|  |
Cultivating Prosperous Partnerships
Like dedicated gardeners -- who know that it's not enough to merely plant seeds and bulbs to create a flourishing landscape -- pharmaceutical companies have come to realize that tending to their partnering relationships is critical to achieving the best results.
And, as the speakers at this month's Allicense 2002 conference in San Francisco stated so clearly, there's no question that corporate alliances are as essential to the continued success of large pharmaceutical companies as they are to biotechnology firms of all sizes. Even the youngest biotech firm has at least one collaboration -- and a multinational pharmaceutical house has hundreds.
But that doesn't mean that each alliance will be a winner. In fact, the partnering landscape is littered with deals that have gone bad, for one reason or another. The trick comes in managing these alliances, to the benefit of both partners. For, no matter how carefully or cleverly they've been constructed to begin with, collaborations are dynamic in nature. Goals are refined or even redefined as results accumulate, the individuals associated with the projects may come and go, and conflicts will inevitably pop up. But it's still possible to create and maintain a successful alliance -- if it's managed properly.
"Partnering is the cornerstone to success," explained David Thompson, the VP of corporate strategy and business development at Eli Lilly and Co. According to Thompson, "35 to 40 percent of Lilly's assets are partnered in." In 2001, Lilly signed 15 discovery alliances, he continued, including the ground-breaking drug discovery/late-stage drug development deal with Isis Pharmaceuticals Inc.
But Lilly also out-licenses compounds, a strategy that's created an incremental value to Lilly of about $700 million over the last two years. "We have to manage the flow of assets in and out to create the best value," Thompson said.
To do that, Lilly created an Office of Alliance Management (OAM) in 1999. The OAM is staffed by 15 people who are dedicated solely to managing alliances, he explained. These individuals are not the project managers; instead, they serve as "ombudsmen with clout," Thompson said. For instance, Lilly has developed specific interventions for resolving conflicts that may arise between itself and a partner; it's also developed ways to solve problems collaboratively. As well, the company conducts a Voice of Alliance Survey, which "measures key issues and key gaps between Lilly and its partners." According to Thompson, "This is tough work… The bigger you are, the harder it is."
Lilly isn't the only big pharma that's recognized the importance of managing its alliances. Aventis Pharma AG, which has about 400 active collaborations (including with universities as well as other companies), has also initiated an alliance management program, which is "still relatively new and not as advanced as Lilly's," according to Thomas Hofstaetter, the company's senior VP of corporate development. "It takes hard work for an alliance to succeed," he continued. "Hardly any alliance ever develops the way the negotiators envisioned. Some need to be adjusted to unforeseen changes, some fail for technical reasons or miss their targets, and many fail or don't deliver value because of poor management." Aventis' alliance management process -- which includes performance tracking, relationship audits and conflict resolution -- is designed to address these issues proactively.
"Alliances are here to stay," commented Goran Ando, Pharmacia Corp.'s executive VP and president of R&D. It's how they're managed that will be "a key determinant in their success or failure."
In fact, he said, Pharmacia is committed to partnering -- and its partnerships. (It currently has about 140 active partnerships.) "Alliances are an important way of risk-balancing our portfolio," Ando said. Pharmacia's goal is to have about 40 percent of its pipeline filled this way. Not only are "alliances a natural way for a pharmaceutical company to add to its pipeline," he continued, but the company can also add value by out-licensing or otherwise divesting products and technologies that are no longer key to its business objectives.
Thomas Picone, Pharmacia's VP of global licensing, also stressed the importance of managing alliances: "When you spend so much time putting these things together, management becomes very important."
There's another management issue that's cropped up, too, and it's going to become more significant over the next several years. Biotech companies are learning a lesson that big pharma has known for some time: Successful product development doesn't stop at approval, but must be maintained throughout the life of that product. In other words, it's important to manage the life cycle of a product to get maximum returns.
