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Pharmaceutical Executive Digital Edition - October 2012

PE, October 2012 Cover Image

As the blockbuster sales model fades, the rush is on for a new formula for growth. "Good" growth: niched, balanced, and sustainable; with high margins from protected pricing; more patient-friendly than patent-centric; and where revenues draw from a deep reservoir of unmet medical need. The sized up, process-driven culture of Big Pharma is finding that new formula hard to swallow: it's a select menu of lean cuisine, without the familiar protein of mass promotion. In fact, the truest advocates of the new "good" growth come from unexpected quarters—what we at 

 call the "stealth" companies, those second tier players who aspire to reach the top by achieving a dominant market position around targeted drugs for underserved conditions. In the following profile,

 takes a closer look at how one key mid-tier player—Denmark's H. Lundbeck—is counting on the momentum of the big US market to vault it to global leadership in treatments that unlock the hard science of the human brain. 

Understatement is core to the Nordic psyche, which raises an interesting question: In a business driven by a complex mix of hope and hype, is it Lundbeck's misfortune to be Danish? "A company of quiet accounts" is how one analyst describes Lundbeck's trajectory since its founding in 1915 by a Danish trading executive, Hans Lundbeck, whose mission was to keep the neutral Danes well supplied with everything from butter to cosmetics during the Great War and beyond. Some early marketing of painkillers led to a post-1945 commitment to the still nascent field of psycho-pharmaceuticals, which culminated in 1959 with the launch of Truxal, the first recognized treatment for schizophrenia and a world-class brand that expanded the company presence beyond Denmark. 

 From left to right: Anders Buur, VP, US drug development; Sally Benjamin Young, VP, US public affairs; Peter Anastasiou, VP and general manager, US Psychiatry; Dan Brennan, VP and general manager, Neurology; Joe Nolan, chief commercial officer; and Staffan Schuberg, president US.			

Still, relatively little is known in the United States about Lundbeck's subsequent emergence as a company uniquely dedicated to the discovery and development of medicines for CNS disorders. For example, despite its diminutive size compared to Lilly and Pfizer in the high-growth category of anti-depressants, Lundbeck's labs have regularly spawned drugs that provide a forward step in therapy through new modes of action, providing clinicians and patients with more choice. Lundbeck scientists synthesized and introduced one of the first trycyclic anti-depressants and its early investigations on the SSRI class pre-dated the Big Pharma competition. The company's biggest seller, an SSRI with the proprietary name Cipralex, helped transform the company from a European to a truly multinational enterprise after it was introduced in 2002.  

Perhaps the biggest surprise about Lundbeck is that Cipralex is marketed in the United States as Lexapro; rights holder Forest Labs leveraged the drug's well-tolerated, low side-effects profile to create an iconic blockbuster that held a 25 percent share of the anti-depressant market until its US patent expired in March. Lexapro, as well as another predecessor drug from Lundbeck, Celexa, helped Forest expand beyond its generic roots and establish itself as a household name in the US mental health practice community, while Lundbeck remained a bit of a cipher to the same.  

Lundbeck's low profile has been accentuated by its distinct ownership model. The company's shares have been listed publicly only since 1999. And similar to its larger Danish counterpart, Novo Nordisk, some 70 percent of the company's shares are held by a foundation established in 1954 by the widow of founder Hans Lundbeck. Besides safeguarding the company's financial health, the Foundation has a mission to promote basic research geared to fighting neglected diseases, especially mental illness and related disorders of the brain. It donated $89 million to this end in 2011, above and beyond the average 20 percent of revenues (a ratio that is one of the highest in the industry) the company itself spends on R&D each year. Lundbeck CEO Ulf Wiinberg told 

that while being publicly listed makes management accountable, the foundation's dominant share position gives executives more freedom to fly below the radar and focus on the longer term. "Without the foundation, we'd likely have been acquired years ago," he said.  

Although Lundbeck's name recognition might score low among the general public, especially outside Europe, reputation in this industry is built patient by patient: the deeper the roots you have in a community of the sick, the better the financial—and societal—return. Lundbeck applies this philosophy in two ways. First, by creating a company culture centered on partnership; not just with other institutions but also affecting how work is done internally. Second, through a highly specialized business strategy geared to the discovery, development, and commercialization of drugs for the treatment of CNS diseases.  

Melding the two is an overriding emphasis on the patient, not just as a marketing target but as a source of the science insight that drives clinical development. "Partnership is central to our DNA—between our research, clinical development and commercial teams—so it has been easy to extend this culture to the way we approach patients," says Lundbeck USA President Staffan Schuberg. "We have 60 years of experience in working with the CNS and mental health communities. That intimacy with the patient extends to our business partners; they know we are deeply committed to neurologic and psychiatric disorders and we aren't going to surprise them with a sudden change in direction that undermines the relationship." 

We have 60 years of experience in working with the CNS and mental health communities. That intimacy with the patient extends to our business partners; they know we are deeply committed to neurologic and psychiatric disorders and we aren't going to surprise them with a sudden change in direction that undermines the relationship. -Staffan Schuberg			

For a small company, an internal culture built around patients and partnerships can be a source of leverage against competitors with a greater scale and geographic presence. This is especially evident in the United States, where the activism of patient groups has fostered networks with prescribing clinicians that would be difficult or very costly for any drug company to replicate on its own. For Lundbeck, insights from this patient journey of self-discovery has led to greater understanding of the therapeutic impact of CNS disorders, affecting the design of trials, lowering the cost of trial recruitment, and—hopefully—boosting relations with the disease community once its medicines are approved. 

Lundbeck's culture of inclusion begins with recruitment. Says Dan Brennan, VP and general manager for neurology, "the selection process in our US sales force starts with a fundamental question: Is the candidate more about 'we' or 'me?' Most of the reps in Big Pharma come from a culture that touts individual advancement—being first—and unfortunately this perspective has been enhanced by all the downsizing. With such a big applicant pool, we have the ability to screen for specific personality types, who want to make that extra connection to patients and the disease through a cultural sensitivity on what it takes to be a good partner." 

However, the therapeutic focus on the brain and its disorders carries some risk. While there is high market opportunity because of the enormous unmet medical need, that need exists because the science behind the cure is so elusive. According to the World Health Organization (WHO), one out of every four people develops a mental illness at some point in their lives; the number of patients with dementia is forecast to double—to more than 75 million—over the next 18 years. In China alone, CNS-related conditions are now the fastest growing source of healthcare expenditures; worldwide, the indirect economic burden of caring for mentally disabled people is rising even faster than their prevalence. 

At the same time, new drug treatments for this population have been slow to emerge from the laboratory. The Tufts Center for the Study of Drug Development (TCSDD) finds that neuroscience drug candidates carry the longest lead time from proof of concept to registration (10 years plus) of any therapeutic sector—a key indicator of risk for a process where time is money. Because of the size and complexity of clinical trials in the CNS field, many candidates end up failing at the crucial Phase III stage of development, where costs tend to be highest. Over the past decade, big companies like Pfizer have scaled down or abandoned their commitment to the field, resulting in less competition and more "blue ocean" market space for those who opt to stay the course.  

Lundbeck is diluting some of the financial risks in CNS through close, selective partnerships. In September 2007, the company forged a link with Japan's Takeda on a long-term arrangement to evaluate and commercialize treatments for mood and anxiety disorders. Last November, it inked an even bigger deal with another Japanese drug maker, Otsuka, to develop and market medicines in the psychiatry field, building on that company's US anti-psychotic blockbuster, Abilify. One key driver of the deal is the sharing of development and marketing costs.  

In addition to the scientific challenge of brain disorders, the Lundbeck product portfolio is in a transitional phase. The company's top-selling therapy, the anti-depressant Cipralex/Lexapro, which accounted for well over half of Lundbeck's worldwide sales of $2.9 billion in 2011, faces a loss of exclusivity in most marketed countries over the next 12 months. The crucial US patent on Lexapro expired in March, and sales here have since dropped by more than two thirds. In Europe, the drug is already subject to intense generic competition. The only bright spot for the once blockbuster drug is Japan, which saw launch of Lexapro last August and with support from partners Mochida and Mitsubishi Tanabe has already wrested a respectable 3.5 percent market share.  

