Hidden Risks for Pharma Companies Collaborating with Academia and Small Biotechs

The trend of multinational pharma companies partnering with academia and small biotechs continues unabated. But given the additional risks inherent in such collaborations, how many of these partnerships will eventually lead to innovative new medicines?

The original version of this article was initially published on March 15th, 2016 as an Expert View article on The Pharma Letter’s website.

The global trend in “David & Goliath” R&D partnerships continues unabated in biopharma. Every month sees a slew of new or expanded collaborations announced between large multinational pharma corporations (‘Goliath’) and small biotechs or academia (‘David’). Over twenty deals were announced in the first few weeks of 2016 alone, including AstraZeneca’s messenger RNA deal with Moderna Therapeutics, and Sanofi’s collaboration with Innate Pharma on bispecific NK cell engagers. An increasing number of these partnerships involve collaborative innovation, both sides work together hand-in-hand, each side contributing their unique skills, as illustrated from the press release of the Sanofi-Innate Pharma deal:

“Sanofi and Innate Pharma will work together on the generation and evaluation of up to two bispecific NK cell engagers, using technology from Innate Pharma and Sanofi’s proprietary bispecific antibody format as well as tumor targets.”

While such collaborative arrangements connect pharmas with the advanced scientific ideas and capabilities that could eventually deliver innovative drugs, they also come with greater risks, especially when both partners are dramatically mismatched.

Historically, earlier-stage pharma R&D projects have exhibited very low success rates owing to our still limited understanding of the human body. Such projects need to adapt to unexpected circumstances and overcome unanticipated issues along a long and winding road. What characterizes successful projects is their capacity to deal with the unexpected. But in a “David & Goliath” partnership, collaborative problem-solving is handicapped by fundamental differences in size, business processes and culture, increasing the potential for misunderstanding and miscommunication. In many cases, the impact of these effects can negate the scientific benefits for a pharma of tapping into small biotechs and academia.

Consider for instance how a multinational manages its portfolio, maintaining a large number of internal and partnered projects, prioritizing over time and terminating many along the way. In contrast, a small biotech has very few research programs. Having one terminated or delayed by its partner’s portfolio process could threaten its very existence; whereas for its partner, this is just “business as usual”.

Differences in decision-making process and speed can cause frustration. Many small biotechs and academia cannot begin to comprehend the multiple governance forums and corporate checks and balances of a complex multinational. And frequent reorganizations and job rotations in multinationals are confusing and irritating for small biotechs and academia who strongly value personal relationships.

Partnerships typically operate with shared leadership. The joint project team and joint steering committee usually comprise parallel leaders from each side for the different functional areas. This practice ensures oversight and clear communication channels—each side understands what the other is doing and captures learning. However, it also creates an additional communication load, and can be damaging if the individuals are misaligned or distrust each other.

Most small biotechs need frequent news flow to grow enterprise value and support fund-raising. And academics need to publish—they pursue scientifically interesting topics that lead to papers in highly-ranked journals, irrespective of whether any new medicines result from this research. In contrast, pharmas focus on commercially-viable outcomes and are greatly concerned about intellectual property leakage. Furthermore, although pharmas often seek academics to perform unique studies not available elsewhere, partnerships where the latter essentially operate as fee-for-service providers are demotivating to academia.

Multi-project industry-academic strategic alliances are getting more prevalent, some even with scientists from both sides working together in the same laboratory to discover new drug molecules:

However, industry-standard discovery projects are managed differently to academic programs, as one academic researcher commented:

“Tight milestones, managed timelines and clear go/no-go criteria can be very helpful, but they are also hard at first for us academics to operate with … there is less liberty to change the scope and pursue side findings. … it can feel quite stressful with the added discussion, communication and reporting workload.”

All the above factors create an unavoidable “collaboration tax”. At best this tax manifests itself as an increased communication load. At worst, it results in tensions and disagreements that bog the project down and severely impair its capacity to resolve the scientific and commercial issues that matter. Moreover, there is a tendency for both sides to stick to the letter of the contract rather than to engage in complex discussions when the situation would be better served by modifying the partnership’s scope and objectives. Such a scenario prevents the project from pursuing other related value-creating paths when unanticipated scientific readouts challenge the original project’s scientific premise, a not altogether uncommon occurrence.

R&D partnerships remain our industry’s best hope for generating more ground-breaking new medicines. Pharma companies need to become more partnering-savvy, able to work effectively on a day-to-day basis with a huge diversity of small biotechs and academic units. Deploying professional alliance managers (as many have done) is a good start, but companies could do even more to embed collaborative working skills and mindsets across their R&D organizations in order to mitigate the added systemic risks in David & Goliath alliances.