Having the right “pre-nup” in place was one piece of advice from the CEO panel at the PA Bio breakfast roundtable this week. And they weren’t referring to marriage, at least not as we typically define it. A “pre-nup” was in reference to the elements of a formal agreement when creating a strong company partnership. The subject of formal agreements was one of several topics shared by the panelists who spoke live from Malvern and via simulcast from Hershey Center for Applied Research and the Pittsburgh Life Sciences Greenhouse. The other hot topics included strategic alliances, acquisitions and commercialization.
So what are the ingredients of a good deal? According to Joe Kaufmann, of Kensey Nash Corporation, they look something like this: Clearly define what you’re giving up, clearly define the milestones (R&D, financial and commercialization), and what happens if things go bad? Since it’s not just the agreement, it’s the partner that matters too, Nash also rattled off the keys to finding a good company partner: The right company, the right focus and the right relationship, were all at the top of his list.
Adding to the partnership discussion, Armando Anido of Auxilium Pharmaceuticals, Inc. encouraged the audience of entrepreneurs and company executives to have multiple potential partners at the table to get the best deal. In his view, there are so many competing priorities within a big company that it’s not hard to envision a deal falling apart due to internal corporate changes. With mulitple players at the table, companies don’t find themselves dependent on, and therefore at the mercy of, one partner’s terms.
Another major factor in closing a deal, according to Anido, is finding internal champions. He cited his experience having to identify several champions inside Pfizer, courted by his company execs and his board. “And even then,” says Anido, “be prepared to spend a lot of late nights talking them back from the edge to keep them in the deal.” Finding an internal champion is easier said then done, according to David Pompliano, who brought his entrepreneurial experience as CEO of BioLeap, Inc. As a start-up company CEO, he points out that it’s hard to find people willing to be internal corporate champions because they’re still skeptical on the science. The initial challenge, before internal champions, is simply trying to be heard within a company. Even after you get a foot in the door, Pompliano suggests companies get ready for “horse trading.” That’s what it takes for a young company to develop a partnership. “You give away ownership in molecules to get validation,” says Pompliano.
Despite the road blocks, all three panelists agreed there are plenty of opportunities for small companies to grab the attention of a larger corporation. “The big guys are not going to be able to handle all the acquisitions,” comments Anido. When the opportunity does land on your doorstep, Pompliano reminds start-ups, “it’s not just about being cheaper, big companies are looking outside for new innovation.”
One cautionary word from the CEO’s was on the sales front. “Make the sales and marketing decisions before the trials, you can’t wait until FDA approval,” shares Anido. Companies need the trial data, marketing claims, and advantages to move the product from approval to actually getting used. He stressed the need to talk to potential customers over and over again because customers say something different every time they’re asked a question. “FDA approval is not the end game.”
Learning to prepare and deal with failure is as important as handling success. In the event an existing partnership, product development effort or licensing deal does go south, Kaufmann has these solemn words of advice for company owners, “Know when to run, take your beating and move on.” In short, know when to pull the plug.
Tags: Auxilium Pharmaceuticals, BioLeap, biotech, CEO roundtable, commercialization, company partnerships, Hershey Center for Applied Research, Innovation Transfer Network, Kensy Nash Corporation, Pennsylvania Bio, start up advice, start up agreements, start up sales
