The cost of producing a marketable drug has skyrocketed in recent years due to greater regulatory oversight, increased competition and globalization. More complex market issues of portfolio management, physician relationship management and consumer education have radically altered the pharmaceutical landscape. To meet analyst expectations and satisfy shareholders, pharmaceutical industry giants must replenish their pipelines with potential blockbusters and hedge against droughts with a continuous, healthy flow of specialty and medium-sized drugs. Now more than ever, pharmaceutical companies must outsource R&D work to their biotech counterparts—and they are doing so in record numbers. Show Nearly a third of new pharmaceutical products are now developed through alliances. Recent news that five major pharmaceutical firms have no billion-dollar blockbusters in late-stage development highlights the rising importance of these collaborations. Table 1 (Number of Pharma-Biotech Alliances) provides hard evidence of the biotechnology industry’s rising importance. Pharmaceutical companies are not the only ones that stand to gain from these partnerships. Opportunities abound for biotechs, as well. These companies often lack the marketing muscle and colossal sales forces required to prepare the market for a new drug. Biotechs need the strong arm of big pharma to achieve rapid sales uptake and boost peak annual sales. So, naturally, pharma-biotech alliances are a match made in heaven, right? Not necessarily. While pharmas and biotechs work toward the same basic objectives—they are two very different animals. Biotechs are smaller and more flexible than pharmaceutical companies and their most coveted assets tend to be their scientific minds and proprietary technology. Pharmaceutical companies’ contributions to partnerships are more often based on regulatory, sales and marketing expertise. To achieve partnership bliss, each party must understand the other’s business, the value proposition each brings to the table, and, importantly, the subtle nuances (such as corporate culture) that can ultimately make or break a deal. Thus far, pharma-biotech collaborations have yielded mixed results. While some substantial benefits have surfaced, no pharmaceutical company has emerged as the biotech industry’s “partner of choice.” The title is still up for grabs, and the company that eventually wins it will have the right of first refusal for hot new drugs. A recent study by Cutting Edge Information reveals specific steps pharmaceutical and biotechnology companies must take to excel in these alliances and strike mutually beneficial deals to develop new drugs. Alliances That Work Large pharmaceutical companies have the financial resources to support drug development costs, which can easily reach half a
billion dollars. Biotech Ligand has developed the “10/50/40 Formula,” accepted throughout the industry, which says that, of the several hundred million a biotech requires in its first decade, 10% comes from venture capital, 40% from public equity markets, and 50% from pharma companies. While no clear leader has emerged in pharma-biotech alliances, Pfizer remains the “Partner of Choice” in pharma-pharma alliances. This position has rewarded the company with access to outside-developed blockbusters including Lipitor, Celebrex and Zyrtec. Pfizer’s leadership is no accident. The company deliberately established its reputation through a company-wide focus on being the Number One alliance partner. Small-to-medium pharmaceutical companies seeking to commercialize their products have given Pfizer a tremendous pipeline—far larger than it could develop in its own labs. Today, the pharmaceutical giant collaborates in some form with 450 partner companies, 250 in R&D alone. Another Big Pharma, Eli Lilly & Co., has overhauled its approach to alliances. Lilly’s Office of Alliance Management has reorganized the way it oversees alliances in less than two years. The program has been so successful that the company now has more than 300 alliances, about half of which are research focused. One of the largest alliances, with Takeda, produced more than $223 million in revenue last year. The first biotechnology and pharmaceutical companies to build top-notch alliance reputations will gain a decided competitive advantage, and can apply that advantage to Avoiding Alliance Pitfalls The good news for pharmaceutical companies is that the market for pharma-biotech alliances can expand pipelines and help build the next great pharma company. A Wharton School of Business study shows that drugs produced by pharma-biotech alliances are 30% more likely to succeed in winning FDA approval than those developed by a single company. However, companies’ lack of experience and expertise in managing pharma-biotech alliances creates uneven performance. Recent high-profile failures highlight the dangers of sloppy alliance execution. Last year, FDA actions prevented six alliance-developed drugs from reaching the market. FDA approval is obviously a fundamental step in making partnerships successful. The problem in many cases is not unsafe products; it is poor allocation of alliance responsibilities. Though companies are stepping up their alliance activities, most partnerships still fail to meet both companies’ expectations. More than 33% of alliances get cancelled or renegotiated prior to the end of their intended term. Companies that fail at pharmaceutical-biotech alliances, according to our research, often stumble in the deal-making stage. What seems to be simple bad luck may in fact be faulty deal design, planning and execution. The components of the deal are simple enough. Every contract must address deal structure and payments, risk factors, control of the product and the relationship, and project milestones. Deals