With the cost of a drug's life cycle anywhere between $500m - $1bn (€395m -€790m), drug companies are spreading the investment and risk by entering mergers, acquisitions and/or alliances to give them every chance of producing the next blockbuster drug.
The report points out that even as the frequency of earlier stage development deals increases, effective management will be necessary to ensure that such alliances are successful.
The formation of these alliances is not without great risks, making these management decisions even more crucial. In the past, many licenses involved mid- to late-stage products, as pharma companies were often confident these products would be approved within a short period.
The report pointed out that currently, due to the competitive nature of the industry and the fact that large pharma companies are facing an internal shortage of new drugs, earlier development projects are being undertaken to supplement product pipelines.
"With pharma companies struggling to maintain R&D productivity, biotech companies present opportunities to enhance product pipelines," said Frost & Sullivan research analyst Paljit Mudhar.
"The demand for biopharmaceuticals is encouraging pharma companies to invest in biotech firms to fill in these critical R&D gaps and access early-stage molecules for development."
It's a strategy that has come about due to the number of new molecules in short supply, redirecting R&D outlays towards biotech companies and forming alliances has become critical and will sustain growth in pharmaceutical companies.
"Strategic alliances are not just a competitive tool for companies, but a tool for survival and it is important to manage these alliances as effectively as managing one's own in-house research team to make sure companies benefit the most out of their partnerships," added Mudhar.
"The only way the success or failure of an alliance can be influenced is by creating a common definition and understanding expectations, assuring commitment and trust between parties and by considering specific contingency actions."
Essentially before the deal, researching the objectives and expectations of the other party and ensuring that there is a process to manage the alliance and appropriate levels of communication and a relationship will help obtain success.
The alliance mindset should be promoted throughout the organisation through a strong partnership.
Frost and Sullivan's report: "Pharma-Biotech Alliance Management - Critical Success Factors," is now available for >purchase.