How to Win Friends, Influence People, and Make NMEs - Pharmaceutical Executive

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How to Win Friends, Influence People, and Make NMEs
Wyeth has quadrupled its discovery output while holding resources steady. Its secret? Really no secret at all.


Pharmaceutical Executive

The headquarters of Wyeth Pharmaceuticals comprises 1.8 million square feet of office and lab space on a campus outside Philadelphia. Shown here (left to right) are: Robert Ruffolo, Jr.; Frank Walsh; Bernard Poussot; Gary Stiles, MD; and Joseph Mahady.

People can’t write a sentence about Wyeth without starting with 'diet drug,'" moans Joseph Mahady, president of Wyeth Pharmaceuticals' North American and global businesses. Yet he knows why the diet "cocktail" known as fen-phen—one part Pondimin (fenfluramine) or Redux (dexfenfluramine) and one part generic phentermine—gets attention: "Where else have you seen a $16 billion block taken from a company?" That's the amount drained from Wyeth during the last five years by fen-phen litigation—the costliest product liability tort ever to hit a single pharma. (See "Balloon Mortgage.") What's more, the ongoing lawsuits have raised a lingering cloud of uncertainty and suspicion that amplifies Wyeth's smallest mishap and obscures its genuine achievements.


Compound Interest
What has Wyeth done to close this episode? Cynics may note the company changed its name two years ago from American Home Products. But its makeover is profound. During the last decade, Wyeth has gone from a diversified company with consumer brands such as Chef Boyardee and Pam and a reputation for "inventing the dry pipeline" into a focused pharma confident enough to pledge to deliver an unprecedented two new molecular entities (NMEs) every year beginning in 2006 and "for many years thereafter," says CEO Robert Essner.

One reason for Wyeth's self-assurance: It successfully revamped how it does R&D. Drug research is notably iffy and expensive—roulette with million-dollar chips—but questions about managing innovation vex executives everywhere: How do you catch lightning in a bottle, keep scientists on schedule and under budget, wring more from less? Wyeth's answers may seem old fashioned but have actually never gone out of style.

Turning Heads Wyeth wants to be "one of the most innovative companies in the industry," says Bernard Poussot, president of Wyeth Pharmaceuticals. Chutzpah might not be the word this soft-spoken Frenchman would choose to describe its aspirations, but only a decade ago, Wyeth "made pots and pans, shoe polish, Jiffy Pop—a great company store—but was nobody's idea of a real research company," Mahady admits.

Over the years, it has divested its crop protection and home foods businesses, exited the generic market, and broadened its research capabilities. "We don't do just small molecules," says Frank Walsh, senior vice-president and head of discovery. "We do biopharmaceuticals, and in another division, vaccines." Wyeth still makes consumer products and has a veterinary unit, Fort Dodge Animal Health. But the pharmaceutical division accounts for 75 percent of sales.

The ninth largest pharma with $12.6 billion in 2003 pharmaceutical sales, Wyeth is often rumored to be shopping or targeted for acquisition. But, Poussot says, "size is not really an obsession for us."


Adding by Subtracting
Wyeth is expert at neuroscience, vaccines, cardiovascular and metabolic disease, inflammation, oncology, and women's health. It has five blockbusters in the market: antidepressant Effexor XR (venlafaxine), Enbrel (etanercept) for rheumatoid arthritis, Protonix (pantroprazole) for heartburn, pediatric pneumonia vaccine Prevnar, and hormone replacement therapy Premarin (conjugated estrogens).

Sales aside, Mahady says, "I would match our in-market portfolio against any in the industry for therapeutic value. There are much larger companies with 'mega-blockbuster' products. But remember, many hemophilia patients died from infected blood products. Now we use a bioengineered product [ReFacto] to offer them assurance. We've changed the way people treat rheumatoid, psoriatic, and juvenile arthritis, and now psoriasis with Enbrel. We introduced the first antibody-targeted oncology agent [Mylotarg]. Prevnar has, in treated populations, virtually eliminated invasive pneumococcal disease. Effexor is an incredibly helpful antidepressant. And on and on, with good products, large and small."

Piping Up At its June R&D update for analysts, Wyeth predictably trumpeted one of the strongest pipelines in the industry, with 68 projects, including seven potential blockbusters in late-stage development. (See "Promises, Promises.") But Robert Hazlett III, an analyst with SunTrust Robinson Humphrey, gives a less-glowing review, calling its pipeline "modest for a company of its size, but improving."

Hazlett expects Tygacil (tigecycline), an antibiotic for acute, complicated, or resistant infections headed for submission to FDA this year, to have "reasonable utilization." Bazedoxifene, a selective estrogen receptor modulator being tested for the treatment and prevention of postmenopausal osteoporosis, with the promise of reduced side effects, shows potential but would be the third such product to market. He feels bifeprunox, a partial dopamine agonist for the treatment of schizophrenia, the product of an alliance with Solvay, has blockbuster potential. But, says Hazlett, claims it has a better metabolic profile than other medicines which raise the risk of diabetes must be borne out. He anticipates Wyeth's follow-on to Effexor XR, now in late testing for panic disorder, will be "a major focus." He's pleased that Wyeth's collaboration with Elan on immunotherapeutic treatments for Alzheimer's disease, which earned three patents this summer and has two compounds in early stage testing, is "percolating." The best news about Wyeth's prospects, though: "not a lot of near-term patent expirations."


