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Pharmaceutical Executive Digital Edition - December 2011

The pharmaceutical industry began a conversion from sophistic snake-oil salesmanship—or saleswomanship in the case of Lydia Pinkham and her well known "vegetable compound," or "women's tonic"—to marketing science-backed medicines in the mid-20th century. At the same time, a group of artists, graphic designers, and typographers, and people like Herb Lubalin, who was all three, emerged to create the first drug advertisements. Early innovators such as Paul Rand, Jerome Snyder, Lester Beall, and others brought ideas from the European avant-garde to bear on drug ads, often to spectacular result. An art exhibit called "Pharma," put on last month by the Herb Lubalin Study Center at Cooper Union in New York City, brought together a fascinating collection of print ads, promotional mailers, and other miscellany documenting the adolescence of pharmaceutical advertising.  

Ad designed by Herb Lubalin, Photo by Carl Fischer, Sudler & Hennessey Agency, 1954. (Photos courtesy of Herb Lubalin Study Center at The Cooper Union; Background: Getty Images / Nic Taylor) 

Paul Rand, who later became best known for his logo designs—IBM, ABC, UPS, among them—was 29 years old when he designed a vibrant ad for Smith Klein & French's Benzedrine Inhaler, a product immortalized by Jack Kerouac in his novel "On the Road" (he called them 'benny tubes,' and cracked them open to swallow the Benzedrine-soaked strip inside, for a cheap high). Herb Lubalin, at 27 years old, joined Sudler & Hennessey as an art director in 1945, and his work quickly drew attention. "He had a certain wit that he imparted to the work, and was great with making words come alive," Alexander Tochilovsky, the exhibit's curator, tells 

 Lubalin "changed the way topography was treated; he was truly one of the first designers to 'play with type,'" continues Tochilovsky.  

Mailer designed for Smith Klein & French by Paul Rand, 1943. 

Illustrator and graphic designer Jerome Snyder, born in New York City like Lubalin (Rand was born in Brooklyn), was the first art director at 

 He also created strikingly creative pharma ads, for example the Paul Klee-inspired promo mailer for Ciba, from the 1950s. "Most designers were trained as artists and were practicing artists, so they invariably found ways to inject their interest in the art into their work," Tochilovsky says, describing the early days of pharma marketing. The best creative work then and today happens when individuals push the envelope, and bring their own ideas to the medium.  

Promotional Mailer for Ciba, Illustrated by Jerome Snyder, 1950s. 

Column

Some of the most creative and influential graphic designers and illustrators did time in pharma marketing.

Artists & Ad Men

Just days before this article went to press, FDA approved the first of a new kind of oral enzyme treatment that mediates cellular response, Incyte/Novartis' Jakafi, for a rare bone marrow disease called myelofibrosis. The next JAK inhibitor, Pfizer's toficitinib, could hit the market late next year, meaning a lot of rheumatoid arthritis patients will never again have to sit in a hospital for a couple of hours to get an anti-TNF infusion. Many innovative drugs, long out of the gate, are closing in on the finish line; science is back, and a better understanding of the way genomics shapes disease is bringing about better outcomes, and sometimes faster approvals. Industry is not off the hook, though, and no one should anticipate a golden era of easy profits. Jobs were lost last year, and R&D facilities shuttered, but consolidation has in some ways reenergized and fortified the industry; organizations have gone back to doing what they do best, or have committed to a new R&D or discovery model, or a new therapeutic class. "I think the financial crisis of the last several years has clarified and concentrated quality in the industry," says Raghuram Selvaraju, senior vice president and senior biotech analyst, Morgan Joseph TriArtisan. "People are focused on doable projects in drug development." 

There are a handful of drugs destined to reach blockbuster status in 

 2012 Pipeline Report, but plenty of other half-billion-dollar drugs that, when strung together, make for a convincing portfolio. Hepatitis C is a hotbed of activity, with Gilead swallowing up Pharmasset and its PSI-7977 candidate, a drug that sidesteps interferon and its side effects. In cancer, companion diagnostics have moved to the foreground, and with them a dramatic change in patient outcomes. Clovis Oncology's CO-101, a first-line treatment for pancreatic cancer, is backed by a Roche-made companion diagnostic. Medivation and Astellas' MDV-3100, a Phase III oral drug for prostate cancer, is likely to be approved at the end of next year, according to Adis R&D Insight, and it could take on breast cancer next.

For very high triglycerides, Amarin's AMR 101, an ultraconcentrated omega-3 fatty acid, is expected to gain approval next July, with huge sales to follow. Several novel antibiotics will go to war with the superbugs, while others will tame pneumonia, the seventh-leading cause of death in the US. In diabetes, longer- and faster-acting agents will make adherence easier on patients while bringing in blockbuster sales. Biogen Idec's BG-12, a Gilenya without the side effects, has the makings of a blockbuster too; it's expected to launch sometime in 2012. Biomarin, an organization committed to rare, orphan diseases, continues to dig out patients around the world for clinical trials on enzyme replacement therapies, drugs that regularly save lives.     

Industry knows that it will have to prove a drug's value to get paid—more head-to-head clinical trials are happening all the time—and in the end, that's good for everyone. The organizations that are succeeding are the ones that are in research for the long run—and are acting like it.

Hepatitis C is the 'It' category of the moment, with a bevy of fast-track, disease-curing, oral treatments in the pipeline, plus a wave of M&A action to underscore the science. Despite Incivek's performance out of the gate—the Vertex/J&J protease inhibitor could reach blockbuster status in nine months, faster than any other drug—there is reason to believe that a new crop of hep C drugs could put a cap on Incivek's sales, making it a three- or four-year trick pony. (Same goes for Merck's Victrelis, a second-to-market protease inhibitor.) Other, presumably better protease inhibitors, among them Medivir/J&J's simeprevir, which Thomson Reuters expects to hit $1.3 billion by 2016, may be bested by the same new drugs that undo Incivek.  

The most promising of the new oral drugs, according to several analysts and evidently Gilead Sciences, is Pharmasset's PSI-7977, a nucleoside analog polymerase (NUC) inhibitor. Gilead announced that it would pay $10.8 billion—an 89 percent premium—to acquire Pharmasset, just days after the latter company raised eyebrows at the American Association for the Study of Liver Diseases meeting in November, with the announcement of a 100 percent cure rate in an early, 40-patient trial designed to test efficacy without interferon. "That's never been seen before," says Selvaraju. "By comparison, Incivek only showed clinical cure rates of around 60 percent to 70 percent, in combination with interferon and ribavirin." Sidestepping interferon, an injectable with flu-like side effects and injection-site reactions that lead to less-than-perfect compliance would be a marked improvement in a therapeutic area estimated to reach $16 billion by 2015, according to Decision Resources. The World Health Organization says upwards of 170 million people carry the virus globally, and 350,000 die from related illnesses each year. Pharmasset had a well-established collaboration with Roche, which may complicate things for Gilead, but "no other development-stage company has multiple shots on goal the way Pharmasset does," says Selvaraju.     

Another NUC, Inhibitex's INX-189, saw its stocks double after the release of early-stage results, but Pharmasset's PSI-7977 remains the NUC of choice for now. Achillion Pharmaceuticals and Idenix both have oral, once-a-day hep C drugs in development, but they'll need stellar mid-stage data to leapfrog Pharmasset in the race to market.  

Pharmasset's data in Phase III will be crucial, too, given the number of contenders on its flank. Roche acquired the most advanced member of a third type of hep C treatments, non-nucleoside polymerase inhibitors (non-NUC), in its acquisition of Anadys Pharmaceuticals, and setrobuvir. FDA fast-tracked setrobuvir in 2008, as well as mericitabine in 2007, another small molecule, oral polymerase inhibitor licensed by Roche and discovered by Pharmasset. Roche believes in the non-NUCs, but analysts—for now—are waiting for the NUCs to hit. "It's a race, there's no question about it," says Ben Weintraub, director of research, inThought. Any oral treatment will need a cure rate above 80 percent, or no one will use it, since Incivek and Victrelis are already on the market. "In the best of all possible worlds, we're going to run out of hepatitis C patients," says Weintraub, "so many companies are going after this market" —including Big Pharmas such as Abbott, Bristol-Myers Squibb and GlaxoSmithKline, in addition to Merck and Johnson & Johnson—that patients "are essentially taken care of ... but I'm not sure about the commercial implications."  

Howard Liang, equity research managing director, biotechnology, at Leerink Swann, is more upbeat. "We see hepatitis C as a rare opportunity for the biopharma industry with millions of potential patients, cancer drug-like pricing, and dramatic ongoing improvement in therapy." Either way, ears perk up when the word "cure" surfaces at medical meetings, and despite who makes it across the finish line first with a once-daily, interferon-free oral drug, it seems likely that hepatitis C could go the way of polio in a relatively short time period. 

Wolters Kluwer's Adis Insight database, and Thomson Reuters Life Sciences Consulting database were both relied upon as research tools for this article 

Cancer: Treating Patients Instead of Disease

Highly targeted therapies have made a comeback in cancer, with the approvals of Pfizer's Xalkori (crizotinib) and Roche/Daiichi-Sankyo's Zelboraf (vemurafenib) this year—both of which employ companion diagnostics, which dramatically improve patient outcomes. "In an era where more and more cancer drugs are failing because they don't demonstrate efficacy in the overall population, these 'magic bullets'—drugs that target specific genetic profiles—are going to revolutionize the market, at least for their niche target populations," says Kiran Meekings,a consultant at Thomson Reuters Life Sciences Consulting "We need to stop thinking about cancer as one, or several, diseases and instead we need to think about it as a set of distinct independent populations, each of which need a targeted set of treatments."  

In pancreatic cancer, Clovis Oncology, a startup biopharma in Boulder, Colo., has fingers crossed over its CO-101 compound, a first-line treatment for metastatic pancreatic cancer. Clovis raised $130 million in its November IPO, and Roche is developing a companion diagnostic for CO-101 through its Ventana Medical Systems. This biomarker-driven clinical strategy could help Clovis succeed where others fail, given that C0-101 is a lipid-conjugated derivative of Gemzar (gemcitabine), Lilly's long-time treatment for the disease. Gemzar's efficacy as a single agent is moderate at best, however, with a median overall survival of just under six months; the drug is often coupled with other chemotherapy agents. Clovis estimates that "two-thirds of pancreatic cancer patients have limited cellular uptake of [Gemzar], due to deficient expression of hENT1—the transporter protein thought to facilitate cellular entry for Gemzar." CO-101's companion diagnostic would identify patients with low levels of hENT1 expression, which have been shown to correlate with poor Gemzar outcomes. 

