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Innovation in Pharma Part IV: What comes next?

Innovation in Pharma Part IV: What comes next?

Apr 1, 2012

This is part IV of a series of articles on innovation in Pharma based on an interview with Jose Carlos Gutierrez Ramos, the man in charge of revolutionizing drug discovery at Pfizer. In part I we establish the difficulties facing Big Pharma as brand name drugs go off patent and pipelines run dry. Pfizer is trying to rewire the relationships between pharma, biotech, and academia to align incentives and take advantage of the strengths of each player. In part II we explore new research initiatives between Pfizer and academia. In part III we discuss a new paradigm for pharma-biotech collaboration. In part IV, below, we examine the effect these initiatives are having on Pfizer and on other pharma companies, and what a new, more innovative pharma sector might look like.

Jose Carlos says all of biomedicine is in trouble. It’s not just pharma, with its litany of drugs going off patent. The ever-increasing cost of running large clinical trials affects biotech companies and their venture capital backers too. The current economic recession renders raising capital an equal-opportunity hassle. And the complexity of biology, which seems to get more inscrutable the more details you learn, makes prospects tenuous for everyone from the smallest start-up to the largest multinational.

In this challenging environment, Jose Carlos sees an obligation to rethink interactions between the key life sciences actors so that incentives and objectives are aligned. Such big-picture initiatives include the Centers for Therapeutic Innovation, discussed in part II, where academic researchers are given the often once-in-a-lifetime opportunity to test a scientific hypothesis in humans in exchange for abiding by an aggressively industrial timeline and funding mechanism. Pfizer gets access to a broad sampling of innovative work from great minds in academia, work that might otherwise remain in the laboratory for years on end. The basic scientists get to ask the ultimate question, ease the translation of a technology from pipette to patient, and profit financially if things go well.

Reverse biotech deals, described in part III, in which pharma spins its early-stage projects into new biotech entities, overcomes the twin hurdles of value and risk. The new biotech company is tasked with discovering which of a number of programs is most likely to work in humans, and the added value when they succeed is kicked back to the venture capital investors. Pharma then has a drug with a high likelihood of success in hand with which to begin the expensive late-stage clinical trials. What was once several players fighting in isolation against systemic financial winds now is tractable through collaboration.

Pfizer is not the only pharmaceutical company thinking these big thoughts. Merck recently announced the creation of a nonprofit research institute in San Diego, the California Institute for Biomedical Research, that will focus on translating discoveries from academia into products. Merck intends to keep its hands off the decision making to allow the best ideas to emerge, but will be attuned to the potential of drugs to fit its pipeline. J&J recently joined the legion of pharmaceutical companies that sponsor start-up incubators, like Biogen Idec’s BI3 and Accelerator Corporation, to strengthen links between themselves and the entrepreneurial community. And virtually all pharmaceutical companies have internal venture capital funds with which to place bets on emerging biotechs. Jose Carlos recognizes that the whole industry is riding this wave. “We are running as fast as we can too,” he says.

In addition to new partnerships, Pfizer is reorganizing its internal R&D structure to be more innovative internally. The company’s $6.8 billion annual R&D budget must be allocated differently in this new world. To Jose Carlos, the solution is to “externalize” effort. The biotherapeutics division that he heads, he notes, “is actually a number of semi-autonomous units of 40-50 people. But these discovery units aren’t just 40-50 people, but rather 80-100 people because they are working with 10 academic investigators in one place, and 30 people at a company in China, and perhaps a biotech partner too.” Discovery units that leverage relationships with scientists and organizations outside Pfizer act as a force multiplier, compounding the amount of work that can be done with fewer employees.

So what of the employees at Pfizer who find themselves superfluous? How bad are the shrinking pains? In 2008, research facilities in Ann Arbor, MI; Nagoya, Japan; and Amboise, France, were closed, eliminating 2,160 jobs. Just last year, Pfizer closed its Sandwich, UK, R&D center that had operated since the 1950s, cutting 2,400 jobs. Just last month, half of the immunology and inflammation R&D staff at the Cambridge facility was let go. The primary lab, two floors above where we sit, feels eerily empty when I walk through it.

Jose Carlos recognizes the pain the reorganization can cause. “We embarked on a journey two years ago that resulted in a lot of colleagues leaving because they weren’t ready, able, or willing to make these changes. Units moving to different parts of the country leaving 50% of the people behind. Sites closed. It’s tough. It has been very painful, and we have a lot of respect for the colleagues that left. ”

“We are changing the fabric of who we are in research. And that process is well under way. After two and a half years, the people that we need to change the fabric of R&D are here. We want different types of brains—people who are willing to see things differently—and so we are selecting different types of employees. We’ve hired 110 new people here in Cambridge, and their pedigrees are very different than those who were here for 20 years before. Not bad, just different.”

The skeptic will point out that there is little evidence to suggest a change in research philosophy will result in more drugs approved. In fact, a recent article in Nature Reviews Drug Discovery (analyzed at remove by Matthew Herper in Forbes) suggests that the modernization of pharmaceutical research—dominated by robotic high-throughput screening—has proven less successful than traditional, low-throughput, medicinal chemistry techniques in discovering new drugs.

Jose Carlos disagrees with this assessment because the bar for success is rising. “We know, all of us, that [the traditional research model] isn’t working. It worked 20 years ago because we had so much need, and because the drugs that existed were awful. But most of the conditions that we call one disease are actually collection of diseases. Take lung cancer. We just launched a drug called Xalcori, that is revolutionary for lung cancer but only works in 10-12% of the patients. Now we’re studying the rest of them. We have a big initiative called Precision Medicine to try to segment the diseases in this way.”

Focused therapies for niche indications are wonderful for the afflicted patients, but a smaller market means the drug must be more expensive to recoup development costs. Is this sustainable for Pfizer or for the healthcare system at large?

“That is why we are building innovation into clinical development too,” says Jose Carlos. There are ways to significantly reduce development costs. “How do you run trials? Not the 1000s of patient trials because those are so regulated and tricky to innovate, but the experimental medicine trials? We’re increasingly sharing risk—not financial risk but operational risk—with patient foundations in areas of niche indications and orphan diseases. We’re partnering with foundations like the Cystic Fibrosis Foundation, the ALS Foundation, the Michael J Fox Foundation for Parkinson’s Research. It’s patient access. It’s advocacy.”

“I really believe that innovation in science, innovation in clinical development, and innovation in business solutions must be completely integrated for us to be successful. If we do great in science but not in how we bring molecules to the clinic, we will fail. If we do good science and good clinical development, but we’re not thinking creatively of how we will run our business, then we will fail also. And it is that total innovation that we want to do.”

“Pfizer is the largest pharmaceutical company on this planet. Other companies may have a social responsibility choice because they are smaller, but at Pfizer we have no choice. We have only one way to go. And it’s to continue to transform ourselves to deliver medicines to patients. That’s what we believe.”


Jordi is a PhD student in chemical engineering at MIT and a writer for the Entrepreneurship Review. His thesis research applies the tools of protein engineering to vaccine development. He is interested in biotech entrepreneurship, particularly as it applies to global health and neglected diseases.