“The global pharma sector's forward earnings multiple has expanded to almost 16 times, up from less than 11 times two years' ago, in part because investors believe the (biotech) industry's R&D machine is again producing the goods.”
Wednesday, July 02, 2014
Expectations, Ballyhoo and Stem Cell Research
Two seemingly unrelated biotech stories popped up this morning on the news. One involved an international stem cell research brouhaha. The other involved what could amount to a nearly $2 billion biotech deal for a California firm.
What brings them together is the diaphanous nature of some of the work in these much ballyhooed fields. But first, let’s look at the latest reports about the STAP stem cell flap concerning research in Japan and Massachusetts that seemed to promise a fast and easy way to make pluripotent stem cells.
After five months and major questions, the journal Nature has decided to retract the STAP paper despite the fact that the journal had it vetted by some of the best scientists in the world. Even with the review, Nature said “extensive” errors have surfaced along with “inexplicable discrepancies.”
It is fair to say that 20 years ago, that paper would still be widely accepted and remain firmly entrenched in Nature’s archive as reliable. What has changed is the Internet and impact of social media on evaluation of research. That has given researchers the unfettered ability to discuss and publish their findings dealing with replication of results and other issues. At the same time, the speed in which this cyber review takes place is remarkable. The change from 20 years ago is the equivalent of the move from hand-cranked printing presses to the high-speed presses of today that can spit out thousands of pages an hour.
(We should note that California stem cell researcher Paul Knoepfler of UC Davis played an important role in probing the scientific reliability of the STAP research with responsible reporting and commentary on his blog, ipscell.com.)
Now, about that nearly $2 billion deal, Wall Street Journal columnist Helen Thomas this morning wrote about the acquisition of Seragon Pharmaceutical by Roche, describing it as “disconcerting.” She said it could be a case of shelling “out vast sums for assets that could quite possibly amount to nothing.” San Diego-based Seragon “was formed only last year and has one breast cancer drug in early stage trials,” Thomas wrote.
Thomas noted, however, that only one in 10 potential therapies entering clinical trials reaches the marketplace. “The risks are substantial,” she said. Those same risks apply as well to the 10 clinical trials that the California’s $3 billion stem cell agency has been involved in.
Earlier this year, noted bioethicist Art Caplan wrote about what he called the “off-the-rails syndrome” in stem cell research. The STAP article was his starting point. Stem cell research is a field that has had more than its share of hype. Well-respected scientists routinely refer to its revolutionary potential. Little public attention is paid to the obstacles and the lengthy and often unsuccessful process of developing a truly usable product. Expectations of desperate patients are raised. Many of them wind up paying for expensive, untested and perhaps unsafe treatments.
The Seragon-Roche deal is also a reflection of the hype that can arise in biotech/stem cell research. It can be so powerful that the supposedly “rational” economic markets are swept up in the exuberance of a nifty research story. Ultimately the deal may pan out for Roche, although Roche can afford to take a big loss. But stories are stories.
What does all this mean for the California stem cell agency? Good reasons exist to manage expectations so that the public and potential sources of funding are surprised by successes rather than being surprised by the agency’s failures. No one wants to see a story like the Solyndra scandal emerge from the California stem cell agency.