After a disappointing year for pharmaceutical companies, the Vioxx heat thrown on the FDA, and the withdrawal of Biogen Idec Inc.'s Tysabri, dissecting the drug development model and insinuating pharmacogenomics into it not only is timely, but appropriate.

Pharmacogenomics, or studying the way genetic makeup affects an individual's drug response, seems poised to bring about an era of personalized medicine. There is hope that one day a single drop of blood will tell doctors all they need to know about their patient. While that sounds extremely efficient, it also threatens the traditional way drugs are made.

PricewaterhouseCoopers LLP, of New York, recently released its report on pharmacogenomics: "Personalized Medicine: The Emerging Pharmacogenomics Revolution." And much of it focuses on the science's impact on the blockbuster model of drug development.

Pharmacogenomics Vs. Blockbuster Model

Everyone wants a blockbuster and the $1 billion plus in revenue it brings. A Viagra. An Epogen. A Claritin. But developing blockbusters is wildly expensive, and, for all their earning power, big-name drugs eventually fall prey to generic competition. That, in turn, creates pressure on drug development firms to constantly restock the pipeline in glorious fashion.

Throw in the drug development attrition rate and inherent risks in making medicine, and the blockbuster model has flaws, said Tracy Lefteroff, global managing partner in the life sciences industry at PricewaterhouseCoopers. Those flaws are perhaps most visible now, he said, in light of Vioxx's and Tysabri's troubles.

"I think [the recent events show] the risks involved with putting all the company's eggs in a few baskets," he told BioWorld Financial Watch. "The costs of development are so huge, and the period you have with intellectual property is typically seven to 10 years, at which time the generic companies come in and take away market share pretty quickly. And if you end up with some of the safety issues we've seen, and drugs are taken off the market, you have some huge holes in your revenue pipeline."

But that blockbuster drug development model is firmly entrenched in the U.S. and it's generally thought that big pharma is resistant to change for fear of losing revenue - blockbusters are usually efficacious in only 40 percent to 60 percent of patients, and leaving the rest of those paying customers out halves income. Also, big pharma has "amassed significant influences over regulatory, business and reimbursement policies," which gives it serious clout in the drug development realm. But Lefteroff and PWC argue that pharmacogenomics could have a positive effect on earnings.

It "could expand markets and revenues by defining new uses or targets for existing drugs, rescuing' drugs in development, managing product life-cycles and dominating niche markets," the report said. Also, a better-targeted drug requires less marketing, and thus pharma could lower sales expenditures.

Pharmacogenomics also could decrease exorbitant R&D costs by stratifying patients, allowing firms to recruit only responders and reduce the size of clinical trials. In its report, PWC said using pharmacogenomics in trial design is expected to cut clinical development time "from 10 to 12 years in traditional commercialization to just three to five years."

"That's a lot of savings from an expense standpoint," Lefteroff said. "That's a lot of patients you don't need to enroll and track."

Eventually, trimmed expenditures should trickle down to the consumer.

"If you reduce costs, you should be able to pass that along," Lefteroff said. "Under the blockbuster model, all those costs get passed along. That's just basic economics."

Regulatory, Ethical Hurdles Remain

The pharmacogenomics era isn't here yet, but there are products on the market, the most notable being Herceptin (trastuzumab), from Genentech Inc., for breast cancer.

Herceptin, approved in September 1998, is a humanized antibody indicated for HER2-positive metastatic breast cancer. Research shows that women with HER2-positive metastatic breast cancer have a more aggressive disease, greater likelihood of recurrence, poorer prognosis and approximately half the life expectancy of women with HER2-negative breast cancer. Herceptin targets those HER2-positive women and is the industry's crown jewel of pharmacogenomics drugs; the product totaled $483.2 million in sales in 2004.

And as diagnostic companies develop tests to validate biomarkers, they have the potential to move pharmacogenomics further into public view, PWC's report said, but since the science is relatively new, regulatory guidelines are not yet firmly in place. The FDA is expected to publish in the first half of this year its guidance for submitting pharmacogenomic data, after publishing in 2003 a draft version that required investigational new drug applications and new drug applications to include all pharmacogenomic data the sponsors have on biomarkers. Also, any pharmacogenomic data related to optimal dose, genotyping for inclusion or exclusion, and safety and efficacy, need to be in the filings.

