Pharmaceutical companies in the state are buckling up for a bumpy ride over the next several years, as patents on blockbuster drugs expire, increasingly specialized medications labor to gain a foothold in the marketplace and concern over the safety of drugs dampens sales.
In a meeting earlier this year with analysts, William Weldon, chairman and CEO of Johnson & Johnson, predicted the next five years would be “one of the most dynamic periods of change” in the history of the healthcare industry. Indeed, pharmaceutical companies here spent much of last year responding to these changes by streamlining operations, searching aggressively for promising new research - often outside of their own laboratories - and pinning hopes for future growth on accelerating demand for their products in emerging markets in Asia, Latin America, Africa and Russia.
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“We will see the industry transform itself around a different portfolio, a different sales force model, around research and development excellence and excellence in bringing products to market,” says Diana Conmy, corporate director for market insights, for IMS Health, a market research and consulting company. We will see more outsourcing of things that aren’t critical to the business.” Conmy says companies here and throughout the country are also responding by diversifying into areas such as diagnostics, over-the-counter drugs, consumer products, and fast-growing segments of the pharmaceutical market such as biologics - medications developed through the use of biological processes that employ recombinant DNA.
As the research around drug discovery becomes increasingly complex - and expensive - many companies here say they are looking outside of their own R&D departments for cost-effective ways to acquire or license new technologies.
“The science is getting harder - the low-hanging fruit has already been picked,” says Bob Franks, president of the HealthCare Institute of New Jersey, the trade association representing the pharmaceutical industry here.
But the bigger companies say that as the pace of drug development in the biotechnology industry has picked up, acquisitions have become more attractive.
“Companies not only spend significant sums on internal R&D, but there is a greater willingness to go out and bring it in,” says Alex Scott, vice president for business development for Eisai, Inc. of Woodcliff Lake, the U.S. subsidiary of Tokyo-based Eisai Co. “Start-up companies are able to acquire financing and bring forward new products in ways they couldn’t 20 years ago. So projects are generally more mature at the point when pharmaceutical companies are deciding whether or not to acquire them.”
Eisai recently acquired two companies that broadened the company’s portfolio of both technology and products. Morphotek, a Pennsylvania-based pure R&D company, provided a unique platform for discovering and developing fully human monoclonal antibodies for therapeutic purposes, Scott says, noting that Eisai has traditionally focused on small-molecule therapeutics, or chemically-based compounds, such as its Aricept and Aciphex, which treat dementia and gastrointestinal disorders, respectively.
“This was a way for us to acquire, simultaneously, expertise in a new technology and projects in oncology, significantly adding to our skill set,” Scott says. Monoclonal antibodies are biologically based therapies that stimulate the immune system to attack tumors and stop their growth by blocking cell receptors.
Another recent acquisition, Minnesota-based MGI PHARMA, has “multi-faceted assets,” Scott says, including marketed products and pipeline compounds in oncology and acute care as well as R&D, manufacturing and sales and marketing capabilities.
The Roche Group, parent company of Nutley-based Hoffman-La Roche, Inc., made a significant investment last year in Alnylam of Cambridge, Massachusetts, which is developing a technology to “silence” disease-causing genes by targeting Ribonucleic acid (RNA), effectively suppressing genes that produce harmful proteins. The investment gives Roche a non-exclusive license to Alnylam’s technology platform and covers four therapeutic areas, including oncology, respiratory diseases, metabolic diseases and certain liver diseases.
Lee Babiss, global head of Pharma Research for the company, says Roche began embracing these sorts of partnerships a decade ago. “They are progressing nicely,” he says, adding that the company also restructured its R&D operations many years ago in order to eliminate what he called bureaucratic “process” that stifled creativity. At that time, Roche set five priority areas: oncology, metabolic disorders, central nervous system diseases, virology and inflammatory disorders.
“We are investing quite heavily in the next generation of biologics,” Babiss says.
Conmy describes this as a trend for the industry.
“Biologics and biotech will see future growth. Large pharmaceutical companies, in order to diversify, will be looking in this direction,” she says.