Value Creation in the Pharmaceutical Industry

Prof. Dr. Alexander Schuhmacher is a professor for R&D management, Vice Dean of the Faculty of Applied Chemistry and Senator at Reutlingen University. And he is Director for R&D performance metrics and business model innovation at Bioscience Valuation. Before joining the academic world, he worked 14 years in the pharmaceutical industry in various functions in R&D, such as in R&D portfolio management and strategic planning. He studied biology at the University of Constance (Germany), Pharmaceutical Medicine at Witten-Herdecke University (Germany) and he is also a graduate of the Executive MBA program at the University of St. Gallen (Switzerland).Prof. Dr. Markus Hinder studied medicine at the Universities of Heidelberg, Paris and Zürich and obtained a doctoral degree in pharmacology from Heidelberg University.  After graduation he trained in clinical pharmacology, cardiology and emergency medicine. Before joining Novartis he held leadership positions in clinical pharmacology, translational medicine, clinical development, medical affairs and project management. Markus is a professor at Cardiff University/ Hochschule Fresenius, reviewer for several journals and associate editor for the Journal of Translational Medicine.Prof. Dr. Oliver Gassmann is a Professor for technology and innovation management at St. Gallen University, where he chairs the Institute of Technology Management. His teaching activities include several executive MBA programs. He has written or edited 18 books and published more than 300 journal articles on technology and innovation management. Until 2002 he headed the R&D department of Schindler. The main focus of his research lies in open innovation and global innovation processes. He is the 1998 recipient of the RADMA Prize and in 2009 was elected among the top 50 researchers by IAMOT, the International Association for Management of Technology.

• List of Contributors XVIIForeword XXI1 Introduction to the Book 1Alexander Schuhmacher, Oliver Gassmann, and Markus HinderReference 82 Global Epidemiological Developments 11Stephan Luther and Peter Schmitz2.1 Introduction 112.2 Model of Epidemiological Transition 122.3 Global Burden of Diseases 152.3.1 Trends in the Distribution of Disease Burden 162.4 Infectious Diseases 202.4.1 (Re-)emerging Infectious Diseases 232.4.2 Neglected Tropical Diseases 262.5 Noncommunicable Diseases 292.6 Antimicrobial Resistance 322.7 Dynamics 35References 383 The Value of Pharmaceutical Innovation: Concepts and Assessment 45Sam Salek and Paul Kamudoni3.1 Introduction 453.2 Concepts and Definitions of Value 463.3 Stakeholder’s Perspectives on Value 473.3.1 Drug Regulatory Agencies 473.3.2 Health Technology Assessment 473.3.3 Patients 493.3.4 Prescribers/Clinicians 493.4 Recent Developments Influencing the Definition and Assessment of Value 503.5 Recommendations: Implications for R&D 513.6 Discussion 523.7 Conclusion 56References 574 A Review of the Pharmaceutical R&D Efficiency: Costs, Timelines, and Probabilities 61Alexander Schuhmacher, Oliver Gassmann, and Markus Hinder4.1 Introduction 614.2 The Historical Perspective 624.3 The R&D Phase Model 634.4 The Low R&D Success Rates 634.5 The Long R&D Time Intervals 674.6 The High Cost of Pharmaceutical R&D 714.7 The Reduced R&D Efficiency 734.8 Can an Increase in R&D Value Compensate the Reduced R&D Efficiency? 