Reasons for discontinuing R&D projects in the biopharmaceutical industry are gradually changing. This presentation suggests how.

1. Reasons for Project
Discontinuation in
Drug Development
Dr Jorge Mestre-Ferrandiz
Director of Consulting
25th Annual
Office of Health Economics
EuroMeeting
4-6 March 2013
RAI, Amsterdam
Netherlands

2. Agenda
1. Background
2. Objectives
3. Methods
4. Results
5. Discussion and conclusions
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3. Background
• Many countries have price control that makes it very
difficult to:
– increase price once a product is launched
– price a subsequent or follow-on indication differently from
the lead indication
• Hypothesis: the additional indications may be
discontinued because of anticipated conflict between
indications in pricing or reimbursement (P&R) systems,
i.e. different indications would potentially have different
"value propositions"
• If true, this poses hurdles to the development of
stratified medicine -> potential loss of drugs and
indications that could have delivered value.
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4. Background
• Published estimates of the mean
(average) cost of R&D per new medicine
that is launched on the market suggest
an increase in cost over the last decade
-- from the estimate of US$1.0bn
(£600m) by DiMasi et al. (2003),
expressed in 2011 price terms, to
US$1.9bn (£1.2bn) by Paul et al. 2010)
• Four main variables determine the
capitalised cost of a new drug estimate
– Out-of-pocket costs
– Success rates
– Development times and
– Cost of capital
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5. Objective
Analyse the rationale behind pharmaceutical
companies’ decisions to discontinue new products and
additional indications (for marketed drugs or for drugs
under development)
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6. Previous studies – Reasons for failures
• Commercial reasons have been increasingly important
for discontinuing projects
• Since 2000, companies have been focusing more on high-
risk, high-premium areas with a lower “expected
probability of success” (POS), such as:
– Chronic diseases (Alzheimer’s disease, diabetes, obesity,
rheumatoid arthritis) compared to acute diseases (6.9% vs
8.8%)
– Potentially lethal diseases, mostly cancer and some
infectious diseases (5.5% vs. 9.7%) [Pammolli, Magazzini and
Riccaboni (2011)]
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7. Methods
• Survey of four pharmaceutical companies in the
top 15 rank in 2008.
• Two part questionnaire: 1) lead indications, 2)
follow-on indications
• Time frame: Jan 2005‒Dec 2009
• Data:
– # of successful, discontinued and active projects
– reasons for discontinuation (3 maximum), # of years
projects remained active, phase at which projects
were stopped, source of projects and their
therapeutic area
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8. Reasons for discontinuation
Portfolio rationalisation
Portfolio
rationalisation
Exiting disease area
Technical Generic competition
Reasons Weak value proposition
Commercial
Reimbursement hurdles
Market value Timing
Clinical trial costs
Other commercial Market value/Net present
reasons value
Existing price (only follow-
on ind)
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9. Results
Successful Discontinued Active
Total (n=1,053) 8% (n=86) 51% (n=541) 40% (n=425)
Lead indications (n=602) 2% (n=13) 55% (n=332) 43% (n=257)
Follow-on indications (n=451) 16% (n=73) 46% (n=209) 37% (n=169)
Time to discontinuation
Lead indications Follow-on indications
Average project life (years) 2.22 6.43
St. deviation (years) 2.25 4.87
Minimum project life (years) 0* 0*
Maximum project life (years) 14 19
Sample size 318 144
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10. Percentage of projects by phase of
discontinuation
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11. Percentage of projects discontinued
between 2005 and 2009, by year
30.0
28.0
25.0 24.1
23.6 23.1
20.0 18.6 18.9 18.9
17.5
%
16.0
15.0
11.1
10.0
Lead indications
5.0
Follow-on
indications
0.0
2005 2006 2007 2008 2009
(n = 39;37) (n = 65;50) (n = 98;51) (n = 81;40) (n = 66;34)
