By Wayne Koberstein, executive editor
Mindset, mission, and model are the self-defined keywords guiding a company that applies its novel delivery technology to new and existing drugs.
General surveys of specialty pharma (SP) are common in the press, but deeper insights sometimes require looking at a specific case. Aptalis Pharma US (Aptalis) serves as both example and exception in shedding light on the SP sector. The company’s president and CEO, Frank Verwiel, M.D., coined the “three Ms” — mindset, mission, and model — as organizing keywords for the qualities and goals that distinguish SP from other industry sectors and Aptalis from other SP companies. The keywords triangulate and guide the company in its overall strategic direction:
Mindset — applying the concept of innovation to improve drug delivery, bioavailability, safety, and effectiveness of drugs for targeted populations
Mission — “To improve the health and quality of care by providing specialty therapies for patients around the world.” (Meaning: the mission is ambitious and global, but focused on a well-defined sector.)
Model — multiple, complementary businesses — specialty pharma and pharmaceutical technology units create a solid cash flow and partnerships to fund infrastructure and proprietary new-product development
All three Ms have evolved amidst tough conditions and resulting shakeout in the SP sector in the past five years. They reflect practical strategies based on what has worked and what has not in a highly competitive business marked by company failures and consolidation. Here, Aptalis is a case in point. Its combined and markedly different assets result from the well-publicized merger of Axcan and Eurand in 2011. The merger represents a break from the original SP model, where a single company would typically focus on either specialty-drug development or drug-delivery technology. Verwiel views it as a fortuitous confluence, and the resulting cultural mix as a “clinical mindset” that sees a new role for specialty pharma as an innovative force in the industry.
Mindset: Specialty Pharma Evolves
Not long ago, no pharma company would have used the adjective “specialty” to define itself. From its inception in the 1980s, drug delivery had remained separate from pharmaceuticals as a business — although a few companies, such as the makers of asthmadrug inhalers, distinguished themselves by their delivery technology as well as the drugs delivered.
Technically speaking, all drugs have some form of delivery, even the simplest pill. But when the large pharmas woke up to the potential of extended release (XR) and other “line extensions” for their off-patent drugs, the delivery sector soared — as companies “licensed in” the new technologies, rather than creating them in-house. Even so, the pharma giants let a lot of products go off-patent and compete in their original forms with generics. Specialty pharma was born when new players leapfrogged both pharma and generics by combining the best of both worlds.
The term “specialty pharma” holds two clues to its own origin and meaning. One, by the spelling of “specialty” (not “speciality”), the term shows its American roots. Two, in America, at least when coined initially, the term could only mean one thing when applied to companies outside Big Pharma: special forms of existing or generic drugs. Only later did specialty pharma take on the additional meaning of “drugs for special populations” and branch into the development of original specialty drugs. And over time, the sector spread globally.
Nowadays, specialty pharma is outperforming all other industry sectors in growth and profits. But it took a major shakeout of the early pioneers and some aggressive risk management to put the sector in its current shape. Aptalis represents some of the major moves the surviving SP companies have made to ensure their prosperity — consolidation, diversification, and an effective balance of revenue-producing specialty products with original specialty-drug research.
Mission: Specialty Means Niches
Once Big Pharma harvested the low-hanging fruit of drug delivery — mainly XR for primary care products such as antibiotics and antihypertensives — it left a sea of smaller markets untouched. Into that sea sailed specialty pharma, and the SP sector is still navigating among the plentiful islands of opportunity to fill the unique medical needs of niche patient populations.
“With specialty pharma products, by targeting smaller populations, you can make very significant breakthroughs in outcomes or quality of life,” says Verwiel. “So in our specialty pharma mission, companies are committed to funding research in a very particular, focused area. The same mission gives us the willingness to use innovative technologies and maximize partnering opportunities.”
For Aptalis, the main targeted islands are cystic fibrosis (CF) and certain gastrointestinal (GI) conditions. (It also has a line of softgel pediatric vitamins and other OTC nutritional products.) If the mix sounds somewhat odd, it is because the two foci come from a 2011 merger of two quite different companies, Axcan and Eurand.
The merger also accounts for the strategic alignment of the company as a hybrid specialty commercialization/product development model. It melds solid revenue producers such as its SP products division with its pharmaceutical technology (PT) division, which applies proprietary delivery and manufacturing platforms to its own and other companies’ products. The company’s hybridization makes sense: To compete in SP, you need more than steady income; you need constant technological innovation — a path that inevitably leads not just to the combination of new delivery with existing drugs, but into novel-drug territory. “One of the main reasons for the merger was to leverage the product-development knowledge in the PT division for our own SP products and development pipeline,” says Verwiel.
