Positioning

The pace of innovation

Like every other generation, I have had my moments of feeling how time has passed me by. I was born in ’67 and recall my parents having to buy gas on even or odd days; my first friend that had cable TV (“I want my MTV”); 8-inch floppy disks; and getting my first email address.

A few weeks ago, I really had a moment to pause regarding how things change – I leased a new vehicle with a “high end” stereo and it did not come with a CD player. I remarked to my daughter that I have seen a new technology come and go quite quickly in my lifetime.  CDs were a huge deal when they came out. I can name my high school friend that first had a CD-player and recall going to his house to listen to it.  Besides telling my daughter to try and impart some great insight, it made me think of how fast innovation and change occurs today.

The pace of change for people living just two generations before me was not nearly so rapid.  Think about TV. Did TV change very much from the 1950s to the 1970s?  With the exception of adding color TV and a remote control, it was basically the same. The relatively small screen, but very heavy, CRT was still the “tube”,  and the signal came from broadcast stations over the air waves into an ugly antennae on your roof. Contrast that with how fast TV has changed in just the past 10 years. LED, Plasma, DLP technologies were all introduced into affordable units (with ever increasing clarity so that now the 4K is the latest must have); TV screens are now larger than people; and one can stream via the internet, TIVO, Apple TV, Roku, cable, and fiber optic networks (you cannot even pick up antennae signals anymore in the US!).

Given the much more rapid pace of innovation, companies need to be on the leading edge to survive. Companies and industries that are often the most successful, become complacent and the least willing to challenge their own business model. Such was the case in the pharmaceutical world where growth seemed to come only from M&A activity.

The pharmaceutical industry is now seeing rapid innovation take place on many fronts: development, market access strategies, marketing strategies, partnering opportunities.  And what happens when innovation is not keeping pace, particularly in the development of new products?  J&J’s Hep C product, Olysio, only just recently approved in late 2013, lost over 68% in sales earlier this year when Gilead launched Harvoni.  Harvoni combines Gilead’s blockbuster product, Solvadi, and another anti-viral (ledipasvir). It was years in the making that Gilead recognized the benefits and need for the combination product (Olysio was being used in combination with Solvadi in many cases), and their planning for the innovation paid off.  The strategic planning while in development for Harvoni allowed Gilead to capture the new combination treatment paradigm versus sharing it with a competitor.

Pharmaceutical innovation is seeing large investments from the industry. Merck created the Global Health Innovation Fund in 2010 for this reason.  This fund is designed specifically to invest outside the traditional areas of pharmaceuticals and vaccines that make up Merck’s core business.  They invest in areas of focus such as health IT platforms and technology enabled solutions – all with a focus on outcomes, improving and saving patient lives.  Investments run from MedCPU that uses a platform technology for real-time decision support analytics for provider systems all the way to Preventice, that uses closed-loop wireless remote monitoring service for cardiovascular monitoring.

While an area of focus for Merck has been on the IT and data side, a number of companies have invested in innovation centers to spur R&D developments with various partners to fill their pipelines.  Most of these centers are physically located away from headquarters and tend to be in biotech and investment hubs such as Cambridge, MA; Sand Diego, CA; Singapore; and London.  These centers look to partner with the academic, venture capital, and local biotech firms in order to partner in the discovery of new processes and assets.

For example, Pfizer has a Center for Therapeutic Innovation (CTI); Johnson & Johnson has several Innovation Centers in San Diego, Cambridge, London, and Shanghai; Bayer has incubators in Berlin, Osaka, and San Francisco. While models can vary slightly company by company, these centers bring the resources of a larger company (e.g. infrastructure and space) that a smaller, more nimble company could not afford on its own. And in at least the case of Janssen, San Diego (Johnson & Johnson’s JLABS) there is no legal tie between the larger and smaller firm.  The call to innovate superseded the normally required upfront ROI guarantee.

With the recent announcement of the first FDA approved pill produced by a 3-D printer, we can only imagine the future changes coming to the industry and to healthcare.  Expect this incubator trend to accelerate and be a primary source for innovation in the industry.