The People Side of Biotech Deal-Making

Posted in Biotech startup advice

Getting deals done with Pharma is critical to the strategy of many Biotech companies.  Pharma deals often offer less dilutive funding to advance a program or portfolio, market validation enabling future traction, and potentially important liquidity for shareholders.  Given their importance, many startups spend a huge portion of their management bandwidth thinking about these deals and trying to execute on them.

While there are many elements of a successful BD campaign, a key one is knowing who you are talking to.  Figuring out who the high potential companies are in your space (or potentially interested in your space) is the first step.  Spending time mapping potential Pharma partners to a grid of portfolio priorities is important, and an entire blog post could (should) be spent on this process.  But it only gets you so far.

Fundamentally, deals get done by people.  And people in Pharma (and startups) come in all sorts of flavors.  Just like in clinical trials where patient stratification helps us get the right drug to the right patient, careful stratification of individuals on the buyside at Pharma is also a useful success factor.

While there are many important types of Pharma folk that aspiring biotech dealmakers can benefit from knowing (e.g., real decision-makers like the head of R&D or head of BD), or have to know to get deals done (e.g., the BD lead in your area), there two key types of people a biotech should actively seek to know, and a third to avoid.

Two you need to identify and engage:

  • Champions.  Invest in building a champion for your deal inside of the Pharma company.  Without a real internal champion, there will be no deal: most big deals require a champion to bang on the table to get it done.  No one will put their reputation on the line unless they have truly bought into your vision of your product or platform’s potential.  Champions are typically not built overnight, as developing a deep relationship typically takes many months if not years.  Startup exec’s need to invest emotional capital to develop trust-based relationships with folks in Pharma, providing them with a credible “permission to believe” in the promise of your story (i.e., to see the big potential of not just one indication but many, not just one drug but many, etc).  A good champion needs to be senior enough to know how to get deals done, but also still immersed in the details to proactively ‘defend’ a positive diligence perspective internally.  Once you have an internal champion and a trust-based relationship, be explicitly clear about what you want and don’t want in a deal; most people appreciate the transparency and honesty of that dialogue, especially a future deal champion.  Most of the time a this internal champion is either an R&D executive or Therapeutic Area leader, although it clearly depends on the stage of the deal (i.e., early stage its purely R&D, later stage deals can be led by commercial champions). Having the head of R&D or CEO as your champion is obviously helpful (think Moderna at AZ).  It’s rare for a BD person to be a true deal champion (vs lead deal facilitator/negotiator), although it can happen if the N.I.H. syndrome is high elsewhere in the organization (Not Invented Here). Unfortunately for many biotechs, they get stuck without a real internal champion but instead only have meaningful connections with BD scouts and their deal counterparts.  Those relationships are valuable, for sure, but getting a real internal champion within the R&D “power” structure (like a therapeutic area leader) is critical for productive deal traction.  It’s fair to say that your “likely” Champion is the #1 most important Pharma connection to identify early and cultivate over time.
  • Deal Prevention Officer (DPO).  Every deal faces obstacles inside of Pharma, and a big one is the DPO (as my friend Kyle Lefkoff at Boulder Ventures calls it).  Figuring out who is likely to try to prevent a deal with your company or technology early in a BD campaign is critical to neutralizing their negativity.  First, determine what’s the cause of their DPO posture: is it a lack of awareness of your data, internal politics, the NIH syndrome, or are you a competitive technology to an internal resource. Determine what is likely to change their opinion (data, authority, ego-stroking) and create an action plan for getting that in place. If there’s not likely any way to change their opinion, figure out a workaround by getting support above them in the company.  If there’s not a likely path around a DPO, getting a deal done is just not very likely – move on to another deal prospect.

And the key type of Pharma person to deprioritize in a BD dialogue:

  • NINAs (No Influence, No Authority).  NINAs are everywhere in Pharma, and they just don’t have the organizational ‘juice’ to push a deal through and no real ability to influence it.  They can be wonderfully engaging and fun to see at conference cocktail party circuits, but they are a giant and unproductive time sink.  Time is the scarcest resource for a startup, and wasting valuable BD time, diligence energy, dataroom facilitation, conference meeting slots, etc with NINAs is a huge tax on a management team. Sadly, most biotech-facing folks in Pharma are NINAs, and startups burn countless amounts of bandwidth on them.  Figuring out how to identify if a person is a NINA is very important for prioritizing a team’s time and energy.

