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Kellogg on Biotech

The Innovation gap in Pharmaceutical Drug Discovery & new Models for R & D Success.

Michael Hu KSM '07, Karl Schulze KSM '08, Jack Sheu KSM '07, and Daniel Tschopp KSM '07

In the past decade the pharmaceutical industry has experienced an innovation gap crisis characterized by relatively flat growth rate in new drug approval rates and a steady increase of over 2.5X in R&D cost. If unchecked, this could undermine industry profitability leading to further innovation erosion. Big pharma has tried to tackle the innovation gap with a series of strategic solutions: increasing the intensity and level of internal R&D, horizontal consolidation, and increased in-licensing from the biotech sector; all with limited success. In our whitepaper, we survey the literature to pinpoint the industry structural root causes of the innovation gap, analyze three emerging business models & solutions on the horizon, assess their opportunities and challenges in addressing the looming R&D crisis.

©2007 Kellogg School of Management, Northwestern University