Partnering: are there risks?

Stock DZ
PCIB 22.07.2018 kl 02:04 1461

Hi

Hopefully this can make a good Sunday read for you. The aim of this thread is to gather / share knowledge about the subject of “partnering” in Biotech, for the obvious reason that we could be signing a partnership agreement soon for FImaChem.

At first, It seems for us investors that partnering is all about getting the funding for the PP2, share price sky high, milestone payments and receiving royalties. But does it really start and end here?

What we must understand is that Partnering is in fact a CONTRACT, and as all other contracts, this consists of obligations as well as rights. The best and easiest description (can also be funny) of this I found in this link:

http://herantis.com/blog/partnering-in-drug-development/

Quote:
“In the meanwhile, the biotech companies are of course doing their best to get heard of by Big Pharma. The small companies (and their investors) are looking for a large partner to maybe provide the missing X hundred million euros for pivotal clinical studies. It’s really just like romantic mating of picky singles, to the extent that an entire dating industry has emerged: There are Biotech x Big Pharma speed dating events (BD conferences), BioTinders for matchmaking, and the industry definitely provides relationship counseling for singles (BD consultants). And trust me, you seldom get married at first sight. Dating can take years. (It is considered ethically acceptable to date several partner candidates simultaneously.)
Finally, if a match is made in heaven, the dreams of the small biotech company come true while the large pharmaceutical company can boast with strengthening its pipeline. There is of course a prenup: For instance, the biotech could receive 50 million euros at signing of the partnering agreement, 200 million if pivotal clinical study is launched, another 200 million if market approval is reached, and then maybe hand over to the Big Pharma who would market the drug and continue paying royalties to the biotech based on actual sales.” Quote ends

So if we agree that partnering is a form of a contract, the question now is: how the risks related to this contract can be controlled and managed (I hope our board and management teams will excel in this task). However, as an investor I believe that I should be aware of these little details, which can have a huge impact if not mitigated in the best possible way, for example:

- What is the partner’s communicated strategy? Does he have long-term commitment to our technology?

- Is the partner a market leader or a growth hungry organization willing to fill up its pipeline?

- Are milestones considered deliverables, can we still be paid if we under-achieve or paid more if our technology over achieves? and under what circumstances can the contract be canceled.

- Can we retain rights for other possible indications within FimaChem application?

- Can we still have option for marketing rights in certain geographical areas

- Patent rights

- Access to partner’s R&D organization and resources

- What about sharing/swapping of assets / projects and expertise

- Are we compensated “fairly” or in other words: are the risks related to the terms of conditions of the partnership agreement fairly priced-in the upfront / milestones payments

Finally, I strongly recommend you to have a look at this document which talks about controlling risks in partnering. This is published in Drug Discovery World website (http://www.ddw-online.com/), which by the way is a good website to look at.

Direct Link to the document
www.ddw-online.com/media/32/2475/03.spr.controlling-the-risks-of-partnering.pdf







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