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Executive Summary

This report, Medicinal Chemistry or Drug Discovery: Signifcance oRecent Trends, aims to review the state o the art and determine the

signicance o technology and market trends in medicinal chemistry oradvancing productivity in drug discovery. Although the undamental

task o medicinal chemists has not changed drastically over time, the

chemical and computational tools and perspectives at their disposal

have advanced signicantly. Whereas each o these modalities has letits mark on medicinal chemistry, and several have become common

practice, one in particular, ragment-based drug design, stands out as

promising major improvements in research productivity. A popular trendo a dierent nature, outsourcing medicinal chemistry to companies with

operations in countries with developing economies, has yet to play outin terms o contribution to the cost-benet equation.

We examine these and other trends in depth via extensive literature

survey, ormal and inormal discussions with industry players, andan opinion survey o personnel active in medicinal chemistry or

drug discovery. Following an account o the history and evolution o

medicinal chemistry, the report turns to a critical evaluation o chemicaland computational technological modalities. The next chapter considers

commercial maniestations o these modalities, and the ollowing one

deals with market dynamics with an emphasis on outsourcing anduser views on the implications o current practices in drug discovery

organizations. Ater a conclusions chapter, the report provides a

collection o complete transcripts o seven interviews with expertsin the eld.

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Executive Summary

Evolution of Organic and Medicinal Chemistry in Pharma

Although much o the work done by medicinal chemists has notchanged much over the years, the strategies and tactics employed haveevolved considerably, driven by major changes in pharmas overall

approach to drug discovery. Origins o medicinal chemistry in the 19th

and 20th century ocused rst on natural products, then on dyes, andlater on synthetic elaborations o natural products. Major advances

in biochemistry during the 1930s and 1940s began to shit medicinal

chemistry away rom empiricism toward a more target-based approachinvolving enzymes and, starting in the late 1940s, cell receptors. The

prevailing paradigm through the 1960s entailed synthesis o relatively

ew compounds or phenotypic evaluation in animal models.

The use o animal models limited the scope o accessible therapeutic

indications. During the late 1970s, the emergence o genetic engineeringbegan to broaden the scope o puried targets available or in vitro

screening o drug candidates. The growth o high-throughput screening

(HTS) ueled a new phase, which has been called the industrialization

or commoditization o drug discovery. Capacity or increased throughputstimulated the need or larger compound libraries and the concomitant

growth o combinatorial chemistry. Although combinatorial method-

ologies and early attempts at quantitative structure-activity relationships

(QSAR) ailed to yield the hoped-or revolution, they did stimulate newthinking, one o the ruits o which was the highly useul Lipinski Rule

o Five describing the physicochemical characteristics o drug-likeness.This seminal observation placed the evolution o medicinal chemistry

on a new track, which led to some cul-de-sacs along the way, but

appears now to have generated a more productive paradigm.

Organic and Medicinal Chemistry Technologies for DrugDiscovery

Key topics considered include structure-based drug design, ragment-

based drug design, natural products-based drug design, diversity-orientedsynthesis, and chemogenomics. Medicinal chemistry has come to

rely increasingly on support rom various favors o computer-aided

drug design aided by rapid growth in the number and diversity o 3Dtarget structures. Virtual screening as an aid to selecting compounds

or screening campaigns is pervasive, i not universal. Structure-based

drug design stemming rom known 3D structures o targets, endogenousligands, or both is becoming increasingly helpul, although they usually

play supportive rather than decisive roles.

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Medicinal Chemistry or Drug Discovery: Signifcance o Recent Trends

Fragment-based drug design appears to have great promise or improved

productivity in drug discovery. During the past decade, the notion o

screening smaller molecules than previously used started to evolve. Theconcept was slow to catch hold largely because these small, relatively

eatureless compounds tend to have low anity or targets, oten

in the millimolar range, which brings into question the meaning osuch results and highlights the diculties in making measurements.

Nonetheless, crystallographic and nuclear magnetic resonance (NMR)

modalities have been shown to generate meaningul results, and asenthusiasm grew, so has the number o technologies applicable to

ragment screening. A major advantage o ragment-based drug design

is that much smaller libraries, oten in the hundreds or low thousands,represent large scaold diversity and can open the door to exploration

o much larger segments o chemical space than can the massive

compound libraries typically applied in HTS.

