Waiting for the upturn
pharmafile | October 15, 2003 | Feature | Research and Development |Â Â drug development, pipelinesÂ
Estimates vary considerably, but many analysts put the current cost of bringing a drug to market at around $800 million, a massive increase that has not been matched by a higher success rate for drug candidates.
The life blood of the industry is its ability to produce innovative products that healthcare providers are willing to pay for, but 2002 saw just 29 new chemical entities launched, a significant drop from 36 in 2001. Moreover, only AstraZeneca's lung cancer drug Iressa and Schering-Plough/Merck's cholesterol treatment Zetia promise significant new options for patients.
Dr Mark McClellan, Head of US drug regulators the FDA, and Thomas Lonngren, his counterpart at the EMEA, have both recently addressed this downturn, which threatens their own funding and reputation. "There is some evidence that this is a result of technology development becoming more costly, and reorienting to new areas as a result of breakthroughs in basic research," said Dr McClellan.
"These results call for decisive action now, so that trends of the future are not toward fewer products with higher development costs. The FDA cannot control these trends, but we can take steps to help by making the drug development and our review processes more efficient and effective."
Of course, because most drugs take at least 12 years to be developed, the current drought of new products dates back to the early 1990s, and subsequent improvements could be just around the corner. There are in fact more than twice the number of drugs in phase II today than there were in 1995, but many more products are now dropped at this stage. 2002 saw 32% of drugs in phase II dropped the highest ever following unfavourable assessments of their chances of return on investment from increasingly expensive phase III trials and competitive markets.
Meanwhile, proteomics, genomics and other cutting edge fields of biotech are clearly the way forward if the industry is to bring new drugs to market that offer minimised side-effects and new effective options for patient care.
Large biotech companies such as Amgen and Genentech in the US, and Serono in Europe have now reached the point where they bear closer resemblance to traditional pharmaceutical companies, but many others, however, are still reliant on pharma for financial, developmental and marketing muscle. Coupled with pharmas need to boost its productivity, this is increasingly leading to closer ties between the two sectors.
As Dr Silvano Fumero, Serono's VP of Research and Pharmaceutical Development, said at the recent Economist Conference in London: "Biotech is increasingly becoming the discovery arm of the pharma industry, as its organisational structure is better suited to creativity."
Statistics bear out biotech's growing importance to the industry – the percentage of drug discovery budgets involved in collaborations rose from 4% in 1994 to 20% in 2000, while biotech derived NMEs accounted for around 36% total NMEs in 2000 compared with 2% in 1982.
Biotech certainly has a lot to offer pharma. WestLB Panmure has identified 169 biotech candidates in clinical development in Europe alone as of November 2002 – 73 in phase I, 63 in phase II and 33 in phase III, many of which have yet to be licensed, and a further 134 in pre-clinical development. Oncology and CNS drugs account for 42% of all candidates in pre-clinical and phases I to III.
But just two new classes of drugs developed by biotech have so far proven their market value, namely recombinant proteins and monoclonal antibodies. Around 160 monoclonal antibodies are now in development, to join the 13 or so products already on the market. One recent success has been the early FDA approval of CAT/Abbott Labs' Humira for rheumatoid arthritis.
These innovative 'biologic' therapies may eventually redefine the blockbuster model, which has traditionally relied upon small chemical molecules treating a large population with low medical need. Biotech-derived specialised and targeted products are more likely to target a smaller population with a greater medical need, fragmenting traditional markets.
But such 'personalised' treatment is at least a decade away, says Dr Fumero. "Genomics and proteomics offer unbelievable potential, but there is too much emphasis on the short-term benefits. The decoding of the human genome was the first step, but we now need to understand what the function of both a specific gene is and the protein for which it codes."
Such innovative classes offer other benefits too, with attrition rates of between one and three times better than traditional chemical therapies. This benefit may well diminish, however, as biologics become more complex. This is one reason why Dr Fumero believes that pharma companies need to cover both bases.
"Having two discovery arms – chemical and proteins – is fundamental. I cant think of a strategy that would succeed in big pharma with only one arm. You cannot exclude small molecules, which is why Serono moved into small molecules seven years ago."
But the importance of biotech to pharma lies not just with what it can offer in terms of cutting edge science but what pharma can learn from its organisational structure.
GlaxoSmithKline's radical restructure of its discovery operations into six biotech-like centres of excellence for drug discovery (CEDDs) is one example of how pharma is attempting to restructure to emulate biotech. Following a two-year period marked by lack of progress, the gamble now appears to be paying off, with Chief Executive Jean-Pierre Garnier saying the company had "turned the corner", predicting a doubling of candidates entering clinical development this year, and a tripling of those entering phase II.
Pharma is generally wary of buying biotech companies outright – happy to allow the creative spirit to flourish with their financial help, but also keen to maintain the option of walking away if molecules fail to deliver on their promise. A notable exception is the recent purchase of Scios by Johnson & Johnson for $2.4 billion, giving the pharma company full rights to promising new molecules for congestive heart failure and rheumatoid arthritis.
Another agreement that may be a sign of things to come is Roche and Antisoma's cancer tie-up, worth a potential $500 million. Roche have taken on the development and costs for Pemtumomab (due to enter phase III in the second half of 2004) and Therex, in phase I trials for multiple indications, and represents one of the most far-reaching deals between pharma and biotech.
But although this growing inter-dependency will undoubtedly pay off in time, it will also mean a sharing out of the risk. While the immaturity of the biotech sector clearly makes it more unpredictable, pharma stocks are no longer the automatic safe haven for investors during this troubled economic period.
Dr Fumero says: "Biotech depends on big pharma financially as big pharma depends on biotech for innovation. The predicted poor financial health of big pharma risks breaking this virtuous cycle."
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