Johnson & Johnson: The Fundamentals of Alliance Management




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Video title: Johnson & Johnson: The Fundamentals of Alliance Management
Released on: July 21, 2009. © PharmaVentures Ltd
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Johnson & Johnson were one of the first companies to realise the importance of an alliance management group closely following in rival Eli Lilly & Co.’s footsteps. Rob Wills, VP Alliance Management at Johnson & Johnson, returned to the show to talk about how deal structures have evolved and the difficulties of measuring success in the alliance management arena.
Formation of alliance Management at Johnson &Johnson
Fintan Walton:
Hello and welcome to PharmaVentures business review here at Bio in Atlanta. On this show I have Rob Wills who is Vice President of Alliance Management at Johnson & Johnson. Welcome to the show.
Rob Wills:
Thanks Fintan, it's good to be back.
Fintan Walton:
Indeed because several years ago I interviewed you on PharmaVentures business review and we talked about the Alliance Management at Johnson & Johnson but things have moved on but one of the key things I remember when we talked was Johnson & Johnson has been doing this for -- probably one of the few companies has been doing with " the longest, is that true?
Rob Wills:
It's correct. In fact when we started in 2001 there was only one other pharma company that actually was informally in the Alliance Management arena and that was Lilly but obviously being you know competitor it was tough to be benchmarked from them so I have to go outside into other disciplines and areas to establish the Alliance Management group. And so lot of it was trailing there just trying to learn and take from peoples with best experiences in other industries and apply it. So I think now this is big issue for us is positive aspect is we've got now about 8, 9-years of running experience.
Johnson &Johnson's approach to alliance Management.
Fintan Walton:
Right, so one of the key things which must be for you is that learning experience. So what is different about Johnson & Johnson's approach to alliance Management and what's key to making sure that the Alliance Management actually works, actually delivers?
Rob Wills:
So you know the process of doing a deal in the industry is pretty common. you have a lead negotiator who will negotiate the terms of the contract and where we are different is alliance Management will play a role in that negotiation process depending on the structure of the deal. That is pretty unique but I think most of our pharma colleagues are engaging at the end of the deal or very close to the end of the deal as the alliance Management formally you know takes over at the signing of the contract integrating the two partnerships. We get in early at the term sheet stage because we help formulate the operational aspects and what we were gonna have to live with.
Fintan Walton:
Yeah.
Rob Wills:
So we actually carry it all the way through in it, that's a pretty unique and I think it served us well in terms of these the our particular agreements.
Fintan Walton:
And you personally get involved in some of those negotiations?
Rob Wills:
Well I am involved in almost all of them and then I have people who work with me and then they'll be engaged as well and then they take over in some of the operational aspects you know whether there is joint development communities or commercialization communities. I often play a lead role for us on our over sight communities because it's a consistency issue, I know the agreement inside and out and I've established the relationship and I will be with it for the long-term so.
Measurement of success and the changes in deal structures over the past years.
Fintan Walton:
The key question people ask is how do you measure success in alliance Management?
Rob Wills:
That is probably the toughest question to answer. It's not " it's lot of what we get in terms of value has soft measure points. What we like to use is customer feedback our partner feedback is one key measure and we will look at it from the senior levels of those organizations down through the people who are interacting with our people on a daily basis and find out from them how we doing or we walking the talk or we -- or with the partner that they visioned that's a key aspect another one that we look at is in these all of these agreements they have dispute provisions. If the parties don't agree there is a process to go through it. We look in at how many times that we gone up to the very top of that dispute process as a measure of are we managing those alliances correctly so.
Fintan Walton:
Right and how that structure has changed? Have deal structures changed? Have you as an organization changed the way you've done alliance management based on your experience over the last 8 to 9-years?
Rob Wills:
Yeah we have. we've you know like everybody when you first start you make some mistakes but we have approached this from a very practical standpoint versus the process standpoint. I think a lot of you know when Lilly first put their process in the place it was published it was a very detailed process they trained the whole organization. We founded that that isn't necessary we preferred to take it more of tailored to the individual alliance that you are involved in because each company is different it is about people, people are different so we do not apply a strict process to how we manage the alliances. We work with the partner and tailor it accordingly.
Deal struture for executing the elements in the agreement.
