Biogen CEO Poses Million Dollar Question – Do We Need To Spend On Weight Loss Drugs?
Therapeutic Classes Concept Outdated
Executive Summary
As demand for Wegovy busts through capacity, Biogen’s Viehbacher asks if we need to spend on drugs for weight loss or other preventable diseases when the dollar could go towards non-preventable chronic diseases. Discussing investments at a recent conference, he was joined by Fidelity’s Rajiv Kaul who said the concept of therapeutic classes is outdated
At a time when demand for anti-obesity drug Wegovy, has busted through recently hiked capacity despite availability in just three markets, Biogen, Inc.’s president and CEO Christopher A Viehbacher, raised a question that might not be to the liking of folks at Novo Nordisk A/S and Eli Lilly and Company.
“Do we need to spend as much as a society on weight loss drugs, when there is another solution, which is much cheaper?” Viehbacher, popularly known as Chris in the industry, queried in response to a question on drug pricing by the moderator – Sam Waksal, founder and former CEO of ImClone Systems, Inc. – during a panel discussion at a recent conference.
Eli Lilly’s Mounjaro (tirzepatide) is expected to be approved by the US Food and Drug Administration (FDA) as a weight-loss medication in adults with type 2 diabetes as positive results from a Phase III trial are foreseen.
Viehbacher’s reference was to the fact that despite the presence of several non-preventable diseases, R&D dollars and nearly 75% of healthcare budgets are spent on chronic diseases, many of which are preventable.
Waksal had asked panelists at the USA-India Chamber of Commerce (USAIC) Annual Biopharma and Healthcare Summit what companies are going to do about pricing and how they view incremental changes versus ones that substantially move the needle.
“We're spending an awful lot of money where behavioral change and different diets, different exercise regimes could actually save an awful lot of money. So personally, I think we're going to need to save our scarce resources for those people who have illnesses for which they can't really do anything,” Viehbacher said. (Also see "Lilly’s Mounjaro Shows Strong Sales And Data As Firm Eyes Obesity Market" - Scrip, 27 Apr, 2023.)
Expressing the view that there's going to be pressure on prices, with the US market looking a lot more like Europe over the next 10-15 years, he said the bar for innovation is going to continue to grow.
“How many CAR-T companies do we need? How many PD-1s do we need? That's not going to fly in tomorrow's world. And we're going to have to get a lot better at healthcare economics and being able to assess the economic value and not just the medical value of our medicines.”
“How many CAR-T companies do we need? How many PD-1s do we need? That's not going to fly in tomorrow's world.” - Christopher A Viehbacher, Biogen President and CEO
While the world “can't afford not to treat Alzheimer's and rare diseases and oncology…..there are probably some other areas where through preventative measures, we could actually save the healthcare system the money that's needed to fund these catastrophic illnesses,” he added. (Also see "Ease The Pain – Making Payment Models, Tech, Integration Work For Patients" - Scrip, 23 Mar, 2023.)
In a separate segment of the discussion PureTech Health plc’s founder and CEO Daphne Zohar said clinical trials will offer an opportunity for a lot of innovation. Apart from decentralized trials, new tools and technologies for remote monitoring and follow up with patients could make a substantial difference.
“And I think there's going to be things like vocal biomarkers that are going to change the landscape for decentralized clinical trials and clinical trials in general,” she added.
Zohar also said she’s excited about the idea that one could build on work that's been done before, where there's been already a new modality, a new target that's advanced to the point of getting some initial signals of human efficacy, "but then it had some drawbacks that seemed insurmountable at the time that the drug was developed. We have new technologies and tools now to unlock important new classes of medicine and through innovation bring those new classes to patients.”
Progress On Alzheimer’s, Medicare Bankruptcy
Waksal’s question had followed his observation that if everybody with Alzheimer's that could be treated were to be treated with antibodies “because they're just desperate, even though I believe there is only an incremental change”, the move would bankrupt Medicare immediately.
His mention of a universe “with Biogen and others (where) we're not looking at a cure but at an incremental change” might have touched a raw nerve even though Viehbacher was not at the helm of the company when Aduhelm (aducanumab) was granted an accelerated approval.
Ever since the US approval for the amyloid beta-directed antibody in 2021 to treat Alzheimer's disease, Biogen’s management and even the regulator, US FDA have faced criticism. A congressional investigation deemed the approval process to be “rife with irregularities.”
