NovaQuest: Principles and Strategies




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Video title: NovaQuest: Principles and Strategies
Released on: March 01, 2008. © PharmaVentures Ltd
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In this exclusive interview, Fintan Walton talks to Ben Cons, Vice President of NovaQuest, about NovaQuest’s functions and operations, and how these differ from those of its parent company, Quintiles Transnational. Ben talks about the financial commitment NovaQuest has made to its partnerships and how this is split between its biotech and large pharma clients. He outlines the two principle ways in which NovaQuest operates with companies, and how it shares some of the risks and returns. Ben discusses the current changes in the industry, the drivers for these changes, and how they affect NovaQuest’s business. He highlights some examples of partnerships that show how the company is adapting to these changes – in particular he discusses its alliances with Eli Lilly and Solvay Pharmaceuticals. Ben talks about how NovaQuest manages the risk within its alliance portfolio and the company’s approach to its equity contributions in life sciences companies. Finally, he gives his opinion on the progress of the industry from NovaQuest’s viewpoint, and discusses how the company will grow in relation to Quintiles.
NovaQuest's functions and operations, and how these differ from those of its parent company Quintiles Transnational.
Fintan Walton:
Hello and welcome to PharmaVentures Business Review here in London. On this show I have Ben Cons, Vice President at NovaQuest, welcome to the show Ben.
Ben Cons:
Lovely to be here. Thank you Fintan.
Fintan Walton:
Ben, you're part of NovaQuest and NovaQuest is part of Quintiles most people in the pharmaceutical industry will know about Quintiles some of them may have heard about NovaQuest, but NovaQuest's function and its operations although they are associated with Quintiles are quite distinct, so could you tell us a little bit about what actually NovaQuest does?
Ben Cons:
Yeah thanks Fintan, NovaQuest is the managed partnership entity within Quintiles Transnational so we look to design the bespoke solutions to work alongside our pharmaceutical partners using the strength of our core business which is the 20,000 employees within our business providing key for service solutions and in contract research and commercialization.
Fintan Walton:
So in a way then you really what you are offering to pharmaceutical companies and biotech companies is a way to access the skill base the Quintiles has but probably in a different way than they normally would through a fee for service basis?
Ben Cons:
Correct, so we are looking to provide those bespoke solutions to their actual needs at that point of time whether they are product need or a resourcing need and to put unique solutions in place which may include capital at risk or resources at risk which enable them to keep the flexibility to drive their programs forward.
Business model and ways of working with biotech and pharmaceutical companies.
Fintan Walton:
Now I can always understand why some biotech company may want to use that the offerings of NovaQuest because clearly they are often looking for equity they don't have the cash for fee for service basis and certainly you can do that, we'll come back to that but you also partner with both mid size and major pharmaceutical companies too?
Ben Cons:
Correct. We've been working on this model for the last seven-years and to date we've committed $2 billion in capital into this space and the vast majority of that is actually partnered with mid and large pharmaceutical companies, so that is the principle of our business.
Fintan Walton:
Right. So what proportion would be directed towards biotech versus pharma companies marketing companies?
Ben Cons:
That's a in a way difficult question to answer, so of the $2 billion we've committed currently we have 2000 employees dedicated to this partnership model through our groups endeavours.
Fintan Walton:
Right.
Ben Cons:
I would probably say that a large number of those employees are split between the biotech market and the pharmaceutical market in terms of capital, in terms of the milestones and royalty based structures the largest proportion of that is with the large pharmaceutical companies and within the equity space there is a large proportion into the biotech group.
Fintan Walton:
And now I understand that there are several different ways you can work with companies do you want to describe those various ways?
Ben Cons:
Yeah we see working with industry really in two principle ways one is the area we called strategic resourcing and that is really providing the resource needs in this changing environment to enable companies to get to the end points they desire, so that could be functional resourcing, that could be a data management group or sales force a specific function in a geography to enable that flexibility as their models move or it could be the alternative it's investment partnering where we look to provide capital solutions alongside our resourcing solutions to enable people to manage their P&L and the opportunities and their the receipts for them.
