Role of Small and Medium-Sized Enterprises and Partnering in Drug Innovation

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Role of Small and Medium-Sized Enterprises and Partnering in Drug Innovation

Abstract

Objectives: This project aims to investigate the role of small- and medium- sized enterprises and collaboration in drug innovation.

Background Information: The drug innovation process has been stagnant in the recent years.

Understanding the factors that can facilitate drug innovation can help us understand how to improve NAS discovery.

Methods: We created a database containing NASs of human use based on EMA Annual Annexes between 2014-2019 along with additional information on these substances.

Additional information about NASs included their previous approval status, therapeutic area based on ICD-10 guidelines, orphan status, scientific advice applications, and whether the NAS is a new chemical entity or a biopharmaceutical agent. NASs were categorized into two major groups based on whether they were self-originated or acquired.

Results: Between 2014-2019, the CHMP evaluated 247 NASs of human use, of which 55,9%

were self-originated, and 44,1% were acquired. 113 NASs originated from small-sized enterprises, 35 from medium-sized enterprises, and 99 from large pharmaceutical companies.

Discussion: According to our results, SMEs discovered more NASs than big pharmaceutical companies. Big pharma, however, showed to have more in-licensing deals than SMEs. There are several theoretical reasons for this phenomenon, including interest in the potential

product, and preferences of SMEs for larger upfront payment.

Conclusion: SMEs contribute greatly to drug innovation, especially when it comes to orphan drugs and biopharmaceuticals. To improve communication between SMEs and the agency, it is encouraged to engage in frameworks, such as the PRIME scheme, to enhance support for development of medicines for unmet medical needs.

Keywords: drug evaluation, European Medicines Agency, New Active Substances Student: Aleksandra Bezhanyan

Student Number: 5912652

Date: February 2020-May 2021 (9-month internship, delayed due to circumstances) Master’s Program: Drug Innovation

Supervisor: Prof. Bert Leufkens

Examiners: Prof. Bert Leufkens and Prof. Aukje Mantel-Teeuwisse

Organization: Department of Pharmacoepidemiology and Clinical Pharmacology Utrecht Institute for Pharmaceutical Sciences

Utrecht University

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Table of Contents

Abstract...1

Introduction...3

Methods...4

Data Sources...4

Analysis Methods...5

Variables...5

Independent Variables...5

Dependent variables...6

Results...7

NAS Characteristics, Originator Analysis...7

Acceptance Rates, MAA Outcome Analysis...8

NAS Flow, in and out Licensing Deals...14

Discussion...16

Previous Results on SMEs Role in Drug Innovation...19

SMEs during COVID-19...20

Limitations and Future Implications...20

Conclusion...21

References...22

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Introduction

Drug innovation has the potential to meet the patients’ needs and improve their overall quality of life. Studies show that access to healthcare results in a longer life expectancy, and standard of life1. In 1960s, Mikhail Chumakov and Ambert Sanin developed the attenuated oral polio vaccine (OPV). The OPV, in combination with previously approved Salk vaccine, had the potential to eradicate poliomyelitis-a potentially deadly uncurable viral disease. If not prevented, polio could lead to muscle paralysis and death. The OPV vaccine showed a higher efficacy rate when compared to the previously available inactivated Salk vaccine2,3. In 1988, the global polio eradication initiative (GPEI) launched, which aimed to eradicate wild-type polio. During the eradication process, they have used the OPV, which resulted in near eradication of polio in the modern world. After the launch of GPEI, the mortality rates of polio have decreased from an estimated 350,000 in 1988 to approximately 500 by 20014. Not only the development of OPV reduced the occurrence and mortality, but it was also a very cost-effective initiative, which lifted economic burden from healthcare systems5. This case study shows how advances in drug innovation increase the healthcare system’s potential to benefit patients and clinicians, by therefore highlighting the importance of drug innovation.

However, drug innovation has become stagnant in the recent decades6. The reasons for this innovative deficit are multidimensional, and not fully explored. However, factors, such as high risk of Marketing Authorization Application (hereafter MAA) failure is one of the core reasons for this stagnation7. In addition to the developmental deficit, drug development costs have been increasing in the past decades8,9. One of the reasons for that increase is the longer pharmaceutical development period, resulting in increased cost of research and development10 (hereafter R&D). Research by Morgan et al. reviewed articles containing cost estimates for drug development between 1963-2010, to understand the extend of cost increase for R&D.

According to the reviewed articles, the estimated cost for a NAS development increased significantly. In the cohort of 1963-1975, the estimated cost for drug development was $92 million, whereas in the period between 1995-2010 it was $1800 million11.

In addition to the increased development costs, the net economic returns from NASs

decreased drastically after 2005, reaching slight negative values in the period between 2005- 200912. The decreased returns implied that the negative turnover rate can potentially

discourage drug innovation and NAS discovery. The combination of the abovementioned reasons for reduced drug innovation signifies the need for understanding how to facilitate drug innovation towards unmet medical needs.

