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European Biopharmaceutical Review

Collaboration Schemes

Research and development (R&D) is not reaching its full potential, with some studies showing that, at the industry level, every dollar invested in R&D brings only 85 cents of return. This situation is obviously not sustainable. In this context, and while the ‘world of possible’ is widening with the development of all the ‘omics’, industry players are seeking ways to embrace a larger set of opportunities, while increasing productivity of their R&D spending. In response, most companies have developed open innovation strategies, in which collaboration with public research organisations (PROs) is central, albeit with mixed results.

The New Role

With the pharma sector moving towards open innovation, many governments have understood the key role of PROs as a source of innovation, competitiveness and growth for their industries. Most developed countries have set up policies to increase public investment, stimulate collaborative R&D between public laboratories and the industry, and foster technology transfer. Some countries have gone a step further, and have created proof of concept (POC) funds to address a key obstacle to technology transfer: the lack of maturity of technologies that are developed in the public sector. For example, in 2009 France launched the ‘Investing for the Future’ programme, representing a €22 billion investment in public research, and providing €900 million to technology transfer offices (TTOs) to fund POC. The European Union is currently working on a funding mechanism for this in which all member states can participate.

Fruitful Collaboration

It is very clear that PROs have a crucial role to play in fuelling innovation and competitiveness in this industry, and considerable resources are invested by both public authorities and private companies. However, the results are mixed, and the ideal collaborative model is still unclear.

Sourcing Opportunities

The first challenge lies in efficiently sourcing opportunities. Most companies have now developed visible ‘scouting’ teams that are responsible for developing relationships with PROs and identifying opportunities which fit the strategic and therapeutic priorities of the business. While this seems to be a rather simple step, experience shows that just creating such a scouting unit – even in the context of an open innovation strategy – may not be enough.

Too often, such scouting teams lack ‘anchoring’ within the business units and therapeutic areas, or are poorly connected. As a result, the process of establishing a dialogue with the right person remains long and complex. Even when achieved, it is not rare to hit the ‘not invented here’ barrier. As they say, old habits die hard. Open innovation strategies should address these issues, and put proper organisation and incentives in place to foster and speed up the process.

Early Stage Licensing

There was a time when pharma players would not look at a project if it had not reached clinical stage. The biotech sector bloomed as an efficient bridge between academia and pharma companies.

Today, most businesses would acknowledge that their strategic interest is to source innovations at a much earlier stage. Some pharma companies have pushed that logic further, even in-licensing at a very early stage. This type of approach translates into little return towards PROs, as limited value is created in the public laboratory, and risk is still at its highest.

Most PROs are becoming more reluctant to out-license at such an early stage. The orientation of public policies towards the generation of higher financial returns pushes them towards building and capturing more value out of their technologies. Leveraging the POC funds that are created in a growing number of countries, PROs are increasingly financing ‘in vivo POC’ programmes aimed at both fostering and speeding up technology transfer, and extracting more value out of them.

But is this the solution? Probably not. Experience shows that an ‘academic’ POC is not an ‘industrial’ POC. The data and validations required for a publication are not identical to those needed for industry. As a result, there is a high risk of ending up with a completed POC project which does not meet pharma requirements for in-licensing.

As PROs are increasingly funding these programmes, and thereby injecting considerable financial resources, it is crucial to inject industrial drug development expertise into the conception of such programmes – this is usually lacking in public research laboratories.

New Collaboration

What is the right collaboration scheme to address these issues while allowing PROs to capture sufficient value, and industry players to secure access to opportunities?

A new approach is the co-conception and co-piloting of POC programmes between PROs and industry players. In such a scheme, once an interesting opportunity has been identified, the POC programme is designed with the private partner who participates with management and the follow-up of the programme. The programme is funded by the public partner – which then carries the financial and technical risks – allowing PROs to create and capture a larger portion of the value.

The private partner, considering its contribution to the programme, is granted a free option on an exclusive licence – thus securing access to the technology – and can decide to raise this option if the programme is successful.

A term sheet can be discussed at the initiation of the programme so that the private partner has visibility. Most of the time, the term sheet will include the coverage of the ‘out of pocket’ of POC programme costs as an upfront payment. Such an approach seems to provide a very balanced mechanism to both the private and public partner. It allows companies to source opportunities and secure access to technologies at a very early stage, and to ensure the relevance and quality of POC programmes funded by PROs, thanks to the expertise injected by the private partner. As the public laboratory carries the financial and technical risk of the POC project, it legitimates the capture of a larger portion of the value created.

What About Biotech?

As pharma companies have increasingly moved toward sourcing early stage projects in academia, the ‘field’ and role of biotech seems to be shrinking. Nevertheless, the flexibility, ability to take risks, and entrepreneurial approach of biotech companies remains crucial to the success of the pharma industry as a whole.

In the context of difficult fundraising for biotech companies, an interesting model is that of a collaborative triangle between academia, biotech and pharma developed at the initiation of a POC programme. Each partner brings their expertise, and the pharma partner brings ‘smart money’ to the biotech company, thus securing access to the technology if early clinical trials are successful.

In such a collaborative triangle, the three partners are involved in the conception and follow-up of a POC programme funded by the public partner. If the POC programme is successful, the biotech company will raise its option and in-license the technology. Because of the funding brought by the pharma partner – which becomes a shareholder of the company – the biotech will be able to conduct regulatory preclinical and early clinical trials. In this triangle, the pharma partner is obviously deeply involved in the design and follow-up of such trials, which is too often not the case in current corporate venture funds.

Such a model has strong potential to allow efficient outsourcing of R&D for pharma firms, and should offer higher productivity of R&D investment (strengthened by fiscal optimisation), yet still provide PROs and biotech with a balanced collaborative scheme.

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Nicolas Carboni is the President of SATT Conectus Alsace, a new kind of TTO created in France in 2012. Conectus is in charge of managing intellectual property and licensing for all public research laboratories in the Alsace Region, as well as research collaboration with the industry. Conectus also manages a €35 million POC fund to speed up technology transfer. Prior to joining Conectus, Nicolas was Chief Executive Officer of Alsace Biovalley, one of the leading bioclusters in France. He has 20 years of experience in innovation management and technology transfer, both accumulated in France and North America. He has a background in law, business and engineering.
Nicolas Carboni
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