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TMFHelical (98.75)

Healthcare News of Note

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October 06, 2012 – Comments (0) | RELATED TICKERS: JNJ , SCLN , GNOM.DL

Some news of note from the week.  Select stories with some brief commentary.  Not sure how consistent I will be with this kind of summary, but we'll see.

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Weekly Healthcare News of Note:

Passing of James Burke, former CEO of JNJ.  A man who lived the corporate credo. His famous handling of the Tylenol scare is a example of corporate responsibility and effective crises management. We could use more like him.  JNJ could use him now in my opinion.

FDA takes over ClinicalTrials.gov.  HHS has passed control of clinicaltrials.gov down to the FDA.  ClinicalTrials.gov has been an excellent solution to making corporations publicly report their clinical studies, but follow up reporting / publication of results is still lacking.  Perhaps the FDA will strengthen this requirement and make keeping the site up to date mandatory for approvals / label expansions.  We’ll see.  I am certainly in favor of expanded visibility in this area.

Open source drug development has been getting a bit of press again.  I still don’t see a practical model.  Good PR to ‘open’ what one is no longer interested in working on, but I have yet to see the incentives for development truly be present for such a model to move forward. Could we get a market exclusivity expansion for such programs, like with antibiotics?  That might do it.

Robots used in the care / rehabilitation of stroke patients. The robot moved the impacted arm of each stroke-affected patient while the patient tried to match those movements with their other arm. Patients could only base movements using their good arm on feel of movements of the stroke-impacted arm, not vision.”  Very interesting.  Perhaps could serve as a more measurable clinical endpoint as well for stroke therapeutics?

Politics: The New England Journal of Medicine has done its usual coverage of the healthcare positions of the two major candidates.  These are must reads in my opinion.

Obama: Securing the Future of American Health Care

Romney: Replacing Obamacare with Real Health Care Reform (same pdf for each)

 

Potential IPO for Quintiles?  This largest of clinical CROs has long been owned by private equity.  Going public would reverse the trend which saw PPD and Kendle go to PE in the last couple of years?  I would like to see Quintiles as a public company, but am more interested in what its potential IPO could mean for existing public concerns like Parexel and ICON.  I’m inclined to think it would be positive (Disclosure: I own ICON).

Could we be seeing an onshoring trend in the US.  API manufacturer CedarburgHauser thins so and is adding capacity.  This may be noteworthy if more US manufacturers follow suit, but I mention it mostly because I myself have contracted with this company for GMP API manufacturing, and I recommend them.

Insurance:  Signs of the future of health insurance are contained in two noteworthy stories.  First, the model for how insurance is sold is changing with the establishment of exchanges, both for individuals and companies.  Ahead of the curve on this is HR consultant Aon Hewitt which is establishing an exchange for small businesses“Nine national and regional insurers, including UnitedHealth, Cigna and Health Care Service Corporation, will sell plans on Aon Hewitt's exchange, which the company said will operate similar to ‘government-run marketplaces’”.  And with the establishment of such exchanges comes the (overdue) move from employer provided to employer reimbursed health coverage. “Two large U.S. companies, Sears and Darden Restaurants, are overhauling how they provide health insurance by giving their employees fixed amounts of money to buy insurance plans from a health insurance exchange.”  As an investor, I can’t help but feel that insurance exchanges are the next PBM-like growth market.

Research backed securities???  Yes, I know it sounds odd (crazy in fact), but there is a proposal to securitize drug discovery research“Faced with rising research costs and dwindling funding opportunities, “drug discovery backed securities” could provide a means to tap into previously inaccessible sources of capital and revitalize the biomedical ecosystem.”  I’m not so sure this would work.  A big reason why securitization works is the risk pooling can help turn risks into measurable quantities (though the mortgage MBS fiasco shows we can still get this very very wrong).  But so far as I know, this has only really been done effectively where there are established cash flows, not promises of potential cash flows.  So .. I don’t expect this to get anywhere (which doesn’t mean I won’t selfishly root for it to succeed).

I do have an interest in anti-aging research (who doesn’t?).  This report on how to activate inherent stem cells to rejuvenate old muscles has potential.  'The finding opens up the possibility that one day we could develop treatments to make old muscles young again. If we could do this, we may be able to enable people to live more mobile, independent lives as they age.'  Whether this research progresses to a rejuvenation drug or the next sports steroid-like scandal remains to be seen.  “Following this finding, the researchers attempted to inhibit FGF2 in old muscles to prevent the stem cell pool from being kick-started into action unnecessarily. By administering a common FGF2 inhibitor drug they were able to inhibit the decline in the number of muscle stem cells in the mice.”  Could lead certainly to some discovery research.  I’d expect the currently unnamed undetailed ‘inhibitor’ isn’t toxicology friendly, or perhaps there would have been more detail on it.

