How Biotechs Can Stand Out in the Competition for a Big Pharma Partnership


Xconomy San Diego — 

[Editor’s Note: this piece was co-authored by Hari Kumar of San Diego-based Amira Pharmaceuticals.]

The benefits of partnerships between emerging biotech companies and major drug developers are numerous and well known. The smaller biotech company gets cash to support its innovative R&D, and the Big Pharma company gets hot new patented drug candidates to replace its aging blockbusters as they start to face competition from cheaper generics. However, obtaining these partnerships is becoming increasingly difficult for biotech companies in the current climate of increased economic pressures and mergers and acquisitions between major drug developers.

In recent months, major drug developers such as Genentech and Schering-Plough, who were previously partnering targets, are now going through the process of mergers (with Roche, and Merck, respectively). This means it is likely that there will be a continued gradual decrease in the number of potential partners looking to acquire co-ownership of new drugs going forward.

As big drugmakers continue to merge, the consolidated portfolios will also change. At first glance it would seem like the mergers and acquisitions would allow the combined company to expand its portfolio. However, these mergers often result in management trimming off ‘excess’ to increase focus on the most profitable areas. Therefore, not only is the number of companies decreasing, but the number of disease indications being pursued by these companies is also likely to continue to decrease.

Consequently, as small companies have ever decreasing choices, major drug developers have more options from which to choose when selecting a partner. It is no longer enough for a start-up biotech to be first-in-class. Instead, it is more important than ever for biotechs to see their own programs from the perspective of major drug developers and create fully enabled programs that are attractive to potential partners in multiple ways.

Identifying a Target

The discovery and the identification of game changing therapeutics have been central to the success of the likes of Genentech and Amgen. Others, such as Gilead Sciences, emerged as a leader in their field through the demonstration of being the best-in-class.

The right decisions at the earliest stages of target selection are instrumental in eventually attracting partners. One of the first questions to ask is, “If we have a program in the clinic in 3 or 4 years, will there be a partner across the table from us?” Or, simply ask, “Is this therapy going to make any difference to the treatment paradigm?”

Companies need to identify targets that will be appealing in the future, which may not necessarily be attractive now. This selection process should include an evaluation of which programs are on the cusp of being “the next big thing” without being overly saturated with competition. There should be some validation for the target to show proof of concept, but still clear areas where a compound can stand out and be best-in-class.

Major drug developers evaluate the attractiveness of a disease indication based on the competitive level and future need for new therapeutics. Factors such as a product’s projected cost-benefit and distribution of the disease across the globe also play a role in the desirability to major drug developers. Whether the therapeutic area is in primary care or in a specialty area may also play a role in the evolving healthcare environment. If an emerging biotech company can evaluate potential targets this same way, it will allow for better selection. It is important to think about disease areas from this perspective instead of simply asking which major drug developers will be interested in potential products, and building from there.

Best-In-Class, not First-In-Class

Once a target is selected, the compounds brought to the table have to be best-in-class. The major drug developers have the choice to buy from many, and being best-in-class is the only way to stand out from the crowd. This allows for an easier time convincing the potential partners that this program is something they want in their pipeline.

Often biotechnology companies become focused on potency and lose sight of safety until the later stages of development. The safety profile is of unparalleled importance, and therefore it has to be pristine. It is vital for the small company to appreciate the need for robust data sets and to seek out these data early in the candidate selection process. Investing in necessary studies early in the drug development process saves time and money overall by allowing the small company to move only the most promising compounds towards the clinic and eventual partnership.

The instinct in small, underfunded companies seems to be to protect an asset rather than potentially harm it. There is often reluctance to performing killer experiments early on which could potentially terminate a program, or at least the lead candidate. This can be seen in companies with programs that are likely to have toxicology problems, yet the company waits to perform toxicology assays in hopes that there will be enough of a therapeutic window to navigate. From the perspective of potential partners, these are potential liabilities and which provide an excuse to walk away from the negotiating table and seek out a better opportunity elsewhere.

Increasing the Odds

Back-up compounds which are structurally distinct are also valuable assets for these discussions, as they allow the partner to continue with a program with minimal delays if the first compound encounters problems. These compounds should follow behind the lead by a short amount of time so that they carry the most value. Many companies do not have this. Without back-up compounds, the entire program could end if the lead compound ever stumbles. Partners understand the value of back up compounds and appreciate the safety net this provides.

It is important to understand that building deals without insight into organizations rarely works. The constant changes taking place in major drug developers often result in challenges arising during partnership discussions. For this reason, it is always necessary to find an appropriate “internal champion” within the organization to help move things through. This is especially important when the door is first being opened – potentially with new contacts in business development roles – but also as discussions continue. Without this internal champion to provide an understanding of the changes or possible delays, discussions may be abandoned too soon.

It is critical for small biotech companies to see these aspects of their programs from the major drug developers’ perspective before going to the table for a deal. In the end, this perspective can result in a better deal for all involved.

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