PharmaTelevision - 1. Out-licensing by big pharma: Pfizer, Roche and CoNCERT Pharmaceuticals discuss this hot topic (Part 1)

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Video title: 1. Out-licensing by big pharma: Pfizer, Roche and CoNCERT Pharmaceuticals discuss this hot topic (Part 1)

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What are the new out-licensing practices of large pharma? How can biotechs capitalise on these? Having the right business models and practices that match the new opportunities is key to success. The leading companies of our industry are acutely aware of this need and have implemented new ways of finding partners, doing deals and accelerate strategies. Dr Tibor Papp, Head of Advisory & Transactions of PharmaVentures asked a panel of leading executives what business development strategies and models they use to position themselves for competitive success. David Rosen from Pfizer, Robert Silverman from Roche and Jonathan Montagu from CoNCERT Pharmaceuticals offer their detailed company and personal insight into their business development models.

Pfizer Inc's approach towards risk sharing deals.

Tibor Papp:

Welcome to our second panel discussion today. My name is Tibor Papp, I am the Head of Advisory and Transactions Team in PharmaVentures. On the second panel I have with me David Rosen, Head of Out Licensing in Pfizer. Robert Silverman, Director of Licensing, Global Director of Licensing in Roche. And Jonathan Montagu, Director of Business Development from the biotech company Concert Pharmaceuticals. In this panel we would like to focus on business models but in particular because this is a deal making conference we would like to address new ways of doing deals, new models of innovative deal making. We know from the first presentation that the number of deals have actually dropped in the past few years, but the values have risen, we know that pharmaceutical companies commercializing entities have become a lot more critical about where you hardly assess that what sort of terms they agree to and what sort of products they want to bring in or keep outside of their machines. We also know that deals have become a lot more complex, deal making groups have become a lot more sophisticated about deal making they have separate transactions teams. The biotech companies themselves have become a lot of more stout about how they do deals. Now with all of these they are trying to assess of course risks and the new opportunities. Those who are more flexible with more open minded would have access to new opportunities, now what it has been touched upon in the previous panels but I would like to go more deeply in that how to share risk and what sort of opportunities there are for risk sharing deals and not just between large pharma and biotech but how to involve third parties? How to create those deals that at the outside they look complex, but if it's done well it can become a process, it can become a key opportunity for companies that are willing to take this to generate a lot more deals, become a lot more productive in deal making and in fact achieve new opportunities even in this depressed market. So the first question I would have to my panel members is about risk sharing deals and I would like to ask this question in your organizations first of all what is your approach for risk sharing especially new ways to share risks? Do you have different approaches depending on the opportunity whether it's in licensing or out licensing, divestments or acquisitions? And I'd like to also ask for your personal opinion which relate to a kind of risk I think in deals that you haven't done yet in your organization, but do you think that is possible in risk sharing, so first I'd like to ask David, please and let's speak up so that everyone can hear?

David Rosen:

