this is a green field, it’s going to take a lot of time. We’ve built most of these long term collaborations with a three or four-year initial period extendable to a total of five or six years not because we want to control [these companies] or own them, but because we think it might take that long to get the compounds and the medications out of the discovery labs and into the clinic. For really important areas of emerging biology, we think it makes more effective collaborations to work on a galaxy instead of a single planet.
X: What’s the biggest mistake you see made in these partnerships, and how do you avoid them?
GG: If we go through a process where our research and early development organization has fully bought in that this is a top drawer, blue chip program, or a disruptive area of science, then almost de facto we say that this company or potential partner is at the top of the heap of those working in this space. And we’ve gotten very comfortable letting them have control. If we’re working with the best player in a given space, why on earth would we want to make every decision? We collaborate incredibly closely with them scientifically, and we tend to have an agreement in principle and contractually that we will really work hard to build a consensus. But generally if push comes to shove up until the time we take the program in house—usually at the end of Phase 1, sometimes at the beginning of Phase 1—-they’ll make the final decision. This is unusual and not the norm in the industry. Big companies tend to say ‘we’re paying the bills and for heavens sake we’ll have the final say.’ I think the first couple of these that we did, we probably held our breath a little bit, but it’s actually worked out brilliantly. Our partners feel empowered—they’re the experts in a given area, they’re lean and mean. So that’s been a great learning experience for us.
X: Some of these early-stage partnership deals have massive upfront payments, in the nine-figure range. How do you go about valuing a transaction like that?
GG: For the early-stage things, it’s really hard to value. I’d argue you can’t calculate something like a firm net present value that really makes any sense. And the error bar on that would be something like 300 to 3,000 percent. So we tend to look more at what it’s going to cost to build this, and is that a number that really is sensible to our business and to our industry? For any deal, an Epizyme or a Bluebird, there’s a period where we are funding the programs totally at risk. It’s preclinical. We don’t know when we’re going to get into the clinic. So there’s definitely a discussion of how big that number is, how big the partner’s needs are. There’s a lot of negotiation back and forth because, of course, we don’t want to fund infinitely when we’re at the riskiest stage. But because so much of that upfront initial investment is based on what funding the project actually needs or requires to succeed, there’s probably less negotiation about that than the things that come after that—where are we going to build the milestones, what are we going to pay on approval, those kinds of things.
X: How do you and Tom Daniel, Celgene’s head of research and early-stage development, work together in crafting these partnerships?
GG: Tom and I have a unique working relationship that has been a key component of our success. We’ve had it from almost day one and it’s improved from constant dialogue and discussion. He has great business instincts; I’m a trained scientist. I have thoughts on some of the science, but it’s his group ultimately that selects these, and my team that helps build a structure that is supportive of our goals, the partner’s goals, and the science. To me, and I think to Tom, there’s nothing more motivating and self-sustaining than setting your sights on a goal of building a pipeline, identifying a couple of great companies, building a collaboration with them, and then seeing that start out well and that the science is producing good results. It just fuels you to do more.
X: What fields are you looking at as the hot emerging fields of biology going forward?
GG: The whole field of epigenetics, cancer metabolism, we see some of that converging. We do have a few other areas that we think are emerging. Tom and I deeply wish that there were 5 or 10 Agioses and Epizymes out there, and we will continue to look for them. But the field of such companies is not infinite. That’s probably my greatest challenge at the moment—finding more companies that have the science that can ultimately produce things that can make a significant difference.
