Pharma’s Rising Stars

A revenue drain has hit the industry – yet there are still pharma firms blossoming in these arid conditions. An NGP profile.

A storm has been brewing in the pharmaceutical sector for several years. A revenue drain has hit the industry and looks set to be with us for some time. The statistics tell a sorry story. Six out of the top 10 best-selling drugs have stagnant or declining sales. Pharma giants such as Pfizer and Johnson & Johnson all reported drops in sales at the end of last year. And over the past five years, Schering-Plough, Bristol-Myers Squibb, Pfizer and Merck have lost a combined US$394 billion in market value – a drop of 54 percent. These drops have translated into job losses and drug companies have announced some 70,000 job cuts over the last three years according to Challenger, Gray & Christmas, accounting for 17 percent of the workforce.

Yet there are still pharma firms blossoming despite these arid conditions. Through a combination of technology innovation, targeted therapeutics and market nous, firms such as VioQuest, PediaMed and Isis are bucking the industry trend and turning out impressive figures and developing what are potentially tomorrow’s blockbuster drugs. Here, NGP takes a look at this next generation of pharma firms and see just why they are bringing optimism back to the industry.

Technology makes perfect sense

The pharmaceutical sector may be going through a production crisis at present but, according to Stanley T. Crooke, Chairman and CEO of Isis Pharmaceuticals, it only has itself to blame. Quantum advances in productivity always come from new technology. And Crooke predicted that the sector’s under-investment in technology would lead to disaster years ago. “I have been involved in the pharmaceutical industry in leadership positions now for almost 30 years – I was President of R&D at SmithKline before I founded Isis – and I foresaw this decline in productivity,” he explains. “It is the same for any other industry, you only advance productivity in an outstanding fashion when you take advantage of new technologies. I believe that the pharmaceutical industry has failed to invest adequately in truly radical new technologies. And that is what antisense is and why I founded Isis.”

Launched in 1989, the Carlsbad, California-based Isis Pharmaceuticals has taken some time to take to the boil but right now it’s red hot, courtesy of a new platform for drug discovery – antisense – and a subsequent treatment that could significantly lower cholesterol. “I founded Isis 17 years ago to evaluate and developed a new platform for drug discovery called antisense technology, based on making drugs to bind to R&A. and our history is one of pioneering this technology,” stresses Crooke. “We have stayed the course, persevered, done the high quality experiments, developed a significant numbers of drugs based on the technology, and we are now convinced that the technology works and we think it is going to create significantly better drugs and it is going to dramatically improve the productivity of drug discovery and development.”

Crooke’s enthusiasm for antisense technology knows no bounds. In a nutshell, antisense technology allows Isis to reverse-print the virus gene codes and home in on a precise section to block it by binding to the gene section that would trigger disease activity. With antisense technology, Crooke believes we can design drugs that are safer and more effective than traditional drugs. Isis combines its expertise in molecular and cellular biology with antisense drug discovery techniques to design drugs to fight a wide range of diseases, including infectious and inflammatory diseases and cancer.

“We marketed the first and only antisense drug on the market some years ago and now we have converted the pipeline to the second generation antisense drugs which are dramatically better,” Crooke adds. “And that is causing a great deal of excitement here and in the pharmaceutical investing public.” These second generation antisense drugs have fewer side-effects and are estimated to be at least 20 times more potent than the first generation drugs, meaning they can be given as infrequently as quarterly and therefore reduce cost of therapy. Isis has yet to create orally active antisense drugs using this technology that are ready for commercialization to date, but it is well on its way. And one drug in particular that has been attracting enormous enthusiasm.

The new cholesterol drug, still known by the code-name 301012, is a second generation antisense drug that targets the protein that carries LDL and VLDL bad cholesterol and triglycerides. According to Crooke, Isis has demonstrated that 301012 is a highly-effective method of reducing all of the bad athrogenic lipids, total cholesterol, LDL, VLDL, small dense LDL particles and triglycerides. This could have enormous implications for patients who have already had a cardiac event and are struggling to get to their target LDL goals, meaning they could hit their targets and therefore not only reduce their potential for future cardiac events but also possibly cause their existing plaque to regress. In addition, however, 301012 has implications for people suffering from familial hypercholestremia, a rare genetic disorder that leaves sufferers with very high cholesterol and early cardiovascular disease.

