Survive and Thrive

Growth is the magic word. In November 2006, Schering-Plough dedicated a new scientific research facility in Cambridge, MA. The new state-of-the-art laboratory, aimed at developing a portfolio of small molecule drugs, provides capacity for approximately 200 scientists and support staff, up from about 80 at the prior Cambridge location, and more than triple the amount of laboratory space.

Schering-Plough is also making a substantial investment to create a pharmaceutical sciences center and an office campus in Summit, NJ. A new 200,000 square-foot Global Clinical Supply facility on the site will contain a pilot plant where medicines for clinical trials will be produced.

With annual R&D investments of more than $2 billion, Schering-Plough Research Institute’s (SPRI) current research programs are focused on the discovery and development of new small molecules and biologics to treat various cancers, infectious diseases, acute and chronic respiratory conditions, inflammatory diseases, cardiovascular and metabolic diseases, and neurodegenerative diseases. “Our CEO and Chairman Fred Hassan has clearly stated that R&D is the engine of our company and that a steady flow of new innovations will define our success” says Koestler. “Today, we are investing more as a percentage of sales than any of our peers in R&D – and our entire corporate top management team feels shared accountability for getting the most out of that investment,” says Dr. Thomas Koestler, Executive Vice President and President of SPRI.

“We focus much of our research efforts on molecular targets that have the potential to become sources of drugs for multiple therapeutic areas, including areas of primary care as well as the specialty business areas,” he adds. “This involves both small molecules and biologics. We have called this a dual discovery approach because it provides a greater opportunity to modify disease pathways.”

Biologics

In 2005, Schering-Plough solidified its commitment to the development of biologics by combining its two research sites in California to form Schering-Plough Biopharma in Palo Alto. The laboratories of Canji, Inc., in San Diego, acquired in 1996, and Palo Alto-based DNAX Research Institute, acquired in 1982, joined together to focus resources on the discovery of novel monoclonal antibodies and therapeutic proteins. Together, these teams harness their strengths in inflammation and oncology research to move important biologic products into the clinic.

“What’s unique about our situation is that we source our innovation targets, both with small molecules and biologics, because in many cases you can have an interesting pharmacologic target that is amenable to a small molecule but may not be amenable to a biologic and vice versa. We basically get the benefit of both in enhancing our probability of success that we can bring forward a potential product innovation,” Koestler explains.

In addition, Schering-Plough acquired NeoGenesis in 2005, which enabled the company to take advantage of the company’s Automated Ligand Identification System (ALIS), a high-throughput screening technology. “By and large, our approach is very simple: it’s a balance of small molecules and biologics, and that’s how we source our innovation and our drug discovery efforts,” summarizes Koestler.

Promising acquisitions

Schering-Plough’s expansions and acquisitions mirror its recent transformation from the troubled child to the rising star of the drug industry. Looking back, the company lost patent protection for its blockbuster Claritin in December 2002. Annual sales of the histamine H1 receptor antagonist, which up until then had been over $3 billion, dropped. The follow-on prescription medication, Clarinex, which was supposed to replace Claritin, was delayed by the FDA. As a result, Schering-Plough faced generic competition as soon as the drug went over the counter.

Five years on, the loss of Claritin has been overcome. And just like the big players, Schering-Plough is attempting to make big business. With the upcoming $15 billion acquisition of Organon BioSciences, that business may just be on the horizon.

“This is very exciting,” says Koestler. “The acquisition will add five phase III compounds to our pipeline, which is significant. In addition, prior to this transaction we were looking for brick and mortar that would enable us to have commercial scale capability to produce large-scale batches of monoclonal antibodies. The acquisition provided a great solution because Organon has a state-of-the-art, 25,000 liter capacity, brand new GMP-authorized facility that really fits our needs.”

Another point, Koestler adds enthusiastically, is that Organon BioSciences gives Schering-Plough a jump start on being able to get into the human vaccine business. “This primarily stems from technology in their animal health R&D. The animal health vaccine technology enables it to be transitioned to a human vaccine technology capability; they have several early phase vaccines in their clinical development, which is something that we’re very interested in,” he explains.

