#34: Sascha Bucher - Deal Structuring With the Pharma Industry - From the Investors Perspective

Drug Development is a challenging process. It needs profound basic research, translating scientific results into products and moving them towards the market.

Making things more challenging deal structuring is also a b2b business, which means selling products to the pharma industry that completes the product development and brings therapeutics to patients.

How does structuring deals with the pharma industry really work to sign one of those multi-billion dollar contracts?

Sascha Bucher is a Venture Capital expert with tremendous experience in deal structuring with the pharmaceutical industry.

In his career at renowned venture funds and companies like Roivant Sciences, Roche, or UBS, he completed transactions worth more than 10 billion dollars.

To give life science entrepreneurs access to the expertise, network, and funding, he and his team are in the process of founding Forty51 Ventures - a novel venture fund dedicated to closing the Life Science Valley of Death in Central Europe.

Join our conversation and learn more about how to negotiate with the pharmaceutical industry.

Gain more insights into VCs' daily business life with a particular focus on building relationships with BD, R&D, and C-suite executives in the industry.

Link to the Video of the Recording:
YouTube

Speaker:
Astrid Woollard
Christian Soschner
Sascha Bucher

Organizations:
CS Life Science Invest
Forty51 Ventures
Scytale Ventures

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Transcript

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Christian Soschner 0:00

Welcome to a new episode of the website podcast. Every industry has its own business model. And when you look on the internet, for example, Reddit, YouTube, uh find a lot of information about uh consumer-oriented business models. But when you look at the lifetime of the industry, which I think too fast uh defensive industry, uh what to find about the business model of the lifestyle of B2B business, I want to find out about the part that is the most important one in the industry, how to bring products from the research code to the farmers of the industry. And today I'm very happy and proud that they have one of the farmers of the corpus on our podcast who has uh one of the most amazing track records uh um four uh several decades uh with 45 teams closed working for companies like uh Royal, like uh Broge USB. And I'm very happy to have the opportunity to get a lot of information and a lot of insights about the industry directly from Satra Buka. Sasha, welcome to the show.

Sascha Bucher 1:30

Thank you for so uh we here.

Christian Soschner 1:35

Satya, you have really an amazing track record, and uh I think going through more than 45 deals would take a long time. Uh, what were the most interesting and the most insightful deals in your career?

Sascha Bucher 1:50

Yeah, no, thank you for uh thank you for the question. Um, I would like to actually um pick out two deals that I think are are worthwhile mentioning. And and these deals actually tackle very two different perspectives because the interesting thing in our industry is that um the acquirer has a very different perspective and also a very different payoff profile, risk profile when acquiring, as does an investor. And uh, while we are all in this industry to bring fantastic products to patients for unmet medical needs, it is uh very different on both ends of the spectrum. And I think that is important for investors and uh for entrepreneurs to understand. So I wanted to pick one where, again, from the acquirer perspective, let's not you know forget um acquisition is somewhat of a surrogate for RD. And uh I take you back quite some time um in uh about the year 2000, actually, was one of the uh very interesting transactions that I worked for. And I go I go back in time for a reason. Um, a company by the name of Tugai, Japanese company at the time with 100 years almost of uh family tradition and uh successful history in the markets, close to uh a billion in sales, um was acquired by Roche through a series, or the majority of the company I should say was acquired through a series of transactions, including a public tender offer, a contribution in kind. Actually, Roche took the local subsidiary and brought that into this new uh company, uh, a fantastic, uh very successful transaction. Now, the interesting part of it was that um when you do the evaluation and you look at the deal parameters, obviously, this was a company with a pretty good and well-established product portfolio, mostly in Japan. And what you do, you do your uh you do your spreadsheet, you do your analysis, you do the NPV, and you have a pretty good sense of what you're actually acquiring with regards to products that are on the market. But when you look at the product portfolio, that is where in the in the development portfolio, um, that's obviously a very different, different um, you know, uh sort of sort of um things that you have to consider and in it's a very uh um you know complex undertaking that you will know only many, many years later down the road. To make a long story short, um while this was a very successful transaction on many accounts, uh it took actually 10 years until the first product in the year 2010 from the pipeline that at the time was preclinical, came onto the market, uh product by the name of Tokila Zumap and IL6, uh, and it took another five years to become a blockbuster. So the point I'm trying to make is you have to have a very long-term horizon as an acquirer. And you can only sort of uh bank and get return on investment on product and innovation that you buy once the product comes into the market. And which investor have you ever asked, or also which venture capital, how many products they actually brought to the market? It's a different pay-off profile, it's when you put it into the hands of the market. So the other part of the coin uh I have also um experienced uh and it wasn't as long ago, but uh a company by the by the name of uh Imunavand, uh in my in my position at the time at the head of the Global Transaction with Rojant, worked together with John Clough and some of the colleagues at the time uh to acquire a uh anti-FCRN monoclonal antibody, pre-clinical, at the end of 2017 from a very little-known company at the time, uh Korean company by the name of Anal. And um we took that product from preclinical within a little bit more than a year, generated phase one data, started actually a phase two A trial and my Athenia Gravis, and on the back of that, a little bit more than two years after that acquisition, I took it public through a spec transaction. It was actually one of the first spec transactions in this, what is referred to as spec 3.0 in the in the healthcare setting company today with 4 billion in uh in in market cap, and um also a very, very exciting story, very different story. And again, I think it's important to understand both of those sides, the payoff profiles, because when we talk about geostructuring later on, it's probably um much of that is is sounds obvious, but it is important to remind one another about what uh what the differences are.

Christian Soschner 6:32

That's very amazing. I'm coming from uh the let's say life science part when the assets are still early, so when they're coming from the universities, uh brought very often by tech transfer into corporate shells, and teams start working on that. And the end of the road very often is uh the clinical phase point when the teams want to sell to the pharma industry. When I now look at those teams and their intention to sell to the pharma industry, what should they prepare? What should they be watching about? What how should they define the asset and the intellectual property?

