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Thinking about Life Sciences

http://blog.aesisgroup.com

Thursday, July 13, 2006

A Time to Make Friends: More Partnerships in Biotech, Med Tech?

The official tagline of the World Cup that just wrapped up was “a time to make friends”. As I write this
column from Munich, I see the colorful signs advertising that slogan are still all around. While the actual play
was brutally competitive at times – as in the “Zidane head-butt” and the “Rooney groin stomp” – all
indications are that the action outside the stadium was overwhelmingly friendly and festive.
Is the world of biotech and medical technology closer to that of the cutthroat game on the field or that of the
convivial scene in the bars around town? It would seem that the med tech industry is evolving toward more
of a collaborative culture driven by three important and related trends:
1. The demand by baby boomers for convenience
2. The rise of convergent and combination medical technologies
3. The growing importance of safety
Just last week, Abbott Laboratories announced a three-way partnership between itself, AstraZeneca and Elan
Corp. in which two different cholesterol drugs (TriCor by Abbott and Crestor by AstraZeneca) and a
nanotechnology delivery substrate (by Elan) are used in a single drug. The advantage to patients of taking a
single drug rather than two was cited as a major catalyst for the collaborative deal. With respect to the two
principal players (Abbott and AstraZeneca), the partnership was designed to share development costs and
profits. Operationally, however, roles were distributed asymmetrically so that Abbott would be responsible
for the clinical trial development and associated regulatory submissions while AstraZeneca would conduct the
investigational new drug application (IND).
Growing Importance of Convergent Medical Technologies
The April 17 edition of this column – “Perspective Following BIO 2006: The Midwest as Innovation
Central?” highlighted the growing importance of convergent medical technologies (also known as
combination medical products) and specifically identified some business models to support this new
sector in the medical technology market. While there has been some collaboration in the earlier stages
of the product development life-cycle (such as Medtronic/Genzyme and this Abbott/AstraZeneca
deal), it will be very interesting to see how these play out later on as these drugs and technologies are
brought to market. How will two pharmaceutical industry powerhouses such as Abbott and
AstraZeneca apportion their sales teams? Especially given the structure of the development deal, it
would be difficult to imagine if only one of these companies would take the full responsibility for
product sales. On the other hand, parallel sales efforts are a recipe for inefficiency at best and product-
killing confusion at worst. It seems this partnership is not about economic efficiency or complementary
research strengths. In fact, it can be argued that this partnership would be decidedly inefficient. This is
being driven by market need rather than intrinsic business considerations.
Another driver (albeit likely minor) is the need to differentiate intellectual property under pressure from
generic manufacturers. Another recent article –“Intellectual Property: Does it Matter?”, proposes that
partnership capabilities are more important for value generation than necessarily specific patent rights.

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So what is the market need that is driving med tech companies away from “head-butting” and more
toward friendly “chin-chin”? Why are convergent/combination medical technologies (CMTs) on the cusp of a
major evolution? First, a quick definition: CMT is defined more by what it is not rather than by what it
is. What we would call, in medical parlance, a “diagnosis of exclusion.” A single drug, for example, does
not constitute CMT. However, drug-device combinations, a “smart device” or a combined diagnostic-
therapeutic device (a.k.a. theranostics) all do constitute CMT. Because CMT intrinsically involves
elements from disparate industries, partnership capability (in addition to specific intellectual property
assets) will characterize successful companies in this growing field.
Companies that are unable or unwilling to partner will consequently be left out of these developments
and may lose market share. There are five basic drivers of growth in CMT:
1. Advances in minimally invasive surgery (MIS)
2. Miniaturization of electronics
3. Closing the loop between diagnostics, therapeutics and personalized medicine
4. Demand for convenience
5. Growing importance of safety
The first (MIS) and second (electronics miniaturization) points actually go hand in hand in making it
possible to implant devices in patients with less risk. As it becomes easier and more accepted for
patients to have these devices implanted, new markets, new capabilities and new indications arise for
biotech/IT/device combinations of a nearly infinite variety. The “bionic man” is becoming a reality
and CMT is a major part of this.

The growth of personalized medicine will go hand in hand with the growth of convergent medical
technologies. By definition, personalized medicine must include not only a therapeutic component but
also a diagnostic aspect as well. A drug-device combination that embodies both of these functions will
in fact be personalized medicine in its most optimal application.
The demand for convenience – the now-classic and well-known characteristic of aging baby boomers –
is not an insignificant factor behind the development of CMT. As with the Abbott/AstraZeneca deal,
it’s a natural progression to allow a patient to take one pill instead of two. Likewise, if a patient can
have the diagnostic procedure at the same time as the therapeutic procedure, that alone will be of great
value.

Finally, the growing importance of safety will also drive further development of
convergent/combination medical technologies. As outlined in my May 9th article “Drug Safety Debate
to Yield Big Changes, Grow More Controversial,” safety is a huge topic. A number of trends –
including greater efficacy of medicine, the coming of age of the baby boomers, the rise of chronic
diseases and more aggressive disease prevention – have given safety a much greater significance than
what might have been in the past.
All this will play into CMT to the extent that a therapeutic combining an agent that optimizes efficacy
with another agent that optimizes safety will be of considerably more value than the single-agent
therapeutics. This is particularly true of drug-device combinations where the therapeutic events (both
safety and efficacy) take place in a local area. In the area of coronary drug-eluting stents (DES), we may
soon see these impacts as outlined two weeks ago in The Future of Drug-Coated Stents: A Big Issue or
a Non-Issue. In this view, safety considerations will lead the current generation of DES to likely be
replaced by next-generation DES or potentially a combination technology of two therapeutic
modalities. Though Johnson & Johnson and Boston Scientific currently dominate the market, these
changes may very well bring to fore another company that can master the nuances of partnership in
order to bring a safer and more effective combination device to market.
The Future of Partnerships

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The future of medical technology will be dominated less by huge behemoths taking a single idea
linearly from concept to market but rather by fluid partnerships that take technologies at different
stages of development and bring them together. In the 1960s and 1970s, research was king (hence the
prominence of Merck as a leading pharmaceutical firm). In the 1980s and 1990s, marketing became
increasingly ascendant (hence Pfizer was able to take over the title for the biggest pharmaceutical). As
we move further along in the 21st century, the ability to partner will be a key advantage.
Who will be able to most effectively take up that World Cup tagline “a time to make friends” and
become the next top dog? It will be interesting to see how these trends develop and deal flow further
increases.
Ogan Gurel, MD MPhil
gurel@aesisgroup.com
http://blog.aesisgroup.com/

Convergent Medical Technology Partnerships Combination Medical Products Aesis Research Group Ogan Gurel MD

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