A loose rein on research brought in the winning products for a star of the drug company big league.
Research and development are an oddly matched pair. Product development is a management problem that normally submits to the disciplines of the dismal art, to targeting, planning, budgeting, controlling and the like. Research is different. It may be proddingly methodical or it may be inspired, and if it's effective it's probably both. In any case it's invariably expensive. Yet however, much you spend, it will not necessarily get you where you want to go. That's why so many UK companies (in sectors such as engineering, say) have virtually given up research. "There's not a lot of R in R and D," says the typical, hardnosed British chief executive - and it's a boast. It's interesting to note that many of the Japanese, who used to neglect R, have gone the other way. Which is one reason why so many more genuinely innovative products are nowsadays coming out of the East.
If you business is in the pharmaceuticals big league - or aspires to be - you don't really have much option. You have to accept a high level of spending on R as well as D. Glaxo didn't attract the highest stock market valuation of any company in Britain by confining itself to development and marketing. You also have to accept, in the words of Dr Trevor Jones, joint head of R and D at Wellcome, one of Glaxo's fast up-and-coming competitors, that "simply throwing money at the discovery process is not enough". During the 1980s certain multinational companies conceded many places in the pharmaceuticals pecking order in spite of a massive financial commitment to research. It needs luck, as well as judgment, to make the investment productive, so success is never assured.
Nevertheless - however side the scatter - there is a statistical relationship between research spending (also R and D spending) and innovation. And there is undoubtedly a relationship between a drug company's record of innovation and its sales and profits growth. Wellcome, a company that has been much in the news lately on account of the share offer (which will make the majority of its shares freely tradable for the first time), is pouring 15% of sales revenues back into R and D, or 18% of its sales of ethical drugs, which is slightly greater than the industry average. The 35% of its R and D spend which Wellcome devotes to research as opposed to development (that's about £85 million in the current year) is also on the high side.
The result of past investment in R and D can be seen in the dozen or more notable drugs that Wellcome has launched in the past dozen years, and in the list of promising new medicines now in the pipeline. The most outstanding successes currently on the market are without question Zovirax, introduced for the treatment of herpes back in the early 1990s, and the AIDs drug Retrovir which was launched in 1987. These two products alone accounted for over 50% of the company's prescription medicine sales in the year to last August. Reaching almost £1.6 billion total group sales had at that point put on more than 70% in four years, while profits before tax were nearly 140% up at £403 million. Not for nothing is pharmaceuticals called recession-proof.
Although their hit rate vary, the leading pharmacuetical houses take a broadly similar approach to R and D. They have to. This is a global industry whose members are subject to very similar opportunities and constraints. Wherever a drug might be developed, it will eventually - of it is effective - be made available to doctors right across the world. But before it can be launched in different markets, the company must first satisfy the local licensing authorities that it is both safe and - at least potentially - beneficial. At an earlier stage, the company will need regulators' approval in order to carry out clinical trials, probably on an international scale.
It is at the initial stage, of research, that the biggest differences appear. For historical reasons each company has accumulated expertise in particular corners of pharmacology, and it is naturally within these that its efforts tend to be concentrated. Wellcome's strongest suit is antivirals. With Retrovit and Zovirax in its hand, it is undisputed world leader in this area. Heart disease is "a relatively new area of interest", which nethertheless goes back a good number of years. Cancer, arthritis, anaesthetics and disorders of the central nervous system are others. But while research must certainly be in some sense focused, "very seldom can you prescribe in advance to a discoverer what he or she should find", says Dr Jones. The researcher "is not looking at enzymes", he's looking at a disease.
Wellcome people pride themselves hugely on the quality of the company's research, reeling off the names of four or five. Nobel prizewinners who were at some time employees or associates. One reason for excellence in this vital function, it's argued, is the loose rein that the company gives its research workers. Scientists are often clever and independent-minded, it goes without saying. Yet some pharmacuetical groups, Jones points out, have tried to "manage" the work of their scientists via conventional lines of responsibility fanning out from head office. "It's very difficult, and culturally wrong anyway," he says. The R and D director cannot possibly outdo his best scientists in knowledge of their own fields. At the research end of the spectrum, therefore, his role should be that of chief coach and cheerleader.
Any more regimental approach to discovery would be entirely foreign to Wellcome's traditions. Its longstanding status as subsidiary of The Wellcome Trust, the medical charity (this relationship is now due to change with the share offer), ensured that research came first. Skills like marketing were be contrast neglected: "We did not, as well as we should have done, direct products to the global market," says development head Dr Tim Melton. But the primacy of research attracted scientists, and the almost total freedom that they were at one time allowed tended to keep them in contented employment.
