Back in 2012, Novo Nordisk made headlines (whether deservedly or not) for establishing a Seattle research center (see the press release at http://prn.to/1OAukdP for more detail) to focus on autoimmunity that is the core reason type 1 diabetes occurs. Truth be told, there were never more than twenty researchers at this facility, although the company did manage to sign such prominent type 1 diabetes immunologists as Matthias von Herrath whose primary work actually takes place in San Diego at the La Jolla Institute for Allergy & Immunology (LIAI), a non-profit research institute founded in 1988 that focuses on the underlying causes of autoimmune diseases including type 1 diabetes.
Novo made headlines because its a company whose fortunes were made on treatments to keep people with diabetes alive, although all of the company's treatments address the symptoms of the diseases themselves, but not the underlying disease. But because it was Novo Nordisk, the presumption was this venture would likely be a big success. I was always a skeptic because Novo may know insulin, but it has never, ever done anything in the field of immunology and has no track record of success in that. Also, Novo never really spent very much money on this venture. It takes more than top-notch talent to succeed, and so far, no company has succeeded in immunlogy treatments for type 1 diabetes, while many have failed. This week, Novo announced it was no longer pursuing immunology treatments for type 1 diabetes and it would sell whatever immunology discoveries and/or patents to Bristol Myers Squibb and exit the immunology business completely.
Truth be told, in spite of hiring Dr. von Herrath and quite a few others associated with the Brehm Coalition, not much has come from this venture so far. But its a discovery investment, and Novo Nordisk's announcement was a validation that it, as a company, has no intention of ever curing type 1 diabetes, it wants the money tree of treating the disease perpetually to continue for as long as possible. Novo Nordisk's stock has been punished by its devastating FDA decision over a year ago that means it cannot start marketing its latest "Lantus-killer" (the company once said the same thing about Levemir, but that didn't quite live up to its lofty statements) in the U.S. until additional safety studies are undertaken which will cost the company millions. On top of that, Novo has lost several big contracts including Kaiser Permanente, United Healthcare and Express Scripts as well as several others because payors (insurance companies and pharmacy benefits managers) are saying no to routine, 15% price increases every year, and Lilly started competing for business after ignoring the business for a decade while it pursued Prozac, Zyprexia and other antidepressants in the neuroscience field. But those patents expired and Lilly's insulin business, which once commanded as much as 80% of the U.S. market, had slipped very badly while Novo stole market share.
Lilly realized that it had been a mistake to ignore its diabetes business for so long, and suddenly started competing on price, and started winning market share back from Novo, which had once stole Lilly's business because it understood the managed care business better than Lilly did. Now, Lilly is still playing catch-up, but Novo thinks it can still raise prices 15% every year and payors won't say anything (see David Kliff's article at Forbes at http://onforb.es/JIsWbo for more detail).
For Novo, the U.S. market had become a cash cow while government-run health plans in Europe demanded - and often received - discounts on old insulin products whose patents are due to expire in the next few years. But the U.S. market is starting to look more like Europe's, only instead of government-run plans, they're publicly-held companies. The price pressures will be more intense because American insurance companies are now vastly bigger than most European state plans, and payors will no longer just accept routine price increases on not-so-new "modern" insulins as Novo likes to call insulin analogues.
The sale to Bristol Myers Squibb is seen as a positive development by Wall Street, not only for Novo, but for Bristol Myers Squibb, which has many immunologists who work in the cancer field. It is believed that the cancer researchers can turn their expertise over to autoimmune diabetes treatments and might succeed. The risk, of course, is that Bristol Myers might go the other way, and simply turn whatever diabetes research into cancer treatments instead. Wall Street is happy either way, but people with type 1 diabetes will have to wait and see if anything comes of it. We know that Novo didn't do much with it, so the sale isn't a major loss in my opinion.
