Hi, I'm Daniel Dornbusch.
I've been doing business development for small
biotechs and large pharmaceutical companies
for almost 20 years now.
My educational background, I double majored
at Cornell University in English and Biology,
got a masters at Tufts Medical School
and Emerson College, and then got an MBA
from Harvard.
Happy to be here today to talk about
a little bit more about business development
and concepts for life scientists.
You've now heard about gaps,
how to fill those gaps. And now we're going to talk
a bit more about the other parts of the circle.
Determining some vehicles to fill those gaps,
executing the deal, and then measuring
success, and maximizing success at the end.
So, some vehicles in order to fill those gaps.
We're going to talk today about some deal types,
some structures used, how to identify some of those
vehicles, and then using vehicles strategically
to achieve those goals. But what I really
want to emphasize today is that while
we're going to talk about some very specific structures,
really it represents a continuum.
And to be creative in your work and your business
development, and your deals, you may create
a new structure compared to these.
But what you can do with these structures
that we talk about today, please combine them,
use them creatively, find new ways to do them,
and the fundamental piece of all of this is
something that I like to call "listen to the science."
Do the right types of deals for your technology,
for your platform, for the products that you may be able
to bring to market and help patients one way.
So, to start we had to do some sort of organization.
So we put them into five structures.
A research collaboration, a license
or a license option, a development agreement,
a commercialization agreement, and then
an acquisition or an acquisition option.
Now again, here's some details which we're going to talk
about in later slides, but I really want to emphasize
again that you can combine these, for example.
One way to do it is to combine a research collaboration,
a license option, with an option to acquire the company,
the technology, the platform.
What this can do is something
that we call a "build to buy."
It's a great way for a larger company
and smaller company to get together
and learn more about the technology, where
the advantages are, how this will be positioned in
the market as it moves through development.
In early stages of any technology,
it can be quite challenging to see where
the most appropriate applications
are. For patients, for physicians, in markets
globally, and as it moves through a lot of these answers
can be determined.
Okay, so let's talk a little bit more about
research collaborations. Some benefits are
you can do some technology feasibility,
in order to build trust and knowledge.
Not only of your science and platform, but with
your partner, about their interest, their expertise,
and where your technology can best be used.
Funding, really the range depends
-- it can be all over the map from
very low to very high, depending on
the excitement in the field, the economic
promise, and the development stage compounds.
Structures, ideally there are several structures
in this and it really depends on the area
of research you're talking about. But one hallmark
I think of success is to clarify what
the success criteria are going to be in any research
collaboration. Risks, tend to be the lowest risk structure.
Which is also why it can be the easiest to complete,
and the fastest that could happen.
But can also be easy to terminate, which can be
good and bad for both sides,
you can get rid of research that didn't work and
move onto ones that may.
And then the key question that I think of
when I do research collaborations is
who's going to own the data, who's going to have publication
rights, who's going to have termination rights,
and then option rights in the future.
On a license or license option,
a couple of benefits can be that you can vary these deal
structures in several ways. Globally,
territory, field, potential options and issues.
Funding here could be from multiple sources.
For example, options as the product advances
in development. There are a lot of ways you could do
milestones in this. Structures can be from
the very general to the very specific.
Territory, indication, by customer, you can split these out
in a lot of different ways.
The risks in license options
can be a myriad. Precedents you can actually raise
the value for future, so a positive on this,
but it can also limit an upside if you
do a cheap deal in the beginning, it can limit
what the possible valuation's going to be in the future.
So some key questions,
what are you exactly giving up
when you do a license option?
Or as the acquirer, what are you actually gaining
in the license option, retaining, and then sharing?
in the future.
So, let's talk about an example.
A few of, I think, hallmarks of pharmaceuticals
here -- and I can talk about these because I was in no
way involved in them, so there's no risk of any
confidential information here. But the Onyx and Bayer deal,
they did a fantastic deal a few years ago.
