Financial Review: Part 4
Research and Development Programs
Abbott currently has numerous pharmaceutical, medical and nutritional products in development.
Research and Development Process
In the Proprietary Pharmaceuticals segment, the research and development process generally begins with discovery research which focuses on the identification of a molecule that has a desired effect against a given disease. If preclinical testing of an identified compound proves successful, the compound moves into clinical development which generally includes the following phases:
- Phase I – involves the first human tests in a small number of healthy volunteers to assess tolerability and potential dosing.
- Phase II – tests the molecule’s efficacy against the disease in a small group of patients.
- Phase III – tests a molecule that demonstrates favorable results in the earlier phases in a significantly larger patient population to further demonstrate efficacy and safety based on regulatory criteria.
The clinical trials from all of the development phases provide the data required to prepare and submit a New Drug Application (NDA), a Biological License Application (BLA) or other submission for regulatory approval to the U.S. Food and Drug Administration (FDA) or similar government agencies outside the U.S. The specific requirements (e.g., scope of clinical trials) for obtaining regulatory approval vary across different countries and geographic regions.
The research and development process from discovery through a new drug launch typically takes 8 - 12 years and can be even longer. There is a significant amount of uncertainty inherent in the research and development of new pharmaceutical products and there is no guarantee when, or if, a molecule will receive the regulatory approval required to launch a new drug or indication.
In addition to the development of new products and new formulations, proprietary pharmaceutical research and development projects also may include Phase IV trials, sometimes called post-marketing studies. For such projects, clinical trials are designed and conducted to collect additional data regarding, among other parameters, the benefits and risks of an approved drug.
In the Established Pharmaceuticals segment, the research and development process focuses on the geographic expansion and continuous improvement of the segment’s existing products to provide Improved Therapeutic Benefits (ITBs) to patients and customers. As Established Pharmaceuticals does not actively pursue primary research, development usually begins with work on existing products or after the acquisition of an advanced stage licensing opportunity.
Depending upon the product, the phases of development may include:
- Drug product development
- Phase I bioequivalence studies to compare a future Established Pharmaceutical’s brand with an already marketed compound with the same active pharmaceutical ingredient (API).
- Phase II studies to test the efficacy of an ITB in a small group of patients.
- Phase III studies to broaden the testing to a wider population that reflects the actual medical use.
The specific requirements (e.g. scope of clinical trials) for obtaining regulatory approval vary across different countries and geographic regions. The process may range from one year for a bioequivalence study project to 6 or more years for complex formulations and new indications.
In addition to the development of new ITBs, development projects may also include Phase IV studies similar to the post-marketing studies described above for proprietary pharmaceuticals.
In the Diagnostics segment, the phases of the research and development process include:
- Discovery which focuses on identification of a product that will address a specific therapeutic area, platform, or unmet clinical need,
- Concept/Feasibility during which the materials and manufacturing processes are evaluated, testing may include product characterization and analysis is performed to confirm clinical utility, and
- Development during which extensive testing is performed to demonstrate that the product meets specified design requirements and that the design specifications conform to user needs and intended uses.
As with pharmaceutical products, the regulatory requirements for diagnostic products vary across different countries and geographic regions. In the U.S., the FDA classifies diagnostic products into classes (I, II, or III) and the classification determines the regulatory process for approval. While the Diagnostics segment has products in all three classes, the vast majority of its products are categorized as Class I or Class II. Submission of a separate regulatory filing is not required for Class I products. Class II devices typically require pre-market notification to the FDA through a regulatory filing known as a 510(k) submission. Most Class III products are subject to the FDA’s Pre-Marketing Approval (PMA) requirements. Other Class III products, such as those used to screen blood, require the submission and approval of a BLA.
In the EU, diagnostic products are also categorized into different categories and the regulatory process, which is governed by the European In Vitro Diagnostic Medical Device Directive, depends upon the category. Certain product categories require review and approval by an independent company, known as a Notified Body, before the manufacturer can affix a CE mark to the product to show compliance with the Directive. Other products only require a self-certification process.
In the Vascular segment, the research and development process begins with research on a specific technology that is evaluated for feasibility and commercial viability. If the research program passes that hurdle, it moves forward into development. The development process includes evaluation and selection of a product design, completion of clinical trials to test the product’s safety and efficacy, and validation of the manufacturing process to demonstrate its repeatability and ability to consistently meet pre-determined specifications.
Similar to the diagnostic products discussed above, in the U.S., vascular products are classified as Class I, II, or III. Most of Abbott’s vascular products are classified as Class II devices that follow the 510(k) regulatory process or Class III devices that are subject to the PMA process.
