Konstantina Katcheves and Daphne Karydas on How Pharma M&A Deals Actually Get Done

Two of the seats that decide whether a biotech acquisition happens were on one call. Konstantina Katcheves, who goes by Tina, is chief business and strategy officer at Acadia Pharmaceuticals. Before Acadia she was at Teva Pharmaceuticals, and earlier she was interim head of strategy and business development at Bristol Myers Squibb, where she says she led the company through its acquisition of Karuna Therapeutics; the Karuna and RayzeBio merger agreements were signed three days apart in December 2023. Daphne Karydas is president and chief financial officer of Flare Therapeutics. She spent about fifteen years on Wall Street, at Goldman Sachs and then on the buy side, before operating roles at Allergan and Syndax Pharmaceuticals.

Lori Ellis opened by saying she does not know much about mergers and acquisitions, and suspects fewer people do than claim to. What they describe is a process measured in years, in which the signature is a late step and much of the hard part is internal.

Why does the industry need M&A at all?

Katcheves starts with strategy and treats deal structure as a second-order question. “We’re pretty much agnostic to the type of deal so long it solves for a strategic question,” she says. Acquisition, partnership, co-development: the instrument follows the problem. Her reason for looking outside is a claim about where science comes from. “Innovation doesn’t happen in one place. It happens all over the world. So, we’re not going to just home grow everything,” she says, which she applies to large pharma, to a mid-cap like Acadia, and to smaller biotechs.

Karydas gives the structural version. Capital and infrastructure sit in one half of the industry, new science in the other. “The larger companies need the smaller more innovative companies and or programs, assets. The smaller companies need access to not just capital, but infrastructure and capability that is just inefficient to create on your own,” she says. The word the conversation settles on is symbiotic.

How long before a deal is a deal?

Corporate strategy gets revisited constantly, Katcheves says, and once a company sets it, “this is your North Star as an organization” for the next three to five years. Deals accumulate against it slowly. “You could be talking and being engaging with and paying attention to a company for years before you know, the opportunity’s ripe for transaction,” she says. She adds one movement in the other direction: “we have seen partnering go earlier and earlier, you know, where there’s more and more risk.”

Karydas puts the same runway at up to a decade and gives the banker a job inside it, long before a transaction exists. “They’re also getting to know both sides of the table,” she says, learning which acquirers want what, and which programs may come available.

What actually starts a transaction moving?

Katcheves names three tests a target has to pass: strategic alignment, science against a real unmet need, and the fiscal discipline Karydas represents. Then something has to trigger it. “There’s something, a catalyst of some sort that often precipitates a transaction. Often that catalyst can be, you know, a data readout. That catalyst could be a need to raise money,” she says. The second arrives with operating signals that show up well before the cash runs out.

What follows is mechanical: early diligence, a closer look at the data, valuation, a term sheet, a contract. Competition sits over the whole sequence, because supply is thin. “Quality assets are still, you know, limited, particularly looking at late-stage opportunities,” Katcheves says, and companies of every size hunt them. She also refuses to treat signing as the end. “We’re talking about getting a deal done, at some point there’s also living with the deal and living with the transaction,” she says.

Who inside the company has to say yes?

This is where both spend the most time. Strategic fit and good science are table stakes, and the deal still dies without someone carrying it. “You need to have an internal champion,” Karydas says, and usually more than one. Clinical has to believe the program, commercial has to want to sell it, and above a certain size the corporate level has to be satisfied the returns hold up.

Katcheves describes what that costs. “The organization typically has a day job,” she says. Commercial teams are delivering medicines, R&D is running the pipeline, and business development arrives with an idea that becomes their work. That is also why the internal case matters. “That’s the group that’s going to live with the deal. So, we can’t underestimate the criticality of that piece,” she says. A Bristol Myers Squibb acquisition now widely credited with opening the modern era of cancer immunotherapy was opposed by its own management team, and the executive who pushed it has described on this show how he forced it through.

Which function carries the most weight depends on the asset, Karydas says. For a product already on the market, commercial has the strongest voice. For an earlier program, clinical development and the scientists judging the mechanism do. Katcheves adds the question that never leaves the room for an unapproved asset: “There’s still a question of needing to assess the likelihood of approval. What is the PTRS of the transaction?”

Why can an acquisition be cleaner than a partnership?

Karydas argues the acquisition is often the simpler instrument. The questions are finite: does this asset make sense, is there a price, can we move fast enough. Integration is real work that happens after ownership is settled. Partnerships and licensing deals keep both parties in the arrangement indefinitely, and that is where she sees them break. “Where they fall apart, in my experience, is in the contract,” she says. Enthusiasm survives the term sheet, then meets the question of who holds which rights in which future scenario. “The devil is in the details,” she says, and a deal can end on a threshold that never appeared in the headline terms. Data ownership is one of those details, and a collaboration agreement written more than a few years ago likely says very little about it, according to a trial lawyer who appeared on this show.

Katcheves agrees and extends it earlier. “Daphne’s point is spot on. M&A can be cleaner,” she says. Preclinical deals carry small headline numbers and enormous complexity, because the parties have to negotiate a joint research plan, and every layer is another place a deal can break.

What changes when the target is public?

“Public company M&A is different than private company M&A,” Katcheves says. A public target already has a price the market has set, so the negotiation runs through the premium. A private target allows more flexibility on structure, with a different stakeholder problem on the target’s side. The categories only take you so far. She says she has never had a single cookie-cutter deal, and asks Karydas whether she has. She has not.

Why is business development an apprenticeship?

Asked for the strangest thing either had seen, both struggled to name one. Karydas ran through her mental catalog and found the surprises stop looking strange once you have seen enough of them, like discovering at the eleventh hour that a third party’s consent was needed, and that it would not be given, for a reason that made no sense to her. “It’s that collective experience that ultimately gets you to be better prepared and more agile,” she says.

Katcheves puts a name on it. “Business development is kind of an apprenticeship kind business,” she says, and the curriculum is exposure. The complicated deals teach the most, and “the ones that don’t go well teach you even more, right? Because you learn what not to do.” One of her more complicated deals was a site acquisition, where integration, the wind-down of one company’s operations, the ramp-up of another’s, and the contract ran at once. She says that creates disparities in leverage.

Why stay in a hard industry?

The decision to leave Wall Street took Karydas seven years. She had the variety of covering the whole sector and could exit a thesis that stopped working, and admits she was something close to a commitment phobe about it. “It took me literally 7 years to make it,” she says. Her reason for staying goes back to her first job out of college, in Merck’s vaccine division, working on a pediatric vaccine; she says she realized then that she liked knowing the work would matter to patients. “I lost my sister to ovarian cancer,” she says, and describes that as what keeps the industry worth it.

Katcheves was promoted into her first global executive role and straight into a reorganization, where one of the first asks was to reduce her own team. “This is people’s livelihood, their sense of self,” she says, and was not sure she knew enough yet to make those calls. She had planned on medicine, found during interviews she did not want hospitals or a bench, and took a science degree to law school and into the business side. “I wouldn’t leave it,” she says of this industry. The advice they close on is for a team facing its first deal: expect a windy road, and bring in someone who has seen where these go sideways.