Once a biotech's new drug has reached "proof of concept" in late-stage trials, it can leverage a much better partnering deal, he said.
"It is a change in the balance of power in making these deals," Longman said. "The reason is that there is such a big audience for new drugs."
More Maryland biotechs than ever are entering final drug trials, according to MdBio, the nonprofit industry group.
"Many bio projects in Maryland are further along in the pipeline, making them higher value targets," said David W. Edgerley, secretary of the state's Department of Business and Economic Development. "In recent years, more funding has become available to the industry, which is allowing these companies to develop their products and expand their pipelines even further."
Meanwhile, big pharmaceutical companies' competition from generics has stiffened as its patents expire. In 2007 alone, at least 10 major drugs with sales totaling more than $8 billion will go off patent, including sleep medication Ambien and hypertension drugs Norvasc and Toprol XL, according to a report by Medco Health Solutions,Inc. and based on the Food and Drug Administration's Orange Book of approved drug products. In 2006, 55.2 percent of all drugs Medco dispensed were generics, up 3.7 percent from 2005.
And with its drug pipelines distressed, big pharma is paying top dollar to merge or partner with biotechs, giving it a piece of the action on these emerging medicines.
The upside for the small biotechs is tapping into big pharma's manufacturing and marketing capabilities -- and credibility.
"Companies with partners are attractive to investors," said James Leslie, chairman of the MdBio Foundation. "They see the partner as giving the biotech the Good Housekeeping seal of approval. If Merck has partnered with the company, then it has done the homework. Investors know that instinctively."
Biotechs are in stronger positions now to hand pieces of drug development to a partner, Leslie said.
"If you are an Avalon or Macrogenics, no one in your company may have experience in building plants and large-scale manufacturing," he said. "The GSKs [GlaxoSmithKlines] and Mercks have hundreds of guys who have done that."
Carving out processing or distribution rights in Europe through a partner, for example, lets the biotech "retain enough in-house for your shareholders, but gain some revenue and value on the development," Leslie said. "You can get significant amounts of money without costing the shareholders. Because [venture capital] is very fickle, partnering is a way to go without giving away equity."
Sometimes, however, big pharma makes purchase offers that just can't be refused. Just this year, MedImmune Inc., Digene Corp. and BioVeris -- all in Montgomery County -- have all been acquired.
More, and bigger,pre-clinical deals
Among the biotechs pursuing the partnership strategy is Avalon Pharmaceuticals Inc. in Germantown.
Its drug developments "are getting to the stage where they are partner-able," said David Muth, Avalon's chief business officer. Avalon, founded in 2000, started its first phase 2 clinical trial in July, to test its lead drug candidate, AVN944, on solid cancer tumors.
In March, Avalon signed a deal with Merck & Co. to find drug candidates to inhibit a new cancer target discovered by Avalon, work that hasn't even reached clinical testing. Avalon could receive milestone payments exceeding $200 million plus royalties.
"The number of biotech's pre-clinical deals with pharma are up and the value of them is up," Muth said.
As Avalon hits biotech mid-life, CEO Kenneth C. Carter has been more actively seeking partners.
"The challenge is there is only so much you can do with 60 people and our budget," Carter said. "So what is the alternative? We have the opportunity to build much more value in the next few years."
In biotech, everything is timing, said Paul H. Fischer, CEO of GenVec Inc. of Gaithersburg.
"The trick is to balance the future finances while always addressing the future of the company," Fischer said.
GenVec's TNFerade, to treat advanced pancreatic cancer, recently entered its final stages trials, which will cost millions and take many years.
But because GenVec has a multitude of drug and vaccine products in its pipeline, "we are not going to wait that long," Fischer said. "People will come to GenVec to partner. We are experiencing a lot of interest right now."
Investors and biotech partners "tend to be lemming-like -- to follow something that works," he said.
Thus far, GenVec has relied on federal contracts to fund much of its research. It has received $17.5 million from the Department of Homeland Security -- including $5.6 million this week -- to develop vaccines against foot-and-mouth disease of livestock. The company will soon partner with a large veterinarian products company to distribute the vaccine, expected on the market within 30 months.
Some reticent,some aggressive
Some biotechs with products now reaching final drug trials, such as Vanda Pharmaceuticals Inc. of Rockville and MiddleBrook Pharmaceuticals Inc. of Germantown, are reluctant to discuss their partnering strategies, while others flaunt their quest for partners.
Macrogenics Inc. of Rockville, which has 85 employees, has a Web page that focuses on partnering possibilities.
"We are taking an aggressive approach to partnering," said Gary Fanger, vice president for business development. "Hitting the later stages can change the strategy. So, with a lot of products and ideas in the pipeline, this can attract investors and forming partners."
As its first product, diabetes drug Teplizumab, reaches phase 3 trials, Macrogenics will consider co-developing with a partner, rather than drain its capital that it needs to develop other products in its pipeline.
Macrogenics has raised about $106 million, which won't cover all of its expected trials.
"What we would prefer to do is to find partners to work with us where they would take up the majority of the funding responsibility," Fanger said. Macrogenics is co-developing some drugs with Genzyme Corp.
"You are seeing more co-promote opportunities with biotech companies which you didn't see a lot of before," he said. "The smaller company actually has some responsibility in selling the drug. And you are seeing more co-development agreements.
"The trend is swinging more in favor of biotech now. The thought is that you can put together a reasonable deal these days and not turn over complete control of your program. You have some say in how it evolves."
The biotech industry may now be fulfilling some of its "long-awaited promise," said Gerald Sadoff, a former Merck senior researcher and now CEO of the nonprofit Aeras Global TB Vaccine Foundation in Rockville.
Biotechs have shown that they, too, can develop "blockbuster" treatments, such as biological proteins that calm rheumatism, he said.
"Big pharma, which previously had not hugely been involved in biotech, has now become much more aggressive about biotech acquisitions, since opportunities have become much more attractive," Sadoff said.
In the late 1990s, Merck "made a strategic decision" to greatly expand its department for external research and licensing, according to the company's executive director for corporate licensing.
Merck has increased its number of drug development collaborations from 11 in 1999 to 53 in 2006, spokesman Ian R. McConnell told The Gazette.
