Skip to Content

Brainstorm Health Daily: February 27, 2017

Good afternoon. Sy has a fascinating interview with Allergan CEO Brent Saunders that went up over the weekend on Fortune.com. If you haven’t seen it, check it out here.

Saunders has been at the forefront of the serial acquisitions and licensing game—and he’s candid about why, in his view, big pharma is better suited to shop for new drugs on the outside rather than try to develop them in-house. “I would say that [drug development] has historically relied on an open science type of approach to innovation,” Saunders says. “But over the course of time, they also built a tremendous and pricey fixed infrastructure to try to discover their own drug candidates. And I think the data would show that, while amazing discoveries have been brought forward for patients in in these large discovery labs, over an extended period of time, they have not been a good investment.”

You may have the most talented and best-funded drug developers on the payroll, he says, but a single pool of talent DNA is going to produce a similar line of product over time. “No one company can corner in or create a monopoly on the best thinking that’s out there,” says Saunders. “And so if we’ve built the lab and we invested a billion dollars in discovering medicines, we can only do what we could in the four walls of our village. But if we if we walk outside of that, we’re fishing in an ocean versus a pond for innovation.”

Some of you out there may think of that as an abdication of the old pharma claim to wonder drug alchemy, surrendering the throne of in-house innovation. But Saunders seems to be interested only in surrendering the old business model, which has been increasingly hard to make work. Bristol’s recent setbacks on the cancer immunotherapy front and Merck and Lilly’s frustrations in drug development for Alzheimer’s are cases in point.

Check out the full interview here and more news below.

Clifton Leaf
@CliftonLeaf
clifton.leaf@fortune.com

DIGITAL HEALTH

Canaan Partners leads $38 million Series A for a new RNA-focused biotech. Veteran biotech leader and entrepreneur Dr. Michael Gilman is opening up yet another shop. This time, the outfit, called Arrakis Therapeutics, will focus on developing novel new compounds which can target and tweak the body’s RNA in an effort to combat rare genetic diseases, cancer, and brain disorders. “RNA is the locus of most human biology, yet our current pharmacopeia is largely limited to protein targets,” said Gilman in a statement. “Arrakis intends to re-architect small molecule drug discovery by redirecting, modifying, and creating tools that enable medicinal chemistry to directly address therapeutically- important RNA molecules.” Arrakis’ work will be cut out for it. RNA-targeting therapies that use small molecules are a challenging prospect (hence the $38 million cash influx from Canaan, Advent Life Sciences, Pfizer, Celgene, and others for setting up shop). And Arrakis has assembled an impressive roster of biopharma pros, including former Celgene and Biogen exec Russell C. Petter and board members such as Canaan’s Colleen Cuffaro and Pfizer R&D executive director Carolyn Green.

Scientists want to sequence the DNA of literally all life on Earth. The Obama administration launched an ambitious initiative to create a biobank of one million human genomes for research and discovery. Well, one group of researchers wants to put that push to shame by launching an effort to sequence the DNA of all life on the planet. The Smithsonian Initiative on Biodiversity Genomics and China’s BGI (a genomic sequencing giant) arranged the meeting of the minds which produced the initiative, dubbed the Earth BioGenome Project (EBP). So how would you even go about doing something on that large a scale? Start with an extremely in-depth sequencing of one organism from each eukaryotic family and then do more rough sequencing for the millions of other species. The researchers hope that the first steps could be accomplished within a decade with about $5 billion in funding and an assist from other genome sequencing projects that are already under way around the world. (Science)

INDICATIONS

Brent Saunders dishes on Donald Trump, drug prices, and the most exciting medicines. As Cliff mentions in his essay today, last week, I sat down with Allergan CEO Brent Saunders at the Fortune offices to chat about the most hot button issues in biopharma, including drug price hikes, innovation and business in the age of Donald Trump, and Saunders’ favorite experimental treatments from the Allergan pipeline. The pharma giant chief has pushed the industry to self-regulate on drug prices and sign on to a new “social contract” with patients promoting transparency and limiting branded price increases to a hard 10% upper cap. Of course, the goal isn’t to raise prices by 9.99% every year, says Saunders, but rather to get approximately down to the same level as general inflation (on net prices).”I think the real issue is, the system we have today encourages capital money to be put at risk to try to to solve unmet medical need. If the government intervenes and takes over,” he says. “I worry that the fragility of the innovation and the types of risks that we have to take will start to disappear. And as a result of that some of these big challenges we face like Alzheimer’s or autism will never be solved or they will be solved too late for too many people.” Read my full write-up of our wide-ranging discussion here. (Fortune)