Tibor thanks, can you hear me in the back or do I need the microphone? Okay so for you that's a little bit better for you. So as Tibor said we are considering a lot of different options for how we develop the portfolio that we have inside of our business. I think you know as the previous panels discussed we have this challenge of, we have a top-line, we have a bottom-line and that bottom-line that we owe to the street limits the amount of money that we can spend on our R&D at least if we're going to try and maintain the EPS that we've promised to the street. So for us we've taken several approaches with respect to how we move those programs forward. Last year Pfizer created an out licensing group first time in Pfizer's history that we are making a dedicated effort to take molecules and try and move them forward and turn them into medicine if we believe that they have legs. And we actually have well over a 100 molecules right now that we are looking for homes for, but what is that home look like? And the answer is it can look like a lot of different things again depending on what it is we want to do with those molecules in the future or what we would hope to do with those molecules in the future, so for some of those programs we are very interested in having a look back at those molecules and in fact we probably wouldn't have put them on a quote on quote out-licensing list if we couldn't spend any amount on R&D but the reality is that we can't. And so you know what does that deal look like? Well as I said it can look like a bunch of different things. It can look like a pure you know risk sharing finance deal where an outside party puts cash in, we continue to do that development and then on the backend they get some share of the backend some combination of milestones and royalties or commit or just royalties you know I think the challenge there and a lot of the challenges that we face internally in terms of trying to get these deals done are related to the right amount of share if you will and the cost to capital. And you know if you have all of the money that you need to do all of the development I think it makes a lot of sense to use your own capital obviously to do that work, your capital is gonna generally be the � it's generally gonna be the cheapest. But I think if you look at the portfolio differently, if you look at it from the standpoint of what is the probability of technical and regulatory success with those molecules you'll find that there are some that you've got a huge amount of upside on but the likelihood that you are gonna get there is very small. And so if you can align your portfolio � this portfolio with an investor interest and need in a high risk portfolio then at least in my opinion it makes a lot of sense to figure out how to take that money for those high risk ventures put that into a portfolio that you share with investors and then for the molecules for the programs that you believe have a higher likelihood of technical and regulatory success put your capital towards those programs and then that is indeed a model that we're actively exploring. In addition we are looking to putting these molecules into new companies that we start along with venture capital or investment banks again with the same idea that in some instances at least if we put a portfolio into these new companies there is a right to take some of those molecules back, one of those molecules back again depending on the situation. We are very interested in taking equity in these companies we see that as a hedge if you will against deciding not to buy back that molecule but having that molecule turn into something successful in the future. And I think (indiscernable) you have the previous conversation around FIN 46 and equity accounting in the like, in some cases although it is going to impact the P&L we are not gonna have to absorb a 100% of the cost of doing that work and if we have an absolutely buy back right it may make sense in those instances to deal with the equity accounting right you know have to write off a part of that investment but not have to write off the entire investment. And again in areas where the you know where the programs are very risky neuroscience programs, like Alzheimer's disease, like schizophrenia where it's not about doing a proof of concept study it's about doing three or five proof of concept studies and hoping that two of the three or three of the five are gonna demonstrate some value. And then in addition to that you know other types of risk sharing types of models that the joint venture that we just recently announced with GSK [PharmaDeals ID = 33119] around HIV molecules and the like where there is an absolute need for the � for the medicines and we're putting together two companies that both have expertise in a particular area can likely do better than, than one alone, so why don't I stop there.

Tibor Papp:

Thanks David, there can be a lot of questions about your statements, but I would like to give a chance to Rob and Jonathan as well.

David Rosen:

Okay.

Roche's approach towards risk sharing deals.

Robert Silverman:

So I will give a different perspective but also a big pharma deal and I guess we will have the other side of the equation on the biopharma side. So at Roche we've been an active participant in externalizing our assets for years now and actually yeah some of the really robust biotech companies in (indiscernable)(indiscernable) like generated of the Roche compounds, we've it's an area that we pay a lot of attention to, we have processes, we have people who actually are dedicated to the practice and there is a core product our partnering business, so we actually divide the world into compartments and then obviously see the grey between these different compartments, so the first compartment is one way to look at the world which is assets that we are going to continue to invest resources in but what we want to work with external investors and developing and commercialization the asset. And there we see three types of sub types, one type is a pure operational partner and our classical example there would be our collaboration we have with GSK [PharmaDeals ID = 9448] on Boniva where we are 50-50 co-development, co-promotion profit sharing partners globally.

Tibor Papp:

Okay.

Robert Silverman:

So Roche makes a - having investment resource wise into the asset, we have a partner who is also investing very heavily asset resource wise into the asset and we share the, and we share the results. The second type of and another type of transaction similar to that was a deal there with a company called [PharmaDeals ID = 14122]Aspreva, right much different company than GSK obviously. And in the United States we actually had a marketed product CellCept which is a $2 billion year turn over at this point globally in a the approval for transplantation, we felt that, that was the right partner we were hoping to actually get approval for autoimmune diseases and they took full risk for autoimmune disease, did not work out we cannot get the approval but I think the principal is sound actually in the deal need, the critical our component there was again external investor in a product that we are actually resourcing. The second type of compartment that we think about in terms of outside investors in products that we are resourcing would be a secure financial investor and there as David had mentioned that the cost of capital is high and you know we are a pharma company and our investors do expect us do expect that we are going to be investing the money that we derive of our operations into our prioritized products so it's hard to justify, but can be we always been a high cash floated company we just need make the acquisition you've seen me into acquisition may be that changes, but the cost of capital is higher and we have not actually executed one of those deals yet. The third type of compartment that I see on that side of the equation is hybrid deals and I think one of the leaders in that space is the TPG-Axon model so it's a combination of the group that has substantial financial resources but can also put to play in a development capability and we work very closely with Quintiles [PharmaDeals ID = 20431] and that's the third type of deal that we'd see which is an externalization of our generating external investment into our internal products that we are still resourcing we are gonna get that executed at Roche one of those deals but there is certainly something that gets presented to us quite often and something that we would think about. The other side of the equation or the other compartment is just is what we or I'd called externalizing our internal innovation so those are assets that we were no longer going to be resourcing moving forward or we actually want to find external homes for the assets and there again I would see it is three types so there is licenses somebody may be approaches us for an asset that we have typically it's going to be an early stage development and may be the preclinical asset based upon some insights that that group has and but a deal to get a licensing deal on some the return to Roche could be through many different mechanisms, it can be through equity, it can be through milestones, royalties if it's a you know operational company Newco, may be an upfront associated with it, but you know we are actually pretty flexible but in terms of that type of constructions. The second type is where we actually utilize our internal technologies as to trade and as will be liquids, so maybe we have like constellation technology or compounding of our library which is an interest too good to work with then may be like we pass some other technology that might be interested for us to work with and may be that group has some other technology that might be of interest to us to work with in-house, but it's hard to find that match but we certainly like to have a discussion. And then the third type is a spin off, a pure spin off where we actually move about all of those people out of the organization with assets and the other classic example of that, we have done recently with Basilea [PharmaDeals ID = 22931] which was our anti-fungal and Vitamin D spin out and Bioxel [PharmaDeals ID = 15281] which was also doing some Vitamin D work which was actually a Italian R&D site that we had and from very talented people and that they've created a lot of value over the years. So those sorts of the compartments that we have, we think about managing our assets and is a group we actually call asset management.

