Biotechs Biting the Dust

On Tuesday, Epix Pharmaceuticals announced that they were dissolving.  And unlike many innovative life sciences companies, they’re not being acquired by another company to take advantage of their research, nor are they evaporating because their one line of research failed in clinical development.  Rather, they’ve just run out of money, can’t raise any more, and their assets are worth less than their debt.  So they’re selling off what they can, and locking the door behind them.

While the company’s announcement isn’t too reveling about their history, looking at their information on Yahoo! Finance shows that while they have consistently lost money, (as do virtually all biotech companies without products to sell), year-over-year, revenue was increasing and the losses were shrinking.  And the company’s profile described various areas of clinical development:

“EPIX Pharmaceuticals, Inc., a biopharmaceutical company, engages in the discovery and development of therapeutics through the use of its proprietary silico drug discovery technology to treat diseases of the central nervous system and lung conditions. Its therapeutic product candidates in development include PRX-03140, which completed Phase II clinical trials for the treatment of Alzheimer’s disease; PRX-08066, a small-molecule inhibitor that completed Phase II clinical trials for the treatment of pulmonary arterial hypertension and pulmonary hypertension associated with chronic obstructive pulmonary disease; and PRX-07034, which completed Phase I studies for the treatment of cognitive impairment associated with schizophrenia. The company also offers Vasovist, an injectable intravascular contrast agent to provide enhanced imaging of the vascular system using magnetic resonance angiography. It has collaborations with SmithKline Beecham Corporation, Amgen Inc., and Cystic Fibrosis Foundation Therapeutics, Incorporated. The company was formerly known as EPIX Medical, Inc. and changed its name to EPIX Pharmaceuticals, Inc. in 2004. EPIX Pharmaceuticals, Inc. was founded in 1988 and is based in Lexington, Massachusetts.”

The Boston Globe also had an article about Epix’s demise, which also noted that Biopure, another Massachusetts life sciences company announced it was going under last week – however Biopure, which had been working on a blood substitute, was much more of a “one trick pony” than Epix.

Last fall I’d written about how biotech companies were treading water because of problems raising new money, and while several other smaller companies have been acquired, I don’t recall hearing about such a previous high profile company completely dissolving.  The ongoing challenge in the current economic quagmire will be for start-ups to find their initial funding, and to see if larger biotech and pharma companies can be enticed by science and economics to buy any of the remnant companies – although with the Merck/Schering-Plough and Pfizer/Wyeth pending combinations, those major players most likely won’t be in the market for new acquisitions anytime soon.

Humana Does Drugs

Humana has put another couple of videos on YouTube in their ongoing series to explain – from their perspective – how the healthcare system works.

The first new video is “Insurance Companies and Prescription Drugs.” Like their other videos, this one paints the insurance industry’s as rosy and altruistic, while stating that “Prescription drug manufacturers are allowed to set their own prices, and they often build large profit margins into name brand drugs to recoup the costs of researching, marketing and advertising.”

This statement strikes me as very curious.  First, how do companies “build large profit margins into name brand drugs?”  Maybe Humana means that pharma companies are making sure that their medicines provide patients with significant clinical benefits? Or more likely, what I think they meant, was that prices are set to include large profits.  However, the problem with that implication is that prices for pharmaceuticals – both brand name and generic – are really set at whatever the market will bear to fulfill the simplest of economic theories, i.e. to maximize profits.

Recouping research and manufacturing costs really comes into play for company’s research and development decisions and priorities.  These decisions are important for keeping innovative pharmaceutical companies in business because analyses show that only about 3 of every 10 new medicines ever recoup their to development costs.  And from what I leaned by talking with people in other industries, this is a lot higher than the ratio for book publishing or movies – which are in the 1/10 to 1/20 range.

Later in the video is another curious statement about how mail order delivery means that the patient gets a monthly supply of their medicine every 90 days. [Go to time stamp 1:30 in the video.]  Wouldn’t that leave patients without medicines for 2 months?  This doesn’t seem like a good way to encourage disease management through pharmaceutical compliance.

