Nycomed: “Always, always looking for partners”
Kerstin Valinder, Executive Vice President for Business Development of Nycomed
Nycomed brings new dimensions to business development. For example a 10-fold increase in revenues to over EUR 3 billion in 10 years of dealmaking and stepping onto the world stage with a global footprint from its cozy niche in Scandinavia.
Partnering is a cornerstone of Nycomed’s strategy, Kerstin Valinder, Executive Vice President for Business Development of Nycomed, explains in this exclusive interview with partneringNEWS. The company has relied upon alliances and agreements to overcome a series of challenges, whether for distribution, marketing or filling its pipeline.
“We have a track record of acquisitions, in-licensing for both early and late stage projects, and we are very active in licensing out products for territories where we feel we are not capable of maximizing the commercial opportunity ourselves,” said Valinder.
The Nycomed pipeline today seems to be bursting with promising products.
Following positive clinical results for the “smoker’s lung” drug Daxas, the company is fully engaged in preparing an international launch of what industry analysts are calling a blockbuster. The Daxas results also breathed new life into a string of internal R&D projects based around the same phosphodiesterase inhibitor (PDE4).
Meanwhile, Valinder reported Nycomed has been highly successful with in-licensing agreements with a surprisingly low attrition rate.
“Yet I would not say we are so rich in our pipeline that we are not looking for anything else,” she said, “I don’t ever want to give the impression that Nycomed has so many projects that we are not interested in more partnering.”
Before arriving at BioPharm America™ 2010 in Boston, Valinder said she wanted to deliver the message that ”We are always, always looking for partners,” she said.
She acknowledges, however, that Nycomed has sharpened its focus in the past 18 months.
“Partnering remains the core strategy, though how our strategy is expressed at this moment depends on balancing where the company is in terms of its development with the kinds of opportunities a potential partner may make available,” she said.
“Still, we tend to have an opportunistic streak,” she added.
Summer reading:
An insider story of Nycomed’s spectacular rise, and the evolution of partnering
partneringNEWS connected with Kerstin Valinder just ahead of her annual vacation break and found her in a reflective mood. The Executive Vice President for Business Development, and a member of Nycomed’s Executive Committee, Valinder shares frontline insight into the company’s development that serves as a rare case study in the growth of partnering in life sciences.
Valinder : “I have been doing business development for Nycomed for more than 10 years. The company had only recently become an independent pharma company, rather small with a turnover of around EUR 300 million. Our original ambition was to become a pan-Nordic player, the preferred partner for the Nordic countries, because we saw that there was a bit of a gap and therefore an opportunity. We did generic deals for the Nordic region. These were simple and not of a very significant size, because Nycomed had only late phase development and regulatory capabilities at that time.
Progressively we saw that most partners were seeking to have a single partner for all of Europe, because we were only seeing hand-me-down opportunities that were part of larger European market deals where there was an interest in covering our niche market. It did not seem to be a sustainable way forward.
“At this point we started a process of building up our organization in the bigger European markets, understanding this would be a long term and risky strategy. We also looked at opportunities for an acquisition that would give us this pan-European capability more quickly. There were several targets on our radar screen, and we tried to make a deal a couple of times. But we could not close any agreements as these were typically midsize, family owned European companies that simply were not for sale, and were not going to be sold for a long, long time.
Then in 2006 an opportunity came along with Altana Pharma. Personally, that appeared a very challenging exercise. Yet it proved to be the most exciting thing I’ve ever done in business development, because we acquired a business more than three times our own size. Taking a hard look at the company, and putting aside their best selling product of pantoprazole, we realized that considering the rest of the operation alongside our own, this was more of a match of two equally sized businesses.
We acquired Altana Pharma at the end of 2006 and began building a new business from January 2007. Our timing was good. We were fortunate to do this when there was still a lot of money around and it was relatively easy to borrow the funding needed.
partneringNEWS: An article appeared at that time including Nycomed on a list of companies that were overwhelmed with integrating acquisitions and not negotiating any new agreements.
