Building the Future of Pharmaceutical Innovation

It has been observed that the future of pharmaceutical innovation will be built on a smaller, less integrated and less complex R&D organization. It is a networked organization model that leverages externalization. In this model, the company manages the strategic direction and relies on skilled third parties such as CROs for execution.

Leading companies should consider taking the following actions:

• Establish a new vision. Explore an R&D model that focuses on the core parts of the value chain for a strategic advantage over the competition with know-how that allows for differentiation in select disease areas. Other parts of the value chain can be externalized or outsourced without giving up strategic control and without creating significant risk.
• Leverage externalization. Externalization not only applies to CRO R&D activities, it is a strong option for an increasing share of the novel IP that can be in-licensed or acquired from early stage biotechs or potentially traded between major pharmaceutical companies.
• Spin out assets. To create value for groups of assets in the portfolio—specific disease areas that are deemed nonstrategic for the future, but still have attractive commercial potential—consider spinning these assets out and creating biotech companies.
• Be objective. Avoid the pitfalls of favoring in-house activities by keeping internal rate of return (IRR) for R&D superficially low. Objectively benchmark capabilities and IP of CROs and other third parties such as biotechs.
• Reward innovation. Institutionalize a culture of innovation and entrepreneurship by rewarding leaders for informed risk taking and creative de-risking approaches through external funding and other mechanisms.
• Keep it simple. Simplify overly complex matrix organizations by creating smaller, independent business units with decision and budget authority. Reduce the number of management layers and decision-making bodies. Link responsibility for strategic direction with budget responsibility and accountability.
• Start small then scale. Start the change process with controlled experiments in which specific and emerging therapeutic franchises pave the way for the broader organization.

(Abstract from the source:  “The Future of Pharmaceutical Innovation: Tackling the R&D Productivity Gap” │ An Article by Accenture Life Sciences Practice │Copyright © 2011 Accenture)