Pullan's Pieces #150                                   
Pullan's Pieces #150
July 2019
BD News and Analysis for  Biotech and Pharma
Dear --FNAME--,

Issue #150!  

We just had a webinar on the oncology landscape based on Pullan's Pieces infographic.  You can still sign up to listen to the recording or get the slides.  SIGN UP

In this issue, I've put in the some of the figures we will talk about in the next webinar August 22nd, on the CNS landscape!  In addition to the markets, I will cover deals and trends in drug development.  Sign up to listen live or later.  





1. Phase 3 terminations- not fatal
2.  Infographic:  CNS marketplace 
3. Jessica:  Beware the 2nd valley of death- implications for partnering
4.  Trevor: Deal averages - helpful but dangerous

Phase 3 Terminations - recruitment problems - but not fatal to drug
Mike Rea of IDEA Pharma wrote a nice piece recently on the large number of failures in Phase 3 for poor accrual.  https://www.linkedin.com/pulse/failure-business-plan-mike-rea/  He points out that the causes of  these failures could be due to "... multi-factorial, from over-promising by CROs, to lack of a true unmet medical need, or possibly a study that would put a control group at a disadvantage (whereas we’re conditioned to look for pure signals, we need to recognise that that’s often at odds with real world prescribing)."
I found that the most Phase 3 terminations in the period were sponsored by Pfizer, and that made me speculate that big companies need big sales, making them more ready to terminate Phase 3 trials.  

But when I looked at the drugs in the Pfizer terminations, I found that 2/3rds of the trials were for drugs that are currently marketed.  So it seems it is generally really an indication or a subpopulation for which trials were terminated.  Not the drug.  

Looking at a sampling across all sponsors found a similar 2/3rds of the trials were for drugs currently marketed.  Termination of a Phase 3 trial is not fatal to the ongoing development of the drug.  
Infographic:  CNS marketplace
Jessica:     Beware the 2nd Valley of Death:  Implications for partnering

Last month I took a departure from cell and gene therapies to discuss the business of antibiotics.  As I researched the complicated market parameters of the antibiotics industry, some similarities to the cell and gene therapy industry struck me.  These attributes can have an impact on the way we think about partnering on the development and commercialization of technologies within each industry.  The rationale is very different, but the themes are the same.  These include:

Antibiotics and Regenerative Medicine:  Market Attribute Similarities

Disconnect between supply and demand

Antibiotics: It would be clinically irresponsible to saturate the market with a new antibiotic; it must be held back as a backup defense against resistance to other available drugs

RegenMed: The manufacture of patient-specific batches using highly variable manufacturing paradigms make stock-piling drug batches impossible (autologous) or, at best, a challenge currently

Need for creative clinical trial design

Antibiotics: Few patients available to test a new antibiotic in patients resistant to other antibiotics – Regulatory response is the Limited Population Antibactierial Drug (LPAD) pathway

RegenMed: With ultra-rare indications and complex manufacturing schemes, smaller trial sizes and/or blended phases (eg Ph I/II) allow for smaller patient numbers and/or identification of efficacy indicators at earlier stages

Unique pricing considerations

Antibiotics: Most of the addressable market for new antibiotics is in developing countries where affordability keeps prices to a minimum

RegenMed: The potential curative nature of these treatments (reduced/eliminated chronic treatments) manifests currently as very high prices – more on this below

The biggest similarity of all though, is the perilous time between regulatory approval and profitability, Second Valley of Death. 

The <First> Valley of Death

Basically, “the” Valley of Death, also known as the Translation Gap, is a concept which is likely understood by the readership of this newsletter.  It is the timeframe between early validation of a drug candidate and later stage clinical development in which clinical efficacy becomes evident.  The timeframe of the Valley of Death is not clearly defined, but generally it may span Phase I and potentially even into Phase II.  The term is meant to describe the period of time in which many product candidates’ clinical development programs can’t command more investment.  Essentially, some money has been invested, some interesting science has been furthered toward therapeutic development, but there is not enough risk reduction at this point to continue investment in the asset and the program ceases.  This can be devastating for small biotech firms; a nuisance for big pharma.

