Peter,
<em>The fact is that the big pharma are desperate for pipeline in the face of their existing patent expirations and generally disappointing internal pipes. The "terms of trade" between biotechs and pharma have radically changed over the last five years or so. It used to be that the pharma would license early stage products in exchange for a single digit royalty - these were really nothing more than options without much commitment to develop the product. Nowadays, 50/50 deals are much more common. The biotechs are holding onto their products longer, and the vast majority of biotechs are financially much more secure than they used to be. </em>
Here is a post from another stock thread that I am invested in, that backs up your assertion that big pharmaceuticals rely on alliances more and more vs. outright acquisitions.
Shawn
ragingbull.lycos.com
Pharmaceuticals/Publishing
05.21.01
Pfizer
Pharmaceuticals
NYSE: PFE
www.pfizer.com
In any business, innovation and speed to market are critical. Big pharmaceutical companies rely on alliances with clinical labs, biotech firms and even competitors to keep them on the leading edge of their markets.
In a recent survey of 184 industry executives performed by PricewaterhouseCoopers, Pfizer was named most-desirable partner in all three measured categories: research discovery, clinical development and comarketing/copromotion. Such Pfizer blockbuster drugs as Celebrex were created via strategic alliances.
Chief Executive: Henry A. McKinnell
Key alliance officer: J. Patrick Kelly
Revenues: $29.6 billion 5-YEAR
RETURN
ON CAPITAL
20.5%
Market Cap: $258.9 billion
Alliances: 400 plus
Smaller firms want to team up with Pfizer in large part because of its marketing power, including its knack for marrying marketing and drug development. "In Phase II trials we're already thinking about marketing and setting that up; how to maximize [the drug's] potential, whether it's through different doses or another application entirely," says Lisa Ricciardi, vice president of licensing and development.
Once the drug is approved, Pfizer's army of 8,000 well-trained reps are swarming hospitals and doctors' offices pushing the product.
You also won't find the "not invented here syndrome" at Pfizer.
J. Patrick Kelly, senior vice president of worldwide marketing, says all employees involved are rewarded for alliance successes, not just the stars or leaders. This strengthens relationships in the trenches. Says Kelly, "We've learned that while you want the engagement of senior management, you also want them out of the way. You want to move the alliances into a smooth operational mode as quickly as possible and let decisions be made at the bottom."
Partners, beware. If Pfizer fears you may switch partners, as it did with Warner-Lambert, comarketer of cholesterol blocker Lipitor, it might decide to buy you out entirely. —Dolly Setton
RUNNER UP
Eli Lilly
Lilly managers go through intensive training and share alliance practices via an intranet. Neutrality is key. Says Alliance Chief Nelson Sims, "At least half of the time I'll make a ruling on behalf of the smaller company."
forbes.com
Baxter International
Medical Supplies
NYSE: BAX
www.baxter.com
Every week five or six new alliance proposals arrive in Victor Schmitt's mail at Baxter International. Staffers in the Biosciences division, where Schmitt runs business development, turn up another ten potential partners per week. And that's just one of $6.9-billion-Baxter's three operating units. "It isn't reasonable to think that any one company is going to control all the intellectual property that will result in meaningful therapeutic products," says Schmitt, who vets alliances with head of business development, Timothy Anderson.
Chief Executive: Harry M.J. Kraemer Jr.
Key alliance officer: Timothy Anderson
Revenues: $6.9 billion 5-YEAR
RETURN
ON CAPITAL
9.7%
Market Cap: $26.2 billion
Alliances: 15 plus
Baxter actively seeks strategic alliances to fill gaps in its product pipeline. They range from early-stage joint development agreements to Web partnerships, including a deal with Microsoft and Cisco to develop a consumer Web site devoted to kidney dialysis.
In January Baxter teamed up with Welch Allyn Protocol to combine its pumps with Welch's patient-monitor system into a single, improved product. "With either company, we've essentially doubled our sales forces," says Ann Demaree, vice president of alliance management at Protocol.
Some of Baxter's alliances are defensive. For example, Baxter makes a treatment for hemophilia that involves using human blood plasma to compensate for immune deficiencies. The treatment's main weaknesses are the potential contamination of blood, and donor shortages. So in early 2000 Baxter signed up Dutch company Pharming Group NV to codevelop a synthetic plasma that will compete with Baxter's human plasma line. If the synthetic plasma is effective, both companies win. —Chana R. Schoenberger
RUNNER UP
Johnson & Johnson
J&J has 125 alliances and, true to its decentralized model, no one person in charge of corporate alliance strategy. J&J's venture arm has done 100 funding deals in devices, biotech and genetics.
forbes.com
Biotech/Broadcasting & Cable
05.21.01
Genentech
Biotech
NYSE: DNA
www.genentech.com
Strategic alliances are embedded in this industry's DNA. The risks are too great and the time spans involved are too long for a single company to bear. A drug takes seven to ten years to develop and it costs $250 million to $500 million to get it ready for federal clinical trials. So big companies tie up with smaller ones, often letting the smaller ones do the time-consuming research. Other alliances connect the companies to university scientists and clinical labs for shared research.
Chief Executive: Arthur D. Levinson
Key alliance officer: Myrtle S. Potter
Revenues: $1.7 billion 5-YEAR
RETURN
ON CAPITAL
-1.8%
Market Cap: $26.3 billion
Alliances: 27
With big-company/small-company alliances, the big fellows supply capital, experience and marketing. Experience counts. Genentech is strong in cancer and cardiovascular drugs, so most of its alliances are in that area.
OSI Pharmaceuticals needed a partner to market its next-generation anticancer agent, OSI-774. The compound is effective in fighting lung, head and neck, and ovarian cancers with fewer side effects than current treatments. OSI picked Genentech over others like Bristol-Myers Squibb because it felt Genentech was the best place for cancer-fighting partnerships. Genentech shares costs and profits from U.S. distribution 50-50. Genentech's 60% owner, Hoffman LaRoche, came in for worldwide distribution. OSI-774 could be a blockbuster--more than $1 billion in sales.
"They [Genentech] had a very clear vision of how this would fit into their goals in oncology. If we had wanted to simply option, we might have had a different outcome," explains OSI chief executive Colin Goddard.
A critical factor in biotech partnerships? The same factor that rules in any corporate partnership: "Trust," says Myrtle Potter, chief operating officer. "We share know-how early so we can be specific about hard facts and see how we can help the alliance. Some might say that we give away too much too early. But it has worked nine times out of ten." --Dolly Setton
RUNNER UP
Millennium Pharmaceuticals
Shares cutting-edge genomics research tools and knowledge of which genes or proteins are related to various medical conditions with drug companies like Bayer and Pfizer. Millennium's alliances are worth more than $2 billion.
forbes.com |