There has been an increasing interest in establishing factors that might result in a higher MAA success rate13. Analyzing factors that can stimulate drug innovation are important for future pivotal investigations. In this study, drug innovation is closely interconnected with the approval of New Active Substances (hereafter NASs) by the Committee for Medicinal Products of Human Use (hereafter CHMP). EMA defines a NAS as a chemical substance not previously authorized in the Union, or a chemical substance previously authorized in the union, but differing in properties from that previously authorized chemical substance14. During this study, we have analyzed the NAS applications to the CHMP for marketing authorization approval. The originators of these NASs were profiled, followed by analyzing the acceptance rate of NASs. Among others, the originator, drug type, MAH holder, and therapeutic area were profiled.

In this study, we analyzed whether the size of the NAS originator affects the MAA approval rate. We analyzed all NASs in the EMA Annual Annex lists from 2014-2019, on which the CHMP issued an opinion on. We have collected essential information about each NAS of human use and created a database. We have studied the nature of NAS originators, and how

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they might potentially affect the MAA outcomes. Finally, we questioned how significantly SMEs and partnering involved in drug innovation. We also investigated whether the

originator size of NASs was correlated with MAA acceptance rate. The originator and MAA sponsors were divided into three sizes: small, medium, and large. Small and medium-sized companies represented the SMEs, and large companies represented big pharma companies.

There are several key elements that clear the distinction between SMEs and big pharma. One of the core differences between these two is the number of financial resources the company owns and controls. Sometimes, the reason SMEs are unable to proceed to the MAA state with their product is the lack of financial and specialized resources for conducting the potentially pivotal studies. On the contrary, big pharma has the means to in-license NASs of interest, to continue its development. During this study, we also explore the partnering patterns of NASs based on originators’ and sponsors’ company sizes15.

This is a follow-up study of that was conducted for NAS applications between 2009-2013.

Therefore, the variables, and the definitions will be in accordance with this previously conducted study, to ensure project consistency15,16.

Methods

Data Sources

All data sources used for this research were publicly available. EMA annual annexes were used for the creation of the database. EMA annual annexes provide information about all the therapeutic agents the agency has reviewed during the respective year. They also provide a summary of the agency performance during the year. Each annual annex contained a list of therapeutic agents the agency reviewed during the reciprocal year. We have selected the medications that contain NASs of human use from EMA annual annex lists between 2014- 2019, and created a database including essential information about these therapeutic agents17–

20. Information, such as the therapeutic field, orphan drug status, previous approvals

elsewhere, scientific advice requests, size of the Marketing Authorization Holder (hereafter MAH) were collected along with the information about the NAS originators.

During this study, we have used the definition of originator taken from the previous study.

The originator was defined as the organization that conducted the clinical phase1 trial.

Therefore, the company that conducted the pre-clinical trials, or isolated the NAS was not considered the originator.

Information about NAS originators were mainly found on Adis Insight, PubMed, and

ClinicalTrials.gov. Once the name of the company that discovered the NAS was mentioned in the first source, it was cross-checked with clinical-trials from PubMed and ClinicalTrials.gov to ensure that company contributed to the first-human trials. Finding the clinical phase1 trial was the most crucial step in finding the NAS originator, since dozens of companies out licensed the NAS at the pre-clinical stage. If the company that discovered the NAS did not sponsor the clinical phase1 trial, the next potential originator was the company the NAS was out licensed to. For every NAS, all phase1 clinical trials were manually checked for the sponsors, to help us identify the originators.

Since we defined the originator as the company that contributes to the phase1 trials, using the company that isolated the NAS, or performed in vivo and in vitro trials as the NAS originator would potentially lead to result errors.

If clinical trials were not available at clinicaltrials.gov, PubMed and Google Scholar were used for finding clinical phase1 trials of that NAS. Information on deals was mainly found by browsing news articles and using Scrip intelligence. Key developmental breakthroughs were also considered when profiling NAS originators. Once the names of all originators and

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sponsors were collected, they were categorized into three major groups: small, medium, and large. The distinction between originator and sponsor sizes was done by using the top100 revenue lists for pharmaceutical companies for the corresponding year (2014-2019). Revenue lists from Scrip Intelligence and Novasecta were used. Lastly, the orphan status of the drug was analyzed based on the EMA Public Assessment Reports.

Analysis Methods

All data about NASs was manually collected from EMA Annual Annex lists and analyzed in Microsoft Excel. Several correlations were analyzed during this study. First, the relation between the size of the originator and the MAA approval rate was explored. We observed whether the MAA approval rate varies for self-originated and acquired NASs. The failed MAA applications were sorted based on the originator sizes and years of outcome, for an advanced visualization of results. NASs were also classified based on the year of MAA outcome, and acquisition type, for an improved insight on the prevalence of the three acquisition types we use in this study.

