this is a great journal about pharmaceutical industry articles regarding both western and eastern approaches to the industry. a must read and subscription to the journal.

1. Drug Research and Development
Bridging the
innovation gap
What needs to be done to improve or change the
R&D productivity of the pharmaceutical industry?
Is biotech consolidation the answer, and if not, what is?
Neil J Campbell, CEO, Mosaigen, Inc. and Partner, Endeavour Capital Asia Ltd., USA
M
any think that 2007 may improve upon the natural biological risky development changes to the
be regarded as the year properties and deliver the compounds parent compound. These new deriva-
that Big Pharma went be- in a format that modern humans could tives of a proven drug or family of
yond merely embracing biotechnol- take and comply with. drugs have become commonplace and
ogy, but decided that consolidation The advent of small molecule have defined the scope of the large
with its biologics breathren may well drugs came about because of their pharmaceuticals to this day.
be the answer to the many problems availability for discovery, develop- According to analysts, small
currently plagueing them. Over the ment and their ability to provide for molecules still dominate the overall
past couple of decades, Big Pharma “incremental” development strategies. number of new drug candidates being
has consolidated with other Big and These incremental strategies of creat- developed with 135 out of 254
mid-size Pharma companies in a so ing synthetic molecules, in what we (53.1%) entering the Phase I human
called Pharma-Pharma consolidation. now call medicinal chemistry, allowed clinical trial process in 2007. These
This Pharma-Pharma consolidation for smaller molecule drugs and less figures are based on the records of
occurred several times and with it
brought about ever-larger companies The Pharma Innovation Gap
with even-greater drug pipelines. The Increased R&D spending yielding lesser drug approvals
goal was to acquire pipelines from
rival companies to boost revenues and, $60 50
in some cases, scientific capabilities
$50
Pharma R&D ($Billions)
in key growth disease areas. But this
New Drug Approvals
40
approach eventually would not be Pharma
$40
sustainable as the primary means for Innovation 30
new drug discovery and development. Gap
$30
Times have changed. 20
$20
Perspectives on the drug industry 10
$10
The pharmaceutical industry, as we
know it today, can be traced back to 0
$0
about 150 years when the source of 1992 ‘96 2000 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07
pharmaceuticals was from nature.
Pharma R&D Investment BioPharm R&D Investment New Drug Approvals by US FDA
Plants and organisms played a vital
role in establishing the mainstay of
Sources: Pharmaceutical Research and Manufacturers (PhRMA) Annual Report 2007; Burill & Company Figure 1
drug pipelines. The strategy was to Report 2003; PhRMA Annual Member Survey, 2007: US Food & Drug Administration Databases.
12 P h a r m a F o c u s a si a ISSUE - 6 2008

2. S t r at e g y
Investigation of New Drug Applica- discoveries that were occurring in the expirations in 2006 and is expected to
tions (INDs) submitted to the US FDA late 1970s in the biology and chemistry lose another US$ 12 billion in 2007,
and announced by drug companies disciplines. These discoveries quickly according to IMS Health. But biotechs
from around the world. Although this grew into a nascent industry that don’t have this problem, at least not
may sound impressive for pre-clinical would change the way drugs would yet. They don’t have to compete with
candidates entering Phase I, according be discovered, designed, developed “biogenerics” because the USFDA
to the latest statistics from the Tufts and administered. With the advent of hasn’t created a system for regulating
University Drug Development Study the discovery of DNA and the abil- them, which is a requirement for drug
and the trade association of large phar- ity to manipulate it in the 1970s and companies to get their products onto
maceuticals companies, Pharmaceu- 1980s, came a new science of genetic the market. Europe has proposals, but
tical Research and Manufacturers of engineering that promised to fulfil the implementation may prove to be more
America (PhRMA), the drug attrition shortcomings of the pharma industry. difficult than originally thought.
rates are still one in ten of making it The commercial aspect of the Biotech Another issue that is plaguing Big
to that market: a mere 25 drugs out of industry started out slowly in the early Pharma is the increasing cost to market
254 entered Phase I in 2007. 1980s, but has become one of the fast- drugs to the healthcare consumers. In
The Big Pharma spent over US$ est growing and strategically important a January 2008 published study in
55.2 billion in 2006 (2007 estimates industries of the 21st century. the Public Library of Science (PLoS),
are over US$ 63 billion) on drug Marc-Andre Gagnon and Joel Lexchin
R&D a 100% increase over the US$ conducted a study that showed that Big
Issues facing the pharmaceutical
industry
26 billion they spent in the year 2000 Pharma spent almost twice as much on
with a declining number of drug Big Pharma lost US$ 14 billion marketing and promoting their drugs
approvals after that according to the worth of annual drug sales to patent than on R&D. The pair analysed data
PhRMA report released in 2007. This from market research companies IMS
so-called pharma innovation gap is and CAM and found that Big Pharma
Issues facing the Big
huge and getting larger each year. spent US$ 57.5 billion on promotional
Pharma companies
So why still focus on the small activities in 2004. By comparison,
molecule approach? Although not spending on pharmaceutical R&D in
Declining productivity with small
revolutionary, it provides a limited the US was US$ 31.5 billion in the
molecule programs
source of continuing drug candidates same year, according to a report by the
Increased costs and longer clinical
along with new and extended forms National Science Foundation.
