Biotech’s Perfect Storm A relatively more favorable funding environment, cutting-edge technologies, and a strong position at the partnership table have many of today’s biotechnology companies poised for success. Biotechnology companies have come into their own. A report from Ernst & Young finds U.S. biotech companies rebounded in dramatic fashion in 2003 and 2004 from a precipitous stock market decline that had left many companies facing severe cash shortages and feeling desperate about the future. The major force driving this resurgence is biotech companies’ success in moving new, first-in-class medicines through clinical trials and into the market. Ernst & Young predicts the industry should achieve net income for the first time in its 30-year history in 2008. The growth of the biotech industry will continue to outpace that of pharmaceutical companies, with the seven largest biotechnology companies growing at rates faster than the pharmaceutical industry’s 9.1% average, according to Wood Mackenzie. Ernst & Young researchers say the biotech industry has moved from technology-driven to product-driven, from potential to performance. This shift from being a technology to product industry, which has been ongoing since the debut of biotech companies 30 years ago, has accelerated in recent years. Advances in biotechnology R&D, which are driving new product development and improving success rates, will result in about 50 new biotech medicines receiving U.S. market approval, according to a study by the Tufts Center for the Study of Drug Development. The Tufts Center estimates that of about 250 protein-based therapeutic products currently in development worldwide, 33 recombinant protein (rDNA) and 16 monoclonal antibody (mAb) therapeutics are likely to receive market approval from the FDA. The bulk of new biotech product development will focus on treating oncologic, immunological, and cardiovascular/hemostasic diseases. In this forum, executives from biotechnology companies address some of the changes taking place within the industry. In a wide range of perspectives, they tackle everything from new technologies to the regulatory environment to funding issues to partnering success. Biotechnology Industry Facts There are more than 370 biotech drug products and vaccines currently in clinical trials targeting more than 200 diseases, including various cancers, Alzheimer’s disease, heart disease, diabetes, multiple sclerosis, AIDS, and arthritis. • Biotechnology is responsible for hundreds of medical diagnostic tests that keep the blood supply safe from the AIDS virus and detect other conditions early enough to be successfully treated. Home pregnancy tests are also biotechnology diagnostic products. • Consumers already are enjoying biotechnology foods such as papaya, soybeans, and corn. Hundreds of biopesticides and other agricultural products also are being used to improve the food supply and to reduce dependence on conventional chemical pesticides. • Environmental biotechnology products make it possible to clean up hazardous waste more efficiently by harnessing pollution-eating microbes without the use of caustic chemicals. • Industrial biotechnology applications have led to cleaner processes, which produce less waste and use less energy and water in such industrial sectors as chemicals, pulp and paper, textiles, food, energy, and metals and minerals. For example, most laundry detergents produced in the United States contain biotechnology-based enzymes. • DNA fingerprinting, a biotech process, has dramatically improved criminal investigation and forensic medicine, as well as afforded significant advances in anthropology and wildlife management. • There are 1,473 biotechnology companies in the United States, of which 314 are publicly held. • Market capitalization, the total value of publicly traded U.S. biotech companies at market prices, was $311 billion as of mid-March 2004. • The biotechnology industry has mushroomed since 1992, with U.S. revenue increasing from $8 billion in 1992 to $39.2 billion in 2003. • The U.S. biotechnology industry employed 198,300 people as of Dec. 31, 2003. • Biotechnology is one of the most research-intensive industries in the world. The U.S. biotech industry spent $17.9 billion on research and development in 2003. • The top eight biotech companies spent an average of $104,000 per employee on R&D in 2003. • The biotech industry is regulated by the U.S. Food and Drug Administration (FDA), the Environmental Protection Agency (EPA), and the Department of Agriculture (USDA). Thought Leaders Roger Attick. CEO and President, CeMines, Golden, Colo.; CeMines is a biotechnology company that applies principles of gene regulation to develop diagnostics and directed therapeutics for cancer. For more information, visit cemines.com. Martina Cartwright. VP of Scientific Affairs and Development, ImmuneRegen BioSciences Inc., Scottsdale, Ariz.; ImmuneRegen is a biotechnology company engaged in the research and development of applications using modified substance P, a naturally occurring immunomodulator. For more information, visit immuneregen.com. Bassil I. Dahiyat, Ph.D. President and CEO, Xencor Inc., Monrovia, Calif.; Xencor is a privately held biopharmaceutical company focused on the discovery and development of protein therapeutics for the treatment of cancer, inflammation, and autoimmune disorders. For more information, visit xencor.com. Lisa N. Drakeman, Ph.d. President and CEO, Genmab Inc., Princeton, N.J.; Genmab A/S, with global headquarters in Copenhagen, Denmark, is a biotechnology company that creates and develops human antibodies for the treatment of life-threatening and debilitating diseases. For more information, visit genmab.com. Michele Garufi. Chairman and CEO, NicOx S.A., Sophia Antipolis, France; NicOx is an emerging pharmaceutical company involved in the research and development of nitric oxide-donating drugs in the inflammation, pain, and cardiovascular therapeutic areas. For more information, visit nicox.com. Dennis I. Goldberg, Ph.D. President and Chief Operating Officer, Transport Pharmaceuticals Inc., Framingham, Mass.; Transport Pharmaceuticals is a developer of electrical-based technology for transdermal drug delivery. For more information visit transportpharma.com. Julia P. Gregory. Executive VP, Corporate Development and Chief Financial Officer, Lexicon Genetics Inc., The Woodlands, Texas; Lexicon Genetics is a biopharmaceutical company focused on the discovery and development of breakthrough treatments for human disease. For more information, visit lexicon-genetics.com. Saul Komisar. President, Protherics Inc., Brentwood, Tenn.; Protherics is a subsidiary of Protherics Plc., a vertically integrated biotechnology company focused on developing and marketing oncology and critical-care products. For more information, visit protherics.com. Daniel L. Korpolinski. Director, and Former President, and CEO, Stressgen Biotechnologies Corp., Victoria, British Columbia, Canada; Stressgen is a biopharmaceutical company focused on the discovery, development, and commercialization of innovative therapeutic vaccines for the treatment of infectious diseases and cancer. For more information, visit stressgen.com. Hans J. Mäder. President and CEO, Procyon Biopharma Inc., Dorval, Quebec, Canada; Procyon is a biotechnology company actively engaged in the development of innovative therapeutics in the fields of cancer and HIV/AIDS. For more information, visit procyonbiopharma.com. Jeff Morhet. Chief Operating Officer, InNexus Biotechnology Inc., Vancouver, British Columbia, Canada; InNexus is an innovative antibody-driven drug development company that has developed two technology platforms, SuperAntibody and TransMAbs, which improve the potency of existing antibody products while opening new markets and disease applications. For more information, visit innexusbiotech.com. Ricardo Moro-Vidal, M.D. President and CEO, BioCurex Inc., Richmond, British Columbia, Canada; BioCurex is a biotechnology company that is developing products based on patented/proprietary technology in the area of cancer diagnosis, imaging,and therapy. For more information, visit biocurex.com. Raul R. Rodriguez. Executive VP, and Chief Operating Officer, Rigel Pharmaceuticals Inc., South San Francisco, Calif.; Rigel is developing novel, small-molecule drugs to address large, unmet medical needs. For more information, visit rigel.com. Morrie Ruffin. Executive VP, Business Development and Emerging Companies, The Biotechnology Industry Organization, Washington, D.C.; BIO represents more than 1,100 biotech companies, academic institutions, state biotech centers, and related organizations in all 50 U.S. states and 33 other nations. For more information, visit bio.org. M. Scott Salka. CEO, Ambit Biosciences, San Diego; Ambit Biosciences is a privately held biopharmaceutical company developing small-molecule neuroprotectants for the treatment of stroke and other CNS disorders and kinase inhibitors for the treatment of cancer and inflammation. For more information, visit ambitbio.com. Brian P. Zambrowicz, Ph.D. Executive VP, Research, Lexicon Genetics Inc., The Woodlands, Texas; Lexicon Genetics is a biopharmaceutical company focused on the discovery and development of breakthrough treatments for human disease. For more information, visit lexicon-genetics.com. Roger Attick CEO and President CeMines Partners must first understand patience, it is only then that a relationship can and will grow. That growth must be based on loyalty, communication, fidelity, and in many cases, the attraction of opposites. In other words, partnerships — at least the most successful ones — must survive on the merits of both partners pulling the same load but adding incremental value. The Future of Biogenerics Over the next few years, a number of first-generation biopharmaceuticals will come off patent or lose marketing exclusivity (first in Europe, then in the United States), including alpha-interferon, erythropoietin, human growth hormone, human insulin, granulocyte-macrophage colony-stimulating factor, and some interleukins (see chart to the right). This will open the door for the manufacture of generic biopharmaceuticals (biogenerics). Assuming that biogenerics have a penetration rate comparable with that of traditional drugs, the potential global biogeneric market is valued at about $2 billion. There is an increasing demand from consumers for access to lower cost biopharmaceuticals and, because drug costs continue to receive increased scrutiny, the timing for generic biopharmaceuticals is excellent. For any generic to be successful several factors have to be met. There must be a large market for the original product, the original product must be at a high price, and it must be in a simple nonproprietary formulation. Many biopharmaceuticals adhere to all of these factors. There are, however, some factors that biopharmaceuticals lack that may hinder the production of generics: • Availability of the active substance produced through non-infringing rights • Well characterized activity with easy to match specifications • Manageable costs for demonstrating bioequivalence The complex and unclear nature of biotech patents also represents a major hurdle for biogenerics. Comparability problems Generic manufacturers have to submit abbreviated registration documents to regulatory bodies for approval to market a generic product. The abbreviated processes do not require firms to replicate extensive clinical trials with generics; instead, they must conduct tests to prove a generic is bioequivalent to the brand name drug. Unlike drugs made of purified small molecules, biopharmaceuticals are difficult to characterize chemically. In certain cases, a product is defined by its manufacturing process, and a product can be process specific. For these reasons, it is challenging, both in scientific and regulatory terms, to determine whether complex drug substances are comparable before and after manufacturing changes or to decide if they are therapeutically equivalent when made by different companies. Proof of comparability is more difficult in situations where a new manufacturer is seeking marketing approval for a biotechnology-derived drug produced by another manufacturer and already authorized, as in the case of generic biopharmaceuticals. Comparison can be made against published data, such as in a pharmacopoeial monograph, with respect to gross physicochemical or biochemical characteristics of the molecule. But this is not sufficient to establish all aspects pertinent to the evaluation of quality, safety, and efficacy for a biotechnology-derived drug. The generic manufacturer does not have access to all of the necessary information for comparison in terms of the quality with the original drug. Indeed, the expression/vector system, production and purification process, facility/equipment, analytical techniques, and so on will probably be different from those of the brand manufacturer, and the extent of these differences cannot be evaluated by the second manufacturer. Specific regulations lacking There are no clear, specific regulations established for dealing with generic biopharmaceuticals. Without these, it is unclear whether a generic biopharmaceutical market will be allowed to exist. In the United States, the Complex Drug Substances Coordinating Committee (CDS CC) in the Center for Drug Evaluation and Research (CDER) has been tasked with producing guidance. CDER has indicated that generic companies will need to provide sufficient characterization of their product to show both chemical and biological comparability with the previously licensed biopharmaceutical, as well as sufficient clinical data to assure their product’s safety and efficacy. Meanwhile in Europe, the Committee for Proprietary Medicinal Products (CPMP) at the European Medicines Agency (EMEA) has put forward guidance on the comparability of medicinal products containing biotechnology-derived proteins as an active substance. European guidelines The first draft of the European guidelines on comparability of biotechnology-derived proteins, drawn up in 2000, leaves substantial room for interpretation: there are no “universally” applicable guidelines — each product has to be reviewed on a case by case basis. It states, as in the United States, that “an extensive comparability exercise” may be required. For each proposed generic biopharmaceutical, appropriate preclinical and clinical studies should be considered, taking into account: • The nature of the drug substance and the complexity of its molecular structure • Knowledge of in vivo behavior • The extent of the clinical experience for a given drug substance and whether the molecular entity under consideration has already been marketed by one or several producers • Established relationship between known side effects (essential immunogenicity) and molecular features No life-long monopoly There is no reason to think that biopharmaceuticals will enjoy indefinite monopolies just because they are difficult to make and regulatory processes are lacking. As health costs continue to rise, biogenerics could offer an attractive source of savings for governments and consumers alike. Companies already working on generic biopharmaceuticals include Cangene (Canada), GeneMedix (UK), IVAX (US), Microbix (Canada), Rhein Biotech (Germany), and Teva (Israel). Some of the generic manufacturers are preparing to sell copycat biopharmaceutical products, which are due to be off patent soon in some major markets without stringent intellectual property rights. Many countries are encouraging their health systems to make greater use of generic drugs, which offer equivalent pharmaceutical care at a substantially lower cost. With healthcare budgets coming under increasing pressure, many governments have introduced a range of measures designed to encourage broader generic prescribing. These include: • Mandatory generic substitution requirements • Pricing restrictions • Formularies • Prescribing guidelines • Positive or negative lists Most advances in terms of generic market development are in the United States, where the generic market is valued at more than $10 billion and this is expected to double by 2006. Source: IMS Health, Plymouth Meeting, Pa. For more information, visit ims-global.com. Selected Biopharmaceuticals Nearing Generic Exposure Brand name(s) Generic name Originator Epogen/Procrit Erythropoietin alpha Amgen Neupogen Filgrastim Amgen Intron A Interferon alpha-2b Biogen Avonex Interferon beta-1a Biogen Engerix-B Hepatitis B vaccine SmithKline Beecham (now GSK) Genotropin Somatropin Genentech/Pharmacia Betaseron Interferon beta-1b Chiron Sales Values of Molecules Coming Off Patent In the U.S. (2001 TO 2011) Martina Cartwright VP, Scientific Affairs and Development ImmuneRegen BioSciences There are several barriers to overcome before biogenerics will become widely available.Regulation of such compounds is vague, if not nonexistent, at this time. Even if a biologic comes off patent, the methodology to make the product may still be under patent protection. I believe that biogenerics are likely to become a reality even