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R&D? S&D? It’s About Science

Posted on February 9th, 2016 by in Pharma R&D


Last month’s announcement that industry giants AstraZeneca, GSK, and Johnson & Johnson had teamed up with three well-regarded UK universities –Imperial College London, University College London, and University of Cambridge – to establish a £40 million ($56.6 million) translational research fund under the guise of Apollo Therapeutics, caught my attention.

It wasn’t the size of the deal; the sums involved aren’t extraordinary.   Each industry partner plans to contribute £10 million to the fund over the course of six years, while the Technology Transfer Offices of the three universities are each responsible for £3.3 million in contribution.

It wasn’t that the deal was particularly complex or that it embodied the concept of “coopetition” (especially among some big names). This type of alliance formation  has become commonplace as a means of satisfying the industry’s need for innovative new therapies and the academic center’s need for funding to incubate and sustain research.   In fact, this announcement served as a very simple reminder of what each party brings to the table and why these models have evolved.   Industry, especially the large players like those referenced here,  has the global scale to develop and commercialize, but pressures from investors, as well as the inherent decision-making by committee and bureaucracy that characterize large organizations, stand in the way of the type of wholesale risk-taking that fosters true, sustainable and large scale innovation.   Academia, on the other hand, is rich with understanding of the basic science and underlying mechanisms of disease and has more freedom to operate and risk take (assuming funding!).  Yet, Academia lacks the late stage development and commercialization capabilities of industry.

What struck me as I thought about this particular news item was how increasingly common the “externalization” approach to R&D has become.  And from that, two very natural questions ensued.

First, how has the externalization model impacted the way in which companies conduct their business?   A whole host of different talent and operational needs have emerged, from identifying and assessing the right potential partners; negotiating and managing the alliances; sharing of vast amounts of data, information and knowledge across multiple, disparate systems; keeping in-house R&D teams motivated; and the list goes on.  This is the new norm.

Second, and more importantly, has this model improved R&D productivity and overall ROI?  The answer to this question isn’t a simple yes; it requires complex analysis and a longer term view.  The very fact that it continues to build momentum suggests that it is delivering.   In fact, some have suggested that Pharma is moving from a Research & Development model to a Search & Development model, a concept that was originally put forth by Andrew Baum, formerly of Morgan Stanley, currently Managing Director of Equity Research at Citi.   But, as both Bain and Deloitte have outlined, externalization is only one part of the strategy.

Whatever the approach to externalization, the value is in the science.   As a 2010 McKinsey Insight entitled “New Frontiers in Pharma R&D Investment” outlines, “It’s important to recognize that while these models can help companies allocate capital and development resources more flexibly, and in some cases to cut operating and capital costs, they’ll enhance R&D portfolio productivity only if they deliver additional successful programs with lower cost or risk…….. Innovative financing and partnership approaches can improve a program’s financial-risk profile but won’t drive value unless they’re based on sound technical and clinical decision making.”

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