· Collaboration to form the basis of a new business model for increased innovation and success.
· R&D costs stand to be slashed by $160m per product and market launch times accelerated by nearly five months.
Despite some very notable successes, the global biotech industry has fallen short of expectations, failing to reduce the risk in finding and developing new commercial medicines. To survive, the industry must now adopt a more collaborative approach, according to a new research paper from PwC, ‘Biotech reinvented'.
Although strategic collaborations are increasing in the industry, PwC believes that there is now a need for more co-operation to produce more efficient and cost effective medicines.
Working in a more collaborative environment requires organisations to share assets and insight that they have previously ring-fenced for themselves, a willingness to take risks and work with third parties and assets that they don't own and this will require investors to take a longer term view on rates of return and change the funding model.
Simon Friend, global pharmaceuticals and life sciences industry leader, PwC, commented:
"The current business model on which Biotech has relied is flawed. Due to poor rates of return, investment has dried up and many of the external conditions that have allowed companies to thrive are vanishing. It is now a time for change."
The research base is shifting East, emerging economies are competing more aggressively and financial investors are getting more cautious. Furthermore, the line between the biotech and pharmaceutical industry continues to blur.
Jo Pisani, partner, global pharmaceuticals and life sciences, PwC, said:
"Efficiency is the name of the game and the adoption of a more collaborative approach could just be the key to unlocking this potential. Working with others accelerates and facilitates innovation, discovery and development, which in turn can reduce costs and benefit both large and smaller companies. Even small changes could yield significant savings."
According to PwC research, given average development costs and lead times, a 5% increase in success rates for each phase transition and a 5% reduction in development times could cut R&D costs by about $160m, as well as accelerating market launch by nearly five months (Note 1).
Kate Moss, director, global pharmaceuticals and life sciences, PwC, commented:
"There are considerable cultural, behavioural and practical hurdles to overcome if the industry is to succeed. But they're well worth resolving, given the rewards collaboration can bring. Those that adapt quickest will invariably have more chance of success."
PwC highlights that greater collaboration will also be required in the rest of the value chain. The opportunities for generating value from new medicines are changing and therefore biopharmaceutical companies will have to recognise the changing dynamics of the healthcare market and move from selling medicines to managing outcomes. This is only possible through extensive collaboration.
Steve Arlington, global advisory leader, pharmaceutical and life sciences industry, PwC, said:
"Hard-pressed governments are now struggling to meet the healthcare demands of growing populations and their changing demographics. More effective and more economical medicines are now more important than ever and, only when the industry can work together will it be on track to meeting the demands of today's society."