Author: Ben Debski

If regulators follow that advice, the Swiss drugmaker could no longer promote Avastin for that use in the US.

Doctors still could prescribe Avastin for breast cancer as it would retain approval for colon, lung, brain and kidney cancers, but sales would likely fall.

Breast cancer treatment accounts for about $1bn of Avastin’s more than $6bn in annual sales, analysts said. The product is Roche’s top-selling drug.

Members of a Food and Drug Administration panel said they did not see enough of a benefit from Avastin in advanced breast cancer to justify its serious risks. They voted 12-1 to urge the FDA to remove the breast cancer approval.

The drug’s risks include gastrointestinal perforations, bleeding and blood clots.

Roche said rates of those problems were low, at less than four percent in the breast cancer trials.

But panel chairman Wyndham Wilson, a National Cancer Institute researcher, said there was definitive evidence that Avastin causes serious and life-threatening side effects. “Small numbers, but if you’re the one, that’s not what you want to be exposed to,” he said.

Overall data “does not support this being effective” in advanced breast cancer, Wilson added.

The FDA usually follows panel recommendations.

The vote was a rare setback for Avastin, a widely used treatment for a variety of cancers.

Morningstar analyst Karen Andersen said the negative ruling in breast cancer “wouldn’t be something that would change my valuation of the firm.”

“Colorectal and lung cancer are both markets where Avastin has been able to penetrate a very high percentage of the first line patients. (Roche) really relies on those indications for the foundation of Avastin sales,” she said.

Roche unit Genentech said the company stands by its data showing Avastin helps patients with advanced breast cancer. “Avastin should be an option for patients with this incurable disease,” a company statement said.

Avastin won clearance for breast cancer in 2008 under a shorter approval process, but Roche was required to run two follow-up studies to confirm the drug’s effectiveness and receive full approval.

Those studies failed to confirm the level of benefit seen in the initial breast cancer trial, FDA staff said.

Avastin, which is given intravenously, delayed the growth of cancer by 5.5 months in the initial study. In the two later studies, the time ranged from about one month to nearly three months.

Avastin did not extend patients’ overall survival in any of the studies.

The drug’s generic name is bevacizumab.

Award-winning ImmuPharma focuses on the creation of medicines aimed at treating serious medical conditions such as cancer, inflammatory and allergic disorders. However, many UK biotech companies are not good at securing licencing deals – or bringing deals to the table that will attract investors.

Not so with ImmuPharma. It has a global licensing partner with highly successful Cephalon, a US specialty pharmaceuticals player. This innovative pharma start-up also boasts talented scientists and a low cost base, not to mention access to world-class technology.

Critically, ImmuPharma also has ongoing clinical human trials on a range of drugs. Which is why investors like M&G – this well-regarded asset management company recently took at 10 percent stake in the business – plus Gartmore, Jupiter, Standard Life and Legal & General, are taking such an interest.
 
“ImmuPharma is a complete steal at current levels and its strong balance sheet gives it little dilution risk. We see numerous catalysts ahead to drive interest in the story globally and are bullish that further Lupuzor data expected imminently will be positive,” said Noble research broker in October 2009.

ImmuPharma focuses on five key markets:
• Lupus
• Cancer
• Moderate to severe cancer pain or post-operative pain
• Highly resistant, hospital-acquired infections such as MRSA
• Inflammatory and allergic disorders
Additionally, ImmuPharma focuses on:
• Niche, high-value specialist areas
• Innovative, targeted drugs addressing unmet needs

Lupus, in particular, says ImmuPharma boss Dimitri Dimitriou, is a good example of a condition where ImmuPharma is taking a strong lead. “Lupus is a chronic, potentially life-threatening autoimmune disease that attacks multiple organs such as the skin, joints, kidneys, blood cells, heart and lungs. There are an estimated 1.4 million people diagnosed with the disease in the seven major countries, according to ImmuPharma and analyst estimates – and there is no known cure.”

