300 Local Biotech Jobs Disappearing by 2009

[The Tim]

[deejayoh]

[LUC]

As Biotech refugee (laid off from Amgen last year). I'm not surprised by the layoffs in the Pharm Industry. The majority of the current Pharm companies have patents that will be expiring in the next few years and will become generics. Most have few products in clinical trials that would become blockbusters( revenue of >1bn) to offset the revenue stream losses. Most of the products these companies have approved recently have been "me-too" drugs (A drug that is structurally very similar to already known drugs, with only minor differences.). These me-too drugs don't benefit the companies, but do benefits the patients because they drive down prices.

Pharm Industry recent foray into Biotech acquisitions, is their desperate attempt to shore-up their pipeline. I think this strategy is a big gamble because Biotech drug approval in not high.

[rose-colored-coolaid]

LUC, I'm real interested to hear your opinion on a question I have about biotech. Specifically, it seems like an industry with huge potential, but where big pharma has eaten up all the innovative companies. This is obviously a huge loss for society.

So, my question is, do you see it as an industry where agile competitors have a chance to enter (IE entrance costs are not prohibitive) due to advances in our abilities to sequence genes and the such? Or, do you see it as an industry where no new competitors can enter due to the extreme costs associated with getting new products to market?

Perhaps, a middle answer would be nobody can get into drugs due to FDA testing requirements, but there is ample room for new competition (which might eventually move to providing drugs) in other arenas.

Thanks

[LUC]

Hi RCC,

Very good question! There are still innovative companies that are being created. Many of them have shifted their strategy from developing a drug from the bench-top to commercial manufacturing, which can cost from 800 million to 1 bn dollars, to partnering up with larger Biotechs and Pharma companies once the product has reached late stage clinical development phase (II-III). These partnerships could be in the form of milestone payments based on reaching certain development goals (e.g., successful clinical trail phase II or IIII results) or selling the rights to the drug as in the case of my former company Immunex {now Amgen} did with Enbrel when it sold the rights to American Cyanamid {now Wyeth}. These companies also offset some of their development and clinical manufacturing costs by out-sourcing to a Contact Manufacturing Organization (CMO). An example of such a company is CMC ICOS Biologics.

I think what we are seeing right now is Pharma and large biotech company shakeout as new technologies are entering the development stages and mature products developed by older technologies are going off patent. It will take time, but the industry will survive.

In the meantime, I want to land a job with either a local contract manufacturer, clinical diagnostic company or the FDA and wait it out! All 3 have good job security.

[Charles Dean]

Getting into this conversation and cross-referencing another topic RCC and I talked about recently in regards to when is government better and when is private industry better at different things.

I've thought for awhile that government could often times be better and more efficient at developing new and better meds than private industry would be.

My thought is that I know most big pharma companies use more than 1/3 of their budget for marketing. Besides the large amount paid for salaries for execs and sales reps. Most of the money that is made is not put back into new development but is rather put into the things mentioned above.

Now, if the government were more instrumental in trying to find cures/helps for different ailments, could they be more efficient than private industry? My thought has been that yes they could, and then prescriptions would be much cheaper for everyone and you would also avoid having "me too" drugs. Also, as a country we would also own the patent on these drugs and be able to profit on the sales of them to other countries.

I know meds are one of the biggest reasons why medical costs are constantly rising at 3-4 times faster than inflation.

What are your thoughts on this idea?

[jon]

What is your source for that 1/3 of budget on marketing? From what I can see, the total US sales is $289B (2006) while marketing is $12B (1998). Of that $12B, half is for free samples of their product ()

[jon]

[Charles Dean]

Sorry, the 1/3 number is in reference to a study showing that money goes into "marketing and administration". Here's a study that shows it's actually closer to 1/4: http://www.sciencedaily.com/releases/20 ... 140107.htm

Medical costs have been rising in the 9-12% range for the last 15 years. That's faster than housing prices rose over the same length of time and well ahead of inflation.

[The Tim]

[LUC]

The Tim,

Thanks for the tip, I heard about Gilead possible expansion from a friend's boyfriend who is currently employed at Gilead. He told me to keep a lookout for employment oppurtunities in process development.

[LUC]

Hi Charles,

To answer your question the govt. does license technology that it has developed and discovered through the NIH Office of Technology Transfer (OTT). At this point the the discovery is at the "proof of concept" stage. Meaning, that the technology has been developed in the lab, but has not been through the commercialization process. Once you reached the commercialization process for a newly discovered therapeutic is when costs escalate and you need a different different type of expertise than those who work in basic research at NIH. The govt. doesn't have the infrastructure or experience to develop a manufacturing process, scale-up that process for tox studies, clinical trials (clinical manufacturing) and commercial manufacturing. It however, provides support for clinical trials (e.g., NIH Clinical Trial Planning Grant Program) and grants for start-up biotech companies.

Drug discovery and development is very expensive; of all compounds investigated for use in humans only a small fraction are eventually approved in most nations by government appointed medical institutions or boards, who have to approve new drugs before they can be marketed in those countries. Each year, only about 25 truly novel drugs (New chemical entities) are approved for marketing. This approval comes only after heavy investment in pre-clinical development and clinical trials, as well as a commitment to ongoing safety monitoring. Drugs which fail part-way through this process often incur large costs, while generating no revenue in return. If the cost of these failed drugs is taken into account, the cost of developing a successful new drug (New chemical entity or NCE), has been estimated at about 1 billion USD (not including marketing expenses). A study by the consulting firm Bain & Company reported that the cost for discovering, developing and launching (which factored in marketing and other business expenses) a new drug (along with the prospective drugs that fail) rose over a five year period to nearly $1.7 billion in 2003.

Recently biotech and pharma companies have been looking to streamline the commercialization process to reduce these cuts. Here are two examples: 1) pharma companies have instituted high-throughput screening to discover new NCE's. 2) Biotech's,such as my former company, are developing a platform manufacturing process for clinical and commercial manufacturing to reduce costs associated with complex biotech manufacturing.

Currently pharma is going through industry wide shakeout. Most major pharmas are laying off people in sales (and other areas) to reduce their expenditures and are having a tough time with approving new drugs because their industry is based on a older technology (small-molecules targeted to receptors). They are not structured culturally or physically to incorporate the newer biotechnologies. In the future companies will be smaller, companies will outsource their development/manufacturing and more cross-partnering will occur between companies to commercialize new discoveries.

[The Tim]

[EconE]