Sanofi, Lonza plot $285 million biologics manufacturing facility. French pharma giant Sanofi and Switzerland’s chemicals manufacturer Lonza are pouring $285 million into a new biologics production facility that will focus on the creation of monoclonal antibodies (mAb). These types of antibodies have become particularly popular in the next-gen cancer immunotherapy treatment space, forming the foundations of major new blockbuster drugs like Merck’s Keytruda and Bristol-Myers Squibb’s Opdivo. (They’ve also been used in therapies for cardiovascular diseases, including for high cholesterol, and other types of conditions.) The investment makes sense for Sanofi, which is trying mightily to push new products with high sales potential as its flagship diabetes treatment franchise continues to strain under the weight of generic and branded competition alike. Developing biologics is also a far more pricey prospect than the traditional small chemical molecule production model, since biologics involve actual living matter. “Approximately sixty percent of our pipeline is made up of biologics, including monoclonal antibodies, dedicated to key disease areas such as cardiovascular, immunology and inflammation, neurology and oncology,” said Sanofi EVP of global industrial affairs Philippe Luscan in a statement. The partnership between the two firms will be an even 50-50 split. (Reuters)

Median drug price hikes haven’t changed all that much. Although a number of prominent drug makers like Merck, Takeda, and Johnson & Johnson have joined in on Brent Saunders’ 10% price increase-limiting pledge that I mentioned above, median drug price hikes announced in January were still pretty darn high – 8.9%, to be exact, according to a new report from investment outfit Raymond James & Associates. That’s not a whole lot different from the industry’s median hikes announced in January of last year (although these are gross price increases, not net increases which consider payer and benefits manager discounts). Still, there were a number of encouraging signs. For instance, this year, just 5.5% of price increasers went for a 10% or greater hike. That’s considerably better than the 20% who did so just two years ago or even the 15% who did so last year. It’s a sign of the toll that a persistent public backlash to price gouging has had on the industry in the past 12 months, fueled by (in)convenient villains like Mylan and Marathon Pharmaceuticals. (Wall Street Journal)

THE BIG PICTURE

We’re about to learn more about what Obamacare repeal could look like. On Sunday, President Donald Trump said that he would unveil details about what his administration plans to do with the Affordable Care Act, or Obamacare, during his first address to a joint session of Congress tomorrow night. The politics of Obamacare “repeal and replace” is at a particularly fraught juncture, with the conservative and moderate wings of the GOP at odds over critical issues like how to preserve insurance for people with pre-existing medical conditions. A recently leaked blueprint of the House GOP’s various ideas include shifts such as basing the level of federal assistance to people buying individual insurance on age rather than income (as Obamacare currently does). But there are plenty of open questions, including whether Obamacare’s popular Medicaid expansion will be rolled back or if the entitlement program for the working poor will be turned into a block grant that could lead to benefit cuts. Republican leaders have also grappled with what to do about people with pre-existing conditions, since allowing these Americans to buy coverage without mandating insurance for everyone (a provision the current Congress has promised to nix) could lead to the very “death spiral” that Obamacare critics have levied against the health law. Certain proposals, such as “high-risk” insurance pools for the medically costliest patients, have been plagued with financial problems in the past. Health savings accounts will likely see an expansion under any final GOP-backed bill. (Fortune)

Women represent just 26% of hospital CEO positions despite outsize role in health care. Women hold a staggering 75% of health care jobs. Yet, just one in four hospital CEOs are female. When you consider Fortune 500 health care firms, just 21% of executives and board members are women. And according to a McKinsey analysis, although women make up 60% of overall health care manager jobs, the rate dwindles to 50% in senior manager or director positions, 32% in senior vice president jobs, and 24% in chief executive roles. (Modern Healthcare)

The WHO just unveiled the world’s most dangerous superbugs. In a pioneering move, the World Health Organization has released its first-ever list of the 12 superbugs that present the biggest threats to global health. Dubbed the “priority pathogens” for which new antibiotics are sorely needed, the list includes a variety of drug-resistant strains of bacteria such as Enterobacteriaceae and Staphylococcus aureus. WHO officials say the list is meant to help light a fire under the life sciences industry and governments. “This list is a new tool to ensure R&D responds to urgent public health needs,” said Dr. Marie-Paule Kieny, the WHO’s Assistant Director-General for Health Systems and Innovation, in a statement. “Antibiotic resistance is growing, and we are fast running out of treatment options. If we leave it to market forces alone, the new antibiotics we most urgently need are not going to be developed in time.” To highlight the nature of the threat: last September, an elderly Nevada woman died from a carbapenem-resistant Enterobacteriaceae infection that was able to ward off every single antibiotic available in the U.S. It was the first recorded instance in America of a superbug resistant to all 26 available antibiotics.

REQUIRED READING

The Pro-Business Populistby Alan Murray

How the Founder of California Baby Took on the Skincare Industryby Polina Marinova

Apple Wants Developers to Build More iPhone Apps for Big Businessesby Reuters

Facebook Ban for Sex Offenders Goes Before Supreme Courtby Jeff John Roberts

Produced by Sy Mukherjee
@the_sy_guy
sayak.mukherjee@fortune.com

Find past coverage. Sign up for other Fortune newsletters.