“There are 18 million Americans who have had a cardiac event and who can’t achieve their target levels so there is an enormous market for routine people around with high cholesterol who can’t achieve lipid targets,” says Crooke. “It is a very exciting drug for the management of the number one killer – cardiovascular disease – and every time we identify new information about it, its profile looks better. But in addition, there is every reason to believe that 301012 could make a difference in the lives of people with familial hypercholestremia. So it is a drug that has an enormous commercial potential, primarily in the more routine high cholesterol patients, but it also has the potential to benefit a group of patients who are in desperate need of improvement, and who are dying very young because of this genetic disorder.”

But Crooke’s optimism is mainly devoted to the big picture, the implications not of solely one drug, but of the antisense platform as a whole, and its potential impact on the field of drug development. “

“We believe we are near the goal line of having created a new platform for drug discovery and development,” he stresses. “301012 is the most visible example but we will be reporting later this year data from Isis 113715 which is the first of our diabetes drugs. We have 13 drugs in development. Our elation is directed to 301012 and the drugs in the pipeline and what they may be able to do for patients and the return that they are going to provide to our shareholders but it is enhanced by the fact that this is at the end of a process of almost single-handedly creating a new technology for drug discovery and development.”

And Crooke is hopeful that this technology could herald a shift of focus in the pharmaceutical sector, moving an emphasis back on to technology to boost the industry’s ailing productivity. “I believe that antisense is a technology that can have dramatic benefits for patients and for the industry,” he concludes. “You only advance productivity in an outstanding fashion when you take advantage of new technologies – and that is what we’re doing.”

Quest for success

In light of the challenges confronting the pharmaceutical sector, firms are finding innovative ways to carve out strong profits. And while the prevailing trends mean that there are many businesses struggling to keep afloat, some are doing just fine thank you very much. Take the example of VioQuest Pharmaceuticals, a firm that was recently named amongst the 2005 Deloitte Technology Fast 500, a collection of the 500 fastest growing technology companies in North America based on percentage revenue growth over five years. With impressive 200 percent revenue growth, VioQuest can celebrate more than merely a mention in the Fast 500 however.

Daniel Greenleaf, President and CEO of VioQuest, acknowledges that this is an achievement given pharma’s predicament. “It is still very much a technology driven marketplace and you have to have exciting products that are able to carve out a ‘niche’,” he explains. “But you also must have a good management team, the right cash position to develop your products, the right investors to support you…so there are a whole variety of things. There are a lot of moving parts and all of those parts play a role in terms of whether or not you are going to be successful or not successful.”

Founded in 2000 as an LLC, the company went public in 2003 as Chiral Quest, based upon a chiral chemistry business that remains an important part of the overall strategy to today. It wasn’t until 2004 that the board of directors decided that there was an opportunity in the field of therapeutics to accompany the chiral chemistry business, heralding the name change to VioQuest and the initiation of therapeutic product acquisitions. Greenleaf was brought into the VioQuest fold in February 2005, after which the therapeutic initiative really took off.

“We’re committed to creating a low-risk high-return model,” Greenleaf explains. “We want to have products that have only been in humans before because invariably your phase I/II trial is built around a max tolerable dose and dose limiting toxicities and if we have drugs that have an abundant amount of safety data we feel we can behave uniquely in terms of how we go about developing our drugs and can be more aggressive and creative in terms of our clinical trials.” In addition to these efforts to de-risk, the company also focuses on a targeted therapeutic approach.

“We have looked for drugs where either a) there was an test that could predetermine which patients were most likely to respond to our treatment or b) we knew the drug had a degree of specificity so that we understood the mechanism of action and that we could at some point develop an essay to predetermine which patients are most likely to respond.” As such, VioQuest believes that this targeted approach means it can execute clinical trials with 25-50 percent of the patients that one would otherwise need, running the trials more efficiently and faster. And there could be added benefits. Greenleaf suggests that because VioQuest has taken this targeted therapeutic approach it could receive a favored status – “We very much believe that we could get some level of accelerated approval for our products,” he says.

