With hundreds of biotechnology companies hungry forresources, and access to cash from investors limited, strategiccorporate alliances often appear attractive during the longyears of product development.
These alliances, however, could be more carefully considered,cautions Robert Esposito, national director of the health and lifesciences practice of KPMG Peat Marwick and author of analliance survey conducted for the newly merged BiotechnologyIndustry Organization.
Fewer than 20 percent of the approximately 170 leadingbiotechnology companies responding to the surveysystematically evaluate opportunities before enteringpartnerships.
"Smaller companies should be more specific about identifyingcompatibilities and objectives," Esposito said. "Ourconversations with several key pharmaceutical companiesindicate that they have a much clearer alliance strategy thanthe biotechnology companies and take a more proactiveapproach to targeting a potential partner, defining objectivesand milestones prior to initiating negotiations."
The smaller companies often rely on networking to findpartners, he said, but could also assess who else has workedwith a prospective partner, what the corporation's strengthsand weaknesses are, and which manager there can championthe partnership as it evolves.
Since people tend to move around more in large companies, heexplained, ongoing partnerships are aided by a spokesman inthe larger business who has authority and power andunderstands the goals of both parties.
The survey found that fewer than 50 percent of respondentswere satisfied with the partner's overall performance, with thepace milestones were passed, and with the ability to makecollaborative decisions.
Those concerns might be minimized by building communicationinvolving executives, manufacturing staff and financespecialists as well as scientists, Esposito said.
Operating from a position of strength also appears to help, sincecompanies found more success when they did not enter analliance to supplement a perceived technological or businessweakness. In line with that strong position, a clear sense ofneeds and goals also aided the smaller companies, and bothparties seem to benefit from well-defined roles andresponsibilities, Esposito said.
Corporate partnerships can have advantages beyond immediatecash infusion and well-financed global marketing assistance.
In the eyes of other prospective investors, the presence of apartnership represents extra credibility, Esposito said, becausethe corporate partner has validated the emerging company'stechnology, management and scientific insight. It also lends asense of security since the larger partner may be able to carrya product along during lean spells.
And with a chilly climate for public offerings on Wall Street,partnerships appear even more attractive. Last yearWindhover Information Inc. tracked 215 alliances betweenbiotechnology and pharmaceutical companies.
"There's just not enough money on the Street to fund all the1,200 biotechnology companies that are out there," Espositotold BioWorld. As companies experience trade-offs inherent inthese deals, he added, "I think they've all become a lotsmarter," retaining some control over their core technology andmarkets.
-- Nancy Garcia Associate Editor
(c) 1997 American Health Consultants. All rights reserved.