Pharma-biotech partnerships: creative approaches to doing the deal
Research and development partnerships between big pharma and the biotech sector are now a vital component in bringing new medicines to the market - so much so that securing the best molecules for the best price has become a core competency for big pharma companies.
The relationship between pharma and "biotech" (i.e. small, start up drug discovery companies) is now mature, and mutually dependent. Declining productivity from in-house R&D operations means big pharma is becoming more and more reliant on external alliances to produce the medicines of tomorrow. Conversely, small pharma and biotech companies with limited cash reserves need to find big pharma partners to help them develop and bring their drug to market.
Around $25 billion was spent by big pharma in licensing deals and other R&D alliances in 2010, a figure which looks set to continue growing over the long term.
The dynamics are clear when pharma and biotech start to negotiate on licensing; big pharma won't have to pay as much if it buys into a molecule at phase I or earlier, and will face less competition from other big pharma companies looking to do a deal. But the chances of the molecule being a failure are high.
The alternative is to sign a deal only once a drug has shown proof of concept in phase II or later - but prices are higher, and competition for the deal is greater. Even then, its success is far from guaranteed.
Figures suggest that the trend for pharma is for a greater proportion of deals to be done in phase III. Statistics compiled by Deloitte in 2009 showed 35% of deals were done in late stages, though early stage deals were still more common, accounting for 41 per cent.
Partnering conferences are one of the prime means for pharma and biotech to meet and exchange information, TVG's recent BioPartnering Europe being one of them.
Speaking at the event, Dr Chris Brown, director of International and Primary Care, Pfizer, explained how his company goes about finding partners.
"Our collaborations span every area of development. We recognise that some of the most exciting science happens outside the walls of Pfizer."
Dr Brown says Pfizer uses a number of means to identify promising molecules - by attending partnering conferences, using pipeline databases, venture capital intelligence and company visits. Promising ideasgo through an initial screening (answering the basic question of whether or not it aligns with the company's strategy) followed by analysis and due diligence, with assessment from the science, manufacturing, commercial and finance side of Pfizer. Then the company's business development committee will follow through negotiations with the various deal structure options on the table.
Pfizer is interested in local, regional and global opportunities to partner. "We are looking for late stage compounds with a broad geographical scope. A deal with Pfizer can provide a company with sales and marketing know-how," Brown says.
Dr Robert Kilpatrick is founder and partner of TVG, which runs the BioPartnering conference. He says that because biotechnology is now a global industry, partnering needs to take place in a variety of ways- between large and small companies; Western and non-Western; established and new; and virtual and bricks and mortar. "Openness to new thinking is combined with access to new markets and novel deal structures, so what is taking place is now termed 'creative partnering'," he says.
TVG launched BioPartnering Europe in 1993 as one of the first life science partnering conferences. This year we have held high profile events in three emerging markets - BioPartnering India in Bangalore, BioPartnering Latin America in Rio de Janeiro and BioPartnering China in Shanghai.
"Partnering is just being adopted in these markets and there is a learning curve involved. TVG has also learned a lot about partnering around the world because we have worked with over 5,000 companies overa 20 year period," he explained.
This year's BioPartnering Europe event brought together more than 450 companies from 30 countries, including many biotech companies eager to talk to pharma licensing executives and persuade them that theirmolecule or technology was worth investing in.
One company was Swiss firm Telormedix, a biopharmaceutical company focused on targeted immunity in the treatment of cancer. Their lead product TMX-101 is moving towards clinical trials in bladder cancer and the company is now looking for partners. Johanna Holldeck, Ph.D., chief executive, who has worked with many big pharma companies, including Roche, Aventis, Schering and Johnson & Johnson, said: "For biotech companies, it is important to have core operations in place for licensing. Investors need external validation and if big pharma is interested, then the investor will be too. Co-operation with big pharma also allows access to their expertise and know-how," she added.
Innovative molecules, innovative deals
Partnering deals between biotech and pharma come in all shapes and sizes. Damian Marron, Ph.D., chief executive at Marseille-based Trophos described an interesting deal it struck with Swiss specialist pharma firm Actelion earlier this year.
Trophos is developing a number of therapies in neurology and cardiology. Its lead compound TRO19622, a novel oxime, is in phase III for amyotrophic lateral sclerosis. Actelion's Tracleer, is licensed for the treatment of pulmonary arterial hypertension, a life-threatening disorder and a $1.3 billion market.
Trophos needed to refinance and to maintain its clinical programme. Under the agreement, Actelion has paid $10 million for an option to acquire Trophos for $125 million plus two milestones for a further $70 million - US approval of its drug and progress on other programmes. The two companies have set-up a research collaboration in which Actelion compounds are screened in the Trophos screening programme.
"This deal buys Actelion a new approach to neurology research," Marron pointed out. "It is a good fit for both companies. This deal is not unique, but there are very few like it and they are mainly in the US," says Marron, citing a deal between Novartis and Cephalon as an example. "This is a win-win deal which brings us the support of a much bigger organisation, but one that knows what it is like to be a smallcompany."
Immutep (Orsay, France) specialises in targeted protein-based immunotherapeutics and has recently announced encouraging phase I/II clinical trial (one of seven trials) results for IMP321 combined with paclitaxel in metastatic breast cancer. Dr Frederic Triebel, scientific and medical director, says that the immunostimulation with first line chemotherapy is a new approach in oncology. "We are hoping to get a partner because clinical trials are very expensive and take a long time," he said.
