Like a teen struggling with his independence, the biotech industry is repeatedly admonished: control costs, make drugs affordable, produce a blockbuster drug to please investors. With enormous research and development costs and endless pitfalls on the path to market approval, this task proves truly daunting. Increasingly, biotech companies are trying to think in new ways and discover effective methods for achieving these lofty goals.
Yet, what if an emerging technology — nanotechnology — helped to reduce R&D costs and improve the efficacy of new and existing biotech drugs while providing investors with healthy returns? According to “Nano-enabled Drug Delivery Systems Market,” a new report by NanoMarkets, this wish list may not be just so much wishful thinking. Cost savings could be realized, says Michael Moradi — author of the report and managing director of Venture Development Associates — through using nanoparticle-based drug-delivery systems.
Greater targeting ability and solubility enhancements for existing and new biotech drugs are just two ways that nano-enabled drug-delivery systems can reduce biotech drug costs. Moradi says, “The increased dosing efficiency afforded by nano-enabled drug-delivery systems may lower the overall need for a drug, potentially lowering costs and undesirable effects in the human body.” Nanotechnology, he adds, also has the potential to reduce biotech drug-development costs by streamlining the discovery process through miniaturization, automation, speed, and reliability.
The use of nanomaterials in traditional drug delivery, he says, could be a huge market opportunity for biotech. “Nanoscale compounds have completely different properties than their macroscale equivalents. This phenomenon is the driving force behind the majority of innovations in the field.”
PATENT IMPLICATIONS
According to the report, a significant market opportunity may lie in extending product lifecycles through reformulation. “Nanotechnology-enabled drug delivery systems have proven to be a weapon against generics” says Moradi. “Novel reformulation may allow an existing compound to qualify as a new chemical entity. This may increase profitability, expand a company’s intellectual property estate, and discourage competition during a biotech drug’s most valuable years.”
Investors are banking on nanotechnology as the next wave. The U.S. government-sponsored National Nanotechnology Initiative, founded in 2000, opened the door for such research. Funding for this initiative might exceed $7 billion during the 2000–2008 period, with 9 percent allocated to the National Institutes of Health. The NIH lists nanomedicine as a top priority, and the National Cancer Institute has committed $144 million to such research.
Private investment is staking claim to nanotechnology investment, too. Venture capital markets are wide open, and many venture capital funds have identified nano-enabled drug delivery as target investment areas. Approximately 40 percent of nanotech venture capital has been allocated to life science start-ups.
NanoBiotech News counts more than 60 drugs and drug-delivery systems based on nanotechnology are in development, 35 of which are for cancer drugs and diagnostics. And finally, Lux Research, a global research and advisory company, focusing on the business and economic effects of nanotechnology and related emerging technologies, estimates that in 2014, 16 percent of healthcare and life science revenues will derive from emerging nanotechnology.
2004: A Decent Year For Biotechnology
The year 2004 was good — but not great — for the biotech industry, according to a year-end assessment of the industry by Burrill and Company, a life sciences merchant bank focused on companies involved in biotech. Burrill notes the year’s highlights: a strong market for initial public offerings, with biotechs raising more than $2.1 billion through IPOs; 32 new biotech therapeutics approved by the U.S. Food and Drug Administration; more than $18.4 billion in venture capital raised by the industry and more than 130 partnerships completed; and U.S. market capitalization rose 8 percent to $372 billion, as of Nov. 30, 2004.
U.S. biotech industry financing in 2004 (in millions)
IPOs=initial public offerings, PIPEs=private investments in public equity securities.
SOURCE: BURRILL’S BIOTECH OUTLOOK FOR 2005
Also in 2004, venture capital funding rose for the first time in four years, providing a boost for the health and information technology sectors. The biggest percentage increase (11 percent) was in health care, where startup companies received $6.58 billion.
Ernst & Young, meanwhile, predicts that 2005 will be one of biotechs’ best years, projecting biotech revenues will show a 19.5 percent increase over 2004. And a new report by Wood Mackenzie concurs with Ernst & Young, predicting that biotechnology growth will outpace that of the pharmaceutical industry through 2008.
Employers Team Up To Lower Rx Costs
Thirty large employers have united to reduce prescription drug costs. The group, known as the Rx Collaborative, seeks to learn where rebates and discounts on prescription drugs are going. The collaborative is monitoring the business practices of Medco Health Solutions, the largest U.S. pharmacy benefit manager.
PBMs have become key players in managed care, thanks to their ability to purchase drugs in bulk and receive discounts and rebates from manufacturers for drugs that receive preferred formulary status. PBMs also receive rebates when a particular drug reaches a target market share. Critics have suggested that PBMs are not passing all the savings on to employers. PBMs’ entry into the specialty pharmacy market may augment calls for transparency.
Federal oversight is imminent with implementation of the Medicare Part D drug benefit. Under the Medicare Modernization Act, the inspector general of Health and Human Services can “investigate whether any misrepresentation of overall rebates and costs has been reported.” Health plans are to disclose “price concessions obtained from pharmaceutical manufacturers” and should expect periodic audits of their records and financial statements.
Medco agreed to allow the employer group, under the direction of an independent auditor, to monitor its practices. The Rx Collaborative expects to save at least 6 percent annually on total spending of $800 million if all fees and rebates are passed to employers.
Chit Chat:
Manhattan Pharmaceuticals will merge with Tarpan Therapeutics… PharmAthene has purchased the lead drug candidate of Canada’s Nexia for $18 million… Isis Pharmaceuticals stopped development of two experimental drugs and has cut 40 percent of its work force to concentrate its resources on its most promising antisense candidates.