Virtual Drug Development: The Road to Value Questing

R. Stephen Porter, Therapeutic Antibodies

Contents

• Introduction
• Research and Development: Pharmaceutical, Biotechnology Companies
• Contract Research Organizations: Strategic Partnerships with Drug Development Companies
• Outcomes-Based Research Initiatives
• Grass-Roots Lobbying: Issues-Based Public Affairs
• Electronic Information Highway: Computer-Mediated Communication
• Integration of the Concept
• Required Reading

Introduction (Back to Top)
When Silicon Valley wants to look good, it measures itself against Detroit. When Detroit wants to look good, it measures itself against the pharmaceutical industry. The comparison goes like this:

If automotive technology had kept pace with computer technology over the past few decades, you would now be driving a V-32 instead of a V-8 and it would have a top speed of 10,000 miles per hour. Or, you could have an economy car that weighs 30 pounds and gets a thousand miles to a gallon of gas. In either case, the sticker price of a new car would be less than $50.00. If the pharmaceutical industry had kept pace with Detroit in this scenario, new pharmaceuticals would cost pennies.

Virtual Drug Development (VDD) facilitates joint research and development for the purposes of:

• Shortening pharmaceutical and biotechnology development times and time-to-market
• Lowering the costs of developing new pharmaceutical and biotechnology products
• Developing markets with long-term relationships built on a shared and interdependent future (i.e., E-commerce and business to business models)

The ideas driving virtual drug/biotech development are:

• Workforces spread far and wide
• Increasing customer dependence
• Developing the most attractive global customer network
• Setting the pace for industry innovation, relying heavily on new technologies
• Growing faster with greater profitability
• Working in new social paradigms that are fungible, porous, connected, fiercely competitive
• Leaving the competition in a less-supportive environment to try to catch up.

The revolution facing pharmaceutical and biotech companies in the global arena requires that, to remain competitive, they must achieve mastery in both information and relationships.

The information about a product—pharmacology, pharmacokinetics, toxicology, safety, and market potential—has real value. Just because you have a lot of information, however, doesn't mean it's worth anything. Information needs to be unified, shared, and fully utilized. By definition, barriers to information sharing don't exist in a virtual company. In vertically integrated companies, fallacies about information and power obfuscates the primary goal—rapid commercialization. In these organizations, protecting headcount is more important than sharing information.

Tomorrow's virtual pharmaceutical or biotech company will need to be organized around knowledge rather than specific products or services. In an information-based virtual organization, information processing becomes the vital management support system for product development. This is because the application of operational decisions, production and design methodologies, R&D trends, exception reporting, intelligence screening procedures, and other management control information become "rich in detail and color" in a virtual environment. Increasingly sophisticated electronic technology (e.g. web farming) and new breeds of scientists, researchers, and executives who live in a two-dimensional world will make many three-dimensional research and management props go away.

Web farming is the use of one or more of the following Internet-based resources, with an increasing level of cost and complexity: Internet browser, news feeds, e-mails feeds, active filtering, push technology (e.g. Pointcast), intelligent web searching, information distribution on an enterprise-wide basis, published subscriptions of content into a structured database, and exploitation of business potential with a value-added reliable time dimension process.

Next, to foster changes and new relationships, government policy needs to change to foster an environment in which virtual drug and biotech companies can prosper and grow. A commitment must be made to building strategic business relationships that are at the same time responsible and fair-minded, thereby ensuring trust by developing long-term relationships built on a shared and interdependent future.

Unlike current pharmaceutical and biotech companies today, the essence of Virtual Drug Development is to build and implement a business model that will appear less a discrete entity and more an ever-changing cluster of common activities and cooperative teams in the midst of a vast fabric of relationships. This is the vision for economic success for a pharmaceutical or biotech company in the 21st century.

Virtual Drug Development is a corporate entity that provides an environment that will shorten drug development times, facilitate the rational commercial development of emerging biotechnology and pharmaceutical compounds, and ensure that a market will exist when these products are approved by the appropriate regulatory agencies. This body of mutually-supportive yet fiercely competitive corporate and private entities will embrace emerging technologies that will integrate the activities of R&D, medical and regulatory affairs, marketing, outcomes research, government affairs, and the electronic information highway. Virtual Drug Development will work in an environment using existing information and/or the electronic highway to leverage the power of previously independent, mature, yet highly decentralized resources and technologies.

As pharmaceutical executives, we must work within the framework of a new array of social paradigms: flattening organizational corporate structures, the emergence of the "generation-x" work force, healthcare reform, looming price controls, and/or rationing of the healthcare dollar.

One of our responsibilities would be to minimize areas of duplication while maximizing porosity and connectivity through a skunk works approach, namely Virtual Drug Development. Skunk works means a small, elite core management team, usually less than 10, of dedicated individuals who take the initial directions only from very senior individuals and then become self-managed around the project. These teams at Lockheed successfully built the SR-71 (fastest plane in the world) and F117a fighter in record time and on budget.

