Unnerving Trends in the Pharmaceutical Industry

"Houston, we have a problem."  This phrase, credited to the crew of the Apollo 13 lunar mission, has been used in many contexts (both seriously and comically) to describe difficult situations.  In worst-case scenarios, like Apollo 13, profound and life-changing (challenging) consequences may emerge.  In today's economy, one may paraphrase this to "ACS, we have a problem."

ACS (the American Chemical Society) is an organization dedicated to the promotion of the chemical sciences through educational programs, industry support and government lobbying.  Twice a year, it brings together thousands of chemists to exchange thoughts on the future of science, the status of academia/industry and government policy. Additionally, career resources are continually provided to aid ACS members in advancing their careers or identifying opportunities to regain or maintain employment.  Such resources are extremely valuable in these days of continued downsizing and outsourcing. However, even the ACS cannot create jobs where few exist.  In previous years, the back of Chemical & Engineering News was full of job advertisements for chemists.  Furthermore, the ACS sponsored career fairs were supported by hundreds of potential employers with jobs spanning all levels of experience.  I am sad to say that these advertisements are sharply diminished compared to previous years.  It is no secret that among sectors, the pharmaceutical industry is among the hardest hit.

Fully recognizing that these trends are industry-related and not the fault of the ACS, the question is now "what can be done to restore growth to the pharmaceutical industry?"  In order to answer this question, it is important to understand the causes of the present multi-year downturn.  These causes can be traced back to the marketing of "blockbuster" drugs and the resulting year-over-year double digit returns to investors.  As patent protection for the existing inventory of "blockbuster" drugs expires, the pharmaceutical industry is forced to look at lower revenues and increased competition from generics.  At the same time, the existing drug development pipeline is deficient in new "blockbuster" products to replace those going off patent.  Lower revenues coupled with continued demands from investors for high returns forces corporate downsizings.  Such downsizings are typically at the expense of research - the efforts generating long-term revenues.  With research departments minimized or eliminated, there are fewer quality products entering development - the efforts generating short-term revenues.  With fewer and/or premature compounds entering development, the likelihood of late-stage clinical failure is increased.  This trend directly results in decreased investor confidence.  With decreased investor confidence, there is less money available for investment in the pharmaceutical industry.  Less money means fewer jobs and fewer products advancing into the clinic.  IT IS THIS CYCLE THAT MUST BE BROKEN IN ORDER FOR THE PHARMACEUTICAL INDUSTRY TO RECOVER!!!

Emerging Trends in the Pharmaceutical Industry

Understanding the cycle leading to poor investor confidence is only the beginning.  In order to reverse the pharmaceutical industry's downward spiral, we must implement new paradigms and develop them to their full potential.  Such paradigms include:

• personalized medicine - novel therapeutics with companion diagnostics
• efficient use of both in-house and outsourced activities
• streamlined processes enabling the "forced failure" of programs more likely to fail so efforts can be focused on programs most likely to succeed.

Regarding personalized medicine, I posted two articles on this subject (see postings on November 12, 2010 and February 27, 2011). Furthermore, the potential that can be realized through the ability to screen likely patients in order to assess their likelihood of responding to an experimental therapeutic is dramatic.  To cite data presented by James Sabry (Vice President of Genentech Partnering) at a recent networking event, 4000 drugs were tracked from clinical trial to market from 2004-2010.  Of this set of drug candidates, only 9% achieved FDA approval.  Broken down to the clinical stages, 63% advanced through phase I clinical trials.  Of the 63%, only 33% advanced through phase II clinical trials.  Of that 33%, 55% advanced through phase III clinical trials.  Finally, 80% of those advancing through phase III received approval.  In order to restore investor confidence and rebuild our industry, these percentages must rise. Through exclusion of clinical trial participants lacking necessary biomarkers, these percentages will increase.

Regarding the combined use of in-house and outsourced activities, I continually comment on industry trends, employment challenges and novel career opportunities.  Two postings on these topics (see postings on August 21, 2009 and October 25, 2009) go into great detail regarding current and emerging trends.  The reality is, outsourcing is here to stay.  Once accepting this reality, potential new opportunities come to light.  In the May 9, 2011 issue of Chemical & Engineering News (pg 48-51), I was quoted regarding trends and opportunities in "Managing Outsourcing."  Specifically, as organizations continue to view synthetic chemistry as "outsourceable," these same organizations recognize that management of these activities requires one both skilled and knowledgeable in the science of organic/medicinal chemistry. Problems always arise when working with CROs.  Success is dependent upon how efficiently these problems can be addressed. Furthermore, simply being able to prepare compounds is not a replacement for the ability to design the right compounds to prepare. In my experience, the most efficient combination of in-house and external resources utilizes a small internal infrastructure for development of robust synthetic methodologies in concert with the technical talents of CROs for the synthesis of targeted compound series dependent upon these methodologies.

