Science and TechnologyJoint written evidence submitted by Geoff Lawton, Simon Campbell, John Dixon, Paul England, Peter Machin, and Alan Palmer

Economic Growth and the Pharmaceutical Sector

1.1 We the undersigned have extensive experience of leadership positions in the discovery of new medicines within large and small commercial enterprises.

We very much agree with the government view that “life sciences and the pharmaceutical industry can be key drivers of economic recovery in the UK”.

There is increasing recognition that the traditional business models of large fully integrated pharmaceutical companies and small venture-funded “biotechs” are important contributors to the innovation and growth landscape, but do not provide a complete self-sustaining ecosystem. This is true on a global scale, but applies particularly to the UK. Because of the historical success of this sector in the UK, we are well-placed to identify the gaps in the evolving ecosystem and to generate new business structures to complement the old models.

1.2 The innovation process in the pharmaceutical sector is unique. Its differentiators include:

The process is lengthy; typically 15–20 years from concept to commercialisation.

The failure rate is high. Contributing factors include the incomplete understanding of the biological basis of human disorders and the variability in individual patient response to treatment.

The end product cannot be designed with the engineering certainty of, for example, an aircraft.

The marketplace is inflexible with a very limited number of payers for the end product.

1.3 The innovation process for new therapeutics has three broad phases and each phase requires very different strategic inputs.

Finding a candidate medicine.

Proving clinical efficacy and safety.

Establishing the commercial mechanism for delivery to the patient.

1.4 This submission focusses on the first of these phases which is underemphasised in the government’s Life Sciences Strategy document. This first phase builds on an understanding of disease pathology and molecular pharmacology in which areas UK academia is exceptionally strong.

The strategy document provides some direction for academic research towards new potential areas of therapy for example regenerative medicine and cell therapy and also covers effectively the second (clinical) innovation stage presaging much needed and potentially valuable engagement of the powerful NHS resource in driving pharmaceutical innovation. The strategy is however inadequate in its coverage of the first phase of innovation. This is the location of the so-called “valley of death”.

Crossing the Valley of Death

Process

2.1 The process of innovation in therapeutics is illustrated below:

Analysis of genetics and disease pathology provides biochemical and cellular “targets” or systems through which the new drug is expected to exert its action. The hypothesis that modulation of this “target” will affect disease goes through a continuous process of “validation” at all stages of the path to the patient.

The next stage of the process involves identification of molecules (hits) which modulate the function of the target. Further research studies transform these hits into “drug-like” leads which are then further optimized into candidate drugs. This phase is an informed “trial and error” process and very frequently involves screening of hundreds of thousands of molecules through a cascade of increasingly complex biological evaluations until one molecule with the potential to be effective and safe in the clinic can be selected for further study.

Even with powerful computational algorithms that attempt to predict problems with particular compound structures and compound families, iterative cycles of design, synthesis and screening remain today the only viable method to refine favourable properties and eliminate the undesired ones in search of small molecule drug candidates for in vivo characterization. These endeavours require experts in biochemistry, medicinal chemistry, pharmacokinetics and pharmacology to act as a concerted team.

The candidates are subjected to a battery of tests to demonstrate that they are likely to be safe and effective in human studies. An extensive series of clinical studies is then carried out before the product can be launched in the market.

2.2 At the stage of selection of a “candidate drug”, the innovation process undergoes a radical change. From here on the work is highly regulated. The success rate is still low. Approximately 5% of “candidates” become drugs available to patients. Importantly from an investor’s perspective, at this point the risk profile of an “asset” changes. Before this point the risk is proportional; a failure does not necessarily mean that the “target” has failed and more work to generate new and better molecules may lead to project success. After this point the die is cast, the risk is binary, the candidate either succeeds or fails. In this latter situation it is often easier for potential investors to take evidence-based rational decisions. Before this point, much reliance is placed on the opinions of experts. These expert-led decisions are the critical success factor in the first phase of pharmaceutical innovation.

2.3 From this analysis, we conclude that in order to achieve sustainable success in this first phase of innovation, it is optimally carried out within an enterprise which houses the requisite multidisciplinary expertise and can simultaneously pursue a portfolio of drug discovery projects to ensure that at least some projects survive the highly attritional process to eventually reach the patient.

