Pharmabiz
 

Alliances in Drug Discovery - The Chemical Element

Jayashri KulkarniThursday, July 8, 2004, 08:00 Hrs  [IST]

Alliances have evolved into a critical cornerstone of R&D strategy in the global pharmaceutical industry. No other industry has been leveraging this business model as successfully as the global pharmaceutical industry in its drive for innovation and success. Over three thousand deals amounting to a cumulative payout of US$ 12.7bn have been signed by pharmaceutical and biotech players in a span of two decades. In the past five years the industry's mania to develop new generation blockbuster drugs has taken on a new sense of urgency as 64% of the alliance value was inked and paid out during the period. This amounts to an average annual alliance payout of US$ 1.6bn or approximately 42% of the total Indian Pharmaceutical Market for the past five years. The Payout Pie - Who takes the cake? Therapeutic focus rules the roost with a cumulative alliance value of US$ 11.7bn which accounts for more than 90% of the kitty and 83% of the number of alliances inked over the last two decades while the rest of the share goes to alliances for drug delivery technologies. The therapeutic focus in alliances varies from disease specific objectives to the need for accessing cutting edge technologies that can provide the necessary impetus to shift gears and race towards the ultimate goal of developing and introducing atleast one drug every year. Currently there exists a 59:41 balance between the therapy-area based alliances and the technology-platform based projects. However, it is no surprise that this balance is expected to tip in favor of rapidly evolving technology platforms that provide the key to unlocking compound-target relationships in therapy area based research. Many players today are developing capabilities to evaluate target clusters with similar active sites but different biological activities and screen drug candidates against the cluster. Within therapeutic category-based alliances, hematology, oncology and infection are the dominant therapy areas that are under the microscope across the globe in most of the research centers and account for 65% of the alliance payout for therapeutic focus amounting to - US$ 4.5bn. Technology platforms in the current context include the old horses - broad based screening tools, and chemistry based technologies and the relatively recent Pandora's Box - Genomics, opened on completion of the Human Genome Project. Broad based screening tools and chemistry driven technologies have essentially provided research facilitating tools that could churn out compounds to be tested against finite biological targets and account for 12% and 25% of the payout pie for technology platform based alliances respectively. Genomics, the new kid on the block accounts for 63% of the payout. With the completion of the Human Genome Project and advances in genetic science, drug research today is being driven by biology - molecular genetics, genomics, and bioinformatics and the trend seem to have reversed from compounds looking at targets to a plethora targets looking for compounds - or so it seems. Chemistry at your service While they have been around for some time, the chemistry-based alliances took off in the real sense in 1994 in terms of deal size and frequency; almost the same time as the genomic alliances boom. Chemistry services have been nurtured by the incessant demand from the industry for potential drug candidates. The sector has been essentially dominated by alliances in the field of combinatorial chemistry, computational chemistry and chemical libraries - synthetic and natural all with the objective of increasing the efficiency of synthesizing & screening compounds for their efficacy and providing the requisite molecular diversity to compound banks for in-house research programs. Alliances for accessing chemical libraries are usually one-time interactions for license activation, while broader collaborations to generate compound libraries against sponsor's targets are more strategic and of a longer duration often with full-time chemist equivalent agreements. Manned by a handful of players specializing in these chemistry services, the sector has seen a CAGR of 26% in the last decade. This measures up quite well to the growth of the genomics sector. With a CAGR of 44% - well below the anticipated impact of genomics revolution on drug discovery alliances, the genomics sector exhibits a high degree of fragmentation with more than 45 players and has also witnessed a shift of alliance demands from genomic supply to genomic targets and gene therapy unlike the relatively unchanged alliance demands in the Chemistry sector. The top five revenue makers in the sector account for 62% of the kitty and have pioneered the concepts of parallel drug design (Vertex), contract chemistry and process development services (Albany Molecular Research), combinatorial chemistry whiz (Pharmacopeia) to developing a human resource competency (medicinal chemists - Array BioPharma) which is being shared / contracted in by the big daddies of the pharmaceutical industry. What makes the sector more interesting and increasingly more important in the pharmaceutical and biotechnology industries is the realization of their impact in the drug discovery value chain. This fact is substantiated by some of these sector participants having started off as biopharmaceutical companies and changing course midway to develop skills in chemistry services for in-house and liaised research programs. The mid-course correction has inked legendary deals for them with major players estimated value of over US$ 1bn. Vertex is one such example - a biopharmaceutical company, its structural genomics orientation led to the pioneering principle called "chemogenomics:" parallel drug discovery for structurally similar targets. The principle groups