Burgeoning diagnostics market means big decisions for pharma
With the increasing effectiveness of companion diagnostics and a plethora of new tests that influence all aspects of drug discovery, development and sales, “diagnostics are rapidly becoming key tools in managing the entire life cycle of a drug. As a result, pharmaceutical companies have big decisions to make as they incorporate diagnostics into their business models.”
So says Harry Glorikian, managing partner of Scientia Advisors, a US-based (Cambridge/Palo Alto) management consulting firm specializing in growth strategies for major and emerging companies in the life sciences, worldwide.
Scientia predicts a robust nine percent global growth in diagnostics through 2013 with molecular diagnostics increasingly gaining share. For some pharmaceutical companies, this growth will mean less trial and error prescribing—and, hence, lower sales for some blockbuster drugs, Glorikian says, citing recent studies finding the anti-clotting Plavix ineffective or risky for patients of certain genetic types. For other companies, the new diagnostics will bring greater efficacy, and, as a result, increased prescriptions and sales. But across the board, the burgeoning of diagnostics requires that pharmaceutical companies develop new business models in order to achieve strategic goals.
Some companies, such as Abbott, Roche and Genzyme are building out their own molecular diagnostic efforts for discovery, development and marketing and Merck requires that biomarkers be present before a drug enters its development pipeline.
Roche, by combining its own diagnostics capability with its recent acquisition of drug maker Genentech, and the vanguard commercialization of Her2 and Herceptin in the treatment of breast cancer, is well placed. Similarly Novartis has formed an in-house molecular diagnostics unit in order to improve the co-development of companion diagnostics and drugs. Sanofi-aventis, Pfizer and Johnson & Johnson are reportedly considering whether to acquire or build.
For companies without their own diagnostics capabilities, licensing a biomarker or test might make sense. Glorikian points out that Amgen and AstraZeneca are exercising limited control by licensing companion diagnostics development to diagnostic company DxS (now Qiagen), as is Pfizer, to Monogram Bioscience (now part of LabCorp).
While the licensing route can be less costly to pharmaceutical companies than full ownership, Glorikian asks, “Do you let someone else create a diagnostic and risk giving away your destiny if the diagnostics owner also works with your competitors?
One solution is a joint ownership agreement in which the pharmaceutical company shares profits in return for exclusive rights to a diagnostic. If the drug is successful, the diagnostic company is prohibited from engaging a therapy competitor. If the drug fails, the diagnostic partner is free to go elsewhere.
Another option is to maintain sole ownership of the diagnostic and partner with multiple licensors. This scenario is most advantageous to the pharmaceutical company but will likely require high upfront payments to the diagnostic partner,” Glorikian said.
For companies with therapies still in the approval pipeline, the “Analyte Specific Reagent” (ASR) pathway, either in partnership with a diagnostic developer or directly, might be the arrangement of choice. In such cases, the diagnostic developer sells a specific reagent to a laboratory certified by the Centers for Medicare and Medicaid (CMS) as having the experience, sophistication and quality controls to conduct testing for use in clinical decision making. This option facilitates earlier market entry, but does not allow promotion of the ASR’s clinical performance.
How does a company decide which option to choose? “That’s a big question,” Glorikian comments. “The answer depends on the company’s size, its pipeline, its stage and its ultimate goals.”
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