Wednesday, October 10, 2007

Spec Pharma: Wrong Bandwagon, Guys

Ok, so we’ve commented before on the definitional problems around ‘specialty pharma’—the topic came up at our PSA conference, and in this IN VIVO feature.

But we feel compelled to say some more. Yesterday during an industry conference in London, yours truly came across two further 'interesting' uses of this label, which is fast becoming totally meaningless as a result.

The first was a UK drug delivery firm that has developed a technology to push tiny, splinter-shaped solid doses of biologics, vaccines or any other drug through the skin where they apparently dissolve and distribute just as fast as a subcutaneous injection. Fine. (Read more here, if you want.) But why call the firm ‘specialty pharma’, as its CEO Charles Potter insisted on doing (and insisted that I do, too)?

“We don’t want to be seen as just drug delivery,” Potter explained, “since that implies we don’t have our own products.” Yet, he continued, we don’t want to be pharma or biotech either, because then people might think we do discovery, and that’s risky. “So we decided to call it specialty pharma,” he concludes.

Ah. So ‘specialty pharma’ means ‘reformulation and delivery’. But then why is Spain’s mid-sized pharma firm Almirall also calling itself specialty pharma? In a press release announcing Almirall's acquisition of some drugs cast out by Shire, CEO Dr. Jorge Gallardo declared that the deal "..reinforces our position as one of the key European specialty pharmaceutical companies.”

Ok, so newly-listed Almirall wants to be a bit more like Shire and get into specialist niches (though it’s unclear at first glance how the $213 million worth of assets, which include peppermint oil, help further that cause). And ok, drug delivery wants to shed its service-associated image, and highlight the lower-risk nature of its game.

But jumping onto the spec pharma bandwagon in order to do that is not a good idea. First, it’s confusing, embracing, as the term now does, so many diverse strategies (and yes, biotechs are in there too). Second, the original spec pharma model is broken anyway, so why go near it?

The traditional acquire-and-market strategy, minus R&D risk, may have created substantial value in the US. But the party’s over. The winners can’t rely on in-licensed, low risk assets to sustain the growth they need. Rumors are that MGI Pharma is up for sale. Endo is looking at strategic options, including moving upstream into risky innovation. Shire and Cephalon have both long shed their specialty pharma clothes, and now prefer to be known as ‘biopharmaceutical firms’ (another popular new label, including among Big Pharma—the ‘bio’ bit supposedly adds a valuation premium).

Despite the challenges of spec pharma version 1.0, new players are emerging. But as Bryan Morton, the CEO of Europe-based newcomer EUSA Pharma, declares, we're not really spec pharma, “we’re start-up Big Pharma.” That, he reckons, captures the idea of possessing full commercial capabilities, adjusted for size.

So the industry re-branding is official, then. Big Pharma and the old spec pharma are now biopharma, new spec pharma are 'start-up Big Pharma', and pretty much everything else, from drug delivery, through mid-caps and even biotechs-with-commercial-ambition, is now spec pharma. Got it?

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