Axcan had a number of products on the market when the merger occurred, including two pancreatic enzymes for exocrine pancreatic insufficiency, one of which was produced until then by Eurand under contract. Eurand had launched its first market product — Zenpep (pancrelipase) delayed-release capsules, a pancreatic enzyme for the treatment of exocrine pancreatic insufficiency (EPI) due to cystic fibrosis (CF) or other conditions. Eurand was mainly a supplier and licensor of drug-delivery technology and manufacturing services: the root of Aptalis’ pharmaceutical technology unit. But it also came to the merger with its own U.S. sales and marketing group, plus a pipeline of development products for CF and GI, including some new-indication candidates. With the addition of Zenpep alone, the merged company’s portfolio continued to expand into the CF area.
Showing market and patient awareness postmerger, Aptalis expanded the usefulness of the pancrelipase line by introducing two additional Zenpep dosages to achieve the broadest range of strength in the class (six dose levels from 3K to 25K lipase units). The expansion was an important strategic as well as therapeutic gain because CF patients must have the right dosage to help them stay active, and each patient’s dose must be titrated according to body weight and individual treatment needs.
Beyond such practical but strategic moves, the company has set its sights on larger strategic goals since the merger. One is to follow the implications of the biology displayed in the areas its products now target — the overlapping relationships of the gut, the lung, and the pancreas. Another is to push the envelope in exploring the patient-centric mission of specialty pharma in those areas.
Model: SP Innovation Trailblazer
For Aptalis, the CF and GI indications share a common trait. Verwiel says, “Our products target a limited number of patients and physicians, but their impact on the quality of care that physicians give to patients is very significant. Our model combines that focus with the pharmaceutical technology part of our business and allows us to go beyond developing formulations for other companies, to leveraging the technology and expertise for our own pipeline.”
For examples, he points to Aptalis’ core technologies: taste masking, oral disintegrating tablets, bioavailability enhancement for poorly water-soluble drugs, and customized drug release for targeting delivery to specific parts of the GI tract. All of the platforms can apply to either existing or novel drugs. One application, in fact, follows logically and practically from the other, to paraphrase Verwiel.
“As the company grew, we had more room to develop more innovative products. One reason the two companies came together was that, not only would we have the financial room to innovate but, with the pharmaceutical technology platform, we would also have the capabilities to do it.”
Innovation has grown along with the company in the form of new indications as well as novel molecules. More than a decade ago, the FDA stimulated new research into pancreatic enzyme products (PEPs) by requiring NDA (new drug application) approval for continued marketing of PEPs, which until then were “grandfathered” on the market for treating indigestion because they predated the 1962 FD&C Act. Axcan then responded by putting its two existing PEPs through the NDA process for exocrine pancreatic insufficiency — one with timerelease delivery; Eurand took the different route of developing its own “specialty” PEP, Zenpep, from scratch. The merged portfolio in Aptalis now accounts for three out of six PEPs on the market.
Postmerger, the company’s experience with CF led it to take a look at the pulmonary area. It soon identified a large unmet need for treating recurring lung infections. So in April 2011, Aptalis acquired Mpex Pharmaceuticals, which was developing Aeroquin, (levofloxacin solution for inhalation) for patients with CF and chronic lung infection, an inhaled form of the normally oral antibiotic levofloxacin. In January 2013, Aptalis announced results from its two global Phase 3 trials of Aeroquin for lung infections in CF, and the company is now preparing an EU marketing authorization application. “If you have a foothold in one part of specialty pharma, one of the ways to expand your business is to go into adjacent areas that you already know well,” Verwiel concludes.
The company has practiced the same principle of expansion in the GI area, but this time in a marketing rather than research mode. It has licensed in the product Rectiv (nitroglycerin ointment 0.4%), indicated for moderate to severe pain associated with chronic anal fissures, for which there is no other FDA-approved treatment. Before Rectiv, compounding pharmacies supplied the only remedies for the condition, though its introduction in 2012 predated the compounding controversy that year.
Meanwhile, the company branched out on the pharmaceutical technology side as well. Aptalis codeveloped Gilead’s pediatric oralpowder form of the antiviral Viread (tenofovir disoproxil fumarate) for the treatment of HIV-1 infection in combination with other antiretroviral agents; the product won FDA and EU approvals in 2012. Gilead will commercialize the product, relying on Aptalis to manufacture and supply the oral powder. The product uses the Aptalis Microcaps tastemasking technology in an oral powder form which is easier on the small patients, who may begin therapy as young as age 2.