Dimitriou knows what he is talking about. He has more than 20 years’ experience in the biotech and pharma industry and has been a senior director at GlaxoSmithKline as well as holding deal-making responsibilities at Bristol-Myers Squibb. (He also held senior marketing roles at Procter & Gamble). He is not short of market nous.

Public for four years, ImmuPharma is principally concerned with developing pioneering drugs in specialist therapeutic areas where there is not much competition. “ImmuPharma has exclusive collaboration with the Centre National de la Recherché Scientifique (CNRS),” goes on Dimitri Dimitriou, “the largest fundamental research organisation in Europe with a budget of 3.3bn euro (2008).”

Real progress
And so far, progress is hugely encouraging. ImmuPharma’s Phase IIb trial was double-blind and placebo-controlled in 150 Lupus patients who received Lupuzor once a month for three months – which demonstrated a significant clinical improvement to their condition says the company.

ImmuPharma was paid $15m before the study was complete, plus $30m last year for the worldwide rights for Lupuzor. “Cephalon is now responsible for the development and commercialisation of the drug worldwide,” explains Dimitriou. “This is part of one of the largest deals in Europe, with ImmuPharma potentially receiving further cash payments from Cephalon of an additional $450m, depending on the achievement of certain regulatory and sales milestones and even more importantly, high royalties on commercial sales of Lupuzor.”

Although ImmuPharma’s Lupuzor is the headline drug, the company has several other innovative biologicals targeting unmet needs. There have been several material developments that have de∞risked Lupuzor say investment brokers, thanks to exciting clinical data and general improving investment sentiment.

Low overheads
So ImmuPharma is attractive to investors on a range of fronts. Its low cost base is certainly a draw. Although it has operations in France, it operates as a virtual company in London. Cleverly, it utilises external companies for much of its clinical trials work and makes extensive use of sourcing compounds from drug libraries such as the Centre National de la Recherche Scientifique (CNRS) in France.

Analyst projections on ImmuPharma look resilient. “We estimate that the company will generate total revenues in FY 2009 of £21.56m,” says pharmaceuticals analyst Dr Navid Malik, “which, after costs of £5.7m and a royalty pay∞ away to CNRS of £4.3m, should generate a pre∞tax profit of £11.66m (net profit of £9.9m).”

Next year, grant income of £1m and a pre∞tax loss of £4.78m is anticipated. Based on estimates of a further significant milestone payment of £15m payable in 2011, it’s estimated that could mean a £6.74m pre∞tax profit.

“The timing of a potential filing for Lupuzor in our view is Q4 2012, with a launch in 2013,” adds Malik. “On launch we are assuming substantial milestones will be payable to ImmuPharma, in the order of $50m for the US market alone. We have modelled a royalty on sales of 20 percent (conservatively, net of payments to CNRS).”

Certainly revenue streams are rare in the biotech sector; funding is often done through new equity issues.  However, because of ImmuPharma’s Cephalon deal, this has alleviated the need for funding and reduced internal costs – Cephalon has assumed all further costs. Analysts’ forecasts range from £1.54 (Singers) to over £3.00 (Panmure and Matrix). Hugely exciting.

Broker upgrade – why ImmuPharma is a buy
“ImmuPharma is a rare breed among UK biotechnology companies,” says pharmaceuticals analyst Dr Navid Malik. “It has a high-value product, Lupuzor, scheduled to enter Phase 3 trials in Q4 next year, which it has licensed to Cephalon, a high-quality US pharmaceutical company. A strong cash position (£27m) combined with a low burn rate should fund existing operations for many years, reducing the risk of dilution and giving investors some downside protection. We believe the market does not appreciate the full potential value of Lupuzor, its lead programme. We are initiating coverage with a BUY rating. Target price 309p.” What is critical to ImmuPharma’s progress with Lupuzor is the development pathway taken by GSK to develop Benlysta, the first drug treatment to treat Lupus in 50 years. A strong Benlysta will benefit Lupuzor as some of the donkey work in developing this new market would be done by a far larger pharma player. When that is achieved then Lupuzor has a perfect entrée.

