The Disaggregation Road

When we saw a conference selling itself with the concept that Big Pharma is likely to disaggregate, we began to realize that what we had once seen as a kind of quirky idea has now gained the respectability of promotional material.

So first, let us invite you to follow our logic for disaggregation: just click here (the presentation’s free).

Since that talk, at the Pharmaceutical Strategic Alliances conference in September, we’ve only become more convinced that Big Pharma – at least to thrive, if not survive -- has got to start thinking small.

Some are. The less-than-confirmed but more-than-rumored information we've got is that AstraZeneca is set to spin off its GI R&D organization, keeping of course its big commercial assets, the Nexium franchise, but letting private equity fund the early-stage candidates. Good idea, we say. AZ is simply too big to manage the internal research it’s got – let alone depend on the notion that it can afford big bets on areas unlikely to generate big advances in medical care. (For an in-depth discussion of GI R&D strategies, see this story in the November IN VIVO).

AZ has by no means abandoned primary care blockbusters, but is clearly moving towards an increasingly disaggregated future. That, it seems to us, is one key message of its independently managed MedImmune acquisition-now-division. We’ll see how much farther AZ is willing to push its strategic envelope – perhaps, eventually, all the way down the disaggregation road paved by the most successful drug company in the industry—the Roche-Genentech-Chugai cluster?

We acknowledge there’s risk to the AZ strategy (spending 20% of one’s market cap for a company providing an additional 5% of sales looks pretty dicey – even if it does provide 25% of AZ’s pipeline going forward). Disaggregation is no panacea. But big-bet development--witness Novartis' well-publicized struggles with its diabetes would-be blockbuster Galvus and the management reshuffle in the wake of that debacle--is no strategy, either.

Galvus Misses Its Window; Is this All Good for Merck?

The Galvus delay is terrible news for Novartis.

Competitor Januvia, from Merck, has already seen the single best launch in recent memory for an anti-diabetes product. With a 40% share of new written scrips just four months after introduction, it may be the best launch of any new drug into a crowded category. Given its labelling -- “similar to that reported with placebo” -- doctors are rushing to prescribe what one clinician called a "no-brainer drug": zero training required in administering it; once-a-day dosing, with or without food, with or without any other medication. Once they're comfortable with Januvia, why would doctors switch to anything else, unless they're dramatically differentated?

Originally estimated to be three months behind Januvia, Galvus was already at a big timing disadvantage. Things are now much worse. Galvus seemed to have little differentiation over Januvia before (and therefore little chance of gaining a market-share advantage--now its only differentiation is negative: the skin lesions in primates, linked in FDA's mind to the toxicities seen with the drug at very high doses. That won't encourage doctors to try new patients on Galvus, particularly if, as a number of experts believe, Galvus' label--granted the drug's ultimately approved--comes with restrictions on use.

The potential time bomb for Merck is that Galvus' problems will redound to its detriment--just as the problems around Merck's own Vioxx KO'd Pfizer's Celebrex. FDA's metabolic division has been under severe scrutiny and it's possible they could do the cautious thing and start looking at lot more closely at Januvia. And when they do, will doctors too start thinking a lot more before prescribing what was once a no brainer?