For biotechs developing an asset for a pharma partnership, it’s crucial to consider the key deal-success ingredients, in the eyes of a future pharma partner, well in advance. It’s all too common that companies seeking to out-license a new development product, discover too late that there is little to no interest from prospective partners, as the asset does not meet the minimum criteria necessary for a transaction. The result can be catastrophic, as frequently at that that stage there are no longer sufficient financial resources to generate fresh compelling program data.
The role and importance of a Target Product Profile in strategic planning and valuation analysis cannot be understated - something we discussed in a previous paper. The classic TPP represents the “destination” of a project in terms of specifying the key parameters the new product must meet at launch in order to be clinically and commercially viable. In an analogous manner, we suggest that companies also establish another profile: the Target Licensing Profile (TLP). The TLP defines the minimum set of characteristics and evidence that would enable a drug in development to be of meaningful partnering interest to Big Pharma/Big Biotech.
The elements of a TLP should include the following items:
The most important assumption in a TLP is the type of data that will be needed to get prospective partners excited enough to do a deal. This is not just the development stage that must be reached, but should also include details such as types of animal models, endpoints, duration, comparators, and effect size. If a company aims too low, they will likely have to leave the deal table to perform the missing study(ies), which may be a financial challenge and require an explanation to investors. The consequences of aiming too high can be a delayed exit or injection of non-dilutive funding, while requiring bigger budgets. Though, theoretically, the additional data should drive higher deal terms.
There are several approaches that can be used to assess the data needed for a future deal, but all have their limitations and should be revisited on a regular basis. These approaches include:
A first step in the asset partnering process should be a mock due diligence (DD) by a multidisciplinary team (something we frequently perform). This serves multiple purposes: it provides an in-depth understanding of the asset so one can determine the best way to pitch it, it underpins a gap analysis and it identifies the key risks (and possible mitigations) in the program. It provides insight into the questions a prospective partner will most likely raise should they show sufficient interest to enter their own DD and provides an opportunity to define answers (or even design/conduct appropriate studies in advance). It also provides an opportunity for a go/no-go decision point for the main partnering process, should it be judged that the chances of a successful transaction are too low, creating an opportunity to terminate or suspend the process before significant resources are expended. Furthermore, it prevents premature exposure of the asset in an unready state, which is important to prevent negative first impressions from tainting future initiatives. Of course, this spot check on readiness for partnerability may not be needed if the sponsor has previously developed a TLP and brought the program forward in development to the point described in the profile, having checked TLP assumptions regularly along the way.
Even with a strong TLP, and an asset that meets or exceeds all of the parameters, a successful deal is by no means guaranteed, as there are numerous environmental factors in play. Prior to initiating formal partnering activity, it may also be worth assessing the probability of a deal going through to completion based on the “temperature” at the time (see previous paper: “Beyond rNPV Valuations”). Here are some of the factors that can influence the chances of a transaction for a specific asset:
These parameters can be assessed and then plotted on a spider chart (along the lines of the one below), and each factor can be weighted appropriately to produce a composite deal probability score. This type of analysis can be especially useful for a company looking to decide which of several pipeline assets to focus partnering efforts and budgets on.
The "sellability" score of an asset can then be charted for interpretation, as conceptualized below. Any situation where the score is below the blue line would be highly unlikely to result in successful partnering.
In our view, a TLP should be established at the start of formal development activities - several years in advance of the search for a development and/or commercial partner. The act of formulating – and generating internal consensus behind – a destination statement for partnering will provide insights into the scope and depth of studies required to bring the asset to a stage where it is partnerable. As with a TPP, the TLP needs to be regularly reviewed and updated in the light of evolving internal data and external competitive developments; success in a competing program can easily render a TLP obsolete, and internal failure to meet pre-defined TLP thresholds may result in the project becoming non-viable. If such is the case, it is always better to fail fast and divert resources elsewhere than to continue plowing ahead futilely. The evolving TLP can also have major implications for financing strategy. For example, if it becomes obvious that prospective partners will no longer be satisfied with a complete preclinical package, wanting also to see Phase 1 safety data, that’s another 12 – 18 months and likely several million dollars. For these reasons, we strongly recommend biotechs maintain active dialogue with their investors, assess partnerability early, and update it regularly, to set their program on the best possible path to a successful partnership.
We provide a range of pharma partnering services, including strategy and planning, partnerability assessments, valuations, mock DD's, negotiation support and deal analyses, among other services.