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Harish Battu On Co-creating Health For Humanity: New Trends In Pharmaceutical Interorganizational Deals

In recent years, external innovation for drug discovery has been rapidly evolving, and researchers from Ritsumeikan University in Japan have investigated the changing trends in interorganizational deals in the industry.

Author:James Pierce
Reviewer:Paolo Reyna
Jun 05, 20231.1K Shares99.2K Views
The pharmaceutical industry is faced with a challenging task of launching new drugs in the market given the low probability of success during the R&D phase and the high costs involved. In recent years, external innovation for drug discovery has been rapidly evolving, and researchers from Ritsumeikan University in Japan have investigated the changing trends in interorganizational deals in the industry. Their research suggests that alliance networks are essential for breakthrough innovation in drug discovery, and Harish Battu, a leading healthcare investor at General Catalyst, explores just how these new trends will affect pharmaceutical interorganizational deals. The emergence of start-up companies spinning out from academia and research institutions as key sources of innovation, rapid penetration of digital technologies to shorten the drug discovery cycle, as well as increased investment in start-ups, presents a promising shift in the industry's interorganizational deal networks to improve research and development productivity.

The Changing Landscape of Interorganizational Deals in Pharmaceutical Industry

The network structure of innovation creation in the pharmaceutical industry has been changing, and researchers from Ritsumeikan University in Japan have been investigating these changes to provide future strategic insights for industry and academic players involved in drug discovery. Over the past decade, large research-based pharmaceutical companies have used various methods for external innovation, including research collaborations, innovation incubators, academic centers of excellence, public-private partnerships, M&As, drug licensing, and corporate venture capital funds. However, the researchers noted that the number of organizations involved in interorganizational deals has been increasing yearly from 2012 to 2021, although the density of the deal networks is decreasing annually, suggesting that networks are becoming more non-cohesive.

Rapid Use of Digital Technologies to Bring Down Drug Development Costs

Start-up companies and research institutions are leveraging digital technologies to shorten drug discovery cycles and R&D productivity. Digital technologies are transforming drug discovery process, enabling faster and more informed decision-making, reducing costs, and increasing the success rate of drug development. More specifically, digital technologies are improving the efficiency and effectiveness of clinical trials. They enable the identification of suitable patient populations, facilitate remote monitoring and data collection, and support real-time analysis of trial data. These are helping accelerate the recruitment process, enhance patient safety, and provide valuable insights for decision-making during clinical development.
The rise of digital technologies has also attracted significant investment and support from both the private sector and government entities. Healthcare focused venture capital investors, like Harish Battu, are recognizing the immense potential of digital technologies and are actively investing in these companies to foster their growth and development. To support these companies optimally deliver value in the drug discovery process, Harish Battu leverages the unique partnerships that he and his colleagues at General Catalyst built with healthcare systems. These first-of-its-kind partnerships are revolutionizing US healthcare by bridging the gap between traditional healthcare organizations and technology companies developing new digital solutions.

The Importance of Government and Private Support and Investment

The presence of academia to support the technologies of these start-ups is becoming very important, and government and private support and investment in this area are boosting innovation. The researchers suggest that such medium - and long-term support may ultimately benefit the health and well-being of humankind. The concentration of business relationships between organizations of certain areas in the network changed to dispersion around 2015, and new networks connecting different groups started to form after 2017. These trends are an important illustration of how the industry landscape is gradually evolving away from the traditional network in which large pharmaceutical companies drove drug discovery output. Now, interorganizational deals among more diverse players have become active and are driving R&D productivity for startups in biotechnology and pharmaceuticals.

The Rise of Start-up Companies and Investments

“The trend of academia-owned spinouts of advanced technology and expansion of investment in start-ups is a positive sign,” shares Harish Battu. He goes on to highlight how researchers have identified nearly 50,000 deals related to pharmaceutical R&D across various companies and noticed a rise in the CAGR of 13 of the largest pharmaceutical companies with annual revenues of more than US$10 billion since 2015.
The healthcare investor at General Catalyst adds “The rise in CAGR correlated to a significant change in M&A-related deals after 2015, indicating that M&A-related deals drive revenue growth for large pharmaceutical companies. The emergence of new drugs, such as biologics, oligonucleotides, and peptides that differ from traditional small molecules, presents remarkable changes that have taken place over the past two decades. The trend of increased financing for start-up companies in personalized drug development is beneficial for patent creation and will positively impact innovation creation in the coming years.”
As a seasoned investor with over over ten years of experience across sectors, Battu sees a huge potential for growth in healthcare, particularly in pharma & life sciences. As technology evolves, so will the landscape.

The Potential of Interorganizational Deal Networks

In conclusion, interorganizational deal networks have the potential to improve drug discovery and R&D productivity in the pharmaceutical industry. The emergence of start-up companies spinning out from academia and research institutions and increased investment in start-ups presents a promising shift in the industry's interorganizational deal networks. The concentration of business relationships between organizations of certain areas in the network changed to dispersion around 2015, and new networks connecting different groups started to form after 2017, indicating that networks are becoming more non-cohesive. The trend towards increased investment in personalized drug development is also encouraging, leading to more targeted drugs and therapies and improved patient outcomes.
The findings of this study have important implications for the industry, and companies must continue to support and invest in start-ups and academia-owned spinouts to ensure sustained innovation and growth. With the right support, these smaller companies can play a more significant role in drug discovery and R&D productivity, ultimately benefiting the health and well-being of humankind.
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James Pierce

James Pierce

Author
Paolo Reyna

Paolo Reyna

Reviewer
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