Gilead shows big pharma how its done

gilead ceo

I was rather surprised to see parking lots belonging to Gilead in Martinsreid (the Munich biotech area), I never realised they had an office here. Gilead is probably one of the most successful pharmas today, experiencing a 300% growth in stock prices ever since it went on the market, multiple drug approvals and billions of dollars on sales of their rather expensive medicines. At a time when most pharmas are struggling to even produce a single drug in a 10 year period, Gilead has managed to gain approvals for 9 drugs in 11 years. How do they do it?

Gilead was founded in 1987 by Dr Michael Riordan who had contracted dengue fever in the Philippines and was so heavily traumatized by the experienced that he decided to start a company producing anti-virals. He hired John C Martin as his chief scientist, now the current CEO (guy in picture), who had a PhD in organic chemistry. A notable drug first discovered by Gilead was Tamiflu. Singaporeans may remember stocking up on Tamiflu during the H1N1 influenza pandemic in 2009. Gilead licensed their patents on the synthesis of Tamiflu to Roche, gaining millions in royalties as governments filled warehouses with Tamiflu in the event of seasonal pandemics. Gilead’s first completely owned blockbuster however, was HIV medication Viread which it obtained from acquiring Triangle Pharmaceuticals from Durham, North Carolina. They then combined Viread with their own drug creating Truvada, a once-a-day pill to treat HIV that was approved in 2004. Surprisingly they did not stop there, Truvada was found to be even more effective when combined with a drug from their competitor Bristol-Myers Squibb, and together they formulated Atripla that was approved only two years later.

Why stop at one blockbuster when you can have two? In 2011, Gilead acquired Pharmasset, a small New-Jersey-based biotech. Their decision was based on Pharmasset’s  presented findings at a medical conference where their lead candidate sofusbuvir, when given to hepatitis C patients for 12 weeks, resulted in complete cures nearly 100% of the time. The deal was done for $11 billion, a steep price which had investors worried. But fears were allayed when FDA assigned Gilead’s new drug for chronic hepatitis C, Sovaldi, Breakthrough Therapy status, accelerating approval  within 2 years. Sovaldi is truly a “breakthrough” drug as existing treatments for hep C involved pegylated interferon injections which cause rather severe side effects such as pain, nausea, and more intolerably, neuropsychiatric side effects like cognitive and behavioral changes. About 10-15% of hep C patients discontinue interferon treatment due to these side effects. Sovaldi not only has a better tolerability profile and defined treatment time (12 weeks with a 99% cure rate), but also worked for patients unresponsive to inteferon treatment. However, Sovaldi could only be used without combined interferon treatment in patients with genotype 2 and 3 of Hep C, making majority of patients (genotype 1) still subject to interferon treatment. This is now changed with Gilead’s most recent FDA approval, Harvoni, for treatment of genotype 1 hep C. Harvoni can be taken alone (without interferon or ribavirin, another antiviral drug commonly used in combination with Sovaldi) and provided high cure rates in as little as 8 weeks.

When asked what their strategy was, CEO John Martin said they kept internal infrastructure to a minimum with a much smaller sales force compared to big pharma. They also hired experts in the field with more than 10 years of experience – meaning, they know their science! Lastly, they collaborate widely. Their collaborators range from reliable manufacturers with specialized expertise, national health organizations and regulatory approval boards, and as we have seen with Atripla and Tamiflu, even other pharma companies, with the ultimate aim of creating better medicines and delivering them to the clinic quickly.

Gilead has recently come under fire for the expensive price tags on their drugs. Sovaldi costs $1000 per pill, making the 12-week treatment come up to $84,000. Truvada, the anti-HIV pill, costs $1500 per month. However, the same medications are often sold at significantly marked down prices in developing nations such as India and Egypt, where Sovaldi is sold at $300 for a bottle of pills. They even have programs demonstrating some social awareness, where they licensed their technology to generic manufacturers in India, generating profit for the local economy. Even in the US, people without the means to pay for the treatments have called the company and have gotten Sovaldi free of charge. Isn’t it all positively inspiring! And that’s how its done.

