Magazine Article | June 28, 2012

The New Pfizer Research Strategy: Openness And Collaboration Replace The Old Imperial Model

Source: Life Science Leader

By Wayne Koberstein, Executive Editor, Life Science Leader magazine
Follow Me On Twitter @WayneKoberstein

To any veteran observer, the words coming out of Pfizer research these days could stretch credulity. Words like “open” and “collaboration” were seldom heard throughout most of the company’s buy-it-when-you-need-it-but-go-it-alone history — until recently.

In the past few years, the company radically overhauled its internal R&D organization. It slashed jobs, hired new research leadership, and cast its fate on external sources of new products, starting at the key transition from drug discovery to development. It also organized the four contemporary arms of biomedical research — proteins, small molecules, oncology drugs, and vaccines — into four separate but collaborative divisions, all united at the level of discovery, where the BioTherapeutics Research & Development Group, headed by Senior VP  Jose-Carlos Gutiérrez-Ramos, plays a leading role.

Gutiérrez-Ramos here describes his mission to “entrepreneurialize” discovery and development at Pfizer through a rebalance of power from the company’s internal R&D to a greatly expanded external network. He gives important tips and lessons for other companies dealing with the new Pfizer and looking to become part of its network, in particular, by the avenues now open through his group.
And he shows how his organization, working mainly but not exclusively with its new Centers for Therapeutic Innovation (CTI), is also incorporating academic researchers into the mix. CTI epitomizes Pfizer’s quest for “biological probes” — novel active molecules at the right development stage for human proof-of-concept studies and ready to complete the translation of science into full therapeutic application.

Gutiérrez-Ramos sees his job as bringing together the three main forces or “constituents” in drug research: academia, biotechnology, and pharmaceuticals — all represented in his own professional background at biotechs Avidia, Millennium, and Amgen, as well as pharma giant GlaxoSmithKline. “Each of the constituents has its limitations,” he says. “In the biotechs I worked in before coming here, there was a very entrepreneurial spirit and a strong focus, but we lacked the experience or the ability to take the big molecules all the way to the clinic. In Big Pharma, though, companies miss the entrepreneurial experience — not just on the market side or the technology side, but as a way of doing business, with small teams, very empowered.”

CONFESSION TO PROGRESSION
On the surface, the new Pfizer sounds a lot like most other pharma companies these days, watching their blockbuster patents disappear and their pipelines disappoint, despite decades of growth in R&D. Every company has in some way turned to the entrepreneurial life sciences sector as the most productive source of innovation.

So what makes Pfizer any different? Perhaps its own legacy as an unparalleled juggernaut that plowed through the industry devouring whole companies like no other, save Sanofi. Now, for Pfizer to champion an open, more egalitarian form of partnering and acquisition requires extraordinary effort. That may help explain its crash program to shrink internal R&D — some say to the point of abdication — and create an external network to replace the jettisoned capacity.

“We want to maximize the way that we generate value in research internally, externally, and in hybrid models,” says Gutiérrez-Ramos. “We want to generate value with a spider web of activities and interactions that allow us to bring programs forward, not just in a binary way — that we do it or not do it — but in a range of risk and investment modes.”

A range of modes means different financial and managerial terms for different deals and the resulting alliances. “In one case we might invest 20% of the cost of the program and the partner invests 80% because they have the top experts, or in another case we might go 50/50 or 70/30 if we have a better position. The driver is the constituent of the partnership that is in the best position to drive based on expertise and resources.”

The driver of an alliance can be an academic, as in the exploratory projects of CTI, a biotech partner, or another pharma partner, he explains. “In a few words, we want to entrepreneurialize the way we operate, and that is mainly by partnering with the best people — the best scientific minds or the best business minds or the best medical minds — and empowering whoever is in the best position to drive the program intellectually, financially, or scientifically.”
Gutiérrez-Ramos acknowledges that the open research model is a big departure for the company, not only in philosophy but in objective terms. Pfizer now has more programs that are externally derived than ever before, he says — a combination of outsourcing, strategic partnerships, programs like CTI, and other significant collaborations. “In the Pfizer of only a few years ago, if we saw something on the outside that we liked, we’d go ahead and buy it. Now we do alliances and limited acquisitions.”

An example of “limited acquisitions” is Pfizer’s purchase of Excaliard Pharmaceuticals, developer of an antisense oligonucleotide for wound healing and treatment of skin scarring, or skin fibrosis. “We retained the key people in the company, and they are driving it. We didn’t try to reinvent the company ourselves; we kept the leaders as well as most of the staff running the program.”

THE IDEAL DEAL
Openness, transparency, and entrepreneurialism among the internal R&D units is one intended outcome of Pfizer’s transformation. The other main objective is a rebalance of powers between the huge corporation and its comparatively tiny partners.

