pharma innovation

For many years, the trend in biotech was for drug development companies to pursue one or maybe two drug candidates, or assets, as they’re called in industry parlance. Go lean and attract the attention of big pharma or investors in the late stage trials. But today’s guest says there is more innovation when the biotech organization invests in a technology platform that produces multiple drug candidates. Paul Hastings is the CEO of OncoMed, a company developing drugs that target cancer stem cells. He’s built OncoMed in what he says was the old model. By mid-2015, the company will have seven drug candidates in the clinic.

"There was a period of time when investors were only interested in late stage products that they could put their arms around and measure,” he says. "But I think investors woke up. . . .They realized that the innovation part of what we were doing before was suffering from this model.”

OncoMed was one of the first IPOs of the current bull market. Has Paul changed his management style since going public? Does he buy into the virtual drug development model? And what does he see for the industry in 2015?

Guest:

Steve Burrill, CEO, Burrill and Co

Listen (3:20) What is going on with capital markets?

Listen (6:48) Drug pricing an easy target but only 11% of healthcare cost

Listen (11:02) Public misunderstands true cost of drugs

Listen (4:21) Which companies excite you today?

Listen (6:00) Where do you stand on FDA's approach with 23andMe?

Listen (4:30) More facts on aging crisis

Burrill and Co has just published their yearly overview of the biotech industry, this year called Biotech 2014: Transforming Healthcare. CEO Steve Burrill joins us today to give his personal takeaways on recent trends.

In 2013, the Burrill Select biotech stock index was up 61%, the biggest gain for any year going back to 1994 when the index was established. This March though, biotech stocks took a tumble. Why the fall? Steve links it directly to the recent controversy over drug pricing, particularly that of Gilead's hep-C drug, Sovaldi.

"Gilead's stock, along with that of some other major biotech companies, dropped and this took off a bit of the market cap and some of the excitement around the industry," Steve says.

Burrill goes on to address the current pressure to lower drug pricing, where it's coming from, and how biotech companies can respond. He says that the general public has a big misunderstanding about drug pricing. The cost of drugs only accounts for 11% of total healthcare spending, and yet drug companies are disproportionately beat upon to lower pricing.

"The real pressure," he says, "is on the doctor community, the hospital community, the broader healthcare community that's consuming 90% of the costs not the 10% that the pharma products are."

Steve doesn't think Gilead will give in on pricing, but will continue to make special deals with various payers and hospital groups, such as their recent agreement with Kaiser. Big pharma and big biotech have become "very sophisticated in working with the various payer communities to both determine outcomes and assign value propositions," he says.

We finish the interview with a discussion about how much FDA regulation is needed for genetic testing. Steve also shares more facts about the aging crisis for healthcare systems around the world.

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