Name: Prashant Singh

Admission No: 19SCSE1010674

Case Study1 : Partnering for success: Working together: how Biotech firms and
large drug companies bring pharmaceutical products to market.
Answer: Large pharmaceutical companies oppose legislation being considered by Congress to lower the
prices of prescription drugs. Reducing their revenues, they contend, will reduce their investment in drug
development and the discovery of new medicines, and thus lead to a decline in drug innovation.

If that argument is credible, there should be evidence to show that the large pharmaceutical companies
are responsible for discovering innovative new drugs.

To test that claim, we examined the provenance of the highest-selling prescription medicines of Pfizer
and Johnson & Johnson, the two largest pharmaceutical and biotechnology companies in 2018.

We found that these large pharmaceutical companies did not actually invent most of the drugs they sell.
Indeed, it appears they have already reduced their investment in the discovery of new medicines to the
point where the threat of additional reductions rings hollow and is no longer a persuasive reason for
opposing legislation to lower drug prices.

A question of scale

“It’s impossible for large pharma companies to work in every single sub-therapeutic area out there,”
explains Wiederrecht. “In today's markets, the vast majority of approved drugs are associated with some
type of licensing partnership or acquisition component. Even the largest companies can only work on so
many targets at once, whereas there are hundreds of thousands of researchers in academia and
biotechs out there who can specialize in vastly more diseases and afflictions. If one of them makes a
discovery that satisfies an unmet medical need, then large pharma can form some type of strategic
partnership or collaboration to provide a jump start on their competitors.”

The path to innovation

So, what exactly does a strategic partnership entail? According to Wiederrecht, partnerships can take
many forms. “It can be something as minor as a feasibility study on a potential partner's asset, or
something more significant like a research collaboration, patent license, development commercialization
agreement, or even an acquisition. In fact, many acquisitions begin with a collaboration that went so
well the pharma wants to acquire the entire biotech. We've certainly seen some examples of that
recently.”

Evaluating potential

Clearly, big pharma is dependent on collaborative alliances. But from a biotech perspective, when is a
strategic partnership the best path forward?

“Strategic partnerships can be essential to a biotech for several reasons. A biotech may have a patent
position on a novel target. However, it may not have the volume of chemists and preclinical
development experts that a big pharma can muster to get through what we call the ‘zone of chaos’ in
drug development, which largely involves solving toxicity issues that can lead to unwanted surprises in
clinical development.”

“Also, if a biotech is working on a project in a large-scale indication that afflicts hundreds of thousands
of people, the clinical trial costs may be too much for them to endure”, continues Wiederrecht.
“Commercialization – particularly for those larger indications – is something big pharma excels in. They
have established infrastructures in most countries around the world to sell the product.”

Measuring the return

With alliances between the biotech sector and large pharma increasing, what is it that makes some
partnerships more interesting than others? If you’re a large pharma company, what’s the criteria for the
opportunities that are worth pursuing?

“In general, big pharma tends to prefer innovative, first-in-class or best-in-class assets in areas of unmet
medical need,” says Wiederrecht. “They like to see a demonstration of target engagement in vivo.
Pharma also likes novel chemical entity composition of matter patent protection, with a substantial
patent protection runway.”

“They also like to see back-up molecules, so that if the lead molecule fails, there’s a series of other
molecules to fall back upon. Also, large pharma tends to prefer worldwide rights. And they don’t like
indication splitting – that is licensing one indication for the molecule to one party and another indication
for the very same molecule to another party.”

The steps to success

Underpinning these partnerships is a mutually beneficial exchange: breakthrough innovations from

biotechs in return for big pharma’s scale and reach. But what does the actual strategic partnership
process look like? What steps are required to get it over the finish line?

“Generally, after an initial meeting with a biotech, large pharma will receive a non-confidential written
dossier,” explains Wiederrecht. “That dossier is then pre-screened by someone in the search and
evaluation group and, if deemed credible, passed on to a scientist or clinician for a deeper dive. After
they’ve reviewed the non-confidential dossier, a non-disclosure agreement will be signed, at which time
the biotech sends a confidential dossier, followed by a face-to-face meeting with pharma subject matter
experts.”

“If the opportunity is still interesting, pharma will want to test the molecule, so you'll execute a material
transfer agreement so the molecule can be tested in internal assays,” continues Wiederrecht. “Then
there will be internal meetings with key executives to make decisions about whether to proceed to
inking some type of a relationship.”

With more and more small biotech and large pharma companies working collaboratively to bring new
treatments to market.