Managing Drug Discovery Alliances for Success

Applying the lessons learned from Aventis' alliance experience could improve the productivity of such alliances. OVERVIEW: Although alliances are increasingly important to pharmaceutical companies, about 60 percent of alliances fail to produce their desired outcomes. Most of these failures are due to non-technical reasons. An analysis of Aventis' portfolio of drug discovery technology alliances suggests that addressing the key challenges that alliances pose to large pharmaceutical companies can reduce these failures. Moreover, three lessons emerge from the analysis as a pattern across successful alliances between large pharmaceutical companies and biotechnology firms as well as academia. These lessons provide a tactical basis for managers to implement and manage alliances across the drug discovery value chain. KEY CONCEPTS: Alliance management, drug discovery, technology management, S-curve, coordination and motivation. Alliances are increasingly critical for pharmaceutical companies striving to meet productivity targets and sustain competitive growth rates. Approximately 40 percent of revenues of the top 20 pharmaceutical companies are expected to come from licensed products by 2007 (1). To quote a senior pharmaceutical executive: "No matter how productive we are, ninety-nine percent of biomedical research happens outside our company" (2). Similarly, large biotechnology firms also expect significant revenues from alliances (3). This puts alliances squarely in the middle of the growth strategies of big pharmaceutical companies and biotechnology firms alike. Nevertheless, studies have shown that about 60 percent of alliances fail to produce their desired impact (4). Less than 30 percent of these failures can be attributed to technical reasons. Although the current literature places disproportionate emphasis on the importance of relationship management for the success of alliances, our analysis suggests that success is achievable by addressing two key challenges that alliances pose to large pharmaceutical companies: first, preserving the unique space that alliances occupy relative to either partner, by achieving the appropriate balance between entrepreneurial drive and control; second, managing performance levels while integrating discontinuities posed by new technologies. In this article, we outline three lessons that emerge as a pattern across successful alliances between large pharmaceutical companies and biotechnology firms as well as academia. These lessons provide a tactical basis for managers to implement and manage alliances across the drug discovery value chain. Challenges Posed by Alliances 1. Preservation of the unique space that successful alliances occupy.-In a matrix of entrepreneurial drive versus control/coordination (5), large pharmaceutical companies are positioned in the lower right quadrant, i.e., high along control/coordination and low on entrepreneurial drive (see Figure 1). Biotechnology firms and academic organizations are positioned in the upper left quadrant of this matrix, i.e., high along entrepreneurial drive and low on control/coordination. This concept is applicable in positioning drug discovery alliances. Successful alliances combine the entrepreneurial drive of the biotech partner and the experience-derived control of a large pharmaceutical company, and hence, occupy the upper right quadrant. The challenge for an alliance management function is to find the right conditions to achieve and preserve this space as the two attributes (entrepreneurial drive and control) oppose each other. 2. Management of performance levels while integrating a discontinuity.-Leveraging discontinuities by incorporating new technologies (represented by S-curves in Figure 2) causes an organization's performance to dip (6, 7). In the context of alliances, each of these S-curves represents a new technology being introduced into the company. Our research suggests that this dip is greater for revolutionary technologies than for evolutionary technologies, which are more incremental in their impact. …