Where Onyx licensed to Bayer their fundamental
technology to their lead product
and it was also seen as a reason why
Onyx was not able to sell themselves
to any other suitor, despite a lot of pharmaceutical
interest for many years.
There was later a lawsuit and the agreement was
restructured, which we'll talk about later.
But essentially, this was a fantastic deal
for Bayer, a fantastic deal for Onyx
in many ways, that did evolve over time.
There was also a really interesting Pharmacyclics,
Janssen, Abbvie licensing deal.
When J&J essentially purchased about a
50/50 profit split with Pharmacyclics in December 2011
for their lead compound, it was about $1billion
for the deal. Fast forward just a couple
of years later in 2015, Abbvie steps in and purchases
the rest of the company for just about $21billion.
So, where literally licenses can limit,
they can also release quite a lot of
value, which moved the product forward.
So let's talk about a development agreement.
Benefits of a development agreement can
be leveraging resources from a larger companies,
financial is one of them, but I'd really talk to
small companies to think about what the advantages
are of working with big companies in terms
of how the regulatory, the research, the preclinical,
the animal models, and really the extent
of the experience that larger companies have
just by virtue of their being large with a lot of expertise.
Funding, options to split in cases of territory
exclusive licenses, what this essentially means is
there are multiple ways to do these deals,
and multiple ways to split them
to unlock the best value and the best partner.
We'll talk about this in just a second.
The structure here, again, highly variable.
And it depends on the asset, the partners,
and the goals. I would make sure that you're listening
to exactly what product, focusing on what product
and where it's going and what makes the
most sense for that specific one.
Couple of risks, as always, ensure that you have the right partner.
Is this person really, or is this company really
expert and have a lot of resources
in the indication that you're looking for
in the developmental area you're looking for.
Is the deal structure representing the strengths of both parties?
And then finally, is it an organization and have you
organized this for future success?
So some key questions.
If you're talking about clinical trials,
could this speed the clinical trials in your
clinical development timeline, could it speed
the research? Legal review times,
is this going to slow things down
with different legal reviews at different stop
and no go decisions?
Approvals, and then we have go/no go decisions in the end.
So, let's talk about an example
to put some color on this.
BMS did a very interesting deal with CytomX, and again
I wasn't involved in this one, those I have some
friends who were and it was really interesting,
and I think exemplary example of a great deal.
You see the headlines here, which you can of course
Google and get a lot more details because so much
of this was public. But essentially, it was a worldwide
research collaboration and license agreement,
as we get to some of the combinations, to discover
and develop and commercialize novel therapies
against multiple immuno-oncology targets using
CytomX's great platform, which they've shown good
progress here.
The economics were quite attractive,
$50million upfront, $300million in milestones
plus sales royalties. But essentially
what you see is a really clever
way to leverage CytomX's platform,
Bristol Myers's experience in both clinical
development and commercial, to maximize
the science of that platform.
So, advancing to commercial agreements.
What we want to do in commercial agreements
for the most part is to maximize the assets
of each party. It sounds trivial,
but it can be so powerful when done
well. And we've got an example coming up next.
The funding of these really depends on the
opportunity, the indication, the product, but
usually includes things like royalties, profit
splits, manufacturing costs, and marketing agreements.
So the structure, and again, focus on unlocking the value
in creating the best commercial value for both
parties. And therefore, the biggest value.
The biggest pie is always the metaphor in negotiations.
Territories, indications, and customer channels.
The risks, of course, in these are
capping commercial upside potentially if you
are essentially valuing what the world
and the global markets are going to be. So
it's potential will cap it. And then working with different
partners. You're picking a dance partner,
and in specific territories you can go back
necessarily and do this.
So some key questions that you need to
ask yourself in these kinds of commercial agreements.
Both on the buy side and the sell side.
Is this the best partner? Is this the best structure?
So, an example.
Illumina did a very interesting deal with 10X Genomics.
