BEIJING - A number of coinciding trends - ranging from the worldwide spread of technologies that can link up scientists and research models from Boston to Beijing to the decline of productivity at traditional drug R&D labs to the rise of the Eastern economic powers - will fundamentally change the structure of the West's pharmaceutical giants and their development of new molecules.

Forward-looking leaders in the industry, along with analysts who aim to map out future trends and adaptations, predict that the titans of today will have to strengthen "open-source" research platforms, along with world-spanning webs of partnerships, in order to survive the next decade and more of rapid-fire change.

The traditional business model for pharmaceutical companies, built on in-house research in the quest for the next billon-dollar blockbuster drug, is not sustainable, according to Beatrijs Van Liedekerke, an associate director at the PricewaterhouseCoopers office in Beijing.

Leading pharmaceutical companies will have to become much more flexible in their approach to research, in collaborative models that crisscross the continents, in order to compete in the Flat World landscape that is emerging, Van Liedekerke suggested in an interview.

"Big pharma's traditional model hinges on the ability to identify promising new molecules, test them in large clinical trials and promote them with an extensive marketing and sales presence," states a report that Van Liedekerke co-authored with colleagues across the Americas, Europe and Asia. "But, by 2020, the strategy of single-handedly placing big bets on a few molecules, marketing them heavily and turning them into blockbusters will not suffice."

Merv Turner, a senior vice president at Merck's research laboratories, agreed with that assessment.

"Over the last 20 years, investment [in R&D] has gone up and up and up, but returns have fallen," Turner said during the recent China Research and Development Summit in Shanghai.

"This is a fundamental structural issue that the industry has to deal with," he explained. As a result, the VP added, "We will not see many more mega R&D centers ahead."

Rather, the most dynamic players in the pharma sector - those quickest to adapt - have been "working toward a much more open-source model of innovation in our industry," Turner said. This new model, he added, will include increasing collaboration in virtual research operations with scientists and start-ups across India and China.

Eli Lilly's Robert Armstrong, one of the earliest advocates of replacing the R&D silos of traditional pharmaceutical companies with research networks that stretch from West to East, said that Lilly is racing to construct a "dynamic matrix of partnerships across the globe aimed at R&D."

Armstrong, who is Lilly's vice president of global external research and development, explained that in China, the company has already formed partnerships with leading contract research organization WuXi PharmaTech and with innovative drug developer Hutchison MediPharma (Also see "Hutchison MediPharma and Eli Lilly Sign New Discovery Deal" - Scrip, 1 December, 2008.).

"We have a molecule-based partnership with Hutchison MediPharma where they do innovation and we agree on targets," Armstrong explained in an interview.

Armstrong said that when he first started scouting China for potential partnerships around the turn of the century, none of the country's most promising start-ups had yet emerged; at that time, he "just started visiting academic institutions around the country."

Yet now, "China has an ecosystem that is poised to have some breakout companies," he said.

Extending Lilly's research network across China dovetails with "the globalization of capacity and talent and technologies," Armstrong said (Also see "Eli Lilly In Asia Expansion Overdrive" - Scrip, 27 October, 2008.).

PWC's Van Liedekerke said in an earlier interview that the West's financial crisis would speed up a process already in place of moving some pharmaceutical research by U.S. and European drug companies to lower-cost Chinese labs (Also see "China Emerging As Big Winner In Pharma Outsourcing Rush To Asia - PwC" - Scrip, 9 October, 2008.).

In the new report, Van Liedekerke and colleagues predict: "By 2020, collaboration will be a 'do-or-die' requirement for pharmaceutical companies."

Already, they add, "the research base is shifting."

"Non-OECD economies accounted for 18.4 percent of the world's R&D in 2005, up from 11.7 percent in 1996," they said. "The number of patents filed by Asian researchers also increased significantly over the same period, albeit from low levels. So the industry will have to forge much closer links with the most reputable centers of scientific excellence in these countries."

Meanwhile, Lilly VP Armstrong said that the Chinese government's new support for innovative drug research, the return of Western-educated scientists to the country, the expanding presence of multinational pharmaceutical companies and the emergence of local start-ups are all laying the groundwork for creative drug development and partnerships (Also see "U.S. Economic Crisis, Beijing’s Perks, Could Trigger Reverse Brain Drain" - Scrip, 18 December, 2008.).

"What is the next big thing that needs to occur in China?" Armstrong asked. "China-developed molecules that are competitive on a global basis - this will be the next big milestone - when there is a sustainable flow of molecules into global development."

- Kevin Holden (k.platt@elevier.com)

Global Spread Of Technologies, West’s Economic Downturn And East’s Rise Will Fundamentally Change Pharma Giants By 2020

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