The multifactorial abnormalities in cancer—which means multiple targets—continues to present a problem, but several cancer drugs coming down the pipeline could do more than add a few months of progression-free survival. In hematology, Phase II data on Celgene's pomalidomide, an oral treatment for Revlimid and Velcade refractory patients with multiple myeloma, will be hyped during the American Society of Hematology meeting early this month. Onyx's carfilzomib, also for multiple myeloma, is the "most exciting thing to happen in multiple myeloma in maybe a decade," according to Selvaraju. Carfilzomib was fast-tracked by FDA in January for patients with relapsed or refractory multiple myeloma, and Onyx launched an expanded access program with the Multiple Myeloma Research Foundation in August, making the drug available to eligible patients across 40 medical centers in the US.  

Medivation/Astellas' MDV-3100, discovered at UCLA, is an oral therapy being tested for prostate cancer; the drug received fast-track designation in November, after the company's AFFIRM trial data showed an almost five-month increase in median overall survival. If approved, MDV-3100 would compete with J&J's Zytiga, which has made inroads against Dendreon's Provenge vaccine; Provenge was expected to hit blockbuster sales figures, but hasn't performed as well as expected. However, CMS issued a National Coverage Decision last July, requiring Medicare contractors to cover the use of Provenge for treatment of asymptomatic or minimally symptomatic hormone refractory prostate cancer, which could standardize coverage and lift sales by the end of this year.    

We're still a few years away from knowing whether a new class of cholesterol drugs—CETP inhibitors—will actually reduce atherosclerosis, and resulting cardiovascular events, but analysts have not been shy about predicting blockbuster sales for Merck's anacetrapib and Roche's dalcetrapib. Despite Pfizer's failure with a first-in-class CETP inhibitor—torcetrapib—in 2006, Lilly is pursuing a fourth, evacetrapib, which produced comparable increases in HDL, and decreases in LDL based on a small, short-term Phase II study announced at an American Heart Association event in November. Fatalities related to hormone-induced hypertension that occurred during Pfizer's torcetrapib trials have so far been an isolated affair among CETP inhibitors. Evacetrapib is being tested as a stand-alone, as well as in combination with a variety of statins, and so far looks to be as efficacious as Merck and Roche's compounds, at a smaller dose.  

Meanwhile, AMR-101, the lead candidate from Irish-based biopharma Amarin, got filed with the FDA in late November, with a PDUFA date scheduled for July. AMR-101 is a prescription-grade omega-3 fatty acid (aka ultraconcentrated fish oil) indicated for very high triglycerides, with Phase III data showing a statistically significant reduction in triglyceride levels, without significantly increasing LDL. A second Phase III trial tested the drug in combination with a statin, in patients with two or more lipid disorders, and met its primary endpoint based on the percentage change in triglyceride level from baseline compared with placebo. An outcomes trial on "reducing the first major cardiovascular events in an at-risk patient population," which hopes to test 8,000 patients for six years, is expected to commence enrollment by the end of 2011. Meekings says AMR-101 differs from GSK's Lovaza, another fish oil concentrate, by offering a better dosing benefit, and because Lovaza tastes a little fishy. More importantly, "[Amarin] is looking at the treatment of patients who are currently on statin therapy, a massive market ... if AMR-101 captures a small proportion of people on Lipitor, where hypertriglyceridemia is a problem, then sales potential is tremendous," says Meekings. Indeed, Thomson Reuters is bullish on ARM101, with predicted sales hitting $2.3 billion by 2016. "It's a one-of-a-kind drug with a very high margin potential, and a totally innocuous side effect profile," adds Selvaraju. "People have been taking omega-3 fatty acids for years."  

Aegerion Pharmaceuticals' lomitapide, an orphan drug in development for homozygous familial hypercholesterolemia (HoFH), is expected to be filed with the FDA and the EMA this month, and expected to gain FDA approval in 2012. Patients with familial hypercholesterolemia, a genetic disorder, have extremely high cholesterol in their blood, and often die of heart attacks in their 30s and 40s. While genetic screening "often only finds one in a million patients that have mutations ... in the real world, physicians define patients with familial hypercholesterolemia according to other surrogate biomarkers like cholesterol level; they use phenotypic definitions of the disease, as opposed to genotypic definitions," says Joe Schwartz, managing director, biotechnology, at Leerink Swann. "We model for 3,000 patients in the US, as opposed to 300 ... which may even be conservative, given phenotypic definitions of high cholesterol and other risk factors for cardiovascular disease in the US." Schwartz predicts eventual sales of $450 million—a mini-blockbuster—and says Aegerion is currently "beating the bushes" with registries to identify prospective patients. Registries "are one of the aspects of orphan drugs that is positive for investors, because drug launches are often seeded with patients that were identified at the outset," instead of post-launch.  

For patients, the biggest news in asthma and COPD is probably more money in the bank, as the Advair (GSK) and Singulair (Merck) juggernauts begin to lose patent protection. GlaxoSmithKline, however, has a plan: shift Advair users to a new combination called Relovair. "As Advair goes off patent, [Relovair] will allow GSK to have an aggressive switch campaign, and there's a huge market for that," says Meekings. Relovair, currently in Phase III, is comprised of the inhaled corticosteroid fluticasone furoate (aka Veramyst) and vilanterol trifenatate, a long-acting beta agonist (LABA). The selling point for the switch will most likely be Relovair's once-a-day dosing (Advair is twice-daily). Theravance contributed to the development of Relovair through a collaboration with GSK to investigate LABAs in combination asthma/COPD drugs. Novartis has a few products in the works for COPD, including the Seebri Breezhaler, which is preregistered for approval in Europe; FDA told Novartis in October that it needed more data to support the use of glycopyrrolate for COPD, which consequently postponed a planned submission by this year's end. FDA approved Novartis' Arcapta Neohaler (indacaterol inhalation powder) in July, and Eisai will co-promote Novartis' Onbrez Inhalation capsules (indacaterol maleate) as well as NVA-237 (glycopyrronium bromide) and QVA-149 (fixed-dose combo of indacaterol maleate and glycopyrronium bromide), should those get approved. "People want a better inhaler, and that's a very high bar for now," says Weintraub. If Novartis can prove glycopyrrolate is safe and effective—and better than the very good asthma and COPD drugs already on the market—it could put a little new wind in this category's sails.  

Novel Antibiotics: Kryptonite for Superbugs

The market for hospital-treated infections—including nosocomial pneumonia, skin infections, and urinary tract infections, among others—will increase from $3.3 billion in 2010 to $4 billion in 2020, according to Decision Resources. In the case of pneumonia, for which a broad armamentarium of treatments exists, the infection remains the seventh-leading cause of death in the US.  

Existing foils for the superbug include Cubist's Cubicin (daptomycin), a drug Cubist cannily licensed to Teva, in exchange for the resolution of a patent dispute; Cubicin will now resist generic challengers through June of 2017. Revenues will help support late-stage candidates like CXA-201, a Phase III drug acquired through Cubist's buyout of Calixa Therapeutics in 2009. CXA-201 is being tested for complicated urinary tract infections (cUTI), and as a first-line intravenous therapy for gram-negative bacterial infections, including multi-drug resistant pseudomonas aeruginosa. For cUTI, the company made the gutsy decision to test against levofloxacin, or generic Levaquin, as a comparator. Levaquin had blockbuster sales in 2010, but lost patent protection this year. "Cubist is banking very heavily on CXA-201," says Selvaraju. 

Another class of antibiotics getting lots of attention is the oxazolidinones, of which Pfizer's Zyvox is a member. Despite some overzealous selling techniques—Pfizer acknowledged "certain improper actions" related to Zyvox promotion as part of the company's humongous $2.3 billion settlement over off-label Bextra marketing in 2009—the drug had blockbuster sales in 2010. Trius Therapeutics, a San Diego-based biopharma, is now in Phase III testing on a next-in-class oxazolidinone called tedizolid phosphate, or TR-701. If approved, Bayer will sell the drug outside the US. "Data [on TR-701] is coming in early 2012, and I'm very confident that it will be positive," says Selvaraju. "There's activity in this drug not only in skin infections, but also in bacterially associated pneumonia, so it's got a broad spectrum of activity, and I think it will become a very nice commercial opportunity for Trius going forward."  

A third member of the oxazolidinones class is Rib-X's Radezolid, which is a little bit further behind TR-701, with Phase III data scheduled for early 2013. Rib-X formed a collaboration with Sanofi to explore bacterial ribosomes as a weapon against superbugs; Selvaraju says Rib-X has a "very unique discovery platform" based on in-depth knowledge of the bacterial ribosome.  

Lastly, Cempra Pharmaceuticals is in Phase III with a next-gen oral and intravenous fluoroketolide called solithromycin, a member of the macrolides class of drugs. Macrolides include some of the most widely used agents for treating pneumonia and skin infection, such as Pfizer's Zithromax. Many of the macrolides have gone generic, and solithromycin "appears to have none of the side effect issues [of other macrolides], but does have a much greater activity against resistant organisms than any other member of its class," says Selvaraju.   

While some believe that FDA has been "overly judicious on compounds for diabetes and other metabolic syndromes," as Matthew Geller, president and founder of Geller Biopharm tells it, there is still a lot going on. After all, the global diabetes market is the fourth-largest, at $34.4 billion in 2010, a 12 percent increase over 2009, according to IMS data. The next possible blockbuster to enter the market may be a GLP-1 from Amylin/Alkermes called Bydureon. The drug worried investors last March after a study showed an efficacy rate slightly below Novo Nordisk's Victoza, a GLP-1 that launched in 2010; although the differentiating factor is Bydureon's once-a-week dosage, compared with Victoza once-a-day and Amylin's Byetta twice-a-day. "People will always prefer the less frequent dosing," says Ben Weintraub. "The reason we like the GLP-1 mechanism of action is that, in addition to glucose control, it helps patients lose weight, and has other ancillary benefits, like bringing down LDL levels and blood pressure."  

Lilly backed out of its partnership on Bydureon, after months of bickering (and a lawsuit from Amylin) over Lilly's surprise collaboration with Boehringer Ingelheim to promote other type 2 diabetes drugs, including Tradjenta, an oral DDP-4 inhibitor. Amylin said Tradjenta is a direct competitor of Bydureon, which would create obvious promotional problems. The eventual breakup could be positive for Amylin, according to at least one analyst—Thomas Russo at Robert W. Baird & Co., who upgraded Amylin shares from neutral to outperform post-breakup. Russo told Bloomberg[ital.] that he expects Bydureon to gain approval in January 2012 (the PDUFA date is January 28, 2012), and that Amylin had become an acquisition target after the lawsuit emerged; now the company is free to make a deal. Bydureon was approved in the EU in June.  

