We spoke with Aaron Coe, former director of corporate development and strategic planning at Calistoga Pharmaceuticals (Calistoga), to understand his experiences using DEAL builder, which played an important role in keeping the Calistoga management team informed during the strategic planning and execution of a robust partnering campaign between Calistoga and Gilead Science. The effort ended with Gilead Science’s structured buyout of Calistoga, an agreement that brought $375 million cash up front and $225 million in potential milestone payments for Calistoga, and gave Gilead access to a promising Phase II cancer compound. Coe said DEAL builder is “a terrific tool that really helped to inform our management team about the specifics of deals that were done in our space and at various stages of development. This was really helpful as we laid out our strategy and the partnering campaign.” In the transaction, Gilead gained access to all of Calistoga’s assets and know-how and was able to retain the vast majority of the R&D personnel. Of particular interest to Gilead was Calistoga’s lead candidate CAL-101, which selectively targets the delta isoform of the phosphoinositide-3 kinase (PI3K), and is undergoing Phase II trials as a single agent in patients with refractory indolent non-Hodgkin’s lymphoma, as well as Phase II trials in combination with Rituxan (rituximab) in treatment-naïve elderly patients with chronic lymphocytic leukemia. “As a 23-person company it was nice to have a tool that made it convenient to stay up to speed with relevant deal activity, something that is common for the big players in the industry” said Coe, who started at Calistoga as the director of operations, the firm’s first non-founding hire. “The Deloitte Recap tool is phenomenal for getting a nuanced understanding of the folks you are about to go into business with. It is very convenient to be able to have all of the deals that a potential partner has done in one place, and then to be able to walk through the press releases chronologically to see how the partnership played out.” Looking at Deals and History ‘In a Very Compact Way’ Calistoga utilized three search techniques provided by DEAL builder to construct a framework of comparable deals that formed the basis of their understanding of current market dynamics. They searched by mechanism of action, therapeutic area, and deal type. “There were a handful of pathways whose impact or potential impact on patients seemed to be similar to what we were working on, other mechanisms that had similar prominence to PI3 kinase,” Coe said. “Once we internally developed a gestalt of what we were looking for, the ‘mechanism’ search [function] became a really critical tool,” Coe said. The company next used DEAL builder to organize the universe of partnering candidates according to their areas of interest, limiting the field to the larger biotech and pharma firms. “In looking at the deal flow, one could see that some folks had deep interest in the target, some were doing research in PI3K or in related pathways, and some had vast franchises in oncology, while others were seeking to build greater presence or leave the space entirely,” Coe said. We (Calistoga) “recognized that we were working on a novel approach to PI3K inhibition and that we would be first in the clinic with a ‘delta-selective’ inhibitor of PI3K,” he added. “Knowing our own position helped us to see where we fit in the marketplace.” With the list complete, Calistoga studied each firm’s last 10 years of deals but focused in on the most recent 2-3 years in terms of deal value. “We could go back as far as the database would go back, and that was really helpful information to pore over, not just for the data on what people were willing to pay for assets in the past, but also how some of the deals evolved,” Coe said. “This showed us a lot about a potential partner or acquirer both positive and negative. With the help of a good set of longitudinal data, history reveals whether a deal or a deal structure becomes a cautionary tale or something that works out nicely for the smaller party in the partnership.”

IQ Series Key Facts 34,700+ deals for over 4,000 organizations 4,800+ unredacted SEC-filed contracts 9,500+ SEC-filed contracts from universities, Pharmaceutical, and Biotech firms 8,000+ SEC filings, including IPOs, SPOs, and annual reports 1,700+ clinical development records and timelines 17,120+ corporate press releases 7,500+ clinical trials with 5,080+ scientific abstracts from both major medical meetings and peer reviewed journals Analytics backed by detailed drug development histories 1,450+ regulatory records and links to clinical trial records in clinicaltrials.gov

Coe pointed to “the robustness of the data set and the convenience of having the ability to filter the data and then elegantly put it into deliverables” as being key reasons for subscribing to DEAL builder. “It is important in an age of sometimes free – and often not-so-reliable – information to be able to reliably deliver intelligence to the team many times on very short notice."

DEAL builder also allows for experimenting with various ways to capture results. This proved helpful as well. “You don’t care about their technology deal that they did to pick up some platform,” Coe said, “or you might. It may very well be that you come up with something that speaks to the fact that they have some medicinal chemistry expertise from an acquisition, or a deal they’ve done that alerts you to the fact that therein lies some competitive threat. There were a couple of people that we distinctly did not allow into due diligence because they were, by every stretch, too much of a competitive threat.”

For some firms courting big pharma or larger biotech, “everyone’s a threat because they’ve got more cash than you,” Coe said. “But if you live like that, you don’t do deals or, worse, you don’t advance promising programs because you can’t raise the necessary resources. One of the great lessons of this experience that I learned from Clifford Stocks, who was the chief business officer at Calistoga and an expert in business development, is that you have to know how to open your stance enough to let those folks in, get them interested, and get them to a point where they can make a buying or partnering decision.”

Finding Patterns, Studying Comparable Deals

DEAL builder let Calistoga survey the landscape and evaluate “who was out there, what they look like today and what they look like historically,” Coe said. “You can start to analyze and ask yourself, ‘They just did these big deals, are they likely to do another one? They just did a similar mechanism, are they consolidating the space or have they already placed their one bet?’ You can see patterns emerge that are telling, in terms of whether you’d want to spend time, and how much time you’d want to spend, working with a group.”

Once Calistoga had grown comfortable with a set of candidates and outreach to parties had begun, Coe said, DEAL builder continued to add value. “As is often the case many dialogues start with discussions around comps,” he said. “Deloitte Recap does a really nice job of providing information so that you can quickly come up to speed and stay informed about relevant deal activity. One added advantage is that, because so many folks use Deloitte Recap, ‘small guys’ can be on equal footing with big as long as they have a realistic notion of the value of what they are partnering.”

A similar principle holds in building models, Coe said. “Methodologies vary when sizing patient populations, but if you’re using a reputable data provider that is being widely used – even if we’re all a little uncomfortable with certain parts of the data gathering methodology, because no methodology is perfect – the fact that we’re convening on similar data sets means that we can have our discussion more about our assumptions, and less about how big things [such as patient populations] are,” he said.

Another benefit that Coe described in using DEAL builder was the ability to locate and download contracts and study the language and non-financial terms of the agreements. “The Deloitte Recap tools provide a ton of convenience. When looking for contracts albeit redacted in most cases, if I was ever going to find a deal’s contract, Deloitte Recap would be the quickest way to find it.”

Published: 01/05/2012