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Big pharma backed away from brain drugs. Is a return in sight?

Many large drugmakers no longer invest heavily in neuroscience. Some biotech executives expect that to change.
Adeline Kon/BioPharma Dive

One by one, they left. The world’s largest pharmaceutical companies, skilled at creating drugs for the heart, lungs and joints, couldn’t find the same success in the brain, leading them to either pull back or shutter development over the last decade.

A handful have kept brain drugs a focus, but that’s in stark contrast to 25 years ago, when almost every major developer was pouring money in. Sales of Eli Lilly’s Prozac enticed rivals to find their own blockbuster antidepressants. Pfizer then brought Zoloft to market, followed by GlaxoSmithKline with Paxil. By the early 2000s, a new wave of antipsychotics was helping build multibillion-dollar neurology businesses for AstraZeneca and Bristol-Myers Squibb.

But AstraZeneca, Bristol-Myers, GSK and, most recently, Pfizer and Amgen no longer devote significant resources to neuroscience. Others, such as Lilly, Sanofi and Merck & Co., have narrowed their investments and number of drug programs. Often these retreats came after a series of clinical failures that called into question whether money would be better spent elsewhere.

Neuroscience still receives healthy levels of early investment, though. It attracted $1.5 billion from venture capitalists in 2018, putting it second only to cancer and suggesting these financiers expect payoffs in the not-too-distant future, perhaps through a big pharma buyout.

Their bet may be well placed too, as industry watchers foresee big pharma mounting a return to neuroscience in the next few years, lured by emerging treatments for epilepsy, mood disorders and genetic diseases of the CNS, or central nervous system.

Though cancer draws the lion’s share of venture capital dollars, brain drugs also attract significant funding.

Venture funding, in billions, by therapeutic area. Mouse-over a therapeutic area to highlight related venture funding.

Venture funding, in billions, by therapeutic area. Click on a therapeutic area to highlight related venture funding.

Therapeutic areas:

    Select an area
      Nami Sumida/BioPharma Dive; data from 2019 BIO Industry Analysis

      “My prediction is that within the next five years, and certainly within the next 10 years, you’re going to see another golden era of these neuroscience products,” said Steven Paul, who was at Lilly when it developed the blockbuster antipsychotic Zyprexa and now serves as CEO of the neuroscience biotech Karuna Therapeutics.

      Paul isn’t alone in that view. Earlier this month, the CEO of Roche Pharmaceuticals said the 2020s could see neuroscience make the same kind of enormous strides that oncology did during the 2010s. Jeremy Levin, head of neurology-focused Ovid Therapeutics and chair to biotech’s largest trade group, expects “radical” new therapies to emerge even quicker, likely in the next three years. Overall, nearly a dozen industry executives and analysts who spoke with BioPharma Dive envision brain drugs making a comeback soon, and with big pharma in tow.

      “This is a repeated pattern that you see in the industry,” Levin said in an interview. “People leave things alone, they think it’s a waste of time, waste of money. Then they see some success. The smart big companies dive in, buy the companies out or board with them, and the result is a complete break-open of the field.”

      ‘Fraught with uncertainty’

      Recent exits, however, could hint that neuroscience isn’t yet seen as a near-term opportunity.

      Amgen terminated drug programs in schizophrenia and Alzheimer’s disease before leaving neuroscience almost entirely in late 2019. The biotech’s head of R&D, David Reese, told BioPharma Dive how the exit rested on several factors, including the industry’s “fairly rudimentary” understanding of neurological diseases, the long development programs some of these drugs require, as well as the clearer opportunities Amgen saw with oncology, inflammation and cardiovascular medicines.

      Reese also said his company didn’t want to invest 10 years and billions of dollars in an area so “fraught with uncertainty,” and therefore concluded that standing up biotechs or establishing public-private partnerships would be more encouraging approaches.

      Pfizer’s story was similar. It had drugs fail in Alzheimer’s and Huntington’s disease in the years leading up to 2018, when the company decided to take a handful of compounds and create a CNS-focused spin-out with Bain Capital. Pfizer said the move allowed it to redirect money to areas of greater expertise.