Subsequently, we analyzed the failed applications to evaluate if partnering increases the chances of a positive CHMP opinion. Moreover, we compared the MAA approval rates for self-originated and acquired NASs based on the originator size, orphan drug status, and drug type. This was done to notice the input of SMEs in the discovery of orphan and biological drugs. We also tried to quantify the trends for NAS acceptance based on originator size and NAS therapeutic area.

Lastly, the directions of NAS transfers in the form of in-licensing deals based on originator and sponsor company sizes were studied. This was done in addition to analyzing big pharma in- and out- licensing deals to obtain a more general picture of NAS development flow through licensing deals.

Variables

Independent Variables

During this study, independent variables were the size of the originator, and the type of acquisition. The additional information collected about NASs were also independent

variables. In this study, additional information about NAS were the following data: scientific advice receival, orphan drug status, previous approval elsewhere, nature of NAS (new chemical entity, or a biopharmaceutical product), and therapeutic area based on ICD-10 guidelines.

The company and originator sizes were divided into three categories based on the top100 pharmaceutical companies lists by revenue. The revenue lists from 2014-2017 were taken from the Scrip Intelligence website, and the revenue lists from 2018, and 2019 were taken from the Novasecta Global 100 lists21,22. If the company name was found in the top 20 of the corresponding lists, it was considered as a large pharmaceutical company, or a big pharma company. If the NAS in the list was found between 20-100, then it was considered a medium- sized enterprise. If the company name was not found in the revenue list of the corresponding year, it was considered a small pharmaceutical company.

NASs were divided into two major groups, based on whether they were acquired or self- originated. The core difference between these two groups was the presence of a second company, that contributed, or in-licensed the NAS. If the originator out licensed the NAS to the MAA sponsor company, then it was considered as acquired. It was also considered acquired, if the MAA sponsor acquired the originator company. The last scenario of acquired NAS was the partial license agreement between the originator and MAA sponsor. The partial

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license agreements were signed to develop the NAS together. The NAS was considered self- originated, if the clinical development was entirely sponsored by the MAH holder at the time of its approval.

Acquired NASs were split into three groups based on the type of partnering: whole product acquisition, whole company acquisition/merger, and a license agreement. The out-licensing deal was considered a whole product acquisition, when the sponsor acquired all the licenses during the development stage, and therefore has all the commercial rights to develop the NAS. In this research, we categorized all forms of partial license agreements as a license agreement. These agreements included partial licensing, conjoined drug development, or simple license agreements. An agreement, that granted exclusivity to the sponsor for a limited amount of time was also categorized as a license agreement. Lastly, an agreement that

granted exclusivity in some geographical areas was also considered a license agreement.

Dependent variables

The dependent variable in this study was the outcome of MAA. Positive outcome of the MAA was defined as a successful application because it resulted in NAS approval.

Withdrawn and refused applications were considered as a failed application. We considered the successful applications as NASs with a positive MAA outcome for two main reasons.

First, because of variable consistency with the previous research about MAA outcomes16,23. Second, because we aim to investigate factors that can potentially improve drug innovation in the future, therefore, a positive MAA outcome is a desirable result for NAS discovery.

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Results

NAS Characteristics, Originator Analysis

Between 2014-2019, the CHMP issued 247 opinions on NASs, of which 107 (44,1%) were acquired, and 140 (55,9%) were self-originated. Of these 247 NASs, 114 (46,1%) originated from small-sized enterprises, 37 (15,0%) from medium-sized enterprises, and 96 (38,9%) from big pharmaceutical companies. 88(35,6%) NASs were orphan medications, and 159 did not have an orphan designation. Detailed characteristics of NASs can be found in Table1.

Based on the therapeutic field, the majority of NASs were discovered in the oncology field, accounting for 71 (28,7%) of total NAS applications. The lowest number of NASs were discovered in the field of the musculoskeletal system, standing for 8 (3,2%) of total NASs.

Every year, the number of approvals was considerably higher than the number of failed applications. From the period between 2014-2019, there were a total of 37 failed applications, which accounted for 15% of total NAS applications. This number was taken from the EMA Annual Annexes; they included withdrawn and refused MAAs. On the contrary, the number of approved applications in this timeframe was 210 (85%).

Table 1: Characteristics of all New Active Substances of human use submitted to the European

Medicines Agency between 2014-2019. In this graph, the size of the company represents the size of the NAS originator.

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Between 2014-2019, 67 (27,1%) MAAs originated from small-sized companies, 49 (19,8%) from medium-sized enterprises, and 131 (53,0%) from big pharma. The summary of MAHs and originators based on company size can be seen in Figure1. Medium pharmaceutical companies showed to have a similar input when it came to drug discovery, and MAA sponsorship, with a difference of 12 more cases of medium-sized enterprises as originators.

