Business minded

Raafat Fahim of Nabi Biopharmaceuticals explains why a more efficient business model is needed to cope with the increasing challenges within the industry.

“To me innovation is that it has to be a huge unmet medical need with huge market potential and not crowded”
-Raafat Fahim

Raafat Fahim has long been a fixture in the pharmaceutical industry. Prior to his role at Nabi Biopharmaceuticals he held a 14-year tenure with Aventis Pasteur before it became a part of sanofi, and it was here in the leading vaccine manufacturer of the world that he developed his concept of developing research to market. By converting research findings into manufactured solutions and implementing them into the market, Fahim found a more efficient business model to cope with the rising industry challenges.

He attributes much of his thinking to his time at Aventis Pasteur: "It certainly provides a wide scope of experiences that I'm using today in my current role as Chief Executive of Nabi - a biotech with a vaccine development pipeline. In this I am able to interact and use my experience in the many areas that Nabi needs, both research and development, as well as from a business development perspective," he explains.

Challenges

Now is the time a wealth of experience is needed to cope with the industry's challenges. Bioinformatics are enabling researchers to identify more numerous and complex targets than ever before, and pharmacies are finding that they're also unusually constrained in their ability to turn research findings into manufactured solutions through the market. Although R&D is much further ahead in its game than manufacturing and not facing the constraints of regulatory processes, it still has its hindrances. Fahim explains that on a daily basis certain things may work in a good way but are often unable to be applied in practice due to regulatory constraints; the rigorous side to this is ensuring that manufacturing continues consistently and in a compliant way.

"Compliance is one of the biggest elements facing biotechs. They innovate very well, but then when it comes to regulations and compliance the brakes are put on their development simply because of the need for a rigor in manufacturing. These are the kind of things that one faces on a daily basis. Having the technology is one thing, but what you can do with it is another. For the most part pharmaceutical companies, and in my case vaccine companies, have understood, digested and accepted that it's a reality and are coping with it reasonably well for most of them."

Fahim points to the example of when this occurs: the concept can be invented in a short period of time but then it often takes five or six years to go through the various stages of regulatory and compliance process. "You can have an idea of what works or you've tested in the lab and in small animals and maybe discovered in a couple of years, but then it takes you another six years to get to the stage where you can apply for marketing authorization," he explains.

This is usually a problem for small biotech companies and this is often an area in which they don't excel in, he says, as the company is unlikely to be developed for manufacturing or engineering but for discovery and research; what Fahim describes as "the fun part". The problem is a practical one that all biotech companies face and each must endure the necessary length of time to go through the regulatory process to arrive at the final stage.

"The best advice one can give is to realize what you don't know very early on," says Fahim. "Most companies, when they get early successes in research and discovery, think and believe that now they can do anything and don't recognize that getting to the next stage of manufacturing, compliance and the regulatory process is actually a completely different set of expertise that you need to start preparing for earlier. That is probably one of the biggest problems facing most small biotech companies, that they don't realize early enough what they don't know and the experience they lack within the company."

This is not the only challenge facing small biotech companies; the pharmaceutical industry also has to face problems within pharmacies' supply chain. Fahim notes efficiency as one challenge; the pharma industry, although it has grown substantially in recent years and is recognizing it is now well established, still remains far less efficient than other industries. He points to the automotive industry, as well as the chemical and food industries and the success in these in getting the supply chain down to the minor details.

"The pharmaceutical industry has enjoyed, for a long period of time, a reasonable return on investment and a reasonable margin for their product, and they were less concerned about cost and efficiency. They recognized that a few years back, but are not yet at the stage that they could be or should be, from my perspective anyway," he says.

"There is no doubt it will change. That I can guarantee you because with the pressure on the pharmaceutical industry to control costs, they are now recognizing and facing quite a bit of challenges to become more efficient. And they are actually coping with it now and addressing it in a big way. They are taking the right steps, maybe a bit later than they should have; but nevertheless they are doing that now."

Efficiency

Driving efficiency within Nabi is of primary importance to Fahim. Still in the development stage, the company is preparing itself for consistency in manufacturing and preparing for commercialization. The first stage is ensuring the drug can be produced correctly and with equality, and the second stage is then to drive consistency, he explains. Nabi has not yet had to face the second stage, but Fahim has already begun examining it; his previous role with Aventis Pasteur taught him to look at such issues very carefully.

"I started to look at that and see how we can do it in the future but I don't have to face it for another two-to-three years or so, fortunately for me. The most important thing for us now is to make sure we can do it and to make sure that I can produce the material. Efficiency becomes a secondary issue at this stage but planning for efficiency is definitely important.

"We're now looking at the supply chain, what is the best way to handle the various contract manufacturing organizations that you're working with to make them more efficient then to be responsive to the needs that we have in the future. So you can consider that we are in the planning phase, as opposed to the implementation phase today," says Fahim.

