Robert R. Ruffolo, Jr., Ph.D., D.Sc.(h), D.Eng.(h)President, Research & Development Wyeth PharmaceuticalsSenior Vice President Wyeth (Corporation)

Directors of Graduate Studies in PharmacologySalt Lake City, Utah July 25, 2007

Training Needs for the Training Needs for the Pharmaceutical Industry in the Pharmaceutical Industry in the 21st Century 21st Century

Brief Overview of the Pharmaceutical Industry

What is the Pharmaceutical Industry?

It is the most technically complex, costly, risky and regulated industry in the world

Attrition rates Development times R&D Investment Costs Risk – Consolidation Regulation

How Can We Assess Risk In The Pharmaceutical Industry?

Odds of Bringing a Product to the Market

Time and Costs associated with R&D

Required R&D Investment Company Survival Regulatory Burden

Some Realities of Pharmaceutical R&D

R&D costs have grown dramatically; disproportionately to R&D budgets or output. The result is decreased R&D productivity.

R&D Inflation is >12%; R&D Budget increases have been between 3-6%

The Regulatory climate is growing more unfavorable and uncertain. Regulatory and patient expectations for safety may be unrealistic and

approaching the unachievable. Unrealistic safety expectations have exposed the Industry to

unprecedented levels of product liability. Innovative new drugs will likely take longer to develop as the Industry

focuses on even higher levels of innovation. The good news: There is more innovation in R&D than ever before.

Stages of R&D: A Long, Expensive and Risky Process

Discovery(2-10 years)

Pre-clinical TestingLaboratory and animal testing

Phase 120-80 healthy volunteers used todetermine safety and dosage

Phase 2100-300 patient volunteers used to look for efficacy (POC) and side effects

Phase 33,000-5,000 patient volunteers used to monitor

adverse reactions to long-term use

FDA Review/Approval

AdditionalPost-marketing Testing

1614121086420

Source: PhRMA, based on data from Center for the Study of Drug Development, Tufts University

Years

Compound SuccessRates by Stage

>10,000Screened

250Enter Preclinical Testing

10Enter Clinical Testing

1Approved by the FDA

Clinical Development Cycle Times are Increasing

Source: Centre for Medicines Research (CMR)

1.4(62)

1.6(58)

1.3(64)

1.5(65)

1.2(64)

1.1(69)

1.0(76)

3.8(17)

2.6(15)

3.0(16)

2.1(28)

2.0(23)

1.7(29)

1.9(46)

3.5(6)

2.3(13)

2.1(20)

2.4(22)

2.1(18)

2.2(27)

2.5(36)

1.6(7)

1.2(14)

1.4(13)

1.0(17)

0.8(21)

0.9(17)

0.8(29)

0 2 4 6 8 10 12

1997

1998

1999

2000

2001

2002

2003

Duration in years

Phase 1 Phase 2 Phase 3 Phase R

Original Patent Term – 20 years

20100Years

PatentApplication Filed

NDA/BLA Approved Pediatric Drug

Patent Certification

Patent Issued IND EffectiveNDA/BLA

Filed

PTR*

Period to Recoup Investment

The Evolving Healthcare Technology Arena

Description of diseaseprocesses

Empirical intervention

Disease homogeneity

Uniform patient populations

Reactive medicine(post-symptoms)

Causal molecular pathology

Rational intervention directedto specific molecular pathology

Disease heterogeneity anddifferent progression/prognosis

Patient heterogeneity andindividual risk profiles

Proactive disease managementbased on risk assessment(targeted care)

This is leading to more innovative drugs in company pipelines

Innovation Comes With a Price: Higher Attrition, Longer Timelines and Higher Costs

IND filings with FDA

0

20

40

60

80

100

1996-1999

2000-2004

(%)

Morenovel

Less novel

NDA filings with FDA

0

20

40

60

80

100

1996-1999

2000-2004

(%)

More novel

Less novel

Source: BCG industry compound database; BCG analysis

More Novel Drugs: Higher Attrition Rates and Longer Development and Approval Times

Source: BCG industry compound database; BCG analysis

Attrition Rates by Novelty Status Development Times by Novelty Status

0

20

40

60

80

100

Less novel

%

Current status of INDs filed 1996 – 1998

0

20

40

60

80

100

Less novel

Mo

nth

s

Average cycle time for NDAs submitted 1996 – 2003 and approved

FDA approved

Failed

Still in Development

Development time

Approval time

More novel More novel

Costs of Discovering and Developing a New Drug are Staggering

Source: Bain drug economics model, 2003

Launch

Phase III/File

Phase II

Phase I

Preclinical

Discovery

Historic 1995-00 2000-02 average

$1.1B

$1.7B

0.0

0.5

1.0

1.5

$2.0B

Change in Average Cost to Develop Successful Drugs Over Time

Pharmaceutical R&D Requires the Highest Level of Investment in the World; A Measure of Risk

Source: PhRMA, 2001, Based on Data from PhRMA Annual Survey and Standard & Poor’s Compustat, a Division of McGraw-Hill

17.0%

Domestic R&D

Industrial Sector Comparison:

10.5%

8.4%

7.8%

5.3%

4.7%

3.9%

1.2%

3.9%

0.73%

3.8%

Computer Software & Services

Office Equipment & Services

Automotive

Telecommunications

Leisure Time Products

Aerospace & Defense

Metals & Mining

Paper & Forest Products

All Industries

Electrical & Electronics

The Pharmaceutical Industry Outspends the NIH on Biomedical Research

Expenditures (Billions of Dollars)

$11.5 $12.7 $13.4 $15.2 $16.9$19.0

$21.1 $22.0

$26.0$30.3 $31.0

$33.0$37.0

$39.0

$44

$8.9 $10.3 $11.0 $11.3 $12.0 $12.7 $13.6$15.6

$17.8$20.3 $20.3

$27.0 $27.0 $27.5 $28.9

$0.0$5.0

$10.0$15.0$20.0$25.0$30.0$35.0$40.0$45.0$50.0

1992199319941995199619971998199920002001200220032004200520062006

PhRMA

NIH

Ref: PhRMA, “What Goes Into the Cost of Prescription Drugs?”& AAAS, OMB Data FY2006

Industry, 93.3%

Academia/Non-Profit, 3.5%

Government, 3.2%

The Pharmaceutical Industry is the Source for Most New Drugs

Source: DiMasi et al., J Health Econ, 2003;22:151-185

Journal of Health Economics, Vol. 13, 1994, pp 383-406.Journal of Health Economics, Vol. 13, 1994, pp 383-406.Journal of Health Economics, Vol. 13, 1994, pp 383-406.Journal of Health Economics, Vol. 13, 1994, pp 383-406.

Most Drugs Do Not Make Money: Only 3 in 10 Medicines Return Development Costs

Present Values by Decile

11 22 33 44 55 66 77 88 99 1010

200200

400400

600600

800800

10001000

12001200

Average R&D Cost

00

1990

Do

llar

s (M

illi

on

s)A

fter

- tax

Pre

sen

t V

alu

e

Industry Consolidation; A Measure of Risk

We May Look Highly Profitable, But What Is The Reality?

Companies Merge Because They Are In Trouble

Another Measure of Risk

The Outlook for our Sales and Earnings is Not Bright

Source: IMS, FDA, Lehman Brothers, BCG analysis

‘03 ‘05 ‘07 ‘090

5

10

5 yr avg. growth

% Sales Growth for Big

PharmaRight now, our Industry

is less profitable than most others

Growing Regulatory Conservatism:Application of the “Precautionary Principle”

“The Committee’s decided to ban further researchuntil it can be proven your ‘wheel’ poses no

threat to the environment, society or public health”

Regulatory Burden on The Pharmaceutical Industry is Increasing at an Alarming Rate

Increasing Review Times

Increasing Safety, cGCP and cGMP Requirements Worldwide; to unnecessary levels that do not increase public safety

Lack of Harmonization among Regulatory Agencies in the US, Europe, & Japan - Despite ICH

Different Standards of Medicine in the US, Europe, and Japan Complicate Clinical Trials

Increasing Post Approval Commitments

Training Needs of the Pharmaceutical Industry

Communication Skills are Paramount

WrittenPublications, Publications, Publications

- It’s necessary to become an opinion leader

- Recognition in the scientific community is crucialFeasibility Study Proposals (equivalent to NIH Grants; except

longer)

- Why should we fund your idea as opposed to somebody else’s?

VerbalPublic Presentations Internal PresentationsThe Power of Persuasion

- Many scientists have good ideas, but we have only a limited amount of money

Team and Leadership Skills

Scientific Breadth and Depth

Our resource needs change constantly, and our scientists must be able to change with our needs (or we need to replace them, a traumatic and expensive process)

Use your time in Graduate School to take as many courses as possible; don’t avoid the physical sciences, mathematics and statistics

Learn as many skills as possible; avoid the temptation to become too highly specialized; there’s time for that later

The broader a scientist’s background, and the more rounded the skill sets, the more valuable the scientist is in the long run

Avoid the mistake of becoming an expert in a technique or technology; they become obsolete quickly

Be conscious of the “technology wasteland” Learn how to write and communicate science verbally!

Understand the Pharmaceutical Industry; The Myths and Stereotypes May Not be True

We are not all stupid and rejects from Academia

We do publish (and if you work for me, it is publish or perish). If you don’t want to publish, then stay in academia

We don’t just do “mindless screening”

We don’t make a “ton of money” You CAN go to meetings/congresses You CAN follow your own research

interests We are not in Industry to escape

“grant writing”; we write feasibility studies, which are worse

The science is just as good You do receive scientific direction But there IS scientific freedom (vs

Academia?) You can’t get in without a post-doc We do science for profit (and to help

humankind and to earn our salaries and pay our bills (just like academia; Professors don’t work for free either, and universities charge overhead to pay bills)

The Pharmaceutical Industry does not live off the science of Academia; Actually the Industry is the largest source of funds for Biomedical Research in the World

Understand the Pharmaceutical Industry; The Myths and Stereotypes May Not be True

We are not all stupid and rejects from Academia

We do publish (and if you work for me, it is publish or perish). If you don’t want to publish, then stay in academia

