PRAISE FOR MANAGINGBIOTECHNOLOGY:FROM SCIENCE TO MARKETIN THE DIGITAL AGE

“We can sometimes forget why technology matters beyond helping us do our workfaster and cheaper; it is because technology tools help us connect with patients, ourmost important end customers. By including a discussion on patients and patientcentricity in their book, Simon and Giovannetti remind us that technology is apowerful way to connect us with them. The recent emergence of patient engage-ment, sophistication and empowerment means that any healthcare leader must beprepared to genuinely understand the needs of patients, and be prepared to engagewith them to improve their health outcomes. This book nicely maps out howtechnology can be used to meet those goals.”

Olivier Brandicourt, MD, Board Member, PharmaceuticalResearch and Manufacturers of America

“Biotech innovation is rapidly embracing digital technologies in the discovery,validation, clinical and product commercialization phases. The Internet of Thingsis bringing forward the Internet of Medical Things and the opportunities to buildvalue with combinations of molecules, software and devices have never been soevident. Personalization, precision, data analytics and elements of consumerconvenience are making their way into product pipelines. Industry participantscan use this book as a modern roadmap to innovation and commercialization.”

Donald Jones, Chief Digital Officer, Scripps TranslationalScience Institute and Chairman, Cardiff Ocean Group

“This is an unprecedented moment in the healthcare industry. Simon and Gio-vannetti have captured the tremendous potential of the period in this innovativeand well-informed book, where they have brought to life the need to leveragedigital technology and patient centricity to drive better health outcomes.”

Lynn O’Connor Vos, CEO Greyhealth Group

“If you want to know where biopharma is going, read this book! Our industry isfacing unprecedented opportunities driven by major scientific breakthroughs,while transforming itself to address accelerated landscape changes driven bydigital revolutions and the emergence of value-based healthcare worldwide. In thisever-changing context, we all need to focus everything we do on the patients. Theyare why we exist as an industry, and this is ultimately what this insightful essay isreally about.”

Emmanuel Blin, former Chief Strategy Officer andSenior Vice President, Bristol-Myers Squibb

“This expert and thorough analysis of the journey from biomedical investigationto patient care presents an innovative blueprint for streamlining, redesigning, andamplifying the process. Specific examples of success stories support the recom-mendations for improved networking among the various players in the medicalarena. Essentially, the authors predict a shift from emphasis on drug developmentto a broader collaborative system focused on the individual patient. The book is aninteresting and important read for anyone involved in the prevention and treatmentof disease.”

Marianne J. Legato, MD, PhD (hon. c.), FACP,Emerita Professor of Clinical Medicine, Columbia University

Founder and President, Foundation for Gender-Based Medicine

“Precision Medicine, Patient Centricity, Digital Health, Value-Based Reimburse-ment, Risk-Sharing—these terms were virtually unused in biopharma evenfive years ago. This book provides essential grounding and concepts to considerfor anyone interested in healthcare, drug development and patient access in the21st Century.”

Ron Cohen, MD, Former Chairman, Biotechnology Innovation Organization

MANAGINGBIOTECHNOLOGYFrom Science to Marketin the Digital Age

FRANÇOISE SIMON, PhDProfessor Emerita, Columbia Universityand Senior Faculty,Icahn School of Medicine at Mount Sinai,New York, NY

GLEN GIOVANNETTIEY Global Biotechnology LeaderCambridge, MA

This edition first published 2017 2017 John Wiley & Sons, Inc.

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10 9 8 7 6 5 4 3 2 1

In memory of my parents, Yvonne David and Louis Simon—Françoise Simon

To my wife Lisa, who has been a companion on theLife Sciences journey for over 30 years in multiple cities,

