Archive | April, 2013

Orphan R&D Shows Greater Returns over Conventional Drug Development

24 Apr

By Jack Fuller, Investor Analyst, LSN

A recent report that took a look at the current trends and future forecasts for drug development found that compared to conventional drug development, the research and development of drugs for orphan indications showed a greater overall return on investment. [1] Orphan drugs are classified as pharmaceutical products aimed at rare diseases or disorders, which in the US means a potential market of less than 200,000 patients. In 1983, the US government passed the financially incentivizing initiative, the ‘Orphan Drug Act of 1983’. Additional markets have emerged since 2000 with the adoption of similar acts in EU and Japan. Drug developers targeting orphan indications have the additional benefits of 7 years of market exclusivity from ‘same drug’ recombinant products (baring clinical superiority), a 50 % tax credit on R&D cost, special grants for phase I – III clinical trial, and user fees waived on revenues <$50 million. These incentives have allowed the development of therapeutics with a limited market financially feasible and as we will see, actually provide a stronger return on investment (ROI) than non-orphan drugs.

According to the new report, worldwide markets for orphan drugs are set to grow from $83 billion in 2012 to $127 billion in 2018 at a compound annual growth return (CAGR) of 7.4 % as compared to 3.7 % for the overall prescription drug market.  The financial incentives and expanding market make a strong case for investment in orphan indications; however, the true value to big pharma is derived from the smaller required patient size for approval. Phase III drug development costs can be cut in half or more with an average of 43 % reduced patient size. These results translate into big pharma achieving a 1.7 times greater ROI compared to non-orphan drugs.

jack1So what is the end result for early stage life science investors? Companies such as Eli Lilly, Roche, and Biogen Idec are acquiring more orphan drug development companies. Of the top 10 orphan R&D products (by NPV) acquired externally, 50% have been the result of company acquisitions, 30% have been in-licensed, and 20% product acquisitions. This is good news for institutional investors looking to exit their investments and foundations looking to advance promising new therapeutics into later stage clinical trials.

Beyond the financial incentives for investors and life science companies, this push toward fostering development of previously underdeveloped diseases is benefiting patient groups who previously had scarce treatment options. Take the Cambridge, MA based Aegerion Pharmaceuticals, which is developing the orphan drug lomitapide for patients suffering from a rare form of familial hypercholesterolemia that causes cholesterol levels to soar, followed by almost certain death from heart disease by age 30. The success of the ‘Orphan Drug Act’ leads us to wonder if the poor market performance of other necessary indications will result in similar legislation and resulting financial opportunities.  Will we be seeing an ‘Antibacterial Development Initiative Act’ in the future? We’ll keep you posted.

[1] “EvaluatePharma Orphan Drug Report 2013.” EvaluatePharma, n.d. Web. 24 Apr. 2013.

Big Device Firms Focusing on Early Stage Opportunities

24 Apr

By Max Klietmann, VP of Research, LSN

It is no secret that venture capital firms are distancing themselves from early stage med-tech investments and are focusing more on later-stage opportunities. Interestingly, there is an emerging trend among the large, established players in the device space, whereby they are making strategic allocations to emerging device companies. What is especially interesting is that in certain indication areas, device companies are starting to see themselves as competitors to pharmaceutical products, meaning that we may be seeing the beginning of a new competitive landscape.

Medical devices were traditionally viewed as a distinct entity in the medical field, and not in direct competition with drug companies. However, as various major sectors in the space are converging, and the concepts of personalized medicine, companion diagnostics, and therapeutically-oriented devices are becoming mainstream, all this is changing. Take for example a major indication like cardiovascular disease – this is an area that has shown limited promise in terms of drug development over the past decade. However, devices might offer a solution for many patients that can be tailored on an individual basis. Consider the faster time to market and significantly lower risk surrounding devices, and you have a major new source of competition in the space.

