The cost of capital for early-stage biotechnology companies is almost twice as high as policymakers have assumed when crafting legislation for innovator biologics and biosimilar drugs, according to a new study.
Findings from research commissioned by the National Venture Capital Association (NVCA) were released in a briefing Friday to support a data exclusivity period of at least 12 years for innovator biologic products. Rep. Anna Eshoo (D-Calif.), who introduced a biosimilars bill in the House in March, held the press briefing on the study (DID, March 18).
The NVCA, which represents about 460 venture capital companies in the U.S., commissioned the study because prior attempts to identify factors driving investment in new drug development have failed to recognize the high cost of capital for small, innovative biotech companies that comprise the majority of the biotech industry, the association says in a statement.
Iain Cockburn, professor of finance and economics at Boston University, and Josh Lerner, professor of investment banking at the Harvard Business School, conducted the study and used various models to determine the cost of capital, according to the association.
“Current estimates about the cost of capital in the biotech industry are based on publicly traded companies — not the small, privately held companies that comprise the majority of the biotech industry,” according to the study’s executive summary.
“While understandable, this substantially understates the cost of capital for the small public and privately held firms because large public companies are intrinsically more mature and less risky than the average private [venture capital]-funded company,” the executive summary adds.
The cost of capital and return analysis has been examined in numerous academic studies, including “Proper Duration of Data Exclusivity for Generic Biologics: A Critique” by Alex Brill, a research fellow at the American Enterprise Institute (DID, Nov. 25, 2008).
Brill finds that a seven-year period balances incentives for innovators with market benefits of competition, according to the earlier report commissioned by Teva Pharmaceuticals USA, a generic-drug maker. He reached the conclusion by updating an economic model developed by Duke University economist Henry Grabowski. The model is used by groups such as the Biotechnology Industry Organization to promote the 14-year exclusivity recommendation.
Brill’s study assumed a biotech cost of capital of 10 percent, based on publicly traded biotech companies, and determined that on average a data exclusivity period of seven years would permit an investor with a 10 percent cost of capital to make a positive return on its investment in the development of new biologics, according to the NVCA.
However, the Cockburn-Lerner study concluded that seven years would not be long enough to clear the 20 percent rate hurdle for investing in early-stage companies.
“Since the VC community supports the overwhelming majority of revolutionary biologic drug discovery, the most innovative sector of the biotech industry will be the most adversely affected by the [seven]-year exclusivity period,” Mark Heesen president of the NVCA, says in a statement. A 12-year period “will allow investors to make an adequate return and therefore continue to invest in biologic innovation while still balancing the need for lower prices for biologics,” he adds.
The report is available at www.nvca.org/index.php?option=com_content&view=article&id=182&Itemid=142. — Elizabeth Jones
The FDA’s Center for Drug Evaluation and Research (CDER) and Center for Biologics Evaluation and Research (CBER) would receive a combined $1.2 billion in funding from the fiscal year 2010 appropriations bill the House approved last week.
The budget includes $3 billion in total funding for the FDA — a $373 million increase over the agency’s 2009 budget (DID, July 10).
CDER would receive $873 million in the House legislation, H.R. 2997, and CBER would receive $305 million. Other activities that may affect drugmakers, including the agency’s Office of International and Special Programs, would be covered by $169 million in the bill.
In the Senate, the appropriations bill including FDA funding, S. 1406, was passed by the appropriations committee July 7 but has not been scheduled for consideration by the full Senate.
The bill would fund the FDA and its centers at the same levels as the House measure but stipulates that at least $51.5 million of CDER’s funding be made available for the Office of Generic Drugs.
The House will wait for the Senate to pass its appropriations bill and then a conference committee will attempt to reconcile both pieces of legislation, Ellis Brachman, a spokesman for Rep. David Obey (D-Wis.), the chairman of the House Appropriations Committee, told DID Friday.
“We hope to conference and finish the bills” before the fiscal year ends Sept. 30, Brachman said.
The additional funding also will be used to improve supply-chain safety and security to protect patients from contamination or other manufacturing flaws, FDA Principal Deputy Commissioner Joshua Sharfstein said in May in congressional testimony (DID, May 22).
The text of H.R. 2997 can be found at thomas.loc.gov/home/gpoxmlc111/h2997_eh.xml. The text of S. 1406 can be found at frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:s1406pcs.txt.pdf. — David Belian
Covidien subsidiary Mallinckrodt is voluntarily recalling one lot of its sodium chromate Cr-51 injection after routine postmarket stability testing found the product to be subpotent.
The FDA and the company announced the recall of lot 370-9004 last week, citing the possibility for a false low reading of red blood cell volume. Cr-51 is listed in the Orange Book as a drug.
Sodium chromate Cr-51 injection is a radiopharmaceutical diagnostic agent used to evaluate blood loss, determine red blood cell volume or mass, and study red blood cell survival time, the company says in a statement. A misdiagnosis or a delay in diagnosis and treatment puts patients at an increased risk of embolus or stroke. No adverse events or complaints have been reported for this product, according to Covidien’s statement.