with tremendous flexibility, support and patience,including with this project

—Glen Giovannetti

TABLE OF CONTENTS

FOREWORD BY PHILIP KOTLER XI

PREFACE XIII

ACKNOWLEDGMENTS XVII

ABOUT THE AUTHORS XIX

PART 1 NEW MODELS FOR NETWORKED INNOVATION

CHAPTER 1 DIGITAL EVOLUTION OF BIOTECHNOLOGY 3

Industry Applications 5

Impact of Megatrends 6

Digital Health Opportunities 6

Infotechnology Initiatives in Healthcare 8

Disruption Risk from Infotech 8

Technology Strategies 11

Big Infotech Strategies 12

Conclusion 21

Summary Points 22

CHAPTER 2 BIOTECHNOLOGY FINANCING STRATEGIES 24

The Long Game 24

Financing Strategies for the Long Term at Alnylam 26

Strategic Decisions 30

Geographic Considerations 33

Sources of Financing 33

A Word about Mergers and Acquisitions 43

Summary Points 44

CHAPTER 3 SUCCESS THROUGH COLLABORATION 46

Alliance Evolution: More Players and New Structures 46

Strategic Alliances: A Stalwart of the Biopharma Industry 50

vii

Janssen and OSE Immunotherapeutics: Deal Strategies in a European Context 52

Alliance versus Acquisition 53

Structure Considerations to Maximize Value 55

Divesting for Focus 55

Doing the Deal 56

Summary Points 65

PART 2 NEW BUSINESS AND MARKETING MODELS

CHAPTER 4 PRECISION MEDICINE 69

What is Precision Medicine? 69

Targeted Medicines Multiply but Drug-Diagnostic Pairs are Rare 69

Precision Medicine is Happening at Several Levels 71

Multiple Forces, Beyond Science, are Driving Precision Medicine 72

Digital Precision Medicine 74

Precision Medicine in Practice: Lessons from Cancer 75

Challenges: Scientific, Infrastructural, Regulatory, and Commercial 79

Surmounting the Hurdles to Revolutionize Medicine 83

Stakeholder Expansion in Precision Medicine 86

Biopharma Must Drive, not be Driven by, Precision Medicine 87

Precision Medicine’s Future 90

Summary Points 92

CHAPTER 5 PRECISION MARKETING 94

Introduction 94

Portfolio Shift to Specialty Products 95

Balancing Evidence and Experience 96

R & D and Commercial Coordination 97

Science is the New Marketing 98

Value of Experience: The Consumer Decision Journey 100

Marketing Beyond the Pill 101

Targeting New Consumer Segments 102

New Physician Segments 102

Dual Branding Models 103

New Launch Strategies 105

Companion Diagnostics 105

Global Organization 108

Multichannel Communications 109

Content Marketing 110

Salesforce Strategies 111

Sustainability Strategies: Beyond the Life Cycle 113

Summary Points 118

viii TABLE OF CONTENTS

CHAPTER 6 PATIENT CENTRICITY STRATEGIES 120

Introduction 120

Patient Centricity Drivers and Barriers 121

Discovery: Understanding Unmet Needs 123

Designing Patient-Friendly Clinical Trials 125

Connecting the Points of Care 130

Understanding the Patient Journey 135

Organizing for Patient Centricity 138

Who Are You Working For? Bristol-Myers Squibb Employee Engagement Initiative 138

Patient Engagement Metrics 140

Organization Models 142

Summary Points 143

CHAPTER 7 DRUG PRICING IN CONTEXT 145

Introduction 145

The Economics of Drug Pricing 146

Competing Definitions of Product Value Complicate Drug Pricing 153

Proving Efficacy in the Real World 155

Setting the Pricing Strategy 157

Analyzing New Pricing Models 160

Drug Pricing in the United States: The Pressure Continues to Build 162

Deployment of New Pricing Strategies 163

Experimental Pricing Strategies 165

Financing the Future: Affordability 169

New Tools for Outcomes-Data Capture 170

Conclusion 171

Summary Points 171

CHAPTER 8 STRATEGIC PAYER ENGAGEMENT 173

Payers Are Not All Alike 173

New Market Forces Increase Payer Power 175

The Increasing Importance of the Consumer in the United States 176

European Payers: High-Level Unity, Low-Level Fragmentation 180

United States Adopts European-Style Cost-Effectiveness Hurdles 181

Payer Engagement Strategies Must be Tailored, Scalable, and Flexible 182

Changing Biopharma-Payer Relationships: From Transactional to Collaborative 185

New Biopharma Organizational Models Needed 187

Biopharma-Payer Engagement Must Move Beyond Experimentation 188

Strategic Payer Engagement Comes in Many Forms 192

Summary Points 193

TABLE OF CONTENTS ix

PART 3 NEW MODELS FOR DIGITAL HEALTH

CHAPTER 9 DIGITAL HEALTH STRATEGIES 197

Introduction 197

Biopharma Digital Strategies 197

Digital Impact on Supply Chain Management 200

Digital Transformation of Commercial Activities 201

Consumer-Centered Trends 206

Provider-Centered Strategies: Telehealth 210

Conclusion 213

Summary Points 213

CHAPTER 10 CREATING AGILITY THROUGH DATA AND ANALYTICS 215

Introduction 215

Multiple Forces Converge to Create Data and Analytics Opportunities 216

Healthcare’s Four Data Vectors: Volume, Velocity, Variety, and Veracity 218

Extracting Value from Data Requires New Tools 221

The Analytics Continuum: From Descriptive to Prescriptive 223

Artificial Intelligence: The Potential to Make Drugs Smarter, Faster, and for Less 225

