COVER STORY
PHASE TRANSITION An AtheroGenics scientist prepares analytical samples of a new anti-inflammatory drug candidate formulation, supporting one of the many steps in the drug development process.
FIGHTING THE CLOCK Pharmaceutical and biotechnology companies seek ways to reduce the time required to discover and develop medicines KAREN J. WATKINS, C&EN NORTHEAST NEWS BUREAU
I
T'S NO SECRET THAT DEVELOPING A NEW DRUG IS A SLOW,
painstaking process requiring years of research and lengthy clinical trials. The drug industry trade group Pharmaceutical Research & Manufacturers ofAmerica (PhRMA) claims that drug companies invest from 12 to 15 years in each new drug. In biopharmaceuticals, the Tufts Center for the Study of Drug Development has determined that, while the number of new products has been increasing steadily clinical development times have doubled since 1982 to an average of 68 months. The reasons for longer biopharmaceutical development times, according to Tufts, include an expansion in the use of complicated
HTTP://PUBS.ACS.ORG/CEN
technologies, the focus on more complex diseases, the demand for higher standards for safety and efficacy, and the need to develop medicines for global markets. All these factors also apply to the greater world of pharmaceutical products. T h e slowness in the development process is a result of the numerous steps that a drug must pass through en route to commercialization. Drug development includes about sixand-a-halfyears ofdiscovery preclinical testing, and toxicity studies; one-and-a-halfyears in Phase I trials to assess safety in healthy volunteers; then two years in Phase II trials with a few hundred patients to evaluate the drug's effectiveness and side effects. The development process continues C&EN
/ JANUARY
28, 2002
27
COVER STORY with three-and-a-half years in Phase III trials involving thousands of patients and scores of research centers to confirm effectiveness and evaluate long-term effects, then one-and-a-half years of Food & Drug Administration review, where all the clinical trial data are presented. Even after the drug is approved, it may undergo further Phase IV testing so more safety and efficacy data can be collected. Each year in this protracted process means one more year before a patient can benefit from the drug and one less year of profit for its inventor before its patent expires and generic competitors jump in. As this patent clock winds down, potential sales of well over $1 million are lost for every extra day spent in bringing the drug to market, says Bruce M.Johnson, senior director of developmental chemistry for Atlanta-based biopharmaceutical firm AtheroGenics. And the development process is hugely expensive— about $802 million on average, according to a recent study by the Tufts Center. Not surprisingly, all players involved in the drug development process are attacking this time expenditure, including big pharmaceutical companies like Novartis and Pfizer, biotechnology companies like AtheroGenics, chemical support companies like Albany Molecular Research Inc. (AMRI) and MediChem Life Sciences, and firms like Covance that provide direct assistance in clinical trials. First, however, it is helpful to consider the general comments of Ken Getz, president and chief executive officer of CenterWatch, an organization that monitors drug development. In its "Speed Demon" analysis, CenterWatch looked at 1,000 drug approvals since 1987 to identify which companies outperformed in development time and how they did it. Getz says that outperforming companies—Abbott Laboratories, Pfizer, Merck, GlaxoSmithKline, andAstraZeneca—employ strategies that can be generalized to all companies. TO SPEED drug development, CenterWatch says, companies should plan projects and prioritize them globally, interact proactively with regulatory agencies, use realistic protocol designs, employ autonomous project teams, and use data man-
agement and communications technologies to control the flood of data. "Fast companies minimize development risk by communicating early on with agencies for input on how to best design the study" Getz says. "Many have engaged research centers as consultants early on to assist in the design of protocols." Successful firms use new technologies to speed the routing of documents—"a critical strategic step," he says. Also, they attempt to "more strategically and intelligently select places where clinical trials will be conducted, by looking at past performance and using a more systematic selection process." Patient enrollment is a particularly wide roadblock, accounting for one out of every four delays in CenterWatch's study, Getz says. Companies must reach "a tremendous number of patients before they get a few to come in for initial screening," he notes. This problem results from a combination of factors, including study design, exclusion criteria, and media reports of deaths in clinical trials. Another major area of drug development delay, he continues, is the data collection and management activity of clinical trials. "It takes a tremendous amount of time and is very labor intensive to copy relevant data into the case report and source documentation, to go to research centers and review information, and to evaluate data for problems with integrity and quality" For a few drugs, the development process can be accelerated significantly. One is Gleevec (known as Glivec outside the U.S.), which was discovered and developed by Novartis for chronic myeloid leukemia and was approved by FDA in May 2001. Gleevec was first synthesized and tested in 1992; the first reports on it were published in 1996, and a Phase I clinical trial was initiated in 1998. Years were cut off the development process because the promise of the drug was so great that patients demanded it be made available. Normally it takes months or years to recruit patients, but Gleevec patients asked to be signed up or they immediately joined the study when approached. "The company was able to recruit patients faster, was able to collect and analyze and review data a lot faster," says Gloria
Stone, head ofpublic affairs for oncology at Novartis. "Everything we did, we did more quickly without cutting corners on any parameters in the clinical trials. That's what helped us develop the drug faster than other drugs." Gleevec was also approved less than three months after its submission to FDA, a record for drug review and approval. "Novartis invested a lot of resources, including manpower, to accelerate development that companies normally don't devote to a drug because you don't know if it's going to work," Stone says. For instance, Novartis management committed to accelerated construction of production facilities because of the potential of the drug—there was no therapeutic alternative and patients were doing very well on it—and because their instincts told them the project would succeed, she says. But not every company has surefire drug candidates, and most must support prospective drugs through other means. In the case of Pfizer, one strategy was the establishment three years ago of a Discovery Technology Center in Cambridge, Mass., that's focused on developing drug discovery tools and disseminating them through-
SEPARATION A scientist at Albany Molecular's Syracuse Research Center isolates a compound during a scale-up and process research project. out the company's six research centers. Rod MacKenzie, vice president of the center, says such an effort is not possible for a firm that does not approach the size of Pfizer, which became the world's largest drug company in 1999 when it acquired Warner-Lambert. "Pfizer decided to leverage its size and resources, not just to speed up drug development, but to make better
"You have to be steeped in chemistry, and appreciate its finer points, in order to avoid pitfalls like chirality and toxicity." 28
C&EN
/ JANUARY
28.
