The Pursuit of Productivity

Dr. Steven Paul, EVP for Science and Technology and President of Lilly Research Laboratories, reflects on the overall state of the industry. The pressures inflicted by rising costs and sliding R&D productivity, and the future direction biotech and pharmaceutical companies need to take.

“We’ve got a mantra of reducing the cost per NME from about $1.2 billion to about $800 million within the next four years and that will dramatically allow our R&D budget to go further”
-Dr. Steven Paul

For biotech and pharma companies alike, the elephant in the room is – and has been for some time – R&D productivity. While many are apt to attempt to address the daunting challenge of raising waning R&D productivity levels, it’s a problem that just won’t go away.

As the head of research at Eli Lilly, the fifth largest biotech company, Dr. Steven Paul echoes the sentiment that pervades the industry. “One of the greatest challenges that this industry faces has to do with R&D productivity – our ability to translate the fruits of the biomedical research revolution over the last 25 to 30 years into tangible new medicines – medicines that will treat and ultimately prevent or cure disease. The challenge is being able to do this in a cost and time-effective way. The current cost per new drug is estimated to be somewhere between $1.2 and $1.5 billion to launch a new medicine.”

Pricing pressures set against the backdrop of the proliferation of generic drugs today in the US have created a different playing field; while generic drugs steal the thunder from once-blockbusters and the big pharmas who poured research dollars into bringing the drug to market, their existence also helps to keep prices low and affordable for those in need of medicines.

In short, the role of generic drugs can be perceived as both the boon and bane of the industry, depending on which way you look at it. Paul estimates that 60 percent of new prescriptions written in the US today are for generic drugs. “What’s happening now is the bar is going up on the definition of innovation. One can’t produce a drug that’s too similar to generic drugs because there’s not going to be a market for such drugs, which is unfortunate because sometimes you don’t know whether a new statin or a new antidepressant is going to be better than the generic ones.”
Amid rising pricing pressures and the heightened definition of innovation comes the call for R&D organizations to drastically improve the efficiency of the drug discovery process. “If the cost for discovering new medicine were to escalate as it has been over the last decade and continue at that trajectory – even despite the incredible science we have at our disposal – it may prove from a business perspective fundamentally unsustainable,” Paul explains. “That sets the framework for what we have to do and so companies – and Lilly has been at the forefront of this – have been working on ways of improving R&D productivity and bringing down the costs.”

The problematic phase II
Escalating attrition rates are one of the greatest challenges today faced by the industry. And in certain phases of drug discovery and development, the attrition rate is still moving up rather than down, particularly in phase II.

Paul elaborates on the realities around the narrow chances of a drug succeeding from the beginning pre-clinical work. “When we bring a drug candidate from the laboratory, we get very excited because our pre-clinical data suggests that this drug might cure cancer or prevent Alzheimer’s disease – we have drugs in our pipeline that we believe may do both of those things. We bring them into the clinic and at that point a drug has really only about a one in ten chance of actually meeting all the requisite criteria for safety and efficacy.”

Phase II is the critical phase that has the industry worried the most. While the statistics vary depending on the company and the disease, attrition rates in phase II can be harrowing. “Right now there are some companies where the probability that a drug that enters phase II will actually get to phase III is only about 25 percent,” Paul explains. “Said another way 75 percent of drugs that enter phase II fail.”

Paul attributes the rising phase II attrition rates that he’s witnessed due to the fact that they’re pursuing drugs with more unprecedented targets with more unprecedented mechanisms. Thus a significant amount of their efforts are directed at reducing attrition in this delicate phase. One approach that Lilly applies to most of their compounds is establishing a proof of concept, typically in phase Ib or phase IIa. “Here we will often do a study to try to determine whether the mechanism we’re pursuing might work or not because we want to resolve uncertainty around that as soon as we can; we don’t want to wait until a drug gets into phase III and find out a drug doesn’t work at all.”

Phase III is also a troubled area with a high attrition rate, with only about half of the compounds succeeding. A fifty percent attrition rate is still way too high in comparison to the cost involved in putting a drug through phase III. “That is really a problem because the unit cost – how much it costs to keep a drug in phase III on an annualized basis can be $30-50 million per year per drug,” Paul explains.

The key to improving attrition rates in phase II and III is reducing uncertainty as early as possible in the process. “You need a lot more molecules so you can resolve uncertainty early and only then move those into phase II and III that have a much higher probability of technical success,” Paul explains. “It’s all about making sure that if you’re making a major investment in a molecule in phase III, the chances that that molecule is going to make it is well above a 50/50 coin flip at that point.”

Reducing cycle time
The other key area is simply reducing the cycle time required to move a drug from one stage of discovery to the next. “How long does it take to get a molecule from candidate selection where a drug is selected by the discovery group in the lab to the first human dose?” Paul asks. “If that takes you two years and you can reduce that to one year, the amount of money you’re spending in that phase can allow you to do twice as many things.”

Lilly has identified reducing cycle time as a very important industry initiative. Paul estimates that cycle time is close to 15 years from a project inception to a molecule launch, with ten years solely in clinical development. “We’re using Six Sigma process improvement technology to reduce non-value-added work and steps that we’ve traditionally used in drug discovery and development that are not necessary to dramatically reduce cycle time in various phases,” Paul says. “We’re beyond beginning those initiatives and so they’re starting to bear some fruit.”

