A Revolution in R&D
A Revolution in R&D
A Revolution in R&D
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Chapter 3: Managerial Challenges<br />
Preface: Look<strong>in</strong>g Back and Look<strong>in</strong>g Forward<br />
The Story So Far<br />
The genomics revolution is poised to sweep aside<br />
the old economics of pharmaceutical R&D. The<br />
biotechnology and pharmaceutical <strong>in</strong>dustries—and<br />
perhaps health care delivery <strong>in</strong> general—are on the<br />
br<strong>in</strong>k of transformation, and companies that<br />
embrace the revolution <strong>in</strong> the right way stand to<br />
reap enormous benefits. Develop<strong>in</strong>g a new drug<br />
should become considerably less unpredictable and<br />
much less expensive. Companies will record<br />
improvements both <strong>in</strong> efficiency and <strong>in</strong> success<br />
rates all along the value cha<strong>in</strong>, and the average cost<br />
and time needed to br<strong>in</strong>g a new drug to market will<br />
fall correspond<strong>in</strong>gly. (See sidebar, “Potential<br />
Sav<strong>in</strong>gs—From Theoretical to Practical.”)<br />
But this benign prospect is clouded by some warn<strong>in</strong>gs:<br />
great rewards will require comparably great<br />
efforts; a new paradigm <strong>in</strong> R&D economics may<br />
necessitate paradigm shifts <strong>in</strong> R&D management;<br />
above all, the great promise is offset by great risks—<br />
though, as <strong>in</strong> any revolution, the risks of stand<strong>in</strong>g<br />
aside may be greater than those of gett<strong>in</strong>g <strong>in</strong>volved.<br />
Ensur<strong>in</strong>g Your Future<br />
All biopharmaceutical companies are, or should be,<br />
actively decid<strong>in</strong>g how best to engage <strong>in</strong> the revolution.<br />
Mak<strong>in</strong>g such decisions is no easy matter. The<br />
familiar bear<strong>in</strong>gs are no longer there, s<strong>in</strong>ce the<br />
competitive and regulatory landscapes have<br />
changed so much—and cont<strong>in</strong>ue to change—<strong>in</strong> response<br />
to the promise that genomics offers. Compa-<br />
nies have been rush<strong>in</strong>g to claim <strong>in</strong>tellectual property<br />
rights (<strong>in</strong> the so-called IP land grab), now that<br />
the sequenc<strong>in</strong>g of the human genome has been<br />
completed. Statutes and court decisions regulat<strong>in</strong>g<br />
those IP rights keep emerg<strong>in</strong>g and modify<strong>in</strong>g the<br />
picture. (See sidebar, “Intellectual Property—Lost<br />
and Found.”) And the corporate map is be<strong>in</strong>g redrawn:<br />
the major mergers of recent years have created<br />
<strong>in</strong>dustry superpowers, and the pace of acquisitions<br />
and alliances is set to quicken, if anyth<strong>in</strong>g.<br />
(See sidebar, “Industry Changes.”)<br />
With so much change occurr<strong>in</strong>g, there are bound<br />
to be w<strong>in</strong>ners and losers. Although the decisions<br />
will be unfamiliar and difficult, success will <strong>in</strong> the<br />
end be determ<strong>in</strong>ed by traditional criteria. The w<strong>in</strong>ners<br />
will be those who make optimal strategic<br />
choices and then implement them <strong>in</strong> an optimal<br />
way. The two components of the w<strong>in</strong>n<strong>in</strong>g comb<strong>in</strong>ation<br />
will differ from company to company, accord<strong>in</strong>g<br />
to each company’s size, aspirations, f<strong>in</strong>ancial<br />
power, capabilities, and so on. In this f<strong>in</strong>al chapter<br />
of our report, we identify the strategic and operational<br />
issues and exam<strong>in</strong>e the various options that<br />
different companies might exercise.<br />
To beg<strong>in</strong> with the strategic issues, then—specifically,<br />
the challenge of def<strong>in</strong><strong>in</strong>g a strategy <strong>in</strong> the<br />
genomics era.<br />
Strategy—Search<strong>in</strong>g for Genomic<br />
Competitive Advantage<br />
Before genomics, biopharmaceutical companies<br />
used two basic tools—chemistry and molecular biol-<br />
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