What are some fundamental problems that pharmaceutical companies are facing and how are they solving them?
The authors (Merck, Sanofi, and The Boston Consulting Group) cite decreased Research and Development (R&D) productivity and rising customer expectations as challenges to pharma. R&D costs can be addressed through acquiring innovation early from external sources. Thus a model was created to understand these resources better.
What are some examples of external innovation that pharma uses?
Open crowdsourcing is used such as a contest like Bayer’s Grants4Targets (over four years there were 900 applications with 120 being funded), GSK Discovery Fast Track (8 projects selected from 142), and AstraZeneca open innovation web portal. Academic Centers of Excellence are co-localized pharmaceutical companies with universities such as Pfizer’s The Centers for Therapeutic Innovation (four so far), Sanofi-UCSF and Boehringer Ingelheim – Harvard University. Biotech co-creations is where an established biotech funds a start-up such as Warp Drive Bio begin launched with $125 million from Third Rock, Greylock, and Sanofi or Mirror Portfolio Program where Lilly will provide up to 20% of the capital up to $150 million. An Innovation Center is where a pharma company sets up in a life-science hub like Bayer with the CoLaborator Program, an incubator for start-ups in San Francisco.
Other models are discussed with examples.
What are the more traditional models pharma uses to innovate?
Licensing, acquisitions, and mergers.
First, note that licensing and acquisitions in biologics have grown substantially in the last two years.
To recap some the big mergers of 2009: Pfizer-Wyeth for $68 billion, Roche-Genetech for $46.8 billion, and Merck–Schering Plough for $41.1 billion.
There is a nice review in this article of how some companies have acquired others to strengthen their pipeline.
The authors (hilariously) mention that external innovation makes sense because of the large amount of naiveté about drug discovery outside of industry (in academia).
Article based on:
Wang, Liangsu, Andrew Plump, and Michael Ringel. “Racing to define pharmaceutical R&D external innovation models.” Drug discovery today (2014).