Pharma Deals for TechBio: Part II

Getting a Deal over the Line

So you've decided that signing a deal with pharma is something you'd like to do. Great, what's next? Several key ingredients are needed to cook up a great partnership and so, in no particular order, I've outlined some of the various elements that go into securing a deal.

For a refresh on what deals I'm referring to, and some of the core reasons you might want to sign such deals, take a read of Part I.

Before I start, note that all of the following factors are within your control. However, it's entirely possible that a deal fails to materialize for reasons outside your control. Closing pharma deals, like closing funding rounds, is long and hard, tends to have less than 10% success rate, and factors on both sides can upend a deal. With that said, here's 3 ingredients, all necessary but not sufficient in themselves, that have helped PostEra close the deals we have.

Ingredient #1: Find an Internal Champion

Somebody in pharma has to want this deal to happen as much as you do. This person can be either a Scientist or Business person, we've had both, but critically they are excited about your technology and think you've got something special. The role of the Internal Champion is to be your "man on the inside" and this is key for two reasons:

• Spokesperson: Though you may get to do the introductory pitch to BD and some of the Scientific team at a JPM or BIO conference, there are so many more internal conversations, due diligence committees, and higher-up presentations that you will not get to be present for. Your Internal Champion is your voice here and so it's critical that they can tell your story and why you're different as well as you can. Spend time with this person, take them out for coffee, give them the backstory of the company and where you want it to go and how this deal helps that. All this context helps build buy-in and a coherence of storytelling when your IC has to present your case to internal teams.
• Back-Channeling: Knowing the internal dynamics of your potential pharma partner helps with a multitude of things. Is this deal being funded from a Drug Discovery budget or a Technology budget? What is the likely ceiling or floor of that budget? Who is the decision-maker in the room and what are they looking for? What things have pharma liked or disliked about previous TechBio collaborations? Your internal champion, within the bounds of confidentiality, can guide you on all these things.

Ingredient #2: The Science Pitch

This is the most famous ingredient, the one that biotech founders spend most of their time preparing for, and hopefully enjoy doing. If you don't get a kick out of pitching your cutting-edge science as a TechBio Founder, you're probably in the wrong seat. A couple of things on the Scientific Pitch we have found helpful:

• Case Studies, Case Studies, Case Studies: Showing a real-world example of what your technology has actually done in binding to a difficult target, elucidating a novel biological pathway, or optimizing the reaction-conditions of a key Process Chemistry step, is arguably the most critical part of the pitch. Differentiation in methodology is interesting and retrospective benchmarking is also helpful, but both are poor substituents to actually "doing the stuff". To whatever extent you can, lean into Transparency. Show chemical structures, give exact timelines, and show the good, the bad, and the ugly of the project. If your case study is too clean, too sanitized, too perfect, pharma will sniff it out.

• Pain Points: At PostEra our secret sauce is machine learning for medicinal chemistry. This is a fast moving field with so many fascinating and challenging problems which we could pour our efforts into. However, an element that has helped our scientific pitches is presenting work which tackles timely challenges in Industry. What are the problems in your field that frustrate teams in pharma? What are the gaps in the academia-to-industry translation that leave industry veterans rolling their eyes at the latest foundation model preprint? Yes, there is some schadenfreude in the industry trenches of drug discovery when theorists in their ivory towers fall short. Show your solutions to those problems. In 2019, when we launched PostEra, there was great frustration with generative chemistry models showing little to no awareness of synthetic feasibility, there was frustration with the lack of interpretability inherent in most deep learning architectures, there was frustration with endless models predicting affinity but very few models tackling the multiparameter problem of pharmacokinetics. Our pitches spoke to these. They went something like "Yes, these weakness in ML methods frustrate us too, here's how we've tackled them."

Ingredient #3: The Business Pitch

The majority of TechBio founders are Scientists, nerds who get excited about the latest advances in science improving the lives of patients. This leads to great thought and energy being invested into the Scientific Pitch, sometimes at the cost of the Business pitch. Both the Scientific team and BD teams at pharma have to sign off so you'll do well to consider the interests of both.

Your science, however incredible, is not sufficient to get a deal done.

• It's about more than just the money: Yes, the money is important. What you should ask for in the upfront vs milestones vs royalties should be triangulated between what does pharma have budget for, what are ranges for similar deals, and what makes commercial sense for your company. You really should never be making a loss on the upfront. However, the non-financial elements can also be a key differentiator in moving you to the top of pharma's preferred partnering list. Often pharma does partnering not just to accelerate their programs using novel technologies but to learn about those technologies. How can you help them learn as part of your business terms? Do they have frustrations with previous TechBio deals they've done which you can be intentional about? Be mindful not only of the BD elements which will make it into the contract such as IP ownership, co-development rights, or exclusivity boundaries, but take care with the non-contractual BD items. They go a long way.
• Breadth vs Depth: It's possible that you'll fail the Business Pitch either because your technology appeared to be a too-narrow point solution or that you claim you can do everything, which pharma will interpret as you being able to doing nothing. It's really important to focus on and emphasize your special sauce in the drug discovery arc, while also offering a wide-enough solution that it actually moves an internal pharma program forward. Again, an Internal Champion can help here, but you should be able to figure this for yourself. It's perfectly fine if 80% of what you offer is powered by your bleeding-edge technology while 20% is necessary grunt work that you expect to be able to do at industry-standard quality. That overall package is still more compelling than an 80% solution which pharma has to then step-in at the final 20%.

Concluding

The deal process is full of highs and low. Moments of breakthrough progress and sometimes months of silence. As far as it's in your power, don't let the process go cold. Check in with your Internal Champion on a non-annoying cadence, take in-person opportunities whenever you can, post them on the latest and greatest from your side. These good practices may not salvage a sinking deal, but they sure can expedite one that has legs.

As I mentioned at the outset, the above 3 ingredients are all in your control. However, we've frequently seen deals fall through for reasons beyond our control. The most common culprit is personnel changes: a new Head of Research arrives with different priorities, your internal champion leaves the firm, or mid-deal, a senior leader decides, "We should develop these capabilities in-house." Don't be disheartened. Dust yourself off and get back to pitching.