Big Pharma is not inventive – or is it?

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Even though open innovation has been around for more than a decade, it is only slowly being adopted by pharma companies. Only a few companies have invested heavily in open innovation initiatives in recent years and, as a consequence, have attracted a fair amount of attention. Eli Lilly, for example, has a long-standing crowdsourcing initiative and claims that it has opened new doors for them in terms of collaboration opportunities and attention by the press. Crowdsourcing has also been adopted by several of Lilly’s competitors including GSK, Pfizer, and AstraZeneca. Bayer is currently leading the field and has started several crowdsourcing initiatives to support the development of healthcare apps or to have scientists explore new indications for Bayer compounds.

Besides crowdsourcing, several pharma companies are operating accelerators to stay up-to-date in terms of technology and innovation. German pharma company Merck, for example, operates an accelerator close to its headquarters in Darmstadt, providing startups with money, coaching, and premises and receiving shares in return. Johnson & Johnson and Bayer even took it one step further: they provide laboratory and office space for a small amount of rent without requesting any equity. Despite the early skepticism, both companies call their accelerators a success as they create direct alliances with academics and startups.

Although open innovation is gaining some speed, the most common way to get access to external innovation remains mergers and acquisitions – or as we call it: “Pioneering by buying”. On the first glance, acquisitions seem to be the saver way compared to open innovation as the efficacy and market value of the acquired products can more easily be assessed. IP concerns are dealt with in the purchase agreement and the in-house R&D department does not have to be aligned to an open innovation strategy. However, in our experience, there are other challenges that are often neglected or only realized when it’s too late. Acquired targets must be integrated into the corporate structure which is often time-consuming and risks killing the innovation in the process. On the other hand, there are startups that have the potential of being an interesting target but fail to handle their documentation, do not have convincing business plans or simply miss the know how they need to comply with regulatory requirements. In our experience, working with startups on those issues right from the beginning and along the way can reduce that risk and lead to a successful collaboration and faster time-to-market. Stay tuned to learn more about our latest offerings in this area.