Regarding streamlined processes, early drug discovery efforts were somewhat linear with compounds advancing through one assay at a time.  By utilizing batteries of assays to evaluate structural classes, early indications regarding pharmacokinetics, metabolism and toxicity can be established.  Structural series failing to demonstrate early acceptable properties can be terminated in favor of those showing promise.  Through "forced failure," more money is spent earlier to save even greater amounts by not advancing sub-optimal compounds into development.  Finally, referring to the percentage of drug candidates advancing through phase I clinical trials mentioned above, the "forced failure" paradigm holds the potential to positively impact this statistic.

The Future of Employment in the Pharmaceutical Industry

While the above describes trends likely to result in greater success and return on investment, it does little to address the current state of employment in this industry.  While the unemployment rate in the United States is around 9.1%, the unemployment rate in the pharmaceutical industry (including biotechnology) is almost twice that.  While disheartening, I continually post on strategies for maintaining employability as well as what types of opportunities are available for those displaced in a shrinking job market.  Additionally, in the April 18, 2011 issue of Chemical & Engineering News (pg 49-51), I was quoted in an article focused on "Survival Skills."  The lessons are more relevant now than ever - those currently unemployed must find ways to stay active in this industry or risk not finding employment as conditions improve.  In today's economy, there are plenty of reasons for not getting paid.  However, there are no excuses for not working.

Even with the unemployment trends, there are those who have the potential to influence policy and, at least partially, restore growth to this industry.  These individuals are our congressional leaders and big-pharma executives.

In the current state of the pharmaceutical industry, large companies have turned to small biotechnology companies to enhance their development pipelines.  However, these deals, especially for earlier stage compounds, come with high milestone payments.  Consequently, deals between large and small companies are dissolving in attempts to minimize these payments.  The unfortunate result is small companies being forced to develop their products without the backing of larger organizations.  The increased corporate expenses related to clinical development often result in significant corporate downsizings - thus compounding the current employment climate (Chemical & Engineering News, June 20, 2011, pg 15-20).  In an industry where high risk yields high reward, the current risk adverse nature of those influencing the pharmaceutical industry continues to result in downward pressure on the economy.  Downstream, these trends will inevitably be reflected in fewer new products and continued medical indications with no available effective treatments.

With the number of highly innovative scientists displaced due to mergers, outsourcing and downsizing, the talent pools in both local industry hotspots and nationwide are unprecedented.  Even so, John Lechleiter (CEO of Eli Lilly & Co.) is lobbying for US immigration officials to issue more green cards for highly skilled immigrants. While I am all for opening up opportunities for the most qualified individuals, isn't it incumbent upon us to first look after those who, through no fault of their own, found themselves unemployed?

Regarding the rich pool of available talent, the trends and paradigms discussed in this posting should generate a great deal of optimism. Once the dust settles and new business models emerge, growth will return.  Furthermore, with appropriate financial resources, the available talent pools will inevitably give rise to a new generation of start-up companies creating new opportunities for innovation.  As Apollo 13 began with a problem and returned safely home, so too will the pharmaceutical industry.  After all, we are a growing and aging population.  We will always need to eat, we will always generate garbage and we will always require medication.

Organic Chemistry Degrees - Training in Thinking vs Training in Doing

A recent editorial in Chemical & Engineering News, along with an accompanying article, has had me thinking about the future and quality of our educational programs.  The editorial entitled "Too Many Ph.D.s?" and the article "Doctoral Dilemma" both appeared in the January 31 issue and, not surprising, have received significant interest and responses.  Presently, I am attending the Anaheim ACS meeting and, in light of the high caliber of science being presented around me, I feel a need to add my thoughts to this discussion.

I received my PhD under the supervision of Professor Satoru Masamune at the Massachusetts Institute of Technology.  As part of my graduate studies, I was responsible for the design and execution of synthetic strategies leading to the total synthesis of Calyculin A.  Those of you who may be familiar with this natural product will recall that it is a highly structurally diverse molecule with an aminosugar unit, a heterocycle, a spiroketal and a tetraene.  The two fragments I worked on were the aminosugar and the tetraene.  In addition, I designed a novel approach for the introduction of necessary chirality adjacent to the heterocycle.  In all cases, my efforts began with an exhaustive study of the target structures as matched with the structures of available starting materials and availability of key reagents.  At no time did I receive instructions as to how I was to approach my assigned tasks.  Instead, I was given the freedom to execute on my ideas and drive these efforts as far as they could go based upon the available technology.  I would not be honest if I suggested that each attempt worked as planned.  However, each strategy, successful or not, allowed me opportunities to ask questions, find answers and evaluate results.  My technical experience was a byproduct of the extensive chemical studies I pursued.  After all, how could I answer questions without doing the experiments.

