Richard Scheller Developing Products that Save Lives No.2
I'm in charge of discovering medicines that will make a real difference in people's lives. So, as you may know Genentech is now an incorporated company in the United States but 100 percent owned by a large Swiss drug company called Roche. But our group is completely independent and our job is to discover medicines that make a difference. We don't make any generic drugs. We don't make any copies of other drugs. Innovation is our... We're going to live or die based on innovation. We also believe very strongly in the view of personalized medicine. That is, making medicines that are tailored to individuals.
The Roche group owns two businesses: a pharmaceutical business and a diagnostic business. So, very large, I don't know, maybe fourth, fifth largest pharmaceutical company in the world and the largest diagnostic company in the world. So the idea is to make medicines that really, really deliver benefit-tangible, terrific benefit-for people. So if we make a medicine for somebody with cancer, we have to show that they actually live longer when they take the medicine, for example. So I oversee research.
So our research group is about 1,300 folks. We have about 150 other people who are post docs. Now, why would we have a post-doc program? People come through. They come from all over the world. They stay for four five years. They bring in new techniques and ideas. They're not cynical yet. They work at night and in the weekends and it just energizes the place. Then we have scientists at various levels. And the job of the scientist is two-fold, to do basic science. We'd like to give each of our scientists somewhere, some what we call discretionary time. Maybe that's somewhere between 10 and 30 percent of their time, so it depends on the individuals. Some people are, frankly, it's a 100 percent but that's a different topic. And with their discretionary time, they're supposed to just do interesting things. Do whatever you want; make a discovery, publish a paper. We published 20 papers in science, nature and cell last year; hundreds of papers overall from the company.
But the other real tangible deliverable of the scientist is to come up with a medicine and move that medicine into what we call early development. And in early development, the compound goes through various further stages of testing to make sure that it's safe. We do all the work to file in I&D. That's a new drug application with the FDA and we file the I&D and then we do the clinical studies Phase I and Phase II. In Phase I, you usually just treat patients. Then, make sure that the drug is safe. You start at a very, very low dose. I mean, imagine, putting something into a human that's never been in a human before. Slowly, escalate the dose. It depends on the disease. Sometimes it will be in patients with the disease, sometimes not. But then, usually in Phase II, you do a relatively small number of patients but enough patients so that you have statistical power to see that you're making a difference in the disease. And what we then do would be, if their Phase II trial works, to hand the medicine to them, the Global Development Group, to do the final clinical testing. And the final clinical testing would then be done in 80 countries around the world. It's a logistical absolute nightmare. It's done in many, many more patients so that the statistical power increases dramatically. And then, work with the regulatory authorities to get permission, if you will-so the FDA, in case of the United States-permission to market the drug. So my job is to deliver molecules that we say have gone through proof of concept. We believe that they work. We have the chemical entity. We know that it can be manufactured and to hand this to the Global Group where there's a lot of science involved but there's a huge amount of logistics and regulatory involvement. And that's when the commercial people get involved and so on. Frankly, I'm less interested in that. I then go back and try to discover a new medicine and show that it works.
From the concept of "maybe this molecule would work in this disease" to actually marketing the drug, well, it depends. If it went incredibly fast it could be ten years. It's more like 15 years and the average cost is about $1.5 billion to get it to the market. Now the $1.5 billion includes the failures. So that's taken into account. So how many make it? That varies from company to company. I would say probably on the average 10 percent make it. For us, it's probably more like 25 percent. But I think the industry is going to do much, much better in the next decade. And the reason is that there's been an explosion in knowledge about biology. What I think was happening in the industry in the '80s and the '90s, there were a bunch of successes. Drug companies-Merck, Pfizer, Roche-they were making tons of money. And then, they're saying "But we've got to stay a growth company. We need to grow." So they gave a lot of money to the heads of R&D. But frankly, they weren't very good targets. But what is the head of R&D supposed to do? Say, "I don't know what to do. They aren't very good target. Here, take the money back"? No, of course not. They spent the money on lousy targets. But, during that time, there was a tremendous revolution in the understanding of biology that was taking place which, as I said, is partially why I moved to industry. And I think that now there are incredible targets that we work on. Think about cancer. We take the cancer, we take the tumor, we sequence the DNA of the tumor. When we sequence the DNA of the normal tissue, we find out what genes are mutated, what genes are actually causing the cell to be a cancer cell. And then, it target those. Is that going to work? Yes, it's going to work. But they are working. You know they work. But that is just terrific sort of pre-clinical validation. Those are the kinds of things that you want to work on versus not knowing what to work on. So, it's an expensive and difficult process. Also, the industry is facing a lot of head wins from various countries including our country, on being willing to pay for prescription drugs. Some of our drugs are extremely expensive. If we make a drug for a certain cancer on their 10,000 patients per year, it's not unusual to charge around $50,000, $60,000 a year for the drug, which we have to in order to basically re-coup the investment. But, look, if you're going to live longer we think it's delivering value. If you're going to take some risks and some big risk, you're going to have a higher chance of failure. But these risks if they work out, you can have some really big hits. So, how do you encourage that type of innovation and risk taking in the organization if people know that, "Boy, if I fail, this is going to be an incredibly expensive failure."? So there must be a lot of tension between that or how do you walk that line - trying to encourage risk-taking and innovation and not wanting to have some big failures. Yeah. Well, we just have to accept that we're going to have big failures. So we have a portfolio balance portfolio approach. So, for instance, in the Phase III, portfolio now has 13 new molecular entities. So with that, that's a new compound. I say 13 because there are probably 50 clinical studies going on. Sometimes the molecules are tested in more than one type of cancer, for example, and those are separate studies. So 13 new molecular entities, each one, by that stage, has a commercial value associated with it. That's also getting better but those are usually wrong. I mean, the drug that we sell a lytic for dissolving blood clot was supposed to be a several billion dollar drug and it sells $200 million a year. And a drug for non-Hodgkin's lymphoma was supposed to be a couple of hundred million a year and last year, it was the largest selling drug in the Roche group and sold $6 billion. So it's just the opposite of what the commercial prediction's worth. But that's better now than it was 10 years ago. So we have a commercial value associated with each molecule. And then, we have associated with that a probability of technical success, a probability that the molecule will work in Phase III. And we take that all the way back, even to the portfolio that I managed in Phase I, where we have a probability of technical success of the molecule getting to the market. So what's the probability it will make it through Phase I, probability through Phase II, Phase III, through regulatory. Obviously, as a molecule moves through the pipeline, the probability goes up as it passes one hurdle, and the next hurdle and the hurdle. So, we have a portfolio with known value for each molecule and the probability of the molecules working. And then, we balance the portfolio with more risky projects and projects that we feel are close to a slam dunk, if there ever is such a thing in our business, and manage the portfolio that way.
