R&D: a new world order
pharmafile | June 16, 2010 | Feature | Manufacturing and Production, Research and Development | industry, job cuts, research, research and development
Big pharma is today demolishing the in-house drug discovery and research structures built up over the last decade, and is instead putting a far greater emphasis on external partnerships to help find the medicines of tomorrow.
But will the new ‘virtual’ model of R&D prove to be more productive than the old one? Pharmafocus investigated how the changes are reshaping R&D, and what it means for scientists working in the industry.
GlaxoSmithKline’s chief executive Andrew Witty announced in early 2010 further cuts to the company’s in-house R&D organisation, saying the ‘bricks and mortar’ of in-house research centres were a ‘hangover’ of the 1980s. Witty said the focus now had to be on a “more virtual, more partner-orientated” model.
Witty’s remarks echoed those of his counterparts in other major pharma companies, who are now disinvesting from the traditional research model in favour of in-licensing drug candidates while outsourcing development work.
Many of these external outsourcing partners are in Asia, meaning that many of the R&D jobs are simply disappearing from the UK, Europe and the US.
This means research scientists and others in the pharma industry in these locations will have to adapt quickly if they want to stay in the sector.
Glenn Crocker, chief executive of biotech incubator BioCity in Nottingham, says the latest developments build on a well-established principle.
“The current trend among big pharma is certainly away from in-house R&D. I remember writing about this ten years ago, so it’s a logical extension of a long-term trend.”
But Crocker says the new system will have its own downsides for pharma trying to in-licence drugs.
“They think everyone will flock to them, but I’m not so sure it’s going to be as straightforward as that.”
R&D productivity
The short-term financial rationale for the major cost-cutting and reorganisation in R&D and other departments is clear – streamlining helps maintain profitability for shareholders.
In the longer-term, the cuts also make sense – the industry’s current R&D model simply isn’t delivering. Budgets have risen steadily over the last decade, but have failed to produce more products.
Figures show that the industry’s total spending on R&D nearly tripled in the period from 2000-2007, but the number of new molecular entities remained more or less static.
It has been clear for years that this is an unsustainable situation, but pharma has only been forced to confront it in the last few years, as a generation of blockbuster drugs reaches patent expiry.
Over the years, there have been numerous suggestions of radical ways in which pharma could re-model itself. Some have suggested that big pharma companies should go so far as to divest themselves of all R&D functions, and simply be companies which gain approval for new drugs and then market them.
This idea is still considered to be beyond the pale – but big pharma no longer sees in-house drug discovery as unassailable. Pharma’s leaders are certainly convinced by the cost estimates. In March, investment bank Morgan Stanley released an influential report which argued strongly for far more externalisation of drug discovery.
The Morgan Stanley report estimated that companies could enjoy return on investment three times higher by abandoning in-house research in favour of in-licensing drugs at the phase II stage. As one commentator pointed out, even if these estimates are too optimistic, and potential returns are only 25% better rather than 300%, it would still be massively beneficial to make the change.
There are plenty of recent examples of big pharma companies restructuring and announcing disinvestment in certain drug discovery areas. One example is AstraZeneca, which announced major job losses and restructuring in its R&D operations in early 2010. Nearly 3,500 R&D jobs will be affected at AstraZeneca as it exits discovery research in 10 therapeutic categories and closes down sites in the UK, Sweden and the US.
The cuts will include the closure of two discovery sites, Lund in Sweden and Charnwood in the UK. The Charnwood R&D facility, which is in Loughborough in the UK, will close with the loss of 1,200 jobs by the end of 2011.
AstraZeneca will exit early-stage research in schizophrenia, anxiety and depression, thrombosis, acid reflux, ovarian and bladder cancers, systemic scleroderma and hepatitis C.
It will also cut back all vaccine research with the exception of programmes in flu and respiratory syncytial virus.
This disinvestment from basic research is a major shift for the company, but one being mirrored across the industry.
AstraZeneca says its restructuring will cut $1 billion per year from its R&D budget by 2014, but without depleting the number of drugs successfully developed and approved.
This model puts externally discovered molecules on an even footing with internally discovered ones, and AstraZeneca is to introduce a new approach to deciding which molecules to develop and prioritise, and which to abandon.
Impact on the UK
For the UK, the combined cuts made by Pfizer, GlaxoSmithKline and AstraZeneca over the 2008-2011 period are estimated to number 3,000 R&D scientists. This represents the loss of around a fifth of all British research-based pharma jobs, and clearly raises a question about the country’s long-term prospects for sustaining employment in the sector.
There is also concern about the ability of the UK’s universities to produce the well qualified graduates to work in pharma. However there are signs that the squeeze on funding in both pharma and academia is forcing the two to work together more closely.
There are numerous recent examples of major long-term alliances – such as Pfizer’s collaboration with University College London on research to develop stem cell-based therapies for macular degeneration, and AstraZeneca’s work on translational medicine with the University of Manchester. Here again though, the competition is global, and the UK will have to prove it can be among the best partners.