Lundbeck's other key products—Ebixa, (promoted by Forest as Namenda in the United States) a treatment to slow cognitive decline in Alzheimer patients; Azilect, (promoted by Teva in the United States) for Parkinsons Disease; Xenazine, an orphan drug used to treat chorea associated with Huntington's disease; and Onfi, an anti-epileptic—are targeted specialty products; together, they are unlikely to achieve the blinding success of the Cipralex/Lexapro franchise. Finally, another new product launched within the past year, Syncrest, an anti-psychotic for bipolar disease and schizophrenia developed by Merck, which Lundbeck is marketing in Europe, is building slowly and will take time to create a significant revenue base.  

The pregnant question of the moment is: What's next? CEO Wiinberg calls the erosion of the big anti-depressant franchise around Cipralex/Lexapro a natural development in the product cycle, one that management has been anticipating for some time. Vortioxetene, a potentially winning replacement for Cipralex/Lexapro, is poised and ready for regulatory approval in key markets. Last month, the company filed an application with the European Medicines Agency, noting that vortioxetene is the first filing of a novel anti-depressant in Europe since 2007. Overall, the company claims a fairly full pipeline, enough for Wiinberg to make the pledge to analysts that by 2015 one half of worldwide revenues will come from new products—in other words, filling the gap left by the fading market leader.  

In presentations to analysts, management touts three drugs that, in addition to vortioxetene, it sees as real breakthroughs: Selincro, designed to treat alcohol dependence and destined to be marketed in Europe; Treanda, in-licensed from Cephalon/Teva for treatment of chronic lymphocytic leukemia, to be marketed only in Latin America and Canada; and aripiprazole depot, a once-monthly injectible version of the Otsuka drug Abilify, to treat schizophrenia. Together, and assuming appropriate regulatory approvals over the next 18 months, the drugs carry a potential revenue stream of nearly $2 billion, or more than enough to replenish the base lost to generic competition. There is also a diamond in the rough: AE58054, a drug candidate specifically aimed at cognition repair among Alzheimers patients, has completed Phase II trials and could advance the state of care by slowing basic skills deterioration. Lundbeck is considering partners to move this compound forward.  

What analysts refer to as a "promising" pipeline is in some ways the surround sound for a much bigger agenda. As the Japanese industry well knows, good science and promising drugs do not by themselves spin profits. Resources, expertise and geographical reach are necessary to avoid having to share the bounty with others that already possess the scale to compete. The implicit desire of any middle-size company is to grow enough to partner on the basis of choice, not necessity. To shed the burden of dependence and— literally—have it all.  

In deciding to move up, Lundbeck is moving in—on the big prize, the tough US market. As the industry becomes more global, it is apparent that no enterprise with aspirations to be global can succeed without carving out a strong presence here in the United States. The intense competition in the home base of the industry's biggest companies acts as a training ground for operational excellence; you learn from a process of Darwinian selection that separates the strong from the weak. CEO Wiinberg notes that the real value of being in the US market is the breadth and richness of the contacts. "It's hard to compete for a global asset if you have no presence to tap the innovations that come from all the scientists, thought leaders, entrepreneurs, and dealmakers who make their home there."  

Peter Anastasiou, Lundbeck USA's vice president and general manager for psychiatry, states it simply to 

 "The destination for future growth in most other pharma companies is China, India—the emerging country markets. Our emerging market is the United States." And there are two therapeutic platforms where Lundbeck USA is vying for market leadership: specialty neurology products, with an adapted portfolio of difficult-to-treat epilepsy products as well as for rare hereditary conditions like Huntington's disease; and psychiatry practice medicines, including novel next generation anti-depressants and anti-psychotics for schizophrenia.  

Lundbeck began filling its play card for America three years ago, when it acquired Ovation Pharmaceuticals, a privately held Illinois-based specialty drug firm that matched Lundbeck's therapeutic focus on brain disorders and had deep roots in the rare disease community. The billion dollar transaction gave Lundbeck what it needed: a bolt-on commercial sales platform in key target therapies as well as strong networks from which to build partnerships among local constituencies that count: researchers, physicians, payers, and patients. Lundbeck inherited a highly-trained sales force with expertise in managing relationships with the select group of US specialist physicians who do the bulk of prescribing for rare conditions like Huntington's disease, a neurodegenerative disorder for which there is no cure. There were also some good partnerships to continue in place, including one with Biovail (now part of Canadian-based Valeant), for the marketing of Xenazine.  

Built on a start-up mentality, Ovation was filled with many exiles from Big Pharma looking to run a different kind of organization. So there was some question of how all this would mesh with Lundbeck's dour Nordic profile. Says USA President Schuberg, who helped push the acquisition forward, "we knew from our partnership record that the number one reason a deal fails is not being sensitive to culture issues. Looking back, I can say we did one prescient thing and that was not dumping all our manuals and rule books, and instructing our new colleagues to read them and come back on Monday as a Lundbeck employee. Instead, we took our time, got engaged and posed a lot of questions, stating 'here's how we view things, what's your take?' We melded their thoughts with our own and ended up being stronger for it."  

Another positive was that Lundbeck itself was on a learning curve, having never run a US business before. "The truth is there was no rule book," notes US chief commercial officer Joe Nolan. "The two organizations had a lot to learn from each other. It became evident that there was little merit in dispensing with the commercial platforms that had attracted us to them in the first place." For example, Ovation's strategy of building sales through mutually beneficial alliances with patient groups was an excellent tutorial on how to be successful in the sharp-elbowed US market.  

It's a lesson that the new US business has taken to heart. Anders Buur, VP of US drug development, told

 "the accessibility of patients and their organized influence on the medical profession's understanding of disease is unique to the United States. The ability to team with patient and professional groups in clinical development is a key reason why we are here—and our definition of a good partner extends beyond the scope of any commercial alliance." 

Lundbeck Partnering Institutions in the US			

In 2010 Lundbeck USA launched the Huntington's Disease Research Initiative to seed networks among academic research organizations and the private sector and underwrite new therapeutic approaches to this rare condition. One of the more interesting compacts under this program was signed in May with the CHDI Foundation, a non-profit dedicated to funding collaborative research in this area. Specifically, CHDI will conduct pre-clinical studies on an investigative compound owned by Lundbeck that might represent a new pathway for attacking the disease and alleviating its symptoms. Simon Noble, CHDI's director of scientific communications, told 

 that the new arrangement with Lundbeck was an easy sell, given the ties that the company had already built among a very committed and passionate base of patients and caregivers. 

The enormous science base in the United States is clearly an asset that Lundbeck intends to exploit. Management considers that establishing an R&D presence here is equally, if not more, important than laying down commercial roots. In fact, the big leap into the United States helped drive the company decision to revise its entire research strategy. Instead of the previous emphasis on building a research portfolio around four disease indications, it adopted a broader approach geared to uncovering the disease biology that underlies the CNS segment as a whole. This will give Lundbeck researchers and partners more focus in seeking out compounds that, if successful, would be real game changers and find ready acceptance in clinical practice. Says Anders Buur, "success rates in CNS are too low. The aim of this reorganization is to improve on that and generate better hits beyond the current standard of care. If we are to confront the human pathology of CNS disease with targeted medicines, we must understand the biology that creates these disorders in the first place."  

Work is now allocated within three disease biology units—covering neuro-inflammation; neuro-degeneration; and synaptic transmission—and conducted at research centers in Copenhagen and Paramus, NJ. A third R&D center, in Shanghai, China, plays an integrating role with a focus on medical chemistry. The Paramus unit, which grew out of a research enterprise purchased by Lundbeck in 2003, is responsible for directing R&D on neuro-inflammation; Copenhagen coordinates the other two. Overall, however, the US group is vital to the new R&D structure because what the company needs—expertise in the basic biologics of CNS disorders—is found mainly in the large academic teaching institutions based in the United States. "Much of our scientific collaboration and partnering work is now occurring here and will filter through the entire global enterprise," says Buur (see list above).  

Lundbeck is choosing its US growth targets carefully, with an emphasis on specialty niches in neurology and psychiatry while relying on its marketing partners—including Takeda and Otsuka—to cover high-cost forays into the primary care space, where big sales forces are a prerequisite for doing business. Since the Ovation takeover, Lundbeck has doubled the size of its neurology sales force and is recruiting highly experienced detailers who know the disease profiles enough to build long-lasting relationships with key prescriber physicians. "We want community builders—experienced sales professionals with the technical knowledge to liaise with specialist physicians, but who are also able to bring awareness of CNS diseases forward to the patient organizations and care givers," said Dan Brennan. 