76References 785 Financing Pharmaceutical Innovation 81Sviataslau Sivagrakau5.1 Introduction 815.2 Measuring Innovation: Categories of New Drugs 845.3 Productivity of Pharmaceutical Industry throughout Time 865.4 Measuring the Cost of Developing New Medicines 875.5 Funding Drug Development: a Global Endeavor 915.6 Public and Private Funds: Complementary Finance for Drug Development 955.7 How Commercial Drug Development Projects Are Financed Today: Big Firms, Small Firms, andTheir Cooperation 975.8 Public Health Economics and Financing Pharmaceutical Innovation 995.9 Conclusion 101Acknowledgment 102References 1026 Challenges and Options for Drug Discovery 107Werner Kramer6.1 Introduction 1076.2 Paradigm Shifts of R&D Organizations 1086.3 Productivity of Drug Discovery 1096.4 IsThere an Innovation Gap in Biomedical Research? 1116.4.1 To Go for First in Class or Best in Class 1126.4.2 HowWe Define Medical Innovation? 1126.5 Why Did Drug Candidates Fail? 1136.5.1 Why Is the Dropout Rate So High in Early Clinical Development? 1156.5.1.1 Drug Behavior In Vivo: Role of Transport Proteins 1156.5.1.2 Hypes and Lack of Scientific Thoroughness 1166.6 Implications from the "Lessons Learnt" for Future Drug Discovery Research 1236.6.1 Organization of Drug Discovery and Development 1236.6.2 Elucidation of the Physiological Validity of a Target for the Human Disease 1256.6.2.1 Extensive Inquiry of (All) Published Data of a Target or Pathway 1256.6.2.2 Integrative Knowledge Management 1276.6.2.3 Demonstration of the Involvement of a Target in Human Disease 1286.6.2.4 A Stringent and Comprehensive Test Sequence 1326.6.2.5 Translational Clinical Trials 135Acknowledgment 136References 1367 Translational Medicine: Enabling the Proof of Concepts 141Gezim Lahu and John Darbyshire7.1 Introduction 1417.2 Translational Medicine and Its Role/Value in Early Development 1437.3 Knowledge Generation 1447.4 Types of Data, Experiments, and Tools Needed to Move from Basic Research to Early Clinical Development 1447.4.1 Dose Selection 1457.4.2 Animal Models 1467.4.3 Fraction of NOAEL and Efficacious Dose 1497.4.4 Allometric Scaling and PBPK 1507.4.5 Physiologically Based Pharmacokinetic Models PBPK 1517.4.6 Pharmacokinetic and Pharmacodynamic Modeling 1517.5 FIM (Dose Escalation and MTD) 1537.6 Proof of Concept (PoC) 154Summary 156References 1578 Preclinical Safety and Risk Assessment 161Paul Germann and Rob Caldwell8.1 Introduction 1618.2 Test Systems 1618.2.1 In Silico Analysis 1618.2.2 In Vitro Experiments 1628.3 Case Study: hERG Assay 1638.3.1 In Vivo Experiments 1648.4 The Preclinical "Package" during the Development of an NME 1658.5 Factors Influencing the Preclinical Data Set 1668.5.1 Timing and Costs 1678.5.2 Intended Clinical Application Route 1678.5.3 Treatment Duration and Treatment Frequency 1678.5.4 Clinical Indication 1678.5.5 Ongoing Changes of the Regulatory Landscape 1688.5.6 New Drug Formats 1688.6 Translation into Humans:The "TherapeuticWindow" 1698.7 Influence of Intended Therapeutic Use on the Risk Assessment (RA) 1698.8 Deep Dive Case Study: Safety Assessment of Biological Drug Formats 1708.9 NBE Case Study 1 1758.10 NBE Case Study 2 1758.11 Carcinogenicity Risk Assessment for Marketed Drugs 1768.12 Treatment Duration 1788.13 Conclusion – the "Art" of Preclinical Safety: Summarizing the Concept of Hazard Identification and Description, Risk Assessment, and Risk Management 179Acknowledgment 179Disclosures 180References 1809 Developing Commercial Solutions for Therapeutic Proteins 183Galina Hesse9.1 Introduction 1839.2 Developing Commercial Solutions for Therapeutic Proteins 1849.2.1 Defining a Target Product Profile 1849.2.2 Developing Formulations for Therapeutic Proteins 1869.2.3 