BioWorld International Correspondent

LONDON - With the capital markets closed, partnering is the only route to survival for biotechnology companies running out of cash. But doing deals is getting harder, with more due diligence, less interest in platform technologies and early stage products, and little appetite for drugs with novel mechanisms of action.

"Partnering is key; it is the lifeblood of the biotechnology business, as demonstrated by the fact that the total value of biotech deals continues to go up," Barclay Kamb, a partner at Cooley Godward LLP, told delegates at the BioPartnering Europe Conference in the Queen Elizabeth II Conference Centre, at a session on partnering in troubled times. "Partnering is the survival strategy," he said.

Robin Breckenridge, vice president and head of informatics at F. Hoffmann-La Roche Ltd., described how in the past 18 months the company has put in place a new and efficient structure for partnering that operates in parallel to in-house discovery and development.

As a result, "Roche is becoming the new industry leader in deal making," Breckenridge said. The company has done 17 deals to date in 2002, and has streamlined the process. "Our [speed of deal making] is down to 4.5 months on average, while the industry average is over nine months."

But Breckenridge told delegates that the new challenge for biotechnology companies seeking partnerships is not only that the product is good, but also that all the associated information is complete and in a format that can be readily transferred. "You need seamless information integration from discovery to the marketplace.

"Ask yourselves: Can you capture, report and transfer your intellectual property to a third party in a manner that is appropriate, relevant, secure, timely and in compliance with the regulation?" Breckinridge said.

Arlene Morris, president and CEO of Clearview Projects, an adviser on partnering for small pharmaceutical and biotechnology companies, said that deal making "can provide some light in such a dark environment." But companies must be aware that there are new and critical challenges to business development.

For example, the merger and acquisition activity in the pharmaceutical sector means companies may think they are getting close to a deal and then a merger blocks it, she said.

"Also, M&A in pharma means there are not so many potential partners. On top of this, there is less chance of doing deals with biotechnology peers because companies with money are hunkering down and conserving cash," Morris said.

After the disappointment to date with genomics and recent high-profile product failures, there is more due diligence. "People are looking at less risky things and taking longer about it," Morris said.

That is putting off potential partners for products in Phase I and II that are based on novel mechanisms of action, while platform technology companies need to be willing to do pilot deals. "If you are offering something incremental in discovery, you will get one kind of deal; if it is transforming technology, you will get a better one," Morris told delegates.

"When you are partnering in such tough markets the quality of the asset is key. You have got to put yourself in the situation of pharmaceutical companies that see a lot of potential deals and prepare yourself well beforehand."

That may be time-consuming, but, Morris said, "I've always thought it took a long time to do quality deals. But at the moment it takes a long time to do financings, too."

Overall, those pressures are translating into fewer deals. "The figures for 2002 vs. 2001 are discouraging," Morris concluded.

The conference ran Oct. 13-15.