Fruitful and Prosperous

The productive partnership between Memory and Roche illustrates the value of (modified) laissez faire.
Oct 01, 2004

Peter Hug is global head of pharma partnering at Roche’s headquarters in Basel, Switzerland.
EVERYONE KNOWS THAT ROCHE WAS, AND ARGUABLY STILL is, the driver of Genentech's success. But not everyone knows that Roche owns a majority stake in the biotech behemoth, as it does in Japanese powerhouse Chugai. And that's by design. Roche's management has long held that the best way to derive good and lasting results from its smaller partners is to let them do what they do best and leave them alone while they do it. That philosophy has served them well, especially when revenues of some of their codeveloped and comarketed blockbuster products are considered. Just two, Genentech's Herceptin (trastuzumab) and Chugai's Epogin (epoetin beta), have earned billions.

Roche's business model continues to emphasize strategic partnering to boost its R&D and global marketing efforts. The company is particularly proud of its continuing relationship with Memory Pharmaceuticals, which specializes in developing therapies for neurological and psychiatric disorders such as Alzheimer's disease and schizophrenia. In this Q&A, two leaders share their visions of what has made their alliance so successful.

Gardiner Smith is vice-president of business development at Memory Pharmaceuticals in Montvale, New Jersey.
Q What is the most important thing your partner is doing to make the alliance work? Hug Memory is giving the compounds the very best chance of success. Its excellent development process and expertise in CNS allows us to have trust and faith in its work. Memory is aware that the trust is there, and this is very important for making the alliance work. Each side can feel confident and positive about the alliance and its potential. Memory is very open and communicative. This ensures that any issues are brought out early and up-front so they can be dealt with quickly. Memory shares our philosophy on partnership. This means that we know each side is genuinely acting in good faith and that every action taken will be for the benefit of the collaboration. At the prediligence meeting, it emerged that Memory shared our philosophy on rigorous testing and analysis at all stages of development.

Smith Roche has consistently delivered on its commitments to our alliance, which is based on the development of two CNS drug targets. The commitment starts with Roche dedicating scientists and business staff to support the progression of Memory's novel compounds. Roche has a long-standing presence and deep expertise in the CNS field. Access to Roche's people and extensive R&D infrastructure complements the capabilities that Memory brings to the alliance. In addition, the Roche commitment importantly includes providing the financial resources required for joint R&D efforts. In these agreements, Roche concentrates on thoroughness and flexibility to ensure that we are able to generate the novel molecular approaches and robust data needed to move products forward. Roche has also built a leading business development and alliance management group. This enhanced aspect of its commitment greatly benefits operational processes, from initial negotiations to product development and through to commercial considerations. What's notable about the alliance is that both companies have approached the collaborative activities with a spirit of openness, and they are willing to put in the extra effort to resolve technical and business issues in a timely manner. In a business that is regulated by technical complexity and patent life, it is critical to have consistent support, progress and rapid problem-solving to maintain a competitive advantage.

For example, in our 2002 PDE4 collaboration for indications including Alzheimer's disease and depression, Roche provides up-front payments, R&D support, and potential milestone payments and royalties on worldwide sales. Research activities under this agreement were extended and expanded in August for an additional two years to continue work on new compounds and new indications. In September 2003 we announced a second deal with Roche for the nicotinic alpha-7 target, initially addressing schizophrenia and Alzheimer's disease. This agreement includes licensing fees, R&D support, potential milestones, and royalties and an option for Memory to co-promote in the United States. In conjunction with the agreement, Roche made a strategic equity investment in Memory. Both agreements are governed by a matrix approach of informal and formal information systems, making communication a priority. Roche's commitment of global pharmaceutical capabilities to the alliance is an excellent fit with the Memory strategy.

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