Pharma and biotech: The promise and pitfalls of partnerships
*Johan Reinhoudt argues that collaborative pharma-biotech partnerships require more than just a good product to be successful*
By on Jan 25, 2011Johan Reinhoudt argues that collaborative pharma-biotech partnerships require more than just a good product to be successful
Collaborative partnerships are of increasing importance for successful innovation within the life sciences industry.
Innovation within pharmaceutical companies today is not comparable to that of 15 or 20 years ago.
One would have to go back to the early 1990s, or even the late 1980s, to find the 'old' in-house pharma research model working successfully in producing blockbuster, breakthrough treatments for unmet medical needs.
Today, old-fashioned in-house research is no longer tenable and pharmaceutical companies increasingly focus on making deals where they canand as early as they canto support their ailing pipelines and fuel innovation. For more on innovation, see 'Pharma R&D: Where will the new drugs come from?'.
There is a tension developing: the pharmaceutical companies 'need' biotech companies to bring selective resources and fuel innovation, while the biotech companies, who feel almost 'forced' due to lack of available financing, must progress by making an early stage deal with a pharmaceutical company.
You would think this would be a great fittwo parties who are in genuine need of each other. Not so fast
The pitfalls of collaboration
Collaborative partnerships have often been unsuccessful.
The statistics are not good: about 60 to 70% fail to deliver the intended outcome.
Pharma-biotech collaborative partnership failure has many causes, but according to surveys the most-often cited reasons are product failure and drastic market change.
Look more closely at the survey results and you'll see that following those two explanations, the most often-cited reasons for failure in collaborative partnerships relate to what many people feel are true "givens" when it comes to forming, executing, and terminating collaborative partnerships: issues such as poor communication, ineffective alliance leadership, unclear definition of roles and responsibilities, weak partner commitment, and differences in partner cultures.
These can lead to big trouble in a collaborative partnership and, importantly, have little to do with the objective scientific merits of a drug in development.
Formation of early collaborative partnerships usually has relatively low risk for the pharmaceutical company.
For them, the fee to be paid when signing the contract is usually relatively modest and the risk is mostly related to the ultimate license fee to be paid when the product would become commercially successful.
The biotech company, on the other hand, is taking great risk.
Its leadership and governance board are often not sure about the pharmaceutical company's drivers, motivation, and commitment; it is usually inexperienced in dealing with the particular pharmaceutical company and, moreover, is resource constrained and culturally adverse.
Add to this the culture clash: when a large established pharmaceutical company establishes a new collaborative partnership with a small or medium-sized biotech organization, the people, operations, organization, and culture are vastly different.
This leads to problems if not addressed early on.
Mind the culture gap
The above factors illustrate the increasing relationship-management tension field.
How the leadership teams of the two partnering organizations deal with these issues will effectively determine a collaborative partnership's ultimate success.
In fact, addressing the culture gap is just as important for the success of the collaboration as the scientific value of the product being developed.
Unfortunately, currently this aspect is often overlooked in favor of the technical and legal aspects in forming a collaborative partnership.
In light of the changing R&D environment, we will see an increasing amount of collaborative partnerships being formed as the life sciences industry continues to change into an industry in which collaboration becomes critical for innovative success.
A favorable outcome for innovation will depend to a large extent on the way the collaborative partnerships are formed, executed, and terminatedin other words, those who can create value at the interface.
A successfully completed or transformed collaborative partnership can even be a successful 'entry' into another collaboration later on, leading to more innovation.
Johan Reinhoudt is president and CEO of Collaborative Primacy Life Sciences Consulting (CPLS Consulting), a specialized management-consulting firm focused on the biotechnology, medical device, and pharmaceutical industry.