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Wednesday, December 16, 2009
Pharma, academia look to each other to refill the pharmaceutical pipelines
By Julie M. Donnelly
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The IPO window for biotech companies remains mostly shut. Venture capital firms are so busy propping up — or weeding out — existing portfolio companies during the recession that they have little energy and cash to fund new startups. And the so-called “patent cliff” facing big pharma is approaching fast: One third of approved drugs will go off patent by 2012.
This all adds up to an environment in which academia is positioned to play a key role in refilling pharmaceutical companies’ pipelines.
“We are incubating a deal with pharma now, and in the past, they wouldn’t have looked at this technology until three years later,” said Dale Larson, director of biomedical systems at the Cambridge-based nonprofit research institute Charles Stark Draper Laboratory Inc. Larson said that pharma companies are taking a look at Draper’s projects earlier than ever as they seek to streamline their drug discovery process.
Both the technology that is the subject of the impending deal, and another collaboration with Pfizer Inc., are based on life sciences tools that can help pharma companies find flaws in their drug targets earlier so they can minimize the number of dollars spent on a candidate that will ultimately fail. Larson said that, typically, big drug companies would want to wait until researchers had met specific technical or financial milestones before looking at a potential deal.
Partnering with a pharmaceutical company is attractive for academic and nonprofit researchers, Larson and others said, because those drug makers have deep enough pockets and a mature enough infrastructure to keep promising technologies from being left on the research shelf. What’s more, you don’t need too many deals to make a significant impact on the whittled budget of an academic program.
“If this drug gets approved, we will get a percentage of sales in the low-single digits. If it’s a billion-dollar drug, that gets very interesting,” said Todd Keiller, director of technology commercialization at the University of Vermont. The school has a licensing deal with Seattle-based Cell Therapeutics for a drug target that has completed all of its clinical trials and is awaiting a decision from the U.S. Food and Drug Administration about whether it will be approved. Keiller said UVM’s tech-transfer program is relatively small, with about 40 ideas to vet per year. Keiller said a research giant like Partners HealthCare likely has 1,000 ideas per year. But the school does have other collaborations with biotech giant Genentech Inc., which was just bought by Roche, and with Pfizer.
Jon Soderstrom, the head of the tech-transfer office at Yale University, said a big uptick in pharma collaborations is just around the corner. “We actually had a surge of interest two years ago, because a lot of the later-stage drug targets out there in industry had just gotten so expensive for pharma and they were looking for cheaper alternatives.”
But when the market crashed and biotech companies’ valuations took a nosedive, pharma went hunting for bargains in the marketplace instead. Soderstrom thinks now the big drugmakers have picked through a lot of the available later-stage assets, and will be looking to do more partnerships with academia.
One phenomenon that has made academic labs increasingly attractive is that universities are reclaiming “distressed assets” — drug targets formerly licensed to small biotechs that dropped the program to conserve cash. “These drug candidates often have large investments already from venture capital firms, so they are somewhat de-risked,” Soderstrom said.
He said Yale has received calls from big drugmakers inquiring about those valuable returned products.
But one impending threat to collaborations between pharma and academia is the number of mergers in the pharmaceuticals industry, including Pfizer with Wyeth and Merck with Schering-Plough, according to Tom Stossel, a hematologist at Brigham and Women’s hospital, and a professor at Harvard Medical School.
“Pfizer, for instance, has decided to abandon its cardiovascular program. These companies are preoccupied with the behemoth merger process, and they’re downsizing,” Stossel said.
He experienced the biotech cash crunch firsthand with his startup company, Critical Biologics Corp.. The company, which focuses on fighting complications of critical care such as sepsis, raised $10 million in a series A round of funding in February 2007. But Stossel said he hasn’t been able to find the $22 million the company needs to move forward, and pharma companies haven’t come knocking.
Researchers and analysts say the chances of doing a deal with pharma are probably most dependent on just how interested the company is in a particular target, and how much the pharma needs it for its pipeline. Oncology is always a hot area, and central nervous system drug targets (for ailments such as Alzheimer’s disease or Parkinson’s disease) are in high demand right now. Rare disease candidates, analysts say, are popular because pharmaceutical companies believe that under health reform, payers will still reimburse those drugs at relatively high prices.
And when it comes to infectious disease, Paul Bogorad, an analyst with Putnam Associates said, “Vaccines are hot, antibiotics are not.”
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