2002
HTTP://PUBS.ACS.ORG/CEN
degussa. Fine Chemicals
We take care ofHaving the paperwork wherever need it. is first-class intermediates that do their job is one thing. you Getting them to the customer another. It's a fine art that takes a solid global network, planning and attention to details. Do you want a partner who can offer you a broad range of intermediates and can take care of all the paperwork? Talk with us.The new Degussa Fine Chemicals. The Fine Art of Fine Chemicals.1 Pharma Intermediates & Exclusive Synthesis Agrochemicals & Intermediates Standard & Performance Intermediates
www.finechemicals.de, North America: Fax +1-973-541-8161, Europe: Fax +49-2365-4919020
Yields in this ad are actual size. High-yield ACS-Sponsored deposit accounts from MBNA America9 Bank— earnings protection in today's market. 24-Month Certificate of Deposit Annual Percentage Yields
In a market where bank rates are so low that certificate of deposit and money market deposit account savings seem to be at a standstill, American Chemical Society-sponsored deposit accounts stand out. Their positive performance combined with the security of FDIC insurance up to $100,000 per depositor make them an ideal choice in an increasingly tough rate environment. For outstanding service and high yields that have consistently been among the best nationwide, open an ACS-sponsored CD or money market deposit account now. Interest rates are subject t o change weekly. Call today for current rates.
Call MBNA at 1-800-510-2083. Please m e n t i o n priority c o d e J A 0 0 2 . Or, visit w w w . a c s . o r g . Monday through Friday, 8 a.m. to 8 p.m., and Saturday, 8 to 5 (Eastern time). *Annual Percentage Yield (APY) for the MBNA CD is valid from 1/7/02 to 1/13/02, based on a $2,500 minimum opening deposit and a term of 24 months. Penalty may be imposed for early withdrawal of CD principal. Withdrawals and fees may reduce earnings. Rates are subject to change weekly. Call for current rates. f AII other bank APYs in the chart are accurate as of 1/8/02, based on a minimum $2,500 opening deposit, and are for comparison purposes only. Rates may be higher for higher balances. Source: Informa Financial Information, Inc.—1/8/02. MBNA and MBNA America are federally registered AIBNK service marks of MBNA America Bank, N.A. jpjpkjjii A M E R I C A ® ©2002 MBNA America Bank, N.A. " M I S
30
C&EN
/
JANUARY
28.
2002
drugs and more drugs—to solve the conundrum of R&D productivity," he says. Drugs that make it into clinical trials fail with alarming frequency because of unexpected problems. This attrition—not the resources required for clinical trials—is the real driver behind drug costs, MacKenzie contends, and accounts for the high risk of pharmaceutical projects. l b reduce attrition at later stages and develop high-quality drugs faster, Pfizer concentrates on converting genomic data into chemical leads that it can use to validate new disease targets. Because of its size and because it "covers every conceivable disease of therapeutic interest in the industry" Pfizer is able to take a different tack on drug development, MacKenzie says. Instead of identifying a disease target and looking for molecules to fit the target, the company works from the genome to identify "drugable" gene families and studies them in parallel to develop small-molecule drugs. By working on the targets simultaneously, the company achieves "terrific savings in screening time and cost in the discovery phase," MacKenzie claims. Another scale-related aspect of Pfizer's research, he adds, is its huge library of chemical compounds. Often a drug target is identified and time is spent searching unsuccessfully for a matching molecule. Large libraries provide time savings because they offer a better chance of finding an appropriate molecule without toxicity, absorption, or metabolic problems. IN THIS WAYp the company does not have to give up on an approach in which it has already invested precious time and resources. And by using only high-quality molecules, the company does not waste effort generating data on nondruglike or unsafe molecules. "Only now have we built up a body of knowledge that we can really make sing," MacKenzie says. Beyond the discovery phase, Pfizer is working to speed a drug's journey through the development process. Before a drug can go into a human, it must pass hurdles such as toxicity and formulation, says Peter B. Corr, senior vice president and head of development at Pfizer. "We are working on ways to predict this early in the process— with attrition before human studies." For example, he says, a drug company can speed the process by including in Phase I—the safety studies—additional tests to see if the drug is working. "This is a key leverage point," Corr emphasizes. "The question is whether the drug works against the molecular target. It might in preclinical trials, but will it in the human?" HTTP://PUBS.ACS.ORG/CEN
COVER STORY amount of data needed to prove that a drug Pfizer uses special methods in the early has been opened by angioplasty works is much less than that required for clinical stages to help predict a molecule's Johnson notes that the speed of drug drugs that are taken over long periods. Beactivity before full-blown human trials. One development depends upon the type of cause AtheroGenics deals with chronic indirect technique is biomarkers somedisease addressed. While a bacterial inconditions, it, like Pfizer, is lookthing that can be measured in the ing for a "quick-response indicablood or urine or skin saying we tor" to shorten drug development have influenced that particular time, Johnson says. target," Corr says. Rather than following the relIf the problem is a tumor, for atively linear traditional timeline, example, the researcher might in which a company does only the do a skin biopsy and relate the amount ofwork necessary for the results to those found from the next step, Johnson suggests intumor biopsy If the drug affects vesting heavily up front in timethe skin as it does the tumor, consuming studies. "The only then the skin test is a clue that thing that matters is time—plus the drug will be effective. being first on the market," he emOn a smaller scale, Atherophasizes. However, the risk is Genics has identified roadblocks much higher this way to drug development and ways to speed things up. Its mission is LIKELY CANDIDATE Lee K. Hoong, a medicinal chemist Johnson also suggests a stratethe discovery development, and at AtheroGenics, carries out extraction experiments as gy for avoiding spending valuable commercialization of drugs for part of the development of a new arthritis drug. time on losers. "We focus on the the treatment of chronic inweaknesses of a new drug instead flammatory diseases such as atheroscleroof its strengths," he says. "The sooner you fection is cured in two weeks if an antibisis, asthma, and arthritis. The company re- otic works, 10 years might be required to learn there is a problem with a new drug, cently announced Phase II results for its the sooner you stop spending money" The show any improvement in the heart attack lead product, used for restenosis, the narobjective should be "to kill a drug as soon as rate by taking an atherosclerosis medicine. rowing or closing of a coronary artery that possible so you don't spend money on someIf a disease is fatal in six months, the
CHIRM PROBLEMS? Most Complete Line of Enzymes for Chiral Synthesis Wide Range of Enzymes for the Resolution of Chiral Carboxylic Acids, Esters, Amines and Amides New Nitrilases for the Hydrolysis of Nitriles to Carboxylic Acids Ketoreductases for the Stereoselective Reduction of Ketones to Produce Optically Pure Chiral Alcohols Hydantoinases, Transaminases and Amino Acid Dehydrogenases for the Chiral Synthesis of Non-Natural D- and L- Amino Acids Custom Development of Enzymes and Processes Custom Synthesis of Chiral Intermediates
CHIRAL SOLUTIONS!
