Merck Invests $1B In A Cancer Pill
20 CommentsBy Ed Silverman // July 12th, 2007 // 12:38 pm
The drugmaker is expanding its move into oncology by striking a deal with Ariad Pharmaceuticals to jointly develop a small molecule inhibitor that acts like a big switch in cancer cells and goes by the eloquent name of AP23573 mTOR.
Here’s the deal: Ariad will receive an initial payment of $75 million, up to $452 million more in milestone payments based on the successful development in different cancer indications, and up to $200 million more based on sales thresholds. Ariad can also expect at least $200 million in estimated contributions by Merck to global development, and up to $200 million in repayable advances from Merck to cover its share of global-development costs, after Ariad has paid $150 million of those costs.
Blocking mTOR creates a starvation-like effect in cancer cells by interfering with cell growth, division and metabolism. The inhibitor has been designated both as a fast-track product and an orphan drug by the FDA and as an orphan drug by the European Medicines Agency for the treatment of soft-tissue and bone sarcomas.
As Forbes notes, Merck has been quietly building a cancer franchise since it bought gene-chip maker Rosetta InPharmatics several years ago for $600 million. Rosetta’s chief, oncologist Stephen Friend, now runs Merck’s cancer research effort, and the $240-a-day Zolinza, Merck’s first cancer pill, was approved last year to treat a rare skin cancer. As of February, Merck had disclosed eight cancer drugs in the early or middle stages of testing. Friend told the mag he likes that the Ariad drug works by a proven mechanism
John Mack
So this is what the pharma industry means when it says it costs $1 Billion to “develop” a new drug? Increasingly, Big Pharma is turning to “buying” rather than developing! No doubt, it will still use the R&D argument to defend high prices — after all, someone has to pay for Ariad profits from this deal!
sid
So Ariad isn’t a drug company? If you haven’t noticed the industry is undergoing a change, and many of these smaller, biotech companies have a better model for developing these new drugs. But the don’t have the resources or capabilities to develop and market them efficiently. I am kind of confused why this is a big deal to you? But if they actually cure cancer they can’t profit from treating it multiple times, so I doubt this will really make it to market. I think they bought it to kill it off. The oncologists are behind the move to rid the world of effective cures.
Reality
I’m with sid…what exactly is the big deal here? And how is it different from every other industry, where larger companies (e.g., Google) purchases products from other, smaller companies (e.g., YouTube). And, yes, A billion dollars is a billion dollars is a billion dollars, and that money will need to be offset somehow.
Melody
But if they actually cure cancer they can’t profit from treating it multiple times, so I doubt this will really make it to market. I think they bought it to kill it off. The oncologists are behind the move to rid the world of effective cures.
Sid–you evil conspiracy theorist! You may be onto something though. Where is the recurring profit if a cure is found? I believe the medical/pharma mantra is “keep ‘em sick enough to keep consuming and coming back, with promises that a cure is just over the horizon.” Check out “Too Profitable to Cure.” It’s not merely oncologists who need a bit of sunlight.
sid
WOW!!! I have to quit being sarcastic on the internet. I forgot there are people who actually believe crap like that. The entire medical industry, from doctors to researchers to nurses are doing their best to keep it a secret their only goal is to drain money from people. Damn it, I did it again - sorry, that was a joke.
There is no possibility that the ENTIRE industry is crooked. Now individuals in limited supply - yes, just like the rest of the world. Millions of people in medicine filled with evil to make millions of people suffer so they can make a few extra $$$ - wow, not likely. Believe it or not, the people actually researching and a majority of people practicing medicine are doing it for the good of humanity. The big check is nice, but most go into med to help people. Most researchers don’t make a ton of jack, so there is no chance they would bag research to make some corporation rich. Also, you guys realize that pharma is profitable, so INVEST in companies, instead of believing they are evil. Then everyone benefits, investors, patients, capitalism is great.
Chris Morrison
The results have been in for some time now: Big Pharma R&D isn’t particularly efficient or productive. Biotech in general may be a loss-making proposition, but it does seem they do a better job overall than Big Pharma in discovering and maybe even developing drugs (which is why Big Pharma has been restructuring its R&D around biotech-like models). But c’mon John, licensing is hardly a new phenomenon; many bigger companies now rely on external sources for the majority of their pipeline. That said Merck clearly isn’t investing $1 billion either: so far, on this drug, it’s only $75mm. sure they may pay $1 billion eventually–if the planets align and this mTOR inhibitor winds up getting on the market in a bunch of indications and becomes a blockbuster, at which point $1 billion would have been worth it.
John Mack
OK, see my blog post where I hope I explain myself somewhat better.
