Presented at Career Day 2009 VCU/MCV School of Pharmacy

1. Chris L. Waller, Ph.D. Science as a Business

3. Outline Introduction Histories Large Pharma Biotech/Academic Academic/Government Current Business Landscape Current Scientific Landscape Future

4. Outline Introduction Histories Large Pharma Biotech/Academic Academic/Government Current Business Landscape Current Scientific Landscape Future

5. Medicines Life Cycle

6. R&D: Long, Expensive and Risky 6 Target Selection Chemical Selection Clinical Trials Launch Discovery(2-10 years) Pre-clinical TestingLaboratory and animal testing Phase 120-80 healthy volunteers - safety and dosage Phase 33,000-5,000 patient volunteers used to monitoradverse reactions to long-term use FDA Review/Approval Years 16 14 12 10 8 6 4 2 0 Cost = $1.3B/new drug Phase 2 100-300 patient volunteers efficacy & safety

7. Outline Introduction Histories Large Pharma Biotech/Academic Academic/Government Current Business Landscape Current Scientific Landscape Future

8. Pharma History http://www.irs.gov/businesses/article/0,,id=169579,00.html

9. Evolution of Innovative Medicines

10. Top Ten Pharmaceutical Companies

11. Productivity is Decreasing 11 Source: Tufts Center for the Study of Drug development, PhRMA

12. Outline Introduction Histories Large Pharma Biotech/Academic Academic/Government Current Business Landscape Current Scientific Landscape Future

13. Biotechnology Revolution Over the past century, semiconductors, computers, advanced materials have used science as a tool for the creation of new products and services. Science is “outside” of the business. In 1976, Genetech, the first biotechnology company, was founded. The first of a number of private firms conducting basic research. Science became the business. Today, academicians seeking venture capital to advance technologies and develop new drugs, etc. continue to blend science and business. Science Business, Gary P. Pisano, 2006.

14. The Promise Biotechnology R&D was organized through a web of collaborative agreements between large pharma and entrepreneurial entrants. The pharmaceutical industry (and human health) would be transformed as the industry would follow the semiconductor path with dramatic improvements in products and a reshaped competitive landscape. Science Business, Gary P. Pisano, 2006.

15. The Reality Over the past 20 years: The biotechnology sector saw exponential growth in revenues, but no or negative growth in operational income (they lost money). Compared to traditional pharmaceutical companies, there was no discernable difference in R&D productivity as measured by drug launches. Footnote: In 2008, 31 new medicines were added to the nation’s medicine chest for maintaining health and treating disease. The new medicines include 21 new drugs (also called new molecular entities or NMEs), three new therapeutic biologics and seven other biologics. (Source: PhRMA) Science Business, Gary P. Pisano, 2006.

16. Root Causes The focus on the monetization of intellectual property has: Impeded flows of information Led to fragmentation Created a proliferation of new firms Root cause: The sector has indiscriminately borrowed business models, organizations, and approaches from other high tech industries. Science-based businesses have unique challenges not faced by other high tech businesses. Science Business, Gary P. Pisano, 2006.

17. Top 10 Biopharmaceutical Companies Company2008 Revenues 01 Amgen $14,687,000 02 Genentech $10,531,000 03 Novo Nordisk $8,989,000 04 Merck Serono $7,338,000 05 Baxter BioScience $5,308,000 06 Biogen Idec $3,968,000 07 Genzyme* $3,751,000 08 CSL Ltd.* $2,961,000 09 Allergan* $1,311,000 10 AlexionPharma* $259,000

18. Outline Introduction Histories Large Pharma Biotech/Academic Academic/Government Current Business Landscape Current Scientific Landscape Future

19. The Bayh–Dole Act: A model for promoting research translation? Abstract The Bayh-Dole Act of 1980 was passed with the intention of promoting research into cancer and other diseases by providing institutions and researchers with a commercial incentive, even though much of their work was publicly funded. Now, many are questioning whether the system has worked as promised and some warn it may be jeopardizing the pursuit of science with no direct market relevance. Samuel Loewenberg, Molecular Oncology, Volume 3, Issue 2, April 2009, Pages 91-93

20. NIH Funded Academic Drug Discovery Centers Burnham was awarded a $98 million grant to establish one of four comprehensive national screening centers as part of the National Institute of Health's (NIH) Molecular Libraries Probe Production Centers Network (MLPCN). 83 National Center for Research Resources (NCRR)-funded Centers of Biomedical Research Excellence (COBRE). Two consecutive, five-year, $10 million grants… New $11 Million Center to Speed Drug Discovery (NorthWestern) A grant from the National Institutes of Health will help establish the Chicago Tri-Institutional Center for Chemical Methods and Library Development. The National Institutes of Health will pump $62 million into more than twenty studies focused on using epigenomics to understand how environmental factors, aging, diet, and stress influence human disease.

