Balancing on the innovation high wire
Successfully managing through value inflection points for life science companies depends heavily upon their ability to manage innovation. Speakers at Tuesday’s plenary luncheon at Biotech Showcase™ 2012 spoke of the realities and substantial challenges of an environment that increasingly incorporates external and internal development programs.
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Pharmaceutical companies are operating leaner and they’re becoming more focused. AstraZeneca, for example, has a three-year rolling plan for its projects that includes the governance and business development departments to ensure everyone’s priorities are clear. Merck’s franchise areas are based on medical need, profitability and scientific tractability, looking across its internal franchises and its licenses to help ensure common goals within the company.
When evaluating internal and external development programs, “We try to look at programs agnostically,” said Shaun Grady, VP of strategic partnering and business development at AstraZeneca. Likewise, Greg Wiederrecht, VP of worldwide licensing and external research for Merck explained that in terms of external programs “we’re looking for better molecules than we’re working on internally. If it’s better on the outside, we try to go for it.” At the same time, he said, they try to identify the failure as early as possible. “Too many experiments advanced that shouldn’t have,” he added.
The notion of killing projects early “is the wrong approach to innovation,” countered Gunner Weikert, Founder, Chairman and CEO of Inventages. “Innovation always fails at first! We need the entrepreneurial spirit of researchers fighting for the idea they have. If you kill a project too early, you have no innovation.”
Big pharma typically accesses external programs for 40 to 50 percent of their pipelines, but less than 5 percent of companies trying to partner, from pre-clinical to Phase III, actually secure a partnership, interjected Dennis Purcell, Senior Managing Director, Aisling Capital. The bar is higher than it’s ever been, as companies focus on product differentiation and reimbursement issues as well as on the science.
“Deals you could have done 10 years ago aren’t available any more. We’ve learned from our mistakes and the selection process reflects that,” Weikert responded. From a pharma company’s perspective, “early engagement and a collective view around what we need is vital,” Grady said. The idea is to develop projects in ways that won’t require the partner to rework the experiments. Part of the evaluation criteria includes the experiments that have been conducted, and the experiments that should have been conducted.”
Although some panelists bristled at calls for increasing amounts of data and later stage research, others noted that the requests may arise because the target isn’t validated or because several others have more advanced programs against that target. “We’ll do deals when we truly believe in the target,” Wiederrecht said.
That said, “Pharma has distributor power. They can wait. When the small company gets funding to advance to the next trial, suddenly there may be a change in the way the data is interpreted,” Weikert cautioned. “Don’t be overly optimistic with data. Be honest with it,” he continued. “You may get a lower valuation, but by managing expectations you may be more likely to get additional funding later.”
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