though they are not generics in the traditional sense of ANDA filings for marketing approval. Biogeneric drugs will require clinical trials for approval, and they are very likely to become a reality within the next five years. Dr. Bassil Dahiyat President and CEO Xencor Biotechnology Advances Have Improved R&D Success Rates Advances IN BIOTECHNOLOGY R&D, which are driving new product development and improving success rates, will result in about 50 new biotech medicines receiving market approval from the U.S. Food and Drug Administration (FDA), according to a study by the Tufts Center for the Study of Drug Development. Based on its analysis of approval success rates for new biopharmaceuticals, the Tufts Center estimates that of about 250 protein-based therapeutic products currently in development worldwide, 33 recombinant protein (rDNA) and 16 monoclonal antibody (mAb) therapeutics are likely to receive market approval from the FDA. “Biotechnology advances made during the late 1980s and the 1990s allowed researchers to design novel products, which have led to an expansion in the number and variety of recombinant products in clinical study and an increase in success rates,” says Kenneth I. Kaitin, Tufts Center director. “Development of mAb therapeutics, particularly those based on human genes, has also progressed significantly, with much higher success rates than murine, or mouse-based, products.” He adds that the bulk of new biotech product development will focus on treating oncologic, immunological, and cardiovascular/hemostasic diseases. The Tufts Center’s analysis, summarized in its March/April Tufts CSDD Impact Report, also found that: • rDNA therapeutics entering clinical study during 1990-1997 had success rates of 35%, a 35% increase over success rates for those entering study during 1980-1989. • Immunological chimeric mAbs and humanized mAbs for oncology indications had success rates greater than 30%. • Safety, efficacy, and commercial issues are the primary reasons for termination of protein therapeutics during the clinical phase of development. • Maintaining or improving future success rates of new biotech products will depend on novel molecular engineering, intellectual property protection, and efficient manufacturing. Total biotechnology patents granted per year Source: The Tufts Center for the Study of Drug Development, Boston. For more information, visit csdd.tufts.edu. New Biotech Drug and Vaccine Approvals/New Indication Approvals By Year Number of Year Approvals 1982 2 1983 0 1984 0 1985 1 1986 5 1987 3 1988 3 1989 6 1990 5 1991 9 1992 4 1993 7 1994 7 1995 15 1996 25 1997 19 1998 25 1999 20 2000 34 2001 25 2002 36 2003 37 Source: Biotechnology Industry Organization, Washington, D.C. For more information, visit .bio.org. Michele Garufi Chairman and CEO NicOx NicOx believes there is increasing resistance from regulatory authorities and the medical community toward drugs being developed and marketed as “across the board therapies” suitable for all patients. I believe there is a shift toward personalized medicine and finding the right drug for the right patient, which will continue. Burrill & Co.’s Outlook for 2005 • A reasonably robust public equity IPO market with 40-plus IPOs completed in the United States and an even a larger number internationally. • An industry raising more than $20 billion in the United States. • A year in which biotech company stocks will outperform NASDAQ, DJIA, and the pharma indices, with the biotechnology industry market cap up more than 25%. • VCs will raise more money for life-science ventures, spend more money, and increase their interest in investing in early-stage investments. • Increased big pharmaceutical company consolidation, increased biotechnology to big pharmaceutical company consolidation, and increased biotech to biotech consolidation. • An improved partnering environment for biotechnology companies with even larger values attributed to earlier stage compounds (including preclinical). • A more challenging regulatory environment (post Vioxx, Chiron’s vaccine issues, and concern for children’s antidepressants) driving toward increased use of pharmacogenomics and theranostics (diagnostics that are attached to therapeutics to identify responding patient populations). • Increased progress with stem cells both scientifically and economically, with more states joining the California focus on funding stem- cell research. • More pressure from payers (managed care, CMS, various country health ministries) resulting in more product bundling, more personalized medicine, less “blockbusterology” (fewer “one-size-fits-all” drugs). • More approval of, and use of generics; and the emergence of biopharmaceutical generics. • Increased effectiveness at both the HHS and the Food and Drug Administration, with confirmed leadership at both, albeit continuing dialogue about the FDA’s role in monitoring drug safety. • Increased dialogue about both predicative and preventive care, as the industry moves from just treating sickness to treating wellness. • Increased growth of the biotechnology industry internationally, especially in the BRIC countries (Brazil, Russia, India, China), Japan, and Scandinavia. • Bioterrorism spending will increase in the United States. Initially spending will be on research and development for new vaccines, diagnostics, and eventually therapeutics. Source: Burrill & Co., San Francisco. For more information, visit burrillandco.com. Dr. Dennis Goldberg President and Chief Operating Officer Transport Pharmaceuticals In general, the ethics debate lags technological development. We have seen that in each period of technological innovation the current speed of innovation exacerbates this problem. Julia Gregory Executive VP, Corporate Development and Chief Financial Officer Lexicon Genetics In my experience, successful partnerships are first forged by both parties agreeing to a set of guiding principles that are followed up by concrete measures. Biotech Market Capitalization 1997-2004 Sources: Biotechnology Industry Organization, Washington, D.C. For more information, visit bio.org. U.S. Patent and Trademark Office, Washington, D.C. Note: The report captures biotech patent examination activity by U.S. Patent Examining Technology Center Groups 1630-1660 (formerly Patent Examining Group 1800). For more information, visit uspto.gov. Venture Capital Investing Settles Back to $4.6 Billion in First-Quarter 2005 Venture capitalists invested $4.6 billion in 674 companies in the first quarter of 2005, according to the MoneyTree Survey by PricewaterhouseCoopers, Thomson Venture Economics, and the National Venture Capital Association. Funding was below the fourth-quarter 2004 total of $5.4 billion but matched third-quarter 2004 funding of $4.6 billion. Over the past two years, quarterly investing has floated between $4.4 billion and $5.9 billion. First-time fundings inched up near a two-year high of $1.2 billion in 197 companies on the strength of relatively more mature companies receiving their first round of venture capital. And life-sciences investing abated for the first time in two years. According to Mark Heesen, president of the National Venture Capital Association, venture investment was indeed down this quarter, but it still fell within the $4 billion to $6 billion range that is considered to be at a rational, investable, performance-driven equilibrium (RIPE). “We would like to see the industry stay within this ‘RIPE zone’ for the remainder of the year, as a $20 billion to $23 billion annual investment level is a logical place to be considering market conditions,” he says. “We are also looking for a noticeable uptick in the percentage of earlier-stage deals that has yet to occur but we anticipate this taking place as venture capitalists begin to deploy recently raised new funds.” Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers, adds: “We’re seeing a natural ebb and flow in the level of investing. This quarter, the breadth of investing in industry segments and in companies at varying stages of maturity indicates a healthy balance between short- and long-term opportunities. The slow down in life sciences also reflects this balance as venture capitalists remain conscious not to overfund specific sectors.” First-Time Financings First-time financings have been trending slightly upward over the last two years. The increase to $1.2 billion in the first quarter compared with an average of $1.1 billion last year is notable in that it accounts for 26% of all venture capital funding compared with 21% last year. This was the highest proportion since 2000. The strength in first quarter 2005 was attributable to a diverse mix of companies receiving venture capital for the first time. Companies in the early stage of their development typically account for the bulk of first-time investing. While that remained true in first quarter 2005, several companies in the expansion stage of development secured significant initial venture capital. And these companies generally require larger investments. In the first quarter, 123 early-stage companies attracted an average of $4.5 million per company for their first round of funding, while 36 expansion-stage companies received an average of $11.4 million, and nine later-stage companies received an average of $20.1 million each. Sector and Industry Analysis After two years of dominance, the life-sciences sector — biotechnology and medical devices together — fell significantly in first quarter 2005 to $1.08 billion, compared with $1.6 billion in fourth quarter 2004 and the lowest amount since first quarter 2003. A total of 129 life-sciences companies were funded versus 162 in the previous quarter. The sector accounted for 19% of all deals and 23% of all dollars during the period — still a solid level, reflective of recent market conditions. Source: The MoneyTree Survey by PricewaterhouseCoopers, Thomson Venture Economics, and the National Venture Capital Association. For more information, visit pwcmoneytree.com, ventureeconomics.com, and nvca.org. Saul Komisar President Protherics The growth in biologics is outpacing the overall pharmaceutical market, and this is expected to continue over the next 10 years. As this market matures without countervailing pricing pressures, there will be considerable pressure on Congress to bring some resolution to the issue of biogenerics or follow-on biologics. Daniel Korpolinski Director Stressgen Biotechnologies Regulatory guidelines are now emerging and it appears the FDA road forward anticipates that nanotechnology products to be regulated will span the regulatory boundaries between pharmaceuticals, medical devices, and biologics. These will be regulated as “combination products” for which the regulatory pathway has been established by statute. Hans Mäder President and CEO Procyon Biopharma The ideal partner would be a global company established in all major markets. At Procyon, our business model is to bring products from preclinical through Phase II clinical trials, therefore we are looking for partners that have the infrastructure to complete clinical development and possess the regulatory know-how to file for new drug approval with the relevant regulatory bodies. Becoming a “Partner of Choice” The biopartnering surveys conducted by IBM over the past five years indicate continued formation of, and reliance on, strategic alliances. Because the technologies driving the next wave of innovation are too diverse for any one organization to develop and manage alone, partnerships will continue to play an important strategic role for biotech and pharma companies. The findings of IBM’s BioPartnering 2004 survey suggest that both biotech and pharma companies need to improve their partnership management skills to execute properly aligned, high-performing alliances. Those that succeed can become “partners of choice” in their sphere. Whether biotech or pharma, a partner of choice does not follow a “one-size-fits-all” strategy, but rather identifies its role in the marketplace and develops its capabilities accordingly. A partner of choice knows what it is good at, is able to target the right alliance partners, and can develop relationships quickly and effectively. For biotechs, the challenge is to plan and execute deals more effectively. With a R&D pipeline that emphasizes drug discovery and clinical development, biotech companies naturally tend to focus on science and technology. But in the 2004 survey, technology and clinical-trial issues were not commonly cited as reasons for alliance failures. This suggests a significant opportunity to realize value by focusing on alliance management issues. One way to move toward this goal is through a clear division of labor — letting scientists do the science, while business development managers or alliance managers drive the alliance itself. With the number of biotech-biotech deals now greater than the number of biotech-pharma deals, pharma companies must take care to be as responsive as possible or risk losing out to biotech. Successful pharma companies identify the strategic focus they wish to adopt in a partnership and consider carefully the internal capabilities they wish to strengthen to excel in this position. Once a pharma company has defined its operational capabilities, it will be able to achieve an advantage only by carrying out these activities more cheaply or more effectively than its competitors. Mastering core operating capabilities will increasingly be expected as a prerequisite by potential out-licensing parties. Organizations that are able to focus successfully on niche markets are less likely to require substantial investment to identify opportunities, as the most valuable opportunities are likely to come to them. Improving the biopartnering process To realize the full potential of alliances, IBM Institute for Business Value analysis suggests that companies need to improve their practices at each stage in the biopartnering process: sourcing and finding deals, deal-making, and post-deal alliance management. Sourcing and finding deals As the results of the 2004 survey indicate, mismatches between partners can lead to failed alliances. To cite one respondent’s experience: “On the development front (the pharma company) was an excellent partner. On the commercial front, (the pharma company) has been a huge disappointment, and we felt we picked the wrong partner for this opportunity.” With fierce competition for alliance deals, biotechs, and pharma companies face a growing challenge in sourcing and selecting the best partner. Partner segmentation is one strategy that can help alliance seekers avoid the disappointment of mismatches. Potential partners can be analyzed according to several criteria: • Resources and infrastructure. What would the potential partner bring to the deal in terms of financial resources, scientific knowledge, other partners, facilities, and supporting organization? • Track record. What previous experiences and competencies does the potential partner bring? What alliances have they been involved with in the past? And what is their average time-to-deal? • Reputation. What is the potential partner’s reputation in the industry? Is it considered a “partner of choice” in the relevant therapeutic area, development phase, technology, or geographical region? It should be recognized that differentiation is becoming more difficult as big pharma companies converge on similar strategic goals. This trend, however, is opening new opportunities for biotechs and small pharma to differentiate from the big players by leveraging relatively smaller complexities of scale. Another strategy for sourcing and finding deals is to develop a structured approach to finding partners. The use of standard operating procedures and proven, reusable “sourcing templates” can increase the probability of choosing the right partner, not just once but across a portfolio of alliances. A structured approach speeds the formation of new deals by helping ensure a consistent and thorough decision-making process for assessing deals, and enables partners to scale up easily in the size and complexity of deals. Tips for improving the chances of success for the alliance: • Implement formalized, shared alliance management policies and processes from the start • Appoint senior business management to alliance; do not divert scientific resource to alliance management • Develop a common culture that fosters open, two-way communication • Define organizational models customized for the individual alliance • Monitor performance of alliance and partners’ satisfaction with the alliance on an ongoing basis • Implement systematic learning and knowledge management across the alliance/portfolio of alliances • Transfer alliance capabilities further across company’s value chain — from R&D to manufacturing and the supply chain to marketing. By addressing six key management alliance issues, alliance partners can salvage 85% of the value lost from failed alliances, a potential savings of $2.7 billion per year in a nearly $500 billion industry that grew 9% in 2003. • Management turnover. Changes in senior management at the pharmaceutical