Shopping for innovation

The commercial life science sector is a challenging arena to say the least and not a place for the risk-averse. The freedom to try stuff and fail is a prequisite for success. Biological systems are inherently and astronomicallly complex and our attempts to modulate their behavior to clinically beneficial ends are always fraught with some degree of uncertainty. Managing the risk and complexity of the drug development process is arguably the major challenge faced by the commercial life science sector and this has been a recurring theme at The Digital Biologist – see for example A new prescription for the pharmaceutical industry, The truly staggering cost of inventing new drugs and A new report by "The Economist" laments the lack of innovation in the biopharma sector.

One of the interesting trends that I have highlighted in these discussions, is the increased emphasis among many larger companies, on licensing in new intellectual property from smaller specialized R&D firms, as opposed to developing it in-house. The most recent announcement by Merck-Serono, of its decision to effectively double its own venture investments in external biotechs, aligns well with this trend and is an example of an alternative kind of R&D outsourcing. Rather than re-investing this money in its own, in-house R&D, Merck Serono is instead, seeking to tap the rich vein of entrepreneurial innovation that exists amongst the smaller, more specialized biotech companies and startups in the Boston biotech cluster.

Such an approach potentially addresses a couple of the perennial problems that the larger life science companies face. Creating a genuinely entrepreneurial environment within large organizations is challenging, especially given their innately hieracrchical management structures. And while the risk associated with such venture-funded biotech investments is significant, it is arguably a more flexible and manageable risk for Merck Serono than expanding its own internal pipeline in such a challenging climate for commercial life science, with all of the concomitant overheads and commitments that this would entail.

At the heart of these changes, there seems to be something of a dilemma for the companies involved. While they would all like to enjoy the kind of kudos and prestige that come from doing cutting-edge research, at least some of them may end up having to accept that what they really do best (and which cannot easily be replicated by the smaller companies) are the long and resource-intensive steps from early clinical to market.

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