Novo Nordisk, the insulin Hercules, may receive an FDA approval for its insulin degludec product next year as well; the company submitted an NDA for Degludec and DegludecPlus (ultra-long-acting basil insulin plus a bolis boost of insulin apart) to FDA and EMA in September, and is subsequently in preregistration for both types of diabetes. Degludec is a thrice-weekly formulation, or once every 40 hours. Mads Krogsgaard Thomsen, executive vice president and chief science officer at Novo Nordisk, said on a Q2 earnings call that the company will "seek label flexibility for any time of day, enhancing convenience and potentially treatment compliance." Thomsen told Dow Jones that he expects both to be blockbusters. Meekings was slightly less convinced: "Obviously, there's some benefit [with the dosage], but realistically, I think it will probably be used as a once-daily regimen—prescribers are likely to be wary of weekend dips in glycemic control. That doesn't really differentiate it that much from what's already out there ... It will definitely be a great drug, but how great is the question?" Thomson Reuters forecasts sales of Degludec at $1.5 billion by 2016. On the other hand, "How much more [are patients] willing to pay for ultra-long-acting insulin? ... In a few years we'll have biosimilar insulin, and that will make it even more difficult for new formulations like Degludec to actually get taken up," says Weintraub. "We have pretty modest expectations."  

Coming in around the same time as Bydureon is the first of a new—and long-anticipated—class of anti-diabetic drugs, known as sodium-glucose co-transporter 2 protein inhibitors. At the Cleveland Clinic Innovations Summit in October, SGLT2s were named one of the top 10 medical innovations for 2012. The SGLT2s represent "a paradigm shift in diabetes treatment, because they reduce blood sugar in a totally new way: by causing it to be excreted during urination," the Cleveland Clinic said in a writeup of the class. The SGLT2s could also contribute to weight loss, since "so many calories would now be lost during urination."   

The closest SGLT2 to market—Bristol-Myers Squibb's and AstraZeneca's dapagliflozin—could be approved as early as the first quarter of 2012, despite the fact that safety concerns, including a small but significant incidence of bladder and breast cancer, gave the FDA pause in late October. Dapagliflozin now shares a PDUFA date with Bydureon, on January 28, 2012. AZ and BMS are in Phase III with a fixed combination of dapagliflozin and metformin for type 2 diabetes. Although the drug is expected to emerge as a post-metformin treatment, the combination "might have huge sales potential if it shows efficacy" in the combo, says Meekings. Thompson Reuters predicts relatively modest sales for dapagliflozin - $403 million in 2016—while Adis R&D Insight has the drug reaching blockbuster status by 2015. 

Features

It's a neck and neck race toward safer, faster, and medically superior treatments. Which organizations have what it takes to jockey their products into the winner's circle?

Pharm Exec's 2012 Pipeline Report

The FDA is under pressure to encourage medical product development, monitor an increasingly global supply chain, and accomplish everything with ever-tighter resources. In the last few years, Congress added tobacco oversight to FDA's plate and expanded oversight of food safety. And that's on top of mandates to speed new therapies to market while ensuring they are safe and risk-free.  

The added responsibilities come amid criticism on all sides. Pharma companies complain that an overly cautious approach to potential safety issues generates unreasonable requirements that stymie innovation. Patient and disease groups echo these concerns and want revised risk calculations that incorporate views of the critically ill. Yet, consumer representatives and some members of Congress continue to highlight drug safety problems and demand more extensive testing of new drugs both prior to approval and after coming to market. 

Commissioner Margaret Hamburg's response is to promote new approaches to drug development, including streamlined clinical research methods and development of biomarkers and other new tools for product evaluation. Hamburg outlined these strategies in an October  2010 white paper on FDA's Regulatory Science Initiative, followed by a "Strategic Plan for Regulatory Science" in August. A "blueprint" on "Driving Biomedical Innovation" issued this October outlines how FDA will revise burdensome and obsolete regulations, provide more help to small biomedical companies, and create a "rapid drug development pathway" for critical therapies. Hamburg also is collaborating more with other federal agencies on research, enforcement, and product evaluation initiatives (see sidebar).  

To better handle new scientific approaches and today's global regulatory environment, Hamburg has spent the past year orchestrating a top-level reorganization of FDA. The most visible change is the appointment of a cadre of deputy commissioners to coordinate agency operations, which involve some 12,000 employees and more than 20 percent of US consumer products.   

A new deputy commissioner for global regulatory operations and policy, Deborah Autor, is in charge of FDA's Office of International Programs and Office of Regulatory Affairs, which operates the agency's far-flung field force. This includes a growing number of foreign offices, established to monitor a surging volume of food and medical products imported into the US. Autor is quite familiar with supply chain vulnerabilities and import issues, as she previously headed the Office of Compliance (OC) in the Center for Drug Evaluation and Research (CDER), which also has undergone a major facelift.  

Michael Taylor remains the head of FDA's Office of Foods, overseeing the Center for Food Safety and Applied Nutrition (CFSAN) and the Center for Veterinary Medicine (CVM). An FDA veteran, Taylor has the daunting task of implementing food safety legislation without the resources to inspect more facilities and to expand oversight as required by Congress.  

Chief Scientist Jesse Goodman is point man on regulatory science. He also oversees the National Center for Toxicological Research, counter-terrorism, and agency integrity and professional staff development, along with special offices for women's health and for minority health.  

Counselor to the commissioner, John Taylor, who served as Hamburg's temporary deputy commissioner for much of this past year, returns to his advisory role, but with added staff responsibilities. He monitors policy and planning functions, legislative relations, and external affairs.  

Particularly important to pharma, a new deputy commissioner for medical products and tobacco, Stephen Spielberg, was brought in to coordinate the activities of FDA centers for drugs, biologics, medical devices, and tobacco products. Spielberg also oversees a cluster of programs that affect multiple products, including orphan drugs, pediatric therapeutics, combination products, and clinical research practices.  

Spielberg comes to FDA with 30 years experience in academia and industry. He has served on FDA advisory committees and got to know Hamburg as a member of FDA's Science Board. Most recently, he headed up a new Center for Personalized Medicine and Therapeutic Innovation at Children's Mercy Hospital in Kansas City, Mo. While in industry, he chaired a Pharmaceutical Research and Manufacturers of America (PhRMA) pediatric task force and was instrumental in promoting the Best Pharmaceuticals for Children Act, enacted in 2002 to provide incentives for developing pediatric therapies. 

An initial task for Spielberg is to orchestrate reauthorization of the Prescription Drug User Fee Act (PDUFA), along with new fees for generic drugs and biosimilars. Industry and FDA have agreed on a new five-year PDUFA program, but the trick will be to head off adding extra measures to the PDUFA bill, and to avoid embroilment in election-year politics that could delay enactment past September 2012. 

Another challenge for Spielberg is to resolve disagreements between the medical device industry and the Center for Devices and Radiological Health (CDRH) over proposals to revise the device approval process. High-profile safety issues and recalls prompted FDA to re-evaluate its testing requirements for devices, with public meetings and a report from the Institute of Medicine.  CDRH has proposed policy changes that expand clinical testing for some devices, and manufacturers are protesting that this will curb innovation. Industry wants Congress to step in and limit FDA requirements, an issue that will play out in coming months as device user fees are deliberated on Capitol Hill.  

Parallel to the restructuring of FDA's top management, CDER director Janet Woodcock has engineered operational changes, with more "super offices" better able to manage CDER's expanding and diverse operations. CDER already had several super offices—for new drugs, pharmaceutical science, and translational sciences. Earlier this year, Woodcock added the Office of Surveillance & Epidemiology (OSE) to the super office list—a move designed to emphasize the importance of drug safety programs, such as adverse event reporting, observational studies, medical error prevention, and risk management. OSE's elevation also may quiet those who want to shift drug safety out of CDER and into an independent entity. 

Next, CDER's Office of Compliance became another super office, with multiple divisions to manage field inspections and ensure compliance with regulatory standards. One new suboffice handles drug recalls, counterfeiting, diversion, and other supply chain issues. And the Office of Scientific Investigations monitors pharmacovigilance and Risk Evaluation and Management Strategies (REMS), in addition to the conduct of clinical trials.  

More recently, CDER's Office of Medical Policy (OMP) also gained "super" status, a change that transforms the Division of Drug Marketing, Advertising & Communications into the Office of Prescription Drug Promotion. OPDP director Tom Abrams gained more managers and operating divisions to better regulate always-controversial drug promotional activities. Another OMP office has a number of high-profile assignments: implement FDA's Sentinel Initiative; oversee the Clinical Trials Transformation Initiative; and advance the Patient Medication Information initiative, which aims to develop a one-page patient information sheet to replace various inserts and handouts.  

Woodcock said she seeks "a high-functioning, policy-driven, risk-based organization," in unveiling the new compliance office. Such an achievement would support innovative and effective drug development. FDA proudly announced last month that CDER and FDA's biologics center together approved 35 new molecular entities in fiscal year 2011 (ended Sept. 30), including a number of new cancer treatments and two drug-diagnostic combinations. The agency is most pleased that 24 of the 35 approvals occurred first in the US, and that most reviews required only one cycle.  

Woodcock pointed to the apparent "speed and efficiency" of the drug approval process as evidence that FDA is not blocking new products from market, and that industry statements to that effect are "inaccurate and unfair." Instead, she said, FDA is using "creative approaches" and "exercising its regulatory flexibility" to expedite approvals, and more ideas for enhancing reviews are in the works. 

's Washington correspondent. She can be reached at 

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Contributors:  Mathilde Paquet; Marine Neveu; Andrey Muntyan 

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As the global economic roller coaster continues to unfold, governments the world over have desperately been scrambling to find the right policies that will effectively clamp on the brakes to end this unnerving joyride we have witnessed over the last few months, if not years. The frontline of this battle against economic gravity involves elaborate financial schemes to salvage countries and banks alike, but inevitably it has also meant that governments and companies have been tightening their belts to cut budgets wherever possible. In the United Kingdom, the slashing has heavily hit one of the country's dearest public institutions, the National Health Service (NHS), which has been asked to whittle £20 billion ($31.5 billion) from its budget by 2014. While most have grudgingly accepted this reality, some still remain optimistic in these times of austerity and vow to make the best out of it. Prime Minister David Cameron falls within the group of enthusiasts and has rallied his citizens by telling them that "we will be tested. I will be tested. I'm ready for that and, so I believe, are the British people. So yes, there is a steep climb ahead. But I tell you this: The view from the summit will be worth it." 

