2012 Dealmakers Outlook

Jun 01, 2012

WL: What about new stakeholders in the partnership game?

Blumberg: Academia continues to advance as a powerful force in the business of deals. There is a palpable sense of empowerment from the universities; they are pushing very hard on the IP front and taking a major interest in leveraging their intellectual capital to generate profit. In my experience, the universities are getting harder to negotiate with. There is no level expectation in recognizing their contribution may only be a small part of the very long and expensive process to bring products to commercialization. The IP and know-how from academia is important in drug development but often represents a small piece of a very complicated value equation.

Wills: The universities are slowly learning how to deal with industry. For a long time, they insisted on terms that were entirely one-sided: take all the patent rights, refuse exclusivity in partnering, and reimburse them for 75 percent of the overhead costs. We walked away from that. Today, the approach is more level and sophisticated. Basically, they want to be treated as a small biotech partner, with upfront payments plus royalties linked to milestones. So J&J has been doing more deals with academia in the last four years than we did in the previous 10. Nevertheless, it's still a tough match because, while academia sees itself as a biotech-equivalent entity, it still lacks awareness of what it's like to actually be a biotech company.

Blumberg: Agreed. The data packages we get from many of these academic partnerships are rarely done to industry standards. It follows that keeping the principal scientific investigators in the loop and explaining to them the complicated necessities of building toward commercialization is critical to a smooth negotiation. The industry academic partnership is a win-win when both sides have balanced, informed, and reasonable expectations.

Wills: One sign of an improving relationship is that academic tech transfer offices are hiring people with background in venture, biotech, or Big Pharma. These people know from experience what is required to progress a deal. We are even seeing the major philanthropic disease foundations hire industry specialists with business development experience to increase productive use of their own money. Philanthropy venture capital is an emerging trend, as these groups want to be more involved in developing drugs that improve quality of life for their constituent patients. We also have a very interesting deal with GSK—it used to be anathema for two Big Pharma companies to work together—and a venture capital firm, Index, to stimulate early stage innovation. The aim here is not to support companies, but innovation, based on networks of collaborators from many sources, including academia.

Altomari: I advise my alma mater on this topic and one of the recommendations I make is to create an external advisory board so that the university has direct access to industry expertise from people they can trust.

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