It’s hard to compete for a global asset if you have no presence to tap the innovations that come from all the scientists, thought leaders, entrepreneurs, and dealmakers who make their home in the United States. - Ulf Wiinberg			

At the same time, Lundbeck is creating a psychiatry sales force from scratch to prepare for a number of important product launches in the next 18 months. The centerpiece is vortioxetene, the highly-touted successor to Lexapro, with a new mode of action that will give clinicians additional options in treating patients who have cycled through existing treatment options such as SSRIs. The compound is part of the alliance with Takeda, which, if the drug is approved, will assume the major role in marketing and promoting it among GPs. Lundbeck will focus on specialist prescribing. And the point man for this effort is VP for US psychiatry Peter Anastasiou. "We're creating that sales force as we speak. All of our recruits must have demonstrated prior success in CNS. More important, we are pursuing a much more interactive, relationship-driven, needs-oriented and highly specialized sales model where we provide solutions to help our customers. It's not going to be a role that involves just showing up to deliver three message points and some literature."  

Vortioxetene has completed Phase III testing and the companies hope to file an NDA with the FDA before the end of this year. Other targets being pursued for the US market include the aripiprazone depot formulation, which is being developed jointly with Otsuka and is now awaiting final FDA action pending resolution of some manufacturing challenges with a third party supplier of sterile water identified by the agency. Two additional prospects are desmoteplase, a compound designed to significantly extend the time window for remedial treatment of stroke; and LUAE58054, the Alzheimers cognition treatment that the company is considering for possible partnership support.  

Creating a viable, permanent business in the world's most competitive market is no simple task—and, as the experience of other foreign newcomers has shown, success in the United States is never earned overnight. In fact, Lundbeck faces a number of early wake up calls, including filling the short-term revenue gap from the LOE on Lexapro and digging roots for the future by securing timely registration of the new products that will cement its reputation among activist patients and a notoriously insular circle of prescribers. Both tasks depend heavily on forging new relationships and elbowing into turf that Big Pharma rivals have been cultivating for decades.  

Features

Pharm Exec takes a look at how a mid tier player - Denmark's Lundbeck - is counting on the momentum of the big US market to vault it to global leadership position.

Lundbeck: Bidding for the Stars and Stripes

Arriving amid promises of innovation, including process efficiencies and unbridled efficacy, President Obama's four years of real-world data has undermined initial investor confidence, creating uncertainty around lifecycle management decisions going forward. Mitt Romney, an also-ran from 2008 and something of a branded generic, is challenging the President's White House exclusivity with a marketing and promotional budget unmatched in the history of direct-to-consumer advertising, thanks to the Supreme Court's decision on 

Citizen's United v. Federal Election Commission

While the deepest troughs of our generalized economic depression are behind us—we hope—money and jobs still dominate the national conversation. Tax code allowances to industry are ripe for meddling, and the sacred cow Medicare "entitlement" could get milked into a voucher system, if potential vice president Paul Ryan has his way. On the other hand, Obama's evidence-based Independent Payment Advisory Board (IPAB) could dramatically affect reimbursement rates on new products in the United States, the last bastion of "free-pricing" in the global marketplace for pharmaceuticals and medical devices.  

Both presidential bids are premised by a Congressional ecosystem whose main outcome is bitter-tasting syllogism and sophistry, where party platform parity exists only as the sum of their respective disagreement. With staggered Congressional elections and the rise of the filibuster as their joint trial protocol, it's unlikely that improvement against placebo, no matter how much hope is randomized, will occur under either incoming administration. With that said, a few distinctions and similarities are worth noting before heading into the polling dispensary on November 6th. 

: Supports cutting the corporate tax rate from 35 percent to 28 percent. Has spoken out in favor of extending the R&D tax credit, but has also levied a steep excise tax—2.3 percent of the sale price—on medical devices as part of healthcare reform. 

: Would cut the corporate tax rate from 35 percent to 25 percent, continue the offshoring of drug company profits, and "strengthen and make permanent the R&D tax credit." Has characterized Obama's medical device tax as "already driving jobs and investment overseas." 

: In his annual budget, has proposed shortening exclusivity on biologics from 12 years to seven years, putting him at odds with the late Ted Kennedy. However, a provision of the Affordable Care Act reaffirmed the 12-year period.  

: No available statement on exclusivity periods.  

: Put programs such as Accountable Care Organizations into the Affordable Care Act that shift some providers away from fee-for-service. 

: Supports "alternatives" to fee-for-service. 

: Opposes any efforts to "privatize or voucherize" Medicare. 

: Reimagines Medicare as a "premium support system" that repackages existing spending as a fixed-amount benefit based on a recipient's income level. Do we hear voucher?  

: Repealed former president Bush's executive order that limited NIH funding to stem cell lines already in existence and which banned the creation or destruction of other embryos for research purposes.  

: As governor of Massachusetts, banned research using embryonic stem cells derived from human embryos created solely for research. His successor, Deval Patrick, lifted the restrictions in 2007.  

 Comparative effectiveness research (excluding this article) 

Both candidates support CER, but defining what that means is another story. "Value," like candidates, is in the eye of the beholder.  

Column

A comparative effectiveness study on the two presidential candidates.

The Drug Vote 2012

Emerging markets will account for 26 percent of global revenues on average for pharmaceuticals and healthcare companies by 2017, up from 15 percent today, according to the "Business Perspectives Report on Emerging Markets 2012-2017 from Global Alliance Intelligence [GIA]." 

Top 10 Emerging Markets for Global Pharmaceutical and Healthcare Companies			

However, a high percentage (94 percent) of pharmaceuticals and healthcare companies surveyed said they would like to have done something differently in how they planned and executed their emerging markets strategy. Many would like to have made greater efforts to enter earlier, while others would have adapted better to local conditions and prices, or ensured they had better local market intelligence and due diligence.  

The survey also showed that availability, accuracy, and completeness of intelligence on emerging markets is an issue for pharmaceuticals and healthcare companies. Nearly eight out of 10 of the 38 companies surveyed said that such information is not readily available in their organizations while nearly 90 percent doubt the accuracy and completeness of the information they obtain. 

One of the largest challenges to 2017 will be capturing growth in rural areas, which until now have been too fragmented to effectively enter. Global pharmaceutical and healthcare companies will also find themselves coming up against local competitors that may have the upper hand when it comes to leveraging local relationships and established procurement systems to undercut newcomers in pricing.  

It could be for such reasons that the pharmaceuticals and healthcare companies in GIA's report say that local distribution and access to customers, pricing, and localized competitive positioning are their top three success factors in emerging markets over the next five years. 

They also said amongst their top five threats would be competition from both local and foreign companies. The heavy hand of the government is also a major threat, with corruption and a flimsy rule of law, bureaucracy, and red tape—regulations and taxes—being the other top five threats. 

Success Factors in Emerging Markets, 2012â2017 			

It is not difficult to see how this will be played out in reality. 

Roche's Xeloda (capecitabine) is a publically-funded drug in China that is used in the treatment of metastatic breast and rectal cancers. It has become effectively "non-reimbursable" due to lack of information and some initiatives to control public health spending on prescription therapies. Public hospitals in Shanghai no longer stock capecitabine and the drug could be subjected to government-mandated price cuts (which applies to all NRDL listed drugs), without the benefit of broadened access.  

Threats in Emerging Markets, 2012â2017			

To address similar problems, many other companies work closely with local governments to allow for tiered pricing and other flexible approaches to establishing value by considering local socioeconomics, disease areas, viable margins, and empowering local markets to make their own decisions. 

In other emerging markets, government regulations and policy are designed to favor local companies. The Russian Ministry of Industry & Energy is working towards having local players provide 50 percent of the drugs in circulation in the Russian pharmaceuticals market by 2020. 

Looking ahead, pharmaceuticals and healthcare companies must be agile enough to secure effective distribution networks, navigate bureaucracies, and price effectively. What is most critical in the short-term is investment in the market research and competitive intelligence required to stay ahead of both local and foreign competitors. 