Concert Pharmaceuticals's approach towards risk sharing deals

Tibor Papp:

Well thanks very much, I'd like to ask the audience to remember some of these because there will be an opportunity to ask questions about that in the end. Jonathan what's your perspective?

Jonathan Montagu:

Thanks a lot. Thank you very much for the invitation to speak today. I am going provide a slightly different point of view today because for those of you who are not aware of Concert Pharmaceuticals we are a Boston based biotech company, we are using the heavy isotope of hydrogen otherwise known as deuterium to create new chemical entities. And we've been able to create a pretty deep pipeline of assets over the last three-years and we are really at the point now where, we're in active discussions with a number of pharma companies looking to engage in those types of risk sharing deals that you've just heard about. And I think the way that we think about licensing is that we certainly we do believe in the validation that a biotech company gets for in when you do a deal with big pharma company that said it's I think the true isn't that all company all biotech companies they have created substantial value for shareholders have been those who have kept product rights in the key geography. And therefore our partnering strategy is one that probably focuses around partnering a couple of assets with pharma companies but definitely keeping a number of assets for the house account that we can take forward well and deep into clinical trials and potentially commercialize ourselves. So with that context certainly deals with the larger pharma companies would really be at the top of our list for creating that value and I think the types of structures that we have thought about lot recently are those that involves a lot of certainly risk sharing and I think the you are seeing a lot more of the option type structure at the moment, I think that is a virtue of the economic times that we find ourselves in, but I think it's also of a reflection of how pharma itself is responding to the challenges of the lack of productivity in the pipeline. And the types of deals that the GSK seed has done that's their centre for excellence for external drug discovery and Merck's external drug discovery organization you are seeing deals where the pharma company will see some sort of upfront payment, but unlike a lot of licensing deals you then don't have FDA support within R&D and a series of milestones through to the option payment really cover the cost of the drug development in the biotech company. And I think what the idea there is to allow the biotech company to push forward the asset to proof of concept typically is your Phase IIa or Phase IIb unincumbent by the bureaucracy of the big pharma company and for us that's very attractive we think that we can progress our anti- infective and renal assets much more quickly than a big pharma company could do. And then they would then have the option at Phase II or Phase IIb to in license that asset. The other category that we've looked at by virtue of the fact there were a platform company we look very carefully at the sort of project financing our deals and within that category I would consider our Symphony Capital, NovaQuest, PBT for example, in that case you can create a frame work in which you have a number of assets may be two or three where you set up a special entity but then that entity has the autonomy to move assets forward as rapidly as possible. That said I think that model is changing considerably and I think if you look at the last year what Symphony did with the [PharmaDeals ID = 31339]OXiGENE there was a substantial equity component within that deal and I think we will certainly look for component of that equity but Symphony ended up only about I think up to a 37% of OXiGENE in that deal and I think we will see that as little on the high side. I can see why Symphony has changes in small in just by the virtue of previous deals, but I think that's an area that is probably give me a less in consideration for us now. And the third area that I think � what we think a lot about are the less traditional deals and just for a couple out one would be thinking about foundations there are � if you are thinking about the assets that we want to move forward ourselves and if there are we happen to happen overlap with the Cystic Fibrosis Foundation or may be JDRF or the Gate's foundation that could a very nice fit there by the fences and another for anti-infectives. And secondly as our assets move into the sort of Phase II, Phase III domain I think that deals with manufacturers at API would also be of interest to us where essentially you guarantee supply from a single supply and there by negotiate either attractive FDA rates or indeed upfront investment into the process chemistry. So I think the what I'd like to convey is that we were actually trying to respond to the challenge of the market realities by being as creative as possible, but I think at the top of the list options deals or licensing deals with big pharma companies still are the preferred mode of action for us.

