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.
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.
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.
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.
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.