Law Times

PAGE 10 FOCUS AUGUST 25 / September 1, 2008 • Law times joined the firm three years ago, she set a lofty professional goal for herself. "My three-year goal was to Expat American atop life sciences M&A world W BY JULIUS MELNITZER For Law Times hen Cheryl Reicin, a life science special- ist with Torys LLP, dent and CEO, is like-minded. "We needed someone with act on the largest licensing and M&A deals in Canada's life sci- ences sector," she says. Even if she failed in her goal, no one could accuse her of setting the bar too low. After all, she was a newcomer to Canada, following on a 20-year career in the U.S., including 10 years at McDermott Will & Emery, where she headed the firm's 85-lawyer international life sciences practice. As it turned out, the issue of the bar's height never did arise. When Indianapolis-based phar- maceutical giant Eli Lilly and Co. announced in December 2007 that it was acquiring the rights to the multiple sclerosis drug developed by Edmonton- based BioMS Medical Corp., the Canadian company's legal mandate went to Reicin. The global licensing and de- velopment agreement, in which Eli Lilly agreed to pay BioMS $87 million up front, and up to $400 million when the drug was marketed, marked the larg- est licensing transaction ever achieved by a Canada life sci- ences company. At the time, it was also the fifth-largest life sci- ences licensing deal globally. On the M&A front, Reicin had already achieved her self- imposed standard when Torys represented Credit Suisse and Merrill Lynch in Angiotech Pharmaceutical's 2006 acquisi- expertise in biotech licensing, U.S. licensing, and cross-border experience," he says. "One of our business advisers said Cheryl fit the bill, and that was obvious the minute we met her. We got what we expected, and she really brought all that expertise to bear." As importantly, Reicin quickly grasped what was im- portant to her client. "I've been in deals where I've 'Half my practice is still composed of U.S. deals, and I want to keep it that way because that's how you stay in touch with the indus- try,' says Cheryl Reicin. tion of medical device-maker American Instruments Holdings for $785 million. That was the largest life sciences acquisition ever by a Canadian company. In 2005, Reicin also acted on Aspreva Pharmaceuticals Inc.'s $91-million IPO offering on the TSX and NASDAQ. The IPO re- mains Canada's largest life sciences IPO and also its first simultaneous cross-border IPO in the sector. Reicin, who has maintained her U.S. practice through To- rys' New York office, says her success is predicated on being in the thick of things. "Half my practice is still com- posed of U.S. deals, and I want to keep it that way because that's how you stay in touch with the industry," she says. "If you were doing only Canadian life science deals, you couldn't possibly offer the same level of service." Kevin Giese, BioMS' presi- had lawyers with tremendous ex- pertise who still turned out to be bad lawyers," Giese says. "Instead of aiming for win-win, they draft documents with an eye to making negotiating points in situations where that does nothing but im- pede the process in terms of what's important to the client." Indeed, the BioMS negotia- tions moved along very smoothly. "Both parties were motivated and the Torys' team focused on the things that were important to us," Giese says. Reicin, who notes that the U.S. biotech sector is humming along, is hopeful that the BioMS transaction will be a catalyst to the Canadian side of the industry. Michael Herman, of Gowl- ing Lafleur Henderson LLP, is optimistic that it will. "If you look at public-market performance or the venture cap- ital market, 2007 was not a good year for the industry," he says. "But if you look at R&D, you'd have to say that it was a good year because Canada continues to do excellent research." As Herman sees it, the BioMS deal reflects ongoing issues in the Big Pharma market. These, he says, will prompt strategic players to become more prominent on the M&A and licensing front. "Many of the big pharma- ceuticals are finding that their product pipelines are struggling somewhat even as some of their major drugs are coming off pat- ent," he says. "So they're aligning with young biotech companies who are developing therapies and technology and drugs that will be the future of medical treatment." University campuses are an- other bright spot for the industry. "Remember that BioMS got its start at the University of Al- berta, which, like many Cana- dian universities, has become far better at commercializing its technology," says Robert Ford, also a partner at Gowlings. In fact, Ford believes that 2008 will turn out to be a bet- ter year for fledgling companies than for more mature ones that are publicly listed. "Things might be tough for the small caps," he says, "but I think emerging companies may fare bet- ter, particularly in drawing U.S. capital motivated by the change in the withholding tax rules." For her part, Reicin thinks Canadian companies should put more focus on medical devices. "Medical-device start-ups re- quire about $35 million of capi- tal before they can get to an exit event," she says. "That's a lot less than the hundreds of millions re- quired to develop drugs. Compa- nies based in Sweden, Israel, and the Far East have done very well in the medical-device arena." In either case, the key for new organizations is to work with a realistic time frame. "People need to understand that biotech is not like other busi- nesses," Reicin says. "It takes many more years to hit a home run. LT Disputes growing "T BY JULIUS MELNITZER For Law Times he number of disputes between suppliers and hospital has been growing in the last few years," says Denis Chamber- land, a procurement law specialist at Aird & Berlis LLP. Frequently, problems arise because hospitals assume that the provisions set out in a bid-call document — such as a request for proposals or a request for information — make up the entire legal framework that applies to the procurement process. "Regrettably, this assumption is as comforting as it is incorrect," Chamberland says. He cites the example of an RFP that reserves "the right to cancel this RFP process any time, for any reason." "It would be unwise for a hospital to cancel the process on the basis alone of the authority apparently provided by that provision," he says. "There is much more to it." The fact is that the body of laws that apply to hospital procure- ment in Canada has grown a lot in the last decade. Even laws that have been around for some time remain relatively obscure. It is not general knowledge, for example, that the 1995 Agree- ment on Internal Trade, signed by the federal government and all the provinces, has a chapter on procurement that applies to health- care providers. "The AIT represents policy requirements to which all governments have subscribed," Chamberland says. "It has the force of law at the fed- eral level, and the force of policy at the provincial and local levels." For many years, service providers typically presented hospitals Lawrence G. Theall, J. Scott Maidment, Teresa M. Dufort and Jeffrey A. 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"The program is designed to help everyone in the public sector improve their supply chain processes and the way they conduct procurement," Chamberland explains. "The idea is that doing so will help them save money." In a sector where procurement has traditionally been relation- ship-based, however, change comes slowly. "Many hospitals are still signing on the dotted line of five-year contracts without conducting any business or legal reviews," Cham- berland says. "As well, sole sourcing remains a problem, as does the absence of documented procurement policies and procedures." The absence of a procurement complaint mechanism in the broader public sector generally doesn't help. "By contrast, the federal sector has the Canadian International Trade Tribunal, which is making procurement more robust, effec- tive, and accountable," Chamberland says. Making procurement more "robust, effective, and accountable" begins in some cases by ensuring that procurement documents are compatible with the hospital's policies and procedures. "Those policies and procedures form an integral part of the pro- curement process and should be updated on a regular basis so they meet the latest legal requirements and protect the interests of the hospital," Chamberland says. Hospitals — especially when an RFP is issued — should also know up front whether they want "contract A" to apply to the procurement process. Contract A is the bidding contract that the law automatically applies to the relationship between the hospital and all compliant bidders. "If the language of the RFP includes any contract A indicia, which are many, the hospital will be subject to a range of 'fairness' require- ments that the courts have defined extensively," Chamberland says. See A specialized, page 11

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