Back in 1970 when I joined the pharmaceutical industry, the preferred company model was called a FIPCO (fully integrated pharmaceutical company), driven almost exclusively by chemical innovation, that is, the synthesis of new chemical entities. While innovation and product development in the pharmaceutical industry have come from natural products, synthetic chemistry, drug delivery, and now, biotechnology, business models have evolved from fully integrated pharmaceutical companies to niche marketing firms to specialty pharma companies.
Drug delivery has had a unique and prominent role as a source of innovation and is now a significant platform for launching specialty pharmaceutical businesses. Continuous waves of innovation in drug delivery have extended marketing franchises, created blockbuster drugs with new claims and therapeutic characteristics, and, most recently, drug delivery has emerged as an enabling tool for biotechnology compounds.
The First Wave
The goal of drug delivery pioneers was to develop products that could unleash the full potential of a chemical entity with maximum efficacy, safety, and convenient administration. At that time, the conventional wisdom held that the impact of drug delivery systems would be limited and, as such, not worth the effort by big pharma companies looking for the next blockbuster.
It was pharma marketing departments that woke up to the realization that whole franchises of compounds were facing patent expiration and generic competition. They saw drug delivery as a way to rescue these compounds—creating new dosage forms with improved characteristics that would be the basis for entirely new patents and rejuvenated pipelines.
While market franchise extensions were the initial motive for the relationship between big pharma and drug delivery companies, the discovery of new therapeutics claims was an unexpected benefit. These claims often transformed a drug with a limited market into a blockbuster, fueling a second wave of innovation that led to the birth of specialty pharma companies based on drug delivery technologies.
In fact, as the time to bring new drugs through the clinic to market lengthens, the time that treatment will enjoy patent protection diminishes. At Durect (www.durect.com) we see firsthand the greater opportunity and the greater need for pharmaceutical companies to begin exploring alternative deliveries much earlier in the development process, thereby extending, in a sense, the patent life of their next big medication.
The Second Wave
The second wave of innovation was based on the realization that drug delivery not only brought convenience and patient compliance, but also optimized the therapeutic potential of the chemical entity. These innovations transformed the market for these compounds often exponentially.
For example, Procardia® was originally an immediate-release compound prescribed for angina that faced upcoming patent expirations. Through Alza’s technology, Pfizer introduced Procardia XL® as a once-a-day antihypertensive with superior efficacy. Tachycardia, associated with the immediate-release dosage form, was eliminated in the extended-release product. On the basis of clear patient benefits, Procardia XL became Pfizer’s first $1 billion drug.
Fentanyl was initially a roughly $20-million hospital room anesthetic; the development of Duragesic® (fentanyl in a controlled-release transdermal patch) took fentanyl out of the hospital and turned it into a $2-billion pain medicine for Johnson & Johnson.
The realization that a relatively modest investment, by pharmaceutical standards, could lead to significant products established drug delivery capability as a boon for specialty pharmaceutical companies.
With big pharma garnering the vast majority of the commercial value created by drug delivery technology, some companies have taken steps to transform from purely licensing business models to niche marketing companies. These firms find small-to-medium sized opportunities that fall below the radar screen of big pharma, tackling specialized markets such as urology and pain management.
Companies improving drug delivery system technologies have been a major, if not the sole, source of innovation in the last 30 years for the management of pain. Examples of that innovation are the development of twice-a-day pain medications such as Oxycontin™; three-day pain medication such as Duragesic; and seven-day pain medication such as Transdur™-Sufentanil. For those like Durect that grew out of this second wave of innovation, building a specialty pharma company on the basis of drug delivery technology is an attractive business model.
The Third Wave
Extending product franchises, developing blockbusters, and improving standards of care are all part of the considerations that drug delivery companies bring to the table in partnership with pharma companies. However, now a third wave of innovation has started, which involves drug delivery and biotechnology.
Beyond ease-of-use and compliance issues, the nature of the compounds themselves may require continuous administration or targeted delivery at the site of action. For example, LHRH agonists, used as prostate cancer hormone therapy, don’t exist without a controlled-release dosage form. Other compounds are similarly dependent upon controlled release to succeed as drugs.
This third wave is just starting to get under way but promises to take the specialty pharma industry to new heights. While all three waves will continue to drive growth in the specialty pharma sector, third-wave companies will have moved far beyond marketing franchise extension as the primary motive. Instead, a new common ground will be found with partners, and these third-wave companies will bring immeasurable benefits for patients and society.
The enormous cost of developing new drugs from basic research to commercialization is prohibitive for start-ups that might someday aspire to bring their own products to market. Venture capitalists and public market investors simply can not provide such enormous amounts of capital, thus driving start-ups to license their discoveries to large pharma partners. In contrast, the ability to bring to market new products for a fraction of the cost and half the time of a new chemical entity uniquely positions drug delivery companies to pursue a specialty pharma business model.