There was an air of optimism among attendees at the June 6 FT US Healthcare and Life Sciences Conference in New York City, and the expressed opinion that life sciences innovation is not dead – in fact, considerable innovation is taking place and industry stakeholders are beginning to evaluate and implement new financing and business models to take advantage of it.
Arguably, the last 10 years have been an amazingly innovative time in life sciences. Among the areas where massive innovation is occurring are data analytics, diagnostics, genomics, nanotechnology, pluripotent cell research, proteomics, regenerative medicine, and synthetic genomics. Just think: Some of these disciplines didn’t even exist 10 years ago.
Yet, innovation in and of itself is not the end game; it should be harnessed and turned into commercial products. This is the message I heard in virtually every FT Conference presentation and panel discussion, including my own, “New Financing and Operating Business Models for Innovation/R&D.” Many of the above-mentioned innovations tend to require a lot more than traditional small-molecule or large-molecule-based chemistry; they need multi-disciplinary expertise, collaboration and cooperation, all of which are characteristics of emerging financing and business models for life sciences R&D.
In the traditional, vertically integrated industry R&D model, one company owns all the risk, makes all the investments, and applies all the knowledge to move its assets through the development and commercialization process. The company also owns all of the upside. This approach worked fine in a world which had nearly unlimited capital, revolved around mainly small-molecule chemistry; and was focused on big categories to address big needs. Think statins. Think blockbusters. Think out-of-date.
The traditional life sciences R&D model has been evolving into a new model that features a mosaic of internal and external relationships and requires an ability to collaborate and partner. A characteristic of this new model is an explicit consideration of investment, risk, and knowledge – and how partners will share these to maximize commercial viability. It’s just not about in-licensing or buying a late-stage asset to develop and commercialize; it’s forming relationships across the entire R&D life cycle. Another exciting aspect of this model is that it acknowledges that there is a lot of innovation and expertise available in smaller, entrepreneurial companies.
While a more collaborative approach is moving life sciences R&D in the right direction, considerable work remains. There are challenges around emerging markets – they offer both opportunities and threats – as well as the financial aspects of new business models; e.g., how do project participants share risks and rewards? Yet, I left the FT Conference feeling more confident than ever about the future of the industry. Innovation is taking place; R&D isn’t as siloed as it has been in the past; companies increasingly are engaging in novel partnerships, joint ventures, and out-of-the-box thinking to optimize their R&D efforts. The ongoing challenge is to leverage these new and diverse relationships to cost-effectively harness scientific innovation and convert it into product innovation. New financing and business models can help us figure out how to do that.