company should be handled carefully to avoid adverse impact on the biopartnering strategy • Timing of results. Partners should be aware that expected results may be slow or fail to appear at all. • Culture. Companies should nurture a distinct culture for the alliance that complements the separate partner organizations. Large pharma companies can be more bureaucratic, for example, while biotechs can be run from a shareholder or scientist mindset. • Documentation. Commitment to the alliance should be codified in documents that both parties consider to be equitable and workable. • Leadership. Key partners from both sides should show their commitment by involving themselves in strategy development sessions. • Processes. Alliance partners should clearly define and articulate joint business processes. Source: IBM Institute for Business Value BioPartnering 2004. For more information, visit ibm.com/bcs. Because the technologies driving the next wave of innovation are too diverse for any one organization to develop and manage alone, partnerships will continue to play an important strategic role for biotech and pharma companies. Dr. Ricardo Moro-Vidal President and CEO BioCurex Inc. Nanotechnology has almost limitless potential, from creating incredibly fast and compact computers to allowing more precision in delicate surgical applications. Of course, when scientists see the vast promise of these new technologies, others see ethical issues based on their various political, scientific, and religious leanings. Jeff Morhet Chief Operating Officer InNexus Biotechnology Scientists recognized long ago that antibodies had the potential to become powerful tools for the treatment of many diseases. From their discovery more than 100 hundred years ago by von Behring and Kitasato, antibodies have fascinated immunologists and, during the last three decades, have proven their membership as successfully developed therapeutics. Geographic Excellence PharmaVOICE asked executives representing various biotech clusters around the country to discuss the necessary driving factors for a successful biotech cluster; the importance of alliances and cooperation within their regions; the biggest obstacles to maintaining and growing a biotech cluster/region; what the No. 1 priority for their cluster is this year; and their top priorities for the next five years. Arizona McGarity: A solid and growing infrastructure and a coalition of thought leaders are extremely important driving factors for a successful biotech cluster. A coalition of leadership should include universities, community colleges, healthcare industry, government, medical research, and business leaders working together and mobilizing both public and private sector interests. A successful biotech cluster also requires a continuous investment in higher education, workforce development, capital formation initiatives, and movement toward increasing shares of federal research funding. Two years ago, the Flinn Foundation in Phoenix developed its Statewide Roadmap with the assistance of Battelle, and the primary forces for developing a successful bioindustry in Arizona included building a research infrastructure, developing a critical mass of biotech firms, enhancing the business environment, and enacting measures to prepare the workforce and educate citizens. Regional alliances and cooperation are vital at every level. Alliances have to happen within organizations with respect to biotech, and they have to happen between organizations. No single entity in a given region has the ability to create an optimal environment for biotech growth by itself; it happens only with strategic goals and partnerships. In this way, Arizona has been extremely fortunate, because there is a very open mindset within the business culture and a willingness to partner. For example, the attraction of the Translational Genomics Research Institute (TGen) might not have been possible without the collaboration of more than 100 statewide partners, including the three state universities, community colleges, business and community leadership, and many others. The biggest obstacle to maintaining and growing a biotech region is maintaining a commitment to stay the course and do the work that is necessary, because there is no short-term fix. Arizona has recently made concerted efforts to compete nationally for biotech industry, but it minimally takes a 10-year commitment before there’s a meaningful shift to another level for a region. Developing a competitive biotech infrastructure takes dedication and lots of energy and will inevitably be a long process. For the Arizona BioIndustry Association (ABA), our top priorities include expanding membership, providing more educational programs to membership, and ensuring financial stability for the organization in the future. In the next five years, we will continue to educate the public, provide assistance with infrastructure improvements, and build a viable association responsive to the needs of bioindustry in the state of Arizona. Poste: There are several driving factors, although a critical mass of collaborative-minded leadership is the primary component for a successful biotech cluster in a region. The future of biotech industry clustering will rely upon the decisions of leaders to join forces and innovate beyond the laboratory, and leaders who can find links and partnerships beyond traditional scientific niches will find the most success. This collaborative enthusiasm has been the main reason for Greater Phoenix’s recent successes in attracting talented scientific minds and innovation. Regional alliances and cooperation are critical, but they have to be the right strategic alliances that incorporate the region’s vision for where it wants to be in the future. It is important that communication can occur openly, honestly, and efficiently between the public and the private sectors, because the world can change in an instant, and a rapid, measured response to economic issues and data must be possible. In Arizona, the passage of Proposition 301 was an excellent example of how alliances and cooperation at key levels helped to positively change the economic platform. In November 2000, the voters of Arizona passed Proposition 301, which authorized a 0.6% sales tax increase to support education over the next 20 years. This ultimately funded university endeavors, such as the Biodesign Institute at ASU, as well as important initiatives in workforce development and research. The biggest obstacle to maintaining and growing a biotech region is preserving continuous public support when many do not understand or highly prioritize the impact of scientific advancement on a region’s future. Many regions are becoming savvier, but it is a long-term educational process. There’s often a public expectation of immediate and substantive economic returns-on-investment after public investments are made, and this can be difficult to satisfy. The Biodesign Institute at Arizona State University, the Arizona BioIndustry Association, TGen, and many other key partners are working together to improve the quality of life in the region for the future, and this is the overarching priority. The mission of the Biodesign Institute at Arizona State University is to improve human health and quality of life through use-inspired biosystems research and effective multidisciplinary partnerships. In the next five years, our top regional priorities in biotechnology will have to include continued improvements in infrastructure and policy to support life-sciences growth and innovation. California — Irvine Irvine, Calif., is a prime location for the biotechnology and pharmaceutical industries, thanks to the research capabilities of University of California, Irvine (including University Research Park) and a highly skilled workforce. Home to well-known companies, such as Allergan and Edwards Lifesciences, many smaller start-up companies also thrive here; Ambry Genetics, Cortex Pharmaceuticals, and Spectrum Pharmaceuticals are just a few examples. Collaboration and knowledge sharing are key factors in business development for our region, particularly with the biotech and pharma industries. Because the success of both industries is predicated on research, there needs to be an open and clear channel of communication between business, education, finance, and government (local, state, and federal). Biomed and pharma businesses face high development and labor costs. Outsourcing and other factors are causing manufacturing and service jobs to leave the county. Alliances and cooperation are critical to ensure the most innovative and promising companies receive the necessary business and financial support and thrive in the crucial early stages of business. In the past year, the economy’s slow recovery has remained a challenge to continued expansion, as it has for many places, I imagine. While we still receive phone calls from executives at biotech and pharmaceutical firms looking to expand or relocate to Irvine, we find that few companies are acting as quickly as they were just a few years ago. We have had a number of significant relocations/expansions in a variety of industries over the last six months, but I do see signs that the economy seems to be recovering. Our biomedical cluster currently consists of pharmaceutical, biotechnology, and medical-device companies, and we are looking to expand upon that base. Because of the most recent statewide initiative providing monies for stem-cell research, we see this as a No. 1 priority for the coming years. Additionally, we see biosecurity as the next logical step in the evolution of the biotechnology sector, and we are making it a priority to reach out to companies in this field. We believe these firms could benefit greatly from research partnerships with UC Irvine. California — Sacramento Important considerations for recrutiment are world-class research/educational institutions with strong technology transfer components, professional support industries (legal, accounting, human resources, consulting, and financial), investment capital, and increasingly, cost of living and quality of life. As companies are forced to become more efficient with investment capital, as well as move ideas into products very quickly, clusters are becoming geographically broader, and second-tier regions near more established clusters will capture a larger portion of growth. Also, large “events,” for example the creation of the California Institute of Regenerative Medicine (CIRM) pumping $3 billion into research institutions, could strengthen existing clusters or even plant the seeds for new specialized clusters. Alliances and cooperation within the region are critically important, especially for start-ups and small firms. The regions that have been successful have been able to create a unique synergy of very accessible public, financial, service, and academic support. I would add not only do regions need alliances, they need “champions” either from the public or private sector to lead the charge. One cluster’s obstacle is another’s benefit. The San Francisco Bay Area’s life-sciences cluster is the largest in the world, but the cost of living and doing business is becoming prohibitive. Combined, they are creating very real barriers to growth. The Sacramento Region’s cluster is seeing rapid growth in related fields of academic and commercial enterprise because of the combination of the rise of UC Davis into the upper echelons of research institutions and investment capitalists turning their sights inward to the inland Capital Region of California. Short term, we are strengthening our regional network to proactively recruit life-sciences companies and capital investment and continue to assist those organizations and firms that have already decided to make their move to the region. Longer term, we will attract major life-sciences headquarters, as well as major research institutions to region. California — San Diego The most important successful biotech cluster factors include availability of experienced R&D personnel, access to capital, and an encouraging local governmental atmosphere that welcomes life-sciences companies. Alliances with large international pharmaceutical companies are definitely important. Regional cooperation creates infrastructure, which helps achieve operating efficiencies. For example, membership in BIOCOM enables life-sciences companies to pool their purchasing power and acquire supplies under favorable, negotiated terms. Unnecessary governmental regulations are always a challenge. Often legislators are either uninformed or misinformed regarding the consequences of their actions. The biotech industry has reached a very exciting stage in its growth but is not yet profitable in a sustained manner and relies on investor confidence in its future to raise the capital needed to complete development of many new medicines. This means the industry remains very fragile and at risk from new laws and restrictions relating to price controls, intellectual property challenges, foreign scientist immigration, and importation of prescription medicines from foreign countries. We need to do a better job in educating both the public and our legislators on the benefits our industry has and will continue to provide in the future. Significant improvements in the quality of our lives are possible as we address important health conditions, such as diabetes, cancer, and inflammation. We need to address the growing public mistrust of our industry and improve our efficiency at getting the next generation of safe and effective new drugs approved by our partners at the FDA. We also need to get congress to pressure foreign governments via WTO initiatives to shoulder their fair share of R&D drug costs that they currently avoid via their local price controls, which then, effectively, are passed onto the U.S. consumer. Georgia Talent, capital, and facilities are the driving factors for a successful biotech cluster, all of which are derived through cooperation and vision. Continuing the growth of a successful biotech cluster in Georgia will require that regional and statewide cooperation continues, as well as a cooperative spirit within all areas of government dealing with life sciences. One of the largest obstacles for an emerging market in any industry is to understand and develop a successful model where the risk is equitably divided. Understanding and assessing risk is key to creating a successful cluster. Georgia is ranked as the 8th largest life-sciences community in the United States by Ernst & Young. We would like to move into the top five within the next three to five years. Louisiana — New Orleans The driving factors for a successful biotech cluster are recruitment of nationally recognized principal investigators, major public matching funds into facilities, early-stage capital, and assistance for start-up companies. Alliances and cooperation within the region are vital, especially in light of the new NIH Roadmap that requires collaboration and coordination among research institutions. The biggest obstacles to maintaining and growing a biotech cluster/region are a lack of lab technicians and state and local funding for infrastructure needs. The No. 1 priority for our cluster this year and our top priorities for the next five years are the development of the new Greater New Orleans Health and Bioscience Economic Development District in the 2005 State Legislative Session for the New Orleans Downtown Medical District, which will dedicate new state and local funds for infrastructure and recruitment of super principal investigators for Tulane, LSU, and Xavier Universities along with the LA Cancer Consortium and LA Gene Therapy Consortium. Development of new training programs at local community colleges to create more lab technicians is also a major concern for our universities and 22 biotech companies located in the region. Maryland A sizeable research base, along with a critical mass of companies, is necessary to sustain a successful cluster. From a workforce perspective, this will give new workers coming into a company a comfort level, so if they relocate and things don’t work out, there will be other opportunities in the region without moving again. The research base and the companies also serve as fountains of entrepreneurship. If the regional culture encourages an entrepreneurial spirit, and the right support mechanisms are in place, individuals will come out of these organizations to start their own new companies. Unlike many other industries, where trade secrets and speed to market are the keys to success, bioscience thrives on partnerships and cooperative activity. If the companies and academic laboratories you work with are physically nearby, it makes it that much easier to maintain a successful collaborative relationship. One of the most critical elements is early-stage capital. A mixture of SBIR grants, angel investors, public-sector investments, and venture capital is needed to get companies to the point where they become attractive to the large-scale investors they are likely to need later. In addition, the entrepreneurs and early-stage investors need