Valinder: I remember in my opening speech, when we integrated the two business development teams, that I said I would actually like to make history as the first company to continue doing deals throughout the merger. I did not want to turn our back on the world and say we were too busy with our own integration efforts to be able to continue doing business. I don’t know if I was very inspiring in my speech, but everyone did like the idea.
In fact, we had acquired a company whose main product was due for patent expiration in a few years. There would be continuing revenues, of course, but the loss of this patent was going to make a dramatic change in the product offering. We decided we needed to get busy with dealmaking.
I would say we stayed quite active in 2007. We acquired Bradley Pharmaceuticals, we did a deal with NPS Pharmaceuticals around teduglutide, and then a collaboration with Micromet around MT203.
During this time we also worked with our partners to expand territories because all the existing Nycomed deals were made only for Europe. Here, suddenly, we had a strong presence in other regional markets with this expanded geographical footprint through Altana Pharma. For example, at the moment we were closing the Altana Pharma negotiations we were in late stage discussions with Durect for a deal expected to close very early in 2007. I remember coming back into the room saying, ”Hey, can we now add Brazil and Mexico and Venezuela to this business?”.
Where we saw a slowdown in dealmaking came in the later part of 2008 and into 2009, which had nothing to do with our internal efforts, but reflected the market. During this period, however, we received positive Phase III results for roflumilast, the active ingredient of Daxas. This made us take a step back and recognize that here, suddenly, were results saying that an entire group of compounds we had in our pipeline could become valuable.
partneringNEWS: This was a legacy of the Altana Pharma R&D portfolio. Since Nycomed paid EUR 4 billion for the company, surely you must have hoped for good results from the clinical trials.
Valinder: When we acquired Altana Pharma, the company’s pipeline was more or less empty except for this one potential COPD (chronic obstructive pulmonary disease) product called Daxas. During the acquisition discussions we had a good look at Daxas and all the work that had been done, including these big, ongoing Phase III trials. Yet with something of this magnitude, a first-in-class product, anything can happen. We saw Daxas as having a high potential but with a high risk as well. Worse, there had already been inconclusive results in trials for asthma. We had to calculate Altana Pharma’s value based on the possibility that Daxas would fail.
After the merger, rather than sitting around waiting for the Daxas results, and to prepare for the worse case scenario, we got busy filling the pipeline. Then, to our great joy, the upside scenario for Daxas came true. Now we had a product coming out of the pipeline that could become really big. And this sent us back into the pipeline to re-examine other PDE4 inhibitors being developed.
These positive results also caused us to step back and look at our strategy, recognizing that this is a great opportunity, yet that we could not do it justice by trying to sell it through our own organization in the United States. We did not have the infrastructure, we had not established the networks with the general practitioner audience or even with respiratory specialists. We decided to partner with Forest Laboratories for the USA (August 2009) giving them exclusive rights. We then set about assessing how we could maximize the commercialization of Daxas in Europe. We reached a co-promotion agreement in April this year with Merck, known as MSD outside the USA and Canada.
These are two different types of agreements, and are built on the belief that with every deal you need to ask how can you make the pie larger for maximum value among the partners, recognizing where you have strengths, but taking into account your weaknesses as well.
partneringNEWS: In November 2009 at BIO-Europe your CEO, Hakan Bjorklund, said during a panel discussion “It would be easy for us to fund five or six early stage deals in the next six months, but that is not going to solve our problems over the next five years.” He went on to say, “We are open to flexible solutions, but the proposals must be based on risk sharing.” What does this mean for your partnering strategy moving forward?
Valinder: I would guess what Hakan’s said, is that it would be easy for us to find five or six deals.
What he was referring to is that Nycomed now finds itself with a big product launch with Daxas that is taking up resources in terms of personnel, but also financially. At the same time we have been highly successful with our in-licensing agreements with a surprisingly low attrition rate. To date all the products we have brought in have survived as we have moved them forward from pre-clinical to clinical and others through the clinical phases. Then we have internal projects built around the PDE4 inhibitors that probably would have been killed if Daxas has failed.
