Drugs in '05: Much Promise, Little Payoff
Even as pharmaceutical companies poured a record amount of money into drug development in 2005, the industry's research drought grew worse.
According to newly released statistics from the Food and Drug Administration, it approved only 20 new drugs, down from 36 in 2004. Only once in last 10 years has the number of newly approved drugs been lower than last year's figure.
The dry spell in 2005 came even as spending on research by the industry reached a new high, passing $38 billion. And in a rarity, several major companies failed to win approval for a new drug invented in their own labs, including Pfizer, Eli Lilly and Johnson & Johnson.
The decline in drug development came as scientists in and outside the companies were making great strides in genomics and other sorts of basic research into the way diseases develop, opening many potential new targets for treatment. Yet such progress in the laboratory has not translated so far into many new drugs on the market.
Some analysts say that the drug industry is in a cyclical trough, and that the number of new drugs - not just new applications for drugs already on the market - will start rising within a few years as research investments begin to pay off. But the F.D.A. and the companies seem to agree that the process for testing and developing new drugs needs improvement.
"Our concern is that the development process itself is not keeping up at a fast enough pace to match the progress on the discovery end," said Dr. Scott Gottlieb, the agency's deputy commissioner for medical and scientific affairs.
The F.D.A. is looking for ways to speed the approval of new treatments - like approving drugs based on "surrogate endpoints," whether, for example, a cancer drug causes tumors to shrink instead of whether it prolongs the life of patients. It was on such a basis that the F.D.A. last month approved Nexavar, a Bayer drug for treating kidney cancer.
But like finding new treatments, diagnosing the problem of drug development is easier than figuring out a solution. Even as the F.D.A. looks for ways to speed the testing of new treatments, members of Congress and some consumer groups are calling for even more testing before drugs are approved.
The low output from research last year was even worse than the top-line figures might indicate. In 2004, important cancer treatments including Avastin, by Genentech, and Tarceva, through a partnership of Genentech and OSI Pharmaceuticals, were among the therapies that regulators allowed onto the market. The drugs that were approved were mostly for rare diseases like chronic iron overload, a condition for which the Novartis medicine Exjade received clearance.
In the meantime, the agency delayed approval of prominent new treatments like Pargluva, a diabetes drug from Bristol-Myers Squibb and Merck, and Exubera, a form of inhaled insulin from Pfizer.
The paucity of new products is a big reason that the stock prices of large drug makers have tended to fare poorly in recent years. Shares of Pfizer, the industry leader, for example, reached a peak of $49 in July 2000 and have trended downward since, closing yesterday at $24.44.
The drought in new drugs has led some industry executives to complain that the F.D.A. is denying approval to good new treatments because of the criticism the agency has faced from lawmakers over Vioxx. Merck stopped selling its arthritis painkiller Vioxx in 2004 after a clinical trial showed that it increased the risks of heart attacks and strokes in patients taking it for 18 months or longer. Some other studies found heart attack risks as early as 2000, and the F.D.A. has been criticized for not forcing Merck to withdraw the drug earlier or to warn doctors prominently of such risks.
Dr. Gottlieb said that the agency's attitude toward approving new drugs had changed only marginally, if at all. Its approval rate has been roughly flat for the last several years, but companies are submitting fewer applications, he said.
Albert Rauch, a drug industry analyst at A. G. Edwards & Sons, says that the F.D.A. should not be blamed for the drop in new approvals last year.
"Some of the drugs that didn't make it through, they had issues," Mr. Rauch said. "If you come up with something that's unique and really has a unique advantage, the F.D.A.'s very receptive to that."
Mr. Rauch said he believed that the industry was probably at the bottom of the development cycle and that the number of new drugs would increase in the next few years, as some sophisticated research techniques started to bear fruit. "When you're talking about targets, there's a lot of them out there," Mr. Rauch said. "But those targets didn't become evident until after 1995. It's only been 10 years, and it typically takes at least 10 years to get a product to market."
Researching and developing a drug is a long and arduous process. Genentech's work leading to Avastin, for example, began in 1989 - 15 years before the drug's approval. Scientists first identify the cellular process of disease within the body. They may search for proteins that cancerous tumors release in order to spread, or receptors on the surface of a cell that become the targets of viruses.
