On Friday, the US Treasury released details about its Therapeutic Discovery Project Program, which was created by the Affordable Care Act to support small pharmaceutical and biopharmaceutical companies’ research efforts. The program’s goals are to promote the development of new therapies, create US jobs, and increase US firms’ competitiveness.

Companies with 250 employees or fewer can apply for tax credits worth as much as 50% of the cost of qualifying research investments. Each company could earn a maximum credit of $5 million. To provide an immediate boost to the industry, the credit will cover research investments made in 2009 and 2010. To startup firms that have not yet become profitable and thus cannot take advantage of a tax credit, the Treasury will offer grants.

On Friday, the Internal Revenue Service published guidance that explains how firms can apply to have their research projects certified as eligible for the credit. Projects must show “significant potential to produce new therapies, address unmet medical needs, reduce the long-term growth of healthcare costs, and advance the goal of curing cancer within the next 30 years,” according to a statement from the US Treasury. The application period begins on June 21, 2010 and lasts through July 21, 2010.

It’s heartening to see the US government try to encourage the development of new treatments, especially in a difficult economy. With luck, the industry’s pipelines and the country’s patients will both benefit. The Therapeutic Discovery Project Program should remind industry of just how valuable R&D scientists are, and I hope it encourages small firms to hire more of them. The program might just put a spring back in the step of these researchers.

Ernst and Young’s report noted that the gap between small and large biotech companies widened last year. Funding remains scarce, and investors are likely to favor established companies’ research and development programs, which are perceived as less risky and more likely to produce immediate returns. In contrast, purses probably will be closed to small and startup companies that need cash just to get off the ground.

Deloitte Touche Tohmatsu’s new white paper, based on a survey of 281 senior life-science industry executives, reinforced the grim picture for small biopharmaceutical companies. About 68% of the executives predicted that 20–40% of biotech companies would cease to exist in five years as a result of economic downturn. Small biopharmaceutical companies also will experience a brain drain, according to the white paper, as scientists jump ship and head for the safer shores of bigger firms.

The best scenario for struggling startups might be to be acquired by a larger firm. This seems a likely prospect; Deloitte’s white paper predicts an increase in consolidation that will enlarge the bigger biopharmaceutical companies. These established companies might find themselves competing for acquisitions with Big Pharma as the latter expands more aggressively into the large-molecule arena.

Recent events suggest that the biopharmaceutical industry will survive. Genzyme, Shire (Hampshire, UK), Biogen Idec (Cambridge, MA), and Vertex (Cambridge, MA) are all hiring. The shape of the industry is changing, though. As small companies sink or are absorbed, the balance of innovation will shift to large, well-financed enterprises. The predicted increase in consolidation could reduce competition and slow the pace of innovation, however. An ideal situation would be an improved economy that brightens the picture for startup biopharmaceutical companies.

To close what Cindrich called a “critical gap in the nation’s defenses against bioterrorism and infectious diseases,” the initiative seeks to construct a flexible vaccine development and production facility. GE Healthcare will take charge of the manufacturing-related aspects of the collaboration, and its contributions to the project are a short list of the hot topics in the industry at the moment. The company will use its own single-use components to help build a flexible manufacturing facility that can produce several vaccines at the same time and switch production quickly from one vaccine to another. Branded manufacturers and contract service providers alike have been using the same tools to achieve the same goals, albeit for reasons that have more to do with the marketplace than with biodefense.

If the 21CB initiative gets the government funding that it’s looking for, the collaboration promises to benefit more than the public health. The interactions between Battelle and Merck could lead to the development of new kinds of vaccines, or at least new methods for discovering and developing these products in high demand. And GE Healthcare, helped by its private partners and public funding, could create process and facility designs that the rest of the industry could learn from. The collaboration seems a ripe opportunity for increasing biopharmaceutical manufacturers’ efficiency. Also, the project could directly create 1000 jobs, and possibly as many as 6000 indirectly.

This initiative is emblematic of the pressures, priorities, and technologies that influence the drug industry today. I think it has the potential to show the way forward for the biopharmaceutical manufacturers and safeguard the public welfare. It sounds like it could be a win–win situation.