Sascha Bucher 7:08

I think um this is a good point, and and you're sort of already stating something very important. Brick and mortar in our industry is seldomly important. Sometimes it is. I mean, there's there's cases I think in specialty pharma and manufacturing, sometimes where that still is is relevant, but overall you're absolutely right. It is about intangibles, IP, and it is particularly, I think, about patents, exclusivity, and know-how. And um, if you go by go through those different uh concepts, probably important to remind ourselves what that what it does when you get exclusivity or when you get a patent protection in place. Many people refer to, I don't like the word so much, but many people refer to it like a mini monopoly during a period of time where you can get actually your your payback. And I think at the top of the hierarchy uh clearly are uh patents and within patents, composition of matter patents. Um, this is what um you know particularly large pharma companies will immediately try to put the finger into. But and we'll talk about the other um potential uh patents and and also parts of intellectual property, but also when you have actually composition of matter in place where you sort of oftentimes you would patent one compound or a family of compound, it gives you a lot of um security around what you are creating, but you nevertheless have to be very mindful and always ask yourself the questions how others can build around it. And I think with regard to composition of matter patent, what you sometimes see uh if people figure out the biology, know what the active metabolite is, you could try to sort of develop the active metabolite as a you know, without infringing the patent, if you haven't patented that as well, or you could also go with some companies do go for a pro drug strategy where you actually to put two compounds together into a new compound, which then breaks down one of the metabolites, but would then be what you are currently working on. So even in that case, I would be I would be you know careful and very mindful of uh of how you do your homework.

Astrid Woollard 11:03

Great. Oh, IP is really one of my favorite topics I need to say. Um I need, I mean, I think it's very interesting how you described also the uh sort of composition of matter patents, and they're certainly core to uh pharmaceuticals um intellectual property strategy. But what I've seen sort of coming on more and more on these days is really a very solid also trademark strategy for certain uh products once the patent is actually running out of life because we know it's just a limited monopoly, so to say. So, where do you see other um sort of um classes of intangible assets being part of making or breaking a deal, so to say?

Sascha Bucher 11:45

I think you're you're raising a very good point, uh Asri, and and I and I couldn't agree more. I think the trademark piece and also the goodwill will sort of come into play as part of the life cycle management once potentially you are close of getting off uh of patent. Um, I think on the on the earlier end, besides composition of matter, a patent, for example, uh, is it very important is used patents or formulations. Think, for example, of endogenous um compounds, compounds that occur in nature or that are even produced by your by your body, uh, or think of plant extracts. Uh, tech fidera from biogen is a good example. Uh, those would be used patents that you can try to put into place and they can also give you solid protection. What is important is when you do your clinical development plan, that ideally you find a medicinally relevant um you know part of how you administer the drug and or how you formulate the drug. And if you get that into the label, like an uptitration or a dosing regimen, um that can give you a pretty strong protection. By the way, if you look at Homera, uh which is uh Adalimumab, uh which is the largest um uh product in the world with 20 billion turnover now by EP, that composition of matter patent has actually already elapsed a few weeks, expired a few years ago, and the company has been diligently putting new uh um you know use patents and formulation patents uh out there in order to protect their franchise. Another, I think, important topic is um is uh is is actually trade secrets. Um and this is something that comes into play that I remember um at many companies this is a debate of how much of the know-how process uh you want to actually uh put out in the public. Because as we know, once you create IP and write patterns, the claims, you need to you need to disclose as much of the process that others basically could could uh could replicate, could replicate the experiment or the process. So here I've seen that sometimes by design you try to keep certain things in-house at trade secrets, but um uh ultimately that's that's probably more of a of a of an of an exception. So uh in in sum I I I agree with you. I mean it's a lot of a lot of effort that you should put early early on into your IP, um, into your IP assessment, into the creation of UIP portfolio. And one last word, maybe I think is important to also make sure that you work with people that really know particularly well what your company is doing. Sometimes it is as specific that there's IP lawyers for a certain class of drugs or for certain mechanisms of actions, and you probably want to do and go with them from the beginning, they're sometimes more expensive, but it will pay off if you get to the um into the situation to be discussing with a potential partner.

Astrid Woollard 14:41

Cool. And how do you actually organize this due diligence or how should companies actually think about it in terms of team and organization? Are there any distinctions that you make in terms of if it's you know concerning an early stage asset versus maybe a later MA deal stage?

