LONDON, UK (GlobalData), 27 June 2012 - Arising from the murmurings and chatter emanating from the 2012 BIO International Convention was a common theme – the need for added collaboration amongst all players in the pharmaceutical industry to spur innovation. While common buzz words such as ‘collaboration’ are handed out like candy at these conventions, this time the industry seems more serious about how to build strategic partnerships to address the grave headwinds it faces. At present there the landscape consists of unimpressive pipelines, “patent-cliffs”, shrinking research and development (R&D) budgets, government austerity, regulatory uncertainty, “valleys of death”, and declining venture capital investment – or as one industry executive described it, a “resource-constrained environment”. GlobalData believes there is a growing consensus in the industry that these challenges must be met collectively by bringing together public, private and governmental organizations to create multi-lateral collaborations to drive the next wave of scientific discovery. However, a lack of incentives, the high-cost of research and access to funding create structural barriers to forming effective private-public collaborations.
One arena where the effectiveness of such collaborations can be put to the test is in drug R&D. The current R&D paradigm is filled with inefficiencies, duplicative efforts and wasted resources resulting in an unsustainable system that is expensive and cumbersome. However, this no longer has to be the case. There is a rising need in the industry to shift from this old, inflexible and partitioned R&D paradigm to a more collective and open ecosystem that fosters creativity. One concept, coined by Ernst & Young, is “The HOLNet”, or Holistic Open Learning Network. In a nutshell, the HOLNet concept is a model where private and public entities come together to align and share resources across the entire value chain matching patient outcomes with R&D dollars. We contend that most partnerships are of this ilk, where the parties involved aggregate the human, scientific and financial resources toward a certain goal or objective. However, the HOLNet approach is slightly different in that the model’s foundation is based on openness and “pre-competitive information sharing” – a cultural shift for an industry with a high level of reluctance to share anything.
While the phrase “pre-competitive information sharing” has an elusive definition, the crux behind the idea is to establish private-public partnerships that support the discovery of new medicines through open access to research by putting all research data and outputs into the public domain without a patent, with the goal of bringing more novel targets to proof of concept phase. This essentially creates a “patent-free zone” explicitly for science, devoid of any profit-motive. Two of the more interesting examples of private-public partnerships founded on the idea of pre-competitive information sharing which were highlighted during the 2012 BIO Convention are the National Center for Advancing Translational Sciences (NCATS) and the Structural Genomics Consortium (SGC).
NCATS was established in 2012 and falls under the auspices of the National Institutes of Health. The center strives to develop “innovations to reduce, and remove or bypass costly and time-consuming bottlenecks in the translational research pipeline in an effort to speed the delivery of new drugs, diagnostics and medical devices to patients”. NCATS organizes its research programs into three working groups; Clinical and Translational Sciences, Rare Disease Research and Therapeutics, and Re-engineering Translational Sciences. While NCATS is not a drug development center, it does serve as a hub for pre-competitive collaborations with pharmaceutical companies. In May, NCATS unveiled a pilot program called Discovering New Therapeutic uses for Existing Molecules, a collaboration which matches researchers with 58 (and counting) donated compounds by eight private drug companies. These bequeathed compounds have advanced from discovery to clinical trials, but have not been successful in treating its original target or have not been pursued any further by industry for commercial reasons. Since approximately 51% of Phase II failures are due to lack of efficacy – the drug is safe, but not effective – the idea of ‘rescuing’ or ‘repurposing’ these existing compounds for new therapeutic uses, such as a previously unexplored disease target, would significantly reduce the amount of development cost and time it takes to get treatments to patients in need. More importantly, these ‘crowd-sourced’ compounds are stored in a publicly accessible database that includes information regarding mechanism of action, route of administration and limitations in usage based on toxicity.
In addition to NCATS, the SGC is another organization that has been engaging in pre-competitive research. The SGC is a not-for-profit, public-private partnership with the directive to determine on a large scale, and cost-effectively, the 3D structures of human proteins and proteins from human parasites. Since proteins serve many purposes and perform essential functions in the human body, it is not surprising that when an individual is sick it is often due to a protein acting abnormally. In order to work effectively, medicines must find the right protein, like a key lock; therefore, knowing the shape or structure of a protein enables drug researchers to design drugs with molecules that fit the specific structure which can speed up the discovery of targeted therapies for diseases such as cancer. As of September 2011, the SGC has deposited the structures of over 1,200 proteins into the Protein Data Bank, an open-access repository for 3D structural data of proteins and nucleic acids submitted by biologists and biochemists from around the world and released into the public domain which can be accessed for free. Current funders of the SGC include; GSK, Eli Lilly, Pfizer, Novartis Research Foundation, the Wellcome Trust, and many Canadian granting agencies. Recently, these organizations together have committed over $50 million to this consortium to sustain operations for another four years.
So, what barriers exist to forming promising private-public collaborations such as these? Research is expensive. Drug companies are becoming increasingly more vigilant on how they spend their R&D dollars, making ‘bolt-on’ acquisitions to augment pipelines more attractive than bringing a drug through clinical development. Sentence structure… Also, structural genomics research comes with a high price tag. It costs approximately one million dollars to determine the structure of a new protein, and there are more than 20,000 different proteins in the human body, with researchers knowing the shapes of only about 10% of them. On the public side, funds dedicated to government sponsored research have remained either flat or have declined when adjusted for inflation. In fact, it has been nearly 10 years since the National Institutes of Health budget has been doubled – which by the way, led to the human genome project.
Even more discouraging, the ‘brain-trust’ that makes up our political system seems to be paralyzed on how to approach the nation’s impending ‘fiscal cliff’ – a collection of tax and debt policies which are set to expire this summer. Stock markets panicked last year due to hostile talks between the White House and congressional Republicans pushed the federal government toward the brink of default. The Dow Jones Industrial Average plunged more than 15% between late July and the start of October, a downturn that could easily be repeated this summer. As a result of negotiations stemming from the Budget Control Act of 2011, if a deal is not reached this year, an automatic ‘trigger’ results in sequestration provisions taking place, which could result in an 8% spending cut across the board in government programs. This means the NIH could be slated to lose approximately $2.4 billion, or about 2,300 research grants, accounting for 25% of its portfolio heading into 2013.
Beyond these cost and budgetary hurdles, collaborations are just not sexy. The frameworks of these private-public partnerships are not structured to fit nicely into quarterly earnings calls and results from these collaborations are not recognized in a company’s stock price, with forthcoming news only buried in corporate websites. Moreover, CEOs in the private sector must show a return-on-investment to shareholders to justify a particular venture, and shareholders want that return on interest now, not several years down the road when these infant collaborations begin to bear fruit. There is also a question of corporate stewardship. According to the Conference Board’s 2012 edition of CEO Succession Practices report, average tenure of a CEO declined to 8.4 years in 2011 from approximately 10 years in 2000. This has possibly led to myopia among management teams with short-term thinking becoming the prevailing wisdom, but these types of collaborations must be examined through an ‘inter-generational lens’, being handed-off from CEO to CEO, like a family heirloom. This interim view combined with hastened turnover and immediacy on behalf of shareholders has created an environment barren of incentives to lure management to dedicate the necessary monies toward collaborations. This has resulted in collaboration fatigue and partnerships that largely go underfunded, never be heard from again.
Thoughts from BIO 2012: Collaboration, Not Competition, Could Spur Innovation, but Barriers Remain
This expert insight was written by Adam M. Dion, Analyst, Healthcare Industry Dynamics Team for GlobalData.
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