The Need for Alternative Support/Investment from Government

3.1 Overemphasis of current business models on the potential profitability of the research at too early a stage has prevented full exploitation of new knowledge. New business models for drug research therefore need to be created in order to contribute to the global drug discovery effort to reduce the burgeoning burden of disease. These new approaches will involve collaboration between different stakeholders and mixed investment from supra-government organizations, national governments, charities, philanthropists, social investors AND commercial funders with a perspective which covers both patient interest and the necessary long term view.

3.2 Faced with the need to find short term solutions to current economic threats, many pharmaceutical companies are refocusing their internal R&D expenditure towards the later stages of drug development where return on investment is quicker. An increasing amount of early stage discovery is out-sourced. This has had a substantial negative effect on commercial drug discovery research in the UK which has taken a number of big hits. Wyeth, Aventis , Roche, Merck Sharpe and Dohme , UCB, Pfizer, GSK and AstraZeneca have all closed research facilities in the UK . Recently announced reductions at AstraZeneca’s one remaining research facility at Alderley Park have confirmed that these trends seem set to continue for the foreseeable future and this means that drug discovery research in the UK is now at risk of disappearing altogether.

3.3 In the short term, this creates a great commercial opportunity for UK based contract research organisations (CROs). However, in the longer term an alternative innovation engine is needed to produce the new UK commercial base. The biotech sector is an unlikely saviour as investor appetite for funding drug discovery research has essentially disappeared. This means that funding a company on the basis of solid leads that have not yet made it to the clinic is extremely difficult. Of the few venture-funded biotechs which do achieve a successful “exit” for their investors, almost all are via trade sales. This compromises the sustainability of the sector.

3.4 In order to strengthen their pipeline of drug candidates, pharmaceutical companies are increasingly acquiring assets from biotech companies through licensing deals or wholesale company purchase. This is good news for UK biotech companies, but the lack of liquidity in the market has seen attitudes to investment become much more risk averse.

3.5 In spite of current challenges, the fundamentals of the medicines research sector remain good: the Global market for pharmaceuticals is expected to increase to $1 trillion in 2014. Growth is expected to continue as medical need increases, largely because of the marked increase in the number of people aged over 65 in the decades ahead.

3.6 Thus there is a large and growing future marketplace, considerable demand for relatively mature drug discovery assets, an excellent supply of new ideas for drug discovery, but no funding mechanism to bridge the gap and translate these ideas to an acceptable degree of maturity.

3.7 All of this creates a critical need and an exciting opportunity to recycle the excellent skills and facilities within a different social enterprise model to contribute to sustained excellence in a scientific field which has historically been one of the UK’s major successes.

3.8 UK academic excellence in life sciences is without parallel. Its continuance in the mid-long term is dependent upon a major local presence of organisations which translate the ideas which emerge from academia into new medicines delivered to patients. Academic institutions, conscious of this widening innovation gap, are making efforts to “translate” their scientific advances towards application, but have limited expertise in this multidisciplinary process and individually are unlikely to achieve the critical mass necessary for sustainable successs.

3.9 In addition to assets, infrastructure and expertise, drug discovery requires time, excellent project management skills, and money. Yet, even if all of these are present in abundance, no single drug discovery programme is guaranteed a compound that will achieve IND status and enter clinical trials. Viable businesses need a portfolio of drug discovery programmes.

3.10 Traditionally, pharmaceutical drugs have been small molecules which are synthesized by chemists, or are modified from natural products of plants or microorganisms. This has been a highly successful strategy for over 100 years, and continues to provide most of the new medicines reaching the market. These are now complemented by many new medicines recently launched and in late stage development which are so-called “biologicals”. These are large molecules most of which (excluding vaccines) are produced in small quantities, are comparatively expensive (in many cases extremely expensive), must be stored in the cold, and are delivered only by injection. Future patients (especially those of the emerging economies) will continue to need medicines produced in large quantities at low cost, with good heat stability, and suitable for oral delivery. Only small molecule drugs typically achieve this profile.

Social Enterprise Models

4.1 Although the traditional pharmaceutical companies and venture-funded biotechnology companies are suffering a major decline in the UK, the social enterprise sector exemplified by Medical Research Council Technology (MRCT) and Cancer Research Technology (CRT) is currently strong. These and other types of social enterprise business model provide the possibility to retain some of the skilled individuals being shed from pharmaceutical companies. Along with our academic strength, the extensive reservoir of talent is the key resource underpinning the UK’s power in this economic sector.

