INNOVATION MODELS IN THE BIOPHARMACEUTICAL SECTOR - Innovation in the Biopharmaceutical Industry - page 12

decisions are long-term because building necessary capabilities to compete effec-
tively in a given disease sector takes many years. It involves bringing together diverse
scientific expertise, facilities and external relationships that cannot be transferred
from one disease sector to another.
Pharmaceutical companies continually assess the scientific, medical and com-
mercial viability of a portfolio of around 50-100 projects. Some of these are high-
risk, with a low probability of leading to a commercial product, while others offer
more immediate prospects of return. Some projects will be in the earliest stages of
the 8 to 12-year time-line from early research to market approval (Fig. 4), while
others will be closer to market entry. Managing the balance of this portfolio over
time requires a sophisticated mix of project evaluation techniques, experience and
risk-taking judgements.
Individual product strategy and life cycle models
Individual product development projects are undertaken by interdisciplinary teams
whose composition changes over time as it moves forward. Successful completion
of the innovation cycle requires major contributions from disciplines beyond R&D,
most notably, manufacturing and marketing experts. Life cycle models of the type
illustrated in Fig. 4 are widely used within companies and by business sector ana-
lysts and academics (Adkins et al. , 2003; Grabowski and Vernon, 2000; Pammolli
et al. , 2003) to evaluate returns on individual products, and to balance expenditures
against income and calculate net present values. The long timescale of over 30 years
makes the accumulation of data a major challenge for retrospective analyses. In the
R&D portfolio context, making forecasts of future revenues is largely a conjectural
exercise.
Despite these difficulties, invaluable insights into patterns of life cycle returns
have been achieved (Grabowksi and Vernon, 2000) which will be discussed further
below.
The “big pharma” - SME - academia interface
In a cross-industry study of the role that small firms have played in innovation
between 1945 and 1980, Rothwell (1984) observed that, unlike other sectors, SMEs
had made little or no contribution to innovation in the pharmaceutical sector. In a
similar study covering the 1980s Patel and Pavitt (1994; Patel, 1995) noted that the
traditional “academia-industry” research model, illustrated in Fig. 1, had evolved
into a more complex three-part model, in which small “spin-off” companies and
SMEs had played a more prominent role in the innovation process. In part, this might
be attributable to the large pool of tacit knowledge created in the biomolecular wave
that was being transmitted from academia to the established large firms.