Open Innovation Lessons From Covid-19 mRNA Vaccine Development
Open innovation propagates to embrace external cooperation, rather than full in-house product innovation in a complex world. Almost two decades after, Henry Chesbrough’s concept is still influential because of intensifying complexity and digitization of every corner of our life.
A recent driver of open innovation for corporations is startup engagement. Although corporations have resource advantages, startups have the flexibility to navigate nimbly. This open innovation type is called outside-in where the external know-how is utilized internally in corporations. This option is viable if the risk and cost of developing internally are higher.
The idea sounds good but there are certain challenges. Chesbrough’s recent book identified 6 challenges against open innovation success. The most important ones are managing the internal change, external relationship, and intellectual property protection as demonstrated in Exhibit 1.
The pharmaceutical industry is a proponent of open innovation
The challenges are valid for the pharma industry, but there is a big motivator. Developing a new drug is extremely expensive and risky. Probably, you heard about Moore’s Law. It tells that the number of transistors per integrated circuit doubles approximately every two years, a prediction that held for almost half a century that makes computer technology cheaper continuously. Conversely, Eroom’s law, having a much shorter history than its more famous cousin, being published in 2012, tells that the cost of developing a new drug doubles approximately every nine years.
Pharmaceutical companies recognize this challenge. Based on the analysis, ten multinational companies do not only rely on their internal R&D effort but also have strong open innovation engagement. Therefore, when the Covid-19 emerged in January last year, external collaboration was an option for the most. A new technology, two mRNA vaccines that were launched by two biotech companies without having any product in the market, has won the delivery race. Both stories could not be realized without open innovation.
Lesson 1: Utilizing open science to build its IP
The mRNA story had started with trial and errors in the 1990s to 2000s by a Hungarian scientist Katalin Karikó and Drew Weissman, an immunologist with a medical degree and Ph.D. from Boston University. The main idea behind the mRNA is that body relies on millions of tiny proteins to keep itself alive and healthy, and the approach uses mRNA to tell cells which proteins to make. If you could design your mRNA, you could, in theory, hijack that process and create any protein you might desire — antibodies to vaccinate against infection, enzymes to reverse a rare disease, or growth agents to mend damaged heart tissue. Although it all made sense on paper, their effort stayed unnoticed and they could not create grants and necessary financial support to progress their work.
But three scientists were interested in their paper. Derrick Rossi, a postdoctoral fellow in stem cell biology at Stanford University, made presentations to other Moderna founders in 2010. Also, a scientist couple Ugur and Ozlem Tureci, founders of BioNTech, focused on mRNA and hired Katalin Karikó as senior vice president to help oversee the work in 2013.
Both company’s founders had seen the potential that others could not realize. But more importantly, they were able to convince investors to inject money into their companies. They had utilized open science to develop their IP.
On 3 January 2020, a Chinese virologist Zhang Yongzhen’s team received a test tube containing swabs from the initial outbreak of a pneumonia outbreak in Wuhan. They were able to sequence the virus’s genome on 5 January. On that day Zhang uploaded the genome to the United States National Center for Biotechnology Information and notified the Shanghai municipal health authority. On 11 January, with the permission of Zhang, the genome on is published on virological.org. That sequence data was instrumental for Moderna and BioNTech to leverage their know-how and develop vaccine designs in a couple of weeks.
Lesson 2: Establishing trusted partnership for win-win
When the pandemics exploded, BioNTech and Moderna were in an exceptional fortuitous position. However, two parameters made the delivery of the vaccine to the market very difficult; finishing clinical trials, receiving the health authorities’ approval quickly, and establishing a global supply chain to deliver the millions of doses of vaccine.
The complex regulatory processes for drug approval pose hurdles for newly established firms in this sector as they lack experience. BioNTech had no products in the market. On the other hand, Pfizer has been used to implement an openness strategy with substantial regulation, clinical trials experience, and global supply chain infrastructure capability. Pfizer CEO Albert Bourla tells about their advantage;
We were able to move faster than biotech companies, faster than companies that are founder-based or backed by venture capital — all of which are known to be able to move very quickly. That’s what makes me prouder than anything else.
BioNTech used its ongoing relationship with Pfizer. Two partners had started collaboration back in 2018 to develop mRNA influenza vaccines. In March, Ugur Sahin called Pfizer’s top vaccine expert, Kathrin Jansen.
I asked her if Pfizer was interested in teaming up with us, and she, without any discussion, said, ‘Yes, we would love to do that,
The collaboration started before signing a contract. BioNTech’s responsibility was to contribute multiple mRNA vaccine candidates as part of its Covid-19 vaccine program. Pfizer was to contribute its leading global vaccine clinical research and development, regulatory, manufacturing, and distribution infrastructure and capabilities. Pfizer had risked $2 billion for an unproven technology.
The short opportunity of window has been used by Pfizer and BioNTech thanks to existing relationships to encounter urgency and enormous inoculation delivery requirement.
Lesson 3: Public-private cooperation
Like BioNTech, Moderna did not have Pfizer’s resources or expertise for clinical trials. However, their approach was different. The US government’s program(Operation Warp Speed) was hugely influential that targets to provide resources, support, and targeting public-private partnerships to facilitate and accelerate the development, manufacturing, and distribution of COVID-19 vaccines.
The program is resembled Manhattan Project, 2.5 years of a race to develop the nuclear bomb in World War II. The similarity is about only due to urgency but the mobilization model. In World War II, big automotive and electrical companies had become the driving engine of the mobilization effort. In the current program, pharmaceutical, drug manufacturing, and delivery companies like UPS and FedEx are involved. The program targeted to use of governmental authority to guide but not micromanage the private economy’s efforts.
Moderna benefited from this program in every way. During its clinical trials, the US government gave Moderna around $1 billion with a total investment of $2.48 billion. Pfizer rejected up-front payment to avoid possible delays for any bureaucracy that comes with having to give reports and agree on how the money is spent. But the program governance and sense of urgency limited bureaucracy’s impact. Moderna’s approval slowed only a couple of weeks which is not bad if you receive billions of grants.
Moderna’s next challenge was to scale the manufacturing and delivery operations globally. The company predominantly had consisted of an R&D team. Executives with international pharma experience were recruited for rapid scaling. The company contracted with Lonza, one of the world’s largest pharmaceutical services firms and other suppliers. By the end of last month, the company’s covid deals reached $18 billion.
Open innovation has played a key role in mRNA vaccine development. Sense of urgency helped to overcome its challenges. Both stories are inspiring for the private and public sector.
