Strike the Perfect Match
January 2007
Ron Wooten, president of NovaQuest, discusses the factors that add up to a successful partnership.
The high–wire act that is drug development has a much smaller net than just a few years ago. Difficulties include not only rising development costs (now $1 billion per approved product), but also launching products in the face of reimbursement issues and increased expectations for post–marketing safety surveillance. Given these factors, we are seeing a steep rise in partnerships—traditional pharma–to–pharma and pharma–to–biotech, plus new options for both—as the industry reshapes its development model to increase efficiency and reduce risk.
Partnerships are important for large pharma because of the pressure to meet financial targets. Many companies don’t have enough depth in their product pipeline, or lack sufficient resources to efficiently develop all the products in their portfolio. Partnering provides a more robust pipeline, shares costs and spreads risk. Most large pharma companies, having learned the hard way, now have dedicated alliance managers to oversee their partnerships.
Biotechs, on the other hand, are driving innovation. Their research success makes them and their products attractive to big pharma, which until recently was the only source for the development and commercialization resources and expertise that biotech companies typically need.
Given a failure rate of more than 50 percent for early–stage development programs, the risks to both sides of a partnership are very real. Those risks include the possibility of a biotech being abandoned by its development partner at the first sign that commercial prospects might be somewhat less than originally envisioned. It takes a strong partnership to have both sides rethink, recalibrate and move forward again.
The traditional product partnership model is one of royalties and payment upon milestones. Early–stage partnerships are mostly, or even completely, milestone driven. At the early stage, it’s a binary equation—it works, or it doesn’t work. This model probably will remain the standard until regulatory agencies fully adopt adaptive trial design, a process now in its nascent stages.
In addition to the standard process of royalties and milestones, some product partnerships include more creative arrangements. Some make provisions for salvage rights—in other words, the ability to use data and maybe even intellectual property. In the case of a failure, the partnership will arrange to salvage some of the resulting data for niche markets. At NovaQuest, for example, we build in some value around the salvageability of a product that may not hit its contracted milestone or endpoint. The data or even the intellectual property itself could be used in a different trial design, or with a specific patient population that may be smaller than originally anticipated.
When selecting a partner, large pharma companies are usually looking for product opportunities that fill vacancies in areas of therapeutic expertise. Often, these companies have formal units that identify biotech companies with the desired areas of expertise, with the ultimate goal of adding depth to their franchises in three or four therapeutic areas. That way, they spread the risk among multiple initiatives.
By contrast, NovaQuest targets companies to partner with based on the strength of their underlying portfolio and their management. Good biotech management understands the need to invest sufficient capital in correct development protocol—otherwise they’re putting their entire product approval at risk.
Ultimately, partnering is a competency. For a successful partnership, you must have three things: intellectual capital exchange, financial resources and good management. Good management is key, because it coordinates resources and ensures consistent exchange of the best thinking by both parties about the development protocol and commercial strategy.
Another key to success is flexibility and constant adjustments throughout the partnership’s lifecycle. You must make product decisions before, during and at the end of every phase in order to effectively react to data and adjust resources. It’s the same with a commercial product, as well—no product ever perfectly realizes its original forecast. A willingness to adjust to these eventualities is vital on both sides in order for a partnership to be successful.
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