The State of Pharmaceutical Innovation Bernard Munos Founder InnoThink Center For Research in Biomedical Innovation Chicago July 16, 2012 InnoThink
Outline The state of innovation Facts about innovation Where does innovation come from? Priorities for returning innovation to drug R&D InnoThink 2
The pharma industry faces a Kodak moment 35 30 Number of NMEs total 80 70 2010 Sales ($ bn) R² = 0.6627 25 20 15 10 big pharma 60 50 40 30 20 5 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Not enough innovation Pct of prescriptions filled by generics 100 90 80 70 60 50 40 Undistinguished innovation 90% 0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 0 2 4 6 8 10 12 14 R&D spending per NME ($ billion) Unaffordable innovation R&D spending ($ bn) Top 12 pharma flat 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Death spiral or transformation? 3
Pharma has changed the business model that made it great The old pharma model: Turning cutting-edge discoveries into commercial products and creating vast new markets and value for patients InnoThink Pharma now spends much of its time iterating on the same targets/scaffolds 4
Pharma no longer lives the values that made it great Ethics: Pharma has paid about 20 bn in fines in last 20 years, 75% in last 5 years (reimbursement fraud, kickbacks, off-label promotion, ghostwriting, falsification ) Innovation: Not enough, marginal, unaffordable Risk-taking: Fear to disrupt Lots of breakthroughs waiting to be translated into something useful (synthetic bio, nanomed, tissue engineering, stem cells ) Patient focus: Retrenchment from Rx areas (anti-infectives, neuroscience, cardiovascular) Drug shortages Pushing patients into bankruptcy InnoThink 5
Pharma s triple challenge More innovation Better innovation Affordable innovation InnoThink 6
Outline The state of innovation Facts about innovation Where does innovation come from? Priorities for returning innovation to drug R&D InnoThink 7
The innovation pathways High-risk, unconventional research Patient-oriented research User-driven innovation Disruptive thinking (Assembly-line model) 8
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Innovation does not scale 10 R&D spending ($ billion) Cumulative number of NMEs 25 9 8 20 7 6 15 5 4 Pfizer s cumulative NMEs 10 3 2 Pfizer s R&D spend 5 1 0 0 Pfizer s trebling of R&D spending since 1999 has had no detectable impact on its rate of NME production 9 InnoThink
InnoThink Innovation is highly nonlinear 1/10/2010 1/9/2000 1/7/1990 1/6/1980 Timing of NME approvals 50 Cumulative number of NME approvals 45 40 pain 35 30 25 20 schizophrenia 15 depression 10 5 0 1/1/50 1950 1/3/60 1960 1/4/70 1970 1/6/80 1980 1/7/90 1990 1/9/00 2000 1/10/10 2010 1/4/1970 1/3/1960 1/1/1950 0 1 2 3 4 5 6 7 8 Innovation comes in waves 10-year dry spells are not uncommon Long compund series are the exception, not the rule 34% of drugs (for CNS) have a poorly understood mode of action 10
Outline The state of innovation Facts about innovation Where does innovation come from? Priorities for returning innovation to drug R&D InnoThink 11
Where does high-value innovation come from? breakthrough discoveries creative scientists + + + open and networked culture transformational leaders + enabling factors diversity (cultural, ethnic, academic, age, etc) cross-disciplinary, silo-free, equalitarian culture few, fuzzy processes (adaptiveness) multiple, diversified sources of financing supportive authorities (policymakers, regulators) intense competition 12
Breakthrough discoveries Breakthrough must be seen through the eye of the patient (user), not the scientist Gleevec is a breakthrough so is Augmentin, Zocor, Aranesp, Humulin Lipitor is not a breakthrough Breakthrough discoveries can stem from novel research, shrewd clinical observations or the recombination of existing ideas Most science funding does not support highly innovative work Most public and private spending supports regular science, not novel original ideas Peer-review and committees foster compromises that do not reward boldness Alternatives? Need greater focus and selectivity, e.g., DARPA s disruptive focus and milestone-driven approach ( Is this disruptive? Why? ); GSK s Discovery Performance Units 13
Creative scientists The marginal innovator Wants to grow and nurture existing markets Seeks competitive advantage from greater efficiency Improves and optimizes Aligned with the organization s goals Analytical, cautious Sticks to process and job description fits in Risk-averse, change-wary Seeks consensus Source: adapted from Munos, Clin Pharmacol Ther. 2010 May;87(5):534-6 The disruptive innovator Wants to obliterate what s there and replace it with something better Seeks competitive advantage from changing the game Disrupts Orthogonal to the organization s goals Intuitive, bold Knows no boundaries sticks out Risk-taking, change-friendly Never minds being alone Disruptive and marginal innovators are different species separated by a chasm that must be bridged The crazies, the misfits, the rebels, the troublemakers, the square pegs 14
Open culture Innovation is a by-product of culture, not a by-product of organization, six-sigma, or anything else Principles and values, not processes, define a corporate culture A few powerful principles are worth more than many standard-operatingprocedures Principles must value diversity and openness 15
Networked culture Networks are a powerful but underappreciated ingredient of innovation Local networks help get things done but can reinforce orthodoxies Global networks bring novel ideas into the fray Both are necessary
Transformational leaders Roy Vagelos, Merck Paul Janssen, Janssen Art Levinson, Genentech George Rathmann, Dan Vasella, Novartis Amgen Corporate leaders who left the most admired legacy were also passionate de-facto Chief Innovation Officers Steve Jobs Jeff Bezos Bill Gates Bill Hewlett, Dave Packard When it comes to innovation, bolder is better, and it starts at the top 17
Enabling factors diversity (cultural, ethnic, academic, age, etc) cross-disciplinary, silo-free, equalitarian culture few, fuzzy processes (adaptiveness) multiple, diversified sources of financing (supportive authorities (policymakers, regulators)) (intense competition) 18
Outline The state of innovation Facts about innovation Where does innovation come from? Priorities for returning innovation to drug R&D InnoThink 19
InnoThink Priorities for returning innovation to drug R&D Foster an innovation culture: welcome the curious, passionate scientist; let boldness and vision drive decision-making; make it safe to be bold Pick an innovation model that works. Stop doing what doesn t. Forget blockbusters, chase breakthroughs: don t let sales forecast, NPVs and ROI steer you toward the trap of marginal innovation and commoditization Build broad innovation networks: no matter how big you are, most great ideas come from elsewhere Focus on translating breakthrough science that has the potential for creating vast new markets Restrict clinical research to candidates that have the hallmarks of breakthroughs, backed by compelling evidence Speed innovation and save money: embrace precompetitive collaboration; leverage open innovation models 20
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