By Randall Osborne
SAN FRANCISCO — The sometimes uneasy relationship of biotech companies with their big pharmaceutical collaborators was one of several subjects explored during a roundtable discussion in which audience members and panelists traded ideas and, occasionally, sharp words.
Biotech's venture-capital supporters turned out to be the villains in the relationship, at least in some quarters.
George Milne, vice president of New York-based Pfizer Inc., and president of the company's central research division, said putting money into a company driven by venture interests may be a waste.
He called the tendency to rely on venture capitalists "a fundamental flaw in the industry that will hurt it in the end."
As an example, Milne recounted an apparent "win-win" situation with a collaborator.
"We spot a group of scientists we really fall in love with," he said. "Then, about six to nine months later, [we] go find out where they are, and they're on the road selling stock, not working on the program."
An audience member, however, said bigger up-front investment — "patient money" — must come from big pharma before anything will change.
"If you're willing to put in the patient money yourself, I'm sure you can find patient partners," he said, followed by loud applause.
The panel, entitled "Setting the Pharmaceutical Research Agenda," was part of an annual biotech forum known as Allicense, sponsored by Recombinant Capital, a San Francisco consulting company, and Wilson Sonsini Goodrich & Rosati, of Palo Alto, Calif., a law firm for growing life-sciences firms.
George Poste, chief science and technology officer of SmithKline Beecham plc, of London, took the side of the venture concerns. Poste called them "the biggest single wellspring of prosperity in the United States" and described their work as "a vital and buoyant venture that must go on."
More Explicit Collaboration Deals Urged
As a way of making more peace and more profit, Poste called for more explicit agreement between partners at the outset regarding how they will recognize success in their collaboration.
"That includes asking what are the consequences of failure and withdrawal, and asking that question up front," he said.
Approaching the pact in such a way, Poste said, generates "far less tension when you get into choppy waters, as you'll undoubtedly do."
Milestones must be clearly specified, he added.
"Not just milestones in terms of who goes to the bank, but milestones in terms of what is the performance we're all going to agree on," Poste said. "And if this [project] looks like it's going off the rails, these are the determinants by which we'll know it's going off the rails. No surprises."
Mark Edwards, managing director of Recombinant Capital, said from the audience that deals often are structured in such a way that biotech companies end up failing to prosper.
"If you look at the net present values of most biotech deals, they are not remarkable," Edwards said. "And yet, the reality is, with successful outcomes, the net present values are enormous. I think that could be interpreted as less than fair sharing."
Overall, interaction with the panel was friendly. Wendell Wierenga, senior vice president of worldwide preclinical research development and technologies for the Parke-Davis division of Morris Plains, N.J.-based Warner Lambert Co., said pharma needs biotech as much as biotech needs pharma.
While it's true that few deals reach their financial potential for biotech firms, nobody wants them to turn out poorly, Wierenga said.
He recalled Warner Lambert's chairman asking the total possible payout of the company's deals. The chairman was shocked by Wierenga's reply: $500 million.
"I said, 'Well, I think it will be fantastic. If we pay out $500 million, we'll have winners across the board. But I can assure you we won't, simply because they're not all going to succeed.'" *