Erythropoietin is marketed by different companies under different names-Epogen, Procrit, Eprex, Espo, Epogin, Aranesp, and NeRecormon-so it has never made anyone's list of best-selling drugs. But EPO is likely to be the first molecule to reach the $10 billon dollar mark in annual sales. Pfizer's Lipitor (atorvastatin) and two biologic proteins, interferon and insulin, will be hot on its heels. What do these molecules have in common that has led to such success? This article outlines the key factors products need to reach that $10 billion dollar goal and gives an overview of the drugs on the market today with that potential. (See "$10 Billion Dollar Criteria," page 66.)	

About 15 years ago, when R&D department heads asked their marketing counterparts to predict blockbuster drugs, a treatment for Alzheimer's came out on top, with some forecasts exceeding $5 billion. Several high-profile research projects of that period-such as inhibitors for aldose reductase, ACAT, 5 Lipoxygenase, renin, and metalloproteinase-failed in clinical trials and were abandoned by the R&D establishment. During that same time, many companies whose new drug applications FDA considered to be the gold standard had disappointments such as Phase III trial failure, NDA delays, withdrawals, recalls, regulatory rejection, or a requirement to generate additional data. Several Big Pharma companies with promising treatments for fungal and bacterial infections, psoriasis, tuberculosis, multiple sclerosis, respiratory syncytial virus, and atopic dermatitis evaluated those projects as having limited market size and consequently terminated them. In fact, Big Pharma seems to be getting out of infectious diseases research altogether. 	

Hypertension drugs Capoten (captopril/SmithKline) and Vasotech (enalapril/ Merck) and anti-ulcer products Tagamet (cimetidine/SmithKline) and Zantac (ranitidine/Glaxo) are examples of therapies in which the inventor company that created the market lost out to follow-up compounds with huge marketing budgets and global reach.	

A review of R&D portfolios of top research companies-Pfizer, GlaxoSmithKline, Roche, Merck, AstraZeneca, Aventis, Lilly, Novartis, J&J, Bristol Myers Squibb, Wyeth, Schering-Plough, and Bayer-which each spend more than a billion dollars annually, and data from the Pharmaceutical Research and Manufacturers of America, provides an overview of research trends. (See "By the Numbers.") In PhRMA's annual survey of new drugs in development, once again cancer, biotechnology products, and infectious diseases topped the list by the number of projects, number of companies involved, and the amount of funds and resources allocated.				

Despite that wishful thinking, Lehman Brothers' 2003 report says fewer than 20 products with billion-dollar potential will reach the market in the next five years, and none of those new drugs is expected to make as much money as the current top sellers.		

Which therapies will be the new blockbusters? To achieve that status, drugs must fulfill an unmet medical need for chronic disease, restore normal organ function, reverse the aging process, have a much better safety or efficacy profile than an existing treatment-and have an accelerated approval process, preferably with  a fast-track designation. (See "Blockbuster Drivers," page 64.) 			

In the past, more than 70 percent of fast track and priority review drugs were for cancer and AIDS therapies. Treatments for Alzheimer's, diabetes, arthritis, and heart diseases sometimes get priority review, but the criteria are difficult to define because the medical community has clinical consensus. FDA's 	

criteria for an anticancer to obtain fast track is to show a 20 percent response rate as a single agent and a 40 percent response as a combination therapy in treating cancers that have not responded to other drugs. For a list of conditions that may receive FDA and European fast track and priority review, see "On the Fast Track," page 68.		

A review of top pharma and biotech companies' 2002 annual reports reveals that only ten products had sales exceeding $3 billion a year. Of those, seven are new chemical entities (NCEs) and three are new recombinant proteins. (See "Best-Selling Drugs," page 62 and "Best-Selling Biologics," page 64.) It is important to note that IMS World Review sales figures are widely used and quoted in the industry, but there are some discrepancies between companies' annual reports and IMS data. In the case of Prilosec (omeprazole), Zocor (simvastatin), Zyprexa (olanzapine), and Lipitor (atorvastatin), IMS data varied in both directions from the company's sales figure by 16.13 percent, 9 percent, 8.4 percent, and 7.87 percent, respectively. (Prilosec had a billion dollar difference, but IMS did not respond to an inquiry to explain why.) 								

Claritin, which had sales exceeding $3 billion in 2000 and 2001, only hit $1.8 billion in 2002 because its US patent expired, so it is not included. Also, few Japanese companies give sales figures for their top-selling products in their annual reports. Takeda and Chugai are two that do; Kirin and Sankyo do not. The figures for total erythropoietin sales were provided by the Japan External Trade Organization and are available online (www.jetro.org).  They can also be extrapolated from Amgen and Roche's annual reports. 		

