Open Innovation in Pharma R&D

A non- profit organization attempts to bridge the gap between researchers’ knowledge and big pharma development capabilities

Across industries, companies are realizing the potential of crowdsourcing as a source for innovation. One of these industries is the Pharma industry. Open innovation in pharma represents a revolution in how we can get life saving and life quality improving innovation to patients. Solving for the lengthy and costly R&D processes required to bring a product to market on the one hand, and the lack of experience and resources for many of the sources of innovative ideas (e.g. academia and the public) on the other hand. In terms of financial implications, Patents expiring are estimated to pose a USD 125 Bn revenue risk to the large pharmaceutical companies, with new drug launches expected to offset only 40% of this amount. [1]

The average development cycle to bring a drug to market is ~8 years long [1]. There is significant potential to shorten that, as shown by the Myelin Repair Foundation, where scientist across five universities created an IP-sharing agreement that allows MRF to retain the rights to license discoveries to pharma companies. This is expected to allow MRF to develop a drug 75% faster, compared to the current research methods. [2]

Across the various stages of the R&D funnel, pharma companies stand to gain most from collaborating on idea generation, screening and complex problem solving. Academia and smaller biotech companies/ research facilities stand to gain from the scale of the operations in pharmaceutical companies, coupled with their vast experience.

One area with great need for faster drug development is antibiotics, giving rise to the founding of the non- profit Community for Open Antimicrobial Drug Discovery (CO-ADD). Antibiotic resistant bacteria are spreading, contributing to morbidity and mortality across the globe. The WHO is prioritizing research for novel antibiotics, as the pharmaceutical industry is failing to meet the demand for new molecules. Only 2 new classes of antibiotics have been developed and approved by international drug agencies in the last 2 decades. [3] There is no shortage in new chemical compounds being created in various research institutes, the issue is screening them and developing them into viable commercial products. [3], [4]

Since launching the program in 2015, CO-ADD has screened over 80,000 compounds from 35 countries, testing them for anti-microbial activity, focusing on the most life- threatening antibiotic- resistant bacteria. [5] The group expects their members (88 groups across 26 countries) to deliver 300,000 additional compounds, most of which will be screened by automatic processes (high throughput screening). So far, the CO-ADD has compared their results and found a 20-30 higher hit- rate compared to that of established pharmaceutical companies’ commercial library of biological activity. In a single year, the CO-ADD was able to discover 128 hits, or relevant molecules. [4]

CO-ADD is not making any claims to Intellectual Property (IP), and the founder describes the collaboration as “No strings attached at all… taking open access to the nth degree”. Pharma giants such as AstraZeneca, Merck, Leo and more are not far behind, each offering a compound screening platform. However, since these companies do have “strings attached” to any collaboration, CO-ADD is attracting a substantially larger number of researchers. [4]

With current hit numbers supporting a substantial potential for new drugs, it remains to be seen if CO-ADD can carry these drugs to the finish line, given the long, complex and expensive R&D cycles. In addition, large pharmaceutical companies are investing more in comparable programs, tailoring them to researchers based on individual feedback they collect from their potential collaborators.

To keep researchers submitting potential molecules in the long term, the CO-ADD needs to establish credibility, successfully collaborating with large pharma companies to ensure ongoing medicine development. One way to do that is by proactively partnering with large pharma companies, finding a way to provide exclusivity or other means of financial incentives to develop the antibiotics (e.g. government support).

