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Exclusive Life Science Feature "Low activity, a me-too type of drug, all sorts of problems in early development, or preclinical toxicity issues should be red flags to kill a drug quickly." Bill Hait, M.D., Ph.D., global head of Janssen R&D; health problems that may have little commercial appeal, the FDA developed a voucher program, which falls under the FDA Amendment Act of 2007 (FDAAA). When J&J; gained FDA approval of Sirturo, it became eligible to receive a transferrable voucher that allows the bearer to designate a single human drug application (i.e. another drug in the company's pipeline) submitted under section 505(b)(1) or section 351 of the Public Health Service Act, to receive six-month priority review status. By developing a nonrevenue-generating and yet lifesaving drug, J&J; has the opportunity to accelerate FDA approval of another drug in its pipeline. Where is the best place to use these vouchers? "There's no formula," admits Hait. "We look for opportunities. Is there an opportunity to enhance the progression of our internal pipeline by using the voucher? We've thought about this in partnering. It's a very valuable asset to have available and is another great FDA incentive." Conversely, Hait advocates thinking about when not to use a voucher. "You wouldn't want to use it on a project that is already moving quickly," he notes. "When you have complex drug-development issues and are looking for partners to help, a voucher could be very beneficial as you weigh risk versus reward around the asset you think could benefit the most from voucher utilization." PARTNERING FOR PRODUCTIVITY There is a saying, "If you can't beat 'em, join 'em." But, when you are a company with nearly 130,000 employees, is it really necessary to partner in order to improve productivity of a drug that's been in development for 13 years? According to Hait, this is exactly what was done with the development of Invokana (canagliflozin), a sodium-glucose co-transporter 2 (SGLT2) inhibitor for adults with type 2 diabetes. The development of Invokana had been strictly internal, but fearing that one of its competitors, Mitsubishi Tanabe Pharma, might be ahead in developing the same type of compound, J&J; sought collaboration. Hait describes the collaboration with Mitsubishi as a "receptor ligand issue — we attracted each other." Perhaps this openness to collaboration is one of the reasons J&J; has been ranked as the most productive pharmaceutical company in the last 10 years. The collaboration with Mitsubishi allowed the companies to optimize processes and share knowledge — keys Hait attributes to gaining FDA approval of Invokana, an entirely new class of drug, this past March. If you are looking to have similar success, Hait advises you prioritize your pipeline appropriately, capitalize on FDA incentives, focus on unmet medical needs, and don't use the possibility of commercial success as the only criterion for where to invest in R&D.; APPROACHES FOR CALCULATING NET PRESENT VALUE (NPV) FOR DRUG DISCOVERY According to Bill Hait, M.D., Ph.D., one of the drug prioritization techniques employed by J&J; is NPV. "Most companies use similar types of algorithms," states the global head of Janssen R&D.; A report produced by consultants McKinsey & Company in which 44 CEOs and the business developers from representative pharmaceutical and biotechnology companies were interviewed does not necessarily agree with Hait's assessment. Of those interviewed, McKinsey found that one-third admitted to not employing any economically valid evaluation method. Of these, 21% used simple cost-plus approaches, and 12% simply made an educated guess. If you fall into one of these categories, you may find the recent article (April 2013) by Andreas Svennebring and Jarl Wikberg, Net Present Value Approaches for Drug Discovery, useful. 22 LifeScienceLeader.com July 2013 Obviously, given the complexity of drug discovery and the high costs of producing reliable data, it is difficult to model the cost of drug discovery. Further compounding this process would be projects requiring major investments, e.g. constructing a building. McKinsey's findings are not surprising if you review the article, the various formulas, the necessary assumptions, and so on. If you are a smaller company and don't have experts in rNPV calculations, you may find a review of Svennebring and Wikberg's work to be insightful and can do so for free by using this link — http://goo.gl/2O9mP. Another useful tool for those with limited resources is an rNPV Excel spreadsheet developed by the Milken Institute. It is free to download here — http://goo.gl/Tg9Yw. Though you may have a great deal of experience in drug discovery, whether your company is big or small, your investors will require a robust calculation, not an educated guess.