Fighting In Bed Coopetition In The Life Sciences Industry

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A treatment of the rise of collaborative competition in the Life Sciences industry and how this might impact future drug discovery.

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  • Alliances are:No Typical Combination of CompaniesWide Range of Functions to LeverageAn Alternative to …Debt or Equity Financing -- without dilution!Make or Buy Decisions – with faster deploymentHiring or Outsourcing – without the overhead
  • From largely Competition > Largely Cooperation > BackGaussian Graph Breakover points
  • Bifurcation – run rate, non-run rate segments
  • Industry and specialty boundaries are blurredOnce separate specialties convergeNew capabilities are requiredMeans to face new rivalsGlobal economy unfetteredCompanies entering new marketsParticularly entering emerging markets
  • Co-opetition Led Synergies
  • Fighting In Bed Coopetition In The Life Sciences Industry

    1. 1. Cooperative Competition and its Impact Upon the Future Development of Modern Drug Discovery Jeff R. Livingstone, Ph.D. Founder & Principal, Pharmagenie LLC and VP Business Development, MLS
    2. 2. I. Definitions II. Forces / Trends III. Considerations IV. Examples V. Epiphanies I've learned it's always better to have a small percentage of a big success, than a hundred percent of nothing. - A. Linkletter
    3. 3. Every possible reezon that could ever be offered for altering the spelling of wurds, stil exists in full force; and if a gradual reform should not be made in our language, it wil proov that we are less under the influence of reezon than our ancestors. - N. Webster Noah, what are you smoking? - C. Merriam
    4. 4.  Competition: Two entities compete directly for the same resources (e.g. customers, market share, wallet share, etc.) to oppositional benefit.  Collaboration: Two typically non-competing entities use their complementary advantages to work together to mutual benefit.
    5. 5.  Partnership: when two entities work together towards a common goal.  Alliance: an extended partnership of one or more entities which work to mutual benefit against a common competitor.  Coopetition: when competing companies work together to mutual benefit, where the advantages of alliance are perceived to outweigh the risks of competition.
    6. 6.  Co-opetition is a term invented by Ray Noorda, the Founder of Novell. A theoretical framework of co- opetition was developed in the mid-nineties by NYU-Stern professors Adam Brandenburger (NYU- Stern) and Barry Nalebuff (Yale School of Management). This was further laid-out in their ground-breaking 1996 book “Co-opetition.”
    7. 7. New Entrants Threat of new entrants Bargaining power of Bargaining power of suppliers customers Supplier Competitor Buyer Power Rivalry Power Threat of substitute offerings Substitutes
    8. 8. Cooperation Competition Time
    9. 9. Customers Competitors Company Complementors Suppliers
    10. 10. Increasing Partner Commitment Outsourcing Corporate Partnerships Traditional M&A Shared Partial Partial Resources & Acquisitions Contract Licensing Joint Acquisitions 100% Competence Non- Services (Non-Equity) Ventures Controlling Acquisitions (Equity/ Controlling Non-Equity) <=50% >50% Contractual Collaborative Increasing Degree of Integration Source: Modified from HLHZ Back
    11. 11. A Portrait of the Industry as a Young Field It wounded him to think that he would never be but a shy guest at the feast of the world's culture. - J. Joyce.