My undergraduate research activities, in contrast to those in graduate school, fell under the tutelage of Professor Henry Rapoport.  In his labs, I was assigned specific tasks with generally understood protocols.  My role was initially to support the efforts of a post doc. Later, I was assigned more independent studies allowing me to begin thinking about chemistry rather than simply following instructions. So, when comparing my undergraduate experiences to my graduate studies, Rapoport taught me how to do chemistry and Masamune provided me the opportunity to teach myself how to think about chemistry.  Both experiences were essential to my academic and professional development.

Current Educational Programs - Are We Training Too Many Ph.D.s?

In the present job climate, there is no question that medicinal chemists have endured more than their fair share of problems.  With the continuing trend of corporate takeovers and subsequent shutdowns, there is plenty of available talent with nowhere near enough new jobs being formed to absorb the unemployed.  At the same time, graduate programs continue to produce a new generation of chemists eager to enter the workforce.  In anticipation of the extremely high level of competition for any available position, I have heard it argued that some graduate student mentors are tailoring their programs to meet specific needs of companies.  If true, this type of "apprenticeship" risks compromising the quality of the PhD degree in favor of the short term benefit of "grooming" students for entry into chosen professions.

As I discussed in the first section of this post, a complete education involves a combination of technical and intellectual training.  Without a firmly established ability to generate and test independent hypotheses, an advanced education would be incomplete.  After all, as "PhD" stands for "doctor of philosophy," is it an unfair expectation that those holding such a degree should be capable of generating and testing their philosophies - even when they differ from more conventional thinking?  Without new thoughts and ideas, progress will come to a complete standstill.  That having been said, I have not been in the academic setting for many years and cannot evaluate the current trends beyond what is reported.  I can only hope that the quality of advanced education today remains as high as it was when I received my PhD.

Returning to the question of whether we are training too many PhDs, the ability to think is not restricted to an individual field of thought. If one is capable of imagining, endless possibilities become available. This applies not only to the advancement of technology, but also to professional development.  Yes, the job market is unstable.  Yes, there are few available jobs.  Yes, there are many unemployed chemists.  However, there are numerous areas where creativity can lead to exciting career options - even if not along envisioned paths. As I have communicated throughout this blog, the key to success is not along one path.  Today, it is essential to continually learn new skills, reinvent oneself and be adaptable to opportunities presented. From this philosophy, it is not the number of PhDs that we need be concerned about, but rather what we are preparing our PhDs to do.  If we train PhDs to think creatively, as I believe we do, there is no limit to what can be accomplished.

Personalized Medicine - Additional Thoughts

Since my posting on personalized medicine (November 12, 2010), I had many discussions with my colleagues and peers regarding the true utility of genetic screening and the utility of biomarkers in establishing appropriate therapeutic regimens.  While many agree with me regarding the promise of this approach, there are some dissenting opinions - most of which limit the reach of personalized medicine to cancer and bacterial infections.  Regardless of opinion, a recent presentation by James Sabry (February 17, 2011 - www.growbold.com) would have been of great interest to all camps.

In his discussion, Sabry argued that the success rate for new drug approvals suffers, in part, from heterogeneous patient populations. Specifically, these patient populations include groups that are genetically pre-disposed to be non-responders.  If we could screen out these non-responders from any clinical trial, drug response rates are likely to improve and more clinical endpoints will be met.  The result, while relevant to smaller patient populations, will be better therapeutic agents.  The key to all of this lies with the development of diagnostic tests for pre-screening patients prior to prescribing medications.  In the cancer arena, Genentech is taking a lead position with the development of disease-specific antibodies tethered to chemotherapeutic agents.  While, at present, this will not address all forms of cancer, I believe that this strategy is moving in the right direction.

The Rx/Dx Model - What it Means for Big Pharma

One of the challenges facing the pharmaceutical industry relates to the market potential of any given product.  After all, the drug industry, like any other, is a money-making enterprise with financial responsibilities to investors.  As such, the larger the market potential of a given product, the more attractive the program to large companies.  To put this in another perspective, it is far easier for a company to earn one billion dollars per year from a single product than it is to earn the same amount from ten products with markets of one hundred million dollars per year.  Aside from the reduced number of programs to manage, fewer dedicated personnel are required in areas such as sales/marketing, QA/QC and manufacturing.