The job cuts are part of the company’s restructuring program that began after the merger with Schering-Plough (Kenilworth, NJ). Certain manufacturing facilities and research and development (R&D) operations will be consolidated, but the company has not yet said which. In addition, positions that are considered “duplicative” will be eliminated.

Job cuts such as these, although unfortunate, are commonplace after mergers. For example, Pfizer (New York) has eliminated positions as part of its own restructuring program since it acquired Wyeth (Madison, NJ). But terminations are occurring even at companies that have not merged with or purchased any competitors.

One case in point is Eli Lilly (Indianapolis, IN), which will cut 5500 jobs worldwide. The cuts are intended to reduce costs and dodge the one-two punch of upcoming patent expirations and competition from generic drug companies. In 2009, the value of Lilly’s stock fluctuated widely and ultimately fell by 11%. The compensation of John L. Lechleiter, Lilly’s top executive, increased, however, by as much as 44%, depending on how you look at the numbers.

And, as I noted previously, AstraZeneca (London) will cut 3500 R&D jobs by 2014 to achieve “flexibility” and “effectiveness.” The company is hunkering down and cutting costs for reasons similar to those given by Merck.

Lean workforces seem to be the order of the day for Big Pharma. As a cost-reduction strategy, job cuts might be effective. Some manufacturing operations might be larger and less efficient than they could be. Yet the industrywide terminations do make me worry about the industry’s future. The cuts to R&D operations are particularly troubling, considering the industry’s recent history of lackluster pipelines.

I hope we are not witnessing Big Pharma cutting its nose off to spite its face. And I hope that laid-off employees can find rewarding work elsewhere and can continue to pursue pharmaceutical innovation.

“There is a large community of researchers—social scientists, life scientists, physicists—running many computations on massive amounts of data,” said Dan Reed, corporate vice-president of Microsoft’s Technology Policy and Strategy and eXtreme Computing Group, in a Microsoft press release. “To use an example many people can understand—how can we enable researchers to run an Excel spreadsheet that involves billions of rows and columns and takes thousands of hours to compute, but still give them the answer in 10 minutes and maintain the desktop experience? Client plus cloud computing offers that kind of sweet spot.”

The principal advantage of cloud computing is that it allows researchers to access processing and computing power as necessary to the scale they need through their PCs without having to build or maintain their own supercomputer sites. “The cloud offers research computing for everyone, which is very much needed,” said Daniel Atkins, a professor of community information at the University of Michigan and former director of the US Office of Cyberinfrastructure at NSF, in the Microsoft press release. “It’s targeted at people who have large amounts of data that they want to process and extract knowledge from, but who do not need or cannot afford their own data centers.”

Some liken the development of cloud computing to a transformational change akin to the invention of the microprocessor, which incorporates the functions of a computer’s central processing unit on a single integrated circuit, and which enabled the rise of personal computers and other electronic devices. “This is a transformative technology like the invention of the microprocessor,” said David Patterson, professor of computer science at the University of California at Berkeley, in the Microsoft release. “I believe, for the rest of the decade, we’re going to watch this wave of technology transform our industry, as well as create opportunities for scientists and educators. Once it’s done, the IT world is going to be a different place.”

Last week, Microsoft and NSF announced an agreement that will offer individual researchers and research groups selected through NSF’s merit-review process free access to advanced cloud-computing resources, according to an NSF press release. Under the agreement, Microsoft will provide cloud-computing research projects identified by NSF with access to Microsoft’s Windows Azure for a three-year period, along with a support team to help researchers integrate cloud technology into their research. Windows Azure provides on-demand computing and storage to host, scale, and manage Web applications on the Internet through Microsoft datacenters. Microsoft researchers and developers will equip grant recipients with a set of common tools, applications, and data collections that can be shared with the broad academic community. Microsoft also will provide its expertise in research, science, and cloud computing. Projects will be awarded and managed by NSF.

