In This Corner: Kinsella & More Vs. Hutton & Samuels on Venture Biotech

4/18/11Follow @bvbigelow

Avalon Ventures founder Kevin Kinsella was practically spoiling for a fight in February, when he called out the pharmaceutical industry for many instances of what he called “short-sighted, brass-knuckle negotiating tactics.” Pharma’s “bad behavior” had Kinsella questioning whether “this partnership between Big Pharma and biotech can really continue.”

Kinsella’s bill of particulars, which includes buyout offers that consist primarily of “back-end” milestone payments, bad-faith negotiating tactics, and no-risk partnerships, raised eyebrows in biotech communities around the world. But just how pervasive are the bad behaviors that Kinsella describes?

In the Menlo Park, CA-office of Versant Ventures, partner Camille Samuels says her firm hasn’t experienced bad-faith negotiating tactics in their encounters with the pharmaceutical industry. As for pharmas offering “back-ended” deals and “no-risk” partnerships, Samuels asks isn’t that a function of supply and demand?

“What I have observed is that there are ‘have and have-not companies’ in this market,” Samuels says. “There are companies that can define their own terms and companies that can’t.” And in the end, Samuels says, “I see our relationship with pharma getting closer, not further away.”

In a bid to explore the issue further, the San Diego Venture Group has organized a breakfast debate tomorrow over the viability of the biotech venture model. The main event begins at 7 a.m. at the Hyatt Regency La Jolla, and more online information is available here.

On one side of the card, Avalon’s Kinsella has been paired with Bob More, a general partner in the Menlo Park, CA, office of Frazier Healthcare. On the other side of the card, Versant’s Samuels will tag team with Wende Hutton, who is in the Menlo Park, CA, office of Canaan Partners. Here’s a preview of the matchup:

—”We’re not in some Pollyanna period, where everything is up and to the right,” says Canaan Partners’ Wende Hutton. “With selective bets and selective strategies, we believe you can still drive value and get good results. How you negotiate challenges and how you are selective is the key to surviving.”

—”If we keep over-promising and under-delivering, then we have problems in this industry,” says Frazier Healthcare’s Bob More. “And I think the biotech industry has been very promotional. We’re paying the price for that in terms of a skeptical market and the willingness of our partners to sign up as investors.”

—”How you sustain a venture ecosystem is with big wins,” Hutton says. You have to be able to drive some big hits in your portfolio. It’s rare that you can sustain it through small deals. What you can’t do in venture is have a bunch of write-offs.”

—”It will be amusing, no matter what, to have me and Wende debate Kevin and Bob,” Samuels says. “I’m planning on having fun.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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