Biotech & Pharma Partnering Survey by BCG

Boston Consulting Group have announced the results of their latest "Biotech and Pharma Partnering Study". Subtitled "Partnering in a new era of challenged expectations" it highlights some of the trends in licensing that have emerged in the wake of the financial crisis.

With fewer exits available, biotechs and their investors are increasingly dependent on pharma deals to realise value. This has translated into a growing emphasis on the part of licensors for partners that offer hard capabilities such as sales & marketing expertise, clinical capabilities and even manufacturing capabilities. There was a corresponding decline in the importance of soft factors such as 'fit with corporate culture' and the importance of licensees being responsive, easy to work with and good at managing alliances.

Companies that have previously been perceived as lower performers in partnering exhibit the most positive growth in perceptions - possibly due to the need to stand out in the fierce competition for quality assets - while the large players remain relatively fixed. While the major players have maintained their good reputations, they do not have a marked advantage in partnering attributes as hard-headed licensors look at capabilities over culture in choosing a partner. Other sites to have chewed over the results include In Vivo Blog and Fierce Biotech.

Overall, the top 'buy-side' licensees identified by the BCG survey are largely unchanged from previous years: Merck, Roche, GSK, Lilly and Novartis make up the top five along with Celgene as a new entrant. This is similar to the results of IBM's "Life Science Partnering" survey published in December 2010. The order of the remaining 20 major licensees included in the survey is not revealed, a sensible precaution given that many of the companies are involved with BCG in the survey process.

Collaboration in Life Science Partnering Survey

According to IBM's recent report "Collaborative innovation: Partnering for success in Life Sciences", the seven pharmaceutical companies that biotech firms have most wanted to work with over the past four years are also those with the strongest financial records. Between 2006 and 2008, they enjoyed higher sales growth and earned higher returns on invested capital than the least desirable partners.

Although the survey identifies Lilly, Roche/Genentech and GlaxoSmithKline as the three companies with which biotech executives most want to partner, it tactfully fails to identify the stragglers. However, it does state that the companies that routinely tag along at the rear are widely criticized for being too slow, too bureaucratic and too aggressive, that are “easily outflanked by smaller and nimbler firms”.

Other insights include the fact that biotech companies are now forming more national or regional partnerships, rather than global agreements. This enables them to strike a harder bargain as "most biotech executives have also realized that adopting a national or regional approach increases the odds of forging a strong partnership. They can get direct access to top management in the subsidiary, rather than going through global channels and having to liaise with a relatively junior business development manager". The trend may also reflect that life sciences CEOs and senior managers are "particularly anxious about the shift of economic power to emerging markets, the growing role of government and the trend toward globalization".

The report concludes that three elements are required to become a “partner of choice” and top-performing R&D organization:

• A strategy and target operating model with collaboration at its core
• A collaborative information structure to support the “to-be” operating model
• Active experimentation with the components of the networked R&D model.

Unsurprisingly, given that IBM is primarily an IT company, they expand on the premise that "the second step in effective partnering is to establish an information infrastructure – or 'infostructure' – to support external collaboration. This includes existing collaboration tools and networks such as shared infrastructure, platform and software models; health and patient information exchanges; and scientific social networking tools".

They conclude that business development groups need to prepare for a future in which R&D is not collaborative but networked. In this model, the traditional licensing function would give way to "a function responsible for coordinating a company’s collaborative activities and providing specialist skills like deal structuring, but which does not initiate or manage most of the partnerships itself. Rather than relying on the current model of alliance management, pharmaceutical companies will therefore have to adopt a new model in which every contact is treated as a potential part of their collaborative R&D ecosystems".