BioCatalytics, Inc. HTTP://PUBS.ACS.ORG/CEN
Phone: 614-579-7414 Fax: 614-575-1034 www.biocatalytics.com
129 N. Hill Avenue Suite 103 Pasadena, CA 91106 C&EN / JANUARY 28, 2002
31
DISTILLATION AND
EVAPORATION OF HEAT SENSITIVE MATERIALS A A A A
MOLECULAR DISTILLATION CONCENTRATION FRACTIONATION EVAPORATION
LOWEST DEGRADATION / HIGHEST QUALITY
POPE WIPED-FILM STILLS A EQUIPMENT Turnkey production processing systems, pilot plants, and lab benchtop models all utilize Pope's proven high vacuum, short residence time technology. Best method for difficult separations of materials high in BR MR MW, heat sensitivity, and/or viscosity. Fractionation possible with column-equipped systems. Many applications including: oils, pharmaceuticals, biomaterials, polymers, foods, flavors, extracts, cosmetics, waxes, silicones, high purity specialty chemicals. A TOLL PROCESSING SERVICES Minimize your development costs, risk, and time-to-market. Fast turnaround for custom manufacturing and processing of your materials - 1 kg to truckload lots. Experienced staff and fully equipped new facility can handle the most difficult jobs and demanding requirements, including GMR Feasibility testing offered. Contact Pope now.
pope POPE SCIENTIFIC, INC. 351 N. Dekora Woods Blvd., R0. Box 80018 Saukville, Wl 53080 U.S.A. Ph: 262-268-9300 / FAX: 262-268-9400 E-Mail:
[email protected] www.popeinc.com 32
C&EN
/ JANUARY
28,
2002
thing that will turn out to be unacceptable." Offering drugmakers outsourcing and collaboration—and a promise of time savings—are contracting companies such as AMRI, a chemistry-based company that conducts R&D projects and partnerships aimed at small-molecule prescription drug discovery and development. DRUG COMPANIES are under pressure from Wall Street for 10 to 15% growth, says Lawrence D. Jones, senior vice president of business development for AMRI, "which translates into one to three blockbuster drugs per year that these companies must produce."To get more candidates through the pipeline faster, the companies can either build more internal resources—a costly and time-consuming affair— or go to outside resources like AMRI. AMRFs goal is to help its clients avoid bringing into clinical trials drugs that are toxic or otherwise unacceptable. It also tries to speed up the discovery process by understanding how structure and functionality affect what a molecule will do. "We have our own technologies that augment the capability for drug discovery" Jones says. " W h e n a client comes to us with a protein target, we can provide compounds to test it against our vast arrays of natural product libraries, botanical libraries, chemical libraries, and virtual libraries. From these libraries we can choose small-molecule 'hits,' or active compounds, to synthesize and optimize." AMRI also saves discovery and development time by using combinatorial biocatalysis. Using enzymes and microorganisms to produce unusual compounds provides "a different avenue to create a derivative in a short period of time, in a unique way that organic chemistry couldn't achieve in one chemical step," he says. AMRI accompanies its clients not only through the discovery phase, but also all the way to commercialization with chemistry and scale-up synthesis. "Making this stuff can be expensive," Jones says. "Ifou need process research to identify cost-effective routes to make the molecule." The company also smooths the way with FDA by making sure it has made the right compound reproducibly in the purity and strength required. AMRI attempts to supply resources at the earlier stages, where letting a clunker
drugget through the screen of testing and evaluation is a costly mistake. " % u have to be steeped in chemistry, and appreciate its finer points, in order to avoid pitfalls like chirality and toxicity," he says. MediChem is another company offering chemistry support for clinical trials by providing Good Manufacturing Practices quality material to its partners. It says its partners include a majority of the major pharmaceutical and biotech firms. David E. Zembower, senior vice president of chemistry R&D, says the companyprovides both process R&D and medicinal chemistry services —for example, structural proteomics and protein crystallography "We work with partners to develop scalable routes to develop candidates," he says. To get around bottlenecks in the discovery and preclinical phases, MediChem uses in vitro techniques such as growing monolayers of Caco-2 cells to determine which molecules can pass from one side of the cell to the other—a measure that correlates with how well a molecule is absorbed across the intestinal wall. Using techniques like these, "we can engineer out problems before clinical trials," Zembower says. This concern about a drug's absorption, metabolism, and excretion properties early in the development process marks a shift in philosophy for the industry, Zembower says. Historically, he adds, the emphasis was on finding a precise molecule, putting it in an animal, and then uncovering technical issues such as oral delivery problems. By using tools to predict these problems, precious development time is saved.
Patient enrollment is a particularly wide roadblock, accounting for one out of every four delays in one study.
