a three-tiered partnership system that spans universities, biotechs, and pharmas. He predicts that Sanofi will try to advance pre-clinical compounds through collaborations with academic research institutions. It will then likely collaborate with venture-backed companies to advance early to mid-stage drugs, he says. Finally, “they’re going to do post-stage 2 on their own, because they have concluded that’s what they’re good at.”
—One pitfall for emerging companies in negotiating partnerships (and M&A deals] is that they fail to a thorough job of determining their own value—and in persuading their prospective partner of that value. “The companies that get the best deals done usually understand the value of what they bring to the table,” Kabakoff says.
—Doing your homework and establishing a solid foundation for the value of a business is important, but it carries relatively little weight with a prospective buyer if there are no competing bids, Baltera says. As the former CEO of Amira Pharmaceuticals, “I’ve been in the position of being the 800-pound gorilla,” he says. “It’s great if you can get into a competitive process. The problem is if you can’t. We went through our deal, it was a $475 million deal, and all but $100 million got paid out [in the first year]. If there had been just one buyer, that deal would have been under $100 million.”
—Neurocrine CEO Gorman says Baltera’s example underscores why it’s important for a startup’s senior executives to begin laying the groundwork for partnerships years before approaching prospective partners. “You do it for a variety of reasons,” Gorman says. “You do it now so 
you don’t have to waste time doing it later, and so you know who your prospective partners will be. No. 2, you build relationships that are going to be useful during background checks with partners and others, so you’re looking to the future. And No. 3, if you do this correctly with a long-term view, you’re laying out for these partners—especially European partners—what you plan to accomplish in the coming year. So when you go back later to meet with them [about a partnership or M&A deal], they’ll have a good, truthful assessment of what you’ve accomplished and what you have not.”
—With patents becoming a major battleground in some competitive markets, Latham’s Chinowsky says a biotech can improve its value and strengthen its negotiating position with a strong patent portfolio. As Ulrich points out, “Having a filed patent is great, but getting it granted and having it survive litigation is all that really matters.”
—Soffinova’s Kabakoff draws a distinction between the process that is intended to lead to an M&A deal, such as Baltera’s sale of Almira, and the series of drug development partnerships that Gorman has been doing at Neurocrine. In contrast to the closure that a sale brings, Kabakoff says the partners in a drug development collaboration usually have to work together for a long time, so the negotiations require attention to many details and elements of the partnership, how the two companies will work together, and what each will get for their efforts. “We just did a partnership between