Economic recession

There are certain challenges that face every pharmaceutical company, regardless of size or stage of development. The economic recession impacted the ability of companies to ensure the security or consistency of supply chains and has driven home the need for efficiency in a big way. Pharmaceuticals and biotechs may be two completely different industries but the challenges they face both derive from the same financial dilemma. The pharmaceutical industry has seen the big issue of control of costs and pricing of pharmaceuticals whereas within the biotech industry this is much more dramatic. The pharmaceutical industry is still reasonably profitable but the biotech industry is less so.

"The pharmaceutical industry is one of the industries that has been least impacted, so to speak, by the financial crisis, although they are facing the challenges themselves. For biotech, however, it is dramatic," says Fahim. "If a biotech company is now wanting to raise money for the next stage of development or discovery they are doing, it is almost impossible to get anybody to back it up now. 

"So many companies have actually gone bankrupt, even though they have a very good product, or sold their companies or products at a significantly reduced pricing simply because they are unable to continue to develop. That's a major problem that we're currently facing. We were fortunate that we had cash in the bank so I didn't have to go and raise money otherwise I could be facing the same fate as others have."

Without money in the bank Fahim explains that the situation is nothing other than a crisis. He advises that if a company has product but no cash, the most feasible move would be for them to partner with larger pharmaceuticals that may be interested in their technology. This is often easier said than done, with large pharma companies wanting to take advantage of the smaller companies dilemma and wait for the price of such a deal to become cheaper. Without public funding or private backing there is little option other than a partnership.

One big issue shaping the industry is the number of acquisitions that have been conducted recently, Pfizer and Wyeth being just one example. But is this proving to be a help or a hindrance during these difficult times? Fahim states that he prefers to be the optimist, advocating that the trend is not necessarily a bad thing and not one that will necessarily stifle innovation. "It may actually make it more efficient," he says. "And in the current realities of price control of pharmaceuticals, that is a very good thing. That's one way to cope because the pharmaceutical industry has been inefficient so far. 

"To drive efficiency is very good. Now, does it impact negatively on innovation? It potentially may have a negative impact, but the overall impact would be positive, in essence, and would drive more efficiency in the pharmaceutical industry. It's not a bad trend. It depends how far it goes. You don't want to end up with one huge pharmaceutical company in the world, and we have regulations in place to prevent that from happening.

Ensuring that smaller companies can still compete against these merged giants is innovation, says Fahim. He notes that there is no longer any doubt that large pharma's ability to drive innovation fast or wide enough is stunted compared to the past. "Each one of them was fully dependant on their own organic growth for innovation. It is clear that they have failed miserably.

"They have a huge infrastructure that makes the cost of innovation very, very high, stifles innovation with the various committees that they had too, and the various triage of projects that they have. On the other hand, the biotech has shown, categorically, that it can develop very fast and in a nimble way all the innovation. That's why they've been gobbled up by the big pharmaceutical companies, be it the products or the companies as a whole. So there is no doubt that biotech has driven innovation over the past 15 years and will continue to do that in the future."

Innovation

Innovation is essential for a company to stay ahead of the game: it has proved to be a critical piece of the drug discovery model. Fahim explains that at the centre of Nabi's innovation is a drive towards areas that are of significant unmet medical need and that are unique. "I can go and discover the next antibiotic, but guess what; there's a lot of other companies doing the same thing.

"The best way for a biotech to be unique, and survive and strive isto get into areas where there's still significant unmet medical need but not very crowded. The vaccine that we are looking at within Nabi, which I consider to be a very good example of that unmet medical need which is not crowded, is a nicotine vaccine. 

"There are still 1.3 billion people smoking in the world and we know how bad smoking is.  And, therefore, a nicotine vaccine, which is a unique technology and a unique drug is a huge unmet medical need with huge market potential. We are the leaders; so obviously, we have found that area to be attractive very early on. 

"The other vaccine we have is against the flu coccus aureus, which is the super bug everybody hears about. Again, there is no vaccine on the market for it, so it's a huge unmet medical need, has huge market potential and is not in a crowded area. To me innovation has to be a huge unmet medical need with huge market potential and not crowded, so you can make your mark in the field."

Driving and managing that level of innovation throughout the company is Fahim's responsibility as CEO. The best way to do this, in his opinion, is to ensure that the scientists have enough freedom to develop the concepts and ideas they have, although this is often prohibited by the constraints of costs and resources. If possible, this is the model he believes to work well. A very heavy structure will stifle innovation, which is to be avoided at all costs.

Fahim explains that efficiency is the future; the most important development for the pharmaceutical industry over the next few years is to drive efficiency and become lean in the supply chain. He argues that the examples of extracting a lot more cost out of the current state of inefficiencies are plentiful. "It's a wise thing for the pharmaceutical industry to start paying even more attention than they are today to the current potential for more price controls over the industry. That becomes, probably, one of the biggest things they need to look at carefully," concludes Fahim.

Raafat Fahim is President and Chief Executive Officer, Nabi Biopharmaceuticals. He most recently served as Chief Operating Officer and General Manager. His career includes 14 years with Aventis Pasteur where he developed several vaccines from early research to marketed products.