In Focus: As Lyrica profits dry up, Northwestern seeks another ‘blockbuster’ drug
April 10, 2016
Northwestern boasts some of the deepest pockets of any university in the country. Its more than $10 billion in net assets is the product of many factors — wealthy donors, pricey tuition, shrewd investments. But one of the largest reasons for the University’s wealth is Lyrica, a pharmaceutical used to treat fibromyalgia, epilepsy and other conditions.
The discovery of this blockbuster drug in an NU chemistry lab brought the university to the top of annual rankings of income from patents and copyrights. It’s highly unusual for a breakthrough pharmaceutical discovery to originate in an academic lab, and even more unusual for such a breakthrough to become a runaway commercial success.
“We were just trying to inhibit one enzyme and not inhibit another,” said chemistry Prof. Richard Silverman, who invented Lyrica. “It turned out that during the experimentation we got results that we didn’t expect, namely that our compound activated one of the enzymes — that wasn’t even something we were trying to do.”
As the U.S. patents on the drug near expiration, the unpredictability of scientific discovery remains a limiting factor in developing successful pharmaceuticals despite steady increases in NU’s research funding.
Sales of Lyrica, the brand name for the compound pregabalin, reached about $1.2 billion in 2006 after the drug’s first full year on the market. Since its approval, more than 9 million people in the United States have used the drug, which is marketed by the pharmaceutical company Pfizer. Due to an agreement between NU and Pfizer, revenue from the drug has significantly increased the University’s licensing income, money NU earns for allowing its copyrights and patents to be used by other companies.
According to the Association of University Technology Managers, NU had the highest gross licensing income of research institutions nationwide in fiscal year 2014. For NU, the revenue — about $360 million — is the last large sum from Lyrica, as the University sold its remaining royalty rights for the drug in 2013, said Alicia Loffler, executive director of the Innovation and New Ventures Office.
Last year, NU’s licensing income decreased more than tenfold to $32 million. The University will likely drop from the top 10 in the Association of University Technology Managers’ 2015 rankings, which are not yet available, Loffler said.
However, vice president of research Jay Walsh said the drop will not have a significant effect on NU. Most of the money from Lyrica has been invested in the endowment, which means the funds will continue to help the University for a long time, he said.
In addition to helping millions of patients, Lyrica benefited NU in several ways, as royalties invested in the endowment supported areas such as financial aid, campus facilities and research support.
“The chunk of the endowment that is directly attributable to Lyrica is mind-boggling,” said University President Morton Schapiro in an interview with The Daily in January. “It’s an enormous amount of money.”
Although no other invention has affected NU on such a large scale, the company Naurex, founded by McCormick Prof. Joseph Moskal, has the potential to produce another very successful drug, Loffler said.
Naurex created the antidepressant rapastinel, which became the company’s lead compound and is now in clinical trials.
“We are hoping that (rapastinel) will be a success, but you never know,” Loffler said. “If that drug makes it onto the market, it will be another blockbuster.”
An unexpected discovery
The work that led to Lyrica’s discovery began as a project for a visiting professor from Poland, Silverman said. Silverman asked the visiting professor, Ryszard Andruszkiewicz, to make a set of molecules to treat epilepsy.
When Andruszkiewicz presented his findings, Silverman said he could not believe the results — instead of just inhibiting one enzyme, the compounds also activated another.
“We weren’t expecting that,” Silverman said. “When Dr. Andruszkiewicz showed me those results, it just looked screwy. I said, ‘I think we ought to retest these and see if this is real.’ And he did. He tested them and he got the exact same results.”
The compounds — one of which would eventually be marketed as Lyrica — were synthesized in 1989. They were tested in mice the following year.
Despite its origins as a potential epilepsy treatment, Lyrica’s primary use in the United States is treating nerve disorders.
“In a way, it was a serendipitous discovery,” Chemistry Prof. emeritus Fred Lewis said.
Silverman was an independent worker, Lewis said, but the two professors’ backgrounds in organic chemistry led to many discussions and some overlap in their work. Although Lewis did not work directly on Lyrica, he and Silverman both worked in the NU chemistry department in 1989.
“Rick (Silverman) had no idea that that one molecule he made would ever be useful for anything,” Lewis said. “Rick just gave (Andruszkiewicz) a whole list of molecules to go make, not knowing which one would be the winner, or if any of them would be a winner.”
As a result of this surprise discovery, about $1.4 billion has gone into the University’s endowment, which reached almost $9.9 billion in August.
