Johnson and Johnson on open innovation and differentiation

Why Johnson & Johnson’s Paul Stoffels believes greater differentiation and a move toward open innovation are the answer to the industry’s woes.

“You can’t get through times like these and the ones to come if you don’t have a vision on how to make healthcare better”
-Paul Stoffels

NGP caught up with Johnson & Johnson’s Paul Stoffels at the recent Pharma Summit in London, UK. Below he gives us his insight into the need for greater differentiation between new clinical entities, the move towards more open innovation, and his personal experience fighting HIV in Africa has informed his current position as Company Group Chairman, Global Research & Development, Pharmaceuticals.

One of the most striking things that comes through when you meet Dr. Paul Stoffels is passion – for his work, for the future of healthcare, even for the wellbeing of his close friends. In his speech to a packed conference room at the recent Pharma Summit in London, he held the audience rapt with his description of effects advances in HIV treatment on his friend Jens.

His focus on the need for new strategies to cope with the pharmaceutical marketplace of the future is also worthy of note. When asked to expand on this point, he specifies two strategies that J&J is committed to: working on real medical needs, and and differentiation. “It’s a combination of transformational research and making the fields we are in better. For example, we have a lot of knowhow today on HIV, but I know that we can make a better drug still. So there we have an evolution.

“On the other hand, we did a discovery on a completely new target for TB, and that was the start of a new area that we now are looking at, to determine if we can use that target for antibiotic research. Tt’s an ATP synthase and we should be able to also find an ATP-synthase inhibitor, so it’s transformational, it’s not incremental. It’s like using similar targets to find better drugs.

“We went from HIV to hepatitis C, because we knew that we had mastered that chemistry very well. A lot of our strategy is building on what you know, taking significant risks in new areas, but always on medical needs.”

Lagging behind

As pipelines dry up and the so-called innovation deficit increases, the need for greater collaboration with both traditional and new partners has become ever more obvious – yet the pharmaceutical industry seems to lag behind other sectors in this regard. Stoffels points out that while the industry has always collaborated well with academia, big pharma companies have traditionally shied away from collaborating with each other.

“That is where we are far behind, on figuring out how can we do better collaboration amongst ourselves and not inventing twice the same thing,” he underlines. It’s not in our genes in the pharma industry. We have grown up as very individual companies, and with big houses you think you know everything yourself.”

Stoffels’ early work on HIV in Africa, which has proved fairly seminal in terms of his later work, began by chance. As a student training in Africa, he found his ability to perform surgery restricted by the rise of HIV. He became fascinated by this new disease, and began looking into it as a research area.

During that time, he met the influential Dr. Paul Janssen, one of the most productive pharmaceutical researchers of the 20th century – he and his team were responsible for the discovery of over 80 drugs, including 25 antipsychotic medicines.

“When I met Dr. Janssen,” Stoffels says, “who wanted to make it a vision in life, a passion in life to make a difference there, and that’s how things evolved. I never had planned to be in the pharmaceutical industry.”

This lack of a planned career trajectory applies to many of those who start off in medicine and end up in pharma. They don’t go into it for the money; they follow their passion, and a true desire to do something worthwhile for humanity. Where then, does the often negative public perception of the industry come from. Stoffels puts it down to a combination of factors.

True dedication

“We have had an exaggerated commercial model for a long time, and that with the profits that are published and some of the challenges we’ve had, like Merck and Vioxx – things like that are spread widely in the press, and put us in a very negative light. I regret that, because if you come into our organization with our scientists, with the physicians we have, they are all committed to making a difference. If you’re in this industry it is such a challenge to work and to commit yourself for so long to a project that you have to do it because you love it, to make a difference in the world.

“Why does the industry have such a bad name? Often, you have a bad name for a football team, because you have a few bad players, and you don’t control them all. At J&J, we have a very good name. We are a company which is very highly respected; we have a very high ethical standard everywhere. I’m very, very proud of what we do, whatever people think. I brought several new drugs to patients which, today, are keeping thousands of people alive, which is not a small thing.

“Of course, we have to make an income because we have to pay for it. We use money from the capital market, so we have to give a return on the investment. But, the economics of our business are very challenging. If you look at most of the big pharmaceutical companies, their stock value which is not growing much. And we pay a dividend of two percent a year.

“If you put your money on the bank, it’s safer today than putting it out in industry. That’s where people say, ‘Think of the shareholders.’ The shareholders are all of us, our pension funds are the investors in J&J, and they want a return on investment. They push us to be profitable in that model. We invest a lot in R&D, and we get a very decent return on that, but that decent return is two percent or three percent a year for the shareholder, which is not huge. I think there are a lot of wrong perceptions about what is happening in this industry.”

Paul Stoffels’ views on the state of the industry.

I worked for several years in Africa as a physician researcher in the area of HIV, where I met Dr. Paul Janssen, who was one of the greatest innovators in our industry, and learned that a long-term vision is the most critical in getting to innovation.

It’s not about the next crisis in the economic or financial environment. It’s all about your long-term view, because innovations in our field do not come about in the next two years, they happen over the next 20 years. If you want to make a difference in healthcare with innovation, it’s long-term.

