Pipeline Anxiety: Scientists Pumped into New Roles

Images courtesy of Merck & Co. For the pharmaceutical industry, the numbers do not add up. Investment in drug development has tripled in the past 10 years to more than $30 billion (US), but the industry has fewer new drugs to show for it. After peaking at 131 in 1996, the number of new drug applications filed with the US Food and Drug Administration dropped to 78 in 2002. In response, pharmaceutical companies are scrambling to realign and reinvent research and development operations. Mass mer

Susan Warner
May 18, 2003
Images courtesy of Merck & Co.

For the pharmaceutical industry, the numbers do not add up. Investment in drug development has tripled in the past 10 years to more than $30 billion (US), but the industry has fewer new drugs to show for it. After peaking at 131 in 1996, the number of new drug applications filed with the US Food and Drug Administration dropped to 78 in 2002.

In response, pharmaceutical companies are scrambling to realign and reinvent research and development operations. Mass mergers, new high-tech equipment, collaborations with academics and biotech firms, and new management structures are being implemented to spur researchers to work better and faster. The push for productivity in the labs has stirred trepidation over the possibility of layoffs and even simple resistance to change; nonetheless, researchers say they welcome the idea of shaking up stodgy bureaucracies in hopes of getting better results.

"On the one hand there is enormous anxiety because the pressure is very intense," says Diane Jorkasky, vice president of clinical sciences at Pfizer laboratories in Groton, Conn. "On the other hand, there is great excitement that we are going to do things differently and the speed will be increased. The clinicians are excited [because] they will have a terrific opportunity to understand drugs better, and the folks at the bench are excited because they will get information back on their compounds more rapidly."

LOW-FLOW PIPELINES The pressure to produce is rising up from the bottom line, scientists say. "There is a greater sense of urgency because of the profound economic impact that the lack of productivity is having," Jorkasky says. "If we can't increase the productivity we can't get drugs in the market. This is a huge problem." The lack of new medicines will become all the more obvious in the next three to four years as a number of blockbuster drugs come off patent, eroding drug-industry sales even more.

While the pharmaceutical industry remains enormously profitable, its appeal to investors has waned in the past few years, in part, over concerns about weak drug pipelines. The industry had long been viewed as a high-growth sector generating double-digit sales increases. Now many companies are struggling to return half that, and stock share prices have tumbled. "In this general economic climate there's a lot of pressure on companies vis a vis their shareholders," says Mike Hildreth, a partner at Ernst & Young. "Whether it's explicit or not, there's got to be pressure felt by the bench scientists to really come up with great ideas." About 20% of a drug company's profit is derived from its manufacturing operations, and 20% to 30% from sales and marketing, but the majority emanates from research and development, says Hildreth.

Doug Giesing, vice president of lead optimization at Aventis' research campus in Bridgewater, NJ, says the main causes for the drop in productivity include tighter regulation, and difficulty coping with the explosion in information spawned by the genomics revolution. On top of that, costs are simply going up, he says. "Phase I and Phase II trial costs have doubled in the past five years. A lot of that is due to the technology we're using today, along with just the basic costs of carrying out trials and paying for the scientists and the nursing staffs that do the work."

The most obvious response to the decline in productivity has been a spate of mega mergers in which companies have joined forces to bolster their pipelines. Pfizer, which merged with Warner-Lambert in 2000, is now the world's largest drug company with a research budget of $4.5 billion. It is about to grow even bigger with its pending acquisition of Pharmacia, and industry analysts say the Pfizer-Pharmacia tie-up could trigger another wave of competitive mergers.

Mergers, however, do not always deliver as promised. "There's a big debate over the size of the research organization and how that impacts productivity," says Hildreth.

Images courtesy of Merck & Co.