Testing Formulations for Therapeutic Proteins 1889.2.4 Development of Primary Containers 1889.2.5 Development of Application Systems 1909.3 Quality by Design 1929.4 Examples for Innovations in Manufacture of Sterile Pharmaceutical Products 1949.5 Summary 197List of FDA/ICH Guidances Referenced 198Disclaimer 199References 19910 The Evolution of Clinical Development: From Technical Success to Clinical Value Creation 203Markus Hinder and Alexander Schuhmacher10.1 Introduction 20310.2 CD: Changes and Challenges 20410.2.1 Clinical Endpoints: From Symptom-Oriented Endpoints to Hard and Predefined Endpoints 20410.2.2 Determination and Quantification of Risks 20510.2.3 Assessment of Medical Progress in Context of Available Therapeutic Options 20610.2.3.1 EbM 20610.2.3.2 Health Economics, Pharmacoeconomics, and the Fourth Hurdle 20710.2.3.3 Results of These Changes and Challenges 20810.3 Technical Success and Clinical Value Creation in CD in the Future 20810.3.1 Established and Novel Approaches to Determine the Dose–Exposure–Response Relationship 21010.3.2 Comparators 21210.3.3 Patient Stratification to Increase Treatment Response and Benefit and Reduce Risk 21210.3.4 New Operational Tools to Succeed in Trials with Increased Complexity, Special Populations, or Large Size 21310.3.5 Collaboration and Outsourcing as Tools toWork in Networks 21410.3.6 Collaboration across Sectors and Industries to Boost the NextWave of Innovation 215Disclaimer 218References 21811 Translational Development 225Nigel McCracken11.1 Introduction 22511.1.1 Legacy 22611.2 Translational Development 22711.2.1 TP 22811.2.2 Translational Toolkit 22911.3 Dose Optimization 23011.3.1 Physicochemical Properties 23111.3.2 Target Affinity and Selectivity 23111.3.3 Clearance 23111.3.4 Prediction of Human Dose 23211.4 Pharmacogenomics 23311.4.1 Patient Segmentation 23311.4.2 Disease Segmentation 23411.4.3 Utility 23711.5 Biomarker Development 23811.5.1 Biomarker Activities 23911.5.2 Assessing the Opportunity 23911.6 Systems Pharmacology 24011.7 Rational Drug Development 24111.8 Concluding Remarks 242References 24212 Forty Years of Innovation in Biopharmaceuticals – Will the Next 40 Years Be as Revolutionary? 245Mathias Schmidt, Sanjay Patel, Petter Veiby, Qiang Liu, and Michael Buckley12.1 Introduction 24512.1.1 The Value Proposition of Biologics 24612.1.1.1 The Patient Perspective 24612.1.1.2 The Pharmaceutical Industry’s Perspective 24812.1.2 Biosimilars: A Blessing or aThreat to Innovation? 25012.1.3 Further Innovation in Biologics – Incremental or Revolutionary? 25212.2 The Evolution of Biologics Manufacturing 25212.2.1 Introduction 25212.2.2 CHO Cells: The Industry Workhorse 25312.2.3 Protein Production Strategies 25312.2.4 The Impact of Increasing Titers on Manufacturing Facilities 25512.2.5 Protein Purification Platforms 25612.2.6 Conclusion: WhatWill the Next 40 Years of Innovation Bring? 25812.3 The Evolution of Alternative Scaffolds 25912.3.1 Novel Small Protein Scaffolds 26012.3.2 Single-Chain Fragment Variables and Diabodies 26012.3.3 Single-Domain Antibodies 26112.3.4 Nonantibody Scaffolds 26112.3.5 Bispecific Single-Chain Fragment Variables and Diabodies 26312.3.6 Other Bispecific Antibody Formats 26412.4 Antibody-Drug Conjugates 26512.5 The Next Wave of Biologics 27012.5.1 Orally Available Biologics 27112.5.2 Biologics That Enter the Cytoplasm 27112.5.3 Biologics That Pass the Blood–Brain Barrier 27212.5.4 Translational Medicine as Driver of Innovation 272Disclaimer 273References 27313 Vaccines: Where Inertia, Innovation, and Revolution Create Value, Simultaneously and Quietly 277Pierre A. Morgon and Hannah Nawi13.1 Introduction 27713.2 TheWorld of Vaccines 27813.2.1 What Are Vaccines? 