Biotech partnering in the credit crunch
pharmafile | May 1, 2009 | Feature | Research and Development |Â Â biotech, partnering, pharmaÂ
Action Pharma’s Torben Jung Laursen explores the new challenges facing pharma-biotech partnering as a result of the economic downturn.
In today’s tumultuous economic and financial environment, partnering is as important as ever for biotech companies wanting to move their programmes forward.
The economic downturn has closed or made exceedingly expensive a number of other options, such as new financing rounds and IPO’s, which have been popular ways to secure funding for the programmes.
At the same time, biotech’s traditional partners, the larger pharma companies, are undergoing another round of consolidation forced by forces such as diminishing returns on the large field forces employed, price pressure on therapies, and poor late stage pipelines.
The first two of these forces will probably only worsen in the years ahead. Governments and other paymasters will implement more cost containment measures, and the largest market of all, the US, is likely to see some radical changes from the new administration.
Biotech is the traditional partner of pharma companies when it comes to offsetting the poor pipelines.
However, this time the challenge will be that pharma companies demand late stage projects to plug the hole in the pipelines. But biotech companies will want to partner at least a number of earlier stage projects to secure funding and to reassure the investors that the technology works and that their money will come back!
So for both parties it is a tougher environment than just a few months back. However, both depend on each other so a solution can be found.
The biotech company first of all must be clear about which projects it wants to partner and have sufficient funding secured for some time.
Negotiating a deal while backed against the wall as a result of being out of cash is not a good position for a balanced deal.
Secondly, the biotech company must find out what kind of deal it wants. Is it a straight outlicensing deal? Is it a deal with elements of co-development? Asset sale? The answer to these questions will decide the approach, and which partners fit and which do not.
The pharma company also must understand that the perfect late phase III projects it ideally wants may not be around, so it must settle for some earlier projects thus sharing the risk that not all will make it to the market.
For both parties some old wisdom still applies: Good partnering requires a deal which is good for both parties. It also demands delivering on the aspects agreed after the deal is signed. The real co-operation and partnering starts when the ink is dry!
Torben Jung Laursen is executive vice president of business development at Action Pharma in Denmark.
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