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Co-chairs:
Philip N. Sussman (EVP, Corporate Development, Memory Pharmaceuticals)
Stephen J. McAndrew, Ph.D. (Director, Biotechnology Licensing - External
Science and Technology, Bristol-Myers Squibb Co.)
Speakers:
John A. Keller, Ph.D. (Vice President and Director, Alliance and Technology
Group, SmithKline Beecham Pharmaceuticals)
Laurence Reid, Ph.D. (Senior Director of Business Development, Millennium
Predictive Medicine, Inc.)
I. Best (and Worst) Practices in Alliance Formation
Philip N. Sussman, John A. Keller
There are four basic stages in a licensing deal,
each with its own pitfalls: 1) first contact, 2) getting to know you (which
begins with a request for a second meeting), 3) term sheet, and 4) contract.
First stage - First contact
One key feature of the first contact with a potential partner is that
the encounter should convey some meaningful information about what your
technology or product is and what makes it special. Many people make the
mistake of contacting the licensing office of a potential partner but
not divulging anything meaningful about the technology out of concern
for confidentiality, so that the potential partner has no way of knowing
whether it is worthwhile to have a meeting.
First contact deal killers include soliciting multiple
people within the same company, harassing business development reps (instead,
you should always add more information when you check back, and e-mail
is less obtrusive than phone calls), giving presentations prematurely,
and making a presentation designed for investors to a group of scientists.
Scientific personnel should be given scientific presentations (not investor
presentations), so that they can become excited about the technology.
Overly hyping the company is also not recommended. One should convey the
company's potential while making sure to delineate the current state of
affairs, so that the partner does not misunderstand where the company
now stands. In addition, even though a potential partner may turn down
an opportunity at one time doesn't mean they won't reconsider it the next
time. It pays to revisit the company at a later date when the technology
is more mature or becomes a strategic fit with the potential licensee.
Second stage - Getting to know you
Deal killers at this stage include discussing money too early and discussing
the deal structure (e.g. exclusivity) too early. Licensors trying to leverage
the exclusivity of a contract may be too aggressive on pricing and scare
away the potential partner.
Third stage - Term sheet
Deal killers at this stage include ignoring budget constraints and having
an attorney as the lead negotiator. Going too deep into the termination
provisions is also a pitfall.
Fourth stage - Contract
Deal killers at this stage include threatening to sell the technology
to someone else, restricting partners' use of a technology after the end
of the collaboration, and insisting on arbitrators.
In terms of best practices, the negotiators in
a collaboration should be asking themselves, " How do we make this
work for both of us?" Companies seeking to license certain technologies
should know their strategic goals, including the technologies that they
want to keep in-house and what they can afford to share. Partners have
expertise, not just money, and if a partner does not wish to contribute
to its part of the partnership, it indicates a lack of commitment. The
landscape is always changing, so it is important to be creative and flexible.
The central idea is to build and keep trust.
II. BMS and Millennium Pharmacogenomics Alliance
Stephen J. McAndrew, Laurence Reid
Bristol-Myers Squibb and Millennium Predictive
Medicine (a unit of Millennium Pharmaceuticals) entered into a pharmacogenomics
alliance with the following three objectives: 1) to identify pharmacogenomic
markers that would predict the efficacy of BMS oncology therapeutics,
2) to develop markers as pharmacogenomic tests in collaboration with a
major diagnostic company, and 3) to launch the drug and the pharmacogenomic
diagnostic simultaneously.
Pharmacogenomics is the identification of markers
of biological variation and the use of those markers to predict patient
response to a therapeutic. The field promises to deliver the right drug
to the right patient, i.e. "customized" drugs with better dosing
guidance. In terms of drug development, pharmacogenomics can increase
the probability of FDA approval, expand the indications for a drug, and
change the logistics of clinical trials. In terms of marketing, pharmacogenomics
can allow for product differentiation, which can drive market share. It
can also identify new uses for existing drugs and enable optimal fair
pricing.
The BMS-Millennium collaboration posed several
challenges stemming from novel interactions with diagnostic companies
and the interdependence of drug and diagnostic marketing.