Sascha Bucher 14:58

Yes, I think that's a good question. I think in a in a general sense, um, I would think of it like if you basically look at your company and you look at um what you are developing, um, ask yourself that where you would want to be when the stock gets onto the market, what are all the things that you need to need to do? And a certain amount of things you will have done, um, but you will not only get diligence about what you have done, but also what you will have to do, or what the new owner uh or the um the licensee will actually have to put in place. I think that's a bit the mindset. If you think about um, you know, um early uh early early preclinical uh you know, the experiments that you've done, um, the way that you put your assays together, why you have worked with certain cell lines, or um you know, um useful quotent stem cell models, how relevant are they, how translatable they are. Um sometimes you find that companies do or work on animal models that might be less relevant for humans or that also have to be adjusted, or or you you know there are special models or animal species that you should work for. And then on the more I think on the on the clinical end, clearly how you how you develop the acid, and something that sounds very um sort of very obvious, but it's sort of um what is the um what is the indication that you would go after? Um, and that is oftentimes something I find that company focus company earlier on focus very much on the biology and doing the right thing, but nevertheless, what's the best use of how you develop um the the acid and developing it into an indication also comes with sort of a development path. Um, can you work if you go into patients, how long will it take to demonstrate clinical relevance? Or can you work with a surrogate marker? If you work with a surrogate marker, I mean in DMD setting, for example, discipline levels have been examples where in the past um the regulators have been open to accept um such such markers for for approving products. Um these are all questions that you should be should be able to answer. Um as opposed, for example, if you work towards a clinical outcome that can take a long time to see the progression of diseases in a in a clinical setting. Um maybe word on on CMC to pick this out. This is sometimes sounds a little bit less uh exciting, but I have to say I have never heard uh doing a due diligence somebody saying that CMC is not going to be a problem. Uh, but I think I've also not seen a due diligence where at the end it was on the critical path. So that is something I think to also watch out for and be very well prepared. Um as you develop a program, and mostly you will realize my comments are mostly with regards to pharma and biotech. Um you will have to do scale-ups as you go from very early preclinical to later stage preclinical settings into the clinic. Um, that is always very difficult to secure the same quality and the same chemical uh characteristics. And at the same time, uh it's also about the the qualities or qualifications, whether that's GMP material down the road, you have to go with other providers. Um sometimes there's only a handful of companies you can work with and they are not working for you. So CMC is another one, another very critical one. And um, I can, you know, I I would then think IP. We talked about the commercial business case, is um is is um is also something that sort of sounds obvious, but it's very, very important that you want um doing that due diligence as a seller or a licensed source, show that you're really on top of um, you know, from an epidemiology point of view, where are the patients? How will you find them? Are these patients that have access to care? Um when how will they be diagnosed? What is the disease progression? What is the price that you believe you can um you can get reimbursement for? So this whole business case, putting this whole package together, I think that's probably the most important parts. Um and then if you give me another minute, there's a whole different world, uh, which is uh sometimes less exciting, but I I think nevertheless uh important to think about is uh is corporate corporate due diligence. And corporate due diligence is a lot about hedging the downside, um, making sure that you've done all the right things. But you know, for example, on a legal from the legal end, um make sure first of all, when you acquire a company, and sometimes to a certain extent also when you're in license IT, you might become the future owner of a past problem or litigation. Um a classic I've also seen is that sometimes you work with scientific founders who have already done work in the area of interest in the past. Make sure that you have that in your bag. Um and then there is uh, you know, taxes is obviously another one that is not so maybe so exciting on the on the on the front of it, but there's a lot of money involved, you know, depending on where where you start your business and um um what the consequence that would be for an acquirer. And then the last one is accounting, which is um sort of also something. I mean, I wouldn't spend an enormous amount of time on this, but you should think a little bit how that transaction looks for the acquirer and then the focus of the acquirer. It's a lot about cosmetics, but sometimes large companies are you know care about cosmetics. So I think these are sort of the the most important elements how I've seen sort of to deal with it.

Astrid Woollard 21:25

Well, that's already a very long list to really check the boxes from. But I mean, if we think about these um differentiations, so when is the ideal point to enter these deal negotiations? I mean, for example, in digital innovations, one says it's never too early to really reach out to a potential acquirer to get their feedback very early on, to ensure mutual alignment on the products and the strategy. So, how does that compare in the pharma industry? What data, what prototypes does one need, and when should one really ideally reach out to partners or potential acquirers?

Sascha Bucher 21:58

Yes, I think it's a it's um it's a it's a very good question, and you cannot think about that early enough. And I think it was actually um I uh I I borrowed this term from uh when I discussed with Christian, I think Christian refers to this as the marketing phase. I think that's actually a good it's a good term. I I used to say it's uh it's a little bit like dating, so you cannot, you know, you can you have to start very, very early before you have actually an asset uh in your hand uh ready to transact. But I think what you first need to do is really thinking about sort of the inflection, value inflection point of uh of your business and um and how that pans out and how you plan for that because you want to make sure that at least you have a plan to get to that in value inflection point at what at which stage you should be able to transact the company or license the asset. Um in the good old days, this I would have said is proof of concept. So you have solid phase two-day data in hand from a few dozens of patients, sometimes a couple of hundred, depending a little bit on the on the implication. Um you have ideally a heart or a clinical endpoint that gives as much comfort as possible that you have a good chance to bring this into a pivotal phase and make it a product. Um in the more recent past, well, I think there's two things. There's there's always been um indications for where there is no standard of care, which are very dire um indications and prognosis, thinking of oncology and also thinking about orphan diseases, where often the regulator will be uh happy to actually go with much shorter timelines and smaller patient populations and Um particularly then it's not about a phase one, phase two, phase three, it's oftentimes a phase one combined. So I'm saying this uh that depending on what you go after, it could be much earlier in time. And then ultimately it's always the risk appetite of the acquirer. And that is depends also a little bit of the strategic approach of the acquirer. Sometimes if you have a something truly novel, um maybe even if this is before the clinic, this is excited, it can be an exciting target for an acquirer. Uh or you might also be early, but you're a fast follower, and you have proven or it is known that this mechanism of action seems to work, and you you develop something with a better with a better profile, safety profile or other characteristics. So um, but to to answer your question a bit more uh in detail, I think this this phase to to start being out there, you should do that as early as possible, so that when you basically approach such a relevant um data point uh that you know the players in the industry, they know about you. Uh you can reach out and you don't start from zero. I think if you were to basically reach out at the point in time, weigh your clothes to get your phase two data readout, um, that's a bit too late then to make uh acquaintances in the industry and then have people to get to know you.

Christian Soschner 25:13

Let's look a little bit more uh on that part of the phase. I really like your example with dating. So nowadays dating changed tremendously since the 90s or 80s when I did that. Uh today we have Tinder, so basically you can swipe left or right and find somebody. Uh, how is that in the farm industry? I mean, we have bio Europe. So I can with a small biotech, I can go to a bioeurope. Is it really just swiping left or right and you find your partner and D is done? Or what is your experience? How does that work in the industry? What must a small biotech do to be acquired at the end of the day?

