Operations Excellence: Optimizing Efficiency

In the April issue of BioPharm International, the article "BioPharmaceutical Operations Roadmap," provided a summary of the key industry gaps executives would like to close in the next 10 years. These goals came to my mind while I was attending Interphex this April in New York.

Marc Puich

Two main events were especially valuable to me during my time at Interphex. The first was a roundtable focused on the impact that pharmaceutical companies are having on biopharmaceutical organizations. With the recent spate of acquisitions, either completed or in-process, involving biopharmaceutical organizations such as Medimmune, Organon, and Chiron, this topic was particularly relevant.

The second interesting session was a presentation on the status of the biotech industry by Steven Burrill, the CEO of Burrill & Company. His talk provided a comprehensive look at the future of the industry.

One theme that was recurrent across sessions was the emergence of "personalized medicine"—a significant breakthrough and challenge to the industry, moving forward. Operations excellence programs could help to make the introduction and growth of personalized medicine less painful.

BENEFITS AND CHALLENGES OF PERSONALIZED MEDICINE

As companies become more knowledgeable about how to treat disease, they are also finding it necessary to be more focused. Burrill mentioned in his report that more than 50% of all consumed pharmaceuticals do not work for the patient. Humans are heterogeneous in how they respond to medication, and newer research techniques can more accurately identify the appropriate patient for a therapy.

This approach results in therapies that are more focused. The "blockbuster" model of drug development may not be the future model as the industry moves to personalized medicine. In my definition, there are two different types of personalized medicine. The first type includes more targeted therapies for subpopulations of particular diseases, for example, Herceptin for breast cancer. The second category is truly individualized. Dendreon, for instance, has developed a cancer vaccine for individual patients. To develop such a drug companies need unprecedented abilities to produce a small batch of product and release it to the customer in a matter of hours or days.

The challenge, however, is running a drug business in this new world with higher manufacturing costs. With drug development and approval costs reaching $1.25 billion (according to a recent Tufts Center study), there is concern about how companies can afford to amortize this large investment over smaller patient populations.

WHERE OPERATIONS EXCELLENCE CAN HELP

While companies in the biopharmaceuticals sector have aggressively pursued operations excellence strategies, they have targeted mostly production, supply chain, or quality areas. This is logical, based on the fact that most operations excellence tools were developed in the high-tech and automotive manufacturing industries. However, as we look towards the future at companies that are developing customized therapies for smaller populations, we need to apply efficiency tools to newer areas, including:

• Portfolio decision-making: Reducing costs of R&D is one key area that can benefit from operations excellence practices. The $1.25 billion figure includes the absorption of costs related to failed products in the development process. The longer a drug stays alive during clinical trials, the more costly it will be. Discussions during the roundtable at Interphex explored a phenomenon where smaller biopharmaceutical companies, either through lack of knowledge or motivation, are hesitant to end clinical trials. There are huge fiscal incentives for moving a product further along the process, even if it may not be a strong candidate. Implementation best practices in portfolio decision-making could help to reduce pipeline sizes and the resulting development costs.

• Process improvement in clinical trials and product development: Bringing a product to market requires significant investment in time and resources throughout the organization. Strong project management needs to be in place, of course, but in addition there should be a focus on streamlining the individual tasks involved in moving a product to the market. Each step should be closely managed and individual timelines and accountability should be in place for all groups. The biggest opportunities are in the interfaces between groups and, more importantly, organizations. Reducing waste in these processes will reduce costs and allow companies to capitalize on their products sooner.

• Quality by design: Operations excellence programs often have been focused on developing a detailed understanding of the design space of a product. By developing more accurate and effective scale-up models, delays can be reduced during product development. Moreover, the FDA will be impressed if an organization has a well-developed, scientifically valid understanding of its products.

These focus areas, although highly beneficial to traditional product development activities, may be critical to keeping the industry profitable and justifying the development of important and targeted therapies.

OPERATIONS EXCELLENCE CONSORTIUM UPDATE

On June 5, 2007, we hosted the first consortium meeting of the year at Amgen in Thousand Oaks, CA. The focus of the meeting was the current state of affairs related to operations excellence programs. The meeting included over 25 representatives from more than 10 different companies. My next column will summarize that meeting. The next meeting will be held in August at Genzyme in the Boston area. More details are available at www.tefen.com/bio.

Marc Puich is a partner at Tefen, Ltd., Foster City, CA, 650.357.1120 x117, marc@tefen.com