FURTHERMORE, like AtheroGenics, MediChem is directed toward "killing" bad molecules as soon as possible or reinventing them to circumvent problems—all in the interest of accelerating the development of good drugs. In early January, the Icelandic biotech firm d e C O D E Genetics purchased MediChem in order to augment its own drug development capability Zembower says MediChem will continue offering its services to third parties. Some chemical-support firms are more oriented toward late drug development. One of these is Covance, whose business is 4 0 % early drug development services and 6 0 % "late stage" services, including Phase II and Phase III clinical trials. HTTP://PUBS.ACS.ORG/CEN
COVER STORY PATIENCE Drug development takes about 15 years
Matt Palazzolo, Covance's vice president of strategic product development, says the company aims to use various screening methods to expedite delivering into clinical trials and to eliminate drugs with a low potential for success. Like MediChem and other companies, Covance approaches each project by trying "to screen out losers really early in the process, before Phase II efficacy trials," he says. Covance is positioned to do this since it is removed from the internal machinery of a drug company: It has "an unbiased, objective view of that drug's probability of being successful," Palazzolo says. He emphasizes that eliminating a drug early in the development process is as important as developing it quickly through clinical trials, owing to the "astronomi-
cal" time and money spent in such trials. Like Pfizer, Covance uses biomarkers, such as enzymes or other clinical markers that establish surrogate biological activity This may relate to changes in gene expression or other clinical indicators of biological activity "Whether it has biological activity in the human is a critical go/no-go decision," Palazzolo says. One of Covance's thriving businesses is its Central Laboratory Services, which fills a clinical support function. This business handles only clinical-trial samples. At any given time, they will have thousands of sample kits being delivered, especially those in Phase II and III, from investigator sites all over the world. In fact, Covance has worked with about 25% of all scientists in the world investi-
gating new drugs in clinical trials, says Marietta Henry, vice president of medical affairs and global laboratory medical director at Covance. "We offer consistency of lab methods, which leads to consistency of results, which leads to more efficient statistical analysis for NDA [new-drug application} submission," she says. The main laboratory, in Indianapolis, handles 3,000 to 4,000 sample kits per day each containing four to 10 tubes, which may require up to 20 tests for each tube. The kits are delivered early each morning, and results are communicated to the investigator sites by late afternoon—using a workforce of only about 2 0 0 people. Everything is bar-coded, and machinery is automated as much as possible to minimize human handling and human error.
chemistry with a pharma
TOUCH HELSINN CHEMICAL OPERATIONS: Your contract manufacturing partner for Advanced Intermediates Active Pharmaceutical Ingredients (APIs) • High Potency Active Ingredients (HPAIs)
HELSINN HELSINN CHEMICALS SA (Switzerland) • HELSINN CHEMICALS IRELAND LTD (Ireland) • HELSINN ADVANCED SYNTHESIS SA (Switzerland) For further information: tel. +41 (0)91 873 01 10 • fax +41 (0)91 873 01 11 • e-mail:
[email protected] www.helsinn.com Visit us at INFORMEX 2002 - New Orleans, February 26 - March 1 - Booth 1645
HTTP://PUBS.ACS.ORG/CEN
C&EN
/ JANUARY
28,
2002
33
COVER STORY
TOO
HIGH?
Debate Continues Over Drug Development Costs
T
here's no question that drug development costs escalate when development time lengthens. But the question of just how much it really costs to bring a drug to market has been argued over the past several years, and it remains a subject of fierce debate. Perhaps the numbers most widely accepted by economists and the government are those produced by economist Joseph A. DiMasi at the Tufts Center for the Study of Drug Development at Tufts University. On Nov. 30, 2001, Tufts announced an update of DiMasi's 1991 study, which pegged the average cost to develop a new prescription drug at $231 million in 1987 dollars. The new study estimates the average "fully capitalized resource cost" at $802 million in 2000 dollars-a 250% increase, adjusted for inflation, over 11 years. Not everyone agrees with this figure. "The $802 million is extremely unreasonable," says Richard DiCicco, president and founder of consulting firm Technology Catalysts International. "It doesn't cost that much to develop drugs. But it costs that much to pay for the mistakes of people who have tried to develop drugs." Two aspects of the Tufts number are particularly controversial: its inclusion of the cost of failures and its inclusion of opportunity cost—the amount of money that could be earned by a comparable alternative investment, which amounted to $399 million in the Tufts study. "The opportunity cost is a theoretical cost, not a real cost," says Larry Sasich, spokesman for Public Citizen, Ralph Nader's watchdog group. Public Citizen claims that the Tufts figure exaggerates R&D costs not only by including the cost of capital and failed drugs but also by overstating the actual after-tax outlay for development costs and by excluding drugs that receive government support. "The pharmaceutical industry gets an awful lot of tax breaks,
Tests to be run are specified in the project's protocol so that only those samples agreed on in consultation with FDA are taken and tested. All this "really shortens the length of the trial," Henry says. "Since 80% of an N D A is laboratory work, the central lab is very important when clients go to submit an N D A to FDA." Considering the roadblocks in the way of 34
C&EN
/ JANUARY
28,
2002
like credits for research," Sasich says. Public Citizen believes that a more accurate figure would include only out-ofpocket expenses and would account for the fact that many drugs receive financial backing from the government sometime during their path to commercialization. The group says the drug industry's main trade group, Pharmaceutical Research & Manufacturers of America (PhRMA), is misleading policymakers and the public to scare them into accepting prices that result in excessive profits. Public Citizen conducted its own study in which it came up with a cost of less than $240 million to develop a drug. Pharmaceutical companies "foster and nurture the belief that the industry spends a lot on R&D," Sasich says. Companies price drugs according to what the market will bear, not what they spent on R&D, he claims. Another issue is the extent to which the Tufts report includes marketing costs. "We don't know if marketing goes into development costs," Sasich says. "I imagine there are some marketing costs in the Tufts numbers, but we may never know because it is confidential information." In fact, Sasich continues, it is difficult to divide some late-stage development costs from marketing costs. For example, the writing and presentation of a scientific paper and the publication of reprints is an important part of the research process but can also be used to help sell the drug. "Our study gave some idea of the outof-pocket cost to develop a real drug— what you would see on a tax return," Sasich adds. This number, he says, is what it costs to develop in-house a new drug in the U.S. and get it to the pharmacy shelf. However, standard accounting practice includes opportunity cost, says accounting firm Ernst & Young. It was hired by PhRMA to rebut claims made by Public Citizen before the latest Tufts report was an-
nounced. Opportunity cost takes into account the fact that R&D investment may be very risky. Furthermore, Ernst & Young claims that rather than being lightly taxed, the pharmaceutical industry pays a greater percentage of its revenues in taxes than any other industry. Equally notable as the size of the Tufts cost estimate is its increase since the 1991 study. DiMasi finds that much of the increase is due to rising clinical-trial costs. At a time when drug development programs are expanding, it is difficult to recruit patients, he says. Furthermore, drug companies are increasingly looking at chronic and degenerative diseases, which require longer trials. Drug companies and PhRMA consider the Tufts figure to accurately represent the state of pharmaceutical research today. "The $800 million cited by DiMasi is important confirmatory evidence of the increasingly complex nature of developing an innovative new medicine today," said Raymond V. Gilmartin, chairman, president, and chief executive officer at Merck, in a speech after the release of the latest Tufts study. He added that this estimate means that a "large and vibrant" drug industry is needed to translate new research into new medicines, and that continued innovation depends upon the ability of the industry to make a profit and protect its intellectual property. The validity of the Tufts figure aside, the cost of drug development is high compared with R&D costs in other industries. In addition, Tufts has found that it takes between 10 and 15 years to develop and approve a new pharmaceutical in the U.S. "The single largest challenge facing drug developers— both pharmaceutical and biotechnology companies—is to contain R&D costs and reduce development times without compromising clinical test design," Tufts Center Director Kenneth I. Kaitin says.