Sascha Bucher 25:48

Yeah, I think that's an excellent question. And uh and a question where you know it's hard to have a standard answer, and I agree with you. It is nowadays, sort of the good news is people are more networked, and you can approach them sometimes to very you know things like maybe even LinkedIn or or um yeah, people are just uh just much more connected, I would say. On the other hand, I would also say that if it comes to scientific conferences, hard data, still these these conferences, these there's certain, you know, you need to be seen in a certain context. And it is more than uh you know connecting by email or via Zoom, but really being close to the people, being close to the action, being close to the circles of of where the decision makers are. Um, to do that in practice, I think all of the above, uh, you know, uh network in at conferences, um, and particularly I think where you should spend time on is um you need to find and you need sort of to create uh a champion within an organization. Um, and um how to do that is more an art than a science. But you know, I would be talking to people who have, for example, I mean, you should anyway from the beginning have like a long list. I think it's not enough if you say um you go on a certain indication and you say, okay, this could become one day a I don't know, a 500 million or a billion dollar product. I don't think it's enough to sort of say, okay, every pharma company should really love this if I have good data. That's not necessarily the case, but really know the companies that could transact, what is what is their stated strategy. And once you have that long list, uh try to find people who transacted with these companies who work with them. I mean, advisors can help, but again, advisors oftentimes sell their services regardless. So, you know, you have to be a little bit careful and critical, but really see people who have been where the action is and can help you. And I think in that sense, um this internal champion is is the sort of an image I like to uh I like to uh illustrate, I think that is illustrative, where you try to find people in those organizations that basically have three characteristics. Uh they have to believe in you, um, and that will not happen after the first meeting, but they have to believe in you and your idea, in your data, and what you're going for. These people have to have a certain gravitas in the organization they represent, uh, which is also hard to actually know from the outside. Um, you know, everybody nowadays is like global head of something. It's sometimes difficult to really get the finesse what that person's job truly is. And uh sometimes there's also this what is what we refer to as informal power. Sometimes it is maybe the number two and the number three guy and not the head of oncology in a company that would actually call the shot to be very influential within a company. So you need to use a lot of emotional intelligence to figure out if that person is your woman or your man to help you. And lastly, you know, it must be a person that is believing in what you do, has the gravitas, but also the eagerness to make something happen. And um large organizations and and and humans are are are complex. So it's um it's it's uh as I said, it is challenging, but I would I would uh definitely invest time and efforts to sort of think how do I get close enough to those people that if the day comes, um they will know that they that day is coming and that I can reach out and and have a you know conversation about how to move my project uh into a transaction next.

Christian Soschner 29:49

Very interesting points. And uh you brought up social media and LinkedIn. So I'm really surprised positively how easy it is today to reach anybody in the in the company, especially the CEOs. And let's just assume I'm a likable person and I use my time. Um that uh I've become friends with a lot of CEOs in the industry. And some people might say, Christian, you know, a CEO, if you want to make a deal, just give him a ring and the deal is done in no time. Is that really true, or is that more uh an urban legend in the industry?

Sascha Bucher 30:27

I mean, this is um this is a good uh uh another good question. I I think um there's no right or wrong answer to this. It can clearly help. And I think it also depends how close you are to the person. And I think maybe to step back for a second, I also think it is something where you need to assess what type of company you're talking about, um, what type of company you're talking about, and actually what type of transaction you're contemplating. So if uh you know um if you have access to the to the CEO at J and you're contemplating a divestment of something where you believe you know you're very early in your clinical development, and it might be a, I don't know, I'm saying a $30 to $50 million upfront transaction, which would make you and your investors very, very happy. If you go to that person, I'm not picking out JJ, this is just uh just an example, but if you would go to the CEO of a large company, it might also be, you know, not the right person to go to as a first one, because that person will ultimately rely on people in his or her organization, will look to them. So I would always make sure that I have allies on different parts of the organization. Having said that, if you're dealing with a family-owned company or a mid-sized company that is overseeable, where you will assume that the CEO probably takes all of the decisions, um, then it is uh it is a bit of a different, uh I would give a bit of a different answer. So I think it's a little bit case by case, but it's just not the panacea that you know just uh go to the to the big guy or the the big uh uh woman in the organization and the deal is done. I think that can also, that in the worst case, can be the back for it.

Christian Soschner 32:18

I absolutely agree to that, especially in large organizations, decision-making processes uh are very complex by nature to make sure that the company takes the right pathway strategically. Uh let's look a little bit on the mechanics of structuring deal. Uh, what does it mean to start deal negotiations?

Sascha Bucher 32:37

Yes, I mean, in a perfect world, this is uh, you know, um following up on the analogy about the uh the dating or the marketing phase, in a way, uh this is a gradual process, and that can you know sometimes actually hard to say when was it the first time that we mentioned that we might be able to work together or to to acquire or to analyze the product? So I think it's a it's a it's a it's a it's a question that is that is hard to answer. And you could think about it that if you do all the right things in the world and you you talk about um your your your progress, um you know that that actually the deal uh or the bidders will come to you. And I think there are cases that this has happened, but obviously you don't want to you don't want to rely on that. So I think what is important is that again you do your homework and as you approach sort of a phase where you or your company could become transactable and you created enough of a network that you can reach out to. Um I think then it is um you know important that you put all your ducks in a row, um, do all your homework and prepare as much as I mean we talked a little bit about due diligence, but you you prepare as much as possible to be able to answer all the questions that a bidder will have, and that will include um you know what you actually want and expect from a deal. Uh you should think about a walkaway position. Sometimes you don't have a walk-away position, to be honest. I mean, sometimes you you know you might run into a situation where you have to transact, but you should actually avoid that you have a situation without it. So try to always have a plan B. Um try to know what um and figure out exactly what you want. And um yeah, and then then align the process such that I think during the preparation phase, you can invest as much time and effort as you want, and then you're sort of the master of your time schedule. But once you kick into the deal process, which is sort of close to the no, it can either be, you know, sort of, I think it falls into place similarly with sort of the deal negotiation. Maybe you already have an offer that you have not come to, that you haven't asked for, or you know that you would get an offer if you asked. But if that phase, that hot phase starts, I think then you should be able to, at least on your end, all the points that you that you can that you can master and that you you can determine, you should be able to drive from very, very fast. Um, and uh also put uh put a competitive pressure into the process that allows you to uh to get the best bidder and and not give people too much time to contemplate and think twice.