I’m convinced, as a physician, that running a large pharmaceutical R&D organization is not that different than being a doctor in a clinic. I consider myself as a partner in healthcare. It’s all about the patient; if we do good work the economics will follow. The focus is relentless on how to make patients better. You can’t get through times like these and the ones to come if you don’t have a vision on how to make healthcare better.

The other thing I’ve learned relates to technology. When I was in Africa 20 years ago, in the 1980s, in the whole of Kinshasa there were probably 20 phone lines. Today every second person has a telephone. How is that possible? It’s possible because significant advances in technology have made it so simple that it can be applied to everybody. I’m a believer that we should continue in healthcare research to be so advanced that, ultimately, we get to solutions that are simple and applicable to everybody.

Being on the leading edge of technology, combined with a passion for patients and making sure we see ourselves as a partner in healthcare, and not just as a business: those are the fundamentals to being successful in this industry in the future.

As an industry, we have made a significant contribution to healthcare over the last 100 years. If you look at the gain in life expectancy, a very significant part comes from the industry offering better tools for physicians to cure and to care for patients. If you look at penicillin and what happened with small pox, and even with HIV over the last 20 years, where it went from being a disease with a two-year life expectancy to today having a 20- to 30-year life expectancy. There’s only one group of organizations responsible for it. It’s the pharmaceutical industry that discovered the new drugs that made the virus disappear from the body, and allowed patients to survive.

Now all the simple diseases have been solved, the challenge of the diseases we have to solve today is dramatic. If you look at where the vision for tomorrow is, we should be able to delay the onset of Alzheimer’s disease by three to five years, and eventually prevent it. Hepatitis C should be cured – we are not that far from it. Schizophrenia should be totally controlled, with no relapses. Prostate and breast cancer should be cured. This is the vision for the next 20-30 years.

In the 1970s and 1980s, a number of reasonably good targets were discovered, and the majority of major pharmaceutical products came out these few targets with first, second and third in class.

Most of that is exhausted now, so, we need transformational science in order to get to the new therapies for the future. There are tremendous medical needs to be solved. Me-too’s are over; high medical need and differentiation are key. Products also need to be more effective and safe today, with the requirements from the regulatory agencies and from society. Everyone wants to have a perfect drug that is safe and effective, with no risk for society or the patient.

The cost of that is huge, so it’s a big challenge to develop the perfect drug, to solve high medical need with differentiation. That’s why only a few drugs are approved every year.

I believe very strongly that the solution for the future is going to be an integrated solution. Developing a new drug might take 10 years of diagnostics, and you might get approved in three years. How do you bring that together as transformation over the years? It will through be partnerships, collaborations and significant new ways of working in the pharmaceutical industry.

Let me get very personal. Jens, a good friend of mine, got HIV in 1986 when we worked together in Africa. He had a life expectancy of two years. He has been on all drugs you can imagine, and five years ago he was terminally ill, with a three-month life expectancy. We were able, with the new technologies, to figure out what drugs he was sensitive to and what drugs he was resistant to, what we should do on his PK, and how we should bring several drugs together in a new way.

What we did over the last few years, as a company, is measure the viruses of 350,000 patients across the world. We genotyped on the left and in the vertical axis; there were 400 patients on this slide. Only on the horizontal axis did we see the mutations of all these patients in their protease gene; massive diverse mutations.

It took us five to 10 years to get a really good feel on it, but we were able to figure out which patients should get what drug. We went to phenotyping; from genotyping we took out certain pieces and learned. Then we went to the clinic, took 25,000 patient records and combined the phenotyping with the genotyping in the patient records. And we could perfectly predict which patient was going to respond to which drugs.

As a proof of concept, taking information, genotype and phenotype, pulling that all together and figuring out which patient responds. Jens has now been alive five years, his disease is undetectable and his life expectancy is at least 10 years – it’s probably 20 years today. He’s never felt so good; he’s back at work. And all because we were able to depict what his future was going to be based on information.

Today there are about 100,000 patients on this therapy. That’s a football stadium full of people who survived because we are able to bring new drugs in a better way to patients, now. This took us 20 years from the first step in HIV to where we are today. What is the next step? We could go from one pill once a day to one injection once a month. And we’ll eventually, hopefully, keep HIV under control with 12 injections a year.

What we need to do now in our business is identify the medical need we want to solve and figure out what science we need for that. For certain diseases, it’s genetic material. For others, like neurology, it’s imaging. Bring that together, medical need matching with the best science, and you get differentiated medicines.

The real challenge in our business is creating the vision for the future. If you do market research today it doesn’t tell you anything on where you have to target your product in 10-15 years. The challenge is that, over time, market expectations go up, because certain drugs become generic, competition comes in, safety and regulatory requirements go up. You need to continuously think about what should be the level of innovation you need to tackle when you start your research.

When you have a great idea, over time you always lose some of the features. If you don’t start high enough, over a 10-year timeframe you hit a wall. A lot of that is happening at this moment in this industry, where market expectations have gone up significantly, and product-associated research was initiated 10 years ago so that now we can’t change it, and you hit the wall. The market expectations are already higher than the drug you’ve got.

