Matthew Herper has excellent coverage here of Valeant’s bid for Allergan, specifically Valeant’s view of actual pharma R&D (which they, for the most part, don’t bother to do). He’s especially peeved (with reason) that the company is citing some of his own stories on the topic of R&D productivity to make its case, but in an underhanded way.
On page 9, which cites one of my stories, Valeant uses data from Richard Evans at Sovereign & Sector, LLC, that is available for purchase on the website hiddenpipeline.com. It takes one of several metrics Evans used to measure companies’ R&D productivity – their economic returns to R&D spending – and says that, for big companies, these are less than the cost of capital, which Allergan pegs at 10%.
OK. But by picking only the largest companies, Valeant gets to not include Allergan, which, like Novartis, has an 8% return on R&D by Evans’s numbers. Gilead and Celgene, have R&D returns of 21% and 32%, respectively, so bigger returns are not impossible. And by Evans’s methods, which include measures of patents and quality of research, Allergan has the fifth-best R&D in the industry. It’s not absurd to expect that it could do better, not worse, in the future. If Valeant is at war with inefficiency, shouldn’t it buy someone inefficient?
Valeant also has some pretty laughable figures on the number of drugs developed internally at big pharma companies. They claim that only four of the fifty best-selling drugs came up that way, which is just wrong:
Valeant aims to make drug research look bad by excluding drugs from its list. Any drug invented or developed at a company that went through a merger or did a co-marketing deal doesn’t get counted, nor does any drug invented at a company Valeant has decided is not “Big Pharma.”
This leads to absurdities like saying that the blood thinner Plavix was not invented at Sanofi or that the cancer drug Gleevec was not invented at Novartis because Novartis was called Ciba-Geigy at the time. The same thing happens with Lantus, the second-best-selling drug on the list, invented at Hoechst, which is now part of Sanofi, and Prevnar 13, the vaccine invented by Wyeth that is now part of Pfizer. By any definition, these drugs were “discovered, developed, and commercialized internally by ‘Big Pharma’.”
There are plenty of other examples – see Matt’s post for more. Valeant’s bid is not catching on (yet) because Allergan’s investors are suspicious of them, and rightly so. Valeant, from what I can see, is basically a parasite on the research-driven drug industry, so to hear them going on about efficient R&D is a bit hard to take.