Data Analytics across the Biopharma Value Chain 226

Data and Analytics Challenges 233

Building an Analytics-First Organization: Cultural not Technical Hurdles 238

Conclusion 242

Summary Points 242

CONCLUSION 243

REFERENCES 246

INDEX 273

x TABLE OF CONTENTS

FOREWORD

The healthcare sector is undergoing unprecedented change. Aging populations andthe rising incidence of chronic diseases have strained budgets, resulting in policyreforms that are changing the way healthcare is provided, consumed and paid foraround the globe. The traditional contrast between the European universal payersystem and the US freer market model is starting to fade, as more than half of USreimbursement now comes from public entities such as Medicare and Medicaid. Inemerging markets, despite the rise of middle-class populations, challenges remain,from intellectual property to manufacturing quality, drug pricing. and patientaccess to health services.

Major players in the health ecosystem—patients, providers, manufacturers,and payers—are changing their behaviors in response by assuming more financialresponsibility for improving health outcomes, adopting new technologies, andleveraging data to drive innovation and care delivery. In parallel, the confluence ofradical advances in biotechnology and information technology is leading to a newmodel of precision medicine. It gives unprecedented power to individuals, and itallows the deep integration of the customer voice into innovation, from product co­creation to continuous monitoring.

As it has happened in many other industries, the entrance of nontraditionalplayers is poised to disrupt the health industry and its incumbents, creating a cadre ofnew potential leaders. Some of these include consumer, telecom, and tech power­houses; Apple, IBM, Google, Intel, and QualComm have all made major invest­ments in health. A plethora of start-ups, particularly in the data analytics space, is alsoupending business as usual. Today, health data is fragmented and in silos.

While consumer data collected on smartphones and biosensors are still notconnected to medical offices and electronic health records, there is great promise ineventually providing seamless care to patients, from research to the clinic, andmoving from treatment of illness to prevention and prediction. Consumers havebecome accustomed to the convenience of personal technologies and will increas­ingly demand the same from their health providers, including more remote careand data sharing. With health budgets already under strain, the value generated bythese insights may come at the expense of healthcare industry incumbents.

The global biopharmaceutical industry finds itself in the middle of this storm.In a world where payment will be based on demonstrating real value, the industry’straditional development and commercial strategies are no longer fit for purpose.Commercial-stage biopharma companies are beginning to adapt their strategies,reducing their dependence on large sales forces that promote undifferentiated

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xii FOREWORD

products. They now seek to unlock value across their operations—from how theyapproach R & D (leveraging data and focusing on precision medicine and orphandiseases), to the evidence they collect to support value arguments, to providing“beyond-the-pill” solutions that may require partnerships with nontraditionalentrants.

Emerging biotech companies working on exciting new science must alsoadapt their financing strategies to this new reality. No longer is it enough to sellinvestors on the promise of new scientific approaches. Biotechs must alsoarticulate why their scientific advances will result in differentiation in a competi­tive global market. In Managing Biotechnology: From Science to Market in theDigital Age, Françoise Simon and Glen Giovannetti provide a comprehensiveoverview of the new business context and global strategies for biotechnologycompanies. The book is an important source of insight into critical topics such asnetworked innovation, alliances, commercialization, and digital communications.It serves as a roadmap to take concepts and products from science to market, and itcaptures the range of knowledge that students and managers need to leverageemerging technologies. It can also help interested policymakers aiming to growand support biotech clusters worldwide to understand the risks, opportunities andchallenges of the biotech industry.

This in-depth examination, based on the authors’ broad experience, will beuseful in teaching and inspiring current and future leaders across sectors driven bybiotechnology. It will contribute high-value guidance for all stakeholders, fromproviders and payers to manufacturers. Most importantly, it may play a part inhelping to bring new medicines to market and improving patients’ lives andoutcomes.

For biopharmaceutical firms, the future may hold an enabling scenario ofoptimized research, but it could also be a disruptive one, of disintermediation byinfotechs of patient/provider communications. As the authors point out, successwill depend on a melding of new cross-industry business models and of leadingedge science, to improve the standard of patient care on a global scale.

By Philip KotlerS.C. Johnson & Son Distinguished

Professor of International MarketingKellogg School of Management

Northwestern University

PREFACE

Since its founding four decades ago, the modern biotechnology industry has been asource of significant innovation across many parts of the economy, especially inthe area of human health. Once-fatal diseases—ranging from HIV and hepatitis Cto many cancers—are now chronic conditions or have been effectively cured, dueto the introduction of innovative biotech medicines. Many of these medicines werediscovered and developed by nimble entrepreneurial companies. New techniquesand technology platforms under development by companies both large and small(and in academic, government, and private research labs) continue to createoptimism that many more poorly treated, or untreated, conditions will soon beaddressed, including many diseases prevalent in aging populations.

