Welcome to Molecular Ideas, and thank you for sharing your time with us. Last week, we discussed how approved drugs can fail on the market through the inhalable insulin product, Exubera™. This week, we discuss three life science ideas that struggled on the market, but whose potential impact warrant a second look. Remember to leave a comment with the biotechnology or medtech idea you think deserves a second chance!
Our Discussion at a Glance
We review the five criteria for non-clinical market failures in pharmaceuticals and biotechnology, including misalignment to customer expectations, underwhelming efficacy, and bad press.
Almost every market failure represents a critical opportunity to build on the investment of prior launches. Despite tepid attitudes from industry analysts, many of technologies that were developed to meet unmet clinical needs that still exist.
Effective market positioning requires an accessible price and clear marketing strategy that differentiates you from competitors - preferably by highlighting use cases rather than relying on doctors to decipher labels.
Non-Clinical Market Failures 101
As we discussed last week, a market failure can arise from one of five causes (excluding poorly planned partnerships, legal/ethical issues, and/or competitor countermoves). These include:
Misalignment to a customer's (patient's and/or practitioner's) expectations.
Failure to obtain (sufficient) reimbursement coverage from payors.
Underwhelming clinical efficacy OR unexpectedly pronounced side effects in the field (outside of clinical trials).
Technical confusion about how, when, or why to use - typically resulting from narrow marketing efforts.
Bad press (which spreads like a plague and is just as detrimental to a product's health).
Any one of these can lead to drugs missing analyst expectations, which in turn hurts the company's prospects at raising funds through equity offers in M&A and/or private financing. Simply put, your company's reputation for success counts, and everyone reads the papers.
Before we delve into three drugs that we think deserve redemption, one disclaimer comes to mind. As famously said by W. Edwards Deming: “In god we trust. All others must bring data.”
There are plenty of biotechnology ideas that fail to make it to the market on account of the pre-clinical or clinical data not holding up under scrutiny. This can be attributed to poorly designed or executed clinical trials, to rushed science under low budgets, to plain old bad luck. If the data doesn’t support it, then either more work needs to be done to tweak it or there is some element that we don’t understand.
For the most part, clinical data is proprietary when used in decision-making. There are a limited few who have the full picture as to why perfectly good ideas fail to pass muster from a regulatory perspective. That's why we're confining ourselves to ideas that passed regulatory validation, but had other causes for market failure. When on the cutting-edge of applied science, we cannot always know what we don't know - that's why clinical trials are analyzed with statistics. As such, we not only have a better idea of business-caused market failures, but also how to avoid them.
Failure or Future Opportunity?
#3) Xigris® (drotrecogin alfa [activated]), from Eli Lilly
Indication: Sepsis
The Lesson
How you can be perceived, even when you act with the best of intentions, matters. Pharmaceutical product promotion is tricky to be sure, but making sure that your funding for external foundations is transparent, your relationships with those foundations are well-defined, and your stance on their messaging is consistent is critical to success.
Disease Overview
Sepsis is one of those conditions under the category 'where things go from bad to worse.' When you are suffering from infection, your body releases a variety of chemical signals to trigger your immune system to fight it. These include activation of various non-specific immune cells (e.g., macrophages, neutrophils, and/or dendritic cells), as well as your adaptive (or disease-specific) immune response cells (your CD8+ 'killer-T' T-cells, CD4+ 'helper' T-cells, and your B-cells). These cells are activated by specific chemical cascade signals and can be modulated with drugs (to a point). The challenge with sepsis is that the third component of the immune response is strictly biochemical. The body has several small molecules and proteins that work to inflame or destroy seemingly infectious material and are difficult to moderate. When the body is stressed by extreme, if not chronic infection, it releases these chemicals to a point where they damage major organs and can cause sudden death.
The Drug
The typical treatment for sepsis is to try and avoid developing it by reducing infection with antibiotics. Xigris® operates on a different mechanism of action. As an antithrombotic (anti-blood clotting) drug, it promotes the breakdown of blood clots.
So what's the relation to sepsis caused by bacterial infection? Simple. Multiple studies have shown that when the body's biochemicals go AWOL, the blood tends to coagulate, forming dangerous clots that can lead to organ damage and sudden death. Additionally, it may have a slight anti-inflammatory effect that reduces organ damage.
