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Key Considerations for Structuring a Winning Deal- A Biotech Approach Thomas Hess Former Chief Financial Officer of Adolor...
Adolor- Pfizer Delta Collaboration <ul><li>Considerations and motivations for entering into the deal! </li></ul><ul><ul><u...
Biotech Perspective Timeline and Activities in Establishing a Partnership Engage Parties Initial  Preparation Due  Diligen...
<ul><li>Date:  December 2007 </li></ul><ul><li>Focus:  Delta opioid agonists for pain </li></ul><ul><li>Milestones:  $232....
Recent Benchmark Example  Pain Compounds in Phase IIa Adolor/Pfizer Targacept/GSK Glenmark/Lilly Transaction Date December...
<ul><li>Adolor had the “option” to attend all JSC meetings! </li></ul><ul><li>Adolor is not obligated to attend- collabora...
Accounting for Upfront Payments <ul><li>Collaboration signed December 2007 </li></ul><ul><li>Two compounds in the clinic a...
Strategies for Communicating & Reporting the Deal Externally <ul><li>Involve investors relations from both parties up fron...
Lessons Learned <ul><li>Insert yourself early in the process. </li></ul><ul><li>Obtain term sheet and draft agreement. </l...
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Pharm Collaborations Cbi Pres

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Transcript of "Pharm Collaborations Cbi Pres"

  1. 1. Key Considerations for Structuring a Winning Deal- A Biotech Approach Thomas Hess Former Chief Financial Officer of Adolor Corporation (currently CFO of Yaupon Therapeutics) September 16, 2008 © 2008 Adolor Corporation. All rights reserved.
  2. 2. Adolor- Pfizer Delta Collaboration <ul><li>Considerations and motivations for entering into the deal! </li></ul><ul><ul><ul><li>Adolor was awaiting approval of Entereg- their lead compound. </li></ul></ul></ul><ul><ul><ul><li>The cost of developing a new compound (Delta) is significant. </li></ul></ul></ul><ul><ul><ul><li>Risk </li></ul></ul></ul><ul><ul><ul><li>Expertise </li></ul></ul></ul><ul><ul><ul><li>Focus </li></ul></ul></ul>
  3. 3. Biotech Perspective Timeline and Activities in Establishing a Partnership Engage Parties Initial Preparation Due Diligence Negotiation Execution <ul><li>Internal </li></ul><ul><li>Buy In </li></ul><ul><li>Develop </li></ul><ul><li>Prospectus </li></ul><ul><li>Identify </li></ul><ul><li>Potential </li></ul><ul><li>Partners </li></ul><ul><li>Establish </li></ul><ul><li>CDA with </li></ul><ul><li>Interested </li></ul><ul><li>Parties </li></ul><ul><li>Confidential </li></ul><ul><li>Presentation </li></ul><ul><li>(and Sell) </li></ul><ul><li>Initial </li></ul><ul><li>Discussion on </li></ul><ul><li>Terms </li></ul><ul><li>Additional </li></ul><ul><li>Asset Data </li></ul><ul><li>Exchange </li></ul><ul><li>Draft Term </li></ul><ul><li>Sheet Exchange </li></ul><ul><li>Establish </li></ul><ul><li>Timeline for </li></ul><ul><li>Completion </li></ul><ul><li>Establish </li></ul><ul><li>Document </li></ul><ul><li>Room and </li></ul><ul><li>Media/Forum </li></ul><ul><li>for Review </li></ul><ul><li>Initiate the </li></ul><ul><li>Drafting of </li></ul><ul><li>Definitive </li></ul><ul><li>Agreement </li></ul><ul><li>Partner Pitch on Collaboration </li></ul><ul><li>Draft Agmnt. </li></ul><ul><li>Exchange </li></ul><ul><li>Multiple F2F </li></ul><ul><li>Negotiations </li></ul><ul><li>GetAccountant to Review </li></ul><ul><li>Know when to </li></ul><ul><li>Say “Enough” </li></ul><ul><li>BOD Presentation </li></ul><ul><li>on Deal Terms </li></ul><ul><li>and Conditions </li></ul><ul><li>Partner </li></ul><ul><li>Governance </li></ul><ul><li>Approval on Deal </li></ul><ul><li>Establish </li></ul><ul><li>Committee </li></ul><ul><li>Members </li></ul><ul><li>Plan Your First </li></ul><ul><li>Post Deal Close </li></ul><ul><li>Meeting </li></ul>Timeframe can run from 3 months to + 12 months
