Personalized Medicine

TOP CONTRIBUTORS

William Raasch

Dan Pan

Personalized medicine is a new trend in drug development based on tailoring drugs to patients based on their individual genetic profiles. The use of genetic codes, or markers, in the DNA of a patient to predict the efficacy and toxicity of potential therapeutics is called Pharmacogenomics. Personalized medicine uses pharmacogenomics to guide the prescription and development of therapeutics for individual patients. This practice can increase the safety and efficacy of drugs on the market and decrease the market size of each individual drug (because of the increase in the number of distinct drug markets).^[1] Analysts predict that personalized medicine may become a part of mainstream practice in medical care within 10 years^[2].

The Impact of Personalized Medicine in Healthcare

The traditional business model in the pharmaceutical industry centers around developing "blockbuster drugs" for large disease markets that bring in over $1 billion in annual revenue^[3]. In 2006, 114 blockbuster drugs accounted for $234 billion in revenue for the pharmaceutical industry. In 2006, top drugs such as Lipitor (Pfizer (PFE)), Seretide/Advair (GlaxoSmithKline (GSK)), Plavix/Iscover (Sanofi-Aventis SA (SNY) and Bristol-Myers Squibb Company (BMY)), Epogen/Procrit (Amgen (AMGN) and JOHNSON & JOHNSON (JNJ)), and Nexium (AstraZeneca (AZN)) each brought in over $5 billion in revenue^[4].

While blockbuster drugs have brought significant financial success to manufacturers, the blockbuster business model has lead to narrow product portfolios, reduced innovation, and a proliferation of drugs providing incremental improvements in treatment large-market diseases for which treatments already exist. These negative effects are a result of pharmaceutical companies focusing their Research and Development (R&D) on a small group of large-market diseases where blockbuster success has already been established. In fact, around 50% of blockbuster drugs in 2004 were "me-too" drugs that have similar chemistries to successful blockbusters already on the market^[5].

Typical efficacies of blockbuster drugs range from only 35-75% in prescribed patients^[6]. Moreover, safety of drugs has been a well documented issue, with medication being the 4th leading cause of death in the U.S.^[7]. The relatively low efficacy and safety of blockbuster drugs can be attributed to the fact that they are marketed to treat entire disease populations despite the fact that there is often a great deal of patient variance within each population.

Personalized medicine-based pharmaceuticals avoid these issues by marketing to patients with specific genetic profiles that maximize both the safety and efficacy of the drug on each patient. Promising personalized medicine-based pharmaceuticals in the pipeline have shown close to 100% efficacy in patients^[8]. Examples of drugs on the market that have used genetic markers to achieve improved safety and efficacy in patients include Gleevec (Novartis AG (NVS)) and Herceptin (Genentech (DNA)).

While personalized medicine has clear medical benefits, the concept of deliberately narrowing the target markets of drugs in development creates a dilemma for pharmaceutical developers. Pharmaceutical companies may need to rely more on innovation in their pipeline as revenue models previously fueled by a few billion dollar blockbuster drugs increasingly rely on a broader array of smaller market drugs to fill their product portfolio. Conversely, pharmaceutical companies may need to spend less on drug development to gain marketing approval from the Food and Drug Administration (FDA). Currently, it can cost over $1 billion dollars and take 6-8 years to prove to the FDA that each prospective drug is safe and efficacious enough to market^[9]. Many of these costs are due to the large clinical trials required to show statistical efficacy of new drugs despite the large percentage of non-responders that exist in the "one size fits all" blockbuster model. By increasing the efficacy rates in target patient populations, personalized medicine can cut the size and cost of trials required to show efficacy and obtain marketing approval from the FDA^[10].

The impact of personalized medicine on the business model of pharmaceutical companies^[11]

Companies that may Benefit from Personalized Medicine

Pharmaceutical and Biotech Companies

Personalized medicine is a disruptive concept that can benefit the pharmaceutical and biotech industries as a whole. Personalized medicine has potential to lower the cost, time, and risk inherent in FDA marketing approvals, increase safety and efficacy of marketed drugs, and increase consumer confidence in the industry. However, as with any disruptive innovation within an industry, the onset of personalized medicine has the potential to create winners and losers in healthcare.

