Avexa CEO: how we landed Shire deal

When asked about Avexa's (ASX:AVX) successful in-licensing of HIV drug AVX754 from UK company Shire Pharmaceuticals, Avexa's CEO, Julian Chick, likes to use the following anonymous quote: "How did a little Australian company with no proven ability in-license a phase II drug from a specialty pharma?"

It's a good question.

When Avexa spun out from its parent company Amrad (ASX:AML) it had three very early projects in its pharmaceutical development pipeline. It also had "a group of people that had been working together for four or five years as a collective," said Chick, which gave Avexa a certain level of skills and ability.

To build a sustainable business, however, the company started to look for ways to either reduce the risk of its early stage projects, or to bring in a project that had a greater chance of success and could generate revenue sooner rather than later.

That's when Avexa began contacting Shire.

"We had a bit of a link into Shire anyway, through our scientific networks," said Chick. "In actual fact we initially started talking to them about one of their preclinical programs because we never thought that we would even have the ability or the risk profile to take in something at such a late stage."

Once discussions were underway, Avexa took a team to the UK and "fundamentally camped there for a week and did a number of pitches to them," said Chick.

"Shire is located in Basingstoke and we literally stayed about two minutes up the road, and we went in there and we sat in their offices and we did various presentations at the same time we were also looking at their due diligence," he said.

Chick said there were two reasons for doing this: firstly, to convince the people that made decisions in Shire and secondly to make them comfortable and show some effort. "It's no different to you buying a car, in a sense," said Chick. "You want to be convinced that this vehicle is the right kind of car for you. You've got to feel happy."

Despite being one of a number of companies that were trying to woo Shire, Chick believes the "quantum shift from being one of the many to the partner of choice" occurred when Avexa made a somewhat risky decision.

"We actually redesigned their clinical development program and we went back to them and said look under these terms we can't take the license in, we can't do the deal," said Chick.

And Avexa walked away from the negotiation table leaving Shire with its suggested terms and a development plan. "It was a risk we were willing to take," said Chick.

It was a risk that paid off for Avexa, because within three days Shire came back to the negotiation table and within four months the deal between the two companies was complete.

"Once we got to a point where they understood that we had the capabilities and the drive to do this and we would put a lot of emphasis behind one of their programs, and secondly we realised that they respected us in a certain sense, then it no longer became a negotiation it actually became a collaboration at that point," said Chick. "So no longer was it two groups sitting either side of the table, we were all sitting on the same side of the table."

Chick sees the deal as a win for both parties. He also believes it is only the start of a very long relationship. "Some people believe that negotiations are going in there and trying to rip them off, or screw the other party as hard as you possibly can to the table. I don't see it as being that. I see it as being a way that two companies try and work together and go forward," he said.

"If every partnership you had was as good as the one we have from Shire, no biotech company would have any issues whatsoever."

From the deal, Shire received a 7.5 per cent stake in Avexa as well as the rights to market AVX754 in North America, although Avexa will get a "double digit royalty out of that," said Chick. Avexa retains the right to market to the rest of the world and there is also the flexibility for both parties to negotiate reciprocal territories.

"I think we're quite lucky to say we've suddenly got 50 per cent of a pie that's in phase IIb," said Chick.

Avexa hopes to have AVX754 on the market in early 2009. "Of the 30 HIV drugs, that have started phase III, 30 out of 30, that's 100 per cent success rate, have gone through phase III and been successful, successfully got fast track approval, successfully got to market and successfully received reimbursement," said Chick. "So what's that telling you is that drugs in the HIV space in the latter stage of clinical development have a very high probability of success."

When asked if he has any advice for other Australian biotech companies making similar deals, Chick said that companies have to be urgent when going out for opportunities.

"Clearly state your enthusiasm," he said.

Also, believe in your capabilities. "You really shouldn't be trying to do it if you don't think you can do it," said Chick. "If you can't afford to do something, as a vanilla transaction with a straight licensing, upfronts, milestones then perhaps creative deals structures are a way that Australian companies can start differentiating themselves from others."

Also, be sure to listen. "There's plenty of companies that have relationships with big top 20 pharma and if you went around Australian biotech, you'd probably find that there is a company that either has a very good contact in those companies or has dealt with them in negotiations or has a current deal with them. It's understanding that culture within those organisations that helps a lot. And probably taking it that one step further -- is understanding the mechanisms within those companies," he said.

Make sure that you are in dealing with the decision makers in the organisation. "Find out who the organ grinders are, rather than the monkeys," said Chick.

If your company doesn't have the ability to pay for upfronts and milestones, be honest. And finally, a dose of good luck will always help. "Wear horse shoes, or have leprechauns in your pocket," said Chick.