Christian Soschner 35:24

Um very early in the career, and this this uh connects to your point of uh driving fast. Uh, very early in my career. Um an investor said to me, Christian, every everything in sec everything that uh becomes a success in our industry is about managing expectations, right? When you look at the expectations towards the duration of a deal process, uh very often I get the feeling that it's more or less uh people think in two weeks you have a deal done. What's your opinion? What should be the expectation of a biotech company when they start with this deal process? How long does it take that this company really closes the deal at the end of the day?

Sascha Bucher 36:06

Yeah, yeah, and and yes, I think that's um important question to ask. And again, there are certain parameters, and I'm now again, we're taking out sort of this preparatory phase. But within when you start negotiations, when you start sort of the deal phase, there's th there's a lot of things that you can you can master on your end. And they will obviously then you need to make sure that the that the acquirer, that the bidder acts fast. That's that for you is I mean, there you will just depend on on how they they dance tango, but you can do many things to to to put on that that competitive pressure, as I mentioned. Um, but there are also certain elements, deal elements that you cannot, that you depend on uh, you know, authorities to to to to vet the deal. Um so I think again, I think it's a it's a it's a question of how how much you are prepared. And maybe we we think about a little bit about some of the things that you have to be prepared for. So when you go out and um you know, um when you go out, you need to first of all know, have all your team aligned, have your team aware of what is coming in terms of a due diligence. You'll have your data room ready, but having the data room ready is just part of it. You have to be able to speak to each and every detail, why you carried out which essay, who was the decision maker behind it, what would you have done differently. Um, there's an enormous amount of detail that you have to have ready. You also have to have ready sort of a process in mind where you what how much time you want to give people to be in the data room, uh, how you answer questions. Answering questions in this part of the diligence is one of the key things. You need to have the key people, literally 24-7 available to shoot back as fast as possible uh questions to the bidders and um at the same time also be available for presentations and site visits. Even I have to say, despite corona, I'm a I'm a I'm a big believer in sort of you know physical location visits and and and negotiations. I would think that if you prepare everything perfectly well, it will still take you a few months. Um, but again, I'm saying that uh in the sense of having very attractive data, having everything lined up, including, by the way, all the transactional work. You need to have a uh a transaction agreement uh ready. You would send that out together with uh at the same time that people do due diligence, you ask them to basically mark up a um a contract draft. Um so um that at the end of the day you have an offer that is as fully informed as possible. I remember that um um it there's on top of that, if you, for example, look at if you look at public deals, probably a little bit less relevant, maybe for you know, we're talking to sort of founders of of still startup companies. Um but if you look at sort of a uh a public deal, uh you have all these things that I mentioned. On top of that, you probably have um order magnitude two or three months of uh two months probably of uh timelines that you have to abide by because of the regulators. You have, for example, to go out with a public tender offer document that has to be open for four weeks, depending on the country, uh, for bidders to um to react and to to tender their shares. You have waiting period for the free trade commission. Uh, you could actually have that as a biotech investor as well, if you go above a certain threshold in terms of deal value. Um and even with that, I must have said that at uh I think at uh in my former position at Roche, we were once able to do this in sort of like 10, 11 weeks. But that is really if you've done it multiple times and you don't, there's not a not one glitch. Uh so I would I would definitely plan several months, maybe you know, somewhere between two to two to four months for a non-public process. Um, but again, you are the master of preparing as much as possible, and I think that will always pay out on the on the back end in such processes.

Christian Soschner 40:29

I agree to that completely. Preparation is everything to success, and 11 weeks is very impressive to get everything done at the end of the day in our industry, especially when it comes to drug development. Yeah. Um, when uh one of the first companies I worked with in the industry uh was running the finance department, and one day the board member said we need an executive proficient in deep structuring. And it was the first time that I heard this term deep structuring in our industry. And um I asked the question, why do we need that? And I said, Well, we have to think about uh what's the right deal? Is it licensing? Is it uh emergent acquisition? What are the exact deal terms? And I thought, what are you talking about? Uh can you shine a little bit of a light on the basics of deal structuring?

Sascha Bucher 41:17

Yeah, yeah, I'm happy to do that. Um, in in very simple terms, there used to be sort of two worlds, and I would call it the MA world and the licensing world. And um if you go back maybe say 20, 20 ish years or so, most of the MA deals, um also the private ones, the private and the public ones are a little bit different. I'll come to a different in just a second. But basically, an MA deal is pretty simple in the sense that you acquire shares for cash, and everything that is within a company, the employees and the contracts, all that transfers over. And it's usually again, I'm talking about the traditional um way that that MA was mostly done, it's like a one-time payment. Um, and you also know pretty much what you get because everything that's in the company, and usually, you know, if this is where it all started, you're usually pretty certain um that you know what you get. And the licensing concept is very different, it's based on a licensing fee. Uh, we all know this term royalties, which historically goes back to, I believe, kings and queens uh owning um uh sort of mines and and and receiving payments for people to basically pay work on their property and and and keeping some of the rewards. And that's not so different actually in the pharma industry, where when you think about licensing agreements traditionally more applied to early technologies, while MA usually were like grown, mature companies. And these licensing agreements would foresee that once a product is on the market, I get like a percentage of these revenues that are being generated. Those were the two old worlds. Um now what happened is that these licensing agreements uh introduced concepts like an upfront payment, meaning like basically like a signing fee. In order to get into this agreement for a licensing agreement under which I can use IP most of the time exclusively or exclusively at least in a certain indication, then I first of all pay when I sign the deal, and when the product gets onto the market, I pay a royalty. In between, then there's also these success-based, I mean, the development of drugs, as we all know, takes a long time. So one of these success-based milestones start of phase one, uh, start of phase two, um, and so forth, these licensing deals uh morphed into what people sometimes refer to as as biodollars. You have this tremendously large deals, uh, but actually, when you read the announcement, you know very little because it says Company A divested or outlicensed uh the compound such and such to company B for a consideration up to one billion. Uh on the MA side, something similar happened, which is um sort of top-up payments were introduced, meaning you close the deal, but if then, let's say a year down the road the product actually gets approved, um you pay once again. And actually, MA deals then did the same thing that uh as you go through the clinical development, you pay for success being generated by the new owner to the sellers, which people often talk about um earnouts or structured MA deals, and effectively they look very similar. If you nowadays look at licensing and MA agreements, they resemble another one very, very much. In the private setting, I said at the beginning that in the public setting that's a little bit different still. Uh, the reason for that, if you do uh a public takeover, a public MA, and you do there's something called CVRs, contingent value rights, basically nothing else than milestones. These are very litigious. Um, they come with a lot of requirements to provide information about the project to the public. So are they, I would say, a little bit cumbersome, a bit complex. They do exist. When Celgin, for example, was acquired by BMS, um, they had a set of Certain milestones that were part of this public transaction, but in general, most of the public transactions are much less complex and more straight, very traditional MA style. That's sort of, I think, the most important elements probably to know about.

