Innovative New Therapies, Uptick in M&A Activity Were Some 2019 Pharma Highlights

The pharmaceutical industry remained in the headlines last year, although not always for the best reasons. Precision’s Andrew Cournoyer, RPh, and Dan Danielson, RPh, MS, give us their takes on the various pharma happenings in 2019.

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Innovative New Therapies, Uptick in M&A Activity Were Some 2019 Pharma Highlights
by Angela Maas
AIS Health

The pharmaceutical industry remained in the headlines last year, although not always for the best reasons. While drugs’ high prices may have dominated the news, there were multiple impressive developments in 2019, including robust merger and acquisition (M&A) activity. And although the FDA’s approval of 52 new therapies in 2019 was down from the previous year, the newest group of entrants to the U.S. market certainly has its share of standouts. AIS Health asked various industry experts to weigh in on pharma happenings in 2019.

What were some of the most notable developments within the pharmaceutical industry in 2019, and why?

Andrew Cournoyer, R.Ph., vice president, director – access experience team at Precision for Value: “Clearly cell and gene-based therapies are one of the most notable drug development topics this past year. This is notable for a few reasons:

(1) Growth: Estimates show that there are over 1,000 clinical trials for these therapies with over 75 in Phase III” (SMA 9/16/19, p. 1).

(2) Cost: The costs of these therapies are well into the seven-figure domain, and the primary question around million-/multimillion-dollar treatments is how to pay for them. To aid with this, we’ve seen some creativity on the contracting front starting with Spark Therapeutics, who has created an innovative value-based approach to reimbursement based upon milestone outcomes achievement [for Luxturna (voretigene neparvovec-rzyl) (SMA 2/18, p. 1)]. Additionally, new reimbursement designs have been discussed and put in practices such as amortization models that spread the cost of these drugs over multiple years.

(3) Scalability: With growing R&D investments, pharmaceutical manufacturers have had to innovate and ramp up their bioprocessing capabilities. These innovations are aiming to standardize processing, ensure quality and meet demands of cell/gene-therapy commercialization.”

Dan Danielson, R.Ph., senior director – access experience team at Precision for Value: “Trastuzumab biosimilars: While Mylan [and Biocon Ltd.] gained approval for the first trastuzumab biosimilar [Ogivri in] December of 2017, Amgen Inc. and Allergan plc were the first to market with Kanjinti in July of this year. Since then, UnitedHealthcare [UHC] established approval criteria for trastuzumab, preferring Kanjinti over [its reference drug, Roche Group unit Genentech USA, Inc.’s] Herceptin. They did the same with the bevacizumab biosimilar Mvasi [also from Amgen and Allergan, whose reference drug is Genentech’s Avastin]. This is quick adoption of a biosimilar by a large payer — which is a bit surprising — however, the fact that it occurred for infused oncology makes it more significant.

“However, the adoption of Herceptin and Avastin does not signal a wholesale move toward biosimilars. Other brand drugs facing biosimilar competition fared better. UHC prefers [Pfizer Inc.’s] Neulasta over Mylan’s biosimilar Fulphila and Remicade [from Janssen Biotech, Inc., a Johnson & Johnson company] over Inflectra [from Celltrion Inc. and commercialized by Pfizer in the U.S.] and Renflexis [from Merck & Co., Inc.].

“This indicates that biosimilars are likely to be treated as competing brands by payers rather than as generics (which often are automatically added to formularies at lower costs to members).”

Deloitte life science and health care industry experts: “In 2019, the FDA approved 22 small molecule drugs, compared to just eight large molecule — or biologic — drugs. Interestingly, though, four out of every 10 drugs under development in 2019 were biotech-derived, which could be significant for future FDA approvals.

“Additionally, looking ahead, cell and gene therapy drugs will continue to have a big impact. The FDA estimates it will be approving 10-20 cell and gene products a year by 2025, and we’ve seen many pharmaceutical companies making strategic investments in manufacturing, from investing in new facilities to dramatically increasing production capacity.”

Todd Wills, managing director at CAS: “Two big ones that come to mind:

(1) Innovation: Though the volume of new drugs is down relative to 2018, the relative novelty of the new drugs is increasing. Small molecules continued to be an important drug modality as they once again represented a majority of the approved new therapeutic drugs (not including diagnostic imaging agents). A majority of the FDA-approved small molecule drugs included at least one new molecular entity based on a new chemical scaffold, the structure of atoms and bonds forming the core of the compound. Many of these new scaffolds were first reported less than 10 years prior to starting clinical trials and have less than 50 other known compounds on them. This suggests drug-hunters are continuing to push the boundaries and searching previously unexplored regions of the chemical space to find new small molecule drugs.

(2) Impact of digital transformation: The impacts of digital technologies such as AI and machine learning on pharma are starting to become more visible [SMA 7/1/19, p. 1]. Quantifiable results are being consistently noted in diagnostic and clinical use cases, while major investments are being made and partnerships are heating up to try to capture the opportunity of these technologies in the early-stage R&D phases. The focus on digital technologies is also making data a critical input across health care, with organizations investing in data management strategies to maximize the value of their proprietary data, acquiring third-party data to support key projects and entering into data sharing partnerships to gain access to high-value patient data.”

What were some of the most notable FDA approvals, and why?

