In today’s life sciences industry, the most common type of partnership seems to be pharma partnering with pharma. But how do you determine if this model is right for you?
If it is, how should you then identify partners, come to an acceptable agreement, and execute the partnerships? Life Science Leader assembled a panel of experts at the Outsourced Pharma West Conference & Exhibition to answer those very questions. The panel consisted of Christopher Haskell, head US Science Hub, Bayer HealthCare; Brian Feth, CEO/founder, Xcell Biosciences, Inc.; Glen Sato, partner, Cooley LLP; Jaisim Shah, CEO and board director, Semnur Pharmaceuticals, Inc.; and Timothy Scott, president, Pharmatek.
PARTNERING WITH BIG PHARMA
The first question posed to the panelists centered on smaller pharma and bio companies partnering with Big Pharma. The consensus opinion seemed to be that the greatest advantage of this relationship is the credibility and validation it brings to the smaller company. “It says a lot for a large pharma company to direct money and resources into any project you might be working on,” noted one panelist. In addition to the validation, Big Pharma partnerships also reduce risk for a small company, cutting the R&D burn rate and allowing the company to tap into the resources of a much larger company.
Of course, structuring these deals is all part of the negotiating process. And while Big Pharma has a lot of negotiating experience, many smaller companies may be lacking in this area. That means trust between the two sides is critical to the process, a theme that came up several times during the session. Engaging slowly, then building around the trust you develop along the way, can be an effective way of fostering a partnership.
Still, it is best to have as much knowledge as possible when entering the negotiation process. Do your homework, and talk to companies that have been through the process, especially those with expertise in your area of research. And be prepared to lose some level of control over the product once you enter into a partnership.
Finally, having a shared vision is critical. Both sides need to be ready to share both the pros and cons of the partnership and have one unified development plan moving forward. “I believe 70 to 80 percent of small companies fail because there is not open sharing of information between the companies,” noted one panelist. “The pharma company will have one view, and the biotech will have another. The pharma company will present its outlook to the management team and the portfolio management. If the biotech company is looking at it in an entirely different way, that will be a problem. Having both teams call into the same portfolio review will dramatically lessen that situation and increase your chances for success.”
THREE SCENARIOS — WHICH WILL YOU PURSUE?
When a small bio company approaches Big Pharma about partnering, they are generally hoping to land one of three types of partnering agreements.
The scenario will determine the type of agreement put in place. The most straightforward agreement is one where an asset has been validated and is ready for licensing, and where a Big Pharma partner is needed to help develop it.
The agreements get more complicated when dealing with an earlier stage product, where there might be some potential, but there are a lot of question marks. In this case, a sponsor research agreement might be the best route.
Here again, trust enters the discussion. No one wants to spend six months on an agreement for a project that will maybe last three months. Everyone is looking out for their own self-interest, but it pays to understand both sides. Rather than ask what they can do for you, consider what it is that you can offer them. “You are entering into a partnership because you need money, equipment, or other resources,” said one panelist. “Your partner has certain things they need. Both sides need to establish goals and make sure those goals align with each other.”
BANDWIDTH IS ALWAYS IN SHORT SUPPLY
At start-up, bandwidth is about the only thing that’s in shorter supply than cash. That means anyone in that start-up role has to take great care to prioritize their list of tasks. They then need to take on projects only in areas that can help build the company’s credibility. Of course, that is easier said than done. The decision is made tougher when someone is giving you money to do something that may not be on your list of priorities.
Some of this talent you may need to hire at some point, but if the skillset is niche and not core to the product itself, then you’re best off trying to leverage it from your partner.
MAINTAIN YOUR FREEDOM
Even if you are in a partnership that is working well and giving you the resources and support you need, one issue will still consume you: freedom. Specifically, how much freedom will you have to pursue other partnerships and explore other opportunities outside of what you are doing with your partner?
According to the panel, the answer to that question should be complete freedom. In fact, unless the pharma company is a fiduciary partner with restrictions on what you can and can’t do with the technology, you should feel free to pursue any relationships you see fit. In fact, your partner should encourage you to apply your technology and skillsets to other companies as well.
According to one panelist, “From the pharma company perspective, it’s even better if [the smaller company grows] but you stay connected to them. If that happens, you are growing your knowledge base as they grow theirs. But you need to recognize that, in the end, you will not own it all.”
Another added, “The earlier you are in the stage of development, the more of the ownership that should reside with the innovating company. They are closer to the technology and have more of the expertise. And most Big Pharma companies would admit that their expertise lies in doing larger, Phase 2 and Phase 3, clinical trials.”
Keeping more control in the hands of the innovator may also result in more doors opening. If a Big Pharma company takes the lead on a drug, they may not look at other potential uses for that drug the same way the innovating company might. The innovator will generally know (better than the partner) what other potential uses there are for a product. If that innovating company elects to get into an out-licensing arrangement, it will be very difficult to get the drug back or have much of a say in the entire development process.
TRANSITIONING OUT OF A PARTNERING HORROR STORY
Try as you might, not all partnering agreements will go as planned. Even if you spent a considerable amount of time and effort selecting the right partner, some partnerships are just not meant to be. The session closed with the panelists discussing a deal that did not go as planned. After all, even if a drug has potential, it may simply end up not being a fit for the company you partnered with.
Oftentimes when a deal goes astray, it can be the result of a shift in the priorities of the pharma company. If the science doesn’t work out or takes a lot longer than expected, the issue of prioritization will arise. The smaller innovator company can easily find itself moved from a large position in the pharma organization to a secondary position. That type of a move also can result from something as simple as a change in management or the company reshuffling its resources. Those changes can happen overnight, and when they do, the project becomes a nightmare, and getting out can be very difficult.
If that happens, you have to focus on a smooth transition out of the agreement. The last thing you want is for a severing of the partnership to affect you negatively and jeopardize your chances of striking a new partnership with a different company.
Having something in the legal agreement that addresses ownership of the data and the support you will receive during the transition period will make the process go easier. When drawing up the initial agreements, it is easy to make the mistake of looking at it only from the perspective of everything working out as planned. To play it safe, step back and look at the agreements from the perspective of nothing going as originally planned. That will help you identify areas of weakness and risk in the documents.
“Sometimes there is a silver lining there,” noted one panelist in closing. “This may be a shiny new car that you invested money into, and which has value, and which has now been given back to you. You now have the ability to do something else with it. With the right partner, you can still bring the technology back and make it a success. The breakdown in one partnership may simply be the start of something new.”