TO CULL FOR PROFITS While pharmaceutical companies are trying to identify and perfect promising compounds faster, they are just as interested in using technology to rule out losers before they sap additional time and research dollars. Peter S. Kim, president of Merck Research Laboratories, told financial analysts that the company has invested heavily in DNA-chip technology through its acquisition of Rosetta Inpharmatics. In an experiment in research productivity, Rosetta took compounds earlier rejected by Merck after extensive animal tests and other laboratory work. Using DNA chips, the Rosetta researchers came to the same conclusion as the Merck scientists--the drug candidates were dogs--but the chips did it faster and cheaper. Kim also told the analysts that the powerful DNA chips may help in discovering why certain drugs work for some people but not others. That information could help the company design more effective clinical trials.

Pfizer recently unveiled a new strategy to improve productivity in the earliest stages of clinical testing. The company will build a $35 million, 50-bed facility in New Haven, Conn., to conduct drug testing of healthy volunteers. The firm will also partner with nearby Yale University to use scanning technology to test the effectiveness of potential drugs on the brain.

Jorkasky says moving certain tests out of the hands of contract research organizations and into its own facility will help Pfizer researchers monitor data and make changes in a test earlier in the process, saving time and money. For example, if researchers originally thought that a compound would take three hours to take effect but discover that it actually takes 48 hours, the study can be immediately altered.

Another advantage is that Pfizer researchers can look for unintended effects of a potential medication. Viagra was intended to be a blood-pressure medicine and failed, Jorkasky says. "But there was this other event that occurred.... It's that kind of opportunity we're looking for. When you have your own research unit you're going to be able to pay greater attention to that kind of issue."

Pfizer's partnership with Yale also illustrates the continuing trend toward large drug companies partnering with academia and smaller biotech companies bolstering their in-house research with access to drug candidates or new technology (such as Yale's scanners). Jorkasky says the Yale Medical School has expertise in medical imaging technology, including the physics of imaging and the chemicals necessary to do the studies. "They have a profound interest in the science," she says. Working with Pfizer's compounds will allow them to better understand the limitations and potential benefits of the imaging technology.

Farther down the road to drug development, companies also are trying to find ways to improve the efficiency of massive Phase III testing, the costliest part of the process. Patient recruitment remains a major hurdle for drug companies, and some are beginning to think of ways to use their existing relationships (primarily salespeople) with physicians to recruit for trials, says Jeff Jung, worldwide health industry leader at the IBM Institute for Business Value.

"One area of opportunity we're hearing about is companies getting better leverage out of their physician relationships," Jung says. "They are talking about building longer-term relationships with doctors not only at the trial, but beginning even further back in the process of clinical trials planning and even designing the protocols." Giesing says Aventis is also turning to technology at this stage of the development process, but is mostly interested in better integration of information technology. The company is in the process of rebuilding its entire computer communications systems for handling clinical trials.

EUROPEAN ENTERPRISE In Europe, the productivity of pharmaceutical research and development operations has risen to the level of a national cause as European companies continue to shift research to the United States. Last year, when Novartis announced it would relocate its primary global research operations to Cambridge, Mass., from Switzerland, the company's chief executive officer Daniel Vasella says the move would "help attract the best researchers and increase research productivity by capitalizing on the vast increase in therapeutic targets stemming from the sequencing of the human genome."

Europe is attempting to respond with government-sponsored networks to boost research. Members of the European Commission have agreed to increase such funding from 1.9% of its current gross domestic product to 3% by 2010, towards its goal to create a unified European Research Area.

Courtesy of Merck & Co.

Giesing says Aventis, which is headquartered in France, has taken advantage of European initiatives. "Where it goes in the future will be based on the success these countries and the companies have in these consortiums." As pharmaceutical executives in Europe and the United States continue to wring their hands over stagnant productivity, some believe the problem will reverse itself in time.

Iain Cockburn, a professor at the Boston University School of Management who has extensively studied pharmaceutical research productivity, believes the current dearth of new drugs is merely an inevitable pause in the industry's development cycle. Today's drug deficit is often compared with a golden age of applications in the early 1990s that were spawned by advances in small-molecule chemistry 15 to 20 years earlier, he says. Now the industry is adjusting to a new era of molecular biology that will take time to produce results.

