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Five critical questions before out-licensing to a pharmaceutical company

Posted by Devin Cole  February 27, 2012 04:37 PM

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Many university scientists and start-up companies develop new drugs. But getting a drug through the FDA (Food and Drug Administration) approval process and to market is a long, expensive and risky process. Many companies seek to share this risk by partnering or out-licensing to a larger biotechnology or pharmaceutical company.

Antony Newton worked for Genzyme from 1992 to 2011, eventually becoming Vice President of Portfolio Management in the Oncology Division, He facilitated the in-licensing process there and describes here what you have to think about in order to successfully out-license your drug to a pharmaceutical company:

  1. Have a clear value proposition
  2. Understand the culture of the company
  3. Understand the structure of decision making
  4. Develop relationships on the inside
  5. Plan for follow through

While the example of Genzyme helps us flesh out these five points, the lessons are general and apply to any pharmaceutical company.

Anthony Newton.jpg

Antony Newton

1. What is the value proposition?

Pharmaceutical companies are increasingly using in-licensing and partnering to build and de-risk their development pipelines. For the out-licensing group it is important to understand the needs of the pharmaceutical company. Are they interested in particular technologies or approaches, are they looking for products at a certain stage of development? By asking these questions up front, you avoid fruitless discussions. And by knowing more, you can tailor the information presented to meet their needs.

2. What is the corporate culture?

Each corporate culture is different, and understanding the type of culture you are dealing with when attempting to out-license to a pharmaceutical company becomes critical. In a more hierarchical culture, there will be fewer key opinion leaders that you need to reach. In more consensual organization such as Genzyme the process is much more complex, because identifying a single person, or even a few people, as decision makers is not easy

The decision making culture in Genzyme where Antony Newton worked, was highly complex. Program and portfolio managers in Genzyme were key to the decision making process. Unlike in the major pharmaceutical companies, program managers did not wield any direct power. Rather they were charged with achieving team objectives through leadership and indirect authority.

Conceivably, this is due to the overall corporate culture encouraged by the then CEO, Henri Termeer. When faced with tension or potential disagreements within Genzyme, Termeer listened and encouraged an exploration of all the issues followed by a full debate. Following that, he tended to take no executive decision but instead encouraged teams to work out the decision.

3. What is the decision making process?

In a consensus decision making company the process is necessarily more complex. Antony worked with Genzyme’s Leadership Coaching group to design a process for portfolio management. He introduced a round table meeting format for biennial portfolio reviews where decisions were reached on which programs would advance or be cut. All participants were involved in simultaneous round table discussions, with up to 8 tables seating 10 people each – and these 10 were a mix of different groups, functions and levels of seniority. Each table would first discuss the key portfolio issues and then have a representative present to the entire room. In this way, everyone was heard, and controversial positions would get an airing in a non-threatening environment. Within this culture of open debate, hard decisions including program cuts could be more easily accepted by all.

This form of participatory decision making was also applied to in-licensing.. University Technology Licensing Offices, start-up companies, and other pharmaceutical companies brought hundreds of new opportunities to the Genzyme annually. The critical issue was how to manage this flow of opportunities, recognize those deserving of detailed review and maintaining a good relationship with outside entities where a negative response was needed. Each month a screening meeting selected 2 or 3 for full discussion. Those selected for full review had to be identified by an internal champion who was prepared to present and lead discussion at a full meeting of a multi-function decision making group. Interestingly this review group which included Genzyme scientists also evaluated Genzyme’s internal programs using the same set of bench marks so was an effective way of evaluating internal programs in the real environment.

4. What are the key relationships?

Pharmaceutical companies are large and complex organizations. There will be many points of contact between the partnering companies. These include Business Development, Science, Medical but can expand to others. It is important for each of the groups to establish mechanisms to manage the multiple communications. Many relationships fail at this critical stage due to confusion in communications and inability for all in the team to ‘stay on message’.

Genzyme also recognized that in many academic collaborations the key expertise is held by a University Professor, whose incentive is often not so much financial but rather to see their creation become a successful drug or product. For the out-licensing group it is important to recognize the incentives and the value of personal relationships. Face to face meetings, a shared lunch or dinner can go a long way to ensuring a smooth process.

5. What is the follow-through?

A relationship does not end with a signing of the deal. The arrangement needs to work in the long-term. It is important to decide who will be on the team and how the information will be transferred from one organization to another. Once again, the management of multiple relationships is key. There will often be an element of internal ‘selling’ of the project in the in-licensing company; so understanding and supporting this dynamic is critical. The end result of a successful transition will be a higher chance of success for all involved and the prospect of future expansion of the business arrangement.

Biotech is now firmly established as one of the life-blood industries of the Boston area and deal making is a major component of the business. The example of Genzyme provides a picture one type of culture in the Biotechnology and Pharmaceutical field. Genzyme has now been acquired by Sanofi but many similar companies in the Boston area remain, each with their own internal dynamics. The Genzyme experience highlights the importance of recognizing the interpersonal aspects of what at first appears to be purely a business transaction.

Generally speaking, in order to successfully get a pharmaceutical company to in-license a drug, you have to figure out how it can be in its interest to do so. You can only do this by understanding how it works and by being attentive to its culture and decision making process. In order to influence this process, you have to become a trusted partner, who is seen as trustworthy, cooperative and helpful. In addition you have to really have a drug of genuine interest.

Arne Hessenbruch is a Danish expat and the founder of Boston Denmark Partnerships, where he connects Danish companies with an interest in doing business in Boston.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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