AstraZeneca gives itself top marks for R&D productivity makeover — but the jury is still out
Is AstraZeneca a model for Big Pharma R&D success?
Looking over their numbers for Q3 last November, you’d be hard pressed to make that case. Five years after they promised to turn around a deeply troubled company, CEO Pascal Soriot and his executive crew were still on the defensive as they walked analysts through the latest slippage on the product revenue side of the business. Product sales were down 3%, following an 11% drop in H1. And after five years at the helm, Soriot was still not saying when the great decline would end.
Inside the R&D organization, though, a group led by Mene Pangalos — who heads the Innovative Medicines and Early Development unit at AstraZeneca — has studied 11 years of productivity numbers for the pharma giant. And in a thorough analysis published in Nature Reviews Drug Discovery they say they’re now whipping the industry standard on R&D productivity after stripping down the early-stage pipeline — quadrupling their success rate.
Keying off of a reorganization launched in 2011, AstraZeneca’s team says they tracked a nomination-through-Phase III success rate of 4% for the five years previous, even worse than the awful 5% industry average they cite from the Centre for Medicines Research. (There are no agreed upon figures here, with some estimates set at a 90% failure rate, though everyone would agree that success rates on this standard are remarkably low.)
The success rate in Phase II was 15%, well under a 22% standard, says the company.
At that point, AstraZeneca began its own version of an R&D restructuring focused on what it calls the 5R framework that centered on the right target, the right tissue, the right safety, the right patient and the right commercial potential. It’s also redrawn the boundaries of R&D around four core fields.
And AstraZeneca also gives itself a pat on the back on the big C — culture.
Placing emphasis on ‘truth-seeking’ behaviour and asking the ‘killer’ questions for a project have been a crucial part of our cultural change. We have continued to push the theme of ‘right culture’ by implementing stronger quantitative sciences and quantitative decision-making.
After slashing the number of programs going into the clinic, AstraZeneca says that it’s been able to track a clear rise in productivity, with their start-through-Phase III success rate for 2012 to 2016 jumping to 19%. The cost for a successful program has gone down significantly as well.
And to top it all off, the company says that industry analysts are tacitly endorsing their approach, much more likely to offer a buy rating on the stock.
So everything is great?
Not by half.
AstraZeneca has had some notable wins, particularly in oncology. But some of those same bullish analysts have been growing restive about Soriot’s strategy of selling off what he considers non-core — or often disappointing — assets. They would also like some clear evidence that the company has hit rock bottom and is coming back up, a hard test for any R&D productivity standard.
Soriot built the story of the company’s prospects in cancer around a combination of two checkpoint inhibitors, Imfinzi and tremelimumab, which failed the first leg of the pivotal trial. And the executive team still faces a mountainous challenge in hitting ambitious revenue projections Soriot set while fending off a buyout attempt by Pfizer.
Soriot himself never denied he was seriously considering a leap to Teva last year, which didn’t exactly look like an endorsement of the company’s R&D success.
AstraZeneca was the industry’s basket case when Soriot took over in 2012. It’s less so now. But no one is calling the makeover a clear success, yet.
Except for AstraZeneca.
And if in fact you can turn around the success rate in R&D and still fail to achieve the kind of near-term commercial success you need, what does that say about ROI in Big Pharma overall?