A New Wave of Collaborations

For three decades, most drug companies have been active in establishing collaborative arrangements involving research, development, and marketing. A smaller number of outsourcing firms have also used creative licensing programs and joint ventures in attempts to spread their risk and enhance their profits. The evidence now suggests that both sponsors and outsourcing companies are stepping up their participation in creative collaborations, both with individual partners and as members of a broader group of associates.

Large drug companies have long used partnerships with discovery-oriented specialty firms to spread their risks, increase their access to talent, and provide unique compounds suitable for extensive clinical development. Since at least the 1980s, they have also been working together in co-marketing agreements for specific products, usually expanding the market access for drugs treating vary large patient populations. Over the years, many of those firms also have joined multi-member research-oriented consortiums such as The International HapMap Project, The Biomarker Consortium, The Critical Path Institute, and CDISC.

Most of the top 20 drug companies have established disease-related partnerships with academic research centers; many also have entered public-private partnerships with government agencies to provide educational programs, develop health system infrastructure, or offer substantial pricing discounts. (As an aside, I wonder why the drug industry critics who know exactly how much companies spend on DTC advertising each year have no idea how much time, energy, or money they devote to these activities.)

In recent times, large drug firms have been entering more research alliances with each other, thereby acting as collaborators in certain therapeutic categories even while competing directly in others. The partnership between Bristol-Myers Squibb and Merck to work with the non-profit International Partnership for Microbicides (IPM) to develop new antiretroviral compounds to protect women from HIV is a striking example. An even more intriguing collaboration is Enlight Biosciences. Just four months ago, that company was formed with capital supplied by Merck, Pfizer, and Eli Lilly, along with PureTech Ventures. It will work on programs involving molecular imaging, biomarkers, and other enabling technologies.

During the past few years, venture capital investors in many smaller drug and biotechnology companies have spurred those firms to take a page out of the Big Pharma book and become more active in licensing the output of single-compound discovery shops. They have structured many such investments, even as these non-integrated companies have continued to establish development and/or marketing agreements with members of Big Pharma.

Most outsourcing firms have long been used to operating as part of a web of providers, with each one delivering a specific set of services to the sponsor. They have watched sponsors learn how to weave the efforts of outsourcing partners with those of internal outsourcing departments and personnel in the various therapeutic category silos. Over time, they have helped sponsors expand their use of outsourcing through the use of non-traditional types of collaborations such as in-sourcing, co-sourcing, and functional outsourcing. More recently, outsourcing providers have begun to enter important strategic relationship with sponsors, as evidenced by various joint ventures, sole sourcing, and dedicated space arrangements. Recent collaborations between Covance and WuXi PharmaTech and between Covance and Eli Lilly appear to be setting new standards for such partnerships.

On another front, only a handful of outsourcing firms have attempted to become discovery partners with their drug development cousins. Early attempts at profit- and risk-sharing between a few contract sales organizations and drug companies did not turn out very well. Discovery partnerships entered into by AMRI, Array Biopharma, and PPD Inc. have the chance to be much more successful. Quintiles Transnational’s NovaQuest unit remains the single most aggressive arranger of collaborative discovery-development partnerships among all outsourcing providers.

I close by noting an interesting March 2008 webinar presented by Cambridge Healthtech Associates. It spotlighted that firm’s Collaborative Innovation service and described a project that involved 10 companies working together to evaluate a novel cell-based assay. The key speakers identified several areas of potential collaboration among multiple firms and individual parties alike in such disparate areas as biomarker development, drug repurposing efforts, adaptive clinical trials, and the conduct of stratified pivotal trials. They have large estimates of the savings that might be achieved by the global drug development industry with more efficient and effective collaborative R&D efforts. I hope and expect to be reading about many more such efforts in the coming months and years.

Michael A. Martorelli is a Director at the investment banking firm Fairmount Partners. For further commentary on the topics covered in this column, please contact him at Tel: (610) 260-6232; Fax (610) 260-6285.