 "British Bulldog" by Elaine Campling, www.elainecampling.moonfruit .com 

DESPERATE TIMES CALL FOR DRASTIC MEASURES

But what exactly will be unveiled when the British arrive at the peak of their mount? When it comes to its healthcare system, the controversial 2011 Health and Social Care Bill provides concrete clues—but not quite certainties—as to where the country is headed in caring for its patients and how pharmaceutical companies will play a pivotal role in constructing a more efficient NHS. The overarching aim of this unprecedented reform is to improve patient outcomes by simplifying the organizational structure of health institutions, which presumably will bring down costs, while at the same time increasing the uptake of innovation through a new value-based pricing (VBP) scheme. 

Mark Jones, Marketing Company President, AstraZeneca UK 

As it stands, the procurement of healthcare services in the NHS is managed by hospital and primary care trusts (PCTs) that are allocated individual budgets for a specific geographic area. Under the proposed system, this responsibility will be delegated to smaller GP consortia that will also be able to procure services from private and third-party providers in order to allow for greater competition. The proposal has been widely criticized as an attempt to privatize the entirely free NHS, to such an extent that the government had to halt its plans in order to hold a 'listening exercise,' after which the bill was amended to incorporate input received from all relevant stakeholders. The way forward is still under discussion. 

Sir Kent Woods, Chief Executive, Medicines and Healthcare products Regulatory Agency (MHRA) 

One of the loudest voices heard during the exercise was that of innovative pharmaceutical companies who are already at odds with the NHS due to the country's lethargic uptake of new medicines and increasingly low prices (both among the lowest in Europe), exacerbated by the alleged 85% penetration rate of generic drugs (one of the highest in the region). The industry fears that the proposed VBP system, which will replace the Pharmaceutical Price Regulation Scheme (PPRS), will further limit the reimbursement of new treatments by the NHS. Under the PPRS, "companies were allowed to include their assets as part of the calculation that determined the amount of profit they could make in the country. This was extremely valuable for the pharmaceutical companies who were conducting research in the UK because those investments were then rewarded by the commercial environment," explains Sanofi UK general manager Steve Oldfield. Alternatively, the VBP scheme sets out to assess the value of a medicine holistically by taking into account its benefits to the patient and wider healthcare system correlated to the overall cost burden for the NHS. In theory this is meant to reward innovation and improve the uptake of new treatments, but skepticism prevails. Mark Jones, marketing company president for AstraZeneca UK, concludes that "While VBP aims to improve the valuation of new medical technologies it does nothing to address the issue of the fragmentation of the wider healthcare system. The pricing scheme will not change the fact that products will still have to go through all these layers of approval before they reach patients."  

Samantha Pearce, General Manager, UK and Ireland, Celgene 

Sir Andrew Dillon, chief executive of the National Institute for Health and Clinical Excellence (NICE), explains that "what the government wants to do is to make sure that the price the NHS pays for new pharmaceuticals properly reflects their value, which is an ambition that NICE shares." As the organization responsible for evaluating whether a new drug should be reimbursed by the NHS or not, NICE can be somewhat divisive among the pharmaceutical industry. Sir Andrew counters that "while NICE is sometimes criticized for restricting access to treatments and pharmaceuticals in particular, everything NICE has done represents a net benefit to the NHS. Contrary to some beliefs, the vast majority (83%) of NICE's recommendations are positive." The reality is that no one is yet sure what VBP will look like nor whether it will be advantageous to the pharmaceutical industry in the long run. 

Samantha Pearce, general manager of Celgene UK and Ireland, is optimistic in her interpretation of the ongoing discussions and how they will affect her company. "The reality is that the reimbursement environment in the UK will always be a challenge, but what encourages me about the VBP discussion is that the rhetoric is centered on innovation. As long as Celgene remains committed to providing truly innovative products that add value to the health of patients, then I think our aim will be parallel to that of the authorities. In our commitment to seeing this happen we are persistent and creative to engage all the relevant stakeholders that will ultimately make the decisions. It is essential for us to understand where they are coming from and vice-versa. We knew from the beginning that it would be a long journey, because the therapeutic areas that our products operate in are quite complex," she concludes. With growth at 40% for the first half of 2011, it is quite apparent that Celgene has in fact managed to communicate and find common ground with UK health authorities. 

Stephen Whitehead, CEO, Association of the British  Pharmaceutical Industry (ABPI) 

Nonetheless, Stephen Whitehead, chief executive of the Association of the British Pharmaceutical Industry (ABPI), has taken it upon himself to voice the industry's concerns. "The ABPI is working closely with the government to determine how we can dramatically accelerate the uptake of innovation within the healthcare system. The government recognizes that innovation is a key part of the solution to cutting costs," he explains. One of his main goals is to get both his members and healthcare authorities "to stop thinking about the product lifecycle as the patent lifecycle, because the real lifecycle of a product extends beyond that—closer to 40 years. The value of a medicine, starting from discovery to the point where it is replaced by something else is much greater than what is currently taken into account because medicines are typically used for about 40 years before a replacement treatment is available."  

Simon Jose, General Manager & Senior Vice President UK Pharma, GSK 

Such a pioneering approach to appraising medicines would surely be in line with VBP's stated goal of evaluating medicines holistically, but local managers are still weary of whether the new pricing scheme can accelerate the current evaluation process. Nick Burgin, European director of market access for Eisai, feels that "whilst VBP is an opportunity to improve access to patients for new medicines, it does have the potential to make patient access worse. It could make the process even longer than it already is and lead to a greater number of payers and decision makers having to agree on access to a single product."  

Despite the company's concerns over the local market environment, Eisai has chosen the UK as its new European headquarters from which all other markets in the region will be centrally managed, touting the country's talent pool and expertise as a strategic advantage. Gary Hendler, president and CEO of Eisai Europe, lays out the company's new regional strategy that has "shifted the focus from being country-specific to becoming European-specific. Now each country operates as a business unit that reports into a single European business unit constructed by therapy area and/or business synergy. The exciting challenge for us is to bring the differences and similarities of all these countries under one Eisai European business model as opposed to a business model that is the sum of all its parts". 

Basing themselves in the UK also makes sense considering that the country has traditionally punched well above its weight within the global pharmaceutical sector, representing 10% of global R&D expenditures for the industry, as well as a hub for manufacturing. Even though one-sixth of today's most popular prescription medicines were developed in the UK, the dilemma is now whether the country can maintain its status as a pharma powerhouse and a trendsetting market for the rest of the world. Burgin concludes that "this situation is not unique to the UK, with the increasing demands on health systems across Europe, many European countries are implementing various methods of cost containment. The question is how to retain a vibrant pharmaceutical industry in the region while at the same time making treatments affordable to the national healthcare systems that pay for the products." 

Simon Jose, general manager of GSK UK, asserts "that as long as we all play our parts and are mature about the way forward, then we will be able to fashion a more harmonized system where our resources are deployed more efficiently to improve patient outcomes." "Fortunately, or unfortunately, the UK is leading the world in this direction, so that pharmaceutical products begin to be evaluated based on their added value to patients and healthcare systems," states Martin Dawkins, Bayer's general manager in the UK. "This is a change that I foresee, and the UK will be one of the leading markets that will bring on this shift in mentality to think in terms of integrated healthcare. The focus will be on how a product will affect the greater population in terms of costs and benefits rather than only focusing on the patients that will be using the treatment directly," he concludes. 

This wouldn't be the first time that the UK sets the standard for the global pharmaceutical industry. Historically, both companies and regulatory authorities have looked toward the British market to determine what policies were most effective to therefore enact them elsewhere. GSK's Jose recounts that "the UK has a disproportionate influence on the global commercial environment for the industry; 25% of world markets reference their prices to the UK, and decisions by NICE have influenced well beyond the borders of England." A tendency to reference prices and regulation on UK practices can also been seen in the predominant role that the Medicines and Healthcare products Regulatory Agency (MHRA) has played in pan-European regulatory initiatives. Sir Kent Woods, chief executive of the MHRA, states, "The agency has attracted an increasing amount of work on European regulatory work. The Agency does more of the decentralized procedures than any other state. Part of our growth has been drawing in work from other areas of the EU."  

Steve Oldfield, Managing Director, Sanofi UK 

Beyond regulation, "the British pharmaceutical industry has a disproportionate amount of R&D spent here. GSK alone locates around 40% of its R&D in the UK and 20% of its manufacturing, while the country only represents 4% of our sales," says Jose. Surely it makes sense that being a British company GSK would have a top-heavy presence in the country, but many of the other European and American pharmaceutical giants have a similar story to tell—even the French. Sanofi's Oldfield validates their local manufacturing and R&D presence by arguing that "the quality of British industry has always been very well-regarded and continues to be so today. For example, the 'Made in the UK' symbol is still a solid sign of good quality around the world. Additional to that is the UK's ability to drive quality improvement measures that continue to raise the standards of production. Another major asset that the UK offers the pharmaceutical industry is the quality of innovation not only in terms of new products, but also in operational and manufacturing processes." Jose concludes that "there already is a strong industrial base here, but the government realizes it cannot be complacent given that other countries are creating policies to attract inward investment in this sector."  

Martin Dawkins, Managing Director UK and Ireland, Bayer 

This point has become most palpable over the last couple of years after companies such as Novartis, MSD, and Pfizer announced plans to shut down R&D and manufacturing sites in the country, representing a total loss of more than 3,000 jobs. "Given our track record in the UK, this was a very difficult decision for the company, but it was in no way a response to the quality of British science and the individuals that are available to conduct research in the country," explains Richard Blackburn, general manager of Pfizer UK. "Rather, people should understand that our decision to exit the site was based on Pfizer's need to rationalize the number of therapeutic areas that we are conducting research in." Yet, such statements have been ineffective in mollifying those who see one of the country's greatest industries in sharp decline. "What I believe has happened is that people have interpreted changes in R&D investments as a signal that the quality and standard of British science is also changing, but I don't think that is the case," states Blackburn. "The UK is still a place where we conduct great R&D, and this is why we have recently established our Pain and Sensory Disorders research unit in Cambridge. The good news is that companies tend to be fairly unsentimental in terms of where they conduct their research," which means that if the metrics improve then there is a good prospect of this continuing to take place in the UK. 