Small companies, on the other hand were significantly more likely to be the originators of NASs rather than the MAA sponsors. Large companies hold over half (53,0%) of MAAs, even though they originated only 40,1% of NASs compared to the 59,9% contributed by SMEs. Therefore, Table1 shows that SMEs contributes greatly when it came to NAS discovery, with both positive and negative outcomes. After understanding the size of originators, we proceeded to analyzing the factors that could potentially affect MAA acceptance rate.

Large Medium Small

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Sources of NAS in the European Union. Originators and Marketing Authorization Holders Categorized by Company Size.

Originator MAH Comapny Size

Number of NASs

Figure1: Summary of MAHs and Originators based on their size. Between 2014-2019, the agency has reviewed 247 applications including NAS of human use.

Acceptance Rates, MAA Outcome Analysis

We examined the number of failed applications based on whether the NAS was self- originated or acquired (Figure2). Between 2014-2019, the CHMP has given negative

opinions on 37 therapeutic agents containing a NAS of human use. The total number of failed self-originated NASs between 2014-2019 was 24; the number of acquired failed NASs between this period was 13. During this period, the number of failed self-originated NASs was higher, or equal to the number of acquired NASs. One exception to this pattern was the failure rate for self-originated NAS in 2018. In that year, 2 failed applications contained acquired NASs, and one failed application contained a self-originated NAS. The highest number of failed MAAs was seen in 2014, for self-originated NASs, which was 8. The lowest number of failed acquired NASs were recorded in years 2015, and 2016, and accounted for one failure per annum. The lowest number of self-originated MAA failures was seen in 2018, which was also 1.

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Out of 247 NASs, 114 originated from small companies. The failure rate for small companies was 23,9%.

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Number of Self-Originated and Acquired NASs with a Negative Martketing Authorization Application (MAA) Outcome between 2014-2019

Self-Originated Acquired

Year of Outcome

Number of Failed NASs

Figure2: Percentage of NASs with a negative MAA outcome between 2014-2019, categorized by the year of MAA outcome.

After studying the failure rates for NAS, we visualized percentages of NASs that were acquired and self-originated between 2014-2019. The percentage for acquired NAS has been increasing between 2014-2016, reaching its peak at 56% in 2016. Afterwards, the percentage of acquired NAS decreased to 47%, and has been fluctuated until 2019 with no significant difference. The percentage of self-originated NASs was the highest in 2014, accounting for 66% of NAS. On the contrary, the percentage of self-originated NASs has been the highest in 2014, standing for 66% of the total NASs in that year

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Percentage of New Active Substances (NASs) that Were Acquired or Self-Originated from 2014-2019

Self-Originated NAS Acquired NAS Year of MAA Outcome

Percentage of NASs (%)

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Figure3: Percentages of acquired and self-originated NASs based on the year of MAA outcome (n=247).

Percentages of acquired NAS with successful and failed MAAs were explored based on the type of acquisition. The acquired NAS were sorted based on the year of outcome and the type of acquisition (Figure4). Between 2014-2019, license agreement was the most prevalent type of acquisition, except for 2016. In 2016, the most popular form of acquisition was company acquisition/merger. The least popular form of acquisition was found to be whole company acquisition-accounting for as 6% in 2017. In total, product acquisition and company

acquisition accounted for 25% of total acquisitions each, and license agreements were 50% of all total acquisitions.

Furthermore, the highest ratio of approved applications were noted for NASs that were acquired either via product acquisition or whole company acquisition. NASs that were acquired via these two methods had 26 approved MAA applications in each category. NASs in these two categories had two failed applications in each group resulting in 93% approval rate. Similarly, a total of 52 NASs were acquired via license agreements. Of those 53 NASs, 43 received a positive MAA application outcome, and nine NASs received a negative MAA application outcome, resulting in an approval rate of 83%.

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Percentage of New Active Substances (NASs) with Positive and Negative Outcomes, Based on the Type of Acquisition.

Product Acquisition Whole Company Acquisition License Agreement Year of MAA Outcome

Percentage of Acquired NAS (%)

Figure4: Percentages of acquired NASs with positive and negative outcomes sorted by the type of acquisition and the year of outcome.

Afterwards, we delved into the effect of possible variables on the MAA outcome. First, we categorized the NAS based on orphan drug status and drug type (new chemical entity, or a biological NAS). Figure5 shows the origins of NAS based on both orphan drug status and drug type. In both cases, small companies originated the largest percentage of NASs.

Medium-sized enterprises have discovered the smallest percentage of NASs in all four categories. Figure5 shows that SMEs contribute greatly to drug innovation in all categories.

45% of both chemical and biological NASs originated from small-sized enterprises. Medium- sized enterprises originated 13% and 15% of biologicals and chemical NASs respectively.

Big pharma originated 42% of biopharmaceuticals, and 30% of chemical NASs.

Afterwards, we investigated the successful MAA rate for both orphan and non-orphan medications.

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Figures 5: (A) Origins of orphan drugs in the EU. NASs categorized based on originator company sizes, and orphan drug status. (B) Categorization of NASs based on drug types (chemical or biological).

