Mass High Tech: The Journal of New England Technology - October 20, 2006
by Dan Passeri
Mass High Tech

Small biotech companies seeking to effectively develop a portfolio of drug candidates face two broad strategic alternatives: Develop such candidates solely with their own resources or seek the support of a partner. While many biotech companies argue that retaining sole ownership of their drug candidates is necessary, there are a number of reasons that biotech companies should consider partnering.
The problem

For a small biotech company trying to develop drug candidates, the process can be daunting -- fraught with risk and uncertainty. Establishing a professional drug discovery and development organization requires time, an experienced scientific and business management team, and a significant amount of capital. Many small biotech companies recognize that they are not vertically integrated enough to develop all the drug candidates they would like because they simply don't have the financial resources, or the breadth of expertise. Instead, such companies often look for an alternative option that will help them to more effectively develop drug candidates. One way to do this is to form partnerships with larger companies.
An alternative

Partnering provides small biotech companies with a number of important benefits. For instance, it offers them the requisite capital necessary to develop a greater number of drug candidates in their development pipeline, which in turn can create a more sustainable business model. This "sustainability" comes from the fact the success or failure of the company is not tied to a single, or a limited few, assets. In addition to the cash payments received by the small biotech company, the larger partner will generally commit significant internal cash and personnel resources to the development of partnered drug programs as well.

Partnering also allows companies to complement gaps in their skill sets. Many small biotech companies, for example, are not equipped to adequately design and develop clinical trials or effectively market and sell an approved drug. By assessing early on what their strengths are -- or aren't -- companies can seek out mutually beneficial partnering relationships designed to help them achieve their drug development goals quicker and more efficiently. Through the collaborative process with its partner, a small biotech company can then gain access to invaluable clinical trial and disease indication expertise, which is essential for proper late-stage preclinical development research, such as lead drug candidate selection and Investigational New Drug (IND) enabling studies. In addition, the depth of clinical development understanding at larger companies generally far exceeds that of small biotech companies. For many small biotechs, leveraging partnerships as part of their business plans provides much-needed access to expertise that proves to be extremely useful.

Because it is well known throughout the industry that larger companies typically engage in an exhaustive due diligence prior to partnering prospective assets, successful partnering also gives the small biotech company validation of its drug programs. By professionally addressing and fulfilling the due diligence requirements of more experienced larger companies, a partnered program is likely to be viewed by investors as having been validated, thereby implying that the small biotech company's drug discovery and development organization is of high quality, trustworthy and professional. This, in turn, can result in enhanced investor confidence for future drug programs under development by the small biotech company as an added bonus.

By partnering with large pharmaceutical and biopharmaceutical companies, a small biotech company can create balanced deal structures and gain access to much-needed capital and research support, as well as complementary and more established competencies. This offers a tremendous opportunity for an otherwise small company to leverage a partner relationship in order to preserve and develop its human capital, foster ongoing education and skill enhancement, and create a greater portfolio of drug candidates that would have not been possible without the added support.

Dan Passeri is president and chief executive officer of Cambridge-based Curis Inc., a therapeutic drug development company focusing on cancer, neurological and dermatological disease indications. He can be reached at dpasseri@curis.com.