2. CONTENTS
• Situation: Current industry situation
• What is a commercial collaboration
• What issues / problems drive commercial collaborations
• Target: What needs to be done
• Favored collaboration models
• Why collaborations are increasing in popularity
• How technology enables multidisciplinary / multinational collaborations
• What industrial dynamics must change before collaboration models lose
popularity
• Proposal: What to do about it
• Case Study : Proacta Therapeutics
• References
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3. WHAT IS THE SITUATION?
• Biopharmaceutical companies need
to get therapies and services out to
patients, meet patient needs.
• They also need to implement
organizational models that produce
sufficient revenue to support
continued operation and investment
in new products and services.
• BUT …
• Very high cost of drug development
• Tight capital markets
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4. WHAT IS THE SITUATION?
Startups …
• Typically lack the resources (time, money, expertise, infrastructure) to
commercialize their products or achieve their desired exit strategy.
• Fundamental research
• Pre-clinical development
• Clinical trials
• Manufacturing, sales, marketing
• Distribution to multiple geographical
locations.
• VC provides funding but not needed expertise in
research, development, etc.
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5. WHAT IS THE SITUATION?
• Current startup model based on VC has high risk of failure
• 1986-2008 Study: 704 / 1606 (43%) biotech investments were
full or partial loss [Cockburn, 2009]
• Therefore, investors are becoming more cautious
• Most startups are funded by VCs, and have a time pressure to
establish and meet an “exit strategy” that is acceptable to
investors
• Sell or license IP
• Acquisition of startup company
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6. WHAT IS THE SITUATION?
Large companies …
• Between 1995-2005, industry
increased R&D spending by
2.5x, while pipeline productivity
remained flat
• Rising costs of Phase II, III clinical trials
• Patent expiration (Patent cliff):
patents for many blockbuster drugs
will expire in the next 5 years
• over $140B in revenue LOSS due to
patent expirations
• They need late-stage (Phase II, III)
drugs to make up for this loss
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7. WHAT IS A COMMERCIAL COLLABORATION?
• Voluntary, joint actions of two or more parties to achieve a
common goal.
• Symbiotic relationship that benefits both sides of the equation.
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8. WHAT IS A COMMERCIAL COLLABORATION?
• Enables each participant to save money by investing less than
it would need to invest if it were to do everything by
itself, internally
• Helps reduce duplication
• Make faster and better progress
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9. REASONS FOR ENGAGING IN COLLABORATIONS
• Anticipated ROI from shared outcome will exceed the
expected ROI derived from achieving the same outcome
independently
• Each party recognizes its own internal resources are not
sufficient to achieve the desired outcome independently
• Money
• Expertise
• Intellectual property
• Time
• Infrastructure
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10. REASONS FOR ENGAGING IN COLLABORATIONS
• Startups can provide lower overhead
costs, can develop drugs, perform
clinical trials, etc. at lower cost than
large companies.
• Large companies can provide
access to more resources such as in-
house expertise, access to more
expensive equipment, large
compound libraries, etc.
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11. ISSUES / PROBLEMS THAT DRIVE COMMERCIAL
COLLABORATIONS
• International push for equal pricing in the pharmaceutical
sector
• Cost controls
• U.S. Health reform
• Keeping IP in separate
organizations may impede
innovation; multiple organizations
may have separate pieces of the
puzzle
• Duplication of efforts increases
costs
• Collaboration helps accelerate
the drug development process
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12. FAVORED COLLABORATION MODELS
• Non-Competitive / Pre-Competitive/ Competitive
[Pratt 2009]
• Non-competitive
• Example: Industry – academia collaborations
• Outcomes of both parties do not overlap
• Company wants novel products for its pipeline
• Academia wants to commercialize an invention
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13. FAVORED COLLABORATION MODELS
• Non-Competitive / Pre-Competitive/ Competitive
[Pratt 2009]
• Pre-competitive
• Focused on development of standards, tools, and information; not
goods and services
• Companies combine their proprietary IP with standards, tools,
information from collaboration to gain competitive advantage
• Example: government – industry consortiums
• Structural Genomics Consortium
• Asian Cancer Research Group
• Coalition Against Major Diseases
• Innovative Medicines Initiative
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14. FAVORED COLLABORATION MODELS
• Non-Competitive / Pre-Competitive/ Competitive
[Pratt 2009]
• Competitive
• Biopharma companies, CROs, Platform technology providers join in
commercial ventures to leverage each other’s strengths
• Example: Amgen – AstraZeneca 2012 deal
• Amgen has multiple products in late-stage clinical trials , but limited
manufacturing capabilities.
• AstraZeneca faces multiple blockbuster drug patent expirations
(Crestor, Seroquel, Arimidex, etc.), pipeline not as deep; has
excellent worldwide manufacturing, marketing, and distribution
capability.
• AZ will complete Phase II, III clinical trials; manufacture, distribute, sell
various Amgen products; both will share profits. 14
15. FAVORED COLLABORATION MODELS
• Other models [Lanza 2010]
• Option-based collaborations
• Once startup achieves proof-of-concept, the collaboration
partner (CP) either continues funding, acquires IP, acquires
startup, etc.