The acceptance rate for NASs based on orphan drug status is shown in Figure6. Overall, non- orphan drugs showed a higher MAA success rate. Both orphan and non-orphan NASs had a positive acceptance rate while originating from all company sizes. Small pharmaceutical companies had an 83% acceptance rate for non-orphan drugs, and 68% for orphan drugs.

Medium-sized enterprises had acceptance rates of 92% and 96% for orphan and non-orphan drugs respectively, which were the highest acceptance rates for this category. Large

companies had an acceptance rate of 88% for orphan drugs, and 93% for non-orphan drugs.

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Small Medium Large 0%

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Acceptance Rate of Orphan and non-Orphan Drugs based on the Originator Size

Orphan Non-Orphan Originator Size

Percentage of Total NASs

Figure6: Acceptance rate of orphan and non-orphan NASs based on the originator sizes, sorted based on years of MAA outcome.

Next, we cross-examined the failure rates for new chemical entities and biological sizes based on the originator size (Figure7). It is noticeable, that the highest failure rate was noticed for NASs originating from small companies, accounting for 30%. Even though SMEs have a higher failure rate for chemical NASs compared to large pharmaceutical companies, the failure rate for biological drugs is comparable, or lower than that of big pharma.

The lowest failure rate was noticed for biologicals originating from medium-sized enterprises and was 0%. The failure rate for chemical NASs originating from medium-sized companies was 9%. Interestingly, the difference between failure rates for biologicals from small pharmaceutical companies and big pharma were similar, accounting for 15% and 12% for small and large companies respectively.

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Failure Rate of Chemical and Biological NASs based on the Originator Size (n=247)

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Figure7: Failure rate of chemical and biological NASs based on the originator size (n=247).

Next, we have sorted NASs based on the originator size and the therapeutic area, which is shown in Figure8. In some categories SMEs discover less NASs than big pharma (e.g., cardiovascular, and respiratory diseases). In many areas, SMEs have a comparable input to big pharma and in certain categories SMEs have an even greater input in drug discovery. In the period of 2014-2019, SMEs have originated more NASs than big pharma in the indication area of bone and muscle systems, and other uncategorized diseases. It is worth mentioning that SMEs have contributed to 90% of NASs in the field of bone and muscle systems. In therapeutic areas, such cardiovascular and respiratory diseases, or the Central Nervous System (CNS), the contribution of small and medium-sized companies is similar. In three therapeutic areas, big pharma has originated more medications than SMEs.

The category others included medications that were mostly designated for orphan or inherited disorders; these disorders did not align with the other categories mentioned in the graph.

SMEs have also originated more NASs in this group. The full distribution of NASs based on therapeutic areas and company size can be seen in Figure8.

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Cardiovascular and Respiratory Haematology0% CNS Immunology Endocrine 10%

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NAS with all MAA Outcomes Based on Therapeutic Area and Originator Size

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Figure8: NASs based on originator size and therapeutic area. The therapeutic areas were chosen based on the ICD-10 codes.

NAS Flow, in and out Licensing Deals

Finally, we studied the NASs flow between originators and MAA sponsor depending on company size (Figure9). We noticed that there were many more in-licensing deals involving big pharma than out-licensing deals. Between 2014-2019, 107 product transfers were made.

Of those product transfers, 75 (70.1%) originated from small companies, 12 (11.2%) from medium enterprises, and 20 (18.7%) originated from big pharma. The direction of product transfers can be seen in Figure9. Big pharma acquired 57 NASs of which more than 80%

originated from SMEs. The largest number of licensing deals were noticed from small to large pharmaceutical companies, accounting for 40 deals out of 107.

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S→S S→M S→L M→S M→M M→L L→S L→M L→L 0

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Product Transfers based on NAS Originator and MAA Sponsor Sizes for Small, Medium, and Large-Sized Pharmaceutical Companies (n=107)

Type of Product Transfer based on Company Sizes: Small(S), Medium(M), and Large(L)

Number of Deals between Companies

Figure9: Product transfers of NAS Originators to MAA sponsors based on size of the originator and MAA sponsor.

We explored the out-licensing and in-licensing deals and explored how involved big pharma is in the drug development process (Figure10). In total, big pharma out-licensed 20 NASs, and in-licensed 57. During analysis, we noticed that Merck & Co. had the highest number of out-licensing deals, accounting for 30% of all out-licensing deals signed by big pharma.

When it came to in-licensing deals, AstraZeneca had the highest participation of in-licensing deals, accounting for 7(12,3%) of total in-licensing deals by big pharma. Based on previous research in this field, we expected Merck & Co. to have high licensing participation. In this study we can see the continuation of that trend.

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A

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Boehringer Ingelheim Bristol-Myers Squibb Eli Lilly GlaxoSmithKline J&J Sanofi Astellas Pfizer Novartis Amgen Merck & Co.

