SAN FRANCISCO - Jack Anthony, vice president of business and commercial development for Tularik Inc., was plainspoken last week during a panel discussion on the reasons and strategies for deal making with pharmaceutical companies at BIO VentureForum West 2003.
"I don't think this is rocket science," Anthony said.
Maybe not. But the justifications have changed over time, and the best approach for one firm is not always best for the next. A handful of panel members from the financial and drug development fields debated the best ways for biotechnology firms to get partnering agreements - and get the most out of them.
Anthony himself acknowledged the new landscape.
"When I started doing business development in 1989, you did it because you needed cash, and the magic word validation,'" he said. "If somebody paid a bunch of cash for your technology or the product you were developing, you were validated, and that was your ticket to move on to the next plateau in your corporate financing life. Today we've gotten a little more sophisticated."
He said the need for cash is "certainly high on the list [of motivators for deals], or even survival, but I think people also look more strategically now," figuring out how much company infrastructure they might want to build as opposed to how to "feed off" a partner.
In May, Tularik entered an oncology collaboration with Amgen Inc., in a deal that included the latter buying 21.3 percent of Tularik - $35 million worth of newly issued stock at $10 per share - and a total of $125 million in committed funding.
Regarding how to shop for a deal, Anthony said he recommends "kissing a lot of frogs. Sometimes you just don't know where the strategic imperatives [of the would-be partner] are. Clearly, if you're doing a cancer thing, to pass by [Bristol-Myers Squibb Co.] is not the wisest thing to do, [but] I can tell you there are companies out there with deeply buried cards in their hands that have strategic imperatives they're not talking about. It behooves you to go around and expose your assets and see if you get a bite. Never assume that somebody's not in the game."
Charles Hoyng, partner in the corporate development department of the law firm Latham & Watkins LLP, disagreed, saying "the opening up of the treasure chest is fraught with considerable peril." It's not possible, he said, to "police each and every comment" and determine how the listener might use what's delivered as teaser material. Be careful about what it is that you expose," Hoyng urged.
But Anthony said trading remarks at lunch with an official from a would-be partner company is harmless and useful in testing whether there might be a "little buzz" of interest.
"Your objective is to advance the ball another 10 yards down a 100-yard field, and you're going to go out of bounds a lot," he conceded. "That's why people go to meetings like this," Anthony added, referring to the two-day event sponsored by the Biotechnology Industry Organization.
The game is somewhat different when going after venture funding, said Dennis Henner, partner with MPM Capital. More than anything, Henner said, he's looking for a "realistic" business plan.
"Our biggest concern is that a company not run out of cash before it reaches a new valuation point or the next validation point," he said. Such a condition can bring about "the ugly financings that you see - the huge down rounds because you really haven't accomplished anything with the last bit of cash and you're at the mercy of the less friendly venture capital groups."
When to partner? Mark Wiggins, vice president of business development and marketing for high-profile IDEC Pharmaceuticals Corp., said the "sweet spot" stage of development lately is Phase I or early Phase II, depending on the terms of the proposed deal.
"One of the advantages there is it allows our scientists and our clinical developers to buy into the program," Wiggins said. "They get to put their fingerprints on the strategy for the clinical development, and that bodes well for the partnership."
Another tip: Mark Edwards, managing director of the consulting firm Recombinant Capital, said to try for "bottom-up access" with the would-be partner rather than telephone, say, the CEO first. And don't take "no" for an answer from the initial contact.
"As you know, many of them can say no and the no can be very firm if [the company] keeps track of such things, or it can be squishy," he said, adding that it's a good idea to have about "four mutually exclusive independent negotiations that you're trying to keep going, because you don't know [when] two or three of them are going to fall out of bed."
John Walker, chairman and CEO of Bayhill Therapeutics Inc., which is focused on autoimmune diseases and has a product for multiple sclerosis scheduled for Phase I/II studies in the first quarter of next year, said such options depend on how far the partner-seeking company's science has advanced.
"With enough efficacy I'll give up very little - with speculative science, I'm going to give up a lot," he said. "If you've done enough deals I think you realize the fact that it is a buyer's market, to some extent," although "every so often you get into a situation where you can get a competitive process going."
The VentureForum West conference ended Thursday.