to be realistic about what the valuation of the company is likely to be as it progresses and whether the business model is one that is likely to attract the attention of institutional venture capital. A steady stream of innovative business plans (not just good science) backed by solid management teams will always attract capital into a region. Another important factor is staying ahead of the workforce demand. As companies move forward, they will need trained workers with different skill sets. If companies in the region have not traditionally employed these workers, they might need to be brought in from other places, which is expensive. The local educational institutions and companies need to be proactive, working together to be sure that qualified workers are available when needed. It’s a delicate exercise in timing for a developing cluster. Our priority is always the same: to assist the bioscience companies in Maryland to reach their full potential. The specific focus may change — capital availability is currently an important issue — but the long-term goal is to help companies become what their investors and management want them to become. Michigan — Southwest When Kalamazoo began developing a biotech cluster a few years ago, we were at the forefront of small communities. Today, nearly every state in the country is looking to develop a biotech cluster. Healthcare, and the life sciences in general provide stability for a community. First and foremost, it is a growth market, regardless of what is happening elsewhere in the economy. Second, it is an industry that offers higher salaries and generates greater investment value to a community. A 2004 Michigan Life Sciences Impact report showed an average of $15,900 more in annual salary compared with other industries. But while most communities would love to develop a biotech cluster, unless they are starting from existing resources, it is very difficult to develop and maintain all of the components of a successful biotech industry. Success for the Greater Kalamazoo Region and Southwest Michigan in general stems from our 125-year history in the pharmaceutical industry. We are also one of only a handful of communities worldwide that can take a new drug from concept to commercialization. So our “cluster” was really a redeployment of existing assets and resources, supported by a communitywide effort that stretched to the Governor’s office. In the past two years alone, Kalamazoo has helped launch more than two dozen biotech companies. Of these, 16 are located at the Southwest Michigan Innovation Center, a $14 million, 58,000-square-foot wet lab incubator accelerator that was built using just $4 million in public funding — half from the state and half from the community. It required a single vision for success and unilateral support from the community. Regional alliances are essential, not only as a part of strategy but as a foundational or cornerstone building block. In Kalamazoo, our vision for success is based on a collaborative model that places higher education at the center and our supply chain in interlocking concentric circles around it. We built our wet lab accelerator in the middle of Western Michigan University’s Business Technology Research Park. This gives our biotech start-ups direct and immediate access to resources from the university as well as surrounding industry suppliers. And just a few miles away, Kalamazoo Valley Community College and its workforce development arm, the Michigan Technical Education Center, provides workforce development solutions. KVCC is also a member of the Core Technology Alliance and is currently developing a high throughput screening center that will serve local startups and suppliers, as well as drug development companies, from around the nation and the world. Perhaps more so than in most industries, the attrition rate of biotech startups is very high. While the rewards can be tremendous, so are the risks. They require enormous amounts of capital to launch and continuous injections of capital to survive. In Kalamazoo, next to capital, we see extending our model of collaboration deeper into the community as a critical key to long-term success. That means engaging new partners, such as our local banking leaders, and extending our efforts deeper into some of the institutions and organizations that are already engaged. For example, in the past, our regional Small Business Technology Development Center has provided an individual to support our local startups with business plan development and business management counsel. This year, by leveraging a team of individuals with varying skill sets available through the SBTDC, we now provide executive coaching around all aspects of sales, leadership, pricing, networking, closing, strategic partnerships, and much, much more — all of the skills sets required to make their businesses successful. And in helping them individually, we contribute to the long-term prospects of our biotech cluster and to the vitality of our economy in Southwest Michigan. Access to venture capital is our single most pressing need. To address this, we are in the process of launching the community’s fourth venture fund. But in addition to this, we need to establish significant and long-term access to funding. To accomplish this, we are once again tapping our regional partners and we are seeking out-of-the box solutions. For example, last year we created the Kalamazoo Bank Consortium for Innovation, an extension of Southwest Michigan First. A formal association of 11 bank executives from Kalamazoo County, the consortium serves as an information resource and provides financial coaching to entrepreneurs. It also provides an important link between traditional lending institutions and the venture capital community. New Hampshire The BioSeacoast Life Sciences Cluster is an industry-specific cluster for New Hampshire and its neighboring seacoast region. Centered in Portsmouth, N.H., BioSeacoast encompasses all of New Hampshire, as well as the region extending from Cape Anne, Mass., through Cape Elizabeth, Maine. There are at least 25 N.H. life-sciences companies located within 10 miles of Portsmouth and more than 100 N.H. companies located within 50 miles of this seacoast city. In addition, there are numerous colleges, service providers, an educated workforce, and many business/scientific professionals in this region. The embedded knowledge base is significant. Portsmouth is located 50 miles north of Cambridge, Mass., and 50 miles southwest of Portland, Maine. Because of this geographic proximity, the majority of life-sciences companies doing business in all three states are within 50 to 70 miles of Portsmouth. This presents an extraordinary opportunity for effecting change in our region. While each state has its own identity and life-sciences initiatives, the workforce is fluid across state boundaries. Job training, educational, professional, and economic development programs that affect one area influence much of the BioSeacoast region. The geographic boundaries between these small New England states are becoming “virtual borders” with no real impediments to business development or workforce employment. The BioSeacoast Life Sciences Cluster comprises two economic and workforce development initiatives: the creation of a life-sciences cluster in the seacoast region of New Hampshire, northeastern Massachusetts, and southern Maine; and expanding opportunities and programs from the seacoast dense industry into northern New England (the North Country Outreach initiative). Our goal is to create and market a “North of Boston” cluster for our region’s life-sciences industry. We can be in charge of our own identity in the Seacoast region, create a regional brand and improve marketing of New Hampshire, Maine, and northeastern Massachusetts. If we are successful, people and companies will want to come to these areas and not just to Boston-Cambridge. It will also be easier for venture capital firms to support our companies if there is a stronger industry identity here that becomes well recognized by the outside world. A significant knowledge base and the resources of people, technology, and companies already exist throughout the BioSeacoast region. A marketing cluster can happen now. Branding the life-sciences industry in this region can happen now. The critical mass is already here to support these activities. We are actively working with people in the triad of academia, industry, and government throughout the region to develop the cluster and its programs. Everyone will benefit if this triad continues to work together on shared projects. Initial activities involve creating marketing materials for newsletters, tradeshows, and conferences; further defining the regions’ life-sciences marketing segments and refining “the story” for each; developing appropriate multimedia materials and Web-based resources; and extending our existing network to include key stakeholders from all three states. Our top priorities for the next five years are to: create more jobs, attract more new companies, and enhance industry growth; facilitate faculty, student, and workforce development; facilitate educational outreach throughout northern New England; improve the region’s competitive position; and fund BioSeacoast programs to establish a solid foundation for future success. Alliances and cooperation are extremely important, both across state lines as well as within the triad of academia, industry, and government. No one entity can do it all. The cluster brings together many different entities to work together on shared projects. A general weakness of economic development in our region has been that it is “every man out for himself.” Self-interest is a necessity for an organization to stay in business. But the region has missed out on the synergistic benefit that comes from collaborative programs and regional development. BioSeacoast is attempting a new way of doing business. Each company, university, or government body needs a healthy dose of “what’s in it for me?” But groups that come together to promote shared interests and work toward common goals have a distinct advantage. Innovation is about people and networks. It requires a good communications infrastructure to allow it to flow out of universities and into the workplace and industry. The BioSeacoast cluster provides this infrastructure. Through it, we are entering a new era of cooperative and regional economic development. It is very important to realize, however, that a successful cluster does not need everybody or everything. Yes, it is important to bring people to the table, especially those with a shared vision. But if important elements are still missing, it is best to partner outside of the cluster with entities needed to supply the missing service or function. Many will argue that fundamental resources of educated people, a trained workforce, good technology and innovation, and an entrepreneurial environment are all key elements to success. They all are; it is hard to deny it. But in our area of the country, image and perception are also large obstacles. The seacoast region of New Hampshire, southern Maine, and northeastern Massachusetts lives in the shadow cast by the world-renown Boston-Cambridge biotech hub. It is easy to ignore us. The key to our success is not to try to be something we are not. We will never compete one-on-one with the research powerhouse of the Cambridge-Boston hub. But the resources we do have — a well-educated and trained workforce and strengths in medical devices, biomanufacturing, marine biotech/aquaculture, among others — are significant in their own right. New Jersey There are a number of important driving factors that contribute to the growth and success of a biotechnology cluster. New Jersey is blessed to have them all: access to a skilled labor pool with the presence of 15 of 20 of the world’s largest pharmaceutical companies and a growing biotechnology community; proximity to the world’s financial markets; venture capital funding with well more than $6 billion in Princeton, N.J., alone; excellent academic institutions and research; supportive and creative government programs; a growing entrepreneurial environment; and a deep pool of support services such as legal, accounting, and clinical research organizations. In any region, alliances and cooperation across cluster members are critically important. And more than any other type of alliance, the alliances and strategic partnerships with big pharma are fast becoming an important method of growth for both biotechnology and pharmaceutical companies. The presence of big pharma means greater opportunity for alliances within New Jersey than anywhere else in the world. Across the industry, the biggest challenge today is the lack of biotech investment. Venture funds are flush with money, but they are reluctant to invest it and they are not inclined to invest in the early stages of a biotech company, which is obviously so critical to their survival. The public markets are not particularly biotech friendly right now. At times such as these, government incentives and programs become increasingly important. New Jersey has a unique package of incentives including tax credits, sales of NOLs, and grants and loans to assist biotechnology companies at key points in their long road to approval and profitability. Our top priority for the New Jersey biotechnology cluster for the coming year is the same as every year: to continue to foster its growth from outside and inside the state. The main vehicle for doing so this year will be BIO 2005 where we will be sending the message to the world that New Jersey is where life sciences lives. Beyond that, for the next five years, we are focused on capitalizing on the momentum of BIO 2005 and the impact it will have in helping us to build the industry here in New Jersey and the surrounding region. New York — Hudson Valley Close proximity to world-class research institutions, a well-educated workforce, easy access to venture capital, and a high quality of life are among the factors driving the growth of the biotech cluster in the Hudson Valley. With more than 60% of the nation’s biopharmaceutical cluster centered in the New York metro region, the Hudson Valley is now home to more than 60 life-sciences firms ranging from biotech start-ups to pharmaceutical giants. Alliances such as the Hudson Valley Bio Alliance are extremely important within a region. By fostering information sharing within the industry, these alliances can help companies and research institutions collaborate, identify challenges, and leverage opportunities with local and state governments. The Hudson Valley Bio Alliance holds a quarterly Bio Breakfast and works as a team to exhibit at industry conferences, such as BIO 2005. The top priority for the Hudson Valley is to keep pace with the demand for affordable R&D and laboratory space that is convenient to our research institutes. Both now and in the future, our goal is to retain and expand the successful biotech companies we nurture here and to locate their manufacturing and sales operations within our region. Ohio As the industry undergoes a normal transition — from heavily basic research to applied research, product development, then manufacturing and sales of products — the definition of what constitutes a successful cluster will change as well. The currently accepted definition of a successful cluster, based on retrospective analysis, is that clusters must have world-class research institutions at their core or they have no chance of success. As biotechnologies intersect with informatics, materials, and nanotechnologies, the role of the private sector, especially in materials, informatics, micro-fabrication, and micromachining will become much more critical to sector success. This fundamental change will make regions, such as the Midwestern United States, much more integral and successful as assets are leveraged and effective collaborations between the private and public sectors occur. The future driving factors for successful cluster development will be not only a balance of assets among basic research, applied research, and manufacturing capabilities, but the ability to create effective and efficient collaborations among these various links in the product development chain. Alliances and cooperation are immensely important if one believes that a major criterion for a successful cluster is effective and efficient translation of basic research into manufactured product. Ohio believes so much in this aspect of developing a robust technology cluster that its $1.1 billion Third Frontier Project requires that all recipients of major projects are in the form of university/industry collaborations with industrial partners providing either 1:1 or 2:1 financial matches. Given that the state has invested $140 million in the biosciences in the past two years, that means an industry match of $200 million plus also has been invested. In addition to the alliances formed for individual projects, we are encouraging the formation of a “supercluster” by mobilizing assets across the entire geography of the state into