For a small pharma company, taking a therapy from a positive Phase 2 study to FDA approval is a daunting task. Standing in the way is generally a large, challenging, and expensive Phase 3 trial. Oftentimes, the best way for small companies to overcome that challenge is with the help of a Big Pharma partner.
But how do you connect with much larger companies? And what are the best practices for working with them? A panel at the 2018 Clinical Leader Forum in Philadelphia attempted to bring some clarity to those questions.
The panel consisted of Art Fratamico, chief business officer at Galera Therapeutics; John Hubbard, a pharma veteran and member of the board of directors at Agile Therapeutics; Howard Johnson, SVP of corporate development, alliance management, and program management at Iovance Biotherapeutics; and Tony Meehan, SVP and chief business officer at VenatoRx Pharmaceuticals. Between them, these four executives have over 110 years of pharma experience.
The Best Time To Partner
One of the first decisions an executive must make is when to partner. Is there a perfect time to find a development partner? Are there conditions that exist within a company that should be a signal to executives that it is the right time to sign a partnering deal?
Johnson believes a good time to consider a partnering deal is when a Big Pharma company or similar potential partner shows an interest in your company. He notes many smaller companies can toil in obscurity until their technology or data comes to the forefront. When that happens, there is suddenly interest from everywhere.
“The advice I like to give companies is that you have to be ready for that interest when it happens,” says Johnson. “I think you have to run your firm as if you’re going to be a standalone company. You have to make decisions to always be ready for the next step in the evolution of what you’re trying to accomplish.”
In other words, you can’t depend on a third-party to create value for you. You must create it yourself and always put yourself and your company in the best possible position to advance. Of course, the best way to make that happen is to always build value in your asset and its clinical data.
“There’s nothing like clinical data,” states Johnson. “You have to position your asset in the most attractive manner possible for potential partners. When there is interest in your company, you can decide on the timing of a partnership. But you must have that interest first, and the best way to achieve interest is to make relentless forward progress with your asset and data.”
Some companies will, of course, announce to the industry that they are for sale. Johnson does not recommend that approach. With the right data, you can generate the interest you need from pharma and the investment community. Seeking potential partners, rather than waiting for them to come to you, is not the best negotiating strategy.
Hubbard agrees, noting it is important for companies to keep all their options open. One of those options must be the ability to move forward on your own. He believes in having a sales plan, a commercial model, a valuation, and the capabilities necessary to move forward. That will put your company in a position of strength.
Is It Too Early Or Too Late?
If you’re looking for a partner, timing is important. Make a deal too early and you could lose millions. Wait too long and you could lose everything. So, how do you know when it’s the right time to strike a deal? Meehan doesn’t think it is ever too early to speak to potential partners.
“I am always very honest with companies,” says Meehan. “Competition is good, and I don’t hesitate to let them know that we have other options. If a company is not ready to put money down, I will tell them that we will finance our development another way. I think it’s healthy to have a competitive tension. I just look at them as two sides of the same coin.”
All panel members agreed that at various times one therapeutic area can be hot or cold when it comes to deals and investment. This is something companies cannot control. If your molecule is not hot, that is when you need to be prepared to move forward on your own.
“This is an interesting conundrum in our industry,” says Hubbard. “We look at innovation as a really valuable thing. We see the value presented by new therapeutic areas and new targets. But at the same time, we are also risk-averse. No one wants to be the first company to enter a new area of research. For example, at one time statins were a niche product. Today, they have completely changed the course of medicine. The same can be said of immunotherapy. If your technology is not currently a hot area of interest, you must find a way to persevere. As you generate positive clinical results, eventually someone will develop an interest.”
Find The Right Partner
Even if the time is right to partner, and you have potential suitors, you still must choose the right company. When you reach that point, how do you go about making that decision?
“I believe the best option is to always cast an extremely wide net,” says Meehan. “You may not know where the market for your product is. We might all prefer a buyout from a Big Pharma company, but the truth is they may not want you.”
Meehan has often been on the other side of the equation. He would find an asset that interested him, but would not have sufficient cash to purchase it. You can instead offer equity and downstream milestones, but don’t be surprised if you get turned down.
“Companies want that large chunk of cash right up front,” he says. “I understand that. So, I told them that when they get turned down by the big companies, that I would be their back-up date. You never know what another company’s needs are. That is why you keep all of your options open and talk to as many people as you can.”
Perform Due Diligence
Fratamico stresses the importance of due diligence. Two years ago, he was with a company that decided to find a partner for a licensing deal. He started the process of filtering through the firms that were interested and narrowed the shortlist to six companies. Each one was asked to present on why they would make the best partner.
“At the end of that process, the decision was obvious,” says Fratamico. “Our goal was to strike a licensing deal, and the top company was very clear to us. We looked at how they did things and knew it closely aligned with how we were thinking. If you can perform that type of diligence, I strongly recommend it.”
“The term ‘strategic fit’ gets thrown around a lot,” adds Johnson. “Still, that is definitely something you need to look at. A company might make a good partner because of its strategic needs, their strategic assets, or their strategic capabilities. It’s always important to do your homework.”
There are certainly potential suitors that you might rule out right from the start. There are companies that seem to be making it difficult for you to work with them. They might be very slow in responding or will always have conflicts that you have to work around.
“There are some companies you will like and some you will love,” says Hubbard. “When the selection process is all over, you never know who will be standing at the altar. Until the final decision is made, do your best to keep each company engaged and never say no to anyone.”
Finally, be sure you understand the future plans of your partner, especially if you strike a deal that includes downstream earnings, royalties, or milestone payments. In those cases, you must be concerned with the other party’s ability to take the asset forward and finance the development. If your new partner ends up just sitting on the asset, you are stuck.
Strike The Right Deal
Once you find the right partner, the final thing you will need to do is strike the right deal. What are some critical considerations you need to keep in mind when negotiating a collaboration or licensing deal?
Fratamico recommends focusing on two things, both of which are introspective. First, know your program, where it stands, where it is going, and your next milestone. You also need to know what activities are required to achieve that milestone.
“That piece really boils down to having a development plan that goes all the way through to approval,” says Fratamico. “It doesn’t matter if that approval is still years away. You must have that roadmap to guide you.”
The other recommendation is to focus on your internal abilities. Fratamico notes you should always know your company’s strengths and weaknesses. In any licensing deal, that will help you know where to focus your partner search efforts.”
“Companies will always have their own internal challenges,” states Hubbard. “When you bring together two different organizations, those challenges are multiplied. Spend as much time as possible really getting to know the person or the company you’re working with. Iron out as many details as possible before starting the work and be clear in your communications. And always have a good governance structure in place, especially if you are working across cultures. Doing that will help you head off any surprises.”