April 11, 2006
In Partial fulfillment
Of the Requirements
Of the Course
R&D and the Product Life Cycle
In June of 2000 the announcement had been made that the human
genome had been sequenced, revealing an estimated 35,000 genes. More
recently that number has been downgraded to between 20,000 to 25,000
genes.1 These genes encode all the proteins that are necessary for life.
Genomics is the study of an organism's genome and the use of the genes.2
Genomics has shown us that within the human population, there are
variations that are consistent with various types of disease states.
Pharmacogenomics is the study of the impact of genomic variability on
pharmaceutical drug response, efficacy, and metabolism.3 In theory, by
understanding this impact the pharmaceutical industry can produce more
efficacious drugs that will have less side effects than the current therapies.
For the past 40 years the pharmaceutical industry has focused mainly
on a limited number of drug targets. This is because in the past,
epidemiologists could only identify small number of genes that played a role
in many diseases. Now that the entire genome has been sequenced, the
number of new targets has increased. Of the 20 to 25,000 protein encoding
genes approximately 3000 of these are druggable on the basis of their
protein domains. On the basis of data from functional genomics and
knockout screens it is estimated that 20% of these have disease relevance.4
This leaves hundreds of druggable gene targets for pharmaceutical
companies to begin development of new molecular chemical entities (NMEs)2
Though many pharmaceutical executives would not like to admit it, the
blockbuster model is considered broken by many analysts. Some estimates
put the return on investment (ROI) at 5% utilizing the blockbuster model.
This is significantly lower than the industry\u2019s risk-adjusted capital and well
below the 13% that was seen in the decade prior to 2002.5 In spite of this
unpleasant outlook, many pharmaceutical companies are still slow to
abandon this model. A major reason for this is the level of R&D expenditures
involved and the industry\u2019s practice of expensing rather than capitalizing it.
The long cycles of R&D investment over the course of development tends to
hide the true costs and not capitalizing the investment helps elevate the ROI,
though over the long run may not be an accurate number. Another reason
that pharmaceutical executives are slow to change is that, although
forecasts of the blockbuster model predict a 5% average ROI, a successful
blockbuster can yield 20 times this amount so instead of trying to fix the
model, executives would rather try and find even larger blockbusters that will
increase the returns. The problem is that there are not enough blockbusters
out there to sustain healthy returns over the future years. For profitability to
remain high pharmaceutical companies are going to have to change the
paradigm that they have relied on in the past to one that includes
pharmacogenomic technologies. There are four major areas that that
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