Commercial Collaborations in Biotechnology

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

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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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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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• 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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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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• 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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• 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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• 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 !

Commercial Collaborations in Biotechnology

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