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Bayer Bristol-Myers SquibbGlaxoSmithKlineGilead SciencesMerck & Co.AstraZenecaAllerganNovartisEli LillyAmgenAbbVieTakedaRocheSanofiPfizerTeva

Number of In-Licensing Deals

Big Pharma In-Licensing Deals (n=57)

Discussion

The current study focused on studying the role of SMEs and partnering on the positive CHMP opinions. We had two major hypotheses for the research project. First, we hypothesized that companies that did not partner during the development process had a higher chance of a negative MAA outcome. Second, SMEs would significantly contribute to innovation by originating more NASs than large pharmaceutical companies.

Our results show that SMEs are a significant driving force for innovation, which also aligns with current literature.

On June 28, the EMA published a report on the increased success rate for SMEs between 2016-2019. According to the report, there has been an increased number of successful applications, which coincided with our findings24. As mentioned above, our research was a follow-up on the research conducted by van den Bogert et al. In their research, they reported,

Figure 10: (A) and (B) Analysis of big pharmaceutical companies’ (top20) out- licensing and in-licensing deals from 2014-2019 The list of big pharmaceutical companies was taken from Scrip Intelligence Scrip100 database.

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that in the period between 2009-2013, small companies had a failure rate of 40%. Our

research indicates, that in the period between 2014-2019, the failure rate for small companies decreased to 23,9%.

It was noticeable from the results, that the most prevalent field for NASs was the field of oncology. There are several theoretical reasons for such popularity of oncologic medications.

First, even though the prevalence and mortality of cancer has decreased in the past decades, it is still high in Europe25. Second, even though R&D of oncologic therapeutics requires heavy investments, it has the highest profit margin for large pharmaceutical companies. According to EvaluatePharma annual report, oncologic R&D is the focus of big pharma companies mainly due to high rewards. An additional reason for out-licensing of oncologic drugs is the high attrition rates. Oncologic medications are still at the highest scope of interest for big pharma26. Although the field of oncology has a greatly recognized unmet medical need, SMEs contributed more to NAS discovery in this field than big pharma.

We noticed that big pharmaceutical companies were more likely to be MAA sponsors rather than NAS originators. One of the key reasons for big pharma holding over half of MAAs can be explained by the facilities and multidimensional specialization big pharma companies have access to. SMEs, on the contrary, are usually specified in fewer therapeutic fields. This results in the acquisition of potential ideas from SMEs for NAS development.

Based on previous literature, we expected that partnering would increase the chance of NASs approval26,27. An analysis by Czerepak and Ryser suggests that high failure rate of SMEs can also be associated with underfunding in the development stage, which can be decreased by encouraging funding from big pharma. After initiatives, such as the PRIME scheme were launched in the EU, the financial burden was partially lifted from SMEs. The PRIME initiative partially sponsored clinical Phase1 and Phase2 trials. However, the clinical Phase3 trials are the costliest constituents of the clinical development stage. A study by Sertkaya et al. analyzed the clinical trial costs between 2004-2012, and concluded that regardless of the therapeutic area, clinical Phase3 trial costs were the highest. They ranged between $11,5 million in dermatology, and $52,9 million for pain medications and anesthesia studies29. In comparison, an average clinical Phase1 trial costs ranged from $1,4 million for anesthesia and pain medications to $6,6 million for medications affecting the immune system. In our study, the total number of withdrawn applications was 31, out of which 24 originated from SMEs. These results could be partially explained by the insufficient funding during the R&D stage, especially for SMEs.

Previous literature suggests that partnering in the drug development stage increases the likelihood of a positive MAA application. A study by Moore described the desire of big pharma to acquire products from SMEs. The primary theoretical reasons for the popularity of acquired NASs was the SMEs ability to receive better deals and better funding from big pharma. Big pharma, on the other hand, needs to produce more molecules, with the motivation to make annual returns that are above 10%30. Therefore, the current situation creates a demand for NAS ideas to be in-licensed. All the values for acquired and self- originated NASs can be seen in Figure3. Previous research by van Bogert et al., explored whether partnering during drug development influences the outcome of MAA. They found that small companies have a higher MAA failure rate for both self-originated and acquired NASs. Analogous to previous research, in our study SMEs have a higher failure rate than big pharma. This implies that communication between SMEs and regulatory bodies still has room for improvement.

Improved communication between SMEs and the regulatory bodies can be improved by various means and initiatives. An example of such a model was described by Rakicevic for Serbian SMEs. They proposed to improve services for SMEs by assisting them during the planning process. In their model, they investigated the problems SMEs needed help with the

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support services they contacted to. Additionally, they have created an eight-step model, to help SMEs with planning their requirements. The first step in this model was identifying SMEs concerns, followed by defining their needs. Next two steps were about defining the support services that could potentially assist the SMEs. The subsequent steps were about defining the required resources, and the extend of required support, followed by defining the endpoints and indicators of the required assistance. The last two steps were the

implementation of support, and assessment of the support SMEs received. After this model was implemented, the core conclusion was that if SMEs receive suitable support, their success chance was significantly higher31.