As I note above, these three types of people are clearly not the only ones important to or involved in Pharma deal-making, but they are three worth thinking about explicitly early in a deal process.  “Focusing on the right people” should be a clearly articulated part of the broader BD communication strategy (latter being a huge topic not covered here).

So how is a startup biotech team supposed to know who is likely to play what type of deal role?  First, obviously leverage the collective experience of your team, Board of Directors, and SAB.  A well-connected group should know who the key players are in most Pharma companies.  Second, and probably an even more nuanced and effective source of insight, are companies that the Pharma of interest has recently done deals with.  Go find them and inquire about the human elements of the deal process.  They won’t often talk economic terms, but most folks will be happy to talk about the softer side of how they got their deal closed, the process, timelines, and individuals involved.  I’d recommend using tried and true methods of ethanol extraction to get the scoop on the real internal deal dynamic.

A last point worth noting is that careers in our industry move fast: most people are only in their roles for 3-5 years before a promotion or a move to another company.  Understanding your counterparts’ career goals can be helpful: for seeking win-win trust-based relationships with Champions or convincing a DPO to be less hostile and perhaps even accommodative.  Today’s DPOs and NINAs in the organization may become important decision-makers in the future, so, although it goes without saying, its not wise to burn bridges.  I heard an executive comment recently about doing a deal with someone in the 1990s, and that they couldn’t trust them ever since.  While institutional memories of companies may be short, people in the deal world don’t seem to forget until the amyloid sets in.  It’s a people business after all and long-term relationships matter – especially for getting deals done.

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  • haiping choo

    Great tips even for non-biotech deal-making and licensing.

    What are some of the best ways to quickly identify NINAs?

  • http://www.hollyip.com/ Suleman Ali

    I think understanding the opposite party as a group of individuals is the key. That means human psychology is going to be very important as well as the technology you are selling. I was told once that you need to identify the person who is going to make the deal go through and then work out how to deal with their concerns. A champion is priceless to have and one may simply pop-up in a key meeting (without needing previous cultivation), and one has to be on the ball enough to spot them, and assist them as necessary in persuading everyone else.

  • Ralph Casale

    I love the NINA acronym. Yes, there is a lot of time spent on these individuals, though I can also appreciate the decision makers wanting a gate keeping function of some form.

  • http://www.lacertabio.com Carlos N Velez/Lacerta Bio

    As BD consultants, you’ve just summarized a big part of what we do. Your comments on finding and seducing (the term we use internally) the internal champion are spot on.

    One mistake we see is when folks assume that the person with the loftiest title (SVP, CXO, etc.) is the decision maker. But this is rarely how BD works. Even if you make a pitch to a celebrity CXO, and that CXO sounds interested, the opportunity still has to be analyzed internally. What you have to find out is a) who is performing the analysis? b) who is the internal champion? And so forth.

    In other words, that CXO “celebrity” may be the ultimate decision maker, but s/he is not the “analyst” who has to put together the internal assessment. This is why we spend a lot of time on the phone understanding how internal processes work. The other reason is what you said about industry turnover. Contact lists have a short half life!

    Take big pharma in-licensing, for example. They typically have enormous databases where meetings and pitch decks are logged. After this, the good companies have sound processes to make sure they are properly vetted in a reasonably timely manner (where “timely” = 1-9 months, give or take). But, not all companies are that well organized or efficient. (I won’t mention who fits in which category). Many big pharma scouts are NINAs because their job is to scout and fill the database with opportunities. That’s it. They are not compensated by deals done.

  • http://www.lacertabio.com Carlos N Velez/Lacerta Bio

    Identifying NINAs is neither easy nor obvious. It takes a lot of knowledge about the individuals within an organization just to understand how it works, who the NINAs are, who the real drivers are, etc. Plus, as mentioned earlier, company turnover may mean there is a new NINA in place today who wasn’t there the last time you met with a company.