The Practical Guide to Biotech Partnerships

The Practical Guide to Biotech Partnerships

25.02.13

From First Date to Long-term Commitment: Lessons Learned from $200M of upfronts at Mammoth

In biotech, a single strategic partnership can transform a company’s trajectory – for better or worse. As equity financings become increasingly challenging, this is more true than ever. However, while headlines trumpet billion-dollar deal values, the reality is that partnerships should be treated more like marriages than transactions. They demand thoughtful selection, clear communication, and deep commitment.

Over the past several years at Mammoth Biosciences I’ve helped orchestrate deals totaling $200MM in upfront payments and had hundreds of meetings with prospective partners. Along the way, I’ve learned a few lessons – some through success, others through missteps that taught me what not to do. These experiences, combined with my perspective advising companies through SciFounders, have revealed some common patterns in what makes partnerships thrive or struggle. I’m sharing these insights hoping others can learn both from what worked well and from the challenges we faced.

Should you Partner?

In the highly regulated biotech world, partnerships represent one of the few ways to generate meaningful cash flow before commercialization. This early revenue can be crucial for platform companies looking to monetize non-core assets while maintaining focus on their primary programs. Beyond the obvious financial benefits, partnerships also provide access to capabilities that small biotechs often lack (disease expertise, clinical development, complementary technologies etc).

In addition, partnerships offer something equally valuable to early-stage companies: validation for investors, particularly generalist investors who might not feel comfortable evaluating complex biotechnology independently.

The flip side of this is that late-stage investors and public markets often value companies almost entirely on their wholly-owned pipeline, meaning partnerships can limit the upside of the company. There’s a delicate balance to maintain. I’ve seen companies fall into the trap of becoming essentially contract research organizations (CROs) by focusing solely on partnerships without developing their own programs. While this landscape might shift with AI-enabled platforms, the most successful biotechs maintain their own programs alongside strategic partnerships. The key is to view partnerships as a complement to your core strategy, not a replacement for it.

At what point in the technologies or program’s development you should partner is also an important consideration. Asset value typically increases as development progresses, creating a complex dynamic in partnership negotiations. Finding the sweet spot between investment in a program and partnership value requires careful analysis and often involves difficult tradeoffs. You will live with the decisions you make for years to come, so make sure you understand what you are giving up.

Acquisition deal value by stage, same trend applies to non-acquisition deal size. Value drivers of development stage biopharma companies, Machaeli et al.

Playing the Field: How to Attract Partners

Finding the right partner is more art than science, starting with clear internal alignment. Before beginning outreach, ensure your board and executives agree on partnership goals and priorities – this alignment becomes critical during the evaluation and negotiation phases.

The partner search process is similar to fundraising but typically runs longer. Success requires a balanced approach of outbound targeting and inbound marketing.

Outbound Strategy:

• Leverage your network aggressively – investors and advisors can provide crucial senior-level introductions

• Start high in organizations when possible – it’s easier to work down than up (also beware that titles can change across organizations)

• Diligently track all interactions in a CRM – partnership conversions often take years

• Use every interaction to refine your pitch, even rejections

• Build relationships early, even before you’re ready to partner

Inbound Opportunities:

• Conference presentations and publications can attract quality interest

• Industry events like BIO or banking conferences (“biotech speed dating”) can provide initial connections but can be lower-quality introductions

• Direct inbound inquiries (LinkedIn, conferences, email) often indicate pre-existing strategic interest and should be highly prioritized

• Maintain mindshare through regular updates and relationship-building

Even more so than fundraising, you’re less likely to get a direct no and more likely to be kept warm indefinitely by prospective partners. Ask for feedback after meetings to help refine the narrative. This feedback is valuable not only to improve your odds with future meetings but also to inform the company strategy.

Timing plays a crucial role in partnership formation. Interest tends to come in waves, often driven by broader industry trends or strategic initiatives within potential partner companies. Targeted outreach to companies that may have key programs going off patent or looking to expand their portfolio in a particular disease can be highly valuable. The key is recognizing these moments and being prepared to act when they arise.

