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Pharma reinvents itself, experiments with innovation


By Brian Orelli
Contributing Writer

SAN DIEGO – To stimulate innovation, pharmaceutical companies have to reinvent themselves, looking outside their walls for early stage compounds.

“We made the naïve conclusion that, if you just invest more money into the same thing, the correlation of innovation will still be linear, and we’ll just get more output. We did the experiment, and it failed,” Uwe Schoenbeck, senior vice president and chief scientific officer of external R&D innovation at Pfizer Inc., told the audience at Biocom’s Global Life Science Partnering Conference.

Diego Miralles, global head of innovation at Johnson & Johnson’s Janssen Pharamaceuticals Inc., said it’s time for a change, “We’re playing a completely different game. It’s not the same industry.”

To discover more drugs for a lower cost, pharmaceutical companies must get creative, moving closer to academia and start-ups.

New Brunswick, N.J.-based J&J has tried to capture innovative products by setting up J&J Innovation Centers in Menlo Park, Calif., Boston, London and Shanghai that will identify early stage – preclinical proof-of-concept – innovation at academic institutions, start-up biotech companies and venture capital firms.

The nimble group integrates finance, law and business development personnel to seek out innovation and sign licensing deals, potentially helping with investments from J&J’s corporate investment arm, Johnson & Johnson Development Corp., which is co-housed in the innovation centers.

J&J has a separate facility in San Diego under its Jansen brand that houses independent start-ups that pay rent and get shared equipment. J&J doesn’t require a partnership before moving into the facility, but working with the start-ups on the company’s campus makes for a cozy relationship when a partner is sought.

To spur innovation, New York-based Pfizer set up Centers for Therapeutic Innovation in four locations in Boston, New York, San Diego and San Francisco. Pfizer helps employees who work alongside academic teams to move ideas out of the lab and into the clinic. Pfizer funds preclinical and clinical development programs while sharing ownership rights with the inventing institution.

While most corporate venture funds are standalone entities, Merck & Co. Inc. established its fund within its research and development organization. The fund was initially set up to invest in other venture funds – Flagship Ventures for instance – that specialize in creating start-ups. Merck’s fund eventually branched out, looking at pre-series A ideas, bringing newco ideas to other venture funds.

Having the fund within the R&D organization allows Merck to provide expertise to the portfolio companies and de-risk the science for its co-investors. “Otherwise what are we really bringing?” questioned Reid Leonard, managing director of Merck research laboratories’ venture fund.

Of course, companies have to be careful not to get too focused on innovation and create a gap in their development pipeline. It can be easy for scientists to get excited about the next big thing, but Leonard pointed out it’s usually the thing that you were excited about a few years ago that’s taking off.

“There has to be some balance of pragmatic realism about what’s available to be done today vs. investing in the future so we’ll be ready for the next day,” Leonard warned.

While these innovation-spurring projects and other ideas that pharmaceutical companies have undertaken are potentially good ideas, they’re relatively new and it isn’t clear which ones will work better than others.

The problem, as J&J’s Miralles sees it, came from the industrialization of pharmaceutical companies as they grew larger, creating structure and avoiding change. While the industrial component works in some stages of the business – sales for instance – it doesn’t allow for experimentation when it comes to the best way to innovate. “Industrialization is killing us,” he said.

Instituting change often requires a change in culture which can be resisted, creating loss of productivity. “One thing that can overcome that though is if you have something that starts to work. People rally around success. It’s harder to keep people motivated when you’re in crisis mode,” Merck’s Leonard said.

To get innovation back on track in big pharma, we’ll need to continue to see tweaking of the current ideas. “We as an industry need to get our act together, but also act together,” Pfizer’s Schoenbeck concluded. “We need to copy each other creatively.”