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Broad Restructuring at Schering AG Not Likely to Affect Its PGx Alliances


A broad restructuring at German drug maker Schering will not affect the company’s burgeoning internal pharmacogenomics research programs, or its two major external pharmacogenomics research alliances, a person close to the company told Pharmacogenomics Reporter this week.

The new corporate direction, which follows on the heels of a massive restructuring that began last year with 1,100 lay-offs, will see Schering bolster R&D funding for cancer therapeutics — with a particular focus on its targeted colorectal cancer candidate PTK/ZK — and discontinue some or all of its R&D in cardiovascular and central nervous system disorders, the company said.

Hoping to save cash and placate investors worried that the company’s troubled R&D labs will be unable to develop additional viable candidates in the near-term, Schering CEO Hubertus Erlen said in a statement the move will “enable us to concentrate our efforts on those fields with the best growth prospects.” Schering said the restructuring will cost an additional 900 employees their jobs and save the company €200 million ($242.4 million) in production, administration, and development costs by 2006.

Investors were heartened by the move, sending shares in Schering up 7 percent, or $4.31, since the June 15 announcement. The stock was trading up at $59.16 late Wednesday on the New York Stock Exchange.

Specifically, Schering said its oncology unit “will become a major business segment,” and that the company is “prepared to build up a strong oncology presence.” Schering aims at increasing to 27 percent by 2006 the proportion of R&D dollars going to cancer. The company allotted 19 percent of its R&D budget to this business in 2003, it said. Total R&D spending at Schering fell by 2 percent to €924 million in 2003, or 19 percent of total revenue.

R&D funding in other specialized areas, which include drugs for multiple sclerosis, will decrease by 7 percent over five years. (Schering’s MS drug, Betaferon, generated €770 million, or 14 percent of total revenue last year, the company said.)

Pharmacogenomics research at the company, though small compared with other mid-tier drug makers, has been growing over the past several years and will likely play a substantial role in this drive, according to a person close to the development.

Schering’s pharmacogenomics initiatives “will not be affected” by the restructuring, said this person, who spoke on condition of anonymity. Additionally, this person said that though the company today has “very few” collaborations with pharmacogenomics-technology companies, Schering looks at this business “as a strategic new area,” and that it “will not be part of” the latest restructuring.”

To date, Schering has at least two well-known pharmacogenomics alliances with a pair of small European specialty shops: Atugen and GeneData. Atugen, based in Berlin, has been helping Schering since September 2002 perform drug-target and gene-function studies. The latest phase of the deal, announced last June, calls for Atugen to develop antisense oligonucleotides that inhibit the expression of certain undisclosed drug targets.

Schering, also based in Berlin, expanded this alliance to include RNA interference research. The original alliance developed after Atugen, Schering, and Schering’s US-based research group, Berlex Biosciences, spent five years in a drug target-validation collaboration.

GeneData, a bioinformatics company specializing in analyzing gene-expression data, meantime, has been licensing its Expressionist system for large-scale gene expression analysis to Schering since 2000. Schering expanded the deal in January.

“For us, [Schering’s restructuring] is no problem,” GeneData spokeswoman Rima Baag told Pharmacogenomics Reporter this week. Schering is one of GeneData’s biggest collaborators, Baag added. In the partnership, GeneData acts as a “consultant” for a variety of toxicogenomics research with Schering’s “toxicogenomics department.”

Officials from Atugen did not return telephone calls seeking comment. Schering declined to comment on its pharmacogenomics alliances.

Will R&D Chasm Hurt PGx Plans?

Schering may indeed continue developing its pharmacogenomics research machine, but some industry insiders wonder whether the company, which has been addled by lackluster drug discovery in recent years, will be able to use these technologies successfully.

“Whether [Schering] has the capability or the panache to pull up anything particularly bright in the world of pharmacogenomics, I’m not so sure,” said an analyst who asked not to be named. “Do I consider them as a top-tier research house? No, I don’t. Could they be lucky with some of the products they can get out? Yes, they can.”

The analyst went on to say that in order to regain investors’ confidence, Schering would have to market a drug with annual sales of between $300 million to $400 million. Targeted therapeutics along the lines of Novartis’ Gleevec for chronic myeloid leukemia or the orally administered colorectal cancer therapy Xeloda, made by Roche, rather than a traditional blockbuster might be all it takes to reinvigorate investor enthusiasm, this analyst said.

“For [Schering], it’s the right strategy to pursue,” he said. “The reason you still see a degree of skepticism in the marketplace is, ‘Will they be able to pull it off?’ That’s the big question,” the analyst said.

The trouble for Schering, he said, is that “the track record for innovation is just not there.” Schering’s most successful products are Betaferon for MS and the birth-control pill Yasmin.

As it happens, Schering’s most promising candidate is PTK/ZK, an orally administered colorectal cancer drug the company is co-developing with Novartis. Schering finished enrolling patients for PTK/ZK in the first of two Phase III trials in June.

PTK/ZK is an angiogenesis inhibitor that blocks “all known” VEGF receptors, Schering said.

“If there is any setback on PTK, then [Schering] is in big trouble,” the analyst said.


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