Investing in bio-tech and pharma? They’re as different as chalk and cheese
With the recent announcement of Teva's (NYSE:TEVA) successful phase III trials for a new “game changing” migraine medication, and new announcements every day from other biotech companies, it is worthwhile to sit back and have a strong look under the cover of the pharma and biotech industry.
Biotechnology has been a hot topic in recent years and the big data possibilities has only intensified it. With improvements in health and healthcare a constant driver in any market conditions, it is alway likely to be a sector that has many businesses. But at the current time we are at a particularly exciting juncture, where technology has provided a clear path toward optimisation of health that was only a dream a few short years ago.
Not only through wearable, wifi, and data, but also by copying how data is used by technology companies.
The best technology companies offer a product designed to provide a maximal user experience as well as collect as much data as they can. Much of this data goes to product development, which is what you would expect data to do. But a large proportion of the collection also goes toward marketing activities. Sometimes it can be sold to other interested parties. Often though, it creates a synergy with your current activities and is used to drive further activities and developments.
At a recent biomed conference, this writer was talking to a provider of dispensing and charting software to the hospital and pharmacy industry. As a former pharmacist, I enjoyed discussing the advantages of the product and its unique benefits. As the discussion grew more detailed, it was clear that rather than developing products further to include more functionality, the business was more interested in its side project of selling user data to pharma companies, to allow them to gauge the sales of their drugs.
This highlights not only the value of data for developing a product, but also the very real way that biotech companies are following the lead of technology companies, in terms of using their collected data.
For pharma companies the same challenges apply that they have always faced. Although technology helps with clinical trial data collection and is continuing to improve the ease of a clinical trial on the test subject, it has not provided much in the way of advancing the streamlining of drug development. Drugs pass through a very time consuming and expensive set of testing simply to get to the first stage of the regulatory process. After that, the time and costs get even more significant, with any of a million factors capable of derailing an otherwise promising product. Issues such as manufacturing, formulation development, stability, toxicity, tolerability, efficacy, mutagenicity (I added this to sound smart - it basically means the ability to give you cancer) and side effects all need to be navigated before a drug can get to the market.
As a result the market is dominated by big players who can reinvest huge profits into development in the hope to create a replacement product that is providing them with their current income. Normally a patent expires within 7-13 years, by which time the market is swamped by a bunch of “me too” generic products. Whilst efficacy data from phase II trials is always promising, there is still a large proportion of drugs that fall over during phase III. Others, succeed in making the long treck to market, and then once there, don’t do all that well.
Pharma has increased its throughput, with new registrations receiving approval in the last few years as they get smarter about their development process. But the nature of the beast is that it is a lot of work to get a drug to market, and once it arrives, there is no guarantee of success.
So whilst biotech is reaching new heights and new paradigms, things remain very much the same in pharma.