How smaller biotechs are benefiting from partnerships with Big Pharma’s cash

The global pharmaceutical industry is constantly working to develop more effective drugs that can cure conditions or make a patient’s life better. Many of these products start their lives at the smaller biotech companies, where big ideas can often be turned into reality, using investments from the major pharmaceutical businesses.

How smaller biotechs are benefiting from partnerships with Big Pharma's cash

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The development of new pharmaceutical products is a risky business, requiring large amounts of money, with no guarantee that the product will even reach the market. just 10% of the drugs that enter phase I clinical trials will earn approval from the Food and Drug Administration (FDA).

Developing partnerships

For biotech startups, one of the first steps is to develop a partnership with a larger business that will offset some of the risks and costs. This money is required to take the drug development through the three clinical trial stages that are necessary before it can be approved, and will cover the costs of some of the elements, such as pharmaceutical consulting positions.

The partnerships don’t come for free, though, and generally the biotechs will need to offer equity in the business or a percentage of profits to guarantee the deal. The biotech company can benefit enormously from these arrangements, gaining expertise in areas of development, clinical trials and regulations, such as the ability to gain the best staff though agencies like

Big discoveries

The products they are working on often deal with completely new areas of research and require a large amount of resources, but they don’t have a concrete guarantee of success. This can make financial investors uncertain about injecting large sums of capital into a business and that is why these early-stage biotechs rely on help from the larger pharmaceutical companies to build up their assets quickly.

These collaborations are an important factor in the development of new drugs, even if they don’t go on to develop the next major breakthrough. Figures show that in 2015, 78% of the FDA approvals were for drugs that started life in biotechs or academic institutions, which compared to just 38% for 1998.

As the big pharmaceutical companies don’t have the necessary research and development skills to discover these new areas, these strategic partnerships will continue to support drug development, as those with the intellect combine with the big money to take a drug to approval.