(© MICHAEL AUSTIN) 

Global Partnering

Whether they occur through acquisitions, joint ventures, mergers or other business deals, partnerships fuel today’s life science industry, and will continue to drive its growth in the future.

In the late 1980s, partnerships between life science companies—between big companies, small companies and big and small companies—started increasing, and that trend has since continued. The metrics are staggering: from 2005 to 2009, according to Deloitte Recap, over 60 big pharmaceutical firms formed 1,824 alliances with an announced value of $177 billion. Among these joint ventures were Novartis/Incyte, AstraZeneca/Targacept, Takeda/Amylin and numerous others. Adding momentum to the partnering trend is the so-called “patent cliff,” or the expiration of many drug patents held by large firms, which will continue this year and extend through 2013. As pharmas are faced with their lead products coming off patent, and generic equivalents taking their place, the need to access innovative products through collaboration has never been greater.

Moreover, the partnering process now takes place on a global scale. Complementing the traditional alliances among firms in Australia, Canada, Europe, Japan and the U.S. are new partnerships forged with companies in the emerging markets, including Brazil, China and India. Initially, many of these life science ventures involved the human health space, but ongoing deals fit in a more broadly defined life science category that includes human, animal and plant health, as well as food, energy, materials and industrial applications.

In the U.S. and Canada, the dearth of funding for start-up businesses makes partnerships with big pharma necessary. Such deals generated $37 billion in 2009. While this is a crucial growth strategy, even large pharmaceutical companies can only digest so many deals at a time. Moreover, the mergers among big pharmas—such as Merck and Schering-Plough, and Pfizer and Wyeth—reduce the number of them to partner with smaller firms and start-ups.

Many companies in the U.S. and Canada are pursuing alliances in Europe and the emerging markets, where numerous small- and medium-size enterprises are massively undervalued and need capital investment. At the same time, big pharmaceutical companies seek immediate access to new products that fill gaps in their portfolios. To achieve this, they look to smaller, product-rich firms, paying premium prices to make up for their own deficiencies. Of the “big five” U.S. biotechs, three have been acquired by European companies: Chiron, by Novartis; Genentech, by Roche; and most recently, Genzyme, by Sanofi—with only Amgen and Biogen Idec remaining independent. In one prominent example of a partnership with an emerging market, AstraZeneca has committed over $300 million to the development of an innovation center in the Zhangjiang Hi-Tech Park in the Pudong area of Shanghai. The new innovation center in Shanghai will be an equal with the company’s R&D centers in Wilmington, Delaware, and Manchester, U.K.

The life science sector has evolved from a regional cottage industry in the 1980s to the globally significant force for economic change it is today, and partnering has been the driver of this change. In the 21st century, no area of the world economy will be untouched by the innovation and inventions arising from the application of knowledge from the life sciences.