Microsoft is not alone in the world of cloud computing. According to a recent article in the New York Times, competing companies such as Amazon, Google, IBM, and Yahoo also offer cloud-computing services. Cloud computing is not confined to tasks that would be done on supercomputers, but can be broadly defined as any service or program sent over an Internet connection, whereby an outside vendor operates the server and software, according to a recent article in the Wall Street Journal.

For scientists, however, cloud computing may be the next tool to help resolve the cost, capacity, and time barriers encountered by researchers in need of high-powered computing and processing. This is an important development to watch in the coming years.

The job cuts are part of AstraZeneca’s restructuring program, the goals of which are to cut costs and achieve an “effective and flexible R&D operating model.” In a report of the company’s 2009 annual results, Anders Ekblom, executive vice-president of development, said AstraZeneca would focus investment on “prioritized disease areas.” This might be the strategy for achieving “effectiveness.”

After the in-house R&D employees are let go, AstraZeneca will hire contractors to discover and develop drugs, presumably to attain the desired “flexibility.” Observers say that firms in China, Europe, and the United States likely will be beneficiaries of this strategy, according to in-Pharma Technologist. This could be an opportunity for scientists unfortunate enough to be dismissed from Wyeth (Madison, NJ) and Schering-Plough (Kenilworth, NJ) during the consolidations that have followed the acquisitions of these companies. AstraZeneca’s plan might provide a glimmer of hope for scientists in my home state.

But why are R&D workers being shown so little love? One theory is that AstraZeneca’s plan is partly intended to reduce the effect of generic competition. Money budgeted for in-house R&D could be used to realize AstraZeneca’s stated intention to add more branded generics to its portfolio. That’s plausible. Asthma drug Pulmicort and breast-cancer treatment Arimidex will both lose patent protection in 2010, which will be two blows to the company’s bottom line.

Still, I can’t help but be skeptical about the wisdom of the company’s plan. Cutting R&D jobs to invest in branded generics might boost AstraZeneca’s revenue stream in the short run. But the company will still need to discover and develop innovative products to remain competitive. As I recently wrote, outsourcing R&D might not be the best way to discover new products. In this competitive economy, sponsors might choose to work only with discovery teams that can prove that their drugs will be successful. Likewise, contract researchers are less likely to spend money on potentially groundbreaking research if the risk of failure is high.

Tight funding will favor conservatism in R&D, which is not likely to yield promising or exciting discoveries. Unless the economy improves, or AstraZeneca’s outsourcing plans prove disastrous, it may be a while before R&D scientists get their props.

Not so fast. The study points out that only five approvals originated at US-based companies. This number decreased from seven in 2008. Johnson and Johnson (New Brunswick, NJ) and Genzyme (Cambridge, MA) were among the lucky few US companies to have products approved in 2009. The record number of FDA approvals is mainly grounds for celebration in Europe.

What gives? A new study published in the Journal of the American Medical Association reveals a plausible reason: the growth rate of research funding in the US has slowed. If you adjust for inflation, the rate may even have fallen. Between 1994 and 2003, which were boom years for research, the growth rate in funding was 7.8%. From 2003 to 2007, the growth rate was only 3.4%.

The industry’s spending priorities could be problematic. More and more, companies are dedicating most of their money to late-stage clinical trials and leaving small companies to be liaisons between academic research and the industry. In this economic climate, sponsors are only likely to work with small companies that can prove that they have surefire molecules. Given this pressure and their limited resources, these small go-between firms are less likely to spend money on innovative research that has a high risk of failure.

If the US biopharmaceutical industry wants to substantiate its claim to be the worldwide leader in innovation, I suggest that it adjust its budget to favor research over clinical trials. Congress may soon give the industry 12 years of data exclusivity for new biologics. The Biotechnology Industry Organization (BIO) has long demanded this exclusivity, which it calls an incentive for innovation. If BIO gets its prize, its members should pony up and put their money where their molecules are.

The loss of these jobs is certainly a blow to my home state, and it also made me wonder about the future of innovation in the pharmaceutical industry. As Pfizer and Merck absorb their respective acquisitions, their R&D staffs will become leaner. But will this mean that they will be more efficient or better able to find new drug candidates? R&D isn’t necessarily a clear process with a defined endpoint like manufacturing is. I don’t think R&D efficiency could be gained by using the same strategies that improve production processes.