Yes, Ariad is a pharma company; NO, it’s not Big Pharma, which is the main force behind propaganda like “America’s innovative drug industry.” It’s BIG Pharma that claims to be innovative, but they are getting their best stuff these days by buying innovation from little biotechs, etc.
And then there’s that $1 Billon figure, which is always trotted out to defend the high cost charged by BIG pharma for drugs — “today’s drugs fund tomorrow’s innovation.” It would be fine if all of the $1 Billion Merck may spend on this drug actually goes to innovation, but looking at this deal, I see that perhaps only the $75 Mill and $452 Mill will go to development — the rest looks like gravy (ie, profit) for Ariad.
Chris Morrison
The deal that Merck struck for the Ariad drug reflects simple supply and demand: Big Pharma needs drugs, biotech has them. And these days, that need is acute (thanks to various factors including patent expirations, candidates dropping out in the late stages of development because they don’t work or arent safe, drugs pulled off the market, etcetc). So biotechs hold all the leverage, or much of it, and if Merck wouldn’t pay that much for it someone else would have probably come along and bought it.
So the deal terms really, in my mind, have little to do with the eventual price of the drug. Had Merck got the drug from Ariad for a song they’d still charge what the market will bear for the product should it eventually hit the market. Whether that is too much or not, whether the drug is great or mediocre or bad, whether it’s got a great safety profile … these are all different issues.
and don’t forget, not too long ago, when Big Pharma had the leverage, drug marketers were able to do just that. Biotechs didn’t make $75mm upfront plus plus plus. and they got 5% royalties instead of co-promotions and 50/50 deals, and they had to be happy with that. And when those drugs made it to market, they were still expensive.
John Mack
Chris, I think we see eye-to-eye here. Merck just should not claim to be the innovative partner as Big Pharma is wont to do. Pfizer did that with the cholesterol drug that tanked in trials — it actually purchased it from a Japanese university!
I agree that no matter what Merck spends, it will always charge the highest price it can get because the argument that drug prices reflect the need to recoup R&D expenditure is hogwash! It reflects the need to make profits — not that’s anything wrong with that from Merck’s shareholder perspective! Let’s just not make it sound like Big Pharma is charging high prices to break even.
sid
Wow, how cutting edge of a business. Make a profit. Someone call Harvard, there is a new concept some moron just discovered. If you can’t beat them, join ‘em. Buy stock, it isn’t that hard. It might even be more productive than having a blog. John, you don’t have any advertising on your blog do you? Or want people to read it? Or hope that it leads to some Michael Moore type job? Come on, this country was brought to prominence by capitalism. We figured out the current model was broken, so we are trying to fix it - lighten up and let the market forces work.
Melody
Sid–
Are you really trying to fix it? Or, as seems to be happening more often because of Pharma’s deep pockets, are you, in truth, trying to “FIX” it? Capitalism is fine, and so is the free market . . . but as seen with the marketing a couple of decades ago by Lilly and their rDNA insulin, the free market was FIXED. Monopolies were disguised, studies were flawed, and experts were self-proclaimed. Consequently, safe, effective products were removed from the market as “unpopular;” the truth is that these drugs were merely unpatentable and therefore could not quickly enough satisfy corporate (and shareholders) lust for unholy profits.
sid
Melody, I am not trying to fix anything, just stating the way things are. I read your posts on insulin before, so I have heard your argument. And everything you are saying could be 100% correct, but it isn’t Lilly’s fault they are good at marketing. Now if cow insulin was “unpatentable” then that means any generic firm could come in and make it correct? But if the other companies out there decided that the product was more expensive to produce, not marketable, less effective, etc. Then why would they do it? If a product is effective and can be produced and is in demand, the free market dictates that it will be produced.
It seems these facts were available to you, a consumer, but thousands of experts (endocrinologists) and tens of thousands of GP/FP physicians didn’t see it the same way you did. Maybe they learned something in medical school you didn’t learn as a consumer. There are enough antipharma docs out there that would write for some generic “unpatentable” med just to spite pharma - even if it isn’t in the best interest of any involved.
I am proclaiming myself an expert in this subject and declaring that you are anitpharma and antimedicine and that your opinion is wrong.
If everyone is sick of “pharma’s deep pockets”, donate money to NIH. If pharma doesn’t do research, then no one does research. Do you really want your tax dollars to fund medicine? Will they do as well on the war on cancer as we are doing on the war on terror? Honestly, I trust the drug companies well before I trust the gov’t. Yes they are businesses and they SELL things, everyone knows that. Is there a doc out there that believes anything that a drug company tells them? Ask any of them, they understand the game - give them a little credit, they did graduate with a doctorate degree.
