Rachael Craig, CEO at MotionHall: Good morning. Good to see so many great people on the call today. Before we begin the conversation we're going to start with an icebreaker and some time zone fun. Please head to the chat window and share your name, company name, location and answer to the following question: Would you rather be having a coffee or a cocktail right now?
Rachael: I'd like to start by introducing Alicia, who’s our special guest today. Alicia began her career as a consultant and project leader at the Boston Consulting Group working on biopharma and global health. She then went on to Versant Ventures where she spent eight years working with the team and did a tremendous amount of work there, leading in a number of financings. She then moved on to support financing at Tempest, leading on the other side of the table. Alicia is now the CBO of Pionyr Immunotherapeutics where she recently closed an M&A deal for the company with Gilead Sciences. A strong trajectory and no doubt the best is ahead.
Our focus for today is thinking from both sides of the table. At MotionHall, we typically explore both sides of the table from a licensing and M&A perspective, however today we’ll dig into Alicia’s background in venture from both sides of the table, as well as her career trajectory moving from supporting deals to leading them.
Rachael: Alicia, what was the biggest surprise for you going from the venture-side to financing biotechs from the company-side?
Alicia Levey, CBO at Pionyr Therapeutics: I think one of the most surprising things is that when you're a venture capitalist, you're very frequently working on term sheets, optimizing terms, thinking about pre- and post-money cap tables. But if you're a company, you might do this once a year, or once every couple of years. It's not something that you're doing very frequently. As such, I never appreciated how much a management team could be at a real disadvantage because of this.
If you’re not working with a seasoned CEO who has done a tonne of financing, which isn't always the case, then I think the learning that came from that is that if you're a management team, and you don't have somebody on your team who has a depth of experience with financing, you really need to be an advocate for yourself and make sure that your law firm is going to go toe-to-toe with the venture firm, or make sure you have an independent director or an independent chair to help you optimize terms - everything from the pre-money valuation to the liquidation preferences, the employee stock option pool.
If your deal is tranched, ensuring the tranches are set up in such a way that they are actually attainable and will set you up for re-negotiation down the road. Looking back it's somewhat obvious, but that was one of the bigger learnings.
Rachael: What is one thing that you wish more biotech company leaders understood about venture financing? If there's one thing you could ask everyone to know, what would it be?
Alicia: This is tough to narrow down. If you're lucky enough to be in a position where you get to choose who is in your syndicate, then I think you want to make sure that the VCs that you let into your round, especially if it's an early round, are aligned with your overall vision for the company or the management team's overall vision for the company.
For example, asking: Are your new investors going to push you to do a deal in the first 12 months? Do you want to spend that money that you've just brought in proving your technology? Do you want to go public in the short term? Or, is going public something you want to do down the road? I think that making sure there's an alignment of vision is critical.
“You want to make sure that the VCs that you let into your round, especially if it's an early round, are aligned with your overall vision for the company”
- Alicia Levey, CBO at Pionyr Immunotherapeutics
Rachael: Alicia, for many of our guests today, we have extensive experience raising venture capital, seasoned CEOs, but they may have never sat on the venture side of the conversation. What do you believe they would find most surprising if they made the switch to working on the venture side?
Alicia: I think that the thing that they might find most surprising is that just because somebody is from a venture firm and can put in a term sheet, sit on your board and lead a deal doesn't mean that they wield a ton of power within their organization. You want to be aware of the power dynamics within the venture fund that you let into your syndicate. This is probably most relevant if you actually get to choose between firms. There are times when a company might take any money you could get, right? This is less relevant for that. Right now, in today’s market, I do think people do have an opportunity to choose.
People are probably not aware of the pressure going on within firms to drive companies to exit depending on where a particular fund that the money is coming is in its lifecycle. Is it the beginning of the fund? Is it the end? If it's the end, you're going to have a lot of pressure to exit earlier. And if the money is coming from the beginning of the fund, partners could be squabbling about how much dry powder they want to reserve for future financing. You want to know how much is being reserved for your deal.
These are some of the things that, again, in hindsight do seem obvious, but there's a surprising number of things that people just don't think about when they're bringing investors into their deals.
