By the year 2005, the drug delivery industry will be a $12 billion industry, a figure that certainly makes investors sit up and take notice of an industry that only started to emerge in the last 20 years. The materialization of drug delivery companies has moved the discovery of novel delivery systems out of Big Pharma,and into small, niche companies. A couple of those companies (Alza and Elan to be exact) grew up to be large, revenue grabbing entities that expedited the change in the way Big Pharma was conditioned to think about drug delivery. Instead of spending valuable R&D dollars on novel delivery systems, the reasoning went, a pharmaceutical company could leave it to a drug delivery company to do their homework for them.
Today, the drug delivery industry shows no signs of slowing down and the development of macromolecules may present the greatest challenge yet to the delivery marketplace. These complex proteins and peptides are commonly delivered through one of the oldest delivery forms, the syringe. The issues associated with macromolecular delivery are common knowledge in the industry and, until now, the only way to transport these substances into the body was only possible through an injection.
Advances in this area have made it possible to deliver a macromolecule, such as insulin, through pulmonary delivery. Last year, Pfizer looked to a company called Inhale Therapeutic Systems to make inhaleable insulin a reality. The product, currently in Phase III studies, stands to replace the syringe as the premier method for delivering insulin. Compared to a daily injection, an inhaler seems like a godsend. But even before the new inhaler is unveiled, an easier delivery form appears to be on the horizon. It seems the injectable form of insulin, which has been around for about 80 years, has not one competitor emerging, but two.
In Tarrytown, NY, a drug delivery company is trying to attain the golden chalice of drug delivery: an oral dosage form for any injectable drug. Emisphere Technologies, according to its web site, is a "biopharmaceutical company specializing in the oral delivery of therapeutic macromolecules and other compounds that are not currently deliverable by oral means." The company is currently in Phase I studies for an oral form of insulin. It has initiated multiple Phase I programs for the testing of an oral capsule formulation, using one of its existing delivery agents. Based on the results of in vivo studies conducted by Emisphere and its collaborators at Hadassah Hospital, an affiliate of Hebrew University, the company may be on the verge of developing a commercially viable oral formulation of insulin. Emisphere also has human studies underway in the Netherlands and United Kingdom for its oral formulation of insulin.
In theory, the potential for revenue from such a delivery system is enormous. However, the risk involved in such a venture is just as large; after all, oral delivery systems for macromolecules do not even exist and possible collaborators need to see some evidence before committing themselves. Dr. Michael Goldberg, chairman and chief executive officer of Emisphere, is confident. "In our case, we now have five different compounds in human testing for which human data is available for most, and will be available shortly for some others," he remarked. "We've got oral heparin, oral low molecular weight heparin, we've got oral insulin, and we've got oral calcitonin; data is available for all of those. We're also in clinical testing for oral parathyroid hormone. That data should be available the first half of this year. So, I think that's when people get interested, and in our case when our first product completes Phase III, which it now has completed (though the data is not yet unblinded). I think having completed a large, 2,300 patient study will convince people not only that it's possible, but that, from a clinical and a regulatory perspective, we can achieve the desired endpoints."
He added, "Yes, it's risky, but if you've got our system, we believe that once you've shown it works in animals, it's very straightforward to expect it will work. We've never failed once we've proved it in animals, that it will work in humans as well." So far, the company has collaborations with Novartis for the company's calcitonin product, and with Eli Lilly for the company's parathyroid hormone and human growth hormone. Still no takers for the insulin product, but once more data is available, Dr. Goldberg sees more collaborations as a foregone conclusion.
Emisphere appears to be the furthest along in the race for oral dosage forms of macromolecules, but other companies are also striving for this goal. Companies such as Alza, currently in the preclinical phase with its oral delivery system for macromolecules, and Elan are trying to compete for the incredible revenue potential for such systems. Although Alza was recently acquired by Johnson &Johnson, it continues to compete with independent drug delivery companies. The company is in the preclinical stage with its L-OROS, or Liquid Oros oral delivery system for macromolecules, which, according to Howie Rosen, vice president of strategic planning at Alza, builds on the company's existing OROS technology. A recent collaboration with the University of Maryland (see "$5 Million Research Project at the University of Maryland" below) enlists the institution's Zot technology, which focuses on solving the problem of squeezing macromolecules in between the cells that make up the walls of the gastrointestinal tract into the bloodstream.
According to Fidelma Callanan, Elan's manager of strategic planning, oral delivery of macromolecules is also an area her company is investigating. It remains to be seen which company will succeed in getting its technology to market first. Unlike Emisphere, however, Elan's current technology for the delivery of macromolecules focuses on injectable systems. The company's MediPad system has an adhesive backing and is worn similarly to a transdermal patch.
