Entries in Intellectual Property (5)


A Look at Pharma-Academic Collaborations From the Sidelines  

Recently, it seems like every day my FierceBiotech RSS feed brings news of another announcement concerning a major research collaboration between a pharmaceutical company (“pharma”) and an academic research institution. 

The recent collaboration frenzy can be attributed to a pharma-wide strategic initiative aimed at addressing a fundamental problem shared among all major pharma companies; a marked decline in revenue growth due to a lack of new innovative products and weak R&D productivity.  By aggressively reaching out to academe, a community that is a rich source of creativity and scientific talent, pharma companies hope to identify novel drug targets and molecules to refill their new product pipelines. 

Without the launch of new blockbuster drugs, pharma has experienced little revenue growth in recent years and faces looming patent cliffs - a dire situation.  The initial sexy solution to solve the revenue generation problem was to pump billions of dollars into drug discovery units in hopes of finding the next Lipitor or Avastin, but those efforts to produce the next generation of blockbusters have largely failed.  A more recent trend for pharma has been to pursue growth through M&A activity. This is at best a stopgap measure since it does little to ensure long-term productivity. 

Collaborative partnerships with academe could increase drug discovery productivity for pharma companies.

However, it is unclear if these collaborative agreements are a viable business model, or a simply crisis management scheme.  In any event, it appears that pharma is in an all-out sprint to embrace ‘open innovation’ as part of an industry-wide strategic shift to downside (in the face of declining revenue growth), outsource (to cut expenses), and globalize (to reach new markets). 

To get a better handle on how pharma-academic collaborations work, I reached out to my colleague and a Founding Partner of Osage University Partners, Louis Berneman.  Lou is the former Director of Penn’s tech transfer office, past president of AUTM, and active member of the tech transfer community for almost 30 years.

Over the next couple of paragraphs I will share some of the thoughts Lou and I have on pharma-academic collaborations. 

Why Now?

Having thrown everything at the wall - internal R&D, in-licensing, co-development deals with biotechs, and acquisition (of biotechs) - pharma companies are now looking toward academic collaborations to help solve their drug discovery, productivity, and profitability woes.  Past academic collaborations has shown participants that, if structured and managed properly, these collaborations can be mutually beneficial and productive.

Academe’s interest in these collaborations can be largely attributed to securing resources to advance and de-risk novel concepts.   This is an acute need as venture capital has retrenched in their willingness and ability to make investments in early stage technologies. 

Pharma’s troubles are academe’s gain as pharma-academe collaborations, and the funding that comes with it, is providing much needed early stage capital.  Well structured and executed, these collaborations create and maintain small, highly focused, well resourced, outward looking, and expertly managed (science and business) projects.  These collaborations also permit academics to ‘prove’ their worth and contribution in the challenging world of drug discovery / development / commercialization.  Also, academics are incredibly prolific at identifying novel drug targets, which enables pharma to focus on its core strengths of chemistry, clinical development, manufacturing, and regulatory affairs. 

Collaborations are Efficient

Partially outsourcing innovation through academic collaborations is incredibly efficient for pharma because it enables them to access the best scientific talent in areas that compliment their existing commercial activity.  Because talent is outsourced and dollars can be easily reallocated should a project fail, pharma is more willing to spread capital amongst a number of bleeding edge projects in a high value therapeutic area.  

Collaborations, as opposed to startups and licensing, are the most productive contractual basis for advancing early stage discoveries.  Collaborations create mutual and aligned interests.  However, among the various approaches to facilitate moving academic discoveries into the marketplace, collaborations are the most complex to establish and difficult to manage.  Unlike a license, which is for a specific technology that has already been invented, a collaboration is for a future unknown discovery.  This leads to a lot of “what ifs”, which can make for contentious negotiations.

Collaboration Structure

There is no boilerplate deal structure for pharma-academic collaborations, as each appears to be designed based on the particular needs and interests of the parties.  I have heard many stories of pharmaceutical companies acting in bad faith during collaboration negotiations, and while some of those anecdotes might be valid, I sense that most stories typically inflate the facts.  Clearly, these are complex relationships and agreements dealing with issues that go to the core of conflicting cultural values and the common interest in the commercialization of new and useful discoveries.  

