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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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May 3, 2011

A Look Inside the Compound Collections

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Posted by Derek

Now here's a comparison that you don't get to see very often: how much do two large pharma compound collections overlap? There's a paper going into just that question in the wake of the 2006-2007 merger between Bayer and Schering AG. (By two coincidences, this paper is in the same feed as the one that I highlighted yesterday, and that merger is the one that closed my former research site out from under me).

Pre-merger, Bayer had over two million structures in its corporate collection, and Schering AG had just under 900,000. Both companies had undertaken recent library clean-up programs, clearing out undesirable compounds and adding both purchased and in-house diversity structures. Interestingly, it turns out that just under 50,000 structures were duplicated across both collections, about 1.5% of the total. Almost all of these duplicates were purchased compounds; only 2,000 of them had been synthesized in-house. And even most of those turned out to be from combichem programs or were synthetic intermediates - there was almost no overlap at all in submitted med-chem compounds.

Various measures of structural complexity and similarity backed up those numbers. The two collections were surprisingly different, which might well have something to do with the different therapeutic areas the two companies had focused on over the years. The Bayer compounds tended to run higher in molecular weight, rotatable bonds, and clogP, but then, a higher percentage of the Schering AG compounds were purchased with such filters already in place. As for undesirable structures, only about 2% of the Bayer collection and 1% of the Schering AG compounds were considered to be real offenders. I hope none of those were mine; I contributed quite a few compounds to the collection over the years, but they were, for the most part, relatively sane.

The paper's conclusion can be read in more than one way:

Furthermore, an argument that might support mergers and acquisitions (M&A) in the pharmaceutical sector can be harvested from this analysis. Currently, M&As in this industry are driven by product portfolios rather than by drug discovery competencies. With the current need for innovative drugs, R&D skills of pharmaceutical companies might again become more important. The technological complementarity of two companies is often quoted as an important factor for successful M&As in the long term. If compound libraries are regarded as a kind of company knowledge-base, then a high degree of complementarity is clearly desirable and would improve drug discovery skills. Based on our data, the libraries of BHC and SAG are structurally complementary and fit together well in terms of their physico-chemical properties. However, it remains to be proven if this leads to additional innovative products.

Not so sure about that, myself. I don't know how good a proxy the compound collections are, since the represent an historical record as much as they do the current state of a company. And that paragraph glosses over the effect of mergers on R&D itself - it's not like just adding pieces together, that's for sure. The track record for mergers generating "additional innovative products" is not good. We'll see how the Bayer-Schering one holds up. . .

Comments (13) + TrackBacks (0) | Category: Business and Markets | Drug Assays | Drug Industry History


COMMENTS

1. RD on May 3, 2011 9:42 AM writes...

I haven't read the paper but what might also be overlooked in a merger and acquisition is how well the databases are integrated and how easy it is for various groups to access and
order from them, ie how intuitive are the in-house database interfaces to use and order from. I have heard that Pfizer's databases are a mess and parts of it inaccessible, which, presumably, would make searching and testing various series extremely difficult.
Not like it's easy anyway at most pharmas, but Pfizer seems to be exceeding expectations in this respect.

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2. barry on May 3, 2011 9:49 AM writes...

"Currently, M&As in this industry are driven by product portfolios rather than by drug discovery competencies."
It's the myopia of the "leaders" (most of whom came up through Marketing) all over again. "Product portfolios" are marketing opportunities. "Drug Discover competencies" are (ostensibly) what Pharma's in business for, but it requires an attention span of years at a time.

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3. Lacerta Bio on May 3, 2011 10:04 AM writes...

A merged compound library is a definite asset, and a seductive, but incremental rationale for a merger. But as the last line of the quotation suggests, a library is useless unless it can be accessed, mined, and screened in an efficient manner.

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4. petros on May 3, 2011 10:16 AM writes...

Another factor in that collection would be the potential inclusion of agrochem derived compounds, both companies having had significant presences in that area.

I remember in the early days the Bayer collection was much less desirable, heavily dominated by DHPs and containing a lot of unattractive structures.

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5. Rick on May 3, 2011 10:34 AM writes...

I'm not sure we have a good idea of the size of chemistry space into which drugs might fit (both discovered and yet-to-be-discovered drugs), but I think it is probably vastly larger (>> 10-fold) than the space occupied by any pharma company's library, or pairwise combination of libraries, and perhaps much greater than that of all of the libraries in all of the companies in the world. If I am right, then the incremental value of combining two libraries, even if they don't overlap as much as Bayer's and Schering's, might be puny compared to the cost of the damage done by M&As (layoffs, slower progress of teams during integration).

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6. bbooooooya on May 3, 2011 11:51 AM writes...

"I'm not sure we have a good idea of the size of chemistry space into which drugs might fit"

No, I don't believe that we do: what we have are some "guidelines" that many medicinal chemists like to take as gospel (Lipinsky's 'rule of 5' filters really bug me).