The drug company then searches for chemical compounds or proteins that are able to interact with the targets the scientists have found - without damaging cells in other parts of the body. If a treatment appears to have therapeutic effects in test-tube and animal trials, the companies then move on to Phase I human testing, when a handful of healthy volunteers are given the therapy to make sure that it is safe enough for wider testing. In Phase II testing, the drug is tried on a few dozen to a few hundred patients for safety and effectiveness.
Finally, in Phase III development, the drug is tested in large-scale trials with as many as several thousand patients to demonstrate its effectiveness and to search for rarer side effects.
If the treatment is shown to be unsafe or ineffective at any stage, it fails development and is put aside.
According to a report in December from Merrill Lynch, the number of potential new drugs in Phase I and II testing has nearly doubled in the last decade, to 1,971 in 2004 from 1,010 in 1995. But that has not translated into success in Phase III development; the number of drugs in Phase III has been flat at fewer than 400.
"R&D statistics over the past decade have been disappointing," Merrill's analysts wrote in their report. Still, the analysts predicted that companies would continue to increase research spending and expand their pipelines of early-stage drugs.
The advances in early-stage development, though, may be increasing the rate of attrition as drugs move into later stages, according to the report. "Technological advances may have allowed companies to more easily create new therapies, thus boosting the number of compounds in early development," it said. "But the increasing complexity of the targeted disease could mean that it is hard to predict efficacy and safety."
Analysts note that the biotechnology industry is still coming into its own and that the medical payoffs from genomics still lie mainly in the future.
So far, said Robert Rech, a managing director at Ferghana Partners, a specialty investment bank that specializes in the drug industry, the increased knowledge about disease processes has created as many questions as answers. "We have all this extra information, and all it's done is complicated everything," he said. "It's almost like we know too much, because for everything that we learn, it almost brings up two new questions."
Still, the companies that Ferghana works with are optimistic that the drought in drug development will not last forever, Mr. Rech said. "If you're in the industry, you certainly don't sense any lack of activity. I think we will get there, but we're only 15 years into this. It just takes time."
According to newly released statistics from the Food and Drug Administration, it approved only 20 new drugs, down from 36 in 2004. Only once in last 10 years has the number of newly approved drugs been lower than last year's figure.
The dry spell in 2005 came even as spending on research by the industry reached a new high, passing $38 billion. And in a rarity, several major companies failed to win approval for a new drug invented in their own labs, including Pfizer, Eli Lilly and Johnson & Johnson.
The decline in drug development came as scientists in and outside the companies were making great strides in genomics and other sorts of basic research into the way diseases develop, opening many potential new targets for treatment. Yet such progress in the laboratory has not translated so far into many new drugs on the market.
Some analysts say that the drug industry is in a cyclical trough, and that the number of new drugs - not just new applications for drugs already on the market - will start rising within a few years as research investments begin to pay off. But the F.D.A. and the companies seem to agree that the process for testing and developing new drugs needs improvement.
"Our concern is that the development process itself is not keeping up at a fast enough pace to match the progress on the discovery end," said Dr. Scott Gottlieb, the agency's deputy commissioner for medical and scientific affairs.
The F.D.A. is looking for ways to speed the approval of new treatments - like approving drugs based on "surrogate endpoints," whether, for example, a cancer drug causes tumors to shrink instead of whether it prolongs the life of patients. It was on such a basis that the F.D.A. last month approved Nexavar, a Bayer drug for treating kidney cancer.
But like finding new treatments, diagnosing the problem of drug development is easier than figuring out a solution. Even as the F.D.A. looks for ways to speed the testing of new treatments, members of Congress and some consumer groups are calling for even more testing before drugs are approved.
The low output from research last year was even worse than the top-line figures might indicate. In 2004, important cancer treatments including Avastin, by Genentech, and Tarceva, through a partnership of Genentech and OSI Pharmaceuticals, were among the therapies that regulators allowed onto the market. The drugs that were approved were mostly for rare diseases like chronic iron overload, a condition for which the Novartis medicine Exjade received clearance.