If you really want to talk insulin, what about all the great new analogs available today - faster working, all kinds of release pharmacokinetics. It seems like if the older insulins really were better, someone would still produce them and put out the data to prove it. It is marketing, but at the end of the day, the best product with the best data wins. Sometimes the ads make it closer than it should be, but really in almost all cases, the best product wins.
Chris Morrison
John i’m with sid on this one–who said pharma was charging high prices to break even?
as for being innovative … that’s a tough one. Is a company innovative if they invest a ton of cash on developing a drug with a novel mechanism of action that it considers worthwhile? (even if they bought it from a japanese university.) the majority of R&D expenses for a drug that makes it to market are in clinical development btw, which along with commercial is what pharma does tend to do better than biotech (because it costs so much and requires a lot of infrastructure etc), at least late stage clinical development.
anyway, these are businesses, and businesses need incentives to invest to create returns for shareholders. this in and of itself isn’t evil. I almost can see your point if this was another me-too drug for a non-life threatening condition, or a new formulation of an old drug, or a drug that should be generic but they’re using an isomer to extend patent life, etc. but it isn’t.
There is absolutely an interesting discussion to be had about drug pricing, which in many cases is way out of whack, sure. But my point is that blaming it on companies like Ariad for turning a profit on its alliance (which it probably hasn’t even done yet) is a non sequitur.
Pharma News 7_13 « Impactiviti blog
[...] 13th, 2007 by impactiviti Merck investing even more in its cancer portfolio - a growing trend among the top pharma [...]
Melody
what about all the great new analogs available today - faster working, all kinds of release pharmacokinetics
You mean the ones that have no long-term safety effects, the ones that have shown carcinogenic effects in rats, the ones that increase incidence of hypoglycemia unawareness? These great new analogs that MANDATE frequent (8-12 times daily) monitoring, and increase expense for all? [When my insurer is willing to reimburse for strip purchases each month more than I pay in premiums, someone else is contributing to my maintenance costs . . . perhaps your increasing premiums are indicative of this?]
Maybe they learned something in medical school you didn’t learn as a consumer.
Maybe they did . . . but few of them are observing what is happening within MY biologic system 24/7/365.
It seems like if the older insulins really were better, someone would still produce them and put out the data to prove it.
They ARE still produced . . . and citizens in other countries have access to them. We, on the other hand, must jump through regulatory hoops to import for personal need, with the threat that our ‘drug of choice’ may invoke a National Security Letter, confiscation, and possible prosecution for possessing an “illegal” drug! As for why there’s no research–the profits just plain aren’t high enough for domestic producers; and the regulatory requirements (new drug application) are odious for foreign manufacturers who might choose to do business here.
But thanks for the conversation.
sid
I guess you made my point. The system is not set up for you to have your own personal physician and your own personal drug manufacturers. If a particular product worked best for you, it is hard to justify the millions of dollars for a handful of people. I don’t hear a huge uproar over the loss of animal insulins.
If they are produced in other countries, my guess is the FDA made it too tough to produce in the US. I work for one of the evil drug companies. We had a drug approved and then later on, the FDA came back and required $200 million in new studies for a drug we were basically giving away to public access hospitals. So, we were faced with a tough decision, invest $200 MM for a drug that cost us about $10MM/year. Guess what, that drug was pulled from production. If we werer a bigger player, say Merck, we would have kept it. But when you are tiny and it would have jeopardized your business, you have to make hard decisions. Again, I have no idea what happened with insulin. But the point is, there is a reason that these aren’t available.
If these insulins were the “gold standard” and someone went thru the whole FDA process to get it approved, and to justify the expense they had to charge $100 per vial, then I would hear the same complaints about greedy drug companies ripping off consumers when a “better, synthetic” version is available for 1/3 the price from Lilly.
So in one conversation people like you complain the FDA doesn’t do enough to regulate drugs, and the next, you compain the FDA makes it too tough for drug companies to produce something here.
If there really was a market, the insulin companies would pull off a deal like the Merck/Ariad deal. License out technology to a company with expertise to get a drug approved and in the hands of consumers in the US.
I don’t believe the profit arguement - there are a lot of very tiny companies making some horrible “me-too” drugs in this country. There is a reason no one wants to produce these meds here, my guess is the FDA has in stringent requirements to protect patients and with better alternatives out there, there is no reason.
Also, have you taken a look at the new (OK, not really brand new anymore) trials indicating that tighter control is the key to extending lives and improving health. More frequent testing seems like the answer all the time anyway.
So let me get the list correct - drug companies, doctors, and now insurance companies are evil? Who does a guy trust
Melody
my guess is the FDA has in stringent requirements to protect patients and with better alternatives out there, there is no reason.
