Hi to all threadsters,
not really a biotech junkie I have been lurking around for a while. I think I found an interesting story from Reuters in the UK on biotech / pharma strategy interactions and some recent changes in this equation, tilting the balance to the biotech companies at the expense of big pharma. This industrial economics area has always fascinated me.
This looks like a "paradigm shift" to me where the balance of power seems to be rolling over in an extended supply chain setup (extended I mean including the "invention" phase where most biotechs in the past put themselves exclusively). Me thinks that from an investing perspective the combination of BIOTECHS + GENERIC DRUG makers could outperform TRADITIONAL PHARMA companies from a stratefic point of view. Comments very welcome..
rgrds
CROSSY
uk.news.yahoo.com
Thursday June 28, 03:18 PM
Focus - Biotech firms gain power at big pharma's expense
By Toni Clarke
SAN DIEGO, California (Reuters) - The balance of power in the pharmaceuticals industry is shifting as biotechnology companies become more savvy about retaining rights to their discoveries rather than signing them over to the big drug makers to exploit.
Until recently, most biotech companies were too poor to pay for their products to be tested in clinical trials or promoted around the world. Instead they agreed to hand over the rights to big drugs companies in return for a lump sum payment and small royalty.
That's changing, industry experts say. Flush with cash from a wave of initial public offerings last year, biotech companies can now co-fund the development and commercialisation of their products, and garner a greater share of the profits.
"Anyone who gives up their products now is selling their heritage for a bowl of potage," said Jonathan Rothberg, chief executive of CuraGen, which identifies proteins that cause disease and sells that information to drug companies.
Earlier this year, German chemicals and pharmaceuticals company Bayer invested $85 million (53,000 pounds) in CuraGen in return for a 5 percent stake in the company. Over the next five years CuraGen will identify 80 proteins for Bayer to attack with drug compounds. If successful, CuraGen will receive 44 percent of the profits.
NEW DIRECTION
Some biotech companies are securing even better deals, according to participants at a biotechnology industry conference in San Diego this week.
In March this year, Cambridge, Massachusetts-based Millennium Pharmaceuticals, which also identifies potential drug targets, signed a five-year, exclusive deal with pharmaceuticals company Abbott Laboratories.
Abbott will pay, over two years, $250 million to Millennium in return for stock. Both companies will have equal stakes in the research, development and commercialisation of all products that come out of the agreement.
"For the first time a major pharma company has committed to exclusively work with a biotech firm across a broad therapeutic area," said Alan Crane, senior vice president of corporate development at Millennium. "Companies have worked exclusively together on single products before, but never across a whole range."
As competition for products developed by biotechnology companies increases, pharmaceuticals companies are scrambling for ways to reinvent relationships with their erstwhile supplicants.
"There's no question that a few years ago we were able to license many molecules outright and we had control over their development and over the ultimate market," said Nelson Sims, executive director of alliance management at Eli Lilly and Co., one of the world's biggest pharmaceuticals companies.
"We're now seeing a much greater trend for the biotechs to want to develop the compound jointly and in many cases to commercialise the product jointly," he said.
For the biotechnology companies, partnerships are no longer a matter of life and death. Many have enough money to go it alone for several years. Others, like Millennium, are trying to usurp the role of traditional pharmaceuticals companies by building strength at all stages of the drug discovery and development process.
"A few years ago we were just a research company providing targets for a royalty," said Millennium's Crane. "Now we have very specific capabilities in chemistry and we're looking to become strong in sales and marketing."
Icos, a biotechnology company that's developing a rival drug to Pfizer Inc.'s erectile dysfunction drug Viagra, has also managed to negotiate good terms with its partner, Lilly. Under the agreement, Icos will share equally in the development costs and profits from the drug, called Cialis.
Two years ago, Lilly realised it was losing out on potential business transactions by not paying enough attention to its partners, of which it has 140. So it set up a special alliance oversight group which it trained in classrooms and staffed not with scientists but with managers fitted to the task of smoothing relationships.
LILLY NOT ALONE
"Most big pharmaceuticals companies have efforts in place to improve their image as a partner," said Eric Rule, a partner at Price Waterhouse Coopers. "They are really trying to get their act together."
Price Waterhouse recently completed a two-year survey to assess which pharmaceuticals companies have the best reputation among biotechs as potential partners. Pfizer came out top, with Merck & Co., Lilly, Bristol-Myers Squibb Co. and GlaxoSmithKline (LSE: GSK.L - news) following close behind.
The rankings are important. The less reliant biotechnology companies are on funding, the more they consider issues such as trustworthiness and reliability.
"Even though we are a small company negotiating with some of the biggest in the world, we can actually say let's not just look at the issue of funding, lets discuss how we can develop a product together, and how we can play a role in the development," said Susan Baldwin, director of business development at Gemini X Biotechnologies, a privately held company based in Montreal.
Some biotechnology companies have even managed to turn the relationship around entirely and are beginning to pay royalties to their pharmaceuticals partners.
Earlier this week, Cytokinetics, which has identified a set of proteins that could be targets for new cancer drugs, negotiated a $50 million transaction with GlaxoSmithKline. The two companies will jointly conduct research, development and commercialisation. But Cytokinetics went further. Some of the jointly researched targets will revert back to Cytokinetics for it to develop alone. It will pay GlaxoSmithKline a royalty.
"We were seeking to retain certain rights for ourselves," said Robert Blum, the company's chief executive. "It was an important part of the deal." |
