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In the mid-1980s, the AIDS epidemic was killing hundreds of people each week. Scientists had identified HIV, the virus that causes AIDS, but there was no cure in sight. For those diagnosed, life expectancy was about 18 months. The only thing spreading faster than the virus was fear, with public health campaigns often resorting to scare tactics as the primary means of slowing rates of infection.

It was against this backdrop that chemist Dennis Liotta and Raymond Schinazi, a professor of pediatrics who had been working on antiviral research, established the first HIV lab at Emory University in Atlanta. In the early 1990s, joined by postdoctoral research associate Woo-Baeg Choi, the scientists discovered the drug that would go on to become the backbone of some of the most effective HIV cocktails.

The molecule, a nucleoside reverse transcriptase inhibitor initially called FTC and later given the generic name emtricitabine, continued development at Emory until 1996, when it was licensed by Durham, N.C.-based Triangle Pharmaceuticals Inc., a small biotech founded by Schinazi only the year before. In 2003, it was snagged by Gilead Sciences Inc. and won FDA approval in combination with other antiretroviral agents. Since then, emtricitabine – branded Emtriva – has become a staple of Gilead’s single-tablet combination strategy, most recently part of 2012’s approved Stribild, a single-tablet combination of three HIV drugs and a boosting agent. Within the space of 30 years, research by those Emory scientists and others have helped shift the narrative of HIV-positive status from certain death to a chronic, manageable illness. And there are indications that medical research is getting even faster.

The pace of biotechnology innovation is accelerating, which is having a major impact on drug research and development productivity. There are a number of factors driving this exciting new era including significant progress being made in our genomic understanding of a range of diseases, the molecular pathways and the discovery of technologies that allow for the development of safer targeted and personalized therapies.

In parallel, there has been recognition that developing new medicines to treat complex diseases, such as cancer and Alzheimer’s, is a massive undertaking and requires a collaborative problem-solving approach.

This understanding has resulted in a shift in R&D strategies by pharmaceutical companies and the willingness to now conduct collaborative research, particularly with universities and start-up biotechs, to tap into the most innovative drug candidates.

Big pharma’s appetite for early stage therapeutic assets during the past five years has been truly remarkable. The competitive environment to partner with emerging biotechs and academic institutions to gain access to transformative drugs and technologies represents a massive change in traditional licensing strategies.

According to the Thomson Reuters Recap deals database, 40 percent to 70 percent of big pharmas’ product pipelines are now in-licensed, as shown in the Clinical Pipeline Sourcing chart below. And the number of licenses signed annually involving discovery/lead assets over the past five years has out-paced all other licensing deals by stage (See 5-year Trend in Number of Therapeutics Licensing Deals by Stage of Lead Asset).

Figure 1: Clinical pipeline Sourcing for Top 20 Pharma
(SOURCE: Thomson Reuters)

Figure 2: 5-year Trend in Numbers of Therapeutics Licensing Deals by Stage of Lead Asset
(SOURCE: Thomson Reuters)

In 2014, no less than 43 percent of the 363 transacted deals were for discovery-stage assets and an additional 23 percent involved products at the preclinical stage of development.

This trend is intensifying with licensing deals for discovery assets representing 53 percent of the 112 recorded transactions in the first quarter of 2015. (See Q1 2015 Licenses by Stage and Rx.)

Figure 3: Q1 2015 Licenses by Stage and Rx Area
(SOURCE: Thomson Reuters)

A Sea Change

Not so long ago, pharma companies leaned more toward accessing assets that had at least proved their worth beyond the early-concept stage. It was attracted to drug candidates that had already been nurtured into early human clinical testing.

Tilting deal structures toward earlier partnerships is being brought about by harsh economic realities and the impact that new technologies are having on drug research and development. A report on pharmaceutical industry returns produced by Thomson Reuters Recap revealed that the cost of bringing an asset from discovery to launch increased 18 percent between 2010 and 2013, yet the average forecast for peak sales of an asset declined by 43 percent. The dwindling returns were attributed mostly to terminations of late-stage programs that resulted in a loss of $243 billion over four years.

The price tag for conducting R&D is also increasing dramatically. A Tufts Center for the Study of Drug Development (CSDD) analysis found that developing a medicine to FDA approval still takes, on average, more than 10 years and costs an estimated $2.558 billion. The figure is based on an estimated, average out-of-pocket cost (actual cash outlays) of $1.395 billion plus estimated time costs – the expected returns that investors forego while a drug is in development – of $1.163 billion.

These dismal statistics have prompted pharmas to look farther upstream for innovation. The impact: small biotechs and academic institutions now have willing partners to share in the risks of early work. Previously they were left to their own devices to find funding to help bridge the chasm between high-risk research and establishing proof-of-concept for their technologies. The increasing number of deals between industry and academia has now evolved as a key strategy to both improve R&D productivity and reduce the costs of translating discoveries into new medical products.