Cournoyer: “[Novo Nordisk A/S’s] Rybelsus (semaglutide), the first oral GLP receptor antagonist used for the treatment of type 2 diabetes. The approval was notable because not only was it the first oral agent in this category, [but] it also came to market with cardiovascular outcomes data and head-to-head efficacy data that demonstrated A1C lowering exceeding the 1% threshold. What was less publicized, however, were some of the rigors associated with taking this oral medication, namely due to its low bioavailability and requiring patients to take it on an empty stomach first thing in the morning and then wait an additional 30 minutes before consuming food.”

Wills: “There were several notable drugs that were structurally novel (i.e., based on new scaffolds). The approval of [Genentech’s] Rozlytrek (entrectinib) is the third time the agency has approved a cancer treatment based on a common biomarker across different types of tumors rather than the location in the body where the tumor originated [SMA 10/7/19, p. 6]. The approval of [Janssen’s] Balversa (erdafitinib) represented the first personalized treatment targeting susceptible FGFR genetic alterations for patients with metastatic bladder cancer. The approval of [The TB Alliance’s] Pretomanid marks the second time a drug is being approved under the Limited Population Pathway for Antibacterial and Antifungal Drugs, a pathway, advanced by Congress, to spur development of drugs targeting infections that lack effective therapies. The approval of [Novartis Pharmaceuticals Corp.’s] Mayzent (siponimod) represented the first oral drug specifically for patients with active secondary progressive multiple sclerosis (SPMS) [SMA 6/17/19, p. 7]. Last but not least, the FDA approval of Zolgensma [(onasemnogene abeparvovec-xioi) from AveXis, Inc., a Novartis unit] for spinal muscular atrophy (SMA) is notable in that the cost of treatment has been set at $2.1 million by Novartis, making Zolgensma the most expensive drug ever” (SMA 7/1/19, p. 6).

Could you comment on all the M&A activity within the pharma industry that occurred in 2019?

Cournoyer: “The M&A activity we’ve seen this past year has generally accomplished the same historical directives:

  • Provide smaller biotech companies with sales and commercialization capabilities of large pharma,
  • Expand pipeline presence,
  • Allow pharmaceutical organizations to change direction and enter new markets (e.g., cancer),
  • Combine strengths and maximize operational efficiencies,
  • Minimize weakness — closing gaps with strengths of acquired organizations,
  • and others.

“So, in short, I didn’t see 2019 M&A activity on the pharma manufacturing front to be much different than years past, despite some huge deals (e.g., Takeda Pharmaceutical Company Ltd. — Shire Plc, Bristol-Myers Squibb Co. (BMS) — Celgene Corp.)” (SMA 4/15/19, p. 1).

Deloitte: “According to Deloitte research and our 2020 Global Life Sciences Outlook, compared to a robust first half for 2019, the third quarter showed signs of a significant slowdown for life sciences mergers and acquisitions.

“While the number of deals for the year may be trending downward, the [global] value of the deals is considerably higher for the first three quarters of 2019 — US$181.7 billion compared with US$135 billion in deal value at the same time in 2018. Through Q3 2019, companies from the United States were acquirers in 537 deals and targets in 480. Chinese companies were acquirers in 411 deals and targets in 382.”

MarketWatch via a Dec. 10 article: “While the number of U.S. pharmaceutical and biotechnology deals has increased year over year, from 365 in 2018 to 484 so far this year, it’s the size of 2019’s mergers and acquisitions that’s notable, according to data provided by Dealogic.

“This year’s $342 billion in M&A activity far surpasses any other year since 1995 when Dealogic began tracking deals. Big-dollar deals like AbbVie’s pending $63 billion buyout of Allergan and Amgen’s $13.4 billion purchase of a single drug, Celgene’s Otezla, are driving the 2019 tally.

“The uptick in deals underscores a broader trend in the industry, one in which large, legacy drug makers are buying their pipelines rather than developing new therapies from scratch. In many cases, this kind of deal making has paid off. Keytruda, which was acquired through Merck’s $41 billion acquisition of Schering-Plough in 2009, has generated $103 billion in revenue since it was approved by the Food and Drug Administration in 2014, according to EvaluatePharma.

“The cumulative deal value for a combination deal versus a bolt-on deal has changed significantly over the last five years, according to an Evercore analysis. Bolt-on deals, like the Otezla acquisition, tally $56 billion so far in 2019, compared with the previous five-year average of $46 billion. The total value of ‘combination’ deals, like the behemoth AbbVie-Allergan tie-up, has reached $137 billion year-to-date, compared with $81 billion, the previous five-year average.”

Wills: “Much of the focus was on the mega deals (i.e., BMS’s $74 billion acquisition of Celgene and AbbVie’s $63 billion acquisition of Allergan). However, Pfizer’s $11 billion acquisition of Array [BioPharma Inc.] and Eli Lilly and Co.’s $8 billion acquisition of Loxo [Oncology, Inc.] were also noteworthy, as they added structurally novel drugs and candidates to their portfolios.…M&A activity is very much being driven by organizations’ innovation strategies to build a strong pipeline aligned with their core therapeutic focus areas.”

View the MarketWatch article at https://on.mktw.net/2QJWEBw. Contact Cournoyer and Danielson through Tess Rollano at trollano@coynepr.com, the Deloitte experts through Ellen Conti at elconti@deloitte.com and Wills through Jessica Moran at
Jessica.Moran@edelman.com.

by Angela Maas

Precision Medicine Group is an integrated team of experts in fields from advanced lab sciences to translational informatics and regulatory affairs, payer insights to marketing communications. Together, we help our pharmaceutical and life-sciences clients conquer product development and commercialization challenges in a rapidly evolving environment.