Over the same four decades, the rise of digital technologies has restructured theorder of many industries, giving a majority of the global population access toenormous computing power and information, while simultaneously enabling previ­ously unimaginable connectivity through social media platforms. These technolo­gies have had an impact on the delivery and consumption of healthcare, although thepace of change in this industry has lagged many other parts of the global economy.

While scientific innovation remains at the core of the biopharma industry,the long-term trend of constrained health systems budgets and persistent publicpressure on drug prices has put the traditional biopharma business model undertremendous strain. Biopharma companies understand that this new reality requiresthem to objectively demonstrate the real-world value of their products. They alsorealize that, to address significant unmet medical needs, they must expand theirtraditional focus on physicians to include engagement with patients and payers; inshort, to think “beyond the pill.” Adoption of digital technologies and access to,and effective analysis of, data will be key enablers as proof of outcomes becomesthe industry benchmark. At the same time, many information technology (info­tech) companies view healthcare as an untapped growth area ripe for digitaldisruption, as was previously seen in the financial and retail sectors. As a result,they are committing significant resources to developing new health offerings.Biopharma companies will have to understand whether these relatively newentrants in healthcare represent collaborators, competitors, or both.

The convergence of these trends is altering the biopharma value chain andultimately the industry’s business model. Traditionally, that value chain was linear,starting with scientific inquiry, product identification, clinical development, and,for those drugs that successfully progressed through regulatory approval, com­mercialization. As development milestones were achieved, responsibility for the

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xiv PREFACE

product was handed off from function to function, with little integration andinformation sharing (or one-way sharing at best). Strategic decisions, includingbudgets and capital allocation, often occurred within functional silos. Thisstructure worked in a world in which “me-too” drugs that did not providemuch, if any, incremental value could still generate a return on investment througheffective sales and marketing.

This fundamentally product-centric view of biopharma drug development isoutdated. It is no longer tenable for companies to invest in products that, even ifproven safe and effective by regulators, do not provide measureable value to patientsand health systems. Patient expectations, driven by growing reliance on digitaltechnologies and the connectivity they provide, are also changing. As a consequence,the biopharma value chain has reoriented around a fundamental understanding ofpatient needs, with data and insights flowing not just in one direction from the lab tothe market but also from the market back to the lab, as depicted in the figure.

Managing biotechnology—framework

The innovation end of this cycle begins with a deep understanding ofdisease, including both the biology and the care pathways that patients experience.These insights are informed by a company’s own experiences in a disease area

PREFACE xv

(again, from research and commercial perspectives). The need to develop thisdepth of expertise is a factor causing many larger companies to fundamentallyrethink their portfolios in order to specialize in fewer areas, increasing thelikelihood of true differentiation. This is also resulting in broader adoption ofprecision medicine strategies to target more precisely patient populations that canbe segmented by genetic or other characteristics to identify those more likely torespond to a particular drug therapy. In addition, technological convergence willalso be a source of insight. For instance, artificial intelligence technologiesdeveloped by infotech companies can assimilate and analyze a range of patientand health data to generate new drug development hypotheses.

Understanding the patient care pathway in the actual health setting isimportant for effective clinical trial designs that support not just a regulatoryapproval but also negotiations with payers. Patient input is also becoming essentialat the clinical development stage where patient relevant endpoints can be con­sidered as part of a strategy to demonstrate effectiveness to a regulator and value toa payer. Connectivity to patients and patient advocacy groups also has the potentialto facilitate trial recruitment.

In commercialization, making the case for the value of a product to payersand marketing a drug to providers and patients will be based on a combination ofclinical data and “real-world” data that takes into account actual patient experi­ences, co-morbidities, and care delivery models. In some sense, the innovationphase of the cycle never really ends, as payers put more focus on real-world dataover that generated in randomized clinical trials with selective enrollment criteria.Companies entering into risk-based reimbursement models in which payment isbased on the achievement of defined outcomes will especially need a deepunderstanding of the patient journey and what other lifestyle factors might impactthose outcomes. In some circumstances, this will drive the need for education,monitoring or other “beyond-the-pill” solutions.

Digitally enabled strategies will result in new ways to connect with patients.They will provide both structured and unstructured data from electronic healthrecords, wearables, monitoring of social media, and other channels for analysis.These data will inform interactions with payers, providers, and regulators and willalso feedback into R & D, completing the cycle.

BOOK STRUCTURE

The structure of this book largely follows the above framework. We have left adetailed discussion of the scientific breakthroughs underpinning the biopharmasector to others. Our book follows the triple transformation of the biopharmasector: networked innovation, including the convergence of infotech and biotech;new digital strategies; and patient centricity through the value chain.

