ReviewPost-screenRacing to define pharmaceutical R&D external innovation models
Introduction
The pharmaceutical industry has been facing decreasing R&D productivity for over several decades driven by many factors, including low success rates in clinical development 1, 2. The return on R&D investment in biopharmaceutical companies has arguably dropped at or below the cost of capital [3]. To address this decline, identify better-understood targets, and develop differentiated therapies, many pharmaceutical companies are designing creative approaches to access external scientific innovation 4, 5, 6. What are these models? Which will bear fruit? And, perhaps most importantly, how will we know that they are any more productive than the approaches used to date?
The external R&D innovation models used by the pharmaceutical industry are wide ranging (Table 1). These models include traditional industry–academic partnerships supporting discovery, open crowdsourcing, academic centers of excellence, company co-creation with venture capital, innovation centers, and shared risk partnerships between companies. Although these creative approaches have by no means made traditional licensing, mergers, and acquisitions obsolete, they act to expand rather than consolidate the industry. Furthermore, whereas traditional approaches are in many cases focused on cost synergies, these new types of interaction are usually focused on improving innovation. This trend toward using open models and early risk sharing is perhaps intuitive and has been something that other industries have embraced for many years.
Section snippets
Traditional pharma–academia early discovery collaboration
The boundary between academia and the pharmaceutical industry is becoming more permeable as the two converge on common goals for the improvement of human health. Most basic research occurs outside the walls of pharmaceutical laboratories; indeed, the initial fundamental discoveries that ultimately lead to new therapies often emerge from academia. Perhaps the greatest contributions to drug discovery from academia are the deep mechanistic knowledge of disease biology and big data techniques, such
Open crowdsourcing
One precompetitive innovation model used by multiple pharmaceutical companies is crowdsourcing, where monetary grants or access to drug discovery expertise and tools are made available to academic scientists to support ideas of mutual interest. Crowdsourcing brings the benefit of scale and diversity of solutions to early discovery. A particularly attractive aspect of this type of relation is the potential to prototype and nurture early ideas at low cost. Once an idea emerges as exciting, in
Academic centers of excellence
Pharmaceutical companies have also focused on targeting premier academic institutions to strengthen ties and build sustained relations. To cast a wider net for accessing the best science and technologies in world-class institutions and to expedite transactions for multiple deals, pharmaceutical companies have been striking long-term master agreements with academia at an institution level. For an example, attracted by the large network of labs and hospitals of the French INSERM, MedImmune formed
Company co-creation with venture capital
An innovative industry–academic partnership that moves away from traditional inlicensing is the investor–partner model. Many pharmaceutical companies have or are building venture capital funds to invest in early biotechnology to support and create equity in groundbreaking science. These activities range from limited investments in existing venture funds as syndicate partners to independent funds with their own profit and loss (P&L) that have varying degrees of interaction with pharmaceutical
Pharmaceutical peer-shared risk partnerships
Most disease targets are pursued by multiple companies in parallel, with failures usually resulting in multiple losses across the industry and success resulting in the largest returns accruing to companies that are either first- or best-in-class [17]. The costs to develop follow-on and second-generation therapies for a successful mechanism are significant, yet the benefits to patients are often small and the investment necessary to develop these therapies creates an opportunity cost for the
Pharma licensing, acquisition, and mergers remain
Without doubt, the pharmaceutical industry will continue to use more traditional external models, such as licensing, acquisitions, and mergers. These activities are indeed on the rise in recent years, with interesting trends.
First, licensing and acquisition deals in biologics (antibody, protein, and peptide) and related technologies have grown dramatically over the past 2 years, even surpassing that of small molecules, especially in the area of oncology (Fig. 3; Table S1 in the supplementary
Innovation centers as a one-stop shop
One new addition to the panoply of external R&D models is the introduction of innovation centers at major life-sciences hotspots. The concept of these centers is to provide a one-stop shop for any potential partner, regardless of origin: academic, biotech, or otherwise, with presumed first-mover advantage by having local representatives in close proximity to scientists on-site to build rapport and promote synergies. Several pharmaceutical companies, including Bayer HealthCare, Johnson & Johnson
Metrics for success
There is a range of external innovation models being explored, covering the full R&D value chain (Fig. 4). The question that we pose is not how we judge the success of these varied models, but how will pharmaceutical companies continue to evolve their research models to increase productivity and which of these models will offer the greatest value. The future of the industry is unquestionably externally facing. The ultimate test of success is whether the return on R&D investment improves (as
Concluding remarks and future perspective
The pharmaceutical industry must and is undergoing sea change. A current and future driver of this change is external innovation. In recent years, the boundaries between pharmaceutical laboratories and those in academia and biotech have become more permeable. Numerous models are being developed to optimize the synergies and interface between these symbiotic groups. As pharmaceutical companies try to figure out how to tap external innovation, it is foreseeable that these new models will continue
Conflict of interest
L.W. is an employee of Merck & Co., Inc., and holds company equity; A.P. is an employee of Sanofi and holds company equity; M.R. is an employee of The Boston Consulting Group (BCG), a management consultancy that works with the world's leading biopharmaceutical companies on R&D productivity and external innovation.
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