And lastly, the other Humana video is about the difference between PPO and HMO health insurance plans.  This video is titled “What is a PPO?” While simple like the other videos, it doesn’t seem as skewed.

Importing and Exporting Health Care

The August 16th Economist had an interesting article (and commentary) about patients traveling to other countries for medical treatments, a.k.a. “medical tourism.”  The article focused on the US healthcare system, and mentioned other parts of healthcare that are being exported, (such as transcription of medical records, reading of imaging studies), and imported, (such as physicians and nurses).  But there are two aspects of this issue that the article didn’t touch upon – chronic care and pharmaceuticals:

Medical Tourism Doesn’t Work for Chronic Care
Patients are traveling from the US to other countries for expensive procedures like heart surgery and joint replacements.  While savings from this medical tourism can be significant on a per procedure basis, it may only make a small dent in overall healthcare spending – and only produce a dip in cost while not significantly changing the growth rate in health care costs.  But more importantly, such medical tourism doesn’t address the expanding problems of providing care for patients’ chronic conditions – which is a major driver of increasing healthcare costs.

Importing Medicines – Safety
Importing medicines from other countries into the US has been a controversy for more than 10 years.  The US Congress has repeatedly authorized the importation of medicines from other countries provided the Department of Health and Human Services certified their safety.  But the HHS (under both Democratic and Republican administrations) has not made such certification – and that was before the deaths earlier this year from contaminated heparin manufactured in China.

Importing Medicines – Politics
While the Obama and McCain campaigns have very different positions on health care reform, their statements on importing medicines are very similar in that both include provisions for importing medicines only if they are safe:

  • “Obama will allow Americans to buy their medicines from other developed countries if the drugs are safe and prices are lower outside the U.S.”
  • “John McCain will look to bring greater competition to our drug markets through safe re-importation of drugs”

Healthcare Jobs and Economic Growth
The world is clearly becoming flatter for healthcare goods and services, and this could be a worrisome trend for the US economy since healthcare products, delivery and research are significant drivers of US economic growth. After all, healthcare jobs – in both delivery and biomedical R&D – are high skilled, high wage jobs that depend upon an educated workforce and an economical comfortable society that can devote a significant portion of its income to healthcare.  If the US starts shipping more and more healthcare jobs (and money) overseas, this could result in a downward spiral as the loss of those jobs undermines the strength of the US healthcare system and the country’s economic growth.  However, it is uncertain how much the loss of that part of economy could be offset by potentially lower healthcare spending – a cost that some economists believe is inhibiting economic growth in the US and our global competitiveness

Canada’s Proposal for Subsequent Entry Biologics

After writing about Follow-On Biologics in a recent posting, I saw a notice about Health Canada’s proposal for how they would approve biologic products that are similar to already approved biologics whose patents have expired. They call these products Subsequent Entry Biologics (SEBs), and the proposal is open for public comment from March 14, 2008 until April 16, 2008.

While the draft guidance is lengthy, it does strike an overall well-balanced tone:

  • “SEBs are not ‘generic biologics'”
  • Approval of an SEB does not mean it can automatically be substituted for the original biologic that it is “similar” to
  • Comparative studies will be required to generate data showing similarity to the original biologic in terms of quality, safety and efficacy

In many ways, the draft guidance is similar (no pun intended) to the process the US FDA used to approve some generic drugs prior to the 1984 Hatch-Waxman Drug Price Competition and Patent Term Restoration Act. (This was the law that created the abbreviated new drug application (ANDA) process which allowed generic drugs to only demonstrate bioequivalence, and obviated the requirement that they replicate the original drugs safety and efficacy trials.) By referencing published studies about the innovator drug as proof of safety and efficacy, these so called “Paper-NDAs” allowed generic companies to be approved much faster and more cheaply.

Health Canada’s “paper biologic licensing application” like proposal, would allow them to rely on published information about the original biologic, while also handling each SEB application individually to decide what additional studies need to be done to demonstrate quality, safety and efficacy of the SEB.

As I pointed out in my previous post, there are many levels of structural and biological complexity with biologic treatments, so Health Canada’s draft approach seems very appropriate and reasonable.

What do you think?