In the EU, vascular products are also categorized into different classes and the regulatory process, which is governed by the European Medical Device Directive, varies by class. Each product must bear a CE mark to show compliance with the Directive. Some products require submission of a design dossier to the appropriate regulatory authority for review and approval prior to CE marking of the device. For other products, the company is required to prepare a technical file which includes testing results and clinical evaluations but can self-certify its ability to apply the CE mark to the product. Outside the U.S. and the EU, the regulatory requirements vary across different countries and regions.
After approval and commercial launch of some vascular products, post-market trials may be conducted either due to a conditional requirement of the regulatory market approval or with the objective of proving product superiority.
In the Nutritional segment, the research and development process generally focuses on identifying and developing ingredients and products that address the nutritional needs of particular populations (e.g., infants, athletes) or patients (e.g., people with diabetes). Depending upon the country and/or region, if claims regarding a product’s efficacy will be made, clinical studies typically must be conducted. Most other product development, such as a product form change from liquid to powder, generally does not necessitate clinical studies.
In the U.S., the FDA requires that it be notified of proposed new formulations and formulation or packaging changes related to infant formula products. Prior to the launch of an infant formula or product packaging change, the company is required to obtain the FDA’s confirmation that it has no objections to the proposed product or packaging. For other nutrition products, notification or pre-approval from the FDA is not required unless the product includes a new food additive. In some countries, regulatory approval may be required for certain nutritional products, including infant formula and medical nutritional products.
Areas of Focus
Abbott’s significant areas of therapeutic focus include the following:
Proprietary Pharmaceutical Products –
Immunology – Projects are ongoing to identify new mechanisms with the potential to treat an array of immune-mediated diseases. Projects include early stage work in oral DMARD therapies and a number of biologic candidates. ABT-122 and ABT-981 are both dual variable domain immunoglobulins in Phase I clinical trials with potential to be disease modifying anti-arthritic drugs.
Additional indications of HUMIRA have registration submissions under review, including ankylosing spondylitis in China where the registration filing was submitted in September 2011 and pediatric Crohn’s disease where the European Union (EU) registration was submitted in October 2011 and the U.S. submission is expected in mid-2012. Global regulatory applications for ulcerative colitis were submitted in early 2011. Phase III trials are ongoing for ulcerative colitis in Japan, uveitis in the U.S., EU and Japan, peripheral and axial spondyloarthritis in the U.S. and EU, and hidradenitis suppurativa in the U.S. and EU. Approval for juvenile idiopathic arthritis was obtained in July 2011 for Japan.
Neuroscience/Pain – Abbott is focused on the development of compounds that target receptors in the brain that help regulate neurological functions to address conditions such as Alzheimer’s disease, schizophrenia, pain, Parkinson’s disease and multiple sclerosis (MS). These efforts include four compounds directed toward the treatment of Alzheimer’s disease. Abbott expects ABT-126 to start Phase IIb studies in the first half of 2012, ABT-354 to enter Phase IIa in late 2012 or early 2013, ABT-363 to complete Phase I in late 2012, and ABT-957 to start Phase I in the first half of 2012. Daclizumab, a next-generation antibody, is in ongoing Phase III clinical trials for relapsing remitting MS. ABT-652 is under development for the treatment of multiple pain indications with Phase IIb clinical trials expected to start in June 2012. Duopa is completing its U.S. Phase III program for Parkinson’s disease and a registration is expected to be submitted in the second half of 2012.
Oncology – Abbott is focused on the development of targeted treatments that inhibit tumor growth and improve response to common cancer therapies. Abbott has new molecular entities in development for more than a dozen types of cancer including:
- ABT-888, a PARP-inhibitor, for which Phase II evaluation is ongoing for a number of specific tumor types.
- Elotuzumab under a collaboration agreement acquired as part of the Facet Biotech acquisition in 2010. Abbott began Phase III development of elotuzumab for the treatment of multiple myeloma with its partner in June 2011.
- ABT-199, a next-generation Bcl-2 inhibitor currently in Phase I development being studied for chronic lymphocytic leukemia (CLL) and non-Hodgkin’s lymphoma (NHL).
Hepatitis C – Abbott’s antiviral program is focused on developing treatments for hepatitis C (HCV) and development is ongoing for ABT-450, part of the Enanta collaboration, polymerase inhibitor ABT-333, and ABT-267, a NS5A inhibitor.
Women’s Health – In 2010, Abbott entered into a collaboration agreement with Neurocrine to develop and commercialize elagolix, an oral gonadotropin-releasing hormone (GnRH) antagonist, for the treatment of endometriosis-related pain and fibroids. A Phase III study in endometriosis is expected to begin in mid-2012 and a Phase IIa study for uterine fibroids was initiated in November 2011.
