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Open Innovation in Biopharmaceuticals: Challenges and Opportunities

Phillip H. Phan, Ph.D.Alonzo and Virginia Decker Professor

Professor of MedicineDepartment of Medicine

The Context

Global BioPharmaceutical IndustryGlobal Spending on Healthcare

Source: Deloitte, 2018

Global BioPharmaceutical IndustryRevenue Forecast

Source: Deloitte, 2018

Global Prescription Drug Sales 2008-2022

Source: EvaluatePharma, 2017

Healthcare Spending in China (40% on drugs)Emerging market opportunities

Sources: Economist Intelligence Unit, OIR

Global BioPharmaceutical IndustryMigration to Value Based Payments

Source: Deloitte, 2018

The Problem

Stagnant productivity of U.S. BiopharmaceuticalsR&D Spending versus Drug Approvals

Sources: FDA, 2018, Statistica.com

Stagnant productivity of U.S. BiopharmaceuticalsTrend in R&D efficiency (inflation-adjusted)

Jack W. Scannell, Alex Blanckley, Helen Boldon & Brian Warrington, Diagnosing the decline in pharmaceutical R&D efficiency, Nature Reviews Drug Discovery, 11:191–200, 2012

Median cost of bringing a drug to marketUS$2.6B + $312M post market

Source: Tufts Center for the Study of Drug Development, 2014

The FDA Drug Trial ProcessTypical small molecule clinical research process

Investigational New Drug

20-100 healthy or with

disease/conditionYield: 70%

IND applicationPhase 1Safety and dosage

Up to 1 year

Phase 2Toxicity & side effects

100s with disease/condition

Yield: 33%

Up to 2 years

300-3000 with disease/condition

Yield: 25-30%

Up to 4 years

Phase 3Efficacy & long-term side effects

30 days

Phase 4Post-MarketSafety Monitoring

1000s of people with the

disease/condition

Final Yield: 6-7%

From patent award development could take 12-17 years leaving 8-3 years for sales and marketing

The Patent Cliff75% decline in revenues within 2 years of patent expiration

Source: PharmaValet Database of Patented Medicines, 2014

The Patent CliffTop 4 blockbuster drug sales 2011-2012

Share of drug sales approved since 2001Shrinking, less productive pipelines

Sources: FDA, Pharmaceutical Research and Manufacturers of America

The Solution?

U.S. Semiconductor IndustryWhat Open Innovation can do

Sales of USD164B in 2016½ global market shareEmploys 250k people in the U.S.Supports 1M jobs in the U.S. economy

Features of an Open Innovation System

• Objectives– Development and commercialization of new ideas– Tools, standards, and models– Knowledge bases– Networking

• Intellectual property– Aligning objectives– Balance between completely open (public domain) and completely

closed (trade secret)• Risk management

– Proportional sharing of gains based on contributions– Disincentives to cheat

Objections to Open Innovation (sharing) in Pharma

• Loss of control over intellectual property (IP represents the core value of a pharma)

• Need for blockbuster (>USD1B) drug to recoup drug development costs

• Horserace paradigm in drug development• No appetite for investments in non-excludable tools and

standards

Structural Solutions to Open Innovation

• Patent pools• Secured technology platform (e.g., blockchain)• Common tools and evaluation rubrics• Open standards and collaboration platforms• Shared best practices and process metrics• Trusted ‘clearinghouse’ or convener

Examples of some structural solutions

The Medicines Patent Pool (MPP) United Nations

• Public health organization working to increase access to HIV, hepatitis C and tuberculosis treatments in low- and middle-income countries.

• MPP partners with stakeholders through a voluntary licensing and patent pooling model.

• Geography: up to 131 countries covered in MPP’s licenses• Quality assured• Flexible (non-exclusive, unrestricted) to encourage generic

competition• Disclosure of company patent information• Waivers for data exclusivity• Compatible with Trade-Related Aspects of Intellectual Property

Rights Agreements• Transparency: full text of all licenses are published

Biomarkers ConsortiumFoundation for the National Institutes of Health

• Accelerates development of precompetitive biomarkers by forging collaborations among the National Institutes of Health (NIH) and world-leading public and private institutions in a neutral environment.

• Focus is on drug development in the discovery stage by allowing researchers to share biomarker test data in, for example,

• Aging and osteoarthritis• Autoimmune• Dermatology• MRI and PET Imaging (endovascular and neuro)• Diabetes• Sarcopenia• Cancer

Single Nucleotide Polymorphisms (SNP) ConsortiumOpen source community

• In 1999, collaboration of 10 drug makers and 5 scientific laboratories to map single nucleotide polymorphisms (SNPs), which are heritable sequence variations.

• Used in Genome-wide Association Studies GWAS to find genetic variations shared only by the disease-affected (e.g., Alzheimer’s, cancer, Parkinson’s, diabetes) groups.