Only five drugs have recently crossed the $5 billion annual sales mark. Four of them achieved that milestone in 2000: AstraZeneca's Prilosec, Merck's Zocor, Pfizer's Lipitor, and erythropoietin. The fifth, interferon, reached that mark in 2002. Wyeth's Effexor (venlafaxine) may cross the $5 billion mark before patent expiry. Other products with that potential are listed in "The $5 Billion Mark," page 66.	

Currently, Lipitor is the number-one prescribed medicine for lowering cholesterol and the world's largest-selling drug, with 2002 global sales of $7.97 billion (an increase of 24 percent from 2001). That success may stem from Pfizer's investment in more than 400 clinical trials involving 80,000 patients. One trial, involving nearly 20,000 patients with high blood pressure, showed that the drug reduced fatal and nonfatal heart attacks and strokes. 				

In 2001, Lipitor overtook Zocor in marketing on the basis of those landmark trials plus approvals for new indications. The success of Lipitor, in spite of its late entry into a saturated market, is a result of its superior efficacy and safety profile demonstrated in head-to-head trials. Lipitor has been used by 28 million patients, and its daily sales amount to $21.84 million. Because approval for AstraZeneca's Crestor (rosuvastatin) was delayed nearly a year, Lipitor may see continued double digit growth and will likely reach the $10 billion dollar mark. 	

Another molecule that could get there first is erythropoietin, which has daily sales of $23.61 million. Amgen originally developed the product, and the company overcame difficult and prolonged patent challenges from the Genetics Institute, Upjohn, Chugai, Transkaryotic Therapies, Baxter, and Aventis. Amgen's licensing deal with Johnson and Johnson-in which J&J markets the product as Procrit in Europe to all patients and to cancer patients in the United States-has been in litigation for several years, with Amgen often winning in the courts. By adding a sialic acid residue to erythropoietin, Amgen was able to patent and launch a new form of EPO called Aranesp in the three major markets: United States, Europe, and Japan. The new drug has a longer half life and a better safety profile and requires dosing only once a week or 2–4 times a month. Amgen has retained all the rights but has licensed Aranesp to Kirin in Japan and China and to Roche in Europe. By the first quarter of this year, Amgen had converted 25 percent of J&J's European Procrit patients to Aranesp. With a lack of clear guidelines for generic biologics, Amgen may not face generic threats even after its primary patent expiry.  	

Erythropoietin was the first molecule to cross $8 billion in annual sales and, with a current forecast of more than 20 percent growth, it will top the $10 billion landmark this year. It is the best selling therapeutic protein, accounts for 20 percent of worldwide sales of therapeutic proteins, and in Japan has a 30 percent share of all biotech products sold. 				

Interferons-marketed as Intron (Schering-Plough), Betaferon (Chiron), Rebif (Biogen), and Avonex (Serono)-crossed the $5 billion annual sales threshold in 2002, mainly as a treatment for multiple sclerosis. Because of patent protection and the absence of a dominant player, competition will keep the market expanding, but total sales may not increase rapidly. Approval for hepatitis C and other new indications should also help expand the market. 	

The $5 Billion Mark and The $10 Billion Mark	

If yearly interferon sales reach $8 billion by 2005 and no consensus is reached about bioequivalence for generic biologicals, then interferon may also hit the $10 billion mark. 	

Wth its current double digit sales growth, Lipitor will cross the $9 billion annual sales mark this year and should reach $10 billion next year. And it may become the first product to hit $15 billion in yearly sales in the next five years. (See "The $10 Billion Mark, page 66.") Expanding diabetic patient base combined with new delivery forms for human insulin such as slow release, oral, and inhalation by the two major insulin producers, Lilly and Novo Nordisk, will likely push sales until they reach the ten billion mark.	

Because gastric ulcers are symptomatic and lead patients to take action, the growth of the anti-ulcer market is greater than therapeutic areas such hypertension, dyslipidimea (high cholesterol) and central nervous system disorders. Therefore, Takeda/TAP's lansoprazole, marketed as Prevacid/Takepron, is the only other product that may reach $10 billion in annual sales in the next six years. 		

Thus, in the next five years, the industry may have two products with $15 billion in annual sales and another three products with more than $10 billion in annual sales, followed by five to ten products with $5+ billion annual sales. These mega drugs may contribute as much as $85–$110 billion out of a total pharmaceutical market of $550–$600 billion. They may also account for the lion's share of the profits of the companies involved and have a substantial influence on pharma marketing trends. 	

Articles

Features

Erythropoietin is marketed by different companies under different names-Epogen, Procrit, Eprex, Espo, Epogin, Aranesp, and NeRecormon-so it has never made anyone's list of best-selling drugs. But EPO is likely to be the first molecule to reach the $10 billon dollar mark in annual sales. Pfizer's Lipitor (atorvastatin) and two biologic proteins, interferon and insulin, will be hot on its heels.