The Dating Phase: Evaluating Partnership Opportunities

Initial meetings are typically non-confidential, focusing on company overviews and exploring high-level alignment. These first conversations reveal much about potential fit – watch for positive signals like senior attendees or follow-up requests for a discussion under CDA. Be strategic with your time; some large companies send junior search teams purely for market research with no real partnership intent. Treat each interaction as a two-way evaluation, remembering that the best partnerships emerge from a mutual interest.

Once a CDA is signed, the real courtship begins. Each subsequent meeting should build incremental alignment on the partnership vision and objectives. Progress should feel mutual and intentional – like any good relationship, both parties need to be invested. As technical discussions deepen, you’ll typically see parallel engagement with BD teams and, eventually, legal/IP reviewers. This phase is critical for understanding not just what your potential partner can offer, but how they operate.

Its not uncommon for there to be a lag between meetings (sometimes months) which may indicate that the partner is talking to other related companies in parallel. In fact, you should assume the partner at this stage is talking to many related groups so be sure to emphasize your differentiation compared to your peers. You often can surmise who they are talking with through their questions (eg how does this compare to company X?) so pay close attention to this.

Use this phase to truly understand your potential partner’s culture, decision-making processes, and long-term objectives. Having a clear vision of your ideal partnership structure is essential, even as you maintain flexibility in negotiations. When partners ask about your partnership goals – and they will – having a well-thought-out response demonstrates seriousness and professionalism (see partnership structures below).

Background research during this phase is crucial. Connect with other founders who have partnerships with your potential partner – their experiences, good or bad, can be incredibly informative. Research their partnership history in your space, paying special attention to any deals that might conflict with your objectives. If you spot potential conflicts, address them directly but diplomatically.

Watch for red flags like unclear decision-making processes, poor communication, or misaligned expectations. Positive signs include increasing senior engagement, clear feedback loops, and proactive information sharing. Throughout this phase, keep trusted board and advisors updated on significant developments – their experience can help you spot both opportunities and potential pitfalls that you might miss.

Getting Engaged: Negotiation and Contracting

Partnership negotiations can span from two months to two years, with success hinging on two critical factors: a passionate internal champion at the partner organization and competitive tension in the process.

Competitive tension is key to maintaining momentum in negotiations and ensuring you are getting “market rate” for what you are selling. Ideally, this means having multiple potential partners advancing through diligence in parallel, though this isn’t always feasible. Competitive pressure can come from various sources – whether it’s multiple parties interested in the same program, limited partnership slots in your portfolio, or constraints on your team’s bandwidth to support collaborations. While it may be tempting to manufacture artificial urgency when you have only one interested party, this strategy typically backfires. Experienced business development teams can usually sense when they’re the only ones at the table, and discovering attempted manipulation can permanently damage trust.

The negotiation process requires careful orchestration of four key stakeholder groups: Legal (particularly IP), Business Development, R&D, and ultimate decision-makers (typically the board). While smaller companies may rely on external resources for some of these roles, maintaining clear communication channels and responsibilities across all groups is essential. Cultivate multiple touchpoints within the partner organization, but be strategic – too many backchannels can undermine your champion’s effectiveness and create confusion.

Remember that everything is under scrutiny during negotiations – from email response times to meeting participation and team dynamics. Each interaction is an opportunity to reinforce your company’s professionalism and readiness for partnership. A well-organized negotiation process signals that you’ll be an effective partner post-deal.

The deal negotiation will start with a term sheet which is a high level document that lays out the key attributes of the deal. Term sheets vary dramatically in form and length but is always a fraction of the length of the contract. Although term sheets are not binding this is the first stage of serious negotiation so don’t give on areas that are important to the company. As an aside: some people (eg. investors) might ask if you have a “signed term sheet” as a signal that its finalized, however BD term sheets are often not actually signed before proceeding.