27813.2.2 Current Vaccines Are Mainly Prophylactic: Curative Vaccines Are Emerging 27813.2.3 Drivers to Immunize: Individual and Collective 28013.2.4 The Pivotal Role of Recommendations 28013.3 The Vaccine Market: Substantial, Fast Growing, with Intense and Concentrated Competition 28113.4 The Vaccine Industry: Domination of the Heavyweights, for Now… 28213.4.1 Barriers to Entry: From R&D Risk to Capital Intensiveness 29013.4.2 Five Forces Analysis: Competitive Intensiveness and Downstream Hurdles 29113.4.2.1 Acceptability 29113.4.2.2 Accessibility 29213.4.2.3 Availability 29313.4.2.4 Affordability 29313.5 New Vaccine Developments: Strategic Trends and Why Innovation Is Needed All along the Value Chain 29513.5.1 Where Is Innovation Needed? R&D 29613.5.2 Where Is Innovation Needed? Manufacturing and Product Improvement 30113.5.3 Where Is Innovation Needed? Acceptability 30113.5.4 Where Is Innovation Needed? Accessibility, Both as a Function of Supply (Availability) and Logistics 30213.5.5 Affordability and Sustainability 30313.6 WhereWill Innovation Come from? Strategy and Players 30413.6.1 Take-Home Messages 305References 30614 The Patient-Centric Pharma Company: Evolution, Reboot, or Revolution? 309Pierre A. Morgon14.1 Introduction 30914.2 Health, Always… 31014.3 The Mission of the Healthcare Industry 31014.4 Megatrends Affecting the Strategic Scorecard of the Healthcare Industry 31214.5 Focus on the Societal Trends and Their Consequences for the Management of Healthcare Innovation 31414.6 The DNA of the Healthcare Industry: R&D and the Management of Innovation 31614.7 Societal Expectations for Personalized Medicine 31814.8 New Players Contributing to Information Management to Substantiate Value Propositions for NovelTherapies 31914.9 The Role of the Key Stakeholders in Shaping a New Regulatory Framework 32314.10 The Consequences for the Healthcare Industry in Terms of Governance and Capabilities 32514.11 The Sustainable Path Forward for the Healthcare Industry 32914.11.1 Take-Home Messages 331References 33215 The Pharmaceutical Industry is Opening Its R&D Boundaries 335Alexander Schuhmacher and Ulrich A. K. Betz15.1 Introduction 33515.2 Open Innovation versus Closed Innovation 33615.3 Business Models in an Open Innovation Framework 34115.4 Open Innovation Processes 34215.5 Capabilities and Attitudes Enabling Open Innovation 34415.6 Open Innovation in the Pharmaceutical Industry 34515.6.1 The More Traditional Elements of Open Innovation 34515.6.1.1 Target Scouting 34515.6.1.2 Research Collaborations 34615.6.1.3 Drug Licensing 34615.6.1.4 Outsourcing 34815.6.1.5 Joint Ventures 34915.6.2 The Newer Concepts of Open Innovation 34915.6.2.1 New Frontier Science 35015.6.2.2 Drug Discovery Alliances 35015.6.2.3 Private–Public Partnerships 35115.6.2.4 Innovation Incubator 35115.6.2.5 Virtual R&D 35215.6.2.6 Crowdsourcing 35315.6.2.7 Open Source Innovation 35515.6.2.8 Innovation Camps 35515.6.2.9 Fluctuating Open Teams 35615.7 New Business Models in View of the Potential of Open Innovation 35615.7.1 General Trends in the Pharmaceutical Industry 35615.8 Outlook 358References 35916 Out-Licensing in Pharmaceutical Research and Development 363Oliver Gassmann, Carol A. Krech, Martin A. Bader, and Gerrit Reepmeyer16.1 Introduction 36316.2 Performance-Based R&D Collaborations on the Rise 36416.3 The Impact of Collaborations on the Value Chain 36516.4 Generating Value from