Fintan Walton:
Right, okay. Now as you will fully appreciate in deals if these deals can get bit more complex these days there are provisions for options which the biotech company will put in there for a co promotion for an example how does that affect Johnson & Johnson when it comes to the realty of actually executing elements of the agreement particularly for a biotech company who may have not developed a proper infrastructure or sales marketing infrastructure?
Rob Wills:
Okay. so first and foremost the way the deals have evolved from the days of just having a straight relative bank license have now gotten to be very complex because it is basically sellers market, all big pharma new products and you are not going to get the products solely on your own research so you -- you have to form partnerships and we embrace that. But part of that is being flexible and lot of these the smaller companies want a say in what you are developing, how it's been developed, the decisions, the investment and of course commercialization and often times they are -- they are not -- they are coming into this from a research side but they have visions of growing up and becoming a fully integrated company so they will ask for co promotion option as an example. The contract will specify all the criteria for how you qualify for the co promote, what happens when it gets triggered, the infrastructure that needs to be put into place and everybody in the industry were doing these in the last probably 5, 6-years. But I think we are in a unique position that we've finally have run the course for these are at the point where they can be triggered. So they are great on paper but now you have to trigger them. And when a company has not grown up as a commercial organization, doesn't have the infrastructure, doesn't have the people actually executing these co promotes are very, very difficult and complex.
Fintan Walton:
Right, so it suits some companies but doesn't suite all companies?
Rob Wills:
Exactly and the hard part is as when you normally when you go into a co-promotion mode where you are now at the point where you are going to launch, it is very fast, it's often very sophisticated as you pre build the market, you get on the market, you launch you got it, you have to do that correctly get one shot at launching a product and so " it is a fast and very furious time period. If your partner is at a point where you have to help them just with the basic building blocks instead of you know what you normally would do is to get together and figure out how you're going to best maximize the effort to maximize the return of the product, you are back at the building block stage you can, the train is leaving the station you have to get on it and it's creates a lot of animosity but the partnership, very difficult to manage, very difficult to deal with.
Fintan Walton:
Right and then what's the best of handling that? is there -- is there a solution to that?
Rob Wills:
Well, I mean we've for the ones that we've triggered it's too late you have to model through it and work through it, it's not optimal but I think that I -- with some of my biotech colleagues are telling me that after experiencing this or seeing it happen or saying may be that option isn't such a good idea to trigger that you better -- it's better to let it go or not get engaged because this is a very expensive process.
Fintan Walton:
Right.
Rob Wills:
As well as you know a risk process.
Economic climate and the funding issues.
Fintan Walton:
Right. you mentioned Rob that you know certainly historically it's been a sellers market with the currently economic climate for 2009 and some of the biotech companies finding it difficult to raise an equity finance, is it turning to a buyers market?
Rob Wills:
Not really because it there is still a shortage of products. So if what you're seeing Fintan at least in my opinion if the company has a product that's worth while everybody is gonna line up. There will be an auction, the bidding process, all the remuneration it will be there "
Fintan Walton:
Right.
Rob Wills:
The financing will be there. If they are struggling and they don't have that product I think in the past if their lead program failed investors would opt for a backup or a follow-on. What you are seeing now is some of the trends the investors saying lets pull that's "
Fintan Walton:
Exactly.
Rob Wills:
First dissolve the company move on, so there is going to be I think this industry is just going through a period now where you know you are going to see some shake out and that's probably normal. But if you have a product you're gonna do well and pharma and biotech together need products so there is going to be that business aspect that's always there about creating companies, creating value and the products.
Alliance Management: The relationships beyond and strategy of acquisiions.
Fintan Walton:
Right, right. And so going back to Alliance Management clearly one of the important things is for you Alliance Management with the biotech company to ensure that that company can be around in the future so is Alliance Management also about making sure that you can have follow on deals that you can continue the relationship beyond the initial deal that you entered into and build stronger relationships with may be just a few good companies that have got competences to be able to take, discover drugs and take them to a certain stage?
Rob Wills:
Certainly that's ideal and in cases where we could do that we will, you know we've had a long time relationship with (indiscernable) company in Germany and we are now on our third product with them because the relationship is built and been successful over the years. So it's certainly it's an ideal situation to be in but again the companies that you partnership they have to have " you have to match not only on the initial interest but the therapeutic area, the technology that's follow -- on or that they have in the their own pipeline has to match our strategic intent or it doesn't make sense.
Fintan Walton:
Right the other element of that is that eventually Johnson & Johnson could buy the company?
Rob Wills:
True.
