How to make an ecosystem work in life sciences
There are several best practices identified in the Ecosystem Survey that life sciences executives can adopt:
- Conducting regular C-suite or board-level review of ecosystems
- Having a corporate function dedicated to track progress
- Having a business development function that identifies potential partnerships
- Having a dedicated ecosystem budget
- Having operating ecosystems as a distinct line of business
- Designating one person to have clear ownership of cultivating and managing ecosystems
Three actions life sciences executives can take now
Life sciences executives can consider the following steps as they build an ecosystem mindset.
1. Build robust and agile ecosystems to support alliances and M&A
While M&A is still a key tool for acquiring innovation, ecosystems can offer higher-growth opportunities (53%), faster execution (50%) and better outcomes (50%), according to life sciences executives. Companies can start to build strong ecosystems by establishing an ecosystem development function with a dedicated budget. C-suite or board-level review is also essential, and companies may bring in a third party to manage the ecosystem.
2. Go early with alliances with optionality for Phase II assets
As mentioned, ecosystems offer significant advantages over traditional R&D by providing greater access to talent and expertise as well as mitigating risks by reducing cost and accelerating time to market. As such, they increase the return on R&D investment. Entering into alliances for promising assets early with an option to acquire at the phase II stage could provide a good balance between risk and return, maximizing the value of assets versus developing them in-house. For the treatment developer, linking with a larger company can provide the scale and commercial capabilities to bring a drug to market.
3. Don’t neglect traditional M&A
While an alliance approach can help shrink the innovation deficit, pressure to do M&A will accelerate as patents expire in 2025-2026. The years 2020 and 2021 have seen the lowest M&A in terms of value in the last several years while firepower, a company's capacity to fund transactions based on the strength of its balance sheet, in biopharma has remained near record levels, exceeding US$1.1 trillion. In 2020 and 2021, biopharma companies had the luxury of employing a watchful, waiting approach. However, with pipeline replenishment diminishing beyond 2022 and the innovation deficit widening by 2025, companies need to increase their deal-making to maintain and sustain long-term growth.
Conclusion
The study suggests major biopharma companies will be challenged to meet their growth objective if they rely too heavily on their internal R&D alone. Taking an ecosystem approach that fosters alliances and M&A with companies producing early-stage products, digital investing and technology can help close the innovation gap that big biopharmas might face in the coming years.
Harish Kumar, Tushar Shah and Kritika Verma contributed to this article.
