Koster A McKinsey study about two years ago actually references this issue. It claims that if large pharma started moving back toward preclinical and Phase I, and then looked at the price of current deals and actually doubled them, they would still come out ahead versus going for Phase II and III deals. An issue, though, for biotech is that the Street is pushing back the opposite way. And if you just look at price-to-book on various companies, you'll see that as you get into Phase II or III, the multiples start going up dramatically. So it's a difference between getting a partner to come in and help you do the heavy lifting, and help you be competitive, versus actually increasing the shareholder return as quickly as possible by taking your own compounds downstream. The right balance has to be found and struck.

Low-Hanging Fruit? At one point, the conversation looked as if it would turn to some early negotiations between licensees and licensors. That was when the topic of hot therapeutic areas came up.

Bernard What are the exciting, appealing, strategically fitting types of compounds or technologies out there today?

Pepin It has to be antibodies.

Koster The answer depends upon what your portfolio and your sales force look like, where you think you can sell, and whether you're selling to a specialty group or to primary care. The answer crosses over many therapeutic areas and indications.

There are areas of unmet need that still require a lot of attention. Pain is very underserved. Inflammation is another area that, broadly speaking, has been underserved and offers a lot of interesting opportunities. But in many cases we're talking about pretty heavy-duty anti-inflammatory agents that are generally immunosuppressive. There's a lot more opportunity for more specific agents.

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Yanni Baby boomer issues: diabetes and obesity. And metabolic syndrome.

We have an extremely active group looking at potential oncology targets, and since there are so many, we have to place our bets, as it were, somewhere—there are only so many that you can do. Many of those that we look at are not going to be within our "strategic direction." We see a lot of opportunities every year, and the number that we actually go forward with is quite small. So there is going to be a high percentage of noes versus the percentage of yeses.

Ko Why can you only go after a small number? Why not a lot?

Cupit There are hundreds of reasons, but I'll try to distill a couple. Sometimes the data is so early that there's really not a lot to talk about, and you can wait six months. And that's what we'll do. Instead of turning somebody down, we'll say, this looks intriguing. When you get to the next phase, please let us know. The other thing is that we've got to make sure that the patent estate is appropriate, because sometimes the patents haven't cleared yet and they're not willing to share them with us. Sometimes we can't get a CDA [confidential disclosure agreement] in place.