Pharma-Academic Alliances: What the Numbers Don’t Tell You
If you’ve been following the drug industry at all for the past few years, you know that Big Pharma has gone alliance crazy.
It seems that every other week a new deal is announced in which a pharmaceutical company has partnered with an academic institution to help identify or develop new drugs for a variety of diseases. Pharma business news these days is often indistinguishable from the sports section. When you read that someone has inked a $36 million, six-year contract, it could be referring to a relief pitcher signing with the Yankees or a biology department’s deal with Pfizer. Let’s review some recent examples to see how these deals are coming together.
Gilead Sciences signed a cancer research deal with the Yale School of Medicine that could pay the School $100 million over 10 years. Sanofi-Aventis recently announced a three-year diabetes research deal with an investigator at Columbia University (funding not disclosed) as well as a translational research agreement with Harvard University (funding not disclosed). UCSF in particular has gone on a partnering tear, inking deals with Sanofi-Aventis (financing amount not disclosed), Pfizer (up to $85 million over five years), and Bayer Healthcare (financial terms not disclosed). GlaxoSmithKline signed Harvard’s Stem Cell Institute to a 5 year, $25 million deal. In addition, GlaxoSmithKline announced a plan to sign up 10 academic “superstars” for long-term partnerships to develop new medicines. Their first choice, Prof. Mark Pepys at the Royal Free and University College Medical School in London, colorfully acknowledged this new arrangement by commenting “we all agree that big pharma is useless at discovering new drugs and has to get its ideas from somewhere else.” I’m sure this remark was well received by the company’s leadership group. Over on the more tech side of biotech, Agilent Technologies signed the new Synthetic Biology Institute at UC-Berkeley to a “multiyear, multimillion-dollar commitment”.
In decades past, academic-industry collaborations generally comprised agreements with individual investigators at specific universities and research organizations. More recently, however, this process has metamorphosized into agreements where pharma has established alliances with entire departments or research institutions. What’s the difference between a collaboration and an alliance? While many people use these terms interchangeably, I see a clear distinction. In general, a collaboration is established when (usually two) partners decide to work together on a specific, well defined project to answer a specific question. Once the project is completed, the collaboration is essentially done (although publications and presentations may still be in the works). Alliances, in contrast, tend to be more open ended, larger in scope, involve many more people, and often lack fully defined, detailed goals at the outset. Key decisions may not get made until the work progresses to a certain decision point, which may be accompanied by a “right of first refusal” to any discovery. As such, alliances generally require a significantly greater level of management skill than collaborations if they are to be successful.
What’s driving this sudden surge of pharma-academia deals? The primary motivator appears to be the shortage of new drugs coming out of Big Pharma’s research labs. Despite increasing their investments in research and development over the past decade, Big Pharma’s hoped for steady stream of new medicines is down to a trickle. Part of this results from a past focus by Big Pharma on developing “me, too” drugs for targets that have already been validated by competitors. For example, it was reported in 2006 that 77 percent of the drugs approved by the FDA for neurological indications during the proceeding five years were copycat medicines. Accordingly, many Big Pharma executives have belatedly decided that it’s time to try a fresh approach. They understand now that their own research investigations, while significant, are but a small fraction of the total world effort.
The new tactic: engage academic labs as an alternative source of new drug targets while continuing to search small biotechs for hot potential medicines. This course makes sense given that a recent study revealed that 13 percent of newly approved drugs originated in academia, where numerous labs are already focused on the drug discovery process. Why have so many deals been established in just the past few years? There are two reasons. First, many Big Pharma companies are facing patent expirations on their best selling drugs within the next few years. This will cut significantly into the cash flow that they could use to fund more research. Secondly, these companies remain locked in mortal combat with each other, resulting in a heated rivalry to sign up entire departments worth of Key Opinion Leaders before their competitors can. Again, it’s just like sports: make sure you sign the crucial free agents before the other teams do.