Trying to discover new drugs based on looking on old drugs (which is what the lipinsky silliness is about), is like trying to discover America by only sailing in the Mediterranean.

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7. CR on May 3, 2011 12:03 PM writes...

@bbooooooya:
"No, I don't believe that we do: what we have are some "guidelines" that many medicinal chemists like to take as gospel (Lipinsky's 'rule of 5' filters really bug me)."

I personally don't know of a single medicinal chemist that takes Lipinski's rule of 5 as "gospel". I know some management personnel that do - but not a single medicinal chemist.

@RD #1:
Could not agree more. I remember right after the Aventis/Sanofi merger we (bench chemists) did not have access to Sanofi's compound collection to search. We had to go through an intermediary (computational group) in order to access and search any information. This went on for a significant amount of time - well after the databases had been merged.

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8. srp on May 3, 2011 12:30 PM writes...

Database integration problems are endemic in mergers. I'm a Bank of America customer, and over a decade after the merger between B of A and NCNB, accounts in California and those outside California are not properly linked. If you move to California, you have to open up new accounts and reset all your automatic payment options.

Naive question: How much gain could be had by allowing people working on similar but not identical things, who previously were separated by proprietary knowledge barriers, to collaborate post-merger? I mean Alice in firm A and Bob in firm B can now get together and compare notes instead of maintaining secrecy. Does that ever happen? Does it do any good when it does?

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9. RD on May 3, 2011 1:09 PM writes...

arp: Yes, it is possible to compare notes once the merger has been given the go ahead and all paperwork is signed. Scientists frequently share information. The problem is that there is generally a portfolio review and this could take a very long time. You're never certain what projects are going to continue or not. Additionally, if you've been reading the literature on your target, you probably already have a pretty good idea of what your counterpart is doing.
The most troubling and destructive part of a merger, IMHO, is
the political jockeying for position. One of those companies is going come out dominant in the management scheme and whoever runs the groups appoints their personal favorites. That doesn't lead to consolidation, It usually means that some very good, intelligent people find themselves either ignored or on the wrong side of their new bosses and either leave or get air-locked doing some pointless job until they are jettisoned.

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10. Rick on May 3, 2011 5:52 PM writes...

srp (#8),
Good questions. My answers below:
"How much gain could be had by allowing people working on similar but not identical things, who previously were separated by proprietary knowledge barriers, to collaborate post-merger?"
>> From a scientific perspective, a tremendous gain. From a financial perspective, though it's a loss because projects similar enough to allow optimally useful information exchange would be deemed redundant evan at the finest detail of the R&D budget. As a result, management would nuke one of the groups with extreme prejuduce and your question is moot.

"I mean Alice in firm A and Bob in firm B can now get together and compare notes instead of maintaining secrecy. Does that ever happen?"
>> No it does not happen very often because either Alice or Bob were fired (one of them was deemed redundant as described above). Some argue that the ghost of Alice or Bob live on in databases, but as already pointed out, merging databases doesn't go as smoothly as is taught in B-school and the information content of databases often doesn't add up to the information content of Alice's or Bob's brains.
"Does it do any good when it does?"
>>In my experience, very little. First, as I already mentioned the databases don't give a sufficiently complete or granular picture of the information Alice or Bob might have generated. Despite the fact that this is sooooo 20th century, Alice or Bob could try to talk with their laid-off counterpart, but for reasons management hasn't yet ascertained, those conversations tend not to be very information-rich.

There seems to be some technical advantage to maintaining the integrity of research teams, but it remains to be understood in B-schools and management consulting agencies and it doesn't improve the short term bottom line anyway. Therefore, the high priests of M&A will continue to treat this item as a valueless threat to improved productivity and maximal shareholder return.

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11. Hap on May 4, 2011 9:00 AM writes...

...and the layoffs amplify the problem - unless there is a status or employment benefit to sharing information (even after being laid off), then people will keep their information tight to attempt to maximize the cost of being fired and thus minimize its probability.

In addition, it's tough to capture the crucial judgments and information to explain how the research happened, and in a cost-cutting environment, management isn't likely to bear the costs for generating a repository for such information (the time needed to put it in and the IT costs needed to make it useful).

Drug development seems like a knowledge business, and yet the knowledge is treated as worthless and thus not valued, and then the cutters wonder why drug development isn't working out the way they planned.

Permalink to Comment

12. anonymous on May 5, 2011 2:54 AM writes...

Hap is spot on....

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13. hypnos on May 5, 2011 12:54 PM writes...

I personally find the idea of "screening consortia" mentioned in the paper quite interesting: companies working in different indication areas could allow each other to use their compound collections for screening. The exchange of structural information could be limited to actives.

Unfortunately, it will probably be a nightmare to bring such an idea through the legal and patent departments.

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