Making It New
Wyeth faces competition, such as Enbrel versus Abbott's Humira (adalimumab), Schering-Plough's Remicade (infliximab), and Genentech/Biogen Idec's Rituxan (rituximab), still in Phase II. Effexor is expected to lose market share to Lilly's Cymbalta (duloxetine) yet to launch.

Then there's the hubbub over hormone therapy which began after a federally funded study was halted in 2002 as the dangers of estrogen and estrogen-progestin products like Wyeth's Prempro (conjugated estrogens/medroxyprogesterone), appeared to outweigh the benefits. Subsequent research has mitigated some concerns, and the rate at which hormone therapy use had been declining has now slowed. A study of Premarin was terminated early this summer because results were clear: Long term, it lowers the risk of hip fracture and raises the risk of stroke and possibly Alzheimer's, but, unlike Prempro, it has no affect on the risk of heart disease or breast cancer. But the damage was done. Sales of Prempro plunged 74 percent in 12 months. And, at last count, 400 Prempro-related lawsuits had been filed on behalf of 850 women, says Wyeth assistant general counsel William Ruane. Anthony Butler, a Lehman Brothers analyst, is neutral on Wyeth's stock, although he calls it "an extraordinary value—the cheapest in the industry, trading at 12 times 2005 earnings—for fundamental reasons: After the collapse of the hormone market, their gross margins imploded."

Essner vows to "go where our scientists take us." Wyeth's researchers, he insists, are "our real strategic planners." Yet it was management that decided to limit the percentage of lifecycle products that optimize the value of existing brands in its portfolio to less than 25 percent (see "Making It New"); produce no me-too drugs; and look for opportunities in markets with high unmet needs, not necessarily mass markets. Robert Ruffolo, Jr., president of Wyeth Research, explains, "It's not that we don't look for blockbusters. We're trying to redefine what they are by focusing on value. He calls Enbrel, which has sales over $2 billion and just 100,000 patients, a great example.


Promises, Promises
Discovering the New Way Blocks of Lucite-encased currency sit on a table in Ruffolo's office, proof of wagers won. His biggest bet, though, is reengineering Wyeth Research. Folks there will tell you Ruffolo is fond of the phrase, "If it ain't broke, break it." At Wyeth, he was encouraged to break tradition, foster a new culture, and create team-based structures. The result is known to the division's 6,000 employees as "the new way of working."

With all the uncertainties of R&D, "We decided to focus on what we could deal with, the optimum utilization of our own resources." But, he says, "if we were going to improve performance, it wasn't going to be with more dollars and people. In fact, we have 300 fewer people than when we started," and although budgets have increased, they've not kept pace with R&D costs across the industry.

Ruffolo called in Accenture to assist. Within months, together they:

  • Wrote an "R&D Vision and Values" statement to clarify the cultural shift they intended. "We also needed to align behind something," Ruffolo says. "We could have 6,000 Nobel laureates, but unless they're aligned, we aren't going to accomplish anything."
  • Set attainable "stretch" objectives called the "R&D Productivity Model." David Boath, a partner in Accenture's health and life sciences practice, says, "We determined Wyeth could improve drug development by a factor of 3-to-4." That meant a final goal of two launches per year, which entails, Ruffolo says, "discovering 12 drugs, eight investigational new drugs (INDs), and three to four Phase III compounds a year."
  • Created scorecards to measure performance against three objectives negotiated with each employee yearly. "We take quarterly looks to see if we're on track, before it's too late to fix it."
  • Put "scientists' skin in the game," Ruffolo says, linking compensation to performance, using scorecards to determine merit raises and bonuses, up or down.

The first year the company focused on discovery. "We tore it all apart with several breakthrough projects," Ruffolo says, cross-functional teams mandated to make changes to achieve radical goals. Among other things, they revised governance structures and standardized procedures, including "a stage-gate process," Boath says, "to make sure a drug met certain criteria before it moved on. Companies usually have scientific criteria. At Wyeth, we set up commercial and ease-of-manufacturing hurdles as well." They created the development council, Wyeth's main scientific decision-making body, composed of dozens of senior managers from a wide range of departments to determine which INDs to develop.

"Almost overnight," Ruffolo says, discovery's productivity increased fourfold, from an average of three compounds entering development per year to 12, a level since sustained. (See "Compound Interest.") "I remember when they exceeded their target," Ruffolo says, "after telling me there was no way they could do it."