Organon BioSciences also brings two new areas of discovery research to Schering-Plough. One is women’s health, the other one is central nervous system. “Organon have a long heritage in CNS, primarily in psychiatry and anesthesia. That’ll complement our efforts on the neurology side of the CNS equation quite nicely. But together, we have increased depth and scope in our R&D operation. There’s very little overlap between R&D in Schering-Plough and that in Organon BioSciences and that’ll enable us to have a very successful integration going forward.”

Listen and learn

The benefits of buying the human and animal health business of Dutch chemical giant Akzo-Nobel are clear. But what about the challenges inherent in integrating one company into another? “I look at these more as opportunities than as challenges,” Koestler responds optimistically. “When we’re talking to our colleagues at Organon BioSciences – and we expect this transaction to be complete by the end of the year – we go through a very regular process called ‘listening and learning’. So we listen and learn about how they run their operation, how they do their research and their development. It’s been a very healthy and valuable interaction so far.”

It’s not the only collaboration that’s proved productive. The joint venture with Merck has transformed Schering-Plough into a global leader in one of the world’s largest therapy markets: cholesterol management. Vytorin and Zetia were the only major cholesterol lowering brands to grow their US market share in 2007. Zetia, by itself and as part of the fixed-dose combination Vytorin, currently generates combined annual sales of almost $5 billion for Schering-Plough and Merck.

“The Merck collaboration also signals to the outside world and other potential partners, whether they be small biotech or large pharma, that Schering-Plough is a company that can successfully be partnered with in order to really leverage and to get the maximum benefit out of a product,” Koestler points out.

Merck, for sure, seems convinced about that. In a second part of their joint venture, the two companies concentrate on a single tablet that contains the active ingredients of Claritin (loratadine) and Singulair (montelukast sodium) for the treatment of allergic rhinitis symptoms. In August 2007, the New Drug Application (NDA) filing for loratadine/montelukast was accepted by the Food and Drug Administration (FDA) for standard review. Schering-Plough and Merck are now seeking marketing approval of the fixed combination.
The company also shares a project with Johnson & Johnson. “This is a late phase III program for a follow up product to Remicade, called golimumab,” says Koestler. In November 2007, Schering-Plough and Johnson & Johnson unveiled positive new data from two late-stage studies of the experimental anti-TNFα therapy designed to treat conditions related to rheumatoid arthritis. If approved, golimumab would join the ranks of other biologic blockbusters such as Remicade, Enbrel, and Humira.

Schering-Plough also has a respiratory partnership with Novartis. “That’s for two programs. One is a major phase III program, which is the fixed combination product of mometasone, our proprietary, best-in-class steroid, and formoterol, one of Novartis’ long-acting beta-agonists. The other program is the fixed combination of, again, mometasone with Novartis’ new long-acting beta-agonist indacaterol, which can be dosed once a day. Together, we’re using it in our Twisthaler technology, which is a dry powder inhaler. It’s a great combination, and I think that we’ve demonstrated, now on multiple fronts, that Schering-Plough is a very good partner,” Koestler emphasizes.

No doubt about it. R&D has clearly recovered from the blow of losing its blockbuster. Has it also recovered from the other woes that were troubling the company? When Koestler joined Schering-Plough in August 2003, it had to deal with a $500 million FDA fine for breaching good manufacturing practices. “Here’s what I would call a challenge,” Koestler admits. “The company at that point was strapped for cash. But despite that, Fred Hassan and our entire top management team believed strongly in the importance of investing in R&D. We all understood that that’s one area we can’t sacrifice. In fact, with the new management we actually wanted to put more emphasis into R&D. So we took a hard look at that.”

However, Koestler continues to say, the consent decree, which involved the company’s compliance with current Good Manufacturing Practices (cGMPs) at manufacturing facilities in New Jersey and Puerto Rico, created a very risk-adverse culture in the organization, and particularly in R&D. “One of the challenges was to provide a more stimulating opportunity to get people focused back on drug discovery and more importantly, drug development, to bring forward some of those important assets that were sitting on the shelf for many, many years. And we were able to get our team motivated and solve some earlier problems by creating opportunities to get, for example, Asmanex approved, where previously it had been under as many as five regulatory review cycles. We were finally able to get the right people and the scientists together in a shared accountability concept that enabled us to successfully get that drug approved and launched into the marketplace; we’re very proud of that,” Koestler adds.