However, the delivery of macromolecules, while currently a hot topic, is not the only area of interest for drug delivery companies. The market is so large that companies stand to reap the profits of improving the delivery methods of already approved drugs.
Ms. Callanan commented, "Definitely a key for large pharma companies is to use novel approaches to extend the patent life of their products or, even if they don't extend the patent life, to add something new to the compound to get marketing advantage. Things like fast-melt technology, extended release compounds, all those areas, those types of technologies; in the next few years they will be exploited to their fullest extent by large pharma companies to protect their compounds on the market."
Not only are drug delivery methods important for drug delivery companies, but solubility issues are also a current hot topic in the industry. Ms. Callanan stated, "I think if you were looking at a scale, in terms of years, of what's going to come on the market, macromolecules are certainly there, but they're probably a bit further off. At the moment, you have issues like solubility. We have developed a nanocrystal technology to address that. For our side of the business, we see that technology as key. Nearly 40% of all compounds, when they're in discovery, have solubility problems and are often discarded at that stage because they are too difficult to work with. It's something that is key to keeping compounds in development, at least a little while longer, until something other than solubility causes the discard. So we're combining that nanocrystal technology with some of our more traditional technologies, such as modified release and controlled release."
Although the industry will be worth $12 billion in a few years, it seems that a pure drug delivery company may have difficulty subsisting on developing novel delivery systems alone. For instance, Elan started off as a pure drug delivery company, but eventually moved into developing and marketing its own compounds. According to Ms. Callanan, the company receives more revenues from the sale of its own pharmaceuticals than from the drug delivery side of the business. The key to surviving may lie in a company's platform of technology.
Dr. Goldberg commented, "I think historically, as we've seen with Alza and Elan, who are leaders in drug delivery, early on they were small companies that went out and created drug delivery for license to big pharma companies. Early in their history, it became clear that they couldn't continue to grow at a reasonable rate with the low royalties they were getting from their products. The question of whether you can actually grow and become a larger drug delivery company that's self sustaining without becoming a pharmaceutical company is highly dependent on how broad a platform of technology you have."
Ms. Callanan concluded, "It depends on how much money they [drug delivery companies] want to make at the end of the day. Certainly our approach has been to become an integrated pharmaceutical company. We see drug delivery as a key part of our business."
Meridian Medical Technologies provides a different case in point. The company expanded from a drug delivery company into the fields of contract development and contract manufacturing. According to Tom Handel, vice president of sales, the company already possessed the space and the capabilities, so expansion into those areas was a logical step. However, succeeding as a pure drug delivery company appears to be a difficult assignment. Mr. Handel commented, "It's hard to sustain any kind of significant mass. If you look at Powderject for example, they have a facility in California that they're now trying to sell off. They were trying to bring in new clients, new companies and products to use with their powder injection technology and my understanding is now that they've really retrenched. Instead, they're now focused on their own products and delivery of vaccines, DNA vaccines specifically."
Another key to sustaining revenue in an increasingly crowded industry is to provide a unique technology that lacks competition, such as Emisphere with its oral delivery systems in development. Meridian was one of the first companies to bring autoinjector products to the market. By securing a contract with the U.S. government, the company now devotes almost half of its business to the production of emergency autoinjectors. In light of recent events, the company is encountering a huge jump in demand for its products.
The terrorist attacks on New York City and Washington D.C. have left municipalities across the U.S. scrambling for Meridian's products like never before. Mr. Handel said, "We've always had a level of business with the military, foreign military and foreign governments, as well as with the Homeland Defense program, which actually started a few years ago. It's never one that we thought would take us to the next level, if you will. Then 9/11 really changed everything."
Prior to the attacks, according to Mr. Handel, municipalities across the country were talking to the company for months, trying to resolve the financial issues for purchasing product. "After 9/11 they [municipalities] called in and I guess the wheels of government had been greased and suddenly they were now purchasing product. We went from about $600,000 in homeland defense sales before the attacks to, so far this year, a little over $5 million."
Although the company is experiencing increased demand, there is no danger of the demand outwstripping capacity. Mr. Handel continued, "It's not like we're supplying product for an effort like Afghanistan. Instead, we're supplying product to backfill product that's going into those offenses. There's not much urgency on us. We have seen a substantial increase in orders, but as far as capacity constraints, we're still operating only at about 66% of capacity at this elevated level."
