Translating Biomedical Innovation / Mental Health and well being
Managing Ideas: Commercialization Strategies for Biotechnology
This article by Joshua and Scott Focuses on the commercialization aspect of biotechnology and stresses how important it is for innovators in the new and fast developing field of biotechnology to effectively forge collaboration with existing pharmaceutical market leaders in order to successfully create a new and strong value proposition for the healthcare sector. Biotech firms have not been able to challenge traditional pharmaceutical companies as they were expected to. The market control of powerful pharmaceutical giants, the risk of expropriation of innovations and the poor integration strategies are responsible for why many biotech firms struggle for their survival. Already faced with huge costs of innovation, biotech firms also have to deal with more hurdles in the form of product development, regulatory issues, marketing and distribution challenges. These challenges explain why biotech innovators have not been able to displace the established pharmaceutical firms. These challenges also explain why we see an increasing number of contracts and collaborations between biotech firms and pharmaceuticals. The authors of the article discuss the various strategic and business issues pertaining to the trend of cooperation between biotech innovators and established pharmaceutical companies. The authors also discuss the advantages and the dangers involved in such a business strategy for the innovator.
As an early and important case study (1978) of the smart strategic partnership between a biotech firm and pharmaceutical giant, the authors discuss the collaboration between Genentech and Eli Lilly for the successful production and marketing of human insulin. This, the authors point out, "set out the pattern of contracting," which is crucial for the success of innovative biotech breakthroughs. Carl Feldman, president of the biotechnology industry organization said, "strength…is reflected in the proliferation of collaborations and partnerships, which are the lifeblood of biotechnology. In year 2000, there were five times as many new deals between biotechnology companies and pharmaceutical companies as in 1993." [Joshua S. Gans, pg 6] These statistics reflect the growing trend towards collaboration as more and more biotech firms realize the advantage of collaborative partnerships with established pharmaceuticals in favor of developing an entire new value chain. This is because, invariably, the development and marketing costs of the new product is many times higher than the initial research costs. So entering a contract with a pharmaceutical company, which already has an established value chain, including the development, marketing and the regulatory process is a smart choice for the new biotech firms.
Having said this however, the authors also warn of the potential dangers in such collaborations in the absence of "effective intellectual property protection." The degree of appropriability or the ability to control innovative knowledge is crucial for the success of this collaboration. In the absence of strong appropriability it is possible that innovators would end up victims of expropriation. Though IP protection is widespread in the biotechnology domain, there are still significant challenges in 'patent portfolio management'. Weak IP protection limits the reign of a firm's technological leadership, as other competing firms are able to easily duplicate the innovation. So the choice of commercialization strategy is dictated by the two main factors namely, complementary assets that include the infrastructural and marketing capabilities and the degree of appropriability. (IP protection). The famous litigation between Amgen and Johnson & Johnson over the anemia drug EPO, is a clear instance of how the collaboration between a biotech innovator and a pharmaceutical partner could misfire. [pg 11] So the new biotech firm has to carefully assess the commercialization environment before it ventures into a strategic business partnership with existing pharmaceutical companies or decides upon independent production and commercialization. The latter approach, as the authors feel, is more feasible when there are less regulatory hurdles. A case in point is Genzyme opting to chose an independent commercialization strategy for its drug Ceregen, useful in the treatment of Gaucher's disease, a rare condition with no known cure in the past. Several factors including the rare and severe nature of the condition, easy identification of the patient base, and the low cost of development justified the choice of Genzyme to develop the entire value chain from the scratch. [Joshua S. Gans, 12]
The fear of expropriation affects potential...
Pharmaceutical companies can help to lessen these fears by developing good reputation and a policy of fairness in the collaboration. Also, signing non-disclosure agreements with the innovators could help to mitigate their concerns about the sharing of their ideas. The authors also point out the potential role for individual venture capitalists as third party 'idea brokers'. [Joshua S. Gans, pg 20] When IP protection is very strong, developing a new value chain is not cost effective. The market forces determine a natural trend towards collaboration. Under these conditions the probability of cooperation increases by 400%.
Success in innovation is determined by the profitability in commercialization of the innovation. Biotech firms have to make judicious business choices that increase their profitability. These include producing 'High quality innovations', making their innovation visible to potential partners, (to increase their bargaining power) and excellent appreciation of the advantages of independence over contracting along the different stages (early innovation, refinement, production, regulatory hurdles, marketing, etc.) of the product development. In short, success for biotech companies lies in their focusing on their core competence, producing high quality innovations and forging collaboration with established commercialization partners. Paradoxical, as the authors surmise, this might necessitate biotech firms to cooperate with "precisely those firms who might have been their biggest competitor." [Joshua S. Gans, 19]
1) Joshua S. Gans & Scott Stern, 'Managing Ideas: Commercialization Strategies for Biotechnology', Melbourne Business School.
Sponsored Research and Public rights to Know
In the article 'Sponsored Research and Public rights to Know', Raymond Fresko and Hind Merabet explore bioethical issues involved in the scientific research collaborations between the academic institutions, government laboratories and the corporate sector. The authors discuss how the government has introduced rules and regulations pertaining to funds allocation for research and promotion of increased collaboration between the three contributors at the same time protecting institutional interests and public health interests. In particular, the article focuses on the bioethics of the promising, controversial and fast developing field of human embryonic stem cell research. With the growing public and political outcry about the ethics of production, and use of human embryos, public funding for research in this area has been limited giving rise to an increase in growth of privately funded research. The authors express their concern that this financial aspect of the research, either institutional or privately funded, has a contorting effect on the dissemination of the findings of the research. This article focuses on the research cooperation between the three sectors namely the academics, federal and corporate sectors and the conflicts of interest arising out of their different vested interests.
The Bayh-Dole Act of 1980 is widely regarded as the main government initiative to formalize and to promote the relationship between academic and federal research labs and private corporations. This act is credited with the promotion of "collaboration between commercial concerns and nonprofit organizations, including universities, and facilitated "the utilization of inventions arising from federally supported research or development without unduly encumbering future research and discovery." [Raymond S. Fresko, pg 104]. To follow suit was the amendments to the Stevenson Wydler technology act that permitted government laboratories and research facilities to directly enter into collaborative research and development agreements (CRADA) with private research firms and educational institutions. The goal of the act was to make available federal research facilities and personnel for collaborative research, with the funding contributed by the private research firms. The Federal Technology Transfer Act was also suitably amended to let these private companies retain the licensing rights for such research. As a success of such collaboration the authors point out the successful development of the cancer drug, Taxol that was the most popular anti-cancer drug of the year 2001.
The field of embryonic stem cell research however, was hampered by funding constraints with the 1996 government ban on the use of federal funding for research on embryos that were "destroyed, discarded, or knowingly subjected to risk or injury or death greater than that allowed for research on fetuses in utero" [pg 104]. In 2000, the National Institute of Health released new guidelines for federally funded research on embryonic stem cells breaking the impasse that had totally stalled the federal research in the field. The new guideline permitted embryonic stem cell research, "only if the cells were derived without Federal funds from human embryos that were created for the purposes of fertility treatment and were in excess of the clinical need of the individuals seeking such treatment." [Raymond S. Fresko pg 105] Also, the government ruling in Aug 9, 2001, restricted the research on embryonic stem cells only to stem lines derived at that time. These limitations had an overall effect of diverting most of the research on embryonic stem cells to the private…
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