4.2 It’s time for a different approach. More effective ways are required to reap the innovation dividend from the UK’s knowledge creation activities and to achieve greater social and commercial value from intellectual property assets. We propose that government supports social enterprise solutions to filling the current enormous gap. This promotes integration of inputs from many stakeholders, including pharmaceutical companies, universities and medical research charities. We believe that, as in other countries, government should be a key stakeholder, both from the high value employment/knowledge economy point of view and, in the UK situation, as the major payer for medicines with a considerable interest in the affordability of future medicines.

4.3 Social enterprise solutions offer financially efficient approaches for the translation of new medical discoveries into therapies for future patients. Removal of the need for profit distribution at the early stage of the innovation process allows inclusion in the portfolio of those projects which are expected to make a significant social but not large financial return.

4.4 MRCT, CRT and the Wellcome Trust’s Seeding Drug Discovery Initiative (SDDI) are three successful UK examples of alternative business models. In each case a portfolio of drug discovery projects is funded, the project’s initiators are able to share their risk and additional partners are brought in to carry out the development and commercialisation phases. The retained stakes in commercially successful outcomes can be recycled to fund further innovative discoveries. In the cases of MRCT and CRT, the projects are operated in dedicated business focussed in house laboratories (separate from funded academic laboratories). In the case of the SDDI, the portfolio is managed virtually by the Trust with the work done mostly by CROs.

4.5 There is an increasing trend to set up academic drug discovery operations. With a few exceptions, these are unlikely to be able to operate a critical mass of projects to achieve self-sustainability and will find it difficult to generate the required business culture for success.

4.6 We propose that a series of self-contained social enterprises be established, where all profits achieved by out-licensing inventions and by spinning out venture capital fundable businesses are retained to sustain and grow the social enterprise. These may be associated with a group of academic institutions. Present government supported strategic thrusts including the Crick Centre, and Innovation Hubs at Babraham and Stevenage, could be complemented by the presence of in house drug discovery social enterprises.

4.7 As the pharmaceutical industry has contracted, the industry’s major educational role has been compromised. For over half a century, the pharmaceutical industry has provided “quaternary” education in the multidisciplinary process of the discovery of new medicines, but this activity is now seriously threatened by the major restructuring that is now taking place, Alternative routes are needed to provide training for the next generation of researchers to engage in medicines research in order to avoid the loss of this important knowledge base. Local and national governments want high quality employment, and to sustain and develop the skill sets capable of contributing to the high value knowledge economy. The new social enterprise structures would be ideally placed to complement the academic education with vocational training and fellowships.

4.8 INMedD has developed a business plan for one such social enterprise drug discovery business which employs 50 scientists and is the minimum scale to ensure continuous delivery of outputs. After five years, the institute will be self-sustaining with revenues from out-licensing deals based on generated intellectual property, grant income and training contracts.

This plan is scaleable and could be replicated or could operate at larger sizes with more funding.

4.9 The positive benefits of our proposals would include:

Retaining UK leadership in the creation of new medicines.

Contributing to economic growth in the UK.

Ensuring that UK discoveries help meet the healthcare challenges of the 21st Century; quality of life would be improved within constrained healthcare budgets.

Strengthening the alignment between medicines research and patient need. Important diseases areas at presently side-lined by Pharma would receive proper attention with consequent patient benefits.

Resurrecting buried assets. Assets not being pursued by Pharma would be revived and developed (note that a start has been made by collaboration between AstraZeneca and the MRC, but this could be extended into preclinical assets).

Strengthening the UK science base with exciting career opportunities for world class scientists to reap the benefits of our internationally competitive science education.

Improving translational research in the UK. New biology emerging from UK laboratories would be expertly exploited by world class medicinal chemists; the biotech sector would be revitalised as an additional source of innovation/discovery with a sustainable return on investment.

We are independent consultants to, and non-executive directors of, a variety of drug discovery organisations. John Dixon, Paul England, Geoff Lawton and Peter Machin are directors of INMedD, which is a company limited by guarantee developing a drug discovery social enterprise. Alan Palmer is CSO of MS Therapeutics.

February 2012

Prepared 11th March 2013