Selling your ambulatory surgery center (part 2 of 4)
Cooperative Competition's Impact on Future Drug Discovery
1. Cooperative Competition and its Impact Upon the
Future Development of Modern Drug Discovery
Jeff R. Livingstone, Ph.D.
Founder & Principal, Pharmagenie LLC
and VP Business Development, MLS
2. I. Definitions
II. Forces / Trends
III. Considerations
IV. Examples
V. Epiphanies
I've learned it's always better to have a small
percentage of a big success, than a hundred
percent of nothing.
- A. Linkletter
3. Every possible reezon that could ever be offered for altering the
spelling of wurds, stil exists in full force; and if a gradual reform
should not be made in our language, it wil proov that we are less
under the influence of reezon than our ancestors.
- N. Webster
Noah, what are you smoking?
- C. Merriam
4. Competition: Two entities compete directly for
the same resources (e.g. customers, market
share, wallet share, etc.) to oppositional benefit.
Collaboration: Two typically non-competing
entities use their complementary advantages to
work together to mutual benefit.
5. Partnership: when two entities work together
towards a common goal.
Alliance: an extended partnership of one or more
entities which work to mutual benefit against a
common competitor.
Coopetition: when competing companies work
together to mutual benefit, where the advantages of
alliance are perceived to outweigh the risks of
competition.
6. Co-opetition is a term invented by Ray Noorda, the
Founder of Novell. A theoretical framework of co-
opetition was developed in the mid-nineties by
NYU-Stern professors Adam Brandenburger (NYU-
Stern) and Barry Nalebuff (Yale School of
Management). This was further laid-out in their
ground-breaking 1996 book “Co-opetition.”
7. New
Entrants
Threat of new
entrants
Bargaining power of Bargaining power of
suppliers customers
Supplier Competitor Buyer
Power Rivalry Power
Threat of
substitute
offerings
Substitutes
11. A Portrait of the Industry
as a Young Field
It wounded him to think that he would never be but a shy
guest at the feast of the world's culture.
- J. Joyce.
12. Industry contraction (Bx > Rx > MDx > Dx)
Prepping to acquire or be acquired
Concentration on later stage pipeline
Pushback on early discovery spending
Elimination of “me-too” projects
Too many Bx for Rx
Buyers IP market, decreasing multiples
“Partnering” becoming an options game
13. Increased competition for increasingly limited capital
Decreasing investor risk > decreasing exposure
Longer term deal closure > but shorter term ROI horizons
Increased Competition and number of deals decreasing
A bargain hunting and “deep discount” mentality
Rx either pre-occupied with merger integration or focussed on
upstream dealing
Bx cash constraints and limitations to alternatives
13
14. Pharmaceutical companies, do drug refinement more than drug
discovery. They are best at taking a drug and getting it through the
labyrinth of testing, regulatory compliance, marketing and so on.
Biotech companies, on the other hand, often function as the research
engine for pharmaceutical companies. Biotechs often approach a
pharmaceutical company hat in hand, because they don’t have the
cash to bring a drug to the next stage.
A “large” biotech company, like an Amgen or Genentech, may own
their own drugs, but most of the time are developing in-licensed
compounds from a Biotech partner.
Bx F I P C O Rx
15. Supply chain contracts
Suppliers consolidated, middlemen eliminated
Broad players bifurcate business
Niche players left with no where to go
> Coopetition >
16. Ecosystem Development
Economics
Demographics
Regulatory (Fiscal, Federal, State, etc.)
Speed
Time to Market
Response to Customer
17. Products
Channels
Expertise (BME)
Activities (Marketing, Engineering)
Relationships
Knowledge Development (future)
Back
20. Small & Med Size Firms
Large Firms
Accelerate Growth
Access Critical Capabilities
Enter New Markets
Build Critical Mass
Accelerate R&D
Reduce Costs or Capacity
Not Somewhat Important Very Extremely
Important Important Important Important
Source: Association for Corporate Growth / Booz Allen & Hamilton/HLHZ
21. Strategic fit
Commitment to research areas
Commitment to partnering
Key
Resource allocation
Criteria
Identified champion
Financial health
Intellectual Property Portfolio
Back
22. Managerial Infrastructure
• Flat lean organization; 24/7 connectivity and communication
• Close to customer
• Global: behavior, organizational structure, finance
Technology
• Fisher capabilities - Maybridge heterocycles; Amidites
• Sourcing technology but a gap exists with global CRM and knowledge management
• Expertise in development portion of product lifecycle
Procurement
• Unique sourcing capability
Assets & Logistics & Marketing & Sales
Manufacturing Customer Service
• Low asset base (this is both • Strong in Europe – weak in • Fisher brand – but needs to
a + and -) America be developed
• Insufficient flexibility of • Front-end customer service • Supplier intimacy
people / assets to fulfill •Needs to get to fast,
incremental business 24/7 availability
• Corporate financial strength •Need accounts
– can raise capital if needed receivable capability in
and justified Fisher Chem
23. Complementary capabilities: The capabilities of the two partners
should complement one another. Sometimes the best partner is
not the strongest partner but the most complementary.
Customizing capabilities: The partners need to customize their
capabilities to the relationship and build capabilities for developing
and managing alliances.
Knowledge sharing: The partners need to develop systematic was
of sharing knowledge between them and across their
organizations.
Effective governance: The coopetive partners need to create a
clear and effective system for developing trust, including good
legal contracts and very well defined exits.
From interview with Harbir Singh, Mack Professor; Professor of Management; Co-Director, Mack Center for
Technological Innovation
24. The Physiological Theory of Competitive
Collaboration
Dans les champs de l'observation le hasard ne favorise que
les esprits préparés.
- L. Pasteur
26. Signet: Private, Denham, MA-based IP licensing and
development shop spun out of J&J’s Cambridge
Research Laboratories (CRL). Antibody developer
and supplier.
Senetek: Public, Napa, CA-based developer and
manufacturer of skin care materials. Antibody
developer and supplier.
27. Signet
Senetek
Accelerate Growth
Access Critical Capabilities
Enter New Markets
Build Critical Mass
Accelerate R&D
Reduce Costs or Capacity
Not Somewhat Important Very Extremely
Important Important Important Important
28. Strategic fit
Commitment to research area
Commitment to partnering
Key
Resource allocation
Criteria
Identified Champion
Financial health
Intellectual Property Portfolio
Back
29. Monarch: Private, Indianapolis, IN-based protein
biomarker discovery and custom MS-based assay
development CRO, originally spun out of the IU-Med
School Core Facility (INCAPS). Has proprietary sample
prep methods for MS.
Aradigm: Private, Hayward, CA-based developer and
manufacturer of custom immunoassays. Antibody
developer and supplier.
30. Monarch
Aradigm
Accelerate Growth
Access Critical Capabilities
Enter New Markets
Build Critical Mass
Accelerate R&D
Reduce Costs or Capacity
Not Somewhat Important Very Extremely
Important Important Important Important
31. Strategic fit
Commitment to research area
Commitment to partnering
Key
Resource allocation
Criteria
Identified Champion
Financial health
Intellectual Property Portfolio
Back
32. A Deal-Maker’s House
I hold that man is in the right who is most closely in league
with the future.
- H. Ibsen
33. Divorce > Marriage (IP, People, Projects)
Channels (Marketing always precedes BD)
Leadership > Point person (too many cooks / sigs)
Communication miscues = 80% failures
Find some happy people and get them to fight.
(Weird idea #5)
- R. I. Sutton, Weird Ideas That Work
34. Adaptivity = Plan 9 not Plan B
Valuation / Value Agreement
Priorities
Values
Culture (80% of the 80%)
Exit Considerations
Building Relationship to Acquire
Building Relationship to Compete
35. The perception that everything is totally straightforward and safe is utterly
naive. I don't think we fully understand the dimensions of what
we're getting into.
- Prof. P. James, Report on Genetically Modified Foods
Back
37. Books
• Brandenburger, A.M. and Nalebuff, B.J. (1997) Co-opetition: A Revolution Mindset the Combine Competition and
Cooperation, Broadway Business, New York.
• Burns, L.R. (2005) The Business of Healthcare Innovation, Cambridge University Press, New York.
• Christensen, C.M., Grossman, J.H., and Hwang, J. (2009) The Innovator’s Prescription: A Disruptive Solution for Health
Care, McGraw Hill, New York.
• Ginsberg, D. (1999) The Investigator’s Guide to Clinical Research, 2nd Ed., CenterWatch, Inc., Boston.
• Kim, W.C., and Mauborgne, R. (2005) Blue Sky Strategy: How to Create Uncontested Market Space and Make the
Competition Irrelevant, Harvard Business School Press, Boston.
• Kornberg, A. (2002) The Golden Helix: Inside Biotech Ventures, University Science Books, Palo Alto.
• Luo, Y. (2004) Co-opetition in International Business, Copenhagen Business School Press, Copenhagen.
• Moore, G.I. (2005) Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution, Penguin
Group, New York.
• Pisano, G.P. (2006) Science Business, Harvard Business School Press, Boston.
• Robbins-Roth, C. (2001) From Alchemy to IPO: The Business of Biotechnology, Basic Books, San Francisco.
• Sutton, R.I. (2002) Weird Ideas That Work, Free Press, New York.
• Williams, J.D. (1986) The Compleat Strategyst: Being a Primer on the Games of Strategy, Dover Publications, London.
Articles
• Brandenburger, A.M. (1996) Business Strategy: Getting Beyond Competition, interview, Management Update, Dec., pp. 1-5.
• Carlin, B.A., et. al. (1994) Sleeping with the Enemy: Doing Business with a Competitor, Business Horizons, September-
October, pp. 9-15.
• Hamel, G., Doz, Y.L., and Prahalad, C.K. (1989) Collaborate with Your Competitors – and Win, Harvard Business
Review, January-February, pp. 133-139.
Back
38. Credits: The presenter gratefully acknowledges the gracious assistance , perspective, and materials
fini
of Barbara Kunz, President, Battelle Memorial Labs, and John Hession , Esq., Partner at
Cooley, Godward, Kronish, LLP, used in the production of this assembly.
39.
40. Baseline
$ Billions Forecast
Safety Concerns
State
programs
Slower growth Personal
importation
in sales force/
300 DTC
Economic
slow-down
Generics
(2003)
Multi-tier Medicare Generics
co-pays
Rx
Lifestyle Under-treated benefit
Negative
drugs disease states
publicity Pipeline
(Oncology,
is still
Weak/delayed Alzheimer’s,
Claritin/ strong
new products Hepatitis C,
Prilosec
Anti-obesity)
goes OTC
Demo-
graphics
150
Technology
2002 2003 2004 2005 2006 2007
Year
Adapted from Lisa Riccardi, Exxex Woodlands, Palo Alto, CA
Alliances are:No Typical Combination of CompaniesWide Range of Functions to LeverageAn Alternative to …Debt or Equity Financing -- without dilution!Make or Buy Decisions – with faster deploymentHiring or Outsourcing – without the overhead
Industry and specialty boundaries are blurredOnce separate specialties convergeNew capabilities are requiredMeans to face new rivalsGlobal economy unfetteredCompanies entering new marketsParticularly entering emerging markets