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The importance of clustering

The GEN website recently published a review of the top Biopharma clusters in the US, Europe and Asia which was based on R&D spending, money made from IPOs and the number of patents, jobs, and companies in the biopharma sector. China took top spot in Asia with close to $340 billion in R&D spending and 7500 companies generating 250, 000 jobs in 2013. It also made the most money through IPOs ($2.7 billion by 18 companies) though it did lose out to Japan in terms of patents ( 30, 627 vs 154, 918 from Japan). Japan came second to China netting $160 billion in R&D spending with 552 companies. India ranked third, with its fair share of generic manufacturers and some successful biotechs. This was followed by South Korea, Taiwan and Australia. Interestingly, Singapore came in at 8th position, even behind Malaysia! This may be attributed to its small size, fewer companies and fewer jobs. R&D spending of $8 billion however far outstrips Malaysia that invested only $1.192 billion and the presence of many multinational pharmaceutical corporations have made Singapore a key hub in Asia.

In Europe Germany came up tops, especially pleased to see Bavaria was one of the top clusters, in terms of number of biotechs and patents. UK came in a close second with its Cambridge-Oxford-London bioclusters, spending more on research compared to Germany. France has done well to come in third, followed by The Netherlands, Switzerland, Italy, Belgium, Denmark, Sweden and Ireland. In the US, as expected the Boston-Cambridge area sees the greatest biopharma activity with highest VC spending ($1.8 billion in 88 deals). San Francisco came a close second, followed by New York and San Diego.

The importance of clusters was first coined by economist Michael Porter who indicated that despite the ease in doing business on a global scale, clustering businesses in a physical location was still important as it introduced a variety of factors that increased competitiveness and productivity. In essence, having clusters enabled better access to skilled employees, suppliers and insider information. After the workshop, I see this to be true for Munich’s biotech sector. People having set up many companies before are willing to share their experience with new business owners, at times even investing in new start-ups themselves. This creates more businesses and drives innovation. Having face-to-face contact is also seminal for creating business relationships. And with appropriate physical and social infrastructure often established with governmental aid, a cluster provides an effective and conducive environment for negotiating business deals and increasing output. Competition is also a key factor, similar companies in the same vicinity are hard-pressed to keep up with their competitors to achieve their share of the market. In this way, they are forced to stay up-to-date with the latest technology and in fact are constantly searching for innovations to boost their advantage, creating the best possible service/product as a result.

A key critique of Porter’s model however is that he never addressed the importance of multinational factors. With that in mind, he had in his book “The Competitive Advantage of Nations” been rather skeptical about Singapore’s progress, citing advancement would be limited by its poor resources. He had focussed only on what Singapore had at the time, a low-cost, semi-skilled workforce and efficient transportation infrastructure. Over the years however, Singapore has obtained vast success mostly stemming from foreign investment as well as Singapore’s investments abroad.

The Singapore biopharma cluster is mostly focussed around the Biopolis/Fusionopolis/Science Park area which is located somewhat central west of the island. Despite large investments by foreign MNCs, there is still limited biotech activity though this may be growing with companies like ClearBridge Biomedics that seem to have a pretty solid base and a cool website to boot. There seems to be some governmental aid judging by initiatives such as this one that provides physical facilities such as hot-desk space, free internet and unlimited coffee. However I suppose it will be a way to go before we achieve the same intensity of clustering seen in China, Germany and Boston. Alot of it I think comes simply from scale and amount of human resource and technology. But I suppose for a tiny island we ain’t doing too bad!

How to set up a biotech

I have been in the German alps over the last few days attending a workshop on starting up a biotech. Funded by the Marie Curie foundation and passionately and superbly organized by my bosses, S and F, it has been an enlightening few days and here I summarize what I have learnt.

1. The idea has to bring value and have a substantial market. I suppose this is the thing that most people struggle with i.e. finding a great idea that people would buy into. In the biotech industry as well, the idea has to be grounded by many years of research and usually start out in the laboratories of universities that eventually spin-off into a biotech.