“We had the tradition of approaching our partners like Big Brother, saying, ‘Okay, we will tell you what is important,’” recounts Gutiérrez-Ramos. “For example there was no openness to discussion before a key milestone was achieved, even when the partner depended on it for a large amount of cash.”
A complete “change of attitude” has since taken place at Pfizer, he says — a change among company personnel that took more than persuasion. “In some cases, the headcount changes at Pfizer have been behavior-driven, related to each person’s willingness and ability to interact, internally or externally. If we are to succeed in establishing connectivity — especially early connectivity between discovery, pharmaceutical sciences, and manufacturing — we need a different kind of interplay.”

In contrast, though understandably, response to the change has been overwhelmingly positive among partners, according to Gutiérrez-Ramos. “If you approach partners, either academic or biotech, with an open spirit, they are delighted, because the fact is they usually don’t have the expertise that we bring to the table.”

Gutiérrez-Ramos uses his own experience in biotech to support the point: “We had a paucity of knowledge at the beginning — a lack of expertise in areas such as business, clinical trials, and manufacturing. To have a partner help us guide those programs to the clinic in an understanding way, not in a Big Brother way, would have been delightful. To make an advantage of that interaction, whatever the situation, that’s what we seek with our partners as well.”

A structural expression of the openness ideal is the option-based partnering agreement that Pfizer prefers — a form of alliance in which both parties share the risks, responsibilities, and possible rewards of the relationship. Pfizer no longer simply licenses in compounds for its own teams to develop, but most often continues to work to a varying extent with the compound originators.

“We recognize that, from very early on, an option-based deal is the best way to go. We have the freedom to adjust according to who is in the best position to drive the program. In some acquisitions, we retain members of the team, or keep the team intact — for example, Icagen, where we retained the team because they are experts in ion channel modulators.”

Pfizer aims to operate its R&D as a “big collective matrix,” he says. Each node of the matrix has to create unique value. In Icagen’s case, because of the financial situation, the best way to make it part of the matrix was to acquire it. But in other cases, it makes more sense to make a partnering deal. So the matrix doesn’t proceed through one particular pathway, technology, or asset.

WHY THE CTI WAS CREATED
The most visible example of Pfizer’s new philosophy is the CTI. Gutiérrez-Ramos says the company created the program because it wanted to help more academic scientists translate their unique ideas into new therapies. “That piece of the discovery chain, translational research, moves novel compounds from early research into human testing. Most interaction in academia and in biotech tends to be in early research and then later on in chemical development. But in between, the unique ideas from bright scientists often go unnoticed.”

Public grants and venture capital do not cover the translational research stage adequately, he says. Thus, Pfizer set out to fill the gap by first consulting with academic leaders, deans of medicine, venture capitalists, physician scientists, and ultimately its own internal leaders to answer the question: “How can we, the largest pharmaceutical company in the world, uniquely interact with them?”

First, the company defined what it would not do — fund start-ups or basic research, leaving those areas to the VCs and government funding such as NIH — then, what it would do: “The one thing we could do uniquely with CTI is to help develop clinical probes. By ‘clinical probes,’ I don’t mean the final medicine — but really quality molecules, small molecules or large molecules, with which we are able to test a hypothesis in humans.”

Small companies may have great chemists, biologists, and protein engineers, but very rarely do they have all the pieces of the puzzle — formulation, pharmacokinetics, pharmacodynamics, and so on — to go into human testing. “One unique thing we can bring to the CTI is that piece of the translational medicine,” Gutiérrez-Ramos says. “So we decided to bring to the biomedical discovery community of the world not just dollars, but operational dollars in the form of clinical probes.”

Gutiérrez-Ramos sees the effect of CTI as positive for all players. “Deans of experimental medicine in the medical schools or the hospitals were telling us, ‘We have great physician scientists but we have no chemists to support their studies because public money does not go in that direction and even if it did, they wouldn’t know where to start.’”

CTI now has 22 academic centers and medical schools signed up with the program, with more than 300 proposals for experimental medicine studies. In all of the centers, the deans of medicine or experimental medicine are part of the governing bodies. “So the consequence of the CTI for the medical schools and the hospitals is that they will do much more experimental medicine research than before. As for the effect on biotech companies: We are building a complementary, not a competing, model to the venture-fund biotech model. I would describe the CTI as a self-propagating biomedical engine.”

Among the 20 research programs accepted by the CTI, 1/4 are run by investigators with prior business experience. The ideal CTI candidates, however, are “the associate professors who haven’t gone on a road show with venture capitalists, are intimidated by the process, or have an idea they believe is too risky. We can take an idea that has 20 to 30 academic papers that say this could be something fundamental in biology that shows some possible beneficial effect in humans and move it all the way to a human clinical study, in healthy individual patients, to test the hypothesis.”

That journey includes discrete steps: 1) Pfizer works with the PI (principal investigator) to build an IP portfolio; 2) it generates half a kilogram of the active compound, whether antibody, protein, or small molecule, for human testing; and 3) a team of Pfizer “drug hunters” guides the key researcher through all of the details of the translational phase. “In our division, we are not giving out venture money; we are putting a team around that PI,” says Gutiérrez-Ramos. “That’s why cooperation with the PI at the academic medical center is very important.”

