Monday, September 19, 1994
The corporate partnering process is being whipsawed by conflicting cross-currents. Changes in managed care and the distribution end of the pharmaceuticals business are diverting the attention of big cap drug companies from partnering, while pressures on prices and profits are squeezing R&D budgets. At the same time, barren pipelines, and a premium on innovation and speed argue for the necessity of deals with agile, technology-rich biotechnology companies.
In this environment biotech companies are clamoring for attention, either because partnering is central to their business plans or because their cash balances have become desperate. In the latter case, the companies also must worry about being driven to the wall by negotiators exploiting their weakened condition.
With this in mind, BioCentury asked experienced negotiators on both sides of the partnering table how biotech companies can create bargaining leverage. These deal-makers suggested a number of common sense steps biotech companies can take to help optimize their deal terms.
In the end, the issues boil down to information and facilitation. On the information side, biotech companies should take time to know potential partners and their needs, and to provide information that will help the prospective partner know the biotech company and its competition. On the facilitation side, savvy biotech companies can smooth the decision-making process within the pharma company by finding internal advocates and keeping them primed on the excitement of the technology and/or products the smaller company is offering.
The importance of listening to and understanding the other side can't be over-emphasized. "You cannot over-communicate in this process, even on your own team," said Ronald Henriksen, president and CEO of Khepri Pharmaceuticals Inc. and formerly director of business development at Eli Lilly and Co.
Understanding the other side begins with the due diligence biotech companies should undertake before contacting any potential partners. For any given product or technology, the universe of pharma companies worth approaching will be defined by their pipelines, areas of expertise and interest, and similar factors. These are essential to knowing what's motivating the pharma company's interest in a deal.