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.

Unusual Suspects: If Pfizer Decides to Really Rattle the R&D Cages

Yesterday, we listed a group of people -- we called them the usual suspects -- that we think Pfizer will try to woo if it ends up turning to an outsider to head up R&D. Today, we'll list some people who could do the job -- but you probably wouldn't think of them right away.

First off: Mark McLellan, former boss of FDA and CMS. The industry loves him; so do politicians. He was even relatively popular among the famously disgruntled FDA staff. But McLellan has just gotten huge funding for his Engelberg Center for Health Care Reform and, as Founding Director, he's not likely to abandon his post at what could be the center of US health policy.

Others qualify for the less-usual category because they’ve spent their careers in research, not development, and because they haven’t had the top R&D job. Michael Dohlsten who runs discovery for Boehringer Ingelheim. “A change agent,” says one recruiter. “He’s just that good.” Likewise, Allen Oliff, GlaxoSmithKline’s discovery boss. Or Marc Tessier-Lavigne, an academic for two decades before joining Genentech in 2003, now playing #2 in research to Richard Scheller.

Indeed, Tessier-Lavigne’s academic career is a particularly intriguing model for Pfizer. If Pfizer "wants to break the mold," says one recruiter, giving a scrub to its tarnished scientific self-image, why not go with an out-and-out academic – which is exactly what Merck and Novartis did in hiring, respectively, Peter Kim and Mark Fishman? Kim’s success at Merck certainly argues for the direction.

So in terms of an academic, why not…Pete Schultz of Scripps, also the director of the Genomics Institute of the Novartis Research Foundation, a prolific company creator (Affymax, Kalypsis, Syrrx and Ambrx, among others), and—by various accounts—intensely ambitious? Probably not—say headhunters: tough personality for a corporate job.

There are certainly a bunch of young research stars—though our headhunters were unwilling to give us their best ideas here. But there’s a problem for Pfizer with this route: Peter Kim was able to understudy for a few years with the previous R&D boss, Ed Scolnick. Tessier-Lavigne is understudying now. A new young academic joining Pfizer won’t have the same chance since LaMattina leaves in December -- and no internal candidate would want to take a temporary coaching job in the corner office.

So what do we think will happen?

Up to now, Kindler & Co. haven't strayed far from the corporate nest in replacing top commercial and business development management. So it's not likely they'll do anything different with R&D, particularly given the sales job they'll have to do to attract a really capable outsider. Our money's on the top internal candidate, Martin Mackay.

Round Up the Usual Suspects: Who Will Run Pfizer R&D?

As soon as John LaMattina announced he was stepping down as head of the world’s largest pharmaceutical R&D organization, speculation over his successor bubbled over.

According to insiders, the top internal candidate is Martin Mackay, who spent most of his nearly 12 years at Pfizer on the discovery side; he’s only been running development since the beginning of the year.

But all the insiders and outsiders we spoke with think that Pfizer CEO Jeff Kindler will need to look externally, too (we understand he's using Spencer Stuart on the search).

Insider or outsider, however, he'll want someone who can straighten out the maze--cultural, bureaucratic, and physical--created from Pfizer's series of acquisitions. Not just the big ones, Warner-Lambert and Pharmacia, but also the myriad of biotechs, plus Pharmacia's acquisitions, too--many of which hadn't been fully integrated when Pfizer bought it.

Perhaps unsurprisingly, not a lot of names dropped from the trees we shook (mostly recruiters at a variety of white-shoe firms). “Who would want that job?” they chorused. Most obviously, Pfizer’s got an enormous challenge in replacing Lipitor in 2011 – a no-win situation, they said, even if the new guy creates the sleekest, best-looking R&D organization in the industry.

Or could there be a way out after all? We think maybe there could. Granted, if Vytorin and generic Zocor continue to munch away at Pfizer’s share of the statin business at the current rate, Pfizer could see $11 billion Lipitor turn into a $5 billion drug several years before patent expiration. In that case, Pfizer stock could reach the floor pretty soon. That's bad news for lots of employees (the layoff program will speed up) but it's good news for a new R&D chief (and his stock options): starting at the bottom is better than starting on a downward slope.

Plus, given all the corporate motivation provided by the loss of billions in revenue, the R&D boss would clearly be allowed to make some big changes--something that stymied previous R&D chiefs, in particular Peter Corr, who was pushed out of the job.

What's more, there are plenty of people who would simply love the ego boost that comes from managing a $7.4 billion budget.

So, we asked, which outsiders is Pfizer likely to approach? Our sources put them into two groups: the usual suspects and the less usual ones. In this post, we'll go through the former group. Tomorrow, we'll consider the less likely candidates.

Bob Ruffolo, Wyeth’s by-the-numbers R&D boss. He’s certainly shaken up the organization, but no one expects him to budge before he sees some of the fruits of his restructuring.

John Patterson, now a board member and head of development at AstraZeneca, the driver behind the effort to root out AZ’s nearly fatal NIH syndrome, and the architect of the industry’s most ambitious business development program.

Joerg Reinhardt, now CEO of Novartis Vaccines and Diagnostics, and the former development chief. But Reinhardt is joined at the hip with CEO Dan Vasella and probably will be his successor, say the jungle drums.

Jeff Leiden, former head of research and COO at Abbott, now a partner at Clarus Ventures (not, like the other senior folks at the fund, a "managing director" -- whatever that distinction means). Was a star academic physician (and a founder of several biotechs) before joining Abbott and would certainly add a start-up shine to Pfizer.

All of these folks would be relatively safe choices for Pfizer--execs with street cred. But Pfizer will need to do a terrific sales job to get any one of them.