CO-ADD will need to find a way to realize their vision: continuously identifying a broad range of molecules but also developing them into medicines that can save lives. Can a non- profit organization- reliant on for- profit organizations which are actively competing with it remain relevant in the long run? Can they keep researchers engaged for almost a decade, while a drug completes its development cycle? (702 words)

  1. Getz, Kenneth A. Transforming R&D Through Open Innovation. http://www.appliedclinicaltrialsonline.com/transforming-rd-through-open-innovation. Accessed 10 Nov. 2018.
  2. The next Step in Open Innovation | McKinsey. https://www.mckinsey.com/business-functions/operations/our-insights/the-next-step-in-open-innovation. Accessed 10 Nov. 2018.
  3. Tacconelli, Evelina, et al. “Discovery, Research, and Development of New Antibiotics: The WHO Priority List of Antibiotic-Resistant Bacteria and Tuberculosis.” The Lancet Infectious Diseases, vol. 18, no. 3, Mar. 2018, pp. 318–27. ScienceDirect, doi:10.1016/S1473-3099(17)30753-3.
  4. McGilvray, Annabel. “Compound Screening: Fresh Hunting Ground.” Nature, vol. 533, May 2016, pp. S65–67. www.nature.com, doi:10.1038/533S65a.
  5. Community for Open Antimicrobial Drug Discovery website, http://www.co-add.org

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20 thoughts on “Open Innovation in Pharma R&D

  1. The pharmaceutical industry is a great industry to bring open innovation to, but I agree that CO-ADD needs to gain credibility in the community. From your statistics, it seems like they’re a very productive non-profit, but I’m curious how they make money off the relevant molecules they actually find.

    If the goal is quick go-to-market development to help address the growing need for antibiotics, I would challenge the idea that CO-ADD can actually do it quicker than a large, established firm with plenty of resources. I’m also interested in the idea of a partnership with the government for CO-ADD, I think this would be a great control to keep the platform focused on patient need, not the goals of large pharmaceutical companies.

    I think CO-ADD could also lower the barriers to entry that researched have in the pharma industry. We need more capacity, and I think the generation of more minds across hundreds of different labs will help to address this problem. One roadblock I think they may face is how to manage their non-profit across several different locations and cultures, because their productivity is paramount to discovery.

    1. To build on Liz’s point about management, I wonder if CO-ADD’s founder and team have the right skillset to make CO-ADD most valuable as in addition to having technical expertise relevant to screening for anti-biotics. In other words, given CO-ADDs unique and collaborative approach, are there lessons to be applied from other industries about idea gathering, prototyping, testing, etc. with which the current team may have minimal experience. If this is the case, they might be able to bring in outside help with less knowledge of the drug industry but with ideas about how to streamline the ideation and product development process. This could ultimately facilitate stronger partnerships with big pharmaceuticals and improve the long-term viability of CO-ADD.

  2. I think one of the major challenges for this model is that manufacturing at scale of pharmaceutical products is tightly regulated (as it should be). The costs are also prohibitive for a newcomer, let alone a non-profit that is not attempting to patent its inventions. I agree with the comment above on the need for a partnership with the government that can potentially provide cost assistance when it comes to manufacturing, either by focusing only on the required regulations rather than an all-encompassing set or through a grants program. For molecules that are mandated by the WHO etc. (which might require a minimum fixed volume), perhaps CO-ADD could work with contract manufacturing organizations and negotiate a preset price at fixed margins?

  3. I am curious as to what role the US FDA plays in this space given the impact that these new antibiotics could have on saving lives. The FDA already provides accelerated approvals for drugs that treat rare diseases, along with drugs that they deem will be able to fulfill and unmet need very quickly. Once the compounds are identified by CO-ADD perhaps they could work with the FDA to accelerate production in the US, however I do believe that CO-ADD could perhaps work with other countries (perhaps in Europe) to determine if they can develop the drug in a faster manner.

    I would be very curious to see if CO-ADD is able to bring drugs across the finish line. Given the way the pharmaceutical industry works, my view is that CO-ADD would not succeed in trying to go to market with this drug without a partnership with one of the major pharmaceutical companies. They need the scale and brand recognition to be able to do so. The proof is in the pudding that no major antibiotic has been brought to market in two decades, thus pharmaceutical companies need to believe that they are going to earn substantial revenue from the drug if they’re going to invest in a partnership with CO-ADD.

  4. Great post! I’m curious about competitive echo in the pharma industry as well. What would stop an Amgen or Biogen from creating their own open innovation initiatives, potentially even with bounties (rewards) attached to submissions that lead to particularly promising compounds/drugs that may end up in their pipeline? To your point, there appear to be some risks in CO-ADD’s ability to stay relevant in the long-term.

