Pharmaphorum 27 June 2016
Paul Tunnah speaks with industry veteran, and guest facilitator, Ian Evetts on what big pharma can learn from the biotech sector about delivering medicines of value to market.
As the pharma industry faces increasing pressure to develop and launch new medicines that are not only efficacious, but can also deliver value for money to ailing global healthcare systems, its relationship with biotech has never been more critical for ensuring post-patent cliff pipelines can be adequately replenished to allow continued innovation to be brought to market.
Here, pharmaphorum speaks with Ian Evetts, an industry veteran with experience on both the biotech and pharma sides of the fence, to hear his thoughts on how pharma can accurately assess the value of early-stage assets, how biotech and big pharma look at things differently and how they can learn from each other to meet these new challenges.
“It is important to make an informed view of the profile of a successful product at the time of launch”
PT: What are the biggest challenges in assessing medicines value at an early stage?
IE: We need to distinguish between asset valuation and long-term forecasting, which is a component within that. The value of an asset depends on numerous factors, including clinical attributes, level of future unmet need, commercial factors related to the asset and the market it is entering, strategic fit within a pipeline, the degree of technical risk and the expected return on investment.
To determine the commercial value for an early stage asset, long-term forecasting is clearly critical, yet it is complex – good forecasting is about increasing the accuracy of prediction; matching the most likely product profile against the predicted unmet needs at the time of launch, given the numerous uncertainties that lie ahead. It’s also about appropriate profiling and benchmarking – considering all relevant market drivers to enhance the relevance of your prediction. The most fundamental pitfall when forecasting for an early stage asset is to forecast value around current unmet needs, rather than those 10-15 years down the line.
Of course, it is almost impossible to second guess which development candidates will pass or fail clinical hurdles, but it is important to make an informed view of the profile of a successful product at the time of launch – and defining what we mean by ‘success’. In addition, it is important to understand the global picture – the impact of emerging markets and trends within established ones; the shifting treatment paradigms and disease prevalence patterns – as all markets are different and often respond to different product profiles.
It is also naïve to dismiss future pricing, reimbursement and market access considerations for an early-stage asset – too many products are progressed without early insight to the likely acceptance of a product within the market – not from a regulatory perspective, but relating to likely pricing and access barriers.
“Biotech valuations are clearly nimbler and have easier connectivity across technical and commercial functions”
PT: Do biotech and big pharma fundamentally assess value differently?
IE: From a general perspective, there is a fundamental difference in the end-points for asset valuation. Big pharma takes a longer term view, whereas biotech companies are normally looking to satisfy investors who are working to short-term ROI (usually based on a five year exit strategy).
Clearly, emerging biotechs are looking to convince potential investors and licensees of the value of their asset and there is a tendency to over-egg the likely sales potential though crude forecasting approaches or use of selective data. Within major pharma, in-house assets can be subject to political drivers as much as sound techno-commercial-based valuation – poor use of considered, independent assessment and too much reliance on therapy area teams who are vying for funds. What tends to be common for both biotech and major pharma is an inflated valuation of most assets and a tendency to continue development for too long, where the real future value is insufficient.
In terms of the processes, big pharma invariably has large cross-functional teams and well-defined process that are, on paper, efficient mechanisms for understanding value and directing medicines development, but in practice are too large & unwieldy, too slow and too politically charged. Biotech valuations are clearly nimbler and, with smaller teams and a focus on delivery, have easier connectivity across technical and commercial functions. Asset development – and, therefore, valuation – focuses on investors and licensees, as previously mentioned, but there is often a low-level of understanding of major pharma needs and processes.
“In the ideal world, individuals and valuation teams need a blend of commercial acumen with scientific understanding”
So biotechs need to ensure that their programmes are satisfactory for investors, pharma licensees, regulators and payers. It’s a misconception that a biotech can ignore market access considerations, for example, because they are looking for an exit by phase II. Ultimately, the drug has to be saleable – having activity against a target is not enough.
PT: At what stage in drug development should commercial take the lead from science?
IE: It’s all about getting an appropriate balance throughout the discovery and development programme. Targets should be selected on the basis of sound strategy and this should be driven by techno-commercial foresight. It is a myth to assume that, ‘if a product works, it will sell’. Good products fail because of poor alignment to commercial factors due to a lack of early, clear direction and consideration.
So, commercial leadership should exist right at the start, followed by strong representation from clinical, technical and commercial functions throughout the whole process, ensuring viable early stage discovery targets, development of clinical programmes that marry with marketable opportunities and into late-stage clinical positioning and pricing – although the balance shifts as a drug is progressed through development stages, the commercial role can never be down-played.
Of course, there are many issues that can interfere with this alignment and it’s easy to point the finger of blame at leadership when things go wrong. In the ideal world, individuals and valuation teams need a blend of commercial acumen with scientific understanding. Without this, a drug can still be commercially successful, but it’s likely to be by chance!
PT: How are market access challenges impacting assessment of medicines’ value?
IE: Significantly. Good science and efficacious drugs are no longer enough and there is effectively no product if an innovation cannot satisfy national pricing bodies’ requirements for premium pricing against their standard of care. Poor understanding of the pricing and reimbursement picture in all relevant markets for a novel drug represents a huge oversight – and one which is often associated with those late-stage opportunities that remain un-partnered. It is imperative that appropriate clinical trials are developed for countries of high value to a brand – and this includes selection of active comparators in phase IIb and phase III trials. Also, trial programmes that satisfy regulators and payers don’t necessarily translate into good market uptake – market access can still remain an issue if data does not resonate with end-users.
“Size dictates both the benefits and flaws of biotech and big pharma!”
The reality is that regulatory approval is just the first step in a long sequence of events which dictate commercial success, from national pricing and reimbursement assessment through to regional and local payer decisions. The health economic package associated with a phase III programme is critical to a drug’s success. Sometimes, even with a good health economic case, deals need to be struck with national payers on pricing; pre-launch buy-in from all prescribers and payers is critical to ensure sufficient value can be retained on market.
PT: What can big pharma learn most from biotech about delivering value?
IE: Size dictates both the benefits and flaws of biotech and big pharma! The biotech ethos is all about fast decision-making, less political involvement in assessments, use of fast-track or streamlined development programmes with key data as priority and less concern over risk-taking – keeping several marketable options open from the outset
For portfolio decision making and asset valuation, maybe big pharma could adopt a strategy to utilise small, highly-skilled, techno-commercial teams with cross-functional expertise who are independent of therapy area and business development groups, but affiliated to them.