# Presentation: 933307

## Strategic Alliances & Positioning

- Neven Karlovac, PhD
- 9th Annual NIH SBIR/STTR Conference February 26-27, 2007Las Vegas, NV

## Agenda

- Nature of Alliances
- Getting Ready & Staying Fit
- Finding & Selecting a Partner
- Negotiating a Deal
- Managing the Alliance
- Conclusion

## Why Alliances?

- For mutual benefit of partners
**Complementary capability & IP**
- Because nobody can do it alone
- However, Watch for...
- Inadequate Returns!
- Strategic Roadblocks!

- New products
- Risk sharing
- Higher ROI

- Market access
- Funding
- Validation

## Pyramid of Alliances

**Acquisition/**
**Merger**

- Vendor

**Licensing/OEM/Private Label**

**Joint Selling/Distribution**

**Joint Marketing**

- Supplier

**R&D Collaboration/Tech Transfer**

**Joint Venture**

## Industry Patterns

| Industry Segment | Typical Partner | Typical Alliance |
| --- | --- | --- |
| Biopharma/
Biomed | Big Biopharma/Biomed | R&D Collaboration |
| Diagnostics | Platform Manufacturers | Private Label |
| Tools | Distributors | Distribution |
| Healthcare IT | System Integrators | Licensing |
| Media | Everybody | Marketing
Licensing |

## Searching for a Partner

- Find those that are looking for you!
- Have gaps you can fill
- Entering your field
- Can grow revenue with your product
- Search everywhere for ideas
- Industry contacts
- Trade press and newsletters
- Company websites and SEC reports
- Scientific papers and USPTO
- Respond vigorously to leads
- Requests
- Customers (and suppliers!)
- Exhibits

## Target Summary 

| Target | Reason for interest |
| --- | --- |
| Contacts | What can we offer |
| Decision makers | Competitive benefits |
| Corporate profile | Evaluation criteria |
| Alliance track record | Deal structure
 |
| Strategic directions | Timeline |
| Major events | Next steps |
|  |  |

## Partnership Matrix

|  | Partner A | Partner B |
| --- | --- | --- |
| Contribution |  |  |
| Benefit |  |  |

## Deal Making Stats

**Required**
**Activity****                 ****20              10               6                 3               2               1**

**Tracking Interval 2:**
- July 1, 2005- Mar. 31, 2006

**Tracking Interval 1:**
- Sep. 1, 2004- Jun. 31, 2005

**Total Number of Partnership and Financing Deal Events**

- Source: NIH CAP Companies 2004/05

## When You Find A Good One

- Launch the alliance project
- Project plan
- Objectives
- Players
- Next steps
- Timeline
- Maintain Target Summary & Partnership Matrix
- Be ready for a lengthy and sophisticated process
- Get an ***experienced*** ***expert*** to structure and negotiate the deal

## The Negotiation Process

- Explore while negotiating
- Series of experiments
- Bet on success with a win-win
- Sensitive to negative motivations
- Cultivate & protect your champions
- Cast a wide net
- Manage due diligence
- Strong clinical/market data
- Explicit requirements
- Bilateral
- Sell and re-sell
- Ground yourself financially
- Sound company financials
- Understand partner’s ROI requirements

## Deal Valuation Case Study

**Notes:**
Cumulative revenue $2.5 M, cum margin $1.75 M
Payments to you $ 500K
Their direct investments$ 440K

## Deal Valuation Case Study

## Term Sheet (LOI, MOU)

- Up front and milestone payments
- Running royalty or transfer pricing
- Equity investment or loan
- Funded research and development
- Diligence obligations - financial and other
- Control of Intellectual Property rights
- Rights of first refusal on improvements, new Indications, etc.
- Dispute resolution

## Exit Strategy

- What happens if it doesn’t work out?
- Need a “pre-nup”
- Define causes for termination
- Define distribution of assets
- Money – present & future
- Capital Equipment
- Product
- IP & know-how
- Everything else in the deal

## Alliance Management

-  Communication
- Face-to-face at multiple levels
-  Simple structures work better
- Complex division of rights leads to issues especially post-market
-  Common understanding of value potential
- Aligned incentives allows flexibility over life of partnership
-  Realistic timelines
- Builds confidence and lowers risk

## Strategic Alliance Success

- Keep the trust
- People to people
- With accountability
- Regular communication
- Visible milestones
- Build successes

## What is Your Future?

- Acquisition by a Big Co
- Protected Niche
- Growth Company
- Aggregator

## Recent Alliances

**Madison, N.J., February 5, 2007** –** **As part of its ongoing commitment to provide advanced therapies for hemophilia, Wyeth Pharmaceuticals, a division of Wyeth (NYSE:WYE), announced the signing of a research collaboration with MediVas, LLC, a San Diego, California, biomaterials company specializing in improved delivery of biologics. This collaboration was initiated to discover, develop, manufacture and commercialize
- novel biopharmaceuticals that extend the duration of action of recombinant factor treatments for hemophilia.
**Wyeth Pharmaceuticals and Nautilus Biotech Announce Collaboration to Develop Hemophilia Therapies**
**Madison, N.J., February 5, 2007** — Wyeth Pharmaceuticals, a division of Wyeth (NYSE:WYE), and Nautilus Biotech in Evry, France, today announced the signing of a research collaboration and license agreement to discover and develop novel recombinant Factor IX proteins for the treatment of hemophilia B.  These extended half-life proteins will be designed to enhance patient convenience as they will reduce the number and frequency of treatments needed.
- As part of the agreement, Nautilus Biotech will apply its proprietary technology to improve the duration of action of recombinant hemophilia B therapy.  The Nautilus Biotech technology makes minimal and specific changes to amino acids sequences in order to slow the breakdown of the protein in the body.
- “Wyeth is continually evaluating technologies for next-generation hemophilia products that provide unique and improved features for patients.  This research partnership enhances Wyeth’s presence in biopharmaceuticals and builds upon our history of innovation in hemophilia research,” says Cavan Redmond, Executive Vice President and General Manager, BioPharma Business Unit at Wyeth Pharmaceuticals.
- Under the terms of this agreement, Wyeth will develop, manufacture and market products derived from the collaborative research.  Nautilus Biotech will receive an upfront payment, research and development fees, milestone payments from Wyeth associated with development, regulatory filings and approvals, and royalty payments based on net sales of products

## Recent Alliances

## Contact Info

- Neven Karlovac, PhD
- Larta Institute
- Tel 213-765-4830
- Cell 310-897-2096
- nkarlovac@larta.org