Fintan Walton:
In all the cases is NovaQuest taking on more of the risk around each of the projects you get itself you get involved in?
Ben Cons:
Correct, so we are looking to take risk on either through a capital structure or through the provision of intellectual capital fund or organization. Over the last 20-years Quintiles has built up a formidable reputation in the drug development and commercialization space where we are taking to leverage the knowledge of our organization to bring that to bare on specific partnerships.
Fintan Walton:
Right. So you are more getting more involved in profit share to some extent because you are taking on some of the risk or you are taking equity or plus or minus equity in the entity itself?
Ben Cons:
Correct it could be a combination of both or one alone or it may just be an investment through our resources that will bring the intellectual capital in and will share in the returns through that partnership.
The current changes in the industry and NovaQuest's strategy towards issues.
Fintan Walton:
Now one of the things with an organization like Quintiles in general and specifically with NovaQuest what I find interesting about NovaQuest is that if there are issues going on in the industry you guys are more likely to see them because people will say look we don't want to just look at you as a fee for service model we want to look at alternative ways, so if there is, if there is an organization out there seeing change going on in the industry must be NovaQuest, so then what's happening in the industry right now?
Ben Cons:
I think it's a dynamic time at the moment Fintan. Now we talk about change a lot in the industry, we believe we are really seeing real change and is not just talk it's actually people doing it. We think there are probably two elements that are driving that change. And we are seeing that the industry has been phenomenally successful over the last 25-years and through that successes built up huge infrastructures and those infrastructures now looking at the decline in the number of NC's which were at their lowest level in the last 25-years, last year and the decline in drug approvals through the FDA which again probably the lowest level in last 10-years or so and with all the fixed infrastructure that goes with them the increasing cost of R&D we are seeing the industry look for flexible solutions and that's definitely the change we're seeing.
Fintan Walton:
Well the pharmaceutical industry is under if I can call it several threats does the pricing and reimbursement issues people those who reimburse pharmaceutical companies for their drugs are looking for lower prices we are also seeing as you say all these various additional hurdles not just getting drugs registered but even when a drug is registered there are continued threats to that now, so how do with NovaQuest moving into the risk business itself is it exposing itself to some of these bigger issues?
Ben Cons:
No exactly that's precisely the area we are moving into. The industry is feeling those pressures but also there are opportunities we are seeing the shift from primary care to secondary care based medicines and the environmental issues you've pointed out alongside that of course is generic competition and what we're seeing the industry respond to that is by saying we need to be flexible to be able to move to those areas where we can see the return, the right solutions for patients and providers. And we are looking to support those that flexible move and solution provision.
Fintan Walton:
So in an extreme case then pharmaceutical companies go ultimately become just virtual companies, how do you see the actual shift in the markets taking place in terms of the industry itself?
Ben Cons:
I think the biggest challenge here is change itself, so you know there are some first movers who are really making that move quite aggressively and we're seeing you know huge changes in there in functional resourcing with some of the pharmaceutical companies where they are they are looking to actually move to a functional model where CRA's, data management those kind of activities are actually moved lock stock and barrel into more of a provider, partner solution. And it, within the biotech industry I think increasingly we are seeing companies keeping their head count low, keeping their SG&A low and looking to develop further down the development pathway through Phase II into Phase III and we are ideally placed the partner with them with the resource base solutions.
Partnership with Eli Lilly.
Fintan Walton:
So give us an example because just to get a feel for this give us an example of how what NovaQuest is doing which is novel because of these changes that are going on in this industry could you give us a couple of examples of that?
Ben Cons:
Yeah, I think the example I would really highlight would be our partnership with Eli Lilly [PharmaDeals ID = 11839] on (indiscernable) in the United States. And Eli Lilly is a household name and has been in the CNS space for a long period of time. We worked with Eli Lilly to develop a solution to enable them to have a flexible co-promotion commercialization solution in the United States. To do that we put capital at risk, we put money upfront in terms of milestones linked to an FDA submission. And that was used both for clinical and pre-marketing activities. In addition we provided a sales force of 550 people including management alongside Lillysales forces to promote that brand in the United States. What that's given Lilly is the ability to be flexible with its resourcing but also to have a capital solution alongside their core business and we think that's very innovative.
