The pharmaceutical industry is a lot like 61 percent of Americans right now. It's overweight and it better shape up fast or its health will be in serious danger.
The Pharmaceutical Research and Manufacturers of America (PHRMA) boasts on its website that the industry invested more than $30 billion in 2001 to discover and develop new medicines.
What PHRMA doesn't mention is that the FDA only approved 24 new drugs. That's three fewer than the previous year, while the overall investment increased by $7 billion.
"That's less than one new chemical entity launched per company," said Michael Perry, the newly appointed CEO of Pharsight of Mountain View, California. "That's a far cry from what's required to sustain productivity in this industry.
"It's also not acceptable performance for patients who are waiting for products with unmet medical needs."
But Perry is on the industry's side. He says Pharsight's technology, which models clinical trials, can help toss out drugs that aren't going to make it before hundreds of millions are spent. Conversely, they'll be able to get the promising ones to market faster.
The industry has been slow to adopt technology in the past. It has used some tools to industrialize the very early stages of the discovery process, such as combinatorial chemistry, rational drug design and genomics.
But no one has streamlined the development stage of the process. It takes at least five years and as much as $500 million to bring a drug to market. Researchers begin clinical trials somewhat blindly. What worked in the lab and on animals is one thing, but how a molecular entity will behave as part of human biology is often a surprise.
Pharsight's technology combines computer simulation, statistics and data analysis with pharmacology, disease and drug modeling, genetics and biological information. The technology determines whether the drug looks safe and effective enough to please the FDA.
For example, one of the top 10 pharmas, which Perry declined to name, hired Pricewaterhouse Coopers to facilitate a mock-up of what Pharsight could do.
They created a model of a drug trial that was already in Phase 1 clinical trials (for FDA approval, drugs must go through three phases) and asked Pharsight to design Phase 2.
Halfway through the mock trial, they realized the drug was going to fail and they strongly recommended that the company kill the product.
Meanwhile, the pharma had come to the same conclusion, but not before spending a lot of money for nothing.
"They found out at the end of Phase 3 trials, at least $100 million into testing," Perry said. He said they've decreased the attrition rate in Phase 3 for their customers by up to 50 percent.
Pharsight hired a consulting company to measure its technology's potential value to the pharmaceutical industry. Meanwhile, it came up with its own number: $1.4 billion annually. The number is based partly on the fact that blockbuster drugs can be worth as much as $4 billion annually, or roughly $10 million a day. Even drugs that are run of the mill in terms of sales can be worth $1 million a day.
The consulting company set Pharsight's value at $1 billion. "I'll take their number," Perry said.
But that value will only be realized if the behemoth pharmaceutical companies are willing to adopt new technologies, and if Pharsight and others like them can keep their businesses running long enough.
Pfizer accounts for 20 percent of their sales now. They've also signed on Millennium, Aventis and Lilly.
Millennium recently pulled an asthma drug out of Phase 2 trials. However, Pharsight's role is impossible to gauge because confidentiality agreements prevent disclosure of just which drugs they've helped bring to market, or to kill.
The deals thus far have been in the range of $10,000 and have typically applied to one drug at a time.
Perry is hoping to shift to an enterprise model, in which drug companies would buy a suite of services for hundreds of thousands of dollars, possibly millions, and could use it for, say, the next 10 drugs in their pipeline.
With a staff of about 100 (18 people were recently laid off), Pharsight would be maxed out after three such deals.
Pharsight has no direct competitor. Other companies do modeling, but while Pharsight focuses on drug development -- sort of the front end -- the others are working on drug discovery -- the back end.
Physiome is a back-end company that can model any type of cell -- heart, lung, kidney, etc. -- and perform simulations to test drugs. For example, the program can tell researchers if a certain heart drug will cause the left ventricle to expand.
Gene Network Sciences (GNS) is another company that models cells. Researchers at the company recently unveiled their model of a colon cancer cell.
Colin Hill, president and CEO of GNS, said the adoption of modeling will be slow, but even the largest and most stubborn pharmas will soon realize they have to adopt it if they want to compete.
He has seen more success selling pharmas the baby steps toward modeling: tools, such as its Diagrammatic Cell Language, software and database information, rather than actual models.
"It's kind of funny for us because it's like we're showing people a rocket for the first time, and they're blown away, but they point to the stand for the rocket and say 'How much can we buy that for?'"
Drug discovery, like most science, is an imprecise process that relies heavily on serendipity. But modeling technology can eliminate some of the guesswork, assuming pharmas are willing to change.
"If there ever was a disruptive technology, this is it," Hill said. "It will take some evangelizing and arm-twisting. Some still think we're crazy. This is wild stuff."