“It would be very tempting to spend it out in the current operating budget,” said University President emeritus Henry Bienen. “I thought, and the Board of Trustees agreed, that it was better put into the endowment for the long run benefit of the University.”
However, putting the money into the endowment was tricky, as a large portion of the Lyrica funds came in during the 2008 financial crisis, Bienen said. The Lyrica money was phased into the endowment because the University was aware that markets were going down, he said.
Bienen said NU managed its budget prudently prior to 2008. When the financial crisis hit, NU was less dependent on its endowment than some richer universities — it used a smaller share of the endowment in its operating budget compared to universities like Harvard, Yale and Princeton, Bienen said. Some universities had to sell stock or private equity to keep their operating budgets intact, but NU did very little of that, he added.
Beyond annual endowment payouts, quarterly checks from Pfizer also supported NU, said Eugene Sunshine, who served as the University’s senior vice president for business and finance from 1997 to 2014.
“I can’t overemphasize how important the Lyrica money was for us,” Sunshine said.
‘Almost legendary status’
Although INVO issues hundreds of patents — 138 in fiscal year 2015 alone — very few have a large impact on NU’s licensing income.
Nationwide, universities’ top two inventions usually constitute more than 80 percent of their licensing incomes, Walsh said.
“That’s just the reality of patenting,” he said. “You end up with a reasonable portfolio and a number of those actually go out and become useful for society, but very few of them make a lot of money.”
University spokesman Al Cubbage said NU would not disclose what percentage of its licensing income comes from Lyrica.
Only a handful of drugs reach the sales threshold of a blockbuster, a status given to drugs that generate more than $1 billion in annual revenue, said David Winwood, president of the Illinois-based Association of University Technology Managers.
“It’s great when new drugs are introduced and they’re available (to treat) pressing medical issues, but not many make the blockbuster status,” he said.
Winwood said Lyrica has “almost legendary status” in the university world.
“It’s one of those great examples of basic research sometimes opening doors that you didn’t expect to have open,” Winwood said. “By doing so, it’s provided to a lot of patients a lot of relief from very uncomfortable medical conditions.”
Michael Moore, invention manager at INVO, said the vast majority of blockbuster drugs are produced by pharmaceutical companies. He did not know the exact percentage, but Moore estimated that less than 10 percent of such drugs are discovered at research universities.
“The pharmaceutical companies are directed toward drug discovery, drug development, where universities really are focused on more basic science questions,” he said. “It’s less of an applied effort to come up with new drugs. We tend to elucidate the underlying mechanisms and understanding the biology behind diseases, and less of an effort toward manipulating those mechanisms to treat diseases.”
Although the number of university-discovered blockbusters is small, Moore said he notices an upward trend — as big pharmaceutical companies move away from research and development, universities such as NU try to maximize their resources to bring potential drugs forward.
For decades, academic scientists did not think in terms of commercialization, Silverman said. At the same time, people would say basic science is the foundation pharmaceutical companies use to find inventions to commercialize. Now, an increasing number of academic scientists focus on patenting work that has the potential to bring in revenue, which Silverman called an important change.
“The fallacy in that thinking is that if you do basic science and you don’t patent your result, but then you publish it, a company isn’t going to follow up on those compounds,” Silverman said. “The company would not be able to have exclusivity.”
Lyrica was first approved by the Food and Drug Administration in 2004 and was sold on the market the following year. The drug treats fibromyalgia, a chronic disorder that causes muscle pain, and epilepsy, a neurological condition characterized by seizures. In addition, Lyrica is approved to treat pain caused by nerve damage.
Pfizer pays royalties to NU in the form of regular payments in exchange for rights to sell Lyrica to patients, said chief investment officer William McLean. According to the initial agreement between Pfizer and NU, the University would receive 4.5 percent of global sales and Silverman would receive 1.5 percent. Silverman split his share with Andruszkiewicz.
Royalty owners may choose to monetize their assets, or exchange the right to receive future royalty payments for cash, with pharmaceutical companies or other investors.
Silverman and the University monetized part of their royalties in 2007 for a total of $700 million to pharmaceutical company Royal Pharma. The University sold about 56 percent of its portion while Silverman sold one third of his, McLean said.
In 2013, the University monetized most of its remaining royalties in a $290 million transaction with HealthCare Royalty Partners and the Canada Pension Plan Investment Board, McLean said. Silverman’s share was not part of the transaction, he said.