Senior Vice President Asia Pacific at Global Intelligence Alliance. 

Pharmaceutical companies looking to wrest market share in high growth markets of tomorrow must overcome challenges from a new crop of national champions.

Your Local Competitor: A Threat in Emerging Markets?

With the Supreme Court's decision in June to uphold the Patient Protection and Affordable Care Act (ACA), life science companies gained access to 32 million potential new customers. While that's worth celebrating, the party may have ended before it began. For pharmaceutical companies to realize the benefits of new healthcare consumers, and to keep the ones they currently have, they'll have to make some substantial changes. And change is never easy. 

Until 15 years ago, the model for marketing pharmaceuticals was akin to marketing pet or baby products, in that products were purchased by one person (the physician) and consumed by someone else (the patient). Since the end user had no input into the purchasing decision, marketing efforts were centered on the individual driving the decision—in this case, the prescribing physician. 

With the emergence of DTC advertising in the late '90s, this model changed. Suddenly, the patient was thrust into the spotlight as another key decision-maker, and manufacturers had to formulate ways to speak to them. But even then, most DTC advertising led back to the physician, echoed by a chorus of "Ask your doctor if brand X is right for you." 

Under the ACA, the target market has become more convoluted. The customer cannot be so clearly defined, and the criteria to satisfy these various stakeholders are disparate at best and conflicting at worst. The physician, patient, and payer audiences remain critical, but a platoon of other stakeholders has been added to the marketing mix. These include administrators, support staff, decision coaches, and purchasing groups, all of whom will be incentivized to achieve better outcomes at a lower cost.  

To address these diverse groups successfully, pharmaceutical marketers will be forced to find ways to reach all of these audiences throughout their commercialization process. 

A solid positioning and messaging platform sits atop every successful commercial strategy. It forms the basis for how companies seek to differentiate their products, while also guiding the sales and marketing initiatives to ensure total alignment internally and externally. Prior to the ACA, pharma built its positioning platforms almost entirely on two dimensions—efficacy and safety. Since the two most important questions that physicians want answered before prescribing a product are "Does it work?" and "Is it safe?," this approach has proven effective, if uninspiring. After all, not many industries can successfully launch a product on the basis that it works for some percentage of the population and probably won't hurt the consumer. 

With the approval of the healthcare law, the conversation has moved beyond efficacy and safety to one of overall "value," which reflects the ACA's stated mission to deliver more effective care at a lower cost. Efficacy and safety are in no way diminished in importance, but they're also not enough to carry a product's positioning platform. They're table stakes for getting into the game.  

Additional challenges such as the ability to demonstrate comparative efficacy will only increase in importance as reimbursement is more closely tied to outcomes and performance measures. In fact, the ACA includes funding for comparative effectiveness research estimated to reach $500 million by 2014. That should light a fire under some pharma manufacturers to initiate comparative research studies and take control of their messaging in this area before the government does it for them. 

Pharmaceutical marketers must now create a value story around their products based on both clinical and economic outcomes. For example, the ability to connect the dots between fewer adverse events and fewer readmissions, resulting in lower total resource utilization with an attached dollar value will create a far more powerful story to stakeholder groups than data alone. Commercialization executives are realizing this and starting to incorporate health economics and outcomes research (HEOR) in their positioning and messaging matrix. Internal HEOR experts are now becoming integral members of the brand team. 

While all of this suggests a heavily rational approach to positioning and messaging, the emotional component will also become increasingly important in a post-ACA world where shared decision making (SDM) continues to grow. Through a variety of online media options, patients are more informed than ever about their treatment options and are taking an active role in many decisions. 

Reform legislation calls for pilot projects exploring SDM, which creates a formal process that lets patients participate in making "informed choices" about elective procedures. Both the Mayo Clinic and Dartmouth Hitchcock Medical Center have already embraced the concept and have launched shared decision making centers where doctors and decision-making coaches use aids to help patients weigh options on intervention and testing.  

To patients and physicians, "outcomes" mean more than economics and analytics. There's a privilege and responsibility that comes with working in an industry that can advance human health and improve lives. Expressing outcomes through emotional drivers like quality of life will reach both caregivers and patients on a more visceral level. 

There are relatively few industries where you can launch a product and know with virtual certainty how large your target market is, who the best customers should be, how and where you can reach them and what competitive products they're currently using. Plus, if any competitors try to enter the market, you'll have years of advance notice because all of the competitive data will be available in the public record. 

Pharmaceutical marketers have operated under these favorable conditions for decades. Given the drug development cycle, by the time a product receives market clearance, pharmaceutical marketers are intimately familiar with their target customers, purchasing drivers, and how they intend to deploy their sales and marketing resources. The combination of pre-market conditioning leading up to launch, combined with the full-court press of an integrated commercial plan, provides a very efficient means to get immediate traction. 

But the ACA creates scenarios that will force manufacturers to rethink their approach. Specifically, the move to tie financial incentives to a performance model rather than the standard "fee for service" model will necessitate a change in the marketing strategy and tactical approach for pharma manufacturers. 

Guidelines for accountable care organizations are designed to integrate hospitals, doctors, and caregivers into a seamless entity to deliver cost-effective care. Providers will be rewarded for achieving clinical standards and performance benchmarks rather than procedures.  

When the customer set or purchasing drivers change or expand, strategies by definition must follow suit. In nature as in business, the concept of "adapt or die" is as relevant as ever. The graves of many a once successful brand are marked by a steadfast dedication to the status quo. 

What this means for commercializing pharmaceuticals is a shift in both the message and method of how products go to market. The direct selling method to physicians will no longer be viable on its own. A more organizational sales approach will be required to reach a multi-disciplinary team of decision makers that range from clinical subject experts to laypeople. This shift will have major downstream implications on the tactics used to support the marketing strategy. For example, sales teams will have to shift toward business-to-business sales strategies instead of relying on high frequency visits and sampling. Marketing channels should expand beyond the traditional media mix to include a broader, integrated approach designed to reach a more diverse audience. And multiple, customized communication vehicles will be required to address the varied interests, purchasing drivers, and clinical understanding of the key stakeholders. 

Without question, the ACA will significantly impact how healthcare will be packaged, sold, delivered, and consumed. It also provides unprecedented opportunities for pharmaceutical manufacturers to access an enormous pool of new consumers. To capitalize on these new opportunities and to protect the franchises they've already built, pharmaceutical companies will be required to transform their thinking around long-held beliefs and basic assumptions, starting with identifying their customers and understanding their needs. 

Senior Principal at Back Bay Life Science Advisors. He can be reached at 

With respect to targeting, positioning, and launching new drugs, the ACA reform stands for Adjust, Change, and Adapt.

Reforming Pharma Marketing

 is still very much a game of chance: a round puzzle of soft edges, with pieces that rarely fit the hard rectangles of time and money. Solving the puzzle correctly—with a new product as the sum of its parts—depends on making that lengthy progression from basic science to registration as linear as possible. In this industry, "taking time out" does not mean the pause that refreshes; instead, it's a process in which speed to market spins profits.  

show how industry is striving to make that venture through the puzzle palace of drug development more predictable—and better positioned. Our cover story on Danish drug maker H. Lundbeck is about managing risk through asset relocation: to retain a reputation for innovation in CNS therapies, get closer to the source, which in its case is the United States. While it has built a small stake in China and other hot emerging countries, Lundbeck is placing its primary bet on this biggest of the mature markets, recognizing that access to US-based talent will jump start its discovery pipeline and, through collaborative networks, reduce R&D overhead too. The challenge is replacing critical patent expirations with organic growth from a small revenue base, in a country where blowout scale is the admission ticket to compete.  

Outperforming the competition in piecing the development puzzle will thus be a make or break differentiator for Lundbeck. It's claiming that uninhabited "blue ocean" market space. Observes Ken Kaitin, director of the Tufts University Center for the Study of Drug Development, "most other companies are saying that spending 20 years and hundreds of millions of dollars on developing new CNS drugs, only to see them fail in the later stages of the pipeline, is a risk they are not willing to take."  