new drugs and the linear way in which the drug discovery and development procedure has been done traditionally the advances in drug development speed are impressive. Still, the drug development process continues to lengthen, particularly as regulatory agencies require more patients to prove long-term safety By reducing the number of drugs that get to clinical trials, and by knocking off time in late-stage clin- I
ical trials, pharmaceutical and biotech companies are trying to reverse the trend toward increasingly long development times. "Companies should not accept the rising cost of drug development as a given," says Raymond V. Gilmartin, chairman, president, and CEO of Merck. "Researchbased organizations like ours must become more efficient and focused in order to master the challenges of rising costs." • HTTP://PUBS.ACS.ORG/CEN
Kollicoat We make your products better with Kollicoat IR instant release coating. Improve Quality and Reduce Costs • • • • •
Low viscosity r High flexibility High solubility Reduces costs K Improves quality
Kollicoat IR (polyvinyl alcohol-polyethylene
I I
glycol graft copolymer) has many advantages related to its extremely low viscosity, enormous flexibility and rapid rate of dissolution. Kollicoat IR spraying solutions can be applied at a high solids content, greatly reducing the coating process time and costs.
Call 1-800-443-0627, fax 973-426-5355 or E-mail us:
[email protected] www.Pharmalngredients.basf-corp.com HELPING MAKE PHARMACEUTICALS BETTER. All trademarks are owned by BASF AG or BASF Corporation. © 2002 BASF Corporation
BASF
IMAGINE THIS: 4X
Greater Accuracy and More Elements New in C A C h e 5 . 0 with M O P A C 2 0 0 2 * PM5, the first new MOPAC method since 1986, challenges experimental accuracy. •
4X greater accuracy The new PM5 method improves accuracy up to 4X greater than PM3 and AM1 with new experimental data and algorithms.
•
All main group e l e m e n t s For the first time, all main group elements are included in one semiempirical method-including Li, Be, B, Na, Mg, K, Ca, and more, opening up new areas of study such as biological systems.
•
Transition metals AM1-cf provides more accurate geometries and heats of formation than current methods. For example, AM1-of heats of formation accuracies are comparable to PM3.
•
Giant molecules MOPAC 2002 provides the patented MOZYME algorithm that enables very fast SCF and geometry optimizations, reaction modeling on molecules of up to 20,000 atoms, and quantum chemistry calculations on whole proteins and polymers for the first time.
•
Over 4 0 other e n h a n c e m e n t s Includes more robust transition state search, intersystem crossing, improved solvation models, MNDO-c/for more accurate geometries, dynamic memory allocation, and more.
* MOPAC 2002 also available standalone on UNIX.
Visit our website T O D A Y : Americas CAChe Group, Fujitsu Tel: ( 1 ) 5 0 3 746 3600 Email:
[email protected] Web: www.CACheSoftware.com
FUJITSU
www-CACheSoftware.com/CAChe5
Europe FQS Poland Tel: (4812)429 43 45 Email:
[email protected] Web: www.CACheSoftware.com
Asia Fujitsu Ltd Tel: (81)43-299-3019 Email:
[email protected] Web: www.CACheSoftware.com
CAChe Group is a business within Fujitsu Business Systems of America, Inc. CAChe and BioMedCAChe are trademarks or registered trademarks of Fujitsu, Inc. All other brands and product names are trademarks of their respective holders. Copyright © 2001 Fujitsu
CAChe'
COVER STORY and constructive partnerships with other biotech or big drug partners. In the last 29 days of 2001, biotech companies initiated $20 billion in acquisitions, including Amgen's record-setting $ 16 billion bid for Immunex. Although the total value of transactions doubled in 2001, the number of deals fell.
BLOCKBUSTER Amgen's financial growth has depended largely on the anemia drug Epogen, manufactured at its Longmont, Colo., facility.
