Behind common wisdom usually lies a more complicated reality. The common wisdom is that biotech companies need pharmaceutical partners because they have marketing experience and established sales forces. The reality turns out to be that the big companies may have absolutely no idea of what they're doing, no clue about how to market a novel drug (especially if it's entering or creating a new market), and may not have done any preparation for launch.

Biotech companies get into partnerships for a number of reasons: for money and validation, and because they need marketing capability. Not infrequently, it seems that the first two incentives dominate, and that sales and marketing come as an afterthought - after all, the money and technology validation are needed immediately, while the marketing capability might not come into play for a half decade or more.

The end game

As in chess, however, the end game is important - and far more difficult than the opening moves. Companies can manage the Street's perceptions while they're in development, but in the end, it's sales and EPS that will be the judge of companies. If the partners don't know how to position and sell their products, all the investor relations in the world won't help.

The industry is now sufficiently mature to have come through an entire partnering cycle. In addition, as equity money became tight in the mid-90s, a growing number of biotech companies explicitly positioned (or repositioned) themselves to do only drug discovery and development. These companies are depending on partnerships for their earnings, making the ability to find and manage partnerships ever more important.

But it's been hard not to notice that more than a few companies have had trouble with their corporate marketing partners - a reminder that it's easier to get married than it is to live with a relationship. This doesn't come out in press releases unless the partnership is actually dissolved. More often, it's heard in a throw-away sentence by a CEO, or in the rumor mill. Less frequently, the mere mention of a partner's name will cause dead silence on the other end of the phone, followed by smoke and fire through the receiver.

We keep muttering that marketing is the next big hurdle for biotech companies. A modest reminder of the kinds of issues that can arise was provided recently when Eli Lilly returned Japanese marketing rights for ReoPro to Centocor Inc. While Lilly likes the drug, it turns out that Lilly Japan isn't focused on cardiovascular disease, and thus really isn't the right partner for development in that country. Also recently, Zeneca returned most international marketing rights for Amphotec liposomal amphotericin B to Sequus Pharmaceuticals.

So having heard the problems that come up in partnerships once too often, BioCentury thought it might be time to review a few cases, together with some advice from the companies that have been through the mill on how to structure partnerships from the beginning to try to avoid the pitfalls.

Because most of the companies interviewed for this story have ongoing partnerships, it was necessary to keep them anonymous.