Sid—for someone who advocates for science, you are quick to rely on “my guess†to explain away bothersome details. But then, your admitted ties to pharma definitely color your opinions and reasoning.
people like you complain
To someone “like you†. . . that is all we are: consumers first, complainers second. (Emphasis first and foremost on consumerism—to hell with health issues, right?)
have you taken a look at the new (OK, not really brand new anymore) trials indicating that tighter control is the key to extending lives and improving health.
I would ask, in all seriousness, have YOU taken at look at the “new†trials? Tight control is WONDERFUL—unfortunately, in ongoing trials, only 5% of the trial population could maintain “tight control†for a significant amount of time (2 years). Additionally, those who were in the “success†(tight control) group had added measures of support (nutrition counseling, weekly maintenance counseling, support group therapy, etc.) The “control†group had quarterly blood work—that’s all. [I would expect long-term follow-ups would show that—as with many support-group treatments–when the support/encouragement/aid withers, so does the compliance and success.
As with many chronic diseases/conditions (smoking, weight loss, etc.), there are numerous studies promoting IDEAL treatments. Unfortunately, most of us do not live in an IDEAL world.
Bottom line: I’m not anti-pharmaceutical or anti-medical—I’m anti-dishonest-pharmaceutical (that skews information and tells us “less†is “moreâ€); and I’m anti-medical only insofar as countless practitioners ARE more concerned for their own bottom line than for patient welfare. It is easier and more profitable for them to spew a pharma propagandist viewpoint than to listen to patients, do their own research, and think!
sid
There isn’t a big amount of “science” in trying to figure out why a seldom used insulin is not produced anymore. That is actually a business decision, not really a science decision. Since no one really cared that the animal insulins went away, my guess is all I have to go on. Not a whole lot of blogs devoted to the missing beef insuling problem.
I certainly understand that people don’t care for themselves as they should. - you really can’t blame the industry for that can you. If say a group of pharmacist came out and gave the support and counseling you are talking about - many would then say they had a hidden agenda and they only did the studies to promote the services of pharmacists. I guess I am not sure what you want. We can give a road map on how to get the best results, we can’t hold everyone’s hand and make sure they follow it.
and doctors care about $$$, yes as does the rest of the world. You think a community doctor is going to add 20 hours of bench research on top of their busy practices in order to do their own research and “think”. I guess I am not sure what you are advocating physicians need to do. Docs hate the drug industry as much as you do, and they aren’t “spewing pharma propagandist viewpoint” because it is easier. They are doing the best job they can to efficiently care for patients. Community docs are not set up to do research, and they are so busy that actual patient care would suffer if they did research.
Is this system the “ideal” - no. But it is the best health care in the world. Yes it is expensive, but is there anything better to spend extra money on. I know if I can buy good health that is money well spent.
Melody
Since no one really cared that the animal insulins went away
But they DID care. The market was quite small for synthetic insulin; neither doctors nor patients stampeded to embrace the “latest and greatest” Eli Lilly offering. But then doctors were told: animal insulins WILL BE REMOVED from the market. What was a doctor to do? begin switching patients now, or wait till no alternatives remained. Lilly followed through on their threats (business decisions). As you state, doctors are busy people. They did not have time back then to advocate for the status quo . . . and they don’t have time now to demand truthful, meaningful comparative studies. Do you think the insulin cartel–selling their expensive, patented products–would endorse, or even allow independent research that might expose liability on a scale equal to Zyprexa or Avandia? I think not. So doctors and patients maintain life as best they can with the products that remain. This wasn’t a case of fair market forces, or free market forces–it was manipulated market forces.
But it is the best health care in the world.
What metric did you use for this “unbiased” determination?
sid
The fact that no one cares is the metric I used. Now pharma isn’t stopping people from doing the research you are advocating. Are they supporting it? Probably not, but how can they stop independent research. Kind of by definition they can’t stop it, since they aren’t in control of it.
If anyone really cared, there would be a market for it and someone would make it available. That is the thing about pharma, if you can make money off of it, you will produce it. If the old insulin was cheap and non-patented, any generic manufacturer could produce it. I don’t know if I would label insulin as an expensive product. People would die without it correct? And what does it cost to have lifesaving medication - $100 per month? My life is worth that. Since allergy medicine for hayfever runs that amount, life sustaining medication seems to be worth it.
Also doesn’t Novo Nordisk produce insulin? And Aventis? Or are they part of the cartel. If there was a market and need for the old insulins - they would be available. There had to be a reason the old insulins were removed. Either the newer insulins are cheaper, better, or safer. No one removes an approved med to introduce an inferior version. If the old was great, someone would have stepped in to produce it. Why didn’t Novo produce it and switch everyone of those patients to their product?
Lilly does not control every researcher and generic manufacturer world wide.
And docs always stick with the status quo unless there is a good reason to change. Didn’t have time to demand research, come on. Who can demand research into anything, the FDA is about it.