Biotech Deal Making – Five Fundamentals When Approaching Big Pharma
7 December 2016
This post is an amalgam of our observations after attending BioNetwork West, a Biopharma partnering conference hosted by World Wide Business Research at the Ritz-Carlton, Laguna Nigel, in Dana Point California, October 5-7, 2016. The BioNetwork conference is an excellent program where keynote addresses and panel discussions explore the world of Biopharma partnering. One-to-one partnering meetings are a central feature of this conference. Between these one-to-one meetings and the sessions themselves, we observed several common threads as they related to dealmaking “best practices.” We’d like to share these threads with our readers. In today’s post, we’ll look at things from the perspective of a biotech or pharma company looking to approach “Big Pharma” companies for a potential partnership.
1. Decide what it is that you’re selling.
Having a clear idea and message about why you are there and what you are talking about is always the best place to begin.
Do not approach a business development team with “We’re doing all this fantastic stuff – do you see anything that you like?” It’s simply not what they want to hear. You sound unprepared and it looks like your team has no focus – or, worse, lacks belief and is seeking validation instead of a partner.
If you are the seller, it’s your job to understand the buyer. Be precise. They look at hundreds of opportunities and are inundated with meeting requests for partnering opportunities.
The ideal intro pitch should be two or three sentences about your technology and why it’s relevant to the buyer.
What are the target, indication, stage and IP protection? And try to tailor your pitch for the buyer.
2. Plan your approach.
Unless you already have a personal relationship with their CEO, direct to the top always means that things will be looked at but can cause additional burden with the partnering group. Not an ideal start, which can quickly lead to resentment when they’ve been forced to put aside their current objectives.
Don’t do the blast approach. Big pharma may have scattered offices around the globe but they all talk, and hiding a three-month discussion that went nowhere is guaranteed to erode any chance you may have of success. Most use a centralized process supported by a database for any business development discussions.
Do your research and attend a conference where you can find a scientist who is likely to understand your technology and could ultimately become a supporter who makes introductions. They’ll likely get pulled into any due diligence anyway and can also help you understand where/if you might fit into the buyer’s strategy – never mind the value of their validation to the business development team, putting you ahead of the game.
Lastly, if you’re cold calling, make sure that you’re the one cold calling, not someone else doing it on your behalf. Bankers and advisors can be useful when they have relationships; if they don’t, avoid this approach at all costs.
3. Differentiate yourself from the competition.
The average Big Pharma business development professional looks at around 150 potential deals in a year, so your first objective when selling is to get their attention – without it no one will want to dive into the details. Ask yourself: How much of your story can you pitch without requiring a CDA? These require a significant amount of effort to be done by the buyer in order to get started. What can you share through a non-confidential deck (5-6 slides)?
Understand your competition, how you stand out, and keep it simple – namely:
- What we have (don’t show compound structures)
- What it does
- Why we think it’s important
Your science is critical – it is the driver and will stand regardless of what the numbers look like. So stay focused on it, not on the market evaluation. It’s not your purpose there to educate the business development team, especially if it’s an area already familiar to them. If not, it’s their job to do their own homework, same as it’s your job to understand their organization and how their strategy is relevant to what you’re selling.
As for indications, it’s not “the more the merrier.” Try to pick what’s most likely to demonstrate the efficacy and safety of the mechanism of action. The more indications, the more people will be needed to review your pitch – never mind making you look less credible.
And lastly, your investor’s deck should not be used for business development discussions!
4. Be honest about the risks.
For both parties: If you don’t want any risks, then you’re in the wrong business; so understand the risks that are inherent with what you’re offering and be upfront about them on both sides. Trust me, they’ll find out if you’re not and you’ll have lost more than just the deal.
The more transparent companies are about risk, the more creative you can be to solve these issues.
—Rachna Khosla, Amgen, Director Business Development
BioNetwork West, Evolution of Risk Sharing Models Panel Discussion
The best deals find the balance between developmental and financial risk sharing.
5. Have patience.
Pharma does not move quickly. Yes, they’re all searching for that next blockbuster, but deals take time and there are hurdles for internal decisions that the buyer needs to work through – especially when dealing with a public company.
Nothing will be done next week.
Most deals get done based on relationships established during the discussions, not purely on the science or the commercial terms, so don’t let unrealistic expectations burn up any relationship you might have established.
The first meeting to term sheet could be nine months to a year, so think of this as a long-term relationship “just like a marriage” and remember:
- Connection! It has to feel right
- Talk to the scientists
- Be careful not to ignore any warning signs
- Don’t overcomplicate things
Big Pharma can move fast IF it’s within the strategy because the legwork has been done and the company knows what it wants. Opportunistic, out-of-the-box deals are always going to be slower and harder to navigate.
And no stalking! There is a fine line between persistence and being too forward; come back if something material has changed – but not every three weeks or even every three months.
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