Emerging Strategies in Drug Innovation

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This paper aims to study various strategies adopted by pharmaceutical companies to boost innovation. These strategies are usually overlapping and must not be viewed as watertight initiatives.
The penetration of the aforesaid strategies may differ with each pharma. However, on a superficial level it is safe to say that pharmas will largely look outside its own company for drug innovation and early development requirements. This trend will also be enhanced by the fact that most of the late stage drug candidates have already been licensed, and hence the focus will shift to an early stage. The success of these strategies will depend on how many potential drugs will be approved after clinical trials for commercialization.

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Emerging Strategies in Drug Innovation

  1. 1. www.beroe-inc.com Copyright © Beroe Inc, 2012. All Rights Reserved 1 Emerging Strategies in Drug Innovation WHITEPAPER | AUGUST | 2012
  2. 2. Copyright © Beroe Inc, 2012. All Rights Reserved 2 Pharmaceutical research and development (R&D) is currently facing uncertainty due to impending patent cliffs. Lack of promising compounds to replace declining blockbuster revenues and receding pipelines are major concerns for pharmaceutical companies.This reduced R&D productivity has to be addressed to minimize the negative effects and proactively face generic competition. Discovery and development of new molecules for potential drugs that can treat various therapeutic targets, like neurology and immunology, is the need of the hour. Such promising innovation is the key to the pharma sector’s current woes. In addition, pharma companies are also cognizant of the fact that innovation can occur outside boundaries of the company.To assist such open innovation, companies in the pharma sector are undertaking many strategies. This paper aims to study various strategies adopted by pharmaceutical companies to boost innovation. These strategies are usually overlapping and must not be viewed as watertight initiatives. The initiatives adopted by large pharma companies range from internal restructuring to focussing on complex therapeutic areas,like oncology and cancer.The current trends also indicate growing interest in addressing neglected and rare diseases. Novartis has set two specialist units,The Novartis Institute for Tropical Diseases (NITD) and The Novartis Vaccines Institute for Global Health (NVGH) to target rare diseases. Pharma companies are also moving towards drug repurposing and creating awareness on personalized medicines. Biologics is also seen as an upcoming area in the R&D. Note: Direct: The strategy will have a direct effect on the internal innovation model Indirect: The strategy may have a ripple effect, seen as an additional strategy to aid drug innovation Internal Restructuring Large pharmas are aiming to establish an autonomous, small biotech culture within its own business models to boost innovation. Lately, many small biotechs have been successful in drug discovery. For example, Merrimack has 5 drugs in clinical trials and Concordia Pharmaceuticals licensed its Phase II cancer drug to Japan’s Ono Pharmaceutical. GSKestablishedmini-biotechsorDiscoveryPerformance Units (DPUs) to create an entrepreneurial research environment in which multi-disciplined teams of scientists are responsible for discovering new medicines and presenting a 3-year business plan to bid for funding of USD 1 billion until 2014. Roche has kept Genentech’s Research and Early Development (gRED) independent from its own Pharma Research and Early Development (pRED). It was basically done to keep Genentech’s innovation environment free from the processes of a larger pharma company. Both these units have its own budget, targets and therapeutic areas to focus on.The early development is done separately until proof-of-concept. Janssen is focussed on 5 therapeutic areas: oncology, immunology and inflammation, infectious disease and vaccines, neurology/pain, and cardiovascular/ metabolism. These 5 areas function as self-contained small companies, structured from discovery to registration. Corporate Venture Funding It is believed that venture capitalists prefer investing in compounds that are in late stages of development, as these compounds being closer to market, significantly reduce the risk of failure. Although most compounds in late stages are already licensed, the interest is shifting towards early stages of drug development. Pharma companies are actively setting up venture funds to invest in companies for drug discovery. Merck invested USD 35 million in the Merck Lumira Biosciences Fund to provide capital in support of early stage innovation in Quebec. Lilly established the Mirror Portfolio with a total commitment of USD 150 million to fund external researchers and get access to innovation through independent investment funds.
