‘Peel Chair’. Photo courtesy of, 27 Hampstead Road, London NW1 3JA, UK. Tel: 020 7388 8871 The selection of the right targets for drug executives to believe that there will soon be a been the case in the past, and it will probably discovery is one of the key decisions in pharma- revolutionary improvement in the industry’s continue in the foreseeable future. Prices of ceutical and biotechnology research and devel- ability to identify and pursue novel targets. As opment (R&D). A fundamental choice that creasing pressure in all markets, such that all companies have to make is the balance between migrated much of their R&D investment going after ‘tried-and-true’ drug targets, or towards novel targets, beginning in the early provements to existing drugs in terms of effi- going after novel targets. Interestingly, the num- 1990s. According to recent research, most cacy, reductions in side effects and convenience/ ber of tried-and-true drug targets is actually pharmaceutical companies devote ~60–70% effectiveness of dosing. However, clinically quite small, at around 5001. G-protein-coupled of their drug discovery portfolios towards receptors (GPCRs) form one important class of novel targets2. Today, given that pharmaceuti- mance can come from new molecules against drug targets that represents 20% of the top 50 known targets, and these do not necessarily best-selling drugs (FIG. 1), including such well- novel targets for nearly a decade, the time is known brands as Claritin, Zyprexa, Zantac and right to ask: how much value do novel drugs sequently, the second message is that pharma- Cozaar. The success of GPCRs as drug targets ceutical R&D organizations should reconsider over the past 20 years has spawned significant the overall distribution of targets in their imitation in certain categories, such as beta- No higher returns for novelty
R&D portfolios. Individual companies will blockers against hypertension. Hence, by some In a recent set of analyses on product launches estimates, GPCRs account for 50% of all drugs from 1991–2000 for the top 15 pharmaceutical on the market. The review by Chalmers and companies, drugs were divided into two cate- precedented targets, but they must be quite Behan on constitutively active GPCRs in this gories: unprecedented/novel and precedented.
rigorous in assessing the true risks of under- issue provides valuable input to discussions on Analyses showed that novel approaches had taking a portfolio that is heavily weighted target selection within the GPCR class, which higher risk, as seen by the lower survival rate of towards new targets. There is no single cor- contains many novel as well as known targets.
rect answer in balancing a portfolio. Overall, How aggressively should pharmaceutical com- approaches. Moreover, the higher risk that is panies be going after novel targets? This issue associated with novel approaches did not gen- represents one of the greatest challenges in port- erate higher returns, as seen by the lower aver- folio management today, and getting the balance age present value of sales of US $2.8 billion right could create significant value in the future.
compared with US $3.6 billion for precedented before they consider new compounds against approaches. If the precedented drugs are sorted Focusing on novel targets
into ‘fast followers’, ‘differentiators’ and ‘late comers’ on the basis of whether they hit the increasing focus among many pharmaceutical market from 2–15 years after the launch of the improvements in the process by which they go companies to discover ‘first-in-class’ novel first-in-class drug, fast followers generated the after novel targets. Analyses indicate that if drugs. Drivers for this strategy include the past most value, but differentiators and even late current ‘high-throughput, high-novelty’ app- success of drugs such as Prozac (for depression), comers could be strong value creators. In fact, roaches do not fundamentally improve, there high expectations from financial markets for of the 31 blockbusters (drugs with annual sales will be significantly higher costs to generate a new blockbuster drugs and an increasing con- greater than US $1 billion) that were launched new chemical entity (NCE). In particular, cern that managed care would limit opportu- by the industry throughout the 1990s, 74% significant improvements will be needed in nities for ‘me-too’ molecules. As demand for (23) have come from precedented approaches.
R&D stages of biological validation and early clinical development leading up to Phase II advances in technology, especially ‘high- Implications for drug discovery
‘proof-of-concept’ studies. Improvements can throughput’ technologies, such as genomics, The first key message is that there is value to come from changes in processes, including have led many scientists and top pharmaceutical be created from precedented targets. This has decision processes on whether compoundsshould or should not advance, as well as frominvestments in the right technologies — for All drugs
Top 50 drugs worldwide
example, predictive toxicology tools, structuralproteomics and clinical genomics/pharmaco- genomics tools. However, investments in new technologies will require parallel investmentsin top-rate bench science from biologists,chemists and pharmacologists to truly deliver Figure 1 | Share of GPCR-based targets for drugs on the market. GPCR, G-protein-coupled receptor.
VOLUME 1 | AUGUST 2002 | 5 7 1
Box 1 | Attrition rates and cost for different R&D models
GPCR-based drugs (TABLE 1). Many pharma-ceutical companies have shifted their R&D In the early 1990s, pharmaceutical companies began to invest substantially in developing a new
portfolios towards novel targets in the hope of high-throughput, high-novelty approach to drug discovery. Research indicates that even with recent
developing more first-in-class drugs. Drugs improvements in the ability of pharmaceutical companies to generate and work with novel targets,
there are still significant challenges with the high-throughput, high-novelty approach. A comparison

