Good morning, my name is Dr. William Ettouatt from Skaggs School of Pharmacy and Pharmaceutical Sciences from the University of California San Diego. Today, we are going to cover a new lecture on strategic alliances and merger and acquisition in pharma, biotech and academia. So, what will this lecture cover? Well, we will discuss why should pharma, biotech or academia develop corporate alliances. We'll talk about what happened in 2015. The types of deals and how many there were. We'll then cover the different types of alliances, as well as structuring and negotiating deals. And finally, we'll talk about briefly about alliance management. So why should pharma develop strategic alliances with biotech or with academic institutions, or vice versa? Well, depending where you sit, there is different objectives. For academic institutions, very often is to translate the research that's being done in the lab, so you can actually provide novel medicine. For biotech, very often, it's a source of capital. It's also something to have access to knowledge and capabilities, especially on the development or the manufacturing or the commercial side. And for a pharma, it's primarily to keep their drug pipeline full. What is an alliance? It really is a formal agreement between two or more companies to cooperate for specific purposes. So, let's go through that. The reason why the life science industry needs to do alliances is because of all these points that are on these slides. They need to deliver promising new drug candidates. And as you know, the process and as you have learned, the process is very complex. A lot of regulatory challenges. A lot of change in the market where people are asking pay for performance, demonstrating value. There is a lot greater global competition. The pharmaceutical business is an international business. The patients are getting also a lot more involved, as we saw earlier in a number of the other lectures and there's also a shorter product life cycle where we were depending on the patents and when the patent was filed. So with that question one could ask, well, if one looks at the numbers over a number of years all the way up to 2010 and this slide was actually developed by a research firm. You can see that there was a very big decline in productivity and R&D. Now having said this, one of the things we can look at is well, what happened between 2010 and 2015? Well, so last year and you see it actually very nicely on this chat and this is really just from a US perspectives. So I apologize for our international listeners, I don't have the data for the EMA or for Japan or other markets. But if we look at the FDA, since 2010s, the numbers have been picking up nicely and they're is a number of reasons for that. But for example, in 2015, there was really a number of approval that had increased. Actually, that was the highest number of approval, 45 drugs were approved. 36% first in class, 47% rare or orphan diseases. I've actually put links to the FDA reports, so you can read it at your leisure. So the motivations we talked about for alliances with pharma and biotechs, and a pharma, and academia are different. So, let's talk about pharma and biotech. So the first one I mention, funding resources not enough grant money. Exchange of scientific expertise. Create collaborative knowledge, we'll talk about this more a bit later on. Capitalize on innovation. If you don't have enough money, you can't necessarily develop your product and really address medical needs in a broader sense of the term. In the sense that biotech companies are sometimes a bit more nimble and can move faster to get into first a human even though that is also changing, because pharma has been reinventing itself at least some of the top pharma have been reinventing themselves to be able to do that. And then the other thing that's also important is cooperative technology development rather than only technology transfer and that's really important for academic centers where there is a true collaborations between the pharmaceutical industry, the biotech companies and academia and whether there's work that's being done in both or all of these institutions at the same time. So, what are the motivations for alliances with academics? Well, pharma or biotech wants to gain access to transformative innovations. Academia still generates a lot of innovative research and a lot of innovative discovery, which again is extremely important for pharma to have access to. This provides pharma an opportunity to diversify their drug portfolio. They also have access to break through technology and disruptive science that they would necessarily have. Because in the pharma and biotech world, you really have to go after more applied research. Whereas in academia, you have a bit more freedom from that perspective. Novel targets identification, novel pathway expertise, new animal models and another thing that is extremely important, especially in the way now we are developing drugs and you heard about this as well a little bit is access to patient and access to patient database. Real world data, which is also quite important from that perspective. Finally, during the past 40 years, over 153 new drugs that were approved by the agency, by the Food and Drug Administrations actually came through research carried out in the public sector. So again, very productive from that perspective. Now, what does biotech want to have to do alliances with the pharmaceutical companies? Well, the first one if you can is to get access to non-dilutive capital. What does that mean? That means that you don't have to have necessary eventual capital that is going to take 60, 70, 80% of your company depending what stage you are. It also applies risk sharing, because now you have a partner. Big pharma knows how to do drug development. They know always how to deduct research. They have a very large infrastructure that's already established. And if you're a small biotech company, well, you can then share the risks. Accelerating the new product development. Again, usually pharma has a really well-honed product development teams. Access to chemical development manufacturing and marketing, which I mentioned earlier. Very important, access to international markets. If you are a biotech company that is maybe based in France, maybe based in Japan, maybe based in the UK or in the US and you are really don't understand in global markets. Having a partner in the big pharma side is really important, because the big pharma are usually market drugs in every single market around the world. Also there is, if you're a brand new company, the FDA doesn't know who you are. And working with a partner who's already known by the agency or the EMA is going to be very helpful, because there's going to be some credibility already and acceptability. Finally, in order to get financing, having a pharmaceutical partner for your biotech company is very important, because it allows basically the venture capital funds to really feel like, well, the pharmaceutical company has already done their due diligence. They've already gone through a fair amount of understanding of your technology or your products and can then go in, and invest a bit more freely. And finally, one of the nice options of having a pharma partner for a biotech company is that you have a built in exit strategy if the IP or market, initial public offering market is closed. And if you have a product that is of interest or a technology of very high interest to that pharmaceutical company, they might decide just to acquire it. For example, Millennium Pharmaceuticals was absolutely stellar in the sense that they established a lot of collaborations with not only the academic sector, but also the pharmaceutical companies. They had many, many deals. And at the time of IPO, it was something that really helped them substantially in getting a high evaluation and go and become a public company. Again, because their technology were validated by a number of pharmaceutical companies as well as by other academic institutions. So now looking at that, what are the pharma motivation to develop alliances, including merger and acquisitions? Well, for mergers and acquisitions, it allows them to basically acquire new products without having to do any of the research. It allows them to replenish their pipeline. It increases innovation, because they have a very big machine that needs to produce more products. There are billion dollars products and any try that on a regular basis. They can be more efficient, because what that means is that they can reduce some of their internal research arms and really concentrate outside. Sometimes, it's much cheaper and faster to acquire the next blockbuster to try develop in house. It will keep revenue growing which will please investors, especially when you are driven by the stock market. And it will really also help gain access to transformative innovation that you very often find in academic institutions or small biotech companies that are spin-offs from academic research. And finally, it also helps them sometimes to have basically access to capital in 2015, for example, with low interest rates. The cost of capital was pretty low and that allowed them to basically be able to do this. The last advantage is the tax advantage and we'll talk about one case. There's many cases where when you have a US company that basically acquires an European company and this group has been somewhat closed now in 2016. But very often, people would look at this, so they could basically have the headquarter based in another country and override taxes. For example, Pfizer has been replenishing its pipeline through acquisition. 2000, they acquire Warner-Lambert. 2003 Pharmacia, 2009 Wyeth. 2014, they attempted to by AstraZeneca. Primarily for tax savings reason, some people will disagree with me. But at the end of the day, that's what it look like, that was rejected. And in 2015, they were hoping to merge with Allergan. Again, a lot of it for tax reason even though they were saying that it was complementary. Again, this is my opinion. That was rejected in 2016, because the SCC basically passed new laws that made the merger not as interesting. So if we look this, they also have done a lot of collaborations and they have developed a Center for Therapeutic Innovations where they have 25 leading academic medical center. 70 external academic reviewers, 8 National Academy of Science Members that basically evaluate projects from numerous universities including UC San Diego.