21. NIH (NCI) Funded Academic Drug Discovery Centers Frye Leads UNC Team Selected for NCI Drug-Discovery Initiative a new National Cancer Institute (NCI) Chemical Biology Consortium, an integrated network of chemical biologists, molecular oncologists and chemical screening centers. The consortium will establish a new paradigm in the use of public-private partnerships to translate knowledge from leading academic institutions into new drug treatments for patients with cancer Other consortium centers are: Burnham Institute for Medical Research in La Jolla, California; Southern Research Institute in Birmingham, Alabama; Emory University in Atlanta; Georgetown University in Washington, DC; the University of Minnesota in St. Paul and Minneapolis; the University of Pittsburgh and the University of Pittsburgh Drug Discovery Institute; Vanderbilt University Medical Center in Nashville, Tennessee; SRI International in Menlo Park, California; and the University of California at San Francisco. NCI Funded Projects in 2008  $12,809,274,079

22. Outline Introduction Histories Large Pharma Biotech/Academic Academic/Government Current Business Landscape Current Scientific Landscape Future

23. Mergers Defined the Landscape The Top 10 Deals Johnson & Johnson and Centocor Warner-Lambert and Agouron Celltech and Chiroscience Pharmacia & Upjohn (Pharmacia) and SUGEN Millennium and LeukoSite Gilead and NeXstar ALZA and SEQUUS MedImmune and U.S. Bioscience Corixa and Ribi V.I. Technologies and Pentose The current pace of mergers in the pharmaceutical industry will—if left unchecked—produce an industry by 2001 that will be very different from the one in 1999. Approximately eight giant firms will divide 80% of the market and distance themselves from second-tier companies according to all financial indicators. Note: Glaxo and Smith-Kline announced merger plans in 1998 www.freshfigdesign.com/images/BusNeeds/lg/topten.pdf

24. Top Ten Pharmaceutical Companies

25. Pharma Family Tree 1. Pfizer  Pfizer, Warner-Lambert, Pharmacia, Upjohn, Monsanto 2. GlaxoSmithKline  Glaxo, Wellcome, SmithKline Beckman, Beecham 3. Sanofi-Aventis  Rhone-Poulenc, Rorer, Hoechst, Marion Merrell Dow, Sanofi 4. Johnson & Johnson 5. Merck 6. Novartis  Ciba-Geigy, Sandoz 7. Astrazeneca Astra, Zeneca 8. Roche  Roche, Syntex, Genentech 9. Bristol-Myers Squibb  Bristol-Myers, Squibb, DuPont Pharmaceuticals 10. Wyeth  American Cyanamid, American Home Products, Genetics Institute Research and Development in the Pharmaceutical Industry, October 2006, Congressional Budget Office

26. Pfizer Family Tree

28. Outline Introduction Histories Large Pharma Biotech/Academic Academic/Government Current Business Landscape Current Scientific Landscape Future

29. The “Druggable” Human Genome Most small molecule drugs interact with or modify the activity of proteins ~30,000 genes in the human genome express proteins ~130 protein families represent the known drug targets 50% of these come from just six families: G-protein-coupled receptors (GPCRs) serine/threonine and tyrosine protein kinases zinc metallopeptidases serine proteases nuclear hormone receptors Phosphodiesterases Drug targets live in the intersection between druggable genome and genes known to be related to disease. 2-5% intersection yields 600-1500 targets. ~400 (120) proteins are targets of known drugs “The limited number of small-molecule drug targets suggests that to exploit the opportunity of the druggable genome in a cost-effective manner, the next round of innovation for the pharmaceutical industry lies not necessarily just in the science, but also in the business models.” http://www.nature.com/nrd/journal/v1/n9/full/nrd892.html

30. A Better Analogy?

31. Outline Introduction Histories Large Pharma Biotech/Academic Academic/Government Current Business Landscape Current Scientific Landscape Future

32. Trends: Pharma Industry 2009+ R&D Efficiency: Continued high costs and lengthy development times, combined with growing regulatory and economic pressures, will drive drug developers to partner, outsource, and in-source to improve R&D productivity. Regulatory Environment: Insufficient personnel and staff turnover will impede the FDA’s ability to confront and resolve pressing challenges. Europe’s EMEA and Japan’s MHLW will continue to harmonize with U.S. policies on a broad range of regulatory issues. Biotechnology Trends: Market introduction of monoclonal antibodies will continue to increase as drug sponsors become more adept at development and drug regulators become more familiar with evaluating this product class. Prescription Drug Policy: U.S. payers will increase their use of formulary management tools to contain costs, particularly with regard to specialty pharmaceuticals. Though the latter account for less than 15% of total drug expenditures, annual growth in specialty pharmaceutical spending is approaching 25%. Drug Development Management Trends: Under growing pressure to achieve faster timelines, reduce costs, and deliver quality submissions, sponsor companies will look to improve protocol design and leverage relationships with CROs and sites.

