Thought Leader: Room for Improvement - Pharmaceutical Executive

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Thought Leader: Room for Improvement


Pharmaceutical Executive


Why do you think Big Pharma has stopped focusing on drug improvements?

It's a two-edged sword. I think their desire to do really sexy science overrides commercial concerns. Sometimes they'll overlook a pretty straightforward, elegant improvement on a product because it's just not very exciting to their scientists. So when you have companies like Merck and Pfizer, where the budgeting for R&D is top-down, there isn't anybody else in Merck who can authorize R&D expenditure. But when you look at Merck research labs that are given around $8 billion—you realize that these are some of the most sophisticated life scientists in the world. They want to work on things that they think are fun. Naturally, what they think is fun is cutting-edge stuff, which probably isn't the leading-edge technology. Rather, it's bleeding-edge technology.

New River recently partnered with one of your competitors, Shire, a global specialty-pharma company. What motivated this partnership?

We had done all of our planning based on the idea that we would self-market NRP- 104, our most advanced compound that is a stimulant used to treat ADHD. But then we were approached by a major pharmaceutical company that wanted to discuss collaboration, and it was then that we decided to open it up and talk with everyone who might have an interest in collaborating. We thought, let's get their proposals on the table and see if any of them beat what we think we can do on our own. We were very skeptical that any of them would do so but in the case of Shire, it was a peculiar alignment of the stars. Shire has the number-one market position in the space, as well as the best sales organization and marketing expertise in this category. But its lead product, Adderall XR, another treatment for ADHD, can be reasonably forecast to lose patent coverage in 2006, which is the very year in which NRP-104 is coming up. So it really made for a very interesting dynamic and an once-in-a-lifetime opportunity. We have a product that we think should really clutch the space. It really should be the best ADHD drug in the market if we continue to hit our marks and get it out there based on the data we have now. And here's an opportunity to commercialize it in a way so as to cannibalize the number-one franchise, while actually having it as your partner. In every other circumstance, the company would have been our principal competitor.

What are the effects of co-promoting a drug?

When we ran the numbers, we concluded that Shire could be adding more value to our shareholders than they would be taking out in profits. Furthermore, if we had not believed that the underlying economic performance of the drug on the market would be better for our shareholders than we could have done for ourselves, we would not have done this deal.

Many of these deals often have venture-capitalist backing. Why did you not allow VC involvement?

The VCs are just looking for some kind of evaluations pop so they can exit and get better bonuses based on the portfolios they have. The VCs have got a very short time horizon, and they want to de-risk as soon as possible. Because a VC investment is very risky the day it's made, they're looking for opportunities to monetize that as soon as possible. If they could monetize it the day after they made it and get 15 percent, then every one of them would take it. So that's their mentality. That wasn't our mentality. That's why we never allowed any VCs to become owners of New River Pharmaceuticals. We were looking at this in terms of long-term value appreciation. We knew we had a very interesting platform technology that could really produce a lot of value for society and for our shareholders, so we didn't want anything mucking that up.


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