Biomedical Engineering Reference
In-Depth Information
To succeed in the ambitious pursuit of blockbuster hits, in their formative years
most of today's large pharmaceutical fi rms saw it fi t to build an organization that
could carry out functions encompassing all stages of the innovation process: from
creating fundamental science to drug commercialization and post-market monitor-
ing. For these Big Pharma fi rms—the powerhouses on the Fortune 500 list—this
legacy business model has driven them to the top and kept them there for decades.
But the blockbuster mentality is essentially opportunistic. It is a costly gamble with
high stakes, prone to generating many more “misses” than “hits.” Given the long time
for drug development, the shorter exclusivity periods, the decrease in expected returns,
and the constantly increasing costs of commercialization, the strategy of sourcing all
the skills and knowledge necessary to create a new drug from within the fi rm, through
a fully integrated business model, may have run its course.
Besides, the frequent breakthroughs in life sciences, combined with high-paced
advances in technology and the ever-expanding toolsets for drug synthesis and
design, suggest that fully integrated fi rms straddling all aspects of drug innovation
might quickly fall behind in the race to invent fast and well. Highly specialized
skills aligned with the constantly evolving technologies are becoming essential. The
current proliferation of state-of-the-art technologies can steer the pharmaceutical
industry toward more decentralized business models. This transition has already
started, and its onset was marked by the emergence of a rather unprecedented new
venture type—the biotech fi rm.
2.3.2.2
The Foray of Biotech Firms
The 1980s brought about a surge of entry into the pharmaceutical industry by small,
research-focused, entrepreneurial fi rms that positioned themselves between the
incumbents (the already large for-profi t pharmaceutical companies) and the public
sector research institutions (Cockburn
2007
). The rise of these independent centers
of vigorous R&D and invention, primarily in the area of biotechnology, was facili-
tated by a range of institutional and legal changes at the time. Widely known as
biotech companies, these fi rms focus on the discovery and development of biophar-
maceuticals (proteins, DNA, RNA, and other biomolecules created by means other
than direct extraction from a native biological source).
14
14
Nowadays, the US biotech fi rms account for 80 % of the world's R&D investment in biotechnol-
ogy. The US culture of encouraging entrepreneurship and innovation has been conducive to the
creation of such fi rms. This tendency can be traced back to several noteworthy factors identifi ed in
Cockburn and Henderson (
2001a
): (a) strong intellectual property protection; (b) favorable fi nan-
cial climate with robust and vigorous venture capital industry (both of which are relatively uncer-
tain in many European countries); (c) regulatory climate that is not restrictive of genetic
experimentation; (d) strong scientifi c and medical establishment with developed infrastructure and
access to the latest technologies to supplement the limited resources of fl edging small fi rms; and
(e) the existence of strong and facilitating academic and cultural norms that permit the rapid trans-
lation of academic results from the originating institutions (often in the public domain) to the pri-
vate sector, with commercial purposes.
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