"The objective of any biotech company is to see its products through [the regulatory process] and to have success in the market," explained Kenneth Weg, chairman and co-founder of Clearview Projects Inc. The question is how a company can maximize that product's success. According to Weg, maximum sales and market share are driven by obtaining the broadest claims in the largest patient populations as well as competitive claims that allow a company to state that its product is superior to others on the market (or even in development). Moreover, a company can leverage its position even further by the order of market entry, the timing of new claims and promotional intensity.
"Partnering offers a strategic option for product life cycle management," he continued. Even after a product's been approved in its initial indication, the appropriate partner can provide funding as well additional resources for the development, clinical and regulatory work that will be necessary to develop new claims for the product. "The right partner will have expertise in life cycle management. Select your partners based on their record of successfully executing these strategies for their own and for biotech partner products."
Take, for example, Immunex Corp.'s rheumatoid arthritis (RA) drug Enbrel, which it partnered with Wyeth-Ayerst in 1997. Both partners met their strategic needs through this arrangement: Immunex retained its hold over clinical development while leveraging Wyeth's marketing capabilities; Wyeth added a significant new drug to its product portfolio and obtained worldwide marketing rights for all indications (except oncology). And, since Enbrel's initial approval in November 1998 (for treating moderately to severely active RA in patients who fail first-line therapy), Immunex has continued to pursue specialized arthritis labeling and new indications for the product. In each case, Weg said, the company's chosen markets with substantial patient populations and a high unmet medical need: moderately to severely active RA (300,000 - 600,000 patients), juvenile RA (50,000 - 70,000 patients in the U.S.), disease modification (2.5 million patients in the U.S.), psoriatic arthritis (2.5 million - 5 million in the U.S.) and, eventually, psoriasis (more than 7 million patients worldwide).
Idec Pharmaceuticals Inc. and Genentech Inc. have accomplished the same sort of thing with the anti-cancer monoclonal antibody Rituxan. The companies joined forces in 1995 to co-develop and co-commercialize the product, which was then in Phase II clinical trials. Here again, both parties met their goals, Weg said. Idec established a presence in the U.S. oncology market and Genentech added an important product to its growing oncology franchise.
First approved in November 1997 for treating relapsed or refractory low-grade B-cell non-Hodgkin's lymphoma (135,000 patients annually in the U.S.), the label was expanded in 1999 to include a longer course of treatment, to treat bulky disease, and for retreatment regimens. The partners are also pursuing Rituxan's use in immune thrombocytopenic purpura (100,000 patients in the U.S.), rheumatoid arthritis (2.5 million patients), autoimmune hemolytic anemia (150,000 patients) and other indications.
In order to build life cycle management into an alliance, Weg stressed, it's important for a company to develop an optimum profile for its product that extends to the fifth year post-launch -- a claim structure that can be anticipated based on preclinical and early clinical trial results. The optimum product profile might include the following elements: all expanded patient populations, expanded and improved dosing regimens, improved delivery systems, enlarged safety studies, new efficacy data, morbidity/mortality/survival data and enhanced competitive claims. "The optimum label five years post-launch will include claims of superiority," Weg said.
When a company puts together an optimized, though theoretical product profile, it's a fair assumption that not all the goals will be met; nonetheless, he added, creating the profile "does allow a company to conduct the trials to test the proof-of-principle."
The alliance garden is in full bloom. According to Recombinant Capital, sponsor of Allicense 2002, the number of new deals has increased by about 65 percent over the last six years. In 2001, biotechnology companies formed nearly 1,200 new alliances -- 442 with big pharma companies and 745 with other biotech firms.
Through alliances with biotech firms -- and often with each other -- big pharma companies are able to tap into new, pipeline-filling opportunities as well as out-license products that no longer fit their core business goals.
Like big pharmas, biotechs with one or more products on the market have found that they also need new sources of innovation, as well as late-stage products to fill the gaps in their pipelines. For this, they often turn to other biotechs, but they may also in-license products from big pharma.
The companies understand each other's strengths and weaknesses, they understand the advantages of working together -- and most of all, they understand what it takes to create and maintain fruitful partnerships.
originally published 04/18/2002 |