Articles

Contact | Print version | Recommend article | RSS-Feed

Alliances in Drug Discovery - The Chemical Element

Samantha Unnikrishnan, Surbhi Dedhia
Frost & Sullivan Research

The Big Hunt

Alliances have evolved into a critical cornerstone of R&D strategy in the global pharmaceutical industry. No other industry has been leveraging this business model as successfully as the global pharmaceutical industry in its drive for innovation and success. Over three thousand deals amounting to a cumulative payout of US$ 17bn have been signed by pharmaceutical and biotech players in a span of two decades. In the past five years the industry’s mania to develop new generation blockbuster drugs has taken on a new sense of urgency as 64% of the alliance value was inked and paid out during the period.

The Payout Pie – Who takes the cake?

With the advent of the genomic revolution, technology platform based alliances have predictably overtaken therapeutic based partnerships in a span of three years. From a 59:41 balance in favor of therapy-area based alliances the dynamics have shifted to the dominance of technology-platform based projects (Chart 1). However, it is no surprise that this balance is expected to tip in favor of rapidly evolving technology platforms that provide the key to unlocking compound-target relationships in therapy area based research. Many players today are developing capabilities to evaluate target clusters with similar active sites but different biological activities and screen drug candidates against the cluster.

Chart 1: Alliances payout by type (Source: Frost & Sullivan).

Within therapeutic category-based alliances, oncology, infection and autoimmune are the dominant therapy areas that are under the microscope across the globe in most of the research centers and account for 72% of the alliance payout for therapeutic focus.

Technology platforms in the current context include the old horses - broad based screening tools, and chemistry based technologies and the relatively recent Pandora’s Box – Genomics, opened on completion of the Human Genome Project. Broad based screening tools and chemistry driven technologies have essentially provided research facilitating tools that could churn out compounds to be tested against finite biological targets. They account for 16% and 27% of the payout pie for technology platform based alliances respectively up from their share in 2003 at 12% and 25%. Genomics, the new kid on the block accounts for 57% of the payout. With the completion of the Human Genome Project and advances in genetic science, drug research today is being driven by biology – molecular genetics, genomics, and bioinformatics and the trend seem to have reversed from compounds looking at targets to a plethora targets looking for compounds – or so it seems.

Chart 2: Technology Platform-based Alliances (Source: Frost & Sullivan).

Chemistry at your service

While they have been around for some time, the chemistry-based alliances took off in the real sense in 1994 in terms of deal size and frequency; almost the same time as the genomic alliances boom. Chemistry services have been nurtured by the incessant demand from the industry for potential drug candidates. The sector has been essentially dominated by alliances in the field of combinatorial chemistry, computational chemistry and chemical libraries – synthetic and natural all with the objective of increasing the efficiency of synthesizing & screening compounds for their efficacy and providing the requisite molecular diversity to compound banks for in-house research programs. Alliances for accessing chemical libraries are usually one time interactions for license activation, while broader collaborations to generate compound libraries against sponsor’s targets are more strategic and of a longer duration often with full-time chemist equivalent agreements.

Manned by a handful of players specializing in these chemistry services, the sector has seen a significant growth making it an attractive opportunity for new entrants considering the growing interest in chemistry based alliances not just in the pharmaceutical industry but in the biotech companies as well.

Chart 3: Alliances in Chemistry (Payout in US$ mn) (Source: Frost & Sullivan).

The top five revenue makers in the sector account for 62% of the kitty and have pioneered the concepts of parallel drug design (Vertex), contract chemistry and process development services (Albany Molecular Research), combinatorial chemistry whiz (Pharmacopeia) to developing a human resource competency (medicinal chemists – Array BioPharma) which is being shared / contracted in by the big daddies of the pharmaceutical industry.
What makes the sector more interesting and increasingly more important in the pharmaceutical and biotechnology industries is the realization of their impact in the drug discovery value chain. This fact is substantiated by some of these sector participants having started off as biopharmaceutical companies and changing course midway to develop skills in chemistry services for in-house and liaised research programs. The mid-course correction has inked legendary deals for them with major players estimated value of over US$ 1bn. Vertex is one such example – a biopharmaceutical company, its structural genomics orientation led to the pioneering principle called "chemogenomics:" parallel drug discovery for structurally similar targets.

What makes the sector more interesting and increasingly more important in the pharmaceutical and biotechnology industries is the realization of their impact in the drug discovery value chain. This fact is substantiated by some of these sector participants having started off as biopharmaceutical companies and changing course midway to develop skills in chemistry services for in-house and liaised research programs. The mid-course correction has inked legendary deals for them with major players estimated value of over US$ 1bn. Vertex is one such example – a biopharmaceutical company, its structural genomics orientation led to the pioneering principle called "chemogenomics:" parallel drug discovery for structurally similar targets.

Biotechnology Players – The Knights in Shining Armor?

With genomic revolution driving technology-platform based alliances for the past decade, there has been an impact on the traditional technologies. Critics may write-off the chemistry based alliances similar to the alliances for broad-based screening tools given the changing paradigm of drug discovery, the advent of alternative technologies, the genomic revolution, the increasing dominance of biologics, and the ever increasing collaborations with biotech companies in the pharmaceutical industry. However the chemistry based alliance sector has witnessed strong growth in the past decade in addition to the increase in its contribution to the technology-platform based alliance revenues

What make the chemistry based alliances sector unique and sustainable are the following five factors:
- parallel drug design
- growing interest for molecular diversity and the consequent need for chemical libraries from multiple sources (natural, peptide, synthetic, building blocks),
- established benefits of stereo-selectivity and chiral chemistry
- industry’s efforts to refocus on small molecules as biologics prove to be a long term bet and more importantly
- growing interest of biotechnology players in addition to the pharma players in small molecules and chemistry based alliances.

The interest from biotechnology players has in fact played a significant role in the recovery of the sector from an all time low contribution of 19% in 1999 in the technology-platform based alliance revenues, to an increase to 27% in 2004. While this is still lower than the 30% revenue contributed a decade back, its evidence enough of the continuous demand for candidates to be taken through the drug discovery process as well as the incremental value underlying deals inked in the recent past.

For an industry spawned by recombinant DNA, the need to shave time and money off the drug development process to come out with successful drug candidates coupled with funding pressures has resulted in a focus on small molecule therapeutics and the related chemistry services by biotech players. Examples include - pure-play genomics firms like Exelexis liaison for a chemistry and High Throughput Screening (HTS) facility and Millennium’s ensured access to expertise in medicinal and computational chemistry through its alliance with Cambridge Discovery Chemistry.

Graffiti on the wall

What does this mean for chemistry based alliances and the service providers therein? The writing on the wall is clear – unlike broad based screening technologies, chemistry based alliances are here to stay despite the growing applications of the genomics revolution. Hence there is a need for holding on to its traditional offerings and developing concepts in line with the changing drug discovery paradigm for pharma as well as biotech players in order to sustain the sectors potential.

As pharma sponsors provide the base line revenues through their demand for more complex chemical libraries, target oriented drug discovery assistance and rational drug design; an increasing number of biotech players are also expected to partner in the chemistry sector to access small molecule therapeutics and the chemistry expertise needed to deliver small molecules to the market.