Home Health Care GSK-Pfizer deal illustrates risks and rewards of moving up the biopharma value...

GSK-Pfizer deal illustrates risks and rewards of moving up the biopharma value chain

80
0
SHARE

On the surface, the news Wednesday that GlaxoSmithKline and Pfizer would form a joint venture to market over-the-counter drug products doesn’t seem like the most earth-shattering news. But it illustrates the risks and rewards drugmakers encounter as they shift their focus into high-value therapeutic modalities and disease states.

It’s well-known that the industry’s transition from the old blockbuster model to one focused on tougher indications like cancers and Alzheimer’s disease has been underway for several years. However, it also significantly raises the stakes, even for global behemoths like London-based GSK. That likely explains the company’s decision to eventually offload its consumer health division.

After running the joint venture for three years as majority shareholder – with New York-based Pfizer controlling a little less than one-third – GSK will spin it off into a new, publicly traded company, it said Wednesday. It also sold some brands like the malted milk beverage Horlicks to Unilever earlier this month. Jettisoning its consumer health division allows GSK to focus its resources on pharmaceuticals and vaccines, which constitute the majority of its sales.

“The payoff for pharma and biotech investments when they work is enormous,” wrote Rita Numerof, president of St. Louis healthcare consultancy Numerof & Associates, in an email. “But the associated risks, development and commercialization costs are also quite significant. If a company really wants to focus on their core business, this kind of move allows them to combine assets in order to maximize the performance of other components to drive profitability and growth.”

A few events over the past month exemplify the kinds of risks Numerof refers to. Last month and this month, respectively, AstraZeneca announced results from two Phase III studies showing that its PD-L1 inhibitor Imfinzi (durvalumab) and CTLA4 inhibitor tremelimumab had failed to improve survival in patients with frontline non-small cell lung cancer and with head and neck cancer previously treated with platinum chemotherapy who had progressed. Following the news of the NSCLC trial’s failure, AstraZeneca’s shares were down 3.5 percent – a significant decline for a large company. And last week, Biogen pulled out of a three-year-old, $1 billion partnership with Gainesville, Florida-based Applied Genetic Technologies Corporation – or AGTC – when interim topline results showed its gene therapy for a rare retinal disease was ineffective.

Although AstraZeneca is doing a deep data dive to find subsets of NSCLC patients who could benefit from its drugs, the trial’s overall failure leaves Merck & Co.’s PD-1 inhibitor Keytruda (pembrolizumab) as the only Food and Drug Administration-approved checkpoint inhibitor option for the first-line setting of the disease. And in head and neck cancer, Keytruda’s rival will remain Bristol-Myers Squibb’s PD-1 inhibitor, Opdivo (nivolumab), rather than Imfinzi. Meanwhile, despite the AGTC gene therapy’s failure damaging that company’s stock far more than Biogen’s, the negative trial also means Biogen has one less opportunity to diversify beyond its traditional specialties of Alzheimer’s disease and multiple sclerosis – all while its top-selling drug, the MS treatment Tecfidera (dimethyl fumarate), will lose patent protection and go generic in April 2019.

Of course, GSK is a well-established player in biopharma and certainly no R&D slouch. But while its pipeline page boasts several therapies in Phase III development or in registration in therapeutic areas like HIV, it is noticeably thinner in some important ones like oncology, where it has two therapies in Phase II development. Indeed, boosting its oncology pipeline was the reason behind GSK’s $5.1 billion acquisition of Tesaro earlier this month.

Numerof noted that consumer health tends to be more competitive and to have short product cycles, along with competition from store brands. That stands in contrast to the billions of dollars and geography-specific regulatory affairs and sales staff required to bring a prescription drug from discovery to marketing authorization. “A consumer business and a pharma or biotech business are vastly different from each other, both in terms of risk and profitability,” Numerof wrote.

Photo: marrio31, Getty Images

Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here