Getting in early – the new face of collaboration
Dr Chris Doherty, managing director, Alderley Park
The willingness of professional sports clubs to sign-up ever younger talent occasionally provokes global headlines. Spanish soccer giants Real Madrid once signed a 7-year-old boy, for instance, but beyond wonder kids and prodigies it’s now commonplace to establish academies to secure potentially valuable assets before anyone else. The business case for this would make sense to pharma executives: the investment required to get in earlier and, in effect, spreading your bet amongst a number of prospects, can be relatively modest compared to the potential upside of finding a winner. There’s also benefit in having input to the formative stages of a project and greater opportunity to be sure of what you are buying.
As the pharma industry gathers in Boston for the annual BIO International Convention, and with it over 41,000 partnering meetings, it’s worth reflecting on how the R&D business model may continue to evolve.
The 10-year pattern of big pharma downsizing and contracting out is well established. We have a familiar model where partnering arrangements mature into licensing agreements, if and when the data looks positive. Yet, given the high cost and failure rate of R&D pipelines as a whole, there remains a pressure to look at ways of diminishing risk and improving productivity. One of the ways forward may be buyers getting into the process earlier and collaborating before formal partnering takes place. It’s one of the most interesting possibilities before the industry.
The standard partnering model is not without shortcomings. One of common issues is that buyers often have to make decisions on the basis of data that has more holes than a Swiss cheese. However promising it looks, there are gaps in what the acquiring party wants to know. This slows down the progress, which in turns poses challenges for the seller, in all likelihood an SME operating in a tough funding environment. If the two parties had worked together earlier, in a form of collaboration that allowed the potential buyer to guide the development process, there’s much less chance of this delay. It’s not just about better knowledge of the project at hand: the buyer also gets a chance to see the management team in action, which can support decision-making.
A collaboration of this nature would be based on a legal agreement but non-exclusive and probably not involve the SME giving up equity. Instead, once the relevant NDAs and IP protection were in place, they would receive a financial consideration for having the potential buyer involved and given a role in help shape the project.
For big pharma the motivation includes having a much better chance of getting the right data pack. For the SME, there’s a degree of validation of their idea, some cash, and a better prospect of a program leading somewhere in a timeframe they can live with.
Having a ready-made buyer sounds wonderful in theory but of course there are barriers to making it happen. On the one hand, the SME is going to have misgivings. They might think it’s too early in the program or fear their idea is going to be taken away. Notwithstanding any legal protection, small companies are understandably wary of any pathway that could lead to a David v. Goliath scenario that would strain management bandwidth and financial resources.
What also comes under the microscope is whether there is any hidden price to collaborating. If you work with one party, will it discourage anyone else being involved at some later date? Is there a risk of a kind of taint that would put off someone who may in fact make a better long term partner - but who you currently are not able to reach or convince?
As the seasoned execs working at BIO would perhaps reflect, the harsh commercial reality is that you can’t always be that choosy about who you partner with. For the SME, the need to raise money is a very powerful dynamic controlling the company. The clock is always ticking against you. Business development takes lots of time and hard miles. You can spend 6-9 months talking to an interested party and very little comes back in the way of commitment. For all that, if you do have good data and are working in an area like cancer, where there is massive demand, there is going to be interest and it’s more of a seller’s market.
The idea that biopharma companies are more open than ever before to collaborating with their peers is evidenced in the experience of our customers at Alderley Park, many of which are involved in early-stage research and looking to scale.
It’s also there in industry reports. The global accountancy firm Deloitte has documented a sharp increase in the number of science-focused, early-stage R&D partnerships over the past decade. It suggests an industry-wide shift away from traditional, narrowly focused asset-based partnerships and a move towards more collaborative research-based alliances and joint ventures. I do believe these initiatives reflect the R&D challenges the industry faces. They will continue to drive change, and collaboration at an earlier stage is set to become much more commonplace.
You can meet Alderley Park at this year’s BIO International in Boston (4-7 June) on the UK pavilion stand #1333.