Fintan Walton:
So you took some of the clinical risk for taking that drug into the final stages of regulatory approval in the United States and then you are also prepared to put money against the actual launch of the product and then the eventually selling or marketing of that product?
Ben Cons:
That's correct, that's exactly the model.
Partnership with Solvay Pharmaceuticals.
Fintan Walton:
Right. And so that's with the large pharma company give us an example of something that you are doing say with the mid size company?
Ben Cons:
So I think a good example of the mid size company solution would be our partnership with Solvay [PharmaDeals ID = 18235] [PharmaDeals ID = 8432]. I think what do you see with Solvay relationship is an evolution from the strategic resourcing type solution I was mentioning earlier where full functional provision of capability alongside their strategic protocol and program design is the basis of the partnership. And in addition to that we've also added in a proof of principal partnership where we look to develop compounds at risk together through to proof of principle.
Fintan Walton:
So that's actually taking risk around products that are acquired earlier, early in the clinical development cycle, which is a greater gain in another level of risk that you, that NovaQuest had to take it on?
Ben Cons:
Correct, so within the development space we do not see ourselves as a pharmaceutical company, we see ourselves as very much a partnership opportunity with the industry through the resources and capital we can provide. So within the development space we look to create portfolios of risk, so the Solvay relationship is around a partnership around 10 proof of principle programs and through doing that you gain a portfolio effect.
Partnership model with biotech companies.
Fintan Walton:
So and then finally you know I know that you've invested in about 33 or so biotech companies, generally how do you approach your interests in biotech and how do you participate in what they are trying to do?
Ben Cons:
So the third pillar to our kind of partnership model is that the emerging biotech companies. And we look to partner with those companies really by getting a meeting of minds of the challenges they face and how we can support those challenges with them. And then to look at structures and capital solutions that may help them along that way and through that we work closely with capital institutions and on occasions we will participate in equity fund raises et cetera. But our real focus there is to believe in the asset, to believe in the management team and then to look to support that with our capabilities in the partnership which may include a capital solution alongside that.
Fintan Walton:
So clearly then NovaQuest has to take a portfolio approach it's across a range of different risks, some of those with biotech companies and others with large and more mature pharmaceutical companies whereby there is probably greater liquidity in terms of their equity and the returns that you can get so how do you actually manage that risk?
Ben Cons:
So we look at all our investments as a portfolio, the $2 billion we committed to the space in seven-years we really view that as a portfolio effect and we manage the risks within that portfolio structure. The way we really look to focus that is we are very active in alliance management so one of our key activities is once we've invested, once we've partnered for us that's just the beginning, we have a 2000 staff dedicated to our partnerships in a very vibrant alliance management function to work alongside those to achieve success.
NovaQuest split in terms of activities and it's investment policy
Fintan Walton:
So another question really is as clearly Quintiles is a US organization I know NovaQuest has got its base both in North Carolina as well as here in the UK, what is the split in terms of our activities between the US and Europe and even the rest of the world?
Ben Cons:
I think that's an interesting question, we see this is very much a global business. And so within the pharmaceutical industry itself our solutions are being executed on a worldwide basis, so in terms of execution as worldwide, in terms of the companies we are working with in the emerging biotech space it's very evenly split between the US and Europe and the big pharma companies you know they are global institutions and we like to work with all of them.
Fintan Walton:
Right.
Ben Cons:
We also have a presence in Japan and in Asia and they are our focus force as well. So solutions in that in those markets the Asian and Japanese markets are slightly different, but we are focused on achieving those.
Fintan Walton:
When you take an equity stake in a company are you normally coming in just solely on your own or are you usually coming in on an investment round anyway with other investors?