In order to obtain blockbuster status, therapeutic agents must target the largest potential patient populations.  However, these patient populations are heterogeneous and include various sub-populations - many of which will not respond.  From an economic standpoint, this does not matter to business as long as the therapeutic does no harm. However, the waste associated with the money spent on products not benefiting patients is significant.  Introduction of companion diagnostics, while beneficial to patients, will likely reduce the potential market size of therapeutic agents resulting in lower profits for drug companies.  I FIRMLY BELIEVE THAT THIS SHOULD NOT BE A CONSIDERATION FOR DRUG COMPANIES!  After all, if a patient will not respond to a given drug, that drug should not be sold to that patient.  In further support of this assertion, Sabry, in his February 17 talk, argued that pharmaceuticals should only be paid for if they work.  While such business models don't currently exist, there is a great deal of merit to this argument that can only result in better products.

Regarding the potential reduced markets for diagnostic-coupled therapeutics, this should not be a deterrent to the pharma industry. To the contrary, this paradigm has great potential.  If diagnostics can differentiate large populations into smaller responsive populations, they can also define additional patient populations suffering from conditions with unmet medical needs.  Furthermore, additional revenue will be realized from the diagnostics which, as a screening tool, will be used on all patients seeking treatment for ailments with established biomarkers.  While the number of blockbuster drugs is likely to decline, the Rx/Dx paradigm is a potential gold mine of opportunities poised to improve the efficiency of drug discovery and the overall quality of healthcare to the general population.

Staying Employed, Maintaining Employability and Finding Work

My apologies for the delay since my last post.  Between the holidays and some major networking opportunities, my time has been very scarce.

In my last post, I reached out to you to learn what topics you wanted me to address.  Among them was a series of questions focused on developing skills that are not "outsourcable" in today's global market. To directly address this question, I believe that all skills are essentially "outsourcable."  However, that does not mean that all skills will be outsourced.  There are a tremendous number of activities, necessary to the operation of a successful business, that are more efficient (based on time, money and logistics) when not outsourced. Among these is the ability to efficiently manage, maintain and troubleshoot projects from remote locations.  Certainly, when faced with outsourcing problems, the ability to assess and correct without having to be on site is marketable.

While managing outsourced activities is a useful skill, this does not help undergraduates as they are not typically in positions requiring management of outsourced chemistry.  Instead, I refer back to my assertions in previous posts that, at least in the drug discovery arena, the broadest knowledge/skills in organic synthesis are essential.  Such skills, however, cannot be obtained through the requisite course material.  Undergraduates seeking to expand their organic chemistry skills have to seek additional educational resources such as undergraduate research and industry-relevant summer internships.

While summer internships may introduce young chemists to industrial environments, they actually do little to provide broad educational experiences.  However, finding a mentor via undergraduate research programs will.  This is, in fact, how I prepared myself for graduate school.  When I realized that I wanted to specialize in organic chemistry, I approached Professor Henry Rapoport.  He was highly receptive to my joining his group.  Through that experience, I began studying heterocyclic chemistry and explored the conversion of amino acids to 4-amino-4-deoxy sugars.  Additionally, I was introduced to my first medicinal chemistry project - preparing rigid analogs of the glaucoma drug pilocarpine.

While there are many valuable skill sets, trends in outsourcing will continue to advance and decline - based on corporate needs, perspectives and strategies.  However, the underlying knowledge required to navigate this "employment at will" environment will always be rooted in the foundation and breadth of acquired education.

Maintaining Employability through Networking - A Self-Taught Skill

While the preceding paragraphs emphasized the value of a strong education, they did not focus on skills important to finding and maintaining employment.  Among the most important is networking. Sure, while social groups such as Facebook, Linked-in and Twitter can provide some resources, the greatest networking activities involve face-to-face introductions/conversations.  These must also be accompanied by diligent follow-up.

For me, the first two weeks of January were packed with networking opportunities.  The first was the JP Morgan Healthcare Investor Conference.  This annual event, bringing together executives and venture capitalists from around the world, is the largest of its kind and conveniently takes place in San Francisco.  Following JP Morgan was the New Paradigms for Biotechnology Funding and Development conference.  Finally, during the following week, I attended the Personalized Medicine World Conference.  Overall, these conferences allowed me to meet numerous individuals including executive recruiters, consultants, executives and industry analysts.

While major networking events, like those just described, present valuable opportunities to expand networks, one must not discount the smaller networking groups which usually meet monthly.  The groups I frequently attend include BioSF, Bio2Device Group, BioE2E and BABCN.  All of these groups have websites with valuable industry information.

In closing, most of one's success will always depend upon a strong knowledge and skill base.  However, There is always a component that directly relates to who one knows and what opportunities are available at any given time.  The value of networking will not always be immediately recognized - but when it pays off, the dividends are usually significant.