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Pfizer/Affinium: A Harbinger Of Discovery Deals To Come?

This article was originally published in Start Up

Executive Summary

The $30 million headline value of the recent discovery deal between Affinium Pharmaceuticals (formerly Integrative Proteomics) and Pfizer may not be particularly noteworthy, but the business structure of the deal is unusual in the extent to which it goes beyond the fee-for-service type arrangements that in recent years have been typical for platform technology biotechs and Big Pharma. Of particular note, Affinium is entitled to potential royalties, as well as rights to certain IP generated by the alliance. Affinium's CEO says that over the next several years, the drug industry may re-warm to the idea of early-stage discovery collaborations.

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Pfizer R&D: The Biggest Pharmaceutical Experiment

In an interview, Peter Corr, the new head of the industry's largest R&D organization, argues that scale, properly managed, can solve the key problem for innovative R&D organizations: the ability to feed both early- and late-stage development. Smaller firms create unbridgeable pipeline gaps by having to focus on the late-stage and starving the early work. Moreover, Pfizer is making a huge investment in attrition-reducing early-clinical technologies, especially imaging, to find biomarkers which will tell researchers whether a drug is working in humans before it begins more expensive trials. Again scale is crucial: Pfizer's investment can be amortized over a large number of projects, making it financially more affordable and productive for Pfizer than a similar investment would be for smaller companies. To increase the utilization and productivity of this investment, Corr wants to increase Pfizer's in-licensing of preclinical and Phase I compounds--a dramatic change in Pfizer's licensing habits, which have focused on late-stage opportunities and the acquisition of discovery platforms.

The Foundations of High-Value Discovery Deals

At a time when high-cash discovery deals, and particularly platform deals, are increasingly difficult to find, a number of companies have pursued alternative strategies for creating important transactions. In the first place, many biotechs have changed their attitude to technology transfer, willingly selling technology, and sacrificing any product-related upside from their clients' programs, in return for more significant upfront funding to pay for creating a more integrated in-house discovery effort. Several companies have also, by focusing efforts on just a few partners, expanded the relationships into a series of deeper and more valuable collaborations. Other biotechs have recognized the value of barter, trading off cash compensation for assets, like combinatorial chemistry expertise, assays, cell lines or even product candidates, which allows them to build internal value faster.

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