      Across neuroscience, clinical failures have stacked up because drugmakers didn’t know enough about how the diseases work. These failures then made further investments a riskier proposition for big pharma.

      At the same time, researchers were developing impressive new drugs in different diseases, most notably cancer, which spurred large companies to re-prioritize. Since most didn’t have an extensive list of promising brain drugs, neuroscience proved easier research to discontinue.

      A consequence of the reprioritization, however, is a relative lack of big pharma resources invested in developing new, effective therapies for some of the world’s most common illnesses. While “me-too” cancer drugs proliferate, there are few, if any, novel treatments for diseases like Alzheimer’s, Parkinson’s and depression, each of which affect millions of patients.

      A handful of large pharmas still consider neuroscience a focus area

      Each square represents a large pharmaceutical company that focuses on the selected therapeutic area. Click on other therapeutic areas to highlight the companies at work in each field.

      Therapeutic areas of focus were either named by the company or selected based on available information for a company’s research pipeline. AbbVie’s areas of focus includes impact of Allergan acquisition, which is pending.
      Nami Sumida/BioPharma Dive; pipeline analysis by Jacob Bell

      “It wasn’t about exiting neuroscience,” Levin said. “It was about not taking risks and, as a consequence, diverting cash into areas that they think are going to be incredibly productive in the near-term.“

      Executives at small biotechs, though, say it’ll take just a few positive studies for the giants to come back. That’s been true with gene therapy as well as immuno-oncology, which produced some of the world’s best-selling drugs, including Merck’s Keytruda and Bristol-Myers’ Opdivo.

      “This is a business of momentum, and you don’t want to be left out,” said Richard Peters, former head of rare diseases at Sanofi Genzyme and current CEO of Yumanity, a biotech making drugs for neurodegenerative illnesses. “So if you see a few successes, boards of directors at these companies are quickly going to ask management, ‘Why aren’t we doing that?’”

      That pressure may explain why many big pharma companies continue to study Alzheimer’s drugs even if they’re not deeply involved in neuroscience. Analysts expect the first Alzheimer’s treatment on the market that shows an effect on the disease, rather than just its symptoms, would become an instant blockbuster.

      Yet neurodegenerative disorders like Alzheimer’s and Parkinson’s have proven exceptionally challenging, due in part to their tangled biological roots.

      AstraZeneca, Lilly, ​Merck, Novartis, Pfizer and Roche each saw experimental Alzheimer’s treatments fail in late-stage testing. Biogen, a top player in neuroscience, plans on asking regulators to greenlight a drug that works in a similar way to its peers’ failed attempts, but controversial clinical data make its efficacy the subject of intense debate.

      Going after genes

      Though an Alzheimer’s solution looks far off, drugmakers have notched victories in other neurological diseases like spinal muscular atrophy, in which a genetic defect causes patients’ muscles to waste away. Effective therapies from Biogen and Novartis have come to market since the end of 2016, and a third from Roche could be approved before June.

      Drugmakers now have better tools to manipulate and correct genes than in the 1990s and early 2000s. As a result, diseases tied to single genetic defects, such as spinal muscular atrophy, seem easier to target and less risky — attributes that would appeal to large players looking for an entry point back into neuroscience. There are already a couple examples of this, with Pfizer getting into Duchenne muscular dystrophy through its acquisition of Bamboo Therapeutics and Roche showing interest in a Huntington’s program developed by Ionis Pharmaceuticals.

      Beside Biogen and Roche, large drugmakers have advanced only a few neurology drugs into late-stage testing

      Chart shows the number of neuroscience programs by study stage. Click on the buttons to see how many programs for each company are at each stage of clinical testing.

      Chart shows the number of neuroscience programs by study stage. Use the dropdown to see how many programs for each company are at each stage of clinical testing.