Richard Blackburn, Managing Director UK, Pfizer 

Stephen Whitehead of the ABPI is convinced that, regardless of unsettling news of site closures and the uncertainty around the healthcare reforms, "the UK will always be a world leader in science and R&D policy because we have some of the best universities, some of the best pharmaceutical companies and we have strong R&D bases here for these global companies." With academic bastions such as Oxford and Cambridge, British science has typically been regarded as authoritative on a global basis. Chief executive of the BioIndustry Association (BIA), Nigel Gaymond, adds that "looking at the long heritage of research, the number of Nobel laureates that come out of the UK for example, it is probably fair to say that the UK is one of the most productive nations when it comes to the generation of intellectual property (IP). Four of the top 10 universities in the world, around 19 of the top 100 and 30 of the top 200, are in the UK. For a relatively small country in comparison to some of the giants in the world, this represents a tremendous front of knowledge, which certainly drives us forward. Whitehead adds that as a country which disproportionately leads the industry's R&D efforts, "the UK is very significantly exposed to global trends of the industry," including the myriad economic pressures and the weak productivity of new drugs over the past few years. Certainly this is reflected in the generally somber mood of Big Pharma locally, which Gaymond justifies by concluding "that in the UK in particular, we sometimes dwell too much on the negative news rather than celebrating our successes". 

THE DEMISE OF ANOTHER BRITISH GOLDEN AGE?

As an eminent figure of the UK's life sciences sector, Sir Richard Sykes is arguably the man responsible for consolidating what is today GlaxoSmithKline, up until 2002 when he stepped down as chairman of the flagship British pharmaceutical company. He reminisces about the times when in the UK "companies could make as much profit on a product as they wanted as long as it was relevant to the amount the company had spent on R&D in the country. This is why many companies came and set up their facilities here, because you had a great pool of people to do the research and also had the government that provided incentives for it. You also had a great test bed in the NHS. Today most of these factors have changed so the positive environment no longer exits." Eisai's Nick Burgin drives this point home with the example of Japanese pharmaceutical companies that "are currently in an investment phase in which they are looking to spread their wings and invest in new markets outside of Japan. As with any investment decisions there are limited resources available to these companies, and therefore they will choose the most attractive opportunities for them. Emerging markets such as the BRIC countries are very interesting options for these companies and therefore markets in Europe must compete for these investments by sustaining an appealing environment through investment-friendly policies." 

Nigel Gaymond, Chief Executive, BioIndustry Association (BIA) 

When compared to some of its regional neighbors the UK has one of the lowest medicine expenditures as a percentage of its GDP, standing at 0.91% in 2010 compared to 1.53% in France and 1.22% in Germany. Furthermore, the NHS has gradually been spending less on medicines every year, from 12.5% of its total budget in 1999 to 9.8% in 2008, even though the institution's total budget has been increasing to more than £120 billion ($192 billion) in 2011. This is in contrast to the fact that, following the financial services sector, the life sciences provide the greatest contribution to the UK economy, having generated a trade surplus of over £7 billion ($11 billion) in 2009.  

Gary Hendler, President and CEO, Eisai Europe 

Why then would the country become complacent about the attractiveness of its commercial environment for pharmaceutical companies? The answer is: It is not. Rather, the cost-cutting and restrictive spending is reflective of the overall economic malaise around the world and a greater need for governments to stabilize their budgets. Picture the UK government walking on a tightrope trying to balance a pole with a sluggish economy and public debt on one end, and the demands of pharmaceutical companies to improve commercial conditions on the other. The point of equilibrium is far from evident. Despite his nostalgia for better times, Sir Richard Sykes advises pharmaceutical companies "to hold their nerve. Yes, they are going through a bad period at the moment, but this is only a period after all. The industry is not in terminal decline by any stretch of the imagination." 

Quite the contrary, the government seems to have taken stock of the warning signs and has reacted by implementing a number of incentives to ensure that the UK remains a stronghold for the global pharmaceutical industry. One such initiative is the Cancer Drug Fund, whose role is to fund the use of innovative cancer treatments that have not been approved for reimbursement by NICE for not meeting cost-effective parameters. Another notable example is the Patent Box Law, currently under discussion, which would provide a preferential tax rate to companies who develop and register their intellectual property in the UK. Similarly, the government has implemented an R&D tax credit system that allows companies to obtain a tax deduction in return for R&D investments made in the country. In January 2009, the Department for Business, Innovation, and Skills (DBIS) also created the Office for Life Sciences (OLS) that dedicates itself entirely to shape a positive business environment for this strategic sector. The OLS is a collaborative effort with DBIS to align business priorities with those of the country's healthcare. 

There are indeed other segments of the UK pharmaceutical industry that are thriving and promise to bring back the scientific and manufacturing prestige that the country is used to. Generic manufacturers in particular are extremely pleased with the announced budget cuts for the NHS, as this means that doctors will be encouraged to prescribe generic products whenever possible. Watson Pharmaceuticals' vice president for European generics, Anish Mehta, is confident that "one of the greatest levers that exists for cutting costs is to increase the use of generics throughout the system. Generics already save the NHS between £7 billion to £8 billion ($11 million to $12.5 billion) annually and there is still more room for greater cost savings. This is a trend that we are seeing all over the world, from the US to France and Germany. The end goal of governments is to improve the quality of healthcare by focusing more on patient outcomes and streamlining healthcare systems so that they become more efficient." In the face of such savings, the DH went as far as proposing an automatic generic substitution scheme in January 2010, which would require pharmacists to dispense generic drugs whenever available, even when a branded prescription had been written by the doctor. To the disappointment of generics companies, the proposal was later scrapped, but business still seems to be moving full-steam. 

Nick Burgin, European Director of Market Access, Eisai Europe 

Watson is a prime example of the rise of generic players in the country, having acquired UK-based Arrow Generics in 2009 to establish its headquarters for all markets outside of the US. Prior to the acquisition, Watson was a single-market company, whereas today it boasts a presence in 17 markets in Europe and is planning for a greater global expansion in the near future. Mehta explains, "The UK is a trendsetting market that has evolved through different healthcare models to achieve a high level of efficiency and high penetration of generics." While some would argue that the British generics market is already saturated, Mehta believes that "the real penetration rate of generics will depend on what data you look at. Nevertheless, there are still some opportunities in drugs that are still prescribed for their brand even though a generic option is available. Undoubtedly the main growth driver in the future will come from biologic products. Watson is positioning itself to play a very important role in biosimilars in the mid to long term." His vision also extends beyond European borders, as he expects the company to grow steadily over the next few years. "From 2004 until today, we have grown almost $3 billion in revenue and are targeted to reach $4.5 billion at the end of this year. Even as we are expanding our European presence at the moment, we are still looking to grow in other global markets. We are very interested in Latin America and also exploring opportunities in Asia Pacific." 

However, it is not only the generics players that have taken advantage of changing times in the UK. As Big Pharma streamlines their operations, shedding away staff, operational sites, and niche segments, the local industry has eagerly been picking up the pieces to turn them into their own growth opportunities. With origins dating back to 1787, Martindale Pharma is a niche and specialty pharmaceutical company that was struggling to maintain its revenues just over a year ago, when in October 2010 its new chief executive officer, Richard de Souza, took the reins of the company. "My job was to figure out what the company could do better and identify through the product portfolio the therapy or business segments that we truly wanted to be a part of. These segments were selected based on whether we were already ranked No. 1 or No. 2, or if we could achieve one of those positions within a segment over the course of two years," he says. Under this new strategy Martindale has identified five business segments—specials, critical care, ophthalmics, hospital specialty products, and addiction—where it is already leading or is soon to be. 

Anish Mehta, Vice President of European Generics, Watson Pharmaceuticals 

In order to achieve such a position, the company has undergone a restructuring that included the up-skilling of its personnel, which was made possible due to the availability of pharmaceutical experts that had recently been laid off by other companies. Detailing Martindale's strategy, de Souza sees "new product development as a key aspect to ensure the continued growth of the company well into the future, but to maintain current growth we have had to develop a very active business development culture. We have been able to better gauge demand by establishing preferred partnership status with major retail pharmacy estates so that when a patient walks into one of those pharmacies with a prescription for a special, then that order will directly come to us. Innovation and customer-centric service improvements help underpin our status as the partner of choice for many pharmacies." This service-oriented approach includes delivering orders within 24 hours of them being placed and launching a new online platform from which a pharmacist can directly make orders. With steady growth and success in the UK the company is now looking to leverage its business model beyond its borders. "As a company, we already know how to solve some of the problems in the UK, so we are looking to transfer that knowledge to other European markets with similar needs and conditions. In 2010 Martindale only had 4% of its turnover coming from international markets. Within 12 months we have taken that up to 10%, and my goal is to reach over 20% within three years." 

Country Report

Even as the global economic roller coaster affects one of the country's dearest public institutions-the National Health Service-there is still reason for optimism in these times of austerity

UK Report: Keep Calm and Carry On ... Differently

To some extent, evidence is a commodity that one can always buy with money. The question becomes how much one is willing to invest and how much benefit one can expect to receive in return. Within payer evidence planning, a tradeoff is always needed to balance the benefits, costs, and risks of various evidence scenarios. It is imperative that market access teams begin working early in development to understand how payers will likely react to various clinical scenarios and then determine what value propositions will be most supportive of the evidence anticipated to be generated. If conducted properly, this will be beneficial in helping the product secure optimal levels of reimbursement and timely access in its target markets.  

The benefits to the company of having a firm understanding of how various clinical, outcomes, and observational evidence will resonate with payers will come in the form of clearer determinants on pricing, reimbursement, access potential, and potential market size. The cost of generating such data, meanwhile, is significant and comprises several components. 

The first and most obvious cost is the absolute price tag associated with conducting the trial, including the expense of site enrollment, patient recruitment, paying investigators, and cost of clinical research organizations (CROs). A second, less immediately apparent component is the cost of delayed market entry. Delayed market entry means potentially facing generic competition earlier in the life of the brand or losing first-to-market status to a branded competitor. 

The third potential cost is the risk of failure. Trial failure by itself is a major setback, but companies face greater loss if the impact of a negative trial directly affects existing business. For example, when an oncology product is trying to extend coverage to include other indications, a company must carefully consider, if the trial fails, the amount of damage this could potentially have on expected revenue in the currently marketed indication(s).  

