With pharma companies experiencing weak R&D pipelines and biotechnology companies grappling with funding shortfalls, strategic alliances are being wielded as a tool for survival. Even as the frequency of earlier stage development deals increases, effective management will be necessary to ensure that such alliances are successful.
For pharmaceutical companies, poor R&D productivity and blockbuster patent expiries have resulted in weakened pipelines with not enough promising drug candidates in later stage pipeline to replace them. With the number of new molecules in short supply, redirecting R&D outlays towards biotech companies and forming alliances with them will become critical and will sustain growth in pharmaceutical companies.
"With pharma companies struggling to maintain R&D productivity, biotech companies present opportunities to enhance product pipelines," explains Frost & Sullivan Research Analyst Paljit Mudhar. "The demand for biopharmaceuticals is encouraging pharma companies to invest in biotech firms to fill in these critical R&D gaps and access early-stage molecules for development."
However, external factors in the current environment will imply additional risk for pharmaceutical companies. In the past, many licenses involved mid- to late-stage products, as pharma companies were often more confident that these products would be approved within a short period. Currently however, due to the competitive nature of the industry and the fact that large pharma companies are facing an internal shortage of new drugs, earlier development projects are being undertaken to supplement product pipelines.
This strategy comes with its own risks. Concerns of safety and efficacy have made biotech a high-risk area. Therefore, more early-stage investments in biotech entail lowered certainty and greater risk for pharmaceutical companies. Additionally, early-stage deals require specific skill sets that need to be managed effectively. Therefore, pharma companies must be clear during the decision-making process about when to terminate a project and when to continue.
"Strategic alliances are not just a competitive tool for companies, but a tool for survival and it is important to manage these alliances as effectively as managing one's own in-house research team to make sure companies benefit the most out of their partnerships," says Ms. Mudhar. "The only way the success or failure of an alliance can be influenced is by creating a common definition and understanding expectations, assuring commitment and trust between parties and by considering specific contingency actions."
Essentially before the deal, researching the objectives and expectations of the other party and ensuring that there is a process to manage the alliance and appropriate levels of communication and a relationship will help obtain success. The alliance mindset should be promoted throughout the organisation through a strong partnership.
