Discussion at FDC/Windhover's annual Pharmaceutical Strategic Alliances gathering in New York reflected the urgent need for the industry to adopt new models in order to spur innovation--in R&D, finance, business development, and commercial operations.

The drug industry has reached the limits of its traditional business model, having collectively destroyed shareholder value since 2000. Companies' responses -- cost reductions, portfolio rationalization, productivity enhancements, bigger dealmaking -- are too little, too late. It's not enough to do business more efficiently; the industry needs to adopt new business models. Problem is: it's almost unprecedented to change models in the drug industry, though companies in other industries have done it under similarly challenging circumstances. Now it's time for Pharma to get moving. Since no company has yet taken a convincing stance on business model innovation, there's significant opportunity for one or more players to take the lead and create strategic advantage in doing so.

Big Pharma's being squeezed by deal prices, both for discovery and development assets. And with new capital coming in to fund earlier-stage projects, deals will only get more expensive. But a few forward thinking drug companies are making the seller's market work to their advantage, too, reducing financial exposure and business complexity while upgrading pipelines.