the status of the regulatory and economic landscape for innovation in big pharma: commentary and...

The Status of the Regulatory and Economic Landscape for Innovation in Big Pharma:

Commentary and Financial Analysis

SC 48100

Spring 2007

Dr. Rudolph Navari

University of Notre Dame

--------------------------

Lindsay Meyer

[email protected]

of 39

mailto:[email protected]

TABLE OF CONTENTS Page

I. Frameworka. Executive Summary/Abstract 3b. Introduction 3-5c. Brief History of the FDA 5-6d. Discovery and Development Process

i. Preclinical Trials 6-7ii. Clinical Trials 7-8iii. The NDA & Review Process 8-9

e. Appraisal of the Current System 9-10

II. Key Players in the Branded Pharmaceutical Industry 10a. Pfizer 10-12b. Merck 12-14c. Abbott 14-15d. Wyeth 15-17e. Bristol-Myers 17-18

III. Competitorsa. Specialist Biotech firms 18-19b. Mid-cap 19-20c. Generic 20

IV. Financial Backgrounda. Trends in R&D Spending 20-22b. Relative Strength of each Pipeline 22-23c. Clinical Applications 23d. Economic Ramifications 23-25

Sources Used 26-28

Appendix1 New Drug Development Process 292 R&D Spending of Selected Firms Matrix 303 3 Year Spending Trends 314 2004-05 Percentage Change Graph 32

2005-06 Percentage Change Graph 33Overlay 34

5 Financial Statements 35-39

of 39

EXECUTIVE SUMMARY (ABSTRACT)

The purpose of engaging this topic is to: examine the current regulatory environment for

new drugs, gain an understanding of breakthrough innovation in pharmaceuticals, evaluate the

efforts of key players, and make projections about the future of this industry. As therapeutics

has evolved away from their theistic origins, natural products, synthetic chemistry, and

biopharmaceuticals have emerged. Yet many difficulties remain for this specialized industry.

The approval process for a new drug can take upwards of eight years and cost $800 million.

The progression from test tube to commercial distribution includes preclinical trials followed by

three phases of clinical (human) trials, marked by ongoing dialogue between the Food and Drug

Administration (“FDA”). Five of largest American pharmaceutical companies have intensified

their efforts in Research and Development (“R&D”) in recent years. But in a space marked with

competition from generic manufacturers and maturing biotech companies, understanding the

dynamics of this highly scrutinized market requires an awareness of the political and economic

climate these key players face. Where this industry is headed is much less clear than where it

is coming from. Careful analysis is one lens through which to examine all of these intricate

elements and is the focus of this research paper.

INTRODUCTION

So long as humans have existed, there has been disease. This trend is written

throughout history as humans began to congregate in settlements some 5000 years ago.1 The

Ebers papyrus is among the earliest records of diseases and subsequent remedies dating back

to 1550BC.2 At this time in history, the prevailing mindset was that gods inflicted illness as a

punishment for wrongdoing. Therefore, medicines were aimed to ameliorate relationships with

the gods and improve human conditions.

1 Rang 3 2 Rang 3

of 39

Fast forward several thousand years and we take note of the departure from the theistic

basis of medicine. A series of advances in the late 19th century spurred the creation of an

“industry.” Three factors fostered progress. First, basic scientific innovation helped medicine

evolve in the empirical sense. Second, synthetic organic chemistry and the development of a

chemical industry in Europe aided growth. Third, the rise of entrepreneurship sparked medical

supplies trade in America.3 In aggregate, these essential ingredients have pushed us towards

today’s landscape. More importantly, our contemporary taxonomic system focused on chemical

structure arose during this period.

There are three main sources of drugs. Natural products include antibiotics, atropine,

digoxin, ephedrine, insulin, opium alkaloids, and vaccines. Synthetic chemistry gave rise to

antiepileptics, antihypertensives, bronchodilators, diuretics, and local anesthetics. Synthetic

chemistry has accounted for the majority of new drugs since 1950.4 Finally, biopharmaceuticals

– human insulin, growth hormone, interferon and the like have emerged from recombinant DNA

technology.

Though this continuum has evolved significantly, the challenges faced in modern

medicinal treatments are increasingly complex. The current state of regulatory affairs aims to

protect the health of American citizens. But a plethora of existing literature suggests that the

bureaucratic red tape encountered with the FDA and exorbitant costs discourages new drug

development. Merrill Goozner’s 2004 work, The $800 Million Pill, attempts to expose some of

the major shortcomings surrounding the current regulatory system. His startling conclusion is

that the big pharmaceutical companies are economies of scale, well-suited for their work… but

profiting handsomely while medical infrastructure crumbles in the wake of ever-increasing costs.

So what measures will be required for a dramatic overhaul of the system? Based on the

lengthy evolution towards status quo, it is unlikely that sweeping changes are in store anytime

3 Rang 4 4 Rang 9

of 39

soon. Our best resource is knowledge. With an understanding of the “system” and the key

players in it, we become better equipped to navigate through the red tape to determine how

effectively the big companies are operating, particularly with respect to research and

development.

BRIEF HISTORY OF THE FDA

Many people would be surprised to learn that $0.25 of each consumer $1.00 spent is

tied to the FDA. Not only is this agency responsible for drugs, therapeutics and medical

devices, but it also patrols most food products, animal feed, and cosmetics.5 The 1906 passage

of the Federal Food and Drugs Act served as the official catalyst for the creation of the Bureau

of Chemistry. In July 1930, the name became as it is at present and in 1953, the Agency was

transferred from the Department of Agriculture to the Department of Health, Education and

Welfare. It was eventually transferred to its current home, the Department of Health and Human

Services upon the Department’s creation in 1980.

The political climate has been an influential factor in the FDA’s decisions in recent years.

Congress has passed laws which extend the patent term of drugs to compensate for the time

incurred in the review and approval process. They have also instituted specific procedures for

reimbursement to the FDA for review of drugs, helping to hasten the evaluation process.6

Congressional investigations coupled with external and internal committee reports have

probed into the agency's mission through much of the past century. Interestingly, many issues

which have which have polarized the American population come to light. These issues have

included sodium benzoate, sulfur dioxide, and other food preservatives during the Wiley era;

Banbar in the 1930s; aminotriazole-tainted cranberries in the 1950s; vitamins in the 1970s; and

5 Swann 6 Swann

of 39

breast implants in the 1990s.7 Despite much attention being drawn to these and other high

visibility cases, they are just a small fraction of the agency's efforts, but remain key contributors

to 20th century U.S. history.