When studying the types of acquisition, we concluded that the most prevalent type of acquisition was the license agreement. In concordance to previous literature on benefits of license agreements, we expected license agreements to be the more prevalent form of in- licensing. In most partial license agreements, there is no implication of instant heavy capital movements. Additionally, license agreements are the more flexible option for originators and sponsors, due to a large variety of license agreements. By the same token, companies can choose this form of licensing to both promote the product, which can potentially bring additional turnover force32.

When it came to MAA approval rates for orphan and non-orphan NASs, we expected orphan therapeutic agents to have a higher acceptance rate. Broadly, there are several factors

affecting orphan drug approval. According to research by Leufkens et al., a company is more likely to receive a positive MAA outcome, if they had previous experience of approved orphan NASs33,34. In this regard, big pharma companies tend to have better assets for communication with regulatory bodies, and they are more likely to have prior experience with approvals or orphan medications. Finally, even though the acceptance rate for orphan NASs is lower among small-sized companies, the generation of NAS ideas is still significant when it comes to drug innovation.

Similar with the previous results, the communication between SMEs and policymakers, in combination with underfunding are important factors that can potentially influence the MAA outcomes. Development of NASs is frequently initiated by SMEs, followed by NAS’s acquisition by big pharma. Based on previous literature, the highest upfront payment in product acquisition is noticed for NASs that have reached Phase3 trials. There are several theoretical reasons for that. SMEs do not always want to take the risk of a failed application, because it can be too costly for the enterprises. Even with the help of the EC for generation of demonstrative results and covering 35% of the clinical trial costs, failing an MAA after conducting clinical phase3 trials is too risky for SMEs.

It can also be argued that big pharma companies have more advanced facilities for drug innovation from start to finish. Based on our results and discussion, it is undeniable that the agency has developed initiatives for more successful MAA applications coming from SMEs.

Additionally, our results aligned with those published by the EMA about the increased success rate for MAAs coming from the SMEs.

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Previous Results on SMEs Role in Drug Innovation

As mentioned previously, this is a follow-up study of that conducted in 2013 by van den Bogert et al. The previous research aimed to highlight the role of SMEs and partnering in drug innovation. Similar to our research, authors highlighted the importance of cooperation during the drug development process and that any cooperation has shown to increase the likelihood of a successful MAA16. One of the major aims in their research was establishing whether acquired NASs were more likely to be approved. In this section, the highlights of our results are presented in the context of previous research.

As shown above, we have found out that out of 274 NASs, 151 (55,1%) have originated from SMEs. Similar to research by van den Bogert et al., this high percentage of NASs highlights the importance of SMEs in drug discovery and innovation.

These SMEs included government organizations, universities, and small biotech companies.

In a previously conducted study by Lincker et al, they researched the originators of NASs, and investigated the type of originators involved in drug discovery. They categorized the originators based on company size, and geographical location. Similar to our study, they found out that SMEs contributed greatly to drug innovation. In their study, about 28% of NASs originated from big pharmaceutical companies, 21% from intermediate-sized companies, and 27% originated from SMEs. The remaining 24% of NASs originated from academic-public bodies, or private-private collaborations. In total, about half of the NAS originated either from SMEs, or public-private partnerships23.

In the period between 2014-2019, the CHMP reviewed 247 NASs, 210 of which received a positive opinion. In van den Bogert’s research, they explored the approval rate of NASs based on the type of acquisition. In their results, all three types of acquisition were relatively equally distributed, with each type of acquisition accounting for 30-40% of all acquisition deals. It was noticeable, that NASs acquired via whole product acquisition had a higher failure rate (38%) compared to NASs acquired via company acquisition (9%) or partial license agreement (19%). They thought one of the theoretical reasons for this trend was the constant nature of the development team working on the product development. In the context of their research, this could imply that if developers from SMEs continue working on the drug development process, the NAS is more likely to get approved. The latter implies that license agreement, where the development team remains the same can be the more favorable form of collaboration for the more favorable MAA result. Our research showed a different pattern. First of all, whole product acquisition and company acquisition had a relatively low failure rate (7%) compared to the failure rate in the period 2009-201316. Second, similar to van den Bogert’s research, the failure rate for NASs acquired via license agreement was 17%.

However, we saw a difference in the distribution of acquisition types, with license agreement being the more prevalent type of acquisition, accounting for 49% of total acquired NASs. The other two types of acquisition (whole product acquisition and whole company acquisition) each accounted for 26% of total acquired NASs. Due to the advantages of license agreements mentioned in the research by Simonet, it is not surprising that this type of acquisition is more prevalent in our results, which indicates that there can be more collaboration between big pharma and SMEs in the coming decades.

