By Turna Ray
Pharma may be increasingly investing in personalized medicine, but so far such molecularly-targeted treatments comprise a small slice of the industry's marketed products and revenues.
Several drug developers have projected that in the next few years treatments delivered with a targeted biomarker strategy will comprise half or more of their newly launched products. However, in a report last year, consulting firm Diaceutics surveyed ten large pharmas and concluded that very few of them were prepared to successfully launch personalized medicine products in the next decade. This, Diaceutics concluded, was due to a disconnect between the pace of biomarker-driven research pursued by pharma R&D divisions and the readiness of commercial divisions to change the operating and business models necessary to facilitate commercialization of personalized treatments (PGx Reporter 6/15/2011).
Launched in late 2005, privately held Diaceutics is unique in that it is a consulting firm solely focused on advising the life sciences industry on personalized medicine strategies. "When we launched, we were wondering whether personalized medicine was moving toward some sort of tipping point. We were wondering is the market really going to be 50/50 or a predominantly personalized medicine model," Diaceutics CEO Peter Keeling told PGx Reporter.
"Our view in the last 12 to 24 months is that that is no longer in doubt. Our own analysis suggests that we're probably looking at a tipping point in the personalized medicine market by 2020, where ... a combination of new drug launches with companion diagnostics, new regulations, new payor approaches and strategies will converge … and really drive this market forward," Keeling said. "So, [as a consulting company,] we're very happy focusing on personalized medicine."
A big pharma executive recently estimated that the industry invests $100 billion in R&D annually in the US to launch between 20 and 30 products, resulting in a $.70 return for every R&D dollar invested. Diaceutics estimates that when it's done well drug makers can hope to see between $1.40 and $2.60 return for every R&D dollar they invest in bringing to market a personalized medicine product.
Diaceutics has at its helm players who have significant experience in both the pharma and diagnostics industries, and therefore have insider knowledge of the cultural barriers that challenge personalized medicine collaborations between drug and test makers.
For example, Tiffany Olson, chair of Diaceutics's board, was recently VP and global head of diagnostics for Eli Lilly. Before that, Olson was president and CEO of Roche Diagnostics. Keeling, before heading up Diaceutics, spent 14 years at GlaxoSmithKline and several years running a diagnostics company called Diagnology.
Beyond consulting companies about personalized medicine, Diaceutics hopes to also provide industry-wide solutions that ease the pathway for such products to be developed and commercialized. The company, in this regard, has identified four key barriers to the field: the lack of integrated processes within pharma for advancing personalized treatments through the pipeline; underutilization of diagnostic tests due to the lack of "joined up thinking" between drug and diagnostics firms; failure to harness consumer support behind personalized medicine products; and poor pharma engagement with laboratories to deliver tests that can improve patient outcomes and ease the pathway for their drugs.
In an effort to tackle this last barrier, in 2011, Diaceutics launched Labceutics, a laboratory network service for the European market. Labceutics aims to help pharma and diagnostics companies gain access to Europe's vast but fragmented lab market and figure out how to use this untapped network to deliver tests facilitating personalized medicine to physicians and patients.
Ultimately, Diaceutics aims to dissipate the industry-wide "nervousness" within pharma "that personalized medicine means small markets or small patient groups," Keeling reflected. "Really, you have to look at the financial architecture and the diagnostics architecture in a very different way in order to get a better return on investment."
Industry demand for a strictly personalized medicine-focused consulting company can, in many ways, represent a barometer of activity and growth for the field at large. According to Keeling, Diaceutics has consulted on 25 personalized medicine projects with 10 pharma companies and seven of these products have been marketed. Although mainly focused on drug developers, the company is also starting to take on some diagnostic clients that are getting savvier in terms of commercializing their products.
In a discussion with PGx Reporter, Keeling provided an inside look into how the dialogue between pharma and diagnostics firms is evolving when it comes to developing and commercializing personalized treatments.
Below is an edited transcript of the interview.
Please describe the types of drug and test developers you provide strategic advice to. What percentage of the life sciences industry do you consult with? What is the breakdown between pharma clients and diagnostic clients?
This is evolving very quickly for us. Historically, we've focused on the pharmaceutical industry, partly because we genuinely see them as a real actor of change in personalized medicine. There are, of course, other very important stakeholders. But the real industrial energy and investment engine [behind personalized medicine] comes from pharma. So, we focused on them.