Chronic Kidney Disease – In 2010, Abbott entered into an agreement with Reata Pharmaceuticals for ex-U.S. rights, excluding certain Asian markets, to bardoxolone, an investigational treatment for chronic kidney disease (CKD). A global Phase III trial was initiated in June 2011. A global Phase IIb study was initiated for atrasentan in June 2011.
In 2011, new formulations of Abbott’s existing pharmaceutical products were approved, including Lupron 6-month depot in June and 3-month depot in August in the U.S. A new strength for Creon was approved in the U.S. in June and AndroGel 1.62% was approved in April in the U.S. Work is also continuing on numerous early-stage programs, including the biologic acquired from Pangenetics for chronic pain in late 2009, a cMet antibody for cancer in partnership with Pierre Fabre SA, and other programs across all of Abbott’s therapeutic areas of focus.
Established Pharmaceuticals – Abbott is currently working on active ITB plans for about 20 - 30 key brands. Depending on the product, the development activities focus on new markets, formulations, combinations, or indications.
Vascular – Ongoing projects in the pipeline include:
- Xience Xpedition, our next-generation drug-eluting stent (DES) with enhanced deliverability and an expanded size matrix. It utilizes the Xience PRIME stent, everolimus and biocompatible coating technology but incorporates new catheter technology for improved deliverability. Submission of the product for CE Mark and U.S. approval is projected to occur in 2012.
- ABSORB, a bioresorbable vascular scaffold (BVS) device for the treatment of coronary artery disease that is gradually resorbed into the vessel wall. In 2011 Abbott released five-year data from its ABSORB clinical trial, which showed efficacy and safety results consistent with the four-year data. In 2010, Abbott initiated the ABSORB EXTEND clinical trial which will enroll up to 1,000 patients with more complex coronary artery disease. In 2011 after receiving CE Mark approval for ABSORB, Abbott initiated a randomized, controlled clinical trial to further study the device in an expanded population in Europe. A global trial, including the U.S. and other geographies, is planned for later in 2012.
- MitraClip device for the treatment of mitral regurgitation – Abbott’s MitraClip system which is on the market in Europe is currently under review for approval by the FDA. An amended filing to the FDA was submitted in December 2011.
- Coronary and endovascular core product projects, including new coronary and endovascular guide wires, and the Absolute Pro and Omnilink Elite stent for iliac indication in the U.S., are at various stages of development and/or undergoing regulatory approvals.
Medical Optics – Abbott is expanding its proprietary laser platforms into new vision correction applications, including laser refractive cataract surgery. Abbott has also developed a new diagnostic instrument and laser treatment planning software which is designed to improve visual outcomes. This instrument and software received CE Mark in November 2011 and will be launched in Europe in the second quarter of 2012. A PMA filing for U.S. regulatory approval is targeted for submission in the second quarter of 2012. A PMA filing for an ophthalmic viscoelastic for the U.S. market was submitted to the FDA in February 2011 and is currently under review. Abbott is also developing new products for patients undergoing cataract surgery, including: the Synchrony intraocular lens (IOL) designed to mimic the eye’s natural ability to change focus and deliver improved vision at all distances; advanced IOLs that address astigmatism as well as presbyopia; IOL insertion systems that improve surgeon efficiency and enable implantation through smaller incision sizes; and feature enhancements to phacoemulsification systems.
Molecular Diagnostics – Numerous new molecular diagnostic products, including oncology and infectious disease assays as well as a new instrument system, are currently under development. Abbott’s companion diagnostic test for an ALK gene rearrangement test for non-small-cell lung cancer was launched in the U.S. in 2011 and is currently in clinical trials and undergoing regulatory review in numerous other countries. In 2011, an assay to aid in the management of HCV-infected patients undergoing antiviral therapy received U.S. regulatory approval and additional assays to detect the presence of HIV virus and CMV viral load as well as a test to detect hepatitis B drug resistance in patients received CE Mark.
Core Laboratory Diagnostics – Abbott is researching dozens of novel biomarkers focusing on areas such as infectious disease, oncology, cardiac and neuroscience disorders and also has several next-generation instrument systems in development.
Diabetes Care – Abbott submitted its FreeStyle InsuLinx blood glucose monitoring system that includes new features designed to support the insulin-using patient for regulatory approval in the U.S. in June 2011. After receiving CE Mark for this system in May 2011 and Health Canada approval in October 2011, Abbott is continuing to provide R&D support as the product is launched in additional markets. Development is also continuing on an updated hospital blood glucose monitoring system for which filings for approval are projected to be submitted in the U.S. and Europe during the first half of 2013. Abbott is also developing a next-generation monitoring system under the Precision product platform. Abbott anticipates submitting filings for approval in various markets in 2013.
