The pharmaceutical industry has, of recent times, been subjected to constant and sometimes ground-breaking changes, and the challenge for firms now rests firmly on their ability to keep pace with the latest developments. One of the industry’s biggest challenges to date is an ageing population, and this trend has imposed costs on the sector not seen before, and has forced firms to focus on the management and prevention of chronic diseases. In the years spanning 1993-2010, the share of the scientific and engineering workforce over the age of 50 grew from 20 to 30 percent, and the continuation of this trend will no doubt ratchet up the pressures already weighing on pharmaceutical firms.
However, this is by no means the only – nor indeed the largest – problem facing pharmaceutical companies; the particulars of drug approval are doing a great deal to reduce profitability too. The bar has been set extremely high when it comes to the issue of regulatory approval, and cost effectiveness and transparency are of far greater importance today than they have been historically. In a world where oversight and unsustainable practices have cost pharmaceuticals in years past, the expectations are now far greater, and so too are the costs. In short, the steps before a product makes it to market are more complex and more costly than ever before.
Where firms in years past have focused on cheap, generic versions of branded drugs, niche products – or limited competition drugs – are now preferable
One of the more common methods of dealing with these challenges lies in consolidation, and – unsurprisingly – struggling firms have looked to deal-making as a means of weathering the storm. In just the opening half 2015, $221bn of pharmaceutical deals were concluded, as companies responded to growing investor pressure and shrinking opportunities. However, even with an M&A wave sweeping the globe, and much of the discussion focused on economies of scale, there is still a place for smaller, more nimble pharmaceutical companies. European CEO spoke to Jim Phillips, CEO of Midatech Pharma, about how the firm is positioned for growth and how the biggest opportunities rest with niche products.
A solid foundation
As a “nanomedicine company focused on the development and commercialisation of multiple, high-value targeted therapies for major diseases with unmet medical need”, Midatech is uniquely positioned to pass comment on the changing nature of the industry.
Phillips was appointed in May 2013, and has no less than 20 years of industry experience to his name. A physician by training, Phillips has held senior positions at Johnson & Johnson and Novartis Pharmaceutical, where he was director of the $1.3bn arthritis, bone, gastrointestinal, haematology and infectious diseases business unit, and later went on to found Talisker Pharma in 2004, which was the first acquisition of EUSA Pharma in 2006. As president of Europe and senior vice-president, corporate development of EUSA Pharma, Phillips led the strategy resulting in the acquisition of OPI and its ultimate acquisition by Jazz Pharmaceuticals in 2012.
Prior to joining Midatech, Phillips was chairman of Prosonix, guiding its transformation into a respiratory-focused business.
Phillips also enjoys support from Midatech’s chairman, Rolf Stahel, who has over 40 years of pharmaceutical industry experience, 20 of which were spent either at CEO or board level at private US, European and Indian life sciences companies, not least at Shire and Wellcome (now GlaxoSmithKline), where he was CEO.
“Midatech is advancing a pipeline of novel clinical and pre-clinical product candidates, based on its proprietary drug conjugate and sustained-release delivery platforms, with a clear focus on the key therapeutic areas of diabetes, cancer and neuroscience/ophthalmology”, states the firm’s website. “Midatech’s strategy is to develop its products in-house in rare cancers and with partners in other indications, and to accelerate the growth of its business through the strategic acquisition of complementary products and technologies.”
Triple threat
Although Phillips is of the opinion that the relatively small firm is positioned to make good on the current climate, this isn’t to say it has chosen not to indulge in the M&A spree sweeping the industry. “With the acquisition of Q-Chip and now DARA, Midatech is in full transition to become an oncology-focused specialty pharmaceutical business”, noted Phillips, who went on to speak about how the company’s business model comprises three components.
The first component centres mostly on partner products, using Midatech’s technologies in diabetes, oncology and neuroscience, whereas the second focuses more on its existing competencies, in orphan oncology, neuroscience and ophthalmology. The third, which is also being pursued by others in the industry, focuses on acquisitions, and the addition of Q-Chip and DARA fit into this category, enhancing the firm’s portfolio of oncology products while also giving the company access to a US sales force.
The company’s strategic focus on acquisitions shares much in common with its competitors, although there are a fair few areas in which Midatech differs greatly. First, a “robust collaborative and internal pipeline portfolio”, as Phillips put it, “positions Midatech for multiple shots on goal”. Another important part of the company’s strategy consists of two core technologies, designed to enable the controlled delivery of existing drugs at the right place and at the right time. The first attaches a drug compound to glycan-coated gold nanoparticles (GNPs), whereas the second encapsulates the drug compound within polymer microspheres. However, Phillips maintains that none of this would be possible without an excellent board and management team, which has repeatedly succeeded in creating value over time.
Leftfield tactics
These important foundations bring us to, arguably, the most important point of differentiation between Midatech and others in the industry: niche products. Speaking on the subject, Phillips noted that the company has a “broad pipeline” of products. In endocrinology, for example, it has Midaform Insulin, which is currently in the approval and site initiation phase, with reporting likely to surface in Q1 2016, and Q-Octreotide. In the cancer department, a gliobastoma treatment is currently undergoing candidate testing in-vivo. Midatech also offers solutions for the liver, and others in the central nervous system and ocular departments, including OpsiSporin, which reported positive results in a proof-of-concept in-vivo study for sustained release treatment of uveitis. These niche products, coupled with the aforementioned technologies, do much to differentiate Midatech’s products and services from those of its competitors.
Not content with its current standing, Midatech has a number of plans and indeed a comprehensive strategy in place to cement and build on its enviable position in the market. First, Phillips pointed out that the company is to undergo a full transition and become an oncology-focused specialty pharmaceutical business. Another aim, and one that has stood since the firm’s establishment, is to drive revenue growth through its own products and ensure additional products are licensed to partners.
A further, closely related target is to develop a more comprehensive clinical portfolio, though perhaps the most notable of the firm’s future plans lies with its search for attractive acquisition targets. The aim of the latter is to both enhance the value of the business and build on the transactions with Q-Chip and DARA. Phillips claimed that the acquisition criteria are threefold: first, targets must have a focus on oncology or other orphan indicators; they must be earning revenue or be in pivotal pre-registration studies; and they must also bring in sales and marketing infrastructure.
Where firms in years past focused on cheap, generic versions of branded drugs, niche products – or limited competition drugs – are now preferable, especially now many drugs are off-patent. Midatech’s focus on innovation, therefore, has been replicated by many firms of its size, although the degree of success is rarely as high.