Title: Unit 16 Reading Assignment
Course: SAT 170 Introductory Biotechnology > Section: SAT 170 Introductory Biotechnology

Unit 16 Reading Assignment

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- Unit 16
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“Biotechnology and Pharmaceutical Commercialization Alliances: Their Structure and Implications for University Technology Transfer Offices” by  Mark G. Edwards, CC BY SA 3.0 U.S.

http://www.iphandbook.org/handbook/ch12/p08/

Reading Assignment: Biotechnology and Pharmaceutical Commercialization Alliances

Since the 1940s, the pharmaceutical industry has largely followed a vertically integrated business model. This was the period when the first antibiotics were being introduced, leading to augmented manufacturing capabilities and, soon after, to the development of sales and marketing organizations. Over the next half century, the industry was sustained by the productivity of its medicinal chemists, who isolated natural products from microorganisms, plants, and animals, designed analogs and, sometimes, stumbled upon molecules with completely unexpected activity.

The emergence of biotechnology over the past several decades has transformed the drug business and ushered in a host of new participants and several novel business models. In the early 1980s, recombinant DNA and monoclonal antibody (mAb) technologies formed the basis of the first biotechnology business model, based on intellectual property (IP) relating to the isolation and/or production of novel compounds. Strong IP positions and difficult-to-master production methods would presumably allow biotechnology startups to initially partner with, and then compete against, established pharmaceutical companies. Assuming a series of novel products and increasingly favorable terms from partners, this model purported to be a blueprint for becoming a fully integrated pharmaceutical company, or FIPCO. Although most of the more than 100 biotechnology companies that went public prior to 1992 adopted this model, Amgen and Genentech are the only two companies from this era to have attained FIPCO characteristics to date.

By the early 1990s, two new biotechnology business models emerged. The first of these—a technology-platform model—was based on the use of novel techniques to discover new drugs and/ or to increase the productivity of the drug discovery process. With a broad platform, a biotechnology company could perform fee-for-service research for multiple pharmaceutical partners while accumulating expertise to pursue programs for its own benefit. The earliest technology-platform companies developed novel assays for screening compounds. However, these screening companies depended on pharmaceutical partners for compounds to screen, and the terms were generally unattractive.

Other types of technology platforms soon emerged, including those using proprietary technologies to produce novel compounds from oligonucleotides (for example, antisense and gene therapy), lipids, carbohydrates, peptides, and combinatorial chemistry. With the sequencing of the human genome in the late 1990s, the technology-platform model broadened yet again to include companies that discover and validate novel drug targets. Joining them were companies making the instrumentation and software to handle the increased throughput of genomic materials, combinatorial libraries, and structural information.

These technology-platform companies had in common a fundamental reliance on corporate partners to pay for at least a portion of the platform’s utilization and enhancement while adding to the biotech’s infrastructure and expertise. Gilead Sciences and Vertex Pharmaceuticals are current examples of successful companies that have adopted the technology-platform business model.

A third business model to emerge in the early 1990s focused on diseases with significant unmet needs and specialized patient populations, such as cancer, dermatology, and neurodegenerative diseases. These companies sought to capture more of the value of innovative products by retaining commercial rights into clinical development—and potentially through to commercialization for selected market niches. Using this strategy, disease-focused companies attempted to create a balanced mix of discovery, development, and sometimes commercial-stage programs. However, the latter were typically less innovative products, used primarily to build a sales infrastructure and prepare the organization to eventually sell the more innovative products under development. Amylin and MedImmune are current examples of successful companies that have adopted the disease-focused business model.

By the mid-1990s, however, many of these disease-focused biotechnology companies had curtailed their drug-discovery programs owing to lack of investor interest. Similarly, technology-platform companies that had partnered their top drug-discovery programs to pharmaceutical companies came to view discovery research as an unattractive use of resources. With the consolidation of major pharmaceutical companies, these companies recognized that product-acquisition opportunities would emerge that were “flying below the radar” of ever larger drug companies. These companies turned their attention to in-licensing of approved and late-stage development compounds from pharmaceutical companies. Since most of these biotechnology companies focused on specialty markets that could be addressed with relatively small sales forces, such as cancer, anti-infectives, and dermatology, by the late 1990s investors came to view this group as a new business model, dubbed specialty pharma. Cephalon and Celgene are current examples of successful companies that have adopted the specialty-pharma business model.

The collective impact of these four biotechnology business models on the pharmaceutical industry has been to significantly enhance pharma’s opportunity to obtain and divest compounds via licensing. This has eroded pharma’s vertically integrated business model, to the point where most pharmaceutical companies now derive 25 to 50 percent of their product pipelines from external sources. In turn, pharmaceutical companies are the principal mode of commercialization for biotechnology products—of the 100 top-selling biotechnology drugs in 2005, 63 were partnered in development for at least some territories, as were eight of the ten top-selling biotechnology products in 2006.