Hey Big Pharma, Hey Big Spender! Steps to Improve Pharma R&D ROI

In times of global recession pharma industry was not immune to the direct and indirect effects of the economic crisis.

It is not just about dry pipelines and skyrocketing R&D costs; it is also about the profound changes in global healthcare systems.

Aging populations, the rise of chronic disease and demand for improved health care, the expensiveness of innovation, the pressures from regulators, reimbursements, generics competition, and disgruntled shareholders are some factors responsible for lower revenue, reduced profitability, and declining P/E valuation ratios for most major pharmaceutical companies.

However, the good news is that the innovation and flexibility needed to explore new avenues to better R&D returns, is within the industry’s reach. How quickly companies are willing to start down these paths will be the next trend to watch in pharma R&D.

Pharma companies embrace non-traditional partnering strategies, innovative approaches to drug approval anddrug development alliances are increasingly being used to leverage resources and cut R&D costs.


Virtual Pharma,Cloud Sourcing,the New Ecosystem of Pharmaceutical R&D andTranslational Pharmaceutics,Partnerships With Venture Capital Firms, Clustering, Positive Externalities, Precompetitive Collaborations, Incubators, Partnering With Academia For Commercial Innovation

Virtual Pharma

It is not a new idea but is now being exploited to full advantage by investigating alternatives to home-grown development procedures, building up programs with leading academic centers, emerging biotechs, venture funds, and specialty pharma companies, to increase the chances of identifying a promising candidate early in its development.

Cloud Sourcing

Drug companies are also exploring open-innovation models to enhance discovery efforts. Eli Lilly and Co. was the first to do so in 2001 with its InnoCentive Internet portal that has since become a standalone operation with a community of more than 200,000 experts worldwide. Lilly currently operates an Open Innovation Drug Discovery program where outside researchers submit target molecules for consideration by Lilly scientists. If the submitted molecule is of interest, the company can arrange an in-licensing or collaboration agreement.

The New Ecosystem of Pharma R&D and Translational Pharmaceutics

The early development process (defined as first-in-human through to proof of concept) must be tailored to individual molecules and address the key questions or risk factors that differentiate successful molecules before their development. Up to now this was done (in outsourcing) by CROs and CMOs.

However, contract organizations are sub-optimal when it comes to supporting the new early development process because the transfer of drug products between them is cumbersome and complex.


Translational Pharmaceutics

Provide a new approach in which make and test supply chains are horizontally integrated to create a delivery platform for early development, enabling rapid and seamless manufacturing-to-clinic transfer of drug product.

This saves significant time and money and allows for processes that lead up to the First-in-Human Program (FIH) study, the first step into a new investigational phase to validate the good point of the drug candidate and molecular target.

The traditional way to take the FIH led to great expenses; translational pharmaceutics platform facilitates drug product manufacture in real time - consequently - investments in pharmaceutical development can be postponed until toxicology studies are announced.

Partnerships with Venture Capital Firms

The "valley of death" is used in the biopharmaceutical industry to portray the potential treatments and cures that will never see the light day-often due to lack of funding, because big pharmaceutical firms and other investors don’t want to invest in early stage drugs or treatments.

Sanofi partnered with a venture capital firm to launch a biotech firm. Warp Drive Bio will develop natural product drugs while Sanofi may handle the licensing and marketing. According to Sanofi CEO, “the primary driver behind investing in early stage firms is that is where the smartest people are; the best people who have great ideas in science don’t want to work for a big company and if you want to work with the best you will have to go outside your own company” http://bit.ly/Jqjmtf


Industry clusters are not a new concept, but their importance has significantly grown in the last decade, as we have already seen on Pharma IQ http://bit.ly/oLpfRT, because it improves competitiveness, and enhances the pace of innovation; a company within a cluster can source what it needs to implement innovations more quickly than others, and find logistic or financial support.

Positive Externalities

The technology transfer from fundamental research to applied innovations is facilitated by partnerships and close cooperation.

Some of the most famous biotech companies were born in life-sciences clusters benefiting from externalities. For instance Biogen, founded in Cambridge, MA in 1978, and Genzyme in 1981, grew and achieved success within an existing cluster.

Precompetitive Collaborations

Precompetitive collaborations among pharmaceutical companies are new trends assuming the form public–private partnerships or consortia; pharma companies exchange knowledge, data and resources with one another, as well as government agencies, non-profits and academic institutions, for the benefit of all.


In April this year Merck Serono inaugurated its new drug development incubator at Inter-Lab Incubator in Yavne. Inter-Lab has already picked three projects from the 130 applicants, and the incubator will probably have five or six projects altogether.

“The Israeli incubator is the first in the world for Merck,” Kley told “Globes” in an interview. Regine Shevach added, “We bring to the incubator companies experienced in drug discovery and development. After two to three years, we’ll either acquire them in full, or if they are interesting but not suitable for our portfolio, we can release them to operate independently or collaborate with other companies. We always try to keep freedom of action.”http://bit.ly/Jv3HSM
Calibr” is Merck’s new, non-profit translational research center in San Diego, aiming to provide expertise and resources for academic scientists and maximize the therapeutic potential of their discoveries.In exchange for its financial support, Merck will retain an option to obtain an exclusive commercial license to any proteins or small molecule therapeutics candidates derived from work conducted at the institute. Calibr investigators will work collaboratively with academic scientists to advance new discoveries to preclinical proof of concept at which stage commercial partnerships will be sought for further development. http://bit.ly/K3ysma

Partnering With Academia for Commercial Innovation

Partnering with the traditional suppliers of scientific novelty, universities and research institutes looks like a good match,  given the wave of closures of core pharma R&D facilities, however, it has deep roots in the past - pharma companies have a long tradition of licensing innovative projects from academic institutions, even if the failure to  generate significant commercial success results from the lack of longer-term and sustainable collaborations, which both parties realize, hence, they are moving to new models of strategic alliances, with longer-term collaborations, better defined and aligned goals, and mutual incentives.

R&D spending has just about doubled in the 12 years since 2000, but the discovery of new drugs has declined, an analogy with the theory of the “inverted U-shaped curve” - a phenomenon in which big investment initially has a corresponding impact on a problem, but then that impact declines and even moves to a point where adding more money will make the problem worse. (Malcolm Gladwell http://bit.ly/My32Gu)

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