The Second Valley of Death

The first valley of death speaks to the commercial potential of the drug candidate.  The second valley of death is associated with the early commercial performance of the drug.  This is a period of time between regulatory approval and profitable sales.  In traditional pharma or biotech industries, this phase should be navigable via careful preparation including manufacturing, marketing, pricing, aligning sales teams – typical commercial readiness activities.  However, with antibiotics the typical commercial readiness activities are not capable of mitigating this perilous time (as discussed last month) due to the need for medical good stewardship which will result in stunted launch and market penetration. 

For Cell and Gene Therapy products there may also currently be a (risk of) Second Valley of Death though the reasons are very different than those of antibiotics.  The best examples of gene therapies that have been commercial failures include Glybera® and Strimvelis®


Years on Market

Products Sold




2012 - 2017


Hereditary Lipolipase Deficiency (LPLD)

General Prevalence:


Drugauthorization withdrawn in 2017

Sponsor – UniQure expected savings of $2M/year in maintenance costs (Ph IV); several gene therapy products in the pipeline

Patients – UniQure is working with EMA to make Glybera® available by other means if needed


2016 - present


Adenosine deaminase severe combined immunodeficiency syndrome (ADA-SCID)

General Prevalence:


DrugTransferred from GSK to Orchard Therapeutics in 2018

Sponsor – GSK?  They’re fine.  Orchard Therapeutics – three assets in advanced stage registration studies, robust pipeline of ex vivo autologous gene therapies to address rare diseases

Patients – Strimvelis® is still available, though one of Orchard’s late stage assets is for ADA-SCID and it is generally assumed that Strimvelis will be withdrawn once OTL-101 is approved

As with antibiotics, typical commercial readiness activities are helpful, but likely will not mitigate the impacts of these forces.  They are:

Manufacturing challenges:

As mentioned above, typical commercial readiness activities include shoring up manufacturing and stockpiling, where relevant.  The manufacture of regenerative medicine products is significantly different then that of small molecule, or even that of biologics.  Currently, with each approval, the word “first” can attached to most of these products in some way (eg first ex vivo gene therapy, or first gene editing therapy, etc) which suggests that the manufacturing sciences can and will improve with time. 

One case study:  Novartis has faced challenges with batches of Kymriah® meeting specification.   Low percentages of viable cells has resulted in the out-of-spec batches not approved for sale, delivered to the patient only under expanded access or compassionate use presumably resulting in no payment on these batches of product.  For the second quarter of 2019, sales of Kymriah® have failed to meet the target.  As described in the reference about meeting specification (above), Novartis has seen two regulatory approvals to changes in manufacturing and/or product specifications which should help reign in some of these challenges, but they will still likely not be able to collect payment on 100% of batches produced.

The Kymriah® case study presented here highlights the disparity between what the fledgling regenerative medicine sponsors are experiencing, and what has been typical for small molecules and other drugs.  For instance, the Industry average batch failure is roughly one batch per year (primarily due to contamination).

Unique pricing strategies:

The hefty price tag associated with the approved cell and gene therapies is pretty well understood across the industry.  Here, we’re not talking about the prices in particular, but rather the unique payment strategies associated with the potentially curative nature of these therapies.  It is wonderful, for patients and their families, that they need-not be saddled with payments for a failed therapy, but these rebates, refunds, and money-back guarantees take time to negotiate and impact profitability of the drugs.