It's a co-marketing deal, also known as a
commercialization deal, there are a lot of
different names for these. But essentially,
what they did was they announced one with a partnership
for long read applications, so it's a technology
play to partner what 10X Genomics, the platform
here, and essentially Illumina's dominant commercial
pipeline and presence.
So what it was, was essentially, providing
customers with additional options for applications,
so it's a great way for 10X Genomics reaching
much broader set of customers,
a great way for Illumina to increase its menu in that point.
So then at the end, and a lot of these type of deals
are, if it's not just a straight acquisition,
and acquisition options are built onto
all of the other, or can be built onto all of the other structures
we talked about so far.
So, some benefits, it can be challenging
for the licensor. So the question everybody
always asks themselves around the table is
Are we selling the company here?
And for how much, and is this the right number
which it will be in the future?
There are a lot of questions between here when
the option is triggered.
Funding can be cash, can be stock,
can be combinations, can be royalties,
can be milestones, all these can be very useful
tools in order to manage that type of
risk. And the structure, I think depends on the
stage. Are we talking about a development asset,
are we talking about a commercial asset?
Do we know all the indications of the assets
going into? All of the customers that it can be
serving? All of these should be managed
by different structures you set up
in the deal you're talking about with your partner.
So then the risks.
Balancing the risk and reward with risk mitigations,
easy to say, quite hard to do and quite hard to do
for both sides. So everybody has risks
and identified their favorite, or most important
list of risks. And the question is, how do you work
with your partner to manage those on both sides.
So calculations can sometimes benefit the
acquirer, and there are some examples of that
in the media, you can just take a look on Google
for those. But some key questions both
sides, are we locking up the target?
Are we locking up a company?
Are we locking up the asset that we're really
interested in? And then can you
limit an opportunity? So from these small companies,
the seller's point of view,
if you do these kinds of acquisition options,
it can often limit your opportunity to raise
capital later. So, in all of these deals
you want to think about what happens if things
don't go according to plan.. which
few things do in biotech and pharmaceuticals.
So when it doesn't go according to plan,
what happens? And if you're locked up
with some of the acquisition options, with
specific licenses to another company,
it can be really hard to bring in
an additional set of investors in order to get
from one situation to another.
So just something to think about.
And here's an example.
Myriad did a very interesting deal with Crescendo
several years ago. So Myriad Genetics, of course
known for their BRCA tests and their
suite of genetic tests for oncology,
acquired, or essentially acquired and did an options
deal with Crescendo, which is in the immunology
space. Similar types of diagnostics, different indications.
So, what they did was a 3 year options
with an equation using a multiple of revenue
and growth rate. And they had a one-time right
to acquire Crescendo at a later date
for a fixed purchase price.
And so what this ended up doing was
it put incentives for Crescendo, and Myriad
for that matter, for sales, for revenue, for profit,
in order to achieve the milestones that were necessary
for this. Crescendo got some cash, which was critical
at the moment, and the deal ended up closing
after 3 years and Crescendo's now part of Myriad,
and they are doing quite well.
So let's talk a little bit more about deal process.
And how to get these types of deals done.
So, some topics we can talk about
but we don't have time today
to address them fully.
Non-binding term sheets, can be
very useful to clarify things on both sides.
There are questions from everyone about
when do you sign a term sheet, is it necessary
if they're non-binding anyway, usually always comes up
at some point, depending on the partners
Managing diligence and liabilities,
there's no real perfect way to do this.
The best is make sure you do it exhaustively
on both sides. It doesn't mean take years to
do it, but what it does mean is be very careful.
When things go wrong, we can talk about indemnities.
Strategic alliances, deals or "coopetition."
It's a term that was coined in several years ago
from companies doing deals with companies
where we're trying to collaborate on one side
and cooperate on one side, yet we're
competing in a very similar area in another.
It happens all the time, you just need to be very careful.
Which comes to competitive protections.
How do you know when a deal is real?
And when another company is just snooping around
for interest or a stalking horse?
There are some hallmarks of this,
a lot of this is experience, some of this is just getting
a great lawyer or deal negotiator on your side.