From a regulatory standpoint, the collaboration
would require working with two different branches of the FDA, one for
the drug and one for the diagnostic. Coordinating two separate discussions
would be necessary in order for the drug and diagnostic to be launched
simultaneously. To date, there has been only one example of a successful
drug/diagnostic pharmacogenomics product, which is Genentech's Her-2 antibody
(Herceptin). Herceptin is only effective in breast cancer patients who
are diagnosed with the Her-2 antigen.
The success of a pharmacogenomics-based therapeutic
depends on the ability of a diagnostic company to develop the appropriate
diagnostic test. A pharmacogenomics-based drug without the companion diagnostic
is useless. Diagnostic companies provide expertise in formatting markers,
have an investment in the capital equipment located in the majority of
clinical labs, have regulatory experience, and can serve as a marketing
force to a different customer base.
Why did BMS and Millennium choose each other for
this alliance? In sum, the partnership combined the number-one oncology
company with a commitment to genomics with the number-one genomics company
with a commitment to oncology. BMS chose Millennium because it was a leader
relative to its competition with respect to oncology expertise, technology
platform, strategic focus on pharmacogenomics, strategic alliances with
major cancer centers, and a portfolio of novel markers with associated
intellectual property. Millennium Predictive Medicine had also demonstrated
proven success as a partner in other alliances.
Millennium chose BMS because BMS was a leader in
oncology drug development and marketing, it shared Millennium's vision
of pharmacogenomics, and it was an existing partner in a technology consortium
affiliated with the Whitehead Institute.
Why did the companies decide to focus on oncology?
The low efficacy of current therapies for cancer means oncology is a field
with a significant unmet medical need. Since the field is associated with
such high mortality rates, it is one in which unparalleled importance
is placed on the "right" decision. Chance of technical success
is also higher in this field, since one can leverage fundamental cancer
understandings, tissue access, and gene expression technology.
From BMS' perspective, the pharmacogenomics alliance
was consistent with BMS' commitment to develop more efficacious oncology
drugs. The alliance was also a means to deepen BMS' pipeline in oncology
and maintain its leading franchise position.
The deal took a total of 16 months to complete:
| Stage |
Dates |
| Scientific
Discussions |
July
1998 - Nov. 1998 |
| BMS
Internal Alignment |
Nov.
1998 - Feb. 1999 |
| Business
Negotiations |
Feb.
1999 - July 1999 |
| Deal
in Jeopardy |
June
30, 1999 |
| Deal
Signed |
November
11, 1999 |
Key issues in hammering out the deal included
the following:
· Absence of a paradigm - given that pharmacogenomics is an emerging field,
there were not many precedent deals that the companies could refer to
as a model
· Valuation - The return on investment was very difficult to predict and
was dependent on such variables as the market impact of the product, the
probability of success, and the cost and time of development.
· Regulatory - There was only one previous example (Genentech's Herceptin)
in which coordinated approval from the FDA had been achieved. Given that
a third-party diagnostics company would be involved, a key issue was managing
a 3-way collaboration, ensuring a strong linkage between the drug and
diagnostic products, and confirming availability of the appropriate platform
from which to develop the diagnostic.
For BMS, a critical strategic question was whether
to partner the pharmacogenomics drug/diagnostic program or develop the
product internally. Significant time was spent achieving the internal
alignment necessary to proceed with the partnership.
The structure of the royalty posed a challenge
because pharmacogenomics contributes to a drug's value on an indication
by indication basis and sales by indication is difficult to measure and
predict. The partners solved this problem by using net sales worldwide
with equations that factored in the number of indications, the size of
the indication, and geographic variations in the size of potential patient
populations.
The deal nearly didn't get done because of the
near-overwhelming complexity of the collaboration (at times, the process
lost focus), the long duration of the dealmaking process (synchronizing
the business and research teams and maintaining internal BMS alignment
was difficult over such a long duration), and personnel changes. The deal
was ultimately signed because the companies shared a mutual respect for
each other's science, they trusted each other, they were both comfortable
with the uncertainties, they remained flexible, and they both shared a
commitment lead the oncology pharmacogenomics field. |