Why lupus is critical
Lupus is a deeply challenging waxing and waning disease and is characterised by severe and sudden flares of activity. Typically it targets women of childbearing age. It’s an autoimmune condition where the body’s immune system comes under severe attack. Some periods of improvement or remission can follow. However lupus cannot be cured and patients typically endure it for life. Depending on its progression, it can involve specific organs such as the brain and kidneys (lupus nephritis). There can also be severe life-threatening complications. Severe infections tend to become more common, plus the risk of miscarriages stroke, disability and ultimately death. In the past, lupus drug development has been littered with failures.

Further information: www.immupharma.com

Women have higher levels of emotional intelligence than men; that’s often just taken as read in management circles.

They are much better at empathy – the ability to see a situation from someone else’s perspective – than men. It means they have a natural edge when it comes to the soft skills needed in the modern workplace.

But there could be a quick fix that levels the playing field for men, and it comes in an unexpected form – nasal spray.

Scientists at Bonn University and the Cambridge Babraham Institute say they’ve found a link between exposure to the neuropeptide oxytocin and the ability of men to show empathy.

The substance also makes men more sensitive to what are called “social multipliers”, such as spotting a disapproving look from a colleague.

The team took 48 healthy males and gave half of them a blast of oxytocin nose spray, the other half a placebo.

They showed the men photos depicting a series of emotionally charged situations – among them, a crying child, a girl hugging her cat, and a grieving man.

They then asked the men to express how they felt about the people in the photos.

“Significantly higher emotional empathy levels were recorded for the oxytocin group than for the placebo group,” says René Hurlemann of Bonn University’s Clinic for Psychiatry.

The dose of oxytocin had the effect of enhancing the ability of the men to experience fellow-feeling. The men who had the nose spray achieved results that would normally only be expected in women, says Hurlemann.

Oxytocin is a hormone that is known to trigger labour pains and strengthen the emotional bond between a mother and her newborn child.

The hormone could be useful as a medication for diseases such as schizophrenia, which are frequently associated with reduced social approachability and social withdrawal, Hurlemann says.

And an empathy spray could be just the product many wives and girlfriends have been waiting for.

Big Pharma will provide somewhat more in savings than the original $80bn agreement under the latest version of healthcare reform but the bill passed by the House of Representatives creates 32 million more customers for the industry’s products.

Crucially, the government will not impose drug price caps.

“The amount they are paying, essentially in a tax, over a five to 10 year period is potentially more than offset by the increased volume that they have coming in,” said Ben Yeoh, an industry analyst at Atlantic Equities.

“It looks neutral, within forecast error,” he said. “There’s relief that something has got through that drugmakers can live with.”

But this would be counteracted by a sharp increase in the number of insured patients and enhanced revenues from the Medicare programme for the elderly, a brokerage said. Drugmakers were unlikely to revise long-term earnings outlooks on the back of the news, it added.

Ending uncertainty
Under the complex deal hammered out in Washington, the drugs industry will have to pay fees of $3bn from next year – rising to a peak of $4.2bn in 2018 – and provide discounts to help ensure Medicare coverage.

Savvas Neophytou, an analyst at Panmure Gordon, put the cost to the sector at between 1.5 to 2.2 percent of EPS per year for the first five years but said the end to uncertainty should help sentiment.

The vote ended a year-long political battle with Republicans over the vexed issue of healthcare reform and achieved a goal that has eluded many presidents for a century – most recently Bill Clinton in 1994.

“There’s a sense that if no health reform had passed this time around, then everything would have got a really big kicking in three or four years time because, inevitably, something had to give,” said Jack Scannell, an industry analyst at Sanford Bernstein.