Shared accountability

As part of its turnaround agenda, Schering-Plough put in place a new company philosophy, ‘customer centered product flow’ (CCPF), which is a system of shared accountability. “This has enabled us to use our leader behaviors in such a way that we get alignment across the organization – and I mean across the entire organization, whether it be in our supply chain, whether it be in toxicology, or whether it be in the clinical development or medical affairs area. By having our CCPF concept in place and training people into that system, we overcame a lot of the previous issues that the company had struggled with for many, many years, namely a relatively sparse amount of productivity coming out of the R&D organization.”

The company’s new emphasis on R&D has put Schering-Plough back on track, with more than 20 compounds in early development, 10 in phase II, including two designated for fast-track status, and two others that were also designated by the FDA for fast-track status and have just transitioned from phase II to phase III. “The first one is our oral thrombin receptor antagonist (TRA), for which we demonstrated in phase II that it did not create any clinically meaningful increase in bleeding on top of the standard of care. What was most striking about this, we were also quite pleased with the fact that we saw a 52 percent reduction in periprocedural myocardial infarctions. Now,” Koestler adds, “this was not statistically significant because of the small numbers and the fact that these phase II trials were not powered for that; but, again, it’s a favorable signal that we’re going in the right direction, which makes us very confident about moving into the phase III setting.”

With the TRA program, Schering-Plough is embarking upon one of the largest trials it has ever conducted. “There are two pivotal studies, one in nearly 10,000 patients with acute coronary syndrome; and one in nearly 20,000 patients for secondary prevention. Our TRA is a very novel and unique mechanism of action. If it can help patients as is hoped, it would be a product that’ll be positioned on top of standard of care. So this could be a potentially transformational product for patients with acute coronary syndrome in the future,” Koestler hopes.

The other phase II to phase III transition is vicriviroc, a CCR5 receptor antagonist which blocks the HIV virus from gaining entry into the circulating white blood cells. “We’re excited about this program because we have shown that we get a highly durable and sustainable suppression of HIV virus in patients now studied up to two years,” Koestler accentuates.

A growing pipeline

Upon close of the Organon BioSciences acquisition, there will be more than 10 potentially important new projects in Schering-Plough’s late phase pipeline. “In our industry, that is a lot of products to have in your late phase pipeline,” Koestler states. “What comes with that, of course, is the opportunity and the challenge to develop those successfully. So we have been taking a number of steps to enhance our processes here at Schering-Plough, for example what we called ‘high-throughput clinical’. This will enable us to get the kind of patient flow into our clinical trials, so that we can successfully contribute to completion of these late phase clinical studies. It’s an abundance of riches in many respects to have that many significant products in the pipeline.”

As in 2006, Schering-Plough expects to invest more than $2 billion in R&D in the years to come. The future, Koestler says, will be exciting. Many of the key products in the company’s R&D portfolio are patent protected until 2014 and beyond. This, Koestler believes, enables a consistent investment in R&D productivity and hopefully a sustainable product flow for the future when current products lose exclusivity. With the company’s own and external innovations to rely on, the stronger trends of the last three years looks to continue, and even skeptics are starting to come around. “The nature of biopharmaceutical R&D is that there are a lot of risks and a lot of failures for every success. But we feel good that we have the rich flow of innovative molecules, the right processes and the right people to get more shots, and get more of those shots on goal.”

About the contributor

Thomas P. Koestler is Executive Vice President and President of Schering-Plough Research Institute (SPRI). With a PhD degree from the State University of New York (SUNY) at Buffalo, Roswell Park Memorial Institute, where he studied medicine and pathology, Koestler held several positions at Smith Kline and French Laboratories, BristolMyers Squibb, Johnson & Johnson and Sandoz/Novartis. Koestler was Senior Vice President and Head of Global Regulatory Affairs for Pharmacia Corporation before joining Schering-Plough in August 2003.