It’s all about… Innovation

In their quest to be innovative, pharmaceutical and biotechnological companies are applying their own strategies in response to the growing demands for improvement, creative ideas, breakthrough technologies and new medicines.

The world’s pharmaceutical industry is currently researching and developing more than 700 new medicines and vaccines in clinical phases in all therapeutic categories. Yet according to the World Health Organisation, there are still no effective treatments available for around three quarters of the world’s 30,000 known diseases.

Roaring research and development costs and speed-to-market demands are only two of the innumerable challenges pharmaceutical companies face day after day. Increased regulations, safety concerns and pricing pressure also add weight to the shoulders. Different companies adopt different strategies to ease the pressure, but they all share one common goal – being and continuing to be innovative.

Innovation is about change and managing change successfully. It can take the form of new products, services, technologies or different ways a product or service is conveyed or a technology is exploited. Innovation is considered a major driver of the economy. Fostering innovation is at the core of the Lisbon Strategy, which aims to “make Europe, by 2010, the most competitive and the most dynamic knowledge-based economy in the world”.

Leaders and laggards

According to the Global Innovation Scoreboard (GIS) Report 2006, Sweden, Finland, and Switzerland are the European innovation leaders based on the ranking of their GSII scores (Global Summary Innovation Index). Next-best performers include Germany, Denmark, the UK, Ireland and France. Italy, Spain and the Czech Republic are in the group of follower countries while lagging countries include Greece, Bulgaria, Turkey and Poland.

Although named a lagging country in the GIS Report 2006, Poland’s largest generic company Polpharma, which specialises in gastrointestinal, cardiological and neurological drug production, is doing well. It recently received the European Health Leader 2006 award in the category of “The Company of Great Reputation” in the Polish sector. In 2006, it launched six products onto the generics market, outgrew overall market growth and consolidated its domestic leadership position. It also grew internationally at about 30 percent, particularly in Russia. “It is important for us to look at being part of the global consolidation. By expanding our business internationally, we will increase the volume of our products,” says Stephen Stead, Polpharma’s CEO, who has been living and working in Central and Eastern Europe for the past 15 years.

Poland’s market is growing at around five percent. Stead’s strategy is to move into high growth markets such as Russia, which is growing at 40 percent, the Ukraine, growing at 30 percent and Turkey, growing at 20 percent. In addition, Polpharma is looking at potential strategic alliances for the US market. “However,” says Stead, “we are the domestic market leader and as a result of that we continue to reinvest into our business. That’s where the value is.”

One such investment was a quality management and compliance system, which Polpharma have recently begun to implement. This move towards centralised data and information management follows a trend to avoid human errors and prevent time-consuming tasks in response to cumulating regulatory requirements. “We have implemented TrackWise, which is an electronic quality management system for managing, analysing and processing events and actions. Combined with increased use of process analytical technologies during manufacturing processes both in chemical and in pharmaceutical processes, it should increase the rate of first pass approvals and ensure that the quality of our products meets and exceeds the world-class standards,” Stead predicts.

IT challenges

One of the challenges of implementing a new system, as Stead sees it, is getting the concept right at the beginning. This includes user agreement and user specifications, so that the system does what it is expected to do once implemented and commissioned. However, the key issue for Polpharma is not just collecting data but turning the data into information and managing this information. “The challenge really is to distil and provide good information, which can be turned into meaningful KPIs.” This, emphasises Stead, enables the senior management and key operation managers to make the right decisions, to be effective in performing their functions and to ensure the running of a lean and successful business, which can take commercial advantage in the marketplace.

Taking advantage of innovative technologies is a key strategy for the company. Polpharma’s sales force, for example, is fully electronic. “They have laptops and palmtops. They are able to communicate using wireless technology across the whole of the country into head office, so that we can analyse their sales force effectiveness, and to feedback information to them to ensure that their targeting and their effectiveness is optimised,” says Stead.

Innovative technologies also play an important role from the manufacturing point of view. Utilising the right technologies, Stead hopes, will drive Polpharma’s business to the next level. Of particular interest to Stead at the moment are better sterile technologies, sterile APIs and difficult to manufacture APIs. “High potency products, products which need special containment areas, liophylized products, dried powder inhalers, injectable powders, preservative-free-type products – basically all the products that take us away from the run-off-the-mill products into something where we are adding either a technological advantage to the product or where it is more challenging for other people to enter.” According to Stead, this ensures that Polpharma stands out and remains competitive.