Lawmakers also rejected an initial plan to end lucrative “pay-for-delay” settlements between brand-name and generic drugmakers – a win for both groups of manufacturers.

The biotechnology industry, too, has reason to be thankful that the legislation was not worse.

A big fear for biotech investors had been that government would give generic alternatives a fast route to the market. In fact, makers of biotech drugs like Amgen Inc and Roche Holding AG’s Genentech unit will still have a 12-year period of exclusive sales before facing competition from generic rivals.

An international team lead by researchers from Britain’s Wellcome Trust
Sanger Institute used very high-throughput gene sequencing machines to
compare individual MRSA bugs from patients and show precisely how they
were genetically related.

Methicillin-resistant staphylococcus
aureus (MRSA) causes infections such as blood poisoning and pneumonia
and can kill. It is one of a group of drug resistant bacteria, or
“superbugs” that are major problems in hospitals around the world.

Stephen
Bentley, who led the study published by the Science journal, said the
new technology had allowed scientists for the first time to find
precise differences in strains of the bug – a “fundamentally important”
step to tackling infection.

“It allows researchers and public
health officials to see how infections are spread, from person to
person, from hospital to hospital, from country to country,” he said.

Until
now, even the best methods for identifying genetic differences between
bacteria have been unable to pick up tiny differences – leaving
uncertainty about how infections spread.

The success of the new
method relies on comparing whole genetic codes, the scientists said.
The ability to track strains in this way will help researchers
understand how strains can spread so rapidly, and should lead to new
control strategies, not only for MRSA but also for other emerging
superbugs.

The researchers looked at 62 MRSA samples. One set of
42 was taken from hospitals in North and South America, Europe,
Australia and Asia from patients who became infected with MRSA between
1982 and 2003, and 20 were from a hospital in Thailand, from patients
who developed MRSA within seven months of each other.

“We wanted
to test whether our method could successfully zoom in and out to allow
us to track infection on a global scale – from continent-to-continent,
and also on the smallest scale – from person-to-person,” Simon Harris
of the Sanger Institute told reporters at a briefing.

The team
sequenced the whole genomes of all the samples and were able to spot
single-letter changes in the genetic code and identify differences
between even the most closely related bugs.

From the results
they created an “evolutionary tree” which showed that MRSA infections
are often clustered in locations, but can be spread across borders by
patients travelling between one place and another and visiting
different hospitals.

Drug-resistant bacteria kill about 25,000
people a year in Europe and about 19,000 in the US. The European Centre
for Disease Prevention and Control says superbug infections cost 900
million euros ($1.31 bln) a year in extra hospital time and 600 million
euros a year in lost productivity.

Sharon Peacock of Britain’s
Cambridge University who also worked on the study, told reporters the
work could “flag up hotspots for MRSA transmission … and these could
then be examined to improve infection control strategies.”

Dutch researchers said that all hospital patients should be screened for MRSA to try to halt its spread.

Billions are spent every year in advanced economies on drugs for Alzheimer’s disease, yet none of these drugs can halt or even delay its progression. The story is similar for schizophrenia: billions spent annually on drugs to treat the psychoses that torment schizophrenics, but no approved drugs for the cognitive impairment that is the real impediment to patients’ productive engagement in society.

Here are two enormous opportunities to help millions of patients and their families and to save billions in public health care costs. Everyone knows the largest international pharmaceutical companies – the so-called Big Pharma – are constantly looking for blockbuster drugs to replace revenue from others that continue to fall off their income statements – and these two opportunities certainly qualify. So what is our emerging company, Allon Therapeutics Inc., doing in the thick of this race?  Interestingly, we are not getting run over. In fact, we seem to be among the leaders at the front of the pack.