Add to that the lack of capital for biotechs today and the lack of funding for academic research, and getting to transformation and innovation will be very, very challenging.

I’m a big believer that much more cooperation should happen in large pharma. Other industries have been doing that for a long time already, where they get together in a pre-competitive consortium to figure out significant problems. Validation of biomarkers to accelerate the R&D in new products for Alzheimer’s, for cancer; typically, those things should be in collaborations together, and that’s happening at this moment, but it’s going far too slowly. We should have collaborations where we bring our forces together to accelerate the platforms we work on.

Today, more than half of our products come from external collaborations and innovations, and it’s a matter of creating a swell of research, development and scientific capabilities, whether it’s diagnostics, safety or clinical operations. It’s all about partnership, and learning to work together in a different world.

Sharing the value with other players is also a new world for a lot of pharmaceutical companies, and it’s a real challenge if you have to develop an imaging, a diagnostic and a drug in one indication, together with three partners, where the drug is reimbursed in a different way and by a different authority than the diagnostic, the information and the imaging. How do you get to one integrated solution?

We’re working hard in our company on Alzheimer’s. It will be three different approaches: a combination of small molecules, large molecules and antibodies, and hopefully, eventually, into vaccines. We are hopeful that we will be able to diagnose Alzheimer’s early and provide a vaccine that will delay onset for several years. This will go together with significant information and imaging to follow up patients and to see what risk factors they have.

In the future, I doubt that a lot of individual drugs will still get to the market without some kind of diagnostic. We need to learn to work in industry to make sure that a value point for the US and Europe is totally different for any other area, but the needs of the patients are the same. It’s the same as with the cellphone; how it is possible that we all pay a few hundred pounds for a cellphone with nice tricks, whereas in somewhere like Tanzania, the majority of people also have a cellphone? It’s the same technology at a different price point.

We need to continue to be agile and drive an entrepreneurial spirit in the innovation world. And then there’s globalization: the cost of development and the cost of what we do in R&D is so huge that you cannot afford to bring a new drug if you can’t bring it in globally.

For me, the mission, the vision, the passion is: Stay with focus on the patient. Economies go up and down. I have seen the biotech crisis. I have seen a lot of financial crises. One thing always stays on track: the medical need in patients doesn’t go away. If we solve a significant need, the business will follow.

Source: Excerpted from a speech given at the Economist’s Pharma Summit, February 24, 2010, Renaissance Chancery Court, London, UK.

Could you give an example of healthcare technology that might be deliverable in that way at a cheaper price point in developing countries?

PS. If you look at HIV drugs in the West, for general therapy, you easily reach $8000-$10,000 per year, while a lot of patients in Africa get access at around $100-$200 a year. But, in that field, there is a general acceptance that, because of the healthcare problem, we are not going to look at the prices as for other drugs, where governments from the West would come back and say, “You give this for $100 in Africa, and therefore we also want it in France for $100.” There’s the respect for the fact that industry put it into that use at a low price. The European Commission has special rules around that where you cannot re-import drugs which are delivered at a lower cost for HIV in Africa. It’s a crime.

What challenges has today’s instant access to information posed for the worldwide availability of drugs?

PS. The global pricing of products has held back a lot of availability, and there is no simple solution to that. If a drug is priced more cheaply in Asia than it is in the US or Europe, it’s known worldwide very quickly through the internet, and people will start fighting to get the low price. And the whole model crashes. I don’t have a solution, but there should be much more thought put into how innovations can become available to patients worldwide, while still being able to pay back the huge development cost.

How can we make it cheaper to make drugs?

PS. That’s a technology story. If you can inject an antibody once every second day, or once every three months, if you make it more potent, with better PK and better tolerability, and it works over a long time period, it becomes much cheaper. I’m a believer that very good technology and very good delivery will give us much cheaper healthcare.

Is there any argument for greater government involvement in funding drug development?

PS. I think the better way to think about it is that we need more respect and understanding on what environment we need to innovate. We are partners in healthcare. If we, as an industry, disappeared, innovation in healthcare would struggle.

Today the ultimate driver for all innovation happening in healthcare is the product in the market. Whether you are in academia, biotech or pharma, academia does research, it goes into biotech, it goes into pharma, and gets into the market, and that’s where the value is created. The decreasing value of what is paid for drugs has an impact on the entire innovation chain. One of the biggest fears I have is that, if this continues, innovation will suffer very significantly.

How do you put a value on the benefit of a drug to society?

PS. It’s a difficult balance, because very few people appreciate what the risks and the challenges are in developing a drug. People should try to understand how our world is organized. In the end, we are owned as a public company by society, which puts pressure on a company like us to be profitable. We use a lot of capital to develop new drugs. We have to have good return on investment, plus we have to have a good benefit to society. People need to understand the mechanism and appreciate it, because otherwise it will disappear.

Biography

Paul Stoffels is Global Head of Research and Development for Johnson & Johnson Pharmaceuticals Group.