Doing Major Life Sciences Deals: The Keys to Success

At the LESI Annual Conference in San Diego, moderator Amanda Hollis of Kirkland & Ellis created a panel discussion around "Doing Major Life Sciences Deals" as a case study. She then asked for advice from panel members. The experts included Stasia Ogden, Vice President, Global Patent Litigation Governance, Head of Patents, GSK; John Calvo, Senior Counsel, Bayer; and Christina Allegrini, Vice President, Associate General Counsel, Global Intellectual Property, Fresenius Medical Care.

The Challenge…

Your employer, LESI Pharma, is a large Pharmaceutical company with many approved products. Years ago LESI Pharma developed and patented a compound named "Silver Bullet" that is very effective at killing certain tumor cells, if it can reach the cells. However, Silver Bullet was never commercialized because in order to reach tumor cells, Silver Bullet had to be given at high levels that created unintended side effects. Unable to deliver Silver Bullet to tumor cells, LESI Pharma shelved the project.

Your CEO approaches you about a new company, Upstart Pharma. They are a small biotechnology company with several promising technologies for delivering drugs to tumors. Upstart Pharma does not currently have any approved products or any revenue, and its founder developed the technology while he was a professor at San Diego University. Several of the foundational patents are owned by San Diego University and are licensed to Upstart Pharma. Your CEO looks to you for advice.

The Advice…

The moderator asked and the panel answered a few good questions:

1. Who at big Pharma is involved? It needs a deal team from business development, legal, finance and alliance management to help live with the deal. They might also need the medical team and regulatory team. It's important to loop in the right people, not just the function. Are the reporting of net sales terms with the agreement in conflict with their financial system? They don't want a big disconnect between deal and on the ground implementation. If you take the long-used template of Phase 1,2 and 3, it might not match the current system of product development. Some companies are trying to file for approval just after Phase 1.
2. Who is on the start-up side? Often they are very passionate people, but often with not a lot of experience. Sometimes they don't know the hurdles of FDA compliance, or manufacturing, importance of adequate patent protection, etc. Sometimes the start-up forgets big Pharma is so slow to move. Smaller companies move faster and are more agile compared to big Pharma. 
3. What structure? Usually In-licenses come with a collaboration, development, commercialization and co-promotion component. Large companies may have lots of resources to do the development, but those people are often already committed to other projects. Sometimes it makes sense for big Pharma to let start-ups do the R&D because they know the technology well. Often there is a disconnect of expectations between parties. We advise an audit clause.
4. What milestones? Define what the milestone and objective criteria is for the start-up's development. There needs to be a system to know that the money is being well spent and on budget. Possibly a joint steering committee could have a mechanism to readjust expectations. Sometimes there are different expectations around clinical trial results; "commercially reasonable" is still very different between types of companies. It's really a long term relationship and no one knows what will happen.
5. How to handle risk allocation, product liability and third party infringement? There needs to be a system to monitor infringement; also need to realize that big Pharma takes a long time to decide strategy on third party infringers (investigate whether it's really an infringement). Intellectual Property is an area that needs to establish and confirm ownership. Also consider scale-up, formulation, marketing and IP. Do customers want this so that it's worth the extra cost? If university or another company has licensed to a start-up, they usually have to renegotiate the license when big Pharma gets involved. Sometimes there's a "collaboration data file" (e.g., following an oral discussion or documents exchanged between parties) and it helps prevent issues of who invented what, etc.
6. What are common things things that help or don't help? You need to communicate, transparently; face-to-face really helps. Also need to appreciate different cultures. 
7. Who initiates negotiations? Both sides. Criteria for prioritizing projects shifts over years. It's based on budget, market or customer input, progress of projects and reimbursement.

Reported by: Katherine Ku, written and photos by Carla J. Blackman

Amanda Hollis – moderator

Audience at the Life Sciences Mini-Plenary in San Diego.