together related proteins despite differences in the biological pathways they participate based on a similarity in their active sites and then screens small molecules effective with one of the group targets against the rest. Biotechnology Players - The Knights in Shining Armor? With genomic revolution driving technology-platform based alliances for the past decade, there has been an impact on the traditional technologies. Broad based-screening tools, once the pharma sweethearts have long since seen drastic market share erosion to the current 12% in the alliance revenue kitty. Critics may write-off the chemistry based alliances similar to the alliances for broad-based screening tools given the changing paradigm of drug discovery, the advent of alternative technologies, the genomic revolution, the increasing dominance of biologics, and the ever increasing collaborations with biotech companies in the pharmaceutical industry. However the chemistry based alliance sector has witnessed strong growth in the past decade in addition to the increase in its contribution to the technology-platform based alliance revenues. What make the chemistry based alliances sector unique and sustainable are the following five things - -parallel drug design -growing interest for molecular diversity and the consequent need for chemical libraries from multiple sources (natural, peptide, synthetic, building blocks), - established benefits of stereo-selectivity and chiral chemistry -industry's efforts to refocus on small molecules as biologics prove to be a long term bet and more importantly -growing interest of biotechnology players in addition to the pharma players in small molecules and chemistry based alliances. The interest from biotechnology players has in fact played a significant role in the recovery of the sector from an all time low contribution of 19% in 1999 in the technology-platform based alliance revenues, to an increase to 25% in 2003. While this is still lower than the 30% revenue contributed a decade back, its evidence enough of the continuous demand for candidates to be taken through the drug discovery process as well as the incremental value underlying deals inked in the recent past. For an industry spawned by recombinant DNA, the need to shave time and money off the drug development process to come out with successful drug candidates coupled with funding pressures has resulted in a focus on small molecule therapeutics and the related chemistry services by biotech players. Graffiti on the wall What does this mean for chemistry based alliances and the service providers therein? The writing on the wall is clear - unlike broad based screening technologies, chemistry based alliances are here to stay despite the growing applications of the genomics revolution. Hence there is a need for holding on to its traditional offerings and developing concepts in line with the changing drug discovery paradigm for pharma as well as biotech players in order to sustain the sectors potential. As pharma sponsors provide the base line revenues through their demand for more complex chemical libraries, target oriented drug discovery assistance and rational drug design; an increasing number of biotech players are also expected to partner in the chemistry sector to access small molecule therapeutics and the chemistry expertise needed to deliver small molecules to the market. The India Advantage An annual US 500mn market growing at a CAGR of 26%, with only nine competitors; and an average deal size of nearly US$ 50mn would automatically make its way to the wish list of many Indian players. With well-established reverse engineering skills, proven expertise in process development, synthesis, API and formulation development in addition to the inherent cost advantage, Indian partnerships in the API and formulation development domain of the R&D value chain are huge. Backed by these credentials, the chemistry expertise and other advantages, Indian players can evolve to be partners of choice for chemistry and chemistry related services. Perhaps the Ranbaxy - GSK drug discovery is a harbinger of opportunities waiting to unfold for the Indian chemistry expertise in the drug discovery alliance domain. The broad-based drug discovery alliance between India's largest pharmaceutical player and the global giant shall cover a wide range of therapeutic areas and aims to leverage Ranbaxy's screening, rational drug design, and computational chemistry skills. The alliance also gives a glimpse into the efforts in leading Indian corporate houses to enter the "R" of the R&D waiting in the wings for their entry on stage. Furthermore the impending establishment of the product patent system next year is also expected to magnify opportunities for Indian players as more global players can get comfortable on issues related to enforcement of global standards of regulations and protection of proprietary concepts, processes and molecules. What makes the opportunity more realistic in addition to the attractive top-line is the relatively lesser degree of capability upgradation needed by many Indian players. Moreover a backward integration into the drug discovery value chain for the Indian players provides the requisite strategic direction for growth in a regulated environment post 2005. Conclusion While Chemistry-based alliances may contribute to a quarter of revenues generated by technology-platform alliances, they are clearly here to stay despite the genomics tide. Characterized by a niche position in the total drug discovery alliance domain and relatively lower levels of competition they provide an excellent opportunity for Indian reverse engineering and synthesis skills with small doses of capability upgradation as the rest of the pharmaceutical world looks at complex and continuously changing opportunities in biologics. - The author is industry manager, Frost & Sullivan

 
[Close]