 

Biotech’s Fierce 15.  I don’t much care to invest in development stage pharmaceutical or biopharmaceutical companies (what most term biotechnology these days).  I’m more interested in companies with products.  Still, new technologies that can engage pharmaceutical partnerships can make for interesting and profitable holdings.  So I do like looks at biotech’s promising company lists, and Fierce has a good one.  Looking with a focus on new technology / plaforms rather than unmet disease indications 3 jump out to me.  Perhaps Bluebird can get gene therapy some traction on its long promise.  Can MiRagen harness microRNAs? Does Okairos have the next technology innovation for vaccines?  Time will tell.

An article from MD&D talks about the legislation before congress to better enable the in-vitro testing market.  “The text of the bill states that its purpose is “to create incentive for innovative diagnostics by improving the process for determining Medicare payment rates for new tests.” In other words, the goal is to better and more fairly reimburse IVD manufacturers, thereby providing them incentive for directing more of their resources toward innovation.”  While the result may be an FDA-like mechanism for getting reimbursement (with demonstrated value being the efficacy analog), this ultimately should enable expensive new tests that do provide value and have had to bill under general codes.

Fierce Medical Device 15.  The first 15 to look at medical devices.  Despite the tax issue with the ACA, I think this is potentially a more fertile investment field than emerging biotechnology (to me, it is all biotechnology). “All the companies' innovations also target ways to save money for patients and payers, reducing trips to the clinic, for example, or figuring out how to minimize unnecessary CT scans. Collectively, they are also seeking to bring new ideas to the table, united in a desire to attack a very common problem with a solution no one thought of before, in areas including cancer, obesity, chronic pain, heart disease and more.”  All these technologies seem quite innovative to me, but particularly intriguing are those from Proteus Digital Health, Apollo Endosurgery, Orthocare Innovations, and Autonomic Technologies

PharmExec reports that large pharma companies are using contract sales organizations selectively in some markets, focusing on SciClone and its focus on China. US-based SciClone Pharmaceuticals has built its business around selling specialty drugs in China. Companies like Sanofi and Pfizer, despite their own in-country resources, have partnered with SciClone and are achieving better returns, according to SciClone CEO Friedhelm Blobel.”  I consider SciClone to be an intriguing speculative consideration (Nasdaq: SCLN), noting it is rumored to be going private and also under investigation for ethical business practices. 

If one struggles to appreciate the need for regulatory agencies like the FDA or considers them overly burdensome, then please read the well written Fortune story that takes readers through the misdeeds at Synthes (now part of JNJ) in developing and promoting a bone cement product.  Seriously, take the time to read this story!

Lawsuits have been filed in an effort to block genetic sequencing CRO Complete Genomics from being acquired by China’s BGI.  No comment on the merits of the lawsuits, but it is bothersome that this forward looking business might go off shore.  BGI already does more sequencing than anywhere else.  Is this a sign that we (the US) may be losing our global competitive advantage in biotech? [Note, I was at one time a speculative shareholder in GNOM, but sold as the cost per genome was dropping seemingly faster than revenues were rising and the profit picture became ever more murky.

Will ‘Crowdfunding’ affect biotechnology capital raising?  There is apparently one story out of France that it has been used for this purpose.  Not expected to generate substantial funds, crowdfunding could nevertheless potentially assist with start up costs / first pass data generation.  We’ll see as this certainly bears watching.

An Ernst & Young Perspectives report looks at the state of the medical technology industry.  These are always worth scanning through, but call for more commentary than a couple of sentences.

The funding landscape for biotechnology and medical device companies is changing, and was the key topic of a recent round table.  A key driver is a larger concern for the opinions of the payors.  “Until recently, the funding priority was always science driven. “David Meeker and I were in a meeting a couple of weeks ago in DC…The medical director for United Health who buys USD 125 billion in healthcare shared his own angst about how innovation is going to get funded or not going to get funded given the pressures that he is operating under in his system. And the basic message was, ‘we’re not going to pay for your drugs unless they are saving us money now, not 10 years from now.’ He acknowledged the fact that that was going to be a challenge,” said Pops.  “What keeps me up at night are the payors, not the regulators,” added MacKay. “And what is really a business risk for us is healthcare reform. We’re all here because we take tremendous science risk to get healthcare modalities to patients and now you really have to superimpose healthcare reform with talk about science risk.”

A brief summary of the healthcare segment of the Obama-Romney political debate with some fact checking commentary is available here.

Since I operate in drug discovery it is occasionally daunting to be reminded how often serendipity does indeed play a role.  GenEngNews comments on a paper that has studied the role of fortune in drug development. “A research paper published earlier this year in the World Journal of Clinical Oncology sheds some light on the phenomenon. Using a 1999 study and three later-published books, a team of New Zealand researchers earlier this year found that 5.8% of all drugs on the market at publication—84 of 1,437 drugs—resulted from serendipity. Of that 84, indications for 53 were discovered in a clinical setting while indications for the other 31 were discovered in the laboratory.” Fortune of course favors the prepared, but I wonder how much is also due to the psychology of sunk costs.

It has long been noticed that the analysis of trends in individual behavior, such as Google searches, can have predictive value like noticing flu outbreaks.  Efforts are underway to better develop and add robustness to this passive second hand information.  I continue to think this will be a bigger deal in the future.  Just wait until EHR data starts to get real time (years away). 

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