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What do the top three selling drugs have in common?

In 2016, the three top selling drugs were Humira (about $16 billion), Harvoni (about $9 billion), and Rituxan (about $7.5 billion). Core indications targeted by these drugs are different (Humira = Hepatitis C; Harvoni = Rheumatoid Arthritis; Rituxan = Lymphoma). Basic technologies of these  drugs vary (Humira = monoclonal antibody; Harvoni = small molecule chemistry; Rituxan = monoclonal antibody).

But a key element of the corporate development paths for these three drugs is the same. Rights to Humira, Harvoni and Ritxuan were acquired while in Phase III stage of development.

In 2000, Abbott Laboratories announced it would pay $6.9 billion in cash for BASF. BASF's pharmaceutical businesses, headquartered in Germany, had products in the areas of pain relief and autoimmune disease. Knoll, a division of BASF, had developed monoclonal antibody technology with a Phase III rheumatoid arthritis candidate, D2E7. Two years later in 2002, D2E7 (now known as Humira) was approved by the FDA earlier than anticipated.

In 2011, Gilead announced it would acquire Pharmasset  for $11.2 billion. At the time, this purchase price was the highest ever for a clinical-stage biotech. Gilead was especially attracted to Pharmasset’s PSI7977, a small molecule compound. PSI7977, which later became known as sofosbuvir, was in Phase III trials in combination for Hepatis C. In 2014, sofosbuvir in combination with ledipasvir (another Gilead compound) was approved by the FDA, and Harvoni was born.

In 1995, Genentech licensed worldwide rights to Idec's C2B8, a CD20-directed monoclonal antibody in Phase III for the treatment of non-Hodgkins B-cell lymphoma, in exchange for a potential $57 million. The companies would share resulting profits. IDEC-C2B8 was in Phase III trials and was approved in 1997 as Rituxan. (Genentech was acquired by Roche in 2009.)

So Phase III deals were critical in the corporate development path of all three of 2016's top three selling drugs!

Acquiring rights to a promising Phase III drug has been considered a "sweet spot" for biopharma corporate development activity. Technology and regulatory risk levels are small as compared to making a significant bet on a Phase II drug. But, of course, the price tag for a Phase III deal can be huge.

Furthermore, risk levels assumed by investing in drugs that have not even reached Phase II trials has given rise to what has been dubbed the "valley of death" problem, which darkly describes a lack of willingness for large pharma companies to license or acquire earlier stage drug candidates.

In future postings we will say much more about the obstacles that this valley of death places on drug innovation.

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