Research Management…

                                                   Research Management Review, Volume 15, Number 1
                                                                                Winter/Spring 2006




    Building and Managing Corporate
 Alliances in an Academic Medical Center

                                    Teri Melese*
                       University of California, San Francisco


                                                 ABSTRACT
Academic Medical Centers (AMCs) are in a position to help foster the development of better
drugs by combining their considerable skills in the basic and clinical sciences with the
compounds, medicinal chemistry and know-how of pharmaceutical and biotechnology companies
to develop a more innovative and coordinated approach to therapeutic intervention. To capitalize
on this opportunity AMCs will need to develop an integrated internal administrative process to
develop, manage, and implement corporate alliances, design the optimum structure for these
relationships, proactively negotiate the actual partnership agreements, provide project
management for collaborative projects, and make informed business and administrative decisions
in a timely manner1,2,3,4. The development of an AMC "corporate alliance" team that functionally
and philosophically unites the academic administrative offices traditionally involved in corporate
partnerships (e.g., sponsored research agreements, clinical trial agreements, material transfer
agreements, technology transfer, etc.) is essential5,6,7,8,9. Oversight of this team will require
individuals with business and alliance experience; an ability to think both strategically and
opportunistically; a detailed understanding of the goals, responsibilities, and governance of
AMCs; a first-hand knowledge of the biotechnology and pharmaceutical industries; an extensive
network of industrial contacts; and an ability to effectively communicate a vision and build
productive relationships at the level of the individual and the institution. Organizations exist that
develop and promote "best practices" for alliance practitioners in the corporate sector and such
practices will be highly beneficial if adopted in AMCs10,11


*The author wishes to acknowledge the University of California Discovery Program Office for a special "Opportunity
Award" that provided support for her work in the area of building corporate alliances at UCSF. She also wishes to
thank Clay Johnston, Joel Kirschbaum and Keith Yamamoto for their careful reading of the manuscript and suggestions
to increase the clarity of the concepts in this article.




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                                       INTRODUCTION

Academic medical centers (AMCs) accept a remarkable challenge: to integrate and achieve with
excellence four core missions: delivery of healthcare; education and training of future generations
of clinicians and investigators; discovery of new knowledge through incisive, decisive research;
and the export of knowledge through effective interactions with industry and government. Each
mission is critical, and each must be interactive with and respectful of the others12. We focus here
on the particular challenges and opportunities of the AMC/industry interface, but we remain
mindful of the broader spectrum of AMC responsibilities, and we consider as well the issues
associated with structuring this interface in a way that facilitates integration with the other core
missions.

The health of the AMC rests on its ability to make choices and timely decisions, especially in a
time of reduced federal and state resources. Informed decision making is essential to leverage the
value of existing resources and to assure that investments meet the needs of the relevant
stakeholders and serve the mission of the AMC2,4,12. Many opportunities are lost due to the lack
of a defined process by which investigators become aware of, and connected to, existing campus
or external resources, including (a) knowledge of potential collaborative research efforts, (b)
technology resources, (c) corporate alliances, and (d) licensing opportunities.

A number of key general concepts are outlined to be considered when forming relationships with
corporate partners in a biomedical setting. Suggestions are also made about how to improve the
business and alliance environment such that working relationships can be effectively guided to
enhance campus innovations and increase the interaction among corporate enterprises, campus
core technology facilities and the campus research community.

      THE CHANGING FACE OF BIOMEDICAL RESEARCH MAKES SOUND
     BUSINESS DECISIONS AND CORPORATE ALLIANCES AN IMPERATIVE

The practice of biomedical research is changing1,2,12. It is evolving towards a bigger enterprise
involving multiple investigators from multiple institutions, both academic and corporate1. No
single investigator can assemble all of the required technologies and expertise to understand
complex disease mechanisms and to translate that scientific knowledge into disease treatment. To
move discoveries effectively between bench and bedside requires close ties among the basic,
clinical, and corporate research enterprises.

Federal agencies also realize the need to unite the core competencies of academia and
corporations to develop better drugs for the treatment of disease13,14,15. As an example, the
National Institutes of Health developed the AP-4 Center Grants that asked academic institutions
to identify corporate collaborations that would focus on treatment of orphan cancers
(http://grants.nih.gov/grants/guide/rfa-files/RFA-CA-04-005.html). However, such
relationships have traditionally been compromised by distrust, the concern being that an
academic/corporate engine cannot successfully focus on common and aligned goals1,16,17. Finding
a way past the inevitable doubts will be critical to improving patient treatment17. The good news
is that for the first time it might actually be possible to know which medications will be truly
effective for those patients receiving them, possibly resulting in less guess work and fewer
negative side effects. As an example, it is clear that all stakeholders in the health care industry




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will need to work together to successfully navigate the new area of "personalized" medicine or
pharmacogenomics18.

