June 25th, 2007

Future Pharma

Lately, there’s been lots of talk about how the pharmaceutical industry needs to adapt to respond to the challenges of today’s marketplace. Pick up any newspaper, scour the web or chat at any water cooler in the “nation’s medicine chest” (AKA New Jersey), and you will come across plenty of suggestions on how to change the industry.

Just last week Pharma Futures – a working group comprised of investors and industry representatives, including people from our own pharmaceuticals business — added one more interesting voice to this debate. It was a realistic assessment of today’s environment. As the Wall Street Journal Health Blog put it, “the opinions of pension funds mangers, with $1.2 trillion of assets, were stark.”

I’m not going to go through each of the seven core suggestions made in the report – you can read it and the industry’s response to get that information — but I did want to touch one point that was made: the suggestion that the industry should provide greater transparency into early stage drug development.

As described in the Executive Summary:

“Investors are interested in better understanding process and productivity in Phase I and II through the provision of more information. In addition to the progress and the number of compounds in the pipeline, investors are particularly interested in the quality of the pipeline, how quality changes over time and to understand better the underlying factors that affect quality.”

A fair point – and one made even more relevant to me since just this month the Johnson & Johnson pharmaceutical business presented its pipeline to the investment community and outlined productivity targets for the remainder of the decade.

As described in the industry’s response to the suggestions made in the report, we are certainly going to work to help address the concerns about pipeline transparency, but additional dialogue is needed to help investors appreciate the limited value of the some early stage data.

While Johnson & Johnson does try to provide insight into the state of our pipeline, I can tell you there is often a struggle over the amount of information that can or should be provided.

When determining how much to disclose about research projects, we consider the competitive impact providing too much information too early could have.

It is also notoriously difficult to provide an accurate assessment of the value and potential of compounds based on early stage data – as the failure rates collected by the industry trade group PhRMA illustrate. For instance, of the 10,000 compounds investigated, only one will make it to the market and of the 250 compounds that enter preclinical testing, only five will make it to the clinic. During my stint in the communications group of one of Johnson & Johnson’s pharmaceutical businesses, I saw first hand how often projects that seemed promising in the lab failed to make it into human testing. With this in mind, we tend to be fairly cautious about how much information we provide about our early stage pipeline. We don’t want to raise the hopes of investors — or patients — too soon.

It’s a fine line, but I’m sure that as the dialogue continues we will find its coordinates.

It’s just one example of how the points raised in the Pharma Futures report are important, complex policy issues that require careful analysis. In fact, I understand that many of the folks in our businesses are looking at the same issues raised here and look forward further discussions.

2 Responses to “Future Pharma”

  1. Steve Woodruff says

    I think these investor groups need to bear in mind that not only is it inadvisable, from a competitive perspective, to say too much too early, but given the growing number of investor lawsuits, such a practice will put pharma companies on very dangerous footing. Many drug candidate failures don’t show up until Phase 3 testing, and I can just imagine the frivolous shareholder lawsuits because the company will be accused of building up false hopes by revealing too-early data. Some cats really don’t need to be out of the bag until a much clearer handle on safety and efficacy issues is established.

  2. Karl Darden says

    I agee with Steve. Sometimes I get a little frustrated with the Wall Street analysts and their desire to know more regarding all the details of the compounds in our pipeline. It might be a good idea to show them our Credo so they understand exactly where the investors fit into our company vision. For the patients sake, I think it is wise to tread lightly when it comes to the release of such information.

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