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STRATEGIC RISING:
Models of Engagement for Research and Development
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By Cedric Bisson, Teralys Capital
Most industry observers would agree on the dynamics facing today’s biopharmaceutical industry: patent cliffs and lost pharma revenues; R&D pipeline productivity; challenging reimbursement landscape; and the list goes on. These occur on a backdrop of accelerated scientifi c innovation at a global scale, advances within regulatory bodies, patient population expansion (via coverage or new markets), search for effi ciency and cost-effectiveness (and cost control), new cross-border opportunities (for instance, the EU-Canada agreements), and ever more informed group of patients worldwide demanding real innovation.
Models of engagement
Against this backdrop, strategic pharma players have been exploring various models to tackle their research and development issues, with each pharma company often combining many models as part of its portfolio of approaches. At the traditional level, pharma still concludes academic collaborations, and they are sometimes large (e.g., Pfi zer’s $100 million investment in the Boston Centers for Therapeutic Innovation), but one could argue that these laudable efforts does change the internal risk-averse culture within big pharma.
More interestingly, pharma’s involvement with new models of accelerators and incubators signal a desire to get closer to early stage drug development (often stemming from academic labs) and to apply a translational approach to it. In Canada, investments from AstraZeneca, Merck Pfi zer GlaxoSmithKline, Boehringer, Eli Lilly, and Novartis in the CQDM represent a novel way to validate and test pre-competitive tools that improve R&D productivity. Likewise, Johnson & Johnson and Pfi zer, among others, have invested in novel types of incubators, such as QB3 in San Francisco and LabCentral in Boston, whereby these incubators are located near innovative university campuses or in downtown locations, and act as magnets for new and emerging younger talent into biotech startup companies by means of their creative architectural design, low and fl exible rental costs, and access to big pharma and top academics for mentoring purposes.
Other strategic players have decided to invest in or create funds. Much has been written about the rise of corporate venture capital, which today is an essential component of many stage deals. In fact, most global pharma companies have some kind of corporate VC effort, with various degrees of strategic alignment on corporate priorities. Some pharma companies go further and pursue exhaustive strategies to invest in external funds with an asset-based investment model. Eli Lilly’s investment in TVM Capital, or GlaxoSmithKline’s and Johnson & Johnson’s investments in Index Ventures, illustrate such approaches.
Finally, pharma companies have been working with small biotech companies for decades, and the pace keeps on getting stronger (perhaps slowed down by the better valuations some companies had recently been enjoying from public markets). Beyond traditional M&A or licensing models, there is renewed interest for deals that provide a unique pipeline boost, either at the platform level (Vancouver’s Zymeworks collaborations on bi-specifi c antibody therapeutics with Eli Lilly and Merck) or on specifi c therapeutic areas and compounds. With regards to the latter, Versant Ventures’ investment with Roche in an Inception company focused on sensorineural hearing loss, or Sanofi ’s investment in Third Rock Ventures” Voyager Therepeutics for gene therapy, are both examples of structuring an exit upon the achievement of certain milestones.
Implications for Canada
What does this mean for Canadian researchers and universities? In a world where assets and technologies are benchmarked globally, and where economic value and reimbursement are driven by the novelty of a drug and its unique place in the treatment armamentarium, only the best research on clinically and commercially meaningful opportunities will fi nd buyers. Canadian researchers therefore must continue their pursuit for excellence and be bold enough to develop truly novel innovation that will attract the attention of strategic pharma companies and headquarters.
Canadians would also be well served to expand their good local pharma connections and to build direct bridges with global R&D headquarters across the world. Researches, tech transfer offi ces, incubators also need to expand their global connections and to pursue innovation champions regardless of their location in the corporate structure.
At the industry level, while there is no denying the importance of established pharma companies, it sometimes pays to be a contrarian (the recent increase in gene therapy deals before pharma companies regained interest, is a good example). It is also a probably a good idea to expand reach beyond very large pharma companies into the increasing web of large biotech companies – the club of biotech companies with valuations in excess of $1 billion may indeed represent another source of untapped opportunities.
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