      THE VALUE PROPOSITION FOR CORPORATIONS THAT PARTNER IN
       BIOMEDICAL RESEARCH IS LESS CLEAR THAN IN HIGH-TECH

The ability to form an effective corporate consortium of partners to develop technology standards
is deep in the history of some academic centers, but on close examination, happens largely within
the engineering or materials science departments. These industries have historically managed to
coalesce around the development of a specific technology (e.g., integrated circuits and
automobiles), but such consortia applied to drug discovery and development are not readily
observed in the biomedical industry19.

In the engineering areas cited above, there was a "tipping point" at which the technology could
only be developed by a collaborative effort because the patented technology required to move the
industry to the next level was held by multiple players, making it necessary to pool resources to
advance the technology18. Thus, each partner stood to benefit from the collaboration, and it was
clear how the technology advancement would directly affect each company's product
development and return on investment. In contrast, the high costs and risks associated with
discovering and bringing a new drug to market and the potential financial rewards for doing so
encourage pharmaceutical companies to retain, sequester, and control enabling intellectual
property20,21. In the biomedical science community collaborative projects are more readily built
around collecting and sharing potentially valuable information as opposed to developing a
specific product. An example is the human genome sequencing effort and the identification of
single nucleotide polymorphisms (or "SNPs", which are naturally occurring genetic variations in
the human genome, some of which might correlate with disease risk, drug efficacy, drug side-
effects, favorable or unfavorable prognosis, etc.). However, the immediate benefit of this
information and how it will translate to commercial drugs and diagnostics is not yet clear. Thus,
many medical centers struggle with how to define the basis of corporate relationships that expect
clear outcomes related to commercial product development. In many ways it is often easier to
align the goals in academic engineering departments with companies because they share a
common applied focus, whereas biology mostly focuses on open inquiry, and medicine on
outcome.

There is also a misconception that corporate alliances are beneficial solely because they provide
financial support for research1. The truth is that most biotechnology companies do not have large
discretionary sources of capital given the high costs of drug development, and even
pharmaceutical companies do not have a business model that readily supports funding of
academic research projects: most critical research is accomplished within the company and
outside investments are usually reserved for in-licensing or purchasing potential therapeutic
candidates. To be successful an alliance must hold mutual interest and high value for both
participants In this context, corporate partners can offer capabilities and resources not present in
academic environments, while academic investigators afford a broad knowledge of basic disease
mechanisms and can be sources of biological specimens not available in any single company.




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          FORMING ALLIANCES IN AMCS HAS DISTINCT CHALLENGES
The art of forming alliances in an AMC poses some interesting challenges. For example, while
alliances at a company are driven by strategic goals and implemented by teams of business
development professionals, and are essential to the success of the company, at a medical center
some investigators might not see the value in partnering, might be dissuaded by the differences in
culture, or might prefer to control their own collaborations, which must be respected in an
academic environment22.

The organized units of medical centers often present a clear identity that is "easy" to match with
prospective corporate partners. For example, centers usually specialize in specific diseases such
as diabetes, cancer, or cardiovascular disease. Patient advocates, federal funding agencies, and
donors mandate that these centers develop products or information that can be used to guide the
treatment of patients and thus provide the driving force for partnering.

A possible strategy is to work with the directors of these centers to develop a portfolio that
describes the resources, technologies, and know-how that are essential for a particular institute or
center to advance their research effort, and with this information in hand to identify potential
corporate partners that might satisfy these needs. Collecting this input is a first step in capturing
the global resource needs of the campus and makes it easier to prioritize strategic efforts in
developing alliances23. For example, if a number of campus institutes or centers often request
materials or tools on an ad hoc basis from particular pharmaceutical companies, it is worth the
campus's effort to work on master or template agreements with those companies to formalize the
partnership and expedite the process for transferring the needed materials to the campus
investigators.

As an example, at the UCSF Comprehensive Cancer Center many clinician scientists requested
compounds from a pharmaceutical company for studies on an ad hoc basis that required
protracted negotiation of a contract for the use of each compound. A decision was made to
facilitate the interactions between UCSF and the company by removing the contractual barriers.
Acting as an alliance manager at the Cancer Center, the author worked with the company,
University of California Office of the President, the UCSF Offices of Technology Management
and Industry Sponsored Contracts to coordinate the effort to put a master agreement in place for
investigator-initiated trials. The greater ease by which materials could be transferred from the
company to UCSF became a driving force for the company to seek to broaden and formalize its
working relationship with the Cancer Center. The company perceived that collaborative studies
with UCSF would be easier and studies would happen on a quicker timescale.