    12. 12.  Industry contraction (Bx > Rx > MDx > Dx)  Prepping to acquire or be acquired  Concentration on later stage pipeline  Pushback on early discovery spending  Elimination of “me-too” projects  Too many Bx for Rx  Buyers IP market, decreasing multiples  “Partnering” becoming an options game
    13. 13.  Increased competition for increasingly limited capital  Decreasing investor risk > decreasing exposure  Longer term deal closure > but shorter term ROI horizons  Increased Competition and number of deals decreasing  A bargain hunting and “deep discount” mentality  Rx either pre-occupied with merger integration or focussed on upstream dealing  Bx cash constraints and limitations to alternatives 13
    14. 14.  Pharmaceutical companies, do drug refinement more than drug discovery. They are best at taking a drug and getting it through the labyrinth of testing, regulatory compliance, marketing and so on.  Biotech companies, on the other hand, often function as the research engine for pharmaceutical companies. Biotechs often approach a pharmaceutical company hat in hand, because they don’t have the cash to bring a drug to the next stage.  A “large” biotech company, like an Amgen or Genentech, may own their own drugs, but most of the time are developing in-licensed compounds from a Biotech partner. Bx F I P C O Rx
    15. 15.  Supply chain contracts  Suppliers consolidated, middlemen eliminated  Broad players bifurcate business  Niche players left with no where to go > Coopetition >
    16. 16.  Ecosystem Development  Economics  Demographics  Regulatory (Fiscal, Federal, State, etc.)  Speed  Time to Market  Response to Customer
    17. 17.  Products  Channels  Expertise (BME)  Activities (Marketing, Engineering)  Relationships  Knowledge Development (future) Back
    18. 18. The Prince(aples) Above all else, be armed. - N. Machiavelli
    19. 19. Buyer’s Seller’s Objectives Objectives • Expand Product • Access • Obtain Capital Portfolio Complementary • Validate Technology Resources • Control Development/ • Minimize Dilution Commercialization • Share/Manage Risk • Spare P&L • Share Reward
    20. 20. Small & Med Size Firms Large Firms Accelerate Growth Access Critical Capabilities Enter New Markets Build Critical Mass Accelerate R&D Reduce Costs or Capacity Not Somewhat Important Very Extremely Important Important Important Important Source: Association for Corporate Growth / Booz Allen & Hamilton/HLHZ
    21. 21. Strategic fit Commitment to research areas Commitment to partnering Key Resource allocation Criteria Identified champion Financial health Intellectual Property Portfolio Back
    22. 22. Managerial Infrastructure • Flat lean organization; 24/7 connectivity and communication • Close to customer • Global: behavior, organizational structure, finance Technology • Fisher capabilities - Maybridge heterocycles; Amidites • Sourcing technology but a gap exists with global CRM and knowledge management • Expertise in development portion of product lifecycle Procurement • Unique sourcing capability Assets & Logistics & Marketing & Sales Manufacturing Customer Service • Low asset base (this is both • Strong in Europe – weak in • Fisher brand – but needs to a + and -) America be developed • Insufficient flexibility of • Front-end customer service • Supplier intimacy people / assets to fulfill •Needs to get to fast, incremental business 24/7 availability • Corporate financial strength •Need accounts – can raise capital if needed receivable capability in and justified Fisher Chem
    23. 23.  Complementary capabilities: The capabilities of the two partners should complement one another. Sometimes the best partner is not the strongest partner but the most complementary.  Customizing capabilities: The partners need to customize their capabilities to the relationship and build capabilities for developing and managing alliances.  Knowledge sharing: The partners need to develop systematic was of sharing knowledge between them and across their organizations.  Effective governance: The coopetive partners need to create a clear and effective system for developing trust, including good legal contracts and very well defined exits. From interview with Harbir Singh, Mack Professor; Professor of Management; Co-Director, Mack Center for Technological Innovation
    24. 24. The Physiological Theory of Competitive Collaboration Dans les champs de l'observation le hasard ne favorise que les esprits préparés. - L. Pasteur
    25. 25.  Products: Signet Labs & Senetek  Services: Monarch LifeSciences & Aradigm
    26. 26.  Signet: Private, Denham, MA-based IP licensing and development shop spun out of J&J’s Cambridge Research Laboratories (CRL). Antibody developer and supplier.  Senetek: Public, Napa, CA-based developer and manufacturer of skin care materials. Antibody developer and supplier.
    27. 27. Signet Senetek Accelerate Growth Access Critical Capabilities Enter New Markets Build Critical Mass Accelerate R&D Reduce Costs or Capacity Not Somewhat Important Very Extremely Important Important Important Important
    28. 28. Strategic fit Commitment to research area Commitment to partnering Key Resource allocation Criteria Identified Champion Financial health Intellectual Property Portfolio Back
    29. 29.  Monarch: Private, Indianapolis, IN-based protein biomarker discovery and custom MS-based assay development CRO, originally spun out of the IU-Med School Core Facility (INCAPS). Has proprietary sample prep methods for MS.  Aradigm: Private, Hayward, CA-based developer and manufacturer of custom immunoassays. Antibody developer and supplier.