In the meantime, the agency delayed approval of prominent new treatments like Pargluva, a diabetes drug from Bristol-Myers Squibb and Merck, and Exubera, a form of inhaled insulin from Pfizer.
The paucity of new products is a big reason that the stock prices of large drug makers have tended to fare poorly in recent years. Shares of Pfizer, the industry leader, for example, reached a peak of $49 in July 2000 and have trended downward since, closing yesterday at $24.44.
The drought in new drugs has led some industry executives to complain that the F.D.A. is denying approval to good new treatments because of the criticism the agency has faced from lawmakers over Vioxx. Merck stopped selling its arthritis painkiller Vioxx in 2004 after a clinical trial showed that it increased the risks of heart attacks and strokes in patients taking it for 18 months or longer. Some other studies found heart attack risks as early as 2000, and the F.D.A. has been criticized for not forcing Merck to withdraw the drug earlier or to warn doctors prominently of such risks.
Dr. Gottlieb said that the agency's attitude toward approving new drugs had changed only marginally, if at all. Its approval rate has been roughly flat for the last several years, but companies are submitting fewer applications, he said.
Albert Rauch, a drug industry analyst at A. G. Edwards & Sons, says that the F.D.A. should not be blamed for the drop in new approvals last year.
"Some of the drugs that didn't make it through, they had issues," Mr. Rauch said. "If you come up with something that's unique and really has a unique advantage, the F.D.A.'s very receptive to that."
Mr. Rauch said he believed that the industry was probably at the bottom of the development cycle and that the number of new drugs would increase in the next few years, as some sophisticated research techniques started to bear fruit. "When you're talking about targets, there's a lot of them out there," Mr. Rauch said. "But those targets didn't become evident until after 1995. It's only been 10 years, and it typically takes at least 10 years to get a product to market."
Researching and developing a drug is a long and arduous process. Genentech's work leading to Avastin, for example, began in 1989 - 15 years before the drug's approval. Scientists first identify the cellular process of disease within the body. They may search for proteins that cancerous tumors release in order to spread, or receptors on the surface of a cell that become the targets of viruses.
The drug company then searches for chemical compounds or proteins that are able to interact with the targets the scientists have found - without damaging cells in other parts of the body. If a treatment appears to have therapeutic effects in test-tube and animal trials, the companies then move on to Phase I human testing, when a handful of healthy volunteers are given the therapy to make sure that it is safe enough for wider testing. In Phase II testing, the drug is tried on a few dozen to a few hundred patients for safety and effectiveness.
Finally, in Phase III development, the drug is tested in large-scale trials with as many as several thousand patients to demonstrate its effectiveness and to search for rarer side effects.
If the treatment is shown to be unsafe or ineffective at any stage, it fails development and is put aside.
According to a report in December from Merrill Lynch, the number of potential new drugs in Phase I and II testing has nearly doubled in the last decade, to 1,971 in 2004 from 1,010 in 1995. But that has not translated into success in Phase III development; the number of drugs in Phase III has been flat at fewer than 400.
"R&D statistics over the past decade have been disappointing," Merrill's analysts wrote in their report. Still, the analysts predicted that companies would continue to increase research spending and expand their pipelines of early-stage drugs.
The advances in early-stage development, though, may be increasing the rate of attrition as drugs move into later stages, according to the report. "Technological advances may have allowed companies to more easily create new therapies, thus boosting the number of compounds in early development," it said. "But the increasing complexity of the targeted disease could mean that it is hard to predict efficacy and safety."
Analysts note that the biotechnology industry is still coming into its own and that the medical payoffs from genomics still lie mainly in the future.
So far, said Robert Rech, a managing director at Ferghana Partners, a specialty investment bank that specializes in the drug industry, the increased knowledge about disease processes has created as many questions as answers. "We have all this extra information, and all it's done is complicated everything," he said. "It's almost like we know too much, because for everything that we learn, it almost brings up two new questions."
Still, the companies that Ferghana works with are optimistic that the drought in drug development will not last forever, Mr. Rech said. "If you're in the industry, you certainly don't sense any lack of activity. I think we will get there, but we're only 15 years into this. It just takes time."
posted by Chris Placitella at 9:27 AM
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