With big pharma facing demand to fill dwindling pipelines, the bargaining advantage is shifting to biotech when it comes to collaborations, and like many biotech firms, Evotec AG is taking advantage.

Since it emerged on the scene in the 1990s, Evotec's success has relied on its collaborations, which at first came in the form of fee-for-service transactions based on its integrated drug discovery technology and, more recently, has entered larger deals with more potential revenue downstream.

"The marketplace is getting more sophisticated in terms of the kind of deals they want," said Mark Ashton, executive vice president of business development, while attending the BioPartnering Europe conference in London earlier this month, adding that the "power of negotiation is turning to biotech.

"It's getting to the point where, if a company has a good product, they can pretty much name their own price," he said.

Evotec, which is building a pipeline of drug candidates for central nervous system disorders, is hoping to strike that sort of deal with its lead candidate, EVT 201, a positive allosteric modulator of the GABA A receptor complex licensed from F. Hoffmann-La Roche Ltd. That product is in a Phase II study in primary insomnia patients, evaluating the primary endpoints of wake after sleep onset and total sleep time, as measured by polysomnography. Pending positive results, the company will seek a late-stage development and commercialization partner, Ashton said.

Evotec's goal ideally is to partner products at the clinical stage, he said, though the company is not averse to preclinical deals, which are becoming increasingly popular in "response to the competition and demand by big biotech and big pharma to enrich their pipelines."

And the aim, of course, will be to enter agreements that provide as much long-term value as possible, something that wasn't possible for the Hamburg, Germany-based firm in its earlier days.

Since its founding in 1993, the company spent years building a complex technology platform to offer biotech and pharma partners drug discovery and development services, such as early stage assay development, compound screening, drug design, medicinal chemistry and drug formulation. During those years, it survived on service-for-fee transactions, which succeeded in bringing in revenues for growth, validating the company's technologies and transforming Evotec into a global services leader.

Those relationships involved several big pharma names - Basel, Switzerland-based firms Novartis AG and Roche - as well as other biotech firms, such as Curis Inc.

"We've worked with Curis since 1999, and it was fee for service at first," meaning Evotec pulled in "no more than $50 million," Ashton told BioWorld Today. "So when Curis licensed that molecule to Genentech [Inc.]" in a potential $240 million deal, "we didn't see any of that."

Cambridge, Mass.-based Curis signed the agreement with South San Francisco-based Genentech in 2003, giving it rights to Curis' Hedgehog pathway program, which includes a systemic Hedgehog antagonist getting ready to start Phase I testing in solid tumors. Development on a topical Hedgehog antagonist was halted in January after the product failed to demonstrate sufficient efficacy in a Phase I study in basal-cell carcinoma patients. (See BioWorld Today, June 12, 2003, and Jan. 25, 2006.)

These days Evotec is "focusing more on the upside," Ashton said. "We're looking at results-based deals, and we're taking on a proportion of the risk."

In June, the firm signed a larger deal with Roche, that one aimed at jointly discovering and developing compounds for CNS diseases and other indications. Both companies will progress projects up to clinical development, at which point Roche would have exclusive rights to the drug candidates, in exchange for up to $126.6 million in milestones to Evotec, as well as royalties. In the case that Roche declines to exercise its rights, Evotec would have the option to take the compounds, with adjusted payments going to Roche.

Evotec also has an ongoing collaboration with Ingelheim, Germany-based Boehringer Ingelheim GmbH, which was expanded in January to include therapeutics to target ion channels and enzymes, in addition to the G-protein coupled receptors listed in the original 2004 agreement. In that deal, the partners will work jointly to identify and develop preclinical candidates, with Boehringer retaining ownership and development responsibility and Evotec receiving research payments and potential milestones.

Beyond EVT 201, the company's pipeline includes EVT 101, a selective NR2B antagonist in development for Alzheimer's disease. That product has completed Phase I. Evotec is in preclinical studies with EVT 102, a water-soluble NR2B antagonist, and aims for evaluating its use in certain neurological conditions in an acute setting.

At the same time, the company of 600-plus employees will continue expanding its services division to new clients, hoping that revenue from that division will go a long way toward funding pipeline work.

"We want to keep our position in that services world," Ashton said, a fact reinforced by the a collaboration with Daiichi Pharmaceutical Co. Ltd. signed earlier this week.

Under the terms of the deal, Evotec will provide its range of medicinal chemistry services to help Daiichi, a wholly owned subsidiary of Tokyo-based Daiichi Sankyo Co. Ltd., identify entities for progression into clinical studies, and also will lend its assay development and compound profiling services to ascertain activity and selectivity.

Ashton said the Daiichi deal serves as "another confirmation of our expertise in both chemistry and biology for small-molecule drug discovery," and also bolsters Evotec's efforts in supporting Japanese companies.

Evotec previously signed a deal with Sankyo, the other subsidiary of Daiichi Sankyo Co. Ltd., to identify small molecules for pharmaceutical discovery programs, and entered a drug discovery collaboration with Osaka, Japan-based Takeda Pharmaceutical Co. Ltd. focusing on Alzheimer's disease.

With a "business model that has been evolving over the past 12 to 18 months," Ashton said, the aim is to "try to find a nice balance between fee-for-service and our long-term, results-driven collaborations."