joint projects so we can reduce redundancy and encourage optimal translation of technology. The first obstacle is the simple one of illuminating all of the available skills and assets so effective collaborations can be formed. The next obstacle is convincing participants that, at least in some areas, it is in their interest to collaborate rather than compete. In the Midwest, a not-so-obvious obstacle that is disappearing rapidly is simply the relatively nonaggressive nature of the region’s residents, which reduces risk tolerance and discourages native entrepreneurism. A final obstacle is overcoming stereotypes. For example, the last presidential election was not favorable to Ohio in that the only thing that was highlighted was the state’s manufacturing job losses. It was not mentioned that the state’s growth in employment in the biosciences over the past five years, on a percentage basis, was one of the highest in the nation nor was it mentioned that Ohio enjoyed the largest percentage growth of bioscience investment influx of any state in the country over the past few years. Our No. 1 priority for 2005 remains a focus on growth of jobs through company formation, expansion, and attraction. Our top priorities for the next five years continue to focus on growth, but also include a strong emphasis on leveraging existing assets through improved technology transfer from our universities, establishment of collaborative public/private partnerships, engagement of the national and federal labs in the state, and so on. Finally a top priority for the next five years is a strong focus on interdisciplinary convergence — bioinformatics, biomaterials, biomanufacturing — where our deep, yet diverse, assets, can be a real differentiating strength. Pennsylvania A successful cluster incorporates an abundance of basic research, a strong community of growing biotechnology companies, access to venture capital, and a deep base of pharmaceutical companies that provide partners for growing companies and a skilled workforce. These are all advantages that are found in Pennsylvania. The alliances and collaborations that are happening in the region are very important to the continued vibrancy of our community. Partnerships between our biotech companies and global pharmaceutical companies, as well as our partnerships between our industry and academic communities, are fueling new therapies for patients and new company growth. Collaborations and alliances include, to name just two: ViroPharma and Wyeth have an alliance to discover, develop, and commercialize additional novel inhibitors of Hepatitis C virus (HCV); Adolor Corp. and GlaxoSmithkline are collaborating on the worldwide development and commercialization of alvimopan for POI, opioid-induced bowel dysfunction (OBD) associated with extended use of opioids to treat chronic pain, chronic idiopathic constipation not associated with opioid use, and irritable bowel syndrome (constipation predominant). It’s difficult if there is no existing base of research and industry in a region, but across the board there’s a decrease in early-stage risk capital, an essential component to starting companies. The No. 1 priority for Pennsylvania Bio this year is to bring more national and international venture capital financing to our companies. Among our top priorities for the next five years are to: bring more business to our region and help us conduct more business within our region, expanding the R&D, manufacturing, and sales and marketing partnerships that are happening in our backyards; bring more international attention to the fact that our region is a global leader in the biosciences, leading the commercialization of new life-saving and life-enhancing drugs, devices, diagnostics, and vaccines; and grow our academic-industry partnerships. Pennsylvania — Pittsburgh Pittsburgh has the advantage of being a city with many of the amenities associated with a metropolitan center — the arts, a symphony, sports teams — but with a more reasonable cost of living. The city also has been blessed by a beautiful setting and industry advantages, such as strong universities and health centers as major advantages in the life sciences. There is also a strong tradition and track record of success in medical devices with Respironics Inc., Medrad Inc., and McKesson Corp. We have less of a tradition in therapeutics with most opportunities in that discipline being very early-stage, making it an area for potential growth. Potential entrepreneurs that would consider locating to Pittsburgh are excited by the burgeoning life-sciences sector, but are concerned that there are still less than 100 such companies in the area. An additional concern is the absence of a significant anchor company that would be an engine in the generation of additional commercial opportunities. Critical to making Pittsburgh more attractive in the relocation of talented entrepreneurs would be the creation and establishment of numerous potential anchor companies that are well-capitalized and provide the entrepreneurs with multiple “bites” at the apple of success. I believe that bankable and venture-backable experienced entrepreneurs with significant track records of success in the life sciences are critical to the success of the Pittsburgh region as a life-sciences hub. I also believe that our regional commitment to the life sciences, coupled with the advantages I spoke of, makes attracting them possible. Pittsburgh Life Sciences Greenhouse (PLSG) anticipates that we will accelerate and expand the original PLSG vision to help create these opportunities for success. In addition, these entrepreneurs not only represent opportunities to initiate new ventures, but also can be a valuable resource to other entrepreneurs who are in current earlier-stage companies in the Pittsburgh life-sciences community. While we are actively recruiting EIRs in the areas of therapeutics, medical devices, and diagnostics, because of the shortage of existing therapeutics talent, we have placed emphasis on building up the therapeutics talent base. George Poste, D.V.M., Ph.D. Director, The Biodesign Institute at Arizona State University, Tempe, Ariz. For more information, visit biodesign.org. Jon McGarity Chairman of the Arizona BioIndustry Association, Chandler, Ariz. For more information, visit azbioindustry.org. Bob Burris Deputy Director, Sacramento Area Commerce & Trade Organization (SACTO), Sacramento, Calif. For more information, visit sactoedc.org. Jeff Strane Director of Innovation & Technology Office, Georgia Department of Economic Development, Atlanta. For more information, visit georgia.org. Brien Manning Executive Director, Destination Irvine, Irvine, Calif. For more information, visit destinationirvine.com. Jack Lief Chairman of the Board of BIOCOM, San Diego, and President and CEO of Arena Pharmaceuticals. For more information, visit biocom.org. Jeff Strane Director of Innovation & Technology Office, Georgia Department of Economic Development, Atlanta. For more information, visit georgia.org. Tommy Kurtz Senior VP, Jobs Development, Greater New Orleans Inc., New Orleans. For more information, visit norcc.org. C. Robert Eaton President, MdBio Inc., Frederick, Md. For more information, visit mdbio.org. William D. Johnston Chair of the Board, Southwest Michigan First, Kalamazoo, Mich., and President, Director, and Chair of Greenleaf Companies. For more information, visit southwestmichiganfirst.com. Lulu Pickering, Ph.D. Past President, Board Member, New Hampshire Biotechnology Council, Greenland, N.H., Board Member, BioSeacoast Life Sciences Cluster; and President, Informagen Inc. For more information, visit nhbiotech.com. Debbie Hart President, Biotechnology Council of New Jersey Inc., Trenton, N.J. For more information, visit biotechnj.org. Anthony Campagiorni President and CEO, Hudson Valley Economic Development Corp., New Windsor, N.Y. For more information, visit hvedc.com. Tony Dennis, Ph.D. President and CEO, Omeris: Accelerating Biosciences in Ohio, Columbus, Ohio. For more information, visit omeris.org. Fritz Bittenbender President, Pennsylvania Bio, Malvern, Pa. For more information, visit pennsylvaniabio.org. Doros Platika, M.D. CEO, The Pittsburgh Life Sciences Greenhouse, Pittsburgh. For more information, visit plsg.com. States Are Tapping Bioscience Specialties to Fuel Economies EMPLOYMENT and other economic activity in the biosciences have grown dramatically in the past three years, and states working to attract bioscience companies are learning that success means specializing in specific sub-sectors, according to a 2004 study by the Battelle Memorial Institute and the State Science and Technology Institute (SSTI) for the Biotechnology Industry Organization (BIO). The study is the most comprehensive analysis ever done to quantify the scope and impact of bioscience employment in all 50 states. It also examines programs in each state to promote the development of bioscience companies. Key findings include: • In 2004, 40 states specifically targeted the biosciences for development and all 50 states had economic development initiatives available to assist bioscience companies. Investments have grown. As much as $500 million in Florida, and experimental approaches, such as tax credits to encourage investment in private venture capital funds, have also increased significantly. • More than 885,000 people in the United States are employed in the biosciences industry. The largest segment of this group is working in the areas of medical devices and equipment, which account for 37% of bioscience employment. • In 2003, bioscience workers on average were paid at least $26,600 more than the overall national average private sector annual wage. While there are many reasons why states are focusing on biosciences, the fact that the biosciences companies cut across manufacturing, services, and research and are not limited merely to medicine or agriculture appears to be a significant factor. States and regions that are promoting bioscience development are focusing on the activities best suited for the area. For example, North Dakota is focusing on bioprocessing in value-added agriculture, while Missouri is seeking to become a leading center in plant and animal health. States such as Colorado, Massachusetts, Minnesota, and Utah are working in the area of medical devices, while other states are devoting their attentions to research and testing. Partly as a result of economic development programs, 15 states have at least 5% employment in at least one bioscience sector, and 24 states have at least 3% employment in one or more subsectors, according to the report. Twelve states — California, Illinois, Indiana, Iowa, Massachusetts, Minnesota, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, and Virginia — have both large employment bases in the biosciences and are specialized in at least one industry subsector. “The states realize that the biosciences have the potential to generate vibrant economies,” says Walt Plosila, Ph.D., VP, Technology Partnership Practice, Battelle Memorial Institute. “What is exciting is that many states appear to be setting realistic and achievable development goals.” Factors that appear to influence a state’s ability to grow bioscience employment include the degree of involvement by research institutions, available capital, access to facilities and equipment, a stable and supportive tax and regulatory environment, and a long-term perspective. That long-term perspective is reflected in every state’s renewed emphasis on science and math education, including programs throughout the K-12 school years aimed at preparing students for bioscience careers. Recent initiatives include Connecticut’s creation of a $5 million BioSeed Fund, which invests up to $500,000 in early-stage companies and Kentucky’s $5 million Natural Product Fund. North Carolina created a Life Sciences Industry Revenue Bonding Authority to finance biomanufacturing equipment and lab fit-outs. North American Biotech Companies by State & Province Number of Companies California 420 Massachusetts 193 Quebec 158 Ontario 137 North Carolina 86 Maryland 84 British Columbia 78 New Jersey 77 New York 66 Texas 64 Georgia 63 Pennsylvania 63 Washington 42 Alberta 39 Florida 33 Connecticut 29 Sources: Biotechnology Industry Organization, Washington, D.C. For more information, visit bio.org. Ernst & Young LLP, New York, America’s Biotechnology Report: Resurgence, 2004. For more information, visit ey.com. Source: Battelle Memorial Institute, San Francisco. For more information, visit battelle.org. Note: The study was funded by BIO and Fleishman-Hillard Inc., a global strategic communications firm. The study is available at bio.org. Raul Rodriguez Executive VP and Chief Operating Officer Rigel Pharmaceuticals The drug discovery and development field is characterized by unanticipated outcomes. Structuring partnerships that anticipate these unanticipated outcomes may seem obvious, but many partnerships are structured with only complete failure or success in mind. M. Scott Salka CEO Ambit Biosciences The two most obvious calls to action in the biotechnology industry right now are to decrease the high price of drugs and improve drug safety, so I think the most innovative and exciting technologies are those that can address these issues. Dr. Brian Zambrowicz Executive VP, Research Lexicon Genetics RNA interference is a cutting-edge platform technology. If it could be developed as a therapeutic, it would alter the industry in that all gene products would be considered druggable. The current environment is not like the bad old days of the early 1990s or the heady ones of 2000, but we see financings working at all levels from private equity to public equity to convertible debt. The markets do seem to be quite selective, and IPOs seem to be taking “haircuts,” but fundings are still closing on a regular basis. Dr. Lisa Drakeman President and CEO Genmab Morrie Ruffin Executive VP, Business Development and Emerging Companies Biotechnology Industry Organization Biotech companies need to know the value of their products and that involves knowing the space they’re in, knowing what the competition is, and being able to explain to a potential partner the benefit of the product to its pipeline. Biogenerics Over the next few years, a number of first-generation biopharmaceuticals will come off patent or lose marketing exclusivity (first in Europe, then in the United States). This will open the door for the manufacture of generic biopharmaceuticals (biogenerics). Experts discuss the implications of the first biogenerics and what some of the technical and regulatory challenges are for the development of biogenerics. Attick. Biogenerics should only be acknowledged as inevitable and a likely alternative under two conditions. From a regulatory point of view, it is important to view biogenerics not as a stand-alone transition, but as a requisite catalyst necessary to bring about broader changes in the drug industry. In my opinion, the presence of biogenerics is likely to accomplish three things. First, the biogenerics model could result in significant cost reduction to the manufacturer and, I would hope, substantially lower prices at the pharmacy counter. The legislation around this model should be oriented toward rewarding biogenerics companies for their achievements in refinement of purity, efficacy improvements, and cost/price reduction. With an emphasis placed on low-cost, biogenerics, by their very definition become a commodity. As such, a new market model will evolve in which these companies will strive to be innovative in their approach to technology, marketing, and distribution. Second, as the industry is driven toward a distinct separation of biogeneric companies and the pure-play drug research and development “innovators,” an interesting set of dynamics will begin to emerge. I believe the “blockbuster” model will eventually be regulated into obsolescence and for good reason. How many deaths does it take to convince the consumer that something is wrong with the “one splice fits all” approach? An educated consumer could be enabled to understand that molecular therapeutics hold the promise of extreme accuracy but only if accompanied by certain other data. The efficacy of molecular therapeutic compounds has a viable link to sensitivity and specificity findings of new in vitro diagnostics that identify certain physiological characteristics such as presence or absence of certain biomarkers. Even more important are the patterns that researchers are just now beginning to identify as links to the stage of development of complex diseases. Another important dynamic is the development of clinical bioinformatics and systems biology applications that model evidentiary diagnostic profiles; in other words biomarkers and associated bioinformatics statistical patterns and physiological profiles of population groups. Third, simply stated I believe minor, yet focused legislation will be required to prepare the industry for this transition. It is important that FDA regulations are clear in their definition of who can play and in which sandbox. If the conflict of interest