After agreement on the term sheet, you’ll move to contracting where legal teams will play a heavier role. While legal teams are essential for formalizing agreements, letting them dominate business discussions can derail promising partnerships, especially when using outside counsel. The best approach is to have business teams align on key concepts before bringing in legal support to document the agreement. Good lawyers should explain risks and consequences rather than simply dictate terms. Think of legal teams as architects helping to structure your shared vision, not as creating obstacles to overcome.

Every contract is different so instead of providing specific advice, I’ve included a table with key terms and considerations to keep in mind during negotiations. Many of these might seem trivial but can create headaches down the line if not carefully thought out. You should expect that throughout the negotiation, there will be points where the partner or you are on the verge of walking away. Focus on creating a foundation for long-term collaboration rather than winning every point.

Remember as you negotiate, especially as a small company, the relationship and incentive alignment is the most critical part of any collaboration. Contracts are important but one of my favorite quotes about partnership is:

“A good partner with a bad contract can still succeed, but a bad partner with a good contract is destined for failure.”

Making the Marriage Work: Executing Partnerships

Once the deal is signed, the real work begins. The first few quarters are about building trust and understanding how your partner operates. Successful execution demands transparent communication about both progress and setbacks. Research is inherently unpredictable – I’ve consistently found that partners respect honest acknowledgment of challenges far more than optimistic spin that later unravels.

At this point, the negotiating team will become less involved and you’ll introduce Alliance Management. While large biotech and pharma companies typically have dedicated AM teams, smaller companies can effectively manage partnerships by having key team members moonlight in the AM role. This works particularly well when led by someone deeply familiar with the partnership – whether from legal (who knows the contract intricacies), BD (who built the relationship), or operations (who understands the day-to-day work).

The best partnerships balance oversight with efficiency. Establish direct communication channels between key team members to prevent small issues from becoming major roadblocks. Never underestimate the power of face-to-face meetings – I’ve repeatedly seen issues that festered for months over email resolve in a single in-person conversation. Think of partnership management as maintaining a healthy marriage: regular check-ins, open dialogue, and dealing with small problems before they become big ones.

First 90 Days:

• Launch joint committees quickly and establish regular meeting cadence

• Create clear project plans with near-term milestones

• Define data-sharing protocols and communication channels

• Align decision-making processes for common situations

• Establish regular status reporting format and frequency

Personnel Management:

• Identify key points of contact across all functional areas

• Create backup contacts for critical roles

• Monitor team chemistry and address conflicts early

• Maintain continuity through personnel changes

• Consider cultural differences, especially in global partnerships

Even the most promising partnerships can face periods of misalignment as priorities shift, personnel change, or external factors intervene. When serious conflicts arise, both parties often find themselves reviewing contract provisions that seemed theoretical during negotiations. While it’s natural to focus on legal remedies in these situations, most companies strongly prefer to avoid litigation, instead relying on the dispute resolution mechanisms built into their agreements. The best approach is preventive: investing in careful partner selection, maintaining strong communication channels, and addressing smaller issues before they escalate.

Remember that partnerships evolve. What works in year one might need adjustment in year three. Regular partnership health checks can help identify areas needing attention before they become problems. Success requires not just delivering on commitments, but building the kind of relationship that can weather inevitable challenges and capitalize on unexpected opportunities.

Final Thoughts

The biotech partnership landscape is complex, with endless permutations of deal structures and terms. But at its core, every partnership shares the same fundamental goal: accelerating the development of breakthrough therapies for patients. While financial terms often dominate early discussions, the most successful partnerships are built on a shared vision of creating lasting therapeutic value.

For platform companies especially, the key is selectivity – choosing partnerships where both parties are genuinely committed to long-term collaboration. The most valuable partnerships aren’t always the ones with the highest upfront payments, but rather those where strategic alignment creates opportunities for both companies to grow and innovate together.

Remember that like any successful relationship, great partnerships thrive on mutual respect, clear communication, and shared purpose. The time you invest in finding the right partner and building a strong foundation will pay dividends in your journey to bring medicines to patients.