Wednesday, August 29, 2007

Bayer-Schering Biz Dev: Reorganized and Ready to Deal

We wondered aloud last autumn, in the wake of four multi-billion euro deals, about the impact that Europe's mid-sized pharma mergers could have on Big Pharma. Could the invigorated middle class of pharma, with its specialist bent and flexible dealmaking, eat Big Pharma's lunch?

Some of them certainly think so. Less than six months after joining Bayer-Schering Pharma as the newly-merged group’s SVP global business development and licensing, Michael Yeomans already has a clear message for the rest of the industry: look out, we’re coming—and we’re coming with aggressive deal terms (read: $$$$), an reorganized, 40-strong business development team across corporate and therapeutic-area-focused units, a love of specialist products and ambitions in biologics, too.

Bayer Pharma and Schering have pretty much sat out of the deal-making pool party since Bayer bought Schering in the middle of last year, distracted by re-structuring and spring-cleaning; just as other Euro mid-caps including UCB Group and Nycomed and Merck KGAA have done, too, as they digest Schwarz Pharma and Altana Pharma and Serono, respectively.

Now the slimmed-down, not-so-mid-cap Bayer-Schering reckons it's ready to dive in. Bayer-Schering isn’t just going to be supplementing internal R&D efforts with deals, it’s going to be replacing R&D efforts with deals, at least in some business units. “There are several areas where we'll emphasize in-licensing and acquisition rather than internal R&D", Yeomans told IN VIVO blog. The R&D budget won’t decrease in absolute terms, but Schering’s historical 18-19% of sales R&D spend will look more like 15-17% in the new group, albeit of a bigger revenue pot.

Sounds like it’s turning into spec pharma, right? Right. But that acquire-and-market model’s a bit out of date, given the cost and rarity of late-stage assets, and given that most niche drugs really aren’t that niche anymore. (Interested in discussing whether the spec pharma model is broken? Wait for September's IN VIVO.)

Still, Yeomans claims the company will have a competitive edge, in part thanks to the new BD structure he has spent the summer building. Each of Bayer-Schering’s six business units will have a team of licensing guys that decide in the first instance what to pursue; a corporate group will get involved only for selected deals “to add expertise, not as a hand-off,” Yeomans clarifies.

In other words, Bayer-Schering is creating a business development answer to GlaxoSmithKline’s R&D-focused CEDDs--centers of excellence for drug acquisition (CEDAs: our label, not theirs). They’re small, nimble, TA-focused, autonomous teams, although they don’t, apparently, have budgetary independence like GSK’s CEDDs. (Need a refresher? Recap on GSK’s CEDDs here, and indeed on GSK’s own attempt to extend the concept to business development here and in a previous blog-post).

Bayer-Schering says it has a winning combo of small-company advantages encouraged by the new structure—focus, flexibility, speed—and the financial clout of Bayer’s corporate coffers. “For the right projects, we can certainly be competitive,” he asserts.

That competitiveness may include something that most Big Pharma lack: a willingness to out-license. We hear that there are a few assets in the discovery and development pipeline that Bayer-Schering may like to part with.

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