Astrid Woollard 46:01

Oh, there's some great insights there, Sasha. Thank you so much for that. But shifting gears a little bit from having spoken a lot about licensing deals and the MA. So entrepreneurs often think of VC as of this big money bag that sort of will finance their ideas very early on and then they will magically do their rest. But arguably, I mean, what other qualities or strengths do you believe a VC should actually bring to the table apart from the money?

Sascha Bucher 46:25

Yeah, I think the um sort of VC and VC money is not always equal. And um it depends a lot sort of when a VC, uh an investor, gets involved and how much does that investor get involved into the operations, into the company creation, what have you. If you look at the US, um the US is obviously uh much, much more advanced when it comes to the amount of venture capital that is available, and that not as a totality, as a as a number, but also if you adjust for GDP and other factors. Um Europe has made progress in that respect. Um you still have today, however, look at the VC industry and Europe in certain pockets or certain parameters, uh still different. There's money is available, series A, series B. Um, there is rather little seed capital available. Um, and also some of the pockets in Europe are much stronger than others. For example, in the UK and the Benelux, you have a much higher density of uh these types of um these types of venture capital that is available. And to concretely answer your question, you know, what what do you bring to the table? I think um it is um know-how how to build a company. Uh many of the things I I I talked about, uh ideally you have people that have worked in the industry, developed compounds themselves, know which are the um the clinical development plans that you should go for, the indications, um, putting the the teams together, bringing in talent, bringing in fresh talent, diverse talent that have um insights from having done deals before. Um and um something interesting that you know, talking about Europe that one still often sees is sort of hedging a little bit for the downside. Um if you look at the amount of science or the not the amount, the quality of science in Europe, it's it's outstanding. But oftentimes there's still this fear of what if I fail? If I actually do this experiment, I might not be successful. Um, so I think that is, you know, this know-how of building growing companies, and I think also to bring that ambition um uh to the table. I think that is something that that venture capitals uh should do and and and and and and that will help uh entrepreneurs tremendously. And the other thing is understanding the the the pharma industry, your future partners and acquirers, uh where they sit and how they work and and um how you create a product champion and how you uh do the um you know do the marketing phase and and and uh and the things that uh you in preparation to become a successful company. I think it's those uh particularly on those two ends that it is um where uh a venture, a capital investor, can bring a lot to the table for early startups.

Astrid Woollard 49:27

Cool. And um, what about the other side of the table? So there are still people out there that sort of believe that entrepreneurship will make you rich fast and that basically anyone can do it. But speaking more generally from your experience there, what expectations should life science entrepreneurs have and what should they be aware about?

Sascha Bucher 49:46

Yes, I I think it's uh it's um you know uh about entrepreneurship is um it it uh it's a high risk, high reward. It's a it's a it's a tall order. Uh you have to be prepared, um, like myself to to or you know many others and entrepreneurs in the industry to to leave a sometimes comfortable or nice job in the industry. And uh you have to have a lot of passion and um the necessary grit, but also expectations that um you know you can achieve many, many things, but it's it's uh it's a long journey and it's um it's not a linear one. Things will always pan out differently than than than you plan for. So I think a lot of risk tolerance um and and and passion is I think what what people need to bring to the table and uh and expect.

Astrid Woollard 50:40

So you mentioned there that you actually sort of left a comfortable job there to uh go and found 40-51 ventures. Can you tell us a little bit more about what it is that you're doing there, what you're planning to do, and what will actually differentiate you?

Sascha Bucher 50:53

Yes, happy, happy to talk about this. Um yes, it goes a little bit in the same vein that I that I spoke about. The I I see a tremendous opportunity in Central Western Europe. So, you know, this includes Austria, Germany, Switzerland, Northern Italy, and the east of France. That part of Europe is um, I think has a top-notch leading science and talent pool that I think still is not exploited or fully exploited or enough exploited and provides particularly chances for uh uh early stage investors. So uh we're we're in the process of setting up um such a venture fund to uh do seed financing and uh also lead CRSAs. Uh as I said, C and CSA leads in that region is what we see too little of. Um and it's a it's a region where while all the the partners and founders who lived in there, and those we lived actually in the US and the Asian, but we we have roots in that area, and it also probably speaks to the fact that um yeah, you need to you need to know sometimes how to go about things. Europe is is sometimes from the outside complex, but again, there's uh fantastic potential, I believe, or or we believe, and uh that's what we are there to uh uh to work on, um targeting a close um mid this year.

Astrid Woollard 52:28

We just spoke about it that uh VC is just more than just money, and you should actually bring also other things to the table. So, what is your track record uh or the track record of your team and what makes you actually different from any existing VCs?

Sascha Bucher 52:42

Yeah, I think that we we bring a lot of to the table uh with regards to development transactional experience across the industry over decades. Uh, more importantly, I think we built numerous companies and transacted IPOs or transacted them through MA or licensing. Um, and importantly, we also have within our partners the um uh track record of having actually brought dozens of compounds into the into the clinic, including three approved products, which is something that for the long term we believe is very essential and and and a and a differentiating factor um when particularly investing uh very early in companies.

