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Smallest drug companies taking big financial risks
Some small drugs companies focus on a few products, while others hope to expand their reach in ophthalmology. Part 1 of two parts.
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Part 2: "Specialty device companies fill niches in ophthalmology," October 15 issue.
Small drug companies have brought many important drugs to the ophthalmic market. Think, for example, of the impact that QLT’s verteporfin has had on management of age-related macular degeneration in the past few years.
The financial burden of shepherding a drug through the regulatory process is immense. QLT’s solution to this challenge was to partner with pharmaceutical giant Novartis Ophthalmics to bring Visudyne (verteporfin for injection) to market. The result of their collaboration is a drug that posted more than $100 million in sales in the second quarter of 2004, according to QLT’s latest financial statement.
This type of success may not be common, and the odds against these small drug companies may be substantial, but they are still abundant in ophthalmology.
“Small companies with limited financial resources are precluded from going it alone with new drugs because of the extensive capital required to guide these products through the regulatory process,” said industry analyst David R. Harmon, of Market Scope.
Small and big
Companies have used a variety of approaches to raise the capital needed to bring a drug to market, but many rely on the financial resources of a larger drug company, said Kevin J. Corcoran, COE, CPC, FNAO, president of the Corcoran Consulting Group and a member of the Ocular Surgery News editorial board.
While alliances with larger companies assist the smaller specialty companies in completing their new drug development, the arrangements also benefit the larger companies, Mr. Corcoran said. The bigger companies have the chance to improve their product lines with marketing agreements or increase their size by acquiring a smaller company and its products.
“Small companies being absorbed by the big guys has been the history,” Mr. Corcoran said. “The marketing muscle is generally taken on by the Alcons and the Allergans after the legwork of clinical, regulatory approval and product launch has been completed.”
Mr. Corcoran consults on regulatory issues with a number of small ophthalmic companies, so he is familiar with the efforts these companies must undertake to earn marketing approval. He cited an analogous situation from the ophthalmic device industry.
“Look to the early 1980s, and there were a ton of IOL companies. Now there are a handful. And yet when you go to the Academy meeting there are still many exhibitors. That is because there are always lots of new advances. It’s a rotating list,” Mr. Corcoran said.
Alliances and acquisitions are part of the cycle, but there is no concern that the small specialty companies will disappear entirely from the ophthalmic community, Mr. Harmon said. Their dynamic approaches to drug development, with the possibility of greater flexibility and innovation than the larger companies, are what help small companies to succeed, he said.
“Smaller companies serve the purpose of developing innovative products that the larger companies are not willing to undertake. The ratio of smaller companies to a relatively few large companies has not changed over time. It has been the trend since the 1980s,” Mr. Harmon said.
This article profiles a number of small ophthalmic drug companies that have drugs in comarketing arrangements or in premarket development. Each company has its own approach and aspiration. Some want to maintain their small size and continue to seek out strategic alliances to assist them in product development. Others say they want to grow independently in ophthalmology and may hope to expand their size eventually to rival the bigger companies.
In a sidebar to this article, Ocular Surgery News takes an expanded look at Ista Pharmaceuticals as a case study of a small drug company that is endeavoring to create its own successes in the ophthalmic marketplace.
This is part 1 of a two-part article. The second part, in the October 15 issue, will look at small device companies in ophthalmology.
Inspire Pharmaceuticals
Inspire Pharmaceuticals began operations in 1995. The initial focus of the biotech company was on respiratory disease, performing research on cystic fibrosis, said Mary Bennett, senior vice president of operations and communications at Inspire.
“As a biotech company, we saw the potential of our research for disorders affecting other mucosal surfaces, such as the eye. We entered the ophthalmic market by following where the science led us,” Ms. Bennett said.
The science led Inspire’s researchers to explore potential new products for dry eye and retinal disease.
The company has two drugs currently in clinical trials, diquafosol tetrasodium for dry eye and denufosol tetrasodium to promote fluid reabsorption after retinal detachment.
Inspire is also looking to the glaucoma market with the thought of growing their ophthalmic presence, Ms. Bennett said. However, she said, Inspire does not intend to be strictly an ophthalmic drug company, but rather a more broadly based biotechnology company.
In addition to its own research and development, Inspire is involved in sales and marketing efforts with Allergan for the products Restasis (cyclosporine ophthalmic emulsion 0.05%, Allergan) and Elestat (epinastine HCl 0.05%, Allergan), both of which were developed by Allergan, Ms. Bennett said.
