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1RAUL SOTO B IOL604
INTERNATIONAL COLLABORATIONS & GLOBAL BUSINESS MANAGEMENT
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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
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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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 geographicallocations.
• VC provides funding but not needed expertise in research, development, etc.
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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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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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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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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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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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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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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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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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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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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.
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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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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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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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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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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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WHAT TO DO?
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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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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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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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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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QUESTIONS?
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THANK YOU !