In Chapter 1, we address the impact of technology convergence and thestrategies of big infotech players on the biopharma value chain, as well as thebarriers to further convergence. As most of the industry’s innovation comes from,

xvi PREFACE

or is advanced by, start-up biotechnology companies, in Chapters 2 and 3 weprovide information for entrepreneurs around financing and connected innovationthrough alliances with large companies and other entities. Chapter 4 discusses theimpact of an expanding view of precision medicine on drug development andcommercialization strategies, including significant market and organizationalbarriers that must be overcome to promote more widespread adoption.

As a companion to precision medicine, in Chapter 5, we introduce theconcept of precision marketing. As payers, physicians, and consumers increasinglyexpect clinical and economic data to support a medicine’s use, biopharmacompanies can make their product profiles more compelling via evidence-basedmarketing. This chapter also discusses product launch strategies, multichannelmarketing approaches, sales force deployment, and product sustainability. Com­plementing material in Chapter 5, Chapter 6 explores what patient-centricitymeans today, discussing in greater detail the concepts described above, as wellas the challenges biopharma companies encounter as a result of regulations and alack of trust by the public.

In Chapters 7 and 8, we discuss approaches to engage with payers on a morestrategic (versus transactional) basis, including understanding the needs of variouspayers and the patient populations they serve. We also develop drug pricingconcepts, including novel risk-sharing pricing structures that can be based either onfinancial or clinical outcomes.

Chapter 9 covers digital health trends among patients and physicians andhow digital technologies are impacting the biopharma value chain as well as digitalstrategies being deployed by biopharma and health systems. Finally, Chapter 10addresses the data analytic core competencies that companies will need to developin order to access and extract value from the data that surrounds the product duringboth development and commercialization.

Leading the biopharmaceutical enterprise is becoming a more complexproposition because of changing market dynamics, including the growing power ofthe patient and the emergence of increasingly powerful and accessible digitaltechnologies. This book is intended to highlight these changes and help students,prospective entrepreneurs, and management teams identify both the risks and theopportunities that come from operating in the Digital Age.

RESEARCH METHODOLOGY

The research material for this book was derived from a variety of public and privatesources including peer-reviewed and industry journals, media reports, and finan­cial databases. This research and analysis were supplemented though qualitativeinterviews conducted over a two-year period with over 150 industry and academicexperts, biopharma and infotech executives across research and commercialfunctions, venture capitalists, and public and private payers.

ACKNOWLEDGMENTS

This book is based on several years of research, and it is also a field study ofbiopharma strategy through the value chain, including many executive interviewsand company case studies. We benefited as well from management seminars andacademic executive programs that allowed us to test our models and concepts.

A global network of academic and industry leaders brought great value toour book. At the risk of overlooking several, we first note the experts andexecutives who contributed thoughtful comments and case studies: Philip Kotler,whose seminal work in healthcare strategy inspired us, and Charlotte Sibley(former SVP, Shire), who generously provided in-depth reviews and expertinsights throughout our book; Olivier Brandicourt (Board Member, PhRMA),Roch Doliveux (former CEO, UCB), Wendy Gabel (former VP, Biogen), andBernard Poussot (Board Member, Roche) also provided valuable comments.

John Maraganore (CEO Alnylam), Michael Pehl (President, Hematologyand Oncology, Celgene), and Jacqualyn Fouse (Executive Chair, Dermavant andretired President and COO, Celgene), as well as Emmanuel Blin (former SVP,Bristol-Myers Squibb) contributed company case studies.

In Europe, we benefited from a case study from Maryvonne Hiance, DominiqueCostantini, and Emile Loria at OSE Immunotherapeutics, and thoughtful reviews andinsights from Philippe Latapie, François Meurgey, and Catherine Parisot.

Françoise Simon would also like to extend her appreciation to her academiccolleagues: At the Icahn School of Medicine at Mount Sinai, Dean Dennis Charney;Annetine Gelijns, Professor and System Chair, Population Health Science and Policy;and Senior Associate Dean, Brian Nickerson, for their support, and Dr. Bruce Darrow,Mount Sinai Chief Medical Information Officer, for his technology expertise.

At Columbia, Françoise Simon would like to acknowledge Deans LindaFried at the Mailman School of Public Health and Glenn Hubbard at the BusinessSchool, and she thanks Professors Kamel Jedidi, Don Lehmann, and MichaelSparer for their support, as well as Emerita Professor Marianne Legato for sharingher expertise in gender-based medicine; in Europe, she thanks Professors NathalieAngelé-Halgand and Frantz Rowe at the Université de Nantes, Martine Bellangerat EHESP, Claire Champenois at Audencia, Pierre Lévy at Université Paris-Dauphine, and Christine Coisne and Loïc Menvielle at EDHEC for providing anacademic testing ground for the book.

