Big Pharma BD Execs Tell Start-Ups: Don’t Be Afraid To Ask Us For Help
Executive Summary
Business development leaders and venture capital investors spoke at Biocom’s annual partnering conference about what they are seeking in relationships with entrepreneurs and start-ups.
Business development is like dating, so start-ups should be confident and sometimes let their guard down when building relationships with potential partners. Tell us what your technology can do, but also ask for help, big pharma executives told entrepreneurs attending the Global Life Science Partnering Conference hosted by the California trade group Biocom on 27 February in San Diego.
Business development leaders from Amgen Inc., Merck KGaA/EMD Serono Inc., Eli Lilly & Co., Boehringer Ingelheim International GmbH, Novartis AG, Genentech Inc. and Daiichi Sankyo Co. Ltd. talked about what their companies are seeking from external partners and encouraged small companies to ask for free advice on what would make their development programs better, as well as on how to overcome challenges.
Amgen vice president Rachna Khosla said her company looks at roughly 3,000 partnership and acquisition opportunities each year. Meeting with external innovators is all about relationship-building, even when deal negotiations aren’t going to happen in the near term, Khosla noted. She encouraged entrepreneurs to ask Amgen and other potential big pharma collaborators for feedback that could help them develop commercially viable drugs.
“We all have to understand that at the end of the day it’s all about the patients, but we also have to get the system we work in to pay for it,” Khosla said.
What Pharma Is Looking For
According to business development executives speaking at Biocom’s partnering conference:
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Daiichi is looking at innovative, early science that may drive the company’s oncology portfolio 10 years from now
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Genentech is interested in novel drug modalities beyond its own in-house chemistry capabilities, such as gene therapies, that can change treatment paradigms
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Merck KGAA wants game-changing technologies that can help the company expand its portfolio over the next five to 10 years or more
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Amgen is seeking both later-stage assets that contribute to revenue growth and early-stage technologies that round out the company’s internal capabilities
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Novartis is active across the full range of deals, from early- to late-stage assets, including novel modalities, like RNA interference and gene therapies
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Lilly is doing more early-stage deals through which it can access drug targets it doesn’t know much about
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Boehringer wants to bring breakthrough science to patients via partners with technology that can compliment the company’s own expertise
Genentech Research and Early Development (gRED) vice president and head of business development Alex Szidon agreed that start-ups should seek free advice from experienced drug developers about what could make a particular drug candidate worth developing. “That’s what capital efficiency looks like,” Szidon said.
Boehringer Ingelheim instituted a program a few years ago called “Office Hours” in biotechnology hubs where it has offices, where the German pharma goes out to meet with entrepreneurs and offer advice – even to firms it is not talking with about a partnership. (Also see "Green Shoots: Pharma Investments In Early Innovation Support Biotech Growth" - Scrip, 24 Jun, 2016.)
“We go to them and they come to us with their problems and ask ‘What do you think of this?’ and sometimes deals come from this,” Boehringer corporate senior vice president of business development Ioannis Sapountzis said.
How Early Is Too Early For A Deal?
It may be too early for a big pharma to enter into a deal with a start-up when it first meets with the young company’s founders, but that does not mean it’s too early to start building a relationship that could lead to partnership years down the road.
Jeffrey Warmke, senior vice president of search and evaluation and alliance management in the global business development group at Daiichi Sankyo said, “I had a lot of meetings this week where we both admit it’s too early,” but both sides agreed to keep in contact. Warmke noted that sometimes early-stage relationships turn into small collaborations where Daiichi might work with a start-up on a pre-deal project that helps each company answer specific scientific questions.
Lilly’s Angele Maki, vice president of emerging technology and innovation, noted that what’s too early for a partnership or acquisition depends on the therapeutic area and other factors. “What’s too early in oncology may not be too early in neurology,” Maki said.
Lilly has an incubator-like facility for biotechnology start-ups in San Francisco, where Maki is based, with 66,000 square feet split into 32 modules with their own wet lab space and workstations. This gives Lilly an opportunity to keep an eye on early technologies and offer guidance as start-ups’ programs progress. These are no-strings-attached interactions, where no deal is promised and Lilly doesn’t retain a financial interest if a partnership doesn’t materialize when the small companies move on. The facility is about 40%-50% full now and Lilly hopes to bring occupancy to 90% by this summer, Maki said.
Lilly also participates in new company formation via venture capital investments as a way to identify novel science. It is a limited partner in more than a dozen VC funds and has invested more than $1bn through its strategic investments in start-ups. The big pharma has acquired six companies based on those investments, she said.
VCs Also Want To Get Involved Early
Venture capital investors in a separate 27 February discussion at Biocom’s partnering conference also encouraged new biopharma companies to seek outside help, because bad decisions made early on can impact who can invest in a start-up or license their drug candidates in the future.
Chris Garabedian, founder of the Perceptive Advisors-backed start-up incubator Xontogeny and portfolio manager of the Perceptive/Xontogeny’s PXV Fund, encouraged entrepreneurs to work with venture capital investors early to make sure agreements to in-license drug candidates or platform technologies are structured in ways that give investors a good return and prove attractive to pharma partners or buyers.
“We’re not trying to steal your deal,” Garabedian noted.
5AM Ventures principal Mira Chaurushiya said the VC firm will redo license agreements for companies in its portfolio “because we know there are things the big pharma buyer down the road won’t like.”
The venture capitalists also warned companies against raising big VC funding mega-rounds – $100m-plus deals have become more common in recent years – because those big financings limit who can back a start-up’s subsequent rounds.
“It puts a lot of pressure on you, the entrepreneur, as well as your team to be able to grow into that [value] and leaves very little room for stumbles along the way,” City Hill Ventures founder and managing partner Jonathan Lim said. Lim, also a venture partner at ARCH Venture Partners, has experience as both an entrepreneur and an investor – he was CEO of Ignyta Inc. when Roche acquired the firm and currently helms the start-up Erasca Inc. (Also see "New Company, Big Goal: Serial Entrepreneur Jonathan Lim Launches Erasca To 'Erase Cancer'" - Scrip, 18 Dec, 2018.)
Avalon Ventures managing director Jay Lichter said the upside of a mega-round is that a start-up can achieve a lot of strategic goals with that kind of capital. The downside is that entrepreneurs can burn through a lot of money quickly. “With smaller rounds, it forces you to be capital efficient and innovate,” Lichter said.