HAMBURG, Germany - Having a product ready for market in this drug-starved industry isn't enough anymore. Before biotechs approach big pharma with partnering ideas they'd better have a team of lawyers, accountants, and managers, representatives from the large companies told a BIO-Europe 2007 audience Tuesday.

Anyone watching headlines knows deals are getting more expensive, but they're also getting more complex, panelists said at a session titled "A Day in the Life of Experienced Dealmakers." But rather than focusing on a single day, the discussion delved into a trend that has been a long time coming and is expected to continue into the foreseeable future. Companies with product candidates can, and are, demanding more in terms of profit-sharing and co-promotion rights than the industry's big players have been accustomed.

"Deals are becoming more expensive and more complicated, and it goes to the heart of micro-economics," said Doug Giordano, vice president of worldwide business development for New York-based Pfizer Inc. "Large companies have gaps in their portfolios. We've had an unprecedented run with innovation and market opportunities for the last 15 years, with some of the best products and best therapies." But, he noted, drying product pipelines and a more conservative regulatory environment has slowed the pace of development. Adding to the problem is the challenge of convincing payers in Europe and the U.S. to reimburse for those drugs that do make it through the pipeline, he said.

"Higher demand and a limited number of players creates a competitive situation, and that adds to the complexity of the deals," he added.

John G. Goddard, global head and senior vice president of strategic planning and business development for London-based AstraZeneca plc, agreed that companies with assets are taking advantage of the competitive nature of drug development, and he warned it can have consequences. For example, the more complex a deal is, the longer it takes for it to "play out," and that can inhibit a company's ability to focus on other areas.

The big pharma panelists were divided on the value of profit-sharing deals. "It's not just about profit-sharing, it also is about risk-sharing," Giordano said. The cost of getting through the development process is escalating, and the idea of finding someone to share that cost with is appealing, he noted, adding that Pfizer has had success with such arrangements. But the key, he said, is "to create a framework to work through the challenges. If there is motivation to make these work, ultimately they can work."

One good thing about profit-sharing is that "it helps create alignment between the parties because you are usually sharing expenses as well as revenues and profits, and that helps focus development efforts," said Michael Yeomans, senior vice president of global development and licensing at Leverkusen, Germany-based Bayer Schering Pharma AG. "On the downside, it does add a lot of complexity to the deal, to the managing of the deal, what with figuring out the profit and loss and who spent what."

Suggest a profit-sharing arrangement with Merck Serono International SA and you could get a cold reception. "Generally, we don't like them," said Vincent Aurentz, senior executive vice president of portfolio management for the Darmstadt, Germany-based company. On occasion, however, Merck has accepted profit-sharing for early stage profits when it needed outside expertise, and Aurentz acknowledged there are times when "we try to recognize what is important to the people we sit down with."

Potential big pharma partners also must have an eye on the big picture, panelists said. Goddard said it is important for both sides to go into any profit-sharing deal knowing what the exit strategy is, and Giordano urged companies to know themselves. "Companies approach us, and they are not at the point where they are ready to form a partnership. They're not ready to write checks, not ready to engage in the complexities, and they aren't realistic about what their capabilities are."

The irony, he said, is that they approach Pfizer because of its record in developing drugs, "which conflicts with the idea of working in a side-by-side, 50-50 co-development opportunity."

The conference ends today.