DRUG DEVELOPMENT DECONSTRUCTOR MANIFESTO: : “Tell me how you read and I'll tell you who you are.” ― Martin Heidegger
Monday, August 6, 2012
Liposomal doxorubicin: a rocket science?
Manufacturing problems at a Boehringer Ingelheim plant did a double whammy on Johnson & Johnson's ($JNJ) cancer drug, Doxil. It forced J&J to ration the drug to patients, current and future. It also interrupted clinical trials testing new drugs with or against J&J's ovarian cancer treatment, putting pipelines in jeopardy.
J&J now says it appears Boehringer Ingelheim will return to production by year's end, allowing it to release some supplies of Doxil for a trial by Endocyte ($ECYT) that will test an experimental drug in conjunction with Doxil, The Wall Street Journal reports. Endocyte says with what J&J will provide and what it has on hand, it can sign up patients without interruption. J&J says VentiRx Pharmaceuticals is getting a supply to test its experimental cancer drug, VTX-2337.
The shortage arose after manufacturing problems at Boehringer's Ben Venue Laboratories plant in Ohio halted production. J&J worked with the FDA to release Ben Venue's stock of Doxil, and the FDA allowed temporary imports of Sun Pharma's Lipodox, a similar drug not yet approved in the U.S.
Doxil is known to be a liposomal formulation of doxorubicin. I doubt a little bit about the efficiency of Doxil (compared to "convenient" non-liposomal doxorubicin) but here we have another strange issue – Doxil supposed to bring a lot of profits (if it were being manufactured and sold to patients). And what is the reason that the manufacturing process is halted for so long? I personally worked a lot with liposomal formulations – it is absolutely not a rocket science, the technology is well developed and used for several decades, therefore I would suggest that the manufacturing process by itself should not be blamed for the delay in the Doxil supply.
Sunday, August 5, 2012
Patent cliff: forget it and continue speculate!
A very interesting article which basically illustrates and describes that stock price has nothing to do with the fundamental state of the business.
Anyone waiting for Big Pharma to stumble on the industry's so-called "patent cliff" has been heartily disappointed. In spite of many high-revenue products facing patent expirations in the next few years, the group continues to be a top performer, lifting the health care sector to a market-beating 9% gain by the end of July.
That bullish movement has come as a surprise to many analysts and investors because of the industry's pending patent cliff, with more than $33 billion in patented drug sales set to expire in 2012 alone. This includes blockbuster drugs like Pfizer's (NYSE: PFE : 24.17, 0.22) Lipitor, which brings the company annual sales of $11 billion and Bristol Myer Squibb's (NYSE: BMY : 32.645, 0.055) Plavix, the world's top-selling medicine, which generated more than $7 billion in 2011.
But though the industry will face headwinds related to the impending patent expirations, world-leading pharmaceutical companies are still positioned for big gains on a number of other long-term trends. And investors can benefit in a big way as well.
However the author is trying to explore a fundamental analysis of the following nature:
In a report titled "World Population Aging: 1950-2050," the United Nations says global population aging is unprecedented in human history. The 21st century will witness even more rapid aging as medical technologies extend life expectancies, the U.N says. And by 2050, 1.5 billion, or 16% of the global population will be above 65 years old, according to the Central Intelligence Agency. These older citizens will likely require higher levels of health care, which will provide a tailwind to the industry and Big Pharma companies with a global reach.
Well, the numbers can be right but the stock price does not care about them – it can go up or down despite your knowing the numbers.
Saturday, August 4, 2012
Acquisitions vs. Internal R&D. Creating riskier companies
The accounting in Big Pharma and its representation can be very tricky:
R&D spending is immediately expensed according to US GAAP (Generally Accepted Accounting Principles), but is largely capitalized in an acquisition. This difference allows acquiring firms to report higher earnings with reduced R&D expense relative to their peers that internally develop their brands and technology.
I utilized this insight to analyze the cost of acquisitions to big pharmaceutical companies, many of which are losing patent protection for their prescription drug products. Despite enticing dividends, investors should look elsewhere. I am not alone in this concern:
The patent cliff in its own right may not be the problem: more the reactions of management to it. For a company facing a patent cliff, a declining share price could even be seen as a sign of a successfully run company - if excess cash is being returned to shareholders via dividends. If a drug company were simply to collect the cash flows and put the money in the bank the share price would remain stable …But because most managers do not follow this business model, they start spending the surplus cash, thereby creating a riskier company, with the assumption that revenues and earnings can be smoothed."
The key word here is “riskier companies” - for sure, no balls – no babies!
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