Training Needs for the Pharmaceutical Industry in the 21st Century

1. Training Needs for the Pharmaceutical Industry in the 21st Century Robert R. Ruffolo, Jr., Ph.D., D.Sc.(h), D.Eng.(h) President, Research & Development Wyeth Pharmaceuticals Senior Vice President Wyeth (Corporation) Directors of Graduate Studies in Pharmacology Salt Lake City, Utah July 25, 2007

2. Brief Overview of the Pharmaceutical Industry

3. What is the Pharmaceutical Industry? It is the most technically complex, costly, risky and regulated industry in the world • Attrition rates • Development times • R&D Investment • Costs • Risk – Consolidation • Regulation

4. How Can We Assess Risk In The Pharmaceutical Industry? • Odds of Bringing a Product to the Market • Time and Costs associated with R&D • Required R&D Investment • Company Survival • Regulatory Burden

5. Some Realities of Pharmaceutical R&D • R&D costs have grown dramatically; disproportionately to R&D budgets or output. The result is decreased R&D productivity. • R&D Inflation is >12%; R&D Budget increases have been between 3-6% • The Regulatory climate is growing more unfavorable and uncertain. • Regulatory and patient expectations for safety may be unrealistic and approaching the unachievable. • Unrealistic safety expectations have exposed the Industry to unprecedented levels of product liability. • Innovative new drugs will likely take longer to develop as the Industry focuses on even higher levels of innovation. • The good news: There is more innovation in R&D than ever before.

6. >10,000Screened Compound SuccessRates by Stage Discovery(2-10 years) Pre-clinical TestingLaboratory and animal testing 250Enter Preclinical Testing Phase 120-80 healthy volunteers used todetermine safety and dosage 10Enter Clinical Testing Phase 2 100-300 patient volunteers used to look for efficacy (POC) and side effects Phase 33,000-5,000 patient volunteers used to monitoradverse reactions to long-term use 1Approved by the FDA FDA Review/Approval AdditionalPost-marketing Testing Years 0 2 4 6 8 10 12 14 16 Source: PhRMA, based on data from Center for the Study of Drug Development, Tufts University Stages of R&D: A Long, Expensive and Risky Process

7. Period to Recoup Investment Patent Application Filed NDA/BLA Approved NDA/BLA Filed Patent Issued IND Effective Pediatric Drug Patent Certification Original Patent Term – 20 years PTR* 20 Years 0 10 Phase1 Phase2 Phase3 PhaseR 1.4 3.8 3.5 1.6 2003 (62) (17) (6) (7) 1.6 2.6 2.3 1.2 2002 (58) (15) (13) (14) 1.3 3.0 2.1 1.4 2001 (64) (16) (20) (13) 1.5 2.1 2.4 1.0 2000 (65) (28) (22) (17) 1.2 2.0 2.1 0.8 1999 (64) (23) (18) (21) 1.1 1.7 2.2 0.9 1998 (69) (29) (27) (17) 1.0 1.9 2.5 0.8 1997 (76) (46) (36) (29) 0 2 4 6 8 10 12 Duration in years Clinical Development Cycle Times are Increasing Source: Centre for Medicines Research (CMR)

8. Description of disease processes Empirical intervention Disease homogeneity Uniform patient populations Reactive medicine (post-symptoms) Causal molecular pathology Rational intervention directed to specific molecular pathology Disease heterogeneity and different progression/prognosis Patient heterogeneity and individual risk profiles Proactive disease management based on risk assessment (targeted care) The Evolving Healthcare Technology Arena This is leading to more innovative drugs in company pipelines

9. Innovation Comes With a Price: Higher Attrition, Longer Timelines and Higher Costs NDA filings with FDA IND filings with FDA 100 100 Less novel Less novel 80 80 60 60 (%) (%) 40 40 20 More novel More novel 20 0 0 1996- 2000- 1996- 2000- 1999 2004 1999 2004 Source: BCG industry compound database; BCG analysis

10. More Novel Drugs: Higher Attrition Rates and Longer Development and Approval Times Attrition Rates by Novelty Status Development Times by Novelty Status Average cycle time for NDAs submitted 1996 – 2003 and approved Current status of INDs filed 1996 – 1998 100 100 Still in Development 80 80 Approval time 60 60 Months % Failed Development time 40 40 20 20 FDA approved 0 0 Less novel More novel Less novel More novel Source: BCG industry compound database; BCG analysis

11. $1.7B Launch 1.5 Phase III/File $1.1B 1.0 Phase II Phase I Preclinical 0.5 Discovery 0.0 Historic 1995-00 2000-02 average Costs of Discovering and Developing a New Drug are Staggering Change in Average Cost to Develop Successful Drugs Over Time $2.0B Source: Bain drug economics model, 2003

