsources R&D
There are many issues affecting Big Pharma drug stocks, and some fresh news is highlighting a trend that you will start to see more and more of. You won’t just see it from Big Pharma traditional drug companies. You will see it from biotech companies and could even see it occur at generic firms.
Eli Lilly & CO. (NYSE: LLY) has signed an agreement with contract research organization (“CRO”) Covance Inc. (NYSE: CVD) which will transform Lilly’s current R&D model. Lilly is selling its Greenfield, Indiana early-stage drug development facility to Covance for $50 million, and Covance will offer jobs to about 260 Lilly employees.
In addition, Covance signed a 10-year pact worth $1.6 billion to provide drug development services to Lilly. This will include levels of research from initial stages to studies and will include clinical services for drug studies in Phase II-IV studies. Covance will take responsibility for the following:
- Lilly’s non-GLP toxicology,
- in-vivo pharmacology,
- quality control lab,
- and imaging services.
So what gives? Are drug companies saying they cannot develop their own drugs any longer? Are they running out of ideas? Are they unable to keep within regulatory requirements? Even if this may be the case(s) among isolated cases, the real answer is far more basic. Follow the money. With this move, Lilly will fix its costs and will be able to control the perpetually higher costs of developing drugs. Keep in mind that most drugs are estimated to cost anywhere from $400 million to well over $1 Billion to just bring the drug to market after years and years of studies, tests, adjustments, development, and more.
Using a firm such as Covance should also accelerate drug development timelines, and may also improve efficiencies as well.
Biotechs are starting to be worth more and more and business to CRO’s as well. While some figures vary on just how much, the going figure that seems to be used is that about 30% of CRO’s revenues come from biotechs. This is a trend that should only become more and more of the case. At least this is keeping the clinical research ‘outsourcing’ within the U.S. For those of you who worry about overseas quality control and jobs being sent overseas, much of this work is already being farmed out in various stages or in various forms to India, China, and elsewhere.
Jon C. Ogg
August 6, 2008
Is Lilly's Loss Really Others' Gain? (LLY, PFE, BMY, SNE)
Eli Lilly & Co. (NYSE: LLY) is following the lead of Pfizer…. in need of a new breed of drugs, and with shares on the 52-week low list and on a multi-year low list.
The FDA has pushed back a decision regarding its anti-clotting blood thinner with its partner Daiichi Sankyo in Japan. Prasugrel is called EFFIENT and the drug had original been fast tracked at the FDA. But there are issues over excessive bleeding from the blood thinner, which means too much efficacy. While part of the problem may stem from the raw amount of data for the delay, you have to wonder if there will be some dosing issues with such large amounts of bleeding. We now won’t know until late September for the next potential FDA decision.
Bristol-Myers Squibb Co. (NYSE: BMY) is up 2% at $20.10 late in the day and Sanofi-Aventis (NYSE: SNY) is up 1.7% at $32.75 as this puts off that much more time that Plavix will be the number one blood thinner on the market.
So far we have seen over 19,500 of the JUL08 $50 CALLS and over 25,400 of the JUL08 $45 PUTS in Lilly trade hands today.
If you want to know the size of the market up for grabs, we noted before that Bristol-Myers saw some $3.4 Billion in sales of Plavix in the first 9-months of 2007 alone.
Jon Ogg
June 24, 2008
Solid Developments for Rheumatoid Arthritis (ABT, ARRY, LLY, INCY, JNJ, SGP, RHHBY)
If you have followed the news on arthritis and rheumatoid arthritis (“RA”) for very long, this was a good week for the possible treatments of the disease. The annual congress of the European League Against Rheumatism in Paris, France took place and this was the venue for many study announcements. This is only a snippet of the data and a snippet of the companies presenting, but some of the companies were Abbott Laboratories, Array, Eli Lilly, Incyte, J&J, Schering-Plough, and Roche. This is a very debilitating condition that affects millions in the US and globally as our populations are all aging.
Abbott Laboratories (NYSE: ABT) announced that its long-term data from a study of 1,469 patients showed its drug Humira, in combination with a common treatment used to treat a type of arthritis pain, led to remission of the disease for up to seven years. After six months of therapy, patients’ symptoms improved, with additional improvements seen after two or more years.
Array BioPharma Inc. (NASDAQ: ARRY) reported on some additional positive results of its Phase I clinical trial of ARRY-162, its novel small molecule MEK inhibitor; and it reported positive results from a Phase I trial of ARRY-797, its modulator of inflammatory mediators in blood. The four-week study of ARRY-162 in patients with stable RA receiving continued doses, showed that ARRY-162 was well tolerated and with no patients that discontinued the study due to an adverse event. Its activity was predictable with no drug/drug interactions with ARRY-162 and methotrexate. ARRY-162 suppressed production of IL-1, IL-6 and TNF, suggesting that this treatment has the potential to reduce inflammation mediated by these cytokines in patients with RA.
Eli Lilly & Co. (NYSE: LLY) presented new data that suggests patients with osteoarthritis pain of the knee treated with 60 mg and 120 mg Cymbalta once daily experienced significant pain reduction. Patients taking duloxetine reported significant pain improvement compared to placebo within the first week of treatment that lasted throughout the 13-week trial. The results from a study of 231 patients were presented at the annual congress of the European League Against Rheumatism in Paris, France.
Incyte Corporation (NASDAQ: INCY) showed clinical results from a 28-day Phase IIa trial of INCB18424, its janus-associated kinase inhibitor, in patients with RA. Results from the first of four treatment groups demonstrated that the 15 mg twice-daily dose of INCB18424 was well tolerated and provided ACR20/50/70/90 response rates of 75%/50%/25%/17%, respectively, with responses seen as early as 1 week. These results suggest that INCB18424 has the potential to be more effective than currently available RA therapies.
J&J’s (NYSE: JNJ) Centocor and Schering-Plough Corporation (NYSE: SGP) showed data in their Phase III human anti-TNF-alpha monoclonal antibody study for an anti-TNF-alpha biologic therapy. Findings from two new Phase III studies showed that patients receiving every four-week injections of golimumab 50 mg and 100 mg and weekly methotrexate experienced significant improvements in the signs and symptoms of RA as well as in physical function and disease activity, with some patients achieving remission as measured by Disease Activity Score.
Roche Holding AG (OTC: RHHBY) said that it expects to increase sales of MabThera in 2008 compared to 2007 in the rheumatoid arthritis indication at the European League Against Rheumatism congress in Paris. Roche also noted that about 30% percent of rheumatoid arthritis patients who failed prior attempts to respond adequately to anti-TNF therapy saw some remission from the disease with Actemra. Rituximab results provide continued inhibition of structural damage after 2 years in patients with rheumatoid arthritis who had an inadequate response to tumor necrosis factor inhibition
And the best news is potentially for boozers. Scandinavian researchers conducted two studies, involving 2,750 people who drink alcohol regularly showing that it may reduce the risk of developing rheumatoid arthritis by up to 50%. This assessed environmental and genetic risk factors for rheumatoid arthritis; and 1,650 participants had the disease, and were questioned about their smoking and drinking habits. By the way, blowing out your liver isn’t a good substitute.
Jon Ogg
June 13, 2008