Nutrition – Abbott is focusing its research and development spend on six benefit platforms that span the pediatric, adult and performance nutrition areas: immunity, cognition, lean body mass, inflammation, metabolism and tolerance. Numerous new products that build on advances in these benefit platforms are currently under development and are expected to be launched in 2012.
Given the diversity of Abbott’s business, its intention to remain a broad-based healthcare company and the numerous sources for potential future growth, no individual project is expected to be material to cash flows or results of operations over the next five years. Factors considered included research and development expenses projected to be incurred for the project (compound or device) over the next year relative to Abbott’s total research and development expenses as well as qualitative factors, such as marketplace perceptions and impact of a new product on Abbott’s overall market position. There were no delays in Abbott’s 2011 research and development activities that are expected to have a material impact on operations.
While the aggregate cost to complete the numerous pharmaceutical and medical device projects currently in development is expected to be material, the total cost to complete will depend upon Abbott’s ability to successfully complete each project, the rate at which each project advances, and the ultimate timing for completion. Given the potential for significant delays and the high rate of failure inherent in the research and development of new pharmaceutical and medical device products and technologies, it is not possible to accurately estimate the total cost to complete all projects currently in development. However, Abbott plans to continue to manage its portfolio of projects to achieve research and development spend equal to approximately 9.5 percent to 10 percent of sales each year. Abbott does not regularly accumulate or make management decisions based on the total expenses incurred for a particular development phase in a given period.
Generally, Abbott seeks to obtain various forms of exclusivity for each product in development. Abbott obtains patent protection, where available, in all significant markets and/or countries for each product in development. Additionally, Abbott also seeks to obtain other forms of legal or regulatory exclusivity that would protect the product upon approval. These forms of regulatory exclusivity have a variety of terms, from 3, 5 to 7 years in the United States, and up to 10 years in the European Union. This regulatory exclusivity is granted upon the approval of each development project. In certain instances, regulatory exclusivity may protect a product where patent protection is no longer available or for a period of time in excess of patent protection. The availability of and length of such regulatory exclusivity is based, in part, on the length of the regulatory review process and can only be determined upon product approval. It is not possible to estimate for each product in development the total period of exclusivity that will be obtained if regulatory approval is obtained.
Generally, upon approval, products in development may be entitled to exclusivity. Abbott seeks patent protection, where available, in all significant markets and/or countries for each product in development. In the United States, the expiration date for patents filed on or after June 8, 1995 is 20 years after the filing date. Given that patents relating to pharmaceutical products are often obtained early in the development process and given the amount of time needed to complete clinical trials and other development activities required for regulatory approval, the length of time between product launch and patent expiration may be significantly less than 20 years if a product in development ultimately obtains regulatory approval. The Drug Price Competition and Patent Term Restoration Act of 1984 (commonly known as the Hatch-Waxman Act) permits a patent holder to seek a patent extension commonly called a patent term restoration for patents on products (or processes for making the product) regulated by the Federal Food, Drug and Cosmetic Act. The calculation of the patent extension is roughly based on 50 percent of the period of time extending from the filing of an Investigational New Drug application to the submission of the NDA, plus 100 percent of the time period from NDA submission to regulatory approval. The extension, however, cannot exceed 5 years and the remaining patent term after regulatory approval cannot exceed 14 years. Only one patent related to the first commercial marketing of a newly approved pharmaceutical product is eligible for a patent term restoration.
Additionally, products may be entitled to obtain other forms of legal or regulatory exclusivity upon approval. These forms of regulatory exclusivity have a variety of terms in the United States and are variable in other jurisdictions. In the United States, when the FDA approves a new chemical entity that it has not previously approved alone or in combination with other chemical entities, the product is granted 5 years of regulatory exclusivity. The FDA may grant 3 years of market exclusivity for an NDA, including supplementary applications, if the application contains reports of new clinical investigations that have not previously been relied upon by the FDA. If the FDA grants pediatric exclusivity, the longest existing exclusivity (patent or regulatory) related to the product would be extended by 6 months. If the FDA designates a product as an orphan drug that is either used to treat conditions that afflict a relatively small population or for which there is not a reasonable expectation that the research and development costs will be recovered, the FDA may grant 7 years of exclusivity.
This regulatory exclusivity is granted upon the approval of each development project. In certain instances, regulatory exclusivity may protect a product where patent protection is no longer available or for a period of time in excess of patent protection. It is not possible to estimate for each product in development the total period of exclusivity that will be obtained if regulatory approval is obtained. However, given the length of time required to complete clinical development of a pharmaceutical product, the minimum and maximum periods of exclusivity that might be achieved in any individual case would not be expected to exceed 3 and 14 years, respectively. These estimates do not consider other factors, such as the difficulty of recreating the manufacturing process for a particular product or other proprietary knowledge that may provide some level of additional protection against generic incursion.