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Christa NicholasDirector

cnicholas@b-c.com

LICENSING, PARTNERING, STRATEGIC ALLIANCES:

ROLE OF AN INTERMEDIATE

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GUIDING PRINCIPLE:

BE A GLOBAL COMPANY FROM DAY 1…IF YOU AREN’T, YOUR COMPETITORS ARE!

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SUCCESSFUL PARTNERSHIP & STRATEGIC ALLIANCES: IMPACT ON BUSINESS MODEL

Access external resources and capabilities- Clinical and regulatory expertise- “Eyes and ears” on market dynamics

Financial resources- Cash from partnering proceeds- Access to equity capital

Share product development cost/risk Validation of technology (and company)

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R&D INVESTMENT VS. NEW DRUG APPROVALS:INNOVATION GAP DRIVES DEAL FLOW

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POTENTIAL PARTNERS: BIG PHARMA AND MATURE BIOTECH COMPANIES

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CHANGING BUSINESS MODELS

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The partnership/alliance should be strategically central to your partner’s business

Internal competing program would not confound decision making

The partner should offer significant added value in R&D capabilities, marketing prowess in key markets (may be a regional market)

Partner has a strong history in successful alliances Good cultural fit, partner values your team’s input “let

the best ideas win!”

SELECTING THE RIGHT PARTNERSHIP, ALLIANCES:IMPORTANT FACTORS

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RISK FACTORS OF LICENSING, PARTNERING AND STRATEGIC ALLIANCES

Daunting odds facing all dealmakers- 200+ “real” deals worldwide for >5000 biotech

companies- Average time to complete a deal is ~17 months- False positives throughout the process

Partnering valuation dependent on a wide range of factors- Market and stage of development-related- Franchise fit for partner

Important to recognize that “the process” is: - Demanding - Complicated - Highly relationship- and network-driven- Requiring of the right expertise at the right time

Balance of internal and external resources

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79% 73% 74%

8% 11% 8%

14% 15% 18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009

Outlicense Co-development, profit sharing(1) "Option" Deals

“OPTION” STRUCTURES GREW IN 2009

Source: Windhover Biopharma and selected Diagnostic deals; Burrill & Co analysisTransactions > $20M announced through 12/31/09(1)Excludes 4 deals with an option to co-develop / profit share in 2007 and 1 in 2008; counted in “Option” Deals category

154 142 131

Total Partnering Transaction Numbers

COMMENTS Generally, upfront

payments are down with the exception of Phase II (where 22 deals produced an average of $55m upfront)

Deal numbers are continuing to trend downward and buyer leverage is increasing;- Co-development and

“profit shares” less frequent

- Option structures on the rise

154 142154 142154

Total Partnering Transaction Numbers142154

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PARTNERING MARKET – RECENT OBSERVATIONS Licensees are currently focusing on:

- FDA/regulatory pathway clarity - Strong human PoC data (only exceptions for novel MOAs in high

unmet need areas)- Heightened safety requirements, especially in cardio/metabolic- Generic entry threat- Managed care perception of product value and associated pricing

potential

2009 was a difficult market in which to sell development stage assets; 2010 showing slight improvement - Many potential buyers had insufficient capital to fund their internal

programs- Raising new capital challenging and expensive- Many programs/companies “for sale” – including big uptick in Big

Pharma out-licensing

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VALUE OF AN EXPERIENCED INTERMEDIARY Extensive Relationships and Access

– Seasoned senior deal-making team with broad life sciences expertise

– Direct access to the in-licensing universe of CEOs and Chairmen

– Broad distribution capabilities to increase deal competition– Network of relationships allows simultaneous start of all

target companies Deal-Making Acumen

– Leverages team expertise, transactions database and “Horse Race” competitive approach

– Facilitates every step of the deal process, provide appropriate resources to the task

– Shared commitment of two organizations Strong scientific capabilities to assist in presenting

opportunities

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PARTNERING, STRATEGIC ALLIANCES: FROM AN INTERMEDIARY’S VIEWPOINT

Good strategy drives good deal-making– Internal value creation– Connection to partner strategic interests

Deal-making requires intensely focused effort– Identify the right mechanism, ideal partner– Manage the deal process

Competition drives success– Getting the deal done– Getting reasonable valuation– Getting a timely outcome

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CHOICES OF INTERMEDIARIES: “BEST TEAM” TO ASSIST YOU IN MEETING YOUR STRATEGIC OBJECTIVES

Business development consultants – Management consultants – Free lance seasoned business development

professionals– Therapeutic or geography focused

Boutique banks– Niche focused– Domain expertise (diagnostics, medtech, service sector) – Global or regional

“Investment banks” – Financially focused– Target larger transactions

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GOAL: GETTING TO SIGNATURE QUICKLY! Strategy: Ensure licensing, partnering and alliance opportunities

aligned with corporate strategy and therapeutic franchise Execution:

– Introduction of partners– Provide valuable input on presentation and the value proposition– Creation of transaction structures– Coordination of due diligence– Negotiation of term sheets– Management of agreement drafting process– Positioning for corporate approvals– Introduction to funding sources

Address partner requirement and concerns Speed & momentum: establishing a shared culture for

success Implementation of the deal post-signing

Transaction Planning

Definitive AgreementApproach Targets Negotiations,

Due Diligence

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TEAM ROLES

CompanyIntermediary

Lead the process Extend company’s business

development capability First point of contact with

prospects Be the “friend of the deal” and

vigorously pursue all means to maximize chances of success

Maintain and manage a “horse race”

Act as a “surrogate partner” to react to, and provide ideas and improvements to Company’s approach

Recommend and win prior sign-off for deal structure and terms

Lead negotiations

Actively engage in the project and contribute to the content

Communicate openly on all aspects of the proejct (positive and negative)

Manage and communicate the process within the organization

Set expectations with BOD Represent and help sell the

technology at key meetings Manage due diligence details Provide/fund legal counsel

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GLOBAL COMPANY FROM DAY 1…IF YOU ARE’T, YOUR COMPETITORS ARE!

Compete globally Confidently align with the right partners Creatively resource your company Consult with external experts to maximize the use of

your resources and increase your odds of success