The failure rate for partial license agreement and whole company acquisition remained the same, while the failure rate for whole product acquisition was lower than that in the period 2009-2013. Product acquisitions are usually performed by big pharma, that has more financial liquidity and capital, which enables improved drug development. Compared to smaller enterprises, big pharma has the luxury of selecting more promising NAS candidates for further development35.

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In van den Bogert’s research, they have also compared the MAA failure rate based on

whether the NAS was self-originated or acquired. Their main results were that the acquisition status of the NAS did not affect its acceptance rate. In our research, self-originated NASs had a higher failure chance in four years out of six in the period between 2014-2019. In 2017, the number of failed NASs was the same for both self-originated and acquired NASs. 36Our results did indicate, that partnering in the drug development stage could potentially decrease the MAA failure rate. In general, the failure rate of NAS has decreased in the period 2014- 2019, compared to that of 2009-2013. The failure rates for self-originated and acquired NASs decreased from 22% and 23% in 2009-2013 to 17% and 12% between 2014-2019. In

particular, the decreased failure rate in acquired NASs indicates that cooperation can be beneficial when it comes to drug development.

SMEs during COVID-19

On March 11, 2020, Coronavirus disease 19 (hereafter COVID-19) was declared a pandemic by the WHO37,38. Since then, hundreds of millions of people were infected with this virus, with almost six million people having lethal outcomes36. The importance of SMEs was again highlighted during the COVID-19 pandemic. SMEs contributed greatly to discovering NASs that helped treat COVID-19.

An example of such a NAS was Molnupiravir, an oral antiviral drug developed to treat mild to moderate COVID-19. Molnupiravir is the prodrug of antiviral ribonucleoside, which acts against RNA viruses, such as Severe Acute Respiratory Syndrome Coronavirus 2 (hereafter SARS-CoV-2), or Middle East Respiratory Syndrome Coronavirus (MERS-CoV)39. It has shown to reduce risk of hospital admission by half in patients at risk40. Furthermore, after one month of Molnupiravir treatment, there were no lethal outcomes in the Molnupiravir group.

On the contrary, there were eight deaths in the placebo group with 377 participants, showing the NASs effectiveness. Ridgeback, that is a small company, performed the first human trial of Molnupiravir in 2020, making it the NAS originator, and Merck Sharp & Dohme’s partner.

The second example showing the relevance of SMEs during the COVID-19 pandemic was the Comirnaty vaccine developed by Pfizer and Biopharmaceutical New Technologies (hereafter BioNTech). Comirnaty is lipid nanoparticle-formulated, nucleoside-modified RNA, encoding for the SARS-CoV2 spikes41. A two-dose administration of this vaccine ensured 95% protection against COVID-19 in participants of 16 years old and above. All sub- groups also showed high vaccine efficacy, e.g. participants of different sexes, body-mass indexes, or comorbidities37. The vaccine was discovered by a small biotech company BioNTech based in Germany.

These two examples of NASs showed how collaboration between SMEs and big pharma can result in drug innovation. More importantly, it highlights how important SMEs are in

discovering NASs that are crucial for public healthcare.

Limitations and Future Implications

The economic definition of originators is in contrast with its philosophical definition. In this study, we have defined the NAS originator as the company that sponsored the first in-human trial. However, many companies have out licensed their product at the pre-clinical phase, which potentially could have resulted in a different outcome of our results. Since we defined the company size based on Scrip100 and Novasecta revenue lists, the liquid assets available for R&D were not known.

In this study, we did not investigate if the originators received private funding in various forms, e.g., funding from business angels. Business angels are usually companies that invest in a potential NAS idea42. This study can be an addition to a larger-scale study, where more

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factors contributing to NAS discovery and approval are studied. An interesting addition to this study would be the investigation of the type of investment (e.g., from venture capitalists, or stock market) originators received, other than the pharmaceutical licensing deals. Whether these funds contribute to the MAA success rate of SMEs should be investigated.

Moreover, additional originator types can be explored, such as private-private partnerships or academic-public bodies, as described by Lincker et al23. In their research, they have provided more categories for NAS originators, such as academic bodies, and private-private

partnerships. On the contrary, we only used three categories of originators, based on the company size and their annual revenue. In the future, this study could be replicated with a further distinction of originators.

Conclusion

In this study, we have investigated the role of SMEs and partnering in drug innovation. We have looked through EMA Annual Annexes to gain information on the NAS that the agency has revied between 2014-2019. We have used the list of NAS from the annexes to create a database and characterized them based on whether the originator out licensed the NAS or not.

We have also investigated whether the MAA sponsors have acquired the originator companies, to have a more elaborate understanding on the NAS deals throughout drug development.

We have concluded that self-originated NAS have a higher application failure rate, and that partnering in the drug development stage can result in a higher chance of a successful application. The largest number of NASs were discovered by SMEs, and a significant fraction of them were out licensed to large pharmaceutical companies.

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