Business
Assessing the value of R&D partnerships
In response to the need to increase the return on investment in R&D, many large Pharma companies are shifting from an internal fixed resource model to more flexible, external relationships1. These partnerships are diverse, ranging from basic scientific investigations, through establishing new technologies and methods, to the discovery, development and commercialisation of therapeutic agents. A host of partnering opportunities now exist, including in-licensing of existing assets and co-discovery of new ones, as well as development of fundamental science and technology in a pre-competitive manner. In reality, the opportunities available far exceed the resources that could be allocated by a single Pharma company; hence, choices between them must be made.
H
istorically available tools for assessing the value generated by projects mainly address those with tangible deliverables (eg, the discovery of a new drug candidate). They also rely heavily on the quantitative, usually risk- adjusted, values that can be assigned to these out- puts2. More recently, fuzzy approaches to real option valuation and decision trees using Boolean algebra have been developed, but these methods still rely on hard commercial valuations that are not realistic for early stage R&D projects3. Partnerships with less tangible deliverables, such as fundamental science or technology develop- ment, are more difficult to value, particularly in a way that would enable comparisons across a diverse portfolio of projects. An additional com- plication is that some partnerships are comprised of multiple projects and can have an impact on different business areas, including those outside of R&D. Without new assessment tools that enable com- parison of such partnerships of disparate nature, R&D organisations will find it challenging to assess their relative value for investment decisions. It was therefore timely to develop a new assess- ment tool that would allow for differences in the various forms of partnerships and their outputs. In
Drug Discovery World Winter 2010/11
addition, such a tool could be valuable for setting expectations over the lifetime of a project and tracking progress.
Developing a new assessment tool Our approach was constructed around three core principles that ensured the scoring methodology was both representative of the value added by an individual partnership and that each element of the assessment contributed to the overall score at an appropriate level:
1. Enable meaningful comparison of partnerships Partnerships address a diverse range of scientific disciplines across all phases of R&D, from target identification to clinical studies, with diverse deliv- erables, such as basic scientific results, best practice recommendations or therapeutic agents. Estimating values based on cost of generating the deliverables relative to other means can be mis- leading, and ignore the fact that these savings alone are no indication of how important the deliverable is to the sponsoring organisation. Therefore, an assessment tool should not calculate the fiscal value generated from the partnership, but instead assess the impact that the output would have on the sponsoring organisation.
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By Dr David A Pardoe, Dr Jackie Hunter MBE, Dr Robert M Cooke and Dr Paul Barrett
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