DISCOVERY AND DEVELOPMENT PROCESS – PRECLINICAL TRIALS

Long before drugs land in the hands of consumers, numerous phases of tests (see

Appendix 1) are performed to ensure that only the safest and most effective compounds make it

to market. Current estimates suggest that a period of eight and a half years is required to test a

new drug.8 Even before clinical trials may commence on potential new drugs, sponsors –

generally pharmaceutical companies, must submit data that demonstrates the new compound is

safe to for use in small clinical studies. This requirement can be fulfilled by compiling existing

non-clinical data from past in vitro lab studies on the compound or by compiling data from

previous clinical tests of the compound in another country, characteristically similar to the US.

Another option is to launch new preclinical studies to provide evidence supporting the safety of

administering the compound to humans.9 During preclinical development, the FDA likes to

obtain a pharmacologic profile of the drug, toxicity results in two species of animals, and short-

term toxicity studies ranging from 2 weeks to 3 months.

Before clinical studies commence, there must be compelling evidence which

demonstrates the biological activity of the compound to be examined. An apt corollary is having

data which demonstrates the safety of the drug for human testing. Preclinical meetings are

conducted to open the communication lines about testing phases, data requirements, and

unresolved scientific issues.

Animal studies are generally punctuated and minimized to insure humane care. In

general, one rodent and one non-rodent species are tested to determine if there are differences

7 Swann 8 Center - Development 9 Center - Development

of 39

in how species react to the drug. Specific metrics obtained from animal studies include blood

absorption, toxicity, metabolites, and excretion.10 The initial phase of animal testing usually

lasts between two weeks and three months, with longer term testing continuing for several more

years. Animal testing often continues after human testing has commenced, to determine if there

are long-term birth defects associated with use. Animal testing forms the basis for clinical trials.

If early successes are demonstrated on animal subjects, the next course of study is with

humans.

CLINICAL TRIALS

Phase 1 clinical studies include the introduction of a new drug into humans. These

investigations are closely monitored and routinely rely on twenty to eighty healthy volunteer

subjects. The goal of this phase is to determine metabolic and pharmacologic actions of the

drug in humans. Any side effects associated with varying the dose are also studied. Being the

first step, the most emphasis is put on obtaining “sufficient information about the drug’s

pharmacokinetics and pharmacological effects” before moving forward with Phase 2 studies.

One possible outcome from Phase 1 is truncating the study due to safety reasons or failure to

disclose risks. It is significant to note that although CDER may offer advice in areas to the

sponsors, it may be disregarded so long as it does not pertain to patient safety. The more

hopeful of outcomes however, is approval to progress to Phase 2.

Phase 2 includes preliminary controlled clinical studies to gather data about the

effectiveness of a drug for a specific indication in patients with the disease or condition.11 This

step helps determine what side effects and risks are associated with the drug in the short term.

During this phase, tests are more tightly controlled tests are performed on several hundred

people. At the conclusion of Phase 2 testing, another series of meetings occur to determine

10 Center - Development 11 Schacter 104

of 39

eligibility for advancing to Phase 3. An agreement between the Agency and sponsor is drafted

to help outline the objectives and plan for particular studies. This process is meant to assist in

avoiding excessive expenditures by clarifying expectations. Optimal productivity is achieved at

this meeting when the sponsor submits protocols for Phase 3 studies, in advance of the end of

Phase 2 meeting.

Assuming that the sponsor has been granted license to proceed, Phase 3 includes

larger scale controlled and uncontrolled trials on several hundred to several thousand subjects.

The intent of this phase is to gain clarity around the benefit-risk relationship of the drug.12 An

adequate basis for extrapolating results to general populations is established and provides

information pursuant to physician labeling.

Similar to Phase 1, clinical holds can be imposed during Phase 2 or 3 if the study is

deemed unsafe. Additionally, deficient protocols and the failure to meet stated objects can also

be grounds for a dismissal. Though many factors come into play, diplomacy is exercised by

taking great care not to make such determinations in isolation, but in reference to current

scientific knowledge, and experiences with the design of clinical trials or similar drugs under

investigation.13

THE NDA AND APPROVAL PROCESS

Following the three phases of clinical trials, a pre-NDA meeting is held to discuss the

application. Information communicated by the sponsor at this meeting includes a summary of

the clinical studies and the proposed format for organizing and presenting the data.14 This

meeting also serves to help the review committee become acquainted with the information to be

submitted. Subsequent meetings may occur in the 90 days after the submission of the

application to resolve issues originally uncovered.

12 Schacter 147 13 Center - Development 14 Center - Development

of 39

The Center for Drug Evaluation and Research (“CDER”) is responsible for ensuring that

drugs are safe and effective.15 With a staff of 1,800 physicians, statisticians, pharmacists, and

chemists, this arm of the FDA does not test drugs but rather reviews each New Drug Application

(“NDA”). Pharmaceutical companies or the groups seeking to market the new drug must test it

and provide evidence regarding its safety and efficacy.

Beyond the CDER, Institutional Review Boards (“IRB's”) are utilized to ensure the rights

and welfare of those participating in clinical trials. The role of these boards is to make certain

that participants are fully informed and have given written consent before trials are initiated.16

IRB’s are monitored by the FDA with the sole purpose of protecting the welfare of participants in

medical research. They are generally composed of five or more experts and lay people with

diverse backgrounds, helping to ensure competence in professional conduct and practice.

APPRAISAL OF THE CURRENT SYSTEM

It is difficult to fathom just how costly the introduction of a new drug can be. It’s all

money… and big companies seem to have an endless supply of it. America benefits

significantly from having centralized policy-making in Congress, and a regulatory arm to protect

our health. It goes without doubt that there are flaws in the system and bipartisan discord is to

be expected. But deference to the government is in order for taking up these issues. For the

vast majority of the American public – uneducated in medicine or pharmacology, our lives

depend on the responsible decision making of those fit for the job.

The American system is one of the most sophisticated in the world. The lengthy process

of clinical trials converges to alphabet soup with NDA reviews by the CDER and IRB monitoring

but taking the long view demonstrates the necessity of maintaining bureaucratic elements.

Without the red tape, we would be a nation at risk. Further, a more thoughtful analysis also

15 Center - Application 16 Center - Development

of 39

reveals that we would be a world at risk without the FDA. Developing and stabile countries alike

depend on the United States to be a model for establishing and maintaining high standards for

human health.