We don’t just do “mindless screening”

We don’t make a “ton of money” You CAN go to meetings/congresses You CAN follow your own research

interests We are not in Industry to escape

“grant writing”; we write feasibility studies, which are worse

The science is just as good You do receive scientific direction But there IS scientific freedom (vs

Academia?) You can’t get in without a post-doc We do science for profit (and to help

humankind and to earn our salaries and pay our bills (just like academia; Professors don’t work for free either, and universities charge overhead to pay bills)

The Pharmaceutical Industry does not live off the science of Academia; Actually the Industry is the largest source of funds for Biomedical Research in the World

You only have to work half-a-day, but 1 day = 24 hours!*

*Stolen from Dr. H. Wolf, Pharmacology 870, 1974

There are More Similarities Between Academia and Industry Than Differences

Science is our foundation Innovation is key Work begins with the identification of a new molecular

target Scientific credentials matter; a lot! Consistent productivity is essential (and a requirement of

continued employment; the equivalent of tenure) Industry doesn’t have enough money either to fund all of

the research it wants or needs either We work on mostly the same molecular targets as in

academia

What’s Life Like in the Pharmaceutical Industry? It’s a hard life The hours are long; it’s not 9 to 5 Science is more directed Scientists are held accountable Greater reliance on a “team approach” to science; but individual

research matters a great deal Industry is not where you go “to retire” Failure is the norm; one needs to be able to cope with failure Change is the norm; one must become comfortable with change Competition is keen for research money and jobs The most common complaint I hear from scientists who move

from Academia to Industry is “I never knew how hard the work was, and I never had to work THIS hard before”

HOWEVER, very few scientists who move from Academia to Industry ever move back

Personality Matters Too!

But Many Scientists Do Not Inherently Have The Traits Necessary To Work In A More Structured Environment Than Academia

Key Findings from “Managing the Innovator” by ISR - Scientists:

Typically like their immediate supervisors

Suspicious of “upper management”

Feel un-empowered

Uncomfortable in taking direction

Criticize their performance appraisals

Are highly dissatisfied with their compensation

Feel less secure in their jobs

Believe that they cannot challenge Company norms

They identify themselves as scientists; not as company employees

Feel limited opportunities for career development

Have a very high degree of stress on the job

Are typically the most dissatisfied employees in any company

Personality Matters Too! What We Look For

Ambitious Team payer Driven Ability to work independently AND with others Risk-taker Comfort with change and uncertainty Ability to deal with stress Ability to cope with failure Managing conflict Looks for ways to make things work, and not for reasons why

things will not work Ability to take direction Motivation (science vs money)

Post-Docs: You Need One (or More) To Get In The Door

One Post-Doc is OK, two is better, and beginning to become the norm

Take advantage of your post-doctoral fellowship(s) and explore your new environment, not just your own project

Collaborate with others; try to develop team skills Develop additional scientific and people skills Work hard; you should have nothing else to worry

about during a post-doc Have fun; it’s the last real freedom you’ll ever have

whether you work in Academia or Industry

What Can You Expect When You Enter Industry At The PhD “Entry Level” A comparable salary to academia (sorry) A laboratory with one or two “associate staff” (technicians) A boss (who you might or might not like; but they can change

quickly) Somebody like me who spends approximately $2 million/year

on you (so you need produce consistently) Some new equipment; equivalent of “seed money” Some freedom to work on your own ideas, and on some

existing programs; DO BOTH! Budget problems A unique opportunity to combine basic and applied research

What Kind of Research Will I Do in Industry?

If you work in Discovery, basically the same kind of research you would do in Academia

Basic research in areas of your own interests and collaboration on research projects of others

Do I publish on “My Research” and do “Company Research” separately?; No, they are one and the same thing

Make sure you publish enough to “get tenure”. If you can’t make it in Academia, then people like me won’t want you either

But, unlike Academia, there are many other opportunities if you find that research is not you true calling (Clinical, Operations, Project Management, Corporate, Marketing, etc)

Can I Get Fired From Industry?

You bet you can; and much easier than from Academia There have been massive lay-offs in R&D throughout the Pharmaceutical

Industry as a result of consolidation and decreasing sales Some R&D groups set “tenure requirements” that are similar to

Academia. If you’re not good enough to get tenure in Academia, why would we want you?

One of the main reasons that I have let people go is because of the failure to publish or failure to align with the direction of R&D

Abuse of research animals Falsification of data Violation of company policies Sexual, gender, race etc harassment/bias/discrimination Willful misconduct Insubordination; Industry is a little bit more like the military, and rules and

appropriate behavior/conduct matter

Summary

The Pharmaceutical Industry is not for everyone; but I love it It’s a hard place to work, and becoming harder every day Our risks, costs and degree of regulation are extremely high The work is challenging, and often frustrating, but sometimes

highly rewarding Communication is key Breadth and depth in training are critical We depend on the motivation and innovation of our scientists,

and their individual as well as team approachs to research We have the resources and scale to do things that cannot be

done by Academia or Government And we make new medicines; there’s no better feeling than to

be part of the discovery and/or development of a new drug