development timelines
of intellectual property protection. Additional regulatory requirements for
Combining small molecule pipeline So, why biotech?
safety and efficacy during trials and
strategies with other drug product / Biotech drugs or biopharmaceuti-
post-approval
formulation strategies will give greater cals are made out of living biological
Spiraling healthcare costs and
pressures on drug pricing
leverage to the research and develop- compounds and provide some attrac-
ment efforts of these larger pharma- tive alternatives to synthetic small
Expiration of drug patents of
blockbuster drugs increasing over next
ceutical companies. molecules that create traditional
several years
If it weren’t for a lack of innova- pharmaceuticals today.
Increased generic drugs coming to
tion on the part of Big Pharma compa- Although there is strong regula-
market replacing many off-patent
nies, the Biotechnology industry as we tory and political support in Europe
blockbusters
know it today would probably have not for Biosimiliars (biological generics)
Acquisition of biopharmaceutical
existed as an industry, but would have and strong resistance to date in the US
companies to bolster science
been another chapter in the evolu- (where there is still predominance with
capabilities and drug pipelines
tion of Big Pharma. We all know that the most drugs being developed in the
Costs to market drugs to consumers
large organisations struggle with crea- US) with the FDA, the complexities
are exceeding the costs of drug R&D;
this puts companies at risk of not
tivity, entrepreneurship and original of redesign, manufacturing and gener-
directing enough resources to develop-
thinking. But large organisations can ating economies of scale in produc-
ing drugs. The current Direct-to-Con-
thrive on execution of ideas (sales and tion costs could be some obstacles for
sumer marketing strategy is creating
marketing), and the later-stage devel- certain biosimiliars than others.
a larger problem as less drugs are
opment of products (manufacturing). Big Biotechs can provide new
developed and more are coming off
patent. Spending should be in R&D,
A creative and original thinking scientific capabilities, knowledge in new
not promotion of existing drugs.
movement began out of the seminal drug classes and revenue generation
w w w . p h a r m a f o c u s a s i a . c o m 13

3. realising the importance of having
Worldwide Biopharmaceutical Development
both generic and ethical / prescrip-
3000
tion drugs in their marketing efforts to
Number of Compounds in Development
improve growth and revenues.
United States
104% Increase in US
2500
Because taking on biopharma-
(Clincal - Pre-registered)
ceuticals means learning and hiring a
2000
large amount of people with a differ-
ent set of skills and knowledge can
1500 be daunting for single in-licensing or
Rest of World
acquisition scenarios, it may be better
EU
1000
to take on a complete company with
larger capabilities that could be inte-
Japan
500 grated well with a Big Pharma. Some
1997 1999 2001 2002 2005 examples from 2007 are the US
biotech, MedImmune’s, acquisi-
Sources: Pharma Annual Report 2007 Figure 2
tion for US$ 1.6 billion by Astra-
Note: Comparisions were completed in June of each year. Some compounds will be at different phases
for different indication: Adis R&D Insight Database, customized run in December 2005
Zeneca Plc to integrate with its prior
acquisition of Cambridge Antibody
Biopharmaceuticals can be attractive for the Technologies (CAT) of the UK to
form a very large and capable founda-
following reasons tion for the creation of a biotechnol-
ogy division. AstraZeneca also added
The Biotech industry is research intensive and can provide for better knowledge of
the UK firm, Arrow Therapeutics to
disease pathways and drug mechanisms thereby possibly reducing risks with safety
expand their original science in infec-
and efficacy
tious diseases along with drug candi-
The biological drug candidates can be specifically engineered to target particular
dates for development.
sources in the body in a more directed and personalised approach, hopefully providing
Others are taking on more original
better odds of achieving approval with better responding populations
thinking and entrepreneurship with a
The biological drugs can provide for very complex and expansionary strategies for
long-term view of drug development
patent protection
by setting up incubators with an idea
Strategies for developing generic biotech drugs will be harder to do from both a
of turning them into scientific centres
regulatory and technical standpoint.
of excellence. Pfizer announced in
late 2007 its intention of setting up a
potential for the Big Pharmas. This first-mover tactics which could become biotech research centre in California,
latest trend shows no signs of slow- the trends for the next few years. Are similar in concept to Xerox’s PARC
ing down in the next couple of years. generics really that bad? Generics, if centre that launched dozens of prod-
Although it should be noted that proactively incorporated into a drug ucts and developed cutting-edge tech-
the number of viable candidates will portfolio, can provide for additional nologies, by investing huge amounts to
diminish over time and force a move- growth in a broader drug portfo- setup and finance the existing technol-
ment towards more creative options. lio management strategy. In many ogies. Aventis moved quickly to acquire
Many of these creative options have pharma companies, life cycle manage- Sanofi and is aggressively pursuing
started with some Big Pharmas taking ment could be adjusted to incorporate more sizable biotech buyouts in the
the proactive approach and imple- their own generics instead of planning not too distant future. Most of the Big
menting some potentially very accre- on how to “defend” against them once Pharmas will continue to transform
tive plans. Could these be just short- the patent protection expires. their drug pipelines with consolida-
term trends or longer-term models of In fact, Novartis has made it a part tions of biopharmaceuticals for several
commercialisation? of its aggressive strategic plan. It has years to come.
