Value Creation in the Pharmaceutical Industry

The Critical Path to Innovation

Alexander Schuhmacher, Markus Hinder, Oliver Gassmann

• Publisher: Wiley-VCH
• Year: 2016
• ISBN:
  9783527693412
• Edition: 1
• Topic: Physical Sciences
• Subtopic: Industrial & Technical Chemistry

This practical guide for advanced students and decision-makers in the pharma and biotech industry presents key success factors in R&D along with value creators in pharmaceutical innovation.
A team of editors and authors with extensive experience in academia and industry and at some of the most prestigious business schools in Europe discusses in detail the innovation process in pharma as well as common and new research and innovation strategies. In doing so, they cover collaboration and partnerships, open innovation, biopharmaceuticals, translational medicine, good manufacturing practice, regulatory affairs, and portfolio management. Each chapter covers controversial aspects of recent developments in the pharmaceutical industry, with the aim of stimulating productive debates on the most effective and efficient innovation processes.
A must-have for young professionals and MBA students preparing to enter R&D in pharma or biotech as well as for students on a combined BA/biomedical and natural sciences program.

Chapter 1
Introduction to the Book

Alexander Schuhmacher, Oliver Gassmann and Markus Hinder

“Value Creation in the Pharmaceutical Industry: The Critical Path to Innovation” is intended to review the current state of the art and to provide cutting-edge knowledge in the pharmaceutical research and development (R&D) process. All authors are well-known experts in their field of activity and provide first-hand scientific, regulatory, management, or business information. They share their personal vision on how their field of expertise will or need to develop to finally keep pace with the changes that will happen in the pharmaceutical industry.

With this book, we examine the situation of pharmaceutical innovation from three different perspectives:

• Technically from the sequence of R&D
• Operationally when we answer the question of what can be done to increase R&D efficiency
• Strategically by examining environmental factors and trends that may influence pharmaceutical R&D in the future

Due to its unique structure and content, we expect that this book will be a way to update knowledge and spark new ideas for R&D managers, industry specialists, academics, and other stakeholders interested in pharmaceutical R&D.

As depicted in Figure 1.1, this book addresses the critical path of value creation in the pharmaceutical industry from the view points of research, development, and business. The articles on epidemiology, antibodies, and drug discovery may be assigned best to the section on “research.” At the interface of “research” to the part of “development,” we provide the articles on preclinical safety, translational medicine (TM), and drug costs. The section on “development” is represented by the articles on pharmaceutical, clinical, and translational development. A more holistic view on pharmaceutical R&D with an interface to the topic “business” is provided by the texts on portfolio management, financing of R&D, open innovation, licensing, outsourcing, innovation models, leadership in R&D, and management of intellectual assets. The business part is represented by the articles on marketing, vaccines, and pharmacoeconomics.

Figure 1.1 The pharmaceutical innovation hemisphere.

We will start this introduction by describing in general how does the highly regulated and standardized R&D process in the pharmaceutical industry look like. The first step of pharmaceutical R&D is the identification and validation of a suitable drug target that, if up- or downregulated, activated, or inhibited, may play a role in a disease. Thus, an in-depth understanding of the disease and its molecular mechanism is key to search for new drug targets. In a next step, researchers search for lead compounds that potentially influence the drug target in the aforementioned way. If a lead compound is discovered, researchers optimize the potential of the compound to become a drug candidate. In preclinical development, it is analyzed as to whether this candidate can be used in the human situation, and it undergoes a series of preclinical testing primarily intended to understand how the compound works and as to whether it is safe in animal models. Next, safe drug candidate can be used for test series in the human situation. First and in view of the US market, an Investigational New Drug Application (IND) needs to be filed at the Food and Drug Administration (FDA). In the following years, several clinical trials are conducted to analyze the efficacy and safety profile of the drug candidate. Principally, the clinical trial process is conducted in three phases. In phase I, the drug candidate is tested in a small group of healthy volunteers to analyze its pharmacokinetic. Phase II trials are conducted to analyze the safety and the efficacy of the drug candidate in a selected group of patients that have the disease under investigation. In the phase III trials, the drug candidate is tested in large groups of patients to provide statically well-founded data on the efficacy and safety of the drug and the overall risk–benefit ratio. Finally, a new drug application (NDA) is filed to get market approval for the new drug. The FDA reviews all data and assesses the benefit versus the risk of the drug candidate and decides as to whether an approval can be granted.

Today, this R&D process lasts on average for about one to two decades and is related with a very low probability of success (PoS) from discovering a new drug candidate to its launch to the first market. The complexity of drug R&D combined with the increasing permeation by technology, the costs related with failed drugs, and the capitalization of costs over the long timelines are the main drivers of the enormous high costs that need to be invested per new molecular entity (NME). Today, the average costs per NME are probably above USD 2 billion (Figure 1.2).

Figure 1.2 The traditional R&D phase model; IND (Investigational New Drug), NDA (New Drug Application), FDA (Food and Drug Administration), PTRS (probability of technical and regulatory success), WIP (work in progress), USD (U.S. Dollar), data derived from Paul S. et al. (2010)

With a total of 22 chapters, this book reviews the whole value chain of pharmaceutical R&D from drug discovery to marketing of a new drug. In detail, this book starts with three chapters that set the stage for the pharmaceutical industry, namely, epidemiology, healthcare needs, and a definition of value in the pharmaceutical business and the shrinking R&D efficiency.

First, Stephan Luther provides an overview and introduction on “Global Epidemiological Developments.” He reviews the basic models which describe the burden of disease in different geographical areas and under different socioeconomic and climate conditions. Based on these factors, he reviews the healthcare needs for specific areas and provides an outlook on likely future developments worldwide. The chapter explains why on a global scale, there is a shift from communicable disease to noncommunicable disease and why in addition to mortality the disability-adjusted life years (DALYs) will become a prominent estimate for the overall global burden of disease.

