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Role Reversal: Big Pharma Provides Rich Pickings for Biotech

Executive Summary

Big Pharma is looking for innovative ways to realize value from non-core assets--including discovery technologies. The U.K.'s Proteome Sciences is the latest European biotech to benefit, as Aventis clears out its house.

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Exelixis: Bartering for Growth

This genomics-based company has used business development as a strategic tool, swapping for key capacities that have helped it quickly leap forward. As the company demonstrated the merits of its model-organism platform, it began asking partners not for the most money they would give--but for assets that would help it forward integrate. One deal that started small expanded into a life-changing technology swap: from BMS, Exelixis got combinatorial chemistry capacity that it can now use to make compounds against its own targets. It also got a Phase II drug candidate for cancer, and rights to half of the molecules it makes for BMS, and Exelixis has used its new chemistry capacity to sign other barter-driven deals. Rapid evolution has risks: unless Exelixis accesses other fairly mature drug candidates, there will be a gap between launch of its first product and other compounds that haven't been tried yet in humans.

BioXell: A New Beginning for Italian Biotech

The creation of Roche spin-off BioXell may signal a change in Italy's hitherto unfriendly biotech environment. Yet much remains to be done.

The Foundations of High-Value Discovery Deals

At a time when high-cash discovery deals, and particularly platform deals, are increasingly difficult to find, a number of companies have pursued alternative strategies for creating important transactions. In the first place, many biotechs have changed their attitude to technology transfer, willingly selling technology, and sacrificing any product-related upside from their clients' programs, in return for more significant upfront funding to pay for creating a more integrated in-house discovery effort. Several companies have also, by focusing efforts on just a few partners, expanded the relationships into a series of deeper and more valuable collaborations. Other biotechs have recognized the value of barter, trading off cash compensation for assets, like combinatorial chemistry expertise, assays, cell lines or even product candidates, which allows them to build internal value faster.

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