The 10 Most Common Fallacies of Biopharma Partnering31 January, 2017
Today's biotech companies are increasingly recognizing the importance of aligning with strategic partners to advance their drug candidates to market. But how does the small biotech partner effectively? According to Linda Pullan, PhD, of Pullan Consulting, partnering successfully requires knowing how to play the partnering game, starting with deciding when you should partner, then understanding the partnering process both from your perspective and the partner’s, clearly defining what it is you want from a deal and having an understanding of alternatives, and then reaching out to a variety of partners in order to find one that best fits your needs.
Sounds easy, right? Well, with more than twenty years of drug industry experience, Linda has seen her fair share of mistakes made along the biopharma partnering path. As a result, she's compiled what she believes are the ten most common fallacies, or false assumptions, that are made during the partnering process. Here they are:
FALLACY #1: LATER IS ALWAYS BETTER
It would be logical to assume that the farther your drug is along the development path the more value you will get in a deal. But typically, the biggest deals with disclosed deal terms are those with Phase II data, not those deals signed with Phase III data. Data shows that both upfront payments and total deal values are bigger for Phase II deals than for Phase III deals.
FALLACY #2: YOU CAN'T PARTNER IN PRE-CLINICAL
Although deals done during Phase II typically see the biggest numbers, that doesn’t mean partnering earlier isn’t feasible. Many deals are done early. In fact, roughly 50-60 percent of deals done in recent years were done at pre-clinical or discovery stages.
FALLACY #3: NOVELTY IS KEY
Novelty is great, but if your drug is truly novel, communicating your story becomes more challenging. Partners need to understand a lot of the biology before they invest in the development of your drug. If your drug is novel, that means creating that narrative from scratch rather than referring to existing literature or competitor’s data. Novelty can be an advantage, but realize it comes with greater challenges in providing all the needed information in a clear narrative.
FALLACY #4: GOOD SCIENCE SPEAKS FOR ITSELF
Yes, strong science can speak for itself, but often being able to appreciate the implications of that science is difficult. As a young company, you need to clearly tell your story in a way that is compelling and resonates with potential partners. This story must be powerfully conveyed from the very first point of contact.
FALLACY #5: NO IS ALWAYS BAD
It hurts to be rejected. You’ve worked hard on your asset and it’s disappointing to be told that someone isn’t interested in it. But the truth is, you need to evaluate the fit of a partner just as a partner needs to evaluate the fit of your opportunity. A small company should not spend its time pursuing partners who won’t do a deal, just as a big company shouldn’t spend time pursuing things that don’t fit their strategy.
FALLACY #6: GET TO TALKING DOLLARS FAST
Negotiations begin the moment you start talking, and moving quickly is almost always advantageous. However, you don’t want to start talking dollars before you know the scope of what is included and how the partnership will be structured. Typically, financials come after diligence is completed. Diligence is a big resource commitment and is the process that leads to a partner’s understanding of the value proposition. If terms are exchanged before diligence, the due diligence process will inevitably reveal issues, which can result in a reduction of terms. Generally, it is best to let the due diligence process play out before talking financials.
FALLACY #7: ASK FOR EVERYTHING
Sometimes small companies, knowing there will be compromises, will start by asking for the moon. This can be a good way to lose credibility and may make the other side walk away before they’ve even had the opportunity to understand your asset. Be sensible. Yes, ask for more than you expect to get, but don’t go crazy.
FALLACY #8: IF WE LOWER THE PRICE WE CAN GET A DEAL
Big companies are very willing to pay top dollar for what they perceive as a top opportunity. In contrast, a low price generally does not increase the probability of a deal. There is some point where no matter how cheap an opportunity becomes, it’s still not perceived as attractive due to too much uncertainty or risk. The industry is remarkably price insensitive for opportunities it wants and doesn’t see a lower price as driving deals.
FALLACY #9: WE ALREADY KNOW THE BEST PARTNER
Having a pre-conceived notion of the perfect partner for your opportunity can be a mistake. The public persona a company projects does not always reflect the current thinking inside the company. Often a single employee can influence a decision. Maybe the company has a new VP with a new vision or a past bad experience in your area. Sometimes a company’s past failure can look like an opportunity for your asset as their solution, when in actuality that experience has made them reluctant to pursue that area at all.
FALLACY #10: IF WE COULD JUST TALK TO THE CEO
Talking to the CEO might be effective if you have a relationship with that person. Otherwise, you risk being perceived as a nuisance and getting funneled off to the Business Development person who would have handled it in the first place. If you have a real connection, by all means take advantage of it. But don’t pester people you don’t know and remember that there is a process.
To learn more about successful biopharma partnering download ShareVault's free white paper by Linda Pullan, PhD, "How to Win at the Partnering Game."