Pharma and biotech: A strong partnership?

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The world of big pharma has been undergoing major upheaval as markets pressure companies to trim back unprofitable R&D departments. Meanwhile, the much anticipated age of biotech-led drug innovation is yet to fully materialize, leaving drug companies at the edge of a patent cliff without innovative replacements in the pipeline.

A closer look into pharma-biotech partnerships

In the 2010 white paper Biotech Reinvented, PwC argued that the solution is to be found in pharma companies working in closer collaboration with biotech firms to create bigger and better therapies.

This makes sense when considering that biotech is, in PwC’s words, not so much a distinct industry as “a group of disruptive technologies for discovering and developing new medicines, and diagnosing and treating patients more effectively.”

On the biotechnology side, the benefits of joint ventures with pharmaceutical companies can also be substantial. According to Bruce Booth of biotech venture capital firm Atlas Venture, biotech startups often depend on larger drug companies for liquidity, R&D collaboration and science and research talent.

 

Collaboration can reduce multiple risks

In an industry as competitive as drug development, which harbors billions of dollars in intellectual property and operates under strict regulatory rules, establishing productive long-term partnerships is no simple affair. But as Booth also points out, forming partnerships often tends to be both less complicated and costly than going down the merger and acquisition route.

An example is Celgene’s recent purchase of 10 percent of Juno Therapeutics, which gave it access to Juno’s immunotherapy-based cancer treatment technology without the risks associated with a complete buyout.

Less successful was Sanofi’s 2011 buyout of Genzyme, which failed to achieve its aim of making the company a leader in cancer research.

Conversely, the alliance between Sanofi and Regeneron helped make Sanofi a major contender in non-statin-based cholesterol drug development.

 

Supporting the value play

Reductions in both business risk and research complexity aren’t the only reasons why pharma should consider partnerships with biotech firms.

Another is the rapid growth of biotechnology research in emerging Asian economies. As PwC noted, many of these companies are capable of the same level of R&D as their Western counterparts, but at a much lower cost. This makes them great candidates for partnership with pharmaceutical companies aiming to reduce their vendor sourcing costs without compromising on the quality of the final product.

The recent fall in biotechnology stocks, stemming from tighter growth expectations, has opened the door for pharma companies to look at establishing more strategic partnerships, especially with early-stage biotech companies that may be struggling to find investor backing.

 

The DNA of successful partnerships in pharma and biotech

Recent free trade agreements and emerging technologies have allowed for much more choice and flexibility in how pharmaceutical and biotechnology companies run their businesses; ranging from how they coordinate basic research to how they choose their suppliers and distributors. We are even starting to see the emergence of the ‘virtual’ biotech business, where all R&D activities are outsourced to external suppliers and partners.

In short, both pharma and biotech are facing the same set of disruptions wrought by technology and globalization. To survive in this new environment, they will need to find better, more integrated ways of working together, involving a close sharing of skills, infrastructure, financial resources and proprietary knowledge.

With drug development requiring such a high degree of coordination between executive, managerial, legal and laboratory teams, such partnerships first require being able to address a huge range of potential concerns, especially if the candidate is based overseas. What is their history and reputation? What quality controls do they have in place? Are their current partners happy with their performance? How transparent are they with their clinical results and other data? If your teams are going to be working closely with theirs, will they be a good cultural match? What kinds of government regulations will be they be working under?

Many businesses know all too well that regulatory change can dramatically influence the nature and future of a strategic partnership. In this type of environment, B2B matching platforms can help you find partners keen to this within biotech and pharma.