Christian Soschner 53:29

Sasha, that's very, very interesting, uh especially your track record, what you're doing. Um, I think, and also the points that you mentioned about uh the pristine ecosystem we already have on the science side in Central Europe, especially and in Europe. And I was smiling when you mentioned uh Europe might look complex from the outside, but when you're an insider, uh it looks much different. In my opinion, one of the important parts for every ecosystem's uh successes in the industry, especially when it comes to acquisition and last year. Yeah, it was last year. We have now 2021, and uh it was 2020. DMIS was acquired by MST, which I think gives a huge push to the ecosystem in Austria. Um are you aware of other deals in our area?

Sascha Bucher 54:17

Yes, I have actually been uh been uh been um uh privileged to work with uh the the Roche team uh when I was deputy head at uh M ⁇ A at Roche, together with Andreas Hohn and the partnering team at Roche on the acquisition of a company called Totalis. Um they were in uh Vienna, actually had an office in the uh Vienna University. Um that was a company that had a um bifunctional um monoclonal antibody platform, uh world-class, outstanding. Uh was a pretty sizable transaction for was still early stage, the company. Um I believe had like 135, 130 million up front, 500 million in total, including milestones. And that was uh uh fantastic. I think it was a very good transaction for for the founders who built this and was very well uh deserved. And likewise uh for Roche it was a very good addition to their um monotonal antibody product portfolio at the time. Um and and I think there are other examples as well. I think um there there is uh clearly uh top-notch science. I'm thinking also about the IMP Institute, which uh is interesting. And in in the times of COVID, people talk about how collaborative the industry is, which is which is true and which I think is fantastic. But this is an example, uh, the IMP uh institute. People probably know this in in Austria. Um, but this is it goes actually back to the 80s and been a collaboration between Genentech and and Büringer Ingelheim, and still today. Uh actually one of our partners worked at at this uh the IMP Institute. So uh a fantastic example how um you can actually generate and and work together on leading science. So uh there are definitely examples.

Christian Soschner 56:17

I completely agree with that. Central Europe is an amazing area. We have Switzerland uh with a huge pharma industry, we have Bavaria, we have Austria, also Czech Republic, for example, with the IOCB, who produced some blockbusters for Gilead in the United States. So on the science and entrepreneurs side, there are many people here. Sasha, we have some questions from the audience, and I would like to hand the microphone to the first question. Uh, it's from Petronella. Hi, Petronella.

Audience Guest 56:47

Hey Sasha, really, really great insights. Actually, I know your um your co-founder, Sarah, and she's quite amazing. So I would say that what distinguishes you as a future VC fund is having that kind of a female energy on board as well. And uh that will attract lots of uh female uh founders to more or less knock on your door, um, if that makes sense. Um, I'd like to ask you a question related to digital health, right? We understand the process that we need to follow when it comes to molecules development and so on and so forth. Um in particular, um I'm um I'm interested in uh in getting your view and thoughts on digital therapeutics and the rise of digital health startups that don't focus so much on chemicals, but on the use of uh AI, machine learning, and let's say um early diagnosis or prevention or you know detection of diseases, and this will have um, I would say, global impact on on the way in which uh let's say the pharma industry will uh will respond with new type of treatments and so on. So um do you have any plans on investing on those kind of digital health startups? And um, yeah, what are your thoughts on this? Thank you.

Sascha Bucher 58:07

Thank you for the question and uh thank you for your comments, uh also, Petronella. Um uh I think uh first of all, we will invest in pharmaceuticals and biotechs only. Um so the the direct answer we will not make divestments in sort of the quote-unquote digital space. To answer your your second part of your question, uh I think that will have profound um uh impact on the industry, um, in sort of you know shortening timelines, um, you know, predicting binding affinities, uh, molecule structuring, and um hardly a day passes where there's new findings on how these tools will become relevant, and they will also become relevant for us as part of the development process. And uh and I think on on many on many different fronts. For example, you I think you touched upon a little bit on the earlier part of AI finding sort of predicting sort of in silico um sort of quote unquote chemistry or modulation of of compounds. Um and then there are also more, much more quote unquote, so simplistic, but still sort of in that space, uh, great opportunities with regards to you know again, and we've seen this in the in the last 12 months speeding up tremendously of how you know you can follow a patient journey with regards to real-time data, uh, with regards to uh doing enrollment uh entirely digitally. So I think on many fronts, this will have an impact on our industry, also on our investment, but it's not something that we would uh invest directly into. We're just we're focusing on what we believe we know best, but it is definitely a very, very exciting space. Uh and I think a lot a lot to happen. Hopefully also a chance for uh for for Europe because the the investments and some of these um are less than than in the more classic biotech uh and pharma field, and as such, um hopefully they're also a very interesting winds uh still still out there.

Audience Guest 1:00:11

Yeah, thank thank you so much. Um actually may I may I ask a second question on as a follow-up on this?

Audience Guest 2 1:00:18

Sure.

Audience Guest 1:00:18

If I'm allowed. Um thank you. Okay, it's a provo provocative question. What keeps awake at night the the pharma industries? Because we see right now the rise of Amazon's, apples, and Google's um accumulating lots of um, you know, patient or you know, our data sets on a continuous basis with the Amazon buying pharmacies and so on and so forth. Like, do you have any insights of what keeps awake at night the the from the big the big uh let's say pharma companies?

Sascha Bucher 1:00:50

You know, the it my the question is I think is really is a paradigm shift around the corner. It was interesting. When I started in the industry and I had my first job at Roche, I remember reading a um a piece of research at the time from a well-established investment bank. And it was about the fact that um since Big Pharma is more and more in licensing and acquiring innovation from outside, they would not do 10, 5, 10 years from when I read that report, they would hardly do any development work anymore. Now that has not proven right, but a lot has changed in that time with regards to, you know, you now look at the top uh, you know, you look at the top sellers in the industry, and I think like 60 or 70 percent of the products are actually not made in-house anymore, but are indeed acquired at e-license. And I think um, you know, to use this analogy, which goes uh back quite some time, I similarly also think that the digital industry will still bring enormous changes with regards to the pharma industry. And I would think that um CEOs of the large pharma companies do spend times and maybe nights awake thinking on how that could impact because uh ultimately more and more of that technology uh will actually find its way also into the development of drugs and into the marketing of drugs. So will there be at one stage like a you know an Apple Merck sort of hybrid? I mean, I mean well possible. I remember during my times at Roche that uh with acquisitions of uh Foundation Medicine, for example, um some of those tools were being brought in housing, and I think um many of the pharma companies are actively trying to address that potential changes in the industry, if that makes sense.