A couple of years back, we actually looked at trying to help diagnostic companies because we could see they were struggling to get inside pharma ... The very few diagnostic companies we spoke to back then, companies like Qiagen, either weren't used to paying for our type of consulting help, or they were themselves not convinced [about the kinds investment and work needed to get their tests to market]. And it didn't go anywhere, and so we continued to focus on pharma.
Within the last 12 months, we were contacted by quite a number of diagnostic companies that have sat up with their venture partners and funding partners and said, 'You know, it's very important that we have a higher profile, and we have a much more efficient way of talking to pharma about our diagnostics, because we want to work very tightly … or alongside them.' We have started to work with some leading diagnostic companies recently who we believe have the deep pockets to invest not just in consulting advice, but also on the commercial spend required to get diagnostics on to the market fast enough for it to be important to pharma.
This change is kind of representative of the fact that the diagnostic industry is no longer going to sit and behave as pharma's supplier. One of the irritations that we have had is that pharma has often looked at diagnostic companies as just another supplier, when in fact they are a very important partner. And, to a certain extent, diagnostic companies have behaved as a supplier. They've turned up and said, 'Here is my technology, and what can you do for me? Can I sell it to you, so you can do something with it?'
There needs to be greater maturity on both sides. For the diagnostic company, that means stepping up and saying, 'I have a very important product. It can drive revenue for you, but it can also be important clinically. Let us work together and get this diagnostic into the market faster.'
In 2006, the number of Rx/Dx deals was around 150, with the vast majority of these being focused on biomarker research collaborations. Around one-fourth of these deals were focused on diagnostics development and commercialization. So, then it was a minority of the time that the diagnostic developer was being allowed to go the whole way, but three-quarters of the time they were still being treated as the supplier, but not as an equal at the table. That mix will change.
Since you launched the company, how have things changed in terms of the types of advice drug makers are seeking with regard to personalized medicine? How about the types of advice that diagnostic developers are seeking?
If I were to put it into broad buckets, the first couple of years of our lives [at Diaceutics were] very much focused on describing how diagnostics work, where they work and where they don't work, [and] how they interfere and integrate with treatment pathways. We would look at the regulatory and reimbursement hurdles. We would very much be giving [pharma] foundation knowledge.
In the last couple of years that very much has shifted. Some companies still want the foundation knowledge, but others have shifted to an implementation [mode], asking, 'Who do we partner with? When do we partner? How much do we pay those partners to incentivize them to work with us?' If you look at reimbursement, depending on which market you look at it's very different. There is no joined-up thinking. So, our clients are starting to look at how they can, for individual projects, make sure that the access and reimbursement side of the diagnostics are in place.
We want to move that along even further, because there are so many infrastructure gaps in personalized medicine ... There's not even joined up thinking in terms of doing cost-effectiveness studies including drugs and diagnostics. Sure, there is Medco and now Roche doing some of that. But, there is a lot that needs to be done.
Last year, Diaceutics released a report that found that although pharma speaks highly of personalized medicine, very few companies are actually prepared to capitalize on late-stage products. What within pharma is holding back such advances?
The devil is in the details. If you listen to the CEOs within the pharma industry, they'll say, 'Yes, we have a personalized medicine division. Yes, we're investing in personalized medicine.' And, yes, there is investment and there are centers of excellence being built, and there are new people being hired. But we have to put this in proportion to the fact that from a pipeline standpoint many of the leaders of these companies have predicted that by 2015 almost 50 percent of the drugs that are developed will have biomarkers connected with them.
So, part of our observation in that report was that although there is investment, it is in no way proportionate to the portfolio wave that's about to hit the market. There is an inadequate level of investment considering how profound this change is going to be to the [drug] industry. These 50 percent figures aren't our numbers ... AstraZenca and Bristol-Myers Squibb have cited [such figures], and Roche has said personalized medicine will be 90 percent of their pipeline.
And what's holding it back? Our general observation is that this is as much a case of what people don't know versus what they do know. What pharma does know is there is opportunity. They are watching their scientific colleagues and watching new therapies brought through the pipeline. What they don't know is the initial investment that is needed to bring those diagnostics to market and put them into use universally and efficiently. That, in itself, is an enormous task. So, they're saying, 'Yes, we're investing,' but they're investing in the scientific side of personalized medicine. There is much less investment in the infrastructure and commercialization side. That's what's holding it back.
Look at the launches for [Roche's] Zelboraf and [Pfizer's] Xalkori. In those cases, there was lot of discussion of how the test and diagnostic were joined up from a regulation standpoint. And that is true, but commercial requirements ... to get those therapies into [clinical] use aren't there. [And processes] to reimburse those tests as efficiently as the drugs aren't in place. Market by market, the sales force required to push the diagnostic into the laboratory and make sure that it's in place when the therapeutic is available — that's not in place.