Payment Strategies for Recently Approval Cell and Gene Therapies



GSK, now Orchard Therapeutics

The first gene therapy to come with a money-back guarantee




Drug launched with outcome-based payments for ALL (this policy was not employed for DCBL) at some treatment centers meaning that the patient only pays for the therapy if their cancer goes into remission within 30 days



Kite, now Gilead

No publicly disclosed unique payment strategies



Spark Therapeutics, now Roche

Harvard Pilgrim (payer) pays in full for a treatment with Luxturna®, but is eligible for refunds or rebates if the treatment wears off


(formerly LentiGlobin)


Bluebird Bio

Initial payment plus installment plan, implication that up to 80% of payments may not materialize if the treatment is ineffective



AveXis, now Novartis

OneGene Program™ - comprehensive Zolgensma® treatment and support program including 5-year installation payments, similar to Zynteglo®, with offer of refund in the event of patient death or product failure

Dates shown are for first regulatory approval

Reimbursement challenges:

The insurance companies (payers, in the USA specifically) are sometimes unfamiliar with these products and struggle with how to reimburse for these pricey treatments.  Even once they iron out the challenges of how to provide and reimburse, they may be hesitant due to the risk of failure to reap the benefits of the investment.  The payers front the money, and the patient may move to another insurance company (for instance, due to a job change), and that new payer will get the health savings benefit (lack of chronic treatments) over many years. Also, the cost of the drug is in addition to the cost of hospitalization around drug administration that these rebate schemes don’t address.  And the 70% of patients who don’t get a cure get other treatments, which can lead to significant costs to payers. Therefore, the hesitancy by payers can result in a delay in product adoption.  For the patient, whom may have precious weeks to live, this can be a life or death predicament.  For market analytics, this can indicate an impairment in market penetration and/or sales ramp-up.

What are the partnering implications?

So there’s a second valley of death for some classes of products.  Does that mean that they can’t or won’t be commercially viable?  No.  Importantly, the word “currently” was used repeatedly in this analysis.  It is likely that as more of these products make it to the market, and as the products themselves improve through experience and competition, some of these challenges will resolve themselves.  Manufacturing challenges will be mitigated as experience is gained by manufacturers and newer manufacturing technologies become deployed into the commercial production of these therapies. 

We should consider this fragile time in the commercial trajectory of a product in thinking about terms for licensing deals.  In many term sheets for cell and gene therapy products there are milestones for BLA filing, regulatory approval, royalties on net sales, and sales milestones.  To ensure the commercial success for all parties, we should think about the potential for a slow ramp in sales and focus on “back-ending” the rewards - lest we promote a slide toward the Second Valley of Death which helps no one. Not all products are susceptible, and this consideration need not be applied unilaterally across licenses for technologies pertinent to all cell and gene therapies.  However, acknowledging the challenges associated with the commercial success of the first indication(s), currently, will help us all be better (and successful) partners, and “rise all of the boats” that these patients so desperately need.

Trevor: Averages - helpful but dangerous
Chris Morrison looked at deal trends and averages in his recent report. Report 

We think that deal averages are helpful but they do get heavily skewed by a few outliers, so medians are better.  And more importantly, these sorts of numbers (which we calculate all the time), are means or medians of things that can be highly varied.  A given average includes global deals as well as deals with very limited territorial rights.  The average might include an option where the upfront goes toward development prior to exercise of the license, or it might include a deal where there is a profit and cost share.  Or it might include a license for a formulation or just contributing IP.  Different things that merit different numbers but all get caught up in the averages.  

Looking at the huge variation, for preclinical licensing deals in 2018 and thus far in 2019, the median upfront is $5M and the median total is $73M.  But the range on the upfront is from $20,000 to $150M and the range on the total is from $20,000 to over $4B.  The great big deal includes the grant of equity and 5 preclinical molecules.  

So use the averages, but watch out for those error bars!!! 
www.Pullan Consulting.com

Pullan Consulting (www.PullanConsulting) provides advice and execution for biotech partnering and fund raising, with outreach to partners and investors, help with shaping of presentations, evaluations and market analysis, preliminary valuations and deal models, and negotiations from deal prep to term sheets to final agreements. 
We have extensive scientific and financial experience, with many deals signed. 

Send us an email or set up a call if you want to explore how Pullan Consulting might be of help!

Linda Pullan                     Linda@pullanconsulting.com 
Trevor Thompson             Trevor @pullanconsulting.com 
Jessica Carmen               Jessica@pullanconsulting.com 
9360 W. Flamingo Road, Suite 110-554 Las Vegas, NV 89147