• Genetic predispositions can point to novel and personalized therapies. • Corporate: AstraZeneca, Bayer, Bristol-Myers, Hoffmann-La Roche, Glaxo

Wellcome, Hoechst Marion Roussel, Novartis, Pfizer, Searle, and SmithKline Beecham

• Academic: Whitehead Institute for Biomedical Research, Washington University School of Medicine, Wellcome Trust's Sanger Centre, Stanford Human Genome Center, and Cold Spring Harbor Laboratory

• Goal to discover 300 000 SNPs in 2 years, result is 1.4 million SNPs released into the public domain at the end of 2001

patientslikeme®‘give data, get data’

• Free website where people can share their health data to track progress, and help others

• Assumes that patients have knowledge researchers need, rather than the other way around.

• Patients share symptoms, treatment info, and health outcomes• Website turns info into millions of data points about disease,

aggregates and organizes the data to reveal new insights.• Share back insights learned with everyone. • Share patient experience with industry to develop better products,

services, and care.

Process Solutions to Open Innovation

• Align objectives among collaborative partners (could have groups within groups)

• Clear expectations• Milestones and deliverables

• Limited and easily enforceable contracts• Trust

• Unhindered interpersonal communication• Frequent meetups • ‘Hero’ stories

Process Solutions to Open Innovation

• Learning opportunities• Room for mistakes• Feedback and adaptation

• Address cultural bias against sharing• Incentives to share

• Well defined protocols for engagement• Joint decision making• Staging

• ‘Gamifying the player network’

GamificationPartner Engagement

• Autonomy at the lowest level– Personal goal setting

• Mastery of skills and capabilities– Recognition

• Purpose driven activity– Goal directed

• Progress to goals– Feedback

• Social interaction for personal validation– Status

Metrics for Collaboration

• What success looks like at an early stage (‘leading indicators’)• Define ultimate quantitative and qualitative outcome/impact

measures• Collect baseline quantitative and qualitative data• Understand that the criteria will vary at different stages of

partnership development and the R&D pipeline

Addressing the objections to sharingUsing open innovation principles

• Loss of control over intellectual property• Create patent pools with protected zones

• Need for blockbuster (>USD1B) drug to recoup fixed costs• Reduce fixed costs with research partnerships

• Horserace paradigm in drug development• Real options strategy instead

• No appetite for investments in non-excludable tools and standards

• View as infrastructure investments necessary for accelerating commercialization

Where business is taught with humanity in mind.

AppendixGamification

Game DynamicsEngaging the primal brain

• Competition (Norepinephrine)• Collaboration (Endorphin)• Community (Oxytocin)• Collection (Glutamate)• Achievement (Serotonin)• Surprise (Dopamine)• Emotional Progress (Endorphin)• Exploration (Serotonin)

Game MechanicsDesign elements in compelling games

Fast Feedback: Immediate feedback or response to actions– Encourage users to continue or adjust their activities with onscreen notifications,

text messages or emails. Congratulate a user for reaching a goal, encourage the next step to a milestone or promote a new reward.

Transparency: Where everyone stands– Show users exactly where they stand on the metrics that matter to you and to your

audience. Individual and team profiles show progress in real-time and historically. Leaderboards show who’s just ahead and who’s behind as well as overall ranking on any number of metrics.

Goals: Short- and long-term goals to achieve– Missions or challenges give users a purpose for interaction, and educate users about

what is valued and possible within the experience.Badges: Evidence of accomplishments

– An indicator of accomplishment or mastery of a skill is especially meaningful within a community that understands its value. Often used to identify skills and expertise within a group.

Leveling Up: Status within my community– Levels indicate long-term or sustained achievement. Used to identify status within a

community and to unlock new missions, badges, activities, and rewards.

Game MechanicsDesign elements in compelling games

Onboarding: An engaging and compelling way to learn– Video games train you how to play as you play – users learn by doing. Simple missions help

new users become engaged immediately as they master basic tasks, rather than being stumped by an unfamiliar interface or a detailed manual.

Competition: How I’m doing compared to others– Raise the stakes for accomplishing a goal by showing users how they compare to others, as

individuals or in teams. Encourage competition with time-based, team and individualized leaderboards. Where do I rank? How can I overtake my closest competitor?

Collaboration: Accomplish a goal working with others– Connect users as a team to accomplish larger tasks, to drive competition, and to encourage

knowledge sharing. Show team members how they are contributing to the group’s success. No one wants to let down their team members.

Community: A context for achievement– Community gives meaning to goals, badges, competitions, and other mechanics. Sharing

participant achievements creates energy in the community by making people aware of what others are doing. They learn about goals, badges, and rewards that they may want to pursue.

Points: Tangible, measurable evidence of my accomplishments– Used to keep score and establish status or accumulated to purchase virtual or real goods.

Earn points through activities, sharing, contributing, or by creating something useful to others