2013 Dealmakers Outlook - Pharmaceutical Executive


2013 Dealmakers Outlook

Pharmaceutical Executive

Looney: How do you assess the state of the relationship between the academic enterprise and private industry? Are you both communicating in the same language?

Paau: The spirit of partnership is proliferating, but there are cultural issues that create barriers and complicate a negotiation. Universities exist to generate and spread new knowledge. We are not used to keeping trade secrets, nor are we familiar with putting conditions on whether a researcher or faculty member can talk to someone deemed to be a competitor. Academic culture is freewheeling and internal rules are not always understood. I often face situations where an industry executive will show up in my office and say he is prepared to enter a partnership with a professor and his research team on the basis of a verbal assurance that the professor wants to do it. This may, or may not, be in the university's interest. It falls to me to sort it out, and many times the industry representative will claim he has been misled. To be honest, we are not reinforcing the basic message that if industry wants to create a business partnership with any representative of the university, it must start with us in administration.

Hence you can see that communication is exceedingly important to a productive relationship. Industry has been slow to recognize that academic institutions operate as non-profits. The laws that govern us are quite different than those for a profit making enterprise. For example, Cornell must be careful about the license terms we can agree to. The university sells hundreds of millions in tax-free bonds to investors. The IRS provisions that allow us to float these bonds free of tax requires that we cannot predetermine a value on inventions that we have not yet created. Violation of the rule would mean a loss of our bondholders' ability to receive their interest payments tax-free and hence our right to sell these bonds, a right that is worth far more to us than any deals with industry. This is why when a company comes in and sponsors research with us, we give the company a first right to license, no more.

Looney: What is your pressure point on the academic side? Do you have targets or objectives set forward in your role as an advocate for deals and technology transfers with industry?

Paau: It varies from one institution to another. At Cornell, the revenue target is set reasonably low—my operation is expected not to lose money; income should at least match expenses. But in terms of disseminating our knowledge widely, we are expected on an annual basis to place about half of all new internally generated inventions in technology disclosed to my office in the hands of a commercial enterprise. This is about the highest knowledge transfer target of any university in the United States. We have every incentive to get a deal done. And it's not the price point, or the dollar value, that counts here. Instead, it's being able to put the inventions in the hands of capable partners, so that these inventions can be developed, applied, and used as commercial products.

Looney: Any additional comments about the key priorities that should drive dealmaking this year?

Funtleyder: A fair and accurate assessment of asset value drives success in today's volatile dealmaking climate. Even though overall market conditions are improving, you have to pick your spots. With regard to the assets and willingness to commit among public companies, there is a lot of enthusiasm but less value. For privately held firms, it is the opposite: less enthusiasm and more value. Ultimately, however, valuations are determined by the perceptions of buyers and sellers about risk. One trend we see is growing concern about the sustainability of pricing for biologic drugs: the federal health reform law and private payers are putting the bull's eye on these big ticket therapies. Conversely, the timing is right for diagnostics, genetic sequencing and other technologies that allow for evidence-based treatment. These segments will flourish because the only realistic solution to the cost curve is to follow the data toward better outcomes.

Another growth area for future deals is digital health. These accessible, personalized, and user-friendly technology platforms hold great promise in improving the woeful rate of patient compliance with medicines; billions in revenue are left off the table due to the inability of drug makers to solve this problem. This is a hot area for dealmaking, at least for companies committed to leadership in leveraging communications technology. Clever, forward-looking industry players have noted the convergence of services, diagnostics and therapeutics in creating a superior value proposition for clinicians, patients, and payers.

Ladha: Deal prospects are going to depend more heavily on the best evidence, for the right audience, at the right time. Even smaller companies are now thinking about building the case for reimbursement by generating real-world evidence from the earliest stages of the clinical trial process. You have to design trials so you can demonstrate not only safety and efficacy but economic enhancements as well. Doing this well and early will differentiate the quality of the asset against others in its class. If an asset seller has incorporated that line of thinking into its development plan, we do sit up and take notice. Our groundbreaking partnership with Healthcore is evidence of the strategic approach we now take in developing real-world evidence.


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