The notion that smaller biotechs are discriminated against by...

The notion that smaller biotechs are discriminated against by the FDA and that only Big Pharma gets approvals because of alleged corruption is suggested a lot here on HC.

I’m not of that view.

Sure, Big Pharma tends to have a higher rate of FDA approval. In the last couple of years, Big Pharma has averaged an 80% NME approval rate compared with 60% for others.

The difference in approval rate (8/10 v. 6/10) isn’t that surprising when you consider that Big Pharma has much, much larger resources to conduct more trials, to conduct larger trials, to be able to afford to toss programs that lack compelling data, to afford the large workforce of top, highly experienced professionals needed to design and conduct trials, analyse data and prepare submissions to the FDA. All of these work to increase the odds in their favour.

But despite that substantial advantage, Big Pharma still has 2 in 10 submissions knocked on the head by the FDA and the FDA still gives the nod to 6 in 10 submissions made by the smaller guys!

I can think of two examples of the “little guys” sneaking through this year.

Neuren’s NDA for trofinetide was submitted by its licensing partner, Acadia. Acadia had a market cap of just US$2.5bn and a fairly recent “run-in” with the FDA over non-approval of one of its own drugs. Some wrote off trofinetide’s chances because of this. But the drug was not only approved, it was approved for a broader patient population than expected as well as a little early.

A month prior, Reata Pharmaceuticals had its drug for an orphan neurodegenerative disorder approved. Also early. Reata was a US$1.1 bn company and had never previously had a drug approved. A few months later, this “little guy” was snatched up for US$7.3bn by Biogen.

Rather than holding hands or greasing palms at the FDA, I think that the main advantages of a big pharma partner are a) paying for expensive Phase 3 trials (a small Phase 3 for Neuren’s drug cost A$300m +) b) navigating the regulatory submission process and c) distribution networks. Some potential disadvantage are that Big Pharma can give smaller biotechs the run-around, be slow in progressing development and be quick to hand back assets with less than stellar data or sometimes just because of a strategic change of direction. And if you get into a dispute….!! It’s super-important to get the agreement right.