People are probably not aware of the pressure going on within firms to drive companies to exit depending on where a particular fund that the money is coming is in its lifecycle. - Alicia Levey, CBO at Pionyr Immunotherapeutics
Rachael: From this side of the table, it’s really helpful to have a checklist. You may know, but to remember it all, in the moment, when it's not something that you're doing every day as a biotech company leader, is really important.
Rachael: Moving on to the recent deal with Gilead Sciences. I know there's only so much you can say about that, Alicia. Are there specific M&A learnings from the Gilead deal that you do feel are appropriate to share with the group today?
Alicia: This was a really unique deal: it was a partial buyout, so Gilead has an option to buy the remainder of the company and we have an R&D collaboration in the meantime. It was very, very complex and M&A typically is not as complex as a licensing deal because you aren't charting a path to work together - we were charting that path. We were optimizing M&A terms, there was a lot of complexity, and we were trying to get things done very quickly.
A learning that this deal really reinforced for me is taking care to have a top-to-top channel setup. By top-to-top, I mean for the CEO of my company to, in the case of Gilead, it's the CFO or the head of business development to chat. Meaning, if there's a hairy issue that comes up at the last minute, where you just know if two people could get in a room they could just hash it out in 15 minutes, having a channel in place to make that happen.
You need to have that channel in place because if you're trying to go through lawyers, the message can get lost. The other side's lawyers are going to tell the other side ten reasons why you shouldn't do this. Whereas, if you can just get on the phone directly, and just cut all the middle people out, it can save so much time. Now, you really want to reserve that for very specific major issues but I think that channel needs to be established early on. So, again, that's not going to be unique for our seasoned folks. But I think for the folks that are doing their first couple deals, this is important.
“Take care to have a top-to-top channel setup . . . Meaning, if there's a hairy issue that comes up at the last minute, where you just know if two people could get in a room they could just hash it out in fifteen minutes, having a channel in place to make that happen.”
- Alicia Levey, CBO at Pionyr Immunotherapeutics
Rachael: Alicia, I'm watching our groups' faces rise and fall as we talk about everything from having choice in venture financing, to some of the frustrations that come up in deal conversations. A lot of us have been through it, and not always in ideal form. It's a challenge.
Rachael: One of our guests asks, “How much time should you give your company to line up an acquisition partner?”
My thought is, that really depends. There's a lot of different ways to answer that question. So, Alicia, I'm curious to have your answer. For folks in the chat who are experienced, if you feel comfortable weighing in on that answer, and we'd love to hear from you too.
Alicia Levey, Pionyr Therapeutics: In my experience, it's been a longer trajectory because I haven't typically done deals where we hire an external bank and we try to get it all done really quickly with a very organized bakeoff process.
I would think a year out. In my experience, boards always want a deal to be done in less than six months, but I think of deals as having almost the gestation time of a human. I say that because I've done multiple deals while I was pregnant and it was like the deal started out when I first was pregnant then the deal ended when I was about to have a baby. [Laughter.] So the deal was just progressing along with a kid. It took that whole time.
I think that these things really take time. You end up doing a better deal if you have the luxury of the time because you're able to generate competition, and competition is the way that you push and optimize terms and have the psychological safety to do that. I'd like to hear from others.
Paul Brennan, CEO at NervGen Pharma: In my view, there are two components to this: 1) The actual dynamics of when you decide you're going to go to the merger and complete it, which can be done in a month or a couple of months, and; 2) When you start to prepare for it. And M&A preparation, if that's one of your potential outcomes, should begin from the moment you start your company.
As Alicia said, deal success is about how much competition you have, and the competition that you have is about how you prepare people for your technology. That lifecycle of knowing your technology begins from the very beginning of when you start your company. It's the concept of: Who are your advocates? How do you get your technology known by the potential acquirers? Building the right advocates from the very beginning. Who are the people who are on your ad boards? Who are the people that do your studies, who talk about your company? How does the knowledge of your company get into the Glaxos, Biogens, AstraZeneca is of the world? Then how do you interact with those companies in the partnering process?
Essentially, partnering is almost always the lead into an acquisition. A company likes what you're doing and eventually acquires you. You can think that context, in terms of, “What's the actual exit strategy for this company down the road?” Is it getting on to NASDAQ? Lots of liquidity? Is it an acquisition? Or, do I want the optionality to go one or the other?
