Strategy & Management

The Art of the Alliance

Big Pharma’s Partnerships Depend on How They’re Managed

04.04.2016 -

Alliances between big pharma and scientists, hospitals and biotech firms are common practice in the health-care business. About half of today’s top-selling drugs are the result of such partnerships. In order to be effective, every alliance needs professional management. Experts discussed the topic at the latest Bio-Europe partnering conference in Munich, Germany.

Just two decades ago, many scientists worked silently and isolated in their “silos.” Cooperation with companies and institutions was more the exception than the rule. This has changed completely.

“This approach doesn’t work anymore,” said Patrick Benz, senior director alliance management at US health-care giant Johnson & Johnson (J&J). Today pharmaceutical and biotech companies spend hundreds of millions of dollars annually to utilize the discoveries, development and marketing capabilities of partnering firms in their quests for the next blockbusters. AstraZeneca, for example, one of the big pharma companies, maintains about 400 alliances worldwide, said Shaun Grady, vice president strategic partnering and business development at AstraZeneca. Morphosys, a biotech company from Munich, has about 21 research and development agreements with other companies.

Good Reasons For Alliances

The reasons for making alliances are manifold. Alliances are vital to innovation and success in the pharmaceutical industry. Nearly all companies feel the pressure to maintain strong portfolios. Another reason for cooperation is the evolution of knowledge. “The knowledge of biochemical processes and underlying genetic causes of diseases is growing at record speed, and research and development requires a degree of specialization that cannot be achieved by a single organization on its own any longer. Through partnering we can fully leverage today’s scientific know-how and translate it into innovative medicines for patients,” according to German pharma company Bayer.

Sometimes the size of a project requires cooperation with other organizations. J&J manager Benz mentioned that his company is engaged in an Alzheimer’s fund with a volume of about $100 million. “One company alone cannot manage such a project. You need partners to do this successfully,” Benz said. His company also realized that collaborations among pharma and biotech begin in earlier stages today than in years past. For this reason, J&J has adjusted its internal structures to picture this development and to cover the whole spectrum of cooperation from early-stage to late-stage projects.

Furthermore the working time of scientific experts in the knowledge-driven pharma business is expensive. James O’Mara from Ironwood Pharmaceuticals hence reminds biotech companies to focus on their core activities and to outsource all other businesses to a partner.

Jan Nilsson, CEO of the small Swedish biotech company NeuroVive Pharmaceutical, did so. His firm entered an alliance with a Chinese contract research organization (CRO) in order to conduct a phase III trial. NeuroVive was too small to do it by itself. The outsourcing was the right decision since the trial failed, Nilsson said.

Challenge Of Alliance Management

It’s a long process to craft a robust alliance, build a solid relationship and keep an alliance on track to deliver value to both parties. Therefore the management of an alliance is crucial. But it is here that many deals fall apart, according to research organization Cutting Edge Information.

So what makes an alliance successful? The experts at the Bio-Europe conference emphasized raising the core questions at the beginning of the partnering process: What is important for us? What do we want to achieve? What will drive the alliance? Grady said this decision-making process at the beginning is important for the subsequent development of the alliance. Also important is to formulate these expectations clearly in the alliance contract. Shaun Grady from AstraZeneca: “You should fight for this. This is better than to renegotiate later or to start interpreting the contract.”

Grady also said the deals became more complex in recent years. “Today there is more peer-to-peer partnership,” Grady said. His experience is that alliances today also last longer than in years past. “You need a good management to handle such complex processes and alliances,” he said. He recommended that the people involved in an alliance should be experts in their fields. “Having a scientific background with hands-on experience of drug development is invaluable. When people with a similar background work together, cultural differences don’t matter anymore,” he said.

In the end, the alliance management personnel keep things running smoothly and monitor alliance health. Ensuring a thriving collaboration is a daunting responsibility requiring many parts — ample organizational support, efficient project coordination, and constant, open communication, according to Cutting Edge Information.

Communication Is Key

One of the key criteria in an alliance is communication. It is the lifeblood of any ongoing partnership. For both sides to work as members of the same team, they need to constantly interact and touch base with each other. “You can’t overcommunicate,” pharma manager Grady said.

To keep the communication going, a single dedicated person should manage it. Experts also recommend a determined contact person on the other side of the partnership. Furthermore, the participants have to raise the right questions in the working process. All participants should think as early as possible about challenges that may arise in their collaboration.

“It is very important to be involved as early as possible during the interaction with a potential partner and during contract negotiation. So you have the history of how a particular alliance was built up, and you can build trust with the partner from an early stage,” said George Rahim, senior director, alliance management center of expertise at the biopharma company UCB, in an interview.

This is especially necessary when problems arise. Alliance managers report that partners sometimes have different opinions about how fast things should be decided and implemented. J&J manager Benz pointed out that big companies usually have more complex decision-making processes than smaller entities. He said that small companies might expect their bigger alliance partners to make decisions within two or three days. “This isn’t realistic for many big companies,” Benz said. Also the regular change of personnel from one department to another one in pharmaceutical companies can be surprising for the biotech partner. In such cases, the alliance management has to ensure that the project does not suffer and the transfer of knowledge is ensured.

On the other hand, the managers of big pharma groups sometimes wonder about the working style at their smaller alliance partners. AstraZeneca manager Grady said the decision-making processes in small biotechs already have frustrated him. And J&J manager Benz has learned that the chief executives of biotech firms sometimes have unrealistic expectations — for example, to have the CEO of a big pharma group as their counterpart in business or alliance conversations. “Big pharma generally ensures that the biotech partners can deal with qualified managers. Normally it’s not the CEO,” Benz said.

Handling Conflicts

A challenge in an alliance is the handling of conflicts. “The last thing an alliance manager wants to do is escalating a conflict to senior levels. This can create negative feelings and irreparable damage,” according to Cutting Edge Information. Alliance managers have realized that the quickest way to deal with problems is to keep them on the appropriate level. It is also a good approach to try to see an issue from the perspective of the other side and to work on understanding cultural differences between two companies, especially between large pharma and biotech.

UCB manager and alliance specialist George Rahim summarized his experiences: “To be a good alliance manager, you need to have good people skills, and the stamina to deal with and resolve conflicts between companies, people and cultures.”