Good interpersonal chemistry can be as important as good biochemistry for small life-science companies trying to “do a deal” with a major corporate collaborator.

That’s one of the take-away messages heard Wednesday evening from acquisition deals involving two fast-emerging spinouts from Research Triangle universities and their big-pharma collaborators.

About 100 people gathered in the North Carolina Biotechnology Center auditorium to get an inside view of the “Anatomy of a Deal,” a CED Biotech Forum held in partnership with the Center.

The audience heard Kyle Chenet, vice president of corporate development with Research Triangle Park-based Liquidia Technologies, and GlaxoSmithKline’s Jennifer Johnson, give their perspectives on their months of working together to enable GSK to buy into Liquidia’s technology platform.

Johnson, an accountant, is director of worldwide business development, transactions and investment management. Liquidia is a spinout from the University of North Carolina at Chapel Hill.

The panel also included Kenneth Moch, president and CEO of Durham-based Chimerix, which licensed technology from the University of California at San Diego, and Sanjeev Munshi, Ph.D., director of external research and licensing with Merck Research Laboratories. They also spent months wrangling out terms for Merck to buy an application of Chimerix technology that is expected to enable one of Merck’s anti-viral drugs to dive into targeted cells at low but effective doses, reducing toxic side effects.

Moderator was Faith Charles, New York-based partner in the Thompson Hine law firm, responsible for life-science corporate transactions and securities, international trade and customs.

Partnered Compounds More Likely Survivors

Peter Ginsberg, vice president of business and technology development at NCBiotech, introduced the program, and Charles. Ginsberg opened by pointing to a Deloitte finding earlier in 2012: Partnered compounds are four times as likely to reach the pharmaceutical marketplace as those that aren’t supported by the deep pockets and expertise of big-pharma collaborators.

De-risked, late-stage assets are the winners in today’s difficult, high-cost market, he noted.

Charles added that collaborations are not only critical to the success of small biotech companies. Big pharma needs the creativity that comes with biotech collaborators, too. That’s why more than 400 such licensing deals are now being consummated each year, and the associated dollar value of those deals is increasing, she said. She added that the two global pharmaceutical companies represented on the panel, GSK and Merck, closed about 20 licensing deals apiece in 2011.

Biotech: ‘R&D Unencumbered by Revenue’

Moch brought a round of laughter from the crowd when he wryly defined a biotech company as “an R&D pipeline unencumbered by revenue.”

That, however, is increasingly the problem, the group agreed.

Venture capital for biotech start-ups has dwindled during the past five years, said Chenet. “So there’s something to be said for having big pharma at the table as an equity partner, even though it may dilute your original venture capital investors.”

Other key points from the panelists:

  • For any young biotech company, the first deal is always the hardest to get. The first deal establishes the credibility of the company and its technology.
  • Global pharmaceutical companies are changing therapeutic focus almost daily. So invest in good intellectual property protection and don’t waste time negotiating unimportant details. That big-pharma interest in your technology could disappear in a heartbeat.
  • Be clear about what’s being bought and sold in your term sheet. Hammering that out will take months. Like the Liquidia/GSK deal, the term sheet could start out at four pages and, six months later, run 17 pages. And it may take another six months from term sheet to final contract.
  • Define the four corners of the deal, agree on the contract, and close. Don’t leave any access rights or rights of first refusal to dangle and potentially cause problems later.
  • The contract-writing phase will be expensive, because the lawyers are expensive. But contract wording can also disappoint, by whittling anticipated revenue from a small biotech company’s total haul.
  • Scientists sometimes write the patent applications for their discoveries, to save money and time. Beware. If your technology patent was written by a scientist, have it reviewed by a good IP attorney to make sure it’s solid.
  • Biotech business development is selling hope. Partnering is like meeting, then dating, then marriage. If you get along with each other and trust each other in negotiations, you’ll get along as collaborators.

Editor’s note: Jim Shamp is NCBiotech Director of Public Relations.

(C) NC Biotech Center

(NOTE: This story has been corrected to reflect the fact Chimerix utilizes technology developed a the University of California at San Diego and is not an NCSU spinout. A quote also was revised with “equity” replaced by “revenue” in a comment from Liquidia’s Ken Moch.)