Achillion vs. Actelion More Biotech M&A’s to Come

Last week’s announcement by Swiss drug maker, Roche Holding AG, that it was buying biotech firm InterMune, Inc. for $8.3 billlion sparked speculation by industry watchers about who would be the biotechs that might be involved in the next round of M&As. InterMune makes a drug, Esbriet (pirefnidone) that treats a lung condition, idiopathic pulmonary fibrosis. Esbriet is approved in Canada and Europe. The drug has the potential to become a blockbuster seller. InterMune’s product would join Roche’s Pulmozyme and Xolair to build up its lung drug portfolio.

A number of names popped up such as Achillion Pharamaceuticals, Actelion, Puma Biotechnology, Intercept Pharmaceuticals, and others. Maybe people heard Achillian but were attracted to similar sounding Actelion.

• Achillion Pharamaceuticals makes Phase II hepatitis C virus (:HCV) candidate, ACH-3102.
• Puma Biotechnology is developing its Phase III breast cancer candidate neratinib, PB272.
• Intercept Pharmaceuticals makes its phase II nonalcoholic steatohepatitis drug, obeticholic acid, OCA.
• Actelion Pharmaceuticals makes a cancer drug to treat a rare form of non-Hodgekin’s lymphoma.

Some in the big pharma side are still holding out hopes of buying a biotech that can make their next blockbuster. So which will it be? Achillion? Actelion? Others? To be sure, we will need wait and see.

Bay Area Biopharma Firms Evolve Their Mobile Apps

I recently attended the Apps World North America Conference on Feb. 5, 2014 held at, San Francisco’s Moscone West convention center. The event is driven by the huge interest in mobile apps by mobile device users, developers and device makers.   Since mobile apps are a core technology that makes mobile devices so useful, the subject of developing and commercializing mobile apps has become an important business topic to over 8000 visitors to this interesting event.

Apparently, a number of healthcare companies were doing some work in the mobile apps space that might benefit many kinds of enterprises.  Paul Lanzi, Senior. Manager of the Mobile, Web and Portal Team, Gilead Sciences, gave a talk about the Evolution of mobility in the enterprise. Paul’s team provides the infrastructure to support mobile solutions at Gilead. Paul said that he started in the tech industry in 1994 and worked at Genentech in a similar job prior to his Gilead role.

Lanzi cited recent mobile milestones by saying that change has come rapidly and best practices were learned from various experiences.  In 2012 his company’s apps development grew from 1 to 100 enterprise mobile apps. By 2013, they were creating enterprise apps that employees actually want to use. Going into 2014, he expects to see more of the evolution of enterprise mobility.  Paul said that the most common mobile devices ten years ago were the Motorola Razor and the Blackberry. Lanzi said that developers need to use the idea of Mobile First and said that “In the Net, Net things change really fast.

There are four evolutionary stages of mobility in the enterprise.

Brochureware. He gave an example of his local restaurant took their paper menu and put it on the web. That’s all they did.  He showed that pharmaceutical firms like Gilead or Genentech make brochureware of Rx package inserts. People can go online and read the drug package insert online.  It adds value above a paper version, its low cost, fast to deploy and easy to update.

Paul said that enterprise app developers need to watch out for certain things by saying that it is best to avoid making an evolutionary dead end with mobile apps. Paul used a biology evolution example to make his point that crocodiles and chickens have something in common.  At some intermediate points along the evolutionary path, dinosaur-like birds with teeth emerged that became evolutionary dead-ends and went extinct.  Similarly in the PC apps evolution, the keyboard driven command line interface evolved into the familiar windows and mouse click interface.

 Snackable Apps. Its best to mobilize a key subset of business processes, “instead of providing the whole ocean.”  For example, Lanzi said that a business app that enables “Review pending transactions, approve pending transaction” is a very simple user interface. Users at Genentech said “I approve with gApprove even when I’m sitting in front of my computer.”

He said that sometimes you get some surprises.  Once they need to needed to assign support tickets on mobile devices for facility power plant workers.  They had a new app designed, but no one used it. It turned out that a 37-yr-old designed it, but the average age of end-user was 58.  What happened is the workers at that age had worse eyesight and could not read the app. The app had 12 point type.  Lanzi said that mobilize the right part of the process,  get a deep understanding of process, and keep adjusting the app.

Full Business Processes. Paul said that Concur is a complete business process at his company designed for expense reports. Concur has done a great job of adapting with Blackberry and IOS devices.  Lanzi said that developers need to choose the right process and never stop evolving.

Mobile First Enterprise.  Paul said that developers need to consider mobile first, the philosophy, and leadership, procurement, finance, hiring, and so on. Lanzi said that enterprise app builders need to design for change. For example, when Paul was working at Genentech, he said that the sales team in Spain was given iPads to replace laptops. The sales people had to get used to doing work on that device instead of on their laptops and so forth. He said that you can contact Paul on Twitter using @planzi.

