What Makes Life Sciences Alliances Succeed?

As it does every year, management consulting firm Vantage Partners released findings from its annual survey of partnering professionals in biopharma. Over the course of six to eight months, the firm sent out questionnaires to ASAP members and its own alliance contacts around the industry—mostly pharmaceutical and biotech employees, but a handful of professionals employed by medical device and platform companies as well. What came back were some interesting trends, detailed in a special ASAP webinar, “Insights from the Latest Life Science Alliance Management Pulse Check.”

Less Funding, Fewer Alliances to Manage, but More Preclinical Partnerships

First order of business: tackling the age-old question, “How many alliances should our alliance managers be assigned?” asked Adam Kornetsky, principal at Vantage Partners. “It depends on the type of alliances and the tier of the alliance.”  

Vantage’s data showed that over half of alliance managers have five or fewer partnerships in their purview. 

“We do think it is interesting that of those polled, many of them are focusing in on some of the most critical alliances,” said Kornetsky.  

The survey analysis showed a slight shift in the type of alliances people are managing. Forty-five percent of alliances in the portfolio are classified as preclinical- or discovery-phase collaborations, as compared to the 31 percent in the clinical and the 19 percent falling in the commercial buckets, respectively. Although the latter two figures are somewhat stable since Vantage’s last survey, the preclinical alliance total “seems to be increasing,” according to Kornetsky. 

His theory? With the price of capital skyrocketing over the last couple of years, life science organizations and private equity firms are more willing to fund the less-expensive earlier-stage partnerships.  

Who’s Managing These Alliances?

Whether it’s because the number of discovery alliances is increasing or because alliance management staff headcount isn’t keeping up with the growing portfolio, almost 60 percent of biopharma companies are turning to project (36 percent) and program (23 percent) managers to steer collaborations. Business development is also taking a decent chunk of these relationships (14 percent). 

“It creates an opportunity to make sure that we are finding standard ways to implement our practices across these different groups,” Kornetsky noted. “Working cross-functionally is going to be a key element here because not everybody has the bird's-eye view that you alliance managers might typically have.”  

Beating the Odds of Alliance Failure

How important are alliance management practices and principles? Very. Although the number of partnerships failing to reach the full value they set out to achieve has risen five to seven percentage points to 66 percent over the last decade or so, that isn’t deterring biopharma companies from turning to the partner function. 

“In our previous survey, about 72 percent of organizations felt alliances were mission critical, and today that number is 83 percent,” noted John Barbadoro, CA-AM, senior consultant at Vantage Partners.

This is mostly because there is an understanding that success or failure in biopharma partnerships often comes down to factors outside of your control (e.g., the science didn’t work out, funding was reduced, etc.). However, better alliance management gives partners significantly better odds of success; although 28 percent of failures can be attributed to improper day-to-day execution, deft application of modern alliance management practices results in significantly more value mined out of joint initiatives. In other words, “organizations that do manage that ongoing execution well are four times more likely to see success from partner programs,” said Barbadoro.  

Today’s Forecast: Value with a Chance of Risk

It stands to reason that organizations that depend on alliances more heavily will invest more into alliance resources, thereby increasing the likelihood of better execution; indeed, Vantage found that organizations that view collaborations as central to their success are more than twice as likely to extract the forecasted value from them. 

Also, Kornetsky pointed out the very real possibility that the aforementioned spike in discovery and preclinical alliances might have something to do with this uptick in failure rates. 

“As you hear about more and more earlier-stage partnerships being formed, we would expect more of those alliances to fail. Both the quantity of alliances continues to increase and this type has higher levels of risk,” he said. “Something to think about in terms of why that failure rate is where it is.” 

Blind Ambition?

And in actuality, that 66 percent failure rate sounds worse than it really is, upon further examination. It turns out that 56 percent of those relationships were actually partially successful. Kornetsky reminded the audience that the definition of success is subjective from respondent to respondent and executive to executive. 

“When we are handed alliances from the very start, more often than not the ambitions are going to be a high bar,” he said. “We're almost playing from behind against the odds to begin with.”

Poor Execution Could Be the Partnership’s Death Sentence 

According to Vantage’s research, the reasons that collaborations fall short of expectations can be categorized into three broad buckets: 

• Strategy and BD (e.g., disconnect in company priorities or in the respective visions for the collaboration) (24.5 percent)
• External factors (e.g., difficult regulatory environment, resources pulled) (27.5 percent)
• Partnership execution (48 percent) 

Of that last category, as stated earlier, 28 percent stem from poor day-to-day execution (e.g., partner incompatibility, lack of clarity around roles, etc.). 

“Managing execution is the major challenge and biggest opportunity to capture value for alliance managers,” said Barbadoro. 

For the remaining alliances, the end can often be traced back to the beginning. 

“We actually found 20 percent higher risk of failure for alliances that were poorly launched,” Barbadoro revealed. Kornetsky added that this figure “continues to be a fairly stable trend” in comparison to previous years’ surveys.  

In-House Doesn’t Always Win

In another interesting twist, Vantage’s data suggests that joint initiatives might be outpacing in-house projects in terms of desired outcomes. 

“Ninety-one percent of our participants basically said that their partner programs were either similarly successful or more successful than their internal programs,” Kornetsky observed. Thus, that “partnership tax”—the extra time for approvals and governance meetings, and the overhead of alliance management employees—doesn’t necessarily make partnerships riskier. “There's real costs associated with that, and this statistic sort of shows that, hopefully, the upsides—the return—outweigh the cost.”  

Hello Central! 

The survey also explored success rates of companies that centralize the alliance management practice versus those that rely on some form of decentralized function (e.g., an alliance management team for each type of alliance, alliances managed through a division or therapeutic area, alliance managers scattered throughout the organization, or no alliance function at all). Alliance professionals working in centralized functions reported 41.7 percent success rates, dwarfing the 16.7 percent of alliances managed out of decentralized practices that achieved similar success.  

Dribs and Drabs

Finally, Kornetsky closed with a few more tidbits of insight: 

• Alliance managers are increasingly being asked to orchestrate integrations – “The number of individuals we've worked with that have commented that they are becoming an ‘accidental integration manager’ continues to grow,” he said. 
• Companies are still struggling to find the right metrics to gauge success – “Trying to come up with those universal KPIs is quite difficult,” Kornetsky noted.
• The number of alliance operations manager positions continues to rise – “About a third of those that we've spoke to have or are considering that role. That continues to tick upward, whereas just a couple of years ago there was only a handful that we could point to,” Kornetsky observed. (For more on the operations manager role, see “Smooth Operators,” Strategic Alliance Quarterly, Q3 2023.) 
• Where companies were hiring at a feverish pace a few years ago, the number of open positions is starting to decline – “There has been some pullback recently,” said Kornetsky. “The organizations that scaled the quickest are the ones that sometimes are [now] finding themselves perhaps a little bit overstaffed.”

You May Approach the Bench(mark): Data Makes the Case for Resources

Kornetsky expressed hope that these survey results will serve as ammunition of sorts for alliance leaders lobbying their superiors for more resources. 

“The goal in doing this is really to let you all have some benchmarking data that you can use to help inform decisions that you might need to make within your organizations, to perhaps build the case that you're trying to make to leadership, whether it be around headcount or operational decisions, and we very much enjoy providing that service to the community, year in and year out,” he said.