Pharmaceutical Innovation: Structure and Alliances

Pharmaceutical innovation is a broad term that can encompass and affect any step of the drug discovery and development process, so how exactly are companies trying to promote it? Innovation can come in the form of new equipment, processes, products, or software, but the biggest contributor today is collaboration. This type of innovation most often comes through structural change or alliances, but even those are broad areas that take on many forms; the most public method is through mergers and acquisitions.

A research paper by Chiaroni studies the relation between collaboration and pharmaceutical innovation, finding that the three types of partnerships are^1:

• Alliance for the generation of innovation. In this case the biotech firm establishes a partnership (without equity involvement) with other biotech firms, pharmaceutical companies, universities or other research centres, in order to pursue a common innovative objective (e.g. the validation of a genetic target);
• Purchase of scientific services. The biotech firm externalizes a specific phase of its innovation process to a specialised provider (e.g. the lead optimisation activity), under a well-defined contractual agreement
• In-licensing. The biotech firm acquires the right to use a specific drug candidate from another biotech firm, a pharmaceutical company or a university.

It is a safe assumption that more collaborations means more innovation. Collaboration allows for greater input on ideas, better matching of complementary assets, and access to more (and better) resources. It is not surprising then that Chiaroni finds that number of collaborations has decreased over time, correlating with the perceived innovation crisis.

There are many factors for pharmaceutical innovation, but collaboration and open structure is within the easy control of top executives. If management is willing to adopt organizational change and new technology, then there is a great opportunity to modernize drug discovery. The divestment of non-core competencies by pharmas, such as by Pfizer² and Abbott,³ opens up an opportunity to externalize research and work with new companies (and not merely by buying them!). “Open Innovation” offers a chance to integrate external knowledge or experts, take advantage of external technologies, and cooperate with “complementary partners or competitors in strategic alliances or network structures.”⁴

Increased collaborations are crucial, but having adequate structure to promote pharmaceutical innovation and take advantage of collaborations is equally important. Adelhelm found that mid-sized biotechs had different definitions of innovation, preferred one-way sharing (afraid to leak knowledge), and employees lacked understanding of how other same-organization divisions operated.⁴ For pharmaceutical innovation to take off, collaborations and structural deficiencies must be addressed. Products like Scientist’s research exchanges offer a possible solution, allowing sourcing of partners for collaboration and consolidation of institutional knowledge.