• Licensing agreements
• CP licenses IP from startup to develop compound.
• New jointly owned company
• CP has controlling interest; once drug is approved, CP
manufactures, sells, distributes, shares profits.
• Risk- Sharing
• Co-development, co-promotion.
• Acquisitions
• CP buys out startup.
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16. WHY COLLABORATIONS ARE INCREASING IN
POPULARITY
• Collaborations allow organizations to leverage their strengths and
complement each other.
• Large companies benefit by getting access to more innovation, by
reducing costs, and increasing their productivity.
• Startups benefit by getting access to scientific, regulatory, and
formulation, manufacturing, and commercial expertise; more
expensive equipment; long-term financing.
• Price Waterhouse Cooper estimates that a 5% improvement in
success rates for each clinical trial phase brought by
collaboration, and 5% reduction in development time, will
• reduce R&D costs by $160M
• Accelerate market launch by approx 5 months
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17. HOW TECHNOLOGY ENABLES MULTIDISCIPLINARY /
MULTINATIONAL COLLABORATIONS
• Technology allows multiple levels of collaboration and information
sharing, regardless of geographical distances.
• Sharing of data such as bioinformatics databases, testing results, reports (Ad-hoc, periodic, or
instantaneous/ real-time) - BusinessObjects, Cognos, Informatica, Data Warehouses
• B2B interfaces allow network access to personnel from partner companies
• Video / audio conferencing
• SCADA: Remote monitoring & control of equipment
• DMS: Documents can be created, edited, reviewed, approved by multiple collaborators at
separate locations
• LMS: Online training standardization
• Revenue Management: contracts and sales
• Enterprise Resource Planning (ERP) : integrate internal and external management
information across entire organization, including finance/accounting, manufacturing, sales
and service, customer relationship, supply chain, QC, maintenance, etc.
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18. HOW TECHNOLOGY ENABLES MULTIDISCIPLINARY /
MULTINATIONAL COLLABORATIONS
• BUT... Technology also brings its own issues…
• COST $$$ of system integration and testing
• Heterogeneity : software, systems
• Lack of data standards
• Limitations of available data mining technologies
• Latency and telecomm issues
• Learning curves
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19. WHAT INDUSTRIAL DYNAMICS MUST CHANGE
BEFORE COLLABORATION MODELS LOSE POPULARITY
Significant changes in those factors that currently encourage
collaborations may reverse the trend:
• Healthcare reform & price controls
• Patent expiration / pipeline issues
• Large companies:
• Emerging markets
• Sales of generics / bioequivalents
• Start ups:
• Increased availability of VC
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21. WHAT TO DO?
• Biopharma companies should identify their own areas of
strenghts vs areas of opportunity; and determine whether
another organization has strengths that complement these
areas of opportunity.
• Startups must demonstrate the value of a commercial
collaboration, based on ROI.
• CROs must develop and maintain highly trained staff able to
achieve the high quality and performance standards
expected by biopharma companies.
• Biopharma companies should also train its professional staff to
improve the transition from leading internal resources to
managing relationships with partners, CROs, etc.
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22. CASE STUDY: PROACTA THERAPEUTICS LTD
• Developed IP which led to a family of cancer treatments, based on
hypoxia that occurs in solid tumors.
• Difficult to obtain funding due to priorities of the New Zealand
government.
• They had expertise in some but not all the areas necessary to
commercialize their IP.
• Did not have skills to provide financial, regulatory, management, or
clinical trials expertise.
• Entered in several commercial collaborations which organizations
which complemented their expertise
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23. Collaborations
• IRL (New Zealand government’s
Industrial Research Limited) : expertise in
carbohydrate chemistry
• AECOM : developing
biopharmaceuticals
• BioCyst: managing clinical trials and
drug approval process
• Roche: mount Phase III clinical trials
• MundiPharma: international marketing
and distribution
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24. REFERENCES
• “Challenges in a Biotech Startup”. (2006). Kellogg School of
Management. HIMT 453, Fall 2006.
• Cockburn, Ian and Lerner, Josh, “The Cost of Capital for Early-
Stage Biotechnology Ventures” (2009).
http://nationalbbr.org.studiesandstats/nvca_early-stage.pdf
• Frazier, Kenneth. “Driving Innovation in Pharma”. (2012). IESE
Alumni Magazine, April-June; 125:80-81.
• Lanza, John. “Big Pharma & Biotech: All Roads Lead to Win-
Win Collaboration” (2010). LifeSciTrends, July 2010.
• Pratt, Bruce. “Collaborative Models in the Pharmaceutical and
Biotechnology Sectors” (2009). Touch Briefings: 61-63.
• Price Waterhouse Cooper, “Biotech Reinvented: Where do
you go from here?”
• Proacta Therapeutics Case Study.
• “The Innovation Gap in Pharmaceutical Drug Discovery & New
Models for R&D Success”. (2007). Kellogg School of
Management. HIMT 344 Professor Hughes; March 12, 2007.
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