ViewPoints: The importance of R&D momentum - Novartis talks up pipeline

R&D 'open days' typically provide pharma companies the opportunity to show off promising compounds that will encourage positive long-term assessments from both investors and analysts. As was the case at Novartis last week, with the Swiss player highlighting a number of potential blockbusters in its late-stage pipeline.

Equally significant, however, was reiteration by the company of its recent track record in R&D productivity. For example, a 10 percent success rate in progressing compounds from preclinical testing to the market, which the company claims is 5 times higher than the industry average.

This raises the question; does a flurry of new product launches over the past five years indicate sustainable success in transferring products from the clinic to marketplace, or serve to set a high level of expectation among investors that will weigh heavily on Novartis if targets are not met?

Insight, Analysis & Opinion

Momentum in the R&D space certainly helps; just ask Pfizer, says healthcare analyst David Maris – who suggests that the recent approval of Xeljanz will galvanise the company, particularly against a backdrop of "reduced investment, low morale and the loss of scientists to smaller, more nimble companies." (see ViewPoints: In Xeljanz, Pfizer delivers key post-Lipitor approval

Similarly, a lack of forward momentum can hinder efforts to develop new products. AstraZeneca's strategy over the past five years to bolster internal research via in-licensing activity has been undermined by a weak R&D core, says Sanford C. Bernstein analyst Tim Anderson (see Spotlight On: AstraZeneca – the David Brennan timeline). The company's new CEO Pascal Soriot arguably needs a Xeljanz-type approval to kick start momentum.

In contrast, Novartis' late-stage pipeline appears to contain numerous catalysts that should enable the company to maintain the level of momentum it has enjoyed in recent years. Bernard Munos – founder of the InnoThink Center for Research in BioMedical Innovation and a leading commentator on pharma R&D trends – noted to FirstWord that the 18 new molecular entities (NMEs) that Novartis has delivered to the market since 2000 is someway higher than its closest competition (Johnson & Johnson with 13).

Munos concurs with Anderson and Maris; "a strong R&D track record is evidence of a vibrant innovation culture, which helps attract top-flight scientists, who in turn enrich the culture and make it more successful and attractive. It feeds upon itself. In unproductive companies, the process often works in reverse."
Novartis certainly appears to be doing something right, but is the strong track record it has delivered over the past decade sustainable? – Munos believes it is.

He suggests that the Swiss company broke rank with the industry 10 years ago when it "stopped chasing blockbusters, and started chasing breakthroughs instead," citing the development of Glivec as a watershed moment for Novartis' R&D ethos. Glivec subsequently 'created' its own market via its effectiveness at treating chronic myeloid leukaemia; had senior management listened to Novartis' forecasting team, the product would have been terminated given a lack of perceived commercial potential. See also Spotlight On: How do you solve a problem like Novartis' Glivec patent expiry?

As a result, internal forecasting of products is banned until Phase III testing, notes Munos; a radical approach that when implemented crystallised the company's ethos of not specifically targeting blockbusters.
Focusing on breakthrough compounds fuels that necessary momentum, says Munos; "it gives their scientists the freedom to work on important problems (instead of seeking successors to aging blockbusters). This is extremely motivating for young scientists and has energized innovation.”

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