Aptalis has also continued to expand its market range for Pylera, an oral-capsule combination antibacterial of bismuth subcitrate potassium, metronidazole, and tetracycline. In combination with omeprazole, Pylera is indicated for the eradication of Helicobacter pylori and prevention of relapse of peptic ulcers in patients with active or prior H. pylori-associated ulcers. Pylera gained FDA approval in 2006, and the company has followed the mutual recognition path in Europe and is now launching the product in the first 10 European markets. The elementary method of combining the three most-prescribed drugs for H. Pylori into a patented capsule-in-capsule therapy may simplify treatment for patients.
Three Ms In One: Centered On The Patient
Whether it is mindset, mission, or model that best describes how Aptalis approaches specialty pharma, according to Verwiel, the uniting principle of development is matching delivery modes to patient needs. “Whenever we talk about development projects, we want to make sure that we understand what we can do to provide the patients with better care.”
He describes how the company recently restructured its sales force to create CF account managers, who visit CF centers to deliver supportive information and product offerings for improving patient care. It has also created an award-winning CF patient support program called Live2Thrive, employing an interactive website where members, caregivers, and physicians can get help managing the disease with educational resources, along with access to Aptalis products such as vitamins and nutritional shakes — the patients are often struggling to avoid malnourishment.
But one of the most important patient-centric activities occurs long before products reach the market. Although drug optimization early in drug development is always a good idea, it is especially critical with SP products. Poor formulation — improper concentration, density, aggregation — can defeat the best delivery method. Conversely, the right formulation can help achieve the best, most tolerable, and effective treatment experience. “All of our three main technologies enable product profiles that can be tailored early to optimize drug performance,” says Verwiel.
Two engines drive the selection process for SP in-licensing and development: the reliable old standard, “unmet medical need” for new products, and complementary presence in the targeted therapeutic areas for existing products. “We know the GI and CF spaces very well, so we can identify opportunities and have dialogues with the parties that hold the assets. And quite often the dialogue can be long term. For example, we began speaking with ProStrakan Group years before we in-licensed Rectiv,” says Verwiel.
The company also maintains a dedicated pipeline group, which he describes as “an experienced team of medical and pharmaceutical scientists whose mission in life is to look at medical need with formulation science and invent, design, and test new concepts that we could develop. These can be new technologies, new applications for existing drugs, new applications for our proprietary technologies, and combinations of all three. The outcomes of this invention feed into our development portfolio and are in the clinic.”
Beyond The Ms: Specialty Pharma Heads On
These days, in the dearth of new primary-care blockbusters, large pharma companies have ventured into new territories such as biotech, personalized medicine, and premium orphan drugs in the quest for profitable new products. Will they now gobble up specialty pharma as well?
More than an observer, Verwiel still sees the large pharma companies with a somewhat distanced eye. “In specialty pharma, there’s still a large unmet medical need, and you can still make significant advances in the medical services you offer. So it’s very logical that Big Pharma is entering the space. But specialty pharma demands a different organizational DNA than large pharmas can maintain. Their only recourse may be to buy a successful specialty drug company and let it operate on an independent basis to preserve the special DNA, the special culture needed to be successful in specialty pharma.”
It’s true that only people can formulate a mission, and mindset, and a model to ensure the continued prosperity of a sector that effectively created itself. Specialty pharma may be one space Big Pharma cannot completely overtake, and its future role in innovation may grow larger than anyone imagines — or could have imagined.
Verwiel: The Road To Aptalis
A medical doctor by training, President and CEO Frank Verwiel loved the scientific environment, but felt drawn to the business side of healthcare. Yet his first encounter with industry, a brief marketing internship with a pharmaceutical company, convinced him to finish medical school in his native country, the Netherlands. Thereafter, Verwiel resumed his search in the pharmaceutical industry and landed a job with Servier. He then moved to Merck & Co., starting on the commercial side and moving up the executive management track during the next ten years, where his last position was heading the global hypertension franchise. In 2005, he was approached by Axcan, the predecessor of Aptalis, and soon became the company’s CEO.
Specialty Pharma Lessons Learned
President and CEO Frank Verwiel of Aptalis shares some key lessons from his company’s experience that may be useful to others in the specialty pharma business.
It’s important to be extremely focused. “We made a very deliberate choice to be in GI and CF and focus on those areas.”
It’s important to know what you do — and even more important to know what you don’t do. “For an organization of our size, we have a very good understanding of what’s in our market. That means that the probability of success is much, much higher.”
You need to have a specific kind of DNA in the organization that recognizes opportunities. “In R&D, the commercial area, or a larger organization active in multiple areas, seeing new opportunities is much more difficult to do.”
Do the basics first, but explore new knowledge. “This is true for everybody but maybe more so for specialty pharma: We were originally only in the GI component of CF, but as our patient-centric SP approach taught us more about the disease and what a patient goes through, we were able to move beyond GI into the pulmonary area of CF.”