“We got an incredible offer,” Schapiro told The Daily. “We were worried about the value when it went generic.”
As patents on Lyrica expire individually by country, Pfizer loses its exclusive rights to manufacture it, allowing other companies to sell generic versions of the compound. An increase in generic versions of Lyrica will decrease Pfizer’s revenue, bringing fewer royalties to NU.
The U.S. patents for pregabalin will expire in December 2018. James Hurley, vice president of budget and planning, said some of the European patents have already expired, but sales in the rest of the world are projected to continue until June 2022.
Noting some of the patents still bring revenue to NU, Schapiro said Lyrica has also improved the world and affected many people. He said he continues to meet individuals who benefit from the drug.
After this year’s Outback Bowl in Tampa, Florida, he said the Silvermans accompanied Schapiro to synagogue in Tampa. Schapiro — who had been to the synagogue a week before and knew some of the people there — said he introduced Richard Silverman to a crowd. One man, a physician, told Silverman many of his patients have been cured by Lyrica, and another individual said they were currently taking the drug, Schapiro said.
“(Silverman) was like a hero,” Schapiro said. “They were around him, going, ‘Oh my God. Thank you. Thank you.’ And I’ve seen that every time I identify (him).”
Exhibits in the Segal Visitors Center highlight some of the most successful members of the NU community. Among them are displays about “A Song of Ice and Fire” author George R. R. Martin (Medill ‘70, ‘71) and lacrosse coach Kelly Amonte Hiller, who has led the team to seven national championships.
Another exhibit highlights the impact of Lyrica — it includes a letter written to Silverman in 2009 by a couple whose son was prescribed the drug for neuropathic pain.
“You and your team have given us the best Christmas present we could ever wish for,” the letter said. “Our sincere and heartfelt thanks to you all. Especially you, Professor.”
A windfall for NU
Hurley said 30 percent of the Lyrica money has been allocated to financial aid and 30 percent allocated to construction on campus facilities. The remaining 40 percent has been allocated to research, including faculty recruitment and startup costs, he said.
Each year, NU used the endowment payout to help fund those major areas, Sunshine said.
“If you want to regard yourself as a great research university, or a growing research university, you need an annual source of money that will help you,” he said.
Few other universities have produced inventions as successful as Lyrica. Such drugs are extraordinary, Hurley said, describing Lyrica as “probably a once-in-a-lifetime occurrence.”
Lyrica money provided a full health insurance subsidy for graduate students, said Sarah McGill, senior associate dean at The Graduate School. Prior to Lyrica funds, the University subsidized 35 percent of health insurance costs for science and engineering students and 65 percent of such costs for all other students, she said. NU was one of the first universities to offer a full subsidy.
Although some graduate students are funded by research grants, students in humanities and social science programs receive funding packages from the University, McGill said. Due to the Lyrica money, the span of the funding packages increased from 16 to 19 quarters.
“When you do great research, you get great students, you get great faculty and then the cycle just continues,” McGill said.
Chemistry Prof. Peter Stair said 10 percent of the University’s royalty stream is allocated to the chemistry department.
Stair, chair of the department, said part of the Richard and Barbara Silverman Hall for Molecular Therapeutics and Diagnostics, which cost about $100 million to build, was paid for using Lyrica money. Silverman donated part of his royalties to help fund the construction, which is named after him and his wife.
Money from the drug has also helped to recruit faculty, allowing NU to financially compete against its peer institutions in hiring professors, Walsh said. When the University recruits new faculty, some of them need start-up packages to begin their research. These packages can be very expensive in some academic areas.
“We want faculty when they come here to be successful, and it makes no sense for them to come here and for them to be under-resourced, especially at the beginning of their career,” Walsh said.
Scientists at NU also benefited from a new Integrated Molecular Structure Education and Research Center, which was built with a large contribution from Lyrica funds, Stair said. The center, a laboratory for chemical analysis, moved into a new space in Technological Institute in 2013.
IMSERC helped attract Sir Fraser Stoddart, a chemistry professor, to NU, Stair said. Although Stoddart was interested in NU’s emphasis on collaboration among faculty, the University’s facilities were an important factor in recruiting him as well.
To recruit Stoddart, NU agreed to hire additional faculty to work on projects similar to his, Stair said. These new professors’ salaries and startup costs are funded from a portion of the chemistry department’s Lyrica money.
NU recently hired William Dichtel, a chemist and MacArthur Fellow who will begin his position this summer. As with Stoddart, the Lyrica funds played a role in Dichtel’s hiring.
