By Varvara Melikhova, founder and CEO of Unison Innovations\n\n\n\nStrategic partnerships are a better way to build a product’s capabilities than outright acquisitions. \n\n\n\nWhile the M&A path is set out for the most mature successful startups, early-stage partnerships can enhance a product’s market value and provide access to Big Pharma expertise and infrastructure, which significantly reduces risk. \n\n\n\nIt allows companies and their partners to share resources they wouldn’t generally have access to as a small business, resulting in a win-win collaborative experience.\n\n\n\nFor example, in December 2020, Pfizer partnered with drug discovery startup PostEra in a deal worth more than $250 million. In the first quarter of 2022, leading industry players including Sanofi, GlaxoSmithKline, and Bristol-Myers Squibb announced multi-billion-dollar strategic partnerships with AI vendors. \n\n\n\nPharma-startup partnerships represent the fastest-moving model for externalizing innovation to accelerate R&D productivity and drive portfolio growth.\n\n\n\nA common perception is that funding and support from a large pharmaceutical company only becomes relevant for startups when their product is in the last stages of development. In other words, after the development project has been significantly “de-risked” by the startup company. \n\n\n\nA recent study found that the startup success rate increased from 18% to 37% when a large pharma investor was on board. This connection also increased both the size of success (from a median of $138 million to $332 million market capitalization) and the acquisition value (from $136 million to $377 million). \n\n\n\nThe study also found that success rates were boosted for startups that partnered not just at the clinical stage, but also earlier - during preclinical development. The conclusion was that large pharma partnerships are advantageous throughout the startup lifecycle - from the preclinical stage through exit by acquisition or IPO.\n\n\n\nWhat are the reasons behind this trend? In the early stages of development, access to the pharma partner’s intellectual property (IP) may play a significant role. The pharma partner essentially de-risks the IP before out licensing it to the startup, which could effectively give them an edge over competitors.\n\n\n\nThe study also points out that a large pharma partner can provide ongoing support in terms of both resources and specific expertise that entrepreneurs may be lacking, such as regulatory interactions and large-scale manufacturing in GMP clinical development.\n\n\n\nFor example, Merck has 17 scientific scouts worldwide, who meet with companies in their respective regions and build relationships with them. Many big pharma companies publish partnering interests on their website, so companies can see if there is a match.\n\n\n\nSanofi even publishes a yearly partnering brochure to make sure it’s easy to understand what they are looking for.\n\n\n\nThe ideal situation is when a big corporation scouts a product and reaches out to a company. However, this does not happen all the time. So, how can startups land the perfect strategic partner?\n\n\n\nProtect your findings\n\n\n\nIn the absence of a tangible product, partners consider the potential future commercial revenue if the product or treatment makes it to market. The decision of whether or not to invest, and the scale of any investment, is based on how well the technologies that form the core of a company have been protected. This is where patents come in. \n\n\n\nDeveloping a patent strategy for a business will provide a strong foundation for future growth, revenue generation and investment. Patents protect new technology or products and block rivals from entering the market, thereby raising profits and market share. Patents, a company asset, allow companies exclusivity for up to 20 years from filing the first application.\n\n\n\nWait for the right time\n\n\n\nIt is crucial to take into consideration where a company’s assets are in terms of their clinical development timeframe. It could be beneficial to wait for a particular milestone or phase to make the most of potential partnerships and provide a stronger USP for the asset. The further a company can take its own research, the better the deal that will be offered in terms of upfront payments, milestone payments, and royalties.\n\n\n\nAttend industry events and meetups\n\n\n\nPotential partners can often be found through conferences, which are typically centered around either business development or R&D. They provide a platform for companies to present assets and clinical trial data. In this scenario, this can cause a big pharma company to approach a smaller company, instead of the reverse, giving it greater leverage when it comes to negotiating a deal. \n\n\n\nFor example, Pfizer’s Hightech Summit offers startups the opportunity to network with neighboring startups and establish contacts with funds, VCs and corporate investors.\n\n\n\nPivot the MVP\n\n\n\nWhile a product might have succeeded on an initial level, it is important to constantly analyze the target market and be flexible with adjusting a product or adding custom integrations or features. Products can be changed and updated rapidly in response to user feedback. If an idea fails, Big Pharma has the resources to help a startup pivot its MVP. \n\n\n\nFind the right strategic partner \n\n\n\nIt’s in the interests of big pharma companies to find new partnerships. That means the company has people that scout potential alliances, they may be found within different departments such as R&D, business development or strategic marketing. \n\n\n\nAfter finding the right person, it is important to send a well-crafted pitch. This means first doing research to understand what the organization is looking for, and its goals. Keep the pitch clear and concise, highlighting how the company can help the target company achieve its goals. Be sure to emphasize the benefits of working together and how it will be a win-win situation for both parties.\n\n\n\nHowever, before sending anyone a product or proposition, especially a bigger, more powerful company, it is important to enter into a nondisclosure agreement.\n\n\n\nMany large enterprises lend support as a test run for future acquisition. For startups, it’s a win-win: the startup gains support and access to the fast track now, and even if relationships aren’t long-term, the company has still made valuable connections that propelled the product forward.