The company is investigating the issue, spokeswoman JoAnna Schooler told DID. Covidien decided to recall the lot June 23 and has accounted for 81 of the 96 vials distributed, the statement says. The product is currently unavailable, and the next production lot has not been scheduled, Schooler said, adding this is a small product line for the company.
Increased red blood cell volume is associated with Polycythemia rubra vera, which is diagnosed by relying on various blood and other test results. Using subpotent product could lead to an incorrect result in red blood cell volume or mass. — April Hollis
Clinical trial sponsors should add more regulatory experts to prepare for increased scrutiny during a time when the industry is becoming global, according to an IMS Health survey.
“When they say they need more regulatory expertise, what you have is the Europeans looking at the U.S. and vice versa,” Suzanne Gagnon, chief medical officer of Icon Clinical Research, told DID last week. “It’s a globalized situation now, and the safety people realize they need more support outside their own countries.” IMS surveyed 140 drug industry executives by phone during the first three months of 2009.
Fifty-five percent of survey respondents say their companies are constantly updating their internal standard operating procedures to conform to the evolving regulatory requirements for clinical trials. The respondents say they expect the greatest need for safety experts to shift to medical and commercial departments next year.
“About half the respondents were heads of drug safety or pharmacovigilance,” Gagnon said. Icon commissioned IMS Health to conduct the survey.
The impact of stricter regulations is seen as greatest in large drug and biotech companies, with 42 percent of the respondents from such companies saying the new regulations have affected their clinical development process to some extent, while 10 percent say the changes had been great.
At medium-size companies, none of the respondents say the new regulations have affected their clinical development process to a great extent but almost one-third say it has been affected to some extent.
One underutilized resource that helps drug safety keep pace with regulatory changes is the use of postmarketing registries. “There’s not a great understanding about what registries can be used for,” Gagnon said. “Typically [sponsors] think of them for products without a great number of patients, but they don’t realize they can be useful even if there are a lot of patients.
“Clinical trial people are often uncomfortable in the postmarketing arena, but real world data come from there,” she added. “A patient registry can be an inexpensive way of collecting data. Epidemiologists can help with this.” — Martin Berman-Gorvine
The FDA has approved Eli Lilly and Daiichi Sankyo’s blood-thinner Effient (prasugrel) to reduce the risk of blood clots in patients undergoing angioplasty.
A clinical trial compared the drug with Bristol-Myers Squibb and Sanofi-Aventis’ blood-thinner Plavix (clopidogrel) in 13,608 patients undergoing angioplasty who had or were at risk of having a heart attack, the FDA says in a statement Friday.
After the surgery, 7 percent of patients who received Effient had nonfatal heart attacks, compared with 9.1 percent of the patients who received Plavix. However, the agency noted patients with a history of stroke were more likely to have another one while taking Effient, and all patients on the drug ran a higher risk of suffering significant, and sometimes, fatal bleeding. The bleeding risk will be listed in a boxed warning on the label.
“Effient offers physicians an alternative treatment for preventing dangerous blood clots from forming and causing a heart attack or stroke during or after an angioplasty procedure,” John Jenkins, director of CDER’s Office of New Drugs, says in the FDA statement. “Physicians must carefully weigh the potential benefits and risks of Effient as they decide which patients should receive the drug.”
Public Citizen urged the FDA last month to reject the Effient NDA, calling the anti-clotting drug neither safe nor effective. Lilly issued a statement disputing the claim (DID, June 5).
“We think that prasugrel has serious bleeding and possibly cancer risks and questionable efficacy over clopidogrel,” James Floyd, a physician and researcher in Public Citizen's Health Research Group, told DID.
In February, the European Commission approved the drug under the almost identical trade name Efient to prevent heart attacks in acute coronary syndrome patients undergoing an artery-opening procedure (DID, Feb. 24). — Martin Berman-Gorvine
Glenmark Generics is launching a generic version of Bristol-Myers Squibb’s Monopril-HCT in the U.S.
The fosinopril sodium and hydrochlorothiazide tablets were approved in both strengths of 10-mg/12.5-mg and 20-mg/12.5-mg formulations and are indicated to treat hypertension, the company says in a statement Friday. The company will launch the drug soon, spokeswoman Jessica Cangemi told DID. She declined to give more details on timing.
Overall generic market sales for the product were approximately $10 million for the 12-month period that ended in March, according to IMS Health data, the statement says.
The ANDA was approved through Glenmark’s partnership with InvaGen Pharmaceuticals that the companies entered in fiscal year 2006. Glenmark will market and distribute the product and InvaGen will be responsible for the manufacture and supply. All development, regulatory costs and profits will be split equally between the two companies, the statement adds.
Glenmark says it has more than 40 ANDAs awaiting FDA approval. — April Hollis
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