Innovation in the Pharmaceutical Industry: The Process of Drug Discovery and Development - Innovation and Marketing in the Pharmaceutical Industry - page 58

Firms looking for licensing or acquisition targets may need to fi nd the right
balance between leveraging specifi c competencies and attaining pipeline
diversity. Evaluating the knowledge-based assets of other fi rms can be rather
challenging. Only fi rms actively engaged in certain therapeutic areas may have
the confi dence and the capabilities to accurately assess the potential of others'
R&D efforts, the expertise to manage the development process more effi ciently,
or the marketing experience and the sales contacts to execute the launch effec-
tively. On the other hand, acquiring a fi rm with a rather different pipeline might
be advantageous in its own right as it will contribute to the acquiring fi rm's
project diversifi cation. Maintaining focused or diversifi ed research portfolios
may be differentially conducive to small vs. large fi rms or to upstream vs. down-
stream organizations. Therefore, large pharmaceutical and small biotech fi rms
alike may need a clear recognition of the combination that could be optimal in
their setting.
Collaboration assists fi rms by supplementing their own R&D activity. Licensing,
strategic alliances, mergers, and acquisitions can invigorate fi rms' internal research
efforts and extend their research pipelines (Chan et al. 2007 ). Promising drug can-
didates can be brought forth for clinical investigation at a much higher rate, building
a valuable momentum in the competitive race to market. Ding and Eliashberg ( 2002 )
fi nd that fi rms underspend on drug development during clinical trials, suggesting
that optimization of their pipelines could be necessary. The infusion of external
know-how and the adoption of candidates from new therapeutic categories will lead
to more diversifi ed research programs, opening up options for more effi cient utiliza-
tion of resources. Besides, diversifi cation through assimilation can create new stra-
tegic advantages and translate into greater gains for the fi rm.
Of course, there can be exceptions and variations from the business models and
practices discussed heretofore. For example, not all biotech fi rms are small, nor are
they solely confi ned to highly specialized research with a narrow focus. Some, like
Amgen, are suffi ciently vertically integrated to take promising drug candidates from
prediscovery to market. Biotech fi rms can learn to successfully manage diverse
R&D programs, too. The modes of collaboration in the pharmaceutical industry are
abundant and multifaceted, and hold great potential for more in-depth analysis and
continued empirical research.
Considerable differences in productivity across pharmaceutical fi rms might be
associated with variability in their strategic decisions about the scope, the focus, or
the coordinated timing of their innovation efforts. In the academic literature, two
likely scenarios have been explored in more detail: overfl owing project pipelines
and shortages in the project pipeline. We sketch out some of the analytical infer-
ences below.
Cassiman and Ueda ( 2006 ) analyze the conditions under which an established
fi rm might be advised to spin off some of its newly conceived technologies to start-
up ventures. Such spin-offs are typically headed by former employees (scientists)
proven to be essential for the development of the said technologies at the incumbent
fi rm. The authors conclude that fi rms will spawn off such ventures, and occasion-
ally even partially subsidize them, if: (a) the fi rm undertakes a lot of successful