Fintan Walton:
And does that tend to happen with those businesses were you've built in, already a built relationship?
Rob Wills:
Not really. The strategy that we use for acquisitions is three fold. One is we would like to get into an area that we haven't been in before so by acquiring a company you instantaneously in there, you got the infrastructure, you got the technology, you got the people so you are in. And we believe with that " that is a strategy that we like to apply when we do acquisitions. Second point of that is, we have to believe that in these acquisitions that there is some value there that is untapped that is in our hands. We are going to increase the value beyond what the current company believes and what may be in the markets believe. And the last piece to the strategy is the people. You know we are just centralized business philosophy so a natural fit to bring in a company and let it run it's own and it's the people who actually got your interest in the first place because they are the ones who developed it, you know they either commercializing the product or brought it forward with the successful company you want to keep that intact. So those are the three arms that we usually look at from acquisition and it may come out of a partnership that's started as a license but not traditionally.
Johnson &Johnson's future deals and the changes in the business model
Fintan Walton:
Right, so Rob what do you see happening I mean the industry is changing as we all know particularly in the biotech landscape and even may be the biotech model is changing as well. So what do you see when you look into the future for Johnson & Johnson and types of deals and the type types of alliances that you have set up? you see further changes there and may be changes to the -- to the business model itself?
Rob Wills:
To the basic business model of licensing and product to get future growth, no. But the content and the structure of these deals are changing in a lot of aspects because of the pressures on companies for their you know profit loss income statements. You know everything is gonna be so expensive so now there is a lot of creativeness going into the deal structures to how to offset some of these burdens of expense that you may not be able to tackle at this time but you know you have to do deals, we were gonna have to continue to do in going forward. If there are good product opportunities we want to be there but I would say that you might see some creativity and how those things are structured.
Fintan Walton:
Rob Wills, thank you very much indeed for coming on the show. Thank you.
Rob Wills:
Thank you Fintan.
Rob Wills
Vice President, Alliance Management
Dr Wills is Vice President, Alliance Management, Johnson & Johnson. He is responsible for managing strategic alliances for the Pharmaceutical Group worldwide. This includes the relationships for Velcade, ceftobiprole, rivaroxaban, telaprevir, tapentadol, Yondelis and others. As head of Alliance Management, he oversees a small group of professionals who play an active role in the negotiations of alliances (structure, governance, dispute resolution, communication), in leading the integration post-signing and in managing the overall alliances. Prior to moving into this role in late 2001, Dr Wills spent 22 years in pharmaceutical drug development including, 12 of which have been at Johnson & Johnson. In his previous role as Sr Vice President Global Development, he was responsible for the R&D pipeline and a member of the R&D Board of Directors. In addition he served on several of the commercial Operating Company Boards and key pharmaceutical group decision-making committees. Dr Willsbegan his career at Hoffmann-La Roche where he spent 10 years in several roles of scientific responsibility. Much of Dr Wills' accomplishments are related to his R&D career, which included the successful development of over 30 NDA's, PLA's, MAA's in multiple therapeutic areas. He has authored over 40 peer reviewed research articles, 5 book chapters, and 50 professional presentations or abstracts in the area of pharmacokinetics. Dr Wills holds a B.S. in Biochemistry and an M.S. in Pharmaceutics from the University of Wisconsin and a Ph.D. in Pharmaceutics from the University of Texas.
Johnson &Johnson
Johnson &Johnson is a global American pharmaceutical, medical devices and consumer packaged goods manufacturer founded in 1886. It's common stock is a component of the Dow Jones Industrial Average and the company is listed among the Fortune 500. Johnson &Johnson is known for it's corporate reputation,[citation needed] consistently ranking at the top of Harris Interactive National Corporate Reputation Survey, ranking as the world's most respected company by Barron's Magazine, and was the first corporation awarded the Benjamin Franklin Award for Public Diplomacy by the U.S. State Department for it's funding of international education programs. The corporation's headquarters is located in New Brunswick, New Jersey, United States. It's consumer division is located in Skillman, New Jersey. The corporation includes some 250 subsidiary companies with operations in over 57 countries. It's products are sold in over 175 countries. Johnson &Johnson's brands include numerous household names of medications and first aid supplies. Among it's well-known consumer products are the BandAid Brand line of bandages, Tylenol medications, Johnsonsbabyproducts, Neutrogena skin and beauty products, CleanClearfacialwash and Acuvuecontactlenses.