“(Dichtel is) a great teacher and has been very innovative and interested in undergraduate teaching,” Stair said. “That’s an example of where Lyrica actually will make an impact on undergraduate instruction in chemistry here at Northwestern.”
Research reaps the rewards
For more than 16 years, NU has experienced annual increases in research funding. In fiscal year 2015, the University received $620 million in grants, according to the Office for Research.
Silverman said collaboration in the sciences has helped bring research funding to NU. Silverman Hall, for example, brought together chemists, biologists and engineers under one roof, he said. At the time it was built, collaborative spaces like Silverman Hall were a novel idea.
“Northwestern has a really strong commitment to collaboration and interdisciplinarity, and so the funding that we get often is for grants that involve more than just one aspect of a problem,” Silverman said. “You’re really looking broadly at solving problems, and you do that by putting together the intelligence of multiple faculty.”
The Lyrica money created a platform for NU researchers to advance their work and buy equipment before even applying for federal grants, Sunshine said.
“Without sufficient funds to build that research platform, we never would have been as successful capturing the percent increase in the amount of federal money,” he said.
The uptick in research funding allowed the University to increase expenditures and be more competitive, Sunshine said. In 2015, NU spent about $498 million on research, the highest amount in at least 16 years.
Executive vice president Nim Chinniah said Lyrica money has enabled many wonderful things at the University, allowing NU to spend more to support faculty, facilities and students.
“Would we love another Lyrica? Absolutely, but they don’t come that often,” Chinniah told The Daily in February. “Our faculty decide what their research fields are, but when there are things that can be monetized, then we want to make sure that we have the infrastructure in place to support that.”
The next blockbuster?
Lewis, the chemistry professor emeritus, said Silverman was doing “good science” in the late 1980s, but nobody could have predicted the discovery of Lyrica. Many people in the chemistry department weren’t even aware that a breakthrough compound had been created until several years after its discovery.
Like Lyrica, drugs developed by the NU spinoff Naurex have the potential to help hundreds of thousands of people around the world, Provost Dan Linzer said. Pharmaceutical company Allergan’s September 2015 acquisition of Naurex can help bring rapastinel through clinical trials and onto the market, he said.
“These are very long-term investments,” Linzer said. “It takes an immense amount of work and follow-through and commitment on the part of researchers to continue to develop what looks promising into something that actually works.”
Video by Bailey Williams/Daily Senior Staffer
Allergan is betting Naurex’s product development will turn into “a very successful story,” Linzer said.
The FDA gave rapastinel breakthrough status in January. According to the FDA, the development and review of a drug will be accelerated if the drug is determined to be a breakthrough therapy. Moskal, the founder of Naurex, said he hopes the third phase of rapastinel clinical trials will begin in months.
By all publicly available indications, the clinical trials have been going well, Walsh said.
“I would hope that this would have a significant impact on people who have some level of depression, and therefore maybe we will make some money off of this,” he said. “The money part is interesting and important, but for my mind, the most important thing is that this gets out there and helps people.”
Moskal, director of the Falk Center for Molecular Therapeutics, said his work focuses on drug discovery pertaining to central nervous system disorders.
Naurex developed rapastinel for treatment-resistant depression. The drug targets NMDA receptors, which are altered in many brain and nervous system conditions. If the company commercializes its drugs in the future, Moskal said, the revenue will benefit the Falk Center, and the University will receive royalties.
Moskal is also the co-founder and chief scientific officer of Aptinyx, a company created last September to develop drugs to treat pain. The core structures of the molecules Aptinyx is developing are similar to those of rapastinel. The new drug does not yet have a name but is currently called NYX-2925, Moskal said.
Aptinyx is developing its lead compound to target neuropathic pain, Parkinson’s disorder and migraine, Moskal said. The company, however, is still collecting pre-clinical data to decide which of these to go forward with, he said.
In a couple of months, NYX-2925 will be submitted to the FDA for approval to start clinical trials, Moskal said.
Moore, the invention manager at INVO, said it would be exciting for the University to have another drug on the market, regardless of the revenue it may bring in.
“The ability to have our research have that kind of impact on the community is something we should be proud of,” Moore said.
Although Naurex and Aptinyx both show potential for commercialization, it is too early to tell if either company will produce a blockbuster like Lyrica one day.
“Most universities are lucky to have one of these blockbusters,” said Loffler, the executive director of INVO. “We hope to have more, but it’s almost a lottery.”