Strakan/Proskelia: Creating Long-Term Value
Symphony attempted to re-create an off-P&L financing vehicle for biotech projects that would both pass the much tougher SEC scrutiny applied since the late 1990s and allow biotechs to avoid licensing away what could be important revenue generators. To do so, it had to create a fully independent corporate vehicle with the capacity-through an alliance with an equity-incentivized CRO--to manage its own development. But its first biotech partner, Guilford Pharmaceuticals, didn't feel Symphony had proven the financing could be completely off-P&L. Consolidating the expenses, Guilford sees the deal's value largely in the additional management resources, along with the funding, that Symphony provides a second-priority program. Symphony also has yet to prove it can make its investors money from these projects: in part because the value of late-stage programs has increased since the original off-P&L vehicles were created, Symphony could only get from Guilford a single compound, not a portfolio of projects with which to reduce its investment risk.
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Europe's financing and regulatory environment means that it has been, and will continue to be, very difficult to build Amgen-style big biotech from scratch here. But a sustainable industry of large biotechs is nevertheless emerging-mostly through the transformation of existing big or mid-sized pharma assets. Big Pharma spin outs, created to circumvent prohibitive labor laws, and small, R&D-embracing in-licensing firms are two important sources. But so are the mid-sized drug firms--another largely European phenomenon. The potential transformation of UCB into a big biotech, triggered by the acquisition of Celltech, is the most recent example.
Sanofi-Aventis stands apart from most other Big Pharma mergers. Granted, it shares many of the same drivers as previous tie-ups: looming patent expiries and hunger for size. But the unashamed political intervention, which helped turn one of the most vocal bidding wars from bitterly hostile to friendly overnight, was quite extraordinary. It points to the still delicate balance in France between commercial freedom and nationalistic pride; more importantly though, its effects may hamper Sanofi-Aventis' success on the global stage.
Apax Partners paid $120 million for Elan's European sales and marketing infrastructure--renamed Medeus--to buy into the in-licensing game with a ready-made continent-wide commercial network. Few specialty companies can match its scope. But with little or no track record and a portfolio of mostly older, sometimes off-patent drugs, Medeus may nevertheless have to work hard to convince licensors to hand over their products.