KEY PLAYERS IN THE BRANDED PHARMACEUTICAL INDUSTRY

A comprehensive analysis of Research and Development (“R&D”) spending was

conducted for five large pharmaceutical companies: Pfizer, Merck, Abbott, Wyeth, and Bristol-

Myers. To make projections and draw conclusions from any raw data, it is essential that we

begin by broadly summarizing the state of each company’s research initiatives, including unique

opportunities as well as challenges and threats. This probe will allow for a better-informed

critique of capital allocations.

PFIZER

Beginning with the highest-revenue generating company, Pfizer is entering a new

generation with Jeff Kindler at the helms as Chief Executive and Chairman of the Board.

Kindler has outlined 5 “immediate priorities” which include: (1) Maximizing revenues in both the

short and long term, (2) Establishing a lower and more flexible cost basis, (3) Creating smaller,

more accountable operating units that will enhance innovation and draw on the advantages of

scale and resources, (4) Actively and more meaningfully engage with customers, patients,

physicians, and other collaborators to provide them with greater value, and (5) Making Pfizer a

great place to work.”17 Pfizer’s 2006 Annual Report boldly states, “Pfizer has considerable

strengths – talented, experienced and dedicated people, outstanding medicines, a promising

pipeline, strong financial resources, and unmatched scale.”18

17 Strong 5 18 Strong 4

of 39

This fanfare leaves something to be desired by way of research initiatives, but much of

the pomp and circumstance around meeting financial goals as delineated in the Annual Report

can be reduced to pleasing shareholders – the target audience. That said, Pfizer has

championed several recent additions to their portfolio of medicines including Lyrica for

neuropathic pain, Chantix for smoking cessation, and Sutent for cancer. Inhaled insulin under

the brand-name Exubera was released in 2006 as was Eraxis, an antifungal drug. In total,

Pfizer’s top nine medications grossed around $1 billion in 2006. Lipitor, the world’s best selling

drug, is Pfizer’s one true cash cow, and revenues from this drug were up 6%, year-over-year

between 2005 and 2006. Despite favorable research credits in over 100 clinical studies, this 6%

jump represents moderation from the previous year-over-year percentage change of +12%.

This pattern of exponential decay can feasibly be extrapolated as Lipitor’s exclusivity dwindles

and competition from other more cost-effective statin drugs cut into cash flows.

Loss of patent-protection of two important

drugs – Zithromax and Zoloft, was another hard hit

for the company in 2006. Both Zithromax

(azithromycin), and Zoloft (sertraline) are now

marketed and sold by generic drug makers. In

addition, closure of five research facilities does not

bode well for the future of research and development

at Pfizer. The lofty goal of “tripling the Phase III R&D

pipeline by the end of 2009, and then introducing four

new internally developed products each year

beginning in 2011”19 seems to require a substantial

commitment to research and cooperation with the

Figure 1 Pfizer’s Nine Therapeutic Areas

19 Strong 7

of 39

FDA. On the offensive, Pfizer claims that its current pipeline is the strongest in the firm’s history

and that its organizational structure, known as the “Therapeutic Area Model” is a sustainable

competitive advantage. This model reduces to nine Therapeutic Areas –

Cardiovascular/Metabolic/Endocrine, Oncology, Neuroscience, Infectious Disease, Pain,

Inflammation, Ophthalmology, Allergy/Respiratory, and Genitourinary – all representing unmet

medical needs (see Figure 1).20

As of January 2007, Pfizer’s pipeline included 131 compounds in Phase I trials, 37 in

Phase II trials, 5 in Phase III trials, and 4 in Registration. They also had 72 product-line

extensions, accounting for 249 total programs.21 Their leadership in tyrosine kinase inhibition

and DNA-based vaccines is promising in the treatment and prevention of disease. So is Pfizer

truly “working for a healthier world” as suggested by the company slogan? Status quo, all signs

point to yes.

MERCK

Merck has been the rock in a hard place since it voluntarily removed Vioxx from the

market in 2004. An appraisal of Merck’s 2006 Annual Report demonstrates their continued

commitment to the “Plan to Win,” an initiative unveiled by Chief Executive and Chairman Dick

Clark in the 2005 Annual Report. Situated amongst glitz and glamour about generating

shareholder value and developing flexible cost structures is plenty of useful information about

the progress the company is making on the R&D front. Five new products were launched in

2006. Gardasil, the cervical cancer vaccine has been hailed by TIME Magazine as one of

2006’s Inventions of the Year. With an estimated 50% of women becoming infected with human

papillomavirus during their lifetime and some 240,000 of them dying annually from cervical

cancer, the market for this drug is obviously large. This vaccine received public attention earlier

20 Strong 13 21 Strong 22

of 39

this year as Texas governor, Rick Perry issued an executive order mandating that the vaccine

be administered to all girls entering the sixth grade in the state as of September 2008.22 Texas

was not the lone state to make such moves. By February 2007, some 20 other states had

explored similar legislation. But on April 25, 2007, the Texas legislature overruled Perry’s

executive order, thereby forbidding mandatory vaccination until at least 2011. The conflict of

interest? Perry’s Chief of Staff is on Merck’s Texas lobbying team. Merck contributed $6000 to

Perry’s election campaign. Public drama aside, the vaccine has quickly been catapulted into

the national spotlight and offers protection from 70% of HPV-related cervical cancer cases.

Also on the vaccine front was the 2006 introduction of Zostavax, aimed at preventing

shingles and Rotateq, which offers immunity to the rotateq virus. Additional product launches

included Januvia, a treatment for Type 2 diabetes, and Zolinza, a treatment for cutaneous T-cell

lymphoma. In 2007, the company plans to file three NDA’s with the FDA for drugs like

raltegravir,, a promising first-in-class treatment for HIV infection; gaboxadol, a novel compound

to treat insomnia; and a compound that combines Merck’s own extended-release niacin with

laropiprant. This last compound, also known as MK-0524A, is expected to further help patients

manage cholesterol by decreasing LDL cholesterol, increasing HDL cholesterol and lowering

triglycerides.23

As of February 2007, Merck had 29 compounds in Phase I Clinical trials, 20 compounds

in Phase II trials, and 5 in Phase III. Three drugs were under review, Emend, Janumet, and

Arcoxia. Despite success in 2006 with five product approvals, Merck is off to a dismal start to

2007 with the rejection of Arcoxia on April 28, 2007. A letter to the company stated that they

“would need to provide additional data in support of the benefit-to-risk profile for the proposed

doses of Arcoxia in order to gain approval.”24

22 Carreyrou 23 Five 2 24 Dooren

of 39

The resilience of Merck in locating strategic opportunities in the osteoarthritis market in

the wake of the Vioxx catastrophe, demonstrates their resolve to rise above setbacks. As the

Vioxx lawsuits continue, Merck’s track record is now a respectable ten wins and five losses.25

Armed with skilled defense attorneys and cash flows from new drugs, the Vioxx legal battles

seem less of an impediment to their growth. It is possible that Merck will come to define the first

decade of the 21st century as one of their best, rather than one of their worst.

