Monday, August 29, 2011

Cultivating a new crop of bioscience leaders

Today is the first day of classes for the 13th year of classes here at the Keck Graduate Institute. (The first students of the 2-year Masters of Biosciences Program graduated in 2002).

While KGI started with just the one program, this fall brings record enrollment of 150 students across four degree programs (MBS, PPM, PPC, PhD) and certificate students from the City of Hope. A total of 102 of those students are new, including 31 in the one-year degree programs.

I’ve already had my first teaching at KGI during the business “ramp up” day in the first week of orientation. I also judged five of about 20 teams of new students on their initial team projects, including the very impressive (and eventual winning) team of Felicia Amaechi (MBS), Richard Chen (MBS), Ramya Kartikeyen (PPM), Brent Vincent (MBS) and Erin White (PPC).

At Friday’s convocation, KGI President Sheldon Schuster emphasized his commitment to core idea of KGI. KGI is about combining science and business — the former to provide the technology and the latter to identify the needs that this technology will solve. He noted that , the KGI was the first to offer a life science Professional Science Masters — which is now being copied — and then was the first to create a post-PhD program.

Our guest speaker was Marina Gorbis, executive director of the Institute for the Future in Palo Alto. She provided numerous examples of how social media and crowdsourcing are changing how new ideas are created, including in life sciences. She concluded with a provocative scenario of how a decentralized social learning model might supplant (or supplement) conventional university-based learning.

Finally, on Saturday night, about 50 returning MBS students came both to learn what happened over the summer and to make the transition from being the junior to senior MBS students. When asked by director of student services Sue Friedman what they wanted to be, they suggested a combination of engagement, institution building and support for their fellow students.

In the fall, I will be almost entirely be spending my time with the PPM and second year MBS students through the TMP program. I am faculty advisor for two projects, and am also team teaching the TMP class (ALS 400) with TMP director Craig Adams and Diana Bartlett, Assistant Vice President and Director of Corporate Partnerships.

However, as with faculty at other top graduate schools, I will also be spending time on my research — in this case as 25% of the full-time business faculty. Right now I’m wrapping up my latest review paper on open innovation, and then will be turning my attention to two presentations next month at the Technology Transfer Conference 2011.

Thursday, August 11, 2011

At what cost diversification?

In teaching about diversification strategies, one of the main theoretical arguments supporting diversification comes when firms provide financing for a portfolio of bets that can’t be separately financed through the stock market.

In his latest posting to “In the Pipeline,” Derek Lowe notes that such diversification has also been one of the historic strengths of Big Pharma. Quoting a blog comment by (longtime Lilly executive) Bernard Munos:
(Arthur) De Vany has shown that the movie industry has developed clever tools (e.g., adaptive contracts) to deal with (portfolio uncertainty). That may come to pharma too, and in fact he is working on creating such tools. In the meantime, one can build on the work of Frank Scherer at Harvard, and Dietmar Harhoff. (Andrew Lo at MIT is also working on this). Using simulations, they have shown that traditional portfolio management (as practiced in pharma) does achieve a degree of risk mitigation, but far too little to be effective. In other words, because of the extremely skewed probability distributions in our industry, the residual variance, after you've done portfolio management, is large enough to put you out of business if you hit a dry spell.
Both Munos and Lowe ask if Pfizer — the largest drug company in the world — doesn’t have a big enough portfolio to diversify against patent cliffs, who does?

In its forthcoming August 22 issue, Forbes is also running an article on the ideas of Munos to reduce R&D and outsource innovation. It also quotes criticism from former Pfizer R&D head John LaMattina, who thinks the death of the pipeline is greatly exaggerated.

Despite LaMattina’s criticism, I find persuasive the argument by Munos — published two years ago in Nature Reviews Drug Discovery — that the current model is running out of steam.

I don’t have enough experience with pharma R&D enough to offer my own fixes, but my sense is that outsourcing inefficient search processes to external partners isn’t going to work. Perhaps startups will have better intuition as to where to look versus a systematic search by big pharma, but if the discovery paradigm is busted, outsourcing it won’t solve the problem. Instead, that would suggest we need a new search or discovery paradigm.

Still this suggests a new debate to bring to my KGI grad students next spring in the innovation management class. In particular, I’d like assign the 2000 article in Research Policy by Scherer and Harhoff (or the Scherer et al article in the Journal of Evolutionary Economics) if their earlier coursework prepares them for the math. (The RP seems more relevant, but the 2002 De Vany article on movie studios cites the JEE).

Wednesday I sent an e-mail to Harhoff, who I visited many years ago and was once dissertation advisor to a friend of mine. He wasn’t aware of the recent visibility of his earlier work, so I guess I’ll have to use the forward cites from Google Scholar to help students make the connection.

Monday, August 1, 2011

Is the death of blockbusters greatly exaggerated?

John LaMattina, former head of R&D for Pfizer, has a provocative post that argues that “The Death of the Blockbuster Has Been Greatly Exaggerated.”

He lists some contrary evidence including a recent WSJ article on potential blockbusters in the pipeline. And of course the title is a deliberate allusion to the famous Mark Twain line.

It’s hard to argue with his credentials and experience, and he makes some important points about the problems about why it’s hard to make predictions about the future. Some drugs will do worse than expected, and some will do better: Lipitor was predicted to peak at $0.8b/year but peaked at $13b/year.

He also argues that there are some major diseases left to be cured, and these cures will be lucrative by any measure.

I can't say I’m complete convinced. Even if such blockbusters remain, on the recent trajectory the cost of getting those blockbusters is getting higher — at some point firms may no longer try.

Perhaps the more serious problem is that the returns from the losers may also be lower, since incremental therapies are having trouble commanding a higher price than established off-patent drugs. (As an allergy sufferer, I can say that the generic versions of Claritin and Flonase are pretty good compared to what was available 20 years ago.)

So the glass is not entirely empty even if it’s not quite half full. The boom times of the old paradigm are clearly in the past. Perhaps some new paradigm (computational biology? personalized medicine?) will enjoy its own boom, but we haven’t seen it.