In numerous animal studies, we have shown that our drug, davunetide, halted brain cell degeneration and improved memory. In a clinical trial in patients with amnestic mild cognitive impairment (aMCI), a precursor to Alzheimer’s, davunetide had a statistically significant positive impact on memory. In a clinical trial in schizophrenia patients, davunetide demonstrated it could improve the capacity for daily functioning of these patients. In that same study, we showed through imaging that davunetide had a statistically significant impact on an important chemical marker of brain cell health.

These trials were carried out by some of the top physicians and researchers in the world and reported at the leading scientific conferences and in journals. Our journey began six years ago when a number of us met the founder of Allon, Professor Illana Gozes.

Davunetide and related compounds were discovered by Prof. Gozes, of the Sackler Faculty of Medicine at Tel Aviv University. Her work was supported by visionary philanthropists, Tel Aviv University, and the US National Institutes of Health (NIH). Prof. Gozes derived davunetide from a naturally occurring neuroprotective brain protein that she discovered, known as activity dependent neuroprotective protein (ADNP). Prof. Gozes, with her colleagues at Tel Aviv and the NIH, demonstrated the significant potential of davunetide in numerous models of Alzheimer’s and neurodegeneration. It was clear then, and is even clearer today, that davunetide could be the leading therapy in the so-called tau pathway of Alzheimer’s and dementia. At the time, however, the generally accepted scientific focus was on other approaches.

We decided to build a business around the significant potential that we saw regardless of industry’s focus elsewhere. We made this decision based on the first principle of biotechnology: follow the data. These data were compelling then and have become even more so after numerous human clinical trials. While following the data is the first principle, we built a business based on common sense.  That is: it’s all about people. We assembled an outstanding team with deep scientific, drug development, and business experience. The team works effectively together, does what it says it’s going to do and, most importantly, shares a passion to help patients and families suffering from cruel and debilitating disease.

Over the past six years, our team has consistently produced animal studies with compelling data in models for Alzheimer’s, schizophrenia, frontotemporal dementias, peripheral neuropathy, and other learning and memory deficits. We’ve shown that our lead drug candidate works in humans, that it works in a way relevant to the patients we’re committed to helping, and we can measure its impacts directly in the human brain. We’ve worked with, and been supported by, the key opinion leaders and public institutions.  

Yet we still have to get this product approved, and studies in Alzheimer’s are long, difficult, and expensive. More disheartening is the fact that it has been about eight years since a novel therapy was approved in Alzheimer’s. In the meantime, there have been numerous high profile and expensive failures. There appear to be basic questions about the approval path, the heterogeneity of the Alzheimer’s population, and the tests used to prove efficacy.

We began to look for a unique and more rational approach – and that is when we learned about progressive supranuclear palsy (PSP), a type of frontotemporal dementia (FTD). Approximately 20,000 and 50,000 people are diagnosed with PSP annually in the US and EU respectively, and it is often characterised by progressive difficulty with balance and walking, eye movement abnormalities, and cognitive and personality changes. Patients are typically diagnosed when they are 45 to 65 years old. PSP is associated with progressive disability and death often a little more than three years following diagnosis.

FTD, including PSP, gradually damages or shrinks the front of the brain – the frontal and anterior temporal lobes. Patients gradually lose the ability to behave appropriately, empathise with others, learn, reason, make judgments, communicate and carry out daily activities. FTD affects approximately 200,000 people in the EU, and a similar number of Americans, or about 6.7 people per 100,000 among people ages 45 to 64.  In people under the age 60, FTD is the most common cause of early-onset dementia. FTD can be mistaken for Alzheimer’s disease, Parkinson’s disease, or a primarily psychiatric disorder like depression, manic-depression, obsessive-compulsive disease, or schizophrenia. There is no efficacious therapy for these patients.

A clear path to approval
We believe that an efficacy study in PSP is not just a unique approach – it is also the right one for Allon and davunetide. We are about to launch a robust human clinical trial in PSP because:

• Our existing data support the hypothesis that davunetide works on tau impairment (or “tauopathies”);
• PSP patients are an homogenous population all of whom have the tau pathology on which davunetide seems to work;
• Sadly these patients decline very quickly and there is no effective therapy; and
• There is a validated rating scale that measures clinically relevant outcomes.