33. Trends: Business Models "2009 is set to redefine the structure and dynamics of the pharmaceutical industry in a way not seen since the year 2000" On 26th January 2009, Pfizer announced plans to acquire Wyeth for $68 billion. Pfizer’s CEO, Jeffrey B Kindler, insisted the deal would be different from the company’s earlier mega-deals involving the acquisitions of Pharmacia (2002) and Warner-Lambert (2000) – the acquisition of Wyeth would provide a broad and diversified portfolio, rather than been focused on a single product or cost-cutting. Pfizer’s strategy of growing its portfolio through a mega M&A deals follows the 2008 acquisitions of Millennium by Takeda and ImClone by Eli Lilly. These major deals are likely to result in two alternative industry responses: a wave of consolidation involving further mega-deals; the emergence of independent players that continue to build their portfolios through internal development, licensing and smaller scale acquisitions. Leading pharmaceutical and biotechnology companies must decide how best to respond Pfizer’s proposition that ‘size matters’. Those that choose to consolidate will have to identify the best prospects, consolidate portfolios and execute synergy cost savings. Those that choose not to embark down the mega-deal path will still have to adapt to a more consolidated world in which broad, diverse portfolios and an efficient cost base or a minimum requirement to compete. http://www.urchpublishing.com/publications/pharma_industry_trends/mergers_acquisitions_pharmaceuticals_sector.html

34. Marking a New Phase in Pharma/Biotech Relations The pharmaceutical industry has been growing more and more reliant on deals and agreements with innovative biopharmaceutical companies to extend and fill its research pipeline. Deals between the two are not novel, but what is new is the realization that the business model based on creating a range of volume-based blockbuster products may have had its day. There will still be blockbuster drugs, but the revenues will be based on selling products at US$10,000 a treatment and not US$10. Can anyone envisage another product such as Pfizer’s Lipitor (atorvastatin) with volumes to drive US$13.5-billion revenues? http://www.urchpublishing.com/publications/pharma_industry_trends/mergers_acquisitions_pharmaceuticals_sector.html

35. Alliances  Acquistions After years of successful research collaboration, Roche has secured outright control of Genentech in a US$46.8 billion deal. The question is, why? Why change what many see as a model commercial marriage? In the words of the adage: "If it ain’t broken, don’t fix it." The official rationale for the merger, from Roche’s point of view, is compelling: Gaining control of the companies’ shared cancer franchise, which includes the blockbuster drugs Avastin and Herceptin, and particularly Genentech’s US revenues Bolstering both its early and late-stage pipeline Enabling the company to cut between US$750 million to US$850 million of combined annual costs. http://www.urchpublishing.com/publications/pharma_industry_trends/mergers_acquisitions_pharmaceuticals_sector.html

36. Alliances  Acquisitions The innovation strategies we found to be most complementary when pursued together were alliances and acquisitions. That's because forming a joint venture with a company before trying to buy it gives a company inside information about the target's worth and the value of the research it is seeking to acquire. Eli Lilly & Co., for example, was involved in a joint venture with Icos Corp., maker of the $1 billion-plus erectile-dysfunction drug Cialis, before purchasing the company outright in January 2007. More recently, Lilly, which has an entire department devoted exclusively to managing alliances, was able to outmaneuver Bristol-Myers Squibb Co. to acquire ImClone Systems Inc., maker of the cancer-fighting drug Erbitux, which also has more than $1 billon in annual sales. http://online.wsj.com/article/SB10001424052970204261704574274221768062750.html

37. FIDDCO a Thing of the Past? Cost pressures, disruptive technologies, and other forces often drive business processes to be externalized. Fully Internal Model Selectively Integrated Model

38. The Importance of CROs PHARMA 1 CRO 1 CRO 2 PHARMA 2 CRO 3 PHARMA 3 CRO 4

39. The Pistoia Alliance, Inc. In Pistoia, Italy circa. 2007 Meeting of GSK, AZ, Pfizer and Novartis—identified similar challenges and frustrations in the IT/Informatics sector of Pharmaceutical Discovery 39

40. The Path Forward: Standardize, Simplify, Centralize Standardize our interfaces and messages Simplify our cross-industry architectures and support models Centralize services to reap economies of scale and scope

43. Future Trends (Predictions/Wish List) Increased joint discovery and development programs Effective public private partnerships Academic drug discovery efforts that fuel industrial drug development efforts Pre-competitive science and technology collaborations across research and development

44. Personal Timeline 1983 HS 1987 BS 1992 PhD 1995 OSI 1998 LLY 2001 PFE 1970 1980 1990 2000 2010 1998 GSK Formed Merger Mania 1976 Genentech Founded Biotech Revolution Starts

45. A Final Note: It's the People Specifically, we found that the most effective way to achieve continuous innovation over the long term is to hire and cultivate talented people. Companies that innovate through hiring will have stronger control over their intellectual property and often a steadier pipeline of future inventions because they aren't relying on outside partners for any part of the innovation process. http://online.wsj.com/article/SB10001424052970204261704574274221768062750.html

46. Sources