Emerging Changes Coming to the Drug Development Ecosystem

At last, the face of the Affordable Care Act (ACA) has entered the public arena.  Last October at the launch of the web marketplace of the ACA, the public became keenly aware that major changes in the US healthcare system were underway.  Despite its rocky beginning, by January several million customers had successfully signed up for their new healthcare insurance plans for 2014.  The ACA will have an impact on many stakeholder groups including patients, health care providers, hospitals, insurance payers, government agencies, drug developers, and others.  In particular, one can expect to see changes of the drug development ecosystem emerge over the next few years.

On January 14^th at the Parc 55 Hotel in San Francisco, the Biotech Showcase presented a plenary luncheon presentation, The Changing Dynamic of the Drug Development Ecosystem.  A panel of experts shared their insights and opinions of what might play out in the industry over the next few years.  Moderator, Ellen Corenswet, Partner at Covington & Burling LLP, posed key questions to the panelists.

The panelists included:  Karen Bernstein – Co-Founder, Chairman and Editor-In-Chief, BioCentury; Anton Gopka – Managing Partner, RMI Partners; Dan Mendelson – CEO, Avalere Health; Dennis Purcell – Sr. Managing Director, Aisling Capital; Evonne Sepsis – Managing Director, ESC Advisors.

Karen Bernstein opened the initial discussion about patients, what drugs they want, how they pay for healthcare insurance and so on.  She spoke about the ACA (aka: ObamaCare) in relation to patients and how they interact with drug companies.  Dan Mendelson seemed to know many detail data points about what to expect from the ACA since his firm has done some studies that model the potential impacts of the law.  Dan said “more and more, healthcare costs are being pushed to consumers.”  He said that many of the plans offered on the Exchanges cause consumers that need Tier-4 drugs “to pay 50% of the market price of the drugs.”  Tier-4 drugs are expensive targeted cancer drugs.

Berstein said that drug companies have offered discount coupons to consumers for some expensive drugs.  Mendelson said that there is a contradiction between ObamaCare and Medicare.  For example, Medicare does not accept discount coupons.  But, ObamaCare does accept discount coupons.

Dennis Percell said “In Boston, there are three hospitals within three miles of each other that do heart transplants. In New York City, there are hospitals that repair hips. There is one that charges $15,000.  At another place it costs $60,000.”  He asked, “What’s going to happen in pricing five years from now to the hospitals that do the heart transplants and the ones that do the hip repairs?”

Dan Mendelson  said he has “seen that consolidation is already happening either through acquisition or through contracts among organizations.“  “In many areas there is significant over capacity such as from teaching hospitals and academic centers.”  He said that “a lot of the teaching hospitals are being excluded from the networks that are fielded under the exchanges.”  Dan said that the exchanges will get up to about 6 million people and will represent just two percent of the health care system.

He said that “small businesses are calling the insurance companies and asking them to design new insurance plans for them.” He expects that “over the next five years, the benefit designs for the ACA will eventually spill over to whole healthcare insurance market.”  This scenario will have an impact on biotech’s future drug development plans.

Evonne Sepsis said “Reimbursement needs to be considered at the beginning of drug development process. She said “historically, most drug development companies considered reimbursement later.”  But not now.

Bernstein noted that companies say that their partner’s drug R&D costs need to be recovered through higher prices. However, high new drug prices are not sustainable. Dennis Purcell pointed out that “the last ten of twelve new cancer drugs cost $100,000 or more” for a course of treatment.

Evonne added “A few years ago, ten years ago, we saw the orphan drug market emerge. It needed just a patient population of 1000-5000.”  But now “with smaller patient populations in personalized medicine it is similar to the orphan drug market.”

Ellen asked  “What about the role of international going forward?”

Anton Gopka said that international pharmas are doing clinical trials in Russia for proof of concept studies.  This business model might work.  After the trials they can commercialize the new drug in U.S. Dan Mendelson said “Well maybe not so, because most U.S. payers or regulators prefer drug trials to be done in U.S.”  Dennis Purcell said  “If it were a country, the U.S. healthcare system would be the 5^th biggest country in world.”

The discussion turned toward disease foundations and patient groups.

Dennis Purcell said “I believe that we will see lot of disease foundations that will open a VC arm.  So VC groups should work together with them to bring their projects forward.  Dan Mendelson offered that disease groups would work as clients. That is. A diabetes group would test the glucose value of products.

Ellen asked how to engage with the patients.

Dan Mendelson said that we need to understand and look at the quality measures. “We can’t expect the payer to give you a guarantee. Its not possible.” “We need to show an advantage vs. other drug competitors.  We need payer buy-in — each payer wants something different.  Small companies need to be competitive.  This situation has ham-stringed the FDA — They are not up to speed with the leading technologies.”

Karen Bernstein wrapped up their discussion by saying that the FDA is good in certain areas.  They are the only government agency that is under funded.  She noted that Janet Woodcock is expected to return soon, others, key people are expected to leave or retire by 2016.  She said “I see the next five years as tough for the FDA.”