It seems 2015 may be remembered as the year of the mega merger; the year when all records were broken when Pfizer paid $160 billion to snap up Allergan and made previously huge sums seem small by comparison.
The fee dwarfed the $40.5 billion Teva paid for Allergan’s generics business and the $35 billion Mylan offered for Perrigo. It also made the $19 billion AbbVie parted with for Pharmacyclics and the mooted Shire-Baxalta deal look puny by comparison.
Many will consider 2015 the year when companies scrambled to grow by acquisition in the search for promising new candidates and sources of revenue in the post patent-cliff environment. Yet more and more this year, something rather more subtle was happening beneath the surface: pharma companies were working with their rivals as partners.
At the ABPI’s 2015 R&D conference much of the debate centred on the state of research and development, and how to maintain and improve the landscape to make the drug discovery and approval pathway faster, more efficient and more affordable for pharmaceutical companies.
The huge sums invested into research and development for promising new candidates, and a tougher regulatory environment, has created a scenario where companies are increasingly afraid to fail. A late stage failure can be devastating to the fortunes of even the largest companies, and fear of this outcome can in some cases stifle boldness and innovation.
No more ‘low-hanging fruit’ in R&D
Dr Virginia Acha is the ABPI’s executive director of research, medical and innovation. She told Pharmafile.com that the difficulty in achieving major progress in discovery alone is driving greater co-operation between companies.
“Syndication is a very good way to deal with a regulated environment. We are basically at the point of discovery now where finding real breakthroughs is amazingly challenging. The low-hanging fruit has long since gone and it is now about really getting to the core problems and pushing right at the front end of understanding biology now. So how does it really work and how are we really progressing? No-one can do that alone, and I think that is what they are recognising now.”
For a long time, pharma companies were reluctant to work with their rivals. Even as little as 10 years ago, blockbuster drugs were easier to come by, and their patents sustained the profitability of the leading industry players while they searched more patiently for the successors to their best-selling products.
In the last few years however, this comfort has changed to a growing sense of panic, which has been reflected in the aforementioned spate of mega-money mergers and acquisitions. When it comes to potential blockbusters, the largest pharma companies seem to be saying ‘if you can’t find them, buy them’.
But this is not sustainable, and as more and more deals are done, the pool of companies worth paying billions for dries up like the low-hanging fruit, making smarter research a priority.
Acha comments: “[The pharma companies] are starting to identify, and this has been a part of the changing R&D model which reflects on Jean-Pierre Garnier’s comment in 2008 that the model was broken and it needed better productivity.
“It has been seven years [since then], and I think what we are seeing is that they are trying to change the way they work internally, reorganising with much more focus on particular therapy areas.”
This can be clearly seen in the asset-swap deal completed earlier this year between Novartis and GSK, in which GSK acquired Novartis’ vaccine business while Novartis took the British company’s oncology portfolio.
Acha saw this process of leaning beginning during her time working on policy development at Pfizer. “[At that time], they had a much broader range of focus areas, and it was part of the process while I was there to start to whittle that down to the areas where they really thought they had comparative strength. And in that case, you can even see it at lower levels of science; you create opportunities to create and trade, exchange and collaborate in a way that you can manage the risk in a syndicated way.
Despite the benefits of shared resources and expertise brought about by such exchanges, it can still be surprising to see the largest pharma companies teaming up, co-operating, and combining the most promising candidates in their pipelines.
Pharma giants Sanofi and Regeneron extended the partnership that brought new heart drug Praluent to the market, with a new $2 billion deal to develop new antibodies to treat cancer signed in July. Boehringer and Eli Lilly’s formal collaboration, signed in 2011, which saw the companies pool their late-stage diabetes pipelines, also scored a success this year, when the FDA approved Glyxambi in February and Synjardy in August.
Of this partnership, Mene Pangalos, executive vice-president at AstraZeneca’s Innovative Medicines and Early Development Biotech Unit, says: “Today, we are working side by side with our peers, and who’d have thought that even five or ten years ago? It is because the best way of developing a molecule and getting it to patients first is to work with the very best in the particular field.
“Partnership has become part of our DNA. We have to work with the very best in biotech, academia and pharma,” he adds.
This year, AstraZeneca and Eli Lilly also teamed up in oncology to run a combination clinical trial of two of the companies’ anti-cancer drugs: MEDI4736 (durvalumab) and Cyramza. AstraZeneca had already agreed to work with partners to conduct trials of durvalumab, a BACE inhibitor in 2014. In October, they broadened this immune partnership to a further five combination studies of their respective molecules.
Deals between larger and smaller companies have been even more common. New partnerships this year include Lilly and Immunocore, Merck and Selvita on oncology therapeutic concepts, Janssen and Nuevolution for new treatments for oncological, infectious and inflammatory diseases,
MedImmune and Inovio, Astellas and Anokion on new type 1 diabetes and coeliac disease treatments (worth up to $760 million), and Merck Serono’s $826 million partnership with Intrexon in March to develop and bring new cancer treatments to market.
The list goes on (see below), and while it would be false to claim that such collaborations are new to 2015, there is certainly a trend towards greater co-operation between pharma companies. Even the largest have been forced to becoming willing to share the potential rewards of a new drug discovery, in return for sharing the risk of its development.
It is a trend that has accelerated this year, and while record-breaking acquisitions may have stolen the majority of the column inches, 2015 will also be remembered as a time of co-operation for big pharma.
• In September, Amgen and Novartis announced a collaboration to develop a BACE inhibitor programme for Alzheimer’s disease. Two months later, Eli Lilly and Merck extended their immuno-oncology collaboration testing two of their respective blockbusters, Alimta and Keytruda, in combination for the treatment of non-small cell lung cancer.
• While Keytruda is still patent-protected for several years, Lilly is engaged in legal struggles over incoming generic competition for Alimta, while Merck was last year dealt a blow over the exclusivity of Cubicin – which is expected to face the same in 2016. It is no coincidence that the two rivals are more open to the idea of joining forces under this kind of pressure.
• GSK is working with Merck to study its immunotherapy candidate immunotherapy GSK3174998, also in combination with Keytruda, in patients with locally advanced, recurrent or metastatic solid tumours that have progressed after standard treatment. This followed, Keytruda combo collaboration, between Merck and Daiichi Sankyo’s subsidiary Plexxikon, announced in May.
• Other immuno-oncology collaborations include AstraZeneca and Peregrine Pharmaceuticals to test durvalumab with bavituximab and chemotherapy solid tumours; AZ’s tie-up with Celgene on the anti-PD-L1 checkpoint inhibitor MEDI4736 in blood cancer; Sanofi and BioNTech’s agreement to discover and develop up to five cancer immunotherapies; and another combination involving Merck’s Keytruda and Eisai.