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To build a great biopharma deal, don't worry, be happy

Nov 09, 2017 Tags: Biotech Pharma Deals

Big pharma wants you to be happy. After grilling you with 200 questions about your biotech project, sending an army of experts to trample through your data, dragging your team through a grinding due diligence and then running up and down your supply chain, at the end of the day this outsized partner wants to hear you are pleased with the engagement it is proposing.

“It is important to avoid disappointments,” said Berthold Hinzen, who leads Business Development and Licensing for General Medicine at Bayer Pharma. “A good deal is one that fulfills both parties’ expectations. A deal that disappoints one party will fail in the end.”

According to Nicholas Franco, the Executive VP and Chief Business Officer with Actelion, which was acquired in July, 2017 by Johnson & Johnson’s subsidiary Janssen Holding, “If both parties can say they are happy with the outcome, that’s a good deal. You have to live with the other party for quite a long time. This is not buying a carpet at a bazaar where you may never see the other side again. If someone loses, the deal is not sustainable.”

Johnston Erwin, the VP for Corporate Business Development at Eli Lilly and Company, said, “The truly greatest transactions are those where the people going into it achieve what they originally wanted to achieve. It’s okay to say you just want to make a bunch of money. What you don’t want to do is create some kind of illusion about what you want in the transaction, only to say later that you did not get what you wanted.”

BIO-Europe‘s venerable plenary session, “A Day in the Life of Experienced Dealmakers,” once again drew a standing-room-only crowd of business development executives in Berlin to hear veteran negotiators talk about recent transactions and lessons learned from transformational deals.

Significant discussions centered on the dilemma for platform companies on how to juggle the need to validate the technology with a single product without diminishing the value in the full potential of the platform; the value of participating in innovations centers and incubators; the advantages of accepting option deals; and unexpected hidden assets that can create value.

For example, take this factoid to know-and-tell from serial CEO and former head of Pfizer’s USD 4 billion Consumer Healthcare business, Amy Schulman from Polaris Partners, who said the most important characteristic shared by the most successful biotech companies in pharma deals is whether the scientific founder is still attached to the company.

Amy Shulman

“In cases where this scientific founder has stayed with the company, the ability to have a successful exit, however you define that, is greater by the order of magnitude,” she said. “This person turns out to be ultimately critical to success with those ineffable traits of integrity, passion and drive. And it is not always easy because wonderful early stage entrepreneurs are often lop-sided with a myopic, single-minded focus that doesn’t always make it easy to build a team around that person.”

Hinzen with Bayer said this is precisely the part of dealmaking that he likes.

“Coming together with these sometimes crazy entrepreneurs who really do have a great idea creates a fantastic atmosphere where you see things in motion, things that have never been seen before, that are absolutely novel. Bringing these teams together and experiencing the creation of a project is really cool,” he said.

According to Erwin, entrepreneurs should avoid surprises and never think that a pharma company will never ask about some part of the project.

“I promise you we will ask about it, and about 30 other questions as well,” he said. “It is not unusual for us to have 150 to 180 questions in the diligence cycle. Before millions of dollars are put into a program we are going to look into everything with people who have deep, deep expertise. We will look into the vendors who you worked with to make what you have, not just the data you want to share, but also to the people who made that data and the way they produced it.”

Franco with Actelion cautions entrepreneurs to always have alternatives to partnering with pharma.

“Beyond being prepared to answer all the questions, you should be prepared to go it alone, to raise money, to find a different partner,” he said.