Viewing a partnership from both sides of the table

Partnerships with major drug developers are crucial in thelife cycle of most start-up biotechnology companies. The benefits of thesearrangements include capital and additional necessary resources to moveprograms through development and eventual commercialization. Unfortunatelyrecent changes in major drug developers have made these partnerships harder tocome by.

The current climate created by increased economic pressuresand changes in the pharmaceutical industry has led to multiple mergers andacquisitions amongst major drug developers. For example, major drug developerssuch as Wyeth, Genentech and Schering-Plough have been acquired by other drugdevelopers. Japanese companies have undergone similar consolidation. Whilethese companies were previously targets for partnering deals, they are nolonger options. This trend is expected to continue, causing a further decreasein the number of potential partners.

In addition to having fewer companies to choose from, it islikely that the consolidated companies will narrow the focus of theirportfolios. The leadership at these companies will look to remove programs onthe fringe and focus resources on areas with the greatest potential for profit.This action leads to an even shorter list of options for partneringdiscussions, which only makes things more difficult for the start-up biotech.

To make matters more challenging, the major drug developersare presented with an even larger pool of potential partners. With lesscompetition in partnering discussions, these drug developers have their choiceof companies. The result of this changing landscape is that it is no longerenough for a start-up biotech to simply be first in class or have a decentcompound. Rather the company must view itself and its programs from theperspective of the major drug developer. From this perspective, it is easier tosee how to develop programs that will bring potential partners to the table fordiscussions.

Monumental challenges in R&D

Small biotech companies face monumental challenges in theR&D arena. It is costly. It is complex. It is uncertain. One must find thatelusive, perfect balance between cutting-edge science and commercializationpotential. Large companies have the luxury of fielding multiple programs tofind one blockbuster, but start-ups live and die by one or two programs theyhave chosen to work on.

A number of start-ups are based on new discoveries or novelinsights into biological pathways. There are also start-ups that practice theart of being "fast-followers." Byetta is an example of new discovery. Lorcaserin is an example of novelinsight, while Alogliptin is an example of a fast follower. These demonstratethat success can come from all arenas.

Whichever route a company takes, it is important todemonstrate added benefit to existing treatment paradigm in multiple ways, suchas safety, compliance and efficacy. Many biotech companies fail because theydevelop products with minimal market needs.

Where the market is headed

When viewing programs from the perspective of a major drugdeveloper, it is important to evaluate where the market is headed. This is akey step for these companies.

Understanding the competitive level and need for newtherapeutics in the future plays a major role in deciding which programs topursue. This can be understood by looking at the potential cost-benefit andglobal disease distribution for a product candidate.

Other conditions, such as whether a disease would be treatedby a primary care physician or a specialist, may also influence the decision ofwhether or not a program receives resources. When small biotechs look at aprogram in the same manner, the quality of target selection with respect tocommercialization potential will also improve.

Understanding the difference between this approach andsimply guessing which major drug developers will be interested in new productsmakes a big difference in the early stages of target selection.

Think programs, not compounds

A growing trend is to develop a single candidate forpartnership instead of programs with multiple candidates. However, major drugdevelopers understand the value in back-up compounds, making them important inpartnership discussions.

These back-up compounds should be structurally differentfrom the lead compound in order to become valuable assets for partnershipdiscussions. The back-up being structurally different mitigates the risk thatboth candidates will suffer from the same compound specific stumbling block.Having back-up candidates will allow the company to continue with fulldevelopment with only minor delays should the lead candidate succumb.

In addition to being structurally different, the back-upsshould also only be behind the lead compound by a short amount of time in orderto have the most value.

'Best-in-class'

As competition has become fierce among biotechs, the onlyway to stand out is by demonstrating best-in-class potential early in the drugdevelopment process. This is very attractive to potential partners who have afocus on eventual commercialization of the product.

The issues described above highlight many of therequirements sought by potential partners in seeing a program as "best-in-class."The job of the start-up in accomplishing these endpoints is complicated by thefact that most have limited capital resources at their disposal. This factmakes it especially crucial for start-up companies to have high hurdles atevery decision point, ensuring that only the best and most promising productcandidates advance in development.

For example, a company may be pursuing a candidate that islikely to have toxicology problems. The first inclination is often to wait onthe toxicology assays or not push the dose high enough, hoping that there willbe enough of a therapeutic window to navigate its development. Major drugdevelopers will see through these lacking studies or narrow windows aspotential liabilities in full development. This provides them an excuse to walkaway from discussions.

The end result is that the biotech has squandered preciouscapital. Killing product candidates early before large capital investments mayseem counterintuitive, but will pay off once a program is ready forpartnership.

Have an 'inside' track

Having an understanding of how major drug developers ingeneral think is important, but every company is different. As a result, it isimportant to have an "internal champion" at a company. After all, deals builtwithout an understanding of the internal operations at a company do not tend towork out in the end. These major drug developers are constantly undergoingconsiderable changes, including mergers and reorganizations, which may resultin challenges during partnering discussions.

Having an internal champion at the company to provideupdates on changes and delays can be very valuable. This person can also helpto move things along when it seems that discussions have stalled. The championmay not necessarily be in a business development role, more likely to be inother functions such as discovery or commercial operations. When there is notan internal champion involved in the process, discussions are often abandonedtoo early.

In the constantly changing climate of this industry, it ismore important than ever that small biotech companies see themselves from theperspective of major drug developers. Understanding every aspect of a program—fromtarget selection through market potential—from this perspective will result inthe best potential deals for both parties.

Dr. Peppi Prasitis chief scientific officer and a member of Amira Pharmaceuticals' board of directors. He has more than 20years of experience in pharmaceutical research and management, most recentlyserving in various positions with Merck. Prasit has led and/or contributed toresearch resulting in more than 65 published papers exploring various elementsof drug discovery and holds more than 30 granted patents. He received his Ph.D.in organic chemistry from Victoria University of Wellington in New Zealand andserved as a post-doctoral fellow in organic and organometallic chemistry atPrinceton University in New Jersey.

Dr. Hari Kumaris chief business officer at Amira Pharmaceuticals. Kumar has almost 20 yearsof Big Pharma experience, including 17 years at Hoffmann-La Roche. In 1996,Hari moved to Eisai Ltd, where he served as the company's European marketing directorbefore returning to Roche in 1999, where he was instrumental in securingpartnerships with Isotechnika, Biotie, Biocryst and Actellion. Kumar trained asan immunologist at University College London, where he completed his Ph.D.under the supervision of Professor N.A. Mitchison. Kumar then completedpost-doctoral fellowships at Tufts New England Medical Center in Boston and atthe Marie Curie Cancer Research Centre in the United Kingdom.