By Jennifer Van Brunt
When a big pharmaceutical partner pulls out of a research collaboration with a biotechnology company, it can often lead to devastating results for the biotech firm. When the funding for the clinical development of the biotech's lead product suddenly disappears, there are few choices. If the drug looks promising, then the biotech will often opt to continue — and fund — development on its own. This means conserving resources by scaling back operations and laying off a significant percentage of the work force. Alternatively, the stranded biotech company can put the potential product on a back burner until it finds a new development partner. If the product candidate has proved disappointing in a clinical trial, the biotech firm may try to re-analyze the data to ascertain whether there is a particular subset of patients who did benefit from the drug. If so, then a new trial is designed — focused on just this subset of patients. In the worst-case scenario, the biotech company is forced to abandon the product altogether and start out on a new tack entirely.
But losing a big pharma partner doesn't always spell disaster. If the collaboration has been structured in such a way that the biotech firm is already shouldering much of the development cost, for instance, the loss of big pharma money can have much less of an impact on the biotech's bottom line. As well, if the big pharma partner chooses to restructure its own research priorities, then the biotech firm will only benefit from having the opportunity to realign itself with another partner with closely matched interests. There are also alliances that have been structured solely to address early-stage, exploratory research. Once the biotech firm has identified promising drug candidates for the pharmaceutical house, its job is done.
Of the hundreds and hundreds of research-based alliances between biotech companies and big pharmas, only a relatively small percentage ever come to these ends. Year after year, the attrition rate for these collaborations (the number of terminated alliances compared to the number of new ones) has hovered at about 10 to 11 percent. That holds true for 1998 to date. Through Sept. 21, 154 new research-based collaborations have been signed, while 15 have been terminated or concluded.
Johnson & Johnson's Moves
Of those 15, however, pharma giant Johnson & Johnson — usually through its subsidiaries — has been responsible for two, and possibly three. All these decisions have come as a result of disappointing clinical trial results, but the biotech firms involved have not all been affected the same way.
In May, the New Brunswick, N.J.-based big pharma stepped back from a collaboration with Alliance Pharmaceutical Corp., of San Diego. This deal, which was first struck in August 1994, had a pre-commercialization value of up to $90 million for Alliance (NASDAQ:ALLP). It centered on Alliance's intravascular perfluoro-chemical emulsion Oxygent, which was being tested as a temporary oxygen carrier during surgery. But when the clinical trials went awry, Johnson & Johnson gave the project back to Alliance. The two parties ended up disagreeing on the scope and timing of further clinical development, including whether to proceed with Phase III trials and for what indication. Alliance gained full control of product development, though Johnson & Johnson's subsidiaries did retain certain marketing rights.
Alliance had already suffered clinical setbacks with another product candidate, the oxygen-carrying LiquiVent for treating acute respiratory failure, in April 1997. Its partner Hoechst Marion Roussel Inc., of Kansas City, Mo., pulled out of that deal in December 1997.
Alliance is still shepherding those products through clinical trials, however, and has a third candidate, the contrast agent Imagent for echocardiograms, in a Phase III trial — a collaboration with Germany's Schering AG.
Amylin Pharmaceuticals Inc. is another San Diego biotech company that fell out of grace with Johnson & Johnson. In March 1998, the big pharma company gave Amylin (NASDAQ:AMLN) six months' notice of its intent to terminate the collaboration on Pramlintide for treating Types I and II diabetes. That deal, first inked in June 1995, had a potential pre-commercialization value of $100 million for Amylin. Amylin regained all product rights, but had to scale back its work force by about 25 percent so that it could continue to develop the drug, a synthetic analogue of the human pancreatic hormone amylin. Amylin currently has four ongoing Phase III clinical trials of Pramlintide, two each in Type I and insulin-using Type II diabetics. It expects results from the European Phase III trials by the end of this year and Phase III results from U.S. trials by next year.
The collaboration that's on hold right now is Johnson & Johnson's alliance with Cell Therapeutics Inc. Four months after Cell Therapeutics first reported disappointing Phase III clinical trial results of its lead drug candidate, lisophylline, the Seattle firm's big pharma partner decided to reevaluate the relationship. But, unlike in other instances, Johnson & Johnson hasn't pulled out entirely. Instead, it's taking a wait-and-see attitude while additional clinical trials on lisophylline are still under way.
The drug, an anti-inflammatory compound administered after chemotherapy or radiation treatments that precede bone marrow transplants, failed to meet its primary endpoints in the first Phase III trial. However, Cell Therapeutics said that in this study, four of 17 centers involved used unusually high levels of radiation and chemotherapy on very sick patients — an unfortunate circumstance that might have marred the results. The company is conducting further clinical trials of lisophylline — another one with higher drug doses in bone-marrow transplants as well as one in acute myelogenous leukemia and one in acute lung injury.
But because the time lines for possible regulatory filings are now set back, Johnson & Johnson has put the project back in Cell Therapeutics' (NASDAQ:CTIC) hands. Cell Therapeutics initiated its collaboration with Johnson & Johnson subsidiaries The R.W. Johnson Pharmaceutical Research Institute and Ortho Biotech Inc., both of Raritan, N.J., in November 1996. The big pharma partner is paying its agreed-upon share of costs through the end of 1998 but then it will wait for new results. If those results prove positive, it has the option of taking an active role once again in funding further trials and helping the drug through the regulatory process to commercialization.
As of Sept. 21, 1998, a total of 154 new research-based collaborations had been struck between biotech companies and big pharmaceutical houses. In that same time period, an additional 62 ongoing alliances were modified in some way — expanded in scope, extended for additional periods of time, renewed or otherwise modified. This is always a good sign, indicating that the research under way is at least promising enough to continue the exploratory process of digging for new drug leads.
The marketing, manufacturing and distribution agreements struck between biotech and big pharmas climbed to a total of 79 by Sept. 21. In 1997, biotech firms signed a total of 91 such agreements, and in 1996 there were 89 new deals. These are predominantly for the marketing of the biotech's product, but there are instances where the reverse is true. *