Viehbacher countered, saying “This is the first breach in the wall against Alzheimer's since (studies) started looking at plaques 100 years ago. And it's the first study that really demonstrated the benefit of reducing those amyloid plaques on cognitive function. We know that we're probably not treating patients at the right time. So, as we get blood diagnostics and conduct tests before there's too much neuronal death, you're going to see an increased benefit.”
Dr Stephen Knight, president and managing partner at venture capital fund F-Prime Capital (formerly Fidelity Biosciences) agreed, saying in areas like neurodegenerative diseases “you have to start picking apart the targets, you're going to have to find the targets on your own. You can't just rely on what's happening in academia and get lucky.”
While regulators can with good reason approve something that is incremental for diseases in which “there is nothing”, it has to be priced appropriately if it’s not a cure. However, with Aduhelm “the real sin was in the pricing.”
While the controversy over Aduhelm meant its sales didn’t live up to expectations, Biogen’s Eisai Co., Ltd.-partnered Leqembi (lecanemab) seems to be showing greater promise. (Also see "CMS Approval Will Mark ‘Starting Gate’ For Leqembi Launch For Biogen" - Scrip, 26 Apr, 2023.) (Also see "How Biogen’s Aduhelm Bet Became A Commercial Bust" - Scrip, 6 Jun, 2022.)
It’s notable that about the time of Viehbacher’s comments Eli Lilly had announced findings of its TRAILBLAZER-ALZ 2 Phase III study showing donanemab significantly slowed cognitive and functional decline in people with early symptomatic Alzheimer's disease. (Also see "Lilly’s Donanemab Slows Cognitive Decline; FDA Filing Imminent" - Scrip, 3 May, 2023.)
On another panel at the same conference, Lilly’s executive vice president and Chief Scientific and Medical Officer Daniel Skovronsky, spoke about “tears of joy” in his research team as data from the study showed 47% of participants vs 29% on placebo had no clinical progression at one year.
The IRA Inflection Point
The panel on investment also dwelt on the impact of the Inflation Reduction Act (IRA), with Waksal asking “to what degree that is going to create an inflection point” in terms of biopharma valuations, investments and portfolio prioritization.
“The industry ultimately has always adapted, but there's no question that the cost of developing drugs keeps going up, and the IRA shrinks the returns that you're going to get from that investment. So, I think the willingness to invest in healthcare innovation is under threat,” said Viehbacher. (Also see "PhRMA’s Opening Gambit: Limiting Medicare Price Setting To The IRA's Minimum Discount" - Pink Sheet, 18 Apr, 2023.)
The Rise Of Chinese Players
Sino Biopharmaceutical Limited’s chairperson of the board committee Theresa Tse could not participate in the event due to technical issues.
However, through Waksal she conveyed that Sino Biopharma is moving towards becoming a global company and it acquires companies “in innovative areas” for instance it bought a UK company F star, which was in a different area by functional antibodies and a delivery company in Belgium.
“So Chinese companies are going to move and the world will change. They won't just do me too, they'll start to get innovative,” she added, a fact that is borne out by Pharmaprojects’ Pharma R&D Annual Review 2023, published by Citeline. (Also see "Oncology’s Hold Over The Pharma Pipeline Increases As Growth Slows" - Scrip, 8 May, 2023.)
Meanwhile, Waksal, who has an interest in Sino Biopharma, in answering his own question on what would happen in the biotech industry 3-5 years when “we've got a world outside of our industry, that looks like it's ready to go your shit any moment” also lent credence to the China growth story. (Also see "Eisai Boards Fast Boat To China In HER2-Targeting ADC Deal With Bliss" - Scrip, 9 May, 2023.) (Also see "Chinese Newcomers Look For Niche Immuno-Oncology Opportunities" - Scrip, 15 Mar, 2023.)
“There are going to be some real global Chinese players, I look at that with some trepidation. But I think that's going to be real. And it's going to be done via acquisitions,” he added.
Going ahead, there will be a need for more evidence and clear data to justify financing, but the environment is going to stay challenging. The political situation should be watched carefully given that the IRA is going to have a “definite impact on how much gets spent. But we as an industry have to be extremely vigilant and make sure that the situation doesn't get worse, which means really ensuring that the value proposition of our industry is broadly and widely understood.”