Figure 2 Abbott’s Key Business Areas

ABBOTT

Abbott Chief Executive and

Chairman Miles White had a busy but

productive 2006, overseeing the

acquisitions of both the former Guidant’s

vascular business and Kos

Pharmaceuticals. As a leader in the

broader healthcare market, Abbott

differs slightly from its purebred

pharmaceutical competitors. The company operates in three key business areas (see Figure 2)

including medical products, nutritional products, and pharmaceuticals. This diversified array of

products helps to normalize cash flows, with the potential of one business unit to act as a hedge

against another’s underperformance. This model, while not unheard of for companies in the

healthcare industry, has also contributed to firm-wide growth in revenues.

Humira is Abbott’s flagship biologic for the treatment of autoimmune disorders in which a

human protein, tumor necrosis factor (TNF), plays a role in disease progression. Humira is a

fully human monoclonal antibody that blocks TNF, reducing inflammation.26 The drug, a long-

25 Tesoriero 26 2006 Annual 35

of 39

term growth driver, is now being reviewed for it’s usefulness in treating Crohn’s disease. The

Humira pen, a one-touch, easy-to-grasp device that offers patients an easier way to self-

administer Humira was also recently launched. Abbott continues to study other indications for

which Humira could be effective including psoriasis, juvenile RA and ulcerative colitis. They

also expect to submit a new drug application for psoriasis in 2007.

Abbott’s pipeline is markedly weaker than that of Pfizer or Merck. It is also far less

publicized and required some digging around to find. A February 2007 presentation used at the

Merrill Lynch Healthcare Conference highlights early state programs in oncology, neuroscience,

and infectious disease. The Phase III trials of their psoriasis drug, are right on track and a NDA

will be filled for a controlled-release Vicodin in 2007, at the conclusion of Phase III testing.27

Opportunities in the statin market also exist and a compound which combines TriCor and

Crestor is also in Phase III testing. Simcor, a fruit of the Kos acquisition, is viewed as a “next

generation Niaspan”28 and also in late-stage clinical testing.

Despite over-reliance on Humira, Abbott is well-positioned in the short-term with many

effective compounds in Phase III clinical trials. However, they will need to continue working on

new projects to ensure that their consistent stream of new drugs continues to flow from pipeline

to patient.

WYETH

Wyeth had an excellent 2006, posting $1 billion in revenues each for six different

products. The company also made great strides in biotechnology, becoming the fourth largest

company in this more specialized field.29 Four NDA’s were filed and in January 2007, a

serotonin-norepinephrine reuptake inhibitor called Pristiq was approved. Wyeth currently

remains exclusivity rights for Effexor and Effexor XR, the world’s leading antidepressant

27 Freyman - Merrill 28 Freyman - Cowen 29 Leading 1

of 39

franchise.30 Prevnar, another Wyeth product is the world’s best selling vaccine with some 42

million doses manufactured in 2006.31 Despite recent press questioning the risk-benefit profile

of hormone therapy in women, the company’s Premarin sales were up 21% in the US last year.

It’s apparent that the company is experiencing “good times” and easily meeting its goal

of submitting two NDA’s each year. In the past six years, 75 new drug therapies have been

placed into development, with the majority having the potential to become first-or-best in class

therapies.32 The Wyeth pipeline can be isolated into six core areas: Women’s Health and Bone,

Vaccines and Infectious Disease, Neuroscience, Inflammatory Disease,

Oncology/Immunology/Hemophilia, and Gastrointestinal/Metabolic. Many compounds are being

reviewed for efficacy under multiple indications and research efforts eclipse small molecules,

biologics, and vaccines.33

Robert Essner, Chief Executive and Chairman, has a pet project of his own. His special

focus is working to combat Alzheimer’s disease. He recently articulated the scope of the

problem by saying, “I know of no disease in our country where more patients are waiting with so

much need and so little hope. It does not have to be so.”34 With 4.5 million sufferers, Essner

has passionately taken up the issue, engaging politicians and clinicians alike to encourage

additional research and accelerated and informed drug reviews.35

Seeking a sustainable competitive advantage of its own, Wyeth recently implemented its

Learn and Confirm paradigm for drug development. This system is a two-phase approach to

streamlining the traditional multiple phases of development. The effort places additional

emphasis on high-performing teams, quick and efficient decision making and improved clinical

trial designs.36 By partnering with a worldwide logistics provider, the company is also able to

30 Leading 2 31 Leading 2 32 Leading 7 33 Leading 4 34 Leading 27 35 Leading 5 36 Leading 4

of 39

accelerate the shipment of clinical trial materials. This approach to re-engineering the

development process will help Wyeth remain a formidable competitor for years to come.

BRISTOL-MYERS

Bristol-Myers was the only company to outwardly proclaim 2006 as a year of transition.

With the departure of Peter Dolan as Chief Executive, James Cornelius assumed the interim

position and was named permanent CEO on April 26, 2007.37 Their Annual Report began by

immediately addressing the concerns regarding Plavix and patent infringement by Apotex.

Making no effort to disguise the issues, Chairman James Robinson wrote, “Clearly, our Plavix

business – and the company’s financial strength and reputation – were seriously damaged by

this turn of events. It was a major setback that we sincerely regret.”38 Despite the problems with

Plavix, Bristol-Myers successfully launched four new products. Orencia treats rheumatoid

arthritis, Sprycel is a promising alternative for leukemia patients resistant to Gleevac, and Atripla

is a once-per day formulation of AIDS drug Sustiva.39 Licensing agreements with Somerset

Pharmaceuticals have also led the company to introduce EMSAM, a transdermal patch to help

combat depression in adults. Figure 3 Bristol-Myers’ pipeline

In the wake of setbacks

with Plavix, the company has been

aggressively pursuing the so

called pipeline within a product.

