Our Eye on the State Of R&D

Debate over pharma's R&D productivity crisis has surged again in recent weeks with publication notably of two articles, one an opinion piece in Nature Reviews Drug Discovery by John LaMattina, ex-head of Pfizer R&D, and the other a news report by Forbes columnist Matt Herper on how some in pharma are calling for nothing short of a revolution in R&D.

The two articles are a fresh reminder of how much turmoil remains in the pharma R&D community, despite clear signals for some time that the current structure isn't working. LaMattina’s article is a lament backed by data analysis over pharma's decade-long embrace of hyper-M&A, which has severely disrupted R&D and hurt, not helped, the industry’s long-term outlook. LaMattina stops far short of calling for an overhaul, and in fact, he told Forbes that the industry is improving, judging by the 2011 FDA approval rate.

Herper’s take goes much farther, as he profiles thought-provoking ideas from former Lilly exec Bernard Munos, who has been on the industry circuit proposing “radical change” in R&D strategies. Herper cites other R&D execs who support Munos, such as Corey Goodman, who helped start Exelexis and Renovis and for a brief time tried to jump-start a biotech-like research network at Pfizer; and Stephen Friend, who ran Merck's oncology R&D after it paid $620 million for Rosetta Inpharmatics, the biotech Friend co-founded.

Both these sides of the R&D debate, and others as well, have been in the pages of IN VIVO recently. In an article in the March issue, Munos said M&A was not the only precipitation of the most severe innovation crisis in industry history. Other financially-driven approaches to R&D, such as portfolio management aimed at mitigating risk and tailored therapies, were also to blame.

Munos argued in IN VIVO that in an era of multiple scientific breakthroughs, companies must embrace high-risk, unconventional innovation, more collaborative approaches, and he highlighted just how important patient-oriented research, based on astute clinical observations by physician-scientists, has been to find breakthroughs -- and it should take precedence once again.

Adding to the foment, consultants Nils Behnke and Norbert Hueltenschmidt of Bain, writing in IN VIVO last February, urge pharma to rethink how it rewards scientific behavior and encourages autonomy and flexibility. The authors surveyed successful R&D heads and came up with a number of ideas based around innovation centers. These ICs, so to speak, would focus on specific therapeutic areas and make independent decisions, all aimed at accessing the best talent and science.

Easy, right? We’ve looked closely at real-world experiences with new R&D models, such as GlaxoSmithKline's biotech-within-a-pharma model, AstraZeneca’s iMEDs, and Lilly’s Chorus and its other venturesome initiatives. Indeed, many of the Big Pharma’s are outsourcing R&D far more than in the past, and some are looking at alternative financing options.

But there's nothing simple about pharma R&D - or efforts to invoke change at big companies. GSK recently re-organized its re-org. Lilly, despite several years of piloting new approaches, is under fire from investors and others because of multiple setbacks and a dry late-stage pipeline just when it needs some gas. Add to the turmoil, the looming patent cliff and subsequent across-the-board budget cuts, along with structural changes in the commercial environment, which ultimately determines R&D success and the result is, at best, uncertainty; at worst, massive disappointment: two of Wall Street's most abhorred scenarios, both of which lead to long-term value destruction.

For the longest time now, one or two big sure-fire commercial hits have papered over a lot of failures, inefficiences, and uncertainties for Big Pharma. Everyone agrees that way of life is no longer sustainable, and indeed, a change is underway. How that change is best carried out, however, is of great debate, and it's in IN VIVO every month.