Still, supplying the country with emergency autoinjectors of antidotes for nerve agents, anti-convulsants and morphine appears like a pretty tall order. Mr. Handel commented, "Supplying nerve agent antidotes has always been a priority for us; it's slightly less than 50% of our business. But as far as draining our capacity, no, we haven't experienced that because of the readiness and the systems that were already in place."
Although Meridian has recently experienced growth in its delivery systems, prior to the attacks, the company depended on its contract manufacturing and contract development businesses to stay in the game. A drug delivery company is faced with a dilemma: can it survive on its technology platforms alone, or does it need to expand into other areas in order to fund the discovery of that technology or succumb to the fate of being acquired? At this point, it doesn't make sense to a Big Pharma company to develop its delivery systems in-house, so, logically, the demand for novel delivery systems is significant. However, there has yet to be an example of a large, pure drug delivery company surviving on revenues from royalties and licensing alone. A company goes in one of two directions: the Elan way or the Alza way.
In March of last year, the second largest drug delivery company, Alza, was acquired by Johnson &Johnson. It's true that Alza had several pharmaceutical products on the market, as well as in the pipeline, that made it attractive to J&J, but its delivery business was comparable to Elan's. To date, the acquisition is the largest the industry has seen. New issues arise with an acquisition of that size. One of the world's largest pharmaceutical companies has acquired the number two drug delivery company: How does a company like Alza promise complete confidentiality to its clients? Faced with the choice between a small drug delivery company responsible only to itself, or a large drug delivery firm owned by a large pharmaceutical company, a possible purchaser needs to weigh the options.
According to Mr. Rosen, the company hasn't changed all that much since joining forces with J&J. "Well, there are three things. One hasn't changed since the acquisition and two have. What hasn't changed is that, we're still very actively working with pharmaceutical and biotech companies from around the world. I think there's been somewhat of a misperception that, as part of J&J, we would only be applying our technology within J&J, that we wouldn't work with partners anymore, and that's definitely not true. So, that hasn't changed."
The company has altered its sales and marketing divisions. Mr. Rosen said, "The sales and marketing organization has been rolled into other parts of J&J." Products such as Alza's Concerta, have become part of McNeill Consumer and Specialty Pharmaceuticals, a division of J&J. "That's been one of the big changes," Mr. Rosen stated.
He continued, "The third thing I'll emphasize is, one of the things that's great about being part of J&J, from a technology side is that we have access to the whole pharmaceutical pipeline. We've been applying our technology to some of the products that are already on the market. We're able to interact with the discovery groups . . . and we're able to work with compounds that are in very early stages so cases where J&J has compounds that have low bioavailability or poor solubility or a short half life for example, we can apply our technology and try to overcome those hurdles."
Although Alza's acquisition by J&J was the largest the industry has seen, there has been movement within the industry itself. "Skye Pharma acquired a small company, RTP Pharma, in North Carolina. That's a case of one drug delivery company acquiring another drug delivery company. I think Inhale has acquired some technology, one or two other companies in the past year," Mr. Rosen commented. "It remains to be seen whether other large pharmaceutical companies will purchase drug delivery companies. But I think in general, there seems to have been a little consolidation on the drug delivery side."
Mr. Rosen believes that certain things are inevitable for drug delivery companies. "I think if you're successful it will lead you to wanting to do your own products. In Alza's case, we were very successful as a drug delivery company, but the larger you get, you realize that there are opportunities to apply your technology that your partners aren't necessarily interested in. That really motivates you to get larger and keep growing aggressively. When you've gotten large enough to where you have the Resources to do some of these things on your own, that naturally leads you that way. The other choice is to be acquired."
Does that mean at some point the pure drug delivery companies will eventually cease to exist, as companies are acquired or move into the pharmaceutical market themselves? Not likely, Mr. Rosen asserts. "I see more companies coming along. There are lots of good ideas. I think places like MIT for example, generate lots of new things. Dr. Robert Langer is well known for starting drug delivery companies and collaborating with other people to start companies, not to mention other researchers who come up with some great ideas and start companies. I think there's going to continue to be new things coming along. I think one of the continuing trends will be leveraging biology more and more. Part of that is delivering macromolecules, but I think traditionally most of the device systems have been physical in nature and, as we learn more, not only from the genome project, but about cellular biology and other aspects of biology, the efforts to do cellular therapy and gene therapy and some of those other areas will advance."
As companies continue to come and go in the industry, brining new technologies and delivery systems, along with advancement in biological pharmaceuticals, the continuous growth that the pharmaceutical industry enjoys will apply to the drug delivery industry as well.