By expanding the range of

diseases which Erbitux and Abilify

are available to treat and

37 Lublin 38 Together 2 39 Together 2

of 39

introducing hepatitis-B drug Baraclude into Asia where the disease runs rampant, have all

helped to bolster the company’s financial health.

So what’s inside the Bristol-Myers bag of tricks? There are six compounds in Stage III

clinical trials (see “Life Cycle Management” in Figure 3) three of which are oncologic agents – a

historically strong area for the company. 40 However, it is evident that as the company

continues to struggle on a financial basis... a problem which has unfortunate consequences for

R&D efforts. Collaborations to co-develop were highlighted, enabling the company to “share

costs and risks.”41

SPECIALIST BIOTECH FIRMS

While the pure-play pharmaceutical companies continue making strides, the likes of

Amgen and Genentech have risen to an equally powerful status. In 2002, one third of all

research projects in clinical trials involved biopharmaceuticals.42 Making use of the “low

hanging fruit of the biotechnology revolution,” Amgen was the first to package a recombinant-

engineered version of erythropoietin, the enzyme produced in the kidney which signals bone

marrow to manufacture red blood cells.43 Yet recent problems with these drugs have arisen for

Amgen, and mandates from the FDA to include the “black-box warning” about using the lowest

possible dose44 have led many speculators to believe that the company is experiencing growing

pains.

Amgen has continually typified success. An investment of $100 in 1980 was worth $1.5

million at the height of the tech boom in 2001.45 The company landed applause from Forbes –

as the Company of the Year in 2004. But as Marilyn Chase of the Wall Street Journal writes,

“Amgen has arrived as a big pharmaceutical company – and now confronts some of the same

40 Together 3 41 Together 3 42 Lednicer 325 43 Goozner 2 44 Harper 45 Goozner 2

of 39

problems as Pfizer Inc. or Merck & Co. Among them: heavy reliance on a few blockbusters, an

uncertain pipeline of new drugs despite heavy research spending, questions about safety and

marketing and, recently, the prospect of competition from generics makers.”46

While it certainly is not fair to frame the mega-cap pharmaceutical titans as failures, the

article helps to illustrate an important point. The press has all but reduced big pharma as

robber-barons of the 21st century; gouging consumers, and contributing to the major

shortcomings of the United States healthcare system. Assuming this to be true, the rise of

biotech firms into companies which become characteristically similar to the biggest names in

pharmaceuticals, while exciting, is alarming in it’s own regard.

MID-CAP FIRMS

Also worth mentioning are the Sepracor’s of the world… high-potential drug makers with

specialized niches. For Sepracor, there is dominance in the insomnia market with Lunesta and

the asthma/COPD markets with Xopenex. But with just four products47 in its pipeline, it can’t

reasonably expect to rise to blue chip status without large capital injections or strategic

acquisitions. In the middle of 2006, there was speculation that Pfizer was contemplating making

a stab at Sepracor, but the rumors never materialized. Sepracor continues to gain brand

recognition and market share with Lunesta – whose revenues skyrocketed 31% between 2005

and 2006.48

For Sepracor and other firms in this mid-market genre, a suitable exit strategy is sale to

a larger company with the resources to help market and distribute the drug on a global basis.

However, it’s worth mentioning that valuable scientific innovation is fostered at smaller

pharmaceutical companies. They play an important role in focused and specialized drug

development, likely benefiting society more broadly than most people recognize by taking a

46 Chase 47 Products 48 Gaining

of 39

disciplined and careful approach to drug development. Other companies that fit this archetype

include Gilead Sciences, Invitrogen Corp., and MedImmune.

GENERIC COMPETITORS

Each year, an average of 22 drugs loses patent protection.49 Commercial sales of

branded drugs generally fall to half their peak by six years after patent expiration and approach

zero at twenty years from expiration.50 The major advantage to being in the generic drug

industry is that the initial investment in research and development is forgone completely

because the technology has already been brought to market. To retain a competitive edge,

many drug makers have shifted their efforts into evaluating existing drugs feasibility for

treatment of other conditions than currently approved and marketed for. Successfully

demonstrating that a compound is capable of treating other conditions is grounds for extension

of exclusivity rights for the sponsoring organization.

For most consumers, the availability of generic drugs helps to diffuse high healthcare

costs. Consequently, generic drug manufacturers have gained prominence and popularity with

the public. This competitive pressure has steered many pharmaceutical companies towards

pioneering studies to examine the efficacy of existing products at treating other diseases. This

is all in hopes of retaining patent exclusivity in the shadow of heightened generic competition.

Unfortunately, by and large this practice is futile. It is an irresponsible use of shareholder

dollars, and a negative externality of the free-market system.

TRENDS IN R&D SPENDING

In an industry where 70% of profits are generated by 20% of the drugs marketed, there

is a huge incentive to discover the next blockbuster drug – one which generates more than $1

49 Lednicer 322 50 Scacter 203

of 39

billion in annual sales. Between 1982 and 1998, US-based companies’ spending on R&D

efforts jumped from $5 billion to $40 billion.51 At present, approximately 15-20% of total sales

are reinvested into R&D, a percentage higher than any other industry. Of this spending, a full

third is committed to discovery, two-fifths to preclinical and clinical development, and the

balance to regulatory and miscellaneous expenses.52 Surprisingly, there has been a movement

away from cardiovascular disease, even as rates continue to spiral upwards. The priority

spending areas have been in treatments for metabolic disorders and cancer.

For the past three years, Merck has been the most aggressive spender (see Appendix 2)

among the comp group studied. Merck pumped a record-setting 21.6% of total revenue into

R&D in 2006. Abbott has been somewhat of the anomaly, allocating a smaller percentage

(≤10%) annually. However, Abbott operates three business segments and R&D efforts on the

pharmaceutical front are only one third of their overall investment in research. It is impossible to

position the spending trends of the studied firms on a spectrum. Individual circumstances and

preferences fluctuate each year, such that no singular company is likely to retain the top

position for a longer time horizon.

