The low number of drugs originating from large pharmaceutical companies, despite growing research and development (R&D) expenditure and the increasing importance of biotech companies as a source of potential innovative therapies, has been widely noted especially in the last two years.
A close look at the drugs approved by the food and drug administration (FDA) during January 2006 to December 2007 could help one comprehend that of the 103 FDA approvals, only 20 drugs were developed through active partnerships in pharma-biotech or via any alliance/strategic alliance across the relevant sector. Of these 103 approvals, only 5 were in the new chemical entity category.
A look at the R&D expenditures of PhRMA member companies since the year 1983 till 2007 versus the decline in FDA approvals over the same period presents a grim picture of the drug development industry. For the expenditure to become "effective" a "tactical/strategic alliance" between pharma-biotech / biotech-biotech/ pharma-CRO/biotech-CRO seems a must.
If we are to segment the drugs by innovation level, of the FDA approved 103 compounds, 30 per cent were for novel drugs or new chemical structures, while another 30 per cent were for line extensions. Me-too types constituted the remaining 40 per cent. Of the novel drugs approved, biotech industry accounted for around 52 per cent approvals, while it also bagged 71 per cent of approvals in the line extension/ me-too category. Overall, for each FDA approval, there was, on average, one phase III failure, and 95 per cent of these failures were from products originating from biotech companies.
This brought about a negative impact on the confidence level and risk assessment of investors in the biotech industry. When considering only novel drugs, the failure rate was even higher, with 1.6 phase III failures for every approval. Novel drugs and drugs with new chemical structures developed by biotech companies fared worse with 4.7 failures on average for every approval (9 approvals, 42 failures).
Biotech companies had a better phase III track record with me-toos (20 approvals, 17 failures) and line-extensions (18 approvals, 9 failures). The pharmaceutical industry had a much better success rate than biotech companies in getting drugs approved, thanks to its dependence on biotech industry. About 40 per cent of all pharmaceutical companies' approved products were sourced from the biotech industry, either through collaborations or acquisitions. Biotech-pharma alliances did not contribute to as several approved novel drugs for the biotech industry, but had significantly fewer failures.
The pharmaceutical industry has not been highly productive in achieving FDA approval for new drugs in the past 2 years. However, products from pharma that have reached phase III trials have had a high rate of approval. In the same period, the biotech industry has been more productive in producing approvable products across all three innovation categories.
Biotech-pharma collaborations also appear to be successful, although a few in number. A simplistic conclusion would be that the pharmaceutical companies should do more collaboration with biotech companies to increase the number and quality of approvable products.
Early-stage R&D collaborations and alliances are of increasing importance to the pharmaceutical sector. When some of the best-in-class drug discovery capability and research programmes exists externally, alliances offer an alternative to build expertise from scratch and present a degree of flexibility, cost advantage and risk sharing not afforded by in-house programmes. Although late-stage licensing agreements have and will continue to remain important in meeting the short-term needs of the pharmaceutical sector (for example, bulking up pipelines or filling strategic gaps), it is early-stage drug discovery collaborations that will have a crucial role in ensuring that R&D operations would continue to remain competitive in the long term.
As companies become more creative in how they exploit alliances, and as networks become larger and more complex and companies come to rely more heavily on these to drive performance, they must ensure that they maximise value and mitigate risks by building alliance management expertise. The core competencies for overcoming challenges can be divided into three groups: identifying, managing and measuring.
First of all, companies must be able to identify best-in-class capability, evaluate opportunities presented by programmes and understand the associated risks. Secondly, companies must create deal structures and design contracts to ensure aligned incentives, objectives and clarity in future contingencies. They should also give consideration to cultural differences and potential impact on partnerships, ensuring effective processes and systems for knowledge sharing and protection of intellectual property.
And thirdly, companies need to ensure that in-house and alliance programmes are captured in the same portfolio evaluation and decision-making processes. It should be judged on a like-for-like basis to overcome bias toward internal programmes, achieve adequate transparency through structured reporting processes and develop approaches to measure the performance of alliance-management capabilities by using surrogate endpoints (such as internal client satisfaction) or true endpoints (financial value created over time).
ACTIVE AREAS IN DRUG ALLIANCES
Oncology is the most active disease area for alliances and accounts for 28 per cent of all collaborative activity in 2005. The majority of alliances involved small molecules, although biologicals (in particular, antibodies) were also popular. The most significant recent deals include AstraZeneca's monoclonal antibody alliance with Cambridge Antibody Technology and Pfizer's US $480 million collaboration with Medarex. As alliances like this bear fruit, the technological distinctions often made between the pharmaceutical and biotech sectors will lose meaning. Indeed, the majority of products brought to the market in recent years by Wyeth are biologicals such as etanercept (Enbrel) and gemtuzumab (Mylotarg). Among the multinational companies, GlaxoSmithKline has been the most active to date in terms of total number of collaborations and the recent formation of a business unit dedicated to sourcing and developing new drugs 'virtually' through partnerships underscores the strategic importance placed on its alliance network. When deal activity is adjusted against 2004 ethical sales, Boehringer Ingelheim tops the list, followed by Merck and Novartis.