Ben Cons:
So there are two possible approaches we take to equity, one approach is that it's part of a specific financing solution that may include royalties and milestones and an equity contribution in those instances we may be the sole equity contributor at that stage. And you know that is a focus for us. The other side is within the emerging biotech space that there may be equity raises going on whether public or private and we'll look on a you know case by case basis at participating in those, but again it's really around providing that strategic resource and solution and partnership with them.
Fintan Walton:
But what does a typical venture capital outfit or private equity groups say well look we should approach NovaQuest and see whether they want to get involved, does that ever happen?
Ben Cons:
Yeah, now we spend a lot of time with our private equity colleagues, I think there is some similarities in our business models and you know through I think our operational support we can bring a differentiated added value to their activities and their portfolios.
NovaQuest's perspective: Future of pharma industry and signifincance of shared risk model.
Fintan Walton:
Right. Now finally we've both talked a little bit about how our industry is changing and how we see pharmaceutical companies being more rational I suppose about how they employ their own resources fixed versus a variable model and we've also got the issues around biotech industry being fully funded and not been so well funded and the various cycles that goes through, what do you see and how do you see our industry going forward from a NovaQuest point of view?
Ben Cons:
I think from the NovaQuest and Quintiles point of view that's how see the industry continuing down this path of change. There seems to be an acceleration to that change at this period in time changes talked about often I think people are really undergoing that change.
Fintan Walton:
But even in the last 12 months you've said to me earlier to put attention?
Ben Cons:
Yeah in the last 12 months we've seen the huge increase in the number of people willing to talk to us about really variablizing their business model to enable them to move quickly to the new opportunities that sit before them, we honestly believe that pace of change will increase.
Fintan Walton:
Is it possible that NovaQuest will end up bigger than the remaining part of Quintiles because there is a such a potential attraction for people to move into that sort of shared risk model?
Ben Cons:
I think Quintiles in terms of the solutions provided, the provides will always be there because ultimately it's NovaQuest we are working with our core business to provide those solutions, so in terms of resources I would see the core business remain in that engine room, but in terms of capital provided and returns I see NovaQuest being the major driving force for the industry and our business model going forward.
Fintan Walton:
Okay. Well thanks a lot Ben for coming on the show, appreciated. Thank you.
Ben Cons:
Pleasure to be here. Thank you.
Ben Cons
Vice President
Ben Cons, PhD, Vice President of NovaQuest, structures and delivers managed partnerships with pharmaceutical and biotechnology companies in Europe and the US. He has participated in tailored financial solutions worth over US$1 B by leveraging the intellectual capital, management and financial resources of NovaQuest and Quintiles. In addition to his role as deal architect, Dr Cons is responsible for delivering the strategic plan for NovaQuest, including relationships with venture capital groups, private equity groups and investment banks. An innovative team leader, he is adept in developing partnership solutions between companies that realize value for all parties. Dr Cons joined Quintiles in 1996, bringing his expertise in pharmaceutical drug development and commercialization to drive corporate development goals. He became a part of the PharmaBio Development Group (NovaQuest's predecessor) in 2003. Early on in his career, Dr Cons expanded his research experience in molecular pharmacology through a position in drug development with Schering AG. Later, at Glaxo Wellcome, he developed expertise in marketing and business development, particularly through a joint venture with Reuters. Educated in the UK, Dr Cons acquired a bachelor's degree in biological sciences with honors from Portsmouth Polytechnic, and then continued his studies to earn a doctorate in molecular pharmacology within the physiology and pharmacology department of Southampton.
NovaQuest
NovaQuest, the strategic partnering group of Quintiles Transnational, is an industry pioneer in offering tailored financial and operational solutions that help pharmaceutical and biotech companies overcome development and commercialization challenges, including leveraging virtual clinical development m odels. Its unique managed-partnership approach ensures sponsorship by senior-level executives; access to global development and commercial resources and expertise; and efficient operational delivery of services. Since 2000, NovaQuest partnerships have committed more than US$2 B in capital to pharmaceutical and biotech companies of all sizes.