The Ten Billion Dollar Molecule

One of pharma's thorniest challenges is how to optimize the potential value of its R&D portfolio with limited resources. To address that, many pharma and biotech companies have begun to enhance their capabilities in the new discipline of portfolio project resource management (PPRM). Those initiatives are beginning to bear fruit, but they face several common obstacles:	

a concern that more disciplined and standardized business processes will hamper the creativeness and independence of scientific inquiry

apprehension that significant effort will be needed to reconcile process differences and information flow across the R&D enterprise

fear that enhanced PPRM capabilities will lead to drastic changes in how portfolio and resource decisions are made and who gets to make them.

The problem is exacerbated by the organizational challenges of implementing PPRM. To make the system work, companies must standardize their business practices, create highly explicit procedures, and exercise a high level of managerial discipline.Like most efforts for change, PPRM requires companies to address issues they previously ignored or devised "work arounds" for, and to eliminate the ambiguities that gave rise to those issues in the first place. 	

Although PPRM demands a significant change in mindset and although decisions made based on it ultimately affect the entire R&D enterprise, it actually changes the day-to-day jobs of relatively few people. Therefore, it is possible for companies to implement robust PPRM capabilities without negatively affecting the science or disrupting the organization. 	

This article explores some of the major issues that pharma and biotech companies may encounter in implementing PPRM and suggests how management can make it succeed. 	

Most pharma R&D organizations operate within the confines of a fixed annual budget-largely determined by the number of people they employ-but they lack the ability to forecast the quantity of resources required to develop compounds in an optimal manner. Unwilling to regularly prune their portfolios, other than through natural attrition, they often wind up fragmenting their resources across a large number of projects. 	

Moreover, in the absence of companywide decisions to set priorities, department and functional heads make de facto  portfolio prioritization decisions by allocating staff to projects. That approach has two significant drawbacks: it allows inconsistent resource allocation decisions and diminishes senior management's stewardship of the R&D portfolio. 	

PPRM enables companies to maximize the value of their pipeline portfolios within budgetary and resource constraints. But to do that, they must make consistent go/no-go, resource allocation, and project-timeline decisions based on the best available information about the risks, costs, and commercial potential of the compounds in the pipeline. 	

All that is not easy. Companies must have a core set of capabilities, including	

up-to-date, standardized plans for all active projects

estimates of the human and key non-human resources required to complete each project

availability of human and key non-human resources

priority rankings of all active projects, from highest to lowest

"probability of success" estimates at key decision points and for each project as a whole.

Standardized project plans. These are the backbone of pipeline management. They establish interdependencies between R&D activities and functions and provide the basis for estimating resource requirements. To create them, the company must agree on standard project templates that include major activities, milestones, decision points, and interdependencies for the full project lifecycle, from early discovery to product launch. 	

When developing templates, R&D managers must decide on the level of detail to include in these plans to meet the needs of the various constituencies. They also need to decide whether to use single- or multi-level plans, keeping in mind that, once developed, the plans must be updated regularly to reflect the latest project status and the team's latest thinking. Developing project templates and maintaining project plans require significant effort and extensive collaboration between the different functions.		

Ability to estimate the resources needed to complete all projects. Companies can use standardized algorithms to estimate resource demand by resource type based on the project assumptions and deliverables-such as the development of a trials protocol or completion of a study report-defined in the project plans. The departments that will do the work need to be intimately involved in developing these resource algorithms. They also need to review, and when necessary adjust, the resource estimates that the algorithms generate for each project to correct for subtle variations between projects that the formulas may not take into account. 	

Thus, both the PPRM process and the system should allow for manual override of the algorithmic resource estimates but retain both sets of data for comparative purposes. The resource estimation formulas, which initially will be based on judgment more than empirical data, should be refined, over time, based on analyses of actual resource consumption. As that happens, the magnitude of the manual resource adjustments should decline.		

 Where are the bottlenecks? and The great data roundup.	

Ability to rank projects in order of priority. To prioritize projects, companies must consider complex scientific and commercial variables, including scientific rationale, compound characteristics, manufacturing complexity, R&D complexity, and sales potential. To be able to rank projects in different therapeutic categories (TCs) and in different stages of development in a consistent manner, pharma companies need standard evaluation criteria, rating scales, and processes to regularly evaluate programs at all milestones and decision points. (See "Go/No-Go Decisions," page 72.) Questions that companies should ask in the course of those assessments include: 	

How well do we understand what happens at the drug target site and why does it result in a specific medical condition? 

How strongly is the target correlated with the disease? 

Have similar compounds made it into human trials? 

How many people suffer from the disease? 

Will this product be better than existing or emerging therapies and, if so, how and by how much? 

How complex is the manufacturing process? 

Are the raw materials readily available at reasonable prices?