R&D spending in 2006 was higher than that of 2004 for all companies studied (see

Appendix 3). Three companies, Merck, Wyeth, and Bristol-Myers spent a greater percentage

each year. Two companies, Pfizer and Abbott decreased spending between 2004 and 2005,

then increased spending between 2005 and 2006 – to a higher margin then that of the decrease

subsequently spending a greater percentage in 2006 than 2004.*

Another useful method for displaying these spending habits is to examine year-over-year

percentage changes of the raw amount spent by each firm (see Appendix 4). Between 2004

and 2005, both Pfizer and Merck spent less overall dollars on R&D, despite spending as a

51 Lednicer 312 51 Lednicer 312 *The liability in using percentage of total revenue as a basis for benchmarking spending is that total revenue also fluctuates. Therefore, our analysis becomes skewed as revenue rises and falls. But on an absolute basis, comparisons are no more effective because of differences in size between firms. Ratios, while not free from error, are the most effective tool in comparative financial analysis.

of 39

percentage of total revenue remaining flat. Between 2005 and 2006, all five companies spent

higher amounts, with Pfizer still lagging and Merck jumping 24.3%. The other mover and shaker

during this period was Abbott who made a swing of its own, from a modest 7.3% increase to a

23.8% increase. An overlay of these percentage changes is provided in Appendix 4 and

illustrates the magnitude of these oscillations.

While this data is telling, it only represents a snapshot of the bigger picture, because of

the condensed time horizon. Three years is hardly representative of anything, especially given

that the broader economic conditions during these years went relatively unchanged. Still, the

nagging question remains. Does being the most aggressive financier of research efforts always

yield the highest payoffs?

RELATIVE STRENGTH OF PIPELINE

An appraisal of each company’s pipeline is one method for determining the fruits of

research investments but is far from perfect. With five glossy Annual Reports each claiming to

have the “best” or “strongest” pipeline, finding fact from fiction is a task of its own.

Quantitatively, Pfizer’s 249 said programs far exceed that of any of its closest competitors. In

this numbers game where so many compounds will fail at each subsequent level of testing,

having more compounds to start with is a true advantage. Yet the benefits of being big will not

pay off for several more years. Just because Pfizer’s pipeline is the most well endowed today,

does not mean that it is the leader in the field today. Investments in R&D serve as a bellwether

for current financial health, but are also one of the strongest predictors of future franchise

success.

Pfizer’s market capitalization gives it a special advantage. On an efficiency basis, the

likes of Merck and Abbott are doing just as well given their size and scale. At a certain

threshold, the law of diminishing marginal returns will also become a factor, reducing the yield

on subsequent inputs. With fixed parameters (employees, laboratory space, and capital)

of 39

pharmaceutical companies are only capable of set levels of R&D activity. Therefore, making

prudent decisions and managing multiple projects is critical.

PROBABLE CLINICAL APPLICATIONS

Domestically there will surely be a heightened emphasis on individualized medicine

going forward. As biopharmaceuticals establishes a firm place within healthcare, technology will

likely reflect the demand for it. This is notable because the framework established to ensure the

quality, safety, and efficacy or conventional synthetic drugs is not entirely appropriate for

biopharmaceutical products.53 Preventative medicine also continues to gain popularity and with

the rise of this trend has come increased interest in vaccines. Particularly for developing

nations, such products will deliver immunity from simple diseases, furthering the prospects for

global industrial development.

New medicines will be necessary to combat problems like obesity which have continued

rising to an epidemic proportion. As diagnostic capabilities improve, so will the ability of drug

companies to treat these conditions. We may still be years away from the magic bullet for

cancer or AIDS, but the effort continues on the research front. To our advantage, as the

amount of research data compounds almost exponentially, new treatments can be developed

more efficiently.

BROADER ECONOMIC RAMIFICATIONS

Having vigorously explored the landscape for pharmaceutical innovation, it is clear that

markets provide some tremendous advantages. A fair and just evaluation of the industry

requires much deference to the progress which has been made on multiple fronts – from the

regulatory end to the clinical front. Taking a more disciplined view requires one to become an

advocate of a particular party. Framing this analysis from different perspectives leads to vastly

53 Lednicer 290

of 39

different conclusions. Assuming the role of policy-maker is completely different from the role of

a patient, a clinical research director, or even a top executive at a major pharmaceutical

company. But policy-makers, clinical research directors and even top executives have all been

a patient requiring treatment for an illness or injury at one time or another. From this

perspective, we can all laud the innovative breakthroughs which have helped to drastically

improve the quality of life.

Still, challenges remain. A recent showdown between the Thai government and Abbott

Laboratories underscores the conflicts that remain for pharmaceutical companies hoping to

profit by introducing drugs in developing countries. The government, striving to act in the best

interest of its citizens informed Abbott that the patent on their costly Kaletra AIDS medicine

would be broken. This would allow Thailand to produce or import cheaper versions of the drug.

Abbott fought back by announcing in March 2007 that they would halt the introduction of new

drugs in Thailand. This brought a surge of unrest by activists and a crescendo of bad publicity.

By April 24, 2007, Abbott had reversed its decision saying that it would introduce Kaletra in

Thailand, if the government respects its patent. Perhaps Thailand is a poor example of the

friction between government and drug companies due to its recent coup. Some pharmaceutical

executives question the actions of government in the wake of this takeover, suggesting that the

government is only trying to win the favor of citizens.54

Who wins in this mess? Most people would concede that the dynamics of the current

system are not accommodative to patients. But is it the blue chip behemoths themselves that

live lavishly off of their one-hit wonders? The business cycle suggests that continued growth is

not always possible and that in time, even the best-positioned of companies will experience a

downturn. Competition will always remain a powerful contingent as well but generic alternatives

generally do not often become an option until many years after a new drug is introduced.

Protecting the interests and investments of the major drug manufacturers remains important.

54 Hookway

of 39

Without the incentive to produce, scientific innovation might stall, leaving patients behind. For

this reason, there is still careful work to be done. Who will ultimately be responsible is not

strictly black and white but to fully address the US healthcare crisis, pharmaceutical reform of

some scale will be absolutely essential.

of 39

SOURCES USED

2006 Annual Report. Abbott Laboratories.

<http://www.abbott.com/global/url/content/en_US/70.10.20:20/general_content/General_

Content_00125.htm>.

Center for Drug Evaluation and Research. “Drug Approval Application Process.” 2006. US

Food and Drug Administration. 11 Apr. 2007

<http://www.fda.gov/cder/regulatory/applications/default.htm>.

Center for Drug Evaluation and Research. “The New Drug Development Process.” 21 Feb.