Next, we venture to the frontier of drug development in a story on how the promise of stem cell research has been slowed by another form of risk, caused by the confluence of morality, ethics, and politics. This risk is more daunting than progress of the science, which senior editor Ben Comer documents as having truly Lazarus-like effects on some patients. Yet solving this development puzzle could literally change the taxonomy of disease—how it is defined, treated, and cured. But here the calculation of risk is reversed: a social and ethical consensus—itself unpredictable, because it essentially represents a leap of faith—must take place before business commits the time and money at the level needed to bring value to patients.  

Our third feature is a profile of Richard Bergström, who as director of Europe's main pharma trade association, EFPIA, must plot a straight course through the Orwellian world of "doublethink" that Europe has become today. No other region has such a volatile mix of recession, debt, splintered governments, declining demographics, and divided industry loyalties; nowhere else are government policy makers more adept at holding multiple contradictory beliefs simultaneously, and addressing each of them with solutions that distract, deflect, disperse—but never resolve.  

The burden is making sense of this muddle and Bergström, still a fresh face at 46, wants to do it with a forward-framed narrative tied to all the good health that Europe can reap from its $10 billion annual investment in medicines R&D. What separates him from the other company gray suits is his curiosity about the communities that the industry tends to ignore or disparage. Bergström is top of the league at dialogue; in my previous life as an industry committee chair in Geneva, I could always count on him to show up and say something that would rouse all those note-takers to actually take note. He certainly didn't come for the muesli.  

Finally, the value from widening the conversation around drug development was underscored by a visit 

 had recently from the Myelin Repair Foundation, which is building a collective to commercialize new treatments for multiple sclerosis. With a small $40 million budget, this professional non-profit group pursues what a labor union might call a platform of mediation: to advance a compound collaboratively, first identify the cultural and practice insecurities that attach to any relationship between industry and academia, then translate and transform these into a set of tools that end up validating the academic work—to industry standards.  

A shorter development cycle starts with taking the time to talk. Product or policy, it's the same. 

From the Editor

Developing a drug is still very much a game of chance: a round puzzle of soft edges, with pieces that rarely fit the hard rectangles of time and money. Solving the puzzle correctly-with a new product as the sum of its parts-depends on making that lengthy progression from basic science to registration as linear as possible.

Three Ways to the Future

The development of affordable biologics and biosimilars are of particular interest in Brazil as the utilization of these products represents a significant portion of the Brazilian Ministry of Health's total budget. In order to increase access to these medications, the Agência Nacional de Vigilância Sanitária (ANVISA) released guidelines in December 2010 that further define a pathway to bring biologics and subsequent entry biosimilar medications to market in Brazil. 

The guidelines require applicants to provide a record of whole quality information and necessary clinical data for their proposed biologic or biosimilar product. While this is an imperative first step in bringing affordable versions of these medications to the Brazilian market, additional guidance is needed from ANVISA to encompass complex medications that fall outside the realm of biologics. These medications, namely non-biologic complex drugs (NBCDs), possess large synthetic molecules, including synthetic proteins, and are typically comprised of higher order structures.  

As a result, NBCDs are often difficult to fully characterize. Taking into considering these regulatory complications, additional guidelines for development of these therapies in Brazil will ensure patients secure affordable medications that are proven safe and efficacious.  

Small molecule, biologic, and NBCDs medications

Small molecule therapies, like aspirins, are manufactured by chemical synthesis and generic equivalence can be demonstrated by relatively simple, straightforward testing. While complex medications are also developed via chemical synthesis in laboratories, they can possess primary, secondary, and tertiary structures, similar to biologics, and may contain an enormous number of polypeptide sequences. NBCDs are often comparable to biologics in size, but the latter are derived from living matter, or manufactured in living cells using recombinant DNA biotechnologies rather than being chemically produced. The figure on page 65 depicts the differences between complex drugs, biologics, and small molecule medications. 

As illustrated, it can be difficult, and in some cases impossible, to characterize the active ingredients of NBCDs. Even slight modifications in the amino acid sequences of molecular weight of these products can have major safety and efficacy implications. Furthermore, changes in the manufacturing process conditions for NBCDs can cause significant changes to the primary and secondary structures, leading to challenges in establishing bioequivalence for follow-on products.

One example of an NBCD is glatiramer acetate (Copaxone), indicated for relapsing remitting multiple sclerosis (RRMS) and part of the glatiramoid class of drugs. Glatiramer acetate is a heterogeneous mixture of polypeptides comprising of the four amino acids L-glutamic acid, L-alanine, L-lysine and L-tyrosine. The constituent amino acid sequences and chain lengths of polypeptides in glatiramer acetate vary and the pharmacologically active epitopes cannot be identified. Currently available analytical technology is incapable of characterizing all of the active sequences of this product, so pharmaceutical equivalence cannot be assured by follow on manufacturers. Consequently, the only way to guarantee safety and efficacy of follow on versions of glatiramer acetate would be through clinical trials with relapse rate as the clinical endpoint. However, this may not be the case for all NBCDs. When securing applications for follow on versions of NBCDs, ANVISA should determine the need for clinical trials on a case-by-case basis to reduce the amount of unnecessary spend and time by manufacturers. As a result, NBCDs possess many of the same challenges of biologics and warrant similar specifications to ensure patient safety continues to remain a top priority. When securing applications for follow-on versions of NBCDs, ANVISA should determine the need for clinical trials on a case-by-case basis to reduce the amount of unnecessary spend and time by manufacturers.  

Regulatory framework surrounding complex drugs

Currently, ANVISA has not yet defined a pathway for follow-on versions of complex medications. The 2010 Biosimilar Guidelines released by the Brazilian regulatory agency took into account frameworks from around the world including Health Canada (Canada), EMA (Europe), CECMED (Cuba), KFDA (Korea) and the World Health Organization (WHO). In its guidelines, ANVISA outlined two potential pathways to bring biosimilars to market: the development copy for comparison path and the individual development copy path. In the development copy for comparison path, applicants are required to compare their biosimilar to the reference product by supplying information surrounding cellular origin, production process, quality parameters, and non-clinical/clinical studies. 

This route enables extrapolation of therapeutic indications and was adapted from the WHO SBP Guidelines. The individual development copy path is used in instances where the biosimilar and reference product cannot be compared. With this pathway, applicants are requested to provide information surrounding the technological development of their product including production data, quality control, and non-clinical and clinical Phase I/II studies on a non-comparison basis. The data submission can then be increased or decreased according to the complexity and specific characteristics of the molecule. Currently, there is one biological product, a low molecular weight Heparin, approved under the individual development pathway and two more products under development. 

On September 10-11, 2012, ANVISA and the US Food and Drug Administration (FDA) came together to discuss issues in law, regulation, and trade between the United States and Brazil surrounding food, medical devices, and pharmaceuticals. During this meeting, industry experts discussed the recent legislation, regulation, and guidance covering biosimilars, follow-on NBCDs, and the bioequivalence standards for both. Discussion at the meeting surrounded the substantially different approaches between the United States and Brazil in defining the pathway of these products. For example, unlike the United States, Brazil does not recognize a data exclusivity period for a company introducing a biologic. In addition, Brazilian law does not apply to complex drugs, a complicating factor for Brazilian innovators. Conferences of this kind are necessary to navigate the new frontiers being explored for complex drugs by regulatory authorities.  

The ability, or inability, to chemically characterize a product should determine requirements for approval of a follow-on NBCD. According to the FDA's 2012 Biosimilar Guidelines, the extent of clinical trials will depend on a number of factors including the nature and complexity of the innovative product, the degree of understanding surrounding the mechanism of action (MOA) for the follow-on product, the extent to which pharmacokinetic and pharmacodynamic testing can predict clinical outcomes, the availability of appropriate endpoints and biomarkers, and the extent of clinical experience with the innovative and follow-on product. Additionally, the importance of understanding the MOA and active portions of follow-on NBCDs cannot be overemphasized. Without this available information, the characterization process of these products is suspect.  

Globally, regulatory authorities have maintained that the clinically active portions of a pharmaceutical product must be defined in order to demonstrate sameness for a follow on product. Without this essential component to the characterization of NBCDs, regulatory authorities cannot definitively know whether the follow-on product is equivalent, or even similar, to the reference drug. The issue of pharmaceutical equivalence/sameness is significant as it determines how much previous work can be relied upon for the approval of new medications. ANVISA must determine the level of necessary data on a case-by-case basis to ensure products available on the market possess adequate non-clinical and/or clinical data to ascertain sufficient safety and efficacy profiles. 

