28Pharmaceutical Outsourcing July | August 2009

OutsOurcing r&D

Outsourcing Screening is Neither a Panacea or Debacle

Brian BissettStaff ScientistStructural Sciences Group of the Analytical Chemistry and Sample Logistics Dept.Pfizer Global Research and Development*

In recent years, expenditures for in-house pharmaceutical research and development at major drug companies has dramatically increased, but despite increased budgets, precious few internally

discovered breakthrough products are on the horizon at any of the major pharmaceutical companies. While the pharmaceutical industry’s research and development expenditures have doubled over the past decade, the number of new molecular entity approvals has plummeted by more than 50% [1]. Clearly, this is not a sustainable business model for any industry, let alone one with high barriers to entry and regulatory hurdles which increase each year as new products are expected to far outperform existing products for any given therapeutic area.

As a result of the changing landscape in the pharmaceutical industry, there will continue to be considerable consolidation and restructuring within the industry [2]. As a result of market pressures from the global economy, declining revenues (and thus research and development budgets) due to generic competition and expiring patents, and a shortage of talent of certain specific skills profiles, pharmaceutical companies are embracing outsourcing as one means of coping with changing the business environment. Unfortunately, those lacking a strong scientific background often look at outsourcing as a panacea to the ills which currently plague the industry as opposed to what it really is, a resource which must be carefully managed in order to be effective.

In some industries outsourcing is a panacea. The company derives the benefits of paying vastly lower labor rates, benefit packages, and taxes while maintaining the ability to produce a product of comparable quality which can be delivered into the existing market at a considerably lower cost. When uncomplicated items are manufactured abroad such as floor tiles and hand tools, quality is readily measurable and discernable. (We all know a bad paint job or finish when we see one.) The point here is that quality is easy to measure when the desired results are known. When the results of a quality job are unknown however, measurement of a quality job becomes problematic at best. I myself witnessed a lab supervisor hand the results from an outsourcing firm to a chemist and say, “Take a quick look at these results and tell me if they are ok.” This of course led to a heated debate as the scientist tried to explain to the supervisor that if the

results were known, the compounds would not need to be measured. This poor scientist might as well have been handed a paper full of unknowns and been told, “Tell me the proper value for these unknowns!”

As a result of dealing with the reality of uncertainty present in measuring the value of physico-chemical properties, some pharmaceutical companies are using computational chemistry calculation tools to “double check” the screening results of outsourcing firms. The problems of utilizing such an approach are numerous. To begin with, computational chemistry calculators from differing vendors will often be more accurate on certain structural classes than other structural classes. This is due to the fact that every computational chemistry calculator is “trained” on a different dataset, and that the underlying algorithms in every calculator are different, and as such often biased toward certain structural classes.

A second problem with the computational chemistry validation approach is that computational chemistry calculators work best on structural classes for which there is a great amount of test data. In other words, they work better on molecules that have already been measured, or derivatives of molecules that have already been measured. This only makes sense, they work best on the data they were built utilizing. However, it is often said that, “the low-hanging fruit of drug discovery has already been picked.” Meaning, the chemistry space in which efficacious medicines have been traditionally discovered has already been very well searched. As a result, what is being screened now is often much more complex and structurally diverse, because the likelihood of finding a drug in older, more well-studied chemical spaces is growing smaller every day. As a result, computational chemistry calculators are often fed unique structures for which little modeled data exists, which makes the results suspect at best.

For example, in the world of molecular properties, LogP calculation (as well as many other molecular property calculations such as pKa, solubility, etc.) is commonly and erroneously viewed as simple. However, most analyses of the LogP calculation process showed low prediction accuracy for most of the existing calculation methods [3]. The consequence of inaccurate LogP prediction is that it can mislead a scientist’s selection of chemical series to follow up on. This, in turn, can result in the unintentional discarding of many potentially promising structures due to “poor” physico-chemical properties.

At this point, many readers may be thinking why not simply submit a set of well- known published standards for screening to the outsourcing company for screening at various intervals to determine quality. The problem here is twofold. First, most well- known standards are well known for a reason, the results are easy to reproduce even when the best methods and laboratory techniques are not utilized. Second, most well- known standards are neither structurally diverse nor “exceptions to rules” in terms of what would be expected. Yet it is exactly these types of compounds one would want to have in a quality control program which would have a chance of providing the confidence one would like to have in a screening process.

As if the preceding information were not enough to complicate the process of trying outsource screening processes, there is yet another factor to consider and that is different screening processes for the same property will exhibit different biases of their own. It is not uncommon to have a screen which works well with bases and abysmal with acids. Some screens are dependant on a compound having a good solubility profile. Others may require a chromophore, or lack of a chromophore. For reasons that may be poorly understood, some may work better with certain structural classes than others. Worst of all, biases may exist but not be known due to a lack of analyses of the existing data or from the lack of enough data to determine the bias.

