Reed Smith partner, Diane Frenier, discusses strategy, regulation and R&D for life sciences companies
It’s clearly been an extraordinarily busy time for corporate activity of one type or another in the life sciences sector. Does it feel like it’s been a transformational year and if so, why?
Diane Frenier: It’s certainly has been very busy and I guess transformational. I’ve been practicing for almost 30 years so there have been other periods during that time where some exciting and new things have been happening.
In terms of why, it’s due to a number of things. Companies are getting more strategic about what they want to focus on and have money on their balance sheets that they are looking to use wisely by investing it for shareholders. They also want to add value to the industry, so are looking for new technologies that bring new therapeutic drugs and medical devices to market.
Can you talk us through a couple of the value-adding strategies that these companies are trying? Are they pursuing more personalised medicine?
DF: They’re looking for more cutting edge technologies and drugs that are focused on meeting unmet needs. Some companies are focusing on those kinds of niches because it drives value. I think they’re really looking for technologies that are new mechanisms of action or new ways of delivering therapies that are actually much better than what is currently available, or that are targeted to particular patients – such as personalised medicine. The regulatory agencies have been telling pharmaceutical companies that they want to see analytical data that demonstrates these expensive therapies will be effective.
Are there other regulatory challenges coming down the track at these companies and, if so, how do they position themselves to deal with them?
DF: The one constant in this industry is there will always be regulation to deal with and the regulatory approval process will continue to evolve. Companies need to find more ways to work closely with the regulatory agencies, to educate them on new technologies that are coming through, help them figure out the best way to analyse them, and develop a process to get them through the approval process. There needs to be more communication, more cooperation, more background, and more education provided to the FDA so that they can be prepared to deal with these new therapies.
Is the US market further ahead of other countries in regulatory terms or do your clients run into the same problems when carrying out acquisitions in other markets?
DF: There are places where the FDA does a reasonably good job and there are places where the European Medicines Agency (EMA) does a better job. For instance, in biologics, the EMA is faster at getting regulations out and further ahead than the FDA in evolving a process.
In other areas, however, the FDA is ahead. Those are the two agencies that are the most critical for companies to work with because so many of the other regulatory authorities around the globe really follow on from what the FDA and the EMA are doing.
People seem to struggle maintaining focused R&D expertise across a portfolio and ensuring their areas of strength aren’t diluted. Are they serious in tackling it?
DF: It’s probably not as high up the agenda as it ought to be. However, going into an acquisition, all companies have a plan for what products they’re interested in, what’s coming through the pipeline that they really want to keep, and what they’re going to divest. The R&D talent want to see their technologies developed, approved and helping patients, so if they’re not being provided with the resources to allow that to go ahead they will get frustrated and that’s usually when you start losing people. On the other hand, you only have a limited number of resources.
How much R&D expertise is there to go around? Is this an industry that has a talent shortage problem irrespective of the M&A activity that’s going on?
DF: I’m not sure there is a lack of talent but there may be a shortage of people that can really focus their efforts on promising business, as well as scientific, research. That’s the challenge with the scientific community – finding someone who not only has the scientific talent but can also see the business case for what they’re working on.
Do you see personalised medicine as being the place where we’ll see the really exciting technology breakthroughs over the next couple of years?
DF: There are a number of areas. Personalised medicine is one of the areas where there is going to be a lot of exciting developments but there are others as well, including 3D printing and the way that’s going to impact on this sector. One of the primary areas they’re looking at (within 3D printing) is in respect to knee and hip replacements, but in future it may change the way drugs are manufactured. With all the M&A activity, we’ll see more product divestitures over the next couple of years as these companies sort out their portfolios. There’s also going to be a shift from M&A to more partnering deals because companies have to figure out how to leverage their new product portfolios and don’t necessarily have all the resources in-house.
With the divestitures that you mentioned, are there enough buyers out there or are companies going to be able to attract the prices they’d like for some of these sales?
DF: There is a lot of hunger for products at all levels of the spectrum because there are companies who are looking to pick up products toward the end of their life cycle. There are also companies looking to pick up some of the smaller, mid-level products that the bigger companies don’t want.