that are based on novel targets have created less of a low-throughput, low-novelty approach, which was used in the industry pre-1990s, with a high-
value on average than drugs that are based on throughput, high-novelty approach, is shown in the figure below. The numbers shown are for the
precedented targets, and have had a higher risk success rate at each stage of development, and the risk-adjusted cost per New Chemical Entity
of failure (FIG. 1). Many pharmaceutical compa- (NCE). Biological validation and Phase II testing will probably be the key drivers for the relative
nies have focused on novel targets over the past success of the high-throughput, high-novelty approach. Without substantial improvements, the total
decade, but what is the productivity impact of risk-adjusted costs of research and development (R&D) for the high-throughput, high-novelty
approach could be ~40% higher than the low-throughput, low-novelty approach per NCE generated.
The high-throughput, high-novelty approach should not be abandoned, but these data reflect the
Philip Ma* and Rodney Zemmel‡ are partners in the
fact that the industry is in transition, and substantial improvements in processes and technology are
Pharmaceuticals and Medical Products Practice,
required to generate higher returns on R&D investments. B, billion.
McKinsey & Company, *3075A Hansen Way,
Palo Alto, California 94304, USA; and ‡55 East 52nd

Low throughput, low novelty
High throughput, high novelty
Street 21st Floor, New York, New York 10022, USA.
Success rate
Success rate
Drews, J. Drug discovery: a historical perspective. Science 287, 1960–1964 (2000).
Fruits of Genomics (Lehman Brothers, New York, 2001).
Online links
The following terms in this article are linked online to:
Drug output
Drug output
adrenoceptors | angiotensin receptors | dopamine receptors |gonadotrophin-releasing-hormone receptors | histamine receptors | Risk-adjusted cost/NCE
~US $0.7 B
~US $1.0 B
5-HT receptors | muscarinic acetylcholine receptors | PGE1 receptors
Medscape DrugInfo:
Table 1 | Examples of GPCR-based drugs in the top 200 best-selling prescriptions
Allegra | Atrovent | BuSpar | Claritin | Coreg | Cozaar | Cytotec |Imitrex | Pepcid | Plavix | Prozac | Requip | Risperdal | Serevent | GPCR target
2000 sales
Singulair | Toprol-XL | Zantac | Zoladex | Zyprexa Access to this interactive links box is free online.
Average present values of sales (US $ billions)
Overall development survival rate (%)
Figure 2 | Value and survival rate of precedented
compared with novel approaches.
Drugs that target precedented approaches create more value on average. Precedented approachesalso have higher rates of development success.
This data refers to drugs that were launched Source: McKinsey Analysis. COPD, chronic obstructive pulmonary disease; GPCR, G-protein-coupled receptor; between 1991–2000. Source: McKinsey Analysis.
5-HT, 5-hydroxytryptamine (serotonin).
5 7 2 | AUGUST 2002 | VOLUME 1



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