Or just knowing the people on the other side,
which we'll get to in just a minute.
So, we talked a bit about the legal experience,
the more experience you have in the area,
I tend to find the better, and it doesn't have to be
the negotiator. This is a team sport
in many ways. Team sport from the research to development
to the clinical, the legal, the BD,
management, board, there's several
ways to do this, but again.
It really is a team effort to getting any of these done.
And getting the best deal.
So now let's turn to moving on in the process.
Executing the deal and measuring and maximizing
success. In executing the deal
there are several ways to maximize
your ability to do this. Working with stakeholders,m
finalizing a deal, measuring success,
maximizing success. What we're going to do
now is talk about the process of doing all of these.
So there's no perfect way to represent
this whole process, they're all slightly different,
but we came up with some sort of schema to give you
ideas about some of the generalizable
pieces that are required and can lead to
success in a collaboration.
First is internal alignment,
making sure that everyone working with your
group, with your company, is aligned on goals,
steps, processes, and prioritizations.
As much as possible in the early days
and doing so with white paper.
Second is the partner integration, finding the right
partner. And so how your goals can fit
with theirs, it sounds pretty easy but when it's actually
done in practice, it can be pretty complicated.
And then once you start discussing,
finding the right scope and structure
to represent both parties' interests and then
the maximal ability for the platform, the technology,
and the products you're developing to make
an impact in the healthcare environment.
Once you get all this right,
then you can ride on to legal and contracting
to make sure that you can put this all into a legally
binding and tolerable format for everyone.
Now, we have a little 3-30x above
this, often you can get lucky and
it works perfectly the first time.
I call that "enjoy that when it happens."
But sometimes this can be highly iterative,
and you have to go back and do this over
and over again to make sure you have internal alignment,
partner integration, and refine a scope and structure,
before you move on to integrating all of the
priorities with all of the different groups
within your company and the partner company,
which is why we have a magnification of
the puzzle pieces we have over here.
Once this all happens, you can move off to
finance sign-offs, corporate approvals,
and then the dressing of the signatures,
the press releases, and the financial finalizations.
All of these pieces are highly critical.
But setting the stage and the initial eight times
with the top row, I think is fundamental too.
So how can you maximize success
once a deal is done? I would start with communication.
I think this is a huge piece that can be
transformative, and the difference between success
and failure in so many ways.
Feedback loops can create transparency
and accountability. So we have some ways to do
this, just some things to think about.
Weekly meetings, monthly meetings,
quarterly, and it depends on who's involved.
So weekly calls with team leads, monthly calls
with larger project management groups,
quarterly financial reviews can be helpful,
and then annually on deal evaluation
and project updates. And they can be useful
in a couple of areas. First, just for the points
of contacts to be organized in finance, and
R&D, and commercial. And also provide
clear mechanisms for dispute resolutions, should these
come up, hopefully they won't.
But they certainly can.
So some key understandings.
Though it may take years to sign a deal,
it really is just the start of a relationship and
building value. So, as a little statistic
to define that, 30% of deals tend to get clarified,
renegotiated, and "revised." The major consulting
companies just came up with this percentage.
But let's talk about an example of one of those.
Regeneron and Sanofi is one of my favorites,
again, one that I wasn't involved with, but one that I'm a big
fan of how they've evolved this over time.
Way back in 2003, the two companies got together
and signed their first development agreement.
Aventis, which became Sanofi during this time,
took a 4% equity stake in Regeneron.
In 2007, they updated and revised the contract.
Sanofi collaborated on a new drug discovery
platform and paid up to $800million,
increasing their ownership share.
2009, Sanofi increase R&D. 2013, Regeron pays
Sanofi back, plus milestones, to get some assets back.
Then 2015, the new immunotherapy collaboration
where they actually alternate leads
in development. One thing we can overlay on this
is the stock processes of Regeneron, we can talk about where
Aventis, which started and was acquired by Sanofi,
at a premium. Some really great things happened
to both companies in their market caps and valuations,
financings, size. Just a success story on both sides.