New models to discover innovation emerge

“The quest for innovation has seen most of the large pharmas develop a model for academic-industry collaboration,” noted Laura Vitez, principal business analyst, Thomson Reuters Recap. “It involves fostering local innovation in hubs of academic excellence.” It’s a simple concept, but one that is likely to have a huge impact going forward.

It means company researchers are working alongside leading academic scientists. If a drug candidate proves promising, it can be quickly moved into more clinical testing. In order to stay current on the vast sea of evolving biotechnologies, pharmas are using this model to cast a wide net to capture the most promising scientific innovations.

New York-based Pfizer Inc., for example, established its Centers for Therapeutic Innovation (CTI) in 2010 and has more than 23 programs across a network of labs that are located in San Diego, San Francisco, Boston and New York. The open innovation model enables Pfizer and academic teams to work side-by-side, blending the research expertise of academics in disease biology, targets and patient populations with the company’s developmental expertise and resources.

One of CTI’s most recent collaborations, for example, was established with the Jeffrey Modell Foundation (JMF), based in New York, to conduct research in the field of immunological diseases. The Foundation was established by Vicki and Fred Modell in memory of their son Jeffrey, who died from complications of primary immunodeficiency, a serious genetic condition that is often fatal.

The goal will be to identify and co-fund translational research projects at medical centers within the CTI network that leads to a potential drug candidate for an immunological disease that can be moved into further clinical testing.

Johnson & Johnson also has its Innovation Centers working in overdrive; since their 2013 launch more than 200 deals have been inked including the first alliance for the Disease Interception Accelerator (DIA), a research agreement with Washington University to identify the root cause of type 1 diabetes and enable the development of interventions that halt progression of the disease. The collaboration will investigate the role of antigen-presenting cells in the initiation and progression of type 1 diabetes in humans.

The ability to detect and potentially intercept type 1 diabetes in at-risk individuals before the disease sets in or insulin dependence develops has the potential to greatly improve health and well-being.

An interesting project designed to address mounting costs of testing human responses to candidate therapeutics that often shelve promising drugs before they see the light of day is being undertaken by Janssen Biotech Inc., a J&J division.

The Johnson & Johnson Boston-based innovation center helped forge a partnership between Janssen Biotech and Cambridge, Mass.-based Emulate Inc., a spinout of Harvard University’s Wyss Institute, where Janssen intends to test its therapeutic candidates in Emulate’s Organs-on-Chips technology. Specifically, it will focus on three R&D programs: Lung-on-Chip and Thrombosis-on-Chip to evaluate pulmonary thrombosis; Liver-on-Chip to predict liver toxicity, a major cause of drug failures in the clinic; and an undisclosed third area.

Rights to any discoveries related to the platforms go to Emulate, and Janssen can extend the collaboration beyond the initial three programs to include other organs, disease models or drugs. “It could really help us with human physiology and pharmacology before we get into the clinic and into humans,” said Michelle Browner, senior director of platform innovation and partnership management at J&J Innovation Center.

Grand challenges

In areas such as neurology, industry-academic collaborations are believed to be the only way to proceed for diseases such as schizophrenia or Alzheimer's disease. In March 2015, a global Dementia Discovery Fund initiated by the UK government and set up by J.P. Morgan was launched at the World Health Organization's (WHO) first ministerial conference on dementia in Geneva. It provided an initial $100 million to fund preclinical and early stage research in the field. Support for the initiative is also forthcoming from a number of pharma companies, including Glaxosmithkline plc (GSK), Johnson & Johnson, Eli Lilly and Co., Pfizer Inc. and big biotech Biogen Inc.

The aim of the fund is to identify new avenues of research from around the world. It will be structured as a traditional VC fund but will be the first such global initiative to invest solely in dementia projects.

Speaking to the dementia conference, Margaret Chan, director general of the WHO said, "I can think of no other disease where innovation, including breakthrough discoveries to develop a cure, is so badly needed."

With Sembragiline, the selective monoamine oxidase B (MAO-B) inhibitor from Evotec AG and recent Alzheimer’s disease clinical trial setback, patients and their caregivers are hoping that the new model for translational research will reap dividends in what remains one of medicine's most intractable conditions.

Patients win, too

The new milieu in drug research is also a huge plus for patients suffering from devastating diseases with few treatment options. Collaborative research is helping companies gain a much better understanding of diseases that will ultimately improve their success rate for the discovery of new potential treatments.

Productivity is already up, too. Last year, the FDA reported that there were 41 new drugs approved by the Center for Drug Evaluation and Research. Interestingly, approximately 41 percent of the approved medicines were targeting rare or orphan diseases. A few years ago the pharma industry paid very little attention to rare disease research. All this has changed thanks to our greater understanding of the genetic underpinnings of their causes.

As pharmaceutical companies grapple to understand the vast new world of opportunities available to them, systematically scouring to be the first to find the next big thing, there is a new solution from Thomson Reuters Professional Services at the intersect of traditional content sets including publications, patents and deals. There is a growing trend for services that identify the hottest research networks, compare the high value emerging technology platforms and benchmark the most appropriate early stage asset deal structures. It will be fascinating to see how this ‘innovation-sourcing’ evolution plays out.