Audience Guest 1:02:43

Yeah, makes sense. And any insights on um, you know, the likes of Amazon, Google, and Apple's, maybe with any potential plans of disrupting part of the pharma, like if we think about distribution.

Sascha Bucher 1:02:58

Yes, I mean, yeah, I mean, I think there is there's many examples of uh, you know, think for example about um uh you know, look at a company like 23andme that actually hired a uh well, you know, the ex-head of RD from Genentech a few years back, uh trying to actually uh obtain uh more and more patient data or or or data from from user data and exploiting that as diagnostics. I think there is there's many examples where this is uh this is starting to take place already. I'm not the um the serious expert to talk about that space, but I I I think it's happening as we as we speak.

Audience Guest 1:03:38

Thank you so much, Sasha. Thank you.

Christian Soschner 1:03:41

We have another question from uh Wyren Mahuka. Hello.

Audience Guest 3 1:03:47

Hi Sasha, how are you? Hey, good to good to hear you. Good and you. Good, good, Sasha. Congratulations on your new uh new position and uh joining the VC industry. So I thought uh I thought it would be interesting to ask where do you think VCs are gonna uh gonna continue to invest in the next two to three years? We've obviously seen a big wave of AI digital, and in the previous question, I had a few questions around that. Uh we've seen a lot of selling gene uh investing in the recent past. So my question is, do you think these are sustainable? Um, you know, and and I hark back to the times in the early 2000s when we had this whole huge genomic bubble and then suddenly it all burst, and then nobody would be you know interested in investing uh in any of that. So uh not that I'm hoping for a doomsday scenario or anything of the sort, on the contrary, but just your view on on how you think uh you know what VCs will continue to focus on, uh, whether these are sustainable trends for the next three to four years um or will they shift direction. So just uh sort of broad, broad brush uh uh question about how you see the uh the focus of VCs in the coming years.

Sascha Bucher 1:04:50

I think thank you for the question. I mean, I think I think what I see in the in the US, we've seen already in the in the last couple of years, uh, a trend that uh VCs would become actively involved in companies. That's also where I think I see the opportunity also in Europe to invest early, hands-on, uh, helping uh to shape and create companies uh from from the start to be as competitive and as well prepared for what you're write is like a wave of uh of many uh companies and a lot of uh things happening in the industry. I think that is uh something that I'm seeing. And then what you what you also see in the US, I think with these booming markets, you see that um I think some of the um you know more traditional um sort of crossover investors also tend to sometimes go a little bit earlier. Some of the Mushrooms investors try to go uh into crossovers. So I see a lot of what is probably a function of a lot of opportunities and a lot of liquidity in the market, where then sometimes a bit more of the stringent uh different pockets start somewhat to overlap a bit more and mesh a little bit more than one would have seen otherwise. But again, I think um focus on you know very differentiated high technologies is I still think there is there's room for improvement. And I would also hope that payers and participants in the market see that, particularly pharmaceuticals actually are addressing a big need and actually also help to um you know to to do a great service to to society and uh and also to keep some of the infrastructure structure costs lower, where which now is on everybody's mind to keep people out of the hospitals. And if you go back in time two to three years, um this was like a discussion that nobody really wanted to have. So in that in that sense, I'm I'm hopeful and uh and and uh continue to be very optimistic and uh will be will be interesting time.

Audience Guest 3 1:06:52

Great. Thank you, thank you, Sasha.

Sascha Bucher 1:06:53

Thanks, Virginia. Good hearing you.

Christian Soschner 1:06:56

Sasha, one one final question from my end. Um you were talking a lot about trends that might come or may not come uh when we go 10 years in the future into 2030, and uh we would have the chance to travel there. And we look back from 2030 to 2021 to 25. Uh, I'm just curious uh to hear your expertise and your opinion. Uh, what will be the most significant change that we see coming in the next five years?

Sascha Bucher 1:07:28

I believe that um some of the diseases, including maybe not in five years, but if we say 10 or 15 years, some of the very dire diseases, including, for example, cancer, uh I think we'll be able to turn into chronic diseases. And um, you know, this one analogy I sometimes use is you know, HIV was a death sentence not too long ago. And I don't want to belittle the fact that what patients still live through today, but for many is this has been able to shift that into chronic disease and hepatitis C, uh, something similar, um, you know, was was achieved by the industry, and I'm absolutely positive if you look at the amount of new technologies that that have that are just you know, gene therapy hasn't has been around for a long, long time, but it's been now that products are coming to the market. It's been now that so many new cell therapies are coming to the market. I think uh CRISPR, there's new technologies that are still in their in the infancy. And I think when we look back, um, you know, um a few years from now, or maybe decade from now, I think many of those diseases we will be able to master and do a fantastic impact to uh to patients' lives and to society. So that's what I'm very convinced and very hopeful, but also very convinced of.

Christian Soschner 1:08:55

That would be a very great future if we can achieve that with your help and the help of your team. Sasha, thank you very much for your time and your valuable insights into the development of the industry, the deep structuring and the life of a venture capital company. I wish you and Sarah all the best in your efforts uh to raise money for your fund, to get your fund started. And I'm pretty sure that you will leave uh a great impact in Central Europe in the industry.

Sascha Bucher 1:09:22

Fantastic. Thank you very much, Christian and African and uh thanks to the audience.

Christian Soschner 1:09:28

Have a great evening. Bye bye. Thanks for listening. Please, please share the podcast and make sure you've subscribed. Have a great day.