I would not say we are so rich in our pipeline that we are not looking for anything else. But we are not right now in a position where we are looking to bring in late Phase II products to develop through Phase III trials.
With pantoprazole coming off patent in a few years and with Daxas still in a launch phase, such that it will be some years before we can expect to be making money from it, we are really looking for opportunities for short- to mid-term growth at this moment. Especially in emerging markets, for example, where we are acquiring businesses and adding products to the portfolios.
On top of this, we are always, always looking out for projects in development. These could be from discovery to pre-clinical to clinical phase programs. Among these, if you were to give me a choice between two nice opportunities, at this point I would rather go for the late-phase development. Or else for market opportunities with a definite interest in finding products for our evolving markets.
Right now Russia CIS (Commonwealth of Independent States) is growing faster than the overall market. We hold a strong position there. The same is true for our markets in Latin America and Brazil specifically. And when I say Russia, by the way, I should point out we are also strong in all the former Soviet Union markets, such as Ukraine or Kazakhstan and other commercially interesting regions.
partneringNEWS: When people speak about the emerging markets of BRIC, there are few who put the accent on Russia. You did not follow the example of your Swedish colleagues at IKEA in abandoning the market?
Valinder: Nycomed was fortunate to stay in Russia through the ruble crisis, so that when the economy in Russia started to improve again, Nycomed was already there with an established organization and a product portfolio.
We had some brave people who toughed it out. They played it smart in a cautious way, and we never lost any money in Russia. To be frank, at certain moments we did not make a lot of money, either. But it meant we were in place and ready to go when the economy picked up and bigger pharmaceutical companies started looking for a partner who could represent them. The in-licensing that has been done by our Russian team has been very good.
In Brazil we have a similar in-licensing success. A lot of that company has been built on partnered products, or acquired products.
partneringNEWS: As for your interests in therapeutic areas, your website shows you now cover a broad number of areas. What is really important? What therapeutic areas have your attention?
Valinder: We keep the website updated regularly, and it reflects our interests. Keep in mind that Nycomed since its very beginning was built on acquisitions. We have so many different brands in our portfolio as a result of the many local portfolios we brought together. Altana Pharma also had a fair share of local brands. As a result we cover a wide range of therapeutic areas in terms of products on the market.
When you look at what we develop in our pipeline, particularly where we say we have an expertise and focus in early phase and discovery, you can see there is a clear emphasis on respiratory, inflammation, pain and gastroenterology. When it comes to near market opportunities, we have a surgical tissue franchise built around our key product TachoSil (haemostatic surgical patch), and this is an area where we are always looking for complementary products.
partneringNEWS: Isn’t there a risk that with the launch of Daxas, and the demands on internal resources you mentioned, that you want to narrow your focus to respiratory?
Valinder: Nycomed has a bit of an opportunistic streak, meaning that we try not to exclude therapeutic areas. You won’t hear us say categorically that we don’t do this or we don’t do that. If an opportunity is great enough we are likely to take a good look at it.
Having said that, there is one area where we do not work actively to bring in products, and that is oncology. I realize we are a bit different than the rest of the industry with this position. We had a very nice portfolio of early phase oncology products, which three years ago we decided to divest. It was not that we did not like the projects. Rather, when we looked at our own ability to bring that portfolio forward, recognizing that we did not have in-house expertise in clinical development for oncology products, and that we did not have the networks to conduct clinical trials with opinion leaders in Europe and the United States, we saw that it would require a very significant investment to become big enough.
To be fair CNS is another area where we see we do not have enough expertise and would not be interested in products that are still in development.
partneringNEWS: What types of deals are you making? Your CEO mentioned risk sharing. And you say you are opportunistic. How does that translate into negotiating?
Valinder: What I see right now, which is a result of the crisis of course, is that a lot of companies are in distress. There are biotechs that lack funding with projects that may be terminated, unfairly because there is not enough financing. And generally there is an aversion to risk.
