Degrees of freedom

As big pharma companies have become more interested in accessing the broad platforms developed by biotech companies, the latter have come up with a variety of strategies for doing these kinds of deals without losing their independence. Early examples include the 1990 deal between Genentech Inc. and Roche, the 2003 deal Novartis AG did with Idenix Pharmaceuticals Inc. and the 2004 GlaxoSmithKline plc deal with Theravance Inc. Last week, Novartis and Intercell AG did another as part of the pharma's push into the vaccines space.

In each of these deals, the management of the biotech company has been given the financial freedom to work with little interference from the pharma partner. In each case, the pharma has paid a big upfront fee for an option to tap into the innovative nerve centers of the biotech and hedged this investment with an equity position. ...