Many of the agreements with investigators are, like company partnerships, option-based. If the company does not exercise the option, it retains only a “very small” royalty and shared IP.  “In each one of the centers, we intend to do 15 CTI projects over the next five years. Pfizer co-invents the compound with you, and with it and the help of venture capitalists, you can still start a company.”

Gutiérrez-Ramos adds that Pfizer management was very supportive of CTI and the open-research model because it places the company in a position to help drive innovation in the biotech companies. Even though Pfizer does not obtain the control over partners it once did, it places itself in the “pole position” for later partnerships or acquisitions — and for fulfilling its mission in R&D.

“Pfizer is the largest biomedical company in the world. Biomedicine needs a big push in terms of new options, and experimental medicine is one area where biomedicine globally hasn’t been too fruitful. This is our way of generating more biomedical projects that focus on translational medicine — not completely in an altruistic way; of course, we have fiduciary responsibility to our shareholders. But we can really help biomedical research by generating clinical probes and initiating more experimental medicine. If biomedical discovery progresses, we will progress because we are in the best position to do it.”


PRODUCTION HANDOFF
An often overlooked aspect of partnering is manufacturing. Scale-up from bench production to clinical batches presents an early challenge to many start-ups, especially in biotechnology. At the very least, it can take a significant amount of the active substance to obtain what many large partners now demand: early proof-of-concept in humans. But once a small company builds sufficient production capacity, the handoff of manufacturing to a larger partner can be complicated.

According to Jose-Carlos Gutiérrez-Ramos, head of the BioTherapeutics R&D Group, Pfizer is aware of the challenge, has created some solutions, and is working to develop others. “With any program that grows internally, the manufacturing team works together with the internal team from day one on. Any problems that a program might have, the pharmaceuticals manufacturing team is aware of them and works to fix them. In dealing with external programs, at times that interaction hasn’t been as strong. But we are changing this to make it as strong as possible from day one and beyond, so that there is the same amount of feedback back and forth, and we can make a lot smoother transition.” For some partners that have not scaled up to clinical production, Pfizer has created another option: It will produce a half-kilogram of the active substance for early human tests. “De facto, this is equivalent to a seed round or a Series A round of funding, say, worth $3M or $7M,” says Gutiérrez-Ramos.


INNOVATION HEADWATERS: PFIZER’S BIOTHERAPEUTICS R&D GROUP

The Pfizer BioTherapeutics R&D Group headed by Jose-Carlos Gutiérrez-Ramos consists of four research units (RUs), including the Centers for Therapeutic Innovation (CTI), and global specialist function units with complicated names reflecting their functions: Pharmacokinetics, Dynamics and Metabolism - New Biological Entities (PDM-NBE), Global BioTherapeutic Technologies (GBT), and Pharmaceutical Sciences (global group). Together, the RUs discover and develop novel biologics and small molecules in inflammation and immunology, in another area the company calls biocorrection (correcting pathological function in metabolic disorders and genetic deficiency diseases such as hemophilia), and in tissue repair associated with various musculoskeletal conditions.

Specifically, the PDM-NBE tests NBEs for absorption, distribution, metabolism, and excretion (ADME) characterization, conducts preclinical pharmacokinetic/pharmacodynamic modeling, and develops quantitative biomarkers supporting the research units. The GBT works with the other RUs and therapeutic units to design and deliver biotherapeutic agents for development. Pharmaceutical Sciences supports early small-molecule development. But the BioTherapeutics division not only contains a collaboration of smaller units, it also maintains a cooperative relationship with the other main R&D groups.

“Our four R&D divisions are all interacting in a very collaborative environment, but we are each experimenting as well with different models,” Gutiérrez-Ramos says. “We vary in the way we run our programs, the rates of externalization, how much we use the CTI model or other models in different collaborations, how much  we partner, how much we do it internally — it’s different in different divisions.”

Although each division is large, staffed with hundreds or thousands of people with many programs and numerous sites, departments are relatively small, according to Gutiérrez-Ramos. Research labs are typically 30 to 100 people, he says. “Departments and labs are very autonomous, and the chief scientific officer in charge holds a budget for all the activities for many drug entities in lead optimization, process engineering, and so on. They act very much like a CEO on the outside. Such transparency of costs and decision making is something that typically did not exist in big companies because of their huge departments.”

Lack of transparency causes inefficiencies and overhead costs because the key decision makers cannot gain a complete understanding of how much each decision is costing, he says. Nor can they balance the costs against the results. “You look at our dashboard operating plan now — every project has four to five key milestones in the program, showing what value those milestones generate compared to the investment in those milestones. With that information, the department heads can make decisions based on a business plan. So this is a fundamental departure from how we were operating a few years ago.”