12. Domestic R&D Industrial Sector Comparison: 17.0% Computer Software & Services 10.5% Electrical & Electronics 8.4% Office Equipment & Services 7.8% Telecommunications 5.3% Leisure Time Products 4.7% Automotive 3.9% Aerospace & Defense 3.8% Metals & Mining 1.2% Paper & Forest Products 0.73% All Industries 3.9% Pharmaceutical R&D Requires the Highest Level of Investment in the World; A Measure of Risk Source: PhRMA, 2001, Based on Data from PhRMA Annual Survey and Standard & Poor’s Compustat, a Division of McGraw-Hill

13. The Pharmaceutical Industry Outspends the NIH on Biomedical Research PhRMA NIH Ref: PhRMA, “What Goes Into the Cost of Prescription Drugs?” & AAAS, OMB Data FY2006

14. The Pharmaceutical Industry is the Source for Most New Drugs Source: DiMasi et al., J Health Econ, 2003;22:151-185

15. 1200 1000 800 1990 Dollars (Millions)After-tax Present Value 600 400 Average R&D Cost 200 0 1 2 3 4 5 6 7 8 9 10 Present Values by Decile Most Drugs Do Not Make Money: Only 3 in 10 Medicines Return Development Costs Journal of Health Economics, Vol. 13, 1994, pp 383-406.

16. Another Measure of Risk Industry Consolidation; A Measure of RiskWe May Look Highly Profitable, But What Is The Reality?Companies Merge Because They Are In Trouble

17. 10 5 yr avg. growth 5 0 ‘03 ‘05 ‘07 ‘09 The Outlook for our Sales and Earnings is Not Bright % Sales Growth for Big Pharma Right now, our Industry is less profitable than most others Source: IMS, FDA, Lehman Brothers, BCG analysis

18. “The Committee’s decided to ban further researchuntil it can be proven your ‘wheel’ poses nothreat to the environment, society or public health” Growing Regulatory Conservatism:Application of the “Precautionary Principle”

19. Increasing Review Times Increasing Safety, cGCP and cGMP Requirements Worldwide; to unnecessary levels that do not increase public safety Lack of Harmonization among Regulatory Agencies in the US, Europe, & Japan - Despite ICH Different Standards of Medicine in the US, Europe, and Japan Complicate Clinical Trials Increasing Post Approval Commitments Regulatory Burden on The Pharmaceutical Industry is Increasing at an Alarming Rate

20. Training Needs of the Pharmaceutical Industry

21. Communication Skills are Paramount • Written • Publications, Publications, Publications • It’s necessary to become an opinion leader • Recognition in the scientific community is crucial • Feasibility Study Proposals (equivalent to NIH Grants; except longer) • Why should we fund your idea as opposed to somebody else’s? • Verbal • Public Presentations • Internal Presentations • The Power of Persuasion • Many scientists have good ideas, but we have only a limited amount of money • Team and Leadership Skills

22. Scientific Breadth and Depth • Our resource needs change constantly, and our scientists must be able to change with our needs (or we need to replace them, a traumatic and expensive process) • Use your time in Graduate School to take as many courses as possible; don’t avoid the physical sciences, mathematics and statistics • Learn as many skills as possible; avoid the temptation to become too highly specialized; there’s time for that later • The broader a scientist’s background, and the more rounded the skill sets, the more valuable the scientist is in the long run • Avoid the mistake of becoming an expert in a technique or technology; they become obsolete quickly • Be conscious of the “technology wasteland” • Learn how to write and communicate science verbally!

23. We are not all stupid and rejects from Academia We do publish (and if you work for me, it is publish or perish). If you don’t want to publish, then stay in academia We don’t just do “mindless screening” We don’t make a “ton of money” You CAN go to meetings/congresses You CAN follow your own research interests We are not in Industry to escape “grant writing”; we write feasibility studies, which are worse The science is just as good You do receive scientific direction But there IS scientific freedom (vs Academia?) You can’t get in without a post-doc We do science for profit (and to help humankind and to earn our salaries and pay our bills (just like academia; Professors don’t work for free either, and universities charge overhead to pay bills) The Pharmaceutical Industry does not live off the science of Academia; Actually the Industry is the largest source of funds for Biomedical Research in the World Understand the Pharmaceutical Industry; The Myths and Stereotypes May Not be True

24. We are not all stupid and rejects from Academia We do publish (and if you work for me, it is publish or perish). If you don’t want to publish, then stay in academia We don’t just do “mindless screening” We don’t make a “ton of money” You CAN go to meetings/congresses You CAN follow your own research interests We are not in Industry to escape “grant writing”; we write feasibility studies, which are worse The science is just as good You do receive scientific direction But there IS scientific freedom (vs Academia?) You can’t get in without a post-doc We do science for profit (and to help humankind and to earn our salaries and pay our bills (just like academia; Professors don’t work for free either, and universities charge overhead to pay bills) The Pharmaceutical Industry does not live off the science of Academia; Actually the Industry is the largest source of funds for Biomedical Research in the World Understand the Pharmaceutical Industry; The Myths and Stereotypes May Not be True You only have to work half-a-day, but 1 day = 24 hours!* *Stolen from Dr. H. Wolf, Pharmacology 870, 1974