“Inspire does not rely solely on internal research, but also looks to universities and other companies for unique opportunities, whether these be new research discoveries, clinical candidates or marketed products,” she said. “We plan to strategically choose companies to partner with, much like we did with Allergan for Restasis and Elestat.”
The company will continue to develop products from its research department, Ms. Bennett said. Some of these products, if promising, may be turned into franchises, and others may be licensed to other companies, she said.
At the end of the second quarter of this year, Inspire reported revenues of $2.9 million, reflecting co-promotion revenues from Elestat and Restasis. The company has the potential to collect an additional $28 million in royalties from Allergan over the term of the agreement.
InSite Vision
Unlike some of the other companies profiled in this article, InSite Vision considers itself strictly a research and development house.
“Our focus and our intent is on R&D,” said Lyle M. Bowman, vice president of development and operations at InSite Vision.
InSite comes up with ideas for products, develops them and licenses them out for marketing and commercial sales, he explained.
“When we out-license, it depends on the agreement. The partner may want to help in phase 3 trials, or they may want to wait for approvals,” Mr. Bowman said.
InSite currently has an agreement with Bausch & Lomb for its ISV-403 fluoroquinolone. Bausch & Lomb purchased the late-stage development, commercialization and marketing rights for ISV-403 from InSite, and InSite will garner royalties from the agreement, Mr. Bowman said.
Other drugs in InSite’s pipeline without current licensing agreements include ISV-401, or AzaSite (azithromycin and the company’s DuraSite drug-delivery vehicle), for bacterial conjunctivitis; ISV-205 for glaucoma; and ISV-616, an anti-angiogenic drug to help prevent neovascularization related to diabetic retinopathy and AMD. The company is still in the preclinical stage with ISV-616, Mr. Bowman said.
In addition to this pipeline, InSite has AquaSite, an over-the-counter dry-eye remedy available in some countries. The company has also developed a diagnostic test, OcuGene, to identify certain glaucomatous genetic markers.
“We will do the development for AzaSite and then we will be looking for marketing partners in the future,” Mr. Bowman said.
Eyetech Pharmaceuticals
Eyetech Pharmaceuticals Inc. is a biopharmaceutical company that focuses on developing treatments for the back of the eye. The company is developing Macugen (pegaptanib sodium injection, Eyetech/Pfizer) for the treatment for the wet form of AMD and for other applications.
Macugen has been fast-tracked by the FDA as a treatment for wet AMD. Data from two phase 2/3 trials were reviewed by an FDA advisory panel in late August. Results of that panel meeting will be reported in an upcoming issue of Ocular Surgery News.
The drug, which is also in phase 2 trials for treatment of diabetic macular edema and of retinal vein occlusion, is designed to inhibit vascular endothelial growth factor, reducing abnormal blood vessel growth and leakage, according to the company.
Eyetech is collaborating with Pfizer in the development, manufacturing and commercialization of Macugen. The company also has an agreement with Pfizer to market the drug Xalatan (latanoprost, Pfizer) to vitreoretinal specialists.
The company has licensed patents related to Macugen from Gilead Sciences and its wholly owned subsidiary Nektar Pharmaceuticals.
For the future, Eyetech will look for more products for clinical development, in particular products to treat the back of the eye, including other eye diseases such as glaucoma and inflammation, according to the company’s Web site.
Eyetech Pharmaceuticals did not respond to requests for comment for this article. However, the company has been the subject of numerous previous articles in Ocular Surgery News. For more information on the development of Macugen, visit OSNSuperSite.com and search for the keywords Eyetech or Macugen to review related articles.
Sucampo
Sucampo Pharmaceuticals Inc. is a research-oriented pharmaceutical company focusing on ophthalmic, gastrointestinal, liver, circulatory and other diseases, according to the company Web site. Its ophthalmic drug line includes the glaucoma drug Rescula (unoprostone isopropyl), which is licensed by Novartis Ophthalmics in the United States and by Fujisawa Pharmaceutical; FK-506 for dry eye, which is also licensed by Fujisawa; and SPI-015 for glaucoma indications.