  4. 4. <ul><li>Date: December 2007 </li></ul><ul><li>Focus: Delta opioid agonists for pain </li></ul><ul><li>Milestones: $232.5MM </li></ul><ul><li>Back End </li></ul><ul><li>United States </li></ul><ul><li>Profits/Losses shared 60% to Pfizer and 40% to Adolor </li></ul><ul><li>- US development expenses (external) to be shared in same proportion </li></ul><ul><li>Rest of World </li></ul><ul><li>Adolor to receive royalties on Pfizer net sales </li></ul><ul><li>Provisions for adding compounds and indications </li></ul><ul><li>Development Collaboration </li></ul><ul><ul><li>Adolor: IND filings and clinical program through Phase 2a </li></ul></ul><ul><ul><li>Pfizer: Subsequent worldwide development and regulatory approvals </li></ul></ul>Adolor/Pfizer Collaboration
  5. 5. Recent Benchmark Example Pain Compounds in Phase IIa Adolor/Pfizer Targacept/GSK Glenmark/Lilly Transaction Date December 4, 2007 July 27, 2007 October 30, 2007 Pain Target Delta Opoid Receptor Neuronal Nicotinic Receptor Transient Receptor Potential Vanilloid Sub-family 1 (TRPV1) Lead Compound ADL5859 TC-2696 GRC 6211 Upfront Payment $30 Million + $1.9 Million reimbursement for Phase 2a studies $20 Million Plus $15 Million in Equity $45 Million <ul><li>Milestones </li></ul><ul><li>Development </li></ul><ul><li>Regulatory </li></ul><ul><li>Commercial </li></ul><ul><li>Total </li></ul>Not Disclosed Not Disclosed Not Disclosed ____ $232.5 MM Not Disclosed Not Disclosed Not Disclosed $1.5 B Not Disclosed Not Disclosed Not Disclosed $215 MM Back End US – 40/60 Profit Split ROW Royalties Undisclosed Double Digit Royalty ~15% Royalty in the Territory Territory Worldwide Worldwide North America, Europe, and Japan Cost Sharing 40/60 US 100% Pfizer in ROW Targacept to fund through Phase 2 POC. Then 100% GSK if they opt to take the compound 100% Lilly in Territory - no mention of access to Lilly trial data Co-promote Option Yes – US Specialty Yes – US Specialty for first two compounds Yes – US
  6. 6. <ul><li>Adolor had the “option” to attend all JSC meetings! </li></ul><ul><li>Adolor is not obligated to attend- collaboration meetings. </li></ul><ul><li>Allows for recognition of the up front payment. </li></ul>Deal Structure for Revenue Recognition
  7. 7. Accounting for Upfront Payments <ul><li>Collaboration signed December 2007 </li></ul><ul><li>Two compounds in the clinic as of the collaboration date. </li></ul><ul><li>Adolor is responsible for the development of each compound through Phase II a and then Pfizer assumes all responsibilty. </li></ul><ul><li>Adolor’s project management projects that compound I & II will be completed in February 2010 (26 months). </li></ul><ul><li>Amortize the upfront over 26 months. </li></ul><ul><li>Adjust if Phase II takes more/less time. </li></ul>
  8. 8. Strategies for Communicating & Reporting the Deal Externally <ul><li>Involve investors relations from both parties up front. </li></ul><ul><li>Create timeline for preparation, review, sign off (both parties) and distribution of press release and Form 8-K </li></ul><ul><li>Reach out to the analysts. </li></ul>
  9. 9. Lessons Learned <ul><li>Insert yourself early in the process. </li></ul><ul><li>Obtain term sheet and draft agreement. </li></ul><ul><li>Include the external auditors and audit committee upfront. </li></ul><ul><li>Involve investor relations up front. </li></ul>
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