Evolving business models
Many of the challenges the global industry faces are beyond its control – breakthroughs in drug discovery and development are elusive, and when they will arrive cannot be predicted. But pharma can control its costs, and cutbacks will continue to characterise the sector for some years to come. Similarly, there is little the UK government can do to diminish the relative attractiveness of investment in Asia, particularly in terms of cost and growing markets. But it can ensure cutting edge R&D technologies are pioneered in the country, and provide a flow of highly skilled scientists, which together could deliver those elusive breakthroughs, and keep the country at the forefront of research.
UK RESEARCHERS RETURN AS ‘BIO-ENTREPRENEURS’
Some of those made redundant from AstraZeneca’s Charnwood site (pictured above) have been given the chance to become ‘bio-entrepreneurs’ in a move to allow opportunity amid redundancy.
BioCity Nottingham is one of Europe’s largest bioscience incubators, and its chief executive Glen Crocker sees the large-scale redundancies as an opportunity for those ex-employees who want to start their own health sector businesses. BioCity is now in its fourth year of hosting its ‘Bio-Entrepreneur School’, open to science entrepreneurs across the UK and Europe.
The firm said that this year they have seen an increased interest given the job losses facing AZ staff in 2011, with eight members of staff from Charnwood attending the three-day workshop.
AstraZeneca has offered to relocate some staff to sites in Cheshire or Sweden, but many are reluctant to travel so far from home. This is very much in line with the general experience; that there are jobs available internationally, but many employees are settled in the UK with families and property and do not want to relocate.
Several ex-employees from AstraZeneca spoke about why they had joined BioCity’s entrepreneur course. Gary Allenby, an AstraZeneca bioscientist, said: “One of the reasons I’m here [at BioCity] is to think about spin-off possibilities from what I did at AstraZeneca.
“This is a way of finding out how successful people have been in the past, which will help decide whether it’s an option for me and my colleagues.”
Speaking shortly after the cuts were announced Steve St-Gallay, a digital drug designer at the site, said: “The atmosphere at AstraZeneca is up and down. A lot of people are still reeling from the shock and there’s a lot of emotion.”
Such entrepreneurial courses are an exciting and fresh challenge for some ex-employees, but clearly it won’t provide an alternative for all those affected.
PICKING WINNERS AT PHASE II….
The deal that AstraZeneca struck with Rigel Pharmaceutical in February is just the sort of externalisation that the company and its rivals are now relying on more than ever.
AstraZeneca and Rigel announced a worldwide license agreement for the global development and commercialisation of fostamatinib disodium (R788), Rigel’s treatment for rheumatoid arthritis (RA) and other indications.
Fostamatinib has completed a comprehensive phase II programme and is the furthest developed oral Spleen Tyrosine Kinase (Syk) inhibitor being evaluated for RA. Inhibiting Syk is thought to block the intracellular signalling of various immune cells implicated in the destruction of bone and cartilage which is characteristic of RA.
AstraZeneca will design a global phase III programme, anticipated to begin in the second half of 2010, with the goal of filing new drug applications with the FDA and the EMA in 2013.
Fostamatinib is being developed as a next generation oral RA therapy in adults who have failed to respond adequately to a traditional disease modifying anti-rheumatic drug (DMARD), such as methotrexate, where a TNF biologic add-on treatment would currently be considered.
Under the terms of the agreement, AstraZeneca will also receive exclusive rights to Rigel’s portfolio of oral Syk inhibitors, as well as for additional indications for fostamatinib disodium beyond RA.
Anders Ekblom, executive vice president of development, of AstraZeneca, said: “There is a very real and pressing unmet medical need in the area of rheumatoid arthritis. Given the debilitating effect this disease can have on patients, AstraZeneca looks forward to working together with Rigel to continue development of this innovative investigational compound.
“Collaborations such as this one, which further strengthen our late-stage pipeline, demonstrate the key role externalisation continues to play in AstraZeneca’s strategy.”
….Disinvesting in in-house research
AstraZeneca, like many of its peers, has recently declared its disinvestment in early-stage research in a number of disease areas, setting itself a target of finding 40% of the company’s drug pipeline from external sources.
To help it meet this target it recently appointed Shaun Grady head of business development and licensing.
Speaking to Reuters at a recent biopartnering conference in the US he said: “We are in the midst of a fairly major organisational change. We’re going to be agnostic as to the source of the products coming in, whether its internally derived or externally sourced shouldn’t matter.”
The company has done five late-stage deals in the past six months, including a $1.24 billion deal for an antidepressant from Targacept and the $350 million acquisition of Novexel, an infection research company to develop two late-stage antibiotics in partnership with Forest Laboratories.
Meanwhile, the company is planning to exit some disease areas that have been core areas for it – and indeed have produced some of its blockbusters, dropping research into areas such as schizophrenia, depression and acid reflux.
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