Pipeline Assets by Out-Licensing 36716.5 Pharmaceutical Companies’ Resistance toward Out-Licensing 37216.6 Managing Out-Licensing at Novartis: A Case Study 37216.6.1 Out-Licensing as a 10-Step Process 37316.6.2 Out-Licensing Contract Design 37516.6.3 Structure of the Out-Licensing Collaboration with Speedel 37516.7 Future Directions and Trends 377References 37817 Trends and Innovations in Pharmaceutical R&D Outsourcing 383Antal K. Hajos17.1 Introduction 38317.2 Drivers to the Use of Outsourcing 38317.2.1 Overview on the CRO Market 38317.2.2 Core versus Noncore Activities 38717.3 Genesis of Outsourcing in the Twentieth Century: From Commodity to Contribution 38817.3.1 Outsourcing Portfolio and the Move to Full-Service Provision 38817.3.2 Globalization and the Emerging Market Hype 38917.3.3 Procurement Takes over the Outsourcing Function 39117.4 Current and Future Trends in Outsourcing: From Contribution to Innovation 39217.4.1 How Has Outsourcing Itself Innovated and What Are the Future Trends? 39217.4.2 How Does andWill Outsourcing Contribute to Innovation? 39417.5 Discussion and Conclusion 395References 39818 New Innovation Models in Pharmaceutical R&D 401Alexander Schuhmacher, Oliver Gassmann, and Markus Hinder18.1 Introduction 40118.2 Some AttemptsThatWere Recommended in the Past 40218.3 The Increasing Pipeline Size 40318.4 The Reduction of R&D Investments 40418.5 The Opening of the R&D Processes 40718.6 The Challenge with the Return on Investment 41118.7 Changing the R&D Processes Is Not Enough 41218.8 What Is the Best R&D Model? 413References 41419 The Influence of Leadership Paradigms and Styles on Pharmaceutical Innovation 416Aubyn Howard19.1 Introduction 41719.2 What Is Your Concept or Model of Good Leadership? 41919.3 Approaches to Leadership Modeling and Profiling 42019.3.1 Personality Types 42119.3.2 Behavioral Preferences 42119.3.3 Developmental Stages 42119.3.4 Competency Frameworks 42119.4 The Developmental Approach to Leadership Paradigms and Styles 42219.5 Inner and Outer Leadership 42419.6 Dynamics of How Leadership Paradigms Evolve 42519.6.1 Magic–Animistic 42619.6.2 Impulsive–Egocentric 42719.6.3 Conformist–Absolutist 42819.6.4 Achievement–Multiplistic 42919.6.5 Pluralistic–Relativistic 43019.6.6 Evolutionary–Systemic 43219.7 Leadership at Different Levels within Pharma 43319.8 Optimizing Innovation in Different Organizational Models and Cultures 43719.9 How DoWe Support the Development of Evolutionary Leaders? 43919.10 What Does It Mean to Operate from the Evolutionary Paradigm? 44019.11 Leadership and Personal Mastery 44119.12 Building an Evolutionary Bridge to Release Innovation 44219.13 Conclusions 445References 44620 The Role of Modern Portfolio Management in Pharma Innovation 449Joachim M. Greuel and Axel Wiest20.1 Introduction 44920.2 Challenges in R&D and the Origin of Pharmaceutical Portfolio Management 45020.3 Goals and Metrics of Portfolio Management 45120.4 Portfolio Management as Enabler of Innovation 45620.5 Modern Portfolio Management Integrates In-House R&D, Business Development, and M&A 457References 45821 Patent Management Throughout the Innovation Life Cycle 461Martin A. Bader and Oliver Gassmann21.1 Introduction 46121.2 The Changing Role of Patents: From Legal to Strategic 46221.3 The Patent Life Cycle Management Model 46721.3.1 Exploration 46821.3.2 Generation 46921.3.3 Protection 46921.3.4 Optimization 47021.3.5 Decline 47021.4 Example: Managing IP Rights at Bayer 47121.5 Concluding Remarks 472References 473Index 475

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