At INSEAD, Françoise Simon also thanks Professor Stephen Chick andResearch Program Manager Ridhima Aggarwal for the use of the PatientsLikeMecase, which she co-wrote with them and excerpted in the book.

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xviii ACKNOWLEDGMENTS

Both authors give a special acknowledgement to Ellen Licking, Senior LifeSciences Analyst at EY, for her insights, her network and for her research andeditorial contributions. Ellen worked with great dedication to advance the researchfor the entire book, with particular emphasis on the following areas: precisionmedicine, data analytics, new pricing models, and strategic payer engagement.

In addition to Ellen, Glen Giovannetti would like to thank many colleaguesat EY including Global Life Sciences Sector Leader Pamela Spence, SusanGarfield, Kristin Pothier, and Ryan Juntado for their contributed articles. EYLife Sciences specialists Jeff Greene, Scott Palmer, Mahala Burn, Alan Kalton,Todd Skrinar, Jamie Hintlian, and Adlai Goldberg also provided invaluableinsights. Melanie Senior, a life sciences writer and analyst, provided supportfor the precision medicine and payer engagement sections of the book. JasonHillenbach and Rajni Sadana ably led a research team who also provided supportfor many of the figures in the book, and Angela Kyn provided marketing support.

Finally, we would like to thank our publisher, John Wiley & Sons, and oureditor, Bob Esposito, and Editorial Director, Justin Jeffryes, for their expertguidance through our book.

ABOUT THE AUTHORS

FRANÇOISE SIMON

Françoise Simon is a Professor Emerita at Columbia Uni­versity and Senior Faculty at the Icahn School of Medicineat Mount Sinai. She also manages her own internationalconsulting group. Her teaching focuses on executive pro­grams and won her the Chandler Award for Commitment toExcellence from the Columbia Business School.

Dr. Simon has more than thirty years of experience inconsulting and marketing management in the Americas,Europe, Asia, and Africa. Her clients include many Fortune500 companies as well as new venture firms, several gov­

ernments, and the United Nations.Prior to joining the Columbia faculty, Dr. Simon was a Director of Arthur

D. Little, and developed a global strategy practice serving clients in the Americas,Europe, and Asia.

Previously, Dr. Simon was a Principal of Ernst & Young, where she led astrategy practice in the health and consumer industries in the United States andEurope. Her corporate experience includes an appointment as New ProductManager in International Diagnostics for Abbott (now Abbvie) in Chicago. Priorto that, she was a Marketing Development Manager for Novartis in Switzerland.

Dr. Simon holds an MBA from Northwestern University and a PhD fromYale University. She has held faculty positions at the University of Chicago andNew York University, as well as Columbia University and the Icahn School ofMedicine at Mount Sinai.

She has published more than twenty articles and conducted more than200 management seminars in the Americas, Europe, Asia, and Africa. She is theco-author of Building Global Biobrands: Taking Biotechnology to Market, withPhilip Kotler (Free Press, 2003), Winning Strategies for the New Latin Markets,with Fernando Robles and Jerry Haar (Prentice-Hall, 2002), and Europe and LatinAmerica in the World Economy with Susan Kaufman Purcell (Rienner, 1995). Sheis a past Vice President and Director of the American Marketing Association, andhas served on the International Council of the American Management Association.

Dr. Simon has also served as a member of the Council on Foreign Relations.

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xx ABOUT THE AUTHORS

GLEN GIOVANNETTI

Glen Giovannetti is a Partner at Ernst & Young LLPand the EY Global Biotechnology Leader. He has morethan 25 years of experience serving clients in the bio­pharmaceutical industry, primarily in Silicon Valley andBoston. He has extensive experience in assisting clientsfrom start-ups to market leaders around issues of growth,global expansion, and strategic transactions including ini­tial public offerings, R&D collaborations, and acquisitions.

Glen has led the development of the EY Bio­technology Annual Report, Beyond Borders, for more

than a decade. He is a past member of the Board of Directors of the BiotechnologyInnovation Organization and a member of the Board of Directors of Life SciencesCures. Glen has a BA in Accounting from Linfield College, where he is also amember of the Board of Trustees, and is a Certified Public Accountant inCalifornia and Massachusetts.

P A R T1NEW MODELSFOR NETWORKEDINNOVATION

CHA P T E R 1DIGITAL EVOLUTION OFBIOTECHNOLOGY

For nearly four decades, biotechnology has driven the transformation of many sectors,from healthcare to food and energy, and it has grown into a global industry. It is nowbeing transformed itself by its convergence with information technology (infotech).Biotechnology has been defined as “the use of living systems or molecular engineeringto create and manufacture biologic therapies and products for patient care” [1], but itcan be more broadly seen as the application of molecular biology across industries.

