Patrick Clinton Large companies have a lot of money, but in dealing with vendors and others, they're often unwilling to let the other partner
have any. Do big companies vary a lot in their willingness to let smaller partners make money?
Pepin It's a balance between that and the other factors we were talking about. I'll be damned if the CEO of any biotech company
wouldn't want his business development person to bring in a deal with good financial terms. That's part of the business.
Koster It's a critical part. And how the finances play out, again, plays to a particular point in time. And that is the cost of
capital. When your stock price is low, then cash—a front-end loaded deal—becomes important. But for ultimate value for the
investor, you need good participation in the royalty stream or whatever profit sharing structure you build into the deal.
Ko I'm an entrepreneur through and through. The bad thing about entrepreneurs is that they don't work well with big companies.
The good thing about them is they know their limitations. I don't know how to deal with Big Pharma, but I know that I need
partners and help in the areas I'm not good at. Once I get the product approved, I just want to turn it over and not even
look at it.
Ormsbee You're articulating a vision, because you're the entrepreneur. You're bringing science to the table. And you're looking for
a partner who's going to take care of the commercialization. The debate is where in the middle do you want to play, and when.
Kicking the Tires
The first thing to come to mind for most of the participants when asked about due diligence was "cost." After that, the answers
Bernard Describe the due diligence process from both the biotech and pharma sides .Who's involved? What's the timing?
Cupit The first hurdle is always intellectual property. First we identify where [the product] fits in our portfolio. Then we get
CDA covered. If the attorneys can get a read on patents early, it can save a lot of time because if there's a problem, reviewing
everything else might make it a little dicey.
The next step is we get every line function to send questions in advance—and we don't do it by paper. We pick up the phone
two weeks in advance and say, "Here's what we'll need. Do you anticipate any problems?" That kind of stuff.
Bernard What are some of the primary reasons that products fail in the due diligence phase?
Yanni Intellectual property is big.
Pepin Freedom to operate.
Cupit Too narrow a therapeutic window for the efficacy and safety.
Carol Fisher Is there anything companies can do in the beginning to address these issues and avoid some of these failures?
Ormsbee You can't always predict the nature of the compound or changes in the market or the new competitors. Sometimes you get lucky.
But that's why you have to structure the deal to pay for the performance of the asset as milestones are met.