Open Source May be the Answer for Pharma and Biotech

2/17/12

In his State of the Union Speech President Obama called for support for ‘the same kind of research that led to the computer chip and the Internet.’ He rightfully implies that for several decades now the innovation story has been primarily focused on computers, software and communication. As the power of science, technology, and free flow information have pushed modernism to new heights we are witnessing a new wave of innovation in other sectors, especially biotechnology and drug discovery. Yet in order to truly achieve critical mass, the innovation model must evolve from its current form.

With growth and promise comes costly regulation and fierce competition. For example, the pharmaceutical industry spends billions of dollars to bring one drug to market and, faced with increasing regulatory hurdles from the US FDA as well as an onslaught of competition from generic drug makers, they are shrinking research and development (R&D) budgets. If that weren’t enough, early innovators are losing their financial cushions as the patents that protect their blockbuster discoveries are set to expire. Since 2006, brand drugs have lost an estimated $60 billion in sales due to patent expirations and by 2015, this figure is projected to reach $160 billion. Simply put, the expenses and risks incurred by companies in the pharmaceutical and biotech industries far exceed nearly any other industry’s business model.

Large pharmaceutical and biotech companies traditionally have dominated the process of medical research and drug discovery from beginning to end, sheltering it within one organization. Over time, these corporations have recognized that they can no longer do everything in-house. A lack of resources and costly expenses up front have made this model less effective and offered little return on investment. Therefore, pharmaceutical and biotech companies and their partners are well-positioned to adopt an “open source” collaborative approach to partnering and developing innovative market-driven solutions and therapies.

An open source approach to innovation would drastically remake this industry. For example, rather than one pharmaceutical company performing all tasks internally – from discovering new drugs to developing clinical trials and then bringing the medications to market – it would look to other partnering resources for its discovery, research and testing needs. This model helps restore the competitiveness among pharmaceutical companies when their internal R&D pipeline is shrinking and the opportunity for risk is spread across a greater number of stakeholders. For biotech companies and research institutions, this model will result in a higher likelihood of bringing their innovations to the marketplace through the go-to-market expertise of the established pharmaceutical players.

This model is gaining traction in the pharmaceutical and biotech fields, and small ground-breaking companies are ideally situated to collaborate with the large organizations. Life sciences hubs, such as Seattle, are a perfect fit for leveraging this open source model. Recently, we witnessed such collaborative outreach during a symposium hosted by Bristol-Myers Squibb (BMS), a global biopharmaceutical company that acquired Seattle-founded ZymoGenetics in 2010. During its “Venture Investment & Strategic Partnering” session, BMS outlined its strategic areas of interest and invited innovators from academia and industries within the Seattle life sciences hub to approach them for partnering opportunities.

Yet success in an open source innovation model requires that a strong framework is in place to manage the underlying intellectual property of each partner and ensure a fair playing field for all. This is not familiar territory for the larger incumbents, who are still reluctant to partner for fear of losing control. Legal professionals are stepping in to ensure both sides of the alliance are rewarded for their innovations and contributions.

The “New IP”, or intelligent portfolios, approach is a philosophy ensuring that every patent in a portfolio has a business purpose and uses IP-based analysis to identify market opportunities and risks. Adopting this approach, intellectual property will be used proactively and be an integral part of any strategic business plan and leverage the market positions of the players. It provides the continued incentives to encourage innovation and protect the shared rewards spent on bringing the innovation to market.

Intelligent portfolios allow for a strategic mechanism to sourcing and sharing expertise through alliances and collaborations, with the goal being to advance business objectives cost effectively and with less risk. Intellectual property will be seen as the motivating step toward getting innovators to initiate more alliances across the pharmaceutical and biotech industry.

The open source movement is encouraging legions of researchers, doctors and scientists to continuously improve upon the life sciences industry. The degrees of open source partnerships vary throughout different stages of development but there is no doubt that this model lends itself to spurring innovation across the industry. The most important part of an open source model is protected information sharing among various participants – each with differing agendas and goals. It is this model that will enable the biotech and drug discovery sectors to move forward with innovation in a way that may one day rival and surpass the economic success of the computing and telecommunications sectors today.

Connie Wong is partner and Chair of the Life Sciences Practice Group at Lee & Hayes. Follow @

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  • http://www.transparencyls.com/ tomasz sablinski

    Hi Connie,

    Great piece, thanks. Take a look at our website. We just launched the world fist OS crowdsourced drug development company.
    Tomasz

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  • http://www.fuentek.com Nancy Pekar

    You’re quite right that pharma and biotech are a match for innovation under an open source model (which also might be referred to as open innovation, collaborations, partnering, etc.). There are lots of examples of such an approach working in the life sciences industry. Those who are concerned about IP issues and/or who are reluctant to partner might find Fuentek’s insights on collaborative R&D helpful: http://bit.ly/wEMmdT In particular, check out the blog post “Tackling the Sticky Intellectual Property Issues in Alliance Collaborations” (http://bit.ly/wpodrl) and the post “Collaborations Protect Your Competitive Advantage and Minimize Risk” (http://bit.ly/yQU6ef).

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  • http://www.indogenbio.us Dr. Ashok Rattehalli

    Excellent analysis of the current Biotech and Pharma industry.
    On these grounds we have created a start up Indogenbio and hope to bring value to this opportunity.

  • Ira Shoulson

    Data Sharing

  • http://www.vegroups.com Joseph Abebe

    I agree with extending open source model into the biotech and big Pharma industry.Especially, in view of the impact on R&D budget due to decline in revenue from expiration of patents and migration to generics and the rise in protein based molecules,open source computing has worked well in IT industry to warrant a success in the biotech.LINUX/APACHE is presently 63% of the web application.Why not, with layers of security and authentication the open source model is a platform for innovation and collaborative project undertaking in the biotech.

  • Sathish Rangarajan

    The Council of Scientific and Industrial Research, India is spearheading such an initiative, geared towards tropical diseases. http://www.osdd.net/osdd-portfolio

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  • Curtis Cunningham

    Connie,

    You may very well be hitting the pulse of what will be necessary for the biotech and pharma industries to catapult to the next level economically, given the R&D and market conditions you have pointed out.

    Curtis W. Cunningham, M.S.

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