  5. Agree with the above comments, I really enjoyed this post. I agree that open innovation in the healthcare space is and will continue to be tremendously valuable. I just worry, as you mention above, that incentives may not be aligned for best use of open innovation. The benefits of collaboration, especially in an expensive space, are immense but the risk of revealing too much information or causing one to lose its competitive advantage. The question then becomes how can we align collaborators in the R&D space to find ways to best utilize an open innovation platform? How can we align incentives to support open innovation?

  6. Open innovation in the pharmaceutical space is a super interesting concept. In recent years, a large portion of large pharma’s compounds / ideas have been acquired from smaller biopharma companies, which have more flexibility to pursue new ideas (pharma’s version of open sourcing). So, continued partnership with large pharma may very much be possible, particularly if CO-ADD has some edge to attract ideas and has greater efficiency in screening compounds. In fact, I was surprised to hear that established pharma companies are pursuing open innovation concepts with researchers because that would force them to spend more time earlier on in the drug development process. However, if the pharma companies make similar platforms, it may be difficult for CO-ADD to compete given its lack of track record taking a compound to the finish line.

  7. This is a fascinating case of open innovation, particularly because this model seems rare in other industries. My main concern would be that the financial incentives of all of the players are not aligned to create a system of true collaboration in this case. I would imagine that most large pharma companies would have the resources and motivations to do their own development (at least in the U.S.), and that only particular drug types would be fit for such an open innovation model, especially for products that offer a less compelling financial return.

  8. To outsource innovation to the public in the pharma world makes perfect sense. This is a great article that demonstrates the power of open innovation. At the end of the day, this is an industry in which people are driven to save lives and improve the quality of care to patients. The real problem with pharma companies’ R&D hurdles these days seem to be the lengthy and costly processes. Companies have to constantly make trade-offs between projects to prioritize and go for projects that have the highest probability of success with that of the lowest risk. However, it makes perfect sense to spread that costs over to the public who may have creative ideas or a better way of solving problems. Any time there is a lengthy development cycle for innovation, companies run the risk of losing talent and having a committed team from start to finish. Open innovation system shifts the control back in the companies’ court and allows for the best and the brightest to solve problems along the development cycle. I enjoyed reading this article.

  9. This is a great example of how open innovation can drive both great commercial outcomes and great societal outcomes. I would curious to understand more about how the economics work for a researcher working with CO-ADD. From the statistics described in the article, it seems like the collaboration that CO-ADD facilitates drives a lot of incremental value by increasing the likelihood of success and reducing the cycle time of R&D. In the system as described, who economically benefits from that added value? Incentives are key to driving behavior and if all of that incremental value goes to the researchers and research community that would seem like an amazing way to create a positive feedback mechanism. More participation drives better collaboration which creates incremental value.

  10. Great article! I definitely did not associate the Pharma industry with open innovation, so it was very interesting to read about a successful example.

    I agree with your recommendation that CO-ADD needs to establish credibility going forward, but I wonder if collaborating with big pharma companies is the way to go. You mention that CO-ADD was able to attract many researcher because there were not strings attached. Wouldn’t that competitive advantage disappear if they partner with a pharma company?

  11. I think that the Community for Open Antimicrobial Drug Discovery is a fantastic example for open innovation. It’s well accepted that the rise of antibiotic resistant pathogens represents an existential threat to humanity, it’s excellent to hear that a solution to this threat is being driven by the CO-ADD when big pharma have been sluggish to react. However I agree that the biggest challenge I see here is carrying these molecules through the development process to become medicines that save lives. I worry that partnering with a large pharmaceutical firm may spoil some of CO-ADD’s unique mission, to protect humanity against drug resistant microbes, if these molecules are not aligned with the current short term financial goals of big pharma.

