If you have an ACS member number, please enter it here so we can link this account to your membership. (optional)

ACS values your privacy. By submitting your information, you are gaining access to C&EN and subscribing to our weekly newsletter. We use the information you provide to make your reading experience better, and we will never sell your data to third party members.



Universities Visit The Business Model

Fee-for-service contracting rises in an opportunistic approach to drug discovery research

by Rick Mullin
September 3, 2012 | A version of this story appeared in Volume 90, Issue 36

Credit: Joseph Labolito/Temple U
The Moulder Center’s Abou-Gharbia says he lets medicinal chemistry be his guide.
Magid Abou-Gharbia, head of Moulder Center for Drug Discovery Research, Temple University.
Credit: Joseph Labolito/Temple U
The Moulder Center’s Abou-Gharbia says he lets medicinal chemistry be his guide.

Panel discussions on supplying services to the drug industry at Chemspec conferences this summer featured executives from companies one would expect to find on such panels. The chief executives of contract service firms and outsourcing managers at top drug companies discussed changes in science and business that are creating opportunities in contract R&D and manufacturing.

A more surprising participant on these panels was the moderator: Magid Abou-Gharbia, director of the Moulder Center for Drug Discovery Research at Temple University’s School of Pharmacy. Still best known in the industry as the former head of chemical and screening sciences at Wyeth, Abou-Gharbia now directs an up-and-comer in the field of academic drug discovery. At the center, he is a proponent for expanding a facet of scientific research that was once anathema in academia: the business model.

Enthusiasm for industry-academic drug discovery partnerships in recent years has jarred the perceived divide between purely academic and commercial science. University research heads say they remain focused on academia’s charge of training scientists in an environment conducive to primary research and discovery. Yet anxiety lingers about a blurring of the line between the business and academic realms.

Abou-Gharbia, on the other hand, is clearly interested in crossing whatever lines need to be crossed to build a medicinal-chemistry-based drug discovery center that serves both commercial and institutional clients. Although he expects the center to do primary research and spin off businesses, he is also aggressively pursuing fee-for-service contracts, such as garden-variety screening runs, that many in academic settings view as a distraction from their scientific and academic missions.

Leaving Wyeth after 26 years and with six commercialized drugs credited to his laboratory there, Abou-Gharbia came to Temple in 2008 with an aggressive business proposition. “I explained to them that contract research or fee-for-service shouldn’t differ from the university getting a grant from the federal government,” he says. “Why? Because the contract work will pay the university’s overhead, which includes paying graduate students. So it is actually supporting the academic mission.”

Administrators at Temple’s School of Pharmacy proved receptive. And the center has grown significantly since it opened in 2008 with an endowment from Lonnie Moulder—now chief executive officer of Tesaro, a biopharmaceutical firm near Boston—and his wife, Sharon, both graduates of the School of Pharmacy.

The operation currently has more than $10 million in funding through contracts and grants, including an approximately $1 million grant from the Obama Administration’s stimulus program. The center has expanded from a single lab to 10 labs. It has amassed a library of 40,000 compounds and a suite of instrumentation and software, much of which is supplied by the software firm Tripos.

Last year, Temple launched the Drug Discovery Research Initiative, a program that funds work in the school’s biochemistry, biology, and other departments coordinated at the Moulder Center. But for Abou-Gharbia, the key measure of the center’s development is its growing list of contract service customers.

The centerpiece of that client list is Cortendo, a drug company in Göteborg, Sweden, that contracted with the Moulder Center last year for drug discovery services in the area of cortisol modulation to treat type 2 diabetes, metabolic syndrome, and unspecified orphan diseases. Cortendo chose the Moulder Center over two commercial contract research organizations (CROs)—one in the U.S. and another in the U.K.—which Abou-Gharbia describes as “well established.”

This year, the Moulder Center signed a contract with Philadelphia’s Wistar Institute under which it will add medicinal chemistry to the institute’s biomedical research in oncology to arrive at drug candidates. The partners will share intellectual property (IP). The work with Wistar does not entail fee-for-service work. Nor are there fees for service in partnerships the center has with the University of Rochester, Johns Hopkins University, Fox Chase Cancer Center, and Shifa Biomedical.

The contract with Cortendo, however, does have a fee-for-service component, as do the Moulder Center’s contracts with Cureveda, for which the center is doing pharmacokinetics and compound synthesis, and Laxai, an Indian drug company for which the center is providing project management services. Moulder does fee-for-service work for India’s GVK Bio, King’s College London, and China’s Youbo Pharmaceuticals.

Abou-Gharbia defines the Moulder Center’s business model as entrepreneurial. He generates projects based on the center’s medicinal chemistry assets, supported where necessary by research partners, including its client GVK. The idea is to offer soup to nuts.

“If you have a target, we can do the fee-for-service screen utilizing our compound library,” he says. “We can make a tool compound. And, as with Cortendo, we can take the project from A to Z. We clone the enzymes, we establish the screen, make the compounds, and optimize them until we make it to a drug candidate.”

The center’s primary mission is an academic one of pursuing basic research and training scientists, Abou-Gharbia maintains. But the current academic funding environment requires innovative means of generating revenue. He sees openness to fee-for-service work as “a clever way to generate funds” that has allowed the center to support four tenured faculty researchers.