issues are dealt with up front, the result will be a much more focused industry “rising from the ashes of restructuring.” Komisar. The growth in biologics is outpacing the overall pharmaceutical market, and this is expected to continue over the next 10 years. As this market matures without countervailing pricing pressures, there will be considerable pressure on Congress to bring some resolution to the issue of biogenerics or follow-on biologics. The concept of perpetual patents is antithetical to every other trend I am seeing right now, so I have to believe that change is on the way. Yet it will be several years before anything substantive takes place and even then it will be a phased-in approach whereby only the most characterized of biologics will initially experience follow-on versions. The European Union is ahead of the United States in that it has published guidance on the basis of “similar biological medicinal products.” But this framework is in a penumbral state that is not clear enough for the long haul. Moro-Vidal. Although a human growth hormone from Novartis was approved in Australia, as of yet, no biogenerics have been approved in the United States or Europe. The FDA is, I understand, in the process of developing guidelines for the review and approval of such products, and European regulatory authorities have recently introduced such guidelines. It is impossible to predict when we should see the first U.S. or European approval though. As with many leaps in medical research, new regulations and guidelines need to be set, but I have confidence that biogenerics will become a reality. Goldberg. There is a great deal of investment and interest in biogenerics. There is also a great deal of pressure to reduce the cost of biologics as well as drugs. These pressures will lead to a biogenerics industry. It is hard to predict when this will occur. There is, naturally, a great deal of resistance and political pressure from the companies with branded biologics. They do not want to face generic competition on their big products, but the technical issues are being solved and that will lead to biogenerics. Zambrowicz. At this stage, the field of biogenerics is still too speculative to make many concrete assessments. While there are a number of biogenerics under development, the future of the field remains to be seen for several reasons. First, biologics are much more challenging to create than small molecular weight compounds. While the bioequivalency of a small molecular compound is relatively straightforward, creating the equivalency is much more difficult with a biologic compound because the structural pattern is not as readily replicable. We need only look at recent production problems associated with the development of some biologics to see that biogenerics are not going to be easy. Since living cells make these biopharmaceutical products, the output is not as predictable as with chemically made small molecules. Even slight changes in manufacturing can affect the product, sometimes in ways that cannot be readily detected. Korpolinski. Downward price pressure on healthcare costs are being expressed at every level. The high cost of healthcare will accelerate the introduction of generic biologics in the United States and Europe. When we might see these products is hard to predict and is in part based on the amount of cost pressure applied to regulatory agencies in the United States and Europe by outside constituencies such as the Federal Medicare program, the state Medicaid program, and business and consumer groups. Goldberg. It is much more difficult to demonstrate chemical and pharmacologic equivalence with biologics than with small molecules. But the FDA is allowing chemical analysis of peptides to demonstrate equivalence. The analysis of complex carbohydrates on antibodies and proteins is a difficult process, but that technology also is moving forward. The carbohydrate profile is a very important component of binding, solubility, and protein conformation. The FDA has to establish chemical characterization and composition standards. In addition, the FDA must determine what in vivo testing will be required to establish biological equivalence. Are pharmacokinetics and pharmacodynamics adequate? Is biological distribution required? Will companies need to demonstrate comparable efficacy? This is not required for generic small molecules. There is political pressure from both sides to establish favorable guidelines. Komisar. It is one thing to talk about biogenerics and another to achieve them. Under the existing structure, or lack thereof, the barriers to biogenerics are formidable. Generally speaking, there are current and improving technologies for characterizing simple proteins. But for proteins with complex spatial configurations, we are really not that close. Moreover, there is no clear regulatory framework with which to navigate. The availability of bulk active pharmaceuticals through nonpatent infringing routes also is a significant issue. Add to that the massive obstacle of attempting to separate the manufacturing process from the product and the tale of Sisyphus and his boulder comes to mind. Yet, the market for “biogenerics, follow-on biologics, or biosimilars,” is more than $3.5 billion. This type of incentive brings a certain indomitability to those willing to try. Korpolinski. There are technical challenges. Large protein compounds are much more complex than small-molecule drugs. Replicating complex manufacturing processes that are subject to variability is a major hurdle. G-CSF is one simpler protein complex that may be the first generic biologic. Immunogenecity issues are one of the key regulatory challenges and may mean clinical trials for generic biologics to provide the FDA with the safety data it would require. Zambrowicz. Another major challenge with biogenerics is the need to demonstrate “essential similarity” to the reference product. Unlike low molecular weight synthetic chemicals where equivalence can be easily demonstrated through full analytical characterization, biopharmaceuticals most often consist of complex substances that are difficult, if not impossible, to fully characterize from a physico-chemical perspective, given limitations in current analytical techniques. Actual clinical studies will likely need to be done to demonstrate and validate the efficacy and safety of the biogeneric drug. And with the widely held view that the manufacturing process defines the product, even minor changes in manufacturing may require additional safety and efficacy data. Dahiyat. I believe that biogenerics are likely to become a reality even though they are not generics in the traditional sense of ANDA filings for marketing approval. Biogeneric drugs will require clinical trials for approval, and they are very likely to become a reality within the next five years. I foresee the largest market for biogenerics coming from non-U.S. generics companies that are moving into the European and then the U.S. markets. A number of patent expirations are imminent and there has been a lot of preparation from generics companies to enter these markets. Moro-vidal. There are many hurdles in the development of biogenerics. Biologics are large and complex compounds that have their own unique set of manufacturing challenges. There are also concerns about whether these compounds can be properly patent protected. In addition, of course, there are the regulatory uncertainties. The large market potential for biogenerics makes them attractive for research and development initiatives, but an abbreviated regulatory pathway is important to make this development time cost-effective. Cartwright. There are several barriers to overcome before biogenerics will become widely available. Regulation of such compounds is vague, if not nonexistent, at this time. Even if a biologic comes off patent, the methodology to make the product may still be under patent protection. This raises the issue of bioequivalence, such that if the biogeneric is manufactured under different methods it may not result in a similarly functioning generic product, hence the requirement of biological equivalence will not be met. Dahiyat. The single biggest technical and regulatory challenge for biogenerics is establishing comparability between the biogeneric and the innovator’s drug. At the very least, the biogeneric would need to be proven comparable to the satisfaction of the regulatory agencies in the United States and European Union. Currently in the United States, the guidelines for demonstrating comparability for biogenerics are not clear. Even though the European Union is further ahead in defining comparability guidelines, there still remains a significant amount of uncertainty that arises from technical challenges in characterizing complex protein molecules. Such challenges are driving the need for biogenerics to complete clinical trials for approval. These technical and regulatory problems are likely to remain for the foreseeable future unless the political pressure to control drug prices can break the stalemate. Cartwright. Regulation will be difficult but will likely focus on methods to obtain stem cells, when and how they should be used, and how such research will be funded. As with other controversial issues, many Americans do not want taxpayer money (public money) spent on projects involving what some taxpayers may consider “morally offensive” technologies. Hence, such funding will likely come from private resources. Regulation regarding pharmacogenomics and other genomic technology will likely focus on protection of privacy and discrimination. Zambrowicz. Creating biogenerics will likely draw scrutiny from regulators. The FDA will likely require clinical trials to demonstrate that biogenerics are safe and equally efficacious to mitigate any patient risk. In addition, there is a lack of a clear regulatory framework for biogenerics. Traditionally, regulatory authorities have considered biopharmaceuticals as a distinct category from synthesized drugs. Biologicals had been approved by the CBER (Center for Biologics Evaluation and Research) under the Public Health Act, while conventional drugs are regulated by the U.S. Food, Drug and Cosmetic Acts and are evaluated by the CDER (Center for Drug Evaluation and Research). But biologicals now fall under the evaluation of CDER. This differentiation was never absolute as there were instances of well-characterized recombinant proteins, such as growth hormone and insulin, having been registered as pharmaceutical drugs through CDER. Biogeneric developers will need clear regulatory standards to be successful. Otherwise they risk undertaking massive investments that do not lead to a marketed product. garufi. NicOx believes there is increasing resistance from regulatory authorities and the medical community toward drugs being developed and marketed as “across the board therapies” suitable for all patients. I believe there is a shift toward personalized medicine and finding the right drug for the right patient, which will continue. Drakeman. In the field of antibodies, manufacturing is a very significant hurdle to overcome from both the technical and regulatory point of view. Antibody processes often contain trade secrets, such as the composition of the media used in the fermentation step. Furthermore, there are significant regulatory hurdles to using the same exact antibody made with the same process but at a different facility or on a larger scale. A biogeneric manufacturer that did not have access to the specific process would have a very difficult time duplicating an antibody exactly. This is important because even minor changes might result in significant differences, such as a product with a different glycosolation pattern that could also cause more or less biological activity. This result would make it hard to rely on safety and efficacy data available from the original product and would likely mean that the proposed generic would need to undergo a full development program. Cutting-Edge Technologies Antibodies, bioinformatics, kinase profiling technology, RNA interference, stem-cell research, genomic libraries, bedside assays, pharmacogenomics, and nanotechnology are just some of the cutting-edge platform technologies that biotech executives have identified as having vast implications for the industry going forward. Morhet. Scientists recognized long ago that antibodies had the potential to become powerful tools for the treatment of many diseases. From their discovery more than 100 hundred years ago by von Behring and Kitasato, antibodies have fascinated immunologists and during the last three decades, have proven their membership as successfully developed therapeutics. While blockbusters, such as Rituxan have shown the commercial potential of antibodies, it is estimated that currently 20% to 25% of biotechnology development programs are focused on antibody development. Large pharma companies also have increased their focus on biologics with increased expenditures and staffing. Small-molecule drugs consume $800 million to $1 billion of expenditure to traverse the 10 years to 12 years of discovery and development, yet antibodies are estimated to require a fraction of the time and cost. Some also suggest that toxicity and safety may be an increased driver for antibody development, which one could reason may help to expedite the regulatory approval process. Whether it be detection, intervention, or resolution, antibodies are becoming the chosen path for pharmaceutical product development. As for which companies will be the winners within biotechnology, it will most certainly be those that are centered on antibodies with the focus of not just developing or screening antibodies and antigens, but increasing therapeutic efficacy, making an impact when the antibody reaches the target. Highly potent superantibodies cross-linking at cell-surface targets and cell-penetrating antibodies to intracellular targets represent breakthrough uses for antibodies. As the Nobel Prize committee awarded its first prize in 1901 to von Behring for “having opened a new path in the dominion of medical science,” we are just beginning to realize the potential application of antibodies. SALKA. The two most obvious calls to action in the biotechnology industry right now are to decrease the high price of drugs and improve drug safety. So I think the most innovative and exciting technologies are those that can address these issues. Technology platforms, such as Ambit’s, that can screen a drug candidate against multiple potential targets are important because they can speed up the drug-discovery process and ensure that the best possible drug candidates are advanced into the clinic, preventing costly later-stage failures. Additionally, of increasing importance is kinase profiling technology that evaluates a drug candidate against nearly 200 kinases at once, providing information not only about whether the drug hits its target kinase, but also revealing potential side effects by showing what other kinases it might be hitting unintentionally. Zambrowicz. RNA interference is a cutting-edge platform technology. RNA interference has been useful in looking at gene function in cell-based assays, but some biotech companies are exploring its use for therapeutic applications. If it could be developed as a therapeutic, it would alter the industry in that all gene products would be considered druggable. But better methods of delivery and better ways of making these types of compounds stable will need to be addressed before RNAi can be widely used for therapeutic applications. Dahiyat. Product pipelines are the primary focus in the life-sciences industry today. It follows that platform technologies capable of creating innovative and proprietary drug candidates hold significant potential to sustain drug development. Previously, technology tools that attempted to catalog or characterize complicated biology, such as sequencing or functional genomics platforms, were significant discovery drivers but have been replaced by technologies that are based on molecular engineering. Such technologies can optimize or create new drug candidate molecules; an emerging area of focus in particular is technologies that allow protein and antibody therapeutic design. Such technologies are designed to allow pharmaceutical properties, such as production or PK, or activities, such as potency and selectivity, to be tuned and biologics to be optimized much like small molecules. This approach opens the door for second-generation protein drugs and for extended patent life and improved efficacy. Zambrowicz. There are several different approaches to determine the functions of genes. For example, we use gene knockout technology to understand gene function in vivo for identifying potential points of therapeutic intervention, or drug targets. Structure-based drug design is also a cutting-edge platform technology that leverages high-throughput X-ray crystallography capabilities to determine the three-dimensional structures of drug targets and then uses these structures to efficiently design best-in-class drug candidates. Structure-based