Open Innovation in Biopharmaceuticals: Challenges and Opportunities

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1 Open Innovation in Biopharmaceuticals: Challenges and Opportunities Phillip H. Phan, Ph.D. Alonzo and Virginia Decker Professor Professor of Medicine Department of Medicine

2 The Context

3 Global BioPharmaceutical Industry Global Spending on Healthcare Source: Deloitte, 2018

4 Global BioPharmaceutical Industry Revenue Forecast Source: Deloitte, 2018

5 Global Prescription Drug Sales Source: EvaluatePharma, 2017

6 Healthcare Spending in China (40% on drugs) Emerging market opportunities Sources: Economist Intelligence Unit, OIR

7 Global BioPharmaceutical Industry Migration to Value Based Payments Source: Deloitte, 2018

8 The Problem

9 Stagnant productivity of U.S. Biopharmaceuticals R&D Spending versus Drug Approvals Sources: FDA, 2018, Statistica.com

10 Stagnant productivity of U.S. Biopharmaceuticals Trend in R&D efficiency (inflation-adjusted) Jack W. Scannell, Alex Blanckley, Helen Boldon & Brian Warrington, Diagnosing the decline in pharmaceutical R&D efficiency, Nature Reviews Drug Discovery, 11: , 2012

11 Median cost of bringing a drug to market US$2.6B + $312M post market Source: Tufts Center for the Study of Drug Development, 2014

12 The FDA Drug Trial Process Typical small molecule clinical research process IND application Phase 1 Safety and dosage Phase 2 Toxicity & side effects Phase 3 Efficacy & long-term side effects Phase 4 Post-Market Safety Monitoring Investigational New Drug healthy or with disease/condition Yield: 70% 100s with disease/condition Yield: 33% with disease/condition Yield: 25-30% 1000s of people with the disease/condition 30 days Up to 1 year Up to 2 years Up to 4 years Final Yield: 6-7% From patent award development could take years leaving 8-3 years for sales and marketing

13 The Patent Cliff 75% decline in revenues within 2 years of patent expiration Source: PharmaValet Database of Patented Medicines, 2014

14 The Patent Cliff Top 4 blockbuster drug sales

15 Share of drug sales approved since 2001 Shrinking, less productive pipelines Sources: FDA, Pharmaceutical Research and Manufacturers of America

16 The Solution?

17 U.S. Semiconductor Industry What Open Innovation can do Sales of USD164B in 2016 ½ global market share Employs 250k people in the U.S. Supports 1M jobs in the U.S. economy

18 Features of an Open Innovation System Objectives Development and commercialization of new ideas Tools, standards, and models Knowledge bases Networking Intellectual property Aligning objectives Balance between completely open (public domain) and completely closed (trade secret) Risk management Proportional sharing of gains based on contributions Disincentives to cheat

19 Objections to Open Innovation (sharing) in Pharma Loss of control over intellectual property (IP represents the core value of a pharma) Need for blockbuster (>USD1B) drug to recoup drug development costs Horserace paradigm in drug development No appetite for investments in non-excludable tools and standards

20 Structural Solutions to Open Innovation Patent pools Secured technology platform (e.g., blockchain) Common tools and evaluation rubrics Open standards and collaboration platforms Shared best practices and process metrics Trusted clearinghouse or convener

21 Examples of some structural solutions

22 The Medicines Patent Pool (MPP) United Nations Public health organization working to increase access to HIV, hepatitis C and tuberculosis treatments in low- and middle-income countries. MPP partners with stakeholders through a voluntary licensing and patent pooling model. Geography: up to 131 countries covered in MPP s licenses Quality assured Flexible (non-exclusive, unrestricted) to encourage generic competition Disclosure of company patent information Waivers for data exclusivity Compatible with Trade-Related Aspects of Intellectual Property Rights Agreements Transparency: full text of all licenses are published

23 Biomarkers Consortium Foundation for the National Institutes of Health Accelerates development of precompetitive biomarkers by forging collaborations among the National Institutes of Health (NIH) and worldleading public and private institutions in a neutral environment. Focus is on drug development in the discovery stage by allowing researchers to share biomarker test data in, for example, Aging and osteoarthritis Autoimmune Dermatology MRI and PET Imaging (endovascular and neuro) Diabetes Sarcopenia Cancer