"Wellcome used to have the reputation of being an university sort of place," says Jones. The R and D centre at Beckenham is perhaps no longer the "University of West Kent" - Wellcome is more commercial these days - but the spaciousness of the site, the lavishly equipped laboratory blocks and the lawns and rose beds in between, all point to a conscious effort to create what Jones calls "an adequate environment" for research. Here, workers in different fields of science communicate quite naturally, and sometimes productively. Thus one of the company's newer drugs, Lamictal, a treatment for epilepsy launched in 1990, came out of an interaction between chemists and biologists. And researchers are still able to pursue their own leads up to a point: ie within Wellcome's chosen areas of specialisation and "subject to a very strong peer review". After a period of not more than a year they are obliged to stand up before their assembled colleagues and explain what they've achieved. It's evidently an effective discipline.
None of this means that management's hands are tied. Not so long ago, Wellcome made a speciality of tropical medicine. Management closed the unit down. "It wasn't going anywhere", says Jones. But research is full of unpredictable twists. The tropical team had a compound that seemed to be effective against it. If the substance was effective against malaria parasites, researchers asked, might it not also hit others? Further study (in collaboration with a university department) showed that it worked against PCP, a form of pneumonia which is what AIDS patients often die of. Wellcome now has a potential product undergoing trials at a treatment of both malaria and PCP. "Where to focus is one of the most difficult decisions," observes Jones. At the start, the company had no idea that it might have an AIDS drug on its hands.
Of course, many pharmacuetical products have been found to be active against more than one disease. Zovirax, the elderly herpes drug that's now on the point of emerging form patent protection, recently won approval in the US as a treatment for chickenpox. So research doesn't stop as soon as a product has been launched. On the other hand 10,000 substances may be examined at the research stage in order that just one product should get on to the market, sometimes a dozen or more years later.
There was a time when large scale screening, of substances was commonplace, at Wellcome as elsewhere, but the practice went out of favour as being unduly wasteful. "It was looking for a needle in a haystack." There are also fewer new molecules (new chemical entities or NCEs) being synthesised nowadays. But selective screening is coming back into fashion. Scientists are looking again at existing compounds, especially those which are known to be active - and at "nature's chemicals" - and screening these. They are asking why drugs of dissimilar chemical composition are sometimes active against the same disease. The answer seems to lie in the shape of their molecular structures, so the computer can be brought into play to find (or design) other molecules that are still more effective - or much less toxic.
Starting from the decision to focus on certain therapeutic areas, the aim of research is to discover potentially active compounds, and to select the most promising which are patented. These then move to the first stage of the more manageable D-for-development process. Animal tests are set up to see whether the substances are safe to give to humans, to measure their rate of absorption, their effect on fertility, etc. At the same time, initial studies are carried out into possible methods of manufacture. "Drugs usually fail because they're too toxic or because they're not active enough," says Jones. "Very rarely do they fail because they're technically impossible to make." In any case, before the company applies for regulatory clearance to conduct trials on humans - after probably two or three years of pre-clinical testing - more than half of the potential medicines will have failed.
Clinical trials begin with healthy volunteers being given very low doses. The volunteers are usually R and D workers, or other accessible employees of the company, and healthy - in the context - means that they don't suffer from the disease. At phase 2 a substance is introduced to patients for the first time. If its efficacy is confirmed, phase 3 trials will follow: only on out of 20 or 30 substances emerging from research is likely to get as far as this. Phase 3 trials are conducted on a grander-scale, probably at several hospitals, and may involve "double blind placebo trials", Neither the doctors nor patients will know whether it's the potential new drug that is being administered or a placebo - or an existing product. "The doctor's role is to observe what happens".
Clinical trials typically continue for three to five years. Assuming they are successful, the company may have to wait another two or three years for registration in different markets before the new drug can be launched. But occasionally the whole process is radically speeded-up. It depends on the balance of risks and benefits: the more acute the illness, the less time a potential cure is likely to spend in clinical trials, and the quicker it will be registered. After all, as Jones says, "The patient won't be there otherwise." When Retrovir was shown to be effective in the "management" of HIV, the brakes came off. The whole process took only two-and-a-half-years.
The financial benefit to the pharmacuetical company will be obvious. After all, clinical trials are a hugely expensive part of the development process. But there is a downside too. There is a real danger, when the pressure is not properly understood. "That was not the case with Retrovir," Jones emphasises. But it also follows that "you only get real experience in the first period of general use" - when the company has less influence over how the drug is used than it had in clinical trials. Last year Retrovir sales actually declined in North America, which is easily the most important market for this product. The main reason, it turned out, was that American doctors chose to cut the daily dose to well below the recommended level. Sales turned up again, quite sharply, in the first half of the current year.
North America is, almost inevitably, the biggest geographical market for Wellcome as for the majority of the leading pharmacuetical groups. Indeed, in relative terms, Wellcome's stake in the western hemisphere is greater than that of most Europeans, and for good historical reasons. Although the company was founded in the UK, its founders, Henry (later Sir Henry) Wellcome and his partner Silas Burroughs, were both American pharmacists. Quite early on Burroughs travelled the world setting up subsidiaries, in the US and elsewhere. And over the years the American company has grown into a fully self-sufficient pharmaceuticals house, with its own manufacturing and its own R and D.
