7/6/18

Biopharma
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Acadia. I still don’t think this drug will ever sell too much. There are a few D2 sparing 5-HT2a antagonists (nothing as pure as pimavanserin, given), but the company’s spending is a bit insane. The drug is probably great for PDP given the levodopa interference at the dopamine receptor, but what good is the drug for the other illnesses when you can use Risperdal, Abilify, Seroquel, etc. Re spending, I understand that one needs to invest in a brand, and it will stop at some point, but this is quite dramatic cash use. I am skeptical of the intellectual property of pima, so I expect a generic sooner than others.

Continuing our Pfizer (Merck next) R&D productivity analysis, what is fascinating is almost all of Pfizer’s drugs were discovered by other companies. I suppose it is not too surprising given the mega-mergers that have occured. Still, the idea that Pfizer has only created 11 drugs in the last 30 years despite spending >$100 billion on R&D fascinates me.

Inorganic
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Warner Lambert/Parke-Davis: Lyrica, Ibrance, Lipitor, Neurontin, Accupril
Wyeth: Prevnar, Enbrel (Immunex/Amgen), Bosulif, BeneFIX, Refacto/Xyntha, Premarin, Pristiq, Effexor XR, Rapamune, BMP2, Zosyn, Tygacil
Pharmacia/Sugen/Upjohn/Monsanto/Searle: Sutent, Celebrex, Genotropin, Somavert, Xalatan, Detrol, Xanax, Xalkori, Bextra, Camptosar, Ellence, Detrol, Cleocin, Inspra, Zyvox, Depo-Provera, Aromasin, Medrol, Fragmin
Bristol-Myers: Eliquis
Eisai: Aricept
Medivation: Xtandi
Pliva: Zithromax
Agouron: Inlyta, Viracept
Merck Kgaa: Bavencio
UCB: Toviaz, Zyrtec
Anacor: Eucrisa

Organic
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Unasyn – FDA approved in 1986
Cardura, Diflucan – FDA approved in 1990
Zoloft – FDA approved in 1991
Norvasc – FDA approved in 1992
Viagra – FDA approved in 1998
Vfend, Relpax – FDA approved in 2002
Revatio – FDA approved in 2005
Chantix – FDA approved in 2006
Xeljanz – FDA approved 2012

I assumed net margins on pharmaceutical products are 50% (well above what they really are but around what they are on a steady-state well-managed level). I assumed 50% of R&D is spent on discovering or running clinical trials for in-house projects (as opposed to clinical trials for acquired products). At a 3% discount rate, PFE made 32B for shareholders from 1991 to 2017 (16 years) investing in R&D. All of the profit was from 1992 to 2006, indicating very roductive R&D in the 1990s, creating monsters like Norvasc, Viagra and Zoloft. Net income of this “inHouseR&DOnlyCo” reached as much as $2 billion in some years. Net income turned negative afterwards, ranging from breakeven to negative 1 billion per annum since 2006.

If, instead of doing R&D, Pfizer invested the R&D cost (50% of reported cost) in a fund returning 5% after-tax, it would have generated 124B in value as opposed to the 32B NPV. I have never seen an analysis like this done (it has taken me the better part of 3 days).

Personal
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I’ve been having a recurring dream about being able to go back in time and see the future and live the past simultaneously. I’m working at a hedge fund and I somehow know the future years in advance. I know that Facebook will get started in 2004. I know that Google is a great buy at or before the IPO. I know what drugs will work and what won’t (although I know that today). I knew the market will crash in 2000-2002 and recover in 2003. I guess this is what insider traders feels like?

Papers I’ve Read Recently
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Idiopathic Pulmonary Fibrosis. Lederer & Martinez. NEJM 2018:378;19.
This is the kind of review article I like to see in the NEJM, especially as it covers emerging therapeutic options. Bravo!

cAMP signaling in brain is increased in unmediated depressed patients and increased by treatment with a selective serotonin reuptake inhibitor. Fujita et al. Molecular Psychiatry 2016.
Fascinating paper with important implications.

A paper in Molecular Pharmacology I cannot discuss.

Efficacy of Exome-Targeted Capture Sequencing to Detect Mutations in Known Cerebeller Ataxia Genes. Coutelier et al. JAMA Neurol 2017.
Nothing too exciting here, very standard in today’s diagnostic odyssey.

Review of Neurological Implications of von Hippel-Lindau Disease. Dornbos et al. JAMA Neurol 2018.
Just catching up on a rare disease.

Glossary
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adnexal. the area consisting of the ovaries, fallopian tubes, their support structures, etc.
endolymphatic sac tumor (ELST). common tumor of VHL disease, fairly benign.
hemangioblastoma. common tumor of VHL disease, fairly benign.
saltatory. growing in an unpredictable pattern.