The chapter by Sam Salek and Paul Kamudoni on “The Value of Pharmaceutical Innovation: Concepts and Assessment” introduces the reader to the different concepts of value and its assessment. Importantly the authors describe value from different perspectives of the multiple stakeholders in the healthcare sector and how the concept of value has evolved over time. They review on how value is assessed today and describe the consequences for pharmaceutical R&D. Based on recent developments, they provide an outlook how the pharmaceutical industry and regulatory agencies decision makers in the healthcare sector can work together in a more unified and transparent way to improve outcomes for the patients and the healthcare systems.

In the following chapter (“A Review of the Pharmaceutical R&D Efficiency: Costs, Timelines, and Probabilities”), we review the efficiency of the current R&D, namely, the R&D costs, the cycle times, the PoS of pharmaceutical R&D, and the number of NMEs that have been launched in past years. Alexander Schuhmacher, Oliver Gassmann, and Markus Hinder describe the traditional R&D phase model, highlight the reasons of the low success rates, and answer the question of why pharmaceutical R&D takes so long. We also detail the drivers of the enormous R&D costs and summarize our research on the question of how much does an NME cost today. Finally, further impact factors on R&D efficiency are discussed.

It is realistic to say that today more than USD 2 billion is required to bring one NME to the market, in a process that takes one to two decades. Accordingly, and as provided by the chapter of Sviataslau Sivagrakau (“Financing Pharmaceutical Innovation”), drug development is concentrated almost exclusively in advanced economies. The United States is the global leader with market share of 60% in scientifically novel new drugs. Globally, two-thirds of the investments in biomedical R&D come from the industry, whereas one-third are publicly funded. Since the 1980s, multinational pharmaceutical companies lost their dominance in providing NME. Whereas in the 1980s the big players originated three quarters of all NMEs, they have lost today's majority market share to smaller companies. In light of this, the financing landscape has become more fragmented and includes venture capital, university funds, public and charity grants, alliances, private–public partnerships, corporate and state venture capital, acquisitions by larger firms, and initial public offerings for companies with late-stage compounds. The last 5 years exhibited very favorable market conditions for exchange-listed drug developers: high valuations and strong industry-level performance. On the other hand, funding at early stages, particularly translational phase, remains scarce.

The next seven book chapters focus more specifically on the R&D process and the related potential of value creation in the phases of drug discovery and preclinical and clinical development.

In “Challenges and Options for Drug Discovery,” Werner Kramer analyzes the different approaches taken in research–discovery and compares historical promises and delivery in these disciplines. He identifies the key obstacles, which need to be overcome to provide sustained success in the discovery space. He proposes and describes a new model, which unites scientific scrutiny, decisions based on understanding of human and molecular physiology. This includes the weighing of target-related safety and efficacy and the stringent application of decision trees in the assessment of projects. The chapter is especially valuable because the author does not forget to build the bridge to neighboring discipline TM.

The transition of a new molecule from animals to humans is a key event in the development of a new medicine. On the one hand, this is important to ensure adequate clinical safety for study participants. On the other hand, TM up to clinical proof of concept can offer precious information on a molecule's mode of action, pharmacokinetics (PKs), and pharmacodynamics (PDs) and its therapeutic potential. Gezim Lahu and John Darbyshire review in “Translational Medicine: Enabling the Proof of Concepts” the overall process and show the benefit of established and emerging tools and skills to enable informed and better decision making. By embedding TM into the bigger context between drug discovery and development, they provide a perspective of how TM can become a value driver in both directions.

In their chapter “Preclinical Safety and Risk Assessment,” Paul Germann and Rob Caldwell review the state of the art in preclinical safety assessment. The authors give an overview of today's preclinical test strategies to support drug candidate testing in the early phases of dr...

Table of contents

• Cover
• Related Titles
• Title Page
• Copyright
• Table of Contents
• List of Contributors
• Foreword
• Chapter 1: Introduction to the Book
• Chapter 2: Global Epidemiological Developments
• Chapter 3: The Value of Pharmaceutical Innovation: Concepts and Assessment
• Chapter 4: A Review of the Pharmaceutical R&D Efficiency: Costs, Timelines, and Probabilities
• Chapter 5: Financing Pharmaceutical Innovation
• Chapter 6: Challenges and Options for Drug Discovery
• Chapter 7: Translational Medicine: Enabling the Proof of Concepts
• Chapter 8: Preclinical Safety and Risk Assessment
• Chapter 9: Developing Commercial Solutions for Therapeutic Proteins
• Chapter 10: The Evolution of Clinical Development: From Technical Success to Clinical Value Creation
• Chapter 11: Translational Development
• Chapter 12: Forty Years of Innovation in Biopharmaceuticals – Will the Next 40 Years Be as Revolutionary?
• Chapter 13: Vaccines: Where Inertia, Innovation, and Revolution Create Value, Simultaneously and Quietly
• Chapter 14: The Patient-Centric Pharma Company: Evolution, Reboot, or Revolution?
• Chapter 15: The Pharmaceutical Industry is Opening Its R&D Boundaries
• Chapter 16: Out-Licensing in Pharmaceutical Research and Development1
• Chapter 17: Trends and Innovations in Pharmaceutical R&D Outsourcing
• Chapter 18: New Innovation Models in Pharmaceutical R&D
• Chapter 19: The Influence of Leadership Paradigms and Styles on Pharmaceutical Innovation
• Chapter 20: The Role of Modern Portfolio Management in Pharma Innovation
• Chapter 21: Patent Management Throughout the Innovation Life Cycle1
• Index
• End User License Agreement