One might also argue that mergers are bad for pharmaceutical R&D because, besides reducing the number of active researchers, they also reduce the amount of competition between companies. The greater the number of drugmakers battling for market share, the greater the incentive for creativity and persistence in R&D.

Mergers are also heightening companies’ desire to outsource R&D. Jim Miller writes that contract research organizations (CROs) are receiving more requests for proposals and more new project awards. Outsourcing R&D could certainly bring cost benefits, but I doubt that, on average, CROs are better able to discover new molecules than in-house R&D departments.

So, in New Jersey and around the world, we’re left with smaller workforces and an uncertain future for pharmaceutical pipelines.

Researchers at the University of California, Santa Barbara and at the University of Michigan used a polymer to create a doughnut-shaped template. The scientists coated the template with layers of hemoglobin and other proteins, then removed the core. The result was a particle that mimicked the size (roughly 5 µm in diameter), flexibility, and functionality of red blood cells.

The synthetic red blood cells can carry oxygen like their natural counterparts do. But unlike the real thing, these synthetic cells can encapsulate drug particles or carry them on their surface for controlled release. The scientists say that the synthetic red blood cells could carry several drugs at once. Also, the synthetic cells can be squeezed to flow through channels (e.g., capillaries) that are smaller than the cells’ diameter when they are at rest. Like real red blood cells, the synthetic particles can stretch in response to flow and regain their original dimensions after they exit a channel.

Although these synthetic red blood cells are still being studied, it’s conceivable that they’d have great advantages for drug delivery. Their composition and physical properties might bypass the body’s immune response and deliver drugs to areas that are otherwise hard to target. The cells’ adaptability suggests that they could be effective vehicles for multidrug therapies for diseases such as cancer or diabetes. The researchers’ invention seems like a creative innovation that could inspire the imagination of drug developers and formulators.

“The key to meeting these challenges—to improving health and well-being, to harnessing clean energy, to protecting our security, and succeeding in the global economy—will be reaffirming and strengthening America’s role as the world’s engine of scientific discovery and technological innovation,” according to a statement by Obama. “And that leadership tomorrow depends on how we educate our students today, especially in those fields that hold the promise of producing future innovations and innovators. And that’s why education in math and science is so important.”

In his remarks, the President offered some sombering statistics on the US position in STEM. American students ranked 21st out of 30 in science literacy among students from developed countries, and 25th out of 30 in mathematics literacy, according to the 2006 Program for International Student Assessment comparison conducted by the Organization for Economic Cooperation and Development.

The Educate to Innovate campaign is a part of a larger goal to attract young people to science and engineering, to improve academic success in STEM programs, and extend STEM education and career opportunities for underrepresented groups, including women and girls. The initial commitment of the private sector for the program is $260 million and includes participation from Intel, Kodak, Time Warner Cable, the Bill and Melinda Gates Foundation, and the Carnegie Corporation. Obama says the administration will be participating as well through launching a national annual science fair with the winners coming to the White House. He added that he will be also be challenging the private sector to improve the rate of college graduates, so by 2020, the US will lead the world in producing college graduates.

The interrelationship between science and economic development is also being tracked on a more immediate basis. In mid-November, the Association of American Universities, the Association of Public and Land-grant Universities, and the Science Coalition, launched ScienceWorksForUS, an initiative to highlight the scientific research and related activities made possible through current stimulus funding provided by the American Recovery and Reinvestment Act (ARRA). According to ScienceWorksForUS, the ARRA provided approximately $21 billion for scientific research and development, the purchase of scientific equipment, and science-related construction. The ScienceWorksforUS site identifies the number of grants, overall funding, and projects in a given state resulting from the stimulus science-based funding.

Current fiscal policy, private efforts, and public–private partnerships to promote education and business development in science and technology are sound investments. Let’s hope that these efforts will yield near-term and long-term dividends.