From the start, biotechnology grew together with other sciences. A firstinflection point, Watson and Crick’s 1953 discovery of the structure of DNA,depended on the development of X-ray crystallography by Franklin and Wilkins. By1986, the first automated gene sequencer by Hunkapiller at Applied Biosystemssupported Venter’s National Institutes of Health (NIH) research, and a later-generation ABI sequencer, introduced in 1998, further enabled his research atCelera. This led to a second inflection point, in 2000, with the draft of the humangenome by Celera and the Human Genome Project. The synergy between computingand bioscience continued with the emergence of bioinformatics and the 2003 launchof IBM’s Blue Gene supercomputer, with a focus on structural proteomics.

Another technology has evolved over the past three decades, supported bythe optimization of gene sequencing: CRISPR (clustered regularly interspacedshort palindromic repeats). This nucleotide sequence was first identified in Japan in1987, but it took decades to define its function as a molecular scalpel and an RNAguide capable of editing genes. By 2007, it was shown that spacer DNA could altermicrobial resistance, and by 2012, a team including Doudna and Charpentiershowed that a simpler CRISPR system relying on the Cas9 protein could work asan editing tool in human cell culture. In 2014, Platt used a Cas9 mouse to modellung adenocarcinoma. CRISPR may be first developed for monogenic diseasessuch as beta thalassemia, but challenges include safety (avoiding activity inunintended parts of the genome), delivery (via methods such as lipid-basednanoparticles or virus-based particles) and manufacturing [2].

Unlike computing, bioscience has not progressed in linear fashion, due to theinherent risk of working with animal and human biology. After the 1953 discovery of

Managing Biotechnology: From Science to Market in the Digital Age, First Edition. Françoise Simonand Glen Giovannetti.© 2017 John Wiley & Sons, Inc. Published 2017 by John Wiley & Sons, Inc.

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4 MANAGING BIOTECHNOLOGY

theDNAstructure, it took29years for thelaunchof thefirst recombinanthumaninsulin,discovered by Genentech and licensed to Eli Lilly. Monoclonal antibodies, developedby Köhler and Milstein in 1975, were not marketed until the introduction of IDEC’sRituxan (rituximab) in 1998, after several failed attempts by firms such as Hybritech.

Similarly, the first genotype-specific oral therapy, Novartis’s Gleevec (ima­tinib) for Philadelphia—positive chronic myeloid leukemia, was approved in theUnited States, Europe, and Japan in 2001, but it took decades to develop it; theabnormal Bcr-Abl gene coding for tyrosine kinase, stimulating leukemia cell growth,was identified in 1985, and the molecule was first synthesized in 1992 (Figure 1-1).

Figure 1-1 Biotechnology milestones

5DIGITAL EVOLUTION OF BIOTECHNOLOGY

INDUSTRY APPLICATIONS

Today, biotechnology has matured and is driving innovation across sectors, frommedicine and food to agriculture and biomaterials (Figure 1-2):

• In healthcare, red biotech has led to novel biologic therapeutics, includingrecombinant proteins such as insulin and growth hormone, monoclonalantibodies such as Genentech’s Herceptin (trastuzumab) for HER2-positivebreast cancer, vaccines, molecular diagnostics, gene and stem cell therapy,tissue engineering, and regenerative medicine.

• In food and agriculture, green biotech has improved crop efficiency and usedbioremediation for environmental reclamation. It has blurred the distinctionbetween food and medicine, with the emergence of medical foods andinnovations such as a strain of “golden rice” yielding provitamin A [3].

• Marine biology has led to blue biotech, with food products and ingredientsderived from algae, invertebrates, and fish; diagnostic agents such asfluorescent reporter protein; and marine extract additives in cosmetics.

• In industrial processes, white biotechnology has produced biodegradableplastics, renewable chemicals, pollution-eating bacteria, and advanced bio­fuels [4].

The following chapters will focus on red biotech, including the transforma­tional impact of digital technologies and the convergence with infotech. A newform of digital convergence has emerged, which presents both an opportunity and a

Figure 1-2 Biotechnology across industries

6 MANAGING BIOTECHNOLOGY

threat for the biopharmaceutical sector. From mobile devices, such as the Fitbitwristband biosensor, to R & D analytics tools such as IBM’s Watson, infotechcompanies are playing a key role in meeting consumer and researcher communi­cation needs.