2007 <http://www.fda.gov/cder/handbook/>.

Dooren, Jennifer Corbett. “U.S. Regulator Rejects Merck Drug.” Wall Street Journal. 28 Apr.

2007 < http://online.wsj.com/article/SB117768083169584816-

search.html?KEYWORDS=merck+arcoxia&COLLECTION=wsjie/6month>.

Carreyrou, John and Rubenstein, Sarah. “Merck Ends Lobbying for Cervical Cancer Vaccine.”

Wall Street Journal. 2 Feb. 2007

<http://online.wsj.com/article/SB117200727319814015-

search.html?KEYWORDS=texas+gardasil&COLLECTION=wsjie/6month>.

Chase, Marilyn. “Amgen’s Star Fades Amid Safety Questions.” Wall Street Journal. 10 Apr.

2007. <http://online.wsj.com/article/SB117616926211164674-

search.html?KEYWORDS=amgen&COLLECTION=wsjie/6month>.

“Five Patients, Five Lives, Five Breakthroughs.” 2006 Annual Report. Merck & Co.

<http://phx.corporate-ir.net/phoenix.zhtml?c=73184&p=irol-reportsannual>.

Freyman, Thomas. “Cowen Healthcare Conference.” Presentation. 14 Mar. 2007

<http://library.corporate-ir.net/library/94/940/94004/items/235754/cowen0307.pdf>.

Freyman, Thomas. “Merrill Lynch Healthcare Conference.” Presentation. 7 Feb. 2007

<http://library.corporate-ir.net/library/94/940/94004/items/230382/ML0207071.pdf>.

of 39

http://www.fda.gov/cder/regulatory/applications/default.htm

http://www.fda.gov/cder/handbook/

http://online.wsj.com/article/SB117768083169584816-search.html?KEYWORDS=merck+arcoxia&COLLECTION=wsjie/6month

http://online.wsj.com/article/SB117768083169584816-search.html?KEYWORDS=merck+arcoxia&COLLECTION=wsjie/6month

http://online.wsj.com/article/SB117616926211164674-search.html?KEYWORDS=amgen&COLLECTION=wsjie/6month

http://online.wsj.com/article/SB117616926211164674-search.html?KEYWORDS=amgen&COLLECTION=wsjie/6month

Gaining Momentum.” 2006 Annual Report. Sepracor Inc. < http://phx.corporate-

ir.net/phoenix.zhtml?c=90106&p=irol-reports>.

Goozner, Merrill. The $800 Million Pill: The Truth Behind the Cost of New Drugs. Los Angeles:

University of California Press, 2004.

Harper, Sean and Kamin, Marc. “Important Drug Warning and New Prescribing Information.”

2007. Amgen. 28 Mar. 2007

<http://wwwext.amgen.com/pdfs/misc/healthcare_professionals_letter.pdf>.

Hookway, James and Zamiska, Nicholas. “Thai Showdown Spotlights Threat to Drug Patients.”

Wall Street Journal. 24 Apr. 2007

<http://online.wsj.com/article/SB117735181629579246-

search.html?KEYWORDS=thailand+abbott&COLLECTION=wsjie/6month>.

“Leading the Way to a Healthier World.” 2006 Annual Report. Wyeth. <http://phx.corporate-

ir.net/phoenix.zhtml?c=78193&p=irol-reportsannual>.

Lednicer, Daniel. New Drug Discovery and Development. Hoboken: John Wiley & Sons, Inc.,

2007.

Lublin, Joann and Rubenstein, Sarah. “Bristol will name Cornelius CEO.” Wall Street Journal.

26 Apr. 2007 < http://online.wsj.com/article/SB117751174939782051-

search.html?KEYWORDS=bristol+myers&COLLECTION=wsjie/6month>.

“Products and Pipeline.” 2006. Sepracor. 28 Mar. 2007

<http://www.sepracor.com/products/index.html>.

Rang, H P. Drug Discovery and Development: Technology in Transition. Edinburgh: Elsevier,

2006.

Schacter, Bernice. The New Medicines: How Drugs are Created, Approved, Marketed, and

Sold. Westport: Praeger Publishers, 2006.

“Strong Medicine – Our Prescription for Change.” 2006 Annual Report. Pfizer, Inc.

<http://www.pfizer.com/pfizer/are/investors_reports/index.jsp>.

of 39

http://online.wsj.com/article/SB117735181629579246-search.html?KEYWORDS=thailand+abbott&COLLECTION=wsjie/6month

http://online.wsj.com/article/SB117735181629579246-search.html?KEYWORDS=thailand+abbott&COLLECTION=wsjie/6month

Swann, John P. “History of the FDA.” US Food and Drug Administration. 20 Mar. 2007

<http://www.fda.gov/oc/history/historyoffda/default.htm>.

Tesoriero, Heather. “Vioxx Federal Trial – Three’s a Charm?” Law Blog. 2007. Wall Street

Journal. 24 Apr. 2007. <http://blogs.wsj.com/law/?mod=home_law_left&paged=2>.

“Together We Can Prevail.” 2006 Annual Report. Bristol-Myers Squibb.

<http://investor.bms.com/phoenix.zhtml?c=106664&p=irol-reportsannual>.

of 39

APPENDIX 1 – NEW DRUG DEVELOPMENT PROCESS55

55 http://www.fda.gov/cder/handbook/develop.htm

of 39

http://www.fda.gov/cder/handbook/develop.htm

APPENDIX 2 – R&D SPENDING OF SELECTED FIRMS

R&D Spending of Selected Pharmaceutical Firms, 2004 – 2006(Percentage of Total Revenue)

2004 2005 2006

17.5%

14.6%

14.2%

12.9%

8.6%

17.5%

14.7%

14.5%

14.3%

8.2%

21.1%

17.1%

15.7%

15.3%

10.0%

of 39

APPENDIX 3 – THREE YEAR SPENDING TRENDS

3 Year Spending Trends

14.6%

17.5%

8.6%

14.2%

12.9%

14.5%

17.5%

8.2%

14.7% 14.3%

15.7%

21.1%

10.0%

15.3%

17.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Pfizer Merck Abbott Wyeth Bristol-Myers