The inherent variability in pharmaceutical screening outlined above make a strong case for using a single supplier for each type of screen to be outsourced. Toyota has long known the advantage of working with a single supplier in that a partnership can be established where the purchaser can work with the supplier to continually improve quality. While such a partnership can be established with multiple suppliers of the same product, with multiple suppliers multiple variabilities must be identified and corrected which can prove to be quite resource intensive. While it is true that a single supplier eliminates redundancy, it is also true that redundancy has costs associated with it in terms of duplication of efforts and analysis of variability. As previously discussed, variability between screens may be unknown or not yet determined, so if multiple outsourcing partners are utilized for an identical screening parameter, results returned from different suppliers should be easily segregated by means of a database parameter such as a unique screen number for each supplier. This allows the customer to return results from a single partner or selected partners by a simple SQL query using the Where clause. (Ex. SELECT LOGD FROM LOGD_TABLE WHERE SCREEN_NUMBER = ‘SCREEN_FROM_COMPANY_X’)

Chances are the parameter to be outsourced will have a small number of outsourcing firms that are capable of supplying the data. Before any testing is to be done with a potential outsourcing client, the following questions need to be answered:

What turnaround time can the company guarantee?1. How many samples per week can the company handle?2. How many times per week will samples be screened?3. How much will each sample cost? Quantity discounts?4. How will our samples be sent to the outsourcing firm? 5. How will our data be transmitted to us? What IT issues exist?6. Is a confidentiality agreement currently in place 7. with this company?How many clients does this firm currently have?8. Can this firm provide the level of attention we require?9. How solid are the financials for this company?10.

With respect to the above questions, numbers 9 and 10 are somewhat subjective in nature, but must be considered. Turnaround time is of the utmost importance, as if customers have come to expect a certain turnaround time for in-house measurements they will be unlikely to embrace (or utilize) an outsourcing partner who delivers what they consider to be “late” measurements. If the firm cannot process the number of samples required then obviously they cannot be considered, unless the firm is willing to make a capital investment to bring them up to level required. Cost should not be looked at as the bottom line but

a definite starting point. If a Monte Carlo analysis has been done of in- house screening costs for a particular screen, this will provide a good idea of what pricing point target must hit in order to make outsourcing worthwhile. Also, depending on the structure of quantity discounting, it may be cost effective to send “test” compounds to reach a certain quantity level to achieve the discount. It can also be interesting to see what result returns when vials full of only DMSO or some other known substance or standard are sent. It is also important to know how quickly samples will be screened, especially for samples in solvent where crystallization may become an issue. Lastly, it is important to have a data handling plan in place with the IT department before operations begin.

If the above questions can be answered satisfactorily, then the process can begin with regard to qualifying vendors to do the screening. As an initial step, submit a set of well-known published standards for screening to the outsourcing company. If the vendor cannot provide the right values for “gold standard” compounds then they no longer merit consideration. For the remaining vendors it is important to pick a structurally diverse set of compounds which have already been screened in house. It is worth the time spent to talk with some knowledgeable chemists and create a set of standards which includes “problem” compounds that posed difficulty in determining a correct measurement. It is the results returned from these compounds which will be of the most value when trying to pick a screening partner because (1) these compounds are truly representative of compounds which are formulated in house and (2) the difficult cases are being tested, of which determination is neither simple nor obvious.

For the final remaining vendors, it is important to run the selected compound sets several times (a minimum of three.) Both the gold standard well-published compounds should be submitted as well as the in-house selected “problem” compounds. It is also a good idea to throw in plates of “test” compounds, as if the vendor is trying to win your business and is only given a few plates, you can be rest assured they will be given “special” attention. The results desired in testing the suitability of a vendor are those which can be expected to be received during normal high throughput operations as opposed to those where an inordinate amount of care has been given to produce superior results.

When the results have been compiled it is time to consult an on staff statistician (or consultant) to make some determinations as to the variability that can be expected from each vendor in terms of both process variability and compound variability. Once the results of such a study are in, a vendor which fulfills the needs and requirements of the organization can be chosen. While accuracy is certainly a paramount consideration in selecting a screening partner, it certainly is not the only consideration when picking a vendor. The vendors’ approach to problem resolution and support are also extremely important considerations, especially when the choice comes down to two or more vendors who are in a statistical dead heat in terms of quality.

29Pharmaceutical Outsourcing July | August 2009

OutsOurcing r&D

Figure 1. Year-over-Year Growth China R&D Outsourcing Labs

In real estate the catch phrase has always been, “location, location, location” and perhaps it should be adopted by those involved in outsourcing as well. Many purchasing managers find themselves under pressure over the “China price.” It is important, however, to understand that over the past three years the once-formidable China price edge has all but evaporated for most goods and services [4]. While China has remained viable for pharmaceutical R&D outsourcing, the year over year growth rate for laboratory outsourcing in China has declined from 19.8% in 2003 to 11.4% in 2008 [5] (see Figure 1). The labor rate in China is currently about 64 cents an hour [6], and while that figure may seem extrodinarily low, the Chinese labor rate his risen to the point where Central American countries are now competitive with China. When the costs associated with quality, logistics, and engineering changes are factored in, Chinese goods and services may not be the bargains they appear to be. There are significant hidden costs in having supply lines that extend to China, as opposed to having supply lines that run across the North American Continent.