The adjustment, Cockburn suggests, was side-tracked somewhat by the 1990's biotechnology boom, which confused the process of drug development as large pharmaceutical firms and biotech companies sorted out their roles as potential rivals and collaborators. Further, he says, it is simply harder to invent new drugs now, because the low-hanging fruit--such as the once-revolutionary ace inhibitors--has already been plucked. "Now the industry is focusing on cancer, Alzheimer, and exotic viruses. They're working on tougher problems," he says. "The way you come up with these drugs is through a lot of heavy-duty science rather than industrial chemistry, and it's just a lot more expensive."

Despite layoffs at individual companies, Cockburn says scientists will remain in strong demand as the key starting point where ideas are generated. The new technology has little use without ideas to test. "Biotech has a bit of a feast or famine feel to it, but the fact is, the industry has been expanding and Big Pharma has been reorganizing and rationalizing how they operate," he says. "The concentration of resources at a company like Novartis or GSK [GlaxoSmithKline] is fearsome firepower."

Susan Warner (swarner@comcast.net) is a freelance writer in Philadelphia.

Courtesy of Merck & Co.
The industry is closely watching an experiment at the world's second-largest drug company, GlaxoSmithKline (GSK), in which researchers have been assigned to six small Centers of Excellence for Drug Discovery, each CEDD focusing on specific diseases. The idea is for each center to mimic an entrepreneurial biotech. While GSK has a total of 15,000 research employees, each of the CEDDs have just 250 to 300 workers.

"There's a real sense of entrepreneurial spirit. I think people feel a bit of ownership of what they're doing," says Eliot Ohlstein, a GSK senior vice president who heads the company's cardiovascular and urogenital CEDD. "In any large organization there is bureaucracy, and multiple committees and multiple levels of review," he says. "Within our CEDD it's been minimized. I am allowed to make decisions the way I see fit, and things are not visited and revisited and put on hold or taken off hold."

Ohlstein says creating the new CEDD system was not without its troubles. One of the system's strengths is each CEDD's intense focus on a single therapeutic area, but scientists needed to learn to work better with other scientists and partners, as well as with the business side of the company. "Sometimes the interaction and the communication needed some work," he says.

When it announced its year-end results in February, GSK indicated that the program may be working. The company put 15 new chemical entities into testing in 2000 and also in 2001. Last year that number increased to 25, and it expects to have 32 this year. Erding Hu, investigator in Ohlstein's CEDD, says the new structure helps the company to make decisions more quickly on targets, but researchers feel more pressure to produce. "Previously when we had candidates, they would go out of our hands and we just forget about it," he says. "There is more responsibility [now]."

At Aventis, the company has decided to tighten its focus on several key therapeutic areas. Last year it spun off its bone-disease research into a separate company, ProSkelia Pharmaceuticals, owned by Aventis in partnership with the venture-capital firm Warburg Pincus. This fall the company says it will also spin off its antibacterial and antifungal businesses.

In addition to developing new systems to manage its scientists, the industry is also leveraging new technology to speed work that once took hours of painstaking experimentation in the lab. Doug Giesing, vice president of lead optimization at Aventis' research campus in Bridgewater, NJ, says the company is developing new technologies to make better use of the discoveries generated in the last technology wave. "We need to bring these enabling technologies up to the same level as the breakthrough technologies," he says. "Once we have solved this problem, the investment in genomics and proteomics, combined with the new technologies, will dramatically accelerate the delivery of very useful products. But it's going to take some intense investment for several more years."

GSK has invested heavily in three massive screening facilities, two set to open this year in Europe and the third next year outside Philadelphia. Ohlstein says new technology at GSK allows it to develop better compounds faster. One drug candidate came through this initial optimization process in his CEDD in 39 months, as compared to the industry norm of 60 to 72 months. "We're starting with leads that are better," Ohlstein says, "so we're spending less time on that because the compounds are coming in already optimized."
--Susan Warner


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