Finally, one must consider the opportunity cost. While this is less of a consideration for large pharmaceutical companies with deeper pockets, for small or midsize companies, in particular those backed by venture capital investment, the options they are able to pursue are often limited. Trial failure can also mean that the company loses the advantages that it may have enjoyed by designing a trial in a different way, for example, in a different trial population. 

Genentech's Avastin is a vascular endothelial growth factor-specific angiogenesis inhibitor indicated for the treatment of metastatic colorectal cancer (mCRC). The product has experienced significant commercial success since it was launched in 2004 for the treatment of mCRC. 

In 2008, FDA later granted marketing approval for Avastin in the first-line treatment of HER2 negative metastatic breast cancer on the condition that further clinical trials be conducted to establish clinical benefit. Genentech was able to successfully launch and market the product even with a minimal level of efficacy data in the breast cancer indication. But Avastin's low level of product differentiation and questionable efficacy data, combined with its large budget impact, led to a heightened need to generate additional supportive evidence for the breast cancer indication. Genentech used this opportunity to focus on patient outcomes to establish a clinical benefit that would meet FDA requirements and at the same time address payer needs. 

Genentech/Roche conducted two pivotal outcomes trials to address regulatory and payer concerns as part of the conditional approval. However, these trials not only failed to show improved outcomes, they also raised significant concerns over Avastin's safety profile. Questionable clinical efficacy in the treatment of breast cancer combined with an unfavorable safety profile led FDA to fainlly—after much debate—withdraw Avastin's breast cancer indication on November 18. 

The takeaway: Launching early with conditional approval is not a silver bullet. Making future promises comes with inherent risk. Therefore, thorough risk assessment is essential before placing bets on future evidence-generation. 

With the cardiovascular drug Multaq, the decision facing Sanofi-Aventis was whether to focus on clinical endpoints or patient outcomes for the product's development. Multaq was challenged to demonstrate product differentiation, particularly after receiving a non-approvable letter from FDA in 2006 and showing lower efficacy versus the generic standard of care (amiodarone) in 2008. Multaq also posed a high budget impact for payers in terms of pharmacy spend given the large size and recurrent nature of the population with atrial fibrillation (AF). 

Given Multaq's inferior efficacy and safety profile, Sanofi-Aventis had to refocus its clinical development program on a different set of value drivers that did not revolve around the product's clinical attributes. The company's new clinical development program took advantage of the opportunity to focus on outcomes that can demonstrate cost savings through reductions in hospitalizations and, at the same time, shift focus away from the short-term clinical efficacy of the drug. 

Sanofi-Aventis succeeded in this task, while simultaneously differentiating Multaq from the generic standard of care without having to conduct a direct head-to-head study. The company's development strategy improved the safety profile by redefining the target patient population to exclude high-cardiovascular-risk patients and addressed regulatory and payer requirements by focusing on long-term patient outcomes. Their goal was to show reduction in cardiovascular hospitalization. 

While Sanofi-Aventis did not include outcomes measures in early development, an outcomes-based trial was successfully used to address both regulatory access and reimbursement requirements, and led to the approval of Multaq in the US and the EU in 2009. Although valuable time was lost due to the change in development strategy, delaying Multaq's commercial launch and shortening its available patent life, Multaq is still forecasted to become a blockbuster by 2012. 

The lesson learned: Superior efficacy is not strictly essential. Surrogate patient outcomes, when unique, compelling, and relevant, can adequately address regulatory requirements and support a compelling value proposition for payers. 

Abbott's challenge with Humira was how to differentiate a third-to-market anti-TNF drug launching approximately five years after Enbrel and Remicade in order to become the biologic market leader for the treatment of rheumatoid arthritis. Given Humira's high product differentiation at the time of launch, Abbott had to decide whether or not to focus on patient outcomes to further differentiate the drug. 

As one of the first biologic treatments for a large patient population, Humira posed a high economic impact for payers. Abbott realized that robust payer evidence would be necessary to develop a strong value proposition for Humira, which would support the long-term success of the drug. Abbott committed to a mix of clinical and outcomes research to address regulatory and payer requirements for new indication approval and patient access to therapy. 

Humira was able to differentiate based on strong efficacy data, favorable dosing frequency compared with Enbrel, a Crohn's disease indication, and an influential marketing campaign.  

As part of Humira's clinical development, Abbott conducted more than 20 clinical trials. A relevant mix of clinical efficacy and outcomes data further differentiated Humira, allowing it to become the biologic market leader for RA treatment. The drug has secured favorable formulary status for a costly biologic treatment for RA, and the drug has received multiple NICE recommendations, even as the category becomes more competitive. 

Because Humira has been able enter the market quickly, generate significant product awareness through effective marketing campaigns, and offer a more convenient dosing schedule, it is expected to experience continued growth and capture a larger share of the RA market. 

Developing an appropriate strategy in order to successfully compile evidence requires substantial time, money, and resources. Because clinical development is a long-term, high-risk investment, it is necessary to obtain payer input early in development so that if a company needs to kill a product in the pipeline, it can do so more rationally to avoid any unnecessary waste in investment. 

As a result of these considerations, organizations need a stable and consistent decision-making authority that can focus on long-term interests. Simply stated, the goal of evidence generation needs to be to provide the necessary means to achieve commercial goals in a cost-effective way. Whether or not a branded product meets manufacturers' expectations will all depend on how the evidence is generated to appropriately address these concerns and how the risk/benefit equation that accompanies this often-costly endeavor is weighed. 

, MD, is Practice Area Leader, Pricing and Market Access, Campbell Alliance. He can be reached at 

Thorough risk assessment is essential before placing bets on good evidence that clears a path to approval.

The Payoff for Payers

If you've ever flipped through a magazine in a checkout line, or even on your iPad, then you've probably seen a print DTC advertisement. If you bothered to look beyond the images and actually read the text, you may have noticed a marked absence of numbers. Instead, descriptive, non-numeric language such as "some," "frequently," "rare," or "common" is used to describe the drug's side effects, in combination with blunt statements like, "It may cause harm to your heart or brain," (from a recent Sanofi ad for Lantus), or "Serious allergic reactions may occur," (from a recent Eisai/Janssen ad for Aciphex).  

As a defense against failure-to-warn claims, this qualitative, laundry-list articulation of a drug's risks and benefits may be smart, but as a way to communicate clearly with consumers and patients, it's obviously lacking. Enter the drug facts box, a concise, quantitative, easy-to-read format for sharing numeric information about a drug's efficacy and side effects. The goal, according to proponents of the facts box, is to make it easier for consumers and physicians (facts boxes would also appear in a drug's promotional labeling) to parse the underlying clinical data for a given product, which would in turn facilitate a more informed decision about treatment.  

This theory has been tested directly by academic researchers, and a body of literature has emerged; the methodologies, participants, and objectives vary, but the resulting consensus in the academic community is that a standardized facts box or table is superior to current presentations of risk and benefit. Indeed, the current members of FDA's Risk Communication Advisory Committee (RCAC) released an extensive literary review in preparation for its most recent meeting, held Nov. 17 to 18 in Washington, DC. The report, titled "Quantitative Summary of the Benefits and Risks of Prescription Drugs," analyzes the findings of 52 journal articles, with a focus on answering two stated questions: 1) "What is the value of quantitative information or summaries about the risks and benefits of medical interventions for consumers, patients, and clinicians?" and 2) "How does presentation of the quantitative information influence consumers,' patients,' and clinicians' processing and understanding of the risks and benefits of medical interventions?" 

These seem like pretty straightforward questions, but as anyone who has personally witnessed an RCAC meeting knows, very little is straightforward in the realm of risk communication theory. As the famed analytical psychologist Carl Jung once wrote, "The shoe that fits one person pinches another; there is no recipe ... that suits all cases." This point is very well taken, given the RCAC November session, but first, it's important to understand what happened the first time the drug facts box went to Washington. 

In 2009, the FDA's RCAC—then chaired by Baruch Fischhoff, professor of social and decision sciences and of engineering and public policy at Carnegie Mellon University—took a vote on whether a standardized drug facts box should be adopted by FDA for use in pharmaceutical print advertising and promotional labeling. The committee said yes, unanimously. Then nothing happened for two years. When the Patient Protection and Affordable Care Act passed, it contained a mandate (Section 3507) ordering the US Department of Health and Human Services (HHS) to review the evidence for or against a quantitative summary of a drug's risk and benefit, "such as a table or drug facts box," and to make a judgment. HHS responded by filing a report to Congress last March, requesting at least three more years for additional research. 

Lisa Schwartz and Steven Woloshin, a wife and husband team of professors at Dartmouth Medical School, and two of the primary contributors to the body of literature around facts boxes, don't get it. Asked about the justifications for another three years of research, Woloshin says he's "completely baffled," an opinion he made known in a 

 editorial printed on July 4. "It's crazy that people—doctors, patients, tax payers—don't have ready access to summaries of [a drug's efficacy and risks] in a way that we've shown can help them make better decisions," says Woloshin. "No one has published any important criticism of the [facts box] studies." 

Conducting research on any topic always leads to new questions. At some point action should be taken, especially when it comes to health outcomes. "One can always improve upon something, but you'd have to be able to claim that your research is going to produce powerfully different results, to justify delaying implementation of something which I think serves everybody," says Fischhoff. "Given the amount of work that's gone into the facts box, and the evidence that supports it, it's hard for me to believe that alternate design [studies conducted by HHS/FDA] would justify a delay of a couple of years." Fischhoff describes the facts box as having a "sound design, both analytically and empirically ... it follows the theories of risk communication, it has demonstrated efficacy in its field trials, and is clearly much better than what we have out now." 

The November RCAC meeting set out to answer the two key questions by identifying perceived gaps in the literature. It quickly turned into a gap-a-thon, with participants identifying gaps everywhere they looked. "What about the consumer's literacy levels, and cultural diversity issues?" asked RCAC member Sokoya Finch Nealy. "Is that a gap?" Sure, "that's fair to say," answered another member. "What about graphs; are those really non-numeric? Some of them have numbers in them," said Nananda Col. "That's a gap," someone else declared. At one point, a member who only recently joined the committee asked, "What are we aiming to do with this exercise ... is it to review and critique the study?" Someone else answered, "To give advice and pointers to FDA on regulatory policy." Craig Andrews identified "two major gaps," including "the external validity of the various findings in realistic settings, like broadcast and print," and the fact that "people bring biases to [drug ads], different moods and emotional states ... the 'magic bullet' effect, etc. They may process these things differently." Valerie Reyna wondered if "it is even possible to get a script for a standardized presentation." Gap, gap, gap ...   