IMPACT OF MEGATRENDS

Multiple trends are disrupting business models and leading the industry to definevalue differently. For consumers, longer life spans are increasing the incidence ofchronic conditions such as diabetes and heart disease, across developed and alsoemerging markets, driving demand as incomes rise. However, this is also placingmanufacturers on a collision course with resource-constrained payers, who areincreasingly defining value in terms of outcomes achieved by new therapies. Forresearchers, postgenomic science is driving precision medicine, which has alreadyyielded a new wave of targeted therapies but is struggling to handle an explosion ofdata: at the individual level, “small data” from biosensors, monitors, smartphones,and smartwatches; at the population level, “big data” from genomic, clinical trial,and insurer databases. These conflicting trends have led to a disconnect within thebiopharma space.

Consumer-generated health data need professional interpretation, whichmedical offices largely cannot provide online due to liability and reimbursementissues and which cannot be transmitted to most hospital electronic health records(EHRs). Researchers now access an overwhelming amount of health data, wellbeyond clinical trial databases, which has led to the entry of informationtechnology leaders into healthcare. Apple is partnering with the Mayo Clinicwith its HealthKit and ResearchKit software that links patients, physicians, andEHRs. IBM aims to streamline R & D with its Watson Health unit and has madesignificant acquisitions in data analytics, including Explorys, Phytel, and Merge.Alphabet is partnering through its Verily unit with Sanofi, Dexcom, and Medtronicin diabetes, and in 2013 it launched Calico, a biotech company focused onlongevity. Qualcomm and Novartis have set up the dRx Capital joint ventureto invest in digital startups and optimize clinical trials. The interaction of thesetransforming forces is summarized in Figure 1-3.

DIGITAL HEALTH OPPORTUNITIES

From research to postmarketing surveillance, digital health has the potential togreatly improve R & D and manufacturing efficiency, as well as product co­creation and communication with patients:

• In R & D, digital health can optimize diagnostics through integratedbiomarkers, increase speed to market, and streamline data analytics.

• In manufacturing, digital technology can adapt processes to reduce costs.

7DIGITAL EVOLUTION OF BIOTECHNOLOGY

Figure 1-3 Transforming forces

• From a regulatory and reimbursement standpoint, it can enable real-time drugmonitoring and support health economics dossiers with real-world evidence.

• At the commercial end, digital health can allow deep integration of thecustomer voice, from drug co-creation to postlaunch communications, andit can help collect real-world evidence to support economics dossiers(Figure 1-4).

Figure 1-4 Impact of digital solutions on the value chain

8 MANAGING BIOTECHNOLOGY

INFOTECHNOLOGY INITIATIVES IN HEALTHCARE

The health sector has been slower than other industries such as banking and retailto adopt digital technology, due to regulation, physician concerns about liabilityand reimbursement, and upfront costs and resistance to changing workflows, aswell as consumer concerns about data security and privacy.

By contrast, infotechs have entered this space rapidly, for various reasons.Companies such as IBM may grow their businesses by addressing largedatabase interpretation problems that require platform technologies such asWatson. Consumer-focused firms such as Apple are responding to marketdemand for online healthcare information by adding health apps on their mobiledevices.

While infotech leaders are reluctant to become directly involved inhealthcare due to the heavy burden of regulation and long development cycles,they still have the potential to disrupt the sector, for instance, if digitalinterventions prove more effective than some drug therapies. To support theirhealthcare penetration, infotechs have the added advantage of massiveresources. Apple’s market capitalization passed $800 billion by May 2017,well above that of Johnson & Johnson, which led biopharmas at nearly$346 billion at the same time. A key advantage for Apple is its brand valueamong consumers. Alphabet combines advertising revenue from Google withstrong gains in mobile search, and infotech growth, in general, is driven by therise of the cloud, that is, the shift of many computing operations to onlineservices [5].

As mobile health (mHealth) comes to dominate the sector, through the fastgrowth of mobile devices versus PCs or laptops, infotechs play a key role in all ofits aspects. As defined by the World Health Organization (WHO), mHealth is“medical and public health practice supported by mobile devices such as mobilephones, patient monitoring devices, personal digital assistants and other wirelessdevices” [6]. At the consumer end, infotech provides hardware and software frombiosensors and smartphones and also enables real-time interactions via socialmedia. At the research end, infotech aims to optimize predictive analytics to gaindeeper insights into the origin of diseases, diagnostics, and treatments.

A hybrid category of mHealth includes Food and Drug Administration(FDA)-approved medical devices such as WellDoc’s BlueStar to measure glucoselevels and AliveCor’s mobile electrocardiogram machine. More broadly, Apple’sHealthKit and ResearchKit aim to address the current lack of interoperability bylinking consumer biomarkers with medical offices and EHRs (Figure 1-5).

DISRUPTION RISK FROM INFOTECH

In addition to opportunities, the rising dominance of infotechs in healthcare maypose significant risks for biopharmas. What makes their convergence uncertain is