Several other modalities and approaches deriving rom academia have

so ar proved more useul in a philosophical than a practical sense.One o these, diversity-oriented synthesis, uses sophisticated synthetic

approaches to generating major scaold diversity rom relatively ew

starting materials. Its chemistry-related complexities would havejustied greater emphasis on the approach i early attempts at it had

generated any notable success stories. The diculty appears to involve

nding overlaps among islands in chemical space occupied by molecules

synthetically accessible by diversity-oriented synthesis and other islandswith sucient lead-likeness to justiy the eort.

Basic research eorts are moving in the direction o generating diversity

libraries inspired by natural product structures, which are programmed

by evolutionary orces or interaction with biological macromolecules.

Pharmaceutical companies have recently tended to reduce or eliminatetheir natural products programs, leaving such research to a relatively ew

small commercial ventures. Despite their apparent advantages, naturalproducts per se are dicult subjects or synthetic modication andinteresting new leads tend to come inrequently. However, attempts are

actively underway in pharma to consider natural products-likeness in

drug design, and in academia to replace diversity-oriented synthesiswith BIOS (biology-oriented synthesis).

Chemogenomics has entered the medicinal chemistry realm in anattempt to annotate chemical libraries with diverse inormation,

notably on the interaction o compounds with diverse targets in various

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Executive Summary

biochemical and biological screening modalities. These eorts, while

high in potential, are still in the ormative stage and have yet to make

a large perceived impact on the practice o medicinal chemistry.

Applications of Organic and Medicinal Chemistry inDrug Discovery

Each o the aorementioned technological modalities is viewed in termso practical examples and commercial activity. Outsourcing arises as

a prominent theme in the applications realm, with special emphasis

on companies with primary operations in countries with developingeconomies, notably China, India, and Russia. Among 32 companies

considered, structure-based drug design is the most prevalent activity

with most players emphasizing the ragment-based variation. Virtualscreening is the second-most prevalent modality, whereas natural

products, diversity-oriented synthesis, and chemogenomics appear

in only a small minority o cases.

Outsourcing vendors are viewed according to participation in hit

discovery, hit-to-lead synthesis, lead optimization, library synthesis, in-house drug discovery, and virtual drug design. More than one-third o

the companies considered have operations primarily located in countries

with emerging economies. A large majority o companies oer computer-

based services, hit-to-lead, lead optimization, and library synthesis.Fewer engage in hit discovery, and a small minority do their own drug

discovery.

Market Dynamics

The report next examines deal activity and the infuence o outsourcing

on research productivity. Results rom a survey o managers and

researchers active in the eld provide a multiaceted picture o practicesand attitudes prevalent in drug discovery organizations today.

Intensication o eorts by drug discovery organizations in developedcountries to lower research costs has led in recent years to a dramatic

upsurge in outsourcing o medicinal chemistry activities, especially to

India, China, and Russia. These countries not only oer cost savings,but the chemists involved are considered on average to be highly skilled

and motivated. O 27 outsourcing deals considered, more than hal

involve organizations with operations located primarily in nations with

developing economies.

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Medicinal Chemistry or Drug Discovery: Signifcance o Recent Trends

During the 1990s, much o the outsourcing activity practiced centered

on compound synthesis. More recently, entire drug discovery programs

are being outsourced to vendors contracted to deliver lead compoundsor preclinical evaluation. Indeed, some deals move things even urther

down the pipeline. However, a signicant minority o recent deals cover

earlier-stage activities or are limited to lead optimization. Deal termsoten moved well beyond classical ee-or-service models, with milestone

payments and royalties appearing in a surprisingly signicant minority

o arrangements. Concerning the risks versus benets o outsourcing toIndia and China, interviewees generally recognized the high quality o

skills available, but cautioned that logistical and organizational issues

may well circumvent some o the advantage.

Conclusions rom the aorementioned survey o individuals active

in medicinal chemistry or drug discovery include:

Computer-aided drug design is rather rmly established as a

useul modality with emphasis on structure-based design.

Fragment-based drug design has yet to make a major impact ondrug discovery, but expectations or the near-term uture are

quite positive. The modality has already played a signicant

role in getting compounds into preclinical development, but itis too early to judge the impact on getting them beyond Phase I

clinical trials.

Surprisingly, chemogenomics, which has minimal current

infuence on medicinal chemistry, is also viewed as having highpotential or the medium-term uture.

Participants view the potential contributions of currenttechnology trends as modestly evolutionary or medicinal

chemistry productivity rather than revolutionary.

Concerning medicinal chemistry budget outlays, respondents

mainly reported stagnation or modest reductions or 2009, witha bit more optimism looking several years down the road.

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Executive Summary