Big biotechs seek growth in innovative deals with small biotechs

March 13, 2014 ctheodoropulos

The show of hands gave the speakers confidence they were in front of the right audience. The majority of participants in the opening plenary session of BIO-Europe Spring® in Turin were executives from biotech companies who are on the sell side looking to cut a deal with a big pharmaceutical company.  Or perhaps they would consider an offer from one of the panelists, who represent an increasingly active force in the industry, big biotechs on the hunt for even greater growth.

The full 90-minute discussion is available on video at partnering360.com.

“When I look at large pharma, I see zero creativity in the way they go about a deal,” said John McDonald. “This is where Biogen is different because innovation and creativity in dealmaking is critical.”

John McDonald, Biogen

Leading business development at what has become one of the largest independent biotechnology companies, McDonald said he sympathizes with smaller companies that today have brought an asset to preclinical development and want to continue moving with the product into the clinic.

Present this vision to a pharma company, he said, “and what large pharma will tell you is they want you to exclusively license your product to them, that they will write you a report, that they never want to see you again and will send you a check at some point in time.”

Such a company may find a better opportunity dealing with big biotech, and Biogen particularly, where McDonald and his team will look at all the elements where value can be created.

The Global Head of Genentech Partnering, James Sabry, suggested the key to deciding whether big biotech or big pharma is the better dealmaker would be in asking which has the development capabilities that fit with the proposed project.

“The only thing that is going to create value in this industry that is lasting is through product technical success. If your project doesn’t make it into late stage development and then to market, you will never really grow as a company,” he said.

“This is undervalued by companies who pay more attention to the balance sheet than to value creation. That is short-sighted,” he said. “You need cash, of course, and this will be taken care of.  Most important by far is the probability of technical success.”

Jeremy Springhorn said Alexion Pharmaceuticals still considers itself to be a small biotech.  “It is nice to see the market cap and the resources we have today, but in the way we approach deals, the way we think about deals, the way we think about partners we are still entrepreneurial in spirit.”

James Sabry, Genentech

The vice president charged with corporate development, Springhorn agreed that a deal must start with the right strategic fit, and for Alexion, “It starts with the disease.  It has to be an absolutely devastating disease and the potential therapy has to be absolutely transformative. The kind of deal we will build around that kind of an asset depends on what fits best for the partner.  We have done asset deals, whole acquisitions, and options structures, whatever is going to bring that therapy to patients. If you are not approved, if you are not on the market, if you are not reimbursed, there is no value creation.”

The issue of strategic fit becomes even more critical in the rare disease space, according to David Colpman, who leads Global Business Development for Shire.

“You need someone who can find the patients, which is a key challenge,” he said. “You need to get the product priced at the right level. Among the big biotechs there is a real differentiation in the ability to do this. Big pharma has tried to move into this rare disease space and have gotten their fingers burned.  There isn’t any reason they could not build this capability, but the evidence is that they have failed to do so and have been pulling back.”

 

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