Tibor Papp:

Thank you Jonathan, thanks for the extensive answers and of course this is what you do like you consider but�

Jonathan Montagu

Director of Business Development Concert Pharmaceuticals

Dr. David Rosen is currently the head of out licensing at Pfizer Inc. In his role, Dr. Rosen is responsible for the externalization and partnering of non-progressing research and development programs that are no longer strategic to Pfizer. He joined Pfizer in 2003 as the head of Strategic Alliances in St. Louis, Missouri and during his 15 year career in business development has had increasing levels of responsibility in both large pharma and the biotechnology industry. He recently completed the divestiture of Pfizer's research assets in Nagoya, Japan resulting in the creation of a new life sciences company. Prior to joining the pharmaceutical industry, Dr. Rosen was a practicing veterinarian and practice owner. He received a Bachelors degree in Bacteriology from the University of Wisconsin in Madison and a Doctor of Veterinary Medicine Degree from Iowa State University. He received a specialty Board Certification in feline medicine in 1998. Robert Silverman is currently the Global licensing Director at Pharma Partnering RocheJonathan Montagu is presently Director of Business Development at Concert Pharmaceuticals. His previous roles include New Product Development Manager at Ortho-McNeil Pharmaceuticals and Business Development Intern at Biogen Idec.

Pfizer

Good health is vital to all of us, and finding sustainable solutions to the most pressing health care challenges of our world cannot wait. That's why we at Pfizer are committed to applying science and our global resources to improve health and well-being at every stage of life. We strive to provide access to safe, effective and affordable medicines and related health care services to the people who need them. We have a leading portfolio of products and medicines that support wellness and prevention, as well as treatment and cures for diseases across a broad range of therapeutic areas; and we have an industry-leading pipeline of promising new products that have the potential to challenge some of the most feared diseases of our time, like Alzheimer's disease and cancer. To ensure we can continue to deliver on our commitments to the patients, customers and shareholders who rely on us, we are focused on improving the way we do business; on operating with transparency in everything we do; and on listening to the views of all of the people involved in health care decisions. Through working in partnership with everyone from patients to health care providers and managed care organizations to world governments and non-governmental organizations, our goal is to ensure that people everywhere have access to innovative treatments and quality health care. RocheRoche plays a pioneering role in healthcare. As an innovator of products and services for the early detection, prevention, diagnosis and treatment of diseases, we contribute on a broad range of fronts to improving people's health and quality of life. Roche is providing the first products that are tailored to the needs of specific patient groups. Our mission today and tomorrow is to create added value in healthcare by focusing on our expertise in diagnostics and pharmaceuticals. Responsibility at Roche we are committed to meeting high ethical standards and complying with all applicable local, national and international laws wherever we do business. Our ethical standards are embodied in our Corporate Principles. For more than 110 years Roche has played a pioneering role in healthcare. Concert Pharmaceuticals Founded in April 2006, Concert Pharmaceuticals is a clinical stage biotechnology company dedicated to creating new medicines through a novel scientific approach utilizing the naturally-occurring element deuterium. Concert applies its innovative precision deuterium chemistry platform to modify specific properties of validated drug molecules, yielding a rich pipeline of new chemical entities (NCEs). Concert leverages decades of pharmaceutical experience to create novel drug candidates with potential for best-in-class efficacy and safety, while greatly reducing R&D risk, time and expense. The Company has over 100 patent applications for new drug candidates addressing a broad range of therapeutic areas, including HIV/AIDS and renal disease, among others. In 2009, Concert's first patents were granted by the USPTO. In June 2009, Concert announced a strategic partnership with GlaxoSmithKline to develop and commercialize deuterium-containing drugs, including CTP-518, a protease inhibitor for the treatment of HIV. CTP-518 is currently in Phase 1 testing. Concert is a rapidly growing company based in Lexington, Massachusetts. The Company is led by an experienced management team and Board of Directors, and is supported by top-tier venture capitalists and leading institutional investors. Concert has raised $110 million since its inception. Concert was co-founded by Richard Aldrich, Roger Tung and Christoph Westphal