Yolanda Fultz-Morris, a public affairs spokesperson at the FDA, said the November RCAC meeting reflects "what we need to know for the types of actual cases that are really quite common in drug regulation, where there is not a single applicable number, or where the meaning of numbers may vary based on the [clinical] studies producing them," such as when a product has different indications; was studied in different populations; contains differing endpoints, such as composite endpoints or surrogate markers; or when some products are notably more dangerous than others. "FDA does indeed wish to facilitate good communication of the efficacy and risks of prescription drugs, but we also wish to avoid unintended consequences that could cause a worse understanding. The only way we know to avoid unintended consequences—as much as possible at least—is to take the time to attend to the practical variations from the theoretical ideal," says Fultz-Morris. Short of implementing the facts box, though, it's hard to say how they would perform in a practical, real-world setting. 

In an editorial piece commenting on Schwartz and Woloshin's 2009 facts box article in the 

titled "Communicating Drug Benefits and Risks Effectively: There Must Be a Better Way," authors Jerry Avorn and William Shrank call the current risk presentation in consumer drug ads "a virtual museum of poor communication: the print is tiny; the prose is usually dull, stiff, and hard to understand; and vital facts are buried in a sea of less-relevant data. The format of the information can mask important side effects, as well as—ironically—numb the reader with so many worries that a perfectly worthy treatment may seem too toxic to take." Even so, it seems FDA is at least three more years away from implementing a standardized, quantitative summary of a drug's risks and benefits.  

Woloshin says he hasn't looked into broadcast media applications for the facts box, but suggests that certain warnings, such as approval on the basis of a surrogate outcome, or the main efficacy finding for a drug, could be easily inserted into broadcast spots. For broadcast, "we imagine the primary goal would be to point people to a drug [facts] box, either in print or online ... We have not tested these ideas, but hope to in the future," he says. 

PhRMA, for its part, is taking a measured approach to the issue. "Careful thought must be given to how to convey risk-benefit information in a simplified format, in a way that remains relevant to the real-world practice of medicine and patients," says Matthew Bennett, PhRMA's senior vp of communications, in an email. "The desire to present simple 'facts' should not trump the overriding goal of ensuring that information about a drug's benefits and risks is accurate, and not misleading." Most people don't have a problem with facts, particularly when they're presented in a readable format. But perhaps more research is needed, to know for sure. 

Patients want to take a more active role in treatment decisions. Drug facts boxes in DTC ads represent a crucial element of informed consent.

Give It to Me Straight!

In most cultures, fire and water serve as emblems of destruction. But in the distinctive Japanese mindset, harnessing these two unpredictable elements of the natural order can also seed a stronger, more rooted revival.  

This is the guiding premise behind RaQualia Pharma, a rising Japan-based venture whose corporate logo taps the latent energies of the sun and sea to highlight a new approach to product development in the local life sciences. Primed by the spectacular flameout of industry's biggest recent development failure—Pfizer's torcetrapib—and positioning itself as a game-changing alternative to Japan's "lost decade" of parched growth, the RaQualia business model finds virtue in adversity. Simply put, failure is the stimulus for radical changes in how the research enterprise initiates and executes its mission. President and CEO Atsushi Nagahisa calls it his "stealth advantage" against the competition, noting that, besides being commercially viable as a source of high-value treatments, RaQualia wants to become 

 alternative to Big Pharma's blinded and bloated path to drug development.  

The strategy is also geared to making RaQualia exceptional in the eyes of investors and the larger policy community. The company wants to stand out as an innovator in the process of invention, committed to building a distinct global model from Asia of customized product development geared to the region's unmet medical needs. The message from management is, "Think big." RaQualia is not just another small-cap enterprise struggling to build a product portfolio with other peoples' funds. The additive element is the pressure its very presence places on the conventional wisdom that Japan lacks an entrepreneurial culture, where new ideas fail because the only choice is between the "salary man" culture of bureaucratic malaise or the "samurai code" of winner take all. RaQualia is carving out a third way focused on teamwork, trust, and partnered collaboration to achieve a level of R&D productivity that exceeds what has been possible in Japanese life sciences to date.  

Whether it works or not, the RaQualia model poses a subtle challenge to its industry peers—and to Japanese industrial policy writ large. The question is whether Japan's best days as a pace-setter in medicines innovation are behind it. Or is RaQualia a breakthrough precedent that must be allowed to succeed?   

From a purely commercial standpoint, RaQualia carries the advantage of a running start. Established in 2008, the company began as a spinoff from the decision of Pfizer to shut down its R&D facility in Nagoya. Richly endowed with a staff of more than 400 scientists, the Nagoya operation stood out as a symbol of foreign investor commitment to Japan and at the time was on the cusp of delivering its first global first-in-class medicine, under Pfizer's veterinary franchise. What sealed its fate was the fallout from the collapse of the company's top development target, torcetrapib, a next-generation statin replacement for the $11 billion global blockbuster Lipitor.  

As the on-site head of Nagoya, Nagahisa became a point man for a wave of domestic criticism about the merits of the decision, which came only weeks after top Pfizer management had told local officials that the company planned to increase its investments in Nagoya as one of three global hubs for research. "Pfizer is here to stay" was the ironic PR message before the torcetrapib trial's bolt from the blue. 

Says Nagahisa, "In the midst of realizing I would have to empty the physical plant and lay off 90 percent of our research staff, I thought of the conversations I had with [former Pfizer CEO Jeff] Kindler and the R&D leadership team about the unrealized potential of our portfolio. Specifically, I estimated 70 percent of Pfizer's IP holdings were sitting on the shelf, being neither reviewed or used. In that simple statistic, I detected a potentially useful new business model where we and Pfizer could exploit these IP assets through a spinoff venture in which it holds a minority share while booking royalties from any successful product commercialization." The risk for both parties was low, and the Japanese knew that even the perception of risk pushes many otherwise good deals off the tracks.      

Nagahisa also realized that the closure would create a rare opportunity to selectively choose some of the best scientific talent in the country. In Japan, the turnover that creates a dynamic, flexible base of human assets is missing—workers are protected and employment mobility is discouraged. Participating in a startup was certainly a change from the resource-rich but bureaucratic culture imposed at a distance by a US company like Pfizer. "I started talking to staff and asked them about their experience as Pfizer employees. The common thread was a sense of disengagement. We had scientists spending most of their time doing things mandated by a global rulebook, or because the US management wanted it or it was perceived as our party line for the local constituencies. I said to myself: Where is the accountability? Who carries ownership? Success was defined internally, by meeting targets that guaranteed the annual salary bonus but had little to do with delivering value to the customer."    

A combination of factors resulted in some useful contributions from Pfizer that led to the launch of the new company in February 2008. RaQualia was able to rely on the credibility bestowed by Pfizer's 19 percent equity stake, which brought in two other major investors—Japan's SMBC Ventures and Coller Capital of the UK—and a group of smaller ones for a total cash infusion of just over $100 million. In addition, Pfizer gave RaQualia access to the IP from Nagoya's six discovery and development programs as well as local marketing rights to two of its leading US products, including the blockbuster anti-psychotic Geodon (ziprasidone). In fact, some 95 percent of the new company's pipeline was drawn from the Nagoya file. In a negotiation that took only nine months, Pfizer opted to retain some parts of the Nagoya development portfolio, dividing up the pain franchise while divesting from the entire GI field, which became the centerpiece of the RaQualia research program. Pfizer received the equity stake as well as first-look rights on two early-stage projects.  

Capitalizing on this insider perspective, RaQualia was able to build a development program that connects to the needs of both the local Japanese market—where many common patented medicines are still unavailable to patients—and to broader opportunities in Asia and globally. In March, RaQualia completed negotiations with Meiji Seika Pharma on a license to market Geodon in Japan for the treatment of schizophrenia.  

The biggest asset obtained was human capital. With over 400 scientists at Nagoya effectively out of work, RaQualia was able to vet a strong team of experienced investigators, absent all the management and associated transaction costs associated with the launch of a new venture. In a process that was largely self-selecting, Nagahisa assembled a team of 70 professionals drawn from the 400. The new organization was launched from scratch, drawing in people comfortable with the idea of eliminating the traditional hierarchical divide between boss and subordinate; where there are no mandatory assignments, with voluntary participation on teams; and transparency is the basis for all communication, both inside and outside the company. Nearly four years later, the structure is still very lean, with the original 70 melded into a total work force of just 79 people.  

According to Nagahisa, "What binds this together is a consistent focus on delivering value at every stage of development, from idea to proof of concept and beyond. There is no certification of a colleague's success unless this takes place, whereas in most Big Pharma organizations, your bonus is built around easy-to-grasp metrics like generating five leads in a calendar year. But what does this really have to do with finding and delivering a drug to a patient and payer community that wants it? So all our people work around a very simple standard of performance: creating value outside the company. Value has to be recognized—and as a commercial enterprise the proof point is always with the customer." 

RaQualia has made this outward—and outgoing—approach to new drug innovation the basis of its appeal to investors. "We call it the Integrated Open Collaboration Model," RaQualia strategy adviser Andrew Saidel tells 

. The main elements are 1) a flat management structure, with only one layer of reporting relationships; 2) a single joint approach to the use of internal and external resources;  3) voluntary selection and participation in teams, with employees free to join development groups that interest them; 4) transparent communication and open access to information, especially in relations with outside partners; and 5) consistent, regular monitoring of progress in delivering an agreed value proposition to a defined external audience, at every stage of licensing or development.  

Specifically, the model shuns Big Pharma's tendency to divide work into "high value" and "low value" activities, where the latter is contracted out. Instead, any activity financed through the company is seen as high value. "We just won't do them, under any framework, if they're not," says Saidel.  

In addition, there are no internal "owners" of an innovative idea at RaQualia. Extensive research was conducted on how to institutionalize a culture that encourages innovation based on collective creativity, which led Nagahisa to embrace the work of a leading Japanese organizational expert, Professor Kunio Ito of Hitotsubashi University. Ito's thesis builds on the importance of the "inadvertent encounter" in forcing people to act outside their comfort zone in a decision environment that is constantly refreshed.  

At first glance, this model seems at odds with the ingrained practices of Japanese business culture, which emphasizes group conformity and a low tolerance for risk. But Nagahisa begs to differ, contending that historically Japan is a nimble, adaptive culture with an unusual ability to absorb—and improve—on ideas regardless of source. "Japan has experience in ruthlessly integrating best practices from multiple channels and using that combined knowledge to create new sources of value for the market, a process I call the 'Five I's:' importing, imitating, improving, internalizing, and, finally, innovating."   

