August 6, 2011

Reviews from the Industry by Joachim Greuel

Written on August 6, 2011 by blended.team in MBM News, News, Pharma Industry

Reviews from the Industry: Today, our academic director Joachim Greuel sets the focus on Biotech Stocks and the relevance of pricing decisions in the Companies.

 Biotech Stocks Vulnerable to Economic Concerns 

Biotech Stocks

 Last Thursday, 4 August 2011 the NASDAQ Biotechnology and the AMEX Biotechnology indices lost 8% and 11%, respectively, while the AMEX Pharmaceutical index fell only 4%. The last time a similar downturn was observed was in 2008.

This demonstrates, once more, that biotech stocks with highly volatile cash flows are more vulnerable to the general economic environment than stocks of more established firms.

While this may not come as a surprise, some biotech companies suffer more from general market conditions than others.

As a consequence, management should design strategies to minimize volatility as much as possible, also in order to reduce its cost of capital.

 In our MBM courses we will discuss strategies how this may be accomplished.

Dendreon Falls 67% After Lower Than Expected Provenge Sales

Dendreon Case

 Last  Thursday, 4 August 2011, Dendreon stock fell 67% (by $24.15 to $11.69) after the company reported a lower than expected uptake of its recently (April 2010) approved cancer cell therapy Provenge.

As Provenge is the first available autologous cellular immunotherapy against cancer worldwide, the stock has received significant attention. It is believed that the therapy’s high price prevents a rapid market penetration. Although the US federal agency CMS has determined that Medicare will reimburse the therapy that costs over $90,000.-, the therapy’s cost-effectiveness has been questioned as it extends life by no more than four months, on average.

The Dendreon case demonstrates the importance of  pricing decisions: innovative therapies that do not demonstrate a clear cost-effectiveness will penetrate the market much slower than they would with a shown, undisputable pharmacoeconomic benefit. Thus, pricing decisions are no longer solely driven by market studies such as conjoint analyses, but also by outcomes research. Biotech managers that often tend to focus on R&D should think about pharmacoeconomics; the likelihood of a good licensing deal, for example, also depends on pharmacoeconomic aspects 

Comments

Claire Bastien August 11, 2011 - 6:53 pm

Hi Joachim
Very interesting information. Thank you very much for the update
I cannot agree more that the key point is to demonstrate value for money. This is essential in Europe as Health system is quite different from the US health system and is universal, financed by the governments (and our taxes). The situation is becoming worse as the economic crisis is again putting pressure on state expenses and debt. A lot of measures are being taken not only by the British NHS to increase cost-containment and drastically reduce health costs but also by all European countries requiring for new drugs, medical devices and any medical intervention to support filing P & R with cost-effectiveness and quite soon cost-efficiency data .

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