BOSTON–“Emerging” therapeutic companies focused on developing treatments for depression and pain have starved for financing over the past decade while cancer drug developers have feasted on the largest share of investment capital, according to a trio of reports discussed here at the 2018 Biotechnology Innovation Organization (BIO) International Convention.

Last year alone, 113 emerging companies—which have a lead candidate in clinical phases, or on the market with less than $1 billion in sales—focusing on oncology captured $2.918 billion in venture capital (VC) funding, more than one third (37%) of the total $7.793 billion raised by 330 companies, according to Emerging Therapeutics Company Investment and Deal Trends

A mere $14 million in VC money was raised in 2017 by a single unidentified company, while pain therapy developers did a little better as nine companies raised a combined $171 million, the report stated.

Between 2008 and 2017, $13.138 billion in VC was invested in cancer treatment companies, compared with $1.398 billion in pain drug developers and a mere $326 million in developers of depression therapies.

A combined $36.736 billion in total VC, IPOs, and follow-on financing was invested in cancer drug developers, 28% of the total $129.704 billion. Next highest at 12% each were infectious diseases ($15.936 billion) and neurology ($15.412 billion). However, depression and other psychiatric drug development attracted just 1% at $1.528 billion over the last decade, while pain drug development drew only slightly more investment at $1.398 billion.

“We find that it is a widespread problem,” said David Thomas, BIO's managing director for industry research and a co-author of the report.

Thomas presented findings from that report and two related studies at “State of the Innovation Industry,” a presentation during BIO 2018, held at the Boston Convention and Exhibition Center.

Thomas and Chad Wessel, BIO's manager, industry research & policy analysis, also co-authored a pair of reports focused on development trends—one on depression drugs, the other on pain and addiction treatments–since the indications represent high-prevalence diseases.

All three reports are available at:

Roadblocks to Development

Thomas said development of depression and pain drugs has been hindered by lack of knowledge about the disease compared with rare diseases and especially cancer; the expense of the large-scale clinical trials needed for approvals, which he said can run into the hundreds of millions of dollars; and concerns that the cost of chronic disease drugs to patients could touch off the same resistance to reimbursement from payers that a class of anticholesterol drugs has encountered in recent years.

“Even if you get through 10 years and $1 billion plus, you get to the market, then people look at the PCSK9s [proprotein convertase subtilisin/kexin type 9] and they say, 'Well, it's a highly generic market, and payers aren't going to be there to meet us, so we're not going to get paid for the drug, and they're going to make it very difficult to reimburse,” Thomas said.

In a subsequent presentation, Sam Ulin, a principal at ClearView Healthcare Partners, a global strategy consulting firm serving the life sciences sector, said the challenges of developing chronic disease treatments outlined by Thomas “have really led to a relatively chilling effect on innovation, especially among small startup companies in that space.”

For example, he noted how development of drugs for pain and other central nervous system disorders faces the key challenge of crossing the blood–brain barrier: “Until that is solved, it's going to be a very difficult barrier to overcome.”

Cancer drug developers also raised the largest amounts of capital generated through U.S. initial public offerings or IPOs (eight companies raising $766 million, out of the total 25 companies raising $2.434 billion). Oncology companies also garnered the most in follow-on financing, with 38 companies raising $3.839 billion, out of $13.936 billion collected by 126 companies.

Cancer treatment developers also accounted for the largest shares of financing raised through:

  • R&D outlicensing, with 47 of 137 companies, racking up $2.256 billion of $4.381 billion.
  • Acquisitions valued at $10 million and above, with four companies (tied with metabolic disorders) raising $13.922 billion, 79% of the total $17.64 billion. That number was skewed by a single 11-figure deal, Gilead Science's $11.9 billion acquisition of Kite Pharma.

Oncology also accounted for the deepest pipeline, with a total 2679 clinical programs—of which 934 were being pursued by emerging companies alone, 932 by emerging companies and partners, and 813 by biopharma giants.

“There's a very high concentration of research programs relative to dollars spent,” Ulin said.” Oncology, one could argue, is overrepresented relative to dollars spent in the space.”

Healthy Oncology Sales

However, with product revenues jumping from $39 billion in 2015 to $52 billion last year, that healthy growth has kept drug developers interested in bringing cancer drugs to market. He added: “Oncology remains a key growth driver.

By contrast, Thomas and Wessel recorded only 33 ongoing clinical programs in major depressive disorder targeting new targets (nonmonoamine based)—of which only five have advanced into Phase III. A greater number of programs (44) were suspended between 2006 and 2017. Even more concerning, Thomas said, the number of clinical trials launched for depression treatments each year fell by more than 50% over the decade between 2006 (23 trials) to 2016 (nine trials).

Drugs for depression have an especially high failure rate, according to the authors, with 36 of 45 Phase II programs and 7 of 11 Phase III programs suspended during the period: “These high Phase II/III failure rates in depression were a major contributor to the low overall probability of success of 5.0% for drug programs moving from Phase I through FDA approval compared to 9.6% across all disease areas.”

Pain treatment developers were included in the disease area, with the next largest amounts in two types of financing: neurology, with a record 43 companies winning $850 million in VC, and 12 companies raising $384 million in R&D outlicensing revenue. The 43 VC winners included nine pain drug companies, as well as eight Alzheimer’s drug companies, and 26 companies working on indications ranging from epilepsy to various rare diseases.

However, neurology lagged behind other disease areas in IPOs (three companies raising $335 million), follow-on financing (11 companies garnering $913 million), and acquisitions (one company for $1.027 billion).

Thomas and Wessel also recorded 220 clinical-phase pain drug programs, with 125 of these testing novel chemical entities, 87% of which are for nonopioid receptors. Abuse of pain medications is a factor behind rising addiction to drugs and alcohol, which affects more than 23 million Americans, the authors noted.

According to their pain/addiction drug development report, only 15 active clinical-stage programs with novel compounds are in development for addiction treatment: 10 for substance abuse, two for alcohol, and three for smoking cessation.

The emerging therapeutic companies report used data from the Cortellis Competitive Intelligence database from Clarivate Analytics and Thomson Reuters, EvaluatePharma, Informa's Strategic Transactions, and BioCentury's BCIQ database. IPO data came from NASDAQ, S-1 filings, and news outlets, while clinical pipeline data came from Biomedtracker.

The pain/addiction and depression pipeline findings were included in reports published as part of BIO's State of Innovation in Highly Prevalent Chronic Diseases series. Additional reports in the series will focus on diabetes and obesity, and Alzheimer's and Parkinson's diseases, Thomas said.

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