Commercial Collaborations in Biotechnology


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Commercial Collaborations in Biotechnology

  2. 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 2
  3. 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 3
  4. 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. 4
  5. 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 5
  6. 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 6
  7. 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. 7
  8. 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 8
  9. 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 9
  10. 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. 10
  11. 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 11
  12. 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 12
  13. 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 13
  14. 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. 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. 15
  16. 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 16
  17. 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. 17
  18. 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 18
  19. 19. WHAT INDUSTRIAL DYNAMICS MUST CHANGEBEFORE COLLABORATION MODELS LOSE POPULARITYSignificant changes in those factors that currently encouragecollaborations 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 19
  20. 20. WHAT TO DO? 20
  21. 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. 21
  22. 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 22
  23. 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 23
  24. 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).• 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. 24
  25. 25. QUESTIONS? 25
  26. 26. THANK YOU ! 26