The Failure
Xigris® suffered from three key failures that compounded each other. The first was a narrow label (which means the circumstances under which the drug could be used were limited). While innovation always has a flatter adoption curve than iterations of proven market entities, this presents a key challenge for pharmaceutical companies.
Then came the ethical issues. While it's not uncommon for pharmaceutical companies to work closely with patient advocacy groups and task forces to promote drugs, the messaging needs to be clear. Financing a task force called “Values, Ethics and Rationing in Critical Care" was seen by some as critiquing doctors for not using Xigris® enough. In 2006, three NIH doctors critiqued Eli Lilly for "marketing strategies masquerading as evidence-based medicine" in the New England Journal of Medicine.
All of this reinforced the need for additional post-marketing surveillance. Following a failure to meet the primary endpoint of PROWESS-SHOCK trial, the drug was removed from the market.
The Redemption Potential
This story speaks to drugs entering the market with lackluster data. Pharmaceuticals is sometimes a dance between 'something is better than nothing' and dancing with the drug you brought to market. While inflammation can be seen as a "necessary evil" in sepsis, being able to modulate it remains an interesting avenue for exploration.
#2) Relenza® (zanamivir), from GlaxoSmithKline & Biota
Indication: Influenza, types A & B
Status: Generic Available
The Lesson
It's difficult to reduce a decade of clinical trials and as many years in pre-clinical work to a cogent market position. On the one hand, Relezna® had superior efficacy to its competitor, Tamiflu®. On the other, it was burdened by a narrower label and difficulties with several of its administration forms. The former was meant as a treatment, whereas the latter could be used as a preventative measure. The bottom line here is that seemingly little differences matter. Sometimes, it's not about how many areas you're similar in, but about exploiting the niches that you can.
Plus, this story highlights a great competitive countermove. With Relenza® sales lagging, Roche (Tamiflu®'s developer) put the final nail in the coffin by donating 30 million doses to the World Health Organization (WHO). When your drug is in demand, donate it. You'll improve access, get mountains of free press, and be their first call when more is needed.
Disease Overview
If there's one thing we've learned from the COVID-19 pandemic, it's that having effective antivirals on-hand matter. The flu is a respiratory infection that causes millions of infections in the U.S. each more, and many more abroad. The mutability and diversity of this virus in our environment makes it unlikely that we will be able to cure it any time soon, but the best defense is typically a seasonal vaccine alongside general good hygiene practices. Whether it's a runny nose to muscle aches and fatigue, it's a bad time. We strongly recommend reading the CDC's coverage here.
The Drug
Relenza® is administered using the inhaler-like Diskhaler® device and operates by inhibiting the influenza virus' neuraminidase. This enzyme is one of two that helps new viruses in your cells be released to infect the surrounding uninfected cells. This enzyme has also been implicated in additional functions that enables the virus to replicate. Additional label information can be found here.
The Failure
While a narrow label and clinical challenges may be unavoidable once a drug hits the market, some low sales numbers can be solved with aggressive marketing to differentiate against competitors. GSK's partner in development, Biota, sued the company for failing to market the drug effectively. The case was ultimately settled for $19.5 million - a paltry sum compared to the market potential that Tamiflu® was able to capture.
The Redemption Potential
In a way, this drug has already seen some redemption in the form of Dectova®, a reformulation of zanamivir for IV infusion. It was approved for use in the EU by the European Medicines Agency in 2019. New administration forms are critical to adoption; with other inhalable drugs like Afrezza® and this IV infusion already approved, there is a chance we can see this compound in more scenarios soon.
#1) Anascorp® [centruroides (scorpion) immune F(ab’)2 (equine)], from Rare Disease Therapeutics
Indication: Scorpion Envenomation
Status: FDA Approved, 2011
The Lesson
This story really stings. While not a market withdrawal or analyst target miss, Anascorp®'s market failure is a classic case of pharmaceutical and insurance companies failing to align supply with patient's ability to pay.
Disease Overview
One things before we go further - not all scorpion stings are lethal, though most of them are painful. Those that are venomous (the scorpion injecting the venom into you is toxic) can have serious side effects. Allergic reactions can be the metaphorical tip of the stinger, as the venom can cause muscle spasms, nausea, and high blood pressure. In major at-risk markets, there are approximately 1.2 million stings per year, leading to approximately 3,250 deaths.
