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SMITHKLINE BEECHAM "DISCOVERY" PORTION OF $500 MIL.-PLUS R&D BUDGET IS OVER 30%; "NDA DAY" FOR NSAID RELIFEX HOPEFUL IN "NEAR TERM" -- MANSFORD

Executive Summary

SmithKline Beecham, looking to the long term, has upped the discovery portion of its more than half-billion dollar research and development budget to greater than 30%, R&D Chairman Keith Mansford told the investment community in New York City April 5. By comparison, Beecham pre-merger allocated 22% of its R&D budget to discovery in 1988-89. The increased discovery outlay brings SmithKline Beecham "in line" with other pharmaceutical firms, Mansford commented. The merged company's 1989 R&D combined budget was over $500 mil. worldwide, up 17% from 1988 for SmithKline and Beecham on a stand-alone basis. For 1990, Mansford predicted a "more modest rise" due to a tighter pipeline focus. * The alleged lack of true innovation in pharmaceutical R&D ("me-too" products and "therapeutic interchangeability") in light of the high cost of drug development -- over $200 mil. per new molecular entity, according to the updated Tufts study -- is a point of contention between the pharmaceutical industry and Sen. Pryor (D-Ark.) in his campaign to reduce drug prices. The decision to emphasize drug discovery to the analysts was apparently an attempt to assuage the investment community's unenthusiastic predictions about the near-term prospects from the combined companies' pipeline. The April 5 meeting was showcased as a view of SmithKline Beecham's reprioritized pipeline. In a session on SmithKline Beecham's pipeline streamlining, Development Project Director Timothy Melton, PhD, noted that as of March 30, SmithKline Beecham had 34 NMEs in various stages of development, pared down from 46. The objectives behind the thinned-out pipeline were a recurring motif of the meeting. SmithKline Beecham management defined the company's goals as: "prioritization guided by commercial and scientific considerations"; "therapeutic areas based on opportunities for market growth"; a "development portfolio able to maintain a regular flow of new products"; and an "organization totally integrated with management and systems in place." One analyst asked if SmithKline Beecham were not just "in the early stage of a learning curve" that would lead to an even thinner pipeline in one or two years. Melton disagreed emphatically: "I don't believe we are in the beginning of the learning. This [the reprioritization] was primarily to establish one, single pipeline that we could commit to...that was the purpose." Reiterating SmithKline Beecham's emphasis on discovery, Mansford added: "I think that your scenario of the numbers coming down and down does not allow for the productivity of the discovery program...many of which are very close to producing additional compounds that could go into that pipeline." While the company put its discovery process in the limelight with a long presentation by R&D Technologies President George Poste, PhD, a large portion of the program was used to discuss seven products that are either already on the market or for which NDAs are pending. The stars of the show were the non-steroidal anti-inflammatory Relifex, the recombinant hepatitis B vaccine Engerix-B, the thrombolytic therapy Eminase, the hypertension drug Corlopam I.V., the vasodilating beta blocker Kredex, the antidepressant Aropax and granisetron as an anti-emetic. * SmithKline Beecham is hopeful that it will soon get an "NDA Day" at FDA for the NSAID Relifex (nabumetone), which has been pending at the agency since 1986. Calling Relifex' four year review at FDA "par for the course" for NSAIDs, Mansford said: "We like to think an NDA Day will be given to us anytime, but we're very hopeful it will be given to us in the near-term." The NSAID is already marketed in West Germany and the U.K., and SmithKline Beecham has provided the post-marketing data to FDA. Nabumetone's patent expires in the U.S. in 2000; however, the company predicts it will receive an extension. Engerix-B was highlighted as a success story -- it was the only drug for which sales figures were provided -- with 1989 sales that "approached $100 mil. worldwide." The vaccine, launched in the U.S. in 1989 and available in 90 countries worldwide, has had over 16 mil. doses commercially distributed to date. Melton praised Engerix-B's potential as "far higher," given proposed U.S. requirements that all health care workers be innoculated against the disease and the possibility of universal infant and pediatric vaccination. In a Feb. 27 "instruction" on standards for health care workers potentially exposed to the virus, the Occupational Safety and Health Administration advised that employers should identify employees "at substantial risk" and that "all such employees...be offered hepatitis B vaccinations free of charge in amounts and at times prescribed by standard medical practices." OSHA published a proposed rule on the issue in 1989. Other vaccines in development include Havrix, a hepatitis A vaccine developed by SmithKline that the company is testing alone (Phase II) and in combination with another hepatitis B vaccine. The company just recently received the go-ahead by FDA for another SmithKline-developed vaccine, a "universal" influenzae product. Human clinicals for the genetically engineered vaccine are set to begin next month. Commenting on granisetron, Melton said that "although we are disappointed with the carcinogenicity findings" that led to a halt in its development as a migraine treatment, the findings would not have an impact on the company's projected NDA filing in the second quarter 1990 for the 5HT[3] receptor antagonist in an I.V. form as a treatment for cytostatic-induced emesis. An oral form of the drug is in Phase II. The NDA for the once-a-day antidepressant paroxetine (Aropax) was filed in November, Melton told the analysts. The company also is pursuing an anti-anxiety indication for the 5-HT uptake inhibitor. Melton noted during Q&A that the firm "consciously" decided not to pursue an anti-obesity indication for the drug. Although the company does not have any head-to-head comparison studies with Lilly's Prozac (fluoxetine), Melton asserted that Aropax has several "probable advantages" over the Lilly drug, including reduced side effects such as anorexia, anxiety, nervousness and a "quicker 'wash-out' period." * OTC cimetidine continues to be a subject of some skepticism by the investment community; however, SmithKline Beecham continues to be guarded in its disclosures on the progress of the OTC gastrointestional product, which the company maintains will be on the market prior to May 1994 patent expiration. R&D Chairman Mansford was asked to comment during Q&A on the dosage "tightrope" and continuing rumors that the product shows lack of efficacy at doses low enough to get FDA approval as an OTC. Mansford acknowledged that an OTC antacid may be needed in combination with the H[2] antagonist in order to provide quick relief from heartburn and related disorders, while cimetidine would deliver prolonged symptomatic relief. Although FDA has looked at all the protocols being used in the Rx-to-OTC studies, Mansford commented that "it is not a clear issue" about the eventual acceptance of OTC H[2] antagonists. However, he noted, "If they are [accepted], we will be there."
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