Big Pharma's Next Challenge: Managing an Increasing Number of Complex Alliances
Executive Summary
Speaker after speaker at this year's Pharmaceutical Strategic Alliances (PSA) conference echoed the theme: Big Pharma firms will increasingly rely on in-licensed products resulting from alliances to make up for shortfalls in their own internal R&D efforts.
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Why Less Is More: The Hidden Cost of Complexity in Pharma Alliances
Drug firms are paying more in non-cash costs--and risking more frequent failures--as biopharmas, intent on building corporate capabilities, not just maximizing the value of a product, demand and receive larger, often overlapping roles in collaborations. Those pharmas who win in this environment will have a complete, measurable understanding of complexity-the hidden cost of dealmaking. They'll forge deals in which, perhaps counter-intuitively, less collaboration creates more value for both parties.
Managing Alliances at Lilly
While alliances look like a relatively quick, cost effective way to keep the pipeline filled with new molecules, available data suggest that over half of all alliances fail to reach their intended outcome, thanks largely to relationship, not technical, failures. Lilly's alliance management program aims to streamline and simplify the alliance management process by systematizing the approach: training managers, creating management structures for all alliances, and regularly assessing each alliance's health along predetermined criteria. Alliance managers, employed by Lilly's Office of Alliance Management, have the responsibility for ensuring that alliance teams use appropriate planning, organization and start-up processes and for fixing alliances when they get into trouble, sometimes by shifting employee responsibilities. These managers can exploit an extensive alliance management tool kit, including a database of all alliances intended to codify what Lilly's learned from each alliance. While ROI on the program is difficult as yet to measure, anecdotally the program is working, having repaired several damaged alliances, and, with luck, helped brand Lilly as a partner of choice in a world when the economics of deals alone don't dramatically differentiate partners.
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