The challenge in constructing these collaborations is managing conflicting core values.  Academe values knowledge for knowledge sake, research grant funding, publications, and academic freedom.  Pharma (and other private sector interests) values the management of knowledge for profit, confidentiality, and limited public disclosure.   Structuring relationships and agreements that resolve these conflicting values toward the common interest is a challenge. 

Some of the more important negotiating points in collaboration agreements are:

Intellectual Property: Collaboration agreements typically include definitions of IP subdivided by ownership class (institution, company, and joint).  The commercial partner almost always pays for prosecution costs.  Institutions retain ownership of IP while granting rights to the IP to the company.

License Rights: Rights to IP, extant and ongoing, are the subject of much negotiation.  As I said above, these are complex agreements and there is no boilerplate.  License rights are deal specific depending on the situation of the parties and circumstances of the negotiation.  Obviously, private use issues are a major consideration in the negotiation. 

Joint Steering Committee (JSC):  Most collaborations include a JSC with  representation, perhaps even equal, from both the academic and pharma collaborators.  The primary task of the JSC is to identify, screen, select, track, and manage scientific projects.  JSCs are generally comprised of researchers (pharma and academic).   

Academic Freedom and the Right to Publish: In 1988, the Boots Pharmaceutical company attempted to block the publication of clinical trial results from the Synthroid Bioequivalence study at UCSF.  The outcry against Boots trying to block the publishing of data that supported the notion that a branded drug was no better than generic became the cause de celebrity among consumer advocates like Ralph Nader.  The Boots Synthroid Affair seems to have cast an unfair shadow on pharma-academic collaborations generally, and clinical trials specifically, ever since.  Derek Bok, the former President of Harvard, a key critic in the debate over academic collaborations was quoted in a 1996 Wall Street Journal article on Boots Synthroid as saying “the price of corporate support is eternal vigilance”.

What I find troubling is that too many critics of academic collaborations hold onto an outlying event from almost 25 years ago.  There will always be bad apples on both sides of the equation, and one event does not speak for the entire collaborative model.   That said, there are clearly cultural value differences and ‘eternal vigilance’ is probably wise.

While Boots attempted to hold sway over trial results, it is hard to believe that such actions would prevail over a larger group of academic researchers.  The reality is that academics enjoy being a bit fractious and will always choose to work on what is of most interest to them (and their grant and donor funding sources).   Instead of trying to push academic researchers around, pharma seems to work hard to identify researchers that are already conducting work in areas of mutual and synergistic interest and who have an interest in collaborating. 

Working with industry can create rivalries amongst researchers and departments, which need to be handled delicately.  Also, the best PIs – those that pharma wants to work with – are not only prolific researchers, but also typically involved with competing “commercial” projects as consultants, advisors, and even as entrepreneurial founders.  Pharma, in their selection of investigators and negotiations, need to navigate these political challenges to ensure that the collaboration is a productive one and boundaries are not crossed.

Co-mingling of Funds: The reality is that most labs receive funding from a variety of public and private sources and have to actively manage how dollars are used.  Institutions and investigators differ in their funding and time management arrangements.  Tracking systems to stay on top of things is essential.  In the end, funding sources have to trust who they are working with to ensure they are getting productive use out of their investment.

Ethical Concerns

Managing conflicts of interest – both individual (generally well handled by academe) and institutional (generally not handled at all) requires eternal vigilance. 

Ethical concerns break down into two main groups: ethical considerations surrounding the academic and that if the institution.  As Lou likes to say, “there are two things no institution will risk: its name and its endowment.  Maintaining academic values, including the right to publish and assuring research objectivity are sacrosanct. 

Much has been made about the ethical concerns surrounding academics working with industry, but most commentators have, in my opinion, at least, overstated the risk.   Having worked in academia for almost 30 years, Lou commented, “Faculty will always work on what is of interest to them (and their funding sources).  There is no co-opting of academic freedom”. 

