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The Infrastructure Dilemma

Executive Summary

Most drug companies struggle against duplicating in their biotech partners the development and marketing infrastructure that will support the collaboration's product. And though they frequently lose that battle, biotechs generally have to co-fund their share of the expenses, including infrastructure. But the Neurocrine/Pfizer transaction on indiplon marks a new valuation sign post. Not only will it pay significant up-fronts, milestones, and royalties, but Pfizer will fund all further clinical work, while Neurocrine makes final development decisions, and 100% of the creation and maintenance of Neurocrine's sales and marketing group, while supplying it with a blockbuster quid, Zoloft. Pfizer's strategy: to turn infrastructure overlap into sales augmentation: it will control indiplon's marketing and, by helping to train Neurocrine's sales force, be able to exercise considerable influence over its direction and activities. Moreover, if it chooses to acquire Neurocrine, it will be able to do so with minimal integration issues since the Neurocrine marketing team will have been so closely associated with the Pfizer way of doing things.
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