Winning R&D Productivity Strategies: Exploiting innovation, licensing and outsourcing opportunities

Table of Contents
Executive Summary 10
Introduction 10
New technologies in R&D 11
Project and portfolio management 12
Licensing and partnerships in R&D 13
Resource management 14
Monitoring performance of strategies implemented 15

Chapter 1 Introduction 18
Summary 18
Introduction 19
R&D 19
Decrease in R&D productivity 20
Industry opinion of R&D productivity 22
Risk and the commercial market in drug discovery 24
Challenges and causes of decline 26
Cost of drug development 27
Innovation and attrition 28
Regulatory burden 31
Size and scale of operations 32
Clinical development times 33
The key issues affecting R&D today 35
Opportunities and how to increase productivity 36
Responses to the crisis 38
Short-term 38
Long-term 38
Big Pharma emerging from the R&D productivity crisis 39

Chapter 2 New technologies in R&D 42
Summary 42
Introduction 43
The future of innovative technologies in R&D 45
Integration of technologies in the R&D process 45
Comparison of technologies in the R&D process 45
Technologies to increase the number of targets in drug discovery 47
Array technology 47
Biomarkers 51
Stem cells 52
Technologies for decreasing costs and development times 52
RNAi 52
Microfluidics 54
Toxicogenomics/ADMETox 55
High through-put screening 57
Technologies for decision making and optimization 57
Bioinformatics 57
Chemogenomics 59
Pharmacogenomics 60
The move towards targeted therapies 62
Conclusions and key points 63

Chapter 3 Project and portfolio management 66
Summary 66
Introduction 67
Why use project and portfolio management in R&D? 67
Challenges to project and portfolio management 68
Portfolio management 68
The R&D portfolio 68
The portfolio management process 69
Reviews and evaluations 69
Decision making and strategic alignment 71
Resource management 72
Portfolio management in action 72
Sanofi-Aventis 72
Genentech 73
Lundbeck 74
Project management 75
The project management process 75
Value and risk profiles 76
Financial evaluation 77
R&D Project management in action 78
Schering AG 78
AstraZeneca 79
Dr Reddy's 80
Conclusions and key points 81

Chapter 4 Licensing and partnerships in R&D 84
Summary 84
Introduction 85
Licensing and collaborations 85
The licensing process 85
Licensing trends 86
Multi product deals, and long term collaborations 87
Increased number and average value of licensing deals 91
Biotech as a licensing partner 91
Oncology is the dominant therapy area by number of deals 93
Licensing deals for later stage drugs 94
Out-licensing 95
In-licensing 95
Biogen Idec 96
Novartis 96
Collaborations 97
Curis 98
Roche 98
Future of licensing and collaborations 99
Outsourcing 99
Out-sourcing to increase R&D productivity 99
Impact of mega-mergers on productivity 100
Conclusions and key points 101

Chapter 5 Resource management 104
Summary 104
Introduction 105
Management and integration of deals in drug discovery 105
Alliance management 105
Managing partnerships 106
M&A 106
Timelines and preventing overruns 107
Organizational and operational issues in drug discovery 108
Restructuring - traditional versus networked R&D model 108
Company size - reduce organizational size to increase R&D performance 111
R&D outsourcing 113
Decentralizing R&D operations 115
Outsourcing to China and India 117
Big Pharma conducting R&D in China and India 118
Conclusions and key points 120

Chapter 6 Monitoring performance of business strategies 124
Summary 124
Introduction 125
What to monitor and how? 126
Who monitors R&D productivity? 128
CMR programmes 128
Cognos 129
Cognos 8 business intelligence 129
Quality versus quantity 130
Short-term and long-term outcomes 131
Conclusions and key points 132

Chapter 7 Appendix 134
Primary research survey 134
Index 135

List of Figures
Figure 1.1: R&D expenditure versus annual NME approvals, 1995-2005 21
Figure 1.2: Total number of drug launches in the US, 1945-2004 22
Figure 1.3: Industry opinion of R&D productivity over time 23
Figure 1.4: Industry opinion of current R&D productivity in the Biopharma market 24
Figure 1.5: Managing risk in drug development 25
Figure 1.6: Industry opinion of the significance of challenges to R&D productivity, 0 = No
significance 3 = Very significant. 27
Figure 1.7: US drug pipeline is increasing novel 29
Figure 1.8: Attrition rates by novelty status, current status of INDs filed 1996-1998 30
Figure 1.9: Key reasons for attrition in drug discovery, 2003 31
Figure 1.10: “Effective” patent life 34
Figure 1.11: Increasing clinical development times 35
Figure 2.12: Potential cost savings per drug using genomics ($m) 43
Figure 2.13: Integration of technologies in the R&D process 45
Figure 2.14: Comparison of innovative technologies in R&D 46
Figure 2.15: Industry opinion of how innovative technologies will affect R&D productivity over the
next 5-10 years 47
Figure 2.16: Microfluidics, features, benefits and applications 54
Figure 2.17: Integration of databases within the discovery process 59
Figure 3.18: The portfolio management process 70
Figure 3.19: Risk assessment in practice 76
Figure 3.20: An example of project management commissioning at Schering AG 78
Figure 4.21: The pharmaceutical licensing process 86
Figure 4.22: Number of top 10 pharmaceutical company licensing deals by deal type, 2001-2005 88
Figure 4.23: Number of top 10 biotech company licensing deals by deal type, 2001-2005 89
Figure 4.24: Industry opinion of change in the number of licensing/partnering deals in the last 5
years 90
Figure 4.25: Industry opinion of change in the number of licensing/partnering deals in the next 5
years 90
Figure 4.26: Average value of top 10 pharmaceutical company licensing deals, 2001-2005 91
Figure 4.27: Number of top 10 pharmaceutical and biotech company licensing deals by partner,
2001-2005 92
Figure 4.28: Proportion of product-based licensing deals by therapy area, 2001-2005 93
Figure 4.29: Number of biotech R&D licensing deals by development stage, 2001-2005 94
Figure 4.30: Licensing process at Novartis 97
Figure 4.31: No economies of scale in pharmaceutical R&D 101
Figure 5.32: Vision of networked pharma in 2016 110
Figure 5.33: Wyeth’s R&D productivity model, 2001 111
Figure 5.34: Advantages and disadvantages of inhouse, outsourced and collaborative R&D 114
Figure 5.35: Industry opinion of the most productive method of conducting R&D 115
Figure 5.36: Industry opinion of attractiveness of countries/regions for R&D outsourcing. 1 = very
unattractive, 5 = very attractive. Response average shown 116
Figure 6.37: Major reasons to implement monitoring of R&D processes 125
Figure 6.38: Markers of productivity 127
Figure 7.39: R&D productivity survey respondents by company focus 134

List of Tables
Table 1.1: R&D by function, PhRMA member companies, 2004 28
Table 2.2: Companies involved in array technologies, A-L 49
Table 2.3: Companies involved in array technologies, M-Z 50
Table 2.4: siRNA-based drugs and therapies 53
Table 2.5: Biotech providers of commercial ADMETox software 56
Table 3.6: Risk factors in project management 77
Table 5.7: Reasons for time and budget overruns 108
Table 5.8: Mean clinical development times in months, based on 400 protocols, 2000 114
Table 5.9: US R&D scientific, professional and technical personnel by function, PhRMA
companies: 2004 117
Table 5.10: US FDA new drug application data generated from India 119