The role of partnership in building value

As patent expirations and pipeline failures abound Big Pharma is finding new blockbusters increasingly hard to come by. Susan Birks reports from the BioBusiness meeting in London on industry’s move away from traditional r&d models to partnering and open innovation.

Whether you believe that the era of the blockbuster is dead, or that mass sellers are still in the pipeline, it is clear that the traditional pharmaceutical landscape is changing. Medical discoveries made in the past decades in the fields of proteomics and genomics have pushed the boundaries of traditional medicine and a host of new biological therapies are possible. The emergence of biosimilars, the unravelling of the human genome and successful therapies using stem cells suggest that the medicines of tomorrow will be more effective and better targeted and not in the form of a blockbuster pill.

As a consequence, Big Pharma is busy adapting strategies to ensure it gains a foothold in these new therapeutic fields. On the other side of the fence, small biotech start-ups and academic spin-offs are on the increase – but face the perennial problem of lack of finance and facilities. So how can the two successfully co-exist and do better business? More creative partnering and Open Innovation were the main themes set out at the BioBusiness conference held in London in February.

For Big Pharma the need to reinvent is urgent. Apart from reaching a ‘patent cliff’, it faces the further issue that new drugs are subjected to increased scrutiny and rising threshold of innovation from regulatory agencies and healthcare payers. Where previously blockbusters merely required a level of improvement in efficacy, safety or convenience compared with standard treatments, now they must perform better in patient outcomes.

While r&d costs are on the increase, Big Pharma is having to downsize. More than one pharma giant has had a ‘painful year’ – as one company spokesman put it, adding that ‘there is a huge challenge in having massive sites, massive infrastructure’. As sales forces are shed and non-value adding activities are outsourced, r&d strategy also needs a rethink. The stock market no longer gives credit to pharma companies’ internal r&d pipelines, so the industry wants to get into bed with academia and get a share of external innovation. Buying in innovation is increasingly seen as more efficient than doing it in-house.

More than half of the leading blockbusters in 2010 were generated from collaborations where the blockbuster originators retained regional rights and royalties for their products.

Partnering is clearly one solution. There are more deals being done today than ever before and there is a growing variety of partnerships types: technology access, product deals; discovery phase funded r&d in return for royalties; co-development/co-commercialisation agreements, etc.

According to global business strategy consulting firm LEK,¹ more than half of the leading blockbusters in 2010 were generated from collaborations where the blockbuster originators retained regional rights and royalties for their products. Furthermore, of the 87 blockbusters commercialised by the top 10 pharma companies in 2010, more than a third were under co-promotion agreement in some region of the world and most had royalty paybacks to third parties.

The problem for Big Pharma is finding the right technologies and partners. The frequent partnering conferences today are considered by many as ‘no more than meat markets’, with unsatisfactory outcomes for both sides.

Big Phama has also realised it needs to look at partnering opportunities earlier in the development cycle. ‘Where Big Pharma used to look at the clinical stage, now it only looks at the pre-clinical area,’ said one speaker during the discussion. Furthermore price is no longer the main issue. ‘Partnership deals used to be price-sensitive, now they are more science-driven,’ said another speaker; and in his presentation James Eshelby, head of European r&d Business Development, Pfizer, suggested that financial deals are becoming more flexible: ‘It doesn’t need to be of equitable benefit but does need to be of mutual benefit.’

The move all round is to foster opportunities for open innovation (OI). This is not a new idea: ‘We already have OI, we just need to link it up better between Big Pharma, biotech and academia,’ said Martino Picardo, ceo of Stevenage Bioscience Catalyst.

It was at this event that Picardo announced the opening of Stevenage Bioscience Catalyst, a joint venture between GlaxoSmithKline (GSK), the UK Department of Business, Innovation & Skills, the Wellcome Trust, the East of England Development Agency and the UK Technology Strategy Board. The £38m development is an independent bioscience campus designed to provide small biotech and life sciences companies and start-ups with access to the expertise, networks and scientific facilities traditionally associated with multinational pharmaceutical companies.

Small biotech companies will gain new insights into their research and development activities and [this] should accelerate the progress from discovery to product development

GSK hopes that the Stevenage Bioscience Catalyst (SBC) campus will foster collaboration and interaction between tenant companies with the hope that the combination of opportunity and co-operation will breed innovation and commercial success for all. ‘Small biotech companies will gain new insights into their research and development activities and [this] should accelerate the progress from discovery to product development,’ says GSK.

Also at the event and looking to foster links between new biotech and Big Pharma was the recently formed Edinburgh BioQuarter Incubator. As well as housing spin-out and start-up companies, the Edinburgh BioQuarter staff are involved in securing partnerships that will help academics to commercialise research and expertise.

Originally planned to be privately funded, Scottish Enterprise and the UK government’s Department for Business stepped in following the financial crisis to fund the construction of the Edinburgh BioQuarter in a 50:50 joint venture. The BioQuarter has already signed a deal with GSK to develop medicines to treat acute pancreatitis and is now recruiting other firms to fill the building.

It is hoped that these kinds of projects will help new translational therapies to get off the ground. Big Pharma, meanwhile, has the opportunity to meet new companies and collaborate in areas that are beyond its traditional research areas.

Such collaborations are valuable in helping Big Pharma to diversify and build future partnerships or in-licensed product deals. It was stated that some 65% of Merck’s revenue now comes from in-licensing products. By the same token Ely Lilly said it had achieved greater chemical diversity; it has screened some 10,000 molecules from outside – molecules that are very different from those it has in-house, delegates were told.

But partnering requires a great deal of trust and effort and ‘has often been done badly in the past’, said one speaker. As a result, Big Pharma is changing the way it goes about partnering.

Partnering has become a lot more creative, and even global companies now accept they cannot always go it alone. This is evident from the fact that today some projects have as many as four Big Pharma partners involved at once. ‘We have to open up to multiple partners as it is difficult going solo,’ said one of the speakers.

Because of its size Big Pharma can try lots of different partnering structures and learn what works best. For the small start-ups and spin-offs getting what they want out of the deal can seem harder – they want the capital but without giving all their invention away; managing the IP is therefore crucial.

Success relies on more than just building a single product company

According to Steven Holtzman, former ceo of Infinity Pharmaceuticals and now evp Corporate Development, Biogen Idec, success relies on more than just building a single product company. It means building one that can produce several new products sustainably. His advice to small companies looking to partner with big companies was leverage your platform; partner-off your younger products but without cutting into that which creates the value long term. He said: ‘In-license some products and find a Big Brother that will allow you to build your pipeline without major interference,’ adding that the downside of a Big Brother is that you ‘are likely to be acquired’.

On the IP question, Patrick Amstutz, chief business officer, Molecular Partners, suggested that (for platform-based companies) secure everything that is ‘platform’ relevant but be flexible on giving away product-based IP. Pfizer’s Eshelby, meanwhile is optimistic: ‘There is a lot of IP beyond patents that we can share,’ he says.

But everybody admits open innovation takes a lot of effort. And it is not just about sharing the success. Open innovation has allowed a rise in trust between companies, such that they are sharing more about failures – knowledge that could help prevent more costly r&d failures in future.

The hub of Stevenage BioScience Catalyst offers meeting and conference facilities – space designed to facilitate open innovation

Reference

1. P. Jacquet, and E. Schwarzbach. In Vivo, May 2011, Vol. 29, No. 5

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• Companies:
• GlaxoSmithKline
• Eli Lilly
• Pfizer
• Biogen Idec
• Molecular Partners

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