The 1 Big Risk That Every Drugmaker Fears

Drug safety trumps efficacy, regardless of how successful a drug is in treating a condition. This makes picking the right drug target and drug design critical.

In this clip from The Motley Fool's Industry Focus: Healthcare podcast, host Kristine Harjes and contributor Todd Campbell discuss how safety plays a role in corporate strategy and competitive battles using Gilead Sciences ' (NASDAQ: GILD) face-off against Johnson & Johnson (NYSE: JNJ) and AbbVie Inc . (NYSE: ABBV) in cancer as an example.

A full transcript follows the video.

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This video was recorded on March 7, 2018.

Kristine Harjes: Let's turn to our second factor of competition, which is safety.

Todd Campbell: Safety is interesting. You're looking at it and saying, I want to build a drug that works better as far as efficacy is concerned, but it doesn't really do me any good if I pick the wrong target or I use a mechanism of action that isn't going to be safe. If I launch a drug that I think is going to be competitive because it delivers solid efficacy, but then safety signals show up, it's basically going to collapse the commercial opportunity of that drug.

Thinking about a good example for our listeners, turning back to Gilead Sciences, they actually had a drug that wasn't nearly as successful as their hep C franchise, and that's Zydelig, which is a drug for chronic lymphocytic leukemia. That won approval in 2004, around the same time as another competing drug in the same indication from Johnson & Johnson and AbbVie, which we've talked about on the show before, called Imbruvica.

Harjes: Yeah. These two were fierce competitors with one another. They were both targeting the same unmet need. It was an enormous, multi-billion-dollar indication. They were hoping that they'd be able to expand these drugs into earlier lines and potentially other cancers. But, neither drug was perfect. Safety ended up being a huge differentiator between the two of them. In March 2016, Zydelig's expansion trials had to be halted, which caused Gilead to have to discontinue the further development of this drug and add a black box warning, which is the FDA's most severe warning, on the label for the drug itself. And it just decimated Zydelig's commercial opportunity.

Campbell: Yeah. I remember thinking in 2013, before this drug launched, I was writing that Zydelig could be a blockbuster drug, it could have billion-dollar potential, this is a multibillion-dollar opportunity especially if you can move it up into earlier and earlier lines of treatment. But, when all was said and done, Zydelig's mechanism of action was inhibiting something called PI3K-delta, vs. Imbruvica's mechanism of action inhibiting the BtK protein, and BtK turned out to be safer. There were, unfortunately, some very sad fatalities caused in the trials evaluating Zydelig, and I think as a result, they had to shutter of the development. And Zydelig, while it's still on the market today because there are some patients that could still respond well to it, it's basically a niche drug. This was once going to be a billion-dollar blockbuster, and I think last year, the sales were maybe $150 million.

Harjes: Versus Imbruvica's sales, which were $2.5 billion in 2017. Something that I really want to emphasize here is, you have to consider the doctors' perspective. From that perspective, safety actually matters even more than efficacy. Think for a second about the Hippocratic Oath, to do no harm to your patients. So, even the most well-intentioned doctor is going to care more about avoiding bad outcomes than missing out on the best possible outcome and using a slightly more effective but maybe more dangerous drug. I think it's the logical choice every time to go for the safer drug. So, it really does matter. And labeling is also super important. That black box warning that I talked about, that's a blemish. Even if the black box is just to maybe narrow the patient pool slightly, having it on there is something that makes doctors very jittery and a little bit more hesitant to prescribe drugs that have some sort of safety hiccups.

Campbell: Kristine, that made me think, as investors, whenever we see a press release that comes out touting this great efficacy, I always, and you probably do, too, scan down about halfway and start looking for adverse events. I think that's a good reminder to all of our listeners that, when they're looking through phase 3 or phase 2 trial data, you want to not just focus on that efficacy. You want to go down there and look, were there any -- I'm most interested, Kristine, and you probably are, too, with the severe adverse events. That's grade 3 or higher events. And of all of them, I'm really interested in what's happening with liver toxicity. Those are some of the things, if you're trying to figure out, will this drug be better than the other drug, absent to head to head comparison, those are a couple things to take a look at.

Harjes: Yep. And one small tip for listeners that are trying to dig into these details, you'll sometimes see these adverse events referred to as SAE or AE, the acronym for severe adverse event and adverse event. If you're CTRL+F searching through any press releases and you're not finding anything when you spell out the words, try the acronym.

Campbell: Kristine, before we jump, one more point to follow on the back of that. It's important to remember that the safety hurdle will differ depending on the indication. You're going to have a slightly different safety hurdle for someone who has, say, late-stage cancer with very few treatment options versus, say, toenail fungus.

Harjes: Yeah, absolutely. And even in different lines of the same indication, it's a little bit more acceptable to have a questionable side effect profile if you're later down the line in treatment and patients have fewer options left.

Kristine Harjes owns shares of Gilead Sciences and Johnson & Johnson. Todd Campbell owns shares of Gilead Sciences. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Gilead Sciences and Johnson & Johnson. The Motley Fool has the following options: short May 2018 $85 calls on Gilead Sciences. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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