    30. 30. Monarch Aradigm Accelerate Growth Access Critical Capabilities Enter New Markets Build Critical Mass Accelerate R&D Reduce Costs or Capacity Not Somewhat Important Very Extremely Important Important Important Important
    31. 31. Strategic fit Commitment to research area Commitment to partnering Key Resource allocation Criteria Identified Champion Financial health Intellectual Property Portfolio Back
    32. 32. A Deal-Maker’s House I hold that man is in the right who is most closely in league with the future. - H. Ibsen
    33. 33.  Divorce > Marriage (IP, People, Projects)  Channels (Marketing always precedes BD)  Leadership > Point person (too many cooks / sigs)  Communication miscues = 80% failures Find some happy people and get them to fight. (Weird idea #5) - R. I. Sutton, Weird Ideas That Work
    34. 34.  Adaptivity = Plan 9 not Plan B  Valuation / Value Agreement  Priorities  Values  Culture (80% of the 80%)  Exit Considerations  Building Relationship to Acquire  Building Relationship to Compete
    35. 35. The perception that everything is totally straightforward and safe is utterly naive. I don't think we fully understand the dimensions of what we're getting into. - Prof. P. James, Report on Genetically Modified Foods Back
    36. 36. Back
    37. 37. Books • Brandenburger, A.M. and Nalebuff, B.J. (1997) Co-opetition: A Revolution Mindset the Combine Competition and Cooperation, Broadway Business, New York. • Burns, L.R. (2005) The Business of Healthcare Innovation, Cambridge University Press, New York. • Christensen, C.M., Grossman, J.H., and Hwang, J. (2009) The Innovator’s Prescription: A Disruptive Solution for Health Care, McGraw Hill, New York. • Ginsberg, D. (1999) The Investigator’s Guide to Clinical Research, 2nd Ed., CenterWatch, Inc., Boston. • Kim, W.C., and Mauborgne, R. (2005) Blue Sky Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, Harvard Business School Press, Boston. • Kornberg, A. (2002) The Golden Helix: Inside Biotech Ventures, University Science Books, Palo Alto. • Luo, Y. (2004) Co-opetition in International Business, Copenhagen Business School Press, Copenhagen. • Moore, G.I. (2005) Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution, Penguin Group, New York. • Pisano, G.P. (2006) Science Business, Harvard Business School Press, Boston. • Robbins-Roth, C. (2001) From Alchemy to IPO: The Business of Biotechnology, Basic Books, San Francisco. • Sutton, R.I. (2002) Weird Ideas That Work, Free Press, New York. • Williams, J.D. (1986) The Compleat Strategyst: Being a Primer on the Games of Strategy, Dover Publications, London. Articles • Brandenburger, A.M. (1996) Business Strategy: Getting Beyond Competition, interview, Management Update, Dec., pp. 1-5. • Carlin, B.A., et. al. (1994) Sleeping with the Enemy: Doing Business with a Competitor, Business Horizons, September- October, pp. 9-15. • Hamel, G., Doz, Y.L., and Prahalad, C.K. (1989) Collaborate with Your Competitors – and Win, Harvard Business Review, January-February, pp. 133-139. Back
    38. 38. Credits: The presenter gratefully acknowledges the gracious assistance , perspective, and materials fini of Barbara Kunz, President, Battelle Memorial Labs, and John Hession , Esq., Partner at Cooley, Godward, Kronish, LLP, used in the production of this assembly.
    39. 39. Baseline $ Billions Forecast Safety Concerns State programs Slower growth Personal importation in sales force/ 300 DTC Economic slow-down Generics (2003) Multi-tier Medicare Generics co-pays Rx Lifestyle Under-treated benefit Negative drugs disease states publicity Pipeline (Oncology, is still Weak/delayed Alzheimer’s, Claritin/ strong new products Hepatitis C, Prilosec Anti-obesity) goes OTC Demo- graphics 150 Technology 2002 2003 2004 2005 2006 2007 Year Adapted from Lisa Riccardi, Exxex Woodlands, Palo Alto, CA
    40. 40. Source: PharmaPipelines
    41. 41. Source: Burrill & Company, US Food and Drug Administration
    42. 42. Source: CMS, Lehman Brothers research

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