The rise of open source drug R&D in consortia involving big pharma should prompt some biotech companies to re-examine their businesses.
Precompetitive collaborations among pharmaceutical companies are increasingly in vogue. They take the form of public–private partnerships or consortia, in which drug makers swap knowledge, data and resources with one another, as well as government agencies, non-profits and academic institutions, for the benefit of all. Their aim is to tackle collectively shared bottlenecks in early-stage biomedical research to both spur innovation and increase the productivity of drug research. As a byproduct, these consortia disrupt the business space for biotech companies, radically transforming the intellectual property (IP) landscape for biomedical technologies and platforms, and severely eroding the market. Indeed, businesses that depend on big pharma paying premium prices for access to proprietary technologies should probably rethink their strategy if consortia become active in their field.
Tackling the problems that hamper pharmaceutical R&D and the high attrition of new drug compounds is a big ask—often too big for companies to tackle alone. All of which is leading big pharma to increasingly embrace precompetitive collaborations.
Around 50 or so of these public-private partnerships exist today, the biggest of which is the European Union's Innovative Medicines Initiative (IMI; http://imi.europa.eu/index_en.html). IMI is attempting to address challenges designed by drug companies in areas such as predictive pharmacology and toxicology, patient recruitment and the validation of biomarkers. Biomarkers are also the focus for the Biomarkers Consortium, a 2006 public-private initiative of the Foundation for the National Institutes of Health, and for the Predictive Safety Testing Consortium. Other collegial approaches involve (some) open access to what companies once regarded as their precious pharmaceutical resources. Thus, in May GlaxoSmithKline and Novartis of Basel between them deposited over 18,000 chemical structures active against the malaria parasite into the European Bioinformatics Institute's open source database ChEMBL Neglected Tropical Disease archive (p. 675). The same month, Pfizer invited outside collaborators to screen a structure-blinded subset of its own compounds in return for limited co-development rights on any optimized leads. And last year, Eli Lilly launched its Phenotypic Drug Discovery initiative, sourcing compounds from outside organizations and offering to screen them against its own set of biochemical, cell-based and secondary assays.
Most of these consortium arrangements involve a mix of other large drug makers, government agencies, not-for-profit organizations and academic institutions. Pharma sees the benefit from avoiding duplication of research and breaking down preexisting 'silos' of expertise in early stage research. But there remains a question: what, if anything, is in them for innovative biotech companies?
The truth is that many biotechs stand to lose more than they will gain. Open consortia can severely undermine their businesses, particularly those based on providing platform technologies and techniques. When a pharma company puts its resources into a collaboration, it is contributing not only a minuscule proportion of its total assets, but also assets from which it is currently deriving little value. A biotech's contribution may be much smaller in absolute terms, but it still is likely to be a larger slice of that company's IP. Thus, if the consortium achieves its goal, pharma R&D is facilitated, but commercial opportunities for biotech firms previously operating in the area are likely to be reduced.
For example, imagine that a consortium finds a way around the predictive toxicity challenge. Both pharma and biotech get better toxicity studies—only the small companies don't have compounds to do toxicology. Similar arguments could be made for biomarkers of disease progression or treatment outcomes. And co-development rights are of little value to a small company without the resources for co-development.
Similarly, the Pistoia Alliance (http://pistoiaalliance.org/) consortium, which is attempting to streamline noncompetitive elements of drug discovery workflow by developing open standards for common scientific and business terms, relationships and processes, offers little incentive for biotech companies currently offering systems modeling packages to participate. Why would they when Pistoia's goal essentially undermines their IP and expertise in controlled vocabularies, data structures and modeling tools—tools that have taken huge amounts of investment to create.
Of course, there are upsides if biotech companies are fleet and agile enough to recognize them. First, although consortia rarely pay premium rates for access to technology, there may nevertheless be fee-for-service elements and, ultimately, some form of technology licensing that, at the least, helps a biotech with nondilutive cash flow in constrained times. Second, biotechs participating in consortia should be able to better benchmark the value of their own contribution both because of access to innovative research coming from academic partners (the future technology threat) and because of access to pharma partners in the consortium (potential customers). Third, IP agreements that fence in many of the consortia will help clarify freedom-to-operate challenges, like those that currently beset such areas as stem cells or gene patents for diagnostics. And finally, the biggest advantage of all to a biotech company may be that the consortium's very existence sends a message about a forthcoming change in the market. That message is very loud and very clear: we, the pharma industry, have identified a tractable problem and we are going to solve it with whatever help we need. When we do, the value of biotech's parallel solutions will plummet and the market will become commoditized.
The formation of R&D consortia does not necessarily signal impending doom for biotechs. Instead, it should be a sign that they need to participate, take what they can get and reorient their business in a direction that does not compete with the consortium outputs. In essence, the formation of a consortium should act as a Damascene conversion for biotech management to look for new ways of developing their business. Crass as it sounds, as far as consortia are concerned, biotechs should take the money and then run with it—preferably in a new direction.
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Industry-Academia Partnership: The Synthesis and Solid-State Pharmaceutical Centre (SSPC) as a Collaborative Approach from Molecule to Medicine
Chemistry - A European Journal (2018)