Better Than Buyouts?

BusinessWeek just carried a well-written and thought-out "viewpoint" from Preston Henske and Tim van Bieson. The authors argue that rather than employ the armies of M&A people, create a gargantuan battle of egos and incur the takeover premium costs, the "r&d collaboration" model has a future. They write: "By effectively pooling research assets within a disease area, the industry would benefit in three ways. First, partners would make resource allocation decisions much earlier than before and fund only those projects with the highest likelihood of showing real differences in medical outcomes. For example, rather than pursuing several expensive late-stage programs in parallel, competitors could combine their resources and fund only the most promising candidate. Second, this approach will reduce the number of duplicative or "me-too" products, many of which now struggle to get access and reimbursement. Finally, the new model will distribute risk—and returns—across partners to increase the predictability of pipelines and long-term revenue." Assuming that this model does not lead to some anti-trust type of issue, this approach has significant merit.