Legally, Burroughs Wellcome in the United States is a subsidiary of The Wellcome Foundation, in the UK, which is in turn owned by Wellcome plc, the holding company whose shares are now on offer. Operationally, the two subsidiaries divide up the world between them, Burroughs Wellcome taking America and The Wellcome Foundation most of the rest. On the R and D front the split is very equal. Research Triangle Park, North Carolina, absorbs just over half the group's R and D budget, and Beckenham, Kent, employs a little more than half its 3,500 R and D personnel - scientists come cheaper in Britain, of course.
On opposite sides of the Atlantic, therefore, are parallel organisations embracing research, development, medical contacts, regulatory observance, and so on. Thus Trevor Jones has his US counterpart, Dr David Barry, and both are on the holding company board. At first glance these duplicated structures and shared responsibilities might seem a cause of avoidable inefficiences, but Wellcome people argue otherwise. They allow the group to call on complementary skills, it's said, they give ready access to more university researchers, and speed up the process of development. Besides, it's as well that more than one view should be heard.
Although pharmaceutical companies operate in a global market, it's one of immense diversity, Jones points out. The French preference for suppositories as a means of administering drugs is well known. Japanese and western doctors look for different symptoms before diagnosing depression. Regulatory requirements also vary from place to place. Wellcome used to come up with separate data for the regulators in the UK and US, and then add them together. "Then we said, let's bring out guidelines that will satisfy the regulatory authorities (in different countries)." The international regulatory group now meets three times yearly. There are also functional liaison groups, bringing together technical, clinical and development managers from both sides of the Atlantic. Portfolios and priorities are subject to international review.
Before this new-found cohesion, the American company was often left to go its own way, which it did with sometimes spectacular success. Burroughs Wellcome scientists were the first to conceive of using the compound AZR, now marketed as Retrovir, for the treatment of HIV infection. In 1989 the Americans launched a novel antidepressant, Wellbutrin, which has sold fairly well in the US but has not been introduced elsewhere. It may well be the last of its kind. "I don't believe we'd have another Wellbutrin, unless there were compelling reasons in a particular market," says Tim Melton, director of product development at The Wellcome Foundation. Global medicines for global markets are today's prescription - and no buts. "Every territory now must launch a product that Wellcome has spent £50-70 million to develop", insists Rolf Stahel, the Swiss-born director of marketing.
As far back as 1987 it was decided to move the marketing department to Beckenham, where its staff could sit alongside the scientists. But there's no doubt that the influence of marketing has grown out of all recognition in the past couple of years, since John Robb - himself a marketing man - became group chief executive. These days marketing people, too, are closely involved in all decisions, from the selection of therapeutic areas downwards.
A small part of the R and D budget (5-6%) goes on support to existing business. This can mean developing the use of two or more drugs in combination or "managing the product life-cycle". For example, as soon as Zovirax comes out of patent protection there are plans to make it available - in certain forms and for certain purposes - over-the-counter at retail chemists. But infinitely more important for the future of Wellcome is that the company should come up with a new-generation blockbuster to take the place of Zovirax, which accounted for 38% of the company's prescription sales in 1991 (and just under 30% of total sales). Retrovir, next in line with 14% of prescription sales last year, has the field almost to itself for the time being although other companies are working hard on HIV. And Wellcome had to go to law last year to uphold Retrovir's patent protection in North America. The result will be known in 1993.
But, clearly, more products are needed - a steady supply of "innovative products with edge" as Melton says. There is no lack of candidates. Flolan, an established aid in bypass surgery, is the subject of a second study, jointly with Upjohn, into blood clots. Campath-IH, a collaboration with Cambridge University, is a biotechnology development and a potential cure of both rheumatoid arthritis and some cancers. There are several antivirals, including possible new herpes and HIV treatments, among the dozen-odd substances in clinical trials. Naturally, Wellcome won't make rash statements about entities that are so far unproven. What Jones does say is that "We aim to introduce, on average, one new chemical entity each year, and one major extension of an existing product."
They may not exactly guarantee Wellcome's future. But nor will anything else, and certainly not marketing. No one will deny the importance of sophisticated marketing, but good research is what, ultimately, holds out the best promise of success in pharmaceuticals.
Wellcome Innovations 1980-1992.
Launch Name Therapeutic category Indications
1981 Zovirax Antiviral Herpes simplex infection
1981 Flolan Anti-clotting agent Renal dialysis
1981 Tracrium Muscle relaxant Surgical muscle
1986 Digibind Cardiovascular treatment Antidote to heart drug
1986 Wellferon Lymphoblastoid interferon Hairy cell leukaemia
1987 Retrovir Antiviral HIV infection
1989 Semprex Coughs, colds, allergies Allergies
1989 Wellbutrin Anti-depressant Depression
1990 Exosurf Synthetic surfactant Respiratory distress
1990 Lamictal Anti-epileptic Add-on therapy
1991 Nuromax Muscle relaxant Surgical muscle
1992 Mivacron Muscle relaxant Surgical muscle