25. There are More Similarities Between Academia and Industry Than Differences • Science is our foundation • Innovation is key • Work begins with the identification of a new molecular target • Scientific credentials matter; a lot! • Consistent productivity is essential (and a requirement of continued employment; the equivalent of tenure) • Industry doesn’t have enough money either to fund all of the research it wants or needs either • We work on mostly the same molecular targets as in academia

26. What’s Life Like in the Pharmaceutical Industry? • It’s a hard life • The hours are long; it’s not 9 to 5 • Science is more directed • Scientists are held accountable • Greater reliance on a “team approach” to science; but individual research matters a great deal • Industry is not where you go “to retire” • Failure is the norm; one needs to be able to cope with failure • Change is the norm; one must become comfortable with change • Competition is keen for research money and jobs • The most common complaint I hear from scientists who move from Academia to Industry is “I never knew how hard the work was, and I never had to work THIS hard before” • HOWEVER, very few scientists who move from Academia to Industry ever move back

27. Personality Matters Too! But Many Scientists Do Not Inherently Have The Traits Necessary To Work In A More Structured Environment Than Academia

28. Key Findings from “Managing the Innovator” by ISR - Scientists: • Typically like their immediate supervisors • Suspicious of “upper management” • Feel un-empowered • Uncomfortable in taking direction • Criticize their performance appraisals • Are highly dissatisfied with their compensation • Feel less secure in their jobs • Believe that they cannot challenge Company norms • They identify themselves as scientists; not as company employees • Feel limited opportunities for career development • Have a very high degree of stress on the job • Are typically the most dissatisfied employees in any company

29. Personality Matters Too! What We Look For • Ambitious • Team payer • Driven • Ability to work independently AND with others • Risk-taker • Comfort with change and uncertainty • Ability to deal with stress • Ability to cope with failure • Managing conflict • Looks for ways to make things work, and not for reasons why things will not work • Ability to take direction • Motivation (science vs money)

30. Post-Docs: You Need One (or More) To Get In The Door • One Post-Doc is OK, two is better, and beginning to become the norm • Take advantage of your post-doctoral fellowship(s) and explore your new environment, not just your own project • Collaborate with others; try to develop team skills • Develop additional scientific and people skills • Work hard; you should have nothing else to worry about during a post-doc • Have fun; it’s the last real freedom you’ll ever have whether you work in Academia or Industry

31. What Can You Expect When You Enter Industry At The PhD “Entry Level” • A comparable salary to academia (sorry) • A laboratory with one or two “associate staff” (technicians) • A boss (who you might or might not like; but they can change quickly) • Somebody like me who spends approximately $2 million/year on you (so you need produce consistently) • Some new equipment; equivalent of “seed money” • Some freedom to work on your own ideas, and on some existing programs; DO BOTH! • Budget problems • A unique opportunity to combine basic and applied research

32. What Kind of Research Will I Do in Industry? • If you work in Discovery, basically the same kind of research you would do in Academia • Basic research in areas of your own interests and collaboration on research projects of others • Do I publish on “My Research” and do “Company Research” separately?; No, they are one and the same thing • Make sure you publish enough to “get tenure”. If you can’t make it in Academia, then people like me won’t want you either • But, unlike Academia, there are many other opportunities if you find that research is not you true calling (Clinical, Operations, Project Management, Corporate, Marketing, etc)

33. Can I Get Fired From Industry? • You bet you can; and much easier than from Academia • There have been massive lay-offs in R&D throughout the Pharmaceutical Industry as a result of consolidation and decreasing sales • Some R&D groups set “tenure requirements” that are similar to Academia. If you’re not good enough to get tenure in Academia, why would we want you? • One of the main reasons that I have let people go is because of the failure to publish or failure to align with the direction of R&D • Abuse of research animals • Falsification of data • Violation of company policies • Sexual, gender, race etc harassment/bias/discrimination • Willful misconduct • Insubordination; Industry is a little bit more like the military, and rules and appropriate behavior/conduct matter

34. Summary • The Pharmaceutical Industry is not for everyone; but I love it • It’s a hard place to work, and becoming harder every day • Our risks, costs and degree of regulation are extremely high • The work is challenging, and often frustrating, but sometimes highly rewarding • Communication is key • Breadth and depth in training are critical • We depend on the motivation and innovation of our scientists, and their individual as well as team approachs to research • We have the resources and scale to do things that cannot be done by Academia or Government • And we make new medicines; there’s no better feeling than to be part of the discovery and/or development of a new drug