Poor Louie
King Louis XI of France (1423-1483) was an interesting character. At 17, he rebelled against his Father, Charles VII. Later forgiven by papa, he ascended to the throne at the ripe old age of 18 and was subsequently nicknamed the “Universal Spider” for all the webs of intrigues that he spun around himself.
But while our friend Louie lived in the 15th Century, he clearly understood the concept of BATNA.
In the mid-fifteenth century, France had endured more than a century of intermittent warfare with England. The Hundred Years’ War, which had begun in 1337, left the French countryside in ruin, the treasury drained, and the population tired of war.
In 1475, the English king Edward IV invaded northern France, bringing with him an army financed by Parliament and motivated by the prospect of reclaiming lost territories.
Outnumbered, broke, and with unreliable nobles, Louis faced a difficult decision. He could have entered yet another long, protracted war with England. Or, he could have negotiated.
Fortunately, our friend Louie saw reason. He sought to negotiate. The resulting Treaty of Picquigny, signed on 29 August 1475, granted Edward a generous pension (or, “Royalty” if you prefer) and effectively ended English claims in France and ended The Hundred Years’ War.
To some, it appeared humiliating. But to Louis, it was survival. He understood that his BATNA was negative because renewed war would have risked collapse of his empire.
By sacrificing short-term pride, Louis achieved long-term stability. Peace with England allowed him to consolidate power internally and strengthen France’s position for the future.
What Is BATNA?
The term BATNA was first coined by Fisher and Ury in their 1981 book Getting to Yes: Negotiating Agreement Without Giving In.
BATNA is an acronym for Best Alternative to a Negotiated Agreement.
Read that sentence again before proceeding.
In essence, your BATNA is what you will do if you fail to reach agreement with your counterpart. It represents your fallback plan, or the next best course of action available to you.
Knowing one’s BATNA is essential because it defines the threshold below which any proposed deal should be rejected.
A positive BATNA (or, multiple BATNAs) gives you power. It means you have credible, valuable options if talks fail.
A negative BATNA, as in Louie’s case, means your alternatives are so poor that almost any agreement is preferable to deadlock.
Positive BATNAs in Biotechnology
In our world, the concept of BATNA is critical. Biopharma companies constantly engage in negotiations, and the strength of their alternatives determines whether they negotiate from a position of strength and confidence, or a position of weakness and desperation.
Examples of positive BATNAs may include:
Adequate Cash Reserves – A company with plenty of cash runway can negotiate a licensing transaction without panic. It can afford to delay a deal, continue generating data, or explore competing offers.
Supportive and Realistic Board of Directors – A Board that understands market conditions and long-term value creation is itself a BATNA. Realistic, supportive Boards allow management teams to reject suboptimal deals without fear of losing their jobs.
A Diversified Pipeline – A company with multiple programs in different therapeutic areas and/or stages of development enjoys resilience. Each viable program represents an alternative path forward, both from the development and out-licensing perspectives.
Strong, Compelling Data – Data are a form of currency. Compelling results can attract new partners, investors, or grant opportunities, strengthening the company’s negotiating position when multiple interested parties are involved in the process.
Non-Dilutive Funding or Strategic Partnerships – Early collaborations, academic partnerships, or government grants create optionality and prevent over reliance on a single financing event.
Case Study: Pandion Therapeutics — The Power of a Strong BATNA (click here to read case study)
Pandion Therapeutics, a US company developing treatments for autoimmune diseases, declined several early overtures from Merck to license or acquire its research programs, including its lead candidate PT-101. Merck’s proposals ranged from an outright acquisition to a 50-50 co-development partnership. Pandion declined each one.
After releasing Phase I data demonstrating favorable tolerability and selective immune activation, Pandion’s leverage shifted. The company’s ability to continue independently, supported by sufficient cash reserves and investor confidence, functioned as its BATNA. In short, its financial position allowed it to walk away from suboptimal terms.
The subsequent outcome validated this strategy: Merck ultimately acquired Pandion in 2021 for approximately US $1.85 billion, a substantial premium over earlier offers. Favorable clinical data strengthened Pandion’s negotiating position, enabling the company and its investors to achieve superior value rather than settling out of urgency or fear of being left behind.
Lesson: A strong BATNA often comes not from multiple offers but from the credible ability to advance independently. Pandion’s confidence in its data, its financing, and its understanding of market interest allowed it to negotiate from strength rather than desperation.
Postscript (2025): PT-101, now designated MK-6194, is reportedly no longer advancing in vitiligo or lupus. This underscores that Merck, too, had a BATNA, in the form of its deep pipeline and diversified R&D budget.