2. As with everything, you need money. This is where investors come in. In Munich as well as Singapore I imagine, good governmental support systems are usually in place in the form of grants that one can apply for. Investors also comprise of business angels (i.e. individuals with lots of private money), venture capitalists, and sometimes banks though rarely. Investors come with their own interests as well, and it is important to match this up with your own expectations. Committing to an investor just to get money may mean giving up something you are not ready to in future, which may cause great distress, and it may prove better to wait for a better-matched investor. To get the support of these investors, this is where your business pitch comes in.

3. The perfect pitch. One has to be ready with the perfect pitch – both short and long forms – to be given at any time to a prospective investor. The relationship with the investor is largely based on competence and trust. So one has to show one has the team, the skills and of course it does not hurt to create a great first impression by dressing well (I personally would not recommend wearing a tie if you are representing the team as the scientist though! Never trust a tie-wearing scientist.). To create trust, one must convince investors you have the right team for the job, balance out your own weaknesses by teaming up with people that can address them. The pitch has to be compelling and inspiring and should also cater to investor interests i.e. exit strategies (i.e. how do the investors get their money back?), timelines and grounded market valuations.

4. Intellectual property. Patents are important. And they are extremely difficult to word so a patent attorney is essential. Patents protect your idea and investors would not invest in something that has not been patented or is extremely hard to copy, so make sure you have one! The timing of patent application is also essential as it can take as long as 10 years to be approved.. giving you only 10 further years for your patent to be in effect. It also struck me how incredibly profitable a cleverly worded patent can be. The key is to make it broad to cover many possibly derived ideas but also substantiated with enough evidence of its novelty to enable approval. An example was how a patent on modifying antibody sequences by a company is now being licensed by many pharma companies that use this technology to produce their antibody-based therapeutics. This can produce substantial passive income for years!

5. The right people. 75% of all biotechs fail and many times this has been attributed to poor management. Having a team as opposed to starting out by yourself usually increases your chance of success but finding the right people with expertise complementary to your own and whom you like to work with may be challenging. As with all relationships, these working relationships require a lot of trust and should endure the test of time. Many a time teams are started among strangers, i.e. you do not have to start a business with your best friend/partner, sometimes it is advisable not to! A leader may be required to drive the process but if everyone in the team is willing to share responsibility, that helps.

6. Focus on the customer. Will customers buy your product/technology/service? This is what drives business and numerous books have been written on how to market/sell/reach out to customers. Contrary to belief, the main customer in biotech may not necessarily be patients, but is usually big pharma, since biotechs are ultimately acquired by big pharma in order to take their techonologies to the patient. As a biotech great investment in business development is required to publicize your expertise and great potential so that big pharma will take notice. A lot of the time, the attention of big pharma rides on ongoing trends – what is hot in the research field. Current hot trends involve immuno-oncology, gene editing/therapy, RNAi, and antibiotics to name a few. So often, your idea may be the bomb but the world has to be ready for it, very similar to the case of journal publications.

The landscape of employment is changing and especially as a scientist, it is no longer safe working in big pharma with their constant mergers and acquisitions often resulting in large lay-offs. Staying in academia is also becoming challenging as limited professorships make it extremely competitive amongst post-docs and PhD students. Currently industrial positions are highly sought after, with more than 70 applicants often responding to a single advertisement. So perhaps starting one’s own business provides a solution. No doubt one learns a lot from the process, with huge potential benefit if the business is a success. But of course, it takes courage… and oh yes, a good idea.

GSK establishes global headquarters for Asia in Singapore

GSK has announced it is building an eight-storey, 15 000 square metre facility at Rochester Park One North in Singapore where it will house its first Asia headquarters. The headquarters will act as a focal support point for GSK businesses in Asia. This follows several similar moves by other global companies. Takeda relocated its main offices from Japan to Singapore early in the year at the Biopolis site where it will focus on emerging markets, its vaccine business and its core research and development operations. Automotive company, General Motors, also opened a regional office in Singapore last year.