Of course, the device firms recognize it, and have begun to outwit big pharma using their own strategy. Rather than develop devices in house or focus on later-stage products, many large device firms are investing in seed-stage companies or forging licensing deals early on in the R&D process to build a robust product portfolio. The implications are huge: Device companies may rapidly become the leading solution to many major indication areas, and pharma might be in even bigger trouble than anticipated. However, for the emerging biotechs and medtechs, this is excellent news – the emergence of a new industry-wide arms race means demand for product and a desire to invest capital, helping to accelerate the industry forward and bring cures to patients faster. Brace for impact!

CRO Marketing 101: The Value of Email Campaigns

24 Apr

By Tom Crosby, Marketing Manager, LSN

A recent study found that among most small-medium sized businesses, approximately 15% of marketing budgets are allocated towards email marketing (by far the largest single line item). By comparison, SEO and social media budgets came in at 8% a piece, and the confidence levels in the effectiveness of each were dramatically lower than they were for email marketing. This may sound surprising, considering the hype that surrounds social media outlets, but the data clearly shows that new and flashy doesn’t necessarily mean effective. CROs marketing their services should be mindful of how to effectively approach this tool.

In the current state of CRO service marketing inbound leads are few and far between, and small & emerging biotech opportunities are hard to map out. In this environment there is no easier and more efficient outbound attempt that a marketing team can make than email. This is reflected in the findings of the study. Personally, I see the positive effects of our newsletter campaign every day at LSN – most notably is that the few inbound connections that we are able to establish often come directly from the newsletter.

Email marketing is definitely a sales tool. However, there is a right way and a wrong way to go about email marketing. Many marketing professionals make the mistake of believing that the wider your audience is, the better your chances are of making that connection. We’ve all seen the cold emails coming into our Outlook inboxes every morning from marketers at nameless list providers. However, the reality is that a clean and narrow list of good targets is infinitely better than a large, clunky list of cold contacts.

The key to an effective campaign is targeted, interesting content that is being sent to interested readership on a regular basis. You want to create a dialogue with customers so they feel engaged, rather than throwing things against a wall and seeing what sticks. Direct, sales-driven “pseudo-articles” will only cheapen your brand, and will likely put your domain name on the spam list. However, if your prospects feel engaged, you can bring the business to you by solidifying your firm’s position in the marketplace as a leader with niche expertise. In other words, show how your CRO is differentiated from the competition by highlighting the unique advantages you offer. Having created a dialogue with prospects, it will then also be easier for you to adapt as conditions shift.

The aforementioned study showed that one of the main concerns with email marketing was losing subscribers when sending out weekly mailings. In my mind, this is a good sign, because it means that our list is getting stronger, and that we’re not reaching out to people who aren’t a fit for our product. This comes with the added benefit of staying in good favor with the community at large. If somebody doesn’t want to receive emails from us anymore, it’s made quick and easy to just say ‘no thanks.’ This is a simple courtesy that has far-reaching implications in terms of your company’s image – nobody wants to be seen as an annoyance. More importantly, this helps to keep your list fluid and up-to-date, allowing for more targeted campaigns and more effective dialogue.

The key take-away is that email marketing requires planning, strategy, and consistent execution and follow-up. Marketers need to maintain a conversation with their prospect audiences, and make their mailings interesting and easy to read. The goal is to connect your brand with insight and expertise that no one else can offer. When successfully executed, this can be an incredibly powerful tool that enhances the efficacy of the business development team.

Hot Life Science Investor Mandate 1: PE Provides Secure Venture Debt Loans to Medtech – April 25, 2013

23 Apr

A private equity group based in Canada has around $500 million in assets, and is currently deploying capital from its fourth fund, which raised nearly $200 million. The firm is seeking greater exposure to the life sciences, and while they do not have a set timeframe to make allocations, the group would invest in a new firm within the next six months if a compelling opportunity were identified.