Here, some business development teams see opportunities to buy up biotechs at low prices. This approach can work well if you are a big pharmaceutical who can pick up ten different companies, knowing that only one of those lead products is going to survive. For Nycomed, which would not be able to manage ten early phase projects acquired in a single year, this is not a viable way forward.
Instead, what we are looking for are partners who are prepared or able to carry a part of the risk. As Nycomed does not have a strong presence in the USA or Japan, one practical way of risk sharing is to partner with someone able to fund and carry the risk corresponding to the value of the US market, while Nycomed carries the risk corresponding to Europe, Latin America, emerging markets and the rest of the world. That represents one option and these are actually the kinds of deals Nycomed has been doing for a while. We find a lot of complementary interests in the US market alone.
When it comes to near market opportunities, it is important to be flexible. If we look at some of the emerging markets where Nycomed has a strong position, some of our potential partners may have a long term ambition to establish themselves in those markets. I think of Brazil, or Russia, for instance. With these new and exciting markets, the partner may not have the resources or the courage at this moment to jump in. Yet they may have a nice project they would like to launch. Here Nycomed has some solid examples of where we can take on a product for a number of years to establish a market and provide the partner with buy-back rights. It is a win-win deal because Nycomed has the opportunity to benefit from the product for a number of years and the partner can then take over a product that will serve as a platform when they are ready to enter the market.
partneringNEWS: So Nycomed will be on the hunt for partners in Boston at BioPharm America in September…
Valinder: We will have four people at BioPharm America. We never play hard-to-get, and we always take a potential partner seriously in our assessment. We may be a bit selective about the projects we will assess, yet we take pride in informing the potential partner early on regarding our decision. We are continually aware that a few years down the road, the situation may be different, or even next year! So we really and seriously give a priority to partnering.
I would tell potential partners to come discuss their project with us. We are definitely not interested in oncology, but we are listening if a product addresses our four major areas, and potentially a few more. I am being upfront about our interest in hearing how we can do a fair share of risk. Someone who wants to keep North American rights is the perfect fit, for example.
Nycomed for its part is very familiar with European markets, which are not very exciting at this moment, but where we can predict what will happen for products in those established markets. We also bring great opportunities in emerging markets. For a partner this presents the potential to enter parts of the world where there are strong growth potentials. Anyone would like to see double digit growth, of course. Yet it comes with higher risk, especially in markets that are highly volatile. Still, if you are present across a number of emerging markets you can expect to sustain growth.
partneringNEWS: You are truly passionate about partnering…
Valinder: Absolutely, it is the best thing you can do for a living…
partneringNEWS: Has partnering changed over the past ten years? Is it maturing as a business strategy?
Valinder: I think it has developed from being a gap filler and a fallback to being a necessity for most companies. Ten or twelve years ago, partnering was not recognized as a priority for pharma. I think it was in 1997 that the CEO of Pfizer said this was going to be important. Everyone was shocked, asking whether he no longer believed in his own research and development. Then one by one the big pharma companies came out saying this would be a priority. It took another five years before they translated this message into any kind of significant action.
Today partnering has become a very well run business within a lot of companies supported by eager investment banks and business advisers and consultants. The whole business has become so streamlined it has almost become boring. All partnering activities are being done in the same way, following a structured process and very well run due diligence, complete with electronic data rooms.
The original spirit of partnering has been somewhat destroyed by this standardized approach. Of course it improves efficiency in the agreements. But I am not sure that it results in the kind of really innovative deals that can result in a good long term solution for both the partners.
In one sense, that is why I like moving into emerging markets because there are still fun things to do. I like the deals where it takes a bit of creativity among people to identify the win-win, where two companies really get to know each other and are able to strike the optimal deal. Partnering demands a real understanding of each other, and a clear interest in each other’s needs. There is usually a way to get to that optimal point if you look close enough and take the time to listen and understand the deal.
This becomes especially important in emerging markets, where it is important to understand needs and then adjust business development activities. There are opportunities that come forward we might not recognize because they are presented in a different way to what we are used to seeing. We also have to look at products differently to be sure we bring products that are effective and affordable.
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