Lefteroff said the FDA hasn't been "that up front" on what the final version will be, but he doesn't expect it "to be much different" from what the agency provided in 2003.

"But the FDA being who they are," he said, anything might happen. "We've been surprised by these guys before."

There are ethical questions to be sifted through. What, exactly, will become of all that personal genetic data, once it's been pulled from a patient's drop of blood? Where would it be stored? What would health insurance companies do with that information, and should they be allowed to see it anyway? Those questions need to be answered before the public accepts pharmacogenomics with open arms.

Public Returns Years Off, But VC Interest High

PWC's report stated that pharmacogenomics products should be in "mainstream medical practice within 10 years." For investors looking to rake in returns from product revenues, now is not the time. But venture capitalists already are dealing themselves in, and Lefteroff said for those involved in "early stage types of investments, it could be very lucrative."

It's certainly been lucrative for Perlegen Sciences Inc., which earlier this month raised $74 million in its third round of funding, giving the pharmacogenomics firm a raised-to-date total of $206 million. Originally spun out from Affymetrix Inc. in 2001, the company has caught the interest of the VC community, and its list of equity investors sports many heavy hitters.

"I have to tell you, we were overwhelmed with the enthusiasm in our existing investors and the new large institutional investors" in the $74 million round, said Robert Middlebrook, chief corporate development officer at Perlegen. "We started the round at Thanksgiving, so as a barometer, to get the size [we did] in 90 days is an indication of the enthusiasm we found in the market."

There is speculation that the next big pharmacogenomics drug breakthrough will come in oncology, because of the specific nature of cancers. In theory, any disease could be attacked with pharmacogenomics, although infectious diseases might still be best served by the blockbuster drug model, Lefteroff said.

"[Infectious] diseases mutate so frequently, it's difficult to get a genetic profile that is indicative of all the mutations," he said.

Perlegen is focused on cardiovascular, metabolic and CNS diseases, but that's "a function of critical unmet medical needs, and because those are large commercial marketplaces," Middlebrook said - the science is applicable just about everywhere.

As for how quickly patients might see benefit, Middlebrook is more optimistic than PWC.

"I suspect the much broader use is much sooner than 10 years," he told BioWorld Financial Watch. "I think drugs that Perlegen are working with pharma on could be in the marketplace in the next few years, and it's our hope and expectation that our own drugs that we will have in-licensed [will be] on the marketplace in well under 10 years."

Middlebrook said the FDA "is very anxious" to get pharmacogenomics to consumers, and felt the "reimbursement community is similarly going to be very anxious."

"And clearly, patients are willing to move away from the one-size-fits-all approach," he said.

Perlegen studies DNA to understand the way in which variations in DNA sequences contribute to diseases and drug responses. The firm has technology for analyzing single nucleotide polymorphisms in thousands of patients, thus identifying individual SNPs that are associated with particular traits. It has collaborations with Eli Lilly and Co., GlaxoSmithKline plc, Bristol-Myers Squibb Co., Johnson & Johnson, AstraZeneca plc and Pfizer Inc. It sits at the front of the pharmacogenomics wave, but the science is establishing itself in some form industry-wide, and Middlebrook said he expects "some of the in-house pharmacogenomics units in some of the large pharma companies" to help the science blossom.

If there's a positive slant to the Vioxx withdrawal and eventual reinstatement, and the Tysabri withdrawal from the multiple sclerosis market, it might be that it forces change and provides an opening for pharmacogenomics.

"At a strategic level, the continuing high-profile incidents of adverse side effects is a driver for the push for pharmacogenomics," Middlebrook said, although he acknowledged that with Tysabri and the two confirmed cases of progressive multifocal leukoencephalopathy, "our approach would not be appropriate" because there is not a large enough sample set.

But "we're very bullish," he said, "and our investors, as evidenced by this recent round, feel this is the future of where medicine is headed."