In addition to its ophthalmic line, Sucampo has drugs available for systemic disease including liver disease and cystic fibrosis, according to its Web site. Sucampo did not respond to requests for comment for this article.
| Anatomy of a small company |
| The absorption of smaller drug companies by bigger companies may be the historical standard in ophthalmology, but some companies manage to expand while remaining independent. Ista Pharmaceuticals is a company that is growing and claiming a place in the ophthalmic industry. In 1992, Ista Pharmaceuticals was formed with the intention of creating products for sale to big companies. That changed with the hiring of the current chief executive officer and president, Vicente Anido Jr., PhD, according to Thomas Mitro, vice president of sales and marketing for Ista. “Ista started as a company that developed products and technologies with the plan to sell them to other companies for commercialization,” Mr. Mitro said. But in 2001, Dr. Anido broadened the company’s strategy, Mr. Mitro said. Now the company focuses not only on the development of products but also their commercialization and sale. “Dr. Anido brought with him a vast knowledge of ophthalmology. He knew there were many opportunities to develop products within ophthalmology. Through his guidance, Ista entered into the ophthalmic market,” Mr. Mitro said. Ista has developed Vitrase (bovine hyaluronidase, Ista) to fill a niche in the ophthalmic market. Vitrase was approved by the FDA this year as a spreading agent, and the company plans to launch it soon. The product has also received an “approvable” letter from the FDA for clearing vitreous hemorrhage. Mr. Mitro said Ista’s missions are to look for innovative products that are needed or existing products that can be improved. The company’s drug Xibrom (bromfenac sodium ophthalmic solution 0.1%), for example, if approved, will be the first twice-daily anti-inflammatory medication to enter the U.S. market, he said. Other anti-inflammatory drugs require four-times-daily dosing, he said. Likewise with Vitrase, there are no other products on the market like it. “We also look for old and established products that are liked in the ophthalmic community, to make them better over existing products,” Mr. Mitro said. An example of this, he said, is Ista’s formulation of timolol, Istalol, which was approved by the FDA in June. The familiar glaucoma drug, in a solution with potassium sorbate, allows once-daily instead of twice-daily dosing. Small company, big productionAlthough Ista is a small drug company with its staff of 80, it has a number of products in development, Mr. Mitro said. “Ista has two approvals and hopefully a third soon. We could have three approvals within a span of 12 months. That is a lot for any company, small or large,” he said. The company is building its own sales arm, he said. This began with the launch of Istalol by a 28-person sales force. “We will not look for alliances with companies for commercialization unless the product has a potential use outside of ophthalmology,” Mr. Mitro said. “But we will look for more R&D collaborations such as the one we have with Senju.” Senju is the company that developed and markets bromfenac sodium in Japan, he said. “Through our partnership, we were able to bring Xibrom to the United States to finish the phase 3 work that was required,” Mr. Mitro said. “This is the type of collaboration we are looking for.” Future plansSince going public in 2000, Ista has raised $80 million from investors. To date, Ista has not reported any sales. “The first thing we need to accomplish is to generate financial profitability in the United States,” Mr. Mitro said. “Our hope for the future is that we continue to grow by taking advantage of opportunities in the marketplace that others are not pursuing.” Mr. Mitro stressed the importance of maintaining a small company feel. “What is unique about this company with 80 employees, compared to companies that have a sales force five times that, is that each individual has a feeling of responsibility and accountability. Regardless of how big Ista gets, it is our objective to maintain a small company environment where each individual makes a contribution that matters,” he said. For Your Information: |
A note from the editors:
OSN Staff Writer Jeanne Michelle Gonzalez contributed to this article.
For Your Information:
- David R. Harmon can be reached at the Market Scope Newsletter, 13610 Barrett Office Drive, Suite 211, Manchester, MO 63021; 314-835-0600; fax: 314-835-0606.
- Kevin J. Corcoran COE, CPC, FNAO, can be reached at Corcoran Consulting Group, 1845 Business Center Drive, Suite 108, San Bernardino, CA 92408; 800-399-6565; fax: 909-890-1333; e-mail: kcorcoran@corcoranccg.com.
- Mary Bennett, senior vice president of operations and communications at Inspire Pharmaceuticals, can be reached at 4422 Emperor Blvd., Suite 20, Durham, NC 27703; 919-287-1245; fax: 919-941-9797; e-mail: mbennett@inspirepharm.com; Web site: www.inspirepharm.com.
- Lyle M. Bowman, vice president of development and operations at Insite Vision, can be contacted at 965 Atlantic Ave., Alameda, CA 94501; 510-865-8800; fax: 510-865-5700; e-mail: lylebo@insite.com; Web site: www.insitevision.com.
- Sucampo Pharmaceuticals Inc. can be reached at 4733 Bethesda Ave, Ste 450, Bethesda, MD 20814; 301-961-3400; fax: 301-961-3400; Web site: www.sucampo.com.
- Eyetech Pharmaceuticals Inc. can be reached at 3 Times Square, 12th Floor, New York, NY 10036; 212-824-3100; fax: 212-824-3101; Web site: www.eyetk.com.