DRUG DEAL-MAKING DYNAMICS CHANGE Biotech firms flaunt a new assertiveness in dealing with acquisitions and alliances ANN M. THAYER, C&EN HOUSTON
M
AJOR PHARMACEUTICAL PRO-
ducers are in trouble. Patents on $100 billion worth of drugs are expiring over the next several years. The time and cost of bringing a new drug to market continue to rise. And investors are holding these companies to annual sales and earnings percentage growth in the midteens per year. For the average company with $20 billion in annual sales, this means launching products that will bring in another $3 billion each year. The pressure to succeed is enormous. Major drug producers have undergone massive mergers to find cost savings and critical mass in R&D and marketing. They also strive to grow organically through the internal discovery and development of new products. To complement or accelerate their efforts, they often look to small technology-based companies for capabilities or potential new drugs. Meanwhile, the biotechnology industry has been growing and maturing over 25 HTTP://PUBS.ACS.ORG/CEN
years. It has garnered many new technologies. More than 300 product candidates are in late-stage clinical development—where success rates run about 80%—and more than 50 await regulatory approval. In the past, small discoveryfocused companies would have licensed away products relatively cheaply for royalties. Most of the major biotech products on the market are there because of the clinical development and marketing muscle of the large drug firms. But now, more biotech companies have their own products, strong R&D pipelines, and much of the competitive infrastructure of fully integrated drug businesses. Many also are flush with cash from product sales, collaborative R&D funding, and recent stock market prosperity From these positions of strength, biotech companies are growing through acquisitions and using their leverage to strike more lucrative
MEANWHILE, major pharmaceutical firms slowed their merger activity There were only two large deals in 2001—Johnson & Johnson buying Alza and Bristol-Myers Squibb getting DuPont Pharmaceuticals— and no megamergers. Collaborative alliances between pharmaceutical producers and biotech firms announced in 2001 should amount to roughly $7 billion, says Scott W. Morrison, Ernst & Young's national director for life sciences. Although the value has increased about 10%, about 20% fewer deals were struck. Meanwhile, the number of alliances between biotech firms grew nearly 50%. The most startling drug-biotech deal was Bristol-Myers Squibb's willingness to pay $2 billion to codevelop and copromote a single product: ImClone Systems' first and much-ballyhooed anticancer drug, Erbitux. ImClone is getting about 20 times what was the going rate for licensing a potential blockbuster just four years ago. In the 17-year Erbitux deal, Bristol-Myers is paying half the money for a 20% equity stake in ImClone. The rest is due in three payments for signing the deal, filing the regulatory licensing application, and gaining approval. ImClone also is to receive about 39% of net sales, plus manufacturing revenues. When they signed the deal in September 2001, Erbitux was in late-stage clinical trials and the Food & Drug Administration had given it fast-track review status. The partners completed the regulatory filing on Oct. 31, but on Dec. 28, FDA called the filing incomplete and refused to review it. ImClone has had to offer explanations to angry shareholders suing the company and a congressional committee over its portrayal of clinical trials and the approval process. To an overflowing room at the recent JPMorgan H & Q health care conference in San Francisco, company President and Chief Executive Officer Samuel D. Waksal admitted that they "screwed up" in making the extremely serious mistake of not documenting required clinical data and in putting together a "faulty" application package. C&EN
/ JANUARY
28, 2002
37
COVER STORY Waksal emphasized his continued faith in the drug's efficacy and Drug developers join forces through acquisitions and collaborations eventual approval. The VALUE company is talking ($ MILLIONS) DRIVERS TARGET DATE ACQUISITIONS with FDA on how to Amgen $16,000 Products, R&D Pending Immunex proceed and will seek 10,500 Johnson & Johnson Products, R&D Alza June 2001 the help of its more 7,800 Bristol-Myers Squibb October 2001 Producer, sales DuPont Pharmaceuticals experienced, and, Im2,000 Products, R&D Millennium Pharmaceut cals Cor Therapeutics Pending Clone says, still com1,600a Roche Producer, sales Pending Chugai Pharmaceuticals mitted, partner. Bris1,500 Medlmmune Products, R&D January 2002 Aviron tol-Myers didn't offer any comment. 620 Merck Genomics May 2001 Rosetta Inpharmatics 592 Drug screening Vertex Pharmaceuticals July 2001 Aurora Biosciences However, Waksal's 450 Cephalon Products, sales December 2001 Group Lafon explanations haven't 200 R&D November 2001 OSI Pharmaceuticals Gilead Sciences, oncology stemmed negative sen175 Development Celera Genomics November 2001 Axys Pharmaceuticals timents or a more than 60% slide in ImClone's ALLIANCES stock price. The com2,000 Bristol-Myers Squibb September 2001 Product license ImClone Systems pany still may have to 1,420 Bayer Discovery January 2001 Curagen conduct more clinical 800 Novartis Discovery May 2000 Vertex Pharmaceuticals 450 Aventis Discovery Millennium Pharmaceuticals June 2000 trials, which would de250 Genomics Abbott Laboratories Millennium Pharmaceuticals March 2001 lay refiling by a year or 200 Development Bristol-Myers Squibb July 2001 Exelixis more and give similar 200 Eli Lilly Product license Isis Pharmaceuticals August 2001 drugs time to advance. Analysts and cona Roche to get 50.1% stake. sultants can only presume that Bristol-Myers did its homework on ImClone and $250 million in Millennium stock, the asset that they have in abundance and can Erbitux before signing. Morrison, for one, companies are sharing unspecified costs in provide as a function ofmilestone payments, doesn't expect that the situation will combining related genomics, drug discovrather than up front to shareholders." change the pharmaceutical industry's stratery, and development efforts. Drug and biotech firms negotiated two egy of doing deals, given the enormous In the long term, alliances are positiontrendsetting alliances in 2001, both inpressures companies have to fill their ing biotech firms to bring products to the volving greater sharing of risks and rewards. pipelines and increase earnings. market as real partners. Shorter term, they One was a $1.3 billion, 15-year R&D and are boosting stock values and providing secommercialization partnership, in which rious amounts of cash to fund other activTHERE MAY be changes, though, in struc- Bayer and Curagen will split costs and profities. On top of this, the industry raised a its on a 56% and 44% basis, respectively turing deals to try to reduce risk. "I believe historic $35 billion from investors in 2000, the idea will be to tie more of the payments The Bayer-Curagen alliance is 10 times followed by another $15 billion in 2001. to actual clinical success, rather than makthe size of what was a record-setting deal Yet another $15 billion or so is expected ing huge up-front payments that are not 10 years ago, BIO President Carl B. Feldto flow in this year. refundable," Morrison says. baum told licensing executives late last year. "Biotech companies are no longer suppli"Compared with historical levels, it's Douglas Braunstein, head of mergers cants; they are able to negotiate as near been great, but the ramp-up in R & D and acquisitions for JPMorgan, calls the equals and act as true partners and collabspending for the industry has increased drug industry's prevailing wisdom toward orators with pharmaceutical firms," he said. substantially, so reserves will be depleted," biotech "rent, rather than buy"—that is, Morrison says. "This is a cyclical industry make alliances, rather than acquisitions. "The goal is no longer merely to secure with years of enormous prosperity and pe"To the extent that they can take a minorlarge up-front payments and milestone riods of enormous drought." ity investment and get access to the prodcommitments as, essentially, financing uct, it is their preferred course of action," vehicles, but to retain a larger share of he told attendees at the firm's conference. HAVING CAPITAL means that many comdownstream revenues," he explained. panies can even afford not to do deals and "Profit sharing, codevelopment, and co"It's more attractive from an [earnings] commercialize products alone—or at least promotion—these terms denote a tectonic accretion and dilution standpoint," he exadvance them to later, and more valuable, shift in the balance of power." plained. "Large pharmaceutical companies stages for deal making. But this advantage are remarkably sensitive about their earnAnother deal was Millennium Pharmais only "a function of a robust capital marings per share. ceuticals' five-year alliance with Abbott ket, and it's burning rapidly" Morrison says. Laboratories. Although Abbott will buy 'And it's cheaper," he added. "Cash is an
Big deals
"This is a cyclical industry with years of enormous prosperity and periods of enormous drought/' 38
C&EN
/
JANUARY
28,
2002
HTTP://PUBS.ACS.ORG/CEN
CUSTOM SYNTHESIS
WANT
Fast Access TO CHIRAL COMPOUNDS?