One other likely advantage for pharma in setting up these alliances is a streamlining of legal paperwork. A single drafted agreement should eliminate the need for a large number of individual Material Transfer Agreements, each of which may require lengthy negotiations with a university technology transfer group. Overworked lawyers on both sides struggle to negotiate and complete these deals, which I have seen drag on for years before they are either finished or abandoned. Scientific advances often obviate them before they are concluded. I routinely advise biotech companies that they should find an alternate investigator to collaborate with if they can’t complete these agreements in a timely manner (e.g. ideally less than three months, but certainly less than six).
It’s also not surprising that these alliances are being established at a time when academic departments at many universities are suffering from deep budget cuts. The success rate for obtaining basic (e.g. NIH) research grants is currently very low, putting additional financial pressures on academic researchers. These deals are injecting some serious money into academic departments sorely in need of financial resuscitation. The initial going rate for these agreements appears to be in the $5 to $15 million per year range, but one can readily imagine all sorts of success clauses that would pump these numbers higher. I’m not surprised that the exact terms of these pharma-academic department agreements are seldom publicized; Big Pharma likes to hold its cards close to the chest. I wonder, though, exactly what academic departments have promised their Big Pharma partners in order to obtain their industry funding?
Many people would argue that a large shift from basic to more applied research in academia is, almost by definition, a good thing. I’m not convinced. Much of today’s applied research is built on a foundation of basic studies whose value when the discoveries were made wasn’t always understood. Who at the time would have ascribed any practical utility to Oswald Avery’s investigations that revealed that DNA was the genetic material? Think about some of the most important basic science discoveries over the past century. What would have happened if Watson and Crick had their attention diverted away from solving the structure of the double helix to work on a pharma problem brought to the Cavendish Laboratory at Cambridge by Glaxo?
I’m not saying that these pharma-academic department alliances are necessarily a bad thing. However, these deals raise a number of questions about the degree of control the companies have over the research and, more specifically, over the investigators themselves. Here is a brief list of some of the issues that I haven’t seen discussed, but which are likely to concern the academic investigators involved:
—Who decides on how the money gets spent?
—Who has the authority to determine which investigators within a department or organization get some of the pharma money, and which ones don’t?
—Will the company play a role in specifying which projects an investigator works on?
—Can the pharma partner specifically block investigators from collaborating with other academic investigators or another (possibly competing) drug company?
—Will work done by an investigator within the alliance affect their ability to get tenure?
—Does the pharma partner get to review (and approve) publications and presentations by the researchers before they are submitted?
—Will the filing of patents result in any delays in reporting the work?
One other important matter that must be clarified at the outset of these alliances involves identifying the source of funding of specific projects. For example, if a researcher within one of these academic departments is working on a grant funded by the NIH, then the Bayh-Dole Act would likely cover any inventions that might emerge from their lab. Congress created this Act in 1980 in order to facilitate the commercialization of academic discoveries from the nation’s research labs. One could easily envision a situation where an investigator’s NIH grant money gets switched to funding supplied by the pharmaceutical company. Patents and commercial products that derived from this work might then belong solely to the pharma company, with the university unable to make a claim for a share of the profits. This might be an acceptable trade off for either the university or the academic department in exchange for the funds that the pharma partner is providing. Alliance agreements with academia are almost certainly constructed to favor the pharmaceutical firms if a moneymaking idea or product springs forth from the work. However, without knowing exactly how these alliances are structured, it is impossible to determine just what, if anything, the academic side is giving up.
Will these alliances be successful in re-energizing Big Pharma? It’s simply too early to tell, and the missing details make these arrangements difficult to judge from several different perspectives. What I can tell you is that these alliances need to be carefully managed. I teach scientists and pharma/biotech companies how to facilitate successful collaborations and alliances, and I’ve witnessed numerous problems that can arise from these arrangements. Ignoring your partner’s concerns, or failing to act on them in a timely manner, is a recipe for failure. Once your collaboration or alliance derails, it is extremely difficult to get it back on track and moving forward. The correct mindset probably involves thinking of these associations as being akin to a marriage. Each is filled with give and take, with negotiations, with misunderstandings, and even occasionally bad intentions. Whether they will be productive in the long term depends on the commitment of the participants to work through the various problems that will inevitably crop up.