In Life Sciences Partnerships, You Must be Smart from the Beginning

deal worth hundreds of millions of dollars can be extraordinarily complex, and requires months to pull off. So what are some of the key factors?

Xconomy asked some of San Diego’s life sciences leaders to explore this question and offer their advice in an “on the record” dinner discussion late last year.

In attendance at the dinner—which was hosted by Alexandria Real Estate Equities (ARE) and sponsored by the Latham & Watkins law firm, Ernst & Young accounting firm, and Hughes Marino commercial real estate—were Bob Baltera, former CEO at Amira Pharmaceuticals; David Kabakoff of Sofinnova Ventures; Kevin Gorman, Neurocrine Biosciences CEO; Wendy Johnson, Aires Pharmaceuticals CEO (and ProQuest Investments Venture Partner); Robin Jackman, Zacharon Pharmaceuticals CEO; Adam Simpson, chief business officer at Meritage Pharma, Peter Ulrich, former CEO of TargeGen; Ping Wang of the Ansir Innovation Center; Hui Cai, WuXi PharmaTech vice president of business development; John Wehrli and Steven Chinowsky of Latham & Watkins; David Marino and John Jarvis of Hughes Marino; Jodi Smith and Chad Whitehead of Ernst & Young; and Jonathan Kabakoff and Jason Moorhead of ARE. Xconomy associate publisher Jim Edwards also attended, and as Xconomy San Diego editor, I was more or less the moderator, master of ceremonies, and chief inquisitor.

Our conversation circled several areas of concern. Here are some key points that emerged:

—The lack of capital, or perhaps insufficient access to capital, on the part of life sciences startups is the No. 1 driver of behavior among decision-makers on both sides of biotech-pharma partnerships. Pricing is down for both biotech assets and entire companies—unless the target is a highly promising experimental drug in late-stage development. Aires CEO Johnson, who also views the industry as a venture investor through her role at ProQuest, says most of the deals she sees are offering biotech companies “a lot less cash up-front, and they’re very back-end loaded,” i.e. future payments depend on hitting a series of milestones in terms of advancing drug development. Unless a biotech is in the enviable position of entertaining multiple offers, Johnson says venture-backed companies have little leverage and few, if any, viable alternatives.

—Having worked with Sanofi after the acquisition of San Diego’s Targeson, Ulrich said the French pharmaceutical appears to be moving to

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Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.