Pharma-Biotech Partnerships: Lessons for Personalized Medicine

Big Pharma entered biotech too late. That same mistake can be avoided in personalized medicine.
Aug 02, 2009
Volume 33, Issue 8

Nafees N. Malik
Today, we stand on the brink of the genomic revolution. The world is only beginning to understand how our genetic makeup affects our inherited predisposition to illness, how a single disease can be divided into different subclasses on a genetic basis, and how our genes influence our response to a particular medication, both in terms of drug effectiveness and adverse effects.

As a result, scientists are now establishing a discipline called "personalized medicine," which aims to tailor drug therapy on the basis of DNA. Leading pharmaceutical companies will need to form partnerships with other life-science firms to realize the full potential of personalized medicine, both in terms of novel product development and profit generation.

In the 1970s, we were on the cusp of another scientific revolution: biotechnology. This article discusses lessons learned from pharmaceutical-biotechnology partnerships and pharmaceutical companies can put them into practice today with the emergence of personalized medicine. For the purpose of this article, a partnership is defined as any alliance or collaboration but does not pertain to mergers or acquisitions.

Pharma–biotech partnerships

Genentech, the world's first biotechnology firm, was established in 1976 in South San Francisco, CA. It aimed to discover protein-based drugs, which are large and complex in composition, rather than conventional chemical-based medicines, which are relatively small and simple. Genentech differed from all other pharmaceutical companies at the time, and effectively founded the biotechnology industry.

The pursuit of biological drugs during the 1980s and 1990s was principally limited to small, specialized firms, largely spun out of academia. The leading pharmaceutical companies paid little attention to this promising field. Why? Traditional drugmakers became very good at discovering large numbers of high-earning small-molecule drugs. Thus, they had no real need to pursue biotechnology, which was perceived as particularly risky.

Times have changed, however, for pharmaceutical companies. Large numbers of their high-earning drugs face imminent patent expiry. In addition, bringing replacement small-molecule products to the market has become increasingly difficult because most of the low-hanging fruit has already been picked. This challenge is reflected in drugmakers' diminishing pipelines and a sharp drop in the number of new drug approvals. Serious questions have been raised about how pharmaceutical companies will continue to maintain lucrative businesses.

On the other hand, biotechnology firms have become increasingly good at discovering drugs. Between January 2006 and December 2007, approximately 50% of novel drugs approved in the US originated in the biotechnology industry (1). This figure is particularly impressive given that the biotechnology sector spends five times less than the pharmaceutical industry on research and development (2). Moreover, in 2007, biotechnology products accounted for one-fifth of all blockbuster drugs globally (3).

To replenish their pipelines and deliver high-earning drugs, pharmaceutical companies have frantically begun to form partnerships with biotechnology firms. The potential value of pharmaceutical–biotechnology alliances in the US between 2001 and 2005 ranged between $5 billion and $8 billion per year (4). These figures stand in sharp contrast to those of 2006 and 2007, $21 billion and $20 billion per year, respectively (4).

Lessons for personalized medicine

Personalized medicine aims to find gene variants associated with a particular disease predisposition, disease subclass, or drug response. The practice then seeks to divide the patient population into subgroups on the basis of biomarkers. The optimal management of each subgroup is finally determined. Pharmaceutical firms are not experts in this discipline. To realize the financial promise of personalized medicine, drugmakers need to form partnerships with genomic companies to find important gene variants, and with molecular diagnostic firms to develop biomarker-detection tests. Academia may, in addition to industry, provide valuable collaborations for pharmaceutical companies.

Big Pharma can learn four major lessons from its alliances with biotechnology firms.

Build partnerships now. First, pharmaceutical companies must establish relationships with suitable companies right away while personalized medicine is still in its infancy. As the discipline matures, more pharmaceutical companies will focus on the field, increasing competition for collaborations and driving up prices. Drugmakers that form alliances early on can get a head start in personalized medicine and prevent competitors from entering into high-quality collaborations by reducing the pool of available partners. Most in the industry agree that Big Pharma pursued biotechnology too late; this mistake can be avoided with personalized medicine.

Be careful not to destroy a partner firm's entrepreneurial culture. Second, Big Pharma needs to acknowledge that the partnering firm plays a considerable role in the partnership's success. Existing pharmaceutical–biotechnology collaborations have demonstrated that success can be achieved by giving the partner company autonomy and allowing it to maintain its identity.

Focus on partnerships with firms that have proprietary technology. Third, pharmaceutical firms need to look for partners that already have proprietary technology platforms and that employ world-class scientists. These characteristics are more important than forming alliances based purely on products. The advantage of such a partnership is that the pharmaceutical company will have access to a source of ongoing discoveries, which can be exploited to maintain a competitive edge. For instance, in 2007, Roche (Basel, Switzerland) formed a partnership with Alnylam Pharmaceuticals (Cambridge, MA) a leader in the field of RNA interference therapeutics. The alliance gave Roche access to Alnylam's technology platform. In addition, as part of the deal, Roche acquired Alnylam's European research site, including approximately 40 staff members (5).

Manage associated risks. The fourth and final lesson is that pharmaceutical firms need to manage the risk associated with developing experimental products that might ultimately fail. Important questions to consider when seeking a partnership include: How close is a potential partner's product to reaching success? How should an alliance be valued? What deal model (e.g., milestone, royalty, or profit-sharing) should be employed?


As the era of personalized medicine draws near, pharmaceutical companies need to enter into alliances with genomic and molecular diagnostic firms to reap the full rewards. Based on previous and current partnerships with the biotechnology industry, drugmakers have amassed a huge amount of expertise in building fruitful collaborations. It is now time for them to leverage this know-how to get ahead in the next great life-sciences revolution.

Nafees N. Malik, MB, ChB, C.Sci., is a masters in bioscience enterprise degree candidate at the Institute of Biotechnology, Univ. of Cambridge, Tennis Court Road, Cambridge CB2 1QT, UK, tel. + 44 7967 992 957,


1. E.A. Czerepak and S. Ryser, "Drug Approvals and Failures: Implications for Alliances," Nat. Rev. Drug. Discov. 7 (3), 197–198 (2008).

2. S. Riley, "The Pharmaceutical Market Outlook to 2018: Key Threats and Opportunities for Big Pharma and its Responses to Them" (Business Insights Ltd, London, 2008).

3. IMS Health, Intelligence.360–Global Pharmaceutical Perspectives 2007 (Norwalk, CT, 2008).

4. Ernst & Young, Beyond Borders: Global Biotechnology Report 2008 (Boston, May 2008).

5. Roche press release, "Roche and Alnylam Form Major Alliance on RNAi Therapeutics," July 9, 2007.