So, pharma gets high marks on the science, but they score pretty low marks for looking toward what they need to change internally to make the [Rx/Dx commercialization] happen not just for one treatment, but across their portfolio. There's still a lot of siloed thinking in pharma, and project teams are being left to do this on their own. [Companies are telling project teams to] … do the hard work, and if they're successful, then they can teach all the other teams. That's one way to do this, but it seems out of sync [with what needs to be done] if 50 percent of product launches from 2015 are going to have a biomarker attached to them.
Is there still a gap between how pharma R&D and sales divisions stand on personalized medicine? What advice does Diaceutics give to drug developers to close this gap, and are they listening to this advice?
What we tell our clients is that there is no point in hiring Diaceutics to teach five people in your company how to do this. What we are trying to do is transform an approach around a project or a therapeutic area. To do that, you have to get all the key stakeholders [and] decision makers into the project together. We really work with the commercial teams, the access teams, the business development teams, the regulatory teams, as well as the scientists. We try to help them see the value of joined up thinking.
That's what is transformative. When you create that structure, they discover that maybe three diagnostics, not one, is the best way forward; [or] they discover that maybe there are access and reimbursement hurdles, but maybe they have capabilities that can sort that out. They may discover that if they have a different relationship with diagnostic companies than just treating them as a supplier, [and instead] talk to them early and frequently, then they can have an outside team that's pulling in their direction, as well.
There is often a debate in the life sciences industry as to whether drug developers with internal diagnostics divisions have an advantage in the personalized medicine market over those who are outsourcing test development or working with partners. Does Diaceutics have a view on whether more drug developers should be investing in internal diagnostics capabilities, particularly during lean years for pharma budgets and healthcare spending?
Takeda and GlaxoSmithKline recently announced they were going to partner, and [when asked if they were going to develop an internal diagnostics division,] they said they weren't going to build up those capabilities internally.
[Meanwhile,] Roche today looks like a joined up, integrated company. It was a long, long journey for them to arrive at that point. One could argue that it took the board of Roche to appoint a diagnostics person as CEO to complete the whole journey. [Roche CEO] Severin Schwan is a luminary because he knows what both sides of the track look like.
It's probably less important which strategy you take and more important how effectively you implement it … Partnering for diagnostics [development] is not easy. Diagnostic companies are a volatile mix of companies that are often underfunded ... Over the last 15 years between a third to a half of diagnostic companies have gone out of business, or they've gone into bankruptcy, or they've changed control … Then there are the likes of Siemens and General Electric, which have built large diagnostics divisions, and have their own goals and their own needs. They aren't going to do as they're bid by pharma.
So, [in partnering with a diagnostic company,] pharma is trying to partner with a different industrial culture. Just to take a stand that they're going to take a partnering strategy and not understand the how, where, when, and with what, is not enough. This is not like partnering with a biotech company. This is a different beast. I'm happy to hear some companies are choosing to partner, but I'd be much happier if I saw that internally they have built the right infrastructure to actually carry that off.
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Novartis [in starting its own molecular diagnostics division] is different in that at least internally they have the people in place who understand how diagnostics work. Even if Novartis' internal division doesn't build its own diagnostics, it will probably be very helpful to Novartis in forming partnerships with other diagnostics firms effectively.
Diagnostics developers often complain that potential pharma collaborators for companion diagnostics don't recognize the value that a test might provide them. Have diagnostics companies gotten better at highlighting the value of their products in their interactions with drug developers?
Over the last four years, we've held two convergence meetings, where pharma and diagnostics companies come into the same room together. It's very interesting to watch the struggle of the diagnostics companies. They're asking pharma, 'Why don't you see the value of what we have?' And pharma is saying, 'We're struggling to understand the science.' It's not that their goals aren't the same. It's just that they're talking past each other.
So, into that mix goes a diagnostic company that may have an absolutely brilliant test, but a pretty short leash in terms of its funding structure. [The firm] cannot put in place the [approximately] $70 million it requires to make a diagnostic align with a therapy in the US market alone. These are very big numbers, and a very small number of diagnostics companies can afford that or have the experience to do it.
The dialogue … needs to get more open [between pharma and diagnostics firms] ... I don't think we're all there yet in terms of how we're managing that dialogue.
