Glaxo deal highlights new structure for innovation
Like other major pharmaceutical companies, GlaxoSmithKline has lately seen its future prospects imperiled as older, big selling drugs have gone off patent (like allergy drug Flonase), while the clock is sticking on others (such as antidepressant Paxil). And it's having trouble replacing those blockbuster drugs with new ones.
So it was no surprise when it announced a deal with US biotech company Synta Pharmaceuticals, to complete testing on and bring to market a new drug that treats melanoma. The deal, which starts at $80 million, could be for over a billion dollars provided the drug passes advanced trials and makes it to market. The drug has passed Phase II trails, but there is over a year more of Phase III tests to go through and cancer drugs have a history of not making it through all the trials. The deal is actually a low risk one for Merck (to whom $80 million is chump change), with a possible big payoff, and for Synta, it allows them to support the more expensive stages of research for proof of concepts.
In itself, this is not such a big deal. But it is an example of the way the drug industry is being changed. The big drug companies are starting to realize that they are not very good at innovation, thanks to the bureaucracy and careerism inherent at megacompanies. What they are good at is all the things that come after innovation: sponsoring, rolling out, and marketing. And small companies like Synta, who are run by entrepreneurs with a do-or-die attitude, are far better at innovation. But they don't have the money and personnel to bring their innovations to market effectively.
A few years ago, Glaxo might have bought Synta out. But doing that was almost guaranteed to destroy the company's impetus to innovate. So instead, Glaxo and other big drug companies are building a two-tier system where small companies take the big risks and Glaxo fills its pipeline at a lower risk. Licensing is nothing new, but it is becoming the main strategy, not just a sideshow.This looks to be, more and more, the only way the big pharma companies can survive.
10:11:04 PM 
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