Market challenges

However, competing on the global market remains a challenge. The pharmaceutical market in Central and Eastern European countries has been relatively small compared to the Western European countries.

According to Sylvia Miriyam Findlay at Frost & Sullivan, the pharmaceutical market in CEE countries has been estimated at €7.4 billion in 2006. It has grown rapidly over the past few years and is likely to reach around €12 billion by 2010.

As Findlay points out, labour costs are very low. It is also easier to recruit patients for clinical trials due to the homogenous patient base coupled with the high treatment compliance rates of patients. And the clinical trial results comply with the EU regulations. As a result, more pharmaceutical companies now consider conducting research in the CEE countries and more foreign investors will be attracted in pharmaceutical research.

Yet, Findlay warns, doing business in CEE countries has its own risks. “Not all countries have implemented all the EU rules and regulations, especially the rules governing intellectual property. Pharmaceutical expenditure has been curtailed because of price and reimbursement controls. Pharmaceutical companies entering the CEE have to obtain marketing approval through the mutual recognition procedure (MRP) and the centralised procedure. This is a major obstacle for the new entrants or generic players. In addition, the threat of parallel importing is a continuing issue and is likely to undermine the growth of the pharmaceutical market in the CEE.”

Despite the problems CEE countries still have to tackle to catch up with bigger markets, Stead is positive that there will be greater success overall. He points out that the CEE countries have, in many cases, managed to make the transition from being ex-state owned into privatised or publicly listed companies. They have been able to introduce new products and new technologies. They are starting to operate if not on a truly global scale at least in a regional one. “Therefore, they are important players on the market as a whole,” says Stead.

Stead sees his company continuing to be the strongest of the domestic Polish companies and entering all the key markets. What remains to be seen is whether this will be as a stand-alone company part of another organisation or alliance. “What really matters for a company like Polpharma is being able to develop products and creative new solutions to work in the business. And that means looking at trends with distributors, pharmacies, hospitals, our customers and being proactive in driving change to make sure that we need their needs.”

A change strategy

Driving change is also behind the business strategy of Melbourn Scientific Ltd, a contract laboratory and provider of analytical services to the pharmaceutical and healthcare industry. At the start of this year, Melbourn Scientific expanded their parenteral testing capacity by investing in a light obscuration particle counter. This technology is designed to accurately sample liquids and is capable of measuring particulates in fluids with various refractive indexes, viscosities and operating temperatures.

The technology itself is not innovative, says Mark Hammond, Business Development Director at Melbourn Scientific. “By their nature, they have to be less innovative. They need to be widely well understood and reasonably available to be used for pharmacopoeial testing.” The creative idea lies behind the technology, in offering the service, at least in the UK. “They exist in some of the large pharmaceutical companies. But within the contract laboratories in the UK we are one of the only ones to offer this.”

Before, Melbourn Scientific used to outsource the technology. Increasing client demand for the analysis of parenteral products, for which one of the key techniques is the determination of levels of sub-visible particles, forced a rethink. Traditionally, Melbourn Scientific measured particles using microscopy, which is less reproducible and more analyst dependent. The laser particle counter improves the accuracy and speed of analysis, enabling Melbourn to increase its throughput and efficiency. The precision of the counter means that short sampling intervals can be used without sacrificing statistical significance.

A panacea

The benefits for Melbourn Scientific’s customers seem obvious, since speed of analysis sounds promising and raises hopes of helping to gee along the whole drug discovery and development process. Hammond, however, shakes his head. “The laser particle counter won’t be a solution to the time-to-market problem. That more revolves around reducing time frames for clinical work and formulation studies, things like that. The laser particle counter is part of a wider solution but the majority of the work for stability studies will still take three to five years and that process can’t really be shortened.”

Still, it is no small comfort to know that, even though time-to-market will remain a problem to the pharmaceutical industry, contract partners such as Melbourn Scientific invest in business ideas that make technologies more accessible, processes more precise and consequently increase effectiveness. “During the past six months we have expanded our service offering with many different techniques and technologies. We have also expanded services for stability storage, pharmacopoeial testing and the ability for screening testing of inhaled products at a range of temp and humidity conditions in a ‘tunable’ controlled environment lab. I believe we are the first lab in the UK to offer this as a service,” says Hammond with a proud smile.

