Thread by @FabiusMercurius

💉Biotech Industry Primer💉

A hot nurse stabs one in ur arm. Wohoo! Ur immune to COVID! (ish)
Now how did this lil vax make it from bench to bedside?
👇
1/ Overview
--Pre-launch
2/ FDA stages
3/ Key drivers
--Post-launch
4/ Supply Chain
5/ Trends
--COVID
6/ Price tag
7/ History

1/ US pharma in a nutshell: high capex, highly regulated, long time to profitability.

Recent industry-wide trends (last 5-10yrs):
- Higher cost to bring drugs to market
- Pricing pressure from shift to value-based care
- Decreasing # of late stage pipeline assets
- Consolidation

Today, pharma co's face 3 main types of risk.

Scientific
- 12 yrs avg time to market
- only 0.1% of drugs make it to human testing from preclinical

Delivery
- KOLs/marketing
- payer resistance
- govt scrutiny

Economic
- declining ROI
- competition via generics
- patent cliffs

Pharma investment specializes into 2 niches (chronologically).

- pre-launch (before drug is sellable) focuses on scientific & clinical analysis
- post-launch (after FDA approval) focuses on commercialization & marketing

Usually, separate analysts cover each niche at a fund.

Pre- vs. post-launch analysis tracks different catalysts & KPIs.

Pre:
- catalysts are bimodal events around FDA approval (e.g. PDUFA)
- target co’s are startups
Post:
- all about drug adoption curves
- catalysts are M&A & earnings
- diverse target co's (e.g. CMOs, distributors)

2/ Pre-launch: FDA Stages

Getting to market is entirely about gaining FDA approval.
There are multiple stages: preclinical --> clinical - phases I, II, III --> final review/approval.

Below is a diagram & description of the drug development funnel:

Preclinical trials: 3+ yrs, testing on lab animals to gather toxicity & efficacy. Must file IND (investigative new drug application) at the end, summarizing preclinical results in order to initiate clinical testing (0.1% get approved).

Clinical trials: 6+ yrs, testing on humans.

NDAs (new drug applications): submitted after successful human clinical trials, reviewed by AC (advisory committee)
- PDUFA date: deadline for FDA to announce decision
- Usually takes 1-2yrs but can be fast-tracked
- ~6m expedited approval on drugs addressing "high unmet need"

3/ Key Catalysts

- clinical trial results (phases I, II, III)
- AC (advisory) vote results
- PDUFA announcement
- regulatory path clarifications
- "orphan-drug" designation (OD status provides exclusivity for rare disease drugs; benefits: extra 7 yrs of patent protection)

A biotech investor who wishes to stay anon describes how to analyze clinical trials:

- Trial design: is it double blind or open-label?
- Control treatment: is it placebo or head-to-head comparison vs currently available drug?
- Patient selection: is it the right population?

- Endpoints (the specific metric being measured btw. control group & test group in the clinical study):
Diff. diseases have diff. endpoints (e.g. AIDS uses amount of HIV in blood). Is the primary endpoint approvable by the FDA? Did they talk to the FDA before starting the trial?

- Statistical significance: Do p-values indicate a high probability that reported endpoint results were not by chance?
- Opinions of KOLs (outside doctors not participating in trial): Is there unmet need? What do they think of the MoA of the drug? If approved, how would they use?

4/ Post-Market Ecosystem

A drug is FINALLY approved after 10yrs! The original researchers have gone bald. Now what?
Time to make money & reap everything sown/lost to R&D.

Unfortunately (fortunately?) now it's a huge political game: many players with many different incentives.

Here is a flow-diagram showing how each dollar flows through the ecosystem as a drug travels from manufacturer to patient:

Let's look at each component in depth:

Manufacturers split into:
- "Big Pharma" (e.g. Pfizer, Eli Lily, Merck): mostly rely on M&A of small biotechs to fill their asset pipelines rather than in-house R&D, often outsource manufacturing to CMOs
- CMOs: 3rd party manufacturers

- Wholesale/Distributors: hyper consolidated, basically tri-opoly (CAH, ABC, MCK); brokers that maintain relationships w/ both manufacturers & retail pharmacies/hospitals
- Revenues driven by service fees & discounts/rebates from manufacturer for prompt payment & bulk purchasing

- Pharmacies: account for 75% of the prescription drug market. (non-retail providers e.g. hospitals, HMOs, clinics, nursing homes, etc. comprise 25%)
Increasingly consolidated niche. Tp 5 pharmacies accounted for >70% of prescription revenues.

- PBMs (pharmacy benefit managers): negotiate discounts & rebates w/ manufacturers on behalf of clients (health plan sponsors)
Also super consolidated (notice a pattern much?): top 3 PBMs manage benefits for 70% of health plans. Also highly "integrated" w/ rest of supply chain.

Now how is each $1 split across & passed around the ecosystem?
Who gets the best bang for the least amount of sweat? Who has the highest margins?
Who wins when healthcare costs skyrocket past sustainability?

Here are 3 hypothetical transactions that dig under the hood:

5/ Industry Trends

1. Personalized medicine getting hotter; big pharma M&A eyes gene therapy
2. Regulations driving value-based pricing (mostly in an effort to lower prices)
3. Cooling of M&A from 2015 days (after death of cross-border tax inversion)
4. SPACs looking to de-spac

6/ And the biggest trend of all: COVID

Don't know how mRNAs work. Ask the brilliant @enhancerleo.
But I can tell u abt the HUGE gap btw what countries are paying for the vax.

Pfizer: UK £15 per jab; Belgium £10.6; Israel £34
Moderna: US $15, EU $18
AZ: UK £1.56; S. Africa: £3.8

For funzies let's toast to more political leadership faux pas besides Trump:

https://twitter.com/JorgeLiboreiro/status/1339897763996332032

7/ COVID Vax History

It's incredible that in less than 1.5 yrs, we've gone from panic, FUD, & global outbreak to 50% of the US (131M ppl) fully-vaxed.

This timeline from Moderna is not only an educational case study showing the FDA stages but a trophy of medical progress.

Huge shout-out to my real-life friend @black6cap for sharing his insights & notes!! I know nothing. He's the guru! 😀🧠