Beyond Borders: Global biotechnology report 2010

John Maraganore of Alnylam
Pharmaceuticals describes a very different
deal structure. His company has been
able to pull off something truly rare — it
has simultaneously signed significant
non-exclusive licensing deals with a
number of pharmaceutical companies.
These deals — which give Alnylam’s
partners access to the company’s small
interfering RNA platform — allow Alnylam
to leverage its platform more broadly than
it could have on its own, by harnessing the
R&D efforts of its partners.
These two deal structures are in stark
contrast to one another. Regeneron’s
deal involves going deep (a long-term
relationship with one partner) while Alnylam
has gone wide, striking non-exclusive deals
with many partners. Yet, there are some
common themes and lessons. The first is
that both were enabled by having strong
platforms. While not every biotech company
is blessed with a compelling platform,
companies looking to attract big pharma
partners at attractive terms will need to
focus on developing strong differentiating
assets. Second, despite being so different,
both deal structures appear to involve less
distraction and more efficient resource
allocation than a series of exclusive deals
with multiple partners, since the companies
are freed up from the operational
challenges involved in managing alliances
with several parties.
For companies looking for creative ways of
partnering with pharma, though, some of
“We can debate the semantics of old
normals and new normals, but for this
industry, dealing with challenges
is the only normal it has ever known.”
the best opportunities may come from the
fact that pharma companies need efficient
solutions in the new normal as much as
biotech companies do. Pharma’s search for
ways to increase the efficiency of its R&D
spending — and the concomitant wave of
out-licensing that may soon follow — could
create tremendous openings for companies
with creative solutions.
The responses and approaches we’ve
discussed so far relate to the business of
biotech — raising funds, operating efficiently,
structuring deals. But biotechnology is
ultimately a science-based business, and
more efficient solutions could equally
be found in scientific and technological
advances. Indeed, this promise — radically
efficient drug development, targeted
therapies — has always been a big part
of biotech’s allure. Commercializing that
promise takes time, and the tremendous
advances in genomics and proteomics
are only beginning to bear fruit. But
game-changing developments — the rapidly
approaching $1,000 genome sequence is
frequently held up as an example — could
very quickly boost market penetration and
ignite investor interest.
Sometimes, business trends and scientific
advances can reinforce each other. This
could well be the case with personalized
medicine, since many of realities of the new
normal — the move toward comparative
effectiveness and outcomes, the need for
more efficient R&D — make the case for
personalized-medicine approaches all the
18 Beyond borders Global biotechnology report 2010
more compelling. To accelerate commercial
adoption, there are challenges that will need
to be worked through (the Perspectives on
personalized medicine piece offers examples
from seven industry leaders), but the nearuniversal
need for more efficient health care
solutions could well provide the impetus to
overcome these barriers.
Guiding principles for the new normal
If there is a common theme defining the
new normal, it is the search for efficiency.
After the end of the era of “easy money,”
investors are looking for more efficient ways
to fund innovation and achieve returns.
Governments and payors have seen their
budgets squeezed by the downturn and
are demanding better outcomes for every
health care dollar they spend. Facing
imminent revenue declines due to
looming patent expirations, pharma
companies are focused on filling their
pipelines — but are searching for ways to
conduct R&D more efficiently than ever.
And for biotech companies — looking
to undertake the capital-intensive
business of drug development in these
capital-constricted times — the need for
efficiency has never been greater.
How will each of these pressures shape the
new normal? We don’t know yet exactly
what the new business climate will look like
or how long it will last, but we can discern
some likely trends. Access to capital will
remain difficult for many, if not most,
emerging companies. There will be a decline
in the number of traditional start-ups
funded by VCs and a corresponding increase
in project- and asset-based funding. The
number of public biotech companies will
continue to fall, driven by acquisitions,
market attrition and the lack of a robust
IPO environment.