The Motley Fool Discussion Boards

Previous Page

Industry Discussions / Biotechnology


Subject:  [LONG] Amgen VP of R&D at MIT Date:  10/29/2002  8:11 PM
Author:  rradez Number:  13733 of 25038

Hi, I don't think I've posted on the Biotech board before, but I'm a shareholder in MLNM, and an undergrad at MIT. Earlier today, Roger Perlmutter, Executive Vice President of Research and Development at Amgen came by the business school here and gave a talk on "Big Biotech: Pharmaceutical Research and Development in the Post-Genome Era." Unfortunately, I had to leave about three quarters of the way through, but I thought what I saw was interesting nonetheless, and I hope you folks don't mind if I give a summary of what he talked about. Much of what I write will probably be a direct quote or close enough that I should probably cite it.

Quick history of Dr. Perlmutter. Before becoming the exec. VP of R&D at Amgen, he was the Senior VP of Merck Research Labs, then Exec. VP of R&D at Merck. He has both an M.D. and a Ph.D, and was the chair of immunology at U. of Washington after being a professor of biochemistry there. He went over to Amgen because it seemed that Amgen is/was the "leading biotech", or as he called it the "Snow White" that goes with the seven dwarves.

He started off his talk by discussing Jurgen Drews idea of an innovation deficit in big pharmaceuticals. The number of new chemical entities not being able to sustain growth, and the fact that new technology is having no major impact on provision of new drugs. Along those lines, he put up a chart comparing complexity, challenge, pace, opportunity, and aspiration versus time. Up until about 1998, chemistry was enough to overcome those. After that point, up until about now, biology becomes preeminent. After 1998, there's a lot more competition, increasing price pressure, increasing cost of R&D, less yield of new drugs from R&D, and very worrysome patent expiration horizons.

The main signs of big pharma's problems that he pointed out were decelerating revenue growth, increasing patent exposure, fewer new drugs, and increasing cost per drug. [The decelerating revenue growth seems less important to me just because a billion dollar drug means a lot less to revenue growth for a 30 billion dollar company versus a 500 million dollar company.] He put up a chart showing the decreasing revenue growth, which only showed a difference of 1%. Next, he put up a chart of new molecular entities (NME or NCE [new chemical entity]), which showed them decreasing from a high in 1996 of over 50 to I believe the mid-20s last year, down to 12 so far this year. Of course, prior to 1996, it looked like there were only mid-20s of NME's approved anyways. However, he also stated that 2003 looks just as bad, and 2004 looks worse. Moreover, the next chart he showed displayed the increasing cost per NME. This was more of an estimate of his, since as he said it has to take into account all of the failed drugs and research that did not even result in a drug. From $54million in 1976 to $231million in 1987 to $802million in 2000. This increase he mainly blamed on the increasing length of drug developmen