GSK suffered a significant hit last year from business in China where it was fined 479 million USD for bribery charges and terminated 110 employees for misconduct. In that respect, Singapore, with an established reputation of strict laws, a stable governing body, the common use of English as a first language, and an increasingly diverse workforce, provides a more attractive environment for global companies to establish their headquarters. Of course, the Economic Development Board of Singapore does its fair share by providing significant tax breaks and monetary incentives.

The sales and marketing units of GSK Singapore currently located in Gateway will be shifted to the Rochester offices once completed. GSK also has a large manufacturing facility in the west end of Singapore. A small drug discovery unit focussing on neurodegenerative diseases established at Biopolis several years ago was recently announced to be closing together with other research sites in Research Triangle Park, North Carolina. CEO Andrew Witty, spent several years himself working in Singapore, expressed that “GSK and Singapore’s histories are entwined”.

All this may spell an even greater foreign influx into Singapore, an issue which locals have become increasingly vocal about and have even impacted general election results in recent years. The small island just 716 square metres in size has been experiencing a population surge and now houses almost 5.4 million people. It looks like its on a similar path as big metropolitan cities like New York and Hong Kong (1100-1200 square metres) which have populations of 8.4 million and 7.2 million respectively.

One wonders if the citizens are ready for this big shift in lifestyle though. Living in Singapore (which I have done for most of my life), is very much like living in a bubble, albeit a hot and humid one. Spoiled by convenience, food is available 24/7 and the island is well-connected by trains and buses (though citizens like to complain whenever there is a delay of greater than 5 min). There is an extremely low crime rate, zero natural disasters, English is spoken by many often in the form of “Singlish“, and shops close as late as 9.30pm, some not at all (Mustafa centre for the win!). Yet the news/media is still regulated by the government, one has to apply for a permit to have a gathering/protest outside of a designated “Speaker’s Corner” which even then is highly regulated (no sound amplifying devices allowed, and intention to speak still requiring registration at the local police post). The increasing cost of living is also putting pressure on citizens, and without a corresponding upgrade of skills, alot more of the high-earning jobs are going to “foreign talents”, affectionately known as FTs by the locals. Despite the strict regulations on freedom of speech, citizens have made their opinions clear thorough internet forums and at election rallies, and the government has acted to cut down on the foreign influx. But it is obvious the government has big ambitious plans for Singapore, and the citizens will just have to do their best to keep up!

Our microbiome

Came across a nice TED talk about the microbiome of the human body by Professor Rob Knight of UCSD. It is fascinating how the human body serves as a breeding ground for trillions of bacteria with a genomic diversity ten thousand fold greater than the human genome.

If you have not heard about fecal transplants by now, then brace yourself for this. Apparently there are bacteria that make you obese. Transplanting bacteria from obese people into mice made them obese too. How crazy is that? Many may view bacteria in a negative light but having worked with bacteria, they play such a key role in scientific research. Genetic engineering is heavily dependent on bacteria, mainly because of their ability to take up DNA and multiply exponentially. This allows the generation of copious amounts of DNA, as well as proteins, and its simplicity allows us to explore the functions of genes. Working with bacteria comes with its pitfalls too, mainly involving nasty smells and putrid gasses, cloudy media and cell contamination. A little bacteria in a moist nutrient-rich space and they spread like wildfire. I suppose this may happen on human skin as well? 😐 It is after all a leading cause of human sickness and infections. Little wonder that big pharma is now increasingly investing in antibiotics as seen from Merck’s takeover of antibiotic-focused developer Cubist, and its subsequent laying off of 120 staff.

Now that bacteria can do more than make us sick though, a whole new approach may be needed apart from trying to kill them.

Takeda’s new CEO

Japanese giant pharma Takeda recently announced its first non-Japanese CEO, Frenchman Christophe Weber, to take the helm from April 1st. Yasuchika Hasegawa, the current Takeda CEO, made his announcement amidst much dissent from a group of more than 100 shareholders and former employees, defending his decision as imperative in keeping up with global competition.

