Vantage Point - Closer collaboration is key to innovative business models

Analysis

From partnerships with universities to government bodies, small biotech firms, companies in other sectors and, occasionally, each other, big pharma is increasingly embracing a collaborative approach across many aspects of its business.

Working with others to help improve pipelines and productivity is certainly not a new development, but the scope of these collaborations is growing. Only this week AstraZeneca opened up its compound library to the Medical Research Council, while Biogen Idec struck a biosimilar deal with an unlikely partner in Samsung. Challenges remain, not least in forging truly collaborative relationships between two parties that might instinctively be mistrustful of each other. But with many convinced that innovation in business models presents a solution to many of the industry’s problems, the desire to make these collaborations work is growing.

Room for improvement

Big pharma has long thrown off the notion of self sufficiency and, arguably through necessity rather than choice in some instances, is fully engaged in the external search for solutions to productivity problems.

The biotechnology industry has been thoroughly mined for licensing and acquisition potential and these sorts of deals are the norm – innovation of the pharma business model means so much more now.

However, there is still much room for improvement in deal structure, according to Jorg Reinhardt, chairman of Bayer Healthcare. Speaking at the FT Global Pharmaceutical & Biotechnology Conference this week, he argued that the current partnering paradigm does not solve the key challenges facing the industry, namely the uncertainty of science. Meanwhile companies are still failing to learn enough from failures.

His answer is to forge fewer but longer term and more closely collaborative partnerships, rather than lots of short term deals with set milestones.

“We need to rebuild partnering models, and move out of the comfort zone,” he said.

Building trust

Mr Reinhardt believes that the bigger partners in these deals need to start yielding more control and work much more collaboratively and freely. This of course requires trust, something that is harder to dictate.

Nigel Jones, co-head of healthcare at lawyers Linklaters, believes a mind set change needs to happen for these deals to really move towards the sort of shape Mr Reinhardt describes.

“I think this is a very good idea in theory. In practise one of the challenges we face when documenting some of these concepts is that people tend to switch back to type," he says. "Everyone in the whole chain needs to adopt an entrepreneurial, innovative mindset. And that includes the senior people, the next rung down who are helping implement it, and the advisory and lawyers to say we don’t need 15 pages to say who owns the intellectual property. A broad concept is enough because we trust each other."

Severin Schwan, Roche’s chief executive, admitted that there was still much distrust and perceived as well as real conflicts of interest among various stakeholders in the sector. "I think it will be a long time before we see real collaboration across multiple stakeholders," he told the conference.

Open innovation

When collaborations are struck between two parties from different industries or regions, the issue can be less about trust and more of a lack of understanding of where people are coming from, or the inability to see another perspective, Mr Jones says.

These challenges are being slowly overcome and despite recognition of the hurdles, comments from many senior executives at the FT conference revealed a real desire to extend the scope of collaborations with all sorts of parties."

Pharma companies have to work closer together on basic science, and much more collaboration is needed between pharma and academia," said Klaus Wilgenbus, corporate vice president at Boehringer Ingelheim, speaking on a panel discussing strategies for the future.

The quest for “open innovation” and the deals struck in its name is one example of where this is already happening.

Under one such arrangement AstraZeneca said this week it would grant academics access to 22 compounds; research funding will be awarded by the Medical Research Council. The rights to intellectual property generated using the compounds will vary from project to project but will be "equitable and similar" to those currently used in academically-led research, the company said in a press release. 

GlaxoSmithKline, a major proponent of this ideal, has gone further than some with the foundation of a bio-hub for start-ups alongside its own research labs in the UK (EP Vantage Interview - Stevenage Bioscience Catalyst a real test of 'open innovation' model, September 1, 2011).

Radical moves

The common consensus at big pharma now appears to be that a more open approach is better for innovation and, ultimately, productivity. So it follows that these more traditional collaborations with universities and the biotech sector will continue to evolve in the coming years, to achieve this end.

At the same time more novel partnerships with companies in seemingly distant industries are also predicted to appear, as big pharma pursues even more radical transformations of its business model.

Samsung, better known for consumer electronics, announced in May last year that the biopharmaceutical sector would be a strategic focus for the future, committing almost $2bn. Since then the Japanese firm has formed a joint venture with Quintiles to build a production plant and said this week it would put $255m into a biosimilar venture with Biogen Idec, which will contribute $45m. Based in Korea, the venture will seek to develop, manufacture and market biosimilars; the US biotech will contribute its protein engineering and biologics manufacturing know-how.

This is exactly the sort of innovative deal that the pharma industry needs to strike, as it continues to seek answers to the productivity problems, Mr Jones believes.

“In order to access new business models from other industries and the hotbed of innovation from emerging markets, current players need to reach out more and collaborate more,” he says.

“Part of the incentive for companies to think differently, to be more innovative in their business models, is because the status quo is no longer an option. Continuing the way the pharmaceutical industry have operated in the past is not sustainable. Innovation is needed not only in terms of new drugs but also in business models, and collaboration is key to that."

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