Harry Glorikian: Opportunities in this market are abundant, but not obvious
Harry Glorikian, Managing Partner, Scientia Advisors
For many years Harry Glorikian, Managing Director, Scientia Advisors has been helping companies navigate the dynamic, yet increasingly turbulent, life science market. Over the holidays we had the chance to meet with Glorikian to get a peek at what’s in store for several sectors in the healthcare industry in 2012 and beyond.
Constantine Theodoropulos (CT) for partneringNEWS™: Let’s jump right in and talk about pharma, a sector that is central to many of our readers. What are some of the opportunities and challenges pharma CEOs will confront in 2012?
Harry Glorikian (HG): Let me start off by making a statement that some will find controversial: The era of the blockbuster drug is not over.
Even though many in the industry have written the epitaph of the blockbuster drug, we maintain that there is more life in this business model. In oncology alone, there are over 280 small molecule targeted therapies. The successful development of any of these agents has an opportunity to become a blockbuster drug. One specific example is the emergence of the JAK inhibitor class of drugs. The first JAK inhibitor, Jakafi (ruxolitinib), indicated for primary myelofibrosis, was launched in November 2011, co-promoted by Novartis and Incyte, and most likely Pfizer’s tofacitinib will be initially approved in Q3 2012 for rheumatoid arthritis. And there are numerous other JAK inhibitors that for different receptor subsets target indications ranging from AML to psoriasis.
So, pharma will continue to find blockbuster agents, although they will be more specialized and targeted. In fact, there are some high-risk drug candidates, notably CTEP inhibitors, in Phase III that if successful could mark a return to statin-like profitability.
CT: You are correct, this insight does strike me as controversial, especially given the doom and gloom surrounding pharma’s patent expiry due to arrive in force in 2012/13.
HG: No doubt, much of the buzz in the pharmaceutical industry is focused on the patent cliff. Even though the industry may be in a contraction cycle, starting in 2013 we will begin to see an industry rejuvenated by small molecules, biologics and stratified medicine. The drug developers who have leveraged their pipeline to be in-line with all three opportunities should weather the patent cliff and industry contraction pretty well.
CT: Given that we are in the era of “biologics,” eyebrows will certainly raise to hear that small molecule drugs are back on the table. Can you elaborate on this intriguing dynamic?
HG: My colleagues and I at Scientia Advisors argue that the era of biologic agents may actually enable competing small molecules to capture exaggerated value-based pricing. One emerging example is tofacitinib, which will likely garner pricing similar to or just below the more expensively produced anti-TNF biologics. This situation will create a large appetite for markets where biologics have led to treatment breakthroughs, but with value priced therapies. The value of less expensively produced small molecules competing in these markets may allow manufacturers to capture margins never seen before for small molecule therapies.
CT: Let’s move on to diagnostics. The number of molecular diagnostic companies attending EBD Group partnering events continues to grow, and there are quite a number of them presenting at this year’s Biotech Showcase. What is your prognosis for this sector?
HG: From an investor perspective, diagnostics is exciting. Last year was notable in that there were several large acquisitions of diagnostic companies by non-traditional companies: Sony buying Micronics, Nestle acquiring Prometheus, and GE gobbling up Clarient. These deals highlight the fact that diagnostics is becoming a critical entry point for companies entering into, or expanding, their healthcare business. And we should expect this trend to continue in 2012. Who knows, maybe we will see Apple or Samsung acquire a diagnostic company, or perhaps acquire a lab as Nestle did. Whatever happens in 2012, one trend is clear—for the IVD industry the hunting season is open. If you don’t have an IVD strategy, you may be left behind.
CT: This interest in diagnostics is tied to the need to make more informed decisions in the clinic. What can you tell us about this trend and its implications moving forward?
HG: Across the healthcare continuum, what we call “Big Data” is today delivering value to the bottom line of providers, payors, therapeutic and diagnostic providers and even consumers. 2012 will be the year when the industry begins to see the benefits of “Big Data” on their bottom line, with the full-scale deployment of platforms from companies like IBM, EMC, Oracle, Humedica, SeeChange Health, Castlight Health, among others.
With Electronic Health Records (EHRs), the healthcare system has become more data intensive than ever. While many physicians are just getting used to the basic features of these EHRs, companies are developing analytics to do “comparative effectiveness” on therapeutics and diagnostics to understand the best treatment options. For instance, does a 30-year-old Asian female with high triglycerides do better on Lipitor or Crestor?
Analytics are also helping to find “appropriate” patients for clinical trials—something that has been hard to do in a paper-based world. Big Data is also providing more transparency of healthcare pricing—something that is very attractive to self-insured corporations and their employees. For example, studies have found that within a one block area of Chicago, the cost of a CT scan can vary by a factor of three. Wouldn’t it be nice to have the option to go to the lowest-cost provider—particularly if you had a high-deductible plan?
CT: How is “Big Data” benefiting drug developers?
HG: Big Data is increasingly being used to better segment patients. As you mentioned earlier, with many blockbuster drugs going off patent in the next year or two, understanding the sub-populations who did not respond well to these drugs is leading to therapeutics more tailored to these individuals. So, data will be a central, critical component of personalized medicine, and data analytics is a core competency pharma will need to be successful in 2012 and beyond.
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