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Trius Therapeutics (NASDAQ: TSRX) and Bayer, and both parties are going to spend a ton of money, and both parties are going to share certain responsibilities…and managing that relationship is much more than that management team anticipated.”
—Partnerships often lead to acquisitions, but Latham’s Wehrli says that doesn’t mean they’re equivalent. While there can be little difference between “renting” and “buying” a company in this economy, Wehrli says, “What I always counsel clients is that if you’re going to negotiate a partnering deal and a M&A transaction at the same time, you’re going to cannibalize both.”
—Another potential pitfall lies with venture backers who push early stage biotechs into premature partnership deals. Ulrich says VCs often want to “offload their development costs and seek third-party validation to help justify the [lower] valuation in a down round.” Johnson agrees, saying, “They get tired of putting money into these companies, and they start having these discussions about partnering, and of course the biotech CEO goes for that.”
—In short, as Neurocrine’s Gorman puts it, “You have to be smart from the beginning, but you can’t foresee everything. When we decided to focus on women’s health, we saw Wyeth as a natural partner. But by the time we got there, Wyeth was no longer a women’s health company. In fact, it didn’t even exist any more.”
Somehow, Neurocrine still managed to reach a deal with Abbott Laboratories that was valued in 2010 as high as $575 million for global rights to Neurocrine’s experimental drug for endometriosis, a painful condition in which uterine tissue grows outside the womb.