My particular company is in pre-clinical, about to be in Phase I, people frequently ask me “What's your exit strategy? What do you think you're going to sell for after you have Phase 2 proof of concept data?” What I always say is, if that's your goal, that's the riskiest way to think of it. Just go into phase two and build the company, because what you want to do is have optionality. You want to be able to finance and continue to Phase III or sell the company depending on what's the best outcome for the technology and the shareholders at the time. If you're in pre-clinical and thinking about buying or selling as an option at the end of Phase II, even now's the time to start building those relationships so you have the most buyers possible.
“That lifecycle of knowing your technology [market development] begins from the very beginning of when you start your company”
- Paul Brennan, CEO at NervGen
Rachael: From the MotionHall side of the fence, we're often working with companies from inception to think about what that M&A strategy would look like, if they're going to go there. We're often thinking about the complexity of the asset and the complexity of the science. How easy is it going to be for the market to understand and appreciate what we have to offer? That's going to impact the way that we develop that market, and it's going to impact our cycle times. If we don't do a good job with something complex and preparing the market to run that competitive cycle, then when we get there, we may find it hard to transact or hard to get the price that we really deserve for that effort. So planning ahead and knowing how the markets are going to respond to our particular asset, impacts cycle times as well. Our goal is for those terms.
“How easy is it going to be for the market to understand and appreciate what we have to offer? That's going to impact the way that we develop that market, and it's going to impact our cycle times.”
- Rachael Craig, CEO at MotionHall
Rachael: Let's go from here into leading the deal, and developing the next generation of deal leaders. We have an all levels crowd, we've got folks here who are actively working towards making that transition; from early career to being that deal leader.
Alicia, what piece of advice do you have for folks looking to make that shift? People here today who are building their careers, who are interested in doing more to lead a deal, who want to be the Chief Business Officer someday?
Alicia: Some of my mentors at Versant were Clare Ozawa and Jerel Davis, and we were all working under Brad Bolzon, who's a very well known dealmaker. I think that the way that Clare and Jerel really helped me get started was, when we were working on a deal, they would give me a significant piece to own with the deal. So there would be somebody in charge of the collaboration agreement, maybe somebody in charge of the option and merger agreement. There was one deal that Jerel and I worked on where he was in charge of the collaboration agreement, and I was in charge of the option and merger agreement. I was negotiating that merger agreement alone, with our legal counsel, of course, because those are legal, heavy documents, but I was the one really making decisions about what we were going to push on and what we would accept. After that, my next step was leading a whole deal. And so, I would start with owning pieces and even maybe owning a whole document, you could own a piece within a document. Even a step before that would be saying, “When we're negotiating, I would like to be able to make these points in the session, you can go to me when we're going to be talking about this particular issue.” For me, the easiest way to do that was to start with areas I was very comfortable with, that had to do with anything that was around the research or the science. I understood our science really well so I was able to come at that from a position of confidence.
“I would start with owning pieces and even maybe owning a whole document, you could own a piece within a document.”
- Alicia Levey, Pionyr Immunotherapeutics
Rachael: If you could share one piece of advice with your former self, say go back to some point in your career where you're really wondering how to get ahead to the next step, what would you today tell your former self?
Alicia: What I've learned over the years is that people go into BD sometimes thinking that you're supposed to be this really tough negotiator. I don't know why, maybe it’s what you see on TV [laughing]. It's good to appreciate that careers are long and sometimes you should leave some money on the table. There's one particular deal where I think we were a little bit too aggressive, and I think it ended up not being the best for the deal overall. I would go into a deal with the goal of being friends with the folks on the other side of the table at the end of it.
“Careers are long... I would go into a deal with the goal of being friends with the folks on the other side of the table at the end.”
- Alicia Levey, Pionyr Immunotherapeutics
Rachael: One of my great mentors, Rod Ferguson, who led quite a number of interesting deals over his career, including Genetech’s Rituxan deal, is often advocating to balance the deal so that there's enough on both sides of the conversation for everyone to feel motivated and good over the course of the relationship. And I think the reason he's repeating that all the time is because that's a lesson that many of us still need to learn even later in our career.
You mentioned some incredible mentors as well, really interesting people who have quite established careers. What's one of the most important lessons you've learned from one of your mentors?
