Assistant

VANCOUVER, British Columbia - Despite warnings of wet, cloudy weather, attendees of the Biopartnering North America conference were welcomed Sunday to the Westin Bayshore hotel on Coal Harbor by sunshine.

"I think we've always had good weather" for this conference, said Robert Kilpatrick, partner at Technology Vision Group LLC, the conference organizer, which reported 130 new companies added to the roster for presentations and partnering meetings, making the sixth annual event the second largest partnering conference in North America, behind only the annual BIO meeting.

Perhaps the good weather reflects the optimism with which biotech firms are approaching partnering opportunities. Given the constraints of the capital markets and competition for venture financing, partnering has become the number one revenue source for a lot of small firms. And big pharma's dwindling pipelines have put biotech in an optimal position to negotiate deals that offer hefty up-front payments, as well as co-promotion and co-development options to retain rights downstream.

But those deals do have their caveats, and kicking off the first day of meetings Monday, a group of industry execs reviewed the shift from the traditional out-licensing deals in favor of those co-promotion and co-development opportunities and highlighted the challenges for small biotechs in the negotiation process.

While small discovery and development-stage firms might have "a real advantage at the negotiation table," said Kathleen Sereda Glaub, president of Plexxikon Inc., they must keep in mind that there will be "cost-sharing contributions and significant human resource contributions," and understand that they will need to be positioned to make that commitment.

For instance, Plexxikon executives were looking ahead when they signed an October 2006 collaboration with Basel, Switzerland-based F. Hoffmann-La Roche Ltd. last year, getting $40 million up front in exchange for rights to a targeted cancer therapy, with the potential for up to $660 million in milestones down the road.

But key to that deal was an option for Berkeley, Calif.-based Plexxikon to co-promote the drug upon approval in the U.S. Even though Plexxikon is a small, platform-based firm now, "we know at some point we will forward integrate," Glaub said. (See BioWorld Today, Oct. 6, 2006.)

It's also important to allow some flexibility to the deal, said Tony Coles, president and CEO of Parsippany, N.J.-based NPS Pharmaceuticals Inc., whose firm partnered its parathyroid hormone for osteoporosis in Europe with Nycomed A/S, but decided to promote the product on its own in the U.S. At the time that deal was inked, "we never contemplated that it would get approved in one [area] and not the other," he said.

But that's exactly what happened. Preotact was approved in Europe, but NPS encountered a few snags in the U.S., (where it's known as Preos), which Coles attributed to the FDA's increasing caution in the wake of Vioxx and other drug safety issues.

Preos was deemed approvable, but NPS found that its priorities became different from Nycomed, especially when the agency requested additional information to address concerns about hypercalcemia in patients given Preos.

"Deals can't always calculate every eventuality," he said. In the case of Preos collaboration, however, NPS was able to renegotiate elements of the agreement to transfer product manufacturing rights to Nycomed so that it could focus on addressing the outstanding regulatory issues.

But biotech isn't the only partner looking to hedge its bets. Big pharma also is looking for ways to "spread the risk," said Corinne Savill, of Novartis AG, who cited the "opt-in" deals as a pharma favorite. Those partnerships are structured so that pharma partners pay for the option to license, but wait until further data are available before making any final decisions.

One of the most promising opt-in deals, said James D. Watson, of Burrill & Co., is Exelixis Inc.'s arrangement with GlaxoSmithKline plc.

That 2002 deal included $134 million in guaranteed funding to South San Francisco-based Exelixis to develop several programs, of which GSK would have the option of licensing three.

To date, GSK has passed on one program, but in December decided to license XL880, a small molecule for gastric and head and neck cancer, which triggered a $35 million milestone to Exelixis. (See BioWorld Today, Dec. 17, 2007.)

There is, however, a downside to those opt-in deals, which might not provide enough cash up front to alleviate a small firm's funding needs, Coles said. And, if the small firm has to foot the bill for all or most of the early development work on a program that doesn't pan out, that "can actually cause a company to go inside out."

The conference ends Tuesday.