Developing sustainable competitive advantage in the biopharmaceutical industry, through the

use of network innovation strategies

Chris JeffsSenior Lecturer in Strategic Management and International Business

Newcastle Business SchoolNorthumbria University

England

Research map

Innovation/creativity

Outline of lecture

Biopharmaceutical Industry Biopharmaceutical networks Projects within networks Knowledge transfer Limitations of Biopharmaceutical knowledge

transfer Optimising biopharmaceutical innovation through

innovation networks

Informatics

Manufacturing & Post MarketSurveillance

Manufacturing

•Process Monitoring•QA/QC•Troubleshooting

Post Market Survey

•Ongoing monitoring of patients

Phase IV Clinical Trials

Generics/ OTC

Clinical Trials

•Human testing (100-300)•Control studies - patients•Efficacy (does it work?)•Dosage (amount, frequency)•Safety and Metabolism•Final mfg process definition

Phase II Trials

•Initial testing of humans (50)•Normal population•Safety profile•Human metabolism•Pharmacokinetics

Phase I Trials

•Human testing (1000's)•Safety testing, long duration•Multicenter studies•Comparative trial (to existing therapeutics)•3 years

Phase III Trials

New Drug Application (NDA)(PLA international)

Stability & Formulation Testing

DrugDevelopment

Process Research

•Evaluate Mfg Process•Environmental safety•IP

Investigational New Drug (IND) (CTX)

Exploratory Drug Candidate (EDC)(Clinical Candidate)

•Historical Libraries•Natural Products•Combinatorial Chemistry•Targeted Synthesis•Rational Design

Lead Compound Selection

Optimize Compounds

Evaluate Compounds

DrugDiscovery

•Characterize compounds•Screen for activity•Hi Thru-put Screening

•Late stage synthesis•Identification/Purification•Secondary screening•Testing in animals•Prelim bioavailability•Specificity, Metabolism•Pharmacology

Generate Compounds

Disease Discovery

Disease Understanding

TargetValidation

TargetIdentification

Safety Testing -InVivo •Animal testing•Toxicity Testing (side effects)•Metabolism (DMPk)•Pharmacokinetics•ADME•Bioavailability•Prior validation

•Functional genomics•Human genetics•Animal genetics (knockouts & transgenics)•Exploratory clinical studies (academic research)•Research–Transcriptional Profiling–Proteomics–Biomedicine

Business Strategy

•Structural genomics•Genetics•Biomedical Research•Mammalian natural products research

Basic Research

Government

Academic

Private

(Leads)

(Hits)

Assay Development

Scale Up

DevelopmentCandidate Discovery

Clinical Plan

•Bioequivalence to existing drugs

•New indications•New dosages

Pharmaceutical Value Chain

Background

Biopharmaceuticals are used therapeutically Biopharmaceuticals include proteins, antibodies

and nucleic acids, and are produced by means other than direct extraction biological source.

The first such substance approved for therapeutic use was biosynthetic 'human' insulin made via recombinant DNA technology. It was developed by Genentech under the trade name

Humulin, but licensed to Eli Lilly and Company, who manufactured and marketed the product from 1982.

Sustainable Competitive Advantage through Collaborative Networking

Relational capabilities (Owen-Smith et al, 2002) Facilitate innovation by network linkages

National/Political Social Cultural

Integrative capabilities (Owen-Smith et al, 2002) Translation of basic research into commercial applications

Switching strategy (Lampel, 2001 ) Seeking high quality opportunities wherever they may be

found; trying to capture these opportunities, and then turning their attention to transforming these opportunities into revenues

GlaxoSmithKline (2009)

We enjoy a strong record in establishing and maintaining collaborations with scientists and organizations in both industry and academia.

Since its inception, GlaxoSmithKline has established over 50 compound alliances, which now represent over 40% of GlaxoSmithKline’s development pipeline, along with a wealth of technology and academic alliances.

http://www.gsk.com/about/downloads/busdev-brochure.pdf

Crystal Genomics Dr Joong Myung Cho, CEO.

SEOUL-headquartered is a structure-based drug delivery and development company. The company was founded in 2000 and was listed on the KOSDAQ in early 2006. It has a wholly-owned subsidiary, CG Pharmaceuticals, in Emerville, US.

Crystal Genomics has a diverse pipeline in the disease areas of inflammation, anti-infectives and cancer

Because Korea is still relatively unknown in the biotech and pharmaceutical industries, it takes extra efforts to be noticed by potential global partners to consider CrystalGenomics as a collaborating partner or to in-license our assets for further development.

