2012 Dealmakers Outlook

Jun 01, 2012
By Pharmaceutical Executive Editors

WL: How do we restore vigor to the venture capital space?

Blumberg: It's a big challenge with the inherent high costs of drug development, long timelines, and other risks, with the growing demand for quicker investment returns. The business of venture capital is essentially unregulated, highly competitive, and tends to perpetuate a race to the bottom where the goal is to exploit the most broken situations. The way the race for capital has become today, I am not sure anyone ends up a winner. And the funds are so skittish about the longer timelines on commercialization to the point where I don't see venture firms returning as the solution to the innovation drought.

Altomari: The venture capital community is stagnant, if not in decline. Few if any new funds are being created. This is not necessarily a bad thing, because it ensures only the fittest will survive. What remains will be stronger, and maybe then we will see the community do what it should do: funding real innovation rather than just taking on the overflow of what Big Pharma doesn't want.

Jonathan Garen, Forest Labs: There is a clear overlap of roles among those who finance deals, but what all the players—Big Pharma, biotech, the VCs, pensions and hedge funds—have in common is a desire to reduce risk.

WL: Would a broader consensus on what innovation is in medicine lead to less risk and more certainty, unlocking the resources to bring more products to market? Isn't it the innovators' responsibility to anticipate what the payer wants in a product? And is it possible for the smaller biotechs to build, maintain, and expense that capability well before market authorization?

Altomari: Resources or not, we have to do it. Two things are required. First, you must have convincing answers for the payer about value. The evidence must be relevant and transferable. Without it, your ticket to access won't even get punched. The second is compliance with the growing complexity of the regulatory rules of engagement, including Phase IV follow-up studies. All this extra work on making the case for your product is expensive. People want their information in real time too.

Blumberg: Advances in molecular biology are raising the bar on clinical outcomes. The ability now exists in many disease areas—oncology comes to mind—to target therapy to the individual patient rather than to the broad population. The per patient drug costs can be higher but it is also more likely the payers will support a price premium for some guarantee of better performance among a defined group of patients.

Thomas: Regulators have taken some positive actions recently toward personalized medicines. The FDA has approved three drugs in the last 12 months whose mechanisms are intended for a specialized target sub-population.

Wills: I will say flatly that the overriding criteria for doing a deal is whether the compound provides added value to the payer and contributes to an unmet need for the patient. If we don't see that, we don't do it. Most of the products we work with have been in various stages of development for more than a decade before a payer comes into play. The cost is measured in billions. We are not going to wager an idle bet with that amount of money at stake. The value has to be visible up front and measurable. There is no choice—it is expected of us now.

Dunn: NuPathe is a small company, with 37 full-time employees. Yet we do a lot of work around assessing prospects for reimbursement in advance of registration and launch.

Wills: Amassing the right evidence is crucial. If you can show that 80 or 90 percent of the target population is going to benefit from your drug, then payers are less likely to have a problem in meeting your price. J&J did a deal with the UK National Institute for Health and Clinical Excellence [NICE] in which we basically guaranteed that if our drug [Velcade] did not work in a patient, we'd pay back the NHS. It was groundbreaking at the time and shows what steps a company may be willing to take to obtain payer buy in.

lorem ipsum