Dr David Tapolczay, CEO of MRCT (the UK Medical Research Council's Technology unit) has 21 years of experience in R&D management; his past roles include joint worldwide head of chemistry for Zeneca agrochemicals and VP of Technology Development for GSK pharmaceuticals. On 27 April 2010, he gave a keynote speech at SCI's Young Chemists in Industry Symposium, in which he focused on 'The future of drug discovery research in the UK and beyond and the potential for academic partnerships'
What are the main focus areas for big pharma R&D these days?
All companies are interested in developing and marketing ethical prescription-based medicines towards unmet medical needs. A major focus for the last twenty years has been increasing shareholder value. Whilst involved in a rewarding and ethical area of research, at the end of the day, they are still commercial organisations.
In the last fifteen years, we have seen a shift of focus from acute diseases to chronic diseases. All major companies carry out research on the key chronic diseases: inflammation, neurodegeneration, cardiovascular disease, diabetes and cancer. Some of this is associated with demography. In the Western world, populations are living longer. Our ageing populations will increasingly suffer from rheumatoid arthritis or neurodegenerative disease. As a consequence there is a greater emphasis on research into chronic rather than acute diseases.
Do these coincide with the focus areas of smaller companies?
By and large, yes. Small companies have a desire to become big companies, so they would also focus on making profit and increasing shareholder value.
One of the differences may be in the size of the market: a niche market of a few tens of millions of pounds may not appeal to big pharma, whereas a small company would be pleased to have that kind of revenue stream. Some small UK pharma companies (spin-offs from universities or from big pharma companies where research areas have been de-emphasised) are focused in niche markets. Several of these companies are focussed on acute diseases such as bacterial infection.
At a time when corporations are pressured to be more productive and cost-effective, what are the main concerns for big pharma's R&D units?
R&D costs have risen at alarming rates, yet the number of new products being introduced to the market is not increasing in proportion to those increased costs. It is becoming more expensive to bring drugs to the market, and it doesn't take an economist to figure out that this model doesn't work if it goes unchecked. Costs have to be contained.
In addition, the era of the blockbuster drug has now passed. The focus is now on developing new niche therapeutics, with products that can be expanded into multiple uses, as that is more cost-effective and productive. Companies are trying to identify the biochemical pathways associated with multiple diseases and finding a drug that works against them. They introduce that drug for one particular indication, and then, as a consequence of their research, introducing the product into different markets. The key is to start generating revenue as quickly as possible to replenish R&D costs, then being able to expand the reach of the product into different markets.
Another concern is that as a consequence of cost containment, there will continue to be job losses. Fifteen years ago, major pharma companies sourced the majority of their pipeline from internal sources. Nowadays, most pharma companies, and certainly the top five, source a substantial proportion of their pipeline from outside, by in-licensing. That trend is set to continue.
Do you think that the trend of mergers and acquisitions will continue in the pharmaceutical industry as a means to tackle challenges in R&D pipelines?
Yes, for the short to medium-term. The need to replenish pipelines will be critical for the next five years. The top five pharma companies have very significant products' patent losses coming up. When those patents expire, revenues will be at risk. A short-term measure to replenish the pipeline is acquiring a company, buying a whole new pipeline to give investors confidence that revenues will return.
Furthermore, the pressure to expand market shares in this mature market will continue to fuel the consolidation trend, so we will continue to see mergers and acquisitions.
For the long term, I think we will see more selective in-licensing. There will be a greater role for public-private partnerships between state-funded institutes or organisations (such as MRCT) and industry working more closely and risk-sharing to bring new products to market.
What are the advantages for big pharma companies in using these public-private partnerships?
The main advantage in this model is shared risk. Listed companies have an obligation to disclose commercially sensitive information to the market. The failure of a phase II product in their pipeline would need to be announced, and the share price would take a hit, as investors would think that the company would have lost an upcoming source of increased revenue. The cost of getting the product to phase II or even III and failing at that stage would be trivial in comparison with the dive in stock prices. Cutting-edge research targets that haven't been validated carry a significant commercial risk for a listed company.
For a public company, such as MRCT, if we were to take a novel target all the way to phase II and show that it didn't work, being a charity, the loss would be limited to the investment; it wouldn't have any impact on our shareholder value. If, on the other hand, we showed that the target worked, it would become a valuable marketing opportunity for a listed company to invest in. We would then have taken a great deal of the risk out of that product for them.