Access to advanced technology has put single-enantiomer API and intermediate production on fast forward. When it comes to chiral chemistry, Bayer offers a variety of approaches. Let us determine the most cost effective path to your chiral compounds. Customers can draw from Bayer's full spectrum of chiral building techniques: Asymmetric synthesis. Enzyme resolution. Classical diastereomer crystallization. And advanced Simulated Moving Bed technology — all backed with Bayer's extensive synthesis experience. So when you need fast access to chiral compounds, contact Bayer. We have the talent, the technology, the services and the commitment to get you where you need to be. www.bayerus.com.
Contact: Cindy Cantwelt Bayer Corporation Industrial Chemicals Division 100 Bayer Road Pittsburgh, Pa. 15205-9741 (412)777-4933
Bayer BAYER BASIC AND FINE CHEMICALS COMMITTED TO CUSTOMER VALUE
COVER STORY Looking at the cash- and profit-rich the parts sitting out there?" proposed companies, analysts and investors still want Matthew Murray portfolio manager at Alto know how and how well biotech comliance Capital, at theJPMorgan H&Q meetpanies will spend the money they now have to build their businesses. CAPITALIZATION Millennium announced in DeBiotechnology company coffers filled in 2000 cember that it will use $2 billion in stock to acquire Cor Therapeutics, which sells a leading heart drug, Integrilin. Although Integrilin sales were lower than anticipated at about $225 million in 2001, Cor expects sales to grow more than 30% per year over the next few years. Analysts consider the deal a straightforward move to assemble the infrastructure needed to become a fully integrated drug company Along with a rapidly growing product, Cor brings manufacturing, sales, and product development capabiliing. Essentially overnight, companies can ties to Millennium's R&D and a product "put the parts together and say, 'Okay we're pipeline gained through an earlier acquisia biopharmaceutical company'" he noted. tion. Millennium's management says the "If Millennium ultimately succeeds, company will continue to look at acquisithen I think a lot of others will follow that tions and expects to be profitable by 2004. pattern," Murray added, "and there are many combinations like it out there to be "Why create a biopharmaceutical comdone." Analysts believe the high-risk, cappany completely organically when you have
ital-intensive biotech industry is ripe for consolidation. With more than 3,000 companies, there's not enough money or product success to sustain them all, and a lot of duplicate technology and capabilities. Indeed, in the past year, the industry saw Celera Genomics acquire Axys Pharmaceuticals to bring drug discovery capabilities to its gene data platform. Small-molecule drug developer Vertex Pharmaceuticals bought high-throughputscreening company Aurora Biosciences to increase its productivity ALREADY PROFITABLE Cephalon recently bought out marketing partner Group Lafon, gaining full product rights and European reach in manufacturing and sales. The $450 million deal is easily justified, says Frank Baldino Jr., Cephalon's chairman and CEO, as it will be immediately accretive to earnings. "There aren't many deals we could construct like that," he adds, "and you should look for us to do more acquisitions." In early December, Medlmmune an-
Wlienwe make Sodium triacetoxyborohydride (STAB) 9 5 %
w e m a k e it rigfrrfc! C o m p a r e d t o in-situ g e n e r a t i o n , y o u get:
• Cleaner reactions • Higher chemoselectivities • Consistent quality • Reduced manufacturing costs H Commercial quantities • Improved safety CALSELECT® STAB is a mild chemoselective and stereoselective reducing agent used for the reduction of functional groups, heterocycles, and the alkylation of amines. In addition, CALSELECT® STAB can replace sodium cyanoborohydride under most conditions, and is less toxic. Call u st o d a y f o r m o r e information. 4 1 2 - 9 6 7 - 4 1 4 1 www.calBery-corrB
CJKLLERY C
H
E
M
I
C
A
L
An MSA Company giTAV=t£^
see u s a * I N F O R M E X 40
C & E N / J A N U A R Y 28, 2 0 0 2
2 0 0 2
booth
#0826
HTTP://PUBS.ACS.ORG/CEN
AIR PRODUCTS
Bingo. Just like that, a breakthrough created not by faceless companies or committees, but through the sheer guts and determination of talented individuals working together t o wrestle the most complex challenges into submission. After 60 years in the business of providing industrial gases and performance chemicals, we have problem-solving down t o a science. In electronics, refining, f o o d , medicine and virtually every industry imaginable, we're known as the hands-on experts w h o deliver vital products and a unique understanding of our customers' business. The m o m e n t of discovery may be brief, b u t the rewards of understanding are long lasting.
tell me more www.airproducts.com/determination ©2000 Air Products and Chemicals, Inc.