ANVISA has made great strides in defining a regulatory pathway for biosimilars in order to bring these complex therapies to market. With continued advancements in science, more complex therapies will continue to be brought to market. Oftentimes, these complex therapies are able to provide benefits for patients that were previously unachievable. As the agency continues to further define strategy for biosimilars, distinct guidelines should be developed surrounding NBCDs to ensure that all complex products are safely regulated for patients.  

, PhD is Senior Director, Life Cycle Initiatives at Teva Pharmaceuticals. He can be reached at 

The Brazilian government's policy on biologics doesn't adequately address non-biologic complex drugs. Additional guidance is needed to bring these important medicines to market.

Complex Drugs and Biologics: Policy Considerations in Brazil

This sponsored supplement was produced by Focus Reports.  

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In the global theater of business and politics, Turkey increasingly leverages its location as an ideal vantage point where actors can seamlessly move between all things West and East. 

 COVER ART BY TURKISH LOCAL ARTIST DENIZ KARAKAYA			

An emerging Asian market with a special relationship to the European Union and close ties with the Middle East, Turkey's strategic geopolitical position is a place where multinational players want to be. The pharmaceutical industry is no exception. 

With a growing, aging population and a young, highly skilled workforce, Turkey's demographics are also a draw. Economically, the country boasts a GDP topping more than 8 percent in 2010 and 2011 and is weathering the global economic crisis better than many of its European neighbors. 

The pharmaceutical industry has also enjoyed a wave of expansion. According to IMS, the Turkish pharma market reached USD 9.8 billion in 2011 and experienced 10 percent growth in volume. This has attracted some of the industry's biggest players. In recent years, Novartis, Merck Serono, GSK, Sanofi, and Novo Nordisk have made the country a regional center of operations. 

Nihat ErgÃ¼n, Turkey’s minister of Science, Industry and Technology			

Nonetheless, major national healthcare reforms, drastic price reductions, and market access delays have made Turkey's pharmaceutical market a particularly challenging place the past few years.  

But with a new budget period beginning in 2013 and signs that the government may be looking to turn a corner, the industry is preparing for the day when Turkey becomes one of the next big pharma countries. 

Over the past decade, Turkey's healthcare system has been radically reformed. With the election of the Justice and Development Party in 2002, universal healthcare became a top national priority. Sweeping reforms began the following year with the enactment of the Health Transformation Program. 

2005 â 2011: TURKISH MARKET GROWTH IN VALUE (IEIS)			

First, the country's three social security schemes were united under the Social Security Institute (SGK). Then, in 2008, the Universal Health Insurance law was passed, aiming to make healthcare widely available. Finally, in 2010, the family practitioner system was implemented, providing low-cost care by local doctors to citizens across the country. 

According to Fatih Acar, president of the SGK, the reforms have made "access to healthcare services easier and waiting periods have been shortened." He said that most of the population is now covered and that Turkey is considered the "most expanded healthcare provider country in Europe." 

Fatih Acar, president of the Social Security Institution (SGK)			

Ayşe Çetinel Sapmaz has been the managing director of Janssen, the pharmaceutical company of J&J, in Turkey for the past 11 years and witnessed the dramatic change in the country's healthcare system. "Access to healthcare has increased dramatically—and this is of course something that we view positively. People are no longer left waiting in queues; they have access to doctors, they have access to treatment. From a societal point of view, things are moving in the right direction," she said. 

On the other hand, critics raise concerns that new healthcare policy has led to over-use of the system. Alp Sevindik, secretary general and COO of the Association of Research Based Pharmaceutical Companies (AIFD), explained, "In 2002, Turkish citizens would visit a doctor three times a year, on average. However, the numbers of visits have now risen to eight. Of course, most of these visits result in a prescription. Hence, one of the problems we are currently facing is government induced volume or demand. If the government wants to provide this level of quality of health service, the volume of medicine usage will expectedly increase and accordingly, so should the budget to account for that. Unfortunately, that has not been the case." 

Alp Sevindik, secretary general and COO of the Research Based Pharmaceutical Companies Association (AIFD)			

According to the SGK, expenditures on pharmaceuticals increased from TRY 7.8 billion (USD 2.3 billion) in 2004 to TRY 15.8 billion (USD 8.7 billion) in 2011. 

In 2010, Turkey was ranked the 6th largest pharmaceutical market in Europe and the 14th largest in the world. According to a recent report by the Pharmaceutical Manufacturers Association of Turkey (IEIS) in collaboration with the Boston Consulting Group (BCG), the country could be doing a lot better. 

Turgut Tokgöz, secretary general of IEIS, said that in recent years, Turkey has been far too "inward-looking" to take real advantage of the international market. "The local market was vibrant and as the pharma industry is heavily regulated, it requires a large amount of effort and capital to export products," he said.  

Turgut TokÃ¶z, secretary general of the Pharmaceutical Manufacturerers Association of Turkey (IEIS)			

"Unfortunately, the industry has taken the easy route and has been focusing on the local market, which has been growing quite handsomely. Now that they are somewhat squeezed domestically, they are very much interested in export markets. This puts Turkey in a late-comer phase and it is not easy to gain a good market share in export markets. The train has already been moving, but it is still possible to catch it," Tokgöz said. 

That is just what the Turkish government and industry leaders intend to do. As the 100-year anniversary of the Turkish Republic approaches (Atatürk founded modern Turkey in 1923), the government has set some ambitious goals for the country, including becoming a top-ten economy, fixing the country's trade deficit, and increasing the country's annual exports to USD 500 billion.  

Specific goals have been set for the pharmaceutical industry, which accounted for 10 percent of the total trade deficit in 2010 (excluding energy imports) due to a high level of imports versus a low level of exports. That year, the sector's imports were valued at USD 4.4 billion, while exports flat lined at USD 600 million. 

Cengiz Celayir, chairman of the Board of TISD			

The IEIS/BCG report suggests that proper measures could boost the country's pharmaceutical exports to USD 16.5 billion by the 2023 deadline. 

AIFD has been working in partnership with government to encourage long-term policies that support innovation. It has developed a strategic document called the "Vision 2023" study, which recommends increasing the level of R&D and clinical research.  

With the sweeping healthcare reforms also came a number of policies that have severely impacted pharmaceutical prices and have been widely criticized by industry leaders.  

AyÅe Ã§etinel Sapmaz, managing director of Janssen Turkey			

Starting in 2004, the government established a revised reference pricing system for pharmaceutical reimbursements. The reference price of an original product is based on the lowest ex-factory price among five EU reference countries, including France, Spain, Italy, Portugal and Greece. In 2009, the Euro/Turkish Lira exchange rate was set at 1.9595. Critics argue that this rate is not representative of current price levels. 

CÃ¼neyt BalikÃ§ioÄlu, general manager of Ferring Turkey			

During September 2009, the government also announced a price decree that led to higher discounts on innovative drugs. As a consequence of these pricing policies, pharmaceutical companies operating in Turkey experienced great difficulty maintaining profitability. 

The International Investors Association (YASED), a non-governmental organization that represents international companies operating in Turkey, has taken issue with pharmaceutical cost containment policies.  

Učur Özkutlu, chairman of the association's Access to Health Working Group, said, "The past three years have been lost from our side. The discounts have gradually increased from 23 percent to 32.5 percent to 41 percent today. In that context, the pharma companies in Turkey have faced the worst setback ever. While the total market growth was 2.7 percent, multinational companies' growth here was negative 2.5 percent last year."  

çetinel Sapmaz of Janssen said, "The new pricing mechanism has enforced not only the lowest prices in Turkey, but also a high number of mandatory discounts. This has put the country at a level that is 50-60 percent lower than mean European prices. We do not find this sustainable." 

Cüneyt Balikçioğlu, general manager of Ferring Pharmaceuticals' operations in Turkey, entered the market in 2005 with high hopes. But the hurdles he faced the past few years stunted the growth that he was hoping to achieve.  

"We were not only negatively affected by the price discounts, but also by the fixed exchange rate that hasn't been adjusted for the last couple of years and reference pricing issues. Prior to these developments, our parent company was putting a lot of emphasis and positive outlooks on our Turkish branch," he said. 

