SAN FRANCISCO - Saying goodbye to biotechnology's booming "days of wine and roses," as well as the tricky "days of smoke and mirrors" that followed, industry leaders had better adopt a more realistic view of the present "days of our lives," when resources are tight and demands from partners are high.
That was the word from George Scangos, CEO of Exelixis Inc., speaking at the Allicense 2003 conference here, sponsored by the consulting firm Recombinant Capital, of Walnut Creek, Calif.
Scangos, stepping up to the lectern about six months after Exelixis signed a deal with London-based GlaxoSmithKline plc (and with a pact previously under way with Bristol-Myers Squibb Co., of New York), addressed the ballroom at the Westin St. Francis Hotel on the subject of "Discovery Collaborations: Where Do We Go From Here?"
But his advice did not include a call for spending reductions.
"You can't save your way to greatness," he said.
Biotechnology firms hoping to ride out the current hard times that way are headed for worse trouble, Scangos said. By reducing spending, they slow progress and investors lose interest, so cash gets even harder to come by.
"You have to hope this kind of financing environment ends before you go through too many rounds of that kind of cycle," Scangos said.
Smarter, instead, to shoot for intelligently structured deals - taking products into Phase II and then looking for partners. Scangos noted the opening remarks by Mark Edwards, Recombinant Capital's managing director, which pointed to a strong trend toward later-stage deals.
Trying too early to take a product through Phase III is "like being on your own 10-yard line and trying to throw touchdown passes," Scangos said.
He also cautioned against greed in dealing without would-be collaborators. "Everybody tends to overvalue what they have," he said. "You have to be honest with yourself. It's easy to start to believe your own hype."
Heads nodded when Scangos remarked that "every biotech company, when you get up at some investment conference sponsored by one of the banks - I'm sure you've all been there - and you get your 20-minute blurb, thinks or at least says they have the answer to some major problem. That's obviously true only a subset of the time."
Scangos also proved candid about the more recent of his South San Francisco-based firm's deals with the two pharmaceutical giants. The agreement with GlaxoSmithKline, entered in the fall, carries guaranteed funding of $134 million and a loan facility of $85 million, plus milestones and royalties. (See BioWorld Today, Oct. 30, 2002.)
The six-year deal involves areas of cancer research not included in the $200 million Bristol-Myers partnership entered in 2001, and includes the areas of inflammation and vascular biology as well. (See BioWorld Today, July 19, 2001.)
"We don't have any compounds as part of that relationship that are yet in the clinic," Scangos said. "Realistically, we will not deliver a very large number of successful Phase IIa compounds over that time frame. There is a target number, but I think [GlaxoSmithKline] would prefer that we not divulge that number."
Scangos also offered encouragement of a sort, regarding the harsh financial climate - which he said is hardly unusual.
"Most of the time the financing environment is not very attractive," he said. "One analysis said the window is open only 5 percent of the time. I don't know if 5 percent is true or not, but certainly it's a small percentage of the time. The danger is thinking the environment here today is going to persist into the future."
Conference attendees also heard from the pharmaceutical side, when Robert Armstrong, vice president of discovery chemistry research and technology for Indianapolis-based Eli Lilly and Co., spoke on the subject of leveraging alliances.
"One of the things that I worry about the most is not so much the deals we're making," he said. "Typically those are so straightforward in terms of the value added that everybody sees that very clearly."
It's the deals Lilly is not making that worry him, Armstrong said, and how to select among the possibilities - as well as how to get the most out of agreements already in place.
"Productivity is what's been driving a lot of these discussions," Armstrong said, projecting a slide with one line to indicate the rise in research and development costs, and another line below it to indicate the number of new chemical entities produced.
"The bottom line is the disconnect" between the two, he said.
Allicense 2003, with about 315 registrants, continues through today.