Reinventing the Biotech Industry
By: Burhanuddin Shabbir
Tags: Biotechnology, Pharmaceutical, Healthcare, Covid 19, Business

I was listening to an a16z Podcast episode titled “Designing a Culture of Reinvention” where Netflix CEO and co-founder Reed Hastings speaks on his new book “No Rules Rules: Netflix and the Culture of Reinvention.” He talks about how he successfully reinvented Netflix not once but twice. Netflix pivoted from DVDs delivered by mail to a streaming service and then again from relying on third- party licensed content to making original programming. Reed mentions that at times you have to “burn your boats” when necessary to achieve significant growth. To further elaborate, he emphasizes that you may need to let go of your current business plan or goal and explore another avenue to find more success.

Burn Your Boats: The Biotech Industry Edition

After listening to the podcast, I started to think about the different ways the pharmaceutical industry has altered its business model or “burned its boats” to address an important problem or challenge. The following are some of my favorite “burn your boats” stories:

Pfizer

Although Pfizer has a diverse pipeline, majority of its success comes from medications in the primary care portfolio (ex. Lipitor, Zithromax, Viagra, Eliquis). Lyrica, a blockbuster drug (a drug that generates annual sales of at least $1 billion), topped Pfizer’s sales charts since its approval in 2004. In 2018 Lyrica generated $3.6 billion, however due to its patent expiration and generic approvals from multiple other manufacturers, Pfizer was facing a major threat. In order to recover from the lost revenue, Pfizer started focusing on their oncology portfolio. By switching their focus on cancer drugs, Pfizer’s revenue soared from $5.4 billion in 2017 to $7.6 billion in 2019. It is expected to grow approximately 15% to $8.8 billion in 2020. Among Pfizer’s oncology-drug portfolio, Ibrance was one of the best commercially successful medication launched in the last decade clearing $4.96 billion in sales in 2019. The release of Ibrance was a game changer in treating HR-positive and HER2-negative breast cancer. Sales for Ibrance is predicted to reach around $11.04 billion by 2026.

Ibrance projected to drastically increase in market size through 2027

The Medicines Company

In the first quarter of 2018, The Medicines Company had agreed to a deal where they would sell their infectious disease business unit which included Vabomere, Orbactiv and Minocin IV to Melinta Therapeutics for $270 million and future royalty payments on the three medications. This deal was made to further invest in Medicine Co.’s efforts to focus on inclisiran, a PCSK9 inhibitor that aims to reduce LDL (“bad” cholesterol) levels. Other players in the space like Amgen and Regeneron were also conducting trials to show its efficacy in reducing cholesterol levels to reduce the chance of heart attacks and strokes in order to attract payors and key opinion leaders. On November 6th of 2019, Medicine Co.’s shift of focus to inclisiran proved to be a great decision. Detailed results from their Phase 3 clinical trials (ORION-9 and ORION-10) showed that inclisiran reduced LDL by approximately 50% with a fantastic safety profile when administered every 6 months. A week after the positive data was shown, Novartis had made a deal to acquire The Medicines Company for $9.7 billion (previously valued at $2 billion). Inclisiran will be a big problem for its competitors (Repatha and Praluent) as it is expected to be sold at a cheaper price and is dosed less frequently. The drug is projected to make Novartis $1.5 billion in sales in the year 2024.

Shares of The Medicines Company skyrocketed 266.8% compared with the industry’s growth of 2.5%.

AstraZeneca

AstraZeneca developed a small molecule called saracatinib with the goal of treating different types of cancer. Unfortunately, a study had shown that saracatinib was not efficacious and did not result in significant positive responses in patients. However, not all was lost for AstraZeneca. Researchers from Yale discovered that Fyn kinase, an enzyme that is responsible for brain cell damage observed in Alzheimer’s patients could be blocked using saracatinib. AstraZeneca agreed to supply the researchers with saracatinib through its Open Innovation Initiative program which is designed to give organizations access to compounds in an effort to drive scientific breakthroughs and discovering potential new treatments. Following this partnership, Phase I and Phase II studies were conducted that showed promising results in the use of saracatinib in Alzheimer’s disease. If future clinical trials show positive trends, we could possibly see a new therapy for this debilitating illness.