      Phase 1
      • Phase 1
      • Phase 2
      • Phase 3
      • Registration
      Additional therapeutic indications for already approved neurology drugs were not included in counting.
      Nami Sumida/BioPharma Dive; pipeline analysis by Jacob Bell

      That’s not to say these illnesses are easily treatable. The newfound excitement around Huntington’s, for example, belies the fact that no drug has yet been proven to change the course of the disease.

      “My cautionary point on the whole hype-train surrounding monogenic CNS diseases is: the more we’ve dug into them, the more we’ve realized they’re not as simple as you might hope,” Stifel analyst Paul Matteis said.

      Even so, Matteis said monogenic diseases would be a reasonable place for big pharma to invest as it rebuilds in neuroscience.​

      But past that broad category, there’s not much consensus. Levin from Ovid sees epilepsy as a promising target, as do others, but believes psychiatric breakthroughs will be harder to find. Karuna’s Paul disagrees, and says the industry is “right on the verge of having very positive” late-stage data in depression and schizophrenia. Such forecasts are perhaps to be expected: Levin’s company is developing an epilepsy drug while Paul’s is working on a schizophrenia medication.

      Drugmaking technologies may also be more valuable than the specific disease target. Ted Dawson, director of the Institute for Cell Engineering at Johns Hopkins Medicine, says he’s seen “an enormous amount of excitement” around antisense therapies that regulate gene expression. Ionis’ business revolves around the antisense platform responsible for developing Biogen’s muscular atrophy drug, while Alnylam Pharmaceuticals has a similar platform that’s at the center of a $1 billion CNS research pact with Regeneron.

      Buying back in?

      Analysts note that any reinvestment in neuroscience will depend on big pharma’s goals. If a company’s aim is to make brain drugs a core part of its business, then a single, small disease that has no relationship to anything else in its pipeline might be an unlikely target. If that’s not the plan, a company may be fine acquiring a niche, low-risk product, with the potential to tuck it into a broader platform later.

      In any case, analysts say big pharma’s interest in neuroscience, if renewed, wouldn’t be focused on just large markets, but also extend to incredibly small, or orphan, diseases. Drugs for those conditions come with regulatory incentives and can be sold at high price tags, potentially making an investment more attractive.

      “These days, it does seem like pharma is increasingly interested in the orphan business model,” Phil Nadeau of investment bank Cowen & Co said. “If there were products that seemed like they’d be very successful orphan therapies in neuroscience, I think pharma would probably be interested in acquiring those.”

      Acquisitions, as Nadeau points out, would hallmark a big pharma return. Since many large developers don’t have deep research and commercialization teams in neuroscience, a buyout would likely be faster than building from the ground up.

      “It certainly seems like a device that companies have used time and again to quickly get back into an area they’ve exited,” Nadeau said.

      Deals, though, carry risk even when the science appears validated. Last spring, SVB Leerink analyzed transactions done by the 21 largest drug companies and found just one-third of deals valued at $1 billion or more were “unequivocally successful,” meaning they resulted in new products or better-than-expected revenue growth. On the other hand, one-fifth were failures.

      “A skeptic would say the return on invested capital of acquisitions in the biopharma industry is relatively poor. So although it may be quicker, it may not be better,” Nadeau said.

      Whether they’re good for the target companies is also up for debate. Many potential buyers wouldn’t have a neuroscience infrastructure for a newly acquired biotech to latch onto, which might make integration more complicated.

      There are also concerns that, after the initial wave of excitement, big pharma might retreat again if positive data and drug approvals don’t come steadily.

      “The risk is pharma swoops in and buys companies at lower valuations, extracts the value, and then you might be in the cycle,” Vlad Coric, CEO of Connecticut-based Biohaven Pharmaceutical, told BioPharma Dive. “They’ll keep you as long as neuroscience is important to them, and then they’ll be out of it again.”

      These worries, combined with easy access to money from venture capital or public markets, may force big pharma to craft better sales pitches if they want to court neuroscience biotechs.

      “Capital markets have opened up sufficiently, at least in the United States, to allow for companies to take action themselves,” Levin said.

      “You don’t need big pharma’s confidence restored” in neuroscience, he added.