Strategic Outsourcing of Pharmaceutical R&D

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Strategic Outsourcing of Pharmaceutical R&D CHEMSITRY TODAY Vol 31(4) P. 14-17 / CROS/CMOS Strategic outsourcing of pharmaceutical R&D - Bringing pharma and drug discovery into the information age KEVIN LUSTIG Assay Depot, Inc Corresponding Author KEVIN LUSTIG: Assay Depot, Inc, email: [email protected] KEYWORDS: Outsourcing; innovation; lean; drug; research; discovery ABSTRACT: The centralized model of pharmaceutical development that was used successfully through most of the last century is no longer a good fit. Advances in modern molecular research have changed the playing field to such an extent that the old model is no longer viable. If drug companies can solve the problems of pre-clinical development and deliver a steady stream of new, high- quality compounds to the clinic, then the challenges currently facing pharma will become a thing of the past. The single most likely route to success is through the application of strategic outsourcing, which if done correctly, can dramatically reduce research costs while simultaneously improving research quality. Utilizing new online tools such as research exchanges, a “lean” pharmaceutical company can find and manage a large number of specialist scientific service providers and experts that can bring exactly the right skill set to bear at the right time in the project cycle. INTRODUCTION Few would argue that the Pharmaceutical Industry has been languishing in the doldrums now for well over a decade. Pharmaceutical companies are having to face three major issues involving drug approvals, development costs and patents expirations. Any of these alone would prove a tough nut to crack, but the fact that they are all converging at the same time is creating a perfect storm! • A paucity of new drug approvals: 2010 was one of the worst years on record, with the European Medicines Agency showing only 41 finalized applications, compared to 125 in 2009. Applications were up in 2011, but still a long way off from the steady stream of new approvals that the industry needs in order to remain viable (1). • Spiraling drug development costs: an analysis of 1,200 drug approvals dating back to the 1950s tells a grim story. The amount of money a company had to invest per drug in 1970 was around $100 million; by 1990 that figure had increased to $500 million; by 2009 it had reached $4 billion; and it is now heading towards $10 billion (2). • The proverbial “patent cliff”: an unusually dense constellation of best-selling drugs whose patent protection period is running out. From 2010-2016, an estimated 110 pharmaceutical products are losing patent protection, including 14 blockbuster drugs (3). AstraZeneca is a good example of a company facing the dreaded patent cliff. Nexium, a gastro reflux drug with annual revenue of $5B, comes off patent in 2014. Two years later the patent on Crestor, a cholesterol-lowering drug, expires; this product generated $6B of revenue last year. If one of the world’s best-selling drugs Plavix, a blood thinner from Sanofi is anything to go by, revenue loss of >90% can be anticipated upon patent lapsed, due to stiff competition from generic manufactures. In light of all this, it is not surprising that stocks of some of the industry’s biggest players – including Pfizer and Merck – are down 40 per cent from a decade ago, and that the industry as a whole has cut 200,000 jobs in the last five years alone. It is clear that the current model of drug discovery is not sufficient to dig the industry out of this hole. As Corey Goodman, a former Pfizer executive and the founder of Exelixis, put it: “We don’t just need a Band-Aid, we need transformational change.” No single solution is going to cure the industry’s woes and put it back on a path to profitability. Rather, a set of solutions will be required that together address the key issues confronting R&D. Reduced costs, combined with a more innovative approach to drug discovery, are likely to form part of the new model. The industry can no longer support huge internal R&D groups, nor can it maintain scientific expertise along every step in the discovery pathway, from target discovery to hit identification to genotoxicity testing. “Biology is too complicated for any one company,” commented Stephen Friend of Sage BioNetworks. The problem for the pharmaceutical industry is that the world has changed. The pace of change in the biological sciences over the last few decades rivals anything we’ve seen in science at any point in our history. In the space of a decade we have sequenced the human genome (along with the genomes of countless other species) and seen the tools to perform such tasks reduced from being a mammoth enterprise costing billions of dollars and requiring the cooperation of governments across the globe to a routine task that one lab technician can perform in less than a week for a few thousand dollars. The problem that has undermined the industry is that Biology is now too big for any one company to master. Unfortunately the model that still persists across the industry today is one of centralization, a model in which all of the skills required to take a new drug candidate from concept to clinic are maintained under one roof. Biology in essence has outgrown the Pharma industry and the 20th century model of drug discovery. Drug discovery in the 21st century will require a new mind-set and a dramatically different way of doing research. The real kicker here is that the very problem we face today, the centralized R&D model, is what made big Pharma such a powerhouse of innovation and prosperity for the last forty years. As anyone involved in change management will attest, it can be very difficult to relinquish the culture, the norms, and the practices that made us what we are today, even if it is now evident that they are no longer working in our favour. THE HEART OF THE PROBLEM The cost of clinical trials is often singled out as a major factor in the industry’s woes, and while clinical development costs have risen dramatically over the last decade they are not the real problem. The real issue is that 12 of 13 drug candidates that enter clinical trials ultimately fail. This statistic points directly to a major problem early in the research pipeline, well before clinical trials are initiated. So, although clinical trials account for two-thirds of the cost of drug R&D, the problem lies further upstream. The real issue faced by the industry is an inability to deliver a steady stream of high quality candidates from drug discovery into the clinic. Few people would argue with the idea that if the industry could create a robust drug discovery pipeline and bring a steady stream of high quality compounds to the clinic, all of other industry problems would fade into the background. It is at this pre-clinical stage of drug discovery where the old model haunts us. Pharma companies still perform most of their discovery work internally; the global 2011 spend on Pharma preclinical R&D was $35 Billion, of which only $9.6 Billion was outsourced (5). WHY THE CURRENT SINGLE SERVICE PROVIDER MODEL WON’T SAVE US Pharma companies have for a decade outsourced clinical development, typically partnering with one or two of the largest CROs (Contract Research Organizations) that specialize in running clinical trials. If 12 of 13 drug candidates entering the clinic fail, however, the real problem lies not in the clinic but in the work that leads up to it; the four to six years of laboratory research that typically precede IND submission to the FDA. Outsourcing research at this early stage is far more challenging than outsourcing a clinical trial for the simple reason that every early stage research project is completely different, requiring a unique project plan that will change during the life of the project based on the on-going research results. Clinical trials lend themselves to a single service provider model because the trials themselves follow a highly defined and regulated protocol that does not vary. Strategic outsourcing is essential during the discovery and preclinical stages of drug development because of the need to access hundreds of different research assays and services in a wide range of scientific disciplines. Nowadays, no single CRO can possibly carry out all the required lab work for more than a handful of drug research projects. Value at this early stage is derived from finding the best individual supplier from the multitude available in the global marketplace. Luckily, over the last decade there’s been an explosion in the number of small, nimble research suppliers, each with a deep skill set in a narrow range of skills. This multitude of small suppliers allows us to neatly side-step the problem of ‘biology being too big for any one company’. Under this model no pharma is master of it all. Instead researchers find and engage the very best service providers at every step along the drug discovery pathway, remaining nimble and flexible and able to embrace whatever latest technology is available to help solve each specific problem, rather than being shackled to the set of tools and techniques available in house, or accessible through a single large CRO. TOWARDS A NEW MODEL Over the last decade we have seen big Pharma embracing external innovation, spending ever more to acquire an increasing proportion of their pipeline from outside sources. Some funds that would previously have supported internal R&D, are now being used to fund research at promising new start-up companies.
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