Doug Lind's decision was supposedly based on his belief that Agouron has not diversified top-line risk through licensing quickly enough. No other analysts expressed similar concerns over this issue, and many did not agree with his opinion and considered it premature especially since it has only been four months since the Roche deal ended. Lind's decision could not have been based on side effects from AG3340 or any other drug, as no results have even been released. As Peter Singleton said: "What's the big deal over the lack of an in-licensed product? There's a lot of deals out there, but very few that would make compelling strategic sense. It takes an enormous amount of time to evaluate these deals, then to negotiate the deal. As far as I can tell, an in-licensed product is a nice to have, but not essential."
Many of us here seem to agree that we would prefer that Agouron develop drugs alone if feasible, rather than give up a chunk of future profits in exchange for funding from major drug companies.
L Moss from AOL has a great post on the subject of collaborations.
Subject: Collaborations
Date: Tue, Apr 21, 1998 20:55 EDT
Some people seem to think that collaboration with one or more big pharmaceutical companies is a necessary part of a successful biotechnology business model, but this is not necessarily the case.
Collaboration has both benefits and costs. For example, the successful collaboration of Agouron and Japan Tobacco in the development of Viracept allowed Agouron to share the risk of possible failure and reduce the dilution of equity that would have been necessary if Agouron developed it on its own. As for the cost, Agouron's just-completed 3QFY98 earnings (after tax, fully diluted) would have been $0.74, not $0.41 per share, if it did not pay
royalties. And this is just the beginning of a long stream of royalty payments.
Agouron was able to make $0.41 per share even after supporting its R&D at an annualized rate of $127 million. The company is now able to bear the risk of possible failure and avoid dilution of equity even while retaining 100% interest in drugs under development. If collaboration does make sense, it should be done for other reasons, and even then it should be delayed until after pivotal Phase ll/lll studies are completed, when Agouron's bargaining
position will be much stronger.
When would it make sense? One example is if a drug developed by Agouron required marketing on a scale beyond the current or near-term prospective capability of the company's marketing department. This would not apply to a second anti-HIV drug, but might well be the case for a remedy for the common cold (AG7088, we hope). An anti-cancer drug is a closer call; though it would require marketing on a scale beyond the company's current capability, such
marketing could focus, at least initially, on the less numerous community of oncologists.
The point is that collaboration is not good in all cases, and must be considered only as part of a comprehensive strategy to achieve the objectives of the company, its customers, and its shareholders.
LMoss |
