Avalon's Kinsella offers scathing review of pharma's 'predatory' BD tactics

Avalon Ventures founder Kevin Kinsella is mad as hell at Big Pharma's deal-making tactics, and he's not going to take it quietly. In a frank series of interviews with Xconomy's Bruce Bigelow, Kinsella accused pharma companies of adopting "predatory" tactics that is pushing the life sciences venture capital sector "almost to the point of extinction."

Kinsella says that pharma companies have been acting hypocritically toward biotechs, with CEOs saying that they need to partner up with biotech more often in order to gain access to a rich new source of pipeline prospects. But in their BD arm, execs "are wreaking havoc on biotech startups."

Business development teams are structuring deals that only return the VCs' investments in the upfronts, he says, holding back any upside for the back end in milestone payments. "It doesn't take a financial genius to tell you that having money in the ground for three to six years, and your upside is just getting it back-and this is for a ‘success'-is not a sure-fire recipe for venture capitalists to raise follow-on funds from their LPs," Kinsella tells Xconomy.

Big pharma companies are increasingly acting in bad faith, more likely than ever to just walk away from buyout deals that have been fully negotiated. Any time pharma companies negotiate a partnership on any product ahead of Phase III, they're more interested in tying up rights to the IP than funding the next stage of development. And the BD guys for pharma often turn out to be recruited from the brass knuckle Wall Street crowd, which scattered in the meltdown.

"The sell-side guys were going to Big Pharma [companies] and saying they can cut better partnerships or buyout deals since they have an ‘inside baseball' understanding of venture-backed biotechs, and they know how to wring the most concessions from a biotech's board."

- here's the in-depth interview from Xconomy