Another company with an innovative product on offer is Genticel (formerly BT Pharma, Labge-Innopole, France). Their cervical cancer vaccine, ProCervix, can be offered to women already infected with HPV and has recently been approved for phase I clinical trials. Dr Benedikt Timmerman, Genticel's chief executive explained: "We want to cure the infection before cancer sets in. Our product compliments the prophylactic vaccines currently on the market." Genticel hopes that their "first in class" platform will attract a pharma partner. "We have the capability to bring this therapeutic vaccine to market on a global and regional basis. It is going to be a market of similar value and size as Gardasil so we need a big partner. The type of deal we are interested in would involve licensing with co-development or purchasing the whole HPV franchise. We are very open to different types of deal."
Each major pharma company applies their own unique approach to partnering. Dr Axel Maibuecher, head of Search and Evaluation for Integrated Hospital Care at Novartis, says his company has a "three-dimensional" pathway involving stage of development, deal stage, and therapeutic area which "ensures that an opportunity gets the right expertise".
Novartis has several different franchises and business units, including cardiovascular and metabolism, neurology and ophthalmology, respiratory and oncology. Novartis is therefore looking for opportunitiesin type II diabetes, obesity, dyslipidemia and antihypertensives.
Neurodegeneration is another strategic focus and Novartis also has an "opportunistic eye open" in old age psychiatry and mood and anxiety drugs with a new mode of action. In ophthalmology, they are interested in wet AMD, from the strategic perspective, and in dry eye from the opportunistic side. Novartis has a long track record in transplantation drugs and is interested in biomarkers in this area. "We are very flexible in the type of deal we will do," said Maibuecher. So these will include mergers and acquisitions, research collaborations and licensing.
Meanwhile, Merck relies heavily on the activities of its scientific scouts in partnering, said Dr Barbara Yanni, VP and chief licensing officer.
In 2009, the company signed 51 licensing and partnership deals. "Merck led the field in biotech partnering between 2005 and 2009," she said.
We expect to do a lot of deal making in the future. The scouts operate worldwide, each taking responsibility for their own area. Also presenting at the conference was Dr Margaret Beer, senior director forexternal scientific affairs, worldwide licensing at Merck Sharp & Dohme. She said: "This is simply the best job in the world." There are 17 scouts in Merck's worldwide network, all of them senior scientists. "Scouting and licensing and the science are so important that we will take scientists from the bench to do it," Beer added.
Merck is interested in all stages of the drug development process. The scouts build close relationships with the local science community including companies, VCs and academics, and they look in all therapeutic areas. "The most important part of my job is relationship building."
Beer adds: "We are as much dependent on our partners as they are on us, however small the company. I like to think of myself as the friendly face of Merck in the region."
What is Merck looking for? The company's areas of interest are published twice a year, and they are interested mainly in phase III and beyond in all therapeutic areas. Dr Manfred Horst is the Merck scout for France and Germany. He gave the example the development of their deal with ElexoPharm, which is a spin-off from Saarland University in southern Germany. ElexoPharm's synthase inhibitors were on Merck's list but were originally too early stage to be of real interest. But scientific meetings were held between the two companies and when ElexoPharm published a milestone paper in the Journal of Medicinal Chemistry, the deal was completed in April 2010. This deal covers development and commercialisation of drug candidates targeting aldosterone synthase, a novel target, in cardiovascular disease.
Dr Jeroen Tonnaer, the Merck scout in Benelux, Israel and South Africa said they always look to see how opportunities in the outside world might fit with the Merck development pipeline. "We are looking fordrug candidates in unmet medical need, for novel validated targets which are first in class or best in class, and solid IP on the target."
They are also interested in new synthetic routes and polymorphs of drug compounds. A biomarker strategy is a plus because it offers the possibility of companion diagnostics. The company is also interested in any technology that helps do things faster, better and cheaper. "More significantly, any technology that will help us identify or validate novel targets is very welcome," Tonnaer added.
Another interest area is formulation and delivery technologies, as well as improved manufacturing approaches and new therapeutics modalities like RNAi.
"Emerging markets are an important part of our strategy," added Tonnaer, listing Turkey, Brazil, India, Russia, China and Korea as examples. They are also interested in Asia Pacific, Latin America, EasternEurope, the Middle East, and Africa.
Kilpatrick concludes by saying there is a definite skillset required in deal making, whichever side of the fence you are on.
"It requires persistence, patience, clarity, communication, access to the right people - and a little bit of luck."
The importance of the legal agreement between firms means that lawyers play a vital role in the process, usually representing biotech firms.
John Wilkinson, partner at London law firm Reed Smith says setting up a partnership is a painstaking process which typically takes six to nine months. First, the company with the asset will decide on a deal structure, then start looking for a partner, making partnering events like BPE extremely important. When a certain level of interest is generated, the details of the deal will be crystallised in order to define the Net Present Value of the asset.
The next stage is to generate a Term Sheet, a non-binding agreement which sets out the draft terms of the deal. This is where firms like Reed Smith often get involved, acting for biotech companies and typically negotiating with a pharma company's in-house legal department.
"We help our clients draft a detailed agreement with specific definitions tailored for agreement," said Wilkinson, adding that it is important to be aware of the very specialised language of life science at this stage.
- Susan Aldridge Ph.D.
European News Reporter