Alicia: Brad [Bolzon] really instilled in me the importance of having competition, like real competition, so you have that psychological safety. I think my current mentor, our CEO at Pionyr, Steve James, gave me, in the deals that we were working on, is to have this notion of psychological safety in place by mapping out your backups. What are the backups so that, if you don't have that first term sheet, you can go and maybe push for that first term sheet and not feel that you're going to get fired if you don't get it [laughing], then once you have the first term sheet you feel a little bit more comfortable. After that you can be a little bit more aggressive with the next company and say, “Listen, we're moving forward with this term sheet, and I need yours so that you can get in the process or you're going to be left behind.” Then, you can go from there. I think that this notion of having psychological safety, your deal confidence, is really, really important.
“After that you can be a little bit more aggressive with the next company and say, “Listen, we're moving forward with this term sheet, and I need yours so that you can get in the process or you're going to be left behind.”
- Alicia Levey, Pionyr Immunotherapeutics
Rachael: For the people here today, we have had conversations about the value of comprehensiveness in the partnering landscape, or an M&A landscape, and how you want to drive a process through that comprehensiveness to create a competitive deal process to maximize the success. We haven’t talked about it in terms of psychological safety, but I like that. What we do talk about is about holding frame, having confidence and following a process. That confidence shouldn’t just be internal, but something the dealmaker at the other side of the conversation can feel too, so you can bring that to the table so they know that you are serious and you are moving. Then we will get that competitive dynamic.
Rachael: I know you have brought someone on board to work with you at Pionyr Therapeutics. Quite a few folks, who are more senior on this chat, are also thinking about growing their teams. We’ve talked a little bit about this already but to explore it further, what might be important in developing a team?
Alicia: I’m curious as to people’s experience hiring for experience vs. potential. I think my bias is towards potential vs. experience, if you can’t have both. Experience and potential is ideal. I’m curious what others think about that.
Paul Brennan, CEO at NervGen: I think it’s situation dependent. I’ve done both. I’ve been in situations where you know your small group and you know exactly what you want someone to do and how they want to work. You have a certain base experience that they understand the industry but maybe not experience in BD specifically - that you can be trained over time if you have the time to do that. But, there are other times where you don’t have the time to train and to bring someone up to speed. It takes, to have someone in BD really functional and not including the transaction components but the other supporting components, six months to a year to do that from baseline. If you have the time and luxury, then I prefer to train somebody. If you don’t have the time, then you get someone with experience.
Jeff Kmetz, CBO at Ascentage Pharma: I have a slightly different point. I always go with the concept of head, hand and heart. I always hire for heart, that’s passion. I’ve done a lot of things across sales, marketing, BD and now CBO, and I’ve always found, like what Paul said, is it’s situational. Right now, I need a transactions person. I’ve got great people that can do search and evaluation and to do the CI and all of that kind of stuff. That’s the easy part of BD and that you can train.
You can’t train transactions because you’ve got to have done them in order to know what different forms are effective, that fit your particular situation, at that particular project that you’re working on. In that case, I would go for experience.
But, fundamentally, my default is passion. I can teach the head, I can teach the hand, I can give them the skills and develop them in the right direction and it does take time. But if I’m looking for a search and evaluation person, I’ll always choose passion because that I can’t teach. Having that heart is what I recruit for. I tell people in my interview process, “I’m going to be your most completely different interview process you’ll ever have because I care about what’s inside of you and what makes you tick and whether we could be compatible.”
Rachael: Alicia, you had a really great answer about benchmarking experience. We’re running out of time to go deeper, but do you want to share that one little nugget you had for how the benchmarking experience is in the context of your goals?
Alicia: What we were talking about is that if you’re thinking, “Am I making progress?”, “How do I compare?”, it really depends on what your goal is. If you want to be the consummate dealmaker, CBO for life, it’s going to be thinking about the deals you’ve done, the transactions - size and type. If your goal is to be a CEO, and that is where I aim to be headed eventually, then I think it’s also about people management and the board relationship, your relationship with investors. So it’s about measuring where you are and where you want to be. You’re constantly moving the goal line for yourself, comparing how you’re progressing.
Rachael: And we’re out of time! Thank you, everyone, and special thanks to Alicia for leading in our conversation today and being our guest.
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