Given these facts, we also believe that our study for davunetide in PSP can qualify for single study approval – meaning that this next study may well be the last required before we ask regulators to approve davunetide for PSP. And regulators have responded positively to this point: davunetide has been granted Orphan Drug status in the US and EU, and it has been given Fast Track status in the US as well. The medical community has responded similarly. We are pleased that one of the world’s leading FTD medical teams, from the University of California San Francisco Memory and Aging Center, as well as many other key medical leaders, has been actively engaged with us.

It is also important to note that this next trial will not just provide data for a potential approval,  it will also help define the opportunity in other tau-related diseases, such as several other types of FTD, as well as Alzheimer’s and schizophrenia. This unique approach may well lead to davunetide being the first approved therapy that actually modifies these diseases. More importantly, we believe that it may bring hope and relief to millions of people and families suffering with cruel and debilitating neurodegenerative disease.

Further information: www.allontherapeutics.com

New findings in people build on studies in rats that showed that reactivating a memory – by showing people objects that stimulate the fearful memory – opens up a specific time window in which the memory can be edited before it is stored again.

“Before memories are stored, there is a period where they are susceptible to being disrupted,” said Elizabeth Phelps of New York University, whose study appears in the journal Nature.

Earlier studies have shown that drugs can be used to block fearful memories, but the results were not long lasting.

Phelps and colleagues based their studies on findings in rats that showed that old memories can be changed or reconsolidated, but only during a specific window time after the rat is reminded of the fearful memory. That window of susceptibility is typically between 10 minutes after re∞exposure to the object to six hours later, when the memory stored once again in the brain.

The researchers applied these findings to people in a lab setting. First, they created a fearful memory by showing the volunteers a blue square, and then delivering a mild shock. Once they had created the fear memory, they simply showed a blue square, which reminded them of the fear memory.

The team waited 10 minutes and then started a training period where the volunteers were repeatedly exposed to the blue square without a shock.

Phelps said simply delaying the exposure training so that it falls within a period during which the memory is susceptible to being edited made a lasting difference in the ability to block the fear memory. A second group that was exposed to the blue square without the ten minute waiting period, continued to show fear when exposed to the blue square.

When they brought people back a year later, the group that got the training showed no fear response – tracked by changes in the skin – when exposed to the blue square, while other volunteers continued to have a fear response.
Phelps said the important aspect of the study is the time window.
   
“What we think is happening is because we did it at the right time, you are restoring the memory as safe as opposed to just creating a new memory that competes with the old memory,” Phelps said.

She said the findings are the first of their type in humans, and she cautioned that the findings cannot be immediately applied to people with severe anxiety problems, such as post traumatic stress disorder.

“We did a blue square with a mild shock,” she said. “Normal fear memories are way more complex than that.”

But she said, the findings do open up the possibility of new training methods that can be studied to help people overcome difficult memories.

“It’s really exciting for the potential of treating these disorders. It’s just a ways away,” Phelps said.

The study was supported through a grant by the National Institutes of Health’s National Institute of Mental Health.

Despite the advances that medical science has made over the years, new drugs are still tested in a very low-tech way: researchers give them to animals.

Animal experimentation still plays a key role in a wide range of scientific disciplines. This is hardly ideal. For one, we are not rats, mice or monkeys: we are people.

Just because a dog hasn’t reacted badly to a trial drug, that doesn’t mean that a human tester won’t. Animal experimentation is also expensive and, depending on your point of view, cruel.

Scientists using animals in their work frequently receive death threats and find it increasingly hard to secure private sector funding: anti-vivisection campaigners learned in the 1990s that targeting investors was an effective way of  
limiting research.