What leavens and turns it into the bread of commerce is another Japanese characteristic: 

 or trust. It also translates as being dependable. The self-selected team created from the Nagoya shutdown has largely delivered that, reflected by the group's collective experience in suffering the jolting shock from Pfizer's abrupt reversal of commitments to the local operation.  

Putting the philosophizing aside, a collaborative organizational model helps underpin RaQualia's commercial plan, which is to leverage the inherited Pfizer IP portfolio in small-molecule GI, pain, and anti-infectives, largely by priming them through to confirmed "proof of concept" for shopping among potential local and foreign licensees; then using the revenues from this base to fund original work in other promising therapeutic segments such as cancer, Alzheimer's, and autoimmune disorders. It's a signal that an ambitious agenda built around explicit metrics to show customer value cannot be executed in a silo or bunker.  

 to produce two new development compounds per year, a target that so far has largely been met.  

, to establish strong partnerships in multiple markets: RaQualia has inked some 400 collaborations over the past three years in 17 countries. Earlier this year, the company scored a significant breakthrough with another Big Pharma, joining Eli Lilly in a multiyear collaboration that will explore ion channel chemistry as a springboard for the synthesis of new molecules and ultimately new medicines. "Prospects are obviously long-term, but it's a vindication of our model, as Lilly decided it could pursue this target faster and at lower cost if they did it with us," Nagahisa says.  

, securing an adequate capital base to root the company's independence and finance future expansion. Progress toward this metric was secured in July, when RaQualia successfully floated a 4 million-share IPO, earning a payout of just under $80 million that will keep the company solvent for at least the next three years.  

This is vital, as for now the company relies entirely on licensing, milestone, and royalty income to underwrite its operating costs; it has not commercialized a product for sale on its own. But the fact the company now trades publicly on the JASDAQ growth market exchange in Osaka puts it on a surer footing than many other startups in a high-risk business.  

Nagahisa expressed confidence in RaQualia's portfolio, as evidenced by the successful share offering in July: "We are very excited about the response to our public launch," he said. A pair of EP4 receptor antagonists, RQ-7 and RQ-8, are the most exciting early-stage compounds, with established proof of concept for osteoarthritis pain (RQ-7). Additional proof of concept testing on other indications for both compounds is "ready to start," according to Saidel.   

Still, most of RaQualia's product offerings must confront a crowded therapeutic field—and face significant pricing pressures, as the small-molecule, primary-care delivery model is mauled by payers. Partnerships geared to overcoming these hurdles are critical to softening the burden. So Nagahisa points to a new alliance with a prominent, diversified, and fast-growing Korean company, CJ CheilJedang, to license its in-house drug candidates, an acid pump antagonist (APA) and a 5-HT4 partial agonist, for gastrointestinal reflux disorder (GERD) and other gastrointestinal diseases. The deal capitalizes on CJ Cheil-Jedang's size, market clout, and resources to drive the manufacture and promotion of this novel therapy to a potentially wide market in Korea, as well as eventually in China, Taiwan, India, and Southeast Asia—the other countries where RaQualia has transferred marketing rights.  

In return, RaQualia will continue to build value for the two compounds by conducting studies in the US and Europe. For example, clinical studies using APA have been shown to improve the standard of care within the PPI class, including better patient response at first dosing, improved efficacy when taken at nighttime, and tolerance on an empty stomach, without common side effects. RaQualia is interested in exploring similar deals in China, as well as other countries in Asia and the developing world.  

RaQualia's organization is a visible experiment that challenges the notion of Japanese reticence toward an entrepreneurial class. But there's not a lot of risk involved, and that won't tickle the fancy of some analysts and investors. "The pipeline agents RaQualia possesses are either a rank below first-in-class in their respective spaces, like ziprasidone, or very small product franchises in geographies outside Japan, like Eraxis," says Raghuram Selvaraju, senior VP and senior biotechnology analyst at Morgan Joseph TriArtisan. "I don't believe that these drugs are likely to become blockbuster franchises in the Japanese market," where drug approvals are slow and regulators are focused on increasing generic drug utilization. Even so, the company's commitment to quality and steady, continuous development may clear the path for innovation. Ultimately the market will decide. 

Pharm Exec sits down with CEO Atsushi Nagahisa to explore how culture can maximize the value of an inherited portfolio

RaQualia's New Spin on the Startup

When European scientists needed to quickly understand the genetic structure of a deadly new strain of 

 bacterium sweeping through Germany this past summer, they turned for aid to what might have seemed, at first blush, an unlikely source: a company headquartered behind a truck repair depot in a former smuggler's village in Southern China.  

Yet BGI, formerly known as the Beijing Genomics Institute, has quietly become one of the world's most powerful sequencers of genetic structures, a key skill that will help diagnose disease and build biomarker maps that could lead to breakthrough drug developments. Not only did BGI help European health officials decode the strands of the mysterious bacteria in a mere three days, its analysis also concluded that this strand—which killed 17 people and sickened more than 1,000—was both new and super-toxic. 

Based in the Yantai district of Shenzhen, about an hour's drive from Hong Kong, BGI now houses the world's most concentrated array of powerful genetic sequencers, and aims to become the "sequencer of choice" for drug firms and disease fighters across the globe. It is also moving aggressively to develop a proprietary software platform that genetic scientists would call upon to unravel genetic mysteries and speed development of new drugs. "We intend to build the platform the rest of the world's scientists will use," explains Yang Huanming, one of BGI's founders. "Our goal is to sequence anything and everything in the world." 

At a time when the life sciences industry in the West is beset by patent cliffs, rising regulatory hurdles, and the declining productivity of its research and development pipeline, China's life sciences industry is quietly gathering a critical mass of skilled talent, and savvy and focused venture investors, all tied to increased support from the Chinese government. While BGI remains a private firm, its top leaders candidly acknowledge they could not grow as quickly without the financial support of the government, which has grown to recognize that the life sciences industry offers the nation breakthrough opportunities in drug development and innovation.  

Investments in new life sciences labs, biotechnology parks, and incubators fit nicely into its goal to see the nation transformed from a low-wage manufacturing power to a source of high-value "indigenous innovation." China's next five-year plan will allocate at least $1.5 billion to stimulate cutting-edge biological research. Provinces around the country are offering incentives to expand the more than a dozen life science research parks that are already up and running. At the same time, policymakers are looking at innovative ways to launch electronic medical records as a critical tool to manage patient needs, with an aspiration to create a vast source of clinical data. 

Today, firms like BGI are able to win support from the Ministry of Science and Technology (MOST) for some of their most ambitious endeavors, even as they create partnerships with top domestic and foreign research laboratories. More than simply building hospitals and funding labs, however, the Chinese government is using its so-called "Thousand Talents" program to actively recruit top Chinese scientists and business experts who have trained in the West, incentivizing them to return to their homeland.  

The effort to woo Chinese into returning home is taking place at a time when many Western firms are being forced to reduce their spending on R&D. A survey published last fall by Monitor Group estimated that at least 80,000 Chinese-born, Western-educated PhDs have chosen to return home after studying and working in Western pharma firms. With access to venture capital and business experience in the West, they hope to leverage China's raw talent and cost-effective laboratories to rapidly develop and test promising molecules. 

As Western firms are beset by the high costs of conducting clinical trials at home and rising failure rates for potential drugs, many are now discovering that China offers significant cost advantages. A new cadre of clinical research organizations (CROs), led by Wuxi Apptech in Shanghai, is working closely with Western firms to accelerate drug development and lower the cost of moving new therapies from lab bench to bedside. Until recently, winning approval for drugs in China took far longer than in Europe or the US—a legacy of China's past, when it focused primarily on screening established generic drugs. But the State Food and Drug Administration (SFDA) is indicating that it will begin to loosen standards for first-in-human drug trials and for accelerating the use of Chinese patients in global clinical research trials. 

Already, the rapid outsourcing of clinical trials from Western labs to Chinese-based CROs is helping Chinese researchers gain deeper experience in working with Western models of drug development and raising their credibility. The "cheaper and faster" differentiator that led to the first boom in CRO investment is also likely to lead to knowledge-based improvements, as clinical centers rapidly move "upstream" into more basic research and discovery. 

BGI hopes to make its mark combining basic research collaborations with innovations in "pure science," while earning funds through collaborations with more established firms. "This is big science, which requires attacking genome sequencing in an industrial way," said BGI co-founder Yang Huanming, who earned his PhD from Copenhagen University in 1988 and received his postdoctoral training in France. "Only with a large scale can we do big jobs at relatively low cost."  

But BGI is also investing aggressively in developing the software needed to better analyze the output from raw genetic sequencing. To that end, it is hiring dozens of young software and computer engineers to help build a sophisticated platform to analyze the torrent of data its genetic sequencers are uncovering. Many of these are computer "hackers" who lack formal education but have become highly skilled in understanding and writing sophisticated computer code. 

"This field is so new," Dr. Yang explained, referring to the rapid sequencing of genetic code and the need to build the best software to read it. "It makes sense to hire raw and talented computer experts who are ready to accept risks and try new experiments to find breakthroughs." 

While China's rapid acceleration toward life sciences leadership is impressive, a myriad of obstacles remain. The speed at which China addresses these issues will determine the pace of its global impact on the industry. 

 If the future lies in biologics, China will need a clear regulatory pathway that drug developers can follow. And it will require more than the current handful of experts at the SFDA Center for Drug Evaluation in order to evaluate new large molecules.  

 Delays of 12 to 18 months for permission to conduct clinical trials represent a major challenge to the speed of drug approval. SFDA is working to accelerate the current timeline, but at the same time the agency is debating fundamental changes in its overall approach. Such changes may allow Phase III trials to act as the first step in a progressive launch that covers an increasing number of hospitals and patient conditions with rigorous, ongoing post-launch surveillance. 

Will big investments in infrastructure carry the day in positioning China as a global drug innovation powerhouse?

Pharmaceutical Executive-12-01-2011

Pharmaceutical Executive Digital Edition - December 2011

Artists & Ad Men

Pharm Exec's 2012 Pipeline Report

FDA Gets a New Look

UK Report: Keep Calm and Carry On ... Differently

The Payoff for Payers

Give It to Me Straight!

RaQualia's New Spin on the Startup

China's Future in Bioscience

Europe's Transparency Directive Revisited

DW Languages – Rebuilding the UK Word by Word

The Medicines Adherence Challenge

Was 2011 the End of the Beginning?