As the AMC develops multiple template agreements with different pharmaceutical companies it
becomes critical to develop a process by which the campus provides information to assure that
the investigators involved in these collaborations understand the terms of the agreements so that
there will be no conflicts should they decide to collaborate with more than one company. It is
important that the investigators have freedom to collaborate with those companies they feel have
the expertise or resources they need for their specific projects. A non-exclusive relationship with
a number of companies will be more likely to meet the needs of campus investigators.

In discussions with multiple pharmaceutical companies and investigators at UCSF it is clear that
both seek to develop best practices for more innovative research collaborations that would result
in earlier academic input in to clinical trial design. One vision is to assemble formalized project



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teams that include members from the company and the AMC. These teams work together in a
timely and efficient manner to accomplish a mutually beneficial goal that is critical to both
parties. The formation of such teams allows each party to bring its core competency to the
project, encourages sharing of key resources, and includes funding that might be difficult to
obtain through federal sources. A challenge will be to provide the infrastructure to assure that
project execution goes smoothly and that concerns or issues are communicated to all project team
members. The project teams answer another AMC mission: to provide the opportunity for the
investigators and their students to better understand the culture of large pharmaceutical or
biotechnology companies. Such an understanding will hopefully lower the barrier to forming such
alliances in the future.

DEVELOPING A CAMPUS CORPORATE ALLIANCE TEAM UNDER INNOVATIVE
      LEADERSHIP IS NECESSARY FOR SUCCESSFUL PARTNERING
Most AMCs do not have designated employees whose job is to lead the development of strategic
alliances based on specific projects involving technology or materials acquisition. Rather, the
initial engagement of a corporate partner in research collaboration is often the sole responsibility
of the investigator, who is unlikely to be able to follow through and manage the administrative
process required to successfully negotiate a collaborative agreement. Few investigators have the
time (or skills) to do this job effectively, and most campus administrators specialize in only one
aspect of the process and may be discouraged from (or not rewarded for) acting more globally
because of operational constraints (e.g., territoriality)22.

In fact, at many AMCs the process for identifying potential partners, initiating the formation of
strategic partnerships, establishing the optimum structure for the partnership, and negotiating the
requisite legal agreements with the corporate partner is fragmented and occurs across different
offices. Although some AMCs have excellent technology transfer offices, these individuals are
expected to focus their efforts on "selling" inventions, and the business relationships they develop
with the corporate sector are in the context of technology licensing. Thus, these office(s) are
typically not encouraged to develop business relationships around the early stages of
collaborative research. As a result, the AMC may fail to take advantage of its resources, and its
success in partnering suffers accordingly. Moreover, there is an increased desire for companies to
engage in strategic research partnerships reflecting a general trend for companies to move away
from licensing arrangements and towards building partnerships24.

On the other hand, most contract officers within AMCs that negotiate research and collaboration
agreements for acquiring technology resources are commonly not trained to make science or
business decisions and are not experts in intellectual property. Consequently, they lack the skills
required to balance scientific and intellectual property risk against the potential benefits of a
business opportunity.

Thus, although the intellectual property and contract officers might perform their specific duties
well, they might lack context or perspective on the roles of these alliances in the AMC's broad
missions. Money and time are wasted on administrative bottlenecks that might be alleviated if the
offices were integrated both functionally and philosophically under creative leadership, to make
decisions as an integrated unit, driven by a common objective and value system. Some
institutions are taking the step to adopt operational processes that combine these offices and also
to develop databases to track corporate partnerships; however, these are only two of the many
steps needed to form successful partnerships in the biomedical sciences. There are financial and


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scientific consequences for not implementing a process for promoting strategic business decisions
within AMCs.

A serious consequence is that some senior investigators seeking to circumvent the campus
blockade simply deny their interest in any intellectual property and encourage the university
officers to accept inappropriate or unfavorable intellectual property terms from the partnership in
order to get the deal done so the research can commence. As a result, the corporate partner might
commercialize a lucrative invention without either the scientist or the university receiving fair
consideration for its intellectual property.

                AN EFFECTIVE CORPORATE ALLIANCE TEAM
           REQUIRES SCIENCE, BUSINESS AND ALLIANCE LEADERSHIP
To partner effectively, AMCs will require a leader or corporate alliance team with extensive
business experience, solid strategic and opportunistic planning skills, first-hand knowledge of the
biotechnology industry (its technology, needs, trends, and people), a wide network of connections
in the corporate world, an understanding of biomedical research, knowledge of a wide range of
technologies, and the skills to forge the right relationships and connect the "right" strategic
partners. Within companies, the counterpart of this corporate alliance team is the business
development group.

This type of leadership team must be able to move several partnerships along in parallel, and
coordinate efforts across campus that have common goals, helping to leverage the value of
existing resources. Optimally, a team member would be present at initial meetings between
interested faculty and the prospective company partner, assuming a project manager role to assure
that action items are completed, communications among partners are sustained and robust, and
the partnership moves forward.

