Rx 'scouts' hunt for the next big breakthrough

WSJ: Big Pharma alliances, acquisitions are on the rise

Like baseball scouts in search of tomorrow's all-star sluggers, pharmaceutical researchers are looking beyond in-house labs for promising medicines that may reinvigorate drugmakers' lineups and tackle major diseases, the Wall Street Journal's Jonathan Rockoff reports.

In the past few years, the pharmaceutical industry has undergone a major shift in how they find new medicines. The preferred method used to be in-house drug development, but developing innovative methods for fighting tough diseases—such as diabetes and Alzheimer's—has proven more difficult than anticipated, resulting in the costly failures of several experimental drugs.

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Rather than going it alone, drugmakers have instead opted for outside expertise in the search for new viable drugs. "No matter how good your research organization is, no matter how good you are, the best work is always going on somewhere else," says Roger Perlmutter, Merck & Co.'s research chief, adding, "You want to be able to take advantage of that work that is going on on the outside."

The shift has created a new type of research and development chief—one whose job title includes scouting the globe in search of new prospects, as well as nurturing drugs in-house. Drug companies like Bristol Myers Squibb, Novartis, and Roche Holding now rely on drug researchers who must be skilled in negotiating deals to acquire licensing rights to drugs or acquire its owner.

According to the drug development database Medtrack, 33% of drugs under development by the top 10 pharmaceutical companies in 2012 were initially created by another company, compared with 16% a decade earlier. "The science has become so complex you can't possibly be an expert in everything," says Sanofi CEO Christopher Viehbacher.

'Project Playbook'

Rockoff highlights the recent efforts of Johnson & Johnson (J&J), which has emerged as a leader in the movement to outsource drug development. Currently, about 50% of drugs under development at J&J were first developed at another company, compared with 20% in 2002.

J&J's shift can be traced back to 2009, when Paul Stoffels, now the company's chief scientific officer, helped launch the drug-scouting plan "Project Playbook." The plan aimed to replace lost revenue the company anticipated from the loss of its top-selling drug patents. J&J decided to prioritize drugs for diabetes, Alzheimer's, rheumatoid arthritis, hepatitis C, and certain cancers.

To do so, the company hired dedicated experts and encouraged its researchers to learn about drugs under development across the industry. For each disease, the researchers created a chart called a "Bullseye," shaped like a shooting target. The most-advanced drugs were placed near the center of the Bullseye, while early-stage prospects were set in outer rings. The Bulleyes depict which drugs "are in front of us, behind us, and if we want to work with them," Stoffels says.

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Once a promising drug was identified, J&J researchers begin forging relationships with the companies on their Bullseye charts. Although money is an important factor in deal-making, J&J says scientists and entrepreneurs often have a personal connection with their creations and are wary of selling to another company. Because of this, prospects often are courted for years before being asked about a deal.

A billion-dollar Bullseye

Project Playbook was behind the company's recent $975 million agreement with Pharmacyclics for experimental blood cancer drug Imbruvica. The medication was approved by FDA last November to treat mantle cell lymphoma and in February for chronic lymphocytic leukemia.

J&J drug hunters also have signed other prospects from Bullseye charts, including a drug they identified as a potential multiple-myeloma treatment. In 2012, J&J won rights to its top prospect, daratumumab, after drug scouts flew to Europe to meet with the drug's Danish maker. And just last year, J&J purchased Aragon Pharmaceuticals, which owns the rights to a promising prostate cancer treatment.

RBC Capital Markets' Glenn Novarro estimates Imbruvica and three other outside-approved J&J treatments will each have $3 billion to $6 billion in peak annual sales: "You put all four together, now you're moving the needle" (Rockoff, Journal, 3/9).

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