Research and Development: Pharmaceutical, Biotechnology Companies (Back to Top)
Pharmaceutical Research and Manufacturers Association (PhRMA) companies are experiencing major internal and external forces that have diminished their ability to grow and compete. Biotechnology companies like Monsanto, Pharming, and Calgene, are running headlong into political and social forces trying to restrict their impact on the established food production and pharmaceutical industries. Politicians, as well as political activists, are seeking to limit the availability of life savings and life enhancing products under the guise of unfettered and unethical bioresearch and a limited healthcare dollar pool (or healthcare rationing).

Historically, the antithesis of research and development has been market-driven development programs. We must now uncover ways to work in this market-driven environment. The biotech pharmaceutical company must demonstrate its value to third party payors, government agencies, physicians, and drug consumers. The pharmaceutical industry takes too long to develop a new drug. We must shorten the timelines. Any savings in time are leveraged by multiples to the bottom line. Finally, we must embrace the existing technology of materials management that has existed for decades in the goods and commodities industries.

Contract Research Organizations: Strategic Partnerships with Drug Development Companies (Back to Top)
Not too long ago, a firm that outsourced was seen as troubled. It was grasping at ways to lower costs to stay alive. Times have changed. Today, healthy firms are outsourcing as a way not only to shed costs, but to grow their businesses. And the outsourcing industry is booming.

The outsourcing market is growing rapidly because drug companies are asking themselves such questions as: What business are we really in? Are we supporting our ultimate customers in the best way possible, or are we simply feeding these growing beasts we call internal organizations? To improve their bottom lines, companies are under pressure to become more efficient. They are trying to boost productivity, increase service levels, and use their assets more effectively. Many find outsourcing helps meet these goals.

Firms also outsource to get a better handle on their core business. It's hard to devote enough time to the real business at hand when there are many supporting functions to attend to. Designed properly, outsourcing through a contract research organization (CRO) can be a "win-win" situation for both the client and the outsourcing firm.

But there are also risks. The loss of in-house expertise leaves firms exposed to the possibility of subpar service. And proprietary information falling into the wrong hands can threaten the very fabric of the organization.

To mitigate the loss of expertise, firms should outsource only noncore functions. Dealing with unauthorized disclosure of proprietary information can be trickier, however. Fortunately, outsourcing firms have a tremendous incentive to keep proprietary information confidential—protecting their good name.

It all comes down to control. Dealing with outsourcing firms requires discipline. Specific controls have to be put into place, including service-level agreements, as well as rewards and penalties for goals made or missed.

In an era of right-sizing, down-sizing, and re-engineering of the pharmaceutical, medical device, and biotechnology companies, CROs have proved they can form strategic partnering for contract research, ranging in scope from pre-clinical activities to filing of the NDA/PLA. However, the same forces that affect their partners are impacting their marketplace. Consequently, CROs will be asked to take on increasingly more of the risk associated with drug and device development and must therefore embrace new technologies that will allow them to remain competitive.

The component parts of these new technologies requires integration into strategic and process-related activities like: remote data entry, bar code technologies, electronic submissions, "neural networks" of physician investigators, site management organizations (SMOs), patient pools, and research facilities. Information flow will be the lifeblood of a successful CRO in the future.

Outcomes-Based Research Initiatives (Back to Top)
Business and regulatory entities have emerged, and will continue to emerge, to help define, assess, and market services that will allow money to flow from government, patients, and third-party payors to the companies that create the products. These service organizations will help focus on those targeted markets, products, and services that will get reimbursement. In some instances, they will even define the market. Service organizations will provide information access through electronic databases that will allow for iterative and real-time analysis of market potential and market response to a new product. They will help match your product features and benefits to the needs of the market, resulting in a win-win situation in the reimbursement battle. They will provide the means for adaptive control and modulation of the process of drug and device development.

Grass-Roots Lobbying: Issues-Based Public Affairs (Back to Top)
Integrated into Virtual Drug Development should also be a public affairs entity whose express purpose would be to form state-based coalitions of non-profit organizations with publicly-stated missions and goals. Lobbying organizations based on public policy issues need to foster local, state, and federal government awareness of our efforts to expeditiously and efficiently develop value-oriented and lifesaving products. To succeed, these public affairs organizations must be apolitical, interconnected, and multidimensional in order to bring the right stakeholders to the table. Their strategy will be to maintain a favorable marketplace for emerging technologies, pharmaceuticals, and biotechnologies. This will be accomplished through utilization of proven methodologies: public affairs, public information and education, networking (personal and electronic),and media relations. The main differences with this initiative and many other lobbying efforts will be the "local content" of the organizational structure and the corresponding diminution of the "suits" endemic to most lobbying organizations.