Despite the Moulder Center’s sprawl of activity, it has garnered less attention than other academic laboratories that have been at it a little longer and are further along in advancing drug candidates to the clinic.

One of the best known is the Vanderbilt Center for Neuroscience Drug Discovery at Vanderbilt University, which, in a partnership with Janssen Pharmaceuticals, is nearing clinical trials of an allosteric modulator intended to treat schizophrenia. The name of the Vanderbilt center pinpoints a key difference between it and the Moulder Center—a narrow therapeutic focus.

According to P. Jeffery Conn, who heads the center, Vanderbilt is not interested in fee-for-service business, despite conducting high-throughput screening and other processes that could be offered as contractual piecework.

“We decided early on not to do that,” says Conn, who previously conducted central nervous system drug discovery at Merck & Co. “It was a clear decision based on the reason we are here, which is the reason that most academic scientists are in academic science. We have a real interest in specific research areas that we are trying to push. If we start allowing ourselves to work on a fee-for-service basis, it would dilute our efforts.”

Instead, the Vanderbilt center pursues partnerships where it can create revenue-generating IP.

Heads of other academic research labs see Conn’s point. “I’m not big on the CRO model,” says Alexandros Makriyannis, director of the Center for Drug Discovery at Northeastern University. “Collaborations and partnerships are good, but the academic community has to offer more than CRO services. There needs to be intellectual involvement. Otherwise what is the use of a university? We are scientists and aspire to be inventors and participate intellectually. We want to train scientists, not technicians.”

Shaker A. Mousa, chairman of the Pharmaceutical Research Institute at Albany College of Pharmacy & Health Sciences, would also prefer to work on projects that generate IP. He will do fee-for-service business, but he’s not particularly enthusiastic about it.

“Basically, I don’t object to the fee-for-service model. Where we try to use it is to build relationships with pharma and biotech companies,” Mousa says. “My favorite model is to bring innovation here and build IP. And why not spin off a company with that IP in partnership with other academic institutions?”

Credit: Southern Research Institute
Chemists at Southern Research Institute have a track record with the NIH.
Researchers at a lab doing contract research.
Credit: Southern Research Institute
Chemists at Southern Research Institute have a track record with the NIH.

Some academic and institutional laboratories have a long history of doing fee-for-service contracting, especially with government agencies.

John A. Secrist III, chief executive officer of Southern Research Institute in Birmingham, Ala., which is associated with the University of Alabama, Birmingham (UAB), has been involved with National Institutes of Health grants and contract work for more than 20 years. He says he sees fee-for-service contracts as a practical element of an academic lab’s approach to partnering with industry. But he also sees resistance stemming from the traditional divide between pure and applied research.

“If you are looking at the charge of most universities, fee-for-service probably doesn’t fit into it very well,” Secrist says. “But the reality of the situation is that it can fit very easily.” He concedes that it is not for every academic organization. Vanderbilt, for example, has carved out an area of expertise in which it may not need to consider fee-for-service business, he notes.

Mark Prichard, director of a viral therapy diagnostics laboratory at UAB, says he has mixed fee-for-service with basic research for years in testing antiviral drugs for the National Institute of Allergy & Infectious Diseases. In recent years, however, much of the work has been fee-based because of a change in how NIAID structures contracts. Increasingly, work is done under what are called indefinite duration, indefinite quantity (IDIQ) agreements that break what had been comprehensive contracts to build viruses and develop therapies into separate contracts for each step of the process.

“We used to look at compounds, and if we saw something interesting, we did secondary and tertiary analyses to see what was going on,” Prichard says. This technique often led to discoveries that advanced compounds to clinical trials. “The legal system has now driven it to more fee-for-service. It has slowed down the science. It is more difficult under this mechanism to do science and to publish. It has changed the dynamic.”

Prichard, however, views the IDIQ approach, put into effect by the White House Office of Management & Budget in 2011 to control costs, as an evolution in contracting. “It’s not necessarily a bad thing,” he says.

At the Moulder Center, researchers are rolling with these and other trends, including the downsizing of major drug companies and the resultant increase in alliances with academic labs. According to Peter H. Doukas, dean of Temple’s School of Pharmacy, the objective is to remain open to opportunities. And he sees the center’s focus on medicinal chemistry as ideally opportunistic.

“What is innovative here is that we are focusing strongly on medicinal chemistry itself,” he says. “A medicinal chemist can take on a project in any therapeutic area once a lead is identified.”

This strategy affords more options than are available to a laboratory pursuing science in a particular therapeutic area, an approach he characterizes as more biologically driven. “We are prepared to take on partners wherever they are, as long as they come with either a fully developed in vitro assay that is amenable to high-throughput screening or a couple of lead compounds that they want us to help develop.” From there, the school is flexible about the treatment of IP. “From fee-for-service up to a 50-50 split and everything in between” is possible, he says.

Abou-Gharbia adds that researchers must be willing to be as flexible in their laboratories as they are in their personal careers. “I can see that academic drug research is going through a revolution, and pharma is facing unprecedented change,” he says. “Scientists should be adaptable.”


This article has been sent to the following recipient:

Chemistry matters. Join us to get the news you need.