William Looney: Building on the selectivity theme, which therapeutic areas today pose the best opportunity for deals?

Ben Bonifant, Campbell Alliance: Our survey found that twice as many people expect to do a deal on oncology products compared to other categories. CNS therapies ranked second in level of interest. We also saw a sharp drop in expectations for primary care medicines that require extensive resourcing through the sales force. For example, few companies are interested in deals involving cardiovascular drugs, which we ascribe to the many competing therapies in the category and the challenges of differentiating value.

Alex Scott, Eisai: I'd say it's not the therapy that counts so much as the value metric. If you have a product in any therapy area that has an interesting new mechanism of action and the Phase I work is solid, then that by itself is a good value point to the investor.

Mary Tanner, Peter J. Solomon Co.: Therapy areas go in and out of fashion. The low hanging fruit in many categories has been plucked, but beyond that we just don't know where the best leads are likely to take investors five or ten years from now. The standard for risk is ratcheting ever higher. That is why there is such strong interest in oncology deals, because progress in developing biomarkers will ensure that the clinical benefits from a new therapy are targeted to the right patient. It promotes certainty by defining the potential size of the market and providing a rationale for the cost.

Dennis Purcell, Aisling Capital: One reason that funds are scarce is that it is harder for the investor to make bets around a frayed business model. The world's biggest selling drug is Pfizer's Lipitor, yet the company has decided to abandon the cardiovascular segment entirely—that's like Gallo saying it wants to quit the wine business. It demonstrates how fickle management can be, and the challenge of defining what kind of start-up company you want to capitalize today to attract the attention of a Pfizer five years from now. With so much in flux, we risk a big disconnect between the companies being funded and what the big in-licensors want in terms of new product candidates. If a venture capitalist could get that equation right, then we are back to the days of a 35 percent or more return on investment.

William Looney: What requirements are important to ensure that your company is seen by target constituencies as the "partner of choice?"

Wael Fayad, Forest Labs: We spend a lot of time and effort on business development, as licensing and partnerships are to us equivalent to what others call R&D. We see two critical measures in securing our reputation as a good partner. First, you must have the skills, resources, and track record to move a project forward and achieve commercialization. This is a key confidence builder. The second has to do with company culture. It's inherent in the task of a good business development team to challenge assumptions and introduce new partners that can threaten the established code of behavior. This is not easy to do, especially in large organizations. The Forest culture is outwardly focused by design, and every employee is taught to look beyond his job description to find ways to add value. In practice, this means that we never approach a potential deal without placing a priority on "active listening"; competitive research, including stakeholder analysis; and respect—in the latter case, for the know how and expertise that each partner brings to the collaboration.

Jeff Brennan, Targacept: The Big Pharmas are all different, and so too is biotech. As a small biotech, we are looking for long term relationships that in most cases should include some type of R&D collaboration. We want to make sure our potential partners take the time to understand first who we are and what our goals are. Targacept's mission is to provide superior treatment options for complex diseases, improving patient lives by developing new medicines that exploit the unique role of NNRs [neuronal nicotinic receptors] that regulate CNS activity. In most cases, we want to be an active contributor as we progress compounds forward in collaboration with our partners. Sometimes we can see the market and assess prospects differently—maybe better—than a Big Pharma would.