Is the industry’s reliance on me-too drugs on the verge of reversing? Could pharma be on the cusp of a new cycle of innovation? That’s the possibility raised by Ian Lloyd. He has been studying industrial R&D for more than 20 years and currently serves as editorial director of Citeline, part of the Informa empire of trade shows and scientific publications.

Citeline recently issued its annual report on clinical R&D. The British firm draws upon a mix of proprietary, unpublished research and public data from government trial registries such as ClinicalTrials.gov.

Biologics & Small Molecules

Citeline’s research process is intensive. The organization monitors the medical literature and corporate press releases. That’s easy enough. But Citeline also periodically labors to verify that a much-heralded compound in clinical testing is in fact progressing toward regulatory approval or market launch. The vetting process knocks some projects out of the database, ensuring it contains only genuinely active research. “We have strict rules about moving it to inactive if nothing happens,” Lloyd notes.

Lloyd and his team were particularly surprised at the 2011 numbers for something called new active substances (NAS). The NAS, in his shop, are defined as either new chemical entities or new biological agents, meaning they are an excellent proxy for overall innovation. (For historical reasons, some data in the Citeline report and this article are from the final seven months of the previous year and the first five months of the current year; other data are the tallies from conventional January-December intervals.)

At any rate, there were 42 NAS in 2010 and 33 in the 2011 report. The average over ten years is that 29 NAS are live at any one time. But of particular note in the 2011 crop, Lloyd says, is that a third of the NAS had their debuts in that year. “This is a vintage year,” says Lloyd. “I can't remember a year when the proportion was so high—when there were so many novel drugs.” New stuff, in other words, is on its way.

Macro Growth

Another encouraging sign: companies appear to have the means and the data to move drugs and biologics from Phase II to III. “The jump at Phase III of 8.3 percent is most encouraging, coming as does on the back of an exceptional 13 percent rise the previous year,” the Citeline report states.

Not so long ago, of course, there was appalling attrition at the end of Phase II that worried both investors and industry veterans. Lloyd is circumspect about making any bold proclamations that are not supported by facts. But he can be coaxed to opine a bit and will allow it appears that healthy numbers of projects are indeed advancing into Phase III—not perishing at the end of Phase II. Says Lloyd: “It's stopped getting worse. It is getting slightly better. But it's not good enough yet.”

What about the big picture? Citeline says the number of drugs being studied is 10,452, a seven percent rise from the previous year. In an era when many R&D budgets are flat or declining, that’s an auspicious development. The rise in compounds in the preclinical pipeline is up by even more—12 percent. To be sure, Lloyd is not an excitable fellow. He says it’s too early to announce a trend, and notes that the firm’s editorial methods may account for some variability in the data in any given year.

Wagging the Dog

Even so, though, it’s clear that there is modest growth in demand for clinical development. “Those top ten pharma companies are cutting back or rationalizing. But this has been more than compensated for with small companies with one or two products,” he notes. In internet terms, those startups are called the “long tail,” obscure firms with slim odds of survival. (Perhaps Prima Biomed or Pharmicell.)

In aggregate, Citeline calculates that the long tail in pharma is quite imposing. The total number of active companies rose 13 percent this year, to 2,705 firms. Of those, 953 companies have a single product in clinical testing, an 11 percent increase from the prior year. The number of firms with two products rose even faster, by 35 percent, to 459 companies. Depending on your perspective, all those small outfits could be a Hollywood-worthy tableau of medical entrepreneurship on a vast scale. Or the statistics might be as fluid as a wildlife census of baby rabbits before the arrival of a wolf pack.

Speaking of big dogs, there was little change among the global companies with more than 200 pharmaceutical products under development: GSK, Pfizer, Merck and Novartis remain solidly in the top slots of research-intensive firms. One intriguing footnote, however, is that Pfizer has recently killed 59 projects, or twenty percent of the compounds being investigated during the previous year’s report. That would amount to an apparently severe internal reassessment of the commercial prospects of the New York company’s pipeline, which now consists of a still-serious 225 projects.

75 Diagnostic Projects

For the first time, Citeline researchers are watching drug-diagnostic pairings, in which a lab test is used to assess if a drug is appropriate or safe for individual patients. There appear to be 75 such biomarker projects at the moment, Lloyd says. His team does not yet have any longitudinal perspective to be able to discern increases or decreases in interest in such projects.

And Citeline’s tallies show that anti-cancer efforts are a predictable and large component of all research. The latest figures for 2011 show that thirty percent of all industry projects are now in oncology. That's up from a quarter of all research during the previous year. Is the industry putting too many eggs in the cancer basket? “I think it is probably reaching critical mass,” Lloyd says of the emphasis on oncology. “Whether this is sustainable, I don't know. I think it is going to level off.”

Because the Citeline report also studies the molecular targets of new therapies in the body, it can show that the number of new oncology targets isn’t keeping pace with the industry’s heated interest in the therapeutic area. That could pose problems later if the targets have been insufficiently validated. “It's a high risk strategy,” Lloyd says. “There is a lot of money, a lot of work, but it is high risk. A lot of these [targets] are unproven in terms of producing successful marketed drugs.”

The 2012 Citeline report can be downloaded for free from the Citeline home page once you provide contact information. The company’s subscribers get their own research assistant as part of a subscription. Access to the company’s data often allows subscribers to answer their own questions, Lloyd says. But Citeline does offer premium, bespoke research reports on a customized basis. Those can explore more elusive competitive questions in R&D across any therapeutic area or geographic region.

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