drug design offers clear and specific models that guide medicinal chemists in modifying and improving compounds. The risk is that while this technology may lead to rapid identification of potent and specific compounds for a given target, it will not alter the safety and toxicity issues that cause drug failures in the clinic. Moro-vidal. Nanotechnology has almost limitless potential, from creating incredibly fast and compact computers to allowing more precision in delicate surgical applications. Of course, when scientists see the vast promise of these new technologies, others see ethical issues based on their various political, scientific, and religious leanings. The voicing of such opinions is important, not only because of our nation’s belief in free speech, but such contrary points of view also keep us all grounded and aware of not only the great potential, but the dangers as well. It is important that we be aware of both sides of the equation. Cartwright. Stem-cell research, the collection of genomic libraries, and development of bedside assays to aid in the rapid identification of specific disease states are some cutting-edge technologies. The latter facilitates earlier recognition and treatment of certain diseases. The future likely will hold an individually tailored approach to treatment. The recognition that certain individuals have a genetic predisposition to specific diseases/disorders will help the healthcare practitioner individualize treatment and perhaps improve survival. Ethical implications are clearly involved with how stem cells are obtained. But such issues involving pharmacogenomics are more privacy related. The implications of knowing what diseases one may develop based on a genetic profile may facilitate better treatment but could also create issues regarding availability of personal health information and insurance coverage. Dahiyat. The largest problem stem-cell research faces is how to communicate the differences among the multiple types of stem cells. Stem cells from adult tissues have fewer ethical issues because the donors can freely consent and there are no “start-of-life” issues. Stem cells from embryonic tissues require guidelines on ethical procurement and controls for the use of the tissue. These guidelines are going to have a hard time being promulgated in the tense political environment surrounding reproductive issues in the United States. It is likely that important research will be stifled because of this political pressure. Korpolinski. Key guidelines for one of the more controversial areas of cutting-edge research — stem-cell research — are now coming forward from rules laid forth by the nation’s leading advisory body, The National Academy Ethics: all stem-cell research institutions establish an oversight committee; researchers should not pay donors for eggs or sperm; and human stem cells shouldn’t be injected into monkey embryos. Such guidelines allow new stem-cell research to move forward efficiently. Goldberg. In general, the ethics debate lags technological development. We have seen that in each period of technological innovation the current speed of innovation exacerbates this problem. Stem-cell research has great potential, but the ethical concerns of embryonic stem cells have stifled research and development in this country. The opponents say it is still theoretical and unproven, and they are correct. But they use that argument to stop the research rather than prove the utility. We are in danger of ceding the leadership in stem-cell research and therapeutic cloning to Europe and Asia. komisar. I have started a fun, new habit whereby anytime I am at a conference reception and there is a lull in the conversation, I volunteer that I am against federal funding of stem-cell research. This one comment is like throwing red meat to a pack of wolves. And what I have learned from this experiment is that, on the whole, biotechnology professionals are fairly likeminded when it comes to many bioethical issues. Perhaps this is a good thing; we need a vocal contingency promoting intellectual freedom. Yet the central issues now running through bioethics are growing much faster and becoming more complex than 35 years ago when we were focused on organ transplantation and behavior modification. Throw in the reality that many of the issues we are now wrestling with force us to define life itself and the water is not so much muddied as it is thoroughly turbid. Regardless of where one stands on the multitude of bioethical issues we are now dealing with, there needs to be a legitimate recognition of the views of the other side. I hate compromise as much as the next person but I don’t see any other way forward. To absolutely pit science against religion obscures the integrated role that both of these play in our society. Dahiyat. While stem-cell research is a political problem right now, pharmacogenomics and the area of personalizing therapy based on individualized diagnostic or genetics tests face regulatory hurdles as well. In particular, how to balance privacy of the patient and the desire of payers to use information to minimize the cost of healthcare presents significant regulatory issues that are likely to require specific guidance and trial-and-error with sponsors and regulatory agencies. Goldberg. Pharmacogenomics is an interesting technology, but the concept that knowing a responsive genotype will lead to quicker, more efficient clinical-development programs has not been actualized. Unfortunately, we learn which genotype is responsive by retrospective analysis of clinical data. This allows us to identify patients who will best respond to therapy after the fact. Genotypic clinical development will also have the consequence of limiting the patient population for which the drug is indicated, thereby limiting the potential market. Pharmacogenomics also involves major ethical issues. Is it ethical to identify a lethal genetic defect in a population when there is no cure or meaningful treatment? Many children of Huntington’s disease parents do not want to know if they carry the genes, since there is no treatment for them. Another issue is how the insurance industry will use genomic information indicating that some people are prone to genetically linked diseases. MORO-vidal. There are many innovative, novel, cutting-edge technologies in biotechnology today, from the implementation of new technologies, such as RNAi and gene therapy, to more effective methods of diagnosing disease. In oncology specifically, the industry’s understanding of the cause, differentiation, identification, and treatment of cancer has increased dramatically over the years. At BioCurex, for example, we are developing RECAF, a cutting-edge platform that has many potential uses in the diagnosis and treatment of cancer. RECAF is a molecule that is found on the surface and inside of cancer cells and is absent from most normal and benign cells. I call it a platform because it opens the doors to many applications; technicians may be able to look at a blood sample under a microscope and identify cells that present RECAF and are therefore likely to be cancerous; or when preparing for a bone marrow transplant for a leukemia patient, a technician can use this technology to separate cancer cells from healthy cells and provide the patient a more thoroughly cleansed marrow; or we could direct a radioisotope to target RECAF on a malignant tumor, thereby concentrating radioactivity at the site of the tumor and killing cancer cells while sparing healthy tissues. Biotechnology companies have historically been seen as the great innovators. There have always been ethical considerations in scientific and medical research, from the development of atomic technology, which can be used to destroy or power civilizations, to the use of IVF to create “designer babies” or give infertile parents the ability to have a family. While scientists, in my opinion, should always be cognizant of the dangers of their research, we cannot, at the same time, hold them entirely responsible for the ill uses society may find for them. Stem-cell research may have great potential to treat diseases such as Parkinson’s and other devastating illnesses. Korpolinski. Regulatory guidelines are now emerging and it appears the FDA road forward anticipates that nanotechnology products to be regulated will span the regulatory boundaries between pharmaceuticals, medical devices, and biologics. These will be regulated as “combination products” for which the regulatory pathway has been established by statute. In such cases, the FDA will determine the “primary” mode of action of the product. This decision will determine the regulatory framework for the product, for example, as a drug, medical device, or biological product. The Funding Environment According to some industry experts, biotech companies with products in late-stage development for primary-care applications are in a position of strength. For smaller companies, the issue remains finding the funding to pull products through clinical development. Garufi. Unfortunately the answer to the funding question still depends on where the company is based and especially on which market it is listed. We founded NicOx in 1996 to exploit the recently discovered properties of nitric oxide (NO) to develop a pipeline of drug candidates with increased activity and reduced side effects. We decided to base the company in France and were successful in attracting venture capital funding from leading funds, including Apax Partners, Sofinnova, and HealthCap AB, before our IPO on the French Nouveau Marché in November 1999 (now the Next Economy segment of the Eurolist, Euronext Paris). It is in the public markets that European biotech companies face the toughest challenge and since the end of the IPO wave in 1999/2000, only a handful of biotech companies have listed on European exchanges, including Basilea, Ark Therapeutics, and Intercell. Furthermore, those European companies already listed often face sporadic support from local investors, because of unrealistic expectations or a misunderstanding of the biotech business model, and they are often shunned by major healthcare funds due to low liquidity. ATTICK. The funding environment is good for companies, especially ones that operate under the guidance of sound business plans and operate with only the highest ethical and moral standards for management and staff. It is important to note that I see a growing trend in which investors are looking for “the good old days.” I do not mean the late 1990s, rather I mean the 1960s, 1970s, and into the 1980s, when companies were founded on principals of adding/creating value and working to build a long-term franchise. I look forward to the return of investor patience and confidence. I look forward to the return of principals of market supply versus demand, and fulfilling viable needs as opposed to attempting to create markets for needs that do not intrinsically exist. Drakeman. I think the answer to the funding question is: “compared with what?” Looking back at the early 1990s, it was hard for a biotech company to squeeze a few million dollars from the financing markets; in 2000, we saw multihundred million dollar offerings. The current environment is not like the bad old days of the early 1990s or the heady ones of 2000, but we see financing working at all levels, from private equity to public equity to convertible debt. The markets do seem to be quite selective, and IPOs seem to be taking “haircuts,” but fundings are still closing on a regular basis. Goldberg. The funding and liquidity environment is leading to a different corporate development strategy. The reluctance of the public markets to provide essentially unlimited funding to early-stage companies, coupled with the limitations on liquidity for early investors after a public offering, makes mergers and acquisitions a more attractive exit strategy. It becomes more important to build value in a company’s technology before it builds budget. Companies are now faced with the need to establish a leaner, more agile operation, with lower fixed costs. This allows the company to survive during the difficult financial times and still move their technologies forward. Leveraging the expertise in the contract research and development industry is an excellent way to maintain a lean structure with more money devoted to product development. But that requires a different expertise in the company: the ability to collaborate and manage external vendors. SALKA. For private companies, such as Ambit, there’s certainly venture capital available if the company has a well-defined investment rationale. VCs want to see that companies have a clear path into clinical trials and then onto an eventual IPO or acquisition. That can take a lot of venture capital, and so more and more I think we’re viewing VC interest in companies that have a revenue source to supplement their venture investments. For example, Ambit licenses its drug-screening capabilities to partners, creating nondilutive revenue that can help advance its own drug candidates through the clinic. Komisar. The first quarter of 2005 has had a mixed review. In terms of fundraising, the sector got off to a respectable start with something close to $5 billion being raised in the first quarter alone. Yet the performance of the sector has been pretty lousy during the same time frame, and we are now starting to feel the repercussions. Whether one wants to attribute it to the Tysabri blowup or other factors, the biotech sector has underperformed the market and this has a trickle- down effect on biotechs raising money at any level. I think we may be in store for a soft summer. Ruffin. It’s difficult right now for many of the early-stage companies and has been for some time. I think the more mature companies can finance themselves if they have late-stage products with good clinical data behind them and a good story to tell. The industry has matured over time. The capital-raising environment for product companies and the companies that have either in-licensed products or have products in the later stages is very different. The early-stage companies and the platform companies need to think about all of the things that all investors are looking for. They need to think about their business strategy. They need to show potential investors they are building value in a company at a predictable rate; they are getting to products quickly; they have a diversified platform; they have a large potential for collaboration with big pharma or other biotech companies; they have good management; they understand the clinical environment they are going to be operating in; and they understand the reimbursement environment in which they are going to be operating. Goldberg. Biotech venture funding dropped in the first quarter of 2005. This was, in part, a response to the weak IPO market in 2004. The biotech industry has relied upon the public markets for both funding and liquidity throughout its history. The public markets are now much more wary of early-stage companies and are requiring late-stage products and pipelines. The model of raising $200 million in private money and getting the public markets to provide a big upside is severely damaged, if not permanently broken. This limits the ability to develop early-stage, cutting-edge platform technologies, such as nanotechnology and RNA interference. A big surge in venture funding went to specialty pharmaceutical companies that acquired products or pipelines from big pharma. But the most attractive of those products are gone and it is becoming harder to find attractive product portfolios for the specialty pharma companies. Korpolinski. Biotech is now in a very difficult down market and has been for months. This has placed a number of private and public biotech companies in a very difficult cash position. Partnering and the cash it could provide will be an even more important contributor to the future growth of the biotech industry. Consolidation could be another consequence of too many companies chasing too little funding. MORO-vidal. The funding environment is now better than it was two years ago. Biotech attracts funding because their stories are generally exciting. Biotechnology companies are always on the verge of major breakthroughs and think beyond the investment, the return consideration, and so on. In my years of searching for funding I have noticed that many people invest because they want to be part of something new, something that might make a difference. What better way to invest than to have a good return and help other people in the process. Partnering A report from IBM shows biotech companies have come of age and, by 2008, large pharma companies will no longer call the shots in drug development. The report, “Learning the BioPartnering Game,” reveals that biotechs are playing the alliance game with more sophistication and success than large pharma companies, and, with the right alliance management practices, biotechs could bring an additional $2.7 billion annually to the $6.5-billion “biopartnering pie.” More than half of the companies identified by