Why Companies End Up With Weak or Negative BATNAs
Despite knowing the theory, many companies find themselves negotiating from a position of weakness, like Louie. Some of these situations are beyond the control of management, but some are. For example:
Over reliance on a Single Asset – Many biotechnology companies are founded around one scientific breakthrough. This focus, while commendable, may lead to a lack of diversification, both scientifically and financially. When that lead program fails in the clinic or encounters regulatory setbacks, the company’s entire future is jeopardized. Without a secondary asset or platform to pivot toward, the organization is left without a credible BATNA and must accept whatever deal preserves survival (if a deal presents itself at all).
One Hit Wonder – In recent years, some venture investors have intentionally created single-asset companies built around a solitary drug candidate or concept. These entities are, by design, without a BATNA. Their existence depends entirely on the success of one positive outcome. While this structure can concentrate resources and accelerate decision-making, the absence of a credible alternative (again, by design) means that failure of the lead candidate results in immediate corporate failure. Is this a wise strategy when we know that the probabilities of success on our industry are inherently low?
Delayed Fundraising – It is common for companies to postpone fundraising until the cash balance is critically low, either because management (or the Board) wishes to delay dilution and/or assumes that new data will improve valuation. However, the capital markets are rarely predictable. When conditions tighten, investors and/or licensees may exploit the company’s vulnerability by offering unfavorable terms or walking away altogether. After all, they are the ones with the BATNAs. In such cases, the absence of a financial BATNA forces acceptance of a low-valuation bridge round, an unfavorable licensing deal (if they are lucky), or, in many cases, bankruptcy (cf., Louie).
Misaligned Governance – A Board of Directors can be an asset…or a liability. When Board members are fixated on unrealistic valuation targets, timing expectations, or “trophy” partnerships, they constrain management’s flexibility. A CEO who recognizes the need to accept a reasonable offer may find him/herself overruled by a Board that insists on waiting for that mythical “perfect deal.” The result is paralysis, followed by desperation once the company’s options have evaporated.
Ignoring Early BD&L Signals – Potential partners may express preliminary interest well before a formal transaction is possible. These early discussions may serve as valuable indicators of external perception and potential deal structure. Companies that dismiss or ignore these signals (perhaps assuming that “serious” offers will come later) miss the opportunity to cultivate multiple bidders or gather market intelligence. When momentum fades and licensee enthusiasm wanes, they find themselves isolated, with no viable fallback partners to engage. Choosers quickly become beggars when the prospective Licensees stop returning calls and emails. This phenomenon is also observed when management believes that a licensing transaction can be “wrapped up” in a few months.
Clinical Tunnel Vision – An exclusive and excessive focus on clinical milestones can blind management to business realities, especially when the clinical endpoints are unique or non-standard. Teams absorbed in protocol design, patient recruitment, and data analysis may find themselves (in hindsight) wasting a lot of time. Communicating these results may present their own challenges. By the time clinical readouts emerge and are understood (or not), potential relationships have cooled and the company’s runway has shortened.
Building a BATNA Years in Advance
A BATNA(s) is not something that you come up with one morning after a coffee or a long run. A BATNA must be developed deliberately, often years before it is needed. How?
Portfolio Design and Optionality – Optionality is the lifeblood of a strong BATNA(s). When constructing a pipeline, think in terms of alternatives. If Program A fails, does Program B continue? Can one platform yield multiple assets? Optionality is something that should be designed into the company’s business plan during start up, and not afterwards when it is needed. This concept has obvious fundraising implications, especially at the Pre-Seed/Seed stages of a company’s life.
Partnership Ecosystem – Cultivate early relationships with multiple potential partners where possible. Informal scientific exchanges, co-development discussions, and joint publications create a network of interest long before formal negotiations begin. Starting the licensing process “when you are ready” is, frankly, naïve and misunderstands how long it actually takes to execute a license agreement.
Governance and Alignment – Ensuring that the Board understand and shares management’s understanding of risk, valuation, and timing is a key aspect of Management – Board relations. Misalignment can place management in untenable positions when partnering discussions actually kickoff.
Scenario Planning –What if the pivotal trial fails? What if capital markets tighten? What if a competitor achieves breakthrough status? Many management teams should be thinking less like innovators and scientists and more like management consultants, but they lack the skills (or courage?) to ask some very difficult questions.
Conclusion
King Louis XI did the right thing. He signed the agreement and wrote the check, recognizing that his BATNA (continued war with England) was not great, and was the only solution to a problem he inