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Leadership Matters: August 2010 Archives

August 2010 Archives

Collaborative partnerships need more than a good product to be successful

Collaborative partnerships are of increasing importance for successful innovation within the life sciences industry[1]. Innovation within the pharmaceutical companies today is not comparable to that of 15 or 20 years ago. One would have to go back to the early 1990s or even the late 1980s to find the 'old' in-house pharma research model working successfully in producing blockbuster, breakthrough treatments for unmet medical needs.

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Today, old-fashioned in-house research is no longer tenable and pharmaceutical companies increasingly focus on making deals where they can and as early as they can to support their ailing pipelines and fuel innovation[2]. 

There's a tension developing: the pharmaceutical companies 'need' biotech companies to bring selective resources and fuel innovation, while the biotech companies, who feel almost 'forced', due to lack of available financing, must "progress" by making an early stage deal with a pharmaceutical company. You would think this would be a great fit - two parties who are in genuine need of each other. Not so fast:

1. Collaborative partnerships have often been unsuccessful. The statistics are not good - about ~60-70% fail to deliver the intended outcome[3].

2. Pharma-biotech collaborative partnership failure has many causes, but according to surveys, the most-often cited reasons are product failure and drastic market change[4]. Look more closely at the survey results, and you'll see that following those two explanations, the most often-cited reasons for failure in collaborative partnerships relate to what many people feel are true "givens" when it comes to forming, executing and terminating collaborative partnerships: issues such as poor communication, ineffective alliance leadership, unclear definition of roles and responsibilities, weak partner commitment and differences in partner cultures. These can lead to big trouble in a collaborative partnership and, importantly, have little to do with the objective scientific merits of a drug in development.

3. Formation of early collaborative partnerships usually has relatively low risk for the pharmaceutical company. For them the fee to be paid when signing the contract is usually relatively modest and the risk is mostly related to the ultimate license fee to be paid when the product would become commercially successful. 
The biotech company, on the other hand is taking great risk. Its leadership and governance board are often not sure about the pharmaceutical company's drivers, motivation and commitment, is usually inexperienced to dealing with the particular pharmaceutical company and more over is resource constraint and cultural adverse.
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Add to this the culture clash: when a large established pharmaceutical company establishes a new collaborative partnership with a small, or medium sized biotech organization, the people, the operations, the organization and the culture are vastly different, and this leads to problems if not addressed early on.

The above factors illustrates the increasing 'tension field': a relationship-management tension field.

How the leadership teams of the two partnering organizations deal with these issues will effectively determine a collaborative partnership's ultimate success. In fact, addressing the culture gap is just as important for the success of the collaboration as the scientific value of the product being developed. Unfortunately, currently this aspect is often overlooked in favor of the technical and legal aspects in forming a collaborative partnership.

In light of the changing R&D environment we will see an increasing amount of collaborative partnerships being formed, as the life sciences industry will continue to change into an industry where collaboration becomes critical for innovative success. 

A favorable outcome for innovation will depend to a large extent on the way the collaborative partnerships are formed, executed and terminated - therefore those who can "create value at the interface". A successfully completed or transformed collaborative partnership can even be a successful 'entry' into another collaboration later on, leading to more innovation.

1] Reinhoudt, J., (2010). Collaboration to Innovate - Changes in the Life Sciences Industry and the Increasing Importance of Collaborative Partnerships for Successful Innovation.
[2] Douglas, J., (2010). Big Pharma Won't Wait in Rush for Biotech's Drugs. Washington Journal Online
[3] Hughes, J., Weiss, J., (2007). Simple Rules for Making Alliances Work. Harvard Business Review, 122-131
[4] Brower, A., (2005). Biotech-Pharma Partnerships Reach All-Time High. Biotechnology Healthcare, 18-20

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