VANCOUVER, British Columbia - The fundamentals of deal-making got marquee billing at last week's BioPartnering North America conference, which for two days provided a forum to illustrate essentials associated with the process.
More than 700 attendees represented biotech companies both large and small, as well as pharmaceutical firms, venture capital businesses and institutional and educational research labs, many of whom filled their days in brief meetings with one another trying to foster new relationships or provide updates on current partnerships.
Young companies, or companies with young products, might have walked away from the meeting with an eye toward extracting value through potential partnerships earlier than originally planned.
"One is always looking for a crystal ball to see what the next trend is, or if there's a change in a trend, for the life sciences community," said Dinesh Patel, president and chief operating officer of Miikana Therapeutics Inc. "Looking over the last few years, we went from one extreme to another. Not only did people not want to hear anything about targets or technology, they did not want to hear about anything sooner than Phase II. But over the past year or year and a half, the big question has been how long will this appetite for Phase II products continue?"
The conference's opening session might have helped to answer Patel's question. One of five founders of oncology-focused Miikana, he was pleased with recent deal data presented by James Watson, director of strategic partnering services at Burrill & Co. Watson's charts-and-graphs review of the industry pointed to a shift in partnering practices from late- to earlier-stage product opportunities.
Last year, there were 28 publicly reported deals related to preclinical product candidates, more than twice as many as those associated with Phase I, II and III products on their own. Also of note was the $30 million average potential value of the preclinical agreements.
Patel scribbled the figures into his notebook, tucking them away for discussion at a future board meeting. He noted the $30 million average value placed on partnerships built around preclinical candidates - which also produced the highest number of agreements - then compared it to the relatively similar average value for Phase I and II deals: $57 million for the former, $66 million for the latter.
"I think I finally have a handle on how these trends work," Patel told BioWorld Financial Watch. "And though this is just my interpretation and I could be off, I think that big pharma is the ultimate customer in this business. Their demands are driven by their needs, and it seems that in the last six months or past year, they have realized that it would be practical to move upstream and try to get some good value from early stage molecules."
Some conference attendees attributed the possible trend toward earlier-stage deal-making to a growing absence of available Phase II or later-stage products. And Watson, the investor representative from Burrill, told his audience that later-stage deals that are getting done have become more complex.
"Over the last couple of years, if you look at some of the high-profile deals, the price of Phase II deals has gotten extremely high," he told BioWorld Financial Watch. "I think there are only a certain number of companies - probably the top-five pharma - that want to or can compete at those kinds of price tags."
Patel's BioPartnering experience might lend validity to the partnering-at-earlier-stage theory. He spent both days of the conference shuttling from one face-to-face meeting to another, speaking with representatives from companies interested in Miikana's therapeutic programs. Large and medium-sized pharmaceutical firms, as well as big biotech companies, sought him out.
"When will we get to the stage when more than 50 percent of Merck's research and development come from the outside? I don't know," said Mervyn Turner, senior vice president of worldwide licensing and external research at Merck & Co. Inc. Speaking as part of a conference panel, he acknowledged occasional difficulty in convincing members of his company's scientific team to look beyond their internal research efforts to outside product opportunities. But he added that quality matters most in further developing the pharmaceutical firm's pipeline, and in-licensing represents a viable strategy to that end.
Sitting on the same panel, Margaret Flanagan took a similar stance in describing her position at AstraZeneca plc. The company's global alliance director for enabling science, technology and information, she said AstraZeneca is curious about outside product opportunities and treats its partnered programs with no more or less attention than internally generated programs.
Patel noted that by in-licensing product candidates at stages earlier than Phase II, large partners can apply their own direction and clinical know-how to further development. Watson echoed such sentiments, adding that earlier access to products allows a partner better steering and influence control. That leaves preclinical activities in the hands of smaller companies perhaps better suited to such tasks, with clinical progress up to a deeper-pocketed partner.
Focused on two primary programs, Miikana has inhibitors of histone deacetylase (HDAC) and proteasome inhibitors of interest to potential collaborators. Both programs are exploring validated mechanisms, as witnessed by the marketed proteasome inhibitor Velcade (bortezomib, Millennium Pharmaceuticals Inc.) and several HDAC inhibitors in Phase I and II studies being developed by others. Patel stressed that Miikana plans to prove in vivo efficacy before entering any serious partnering discussions and down the road likely would sign two to three agreements.
"This was a little bit assuring, and an ego-boosting surprise in a way, to have companies approach us and say, When you are ready, we want to talk to you and see what you have in your internal programs,'" he said. "They did not ask about the status of our Phase II molecules, because we don't have one yet. That was a pleasant surprise."
He expects that such a shift toward upstream partnering would take about a year to change the mindset of venture capitalists, which he said continue to express a need for clinical candidates. Those investors might have renewed interest in young companies with an industry-wide higher value on early stage products, a predicted ripple effect that bodes well for companies boasting a strong preclinical pipeline.
Miikana, which raised $4.25 million in its first private financing round, is not idly awaiting the future - the company plans to move a product candidate into the clinic on a yearly basis, beginning next year. Miikana also is pursuing an in-licensing strategy of its own. And Patel noted that initial clinical studies of internally generated products could come under the watch of a partner.
"Miikana is open to doing deals at any stage where there is a good valuation to be had," he said. "We are not hung up on any idea that we will only license after we have done a Phase I study. Through our own independent efforts, or by joining hands with big pharma, we want to be a company where one molecule is introduced into the clinic per year."
The company already is in one partnership, a co-development deal with NovImmune SA centered on antibody drug development. The arrangement leverages the partners' respective technologies through a 50/50 sharing of costs and potential profits.
Such overseas outreach is inherent in Miikana's business - the 11-person company maintains operations in Toronto, the base of chief scientific officer Tak Mak, and out-sources chemistry work in India.
"Globalization is really occurring very seriously in the pharma industry," said Patel, who also referenced a conference panel that addressed partnering in Asia. "You want to have a critical mass [in North America], but there is a huge economic advantage to out-sourcing."
He predicted that as markets emerge in India and China, which are characterized by loose patent protection and as a result used instead mostly for manufacturing and contract services, multinational pharmaceutical firms would create bases there, as they have in Japan and Singapore.