Rajiv Kaul, portfolio manager, Fidelity Investments, sounded more optimistic, saying while “we go through moments of irrational behavior, like maybe some elements of the IRA, I think in the longer term, society's going to do the right thing.”
It’s time for honest conversations about the cost of innovation, emphasizing that keeping people out of the hospital and moving towards cures is going to save money while preventing and alleviating suffering, he added.
Valuations And M&As
“One thing that stood out for me the last 12 months, even in this period of macro pressure on the biotech sector has been that big pharma companies are cash-rich and they recognize that they've got half the revenues going off patent by the end of the decade.”
The industry recognizes the fundamental importance of innovation and is willing to pay for it, “particularly in the context of the uncertainty around reimbursement globally”, he added while citing examples of Pfizer Inc. acquiring Seagen Inc. and Biohaven Pharmaceutical Holding Company Ltd. and Merck & Co., Inc. acquiring Prometheus Biosciences Inc. which were “all acquired at 70 to 100% premiums". (Also see "Merck Acquires Much Needed Diversification With $10.8bn Prometheus Buy" - Scrip, 17 Apr, 2023.) (Also see "Seagen, With Two Big Pharma Bidders, Nearly Lost Both" - Scrip, 17 Apr, 2023.)
Kaul also said he feels much better investing in the current environment where stocks are “cheap and in some cases, extremely cheap.” Biotech stock prices are not necessarily economically sensitive and given the “period of great innovation and the possibility of some real breakthroughs in fundamental science and translational clinical research, my approach has been long-term fundamental- driven.” (Also see "J&J CEO On Stereotypes, Innovation Secret Sauce And Kenvue" - Scrip, 8 May, 2023.)
During USAIC last year, Kaul who manages the biotech fund of Fidelity and has been investing in the space for two decades, had said euphoria around the impact the industry had on COVID-19, excessively low interest rates and institutional incentives had led to a period of excess financing. (Also see "‘The Next Tulip Mania?’ – Fidelity, Gurnet, Biogen Put A Lens To Funding, Valuations" - Scrip, 8 Jul, 2022.) (Also see "Finance Watch: Mega-Rounds Make A Comeback, But Will VC Funding Totals Rise Too?" - Scrip, 4 May, 2023.)
“About a third of the industry was trading even low(er) at one point for the last 12 months than it was at post the.com bubble crash. It's really set up a very exciting moment to be a stock picker.” - Rajiv Kaul, Portfolio Manager, Fidelity Investments
Zohar had a different take on the recent acquisitions. “One of the things that strikes me about this industry is that there are certain things that are accepted and are in fashion and one of those is this preference towards single asset or single therapeutic area companies. This may be because the investors like diversifying their portfolios themselves, and single asset companies make it easy for them to focus on what they're investing in.”
Challenging the perception that single asset companies make better M&A targets, she added “I'd like to make the case for companies with broader pipelines. I believe they have their own advantages, and they mitigate binary risk. And the management incentives are aligned with shareholders in terms of prioritizing the winners, so there's less incentive to continue a program that has mixed results.”
In March, PureTech sold royalty rights to KarXT (xanomeline-trospium), a schizophrenia candidate being developed by Karuna Therapeutics, Inc., one of the companies it founded after Karuna had reported a second set of positive Phase III results for KarXT. (Also see "PureTech Cashes In On Promise Of Karuna Schizophrenia Drug" - Scrip, 23 Mar, 2023.)
Therapeutic Classes Concept Outdated
Meanwhile, Kaul stressed that the traditional view of thinking about therapeutic classes is becoming less relevant.
“I understand the commercial side of it, but it just feels like as you grow towards the atomic level resolution, and you've had this journey in the last 30 years, from replacing proteins to blocking proteins to now getting into the cellular machinery at a deeper level, it, you're starting to figure out some of these fundamental principles of how cells work and how they regenerate and how they communicate. And you've got machine learning that can enable those processes. I just wonder if, in the next period, it's going to be more about solving the problems. One or more. Not in the traditional way,” he observed.
Giving the example of an overlap between immunology and oncology, Kaul pointed out that if companies want to figure out breakthrough therapies, “you can't really think about therapeutic classes anymore.”
Viehbacher concurred saying companies describe too many diseases by their symptoms or the location of a tumor rather than the cause. However, “we are certainly moving towards that.”