Lilly is also devoted to reducing attrition using a variety of other mechanisms. “We’re using all kinds of approaches including new technology, biomarkers, surrogate markers, and brain imaging, which we use extensively at Lilly because we’re a big CNF compound company,” Paul explains. “So answering questions like does the drug even get into the brain, does it get to the target, does it occupy the target at a dose that we believe is safe that we can go into the pivotal trials with in phase II?”

As one of the biggest diabetes companies, Lilly also employs biomarkers for testing diabetic patients early on to determine if a drug lowers blood sugar. The probability for technical success increases greatly once there is an indicator of lowered blood sugar levels. While some areas like cancer have proven the use of biomarkers to be more difficult, Lilly still employs a variety of approaches to determine efficacy at the earliest part of clinical testing possible.

Broader R&D initiatives
Aside from improving attrition rates and quantifying drug success likelihood, larger industry trends are also playing a role in the improvement of R&D productivity. One of the largest and most obvious trends is globalization among the industry. Harnessing the collective intelligence and capacity of science around the world is a significant step to progressing individual company drug discovery along with advancing global development of medicines.

Lilly is highly involved in globalization – having already made investments in Singapore, China and India. In March, Lilly announced a $150 million expansion over the next five years of its drug discovery research activities at the Lilly-Singapore Center for Drug Discovery. The additional investment comes after its success in biomarker research and information technology tools development carried out at the Singapore facility. Moving forward Lilly hopes to leverage the center to further expand its biomarker and drug discovery capabilities, primarily in cancer.

Despite the well of scientific resources at Lilly, the company recognizes the benefit and the need to leverage the expertise of the multitude of scientists scattered across the globe. “We have well over 7000 scientists at Lilly but we need to tap into the hundreds of thousands of scientists that exist outside Lilly to provide the kind of value we need to the drug discovery and development process,” Paul says. “There is an emerging critical mass of very fine scientists in Singapore but there are tremendous opportunities in India and China as well. We sort of adhere to the Tom Friedman of the world is flat and it’s been increasingly globalized and linked through informatics and Lilly is tapping into that.”

Tailor-made drugs
Another pending trend is the evolution of medicine towards tailoring. The concept of tailoring is very important, as it narrows the patient population down to those who will more than likely respond well to the drug and it also reduces the number of patients who may not benefit from the drug but may be exposed to the side effects as well.

Thus Lilly is intent on identifying subgroups for dramatically improving patient response. “What we are attempting to do with all our medicines now is finding those subgroups of patients that respond much better to our drugs – to call out the 30 to 50 percent of our patients that have really good responses to our drugs or reduce the number of patients who may or may not respond but may have a side effect or an adverse event associated with the drug,” Paul explains.

He views the concept of tailoring as extremely important to the future of the industry, and tailoring their medicines is currently one of Lilly’s primary goals in order to improve patient response and to increase overall the value proposition around their medicines. In some instances, tailoring may be extended to targeting. “For example, in our cancer program we actually now look at various tumor tissues,” Paul explains. “If you take something like breast cancer or colon cancer, it turns out that subsets of patients have different types of colon cancer or breast cancer, and they’re caused by different changes in genes and gene expression. Now we’re actually sequencing the genes in these tumors and coming up with subsets of patients.”

“For example, we recently found a gene in a particular type of enzyme that’s mutated in about 10 percent of patients that have various forms of cancer,” Paul explains. “Now our belief is that if we get a drug targeted for this particular enzyme, it will work but will probably work well in those 10 percent of patients. So, we’re going to develop this drug but we’re going to develop it very differently than we would without this information. Instead of giving it to all patients with breast cancer or all patients with colon cancer, we will test the cancer and make sure that they’re in that 10 percent and then we will design our clinical trials to try to treat, cure or prevent the cancer in those patients.”

The advantages to tailored therapies are endless. “We should get a much more dramatic response of the drug – the patient’s disease should be much more dramatically impacted with this drug,” Paul says. “We can design a clinical trial in phase II and III with a lot fewer patients, which will save a lot of money. For every 100 patients that we would treat otherwise and only get 10 responders, now we can enrich the population and improve the response rate hopefully dramatically.”

Biomarkers
Lilly also plans to move forward with implementing more biomarkers more aggressively into their cancer R&D for developing targeted and tailored therapies. “This is not the exception anymore; this is the rule,” Paul explains. “Cancer drugs by and large are going to be developed in such a way. Lilly has invested very heavily in the last ten years in cancer R&D and we have a very rich pipeline of cancer right now.”

Biomarkers have come to play a critical role within the notion of tailoring therapies, and will play a larger part in improving R&D overall. “They’ll know from a value proposition perspective that the drug is working and it’s well worth the investment in time and money to be taking this medicine because this biomarker reveals it’s working well before having to wait 18 months,” Paul explains. “This is the new way of discovering and developing drugs that we at Lilly are implementing.”

From biomarkers to globalization to lowering attrition rates, the bottom line is that R&D productivity needs to be – and can be – on the rise, with an entire host of initiatives able to be applied to improve the drug discovery process. “The drug discovery development and productivity piece is key to the industry’s success moving forward,” Paul admits. “We’ve done a lot at Lilly to improve productivity. We’ve got a mantra of reducing the cost per NME from about $1.2 billion to about $800 million within the next four years and that will dramatically allow our R&D budget to go further.”