Crystal Genomics collaborations

Biopharmaceutical collaboration

Rapid technological change, uncertainty & risk leads to increased numbers of collaborative ventures

Collaboration may be to- Fill in gaps in the value chain / gain resources Increase the likelihood of market success Increase the product portfolio Gain access to knowledge Embed the organisation into a community of practice

Biopharmaceutical collaboration- Collaboration is typically as focal hubs Collaboration raises entry barriers Exclusivity is not always essential, competitors may also be

partners, profit can be made at all stages of the value chain

XOMA collaborative product development

www.pharmalicensing.com

Alliances by stage Garnsey, Leong (2007)

Project Classifications Newell et al (2007)

Multiple dispersed projects involved but each operating independently on tasks with output pooled or sequentially

added

Multiple dispersed projects working together reciprocally on tasks in order to integrate

knowledge

Small number of co-located projects each operating

independently on tasks with output pooled or sequentially

added

Small number of co-located projects working together

reciprocally on tasks in order to integrate knowledge

Project Interactivity(How task interdependencies are managed across projects)

Project E

cology(T

ime, space, # of organisations involved) Low High

Com

plexSim

ple

Knowledge transferability

Type of knowledge Description Protection issues

Individual tacit knowledge

(Polanyi, 1966)

Developed through experience and hard to put into words, or even to detect until required

Protected by good HRM processes to motivate and retain employees

‘Sticky’ collective tacit knowledge (Szulanski, 1996)

Knowledge embedded in social structures about how to act in particular situations

Protected as distributed through a collection of people. Damaged if social structures are disrupted

‘Leaky’ explicit knowledge (Szulanski, 1996)

Knowledge that is explicit and inherently mobile

Protected through forms of data protection & patents, trademarks etc

Adapted from McKenzie, J. & Van Winkelen, C. (2004).

Knowledge transfer across boundaries:Integrated 3-T framework (Carlile, 2004)

SyntacticTransfer

SemanticTranslation

PragmaticTransformation

Increasing Novelty

Known

Actor A Actor B

Knowledge transfer in networks

Inter or Intra organisational networks based on shallow/weak ties more effective for the integration of explicit knowledge (Hansen, 1999)

Interpersonal networks, involving deep trust based relationships more appropriate for the integration of tacit forms of knowledge (Oliver & Liebeskind, 1998)

Reciprocal interdependence, Sub-tasks must continuously interact because the outputs and decisions from one will have a direct impact on the other; i.e. knowledge flows to and fro between those involved. (Thompson, 1967)

Opportunities for networked innovation are seen as increasingly important to organisational performance facilitating the creation of new knowledge, rather than just the transfer of existing knowledge. (Gulati, 1999)

Barriers to knowledge transfer within networked collaborations

Processes

Boundaries

Power relationships

Cultural differences

Technologies

Boundaries, innovation & competitive advantage

Most innovation happens at boundaries between disciplines or specialisations (Leonard,1995)

Innovation is most likely to form at the interstices of collaborating groups and organisations (Powell et al, 1996)

Innovation is difficult to maintain due to ‘knowledge boundaries’ (Brown & Duguid, 2001)

Knowledge is both a source of and barrier to innovation (Carlile, 2002)Processes

Boundaries

Power relationships

Cultural differences

Technologies

Boundaries to innovation in complex networks (Carlile, 2004)

Not just a bundle of resources but a bundle of different boundaries where knowledge must be shared and assessed.

Boundary management essential and where novelty arises it must be addressed

Actors tend to reuse knowledge which limits capacity to recognise when novelty is represented

Processes

Boundaries

Power relationships

Cultural differences

Technologies

Innovation leading to sustainable competitive advantage (Lampel, 2001)

Requires: Trust between partners in the partner selection

process Entrepreneurial competencies – quickly sizing up

and judge which opportunities and relationships are worth exploring or avoiding

Able to handle relationships with diverse partners and deal with unforeseen contingencies as they arise.

Complex innovation networks/ project ecologies rely on “a collaborative effort by a group of organisations in which none wields complete control”

Limitations to biopharmaceutical knowledge transfer (Carlile, 2002)

Complex project ecologies pose distinct challenges for coordination of project work. Knowledge regime

IP framework unfavourable to collective learning

Power dynamics Conflict rather than interaction Knowledge transfer dependent on changeable relations

and interests

Resource dependency relationships

Pisano (2006)

Existing anatomy of biopharmaceutical industry not appropriate, giving the long-term risks and uncertainty of projects

Need for knowledge transfer and integration across disciplines is not being met

Long-term collaborations rather than shorter term contracts

Monetizing IP is not sustainable More inter-disciplinary research required

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