"With the impact of these developments, we were not able to live up to those expectations. In my opinion, I think that we could have achieved at least three times the success and contribution that we have now realized, had these changes not taken place. I find this both disappointing and frustrating," Balikçioğlu said. 

Country Report

In the global theater of business and politics, Turkey increasingly leverages its location as an ideal vantage point where actors can seamlessly move between all things West and East.

Country Report: Turkey

Tucked away in a tiny room at last summer's BIO convention, adjacent to a big top vendor circus that would make even P.T. Barnum jealous, a handful of stem cell company executives convened for a panel titled "Stem Cell Therapies...Fact or Fiction?" The meeting was sparsely attended. After trotting out some compelling statistics in support of their chosen field—that stem cell research spending in 2011 was $1.2 billion; that, as of June 2012, 4,067 clinical trials involving stem cells were ongoing worldwide; and that stem cell products will earn upwards of $21 billion in sales by 2020—the executives moved from a discussion of facts to address the fictions.  

Eduardo Bravo, CEO at TiGenix, a Belgium-based cell therapy company, said the most problematic fiction was the initial hype around stem cells. "Pharma jumped in and burned their fingers," he said.  

Pharma's fingers are still smarting. It's true that the vast majority of stem cell companies are in the earliest stages of product development, and the sector has not been immune to the typical setbacks common in bringing forward a new class of drugs. Tumors in patients receiving human embryonic stem cells (hESC), or immune rejection in allogeneic transplant—a term that refers to patients receiving stem cells originating from another person, embryo or fetus—helped to scare off potential investors, especially those that weren't already frightened by ethical concerns and political or regulatory uncertainty. But as stem cell companies have developed work-arounds and solutions to these problems, they still haven't been able to fully assuage would-be funder's fears.   

"Seven years ago, partnering discussions with Big Pharma lasted 15 seconds," said Bravo. "Now they last 15 minutes." Even as mid-sized organizations with stem cell programs like Celgene and Shire have "increased the pressure on Big Pharma" to take notice or be left behind, Bravo said the future primary players in stem cell therapeutics won't likely emerge from the Big Pharma set. "I think it will be someone new, like Samsung, General Electric, or Fuji." 

Maybe that's fitting. After all, stem cell therapies are fundamentally different than small molecules in that small molecules were designed to address symptomatology, whereas "the promise of cell-based therapies is that they offer the prospect of restoring lost function and preserving against degeneration," says Martin McGlynn, CEO at Stem Cells Inc. "These are areas where the pharmaceutical industry's efforts in the past have not been stellar." The problem is that small molecules aren't the game-changers for patients or blockbuster sources of revenue they once were. As pharma moves increasingly toward specialty products and biologics that block the pathways leading to loss of function, perhaps it's time to reconsider stem cell therapies as an additional area for future growth. Stem cell technologies "could be partnered much earlier if there was vision and support from the [Big Pharma] C-suite, if they said to their executives, 'Go out and put some place-holder bets on the table. You don't have to go for winners, but put us in a favorable position if any of these technologies do pan out in controlled trials,'" says McGlynn.  

While stem cell companies continue searching for the funding and partnerships that will pay for the next round of clinical trials, early-stage data continues to accumulate. With the help of stem cell therapies, embryonic and otherwise, recent animal model tests have shown subjects to regain hearing, memory, and motor function. Human subjects with macular degeneration have demonstrated improvements in vision; paraplegics have regained sensation; and patients with aplastic bone marrow—a condition in which the body fails to produce the critical hemtaopoetic cells that in turn produce red blood cells, white cells, and platelets—have been essentially cured, their lives saved by stem cells. There are other examples of early successes with stem cells, and other programs targeting many of the biggest unmet needs in disease areas like Parkinson's, Huntington's, ALS or Lou Gehrig's disease, traumatic brain injury, stroke, Alzheimer's, multiple sclerosis, cerebral palsy, lysosomal storage disorders, diabetes, hematologic cancers, peripheral artery disease, and critical limb ischemia. Stem cells have been shown to provide protection even from radioactive bombs. 

Even if stem cell therapies turn out to be as successful as, for example, the monoclonal antibodies have been, there will continue to be societal and political headwinds. It's notable that every stem cell executive interviewed for this article sought to distance his company from the traditional means of stem cell derivation, which by necessity destroys a human embryo. Questions of when precisely life begins, and the implications of that largely subjective determination, are far beyond the scope of this article. It is important, however, to understand the complexities of the current political landscape with respect to funding stem cell research, and how companies working in the space have managed to innovate around the most controversial practices. 

Roughly 64 percent of Americans support federal funding of stem cell research, according to data presented at the aforementioned BIO panel. Sensing this majority sentiment, President Obama, during his first 100 days in office, repealed former President Bush's executive order which limited NIH funding of hESC research to cell lines already in existence, of which there were approximately 60. As a result, "the federal government removed itself from the marketplace for innovation on hESC because its money couldn't be used," according to Jennifer Geetter, partner at the law firm McDermott Will & Emery. "The second impact was that if the existing stem cell lines weren't adequate from a quantity or quality perspective, [researchers] were frozen in what they could do, if they rely on federal funds to do it." 

With Obama's repeal of the Bush order, NIH was allowed to develop its own guidelines on funding hESC research, which involved an interpretation of the Dickey-Wicker amendment, the latter of which was signed into law in 1995 by Bill Clinton, three years before James Thomson, of the University of Wisconsin, successfully derived the first hESC. The Dickey-Wicker amendment states that no federal funds be made available for "the creation of a human embryo or embryos for research purposes," or "research in which a human embryo or embryos are destroyed, discarded, or knowingly subjected to risk of injury or death greater than that allowed for research on fetuses in utero" under the Public Health Service Act.  

NIH produced guidelines, which allowed for funding of research on hESC, so long as the scope of the specific research program didn't involve creating an embryo or destroying an embryo, even if researchers did indeed use cell lines derived from newly created embryos, or destroyed them as part of the derivation process. This reading of the Dickey-Wicker amendment was challenged in court, and even after two appellate courts considered the matter, first in 2011 and most recently in August of this year, the NIH guidelines continue to stand, for now. 

How important is government's preclinical research funding on hESC? "Since there isn't a whole hell of a lot of private activity in the stem cell area, it's crucial," says Hank Greely, a professor of law and genetics and director of Stanford University's Center for Law and the Biosciences. "If stem cells are ever going to make a significant medical contribution through the biotech or associated industries, there has to be some sustainable source of funding for the kinds of basic research that is going on now." 

It's important, too, to note that in vitro fertilization (IVF), which is more or less legal in every country except Costa Rica, where it is banned entirely, is an indispensible source of embryos for hESC research. Typically, many embryos are developed as part of the IVF process, the healthiest of which is then transferred into the uterus of the patient for gestation. The embryos left over are typically frozen, discarded or used for research. In January of 2011, Rep. Paul Ryan (R-WI), potentially the next vice president of the United States, co-sponsored a bill—along with 63 of his Republican colleagues in the House—titled the Sanctity of Human Life Act, the purpose of which is to "provide that human life shall be deemed to begin with fertilization." If this bill were to pass, leftover embryos developed during the IVF process would ostensibly be considered human beings, and off limits to the research community.  

 A Romney administration would "be highly likely to reinstate the Bush era restrictions on federal funding, or be even more restrictive."-Hank Greely			

Mitt Romney, for his part, would "be highly likely to reinstate the Bush era restrictions on federal funding, or even be more restrictive," says Greely. "I don't think he has strong feelings about it"—several of Romney's grandchildren were conceived via IVF—"but powerful voices in his party do." Asked if a Romney Administration would mean a setback for stem cell research, McGlynn, Stem Cells Inc.'s CEO, declined to enter the political fray, but said that "a critical success factor in other technologies in the healthcare field has been a very active NIH, one that is not only active and knowledgeable, but also able to fund early research, to prime the pump, and to provide funding to academia as well as companies like ours that are engaged in translating scientific discovery into clinical outcomes."  