The PE provides secured venture debt loans ranging from $2-15 million and has the ability to syndicate loans as large as $30 million for public companies. They are most interested in medical technology firms that are developing medical devices. The firm will only consider medtech companies that have products that are currently on the market. The firm will consider both US- and Canadian-based firms. The firm only considers funds that have at least $5 million in revenue, and will consider both private and public firms.

Hot Life Science Investor Mandate 2: Mezzanine Debt Fund Looking to Invest Directly in Healthcare, Research Institutions – April 25, 2013

23 Apr

A mezzanine debt fund with offices across the US is currently focused on structured financings of commercialized biopharmaceutical products and medical technologies. The firm’s total AUM is approximately $400 Million. Collectively, the fund has completed more than 50 royalty transactions representing nearly $4 billion in capital over the past 15 years.

The fund is heavily invested in healthcare investing that focuses on IP investments in FDA-approved biopharmaceutical assets through royalty bonds, structured debt, revenue interests and traditional royalty monetization. Typically, they target investments between $20 and $200 million and work directly with leading healthcare companies and research institutions.

Typical financings are intended to healthcare organizations fund pipeline development, make acquisitions, and expand into new markets—all with an adaptable source of capital. The firm’s primary source of collateral is derived from commercialized products. 

Hot Life Science Investor Mandate 3: PE Group in Eastern US with Large AUM Looking for Life Science Opportunities – April 25, 2013

23 Apr

A private equity group based in the Eastern US currently has over $9 billion in assets under management, and is currently looking to deploy capital from its fifth fund – which raised over $2 billion – to life science companies.

The firm has no set timeframe to make allocations, but would invest within the next sixth months if a compelling opportunity were identified. The firm’s investments typically range from $30-50 million. The firm is most interested in biotech R&D service firms, and specifically is looking for contract manufacturing organizations (CMOs) and contract research organizations (CROs).

The firm provides firms with growth capital, and also does distressed equity transactions, and therefore is only looking for established firms. The PE has no preference as to where the firm is based, and plans to invest up to 49% of the fund’s assets in firms that are located outside of the US. The firm mainly invests in private companies but will consider public companies as well.

LSN Database Feature: Trends Suggest Oncology, Antibody & Early Stage Licensing Demand Increasing

17 Apr

By Dr. Karin Bakker, Managing Director, PharmaPlus Consultancy, B.V.

LSN’s deals database is a powerful tool for investors and corporate strategic groups looking to follow key trends in the area of licensing and product/technology specific transactions. This week, LSN takes a deeper look at three popular parts of the space with compelling activity in 2011 and 2012: These are oncology-focused therapeutics, antibodies, and early-stage products. The tables below explain the latest shifts in the space.

Worldwide deals increase dramatically: For oncology deals done between 2011 and 2012, there was a nearly 20% rise in deals that had worldwide licensing rights.

WorldWideDeals

This means that the licensee has exclusive rights to research, develop, manufacture & commercialize, regardless of territory. Of these deals, at least 41% in 2011, and at least 26% in 2012, were reported to pay double-digit royalties to the licensor (10% or more.) It is important to note that this number tends to fluctuate positively, because royalty figures are not necessarily publicly disclosed in licensing deals.

DDRoyalties

In at least 7% of the deals of 2011, and at least 15% of the deals in 2012, equity payments became publicly available in the database. In 50% of the deals with equity in 2011, the investor was a large pharmaceutical company. In 2012, this figure fell to 25%. This statistic highlights another trend – companies are licensing more to smaller private companies than to big pharma.

EquityDeals2

In terms of deals involving antibody-based therapeutics, there was a 2% rise (from 28% to 30%) between 2011 and 2012. It is important to note here that a majority of these are early stage deals – for example, deals with research alliances and companies in the preclinical stages.

AntibodyDeals

In summary, there is an increase in licensing activity surrounding oncology, antibody-based therapeutics, and among earlier stage products. This shift represents a positive trend for those emerging biotechs targeting this major indication area, who are considering early stage licensing as an alternative route to capital or exit.