Despite Lou’s sentiments, I always seem to hear anecdotal stories about pharma imposing unethical and prolonged publishing restrictions.  What seems to never make it to press is the fact that publishing embargoes are included in almost every collaboration agreement and the terms seem reasonable and work for both parties. Lou notes that, “counterparties have a right, pre-submission, to review new publication submissions before being submitted (e.g. 30 day window).  If the company wants to file patents, they get another brief period of time to file (e.g. 60 days).”  These are standard terms that are widely accepted. 

Alliance management

At the end of the day, the greatest risk for these collaborations is not the crossing of ethical boundaries, but a lack of delivery and execution.  Pharma understands the need for alliance management and generally does so well.  Academe – not so much, and more’s the pity.  Lou has shared with me horror stories of outstanding collaborations gone awry for lack of academe attention to alliance and project management. 


NY Times Business Section Interviews Osage University Partners

Damon Darlin of the NY Times Business Section recently interviewed Marc, Bob, and Lou about the launching of Osage University Partners.  For a small fund, being in the NY Times is a humbling experience and we want to thank all of our friends and colleagues for their support.  

To view the article click here

We welcome any comments or reactions people have to Damon’s article on Osage University Partners and the commercialization of university technologies.


GlaxoSmithKline Seeks Academic Partnerships

GSK is launching a new program to partner with leading academic centers to accelerate early stage drug development.  This announcement comes shortly after Pfizer’s similar proclamation several months ago.  To compare:


The aim is to work closely with leading external medical researchers all the way until the launch of a new drug over a decade. This will allow GSK to tap their expertise while providing them with facilities, funding and incentives paid largely if a treatment proves successful.  While big drug companies often license ideas from universities and then take full control, GSK wants instead to continue working alongside leading medical authorities who prefer to remain in academia rather than be recruited directly or join a biotechnology company.” 


University scientists will have access not just to Pfizer’s drug development knowledge, but to its research tools—of particular note is that Pfizer is making its phage display libraries accessible to those working on joint projects. Pfizer, meanwhile, will have easier access to tissue samples and tools that can help it quickly understand which patient populations its drug candidates will be relevant in. 

Proposals by university scientists are reviewed by a steering committee comprised of four members from the university, and four members from Pfizer. And just like a biotech is funded, follow-up cash will be linked to the project achieving milestones.”

The partnerships are structured in a very intelligent way, as each promising molecule or program is rolled into a stand-alone startup company (LLC to simplify the tax structure) that the pharma partner will manage.  The pharma company is responsible for covering patent and research costs, while the university receives a small upfront payment followed by subsequent milestone payments.  If projects really start to take off, pharma companies, in some cases, have the ability to buyout the university’s interest through a lump-sum payment. 

From a financial and drug development standpoint, this model is very attractive for universities.  They receive “valley of death” funding, do not have to pay patent costs, are entitled to solid downstream economics, receive expert guidance, and support the local economy (Pfizer and GSK are both targeting partnerships in markets where they are co-located).  Some contracts include predetermined exit values for the new startups, which is potentially great for the university with regards to early stage assets but potentially troublesome for later stage assets.  Universities have to be careful in how they structure the terms of the deals so that they are paid market rate for later stage assets. 

What is a little less unclear is what the partnership model means for venture capitalists who have traditionally supported early stage drug development.  The academic partnerships tend to cover whole therapeutic areas (CV, oncology, etc.) at particular universities, opening the possibility that venture funds will only get to look at table scraps.  The reality will most likely be a little more nuanced.  Pharma companies will not develop every promising asset, nor will they likely develop all assets independently.  Venture funds will most likely play a role in the pharma partnerships, though at the moment, that role is a little unclear.


Using Compulsory Licenses to Develop the Indian Drug Market  

Last week, Natco Pharmaceuticals of India announced that it would seek a compulsory license to produce Pfizer’s maraviroc HIV pill.  If approved, the compulsory license would grant Natco the right to produce the branded drug for Indian distribution before the maraviroc patent expires. Natco intends to sell its version of maraviroc at 77% of Pfizer’s retail price to India’s 2.3 million HIV patients.

A historic move that is potentially troubling for PhRMA members, Natco would become the first Indian pharmaceutical company to register a compulsory license for a branded therapeutic, possibly opening the door for other fledgling Indian drug companies to follow in its footsteps.  Natco’s actions did not catch Pfizer off guard, as the Indian government has repeatedly stated its discomfort with the number of foreign pharma companies setting up shop in the country and its desire to promote homegrown companies.

