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Intra-Biotech Alliances, Part II

This article was originally published in Start Up

Executive Summary

What are the critical success factors which cause a joint discovery research partnership between two biotech companies to succeed? Why haven't more of these deals created significant commercial value? Each side needs significant skin in the game. If they don't, and the stakes are low for the partners, the venture remains a low priority and simply doesn't get the proper attention.

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ArQule Takes the Drug Discovery Plunge

Over the past two-and-one-half years, ArQule's new management has refocused the once divided company, and repaired its reputation in the eyes of the financial community. That leadership also decided that ArQule can reach its growth potential only by moving away from a fee-for-services model and becoming a full-fledged drug discovery company. It's a transition that few companies have successfully managed, in part because of the tough balancing act required to build the requisite R&D infrastructure, while devoting sufficient resources to the near-term activity needed to build that infrastructure. ArQule will likely try to acquire biology-based companies to gain control over its own targets, but must deal with the valuation imbalance that still favors genomics/biology firms. But ArQule's management believes that its technology platform--as enhanced by the addition of predictive ADMET modeling--will boost its ability to process target into targets and thus its value.

The Proteomic Evolution of Celera, Incyte and Myriad

Impatient with the progress of genomics, investors are looking to a new set of proteomics technologies to provide the necessary boost in research productivity. Celera, Incyte, and Myriad, the heads of which we interview in this article, have each created widely different strategies for accessing the new opportunities. Aside from differences in technology approaches, the strategies of all three firms attempt to directly address the investment world's dissatisfaction with platform models-the original business model of both Incyte and Celera. Myriad has taken a low-risk leap into the world of proteomics, spinning off its proteomics tools into a new database company that will map the proteome, delivering Myriad the information it needs for its own product discovery and development programs and selling it at the same time on a non-exclusive basis to subscribers.Celera is radically modifying its information-only strategy, transforming itself into a drug discovery company that will be assisted financially with proceeds from its database business, which will itself be boosted by new proteomic data Celera will create, review before others, and then make available to subscribers. Incyte is continuing to focus on selling information as its base business, but is adding proteomic features to its basic systems through acquisition and internal development. At the same time, it is trading access to its LifeSeq database to new proteomic technology developers for a share either of their downstream product revenues and/or rights to sell the information those products generate.

Intra-Biotech Alliances

As pharma companies increasingly require their biotech company partners to offer more integrated technology platforms in drug discovery deals, and as more biotech companies take internally developed compounds to later stages of development, the number of intra-biotech company alliances continues to increases Advice of Counsel discusses how these deals differ from traditional alliances between biotech and pharmaceutical companies.

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