Taking a different approach, a new kind of "organisation," known as the public-private partnership (PPP), has developed a clever virtual business model that emulates the collaborative features of the open-source concept. An example is the Medicines for Malaria Venture (MMV), which was established in 1999 to discover and develop new, affordable anti malarial drugs. Established as a non-profit entity with a staff of mere 13 people, it has assembled a portfolio of 19 projects ranging from discovery to phase III. MMV gets its projects through open calls - anyone with an idea can contribute.
An expert scientific advisory committee reviews the submissions and selects the projects that will be funded. Each is managed by a project manager, who outsources the R&D to a network of 300 scientists at 40 institutions (universities, big pharma, biotechs and research institutes). Funding comes from public and philanthropic partners.
After each step, the scientific advisory committee reviews the data and decides whether to proceed or terminate the project. MMV's cumulative spend from 2000 through 2005 is about US $100 million, 90 per cent of which funded actual research. MMV plans to outsource manufacturing to low-cost partners, sell drugs at cost to developing countries, and market them through partners in developed markets (for example, to treat travellers).
Its alliance with GlaxoSmithKline supports 25 scientists funded equally by the partners. The initiative on public-private partnerships for health reckons that there are about 24 PPPs engaged in drug and vaccine R&D. Most of them were created in the past 7 years and share a common profile. First of all, they focus on neglected diseases. Secondly, they operate as virtual drug companies, with a small staff getting project ideas from outside, vetting them through a committee of experts and outsourcing R&D to a network of institutions. Thirdly, they manage growing portfolios of projects ranging from discovery through to phase III trials. Fourthly, they have been able to function on lean budgets with a cumulative spending that seldom exceeds US$50 million. This makes them attractive vehicles to fund research in areas that are not economical for traditional drug R&D.
By the end of 2005, PPPs had attracted funding in excess of US $1.5 billion. Foundations have given about US $1.15 billion (with the Gates Foundation alone contributing more than US$950 million), governments US $244 million and private entities US $36 million. In addition, donors have committed another US $3.5 billion, which will be disbursed as needed by the global fund to fight AIDS, tuberculosis and malaria.
PPPs & Big Pharma: Even Big Pharma like GlaxoSmithKline, Bristol-Myers Squibb, Novartis, Bayer and Sanofi-Aventis have entered into ppp.
The public-private partnership R&D model has worked reasonably well. Some of this success comes from targeting low-hanging fruits in diseases that have long been neglected. But it also suggests that the PPP model can be a potent tool in finding new cures. Whether the PPP business model becomes a transformational force or remains a non-threatening niche depends on how it ultimately performs against traditional pharmaceutical R&D. To succeed, it must go beyond tools and software and tackle large projects where it will rival the big firms that are helping it today. Yet, this rivalry need not be a zero-sum game. On the contrary, there is a place for collaborative and proprietary research in drug R&D, just as in software. If open source drug R&D takes place, what will probably emerge is not the replacement of one model by another, but an ecology in which Big Pharma, biotech and collaborative research compete and collaborate at the same time, feeding off each other synergistically, while moving towards therapies along their own distinctive paths.
IMPACT ON CRO
Any clinical trial alliance/partnership around the world is likely to have an impact on contract research organisations in emerging countries like India and China. One of the areas that influence Indian CROs is the area of drug discovery alliances.
The Indian CROs should aim to have a partnership/ alliance with any pharma/bio or pharma/CRO in the western world. This can be important factor in driving the growth of the Indian CRO industry. Certain alliances that include a CRO are:
● Jubilant with Amgen: This tie up is an example for the alliance in the area of drug discovery services. Under the agreement, Jubilant will develop early pre-clinical candidates emanating from Amgen's early discovery efforts for an initial term of three years. Amgen will have responsibility for the subsequent pre-clinical and clinical development and commercialisation. Amgen will retain/own the drugs developed under
the collaboration with worldwide commercialisation rights.
● GVK Biosciences has entered into a research agreement with Wyeth Pharmaceuticals, a division of Wyeth, to discover drug candidates focused on pre-defined discovery targets.
● The Ahmedabad-based clinical research organisation Synchron Research Services Pvt Ltd has acquired bio-analytical and bio-marker facility of Parexel in France. The lab is located in Poitiers, south of Paris. It has increased its stake in Synchron from present 19.5 per cent to 31 per cent.
In a move to enter into alliances with Indian CROs, the western world has recently embraced the "concept" of outsourcing to Indian CROs via strategic partnerships.
(Dr Kiran Marthak is a member of Veeda Clinical Research's board of directors and has more than 25 years of active participation in the field of clinical research.)