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12. Reasons for discontinuation
Lead indications Follow-on indications
Number of reasons N % N %
1 307 92.5 170 81.3
2 20 6.0 32 15.3
3 4 1.2 6 2.9
4 1 0.3 0 0
Total projects 332 100 209 100
Lead indications Follow-on indications
Reasons N % N %
Technical 253 72.1 121 50.4
Market Value/NPV 32 9.1 43 17.9
Portfolio rationalisation 62 17.7 57 23.8
Other commercial reasons 4 1.1 19 7.9
Total responses 351 100 240 100
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13. Reasons for discontinuation – by year
Lead indications: reasons by Follow-on indications: reasons by
year of discontinuation year of discontinuation
100.0 2.5 1.5 0.0 1.3 1.5
100.0 1.8 2.5
5.0 7.6 6.0
10.4 12.4 10.3 10.3
90.0 2.5
90.0 16.1 17.5
4.5 23.4
80.0 24.1 26.9
21.6 80.0
27.6
16.1
70.0
70.0 14.9 41.0
25.0
60.0
Other reasons 60.0
Other
(n=4)
50.0 17.0 reasons
% 50.0 24.1 (n=19)
90.0 %
83.6 Market value
40.0 Market value
(n=32) 40.0
(n=46)
66.0 67.1 65.7
30.0 66.1
30.0
Portfolio 55.0
48.7 Portfolio
20.0 rationalisation 44.7 rationalisatio
(n=62) 20.0 37.9
n (n=57)
10.0
Technical 10.0
Technical
(n=253) (n=121)
0.0 0.0
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
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14. Reasons for discontinuation – by phase
Lead indications by phase and Follow-on indications by phase and
reasons for discontinuation reasons for discontinuation
100% 0.4
1.2 4.8 3.1 100% 0.8
6.3 5.3
90% 11.6 11.6 15.8
17.4 90% 10.5
19.4 25.0
80% 80%
25.0
22.8 27.9
70% 33.1
70% 31.6
30.4 60%
29.0 25.0
60%
50%
50% 31.3 32.6
40% 33.9 45.6 26.3
40% submission 30% submission
phase 3 10.5 phase 3
30% 20%
phase 2 23.3
50.6 46.8 50.0 phase 2
10% 20.7 15.8 15.8
20% phase 1
34.4 4.7 phase 1
0%
10% phase 0 phase 0
0%
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15. Future key trends – from companies
• Commercial reasons, especially linked to reimbursement, will
not only continue to apply, but also will grow in importance
over time
• Significant resource constraints are expected over the next
couple of years. As a result, this will lead to increased
portfolio rationalisation, linked to the need to make more
trade-offs on which projects to progress
• The need to demonstrate product differentiation (compared
to Standard of Care) plus the need to clearly demonstrate
"value" will increase, and if not clearly achieved will lead to
more discontinuations
Commercial reasons are likely to have more influence in the future
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16. Discussion and Conclusion
• About 72% of discontinuations for lead
indications were for technical reasons ‒
similar to earlier studies.
– But when analysed on an annual basis, clear
suggestion that this rate is reclining, e.g. 66% in
2009 versus 90% in 2005
– Since 2007, portfolio prioritisation has played a
more significant role in driving discontinuations,
increasing from 2.5% in 2005 to 27% in 2009.
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17. Discussion and Conclusion
• The pattern for follow-on indications is more
complex
– Technical reasons triggered a smaller proportion
of discontinuations, presumably because many
were addressed with the lead indication
– Influence of market value was variable over the 5
years
– Portfolio prioritisation again appeared to have
driven a higher proportion of discontinuations
over the last 2 years
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18. Discussion and Conclusion
• Main hypothesis not proved: to date, lack of payer
flexibility does not appear to have been a key driver for
discontinuation of follow-on indications
• No evidence found suggesting that pricing inflexibility
will inhibit the development of stratified medicine. The
surveyed companies suggest this may reflect:
– The “noise” of rationalisation over the last couple of
years
– The stage of evolution of stratified medicine
• The companies expect commercial factors to increase in
importance
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19. Contact us
To enquire about additional information and analyses, please contact Dr. Jorge Mestre-
Ferrandiz at jmestre-ferrandiz@ohe.org
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