seen generics as part of its product line
and market penetration strategy by
New models for consideration? Big Pharma looks more like big
biotech
A few companies have started deploy- using M&A to gain new groups. Many
ing more original strategies out of of the pharmaceutical companies in Some drug makers like Novartis have
necessity and 2007 had seen some the Indian sub-continent are now diversified so much that they have
14 P h a r m a F o c u s a si a ISSUE - 6 2008

4. S t r at e g y
effectively become pharma-biotech Accretive Strategies
hybrids. The biotech industry is
Pharmaceutical Products Organisational Strategies
expanding more rapidly than the
pharma industry now. According to New drug formulations/applications M&A of larger Biopharmaceuticals
the data released by IMS Health in Nutriceuticals Incubate and accelerate directed startups
2007, the sales of US biotech grew at various stages of development
Cosmeceuticals
20% to US$ 40.3 billion in 2006, Develop targeted therepies
Therapeutic Devices
(personalised)
while pharma sales grew by only 8% Biopharmaceuticals
Expand geography with therapies
to US$ 275 billion. Small Molecule Generics
Grow expansion plans into Asia
Another consideration is the size Biogenerics/Biosimiliars
or economies of scale. The sheer size of
Table 1
Big Pharma, if they could become more
creative with these alternative strategies,
Value Drivers: alternative growth strategies?
could bring advantages in several criti-
cal areas for biotech companies, espe-
Nutraceuticals are fast becoming a strong growth category with the global market valued
cially through complete acquisitions at the retail level, was approximately US$ 110 billion in 2005 according to the American
by the Big Pharma. The large size of a Chemistry Report. Nutraceuticals are pharmaceutical-grade, cGMP manufactured
Big Pharma company provides an edge products that can provide drug-like benefits and stop short of the extensive clinical
in launching and promoting new drugs trials and efficacy claims that approved drugs go through.
or additional indications or formula- Cosmeceuticals are pharmaceutical grade and, in some cases, regulatory-approved
tions. A large company can increase products for cosmetics, dermatology indications, etc. One of the most recognised
the number of bets that it can place on cosmeceutical is Botox®, the derma filler for wrinkles sold by Allergan of the US.
Botox® is an engineered attenuated version of botulism and is approved by regulatory
new technologies, novel therapies or
authorities.
additional disease indicators. If a big
Another approach is to combine pharmaceutical compounds with medical devices to
pharma company manages its clinical
create a therapeutic device. These therapeutic devices can deliver, be formulated into
programmes well, it can do the clinical
a drug and/or be used as a device itself with therapeutic benefits. The drug-eluting
trials both in-house as well as outsource
cardiovascular stents used in angioplasty to prop open an artery are a good example
to Contract Research Organisations
of therapeutic devices. Many devices are being developed to work in the eye and other
(CROs) to help it complete clinical
organs to provide a more targeted, localised approach to therapeutic intervention.
trials more quickly and broadly. The
growth of Asia as both a technology and
manufacturing region has become more drug formats. The accretive strategies Big Pharma reaching a point of critical
mature in terms of product manufactur- table shows some of the more accretive mass where they will have to find ways
ing and clinical trial programmes. Also, new strategies currently being employed to deconsolidate and yet, control the
growth in original research represents by pharmaceutical companies to expand development and expansion of its estate
a vast new population of people who product portfolios and growing more of drugs and intellectual property.
would serve a growing pharmaceutical protected revenues. The biotechnology industry has
market. In the end, larger Pharma compa- provided and will continue to provide
nies will have to take a broader look at cutting-edge science, innovated tech-
how they serve the overall healthcare nologies and products that Big Pharma
Looking ahead
Just as generics provide for a greater marketplace and provide, where needed, will be interested in. Biotech provides
opportunity with expanding drug port- focussed solutions to unmet medical some, but not all, of the answers to the
folios and life cycle management chal- and healthcare problems. An expand growth problems Big Pharma faces in
lenges, a new and emerging group of and contract scenario is most likely with the years to come.
product categories and technologies
could provide new proprietary market
Neil J Campbell is currently Chairman and CEo for Mosaigen™,
Author
growth to augment and complement Inc., a global Life Science development corporation, located
the addition of biotech products and in rockville, Maryland and Partner with Endeavour Capital
in Asia. During his career, he has successfully developed and
technologies.
introduced over 200 products in healthcare, life sciences
Many companies are expanding and information technology. he earned his MBA and MA in
their product offerings and are diver- Management Systems from Webster university in Saint Louis,
Missouri and his BS-BA from Norwich university in New England.
sifying outside traditional prescription
w w w . p h a r m a f o c u s a s i a . c o m 15