This article is guest contribution by Robert Thong.
The trend of big pharmas partnering with small biotechs and academia continues unabated—scores of new deals were announced in the first half of 2016 alone. However, big challenges arise in these alliances from the inherent asymmetries between the partners, such as the differences in:
- Sheer size between a much smaller group (whether this be 5, 50 or 500 scientists) compared to an organization of 50,000 people.
- Organizational history, mission, raison d’être, culture and values.
- Decision-making process and speed.
- Relative perceptions of power and risk.
These factors greatly increase execution risk—the risk of being unable to solve unanticipated problems or exploit unexpected opportunities as the project develops. Execution risk is a major cause of partnerships not generating outputs that eventually lead to new medicines since unexpected scientific findings and frequently-changing external requirements are the norm in biopharma R&D.
In addition, these asymmetries also give rise to other collaboration risks that the smaller partner faces. For example, most big pharmas adopting a portfolio approach to deal with the very low success rates in biopharma R&D—on average less than 1 in 10 candidate drugs that start clinical trials gain marketing approval. It is not uncommon to initiate multiple research projects targeting similar unmet medical needs since many of these projects will eventually fail. This “numbers game” makes sense for a big pharma, but a small biotech or academic group might find their partnership terminated despite demonstrating interesting scientific findings because a competing project in their portfolio looks even more promising. For example, AbbVie walked away from its arthritis partnership with Galapagos in 2015 despite solid clinical findings, citing a preference to prioritise its own internal project. Or there may simply be a change in strategic priorities that leads to the partnership becoming “orphaned”, losing visibility in the big pharma’s organization, as one biotech CEO put it: “Your project just sits there, neither dead nor alive, starved of the best resources, attracting little management attention.”
While there is no magic formula, you can do much to improve the odds of success. For example, before the partnership commences, you should jointly agree with your collaborator:
- A financial model (R&D funding, milestone payments, royalties, etc.) that anticipates practical execution issues, not just the most appealing press release!
- A partnering model that supports successful execution—clarity on who does what, how the parties interact day-to-day, and how decisions are made and disagreements resolved.
- Clear mutual expectations on each other’s wider requirements such as the academic’s need to publish or the small biotech’s need for frequent news flow, balanced against the larger partner’s need to maintain a competitive advantage.
Once the partnership begins, it is very helpful to:
- Conduct a kick-off event and navigate an initial “honeymoon period” that deliberately focuses on relationship building.
- Establish alliance management activities on both sides to ensure the partnership runs smoothly, resolving in a “win-win” manner those collaboration issues that will inevitably arise.
- Manage the transitions in scientific work and team members over the different research stages—concentrating on the group’s dynamics and its emotional state.
- Conduct regular “alliance health checks”, take corrective actions and convene team events to revitalise the relationship periodically.
R&D partnerships remain our industry’s best hope for generating more ground-breaking new medicines. But there is an unavoidable “collaboration tax” that has to be paid—you have to invest additional time and effort to thoughtfully set up and manage the partnership in order for it to bear fruit.
About the Writer
Robert Thong is the author of “Biopharma R&D Partnerships: From David & Goliath to Networked R&D”, a new book on collaborations between small biotechs or academia with large pharma, based on the practical experiences of over forty different organizations.
Robert Thong is an independent consultant, speaker and writer on business strategy and collaborations in the biosciences. Over the past 25 years, he has worked with more than 100 different pharmaceutical, biotech, medical equipment and healthcare organisations. During the 1990s, Mr. Thong co-headed the Gemini Consulting (now Cap Gemini) Life Sciences Group and then led the European Bioscience Business Unit at COBA-Renaissance. In the 2000s, he led Datamonitor’s Healthcare Division, founded two boutique consultancies and served as a non-executive director on the board of Alpharma Inc. (an NYSE-listed mid-sized pharmaceutical corporation). Mr. Thong holds a Bachelor’s degree from Imperial College London, and a Master’s in Management from the MIT Sloan School of Management.