For example, if a factory runs behind schedule because a screening component has failed in a robotic system, the items must be shipped by air at huge cost rather than by boat. While Thomas Friedman argues that “the world is flat,” he fails to mention that the world can only be flat under certain conditions, principally if: (1) energy is cheap (2) intellectual property laws are enforced. When oil is $40 a barrel it is very easy for the world to be considered flat. When oil hits triple digits that paradigm begins to evaporate. It is very easy for the world to be considered flat when a Chinese company makes software CD-ROMs and keeps an accurate inventory for their client. When the same company makes extra copies of those CD-ROMs and sells them at a fraction of the cost illegally however, it is hard to convince anyone that the world is flat. It can become very easy to end up chasing nickels at the expense of huge supply chain costs without realizing it.

The single largest advantage in outsourcing pharmaceutical screening is that no product needs to be shipped back to the client. A secure electronic transmission with the screening results is usually all that is required. Keep in mind however, that the samples must be shipped to the outsourcing company, often at enormous costs. (It is often necessary to ship compounds in solvent on dry ice by overnight mail to prevent degradation or crystallization.)

When setting up a successful outsourcing project, it is important to bring together many different groups in the company to achieve the desired results. Typically, an outsourcing project would require the involvement of R&D scientists and chemists, legal, procurement, finance, strategic alliances, materials management, shipping, and sample logistics. It is very important to have meetings with everyone involved in the internal supply chain to prevent unforeseen problems. As Figure 2 shows, an outsourcing project will typically have four phases: preparation, transition, adjustment, and benefit. By having everyone onboard and on the same

page, the inevitable hit taken to performance and productivity periods can be minimized. While it may be impossible to foresee every potential problem and pitfall, it will only be by the solicitation of input from everyone involved in the process that a robust method of outsourcing can be achieved with a minimal disruption to the existing internal processes.

*The opinions expressed within this article are solely those of the author, and should in no way, shape or form be taken as the position of his employer, Pfizer, Inc.

ReferencesSource: Cutting Edge Information.1. Transformational Disruption in the Pharmaceutical Industry – Jeffrey 2. Leiden, M.D., Ph.D. Clarus Ventures.Igor V. Tetko, Gennadiy I. Poda, Claude Ostermann, Raimund 3. Mannhold. Are Log P Calculators Accurate? Benchmarking on 96,000 CompoundS. Study by Southfield (Mich.) consulting firm AlixPartners.4. Global Outsourcing: Defining China’s Leading Edge, Frank L. 5. Douglas, Ph.D., MD and Gigi Hirsch, MD, MIT.U.S. Bureau of Labor Statistics6.

OutsOurcing r&D

30Pharmaceutical Outsourcing July | August 2009

Figure 2. Performance vs. Time

Brian Bissett holds graduate degrees in Business (MBA) and Electrical Engineering (MSEE) from Rensselaer Polytechnic Institute in Troy, NY and is employed as a Staff Scientist in the Structural Sciences Group of the Analytical Chemistry and Sample Logistics department at Pfizer Global Research and Development in Groton, CT. He started working at Pfizer nearly fifeen years ago for Dr. Christopher Lipinski who is best known for his discovery of the Rule of 5, and continued to work for Chris until his retirement from Pfizer in 2002. He then reported to Dr. Franco Lombardo, who is well known for his development of an outstanding experimental LogD method (ElogD), until Franco’s recent departure to work at Novartis Pharmaceuticals in Cambridge, MA. Presently, he reports to George Perkins, Associate Research Fellow, constructing assays and automating measurements and data analysis routines for parameters such as ElogD/P, pKa, Solubility, Permeability, and Stability. He is a member of both the national chapter of The Institute of Electrical and Electronics Engineers (IEEE) and the IEEE’s Consultants Network of Connecticut. He is the author of two textbooks Practical Pharmaceutical Laboratory Automation (May 2003 CRC Press) and Automated Data Analysis with Excel (May 2007 Chapman & Hall), as well as numerous technical articles, and co-author of several book chapters. He has also been credited in many papers for creating automated data analysis routines to automate the analysis of pharmaceutical drug discovery parameters such as ElogD/P, pKa, Solubility, and Stability. Many of these routines are utilized worldwide across numerous Pfizer sites.

Prior to working at Pfizer, he worked as a contract engineer at the Naval Undersea Warfare Center (NUWC) on projects ranging from digital design on the New Sonar Intercept System (NSIS) for Robert J. White, to analog preamplifier testing and fabrication for towed arrays for Thomas A. Freehill, technical director of the Hybrid Microelectronics Laboratory.