Toolkit: How To Be a Better Partner

May 1, 2007
Waseem Noor
Pharmaceutical Executive
Volume 0, Issue 0

Pharma industry alliances are increasingly critical to success. They are gaining on R&D in terms of importance, especially since many companies are falling short in their internal pipelines and need to look outside for promising compounds. Today, nearly two-thirds of the top 20 pharma and biotech companies have established alliance-management functions. These usually cover deals in the discovery, development, and marketing space.

Pharma industry alliances are increasingly critical to success. They are gaining on R&D in terms of importance, especially since many companies are falling short in their internal pipelines and need to look outside for promising compounds. Today, nearly two-thirds of the top 20 pharma and biotech companies have established alliance-management functions. These usually cover deals in the discovery, development, and marketing space.

Waseem Noor

These companies have also adopted a variety of industry best practices and achieved some notable successes. One example: The partnership between Eisai and Pfizer produced Aricept (donepezil), a drug considered the gold standard in the Alzheimer's market. The results of this particular alliance have been so striking that even after nine years on the market, the drug boasted annual worldwide sales that had grown 11 percent as of the third quarter of 2006.

Despite the proven value generated by innovative alliances, most pharma companies remain committed to a traditional approach to structuring their partnerships. By contrast, mature industries, such as oil-and-gas and utilities, have developed considerable diversity and effectiveness in this area. Like the life-sciences sector, these high-risk, R&D-driven industries require major capital investment, face long lead times to market, and operate in heavily regulated environments.

An analysis of established and emerging trends in the pharma industry and in others suggests that three principles are key to strong partnership management.

Over the past decade, the annual number of pharma–biotech partnerships has hovered between 250 and 300. Many follow the traditional script, with equal representation from both parties in all activities and decisions, much like the animals boarding Noah's ark in pairs.

What such matchups fail to recognize is the specific strengths of each partner. Designing the alliance to reflect each party's core competencies can increase efficiency across the board. By dividing responsibilities—say, day-to-day development decisions go to the biotech wonks, while the pharma's marketers play to their own strengths—risk is distributed more rationally, in contrast to equal partnerships, where decisions are made slowly, unsettling biotechs for which failure of the product may mean failure of the business.

Consider the partnership between Pfizer, the pharma industry leader, and (OSI) Eyetech, which specializes in novel therapeutics to treat diseases of the eye. Nominated in 2004 for a Breakthrough Alliance Award at the annual Allicense Conference, both companies brought strong marketing and medical skills, keeping the team focused on the customer–product needs and the mission of the collaboration.

The drug the alliance produced, Macugen, an anti-angiogenesis agent for age-related macular degeneration, was being introduced in a nascent market. Plus, as a treatment injected into the eye every six weeks, it required the companies to work closely to generate sufficient safety data to overcome patient fears. In order to achieve this goal, they organized around each firm's specialties. "Because the companies had different infrastructures, we worked hard to understand each other's priorities and motivations," says Paul Chaney, president of (OSI) Eyetech. "Eyetech targets the retina community in the United States, while the Pfizer sales and marketing organization brings our message to ophthalmologists as well as retinal specialists."

The team's clear governance empowered members to make decisions. When conflicts arose, the companies considered it a failure if the issue needed to be escalated to senior management. An expectation was set around these norms, and people were held accountable. This continuous pushing down of decision-making also drove trust and motivated teams to realize "each other's strengths within the alliance," according to Robert Besthof, Pfizer's global commercial leader.

The team also made a point not to forget the human element—and, after the first year of launch, celebrated what they had accomplished in a challenging marketplace. "It was important to step back and think about the new option we were able to bring to patients as a result of our efforts," says Neil Levine, Pfizer's former US group leader, ophthalmology.

To extract all potential value from an alliance, partners must learn to think outside the contract. Once a partnership starts doing really well, however, the tendency is to remain narrowly focused on the original intent. By shifting attention to new opportunities, the alliance can keep evolving.

