Dr. Peter Corr thinks the business model that underpinned Big Pharma for years is irrevocably broken.
And he should know. Dr. Corr, a former global research and development chief for Pfizer, witnessed firsthand how big corporations approached product development, which, he says, was not particularly impressive. In fact, it was downright dysfunctional, Dr. Corr says.
“I saw more waste in the system than I ever seen before,” he says.
Dr. Corr, now a general partner for the private equity firm Celtic Therapeutics in New York, spoke to Xconomy last week during a visit to the University of Michigan’s North Campus Research Facility in Ann Arbor, MI.
It was a bit of a homecoming for Dr. Corr: as the top R&D executive for Warner Lambert/Parke Davis, he ran the Ann Arbor facility before Pfizer bought the company in 2000. A few years later, Pfizer closed the center and sold it to the U-M. Dr. Corr has nothing but fond memories of the building. Before Pfizer pulled out, the facility and another one in Sandwich, England were the company’s two most productive sites, he says. (Lipitor, a popular anti-cholesterol drug was invented in Ann Arbor.)
“When I left, it didn’t take them long for them to cut it,” says Dr. Corr, who retired from Pfizer in 2006. “I’m delighted the university took this site. As I remind people, I had nothing to do with [the decision to close it] but wanted to see something happen because I was involved in stimulating this building, which is a sensational building. A lot of money was spent here. Someone ought to take advantage of the fact that this was a world class facility.”
Closing the Ann Arbor facility may not have been Dr. Corr’s idea but it seems to jive with his current thinking about R&D and the drug business.
Innovation, Dr. Corr argues, best happens in smaller groups and often dies in large, top-to-bottom managed corporations.
“Bigger R&D organizations are not as productive per person,” Dr. Corr says. “I think the proof has shown that. Small sites that come together, having very small groups, that’s where innovation comes from. It comes from a few people coming together, getting expertise from where they need to make things happen.”
“That’s how ideas germinate,” he continues. “That’s something, unfortunately, is limited in a large company, when you have overarching committees at every level reviewing it. By the time something comes up to the executives at the top of the company, it has become melded in a variety of ways and that’s not positive for innovation in my view.”
Faced with dwindling sales and shrinking pipelines, Big Pharma over the years grew bigger when they should have shrunk, Dr. Corr says. Pharma executives drove profits mostly through buying rivals and cutting costs instead of developing new products, he says.
“Big Pharma firms will have to break down in smaller segments,” Dr. Corr says. “They got to let the germination of innovation occurs where it occurs: in tiny companies, or even within small groups in large companies. But if you manage the whole thing on a global basis, you destroy innovation.”
“And that’s why a facility like this—where scientists from the U-M, other people in the area, companies outside of Michigan—can have access to different areas of expertise and drive home their particular product, at least into an early phase of development, get some data that works and then it would be bought by a pharma company.”
I asked Dr. Corr when he realized Big Pharma wasn’t working.
“That’s a real good question,” he answered.
A longtime academic who graduated from Georgetown University School of Medicine and taught at Washington University near St. Louis, Dr. Corr eventually joined Monsanto/Searle as senior vice president of discovery research. The company accomplished a lot on a limited budget but lacked scale, he recalls.
Warner Lambert/Parke Davis was a larger company “but decisions were still made fast,” he says.
It was not until 2003, when Dr. Corr was Pfizer’s executive vice president of global research & development and president of worldwide development, that he realized the old model was not sustainable.
The company was spending about $8 billion on R&D but only producing about four products a year, a whopping $2 billion per drug, Dr. Corr says.
“That doesn’t work,” he says. “We needed to go out and license (drug candidates) and keep smaller (R&D) sites and let them go on their own. Let them be funded independently. Let them define how they can work best at their particular site as opposed to manage all of these sites around the world and pretend that we knew what was actually going on.”
Dr. Corr isn’t just pontificating. He practices what he preaches. His private equity firm buys early stage drug candidates with some clinical data, works with outside experts and contract research organizations to further develop the drug, and then auctions off the drug to pharma firms within three to five years.
Nowadays, it might take a single company 12 years to bring a product to market, he says.
The drug industry today is increasingly following this decentralized, outsourcing model, according to Tufts University Center for the Study of Drug Development (CSDD).
“The current business climate is challenging pharmaceutical and biotech companies to rethink their approach to outsourcing and how best to build alliances with external service providers as part of a long term drug development strategy,” the center said in report last year.
“The global economic downturn and operating pressures to launch new products faster and more efficiently have increased the need to leverage the benefits of outsourcing,” CSDD Senior Research Fellow Ken Getz said in the report. “But sponsors are rethinking how to best integrate [contract research] partners, given their unique corporate cultures, development and operating philosophies, and legacy processes and systems. That’s why integrated partnerships are being supported through hybrid outsourcing relationship models.”
Dr. Corr says Celtic Therapeutics is currently raising its second fund, which will likely be larger than its first $450 million fund.
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