24 Single Nucleotide Polymorphisms (SNP) Consortium Open source community In 1999, collaboration of 10 drug makers and 5 scientific laboratories to map single nucleotide polymorphisms (SNPs), which are heritable sequence variations. Used in Genome-wide Association Studies GWAS to find genetic variations shared only by the disease-affected (e.g., Alzheimer s, cancer, Parkinson s, diabetes) groups. Genetic predispositions can point to novel and personalized therapies. Corporate: AstraZeneca, Bayer, Bristol-Myers, Hoffmann-La Roche, Glaxo Wellcome, Hoechst Marion Roussel, Novartis, Pfizer, Searle, and SmithKline Beecham Academic: Whitehead Institute for Biomedical Research, Washington University School of Medicine, Wellcome Trust's Sanger Centre, Stanford Human Genome Center, and Cold Spring Harbor Laboratory Goal to discover SNPs in 2 years, result is 1.4 million SNPs released into the public domain at the end of 2001

25 patientslikeme give data, get data Free website where people can share their health data to track progress, and help others Assumes that patients have knowledge researchers need, rather than the other way around. Patients share symptoms, treatment info, and health outcomes Website turns info into millions of data points about disease, aggregates and organizes the data to reveal new insights. Share back insights learned with everyone. Share patient experience with industry to develop better products, services, and care.

26 Process Solutions to Open Innovation Align objectives among collaborative partners (could have groups within groups) Clear expectations Milestones and deliverables Limited and easily enforceable contracts Trust Unhindered interpersonal communication Frequent meetups Hero stories

27 Process Solutions to Open Innovation Learning opportunities Room for mistakes Feedback and adaptation Address cultural bias against sharing Incentives to share Well defined protocols for engagement Joint decision making Staging Gamifying the player network

28 Gamification Partner Engagement Autonomy at the lowest level Personal goal setting Mastery of skills and capabilities Recognition Purpose driven activity Goal directed Progress to goals Feedback Social interaction for personal validation Status

29 Metrics for Collaboration What success looks like at an early stage ( leading indicators ) Define ultimate quantitative and qualitative outcome/impact measures Collect baseline quantitative and qualitative data Understand that the criteria will vary at different stages of partnership development and the R&D pipeline

30 Addressing the objections to sharing Using open innovation principles Loss of control over intellectual property Create patent pools with protected zones Need for blockbuster (>USD1B) drug to recoup fixed costs Reduce fixed costs with research partnerships Horserace paradigm in drug development Real options strategy instead No appetite for investments in non-excludable tools and standards View as infrastructure investments necessary for accelerating commercialization

31 Where business is taught with humanity in mind.

32 Appendix Gamification

33 Game Dynamics Engaging the primal brain Competition (Norepinephrine) Collaboration (Endorphin) Community (Oxytocin) Collection (Glutamate) Achievement (Serotonin) Surprise (Dopamine) Emotional Progress (Endorphin) Exploration (Serotonin)

34 Game Mechanics Design elements in compelling games Fast Feedback: Immediate feedback or response to actions Encourage users to continue or adjust their activities with onscreen notifications, text messages or s. Congratulate a user for reaching a goal, encourage the next step to a milestone or promote a new reward. Transparency: Where everyone stands Show users exactly where they stand on the metrics that matter to you and to your audience. Individual and team profiles show progress in real-time and historically. Leaderboards show who s just ahead and who s behind as well as overall ranking on any number of metrics. Goals: Short- and long-term goals to achieve Missions or challenges give users a purpose for interaction, and educate users about what is valued and possible within the experience. Badges: Evidence of accomplishments An indicator of accomplishment or mastery of a skill is especially meaningful within a community that understands its value. Often used to identify skills and expertise within a group. Leveling Up: Status within my community Levels indicate long-term or sustained achievement. Used to identify status within a community and to unlock new missions, badges, activities, and rewards.

35 Game Mechanics Design elements in compelling games Onboarding: An engaging and compelling way to learn Video games train you how to play as you play users learn by doing. Simple missions help new users become engaged immediately as they master basic tasks, rather than being stumped by an unfamiliar interface or a detailed manual. Competition: How I m doing compared to others Raise the stakes for accomplishing a goal by showing users how they compare to others, as individuals or in teams. Encourage competition with time-based, team and individualized leaderboards. Where do I rank? How can I overtake my closest competitor? Collaboration: Accomplish a goal working with others Connect users as a team to accomplish larger tasks, to drive competition, and to encourage knowledge sharing. Show team members how they are contributing to the group s success. No one wants to let down their team members. Community: A context for achievement Community gives meaning to goals, badges, competitions, and other mechanics. Sharing participant achievements creates energy in the community by making people aware of what others are doing. They learn about goals, badges, and rewards that they may want to pursue. Points: Tangible, measurable evidence of my accomplishments Used to keep score and establish status or accumulated to purchase virtual or real goods. Earn points through activities, sharing, contributing, or by creating something useful to others

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