Last year, you launched Labceutics, a lab testing service in Europe. Why does Europe need such a service? And how do you hope to advance the personalized medicine through this service?
In working to integrate personalized medicine into pharma we've identified a number of infrastructure gaps. We have decided to either partner or internally build the capabilities to fill those gaps, because frankly no one else is doing it. Labceutics is the first of our investments in that regard. Although it was initially focused on Europe, we've already expanded that to Asia, and we've opened up an office in Hong Kong. We'll look at other geographies as required.
Labceutics [was started in recognition] that laboratories are important stakeholders in personalized medicine. They are by and large forgotten, but yet, they are on the front lines of delivering test results quickly, efficiently, and with high quality to the same physicians that pharma is talking to. There has been a preoccupation with diagnostics developers [in personalized medicine] and laboratories have been forgotten.
I've met lab leaders in Europe and Asia, who are incredible innovators in the personalized medicine space. With Labceutics, we're trying to harness that energy ... so labs can equally contribute to changing and transforming patient pathways. In the short term, that might translate into faster test results and higher quality testing in Europe, which has a very fragmented lab business.
There are 14,000 labs scattered across Europe. That's a lot of labs to try to coordinate and set up testing in. So, in its simplest form, Labceutics will just help join the docs and make sure that as a new test is brought to market, we say to our clients, 'Let's make sure that the test you need to get before the physicians, gets there, with fast turnaround times and good quality.'
We did research where we asked lab managers how they implemented a new diagnostic in their service. Ninety-four percent of them found out about a new test because they read about it somewhere or a physician asked them for the test [or by some other way]. Only around 6 percent of those lab managers were contacted by the pharma industry [to discuss new test launches].
That's a terrible indictment. We're relying on this lab infrastructure but we're not talking to labs. So, Labceutics is attempting to step in and fill that gap.
Regulatory gaps in the US have created a situation where labs don't have to adopt the FDA-approved companion diagnostic test, and can continue to test for the same markers with lab-developed tests that a companion diagnostic gauges. Are there similar issues in Europe and can Labceutics mitigate those issues?
The regulatory dynamics in Europe and the US are very different. There is no US Food and Drug Administration regulating the test. That may change, and the EMA is already looking at molecular diagnostics as a target for higher levels of regulation. So, as with everything in personalized medicine, what we have today may not be what we have in three weeks time.
Whether the lab is regulated or not, there are vast inconsistencies in the quality of testing across Europe. So, for example, Pfizer, is presumably working on launching [Xalkori with] ALK testing in Europe, and their chosen [companion diagnostic] partner is Abbott Molecular. That buys Pfizer access to labs that are either ready to run a test at high volumes ─ and remember this is a very young market ─ or they already have the Abbott test in place. What Pfizer doesn't get access to is the 90 percent of the lab market in Europe, which operates by developing their own test, and very seldom will they acquire a kit. If they do they acquire, it is for very high volumes.
What Labceutics is attempting to do is help our clients think not just of developing one test with one diagnostics partner, but to look across the laboratory market and consider how they can improve the quality of testing, whether it is developed in-house or whether it is acquiring a kit.
International personalized medicine markets have different drivers and challenges in terms of reimbursement and regulation. Which country is ahead in terms of personalized medicine adoption at this time?
I am afraid I can't find a winner. What I can find are winning stakeholders. Among the top … the FDA is an unsung hero in personalized medicine. Despite the fact that there is concern about regulation in any industry ... the FDA has been very forward thinking within a government policy framework, and has been willing to explore new ways to start early dialogue with pharma and diagnostics companies.
In other countries, for example, in France, there is a group called [L'Institut National du Cancer], which has been instrumental in recruiting the energy of pathologists to create standards around diagnostics, such as KRAS testing and for EGFR mutation testing ... INCa has a network of labs, but also it is working to solve the problem of [molecular diagnostics] reimbursement.
Within the UK, there are groups like the [National Institute for Health and Clinical Excellence], which is often regarded [negatively] as the group that's doing the technology assessment. Often, there is some very forward thinking within NICE about how diagnostics can help the UK in meeting its goal of being cost effective by avoiding treatment for patients who won't respond and about how diagnostics can be delivered faster and [integrated into healthcare] more seamlessly. There is an initiative called the Stratified Medicine Program in the UK, [which is an effort to establish a standardized, national genetic testing service to deliver personalized cancer treatments]. NICE is a part of that program.
So, I don't think there is a country that's in the lead when it comes to personalized medicine, but there are promising initiatives in different regions driving the field.
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