The answers to those and similar questions will provide consistent data that enable managers to evaluate and prioritize all projects. 	

To evaluate an R&D program requires a high degree of judgment; as a result, program assessment cannot be mechanistic. Rather, it must be the result of a dialogue among project teams, functional leaders, and senior R&D managers. Yet, the use of a consistent rating methodology, data collection process, and analysis across all programs will greatly improve the quality of the discussion and the ensuing decisions. 	

R&D organizations have traditionally found it difficult to take resources away from low-priority projects that hold some scientific promise. In fact, it is not uncommon for them to allocate some resources for every feasible project rather than to concentrate resources on the highest priority ones, thus dooming all projects to move at a suboptimal pace. To improve the management of the R&D pipeline, managers need to make difficult decisions that will maximize the value of their portfolios. That will also enable them to define how risky the portfolio is and ensure that it is aligned with the company's financial strategy. (See "How Risky is Your Portfolio?")  	

By aggregating the resource estimates for all projects, adjusted according to their probability of success, companies can quantify total expected resource demand by time frame and resource type. Comparing needed resources with the company's actual resources will reveal the "static" demand–supply balance and identify current and expected resource bottlenecks. (See "Where are the Bottlenecks?") Based on that insight, the portfolio group will be able-manually or with optimization software-to sequence project activities so as to minimize bottlenecks and optimize aggregate pipeline output. (See "The Great Data Roundup.") 	

Although maximizing pipeline output is a good thing, it is not the same as maximizing the portfolio's expected value. Doing that requires sophisticated portfolio simulation capabilities based on well defined relationships between the level of project resources and time to market, as well as between the timing of product launch-relative to competing products-and lifecycle product revenues, in addition to knowledge of the resource constraints across the company's entire R&D value chain. 	

Integration. It is critical that PPRM be tightly integrated with stage-gates-predetermined hurdles that projects must meet before being allowed to continue-that pharma companies use to control projects. Stage-gate keepers need the PPRM information and analytical capabilities to make informed decisions. They need to clearly understand the resource supply–demand implications of their decisions and have ready access to project attributes and project priority rankings.	

Some R&D organizations that implemented PPRM have concluded that they needed to redesign their stage-	

gate processes to align them with the PPRM-based management approach. Companies that have failed to symbiotically link stage-gate reviews, resource management, and portfolio management have frustrated project teams and executives alike by duplicating the information collection, review, and decision making processes. 	

Some sophisticated companies have combined those processes by using "workflow" software for stage-gate submissions and a single database to support the stage-gate process, resource management, portfolio management, and other related capabilities. Stage-gate governance bodies are an important component of PPRM-based R&D management and need to be included in the design and implementation activities from the outset. 	

To bridge the gap between their current and desired PPRM capabilities, pharma companies need to carefully define their multi-year, multi-stage deployment plans. Those plans will be based on each company's specific needs, capabilities, and ability to absorb change. First, the company must decide on the scope of the effort, taking into consideration the company's purpose in using PPRM, its organizational reach, and the specific needs of the different functions. 				

Users. Next, the company needs to clarify who will use the PPRM system. Is it employing PPRM to give senior management a strategic view of resources and the portfolio, to make it part of the project teams' everyday management activities, or both? Those alternatives imply vastly different PPRM capabilities as well as a need for different levels of effort and complexity. They also raise different organizational issues.	

Organizations. There are important differences in the business process characteristics of the main areas of R&D: discovery, pre-clinical, pharmacology, full development, and pilot plant. Those differences manifest themselves in the number and size of projects, scheduling predictability, complexity defined as the number of interdependencies and diversity of skills required, and project duration, to name a few. 	

Such differences in business characteristics naturally lead to differences in PPRM requirements. For instance, discovery may primarily need to monitor and manage resources that are chronically overburdened, such as high-throughput screening and computational chemistry. Pre-clinical functions may derive the greatest benefits from the ability to assign specific resources, such as labs and animals, to specific studies. Development may need the ability to identify functional areas in which resource constraints are most likely to occur. 	

As companies plan their PPRM strategy, they need to take those differences into account, while ensuring that a core set of capabilities is available across the entire R&D enterprise. At the same time, R&D organizations must take care not to create unnecessary complexity by extending PPRM capabilities to units and functions that don't need them. For example, it may be essential for the toxicology group to assign specific resources to individual studies, but using that capability to manage a small medical writing group could create unnecessary complexity.  	

One of pharma's thorniest challenges is how to optimize the potential value of its R&D portfolio with limited resources. To address that, many pharma and biotech companies have begun to enhance their capabilities in the new discipline of portfolio project resource management (PPRM).

Pharmaceutical Executive-11-01-2003

The Ten Billion Dollar Molecule

Table of Contents

The Path to Smart R&D