Fran Heller talks art of the deal
“Everyone is a dealmaker” can be a common sentiment when faced with the need to get a deal done, perpetuating the notion that business development is simply a skill that can be learned. On the contrary, successful negotiation is an art form that is in reality only mastered by a select few. One such “deal master” is Fran Heller, currently Executive VP of Business Development at Exelixis. Over the course of her career, Heller (as both a lawyer and as a business development professional) has been responsible for strategy setting and dealmaking on behalf of both pharma and biotech. She has led or participated in nearly 100 strategic deals, totaling many hundreds of millions in revenue dollars for biotech, and has also acquired key products and programs for pharma.
partneringNEWS recently sat down with Heller to get her thoughts on the state of dealmaking in the life science industry.
partneringNEWS (pN): How do you get the best deal?
Fran Heller (FH): If the “best deal” is simply a function of price, then the circumstance that gives rise to the “best deal” is one in which there are multiple bids (in an auction-like environment). There’s no question that the richest deals are a result of there being multiple bidders, so if you want the richest deal, you need to attract multiple bidders to the table.
However, it’s important to remember that price is not the only defining characteristic of a good deal. Every company should seek a partner that will not only give them appropriately rich financial compensation, but who also provides whatever complementary expertise they seek, such as late stage clinical development or commercialization.
pN: When is the right time to partner an asset or program?
FH: Any time is the right time as long as you have a “buyer” with the right terms. I am often asked whether it makes more sense to find a partner sooner or try to wait and raise the value by generating more data, and I tend to give the same answer: if you have a potential partner willing to give you the terms (up front and milestones/royalties) and the relationship (division of roles and responsibilities) you seek now, then why wait? Of course, you have to test the market sufficiently to know that answer, but sometimes you can explore valuation through some preliminary discussions and gauge the response from there.
pN: What is the current environment for dealmaking?
FH: I think it’s actually pretty favorable. Although beauty is in the eye of the beholder, there is usually a buyer for most high value programs based on good science. Fortunately for our industry, big pharma is always reassessing its portfolios and areas of interest/focus and therefore is always hungry to add to its pipeline, and biotech is always eager to provide the programs. This dynamic—the consistent need on both sides—pretty regularly feeds the dealmaking environment and is good for all of us.
pN: Do I need to understand the mechanism of action for my compound before talking to partners?
FH: Not knowing the mechanism of action for your program or compound isn’t necessarily a deal killer. Any head of a therapeutic area within a pharma company (who is acting as the scientific champion supporting the deal) will have his or her own level of sensitivity on whether or not that is a must-have for that program. That champion has to subsequently persuade his or her organization that it is a risk that they are willing to take in the case that MOA is not understood or is only partially understood. So it ultimately depends on the particular organization’s risk tolerance.
pN: How important is it to talk about product pricing and reimbursement?
FH: For most deal negotiations, it is not an important element of the contract per se; however, there are certain contract provisions that have pricing and reimbursement assumptions and definitions imbedded. If your program is closer to launch, it’s more important because the economics that are based on sales and pricing, e.g., royalties and sales milestones, must be carefully modeled to ensure the parties are receiving/paying appropriate compensation based on the relative development and commercialization costs. For most earlier-stage deals, it’s usually sufficient to show sales forecasts and see if the parties agree on the relative valuation of the program. Reimbursement is too hard to predict for products that are still a few years away from launch, so there is too much uncertainty to negotiate the specifics.
pN: If a small biotech wants to get a deal done, do they have to hire a full-time in-house business development professional, or is there a way to get the deal done without that?
FH: Whether or not you need to hire a full-time Chief Business Officer or business development professional would depend on how complex and how many deals the company desires to do.
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