    There is a lot of open innovation in the realm of mitigating climate change. This has generated many ideas, however implementing these ideas and scaling them has proven difficult. The analogy with this article and climate change is that the pain felt by society now is low, and therefore there is little financial incentive for businesses to implement these ideas. However by the time the pain of drug resistance or climate change is truly felt, it may be too late to act.

  12. Excellent application of open innovation. One of the biggest reasons for taking on extensive R&D for pharma companies is the promise of patent protected profits. As the industry moves towards open innovation, what role is the pharma industry expected to play? Additionally, if pharma companies know that open-innovation platforms can probably come up with cures faster (due to its access to hundreds of researchers), then what incentives does it have to even start some of the R&D projects?

  13. Agree with many of the comments above. A couple things I would add are:
    1) How can this be carried to other areas of medicine? One startup doing interesting things around a hybrid open/closed approach is Flatiron Health. They work closely with not only hospitals to share data about cancer patients (which traditionally have been closely guarded) and outcomes but also with academic and research institutions to make use of that data.
    2) To a certain extent, academic research already fosters some “open collaboration”, with research journals and publications. I wonder how this is different from that existing status quo and what are the differentiated incentives to go via this path vs standard academia.

    In answer to your question regarding ability to commercialize and competitiveness of a non-profit compared to for-profit initiatives, I think providing not only a collaboration platform but also . This has been done in academia to some extent via commercialization labs, but there is room for more structured and focused initiatives like CO-ADD.

  14. Thanks for sharing! It was great to learn about this organization. You mentioned some concerns about the challenges of a nonprofit organization being dependent on a for-profit organization. Additionally, do you think the work is available and sustainable given the funding pressures that nonprofits often face? What are your thoughts on an organization like this being brought in house by a larger pharma company?

  15. I often think of how wasteful it is that labs around the world all spend millions of the dollars on the same things in a race to be the first to publish. This open platform is a great example of how they should be sharing resources and working together, but I agree with several of the comments above that it will be hard to sustain. In the end, the goal is to make money off a drug, so people won’t always be open to sharing their ideas because they want the reward for themselves. This is also easily replicable by the pharma companies that could open similar platforms, and then be able to actually make a product from it much faster. I think it’ll be hard to maintain.. but they should definitely get credit for bringing open innovation into this space!

  16. Totally agree with the comments above – very interesting article. The one question that popped in my mind was how truly can open innovation and big pharma companies come together. Although the idea itself is pretty compelling, it is tricky to establish a genuine consensus among these drug giants. Even they start rolling this out with good intentions, I think it would not be unrealistic to question if one of them would secretly diverge from this sharing culture by just to gain some competitive edge. Maybe Gordon Gekko had a point by saying greed is good in his own opinion, but greed in this context could potentially cost lives. Fascinating topic, thanks!

  17. For an industry that relies so heavily on IP rights to recoup R&D dollars, the open innovation that CO-ADD is doing is interesting and unexpected. It seems like the main need for antibiotics is screening molecules rather than developing them. I therefore wonder if this model would work for other indications as the typical drug development process focuses more on the development rather than screening stage. Does CO-ADD have those research capabilities too?
    On another note, I am curious how this open innovation concept would affect the pricing on drugs. The current justification for high drug prices is the high cost of R&D. Would this open sharing of information and fewer IP rights necessarily translate into lower drug prices、or would that merely allow big pharma to reap higher profits instead.

  18. Relying on grants will not be enough for a non-profit organization to remain relevant in the long run. Whilst unpopular, CO-ADD may need to consider charging users a nominal fee if the molecules are proven to produce successful drugs to keep the organization running. It can also consider partnering up with trade associations or big pharm companies with express promises that no strings will ever be attached in the future.

  19. Great and thought-provoking article. I struggle a bit to see the incentives for a researcher to participate in CO-ADD (other than pure scientific pursuit). Are there scenarios in which a for-profit company encourages open innovation and there are incentives for all parties involved? Given the sheer size of the task that CO-ADD and others are faced with, I can see the value of collaboration but wonder if there is inefficiency due to potentially duplicative efforts of CO-ADD and for-profit companies.

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