November 24, 2008

Tough times spur innovation

The current financial crisis has hardly slipped past anyone’s life unnoticed, and the life science sector is certainly no exception. Bloomberg’s article about recent biotech bankruptcies has been a major discussion topic in the biotech blog world lately (e.g. California Biotech Law Blog, The In Vivo Blog, etc). It is probably close to impossible to see any positive effect for those affected by the crisis, but I thought that I would elaborate on the competition question lifted in relation to my last blog post in the context of the current crisis.

Competition over financial resources forces strategizing
Scarcity of financial resources leads to strategy restructuring to gain competitive advantage in an increasingly fierce competitive environment. It seems as innovation becomes the major vehicle for differentiation when the economy goes down while cost-cutting becomes more of a simultaneous norm for the whole industry. Some recent examples include;
Astrazeneca announced, 20 Nov, that it as part of its company strategy, to focus on drugs available on prescription only, will sell a drug portfolio to Glaxosmithkline comprising prescription free drugs such as Alvedon and Reliv. This monetization, providing Astrazeneca with USD 253 million according to the agreement, takes place while the company is announcing closures of plants in Sweden, Belgium and Spain affecting 1400 employees.

A great example of how innovation does not only have to relate to products and portfolios is Infinity Pharmaceuticals Inc., which recently entered into an innovative strategic alliance agreement with Mundipharma International Corporation Limited. Mundipharma gains access to Infinity’s entire oncology-focused discovery and development pipeline for an initial (with options to extend for two additional one-year periods) term of three years. Infinity will retain US commercialization rights for all oncology products developed under these programs and is obliged to pay a (double-digit) royalty on US sales of these products to Mundipharma. Commercialization rights outside of the US are held by Mundipharma, which are also required to pay a (double-digit) royalty to Infinity for the sales of these products. As part of the deal, Mundipharma will pay all of Infinity’s R&D expenses until at least the end of 2013.
These are just two examples of how tougher times may spur innovation, it will be interesting to see what strategies other biotech firms will come up with to stay afloat.

Tobias Thornblad

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