Despite the ongoing funding issues and political challenges, several companies are moving forward with clinical trials and logging impressive early stage data. Last May, Osiris Therapeutics, an elder statesman in the stem cell space, secured the approval of Prochymal in Canada, for the treatment of graft-vs-host disease in children who have received bone marrow transplantation. The product received a second approval in New Zealand in June. Prochymal isn't the first stem cell therapy approved; Genzyme's Carticel was the first FDA approved therapy, way back in 1997. The reason that Osiris can legitimately claim to be the first approved stem cell "product" is because Carticel, and several other therapies approved globally, rely on an autologous procedure, meaning that adult stem cells are extracted from the patient, and then readministered to the same patient. Autologous therapies are limited, from a commercial standpoint, by the fact that cells must be derived from the individual adult patient that will make use of them. Prochymal, on the other hand, utilizes human mesenchymal stem cells sourced from the bone marrow of healthy adults ages 18 to 30, for use in other patients, a cell transfer process known as allogeneic transplant. Allogeneic therapies are closer to products in the sense that they can be scaled and used by any number of people. 

A critical success factor in other technologies in the healthcare field has been a very active NIHâ¦one that is able to fund early research. -Martin McGlynn			

Autologous therapies have much to recommend them, however. Tim Mayleben, CEO at Ann Arbor, Michigan-based Aastrom Biosciences, says primary market research conducted by his company found that autologous therapies, like Aastrom's Phase III candidate targeting critical limb ischemia, are perceived as safer by physicians, payers, and patients. "Physicians in particular like autologous cell therapies, because if you're starting with the patient's own cells, there's not the risk of [immune] rejection and there's not the perceived or real safety issues that people have with allogeneic cells," says Mayleben. However, Mayleben concedes that in some ways, working with allogeneic cells is "easier" due to manufacturers not having to process cells for each individual seeking treatment.    

At Stem Cells Inc., which is focused on CNS disorders using cells derived from fetal brain tissue—which are classified as "adult" stem cells as opposed to hESC, since organs have fully formed—there is less of a tumorigenicity risk to patients, a key challenge with embryonic stem cells. Being close to "totipotent," or capable of turning into any cell type in the body, hESC must be "terminally differentiated" in the lab, ex vivo, a complex process that prevents the cells from turning into anything other than the cell type or organ tissue that's being targeted in the patient. If just one cell slips through without being differentiated in the manner, it could lead to tumors. In this example, a patient could end up with tumors containing cartilage, teeth, hair or bone, for example, a gruesome outcome to clinicians and potential investors. However, stem cell companies—Stem Cells Inc. included—have largely avoided this problem, primarily by using other kinds of stem cells whose fates are more hardwired, unlike the youthful and fancy-free embryonic stem cells. Or by meticulously screening embryonic cells using assays or procedures to assess whether cells have indeed been made to "dance to a tune" that leads to terminal differentiation, as McGlynn put it.  

Stem Cells Inc. is pursuing therapies across a range of CNS disorders including spinal cord injury, stroke, Alzheimer's, lysosomal storage disorders, cerebral palsy, and macular degeneration, among others. McGlynn says the putative label for his company's neural stem cells would be as follows: "A neuro-active, cell-based therapeutic, for the restoration and preservation of neurological function in a broad range of CNS disorders."  

We were last in the IVF clinics in 2005, so our methodology doesn’t destroy, harm, or change the fate of the embryo in any way. -Gary Rabin			

Pluristem Therapeutics, an Israeli cell therapy firm that raised roughly $34 million in a September public offering of common stock, is also targeting patients with critical limb ischemia, the end stage and most severe form of pulmonary artery disease. In its lead program, Pluristem treated 27 patients —12 in the United States and 15 in Germany—with the goal of demonstrating progression-free survival against historical data. The result was 85 percent progression-free survival, compared to 65 percent in the historical, placebo-controlled studies. For CLI, however, it's likely that FDA would require amputation-free survival, which the endpoint that Aastrom Biosciences is looking at in Phase III. Pluristem is now moving forward with a Phase II trial evaluating its placental expanded cells (PLX) in the treatment of intermittent claudication, a subset of peripheral artery disease. Through a compassionate use program in Israel earlier this year, the company also successfully saved the life of a seven-year-old patient with aplastic bone marrow, who had failed a bone marrow transplant. She was given two doses of PLX cells one week apart, via intramuscular injection, and "in seven to 10 days, she had recovery of her red cells, white cells, and platelets, and was discharged" from the hospital, says Bill Prather, Pluristem's senior VP, corporate development. The company has saved two additional bone marrow patients' lives in the last few months.  

Pluristem struck its first PLX out-licensing deal with United Therapeutics in 2011, to fund development for treating pulmonary arterial hypertension, a chronic syndrome characterized by abnormally high pressure in the arteries leading from the heart to the lungs. The company manufactures its own cells, which are derived from human placentas, and hopes that its sophisticated 3D culturing process will lead to a situation where "we will be considered by our partner as the best supplier," says CEO Zami Aberman. "We don't want to give any manufacturing rights to the pharma companies." The subcutaneous administration of PLX is also a differentiating factor of Pluristem's therapies. "We don't believe we need to go to the intravenous route because that's a dose-limiting procedure. There's a certain amount of cells you can't exceed because the cells get stuck in your lung," says Prather. "In our ischemia trials, it was an outpatient procedure...it took about 20 minutes [to administer the cells]." Pluristem's PLX cells cannot be differentiated, and the company isn't focused on pluripotent cells, or cells that can be differentiated in the lab. Instead, Pluristem is focused on cells that are "good secretors, that can secrete a variety of factors, which is a completely different approach than embryonic stem cell therapies." The company is "working with both the EMA and the FDA on all our projects," says Prather. By forming relationships with expectant mothers, Pluristem is able to show up for scheduled C-sections to collect the placenta. "We'll be able to manufacture 10,000 doses at a dose of 300 million cells from one placenta, and we have a lot of them,"according to Prather.  

Aberman uses Geron, the first company to invest heavily in developing stem cell therapies, as a supportive example of Pluristem's approach. Geron shuttered its embryonic stem cell R&D programs late last year, a sign many interpreted as a swan song for stem cell therapies. "Geron was involved in the field for 20 years, and they tried to differentiate hESC for spinal cord injury. They spent about $500 million over 20 years, and nothing happened," says Aberman. "Talking with them a year ago before they shut down, they agreed that the therapeutic effect is achieved by the factors that are secreted by the embryonic stem cell...so why mess with embryonic stem cells if you're looking for these [secreted] factors? What we do is inject the cell, which releases a multifactorial process that interacts with the patient's body to generate a paracrine or endocrine effect...that helps the body to heal itself and to change or modify the disease progression." 

Advanced Cell Technology (ACT), based in Santa Monica, California, hasn't given up on hESC, but "unlike the conventional methodology for creating human embryonic stem cells," which necessarily destroys the embryo, "we don't do that," says Gary Rabin, CEO. "That activity, obviously, has cultural, religious, ethical, political, and legal repercussions involved." So how does ACT avoid destroying embryos during the derivation process? "We take a much earlier stage embryo, when it's at about the eight-cell stage, and remove a single cell," which is then used as the progenitor cell for ACT's embryonic stem cell lines. "This technique is identical to what's done in pre-implantation genetic diagnostics in IVF clinics," a routine procedure conducted when a parent is donating embryos, and the embryos are screened for significant genetic disorders like Huntington's or Tay-Sachs, for example. "We were last in the IVF clinics in about 2005, so our methodology doesn't destroy, harm, or change the fate of the embryo in any way," says Rabin. The problem with using the NIH approved cell lines, per Rabin, is that the NIH lines "are already exhibiting a fairly significant amount of fate commitment to become the kinds of cells that they're already going to become. Our much earlier stage cells don't exhibit any of this kind of fate commitment, so they're much more efficient at creating the three germ cell layers, than any of the NIH lines we tested."  

Having sidestepped the cultural, religious, ethical, political, and legal implications associated with embryonic stem cell research and development, ACT's lead clinical program involves taking hESC and turning them into retinal pigment epithelium (RPE), which are cells that sit at the back of the macula, in the eye. These cells provide "a whole variety of trophic factors," as well as waste removal for the photoreceptor layer. As RPE cells decline, the photoreceptor layer begins to decline, the result of which is age-related macular generation (AMD), "a massive unmet medical need," says Rabin. "There are 15 million people in the United States that have this disease, and there's no cure." 

Ideology, politics, and a stilted political debate may be causing pharma to overlook the potential of emerging stem cell therapies in fostering a new generation of cures.

Pharmaceutical Executive-10-01-2012