The productivity crisis that has challenged the pharmaceutical industry for years shows no sign of abating. Contrary to the popular opinion that the industry simply doesn’t spend enough on research, budgets for research and development have actually increased over the last 10 years. Yet R&D productivity continues to stagnate.
Having spent more than 30 years working with pharmaceutical companies on their research and development strategies, and before that as a researcher in such companies, I’ve seen firsthand the considerable resources poured into R&D and the bottlenecks that slow innovation. Pharmaceutical companies are some of the most conservative organizations on the planet and are typically slow to embrace change — even adopting something as simple as an electronic lab notebook application or cloud service. In 2011, for instance, an influential pharmaceutical information technology research and development leadership group, PRISME, wrote a position paper on the significance of “the cloud.” In 2017, while adoption of cloud infrastructure is gradually increasing, it is yet to be fully embraced.
Complex, monolithic R&D infrastructures and entrenched positions from legal and regulatory advisors often result in an unwillingness to collaborate, which holds back research and development. It’s no surprise, then, that dynamic biotech startups are nipping at the heels of big pharmaceutical companies. In fact, 45 percent of the big companies’ total forecast revenue in 2016 came from external sources. The bottom line? Big pharmaceutical companies need these upstarts, and industry players must do more to foster the growth of the startups they have come to rely on and improve collaboration with them.
To understand why startups are so important to big pharmaceutical companies, look at how innovation has changed. Today, the business of discovering new targets and developing diagnostic tests and medicines is far more complex than it was in the 1980s, when bigger breakthroughs were more common. The key now is collaboration between multidisciplinary teams, some of which do not even belong to “your” organization. This requires a high degree of trust and closer working relationships than we are used to. Further, as we learn more about the precise genomic and molecular stratification of patient groups, and even the need to create individual drugs for individual patients, research and development complexity is deepening and big breakthroughs are becoming less frequent. The blockbuster has given way to the nichebuster.
The $100 genome is almost upon us, wearable devices promise instant diagnoses, and supercomputers like IBM’s Watson aim to help doctors select the best treatment for individual cancer patients. The public’s expectations for what the health care and pharmaceutical industries can achieve have never been higher, and even doctors are confused about what supercomputing can deliver. Creating the data to meet these expectations is not the problem — analyzing it is. Artificial intelligence, along with machine learning and deep learning, holds the key to unlocking these data. But pharmaceutical companies generally aren’t technology companies and they lack the tech savvy required to do that. According to McKinsey analysts, the pharmaceutical industry lags behind all others, except for the public sector, when it comes to digital maturity.
This skills void is one area in which pharma startups can really make their mark. Many startups have tech-savvy staffs on board that can help larger companies adopt digital paradigms that deliver results from data. The caveat is that big pharmaceutical companies must work in tandem with the startup ecosystem, instead of simply awaiting opportunities to acquiring promising startups. Indeed, the mere presence of a large acquiring firm, or the knowledge of an impending acquisition, can actually disrupt innovation and drown a startup in bureaucracy. This is because promises made by the acquirer to be “hands off” following an acquisition are rarely met.
Instead, large companies should be looking to nurture collaborations so both parties benefit from the experience. Just as big pharmaceutical companies may lack tech expertise, startups often need a hand up when it comes to building a business.
Fostering these collaborations is the driving force behind the President’s Startup Challenge, which my organization, the Pistoia Alliance, launched three years ago. The challenge recognizes startups with the potential to positively influence R&D — from blockchain technology to the Internet of Things to deep learning. In addition to monetary prizes, winners also receive six months of one-to-one mentorship from a member of the Pistoia Alliance. This could be a senior executive from a top-10 pharmaceutical company, a medium-sized life science or technology enterprise, or even another startup with recent experience navigating the big pharma ecosystem. I know from experience that the pharmaceutical industry can seem like a daunting and sometimes closed arena to enter, with the same names and faces cropping up time and again. Having an experienced mentor make connections is invaluable for startups.
It’s this type of symbiosis that will be essential for future breakthroughs. I moved to the Pistoia Alliance because I firmly believe that the breakthroughs that will allow us to develop new antibiotics or determine how to control our genetic code to reduce the impact of disease will happen only if pharmaceutical firms of all sizes work together. No single company has the resources, knowledge, or bandwidth to meet these challenges alone. Creating breakthroughs requires the agility to stand on the shoulders of giants, which is what startups bring to the future of R&D.
It is up to established companies to support startups’ paths into the pharmaceutical industry, as much to ensure the continued success of big companies as well as to deliver on our quest to bring new medicines to patients.
Steve Arlington is president of the Pistoia Alliance, a not-for-profit organization that aims to lower the barriers to innovation in pharmaceutical research and development.