SAN FRANCISCO - Invoking the comic wisdom of Woody Allen, financing expert George Milstein took apart the "art of the deal" for a full ballroom of the Palace Hotel during the BIO VentureForum West 2003 conference.

"The lion and the lamb shall lie down together, but the lamb probably won't get too much sleep," said Milstein, senior managing director of Pacific Growth Equities in San Francisco, quoting Allen.

"That's something you have to remember when you're dealing with a very large company," he said. "You have to make sure that you're watching every piece of this deal." His remarks came as he moderated a panel on partnering at the conference, sponsored by the Biotechnology Industry Organization, of Washington.

Deciding how much to give away for how much return, now and later, is a key element, Milstein said, as is the "early vs. late debate" over whether to wait until a drug is farther along to partner or try getting a big pharmaceutical concern aboard as early as possible.

"Sometimes you're fighting a very difficult internal battle," with company officials' opinions differing sharply, Milstein acknowledged, and many heads in the crowd nodded.

Nalini Murdter, senior director of strategic programs with Palo Alto, Calif.-based Agilent Technologies Inc., said the most-coveted pairing - one that proves to the market that a product or technology is worthwhile - amounts to an adoption.

"If [the property on which the deal focuses] is not really brought in, and it's a look-see' type of relationship, you have to be very careful," she said.

Joyce Lonergan, vice president of corporate development for Chiron Corp., of Emeryville, Calif., said her company has established a $60 million venture fund as a different approach to deal making.

"We want to get to know companies through our venture partners and then track their progress," she said. "To us, the validation is getting to see consistent achievement of reasonable milestones. That helps us get a window without necessarily worrying about whether they have a partner because they have [us] as a partner, the venture investor."

She questioned the "lion" analogy and compared the relationship between would-be partners to the stages of dating and then marriage.

Also taking part in the panel was Daniel Swisher, chief operating officer and chief financial officer of Sunesis Pharmaceuticals Inc., which this week made news through a licensing deal with Dainippon Pharmaceutical Co. Ltd., of Osaka, Japan. (See BioWorld Today, Oct. 16, 2003.)

Sunesis acquired exclusive worldwide rights to a preclinical cancer compound discovered by Dainippon and called SPC-595, which acts as a cell-cycle modulator in the naphthyridine class, no member of which has previously been used in oncology.

Swisher noted Sunesis, whose Tethering technology identifies drug fragments that bind to specific target-surface sites, has lion/lamb (or marital) relationships with Johnson & Johnson, of New Brunswick, N.J.; Biogen Inc., of Cambridge, Mass.; and most recently Merck & Co. Inc., of Whitehouse Station, N.J.

"Once you got Merck on board, that's a sort of seal of approval," he said, adding that "with every deal we do, the bar does get raised. We've done drug discovery collaborations around specific targets, and we work quite hard to keep our partnerships very contained so it doesn't taint our freedom to operate for our own programs or future partnering programs."

The company will "evolve to doing compound deals, hopefully the Phase II, Phase III type deals where you can get large dollars, commercial resources and all the rest."

In deciding whether to partner, do a licensing deal or enter an equity agreement, details that may not seem vital on the front end can have surprising, painful consequences down the road if overlooked, said Dante Giannini, tax partner in the life-sciences group of New York-based PricewaterhouseCoopers.

"The partnership or joint-venture arrangement is particularly troublesome," he said. "For example, you can't give equity compensation as easily in a partnership as you do in a corporation. So, if you're going to put your key scientists out in this partnership, are they going to become employees of the partnership or are they going to stay employees of the company? How are you going to compensate?"

Profit interests, which can be used as substitutes for stock options in such setups, "don't work nearly as well," he said.

The BIO conference ended Thursday.