  3. 3. Copyright © Beroe Inc, 2012. All Rights Reserved 3 Out-licensing Large pharma companies are following the strategy of out-licensing compounds that are not in its active development path or are not of strategic interest. Lilly’s Chorus managed to generate data from molecules that Lilly was not developing. Janssen and BMS are other companies that are mining internal compounds and outlicensing those programs that it does not wish to pursue in-house. Pharmas greatly benefit from such a strategy as it may not require paying for the development costs of the compound and may still hold the right to in-license the compound back, if promising data is generated. NovaLead is another company that works on shelved compounds through drug repurposing. In-licensing Licensing discoveries is a highly adopted strategy. Licensing is undertaken from discovery to clinical development of the pharmaceutical value chain. VDDI Pharmaceuticals, for example, licenses early stage compounds and after phase II clinical studies, seeks equity financing based on royalty and milestone payments. Concordia Pharmaceuticals is another company that develops compounds until Phase II after which it licenses the compound to a pharma company. Both these companies follow a highly virtual model. Pharmas also license compounds discovered at universities, Lilly collaborated with University of Cambridge and GSK collaborated with University of Edinburgh in 2011 for acute pancreatitis. Pharma companies may also co-develop compounds,for example in Pfizer’s Centers for Therapeutic Innovation, wherein the pharma will provide funding, technical support and infrastructure to the primary investigator of the university. Pre-competitive Model Pharma companies are collaborating with competitors and suppliers alike to speed innovation, leverage complementary capabilities, and distribute costs of innovation and development. Merck Serono is a part of NEU², a consortium dedicated to innovation in neurology. In the BioPontis Alliance, Pfizer, Merck and Johnson & Johnson have collaborated with 10 universities and suppliers where pharma companies provide guidance to universities. Suppliers help in the initial development of the compounds discovered by the university. Not for Profit Organizations These kinds of organizations basically aim at areas of unmet medical needs and can be based out of public or private organizations. Structural Genomics Consortium’s funders include GSK, Lilly and Pfizer along with the Novartis Research Foundation. The consortium has been awarded a fund greater than USD 50 million. Merck established California Institute for Biomedical Research (Calibr) in 2012. This is an independent not for profit organization that would collaborate with academic scientists to advance discoveries up to preclinical proof-of-concept. The Wellcome Trust recently launched a £200 million business to invest directly in health-care and life- sciences companies. Lilly launched a not-for-profit initiative called the TB Drug Discovery Initiative in 2011.The unit would screen molecules for potential activity under tuberculosis. Open Innovation: Crowdsourcing Crowdsourcing is the use of collective intelligence of the larger public domain to perform business tasks that a company would have ideally performed in-house or outsourced to a third party. Sanofi has used this model to treat diabetes.It launched the Open Innovation Challenge for diabetes in 2012. This is a 5 step process that would award USD 200,000 in prize money and grants to entrepreneurial innovators and health experts. Sanofi uses crowdsourcing to not only use external ideas and product designs, but it also uses this medium to identify diabetes care requiring most repairs. Sanofi initially launched this approach in 2011.
  4. 4. Copyright © Beroe Inc, 2012. All Rights Reserved 4 Virtual Model Pharma companies now believe that there is no need to be vertically integrated to discover and develop drugs. Biotech investors are not interested in a company’s building infrastructure. At the same time, large pharma companies have reduced their internal capacity in terms of both human capital and physical infrastructure. Hence, these companies may not be too keen on acquiring facilities of other biopharma companies during acquisitions. Roche was an early adopter of this model, when it established Protodigm, a virtual drug development company in 1996. Protodigm identified a potential molecule discovered in a university lab. Protodigm selected most qualified subcontractor for every stage of R&D, in order to cut down R&D costs by 40%. Lilly’s Chorus experiment is another such example of a streamlined and flexible virtual model. Established in 2002,Chorus is a team of 30 experts in multidisciplinary fields, responsible to generate proof-of-concept data faster and more cost effectively.As of early 2011,Chorus had delivered data on 17 molecules, 6 of which resulted in positive proof of concept clinical data. Following this success, Lilly established Chorus Resonance in Indianapolis and Chorus Europe. Lately advancements in in-silico technologies and computational chemistry for compound screening have made it easier to virtualize drug discovery and early development. Outlook The penetration of the aforesaid strategies may differ with each pharma. However, on a superficial level it is safe to say that pharmas will largely look outside its own company for drug innovation and early development requirements. This trend will also be enhanced by the fact that most of the late stage drug candidates have already been licensed, and hence the focus will shift to an early stage. The success of these strategies will depend on how many potential drugs will be approved after clinical trials for commercialization. Disclaimer: Strictly no photocopying or redistribution is allowed without prior written consent from Beroe Inc. The information contained in this publication was derived from carefully selected sources. Any opinions expressed reflect the current judgment of the author and are subject to change without notice. Beroe Inc accepts no responsibility for any liability arising from use of this document or its contents. For more information, please contact info@beroe-inc.com. Author: Ridhima Agarwal | Senior Research Analyst Source: References: http://seekingalpha.com http://www.bullfax.com http://www.iptonline.com/articles http://ebdgroup.com/partneringnews http://socialmediaweek.org

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