The demand for an alternative to animal testing is clear, and researchers from 13 European universities are working on what they believe will be the solution: a computer simulation of the entire human body.

The Virtual Physiological Human Project is being funded to the tune of €72m by the EU. The idea is to bring together the masses of patient-specific genetic data being gathered across European research institutions.

With advances in computing power and information technology, there is the potential to use a human simulation to develop tailored clinical treatments for patients, based on their unique genetic profile.

If it works, the project could revolutionise medical science in the 21st century. And this is not just a long-term goal, the researchers working in this field say.

They expect to make substantial advances in this field over the next ten years in a range of diseases, from cancer to HIV/AIDS. It could mean the end of animal testing and eventually even clinical patient drug trials.

Kelly BéruBé, a cell biologist from Cardiff University, told a recent conference that the advances in this technology were now moving very fast, and offered the prospect of enough quantitative data to allow much greater use of “virtual tests” in the next decade.

Steven Manos, a computational scientist at University College London, agreed that the project will lead to more effective treatments.

But he cautioned that even the most sophisticated computer models represented only a small fraction of the complexity of animals.

Real reduction in the use of animal experimentation would, therefore, be a long-term goal, he said.

At just 28, Duncan Casey has already been from the university science bench to the world of Big Pharma research and back again. Now working in an Imperial College lab tucked behind London’s famous Science Museum, he has no illusions about the prospects for researchers in the pharmaceutical industry

“The unit I used to work in – GlaxoSmithKline’s place in Harlow – has been closed down now,” says Casey, dressed in signature protective goggles and white coat as he works on synthetic chemistry. “It used to be a job for life. Now it’s a job until the next restructuring.”

Across the western world, Big Pharma is cutting back on the number of scientists it employs in its labs and the money it spends on research and development. The hunt for new drugs continues, but the men and women in white coats – traditionally viewed as the lifeblood of the industry – are not as untouchable as they once were.

It’s a similar story at GlaxoSmithKline’s research laboratories in Verona, where lunchtime conversations can be decidedly gloomy. Glaxo is axing the Italian facility, shedding 500 jobs as part of a programme of cuts designed to improve returns on R&D. Many scientists feel stranded or wonder why they entered the profession at all.

“It’s a sad but true fact that science really doesn’t pay any more,” says one young researcher who would not give her name for fear of jeopardising her future prospects in the industry. “The lunchtime discussion today was about what we’d go back and study if we were 18 again and choosing university courses. There were only a few of us who said they’d still go for a science degree.”

Across the Atlantic in Cambridge, Mass., Adrian Ivinson, director of Harvard’s NeuroDiscovery Centre, is reminded of the shifts underway in the industry every time he looks out of his window. Over the road, the “gorgeous, state of the art labs” no longer house Merck & Co Inc’s neuroscience team. “They only built it a few years ago and had this wonderful neuro group in there,” Ivinson says. “Now they’re gone.”

The magnitude of the changes is hard to ignore.

US drug giants Pfizer Inc and Merck have slashed thousands of jobs since acquiring smaller rival firms last year. British-Swedish firm AstraZeneca has plans to close its research labs at Charnwood in central England by the end of 2011, with the loss of up to 1,200 jobs; its Swedish research unit in Lund will also shut. In Japan, Astellas Pharma Inc has announced plans to limit its research expenditure.

Sam Isaly, managing partner at OrbiMed Advisors – with some $5bn under management it is one of the world’s largest healthcare investment firms – expects employment in the 14 Big Pharma companies across the US, Europe and Japan to fall around 20 percent between 2009 and 2015. That means some 200,000 jobs will disappear across the drugs business – not only in research but also in sales and back office functions. “The management of these companies have to deliver to their shareholders, so they are downsizing or making acquisitions or diversifying,” says Isaly.