Before I dive into my own thoughts, maybe a little primer on compulsory licensing is in order.

Doha Declaration

In 1995, the World Trade Organization (WTO) established the Trade Related aspects of Intellectual Property Rights (TRIPs).  Essentially, this agreement stated that all 153 members of the WTO would respect the 20 years of patent protection after a patent has been filed for international patents.

As pharmaceutical products stronger international patent protection, drugs became unaffordable to many people in developing countries. 

In response to the rising cost of drugs in developing countries, the WTO issued the Doha Declaration in 2001.  Doha grants developing countries the right to override patent laws to protect public health in the event of national emergency, circumstances of extreme urgency, or for public non-commercial use.  Also, compulsory licensing under the Doha Declaration grants governments or government-authorized manufacturers the right to make a patented product without the patent holder’s permission.

Brazil proved to be a great proving ground for how a country could use the threat of compulsory licensing to enhance access to drugs.  In 2002, over 730,00 Brazilians were living with HIV/AIDS and the government was struggling to pay for the HIV/AIDS drug cocktails. The Brazilian government used the threat of compulsory licensing to negotiate lower drug prices. The common retrovirals – Efavirenz, Lopinavir / Ritonavir, and Nelfinavir – had price drops of 73%, 56%, and 74% respectively.  While Brazil successfully employeed compulsory licensing to negotiate lower drug prices, few other countries have been able to replicate such success.

There are two main reasons that countries have been unable to execute compulsory licenses – lack of manufacturing capacity and political mismanagement.  Most developing countries do not have the facilities, talent, or ability to produce consistent power that is necessary to run commercial operations.  The countries that do have manufacturing capabilities typically do not have the money or resources to confirm the quality (safety trial, quality control, etc.) of the generic against the branded drug.  A simple solution would be for larger members of the WTO to ship lower priced drugs to developing nations, which they are allowed to do under Doha.  That rarely occurs since pharma companies are concerned that such actions would cannibalize their business in developed countries.

Political mismanagement of compulsory licenses by some countries has aided pharma companies in blocking access to their branded drugs.  In 2002, Pfizer received approval to start selling Viagra in Egypt.  Shortly thereafter, the Egyptian government was pressured by local manufacturers to issue a compulsory license for Viagra so that they could start selling it themselves.  Pfizer, justifiably irate, responded by scraping plans for a new factory in Egypt and pulling all drugs from the country for the foreseeable future.  The US also responded by placing Egypt on its “Watch List” for countries with poor intellectual property standards.  Trade sanctions followed shortly thereafter.


To dovetail back to a Natco Pharma, the Indian government’s support of the company’s attempt to gain a compulsory license is short sighted.   I appreciate the challenges the country faces in balancing the presence of foreing companies while trying to promote the creation of the country’s own homegrown pharma industry.  But, a compulsory license is not the solution and should not even be considered for patching up the problem.  Compulsory licensing creates a situation were negative price pressure is expected, limiting the profitability and growth of the Indian market.

An alternative to compulsory licensing would be for the Indian government to pursue two strategies.  First, the government should continue to encourage foreign pharma companies to setup shop in India.  Those pharma companies provide an optimal learning environment for up-and-coming Indian executives who will use their corporate skills to run homegrown Indian companies.  Second, the Indian government should pump money into the university system to encourage and promote life science innovation.  PhD’s and Post-docs will create the innovations that will be nurtured in companies that will be led by managers who were trained by multinational pharma companies.  This is a model that has served China quite well and the country is now starting to innovate which is the ultimate driver of economic growth for any country.


Securing America's innovation future: Challenges & progress for the intellectual property system

On Tuesday, December 14, 2010 David Kappos, Director of the US Patent and Trademark Office (USPTO) and Under Secretary of Commerce for Intellectual Property spoke at Columbia University. Mr. Kappos spoke intently about the current initiatives at the USPTO and the importance of innovation for building the economy. 

This lecture is part of a series by Columbia Technology Ventures.

Securing America’s innovation future: Challenges & progress for the intellectual property system from Columbia Tech Ventures on Vimeo.