Biotech winner

Désiré Collen, CEO of Belgian biotech ThromboGenics, also has every reason to smile. Over the course of two months, her company was awarded two €2 million EU grants for the joint development of a new class of anti-angiogenesis agents. One of these grants will be used for a collaboration project with Swedish BioInvent. The other grant goes to the VASOPLUS consortium, which comprises ThromboGenics, Geymonat, Roche Diagnostics, Eurogentec and three expert academic groups. The two projects are derivatives of one common project, VASOMOT, which was submitted earlier but had been refused funding. “We took the reasons for refusal of VASOMOT very seriously. They were mostly non-fundamental to the quality of the project but more to its formulation. We have taken the advice into careful consideration and therefore split up the new submissions,” explains Collen.

According to EFPIA, Europe’s pharmaceutical industry invests 17.6 percent of total sales in R&D. The estimated pharmaceutical R&D expenditure in Europe was a staggering €21,700 million in 2005. Recent studies put the total cost of researching and developing a single new medicine at €895 million. Surrounded by these mighty numbers, a €2 million grant seem more than limited. Still, the financial support from EU’s Framework Programme 6 is very important for ThromboGenics.

“We already have the development of our new class of anti-angiogenesis agents in our portfolio. The grant helps us bring it from pre-clinical experimental animal stage towards the initial clinical development. If we had licensed it out early, we would have added little value and therefore the return to the company and our original licence source would have been relatively small,” explains Collen.

The further a company such as ThromboGenics can carry a programme down the development pipeline, the more value they generate. Ideally, they would bring it all the way to the market. In order to be able to do this, however, a lot more funding is needed, which is why ThromboGenics are already considering looking at a major pharmaceutical partner for the Phase III stage of the development.

EU investment

In its new Framework Programme (FP7), its biggest ever investment, the EU puts an emphasis on research themes and significant simplification of its operation. Collen welcomes both. “Research is going to be, if possible, even more important in the development of new medicines than ever. The knowledge over the last decade has increased so rapidly that the translation into treatments, into new medicines, has become increasingly more complex and increasingly more difficult.” He believes that a new area of research, the so called translational research, is an area where major investments and major developments will have to be made.

With the help of both academia and the pharmaceutical industry, says Collen, the EU can catalyse this. “That sort of research is one that is neither the primary vocation of academia nor really the primary vocation of the pharmaceutical industry. So this is where the so-called start-up biotech and other pharmaceutical companies come in. And that is an area where clearly support from the authorities and the EU is necessary.”

Regional support

R&D investment is almost entirely funded without government subsidies. Yet, Collen praises the Flemish regional government, which has done “a wonderful job” in supporting biotechnology research.

“Our regional government has recognised that innovation will be the value driver behind our future development, not primary activities such as agriculture, the steel industry or similar. These activities will all delocalise to other countries in the world,” predicts Collen. Most of the support from the Flemish government is coming through either academia, the universities, or through a research institute, which is called the Flanders Institute for Biotechnology, who receive significant support to the order of almost €50 million per year.

Where else to turn for funding? ThromboGenics are looking at various sources. “We have to raise it from investors. We went for an Initial Public Offering (IPO) last summer and raised €35 million. This together with grants, such as the two EU grants, and some money from the Science and Technology Institute in Flanders, will carry our activities for another 18 months from now. Then we have to look for other sources – either a new financing round, a corporate deal or a licensing agreement. There are many ways.”

“Innovation distinguishes between a leader and a follower”
Steve Jobs, Co-founder and CEO, Apple

“The challenge really is to distil and provide good information”
Stephen Stead, CEO, Polpharma

Stephen Stead, CEO, Polpharma: predicts greater success for CEE countries because they are delivering on their promise of being interesting, useful markets.

Mark Hammond, Business Development Director, Melbourn Scientifc: a company can be innovative even without using the latest technologies.

The pride of the company: Melbourn Scientific’s light obscuration particle counter.

Désiré Collen, CEO, ThromboGenics: every reason to smile about EU funding