On the corollary, there are some disastrous
examples, of course, in any situation, in any
corporate environment. Here are some things that
tend to not go so well.
Neglecting your company's interests,
trying to get a deal done that your company and your stakeholders
don't represent or want.
Don't listen to the other sides' needs,
I've seen this happen before.
Negotiators being inflexible and saying
these are the only terms that are possible,
take it or leave it.
Anticipating issues, don't listen to the science,
do a deal that doesn't apply to the scientific or
the assets that you're talking about.
These may seem obvious, but
once negotiators or BD people, people who
-- doesn't have to be a BD person, someone who
negotiates can sometimes lose sight
of the bigger picture and just try to get a deal
done. I recommend trying to avoid all of these.
But let's focus on the positives.
Because it's a lot easier to go that way.
Hallmarks of outstanding business development,
some of these are just corollaries.
Relationship building, make sure you build trust on both
sides, that there's active communication
and you can solve problems, and solve for the
bigger issue. And part of that is being able to
listen to what's shared and then what isn't
shared. What the other side can't share.
But that sometimes you can read into
what their sensitivities are, in order to get the best
deal done. Finding creative solutions.
Essentially, that's taking the first two
and putting into practice. Knowing your partner's
constraints and their challenges, and then knowing
the relationship can be only the beginning
and not the end. Obviously if you're selling your company,
it tends to be a one-time exchange, however,
as we looked at with Sanofi and Regeneron,
it really can be just the start of an evolution.
So, in the BD timeline,
it can reflect both long-term and short-term
goals. From the search and evaluation,
the diligence, the negotiations and contracts.
Now let's talk about some advanced topics
on each. So there's a lot more information
hopefully for future videos for you.
But things to Google and to look at,
in addition, in the scientific analysis,
really thinking through carefully the discovery, development,
lead optimization, CMC, ADME, a lot of the pieces
between the scientific and the therapeutic,
the integration of care is being more and more
important these days with the complexity.
And again, don't just look in the United States,
look in different countries and how they're
healthcare systems, approval systems, can be
different in different educations.
And again, not just pharma, we're talking about other
technologies as well. And then the commercial,
clinical use, an absolutely critical piece that so many
early stage companies don't think about. How this
will actually be used in the clinic when physicians are
prescribing it, using it, using it in a surgical suite,
how is it actually done, used, combined?
TPPs, TAMs, target product profile,
total available markets, potential available markets,
regional uses, all very useful and important things
to work on in the negotiation. And
on a personal level, there are rooms of books
written on these types of things that you can
go to your local library. But really, I think it comes down
to several fundamental things.
Curiosity, patience with the science, with people,
with the sides, with people who are not like you and
different groups. Again, a team sport. Clear
written and verbal communication
can never be important enough.
And then the ability to work with other people,
this is.. it really is all about the people.
Never seen a deal get done between companies,
it's always done between people.
Here are some parallels to academia
and some questions to consider as you
do in a lab, developing your technology
and your platform, and how to move forward in the partnership.
What vehicles could you use, how could you establish
collaborations, how do you structure them? Hopefully,
we've given you some information and some ways
to think about this. For further information,
I urge you to take a look at Anatol's video,
who's got some great insights into how to
apply a lot of these for an academic
audience, purpose, and technology.
So hopefully by now, we've achieved several
or hopefully all five, of the BD objectives here.
We hope that by now you can
define business development, identify the steps,
understand how business development contributes,
describe the different vehicles that business development
can leverage, and successful deal structures.
So just to wrap up, here are a few additional
resources on business development to give you
more information on what we touched on today.
Entrepreneurship Centers, Coursera, two
of my favorites, Harvard Business Review has some
great in-depth articles going back
decades now, FierceBiotech is one of several
weekly, monthly newsletters can give you great
insights into the types of deals that are
working well, ones that are working well over time,
and then where trends are moving in the industries.
Thank you very much for watching.