A Revolution in R&D

isks inherent in genetics-based R&D, and explore
various ways of managing them.
Two Kinds of Genetics Approaches
There are two relevant approaches to consider
when assessing the economic impact of genetics on
DIAGNOSTICS—AN OPPORTUNITY TOO GOOD TO MISS…
AND PERHAPS TOO GOOD TO GRASP
It will be several years before genetics fulfills its
promise. In the meantime, however, companies
might begin to enjoy a preliminary reward, in the
form of diagnostics—essentially a byproduct of their
broader genomics research programs. Certainly diagnostics
is the subject of great expectations, though
whether and how soon it will meet them remains to
be seen.
Many research projects in genomics and genetics
will devise diagnostic tests as a matter of course—in
parallel with research or simply as a preliminary
step, perhaps—without portraying them that way.
Diagnostic tests can be understood in a fairly broad
sense here. Disease genetics, for example, in identifying
a target, is in effect finding a marker of disease
susceptibility. Expression profiling, in identifying the
molecular differences characterizing a disease’s different
subtypes, is pointing the way to differentiated
and fine-tuned therapies. And pharmacogenetics, in
identifying variations in drug response among various
patients, could be helping to suggest the most
suitable drug for them.
The opportunities inherent in diagnostics will appeal
to drug companies at several levels. First, costs are
low. The intellectual capital needed to develop a diagnostic
test comes free, courtesy of existing research
in drug discovery and development; validation
studies can be run in parallel with drug efficacy studies,
or perhaps can even simply borrow their results
and extrapolate from them; and as for safety studies,
diagnostic tests don’t need any. All in all, then, the
incremental spending required to develop a marketable
diagnostic test is, relatively speaking, paltry.
R&D: disease genetics and pharmacogenetics. They
operate at different stages of the value chain.
Disease genetics is invoked earlier, during the discovery
phase: it involves the search for genes that make
people susceptible to particular diseases, with the
aim of then finding targets. Pharmacogenetics is the
Second, rewards are prompt. Diagnostics, in bypassing
most of the traditional steps of pharmaceutical
R&D, can be brought to market not only far more
cheaply than drugs, but far more quickly too. Drug
companies are thereby able to realize some unusually
fast payback on their R&D spending.
Third, the market outlook is favorable. As new therapies
proliferate, more diagnostics will be demanded;
and as technologies advance, new types of diagnostics
will become available. The signs are good.
These opportunities are to some extent offset, however,
if not by risks, then at least by challenges.
There is the challenge of novelty, for instance: for
many traditional companies, diagnostics would
involve manufacturing an unfamiliar kind of product—
a kit—and that in turn would involve developing new
capabilities, or else partnering with a dedicated diagnostics
company. Companies that have an in-house
diagnostics division, such as Hoffmann-La Roche,
Abbott, and Bayer, will have an advantage here.
Then there is the challenge of intellectual-property
rights: companies might find it more difficult to
assert those rights over diagnostics than over their
findings in pharmaceutical research.
Perhaps the most daunting challenge is timing: diagnostic
tests will tend to emerge too speedily, becoming
available sooner than the therapies they indicate.
So the chief appeal of investing in diagnostics—its
prompt availability—may be undercut. Drug companies
may have to delay marketing their diagnostics
(and thus delay capitalizing on the opportunities)
until their drug R&D pipelines catch up.
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