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Anson Chan/The Globe and Mail

When Ottawa announced last year it would make a multimillion-dollar investment in the development of a COVID-19 vaccine production facility in Montreal, to be owned and operated by U.S.-based Novovax, the decision represented not only a bid to repair a supply chain problem but also a bet on a company that has long struggled to turn its science into profits.

The 33-year-old Maryland pharmaceutical firm had never managed to win FDA approval for any of the drugs in its pipeline—a record of strike-outs that attracted short-sellers and even the threat of de-listing from Nasdaq, as the Financial Times reported recently. But then came the Trump administration’s push to finance vaccine development, giant cash infusions, successful clinical trials and, ultimately, a massive bounce in both revenues and Novovax’s stock price, which now trades in the $200 range, up tenfold in the past year.

Though now a moot point, it’s worth considering what would have happened if Novovax had pulled the plug on its vaccine development program when the science seemed to be going sideways. After all, in the world of both big and little pharma, drug development programs fizzle out all the time. In fact, according to many assessments, only about 5% of drugs get from the lab to pharmacy shelves or hospital formularies—a bracing statistic that explains both the extravagant cost of drug R&D (as much as $3 billion per medication that surmounts all the clinical and regulatory hurdles) and the perennial industry hand-wringing about productivity.

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Pharmaceutical companies should be more prepared to actually reject the kind of stick-with-it-ness that Novovax demonstrated for all those years in the wilderness, according to a new study. After reviewing 1,274 early-stage drug development programs, the paper, published late last year in the Journal of Production and Operations Management, concluded that pharma companies should give up sooner on floundering projects, redeploy resources to ensure that later-stage drugs get across the regulatory finish line, and look, well, clinically at the amounts rival firms are investing in comparable products.

“If all they do is emergent drugs [i.e. brand new treatments], they face a very large risk,” says co-author Moren Lévesque, a professor of operations management and information systems at the Schulich School of Business, as well as the CPA Ontario Chair in International Entrepreneurship. (Her collaborators are Annapoornima M. Subramanian of the National University of Singapore, and Vareska van de Vrande of the Rotterdam School of Management.)

In some cases, they note, drug companies may be pushing long-odds projects because their scientists are overly invested in a new compound or, more problematically, because C-suite executives are anxious that investors will bail if they disclose that one of their pipeline projects has been discontinued.

Pharmaceutical industry managers and research team leaders, the authors argue, should discontinue early-stage drugs not just because they aren’t panning out as expected, but also for business reasons relating to their overall portfolios—an approach, they observe, that AstraZeneca adopted after a shake-up of its R&D operations in 2011. Yet, Lévesque cautions, if research is contained to a small team working on an early-stage discovery process within a large firm with lots of other development drugs nearing approval, “the opportunity cost is small enough to warrant taking the risk of hitting a winner.”

While Lévesque and her collaborators approach the industry’s grand productivity dilemma from a strategic management perspective, scientists and R&D managers know the decision to discontinue the development of a compound involves countless variables.

Before they go to clinical trials, drug development projects may be halted because the compound is not safe, not effective, or would require massive doses to achieve a therapeutic result. “I’ve seen all of those play out,” says industry veteran Les Brail, a medical biophysicist. “You can always go back and do more chemistry. But at some point, unless you can make a very good argument for why you can solve the problems you’ve run into, there are reasons that programs should be killed.”

At the same time, emerging technologies may offer new approaches. Sarah Dion-Marquis, a spokesperson for Innovative Medicines Canada, an industry body, notes, “Developments in artificial intelligence may further change the nature and development cost structure where therapeutic candidates can be more targeted and identified earlier.”

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Lévesque and others also argue for further structural changes in the drug sector—more collaborations and data sharing between big and little pharma, or with academic institutions, to spread out risk. “Such initiatives,” write Lévesque, Subramanian and van de Vrande, “will not only help biopharma firms allocate their resources more effectively…by extending [discovery and development] initiatives beyond firm boundaries, but also help firms to combine [their] expertise and efforts across the entire industry.”

These are great high-level fixes, but the latest X-factor in the ongoing pharma productivity saga is how COVID-19 has impacted drug development pipelines— something we won’t know for a few years. The Lancet reported that the National Institutes of Health found that hundreds of clinical trials had been halted or suspended due to workplace restrictions, lab closures, and the re-deployment of medical staff to the front lines of the pandemic.

Both Lévesque and Brail expect that the pandemic may also serve to streamline some of the logistics involved in R&D that have soaked up huge sums over the years, for example the practice of flying teams of drug company personnel to hospitals all over the world to oversee clinical trials.

Consider it the pandemic’s booster shot for Big Pharma’s chronic productivity condition.

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