Big Pharma is at a turning point. The shortage of new drugs in the development pipeline that can replace current blockbusters , the expiration of important patents, and intense competition from generic drug producers is putting incredible pressure on companies to innovate more and to do it less expensively.
What to do? The answer proposed by a group of IBM life sciences consultants: Large pharmaceutical companies should form robust R&D networks, combining their skills and expertise with those of academics and other companies to take on the challenges of developing new treatments for diseases.
Most large pharmaceutical companies have focused on traditional drug development approaches–doing all or most of their research internally. Many have augmented this through collaborations with other companies, often biotech firms,.. But Stuart Henderson and Per Lindell, two IBM life sciences consultants, believe that those hub-and-spoke collaborations won’t be sufficient. Companies need to create true collaboration networks where they and their partners fully tap into each others’ expertise and share efforts on an ongoing basis. “It’s hard to know where the next big insight will come from. No one company can know all of it. So you need to build a network of knowledge and capability,” says Lindell.
This argument is an outgrowth of IBM’s 2010 biopartnering study, the sixth to be conducted since 1999, which assesses how well the 24 biggest biopharmaceutical companies interact with small biotech firms and academia. The top-ranked companies this year are Roche, Genentech, AstraZenica, Lilly, and GlaxoSmithKline.
This year’s study uncovered a correlation between popularity as a collaboration partner and financial performance. The pharmaceutical companies that biotech companies have most wanted to work with over the past four years also had the strongest financial records. They produced higher sales growth and better returns on invested capital. “We’ve proved that financial results are connected to collaborative innovation. This is a critical capability that pharma companies need to have,” says Henderson.
Henderson and Lindell lay out their case in a new report, Collaborative Innovation: Partnering for Success in Life Sciences, which they co-authored along with IBMers Salima Lin, Heather Fraser, and Tiffany Yu. The report is based on the results of this year’s biopartnering study. It’s available here.
So far, no large pharmaceutical firm has developed a robust R&D network, but several are working up strategies. Lilly, for example, is implementing a strategy it calls the fully-integrated pharmaceutical network, or FIPNet. The idea is to diversify its sources of innovation, its research talent pool, and its access to capital. As part of the strategy, it’s sourcing clinical trials and drug discovery efforts with partners around the world including India and China.
R&D networks require new business processes and information technologies capable of managing globally-distributed projects and complex relationships between companies. This is an area where IBM plans on playing a central role. It’s building cloud computing services where multiple companies can share data and coordinate activities on deep, sustained basis. In addition, there will be opportunities to use advanced analytics to measure the effectiveness of collaborations and to improve their performance, and to use social networking to make connections between organizations. “We can help enable the collision of people and ideas,” says Henderson.
The iconic organizational model for businesses in the 20th Century was the large, monolithic corporation. It could be that the most important organizational model of the 21st Century will be the innovation network.