Innovating in the Industry's Backwaters: TransForm's Deals with Lilly and Alza

01 Jun 2002

Too often, new discovery platforms brought in from biotechs have increased the risk and complexity of the R&D process. Drug companies have begun to recognize this and have been cutting back on their discovery dealmaking. Thus, at a time when many platform-based start-ups are having trouble interesting Big Pharma in dealmaking, it is notable that TransForm Pharmaceuticals has managed to announce two major deals this month, both of which explicitly address the issue of R&D risk.

Innovation—the catechism of those who would save the drug industry—has its dark side: the increased risk of failure at a time when the business can ill afford it. On the one hand, the drug industry continues to equate novelty with new molecular entities (NMEs). On the other, the industry focuses substantial energy on the novel targets of genomics and proteomics, and the novel chemistries created for them, thus substantially increasing the level of R&D risk—it's far less risky, scientifically, to pursue a target many researchers have already explored than one you've discovered yourself.

Drug companies have begun to recognize this unfortunate circumstance and have been cutting back on their discovery dealmaking: too often,...