The pharmaceutical industry faces a stiff challenge in revitalising the process of drug discovery, which is perceived to be increasingly under threat. Blockbuster drugs are coming off patent, investment in early-stage biotechnology research is diminishing and the pipeline of new pharmaceutical products needs to be rapidly refilled. Many pharma and biotech companies are now looking to develop partnerships to address these problems, and the signs are that they are achieving a measure of success.
"Access to innovation is the key driver of partnering," says Mark Ashton, executive vice president, business development for Evotec. "Figures suggest that the industry is losing efficiency in the discovery of new drugs, so it is looking for ways to reverse that trend. Pharmaceutical companies have tried to bolster their pipelines through mergers and acquisitions, but in my opinion it hasn't worked. Similarly, biotechnology companies are partnering with pharmaceutical companies more because VC funds now tend to invest in companies that already have phase 1 or phase 2 compounds, rather than in early-stage development. They want a faster return. Pharmaceutical companies want to access innovation and biotech companies want funding."
Evotec specialises in the discovery and development of new small molecule drugs. Its business relies heavily on partnerships and collaborations, through which it generated all of its revenue in 2006. The company has built up a strong reputation with key partners such as Roche, with which it has rapidly increased its number of agreements.
Evotec's track record gives it a valuable insight into what makes a successful partnership, and there are many key ingredients beyond simply the quality of candidate compounds and expertise.
"Partner companies need to have open communication and strong alliance management capabilities," notes Ashton. "Both sides must align their expectations so that senior management understands what they want to achieve and how to measure progress towards these goals. Failure to do so has often been a cause of unsuccessful partnerships."
These elements essentially underpin the success of a partnering programme, but a further requirement is flexibility in terms of deal structure. Evotec feels one of its key strengths is its capacity to adopt different approaches to partnerships, from fee-for-service deals to risk-sharing or results-based projects.
This flexibility is important, as it enables the rapid evolution of a relationship to more rewarding and profitable agreements as the partners get to know each other better and understand the capabilities that each can bring to the equation. The initial deals are not necessarily where the most value is obtained and it is important to be able to move quickly to new arrangements that deliver more benefit to both parties.
"We partner to increase the value for both companies," notes Ashton. "It is usually the third or fourth partnership with a company that starts to deliver much higher value. Our partnership with Roche, for instance, began in 2001 and we have now signed around 14 different agreements - each one more complex but negotiated more quickly. We know each other well enough to move to a new agreement quickly when we identify a new area we want to work in."
For instance, Evotec decided three years ago to enhance its capabilities through drug development and as a first step re-acquired Evotec Neurosciences, specialists in the biology behind CNS-related diseases, the aim being to move into higher value partnerships by building a drug pipeline for partnering at points of optimum value.
In order to make the pipeline sustainable, a strategy of in-licensing of clinical assets, together with in-house drug discovery, was designed. Roche had such clinical assets for which it wanted to maximise its value, so both could accelerate their progress in CNS development through their partnership. Evotec's experience of partnering shows clearly that when the right parties get together progress can happen swiftly and successfully.
Evotec AG is a leader in the discovery and development of novel small molecule drugs.