New products, new markets
One factor forcing Big Pharma to rethink its business model is the huge number of patents that are set to expire over the next five years. As patents run out on blockbuster prescription tablets like Pfizer’s $12bn-a-year cholesterol medicine Lipitor and AstraZeneca’s $5bn heartburn pill Nexium, cut-price generics are sure to rush in and slash margins. Between now and 2015 products with sales of more than $142bn will face copycat competition, according to IMS Health, the leading global supplier of prescription drug data. It is the biggest “cliff” of patent expiries in the history of the pharmaceuticals industry.

Add in tougher regulatory hurdles and a brutal squeeze on healthcare budgets as cash-strapped governments push austerity programmes and it’s little wonder that drug companies are cutting back and shifting focus.

The strategy so far has been to buy promising new drugs from outside developers and boost investment in the relative safety of non-prescription consumer products. Big drugmakers are also moving into new markets – with Asia at the top of everybody’s list. It all adds up to a redesign of the multinational pharmaceutical company. In the 21st century, says Isaly, Big Pharma will primarily be a distribution business.

Horlicks helps CEO sleep at night
A peek inside the bag of free goodies handed out to shareholders at Glaxo’s annual meeting in London gives an idea of one direction the industry is headed. Aquafresh toothpaste, Corsodyl mouthwash, Breathe Right nasal strips and Lucozade energy drink are not exactly at the cutting edge of bioscience, yet they are all products that now enjoy top billing under Glaxo’s youthful Chief Executive Andrew Witty.

Under Witty, who has been in the top job for two years, over-the-counter remedies, oral care and health drinks have become a key pillar of Glaxo’s drive to reduce reliance on traditional prescription pharmaceuticals. As if to emphasise that fact, the one new hire highlighted by the CEO in his address to the meeting was Emma Walmsley – an executive poached from French cosmetics group L’Oreal SA and heir apparent to run Glaxo’s reinvigorated consumer healthcare business.

Glaxo may be working on groundbreaking treatments for cancer, but one of Witty’s favourite products is Horlicks, a malted milk powder best known in Britain as a bedtime drink for the elderly. Horlicks is a huge seller in the key emerging market of India. The brand clocked up £146m ($214m) in Indian sales in 2009, bagging an enormous 48 percent of the hot drinks market there.

The latest in a string of deals in developing markets gives Glaxo a portfolio of branded generics covering therapeutic areas such as cardiovascular, gastroenterology, metabolic and urology.

Phoenix also brings Glaxo a factory near Buenos Aires, a primary care sales force and pipeline of additional branded generic medicines.

Emerging markets are the new battleground for the world’s top drugmakers as sales stall in Western markets – and Glaxo has vowed to increase its business, partly by moving into the sale of off-patent branded medicines.

Phoenix had sales last year of around £70m ($102m), ranking it number eight in Argentina’s pharmaceutical market, while Glaxo’s Argentine business had revenue of £100m. Combined, GSK Argentina and Phoenix would rank third in the Argentine market.

“This is an important step forward in our strategy to grow our business in Latin America – a key group of emerging markets for GSK,” said Abbas Hussain, the company’s head of emerging markets.

Following the acquisition, GSK Argentina and Phoenix will remain separate legal entities.

In May, Glaxo agreed to buy a 9.9 percent stake in South Korean group Dong-A Pharmaceuticals for £73.9m, the latest of a string of deals designed to increase its share in up-and-coming markets worldwide.

Other deals have included the acquisition of branded generics from both Bristol-Myers Squibb and UCB, as well as product development and distribution deals with Dr Reddy’s of India and South Africa’s Aspen Pharmacare, it which it also has an equity stake.

The balance of the pharmaceutical market is expected to shift significantly toward emerging markets in the next five years.

IMS Health, a leading provider of prescription drug data, forecasts drug sales growth in leading emerging markets will average 14-17 percent annually, while major developed markets grow three to six percent.

Argentina is the eighth largest of the emerging markets for drugs, with a total market value of $3bn and the third highest growth rate at 22 percent, according to IMS.