The group would have general knowledge of research programs, technology resources, people,
and strategic goals across the campus and, as appropriate, would facilitate hand-off to other
campus offices. As mentioned above, an effective facilitator not only has knowledge of industry
trends and investigator needs, but also serves as a communicator, relationship builder, and project
manager to assure follow-through on important initiatives, both internally and externally.

   CORE FACILITY DIRECTORS PROVIDE INSTITUTIONAL DUE DILIGENCE

AMCs are creating an expanding network of high-technology research core facilities that offer
access to a broad range of instrumentation and services, usually on a subsidized recharge basis,
that lie beyond the scope of a single investigator. Campus core facility directors­­the professional
staff that operate these units­­are the resident experts in these specific technologies and should
advise the corporate alliance leadership team, rigorously evaluating the technology and
suggesting the appropriate alliances to meet or exceed faculty needs. With the growing
sophistication of the technologies, together with intense marketing by companies, few biomedical
researchers will have experience, breadth, or time to critically evaluate the potential options.

Thus, core facilities can serve as effective interfaces between tool-based companies, AMCs, and
individual investigators, with potential advantages for each. For companies, core facilities offer a
single portal through which to negotiate supply costs, providing broader access without the need
to market to individual researchers. For the institution, core facilities produce price negotiation


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leverage. For investigators, they open a stream of appropriate frontline technologies that may
otherwise have remained inaccessible and perhaps even unknown. Moreover, facility directors
provide a stable base of expertise for technology training and communication that would
otherwise be missing in the highly dynamic environment of graduate students, clinical trainees,
and postdoctoral fellows who populate academic laboratories. It is not surprising that many tool-
based companies embrace the notion of centralizing their technologies in core facilities that serve
an entire campus.

       CORPORATE ALLIANCES CAN PROMOTE OTHER AMC MISSIONS

Perhaps the greatest challenge to achieving the four key missions of AMCs (healthcare,
education, research, and dissemination of knowledge) is the potential for these missions to be
conflicting or contradictory. Can trainees be put on the wards and still deliver the finest patient
care? Can partnerships be built with corporations without sacrificing the open intellectual inquiry
needed for education and research? Can the most insightful discoveries be made in laboratories
powered by students?

To avoid such conflicts requires that each mission be approached thoughtfully and in a manner
that takes the other three into consideration. In turn, this demands close interaction and
cooperation between those with primary responsibilities for each mission. Although it is not
practical to govern these functions from a common office, explicit responsibility for vigilance and
oversight at the highest administrative levels is essential for proper integration. Successfully
done, the execution of each mission could enhance the other three. For example, thoughtfully
crafted research alliances could serve not only to move knowledge beyond academic walls, but
also to deliver novel technologies into the research and health spheres that indeed bolster the
bridge between them, to strengthen both the conceptual underpinnings and the practice of
education, and to provide resources that can help support the whole institution.

                                         CONCLUSION
Partnerships require time, effort, expertise, and management by a corporate alliance team that
unites key personnel, functions, responsibilities, and resource capabilities now commonly spread
across multiple campus units. Together, this group can build and capitalize on a working
knowledge of internal and external resources and develop a rich functional business network for
campus investigators that leverages institutional resources.

Successful alliances are driven by complementary needs of the partners, and the joint perception
that meeting those needs would benefit each partner. The right team would couple business
expertise, a sophisticated knowledge of research within the AMC, and a robust network of
corporate contacts and interactions to complete the entire process from the initial science
discussions to the business and intellectual property discussions, the actual contract negotiation,
and the monitoring the performance of the partnership against mutually agreed-upon milestones.
Operating within an integrated institutional context, the corporate alliance team can advance
many key goals of modern AMCs.




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15. The National Academies: Institute of Medicine (2004). Forum on Drug Discovery,
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                                   ABOUT THE AUTHOR
Teri Melese is an Adjunct Associate Professor in the Department of Medicine at the University of
California, San Francisco, and is Director of Research Technologies and Alliances in the UCSF
School of Medicine Dean's Office. Before joining UCSF in 2001, she ran an independent
research laboratory in yeast genetics and molecular biology at Columbia University from 1988­
1997 and in 1997 left Columbia to be founding member of Iconix Pharmaceuticals, a
biopharmaceutical company in Silicon Valley. She has 4 patents for biomedical technologies and
small molecule inhibitors and is the author of numerous scientific articles. In 1988, she was
awarded a National Science Foundation Young Presidential Investigator Award. Melese holds an
A.B. from the University of California, Berkeley, a Ph.D. in Cell Biology from UCSF (Regents
Fellow), and was an American Cancer Senior Postdoctoral Fellow at the University of California,
Los Angeles.




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