Adare Pharmaceuticals Business Model Steady Through the Rodeo

By Louis Garguilo, Chief Editor, Outsourced Pharma

Take a deep breath:

Eurand Pharmaceuticals was acquired in 2011 by global private equity firm TPG Capital, who merged it with Montreal-based Axcan Pharma to form Aptalis Pharma, which was acquired in February 2014 by Forest Labs and dubbed Pharmatech. A few weeks later, Forest Labs was acquired by Actavis, who on April 1, 2015, again spun out Aptalis (Pharmatech) … right back to TPG Capital, who renamed the company Adare Pharmaceuticals.

Fraher, who started his career with Sterling-Winthrop in Ireland at the end of the ‘80s, might not be very familiar with real rodeos. And unlike that form of sport, he’s been able to maintain a steady business model despite all the change in directions.

Today, that business model may be additionally well-suited to the strategies of biotechnology and pharmaceutical companies, as well as the court of public opinion. It’s focused on deriving additional value from drugs and drug franchises. The model also converts the sponsor-provider equation to a much sought-after sponsor-partnership relationship.

A Model Of Development And Partnerships

Sometimes the best way to explain a business model is through an example.

Amrix is a once-a-day formulation of cyclobenzaprine for relief of muscle spasms. This advanced formulation of an existing drug was developed at Adare (then Eurand/Aptalis) and with a pharma “partner” – Fraher rarely uses the words “client” or “customer.” Prior to the commercialization of Amrix, only immediate-release formulations were available. Amrix also provides an improved side-effect profile.

“The product was licensed in the U.S. to Cephalon, a wholly-owned subsidiary of Teva, and remains a very successful product for them,” says Fraher. “We have since taken that product and clinical package, and licensed it in 22 countries. Importantly, our patents were challenged by generic companies, but upheld all the way through to the U.S. Supreme Court.”

To summarize: An existing drug undergoes strategic development and a strengthening of patents to: (1) unlock value and open global markets for partners, and (2) provide greater access to drugs, and aid the ability to adhere to drug regimens, for patients.

More on these two points in a moment, but there’s an additional component: The willingness to go sans initial partner when Adare identifies an opportunity to acquire a molecule for further development. “That we develop our own products means we have a different skill set than most [outsourcing] companies. Others tend to focus on the service side of the business,” says Fraher. He adds that an active product development capability brings intellectual property to the table, either when developing partner products or Adare’s own products, which ultimately end up at partners as well.

All products end up with bio and pharma companies because in this model, Adare doesn’t commercialize products. This is key, says Fraher. “Adare is not a CMO in that it does not look to obtain outside contract manufacturing projects from clients. We are really only connected to the typical outsourcing model in that we develop products for others.”

To execute on this strategy, Adare is willing to spend upfront, and also to co-invest with bio and pharma partners. Sponsors have certainly indicated a predilection for risk-share arrangements over pure pay-for-service models at CMOs: Pharma because it’s a good financial practice, and biotechs because often they simply lack the funds. “We’ll invest in projects for a potentially greater return on the backend when we are successful,” says Fraher. “It might be taking more risk, but we’re really interested in creating novel, value-added products foremost. We’re not just interested in earning service revenues on an annual basis.”

Riding The Technologies

Adare restarts as an independent provider with a book of about $150 million in revenue, 600 employees at six locations globally (U.S., Canada, France, two in Italy), and a thirst “to grow rapidly and significantly with the backing of TPG Capital,” according to Fraher. He is unable to talk about profitability, but can say his customer mix is quite evenly split between pharma and smaller biotechs.

Ultimate success of the business rides on Adare’s technology offerings. A more well-known disciple of the “technology approach” is Catalent, which like Adare would rather leave the CMO moniker behind. “If you think about Catalent—I hope you talk about us as a technology and services company,” said CEO John Chiminski.

Adare’s particular suite of technologies starts with its specialty in taste-masking, modified release and solubility enhancement, always with a focus on alleviating “chemical, medical efficacious side effects to make drugs more available to those who otherwise would not be able to take them,” says Fraher.

How important is this technology to unlocking value in drugs? Patient adherence to prescribed drug therapy is now widely recognized as a significant healthcare issue. For example, as this article is being written, a survey reports that over half of heart stent patients don't take their oral antiplatelet medication as prescribed. While there are various reasons for non-adherence by patients, taste and frequency of dosage are two major ones.

The Judges Are Watching Carefully

Also “recognized” publically nowadays is the cost of drugs, and pharma behaviors, shall we say. You won’t get criticism for free-market pricing and marketing from this editor, proven in articles such as these. However, there is a price-positioning battle going on between pharma and other elements of the “healthcare system,” including payors, insurers, growing hospital organizations …. and the public. Perceptions can count, right or wrong.

The Wall Street Journal recently reported on a strategy most likely not good on the perception front. “More pharmaceutical companies are buying [existing] drugs that they see as undervalued, then raising prices” without improving the drugs in any way, according to the article.

Public perceptions and patient realities will improve should pharma enlist outsourcing providers – or proceed internally – to add value to existing drugs before considering increased revenue opportunities. Price and value need to be correlated, better measured, and openly reported on all sides of the healthcare system. This has become a defining social verity of our times, and cognitive attitudes are hardening. The Adare Pharmaceuticals model of enhanced patient outcomes via improved products, creating additional financial value to sponsors and the overall healthcare system, appears made for our times.