Question

What do you think are the possible major tensions that exist when a pharmaceutical firm forms an alliance with a biotechnology firm?

How would you try to address those tensions?

Identify different challenges that exist for maintaining or strengthening an ongoing alliance versus beginning a new relationship.

1750-2000 words

Answer 1

As we know Phar companies and Bio-tech companies are increasing entering into tie-ups in order to achieve the best commercial value and business expanse for their new drugs. Intuitively Pharma companies bring regulatory, Sales and marketing expertise to the table whereas Bio-tech firms have their core competence in their R&D and proprietary technology.

1. Strategic misfits: It refers to the clarity of the strategic objectives and needs of both the companies such as technical expertise, financial resourecs, necessary infrastructure etc. In case of a misrepresentation or a partnership entered even in case of strategic misalignments, the same would never last for long.
2. Deal Structure: Any deal/contract between the 2 types of companies must address Payments structure, risk factors, project milestones and deliverables, Clear segregation of responsibilities etc. Hence the more detailed and informed structure for the deal created at the contract stage, the better chances for the partnership to work. This could be achieved based on the lessons of past failures and success of the pharma industry.
3. Clear strategy in terms of In-Licensing or Out-Licensing: Another important aspect of such partnerships is the choice of the licensing based on the drug or drug category. Based on the drug discovery stage, internal capabilities and bandwidth of the Pharma firm, expected rollout time for the drugs and other higher-priority drugs in pipeline etc the Pharma company needs to be absolutely sure of the type of licensing it wishes to go ahead for a partnership. This would avoid a late stage failure when the drug turns out to be a failure or success.
4. Lack of respect, understanding and Open communication: Many a times after the fancy kick-off meetings and deal signing ceremonies, the project fizzles out due to a lack of understanding and unclear communications in the partnership. Hence the pitfall however tactical it may look, should be avoided.