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The importance of R&D alliances in the biopharma industry has grown markedly in the past decade. For example, it has been noted that US$100 billion — or ∼25% — of prescription drug sales of the 55 largest pharmaceutical companies globally in 2005 were derived from licensed products1, a percentage that seems likely to be higher in the future given the flurry of partnering activity in recent years.

With executives at larger biopharma companies increasingly looking externally for opportunities to boost R&D productivity, the probability of success of an externally sourced product and the factors that could affect this are understandably the topic of considerable debate. An article in this month's issue by Czerepak and Ryser aims to provide some insight on this issue by analysing the origins of drugs that were approved by the US FDA in the past 2 years, as well as those of drugs that failed in Phase III trials.

As reported on page 197, of the 103 FDA drug approvals from January 2006 to December 2007, almost half were for products developed by biotech companies alone. When including partnered or acquired products too, nearly two-thirds of the FDA approvals were for products originating from the biotech industry, which is in line with the general perception of the increasing importance of biotech companies as a source of new drugs.

However, during the same period — in which there was one Phase III failure on average for each FDA approval — three-quarters of the failures were for products developed by biotech companies alone. Furthermore, when considering novel drugs (rather than 'me-toos' or line extensions), the rate of failure of products developed by biotech companies alone was considerably higher: on average, biotech companies had 4.7 Phase III failures for each approval of a novel drug, compared with 1.6 Phase III failures for each approval of a novel drug overall in this time.

There are multiple factors that might underlie the higher failure rates of products from biotech companies observed in the past 2 years. For example, biotech companies are often focused on therapeutic areas such as cancer that seem to have inherently higher failure rates compared with other areas. However, another factor suggested by Czerepak and Ryser might be more readily tackled: many clinical failures originating from biotech companies might be the result of underfunding, which could be associated with suboptimal clinical staffing and clinical programme design. This possibility is also supported by another of their observations that three-quarters of the products having 3-month regulatory delays were from biotech companies, which they suggest might have been due to poor-quality regulatory submissions, rather than flaws in the drugs themselves.

Previous studies provide further evidence that improving the quality of late-stage development and regulatory submissions could have significant impact on the likelihood of approval of novel products from smaller biotech companies. For example, an independent report analysing differences between regulatory applications that were approved in the first 'cycle' of FDA review and those that went through multiple review cycles before being approved found that small US biotech companies had a first-cycle approval rate of 33%, compared with 64% for US-based large pharma companies2. Indeed, the report also notes that, according to FDA reviewers, unfamiliarity with FDA regulations and the drug application process is a key problem for inexperienced sponsor companies and leads to poor-quality submissions2.

So, as well as the obvious benefit to larger companies of a boost to dwindling internal pipelines through external partnerships, smaller companies with innovative, high-potential products could also benefit significantly from the clinical and regulatory experience of larger companies. Although it might be anticipated that larger companies would have already identified and partnered such products, Czerepak and Ryser suggest that this is not necessarily the case on the basis of their analysis of the Phase III failures. Given the continuing drought of new drug approvals, it is to be hoped that the growth in emphasis on partnerships in recent years could lead to their potential to improve the productivity of the industry overall being more fully realized.