See the following for more details, historical and more recent on Novo's exit and Bristol Myers Squibb's entry:
Doug Melton's Semma Therapeutics and AstraZeneca Partnership
The other major news was that after decades of research, Harvard stem cell researcher Douglas Melton, who has two kids have type 1 diabetes (they're now adults with type 1 diabetes, by the way) made news by landing $44 million in funding (see http://ow.ly/KLlZp for details). Melton has been working on stem cell treatments to create new pancreatic beta cells that are responsive to blood glucose. Truth be told, its now a startup called Semma Therapeutics, but in addition to funding, it also landed a collaboration with AstraZeneca (AZ) (see HERE for details). Having a major drug company is seen as a sign of success, because few startups can afford to bring drugs or biologics to fruition anymore. in 2011, AZ had one autoimmunity treatment it had great hopes for called otelixizumab, but that failed to meet its critical endpoint. That was a start of several big failures for its development pipeline and some presumed the company would be acquired as a result.
But AstraZeneca is a pharmaceutical company that spent some time last year fighting off an aquisition attempt by Pfizer, who cared nothing for AZ's underlying researchers or pipeline, rather it was an "inversion" attempt to use AZ's European incorporation to reduce the company's tax burden on income earned outside the U.S. Its a tax manuever that has nothing to do with pharmaceuticals. In recent years, we've seen companies including Medtronic and Perrigo do the same thing. But this has about as much to do with drug development as share buybacks do, a strictly financial maneuver to reduce the number of shares outstanding and therefore boost the price of the remaining shares outstanding. It has nothing to do with drugs.
Pfizer is big, but hasn't had much success in developing actual drugs in recent years. Its last major successes on its own were Lipitor and Vigara, if that tells you anything. In recent years, it has become more of a serial aquirer because Pfizer's own internal researchers haven't done much. That's not to say it hasn't tried, but prioritization by top execs means promising but smaller treatments developed intenally don't go anywhere.ut AstraZeneca is a pharmaceutical company that spent some time last year fighting off an aquisition attempt by Pfizer, who cared nothing for AZ's underlying researchers or pipeline, rather it was an "inversion" attempt to use AZ's European incorporation to reduce the company's tax burden on income earned outside the U.S. Its a tax manuever that has nothing to do with pharmaceuticals. In recent years, we've seen companies including Medtronic and Perrigo do the same thing. But this has about as much to do with drug development as share buybacks do, a strictly financial maneuver to reduce the number of shares outstanding and therefore boost the price of the remaining shares outstanding. It has nothing to do with drugs.
Pfizer is big, but hasn't had much success in developing actual drugs in recent years. Its last major success on its own was Vigara, if that tells you anything. In recent years, it has become more of a serial acquirer because Pfizer's own internal researchers haven't done much. That's not to say it hasn't tried, but prioritization by top execs means promising but smaller treatments developed intenally don't go anywhere.
AstraZeneca announced that it entered into a five-year research collaboration with the Harvard Stem Cell Institute (HSCI) to adapt a technique that creates human beta cells from stem cells for use in screens of AstraZeneca's compound library in the search for new treatments for type 1 diabetes. In addition to selling Amylin to treat type 1 diabetes, AZ also sells some other diabetes treatments, mostly for type 2 diabetes. These haven't been huge sellers, but AZ still sells drugs that many people use, so just because its pipeline is hurting doesn't mean its not a viable company on its own.
Under a 5-year deal, Melton's team at the Harvard Stem Cell Institute will use its technology for engineering insulin-producing beta cells to better understand how both types of diabetes develop. The plan is not to use the cells as treatments unto themselves--that's the remit of the newly un-stealth Semma Therapeutics--but instead to probe how the decline of beta cell function leads to diabetes and tap AstraZeneca's vast library of compounds to see if any small-molecule drugs (or drug combinations) can disrupt the process.
For Melton, this is a double-whammy. First, his startup got funding needed to proceed to the next phase of development which could someday lead to commercialization, whereas his partnership with AZ may help to address the other issue in type 1 diabetes. Its fine to create more beta cells, but if the body's immune sytem continues destroying them, it doesn't really solve the problem. So far, few (if any) autoimmunity treatments have succeeded or been commercialized yet, so there is a long list of failures. But perhaps AZ has something which might work?! Melton knows what's needed to succeed. Let's see if he can assemble everything that's needed to make it happen. The good news is after years of researching in a lab, we're starting to see the first signs of commercialization. I have no delusions these will succeed where others have failed, but with each, we learn something that we didn't know before.
Anyway, I don't blog as often as I once did, but I though these two developments were worth calling everyone's attention to.