Biopharmaceutical notes from San Francisco
Stuart Wren gives the second instalment of his report from BAY Bio 2006, on a panel discussion entitled Key Trends in Life Sciences Partnering and Deal Making.
These notes are from a panel discussion moderated by Sergio Garcia, Partner, Co-Chair, Life Sciences Group, Fenwick & West LLP, with contributions from Jim Adair, Associate Director of Business Development, Genentech Inc., Nicola Campbell, Partner, Sofinnova Ventures and Charles Hutchinson, CEO, Glycofi.
With the elusive IPO window, venture capital funded companies are increasingly relying on the licensing and partnering route to finance clinical development with out losing the benefit from commercializing their products. Such deals not only increase liquidity but validate the quality of the products concerned. At the same time big pharma is realising that it needs partnerships with biotech companies to supplement its in house efforts to fill its pipelines. The innovation gap, fewer new products coming to market and the increased competition amongst big pharma are driving the shift towards substantial deals on innovative early stage products. Of the ten largest discovery deals, eight were concluded in 2005.
With the increasing amounts paid by big pharma to biotech companies for early stage deals, acquisition is becoming more sensible. Since trade sales are offering more value than the IPO route, VC's exit strategy is directed toward acquisition and companies are being kept lean with little or no assets other than the product(s). However, key members of staff were recognised as important assets to be retained by keeping them reassured and informed as much as possible throughout the process.
It is not just big pharma that is relying on partnering. In recent times, 60% of partnering deals were between biotech companies, driven by the familiar factors of competition and the need to improve their development pipeline.
Although partnering represents an attractive option, finding the right partner and successfully managing the relationship are essential. In shaping the deal, financial issues usually receive the greatest focus yet other equally important areas receive short shrift. For example, it is inevitable that problems and disagreement will arise and it is important to have mechanisms, such as steering committees in place ahead of time to resolve them and ensure the successful continuance of the partnership.
It was considered that big pharma has improved on its partnering skills, primarily because it has had to due to the increased competition and leverage that can be brought to bear by biotech companies.
Please contact Wren International if you have any questions or would like to discuss the issues raised here.