War stories inspire partnering at BioPharm America™ 2010
Daphne Zohar, Managing Partner of PureTech Ventures
The founder and managing partner of PureTech Ventures, Daphne Zohar specializes in venture creation, moving break-through discoveries from academic labs into the mainstream of product development.
PureTech has quickly established a track record for spotting potential in early stage technologies and then successfully launching companies to translate innovations into commercial applications.
Then PureTech did something unexpected, creating an alternative source for seed funding in a collaborative venture with six major pharmaceutical partners.
Having learned through a series of deals that traditional venture capital funding can be harmful to healthy innovation in life sciences, PureTech took a bold step into the intersection where innovation meets financing and then invited all the actors to sit down and talk.
The result was Enlight Biosciences, a ‘first of its kind’ collaboration between six major pharmaceutical companies that to date has raised USD 78 million in seed stage funding and so far has four active program/spinouts in progress, each exploring a promising new technology for drug discovery and development.
At BioPharm America, Zohar will turn her talents for creative problem solving to another level of challenges in life sciences when she leads a panel discussion focused on the unseen dynamics within large, complex organizations that can derail negotiations toward a partnering agreement.
The session she organized for Thursday, September 16, entitled “From the Trenches: Partnering War Stories,” gathers what Zohar describes as three seasoned veterans of headline making deals. In the discussion she will moderate, Zohar said the panel will drill down into specific case studies and describe how hidden challenges were overcome.
‘Complexity can’t be avoided, but it can be managed’
PartneringNEWS: What inspired you to organize the panel session for BioPharm America, “Partnering War Stories”?
Daphne Zohar: The people who come to BioPharm America are fairly sophisticated about business development. What I have not heard discussed are the ‘behind the scene’ dynamics of deals. In panel sessions speakers tend to provide a general perspective of their organization and speak about deals in generic terms. We don’t really hear enough about case studies, which is what really interests me, and I am sure other conference participants. The idea was to gather industry veterans who can share stories of specific high profile deals.
What we often see in partnering is a business development team doing everything right, but then they encounter internal influences that are not always transparent and that ultimately impact the deal. There are internal politics, for example, and there are internal programs at the company competing for the same dollars. Executives on the BioPharm America panel are going to describe what happened in specific deals and then tell us why one worked, or why another did not work. We are going to talk about how hidden influences affected the process, and hopefully give people in the audience a fresh perspective on that process. I think these insights could help all of us in our negotiations.
PartneringNEWS: Did you have any experience fresh in your mind when you came up with this idea for the panel discussion?
Zohar: There was a high level of complexity that developed in putting together a collaboration between six different pharmas in a company we created called Enlight Biosciences that made me think these hidden influences can pop up within every deal. This was definitely on my mind. There were a lot of ‘behind the scene’ discussions to resolve issues in a collaboration involving so many actors, and creating Enlight Biosciences was perhaps more complex than the usual biotech-pharma deal.
Yet within every organization, and especially large pharma organizations, there are always multiple levels of decision making. Even if the most senior people are onboard for an agreement and everyone is ready to do the deal, there may be technology or therapeutic area leaders, or perhaps a financial group within the organization that will not be convinced and need to be persuaded. Whenever there are parts of an organization that are not aligned with the agreement, there is always the potential of disrupting the entire deal process. Gaining alignment across multiple levels of the organization becomes critical to getting a deal done.
Yet as obvious as this may sound, and as members of the panel will discuss, this kind of alignment is not always possible. I don’t believe that mis-alignments can be avoided, but I do believe they can be managed in some cases. We are hopefully also going to hear about those cases where alignment could not be achieved, and yet where the deal went through anyway.
PartneringNEWS: How do the deals you put together at PureTech differ from the high profile cases we will be hearing about during the panel session?
Zohar: PureTech is working in a highly innovative space, working with academic innovators where we start with the unmet need, then look at potential technologies and determine what is necessary to translate them commercially. The space we work in is often undefined prior to our involvement.
I think this innovative space we exist in provides a different perspective which sometimes enables us to get new types of deals done. However, when you are doing something new, there is actually an added level of complexity because there are not any comparables you can look at. It’s different from more straightforward agreements where there are plenty of examples and templates. At the same time, there may be an advantage in being first with something or creating a new technology because Innovation has a premium in the current environment.
PartneringNEWS: In a given work day you are dealing with both the world of independent inventors and corporate finance. How do you reconcile these two cultures?
Zohar: I would not say there is a difference of values so much as there is a change in emphasis. The world of innovation is very entrepreneurial, creative, open minded and oriented to problem solving with a continual emphasis on novelty and differentiation. In the world of business and commercialization you are looking at a different set of issues, for example where something that is too new and different may be the very reason they do not want to do a deal. The emphasis here ranges from wanting to have an impact on society with something new, yet balanced against more financial concerns, such as asking how this technology will bring a benefit to shareholders.
Larger companies have been transforming themselves to become more entrepreneurial, moving away from the attitude of resisting anything that is ‘not invented here’. People we are interacting with, even though they are in a more corporate environment, tend to have an innovative mind set.
PartneringNEWS : With the creation of Enlight Biosciences, you placed PureTech at the intersection of these two worlds. What’s behind the idea?
Zohar: Enlight serves as both the entrepreneur and the early investor for the companies we start. We believed there needed to be a better source of financing early stage companies than the large venture firms.
In many ways the venture capital model is not optimized to provide benefit to entrepreneurs. In fact, the way venture capital has treated founders and early innovators has significantly damaged the innovation pipeline. To the point that people who want to start companies, or business angels and seed stage investors who want to invest in companies, are beginning to perceive venture capital as a sub-optimal source of funding. There are people who created a technology and then an early stage company that saw their ownership completely wiped out in venture capital deals. They not only gave up ownership, in many cases a venture fund took the technology in a completely different direction than the founders intended. Why would someone today want to take USD 20 million from a venture fund if in the end they are not going to be left with anything?
At PureTech we have been exploring alternative sources of financing in parallel to syndicating with venture funds, and today with Enlight Biosciences we have helped to create such an alternative source for academic innovators.
Enlight Biosciences currently has USD 78 million contributed from six pharmaceutical partners. We started with Merck, Pfizer and Eli Lilly, then Novartis, Johnson & Johnson and Abbott joined the collaboration.
What is exciting in this collaboration is that we have attracted innovative programs with new technologies, but instead of entrepreneurs or academics trying to guess what applications will interest pharma companies, they are at the table with some of the brightest people from six major pharma companies .
There are already four active programs in Enlight Biosciences. These very exciting areas with promising technologies, for example in medical imaging, drug delivery, predictive ADME-Tox (absorption, distribution, metabolism, excretion and toxicity of a compound), and other areas.
PartneringNEWS: What is the scope for Enlight Biosciences? Is it focused only in the Boston area?
Zohar: Enlight Biosciences is based in Boston, but there is not a specific regional focus to our work. The way we work is to identify a group of experts in a given field of interest. Usually there are just a handful of people who lead in a specific area of technology. They might be at Imperial College in London, or the Weizmann Institute in Israel, or at Stanford in California. It is nice that there is a lot of brain power in Boston and when we are looking for the top people in the world we can usually count on finding one or two here in the Boston area. But PureTech and Enlight Biosciences go wherever in the world the innovation can be found.
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