A recent good example of the type of public private partnership I refer to is that Cancer Research UK has recently announced a partnership with AstraZeneca http://info.cancerresearchuk.org/news/archive/pressrelease/2010-01-07-CRT-and-AstraZeneca-form-alliance-to-create-cancer-metabolism-drugs to tackle unmet medical needs in oncology. This is a quite significant development where a publicly-funded charity works in conjunction with a listed company. I think those partnerships can become more prominent.
What are the advantages for big pharma companies in using university-based R&D capabilities?
Ten years ago, a lot of basic research was being done in the research headquarters of big pharma corporations. That research has ceased now. The focus of R&D dollars is in later-stage opportunities, which are closer to market. A translation gulf has opened. Research coming out of universities today is not of significant commercial value. If it is moved that bit further up the value chain, then it comes into the sweet spot of pharma companies.
Most universities in the UK lack the infrastructure to do drug discovery effectively. Whilst they may be able to identify targets, a big pharma company would probably not want to work with those targets because they wouldn't have been validated. A way to tackle this could be through partnerships between the universities and organisations such as MRCT or CRT.
These organisations could help by taking those early-stage assets and moving them up the value pipeline, de-risking them to the point where pharma companies would be interested in them.
How are UK research centres faring in comparison with centres overseas when it comes to partnerships with big pharma?
I would put the US ahead of us, but I think the UK academic sector is a close second along with Japan. However, China and India are significant threats to us retaining that position. They have been investing heavily in academic infrastructure, they have highly talented and motivated research staff, and quality issues historically associated with them are more or less gone.
Ten or twelve years ago, if you were collaborating with colleagues in India or China, you would have concerns about the quality of materials they would be providing. Those concerns have by and large disappeared, as their quality has increased significantly.
Whilst major pharma companies are significantly downsizing their R&D facilities in the UK, many of them are significantly upsizing their capabilities in India and China. They wouldn't invest if the science wasn't there.
What would be the UK's competitive advantage in terms of pharma R&D?
We have a fantastic science base in inflammatory disease. We are competitive with the best in the world. We have a strong history in oncology through Cancer Research UK. The emerging areas of stratified medicine and regenerative medicine are great opportunities for us in the UK. The MRC is seen by pharma companies as a very significant investor in basic science that can ultimately transfer into innovation in the healthcare industry.
There are also significant opportunities working more closely with the NHS. We have massive patient cohort populations stratified by disease around hospitals with research capabilities. Connecting academic research with MRC, doing the translation through MRCT, going into clinical proof of concept, and then potentially getting that product approved is a challenging but fascinating prospect that offers significant opportunities to improve human health and the wealth of the UK economy.
What are the biggest challenges achieving technology transfer from academia to industry?
Firstly, relationships need to be built. Another challenge is putting the legal agreements in place to ensure that when success leads to substantial commercial gain, the earnings are apportioned to participants in the partnership. Accountability for income is a major focus for the government at the moment, so academic institutions and publicly funded organisations would be required to demonstrate the return on investment for each pound spent. It would be important to show the part played by each party in bringing invention to production, and how each party has played a part in the creation of health and wealth to the UK.
What would you recommend to chemists working in academia or at an early stage of their career who might be interested in finding ways to commercialise their discoveries?
Those working in academia should contact the technology transfer offices in their universities. They are professionals in seeking partnerships, licence agreements, and commercial relationships, regardless of the area of science. The technology transfer office should be able to provide guidance. The MRCT assists technology transfer offices in trying to commercialise interesting discoveries of academic research scientists or chemists in the area of healthcare.
If you are in industry, clearly, you are working in an area of the company towards commercial gain. The company will have a strong vested interest in commercialising that science. That said, it may be the case that you have an idea that you are interested in pursuing, but the company isn't interested in pursuing it. You would then need to consider how to partner with somebody who might be interested in developing that idea on your behalf.
For many years, I worked for major pharma companies, but at one point, I had an idea to start a company around a particular technology. The company I was working for wasn't that bothered about this technology application, so with three friends I left them and set up a company. The company was successful and so I did it again and again. I have founded or been part of a team that has founded seven companies to date!
For this, you need someone to talk to. You need mentors. Some of the angel communities in the UK (there are strong ones in Cambridge, Oxford and in the North West of England) can provide mentoring. Talking to other scientists about your ideas is important, but beware of confidentiality! Multiple people tackling a problem are always better than a single person tackling the same problem. One of the things I learned is that starting a company on your own is quite difficult and pretty lonely, but doing it with a motivated team of friends or colleagues is a hell of a lot easier and also more fun.