succeed or fail based on how well they address these components. For pharmaceutical companies, choosing the wrong alliance partner could lead to a drop in stock price. For biotechnology firms, the consequences may be much more grave. Demands for continued growth make partnering a strategic necessity. In-licensing companies seek late-stage products to fill pipeline gaps and build therapeutic area presence. Out-licensing teams share new drugs to build capital and focus resources on other, higher-priority products. Mastering candidate identification and due diligence, deal negotiation and alliance management positions companies to build and defend revenue generators—and tangible competitive advantages. At the same time, fewer than two out of every five partnerships meet objectives. As the pharmaceutical industry evolves, companies that excel in alliance management—by producing positive results for both themselves and their allies—will establish partner-of-choice reputations that make it easier to both win attractive incoming deals and gain favorable out-licensing terms. Building a “Partner of Choice” Reputation For example, Bristol-Myers Squibb’s Erbitux alliance with ImClone put the FDA approval process primarily in ImClone’s hands—and the FDA rejected the drug due to a shoddy filing. One of the lessons learned from this and other high-profile FDA rejections is the importance of bringing the pharmaceutical partner’s regulatory expertise into the approval process. As the pharmaceutical industry focuses on developing new blockbusters, the competition for innovative new technologies has increased to a fevered pitch. Spotting, evaluating and closing lucrative deals require companies to gain as much expertise at pharma-biotech alliances as they have at R&D. The “Partner of Choice” recipe begins with a strong alliance program. Successful alliances are built on abundant resource support and influential leaders who internally champion the company’s focus on partnerships. Cutting Edge Information’s study shows that internal buy-in must go beyond exciting kick-off events and contract-signing ceremonies—and they must remain strong two or five years later, when researchers are slogging through laboratory data. Identifying “superstar” alliances—late-stage compounds with excellent chances for market success—is easier said than done. Established alliance functions get a jump on competitors by finding the largest opportunities through in-depth identification and due diligence. One large biotech, for example, looks at key factors—such as potential partners’ product portfolios, potential sales and the ability to replicate a partner’s technology—to identify superstar deals. Lastly, no alliance is worth undertaking unless it meets both parties’ needs. Companies must structure their relationships to reflect each partner’s differences and encourage them to focus on their areas of competitive advantage, increasing the total value of the collaboration. Successful relationships are based on respect, understanding and open communication. Pharma companies that respect smaller partners’ strategic needs build reputations as safe havens for promising products. Winning the “Partner of Choice” Nametag In addition to public buzz, successful alliance companies leverage their strength and expertise as a selling point in negotiations. Alliance teams tout their strengths and past successes alongside their marketing, sales and scientific expertise and capabilities. Our research highlights how several companies have employed innovative strategies and tactics to approach pharma- biotech alliances:
Working Within Your Limits Companies that recognize their strengths and limitations develop lucrative partnerships without overtaxing resources. It takes a mature, well-led organization to be honest with itself about its shortcomings. Our research spotlights companies that identify corporate limitations as a critical factor in driving successful collaborations. Biotech firms must have a clear idea of what they need from a major partner, and this task is not always easy—veteran negotiators make frank appraisals of their company capabilities and use this understanding to develop smart, win-win deals. On the other side of the table, pharma companies must know when to rein in their partnering impulses. The most lucrative deals turn disastrous if they do not fit with strategic objectives or if they depend upon non-existent expertise, resources or infrastructure. In what way does biotechnology benefit the pharmaceutical industry?Biotechnology helps the pharmaceutical industry to develop new products, new processes, methods and services and to improve existing ones. Thus, international competitiveness can be strengthened, new jobs can be created and existing jobs preserved.
What is the connect between biotechnology and pharmaceuticals?Pharmaceutical biotechnology is a relatively new and growing field in which the principles of biotechnology are applied to the development of drugs. A majority of therapeutic drugs in the current market are bioformulations, such as antibodies, nucleic acid products and vaccines.
How can we promote the pharmaceutical industry?10 Tips to Promoting and Marketing a Pharmaceutical Company. Understand the Audience You Want to Reach. ... . Design a Simple, Yet Professional Logo for Your Company. ... . The Importance of Humanizing Your Company. ... . Use Social Media to Strengthen the Relationship You Have With Prospective Patients. ... . Use Professional Marketing Materials.. How does technology help the pharmaceutical industry?Technologies are helping drug manufacturers go further and faster in monitoring patient safety. They're also helping to reduce costs and promote efficiencies by reducing manual input.
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