COVER STORY nounced a $1.5 billion premium-priced stock offer to buy vaccine developer Aviron. Medlmmune is already a fully integrated and profitable company with five products, although more than 85% of its sales and most of its sales growth in 2001 were from just one product. Aviron, meanwhile, is on the cusp of commercializing its first product, the nasal influenza vaccine FluMist, which it expects to have annual sales of $1 billion within five years. "Medlmmune really had their cards in line when they did that acquisition," states Laurence J. Blumberg, president of Blumberg Capital Management. Medlmmune's expertise is in infectious diseases, and the combination has clear R&D synergies, while bringing regulatory, manufacturing, and sales infrastructure to bear on FluMist. Marrying strong R&D pipelines to existing commercial infrastructures is as important as acquiring a major product. "Yxi've got to have aflowof products into a development organization and a sales
force," says Dick Haiduck, a director at the merchant bank Burrill & Co." Y)u can't have one product every three years, and then let them sit there waiting for another." The biotech industry's biggest deal—between Amgen and Immunex—was driven, some analysts believe, byproduct pipeline concerns. Although it's the industry leader with nearly $4 billion in annual sales and double-digit earnings growth, Amgen's success has been tied to two blockbuster products launched in 1989 and 1991. It took another decade for another major product to emerge: its recently approved, next-generation anemia drug Aranesp. Similarly, 20-year-old Immunex took until 1998 to realize its first major product, the antiarthritis drug Enbrel. Limited production capacity has hampered the drug's recent sales growth, and Immunex' next nearest product candidate is only in midstage clinical trials. On Dec. 17, Amgen offered to pay $16 billion—85% in stock and the rest in cash—to acquire Immunex. Sales of En-
brel are expected to approach $1 billion this year and $4 billion by 2005 as it gets approved for new uses and Amgen's resources expand production. SOME ANALYSTS reacted negatively to the deal, as did trading in the companies' shares. The deal's nature has provoked some disparaging analogies to major pharmaceutical mergers driven largely by cost savings and economies of scale. In fairness, stocks of most biotech companies that announced mergers and acquisitions initially fell as investors responded to these relatively unfamiliar events. Large pharmaceutical companies have "gotten very good at acquisitions, and the idea is ingrained in their psyches as part and parcel of growth," JPMorgan's Braunstein said at the meeting. Hefindsit an interesting change that biotech companies are more receptive to and thinking strategically about mergers and acquisitions, and not just their discovery engines. Many analysts are skeptical about the deals, particularly the one between Amgen and Immunex. "Most mergers don't work," Murray commented. "If you com-
HYpERa CTi Ve Building n e w blocks for chemical construction. Every m o n t h .
www.maybridge.com 42
C&EN
/ JANUARY
28,
2002
Bringing life to drug discovery
MAYBRIDGE HTTP://PUBS.ACS.ORG/CEN
We call our newest breakthrough intelligent gel technology. But, in fact, it's giving our customers a lot more to think about.
AFTER
W h e n you consider the outstanding fragrance release and moisture properties of our Versagel™ products - and the fact that w e can gel virtually any nonpolar oil - the possibilities are staggering.
100 YEARS, EVERYTHING JUST
Formulators of cosmetics, pharmaceuticals, sunscreens, air fresheners and candles n o w rely on Versagel products. N o t to mention the legendary customer service Penreco has provided for more than 1 0 0 years. Call 1-800-245-3952 today and tell us what you're thinking. W e can help your best ideas gel.
ponreco
www.penreco.com
A I R FRESHENERS ANTI-PERSPIRANTS BABY CARE PRODUCTS CANDLES COSMETICS H A I R RELAXERS H O M E FRAGRANCE PRODUCTS LIP B A L M LOTIONS INSECTICIDES
COVER STORY pare growth rates {before and after], in Along with market value, bio tech commost of these situations it just looks like the panies have more financial flexibility to company slows down after the acquisition." structure biotech acquisitions than do large "When I see tons and tons ofmerger and drug companies. acquisition activity, and the prospects for Braunstein notes that the average pricemore, it calls into question what the organic to-earnings ratio for a drug producer's growth models are for the companies that stock is about half that of most biotech are in play" added Richard van den Broek, companies, so its stock currency is less principal at Cooper Hill Partners. valuable. This makes the price of any acOther analysts have been more positive, suggesting that the Amgen/ImVALUATIONS munex combination will create a more Value of biotech mergers and acquisitions diversified company "There are doubles, while that of drug deals dives economies of scale but also two great research organizations with proven track records ofgetting major products to the finish line," Morrison says. Amgen also deserves comparison to major drug firms in that its $60 billion market valuation, not yet including Immunex' $15 billion, already surpasses NOTE: Number printed on each bar is the number of deals made. SOURCE: JPMorgan H&Q the $50 billion values of Pharmacia and Schering-Plough and is approaching the $80 billion to $90 billion values of Eli quisition by a large drug company, espeLilly, Abbott, and American Home Prod- cially at a premium, unfeasible. The deals ucts. Morrison and others anticipate that also would be highly dilutive to earnings a few other bio tech firms might near these per share and therefore undesirable. Thus, ranks in the next five years. for the next year or two, he believes, bio-
tech companies can probably make deals without fear of disruption from bigger competitors. Analysts expect, however, that within a fewyears the relative price-to-earnings ratios —and thus who has the financial flexibility—will reverse. Pharmaceutical producers then, they believe, will use the opportunity to make biotech acquisitions. Meanwhile, biotech companies are expected to be more serious and aggressive competitors in snapping up new technologies and late-stage or marketed products. What's happened so far is "hardly the start of musical chairs within the industry," says G. Steven Burrill, CEO of Burrill & Co. He still expects a slight increase in biotech mergers this year, including what he calls another "marquee transaction." "It's important to remember that only a handful of companies are positioned to pull one off," he says. "Individual deals happen for specific reasons, unique to each, and just because one combination happens, it doesn't lead to large-scale industry consolidation." •
www.hovione.com/time-to-market
Need it yesterday? • Over the past 5 years Hovione has been the API producer behind 4 drug applications t h a t resulted in successful product launches. Visit our website to find o u t more a b o u t this and o t h e r areas of o u r expertise.
N o o n e is m o r e a c t i v e in p h a r m a c e u t i c a l i n g r e d i e n t s
44
C & E N / J A N U A R Y 28, 2002
H
HOVIONE HTTP://PUBS.ACS.ORG/CEN
