Biopharmaceutical companies, under mounting financial and regulatory pressure, have stepped up their experimentation with new collaborative business models to share the costs and risks of drug discovery and bring more treatments to market.
Drug makers have been merging and striking research partnerships for years, but several new twists were discussed at last week’s Biotechnology Industry Organization convention, which drew 16,500 industry leaders to Boston. These approaches could pioneer new ways of doing business and finding treatments for diseases ranging from cancer to neurological disorders.
Among the experimental business models:
■ Sanofi SA, the French company that bought Genzyme Corp. in Cambridge last year, is “separating the R from the D” in drug discovery, said Elias Zerhouni, president of global research and development for the Paris-based pharmaceutical giant.
That means it is consolidating research in Cambridge, where Sanofi scientists can work in alliance with the area’s smaller firms and academic researchers, while keeping development — managing clinical trials and pre-commercial programs — at its US base in Bridgewater, N.J.
‘The existing business model isn’t working, so companies are looking around for what’s next.’
■ Massachusetts state officials, who believe the collaboration trend plays to the strengths of the state’s broad life-sciences cluster, have corraled seven drug companies into forming a novel neuroscience consortium aimed at improving the understanding and treatment of neurological disorders such as Alzheimer’s disease, Parkinson’s disease, and multiple sclerosis.
The consortium, made up of big drug makers working in the field, represents a shift toward “open innovation,” in the words of James Hoyes, president of Rockland-based EMD Serono, one of the companies involved.
Other consortium partners taking part in the early-stage “pre-competitive” research are Abbott Laboratories, Biogen Idec Inc., Janssen Research & Development LLC, Merck & Co., Pfizer Inc., and Sunovion Pharmaceuticals Inc.
■ Some smaller biopharma companies, such as Orexigen Therapeutics Inc. in La Jolla, Calif., and Endo Pharmaceuticals Inc., of Chadds Ford, Penn., have accelerated efforts to outsource operations ranging from research and drug testing to clinical trials and manufacturing, using outside parties that can perform such functions cheaper and better. The companies themselves increasingly are becoming “virtual” drug makers, playing the role of orchestrators or command centers in a model mirroring the trend in the medical device business.
While entrepreneurs historically aspired to turn their start-ups into full-service research, manufacturing, and sales companies, that traditional model is now frowned upon by venture capital backers and other private investors.
“This notion that you have to control your asset base — capital providers are not going to let that happen anymore,” said H. Thomas Watkins, chief executive of Human Genome Sciences Inc. in Rockville, Md., at a BIO industry panel.
Most of these business models are just emerging, so it is too soon to gauge their results, said Harry Glorikian, managing partner at the life-sciences consulting firm Scientia Advisors, in Cambridge. Much will depend on how the partnerships are managed and whether their contracts are drawn up in a way that prevents fights over intellectual property, he suggested.
“They’re all part of the same trend: How do I find the next molecule or therapy that’s going to be better than something else and that can get to market in a reasonable time?” Glorikian said. “The existing business model isn’t working, so companies are looking around for what’s next. They have to decide what they do well and what they don’t do well, and how they can make their research more efficient by getting more minds looking at it from different angles.”
One of the drivers of the trend is the need to conserve capital at a time when returns on biotech investments have declined. But another is the conviction that productivity at drug companies has dropped during the past decade. The number of small-molecule and biotech drugs approved by the Food and Drug Administration climbed to 30 in 2011, from 21 in 2010, but remains substantially below the 36 approved in 2004, according to a report released at BIO by the consulting firm PricewaterhouseCoopers.
The key to spurring productivity may be a recognition that scientific advancement is “a team sport” that can best be done in a biopharma hub with multiple players, said Sanofi’s Zerhouni, a former director of the National Institutes of Health. “That’s what Boston is to us,” he said. “It’s not a one-off. It’s a research lab.”