The power of collaboration
After the remarkable collaboration efforts that emerged in response to the COVID-19 pandemic, the pharmaceutical industry has entered a new age of partnerships, leveraging extensive collaboration to become more flexible and agile, particularly in early R&D efforts. In fact, over 50% of late-stage pharmaceutical projects originate from collaboration.
Partnerships are not only good for innovation, they are also good for mitigating the increasing inefficiency of R&D across the pharmaceutical industry. As the cost and complexity of the drug discovery process increases year by year, life sciences organizations are having to find ways to maximize their R&D ROI in order to stay competitive. But what does this look like for the sector?
Eroom’s Law and the R&D efficiency problem
As a metric, R&D efficiency is difficult to measure, particularly as R&D processes become more and more complex. It’s generally taken as the ratio between input and output, with input referring to the overall cost of an R&D effort, and output referring to the number of granted patents, patent applications, approved New Molecular Entities (NMEs) and publications that result from that effort.
Recent academic research shows that there has been a significant decrease in pharmaceutical R&D efficiency in the last few decades. Although the capital investment in and cost of pharmaceutical R&D has consistently increased, the number of approved drugs has consistently decreased – a phenomenon researchers have termed “Eroom’s Law” (Moore’s law, backwards). In fact, the number of new drugs approved by the FDA per billion dollars spent has halved every nine years since 1950. And while total R&D spending in the pharmaceutical industry is set to hit USD 230 billion in 2026 (one of the largest R&D budgets across all industries) the sector’s growth rate is set to drop or plateau – a direct result of R&D inefficiency.
A move toward more open partnership models to drive innovation
So how are life sciences organizations working to counteract the effects of Eroom’s law? Many are turning towards more open partnership models to drive innovation and build more efficient R&D processes. A recent survey showed that 65% of the top 20 pharmaceutical companies are engaged in some form of open innovation. By outsourcing more aspects of the R&D lifecycle, pharmaceutical organizations are able to plug gaps in their portfolios, mitigate risk and overheads, access skills and technologies driven by innovative emerging startups and leverage more cost-effective R&D processes to maximize their return on R&D investments.
Open innovation models take a number of forms, not all of them new. For example, over 20 000 licensing agreements were in place in 2023, with that number expected to rise steadily as the sector stabilizes after the COVID-19 pandemic era. Through licensing agreements, life sciences can fill pipelines and access innovative discoveries and technologies without the significant costs associated with M&A.
Outsourcing R&D processes to Contract Research Organizations (CROs) is an increasingly popular strategy, too, particularly in the clinical phase. The CRO market has experienced unbelievable growth since 2015, expecting to exceed $60 billion by 2024.
Public-Private Partnerships (PPPs) are another open innovation model available to life sciences organizations. In these instances, R&D activities are funded through public funds or charities, and usually focused on more niche targets where R&D activity is less active.
Crowdsourcing initiatives are another example of an open innovation model that pharmaceutical companies are increasingly adopting to drive R&D processes. For example, the EteRNA platform gamifies the design of RNAs by asking the public to solve shape-based puzzles. These desktop experiments are intended to verify the prediction of how RNA molecules fold.
Partnering with emerging startups to fast-track R&D
According to a recent IQVIA report, emerging biopharma companies were responsible for 65% of all new molecules in the industry’s 2022 R&D pipeline. 42% of all new products filed with the FDA came from emerging companies. In 2021, only 18.6% of new active substances were launched by the 10 biggest biopharma companies. In reality, it’s emerging companies and startups who are driving the biggest share of innovation in the biopharma and pharmaceutical industries.
Partnering with emerging startups is a solid strategy for accelerating R&D efforts, one which Big Pharma is increasingly adopting – 90% of all deal activity in 2021 involved emerging startups. Research shows that emerging companies are consistently responsible for new products with the highest sales, as long as larger companies launch those products.
That said, 62% of deals involving emerging companies did not involve larger organizations in 2021, indicating an increase in partnerships between startups to drive innovation, too.
Spotting potential partnerships first
In the current life sciences landscape, partnerships are proving to be the most productive approach to mitigating R&D inefficiency and driving innovation. As emerging companies and more open partnership models continue to drive innovation in the sector, it follows that collaboration with innovative emerging startups is a solid strategy for accelerating R&D efforts. But how do you spot these partnership opportunities before your competitors do?
You’ll find them first in your Similari feed.
Similari’s AI-enabled insights management platform gives you a real-time overview of all emerging and rapidly growing startups in your arena. From the dashboard, you’ll get key insights into who is currently leading your arena of inquiry, who’s growing the fastest, and who is working on what, and when.
Never miss a potential partnership opportunity again. Get in touch today, and we’ll show you how Similari gives you a major edge when it comes to monitoring even the smallest movements in your field.