PFE MRK ABT WYE BMY

Firm and Ticker

Spen

ding

as

a Pe

rcen

tage

of T

otal

Rev

enue

2004 2005 2006

of 39

APPENDIX 4A – PERCENTAGE CHANGE 2004 – 05

Change in R&D Spending: 2004-05

-3.1%

-4.0%

7.3%

11.7%

9.8%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%


PFE MRK ABT WYE BMY

Firm and Ticker

Year

-ove

r-Ye

arPe

rcen

tage

Cha

nge

of 39

APPENDIX 4B – PERCENTAGE CHANGE 2005 – 06

Change in R&D Spending: 2005-06

2.1%

24.3% 23.8%

13.1%11.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%


PFE MRK ABT WYE BMY

Firm and Ticker

Perc

enta

ge C

hang

e

of 39

APPENDIX 4C – PERCENTAGE CHANGE OVERLAY

Change in R&D Spending

-3.1%-4.0%

7.3%

11.7%9.8%

2.1%

24.3% 23.8%

13.1%11.7%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%


PFE MRK ABT WYE BMY

Firm and Ticker

Perc

enta

ge C

hang

e

2004-05 2005-06

of 39

APPENDIX 5A

Pfizer Inc.

Statement of Profit & Loss56

Calendar Years 2004 - 06

PERIOD ENDING 31-Dec-06 31-Dec-05 31-Dec-04Total Revenue 48,371,000 51,298,000 52,516,000Cost of Revenue 7,640,000 8,525,000 7,541,000 Gross Profit 40,731,000 42,773,000 44,975,000

Operating ExpensesResearch Development 7,599,000 7,442,000 7,684,000Selling General and Administrative 15,589,000 16,997,000 16,903,000 Non Recurring 2,158,000 3,044,000 2,264,000 Others 3,261,000 3,409,000 3,364,000

Total Operating Expenses 28,607,000 30,892,000 30,215,000

Operating Income or Loss 12,124,000 11,881,000 14,760,000

Income from Continuing OperationsTotal Other Income/Expenses Net 1,392,000 124,000 -406,000

Earnings Before Interest And Taxes 13,516,000 12,005,000 14,354,000 Interest Expense 488,000 471,000 347,000 Income Before Tax 13,028,000 11,534,000 14,007,000 Income Tax Expense 1,992,000 3,424,000 2,665,000 Minority Interest -12,000 -16,000 -10,000

Net Income From Continuing Ops 11,024,000 8,094,000 11,332,000

Non-recurring EventsDiscontinued Operations 8,313,000 16,000 29,000 Extraordinary Items - - - Effect Of Accounting Changes - -25,000 - Other Items - - -

Net Income 19,337,000 8,085,000 11,361,000

Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares $19,337,000 $8,085,000 $11,361,000

56 Data from CaptialIQ

of 39

APPENDIX 5B

Merck & Co.




Operating ExpensesResearch Development 4,782,900 3,848,000 4,010,200Selling General and Administrative 8,165,400 7,155,500 7,346,300 Non Recurring 142,300 322,200 - Others - - -

Total Operating Expenses - - -


Income from Continuing OperationsTotal Other Income/Expenses Net 878,300 2,334,600 1,352,200

Earnings Before Interest And Taxes 6,596,500 7,749,400 7,974,500 Interest Expense 375,100 385,500 - Income Before Tax 6,221,400 7,363,900 7,974,500 Income Tax Expense 1,787,600 2,732,600 2,161,100 Minority Interest -120,500 -121,800 -


Non-recurring EventsDiscontinued Operations - - - Extraordinary Items - - - Effect Of Accounting Changes - - - Other Items - - -

Net Income 4,433,800 4,631,300 5,813,400 Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares $4,433,800 $4,631,300 $5,813,400


of 39

APPENDIX 5C

Abbott Laboratories




Operating ExpensesResearch Development 2,255,271 1,821,175 1,696,753Selling General and Administrative 6,349,685 5,496,123 4,921,780 Non Recurring 2,014,000 17,131 279,006 Others - - -



Income from Continuing OperationsTotal Other Income/Expenses Net 174,512 499,007 376,367

Earnings Before Interest And Taxes 2,692,542 4,861,275 4,274,687 Interest Expense 416,172 241,355 149,087 Income Before Tax 2,276,370 4,619,920 4,125,600 Income Tax Expense 559,615 1,247,855 949,764 Minority Interest - - -


Non-recurring EventsDiscontinued Operations - - 60,015 Extraordinary Items - - - Effect Of Accounting Changes - - - Other Items - - -

Net Income 1,716,755 3,372,065 3,235,851 Preferred Stock And Other Adjustments - - -

Net Income Applicable To Common Shares $1,716,755 $3,372,065 $3,235,851 58 Data from CaptialIQ

of 39

APPENDIX 5D

Wyeth


Calendar Years 2004 – 06


Operating ExpensesResearch Development 3,109,060 2,749,390 2,460,610Selling General and Administrative 6,501,976 6,117,706 5,799,791 Non Recurring - - 4,500,000 Others - - -


Operating Income or Loss 5,151,768 4,457,494 -349,642


Earnings Before Interest And Taxes 5,928,751 5,137,423 -19,542Interest Expense 498,847 356,834 110,305 Income Before Tax 5,429,904 4,780,589 -129,847Income Tax Expense 1,233,198 1,124,291 -1,363,844Minority Interest - - -


Non-recurring EventsDiscontinued Operations - - - Extraordinary Items - - - Effect Of Accounting Changes - - - Other Items - - -

Net Income 4,196,706 3,656,298 1,233,997

Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares $4,196,706 $3,656,298 $1,233,997


of 39

APPENDIX 5E

Bristol-Myers Squibb60

Statement of Profit & Loss



Operating ExpensesResearch Development 3,067,000 2,746,000 2,500,000Selling General and Administrative 6,270,000 6,619,000 6,427,000 Non Recurring 161,000 -268,000 267,000 Others - - -




Earnings Before Interest And Taxes 3,133,000 4,516,000 4,418,000 Interest Expense 498,000 - - Income Before Tax 2,635,000 4,516,000 4,418,000 Income Tax Expense 610,000 932,000 1,519,000 Minority Interest -440,000 -592,000 -521,000


Non-recurring EventsDiscontinued Operations - 8,000 10,000 Extraordinary Items - - - Effect Of Accounting Changes - - - Other Items - - -

Net Income 1,585,000 3,000,000 2,388,000 Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares $1,585,000 $3,000,000 $2,388,000


of 39

the status of the regulatory and economic landscape for innovation in big pharma: commentary and...

Health & Medicine