Electronic Information Highway: Computer-Mediated Communication (Back to Top)
The tools of this electronic highway will be personal computers, telephones, cellular phones, and personal data assistants (PDAs). The highway is growing at an unprecedented rate, with bandwidth and access being enhanced daily. The paradigm for success will include those who can access, integrate, and deliver through this emerging, timesaving tool. Companies that do not embrace novel communications technology will not exist in a few short years. The advantages of Silicon Valley (porous, connected) versus Boston's Route 128 (closed, bureaucratic) cannot be overstated. We must remain fiercely competitive and yet porous and connected.

The potential for companies like VeriFone to stimulate our thinking and to revolutionize the way we do business must not be lost. Integration of virtual access to our research data to enable real-time analysis of safety, outcomes measurement, enrollment, and results of investigative trials must be facilitated as soon as possible. Companies like Phaseforward have opened up a world of possibilities in this regard. Electronic submissions at the inception of drug development is essential. Even if the product fails to go to market, the lessons learned relative to time saved or increased efficiencies in decision making at key milestones can be applied to other emerging products.

The ability to connect to vast databases with smart query-based relational software will be the challenge to this initiative. Establishing industry-wide standards for formatting and retrieval of clinical information would be a laudable goal of this work effort. Interaction with the FDA and other regulatory agencies will facilitate these goals.

Integration of the Concept (Back to Top)
Many successful Virtual Companies can serve as examples of this development strategy. The companies' organizational structures vary, but their overriding and cohesive corporate theme is small, fungible, mobile work forces (2–25 people) that manage a diverse array of projects across many time zones and cultural, financial, and functional barriers. The founders of these companies have been physicians biochemists, lawyers, and pharmacists. The forward integration of these companies has been limited to a handful of senior managers in clinical, regulatory, manufacturing, and marketing expertise. All other functions, the "brute force" of drug development, is accomplished through independent consultants, universities, CROs, and contract manufacturers.

Some of these firms include: Antisoma, Acorda Therapeutics, Autoimmune, Inc., Copernicus Gene Systems, Ixion, Medco Research Inc., Protodigm, Sensus Drug Development, SunPharm, Inc., Sugen, The Medicines Company, and Zonagen.

Required Reading (Back to Top)

1. Freedman, David H. "Culture of Urgency." Forbes. September 1993; 25–28.
2. Stuckey, John, and David White. "When and When Not to Vertically Integrate." Sloan Management Review. Spring 1993; 71–83.
3. Byrne, John A. "The Horizontal Corporation." Business Week. December 20, 1993; 76–81.
4. Quinn, James Brian, and Frederick G. Hilmer. "Strategic Outsourcing." Sloan Management Review. Summer 1994; 43–55.
5. Saxenian, AnnaLee. "Silicon Valley Versus Route 128." Inc. February 1994; 25–26.
6. Verity, John W. "Robo-Software Reports for Duty." Business Week. February 14, 1994; 110–111.
7. Huey, John. "The New Post-Heroic Leadership." Fortune. February 21, 1994; 42–50.
8. Reinhardt, Andy. "Building the Data Highway." Byte. March 1994; 46–74.
9. Hone, Jenny. "The Rise and Pull of CRO Partnerships." Scrip. March 1994; 32–34.
10. Hill, Thomas. "Calculating the Cost of Clinical Research." Scrip. March 1994; 28–30.
11. Tetzeli, Rick. "The Internet and Your Business." Fortune. March 7, 1994; 86–96.
12. Stewart, Thomas A. "Your Company's Most Valuable Asset: Intellectual Capital." Fortune. October 3 1994; 68–74.
13. Roberts, Ian. "Total Quality Management in a Clinical Trial Setting." Scrip. May 1994; 6–8.
14. Byrne, John A. "The Pain of Downsizing." Business Week. May 9, 1994; 60–69.
15. O'Reilly, Brian. "The New Deal—What Companies and Employees Owe One Another." Fortune. June 13, 1994; 129:(12):44–52.
16. Reingold, Harold. The Virtual Community: Homesteading on the Electronic Frontier. Addison-Wesley Publishing Co., 1993. Especially Chapters 1, 2, 3, and 6.
17. Kureczka, Joan. "Virtual Reality." Biopeople. 1995; 9–18.
18. Handy, Charles. "Trust and the Virtual Organization." Harvard Business Review. May–June 1995; 40–50.
19. Pape, William R. "The Fewer the Merrier." Inc. Technology. No.4. 1998; 33.
20. Pape, William R. "Chairman of the Keyboard." Inc. Technology. No. 3. 1998; 23.

R. Stephen Porter is director of medical affairs for Therapeutic Antibodies Inc. (TAb), an international biopharmaceutical firm headquartered in Nashville, Tennessee. Porter joined TAb from American Cyanamid Company, where he served two years each as assistant director, then associate director, of Cardiovascular and Drug Metabolism in its Medical Research division.

For more information: R. Steven Porter, Director of Medical Affairs, Therapeutic Antibodies, Inc., The Villages Vanderbilt 1500, Nasvhille, TN 37212. Tel: 615-327-1027. Fax: 615-320-1212. Email: steve.porter@therapeutic-antibodies.com.