Fields of Plenty
Every disease category or drug class follows a fairly predictable growth pattern. Where primary needs of patients are acute,
a product's performance may be judged on how long it can extend life. Fortunately, progress associated with new drug classes
in such diseases as HIV have allowed researchers to focus on vastly improving efficacy, toxicity, and convenience.
As a drug class becomes well developed—with many companies competing—it gets harder to differentiate products based on the
characteristics of the molecule. Innovation is defined downward, in terms of smaller, more modest advantages. New candidates
typically focus on delivery technologies or reformulations. It is at this point in the category's lifecycle that early products
begin losing exclusivity. As a result, formulation companies are free to marry delivery innovations with the now-familiar
treatments on the market.
Current deals in CNS, oncology, and immunology highlight current trends in innovation and business development when a therapeutic
area is relatively hot.
Pharma has seen major growth in CNS over the past decade. Many companies, including Lilly, Pfizer, Forest Labs, and Shire,
have built impressive franchises around products for depression, schizophrenia, and ADHD. More recently, some of the most
interesting CNS approvals have incorporated new delivery or combination-product characteristics—for example, Reckitt-Benckiser's
Suboxone for opioid dependency, Novartis' Stalevo for Parkinson's, and two pain pills, Ligand's Avinza and SkyePharma's Depodur.
Following this trend, some of the biggest CNS deals since 2003 have focused on products with delivery innovations (see "CNS
Developments in delivery are well-suited to the needs of CNS licensors right now because many companies are behind the curve
in their licensing efforts—and banking on short timelines to product launch and revenue accrual. While it's not uncommon for
seven to 10 years to pass between a Phase II licensing deal closing and the drug's FDA approval, a product with a delivery
innovation can cover that ground in less than a year.
During 2007, as the CNS market matures and even delivery innovations are tapped out, companies will return to the pursuit
of true R&D innovation. We will likely see a flurry of licensing of new compounds—either to address previously untreated conditions,
such as stroke or spinal injury, or to attack a disease using a new mechanism of action.
Every class of compounds has a sweet spot for deal activity—the point at which the new mechanism of action has proved itself
with several product approvals, while room still exists for several more. Such is the status in oncology with anti-angiogenesis,
a method of blocking the blood flow to cancerous tumors that has yielded a host of promising new therapeutic targets and innovative
After the pioneering success of Genentech's Avastin, Big Pharma rushed to develop similar compounds, with Bayer licensing
Nexavar from Onyx, BMS licensing Erbitux from ImClone, and Novartis licensing PTK787 from Schering AG. Amgen, for its part,
licensed panitumumab from Abgenix, only later to swallow up the entire company. Meantime, GSK and Pfizer developed their own
blood-blocking compounds, Tykerb and Sutent, respectively.
But as anti-angiogenesis has realized its product potential over the past two years, there has been a surprising decrease
in the number of oncology deals over $50 million (see "Oncology Deals"). Companies are already turning their attention to
early clinical data on the wide range of other oncology approaches on tap, such as mTOR inhibitors, alpha 5 integrins, and
That means we can expect a second crop of licensing deals in 2007 as new molecular understandings of cancer yield new fruits,
and as current treatments are tested as combination therapies. Fierce bidding wars are likely to erupt, since most large firms
have proclaimed oncology a strategic R&D imperative. Rather than staking bets on particular technologies, companies will aim
to build a full arsenal in an ambitious attempt to cover all the bases and maximize their chances for success.
The number of immunology deals involving large pharms has recently shown a steady increase. This trend was capped, as previously
mentioned, by a $1 billion-plus deal between GSK and Genmab and an equally big acquisition of Cambridge Antibody Technologies
All of this licensing and acquisition activity confirms an old industry truism: Power goes to those who innovate. Developing
a drug that confers a definite health benefit, treatment advance, and competitive edge can allow a company to turn to the
most attractive partner to fulfill strategic goals, from maximizing short-term financial returns to gaining leverage to build
internal R&D or commercial capabilities.
As for 2007's outlook, early-stage or midsize companies looking to out-license products in CNS, oncology, and immunology are
likely to draw increasingly bigger deals. With large pharmas on the prowl for promising compounds, small biotechs may have
new negotiating muscle to call the shots and pursue co-promotion deals when they want to. Yet each will have to find its own
comfort zone when it comes to striking a balance between the need to "do a deal" and the desire to build commercial capabilities
internally. At the end of the day, companies must remember that today's deal affects tomorrow's products, and should structure
deal terms accordingly. That industry lesson can present a sharp learning curve. Stay tuned.
Ben Bonifant is vice president of Campbell Alliance. He can be reached at firstname.lastname@example.org
Michael Dombeck email@example.com
is a Campbell Alliance associate practice executive. Alex Lugovoy firstname.lastname@example.org
is a senior consultant for Campbell Alliance's business development practice.