biotechs as alliance partners were companies other than the top 10 pharma companies. The number of biotech-biotech deals more than tripled in five years, while biotech-pharma deals grew less than 20%. ruffin. Biotech companies need to know the value of their products and that involves knowing the space they’re in, knowing what the competition is, and being able to explain to a potential partner the benefit of the product to its pipeline. They need to demonstrate that they have the management expertise to develop a program and to complement what a large pharmaceutical firm or a large biotech firm might have in its existing pipelines. Drakeman. For Genmab, financial terms are only the beginning in our search for the right partners. We also hope to find a combination of development expertise; capabilities we do not possess, such as large scale manufacturing; and collaborative skill. Generally speaking, we are also very interested in maintaining an active role in the development of our clinical-stage products. Goldberg. Transport uses an “essential” company model in which a highly skilled, experienced cadre of development experts with all of the essential skills within the company closely manages the activities of our vendors. This allows us to tailor the programs at each vendor to best fit our needs and still use the expertise of our contractors. As opposed to the “essential” business model, the weakness in the “virtual” model is the notion that a handful of generalists or project managers can efficiently manage the programs in all of the product development disciplines. This has not resulted in efficient product development. Once the value of a technology is established through an efficient, focused development program, the company can choose its exit strategy or continue to build its platform and pipeline. Efficiency, focus, and internal expertise are the “essentials” of this model. ATTICK. Partners must first understand patience; it is only then that a relationship can and will grow. That growth must be based on loyalty, communication, fidelity, and in many cases, the attraction of opposites. In other words, partnerships — at least the most successful ones — must survive on the merits of both partners pulling the same load but adding incremental value. Once partners learn how to share in the risks, they will find no problems participating in the rewards. Partnerships must be accretive, not simply a way for companies to shake up the mix and see what rises to the top. Partnerships must be guided; in fact, it is a sign of leadership that a partnership can survive the rigors of regular participation in reviews of objectives and analysis of performance against the objectives. Garufi. In our strategic review in 2004, we committed to developing HCT 3012 through Phase III trials ourselves. If we were to team up with a partner at this stage, we would look for a company that shares our vision for HCT 3012 as a unique product for the osteoarthritis patient, targeted primarily at those who are also hypertensive. SALKA. The best partnerships are those that can be beneficial to both parties over an extended period of time. To foster that type of relationship, companies want to make sure they have a crystal clear contract and communicate as frequently and openly with their partners as they can. It’s important to make sure everyone is on the same page, even down to details such as announcing milestones, because what’s material and important to a privately held company, such as Ambit, is not necessarily material to its big pharma partners such as Roche, Pfizer, Bristol-Myers Squibb, and GlaxoSmithKline, among others. But when both partners are committed to communication on many levels, not just between the CEOs, I’ve found that we often discover new synergies that can lead to expanded partnerships or equity investments by the partner. Komisar. Obviously, a biotech company wants a partner that has competencies and capabilities that it may not have or one that further complements its core strengths. Yet this over simplifies the situation. The perfect pharmaceutical partner does not exist. As in every other aspect of life, choosing a partner comes down to trade offs. Does the biotech company want a partner that will allow copromotion or one with expansive salesforce reach? Does it need disease state expertise in the design of the next clinical trial or a better royalty split when the product gets approved? Does it need a partner that will put its best people on its product? Or does it need a partner that has the financial muscle to take a product through a very large pivotal trial if needed? Korpolinski. The key to identifying the best target companies for partnering involves biotechnology companies doing their homework and answering some key questions: what is the mission; what is long-range plan (cash flows) for current programs for at least three years; which companies are already engaged in their area of focus; do they want a large global partner that is likely to want world rights or a smaller company where they can carve out geographic regions for themselves; do they want a partnership with an alliance — sharing development strategies or tactics — or a company that traditionally takes programs in-house and runs them by themselves? To ensure a successful partnership, companies need to identify their objectives before they begin. They need to identify what they want to keep and what they are willing to trade. They need to be honest and forthright on all issues; credibility is key. They need to listen to the other side carefully; a potential partner has its guidelines and will walk away early if it perceives negotiations will be one-sided. Keep negotiations going; the more time and effort a potential partner invests the better the chances it will stay to the end. Biotech companies need to build relationships broadly across as many levels of the potential partner as possible. This keeps the company front of mind and on the short list. Goldberg. The partner should be forthcoming during the negotiation in defining the roles of each member of the partnership to ensure that it will indeed be a partnership. Everybody should want to operate in a collaborative mode. A successful partnership between a small, entrepreneurial company and a mature biotech or pharma company should benefit both parties. The small company can infuse the free-thinking, can-do, and entrepreneurial spirit into the program, while the large partner can provide expertise and support to help the small company grow and improve without stifling its creativity. A true partnership between small biotech and large biotech or pharma companies requires a blending of two very different cultures and absolute support from the top of both sides to ensure a successful outcome. Gregory. In my experience, successful partnerships are first forged by both parties agreeing to a set of guiding principles that are followed up by concrete measures. Specifically, I believe there are three keys to creating winning partnerships. The first tenet that both parties must embrace before entering a collaborative negotiation is that they must forge a win-win partnership. Therefore, the risks and rewards of the collaboration must be balanced so that there is equal motivation and incentive between the parties to make the partnership work. Second, both parties must develop a detailed workflow to ensure the successful implementation of the collaboration. A scientific and clinical workflow that considers possible outcomes and mitigates potential conflict will create an atmosphere governed by transparency and clarity of responsibility. Once the workflow is developed, and responsibilities assigned, the financial terms of the partnership can be layered around that arrangement. Third, the management of the partnership should be established so that both voices are heard. By that I mean that management meetings must be frequent and inclusive enough so that everyone in the collaboration knows how it’s working and what needs to be changed. Komisar. Clearly, it does not always come down to these exact trade offs but inevitably, compromises get made. A good partner has balance in most of the needed areas and intense strength in one or two that are particularly valuable for the product under negotiation. A good biotech company will have a multitude of pharmaceutical partners because it recognizes that selecting a good partner means switching between different parameters at different times and at different levels of abstraction and specificity, depending on the situation. Dahiyat. At Xencor, we are looking for commitment from the alliance partner to the programs in the collaboration. We consider this level of commitment key to the success of the collaboration. Partners need to invest their internal resources and maintain focus on partnered programs. To maximize potential and achieve development milestones, partners need to be structured for success and committed to seeing the project through to completion. Rodriguez. The drug discovery and development field is characterized by unanticipated outcomes. Structuring partnerships that anticipate these unanticipated outcomes may seem obvious, but many partnerships are structured with only complete failure or success in mind. Thus, negotiating a structure that allows for various alternatives is a very useful approach. For example, if the large pharmaceutical partner does not wish to take a product further because of its reduced market potential, an outcome that occurs frequently, then returning the product to the biotech company with reduced reverse royalties or options would allow for the continued development of the product. It is advisable, then, to negotiate an agreement in which a joint advisory committee is formed to make decisions regarding a breadth of possible outcomes. In general, negotiating agreements that recognize the nature of the biotechnology industry helps to ensure a successful partnership and continued product development. ATTICK. If a partnership is modeled around solid principals, the companies involved will certainly be aware of the warning signs, signaling that their partnership is no longer working. Strong partnerships must maintain discipline to the very end. The principals should not be timid about cutting bait. Often timing is the culprit of a partnership gone bad. Partners should not forget how important it was for them to initially maintain discipline in the rules of engagement. Likewise, they should also be concerned about maintaining discipline in the rules of retreat. Goldberg. Transport Pharmaceuticals has no intention of marketing its products on its own. As such, we are looking for a strong marketing partner with an invested interest in our product opportunities. We have specific internal expertise and are able to move more nimbly through the development process. We want a partner that will support and leverage our expertise rather than come in and try to take control of the development process. We recently completed a licensing and collaboration deal with GlaxoSmithKline for the European rights to market and sell our lead product, a drug-device combination for the treatment of cold sores. We were able to structure this deal to fit this model for partnerships and will look to continue in the same manner as we seek a partner in the U.S. markets with this same lead product. Gregory. We are very strategic and targeted about our partnership endeavors and look for six basic qualities from a pharmaceutical partner. The first is shared vision, which is the most important evaluation we will make with a potential pharma partner. Lexicon Genetics is working on 60 drug-discovery programs in six therapeutic areas and is not able to commercialize all of them at the same time. We need partners to accelerate commercialization so we look for partners that understand our vision and sense of urgency, are committed to our therapeutic areas, and appreciate our novel mechanisms of action. We also look for a great brand name. We are looking for companies with good reputations and brand recognition that want to have a pipeline of potential products in our area of drug discovery. We look for synergies; an important characteristic for a potential partner is complementary chemistry and antibody technologies with production capacity as well as clinical and marketing expertise that will augment our own expertise at Lexicon. Cultural/personality fit between the two organizations is a part of shared vision but I mention it because it is absolutely essential that the two parties are able to work together productively and creatively. And, clearly, partnership opportunities are a source of funding. Rodriguez. Rigel’s strategic approach for developing partnerships is to identify organizations that complement the company’s skill set in the drug-discovery and development process. Rigel has aggressively discovered new drug candidates against major diseases and introduced these targets into the clinic. In an effort to maintain a high level of productivity, Rigel seeks partners that will move these programs from mid-clinical development through commercialization, globally and for substantial payments. Large pharmaceutical companies are well positioned and have the resources to support these goals. Rigel’s partnering approach segments the R&D process by empowering each entity to leverage what it does best. MORO-vidal. An important point is the interest a potential partner shows in our technologies since that is an indication of how aggressively it will move with the development and marketing of the final product. Additionally, the ability to deliver is an important consideration, which is why large companies are preferable to smaller ones, even though it might take longer to strike a deal. The next factor in considering a partnership is the capability of the prospect to interact in a mutually beneficial way and enable other good ideas to emerge as a result of the partnership. Both parties should lay out their expectations. This should be done in a short period of time and should include most of the important aspirations of each side. New conditions and terms emerging late in the structuring of a partnership generally sour the relationship and erode the trust of the party proposing the new terms. A partnership based on trust will always try to find a solution to a problem affecting the relationship. Both parties need to understand that negotiation is a fencing exercise and that the way it is done is as important as what is demanded or obtained. In the long term, it is better to graciously concede a point that is secondary, and in any case difficult to win, than to be forced to concede the same point after much debate, otherwise the negotiations reach a dead end. A good deal ends up with both parties thinking that they got what they wanted over a worthy opponent. Drakeman. As both a business development executive and a CEO, I have worked with a significant number of the large pharmaceutical and biotech companies. I have learned from this experience that one cannot place too high a premium on communication and collaboration. Both partners should commit resources to these efforts. One way to do this is through an alliance management system that identifies the key contact person for all issues, business or scientific, at each company. Another key is regularly planned interactions of the research or development teams. None of these strategies will work well, however, unless the partners respect the skills and talents of each other. Finally, skill in recognizing the need for and reaching compromises is a must. mäder. The ideal partner would be a global company established in all major markets. Our business model is to bring products from preclinical through Phase II clinical trials. Therefore we are looking for partners that have the infrastructure to complete clinical development and possess the regulatory know-how to file for new drug approval with the relevant regulatory bodies. Finally, the ideal partner should be a strong competitor in terms of marketing skills and sales capabilities in the targeted therapeutic field. The most important element in this crucial stage is that the partners be accessible. In addition, successful partnerships are based on sharing the risks as well as the successes, as these go hand in hand. On the pharma side, it is important to have an internal champion with the technical know-how to recognize and maximize the value of the technology to be licensed. Of course, this success is contingent on a first-rate expert internal decision-making process. As far as negotiations are concerned, pharma companies need to place less emphasis on back-end loading in deal making; biotech companies rely more on upfront and milestone payments. Finally, once the deal is done, an effective transfer of the technology through an interactive team, including the biotech company, is key to a successful partnership. PharmaLinx LLC, publisher of the VIEW, welcomes comments about this article. E-mail us at [email protected]. VIEW on Biotechnology May 2005

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