The early advantage in the pharmaceutical and biotech industries goes to companies that have competencies in both drug and diagnostic development, since personalized medicines requires companion diagnostics to guide their prescription. These companies include:

• Roche Pharmaceuticals (RHHBY)
• Johnson & Johnson (JNJ)

Companies that have already shown a committment to developing personalized medicines include:

• Genentech (DNA) (Herceptin)
• ImClone Systems (IMCL)/Bristol-Myers Squibb Company (BMY) (Erbitux)
• AstraZeneca (AZN)/Genzyme (GENZ) (Iressa)
• GlaxoSmithKline (GSK) (Ziagen)

Genetic Analysis Companies

The development and prescription of personalized medicine requires genetic analysis technologies that can diagnose or characterize patients that are most appropriate for a given medication. Companies involved in genetic analysis include:

• AppliedBiosystems
• Illumina (ILMN)
• Affymetrix (AFFX)
• Sequenom (SQNM)
• Gen-Probe (GPRO)
• Applera (ABI)
• Agilent Technologies (A)
• Roche Diagnostics
• Agendia

Growth in genetic analysis technologies from 2001 to 2004 (2009 projected)^[12].

Health Insurance Companies

Health insurance companies benefit from personalized medicine in the long-term as safety and efficacy levels of marketed drugs increase. However, higher mid-term costs associated with the need to assess the broader array of treatment options available for patients and the added costs of genetic diagnostics used for prescription purposes may negatively affect health insurance companies. Major health insurance companies include:

• UnitedHealth Group (UNH)
• WellPoint Health Networks (WLP)
• Aetna (AET)
• Humana (HUM)
• CIGNA Corporation (CI)
• Coventry Health Care (CVH)

Companies that may need to adjust for Personalized Medicine

Blockbuster Model Companies

Personalized medicine gives companies the chance to claim market share from blockbuster drugs by offering improved safety and efficacy for sub-populations within the market. Overall, mid-sized firms with small, narrower portfolios that are dependent on one or two blockbuster drugs are highly vulnerable to this fragmentation of their markets. The following companies may be threatened because they derive a significant portion of their revenue from blockbuster drugs:^[13]

• Biogen Idec (BIIB): Avonex, 87% of revenue (multiple sclerosis)
• Forest Laboratories (FRX): Lexapro, 60% of revenue (depression and anxiety)
• Amylin Pharmaceuticals (AMLN): Byetta, 81% of revenue (diabetes)
• Novo Nordisk A/S (NVO): Insulin, 73% (diabetes)

Industry Service Providers

Pharmaceutical and biotech companies often outsource large clinical trials or manufacturing orders to Contract Research Organizations (CROs) and Contract Manufacturing Organizations (CMOs). Although the number of drug trials would increase with personalized medicine, experts say that FDA is likely to lower its safety testing requirements because of the smaller size of target patient populations. With the reduction in clinical trial requirements and market size that personalized medicine brings, CROs and CMOs faces a decrease in demand under their current business model, which rely on large trials for blockbuster drugs.^[14] Service providers may need to change their business models from large-scale single product services to smaller-scale programs focused on specific patient-disease states and genotypes and coordination between development of personalized drugs and their diagnostic components.

Top CROs include:

• PharmaNet Development Group (PDGI)
• Quintiles
• ICON (ICLR)
• Covance (CVD)
• Kendle International (KNDL)
• Omnicare (OCR)
• MDS (MDZ)

Top CMOs include

• Avecia Biologics
• Boehringer Ingelheim
• Diosynth Biotechnology
• Lonza
• Sandoz

References

1. ↑ Personalized Medicine Coalition: Incentives for Personalized Medicine
2. ↑ Personalized Medicine: The Emerging Pharmacogenomics Revolution. PriceWaterhouseCoopers. Feb 2005.
3. ↑ The Dangers of Product-Driven Success: What’s the Next Growth Act?
4. ↑ Blockbuster Drugs 2006
5. ↑ Business Week: The Waning of the Blockbuster Drug. Oct 2004.
6. ↑ The Changing Face of R&D in the Future Pharmaceutical Landscape
7. ↑ Merck: From "One size fits all" to "Tailormade". Oct 2006.
8. ↑ The Changing Face of R&D in the Future Pharmaceutical Landscape
9. ↑ The price of innovation: new estimates of drug development costs
10. ↑ Targeted Therapies: Navigating the Business Challenges of Personalized Medicine
11. ↑ The Changing Face of R&D in the Future Pharmaceutical Landscape
12. ↑ Targeted Therapies: Navigating the Business Challenges of Personalized Medicine
13. ↑ The Changing Face of R&D in the Future Pharmaceutical Landscape
14. ↑ The Changing Face of R&D in the Future Pharmaceutical Landscape