The Japanese work and management culture is seen by many as extremely hierachical and impenetrable by foreigners. The main cultural differences that make it difficult for foreigners in Japan applies as well to other asian cultures such as Chinese where many business deals are based on relationships. The state of business deals are often difficult to perceive due to the Japanese innate politeness and unwillingness to say no. One can often spend months courting a Japanese client, the latter of which has no intention at all of accepting the deal and is only patiently waiting for the foreigner to lose interest. Japanese business relationships once established however are extremely loyal and productive to both sides. But often the time taken to achieve this proves too frustrating for many foreigners to bear. Japanese need to be 100% sure they can trust you before entering any kind of business deal. And because of their collective culture, this establishment of trust has to be agreed on by a board of members as opposed to a single person. Something I am sure Mr Weber will be aware of.

Mr Weber did however spend a few years in Singapore heading the GSK Vaccines unit, so he is not a stranger to doing business in Asia. There have been many a story of non-Japanese CEO disasters. Olympus being the stand-out case where British CEO Michael Woodford blew the whistle on several Japanese executives on accounting irregularities. He’s probably never getting a job in Japan again for sure. In 2013, American Craig Naylor quit as CEO from Nippon Sheet Glass only a short while after his predecessor Stuart Chambers left, the former citing differences with the board while the latter deciding he is not Japanese, putting family as no.1 instead of work. Yet French-Lebanese CEO of Nissan and Renault, Carlos Ghosn, has done well for the business. I attribute this to his Lebanese side, which share some similarities with Asia in building business relationships.

The spirit of entrepreneurism is also often looked at with disdain in Japan and societal standing is very much based upon the reputation of the large corporation you work for. All this is now changing as prime minister Shinzo Abe rolled out certain reforms named “Abenomics” over the years to loosen bank lending to small businesses and encourage foreign investment with the use of tax breaks and incentives. The Japanese seem to come up with amazing and crazy ideas (recall banana-shaped tupperware and selfie stick) though so it was disappointing to see that only 7.6% of the population felt they have an opportunity to start a business in Japan with 12.8% feeling they had the capabilities to do so, from the Global Entrepreneurship Monitor 2013. This is in stark contrast to other Asian countries such as Indonesia for example, where 46.6% perceived opportunities and an optimistic 62% felt they had the capabilities. Singapore by the way is not far off from Japan, 22.2% in perceived opportunities and 24.7% in perceived capabilities.

One thing’s for sure, with increasing globalization, one needs to be adaptable to different cultures and business customs in order to progress and succeed. Both as a CEO, and as a country.

China lifts price controls on pharmaceuticals

Chinese premiere Li Keqiang announced on thursday a lifting of price controls on pharmaceuticals though no specific time-line was set as to when this might happen. On one hand the decision undermines China’s initial policy of making medicines accessible to all consumers from cities to countrysides yet on the other it is seen as necessary as pharma companies would only fight to offer better drugs when they are able to charge steep premiums for it.

This decision has been brewing for some time now. In April last year, China removed price caps for certain drugs, including Tapazole, used in treatment for hyperthyroidism, after receiving harsh criticism that its price controls were resulting in shortages of the drug. Many other drugs face similar disappearances from shelves as pharmaceutical companies deem it not economically viable to produce them and sell them under these price restraints. More worryingly, as seems to often happen in China, reports on local manufacturers using cost-cutting materials such as leather scraps in the making of gelatin capsules, have led to an increase in carcinogenic material in pills.

The Chinese government however is expected to still enforce controls in ensuring drug spending does not get out of hand. A vast majority of drugs are sold through hospitals in China where suppliers are chosen through provincial bidding systems geared to keeping costs low. The management of these bidding processes however have been criticized for having variable evaluation criteria from state to state, and pharma companies have been known to try to “influence” the physicians or experts on the bid evaluation board. It also takes up to 18 months from submission to hospital listing which may act as a deterrent for many pharmaceutical companies. Efforts are now being made to streamline this process.

China still holds an enormous share of the world market though and spending on pharmaceuticals range in the 600 billion dollar range and will likely increase as the region develops.