How did they do it? Walsh, a Scotsman, suggests it's a by-product of frugality: "Some of our competitors look at every target, screen against them, then choose. That's very much a rich man's sport. We tend to be more pragmatic and identify important biological pathways and saturate our efforts associated with individual ones rather than across the whole pitch."

Another possibility is the power of elementary managerial precepts: direction, accountability, teamwork. "Scientists love anarchy," says Walsh. "They also love to be left in peace. But sometimes you have to say, 'Guys, that's the finishing line. Let's go.' [In the past,] we've had groups talk to each other, but by having a better understanding of the possibilities, by sharing targets and approaches, productivity has increased dramatically."

A third explanation hangs on the distinction between efficiency and effectiveness drawn by management guru Peter Drucker. Efficiency, exemplified in manual labor, stresses "doing things right," Drucker says. Effectiveness, the hallmark of mental labor, puts a premium on "getting the right thing done." Of course, once you've determined the right thing to do, you can try to do it right. But doing the reverse can "optimize" pointless activity—getting nowhere faster. It may be that "the new way of working" properly treats pharma R&D, a scientific enterprise with industrial roots, as knowledge work, elevating effectiveness over efficiency. As Jurgen Drews, former head of R&D at Hoffman–La Roche, points out, in discovery as elsewhere, "inappropriate questions lead to meaningless answers."

Wyeth could have sacrificed quality for quantity but didn't. In fact, Ruffolo says, "quality went up so much that our success rate at getting a drug from Phase Zero (preclinical) to Phase I is much higher than the industry norm." This is in part due to a "push–pull" dynamic that arose unexpectedly between discovery and early development. Their relationship is more often push–push, with discovery throwing compounds over the wall and preclinical throwing them back. At Wyeth, the existence of clear metrics, explicit criteria for compound acceptability, and mutual accountability—preclinical couldn't meet its objectives unless discovery met its—subverted their traditional antagonism. Preclinical invested its precious resources in discovery to "pull" forth more drugs of higher quality.

By transforming discovery, Ruffolo created challenges downstream. They targeted pre- and early clinical development next. "The good news: Our pipeline is robust and deep," says executive vice-president and chief medical officer Gary Stiles, MD. "The bad news: We haven't had that for a long time. We can't quadruple our budget, so we've got to be more efficient."


Balloon Mortgage
Among other things, Stiles introduced specialization, splitting the "day-to-day mechanics of the trials into an operations group [and] letting people who like to deal with therapeutic issues do that." He's also been party to a pathbreaking outsourcing deal. (See "Adding by Subtracting.") On his watch, Phase I cycle times were slashed from 12 to 18 months to about six. Ruffolo says, "Throughput in clinical pharmacology has increased by 1,000 percent." And the number of NMEs in Phase II and Phase III is up 188 percent in the last two years, from eight to 23.

All this is more impressive when you remember, Ruffolo says, that productivity gains at each phase "have an amplifying effect through the system." They don't add up, they multiply.

While easy to recount, the implementation of "the new way of working" is uniformly described at Wyeth as gut wrenching. "One reason: R&D was an amalgamation of other companies—Wyeth, Lederle, Ayres, Genetics Institute," Ruffolo says. "We weren't functioning as one group. Second, managing scientists is hard. They don't like to be managed. They're not always secure with change, and the changes we were seeking weren't tweaks" but far reaching. "Those who didn't or couldn't align," Ruffolo says, "either left or we exited them."

Atomic Bonds Astonishingly, many companies don't try to encourage scientists to work together. An article in Research-Technology Management says, "Especially in pharmaceutical settings, the organization of scientific work is left to tradition and still relies heavily on the idea of the researcher's autonomy." Scientists may be assigned to teams, the authors say, but "they select the methods used, how they allocate time between tasks, and what schedule they abide by" because managers believe "creativity to be unmanageable." Boath agrees, "Many say they can't measure discovery—it just happens." Not surprisingly, this self-fulfilling prophecy usually comes true. "Many discovery and clinical organizations don't spend as much on people as they should," he says.

What about the things everyone else worries about—combinatorial chemistry, rational drug design, bioinformatics, genomics? Ruffolo says, "We worry about them, too, [but] we made a strategic decision not to develop new technology."

The benefits of "the new way of working" have cascaded throughout Wyeth, well beyond R&D. "We can pretty much hire anybody we want," Ruffolo says. Turnover is low and morale is high. "We don't have all the answers," he admits, "but I think we're developing a culture where we take risks. We can go back and fix a mistake, but you can't fix paralysis."

Butler credits Wyeth with "a very good job on productivity." The question, he says, is not will they produce the two drugs the averages predict but will it be the right two—the ones making the greatest contribution to revenues? All told, he believes Wyeth "is very much stronger than they were." The company's "been hit with a couple of right hooks and maybe even an uppercut," he says, "and they're still standing."

What more can Wyeth do? Breakthrough projects are planned for areas yet untouched. Ruffolo will keep breaking things that aren't broken: "Even things we've improved in the past, we're going back and making more changes to improve them further."

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