November 27 2023

Pharmaceutical corporate-sponsored digital incubators – is this an answer to the perennial question of how to digitize pharmaceutical companies?


Erin Johnstone

Sean Abbott-Imboden

The technology revolution is continually happening around us – businesses, stakeholders, and everyday citizens witness how digital changes the way we live our lives. A pertinent question now challenges even the most seasoned Executives, including those across the pharmaceutical industry – how can enterprises integrate digital solutions to enhance operations?  

Historically, a lack of digital nascency has seen pharmaceutical companies rely on an ecosystem of smaller technology-based start-ups to assume development responsibilities for defined problems. While the model of partnering to solve the problem is valid and has produced results, pharmaceutical companies have increasingly sought alternative ways to engage the digital biosphere.   

Pharmaceutical corporate-sponsored digital incubators are pharma’s answer to the ‘Y Combinator’.  

Novartis, J&J, AstraZeneca, and others have all established these innovation hubs, each pursuing nuanced approaches but with the shared fundamental concept of integrating digital solutions to enhance operations.   

Pharmaceutical corporate-sponsored digital incubators – the current state of play 

J&J’s JLABS, AstraZeneca’s A.Catalyst Network and Novartis’ Biome are often considered the most advanced pharmaceutical corporate-sponsored digital incubators / accelerators.  

Each operates a series of regionally based innovation hubs that have tailored their focus to address specific healthcare challenges or access local resource strengths. The digital focus is not exclusive, but analysis of their incubated and accelerated start-ups reveals that tapping into this digital ecosystem is a core priority of each program.  

Pharmaceutical corporate-sponsored digital incubators typically have a “no-strings-attached” operating model. In other words, pharmaceutical companies do not take equity shares or ownership of the startup. Instead, they provide start-ups with laboratory space and knowledge exchange opportunities (e.g., access to executive leadership) to grow and evolve, and in return value is received via rental revenue. The value delivered from these incubators is truly staggering, for example: 

1. AstraZeneca’s A.Catalyst Network – a global network of >20 hubs.  

  • Formed 500+ partnerships  
  • Mentored 300+ start-ups 
  • 100+ solutions are currently in development  
  • 20+ solutions have been scaled after pilot phases  

2. Novartis Biome – a global network of more digitally focused and dynamic incubators. It aims to democratize access to technology innovation and expertise and, keep in lockstep with the ever-evolving healthcare landscape. 

  • In less than 3 years, since 2018, 15 Novartis Biomes were operating globally 
  • ~75% of the expansion happened during the COVID-19 pandemic 
  • Their approach was iterative and centered on users and prospective digital health partner feedback.  

The Biome’s Partnering-as-a-Service model was a real first for the industry. A recent article from the Novartis Biome co-founders neatly summarizes this novel approach:  

It was a completely opt-in model. Essentially, Novartis country organizations subscribed to The Biome… Like any potential customer, they evaluated its value proposition and made the decision whether to buy or pass. A buy decision would mean they would get access to the full Biome package—the brand-like assets, the partnering process / solutions and services developed by the founding team, and support from the founding team throughout its lifetime. In turn, the country organizations would provide the resources and capital needed to run their respective Biome. Every year they could choose to renew their subscription or not. This model allowed the Biome to become instantaneously connected and relevant to ‘the business’ in that local ecosystem and for their specific needs.”  

Even innovation hubs need to innovate  

While Novartis Biomes' centralized opt-in model was successful in scaling operations and launching a multitude of initiatives, it has had to evolve. The new modus operandi is to give full ownership to the businesses supporting them to solve the healthcare needs of the country or region in which they operate. What this means is yet to be formally communicated. Whether the Biome follows the more typical Pharmaceutical corporate-sponsored digital incubator model, in providing global start-ups with access to laboratory space and standard incubator program resources before establishing more holistic partnerships, is to be determined.  

Inflection and reflection – How to determine the ideal approach  

It is fair to say that pharmaceutical corporate-sponsored digital incubators are at a true inflection point, with several critical factors to evaluate including: 

  • Their degree of autonomy within the broader pharmaceutical organization 
  • Chosen operating models 
  • Resource allocation 
  • Alignment with different internal venture investment arms 
  • Broader mission statement  

Consideration must also be given to other approaches to bridge the pharmaceutical-digital gap, for example: 

  • Sanofi’s Digital Accelerator - launched in 2022 this focuses on driving digital innovation to develop products and solutions, upskill the internal workforce as well as enhance internal capabilities and R&D. The Digital Accelerator addressing unmet needs in patients suffering from atopic dermatitis in France, Italy and Spain. The team is developing an integrated platform and data solution to better engage with HCPs, enhance awareness of the disease and the available treatment options. 
  • PharmStars – the pharmaceutical-technology industry resident matchmaker that counts Pfizer, Roche, Novo Nordisk, Eli Lilly, Takeda, Boehringer Ingelheim and others amongst its ranks. The accelerator aims to connect pharmaceutical companies and digital health start-ups. They both go through a series of workshops to learn about each other’s business and intentions. This prefaces a pitching event in which start-ups present their solutions to PharmStars’ members and have the opportunity to engage individually with them. 
  • Pharma-company agnostic initiatives, such as StartUp Health also offer a compelling value proposition. Startup Health is a healthcare-focused venture capital and private equity company that supports and invests in digital health startups.  

This inflection point extends to the broader digital health landscape, an industry also seemingly suffering from a COVID-19-related hangover. While the pandemic rocket-fueled pharmaceutical investments into digital companies, global digital health funding recently slipped for the 6th-straight quarter, while deals reached an 8-year low. Compounded by an uncertain global economic environment and proposed industry reform, pharmaceutical companies are increasingly waiting to see the proverbial harvest from their previously planted digital seeds.   

It is a certainty that the technology revolution will increasingly accelerate, for example through AI. In an age of democratized access to technology solutions, pharmaceutical corporate-sponsored digital incubators offer a road to tap into these developments.