This interview was conducted by BioWorld Amanda Lyle at BIO-Europe in Hamburg, Germany, in November 2007, with the following senior staff members of the Biotechnology Industry Organization:

Jim Greenwood; President and CEO
Alan Eisenberg; Executive Vice President, Emerging Companies & Business Development
Sara Jane Demy; Vice President, Business Development & Investor Relations
Kelly Parsons Lai; Director, International Health Policy

Partnering In The Biotech Industry

BioWorld: What recent changes have you observed in partnering component to the the biotech industry?

Jim Greenwood: I have my experts here to help me with this. But just to state the most obvious — which has been stated here a thousand times already. With big pharma's pipelines drying up, with major products going off patent soon, the big pharma companies are looking for products; they're looking to partner in a variety of ways — through licensing agreements, through investments, through acquisitions and mergers, to take advantage of the innovative engine of smaller biotechs.

Sara Jane Demy: And in some cases, when they do acquire, to preserve the innovation. So companies like [AstraZeneca], with its acquisition of MedImmune — they will for the most part continue to let MedImmune operate like MedImmune. And [Johnson & Johnson] has done that successfully. Other companies have tried to merge the personalities into their organizations, but not everybody is doing that, in order to maintain the innovation engine.

Greenwood: There is a phenomenon, which is that it is sometimes more difficult for large pharmaceutical companies to be innovative. Part of that is because they have such gargantuan costs in terms of sales force and infrastructure and so forth that they need blockbuster after blockbuster, and sometimes the best way to get a blockbuster is not to create a new way to fight a new disease, but to tweak an existing product. Whereas the smaller biotech companies can be much more risk-taking — go after new targets, new diseases, new ways and new compounds and so forth. And so the trick is: How do you bring that into the pharma stream without diminishing its innovative capacity?

Alan Eisenberg: If your question is about trends — where is this going? — the numbers [show that] this exercise of partnering — in-licensing and out-licensing — will continue to increase. It has gone up dramatically during the last decade looking at it in terms of numbers, be they numbers of meetings, one-on-one meetings that are held at events like this, or the number of companies participating. And as the industry grows, the opportunities certainly increase. In addition, you'll probably continue to see an increase internationally. At this event, at our BIO-Asia event — both of these events have shown real sustained growth over a multi-year period, so the trend certainly is there. It will continue for the reasons Sara just mentioned.

Demy: One concept to communicate here is that back in 2000 when we were doing these meetings, we had to beg pharmaceutical companies to meet with biotechs. They would send one representative — maybe we had 20 — and the biotech companies were desperate because of the capital situation to meet with any pharma they could to do a deal. Today, they send delegations to our meetings; it's not just one representative coming. I just ran into someone from [Bristol-Myers Squibb] and he's representing the neuroscience division; he has five or six other colleagues here representing other divisions. And J&J has a delegation of people here. You go to the annual meeting — companies will send 25, 30, 50 people to do business development. So in terms of the growth of this particular aspect of it, here we do speed dating as you call it. Our companies are starting to ask us for meetings that are much more in tune with what they need to do — sit down and talk about more confidential documentation, have meetings off-site that we will schedule for them that may be two hours so that they can sit down and complete a negotiation. The meetings are looked at kind of like inflection points on a calendar. People come here, they do their work, they go back, and they work on everything that they've assimilated here, and then come together again at another point in time. The next natural step is for them to actually conclude discussions at an event such as this. And it makes it much more efficient for their teams to get together if everybody is brought together in one place at one time. You can conclude multiple negotiations. That's where I think the future of this is going. And as Jim said, it's not going to get smaller; it's just going to get bigger.

BioWorld: Is there reason for biotech to be concerned with pharma companies trying to mimic biotech's R&D models, such as by starting divisions like Eli Lilly's Chorus?

Greenwood: I don't think it's threatening at all. There will be efficiencies that continue to develop in the system. It seems to me that there's a limit to how efficiently you can build companies that have global sales forces. And so, as you create more and more therapeutic products, it makes sense for large pharmaceutical companies that have that sales force to be able to literally visit a doctor with more than one product. And so, for more and more biotech companies, for smaller biotech companies, the exit strategy is to form that collaboration. And as university personnel see their brothers and sisters leaving the university, starting a little company, advancing it to a point where it gets bought or licensed or some other way invested in by a big pharmaceutical company, they see that success and they're more inclined to take their ideas out and start a company. So I see this huge appetite that pharma has as accelerating the movement of ideas from basic research into commercial products.

Eisenberg: Imitation is the sincerest form of flattery. To the extent that Lilly internally needs to set up a group like Chorus, which is dedicated to try to shave off months and time away from the development process, that's fantastic. This is fundamentally still a scientific endeavor — trying to commercialize is a fundamental science. To the extent that they're able to, and do what many biotechs are doing, that seems like that's only a productive thing moving forward and not a threatening thing from the vantage point of the industry.

Greenwood: Hopefully, it's a very experimental process. You have Procter & Gamble, for instance, which says, We don't want to invent anything internally; we only want to acquire the work of others. You have Merck, which is really more focused on doing everything in-house, and you have every hybrid you can think of in-between.

BioWorld: Since BIO is experienced in partnering conferences, what are the best ways for biotechs to be successful in partnering?

Demy: Constant exposure. For a small company, in order for them to become known players and to gain credibility to deal with another company, they have to consistently be out there in the public. They have to be meeting with people; they have to talk with people all the time. When you go into the partnering system for instance, and you're deluged with meeting requests, it's those companies that the larger companies have heard of and seen in the past that they will more likely accept meetings with. It's less likely and less attractive for them to accept meetings with companies that have not been on their radar screen at all. So it's a really key element for companies that are out there doing deals or trying to raise money to get their name known. And it's a slow process; they just have to keep at it rather consistently. Companies do choose to stay under the radar screen because they don't want that curiosity around what they're doing, and that should be a conscious choice of a company, not a default choice of a company. If it's by default then the management of the company is not really well-informed about what they need to do.

One of the things that we don't yet have a handle on is the value creation of these activities. We know that companies are doing deals. We don't yet have our arms around the dollar value of those deals. We hear anecdotally that it's quite significant, and certainly if you take a look at the history of these meetings, these busy professionals would not come here and spend their money and time here unless they were getting significant returns. Years ago we did a quick question in one of our surveys, and the results that we got were in the billions of dollars of anticipated revenue. That doesn't happen until the deals are actually done, but it gives you an idea of the value that this creates for the industry. And this type of deal-making is considered non-dilutive for companies, which is a very important component.

Published: January 11, 2008