For the mathematically inclined, that's only 0.27% of stings that lead to death. While it is possible that antivenom is administered in more cases, that's a very small market for a one-time use drug and limited future doses. After all, you may know when a cancer patient will arrive for their chemotherapy, but not when your neighbor will be stung by a scorpion. (By the way, if you want to learn the difference between venomous and poisonous animals, check out Rosemary Mosco's adorable comic here).
The Drug
Anascorp® is a combination of antibody components that are specific to a wide range of venom toxins. By binding to the toxin in the bloodstream, it inactivates the venom and enables to body to move it away from tissues before elimination.
The Failure
There's a reason why the first of the '4 P's of Marketing' is Price. Shortly after its FDA approval, Anascorp® came under fire when a patient was billed $80,000 for two doses of the drug. While insurance reportedly paid over $57,000, the hospital markups and 'out of network' fees still totaled approximately $25,000. For the accountants in the room, only $3,000 were for other hospital fees.
Even experienced pharmaceutical executives and market access professionals would wince given what the hospital paid for the drug: $3,750. That's a nearly 1,000% increase.
Without swerving too far from the subject, this case underlines critical fault lines in the healthcare system's reimbursement structures. Hospitals are able to charge exorbitant prices to insurance agencies to cover high salary and overhead costs. In turn, insurance companies charge patients a premium for the right to have large payouts when needed. The gaps in the system mean that patients are left to grapple with the difference. The system is effective, if occasionally grossly imperfect. The simplest improvement is to better align insurance coverage with ability to pay - and that has been a highly politicized subject for nearly a century.
The Redemption Potential
Anascorp® was approved in 2011. In the decade that followed, additional financial and regulatory incentives aligned with lower blockbuster approval rates to shift the industry's focus towards developing drugs for rare and underserved diseases. According to the NIH, a rare disease is defined as a condition that affects fewer than 200,000 people. While scorpion stings are hardly chronic and Anascorp® may be headed towards generic competition, these incentives might serve to launch investment in next-generation antivenom products that can be offered at lower cost.
Honorable Mention: uBiome's Personalized Microbiology Insight Tests
As we alluded to in our 'Five Steps to Avoid Startup Fraud' post, uBiome was on the path to unicorn status with its personalized microbiology insight testing. The premise was simple - send in a fresh fecal sample, and we'll paint a data-driven picture of your microbiota, as well as what that might mean for your help.
Setting aside the deliberate cultural failures and corrupt insurance billing practices that were allegedly set in place by the company's leadership, there one key issue that led to the company's demise. The underlying basic research needed to draw clinical insights between a person's microbiota and their health was flimsy at best. This remains the case today, though many companies and research centers are attempting to crack the code with a combination of AI-driven analysis and traditional clinical work.
As said best by Ed Yong in his book (or Bob Dylan - your pick): I contain multitudes. What we know already is that our microbiota affects - and in some case, enhances - our innate biological functions. Unlike genetic testing, the fluid nature of individual bacterial genomes and the unique ratios of different microbes found in each person make it difficult to establish a 1:1 relationship between presence and outcome. The fact that bacteria can metabolize and synthesize countless molecules that our bodies cannot has immense potential value. Unraveling these insights and translating them to tests with clinical value will be a Herculean task - but one that also defines the next frontier of medicine.
Failing Forward
Image Source: Media from Wix
There's no doubt that failing to meet market (and patient) expectations is crushing. One of the many maxims of the startup world is 'fail fast'. Speaking from experience, the only thing worse than being in Hell after getting a poor result is being in Limbo waiting for one. Plus, now you know how not to build the metaphorical lightbulb (or commercial strategy, as it were).
Some of the ideas we've discussed above had notable clinical challenges in addition to commercial barriers. Part of redeeming failed ideas is recognizing imperfections, and building with, over, or around them. That takes a team of dedicated scientists, clinicians, and business strategists working in tandem and able to efficiently pivot.
And for all of the investor-minded entrepreneurs out there, redeeming tough ideas helps you know what questions you'll be asked. It helps you build your story and defines what you need to do to walk the walk. Remember our discussion last week - even the worst drug launches in history can be redeemed.
What life science or medtech ideas do you think should be given a (second) chance? Leave your thoughts in the comments below or send us an email through our Contact page here.
That’s all for today! Thanks for spending your time with us. Please share this article, and sign up to leave your thoughts, ideas, and opinions in the comments. Your feedback is always welcome and helps Molecular Ideas grow!