Tunnah’s musings: pharma meets biotech - a match made in heaven?

Paul Tunnah

pharmaphorum

Every now and then we all need to let our hair down and it just so happened that the publication date for this piece fell today, February 14th - officially the most romantic day of the year. Call it fate, call it serendipity, call it luck or perhaps even call it pre-determined by our editor who got fed up with me being so serious, but I thought given the coincidence it might be time for something a little more light-hearted than my usual observations.

The truth is we all need someone by our side to help us get through life and, as I discussed in last month’s musings, right now pharma really needs that special biotech to help it get through the ups and ‘dropping off a patent cliff’ downs of the next few years. But with a limited supply of good biotechs, the pharma suitors have their work cut out and it all forms a rather familiar story…

"As a well-respected pharma company, there are many ways to find the right biotech."

Playing the dating game

As a well-respected pharma company, there are many ways to find the right biotech. All over the world, you can try the latest craze of speed dating by visiting one of the many networking conferences. Here, you can get an overview of what possible partners have to offer, as they will readily provide a quick overview of their interest areas and ambitions. If you want something a bit more personal you can try arranging a one-to-one through a dating site – LinkedIn being one of the most popular. Be sure to check out the credentials of possible matches, before discretely contacting them to organise a more intimate meeting – they’ll no doubt be dressing up with their best pipeline for the occasion.

Also, you might like to try using one of the special matchmakers, or brokers as they’re sometimes known, to connect you directly with your future other half. But be careful – they don’t come cheap!

A period of courtship

Once you find a biotech that seems to “click” with your interests, it’s time to start getting more serious. Expect to spend a lot more time with your new partner as you get to know each other much better. This typically involves an extremely detailed analysis of their drug portfolio whilst also ensuring your commercial capabilities come across loud and clear – you don’t want them running off with another pharma at this critical stage.

In these early days, be particularly careful how you treat them. Whilst some like to keep their options open before committing too far, playing the field can be risky. Being seen out with another biotech, or foolishly leaving a risk-adjusted net present value calculation for a rival lying around could signal an abrupt end to your relationship. It’s best to keep it all as low key as possible at this stage, as you don’t want unwelcome media attention.

"…foolishly leaving a risk-adjusted net present value calculation for a rival lying around could signal an abrupt end to your relationship."

Time to get hitched

So, you’ve been courting for a while and the analysis has been done, the asset seems to fit and the commercial plans have been drawn up – the future looks good and the revenues even better. This is definitely “the one” and it’s time to let the world know. As speculation mounts, it’s time to put a notice out about your engagement in the form of a hastily prepared press release declaring what a great fit you are for each other (especially if you suspect other suitors are waiting in the wings with their own offer).

At this point, you should be prepared for some pushback from the family, as some of them are sure to not approve of the new union. Bear in mind that tying the knot does not come cheap and those with a vested interest in you will say the price is too high to justify the benefits and that too much risk is involved. But you know better and if your PR team chooses the right location you can keep them away from your big day so that everyone’s happy.

Make sure you have the funds though – as well as a hefty initial investment your new partner will expect you to provide for them longer term with on-going gifts and royalties.

It’s complicated

We all like a happy ending. In the ideal scenario expect to bring new drug after new drug into the medical world with your biotech partner, until you have a whole portfolio of offspring generating lots of income and pursuing exciting careers in different indications. Over time you may even be the proud parents of second generation assets in the form of modified release or isomeric versions, or even relocate together into new disease areas.

However, the truth is that it’s not always plain sailing. Sometimes, those early promises can be unfulfilled and those who expressed their concerns might turn out to be right. You simply weren’t right for each other, the cost was too high and it’s not a happy marriage. In the worst case another big pharma might even come along and steal your biotech away with an underhand acquisition. Remember – it’s a messy and expensive business when it goes wrong and you could be right back to square one, so keep a little funds to one side just in case.

"So where do we think this particular love story between pharma and biotech will end?"

Happily ever after?

So where do we think this particular love story between pharma and biotech will end?

Well, to finish on a slightly less frivolous note there is no doubt they need each other more than ever right now. Most biotechs really need the cash to drive their innovation forwards and most pharma companies desperately need the assets for their dwindling pipelines. But just as in the real world of relationships, identifying the right match is only one factor – how you treat each other over the longer term is even more important for success.

So whilst analysts will predominantly be looking very closely at the price of acquisition and the corporate fit, I would suggest keeping one eye on cultural fit and freedom to operate to each other’s strengths as another key marker for which pharma-biotech relationships will thrive. Business is ultimately as much about managing relationships as our family lives are.

I’ll be back with something less silly next month, so for those celebrating have a great day and, until next time, stay well.

About the author:

Paul Tunnah is Founder and Managing Director of www.pharmaphorum.com, the dynamic online information and discussion portal for the pharmaceutical industry featuring news, articles, events / company listings and online discussion. For queries he can be reached through the site contact form or on Twitter @pharmaphorum.

Is it time for pharma and biotech relationships to get serious?