Going Virtual in the European Biopharmaceutical Industry: Conductors and Oxpeckers Make It

Going virtual in the European Biopharmaceutical industry: Conductors and Oxpeckers make it

Sabatier, Rousselle, Mangematin9th IFIP Working Conference on Virtual Enterprises

Poznan, POLAND, 8-10 Sept. 2008

Going virtual in the European

Biopharmaceutical Industry: Conductors

and Oxpeckers make it

Valérie Sabatier1,4, Vincent Mangematin1,2,3, Tristan Rousselle4

1 Univ. Grenoble 2, UMR 1215 GAEL, F-38000 Grenoble, France2INRA, UMR 1215 GAEL, F-38000 Grenoble, France

3Grenoble Ecole de Management, F-38000 Grenoble, France 4Protein’eXpert, F-38000 Grenoble, France

[email protected]




� Introduction� Theory

� Methodology� Case studies

� Discussion

Introduction Theory Case studies DiscussionMethodology




� Biopharmaceuticals are drugs derived from biotechnology research.

� The value chain of drugs:

Pharmaceutical companies

The biopharmaceutical industry

Research &Drug Discovery

Preclinicalstudies

Phase I Phase II MarketPhase IIIResearch &

Drug DiscoveryPreclinicalstudies

Phase I Phase II MarketPhase III

Biotech firmsAcademics


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The biopharmaceutical industry (2)

� The biopharmaceutical industry is dominated by the business models of the full integration: firms integrate every activity among the value chain of drugs.

� A business model represents the way a company organizes its activities along a value chain in order to create and capture value.

� Since 2000’s some biotech firms that develop products mimic the integrated model and made up their way thanks to reticular organizations:

• How do these firms organize themselves?• How do they manage their network? • What are the relationships between the actors?• How is value created and captured?


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Theory then methodology





Hub firms and networks

� Dhanaraj & Parkhe, 2006: a hub firm is“one that possesses prominence(Wasserman & Galaskiewicz, 1994) and power (Brass & Burkhardt, 1993) gained through individual attributes and a central position in the network structure, and that uses its prominence and power to perform a leadership role in pulling together the dispersed resources and capabilities of network members”

Proposition 1: A small firm can play the role of hub firm

� Virtual biopharmaceutical firms are small biotech firms, outsourcing most of their activities to an array of partners (Chesbrough & Teece, 1996)

Proposition 2: A virtual biotech firm can be the hub firm of a network


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Virtual firm and network

� A virtual firm should be far superior to the monolithic and pyramid-shaped corporate structure because it takes technologies and skills in core business of each company of the network (Bigras, 2002). Advantages of virtual firms result from the “networked intelligence” they enable among the flexible components that comprise them (SawhneyM. and Parikh D. 2001).

Proposition 3: The cost of a biopharmaceutical developed by a virtual firm orchestrating a network will be lower than the cost of a (bio)-pharmaceutical developed by a big pharma.


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Methodology

� A qualitative approach to understand the dynamics present within single settings (Eisenhardt, 1989).

� Two organization are chosen because they are very specific: they allow to gain certain insights that other organizations would not be able to provide (Siggelkow, 2007).

� 4 phases: � First interviews, accompanied by a trust facilitator,� Study of documents from several sources, � Second round of interviews,� Monograph.


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Case studies of Emics and OphSmart




Case study of an orchestra firm: Emics

� Emics develops a drug (a vaccine) along the value chain orchestrating a network of partners and suppliers.

� Main characteristics: � An experienced team of 3 people, � A great ideological aim, � A network of 12 partners,� Risk sharing with the strategic partners and

stakeholders.


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The network managed by Emics

Research &Drug Discovery

Preclinical studies

PhaseI and II

Phase III

Progress of the vaccine

Emics

Academic strategic partner Academic strategic partner

Industrial strategic partnerIndustrial strategic partner

Ac. supplierAc. supplier

Ac. supplierInd. supplier

Ind. supplierInd. supplier

Ind. sup. Ind. sup.


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Emics: Value creation and value capture

• The product development

• The network orchestration

Value creation

• Perceived value of the companyand potential success of the vaccine

• Time savings

•Cost savings

Value capture


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Case study of a repurposing firm: OphSmart

� OphSmart develops drugs that are in development in other companies but on a new therapeutic area.

� Main characteristics: � A very experienced and skilled team, � A permanent network,� A real management of shareholders: academics and

stakeholders,� A double business model.


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Advancement of in-house drugs

Research &DD

Pcstudies

PhaseI and II

Phase III

In-house research

The network managed by OphSmart


Academic strategic partner

Research &DD

Pcstudies

PhaseI and II

Phase III

Advancement of repurposed drugs

Drug developed by another firm Repurposing

Ind. supp.

Ind. supp.

Ind. supp.

Ind. supp.

Ind. supp.

Ind. supp.

Ind. supp.

Ind. supp.

Ind. supp.OphSmart

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OphSmart: Value creation and value capture


• The product development

• The network orchestration

• The management of shareholders

Value creation

• Perceived value of the products and the company

• Research savings

• Time savings

• Cost savings

Value capture

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Do these types of organizations have an impact on drug costs?

� In four years of development Emics spent 7.945 million US$. This is ten times lower than what big pharmas announce from preclinical studies to phase I clinical trial for drugs (see DiMasi et al. 2003).

� Regarding the cost of repurposed drugs, OphSmart spent 15 million Euros in two years from preclinical studies to the end of phase I. The gap with big pharmas is huge.


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Emics and OphSmart’ s networks are key factors

� The information flow is regulated by the virtual firms. Relations are always dyadic.

� Emics has a strategy of partnering and shares the risks when it is necessary to survive.

� OphSmart keeps as much as possible its independence and negotiate for it.


More than 18

001OphSmart’s network

5322Emics’ network

Industrial suppliers

Academic suppliers

Industrial strategic partners

Academic strategic partners

Actors of the network

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Why are these firms virtual?

� Emics is looking for liberty: a rash scientific approach that would not have been possible in a big organization. � It was not a choice at the beginning, now it is a strategy.

� OphSmart is looking for facilitating its assets’sales. � Preparing the stakeholder’s exit.

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Conclusion: Virtual firms vs big pharmas

� Virtual firms manage pretty well drug development. � In both case the management of the network is a

success.

� Limits: Both companies do not plan to manage the end of the value chain alone (or at all).

� Credibility and negotiation


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Thank you for your attention.

Feedback and questions are welcome.

Going Virtual in the European Biopharmaceutical Industry: Conductors and Oxpeckers Make It

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