By Jim Shrine

ATLANTIC CITY, N.J. ¿ Richard Sherman recalled the time a snag developed in a deal between a U.S. firm and an international company, when the contract calling for ¿free¿ clinical supplies actually translated to ¿freely available.¿ Serious unpleasantness ensued after the revelation that vials went for $12 apiece.

Such are the pitfalls that can develop in international collaborations, said Sherman, a managing officer at QED Technologies Inc., a life sciences consulting firm.

Sherman was moderating a session titled ¿Finding an International Pharmaceutical Partner,¿ at the Biotech 2001: Opportunities in the Nation¿s Pharmaceutical Center conference, which ended Tuesday at the Atlantic City Convention Center. About 700 people attended the event, sponsored by the Biotechnology Council of New Jersey and the Pennsylvania Biotechnology Association.

Areas that usually cause the most misunderstanding in partnerships are patent and legal issues, differences in accounting and medical practices, and subtleties of language, he said. Careful preparation can overcome most obstacles, Sherman added.

That preparation, said Tamar Howson, could include knowing that deals in Korea can be put together quickly while the same negotiations in Japan could drag on, as the potential partner digests the proposal.

¿Each country has a culture¿ that American companies need to be aware of before they begin the process, said Howson, a former senior vice president of worldwide business development at London-based SmithKline Beecham plc, recently merged with Glaxo Wellcome plc. ¿You have to do your homework.¿

One reason the Koreans move faster is that companies there use a lot of U.S.-educated lawyers, while a trend is emerging among the Japanese to use business development people from the West or educated there, she said. Another trend among Japanese pharmaceutical companies ¿ which remain keenly interested in late-stage products because of the complicated development process there ¿ is their interest of late in licensing platform technologies, Howson said.

¿Their willingness to get on the learning curve has changed in recent times,¿ she said. ¿It is very much how relevant it is to their research and development programs. If they see value, closure can come quickly.¿

Closure can come quickly, that is, after the decision has been made that the technology has value. That decision still can take a long time relative to partners from other countries.

As a personal tip, Howson said, she¿s found being a woman can offer an edge when negotiating with the Japanese and Koreans.

¿I think they are more gentle with me,¿ she said. ¿They¿re very supportive, in a way. They share aspects of the negotiations with me that they may not share with my male counterparts. I¿ve found it to be an advantage.¿

Cultural differences can get in the way of deals between U.S. and European companies, too, said Alain Munoz, who a year ago founded S.A.R.L., which connects biotech companies and venture capitalists. He sits on the boards of several European biotech companies.

¿You have to be sure you¿re understood¿ when negotiating trans-Atlantic deals, he said, which takes ¿reformulating and re-expressing¿ ideas until you get there. ¿You have to make sure everyone is on the same page,¿ that both parties are satisfied and that the deal can work for the long term.

Mid-size European pharmaceutical companies are good partnership targets, Munoz said, as long as the biotech company is not looking for too much on the front end. Those companies can be easy to work with and are eager to find new products.

¿One major factor in any big deal is the human factor,¿ Munoz said. Companies should not hesitate to change the lead negotiator if uneasiness develops.

¿Making an international deal is difficult, it¿s long, it¿s fascinating,¿ he said. ¿The key to making the right deal is [knowing] what is the common goal.¿

On the U.S. side, the strong cash positions of large biotechnology companies and the emergence of specialty pharmaceutical companies have expanded the universe of potential partners, said Gordon Ramseier, executive director of the consulting company Sage Group Inc., who moderated a session on biopartnering.

In general, Ramseier said, those companies have plenty of cash, viable marketing organizations, a hunger for additions to their pipelines and an appetite for acquisitions. They also are good companies to look at when the product does not carry blockbuster potential.

Priorities at pharmaceutical companies, Ramseier said, are discovery platforms in the areas of genomics and proteomics, late-stage products and targeted pipeline building for specific therapeutic categories.

¿We do a lot of work with small companies and my major complaint is that they do not invest in business development,¿ he said. ¿They wait for business development to come to them.¿

Peter Grebow, senior vice president of worldwide business development at Cephalon Inc., said ¿you only get one shot to sell your wares to a pharmaceutical company.¿

He stressed the importance of the person presenting the research to rehearse the pitch. Grebow, too, cited the importance of the business development people early in the partnering process, and said another key aspect is having a legal department capable of quick turnaround.

Material transfer agreements are a key issue, followed by due diligence. Then there¿s term sheets, draft agreements . . . ¿Every word is crucial,¿ Grebow said. Inevitably, there will be a person from the pharmaceutical side who comes in at the end of the review process, seeking last-minute changes, such as a reduction by 1 percentage point in the royalty rate.

Know where you will draw a line in the sand, Grebow advised. Then, allow for two or three times as long as the original assumption to get the deal done.

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