Solvay Pharmaceuticals, a leading worldwide pharmaceutical organization, and Quintiles Transnational, a contract research organization (CRO), have developed one such groundbreaking alliance. Initially, the two companies had a typical transaction-based, or "fee for service," deal: Quintiles was a CRO to which Solvay outsourced clinical development of their Phase III products. But in 1999, Solvay's CEO, Werner Cautreels, wanted to reduce inefficiencies in its approximately 100 CRO relationships. Quintiles proposed a solution, offering itself as preferred provider along with reduced rates in exchange for a fixed percentage of Solvay's external R&D costs.

For Solvay, the savings in R&D would mean more money for completing trials. Under the partnership, Solvay could finish Phase II studies earlier and start Phase III as much as a year sooner. So pleased was the firm that even though the original contract specified that at least half of the external R&D costs go to Quintiles, ultimately the figure was closer to 90 percent.

This success changed Quintiles' thinking as well. Typically, a CRO needs to gain approval from the client before taking the next step. But the teams were encouraged to be more proactive, resulting in greater efficiency. "If you can do a project in eight hours instead of 12, then there is four hours' less revenue," says Jan de Witt, vice president of NovaQuest (the partnering group of Quintiles Transnational). "But the four hours saved can be put into another project, which would come back to us."

With the success of this first phase in 2005, Quintiles and Solvay recently agreed to a second phase. Checking its pipeline, Solvay found a bottleneck in Phase II. The partnership agreed that Quintiles would provide $25 million for Phase II, bear half of the costs, and receive a milestone payment from Solvay for each of the compounds reaching proof-of-principle. The new agreement could triple the capacity to process Solvay's early clinical projects: Before the alliance, approximately one Phase II completion was planned per year; that is expected to jump to three Phase IIIs per year.

"The whole idea was revolutionary—but the process was evolutionary," says de Witt of this novel partnering agreement involving shared risk and rewards.

In many industries, alliances have been formed that benefit not only the partners involved but the industry as a whole. For example, the Motion Picture Association of America (MPAA) was formed by competing movie studios to meet the common challenges of censorship and copyright. Today, the MPAA ratings systems are universally recognized. The life-sciences industry is beginning to develop alliances that address important issues, such as global health—unlike PhRMA, which focuses on political lobbying.

Take the Global Alliance for TB Drug Development (TB Alliance), which was formed in 2000 to work with governments, foundations, universities, and nonprofits. While governed by a board of directors, the alliance gets feedback from a stakeholder association of more than 35 groups, including the Gates and Rockefeller foundations and other funders. Among its many partnerships are joint programs with pharma to develop TB drugs, such as the licensing deal with Chiron for PA-824, which had been put on the shelf after an acquisition of Pathogenesis. The product is now completing Phase I. An alliance with GlaxoSmithKline (GSK) includes a joint research program around four projects designed to shorten the treatment time for patients with TB and develop novel therapies for drug-resistant strains.

The alliance is a win-win. In the Chiron case, the product was moved into human trials at a much faster pace than typically would have been possible. In addition, the TB Alliance obtained exclusive worldwide rights to PA-824 for TB, and Chiron committed to making the TB technology available royalty-free in endemic countries. As for the GSK deal, the alliance helps support 25 full-time scientists dedicated exclusively to the TB drug program, while GSK offers a matching number of staff and its drug-discovery expertise.

The Partnership for Quality Medical Donations (PQMD) is an alliance between pharma and nonprofits for the development and delivery of medical products to the underserved and to disaster victims worldwide. The organization had its genesis in the early 1990s during the Bosnian War, when reports surfaced of donations by pharmaceutical companies of expired medicines and other unneeded drugs, delivered unannounced and inadequately packaged or labeled. According to James Russo, former head of PQMD, the donations became "instead of a helpful event, a toxic one." Prompted by industry concern, the group was formed as an alliance among pharma firms and on-the-ground nonprofits. It now provides billions of dollars of products and services to areas in need.

Of the three principles, this one perhaps represents the biggest stretch on the part of competitive pharmaceutical companies. Given that many corporations are still learning how to partner with one another as well as with governments, nonprofits, and public-policy groups, it may take time before these alliances become commonplace. Yet this principle, too, will increasingly underlie innovative partnerships as pharmaceutical companies push alliances into new territory.

Waseem Noor is a principal at IMS Health, specializing in strategy development, portfolio management, and decision process design. He can be reached at wnoor@us.imshealth.com