Meanwhile, the company has also looked towards where the company is going to get the highest return, an area that Greenleaf is confident about. “We think there is tremendous efficiencies to be had by in-licensing drugs that have been in humans before, that could be called targeted therapeutics, because we believe that personalized medicine is going to fundamentally change the way that drugs are delivered over the course of the next five to ten years. It will be the change in terms of how medicine or therapeutics or pharmaceuticals or small and large molecules are delivered. So that is the high-return part of this.”

After discussions with Greenwhich Therapeutics, a privately held New York company, VioQuest eventually sealed a merger, and by way of that acquired two targeted therapeutics. These two targeted therapeutic oncology compounds – VQD-001 (sodium stibogluconate), a protein tyrosine phosphatase inhibitor, and VQD-002 (triciribine phosphate), a specific inhibitor of phosphorylated Akt – are novel anti-cancer agents for the treatment of melanoma, myeloma and lymphoma, and breast, ovarian, pancreatic and colorectal cancers, respectively. VQD-001 is currently in clinical trials at the Cleveland Clinic Taussig Cancer Center, and a Phase I/II clinical trial for VQD-002 is expected to initiate in the second quarter of 2006 at the Moffitt Cancer Research Institute in Tampa, Florida.

But the importance of VioQuest’s subsidiary, Chiral Quest, to the overall success story should also not be underestimated. While its work in therapeutics has blossomed in recent years, its grounding in chiral chemistry have continued to pay dividends and it is this that has proven to be the real engine of growth. Chiral Quest commercializes and sells its proprietary products and services to an increased number of pharmaceutical and fine chemical companies, including 12 of the top 18 pharmaceutical companies worldwide. “We are a leader in asymmetric hydrogenation and we’ve also created a global supply chain that provides us with incredibly unique proprietary technology and world-class technology in the area of our offering on the chiral chemistry side,” concludes Greenleaf.

Taken in conjunction with its therapeutic work, VioQuest offers a compelling business case, and this is reflected in its place in the 2005 Deloitte Technology Fast 500. “We offer biotech investors the best of both worlds,” Greenleaf concludes. “We have got these very exciting targeted therapeutics where we have been able to de-risk the development profile of them as much as possible, and then secondly we have this exceptional growth in our chiral chemistry business because of our proprietary technology and our ability to take advantage of the global supply chain.”

“It’s not hard to build motivation”

The era of the blockbuster drug looks increasingly to be coming to an end in the pharmaceutical sector. Most of the low hanging fruit has been taken and it is becoming harder and harder for even big pharma to find blockbuster medicines. As a result, pharma firms are now turning their attention to targeted drugs. Success in this, however, depends on the target. In the case of Tom Jennings, President of PediaMed, the target was never in question.

“We started the company as an idea in 1999, with the thought that paediatricians were very much an underserved market and that in general there weren’t a lot of medications that were strictly for children,” he explains. “Unfortunately the pharmaceutical industry has tended to treat children as little adults, and that is not really appropriate. So we saw an opportunity that there be a great niche in paediatrics in that nobody was solely focused on paediatrics, and we started the company and started in the cough/cold/allergy arena.”

The choice was an excellent one. Pediatrics now established as the fastest growing prescription segment, valued at over US$20 billion and PediaMed is right in the mix, having demonstrated consistent excellence since commencing commercial operations in 2001, with net sales tripling from 2002 to 2003. “When you focus, you become the expert in your area,” Jennings explains. “We know pediatricians better than anybody else – we know what their needs are and we know what their patients’ needs are – and then that allows us to have the competitive advantage of providing the right answers to whatever problems they face.”

PediaMed’s success has not gone unnoticed. Last year it was recognized as a Fast 55 company by the Cincinnati Business Courier, as well as being named one of the Emerging 30 businesses by the Northern Kentucky Chamber of Commerce for the third consecutive year. In 2004, it was also awarded first place by the Business Courier program in its revenue category as well as the leading grower of all revenue categories. But, as Jennings explains, PediaMed’s focus has now shifted onto its pipeline.

“To build a company and really reach the next level you have to have a pipeline and we made the strategic decision in December that for now our sole focus will be our pipeline,” he says. “We were approached by Kinetics Corporation, which was looking for a pediatrics sales force, and although we weren’t looking to sell our commercial operation, when we looked at the offer they put on the table, and we considered the resources that it would allow us to focus on our pipeline, it was quite honestly an offer we couldn’t refuse.”

The move has placed the company in an ideal position to create a first-in-class pediatric clinical development group, according to Jennings, and one of its main priorities will concern the development of a treatment for autism. “Our flagship product is looking at both the gastrointestinal dysfunction in autism as well as autistic behavior itself,” explains Jon Bruss, Chief Medical Officer of PediaMed. “We acquired that from Protein Therapeutics in August 2004, put together a product development plan, met with the FDA, got a phase II protocol approved and launched the phase II program. In February of this year we announced a completion of our enrolment for that trial. So that was a fairly significant milestone. Autism is a severe disabling disease in young children and is particularly challenging for the families of children with autism and there are currently no treatments for autism. It is an exciting program for us and we are really looking forward to moving that project forward.”

The results of the phase II trial will be coming out in the summer of this year and then PediaMed will be looking to meet with the FDA in a pre-phase III meeting and launching the phase III program later this year. Optimism is running high at the company, not least because of the potential for new legislation that could benefit any firm operating in the pediatrics sector. “Legislation is granting pharmaceutical companies who do pediatric trials an additional six months of exclusivity on the drug,” explains Bruss. “And there is legislation in EMEA that would provide even further incentives for pediatric drug development, and we are hoping that those kinds of initiatives will also filter over into the US. So there will be a lot of interest in the whole area of pediatrics in the coming years.”

But PediaMed also attributes its current and future success to the power of its people, and its staff are its strongest asset according to Jennings. “You are not going to build great companies without great people and our whole focus is on having the best people involved in the company,” he says. “When you do that, and you focus strictly on pediatrics, you are going to make some very good things happen.” And for the staff themselves, the experience has been a rewarding one – last year the company was the winner of the Best Places to Work in Kentucky competition in the medium-sized employer category.

Bruss believes that inspiring employees has been easy. “When you develop a company that is focused on pediatrics it is not hard to build motivation,” he concludes. “People at PediaMed love to come to work because they know that the ultimate outcome is going to be to develop medicines for children, and there is a real satisfaction around doing something that is going to have a positive benefit for society. We are not developing medicines that are just ‘me-too’ drugs, we are really having an impact on the health of the public.”

Bubbling under

Isis, VioQuest and PediaMed aren’t the only pharma firms that are creating excitement in the industry. Here are a few others to watch out for.

• Abbott
Currently one of the industry's fastest growing companies with global sales climbing and 78 percent over the last five years, Abbott also has a very hotly tipped pipeline. Promising candidates include Xinlay a new prostate cancer treatment is currently awaiting an FDA decision and while Simdax a new heart failure drug in phase III. Abbott’s rapid growth has also been aided by a rationalization of its business structure, with its management bringing together disparate pieces of the business to focus on five core areas: Infectious diseases, neurology, urology/cardiology, paediatric and speciality pharmaceuticals.

• Kos Pharmaceuticals
Although competing in one of the sector’s toughest arenas – cholesterol-lowering – Kos has punched above its weight with Niaspan, a US$432 million a year drug that not only lowers cholesterol and also raises good cholesterol more than other remedies on the market. And with plans to release a combination of Niaspan and generic Zocor later this year, Kos is expected to gain a significant share of the emerging HDL market by the decade’s end.

• Eli Lilly
Although presently an industry middleweight with heavy reliance on one product – schizophrenia drug Zyprexa, which accounts for around a third of its global sales – Eli Lilly has recently opened up exciting new avenues whilst analysts speculate it has one of the best pipelines in the sector. Its new cancer drug Alimta should help growth, whilst new brands Cymbalta, a depression treatment, and diabetes treatment Byetta, also point to a strong future. In the longer-term, there is much promise from products including ruboxistaurin, a novel treatment for neuropathic pain.

• Cephalon
With a market cap of US$4.8 billion, Cephalon has carved out a name for itself in central nervous system research, whilst its bestselling drug, Provigil, a remedy for narcolepsy, is also being prescribed for night shift workers and truckers who need to stay awake and alert. Its pipeline also points to great potential, featuring Vivitrol, a forthcoming injectable medicine to treat alcoholism and a cancer-pain reliever named OVF. Elsewhere, its attention-deficit treatment drug Sparlon has also been the focus of interest on Wall Street.