by Dr Fintan Walton, CEO, PharmaVentures.
After nearly 40 years in the pharmaceutical industry, I believe pharmaceutical companies have still not got it quite right when it comes to innovation
In the 1990’s and 2000’s, there was considerable M&A amongst pharmaceutical companies. A largely fragmented industry underwent a significant process of consolidation so that the acquiring companies could achieve market dominance and efficiencies of scale. There was great debate about whether these goals were ever achieved. Since then, pharma companies have acquired or merged with the more mature biotech companies who have a market dominance in a particular field. These strategies often provide short term temporary solutions to a pharmaceutical company wishing to maintain its market position. Nevertheless, market dominance amongst pharmaceutical corporations no longer begins in the commercial marketplace, but at the very early stages of innovation.
Today, market dominance is achieved by selling products that are wholly exclusive to the successful company, i.e., through patent protection. Patents protect the pharmaceutical company from competition, or at least from drugs that infringe the claims within the relevant patents. Patents, by definition, are non-obvious inventions and drugs are often protected not by one patent but by several. So typically, a pharmaceutical company’s strength and market dominance is its ability to identify and gain access to patents that are commercially viable. This is not a simple task.
For nearly 30 years, PharmaVentures has been very active in helping both emerging biotech companies and larger pharmaceutical companies to partner around innovation. We have seen how pharmaceutical companies have become more sophisticated in their partnering strategies and processes. VCs and pharmaceutical companies now work more closely together, with the venture arms of pharma co-investing alongside VCs. This was a proposition I put to several pharmas 20 years ago and it was quickly adopted.
However, I am not convinced the industry has got it right yet. My observation is that pharma companies have become complacent and are posing a great threat to their market position. The close partnering between pharma and VCs has just created a bubble where convergent thinking occurs, mantras develop, and new ideas are more difficult to accept. If anything, companies have become more risk adverse as a result, despite partnering sooner. Innovation thrives where there are no barriers and closed bubbles. Fortunately, we at PharmaVentures provide access for our clients into all the significant pharma and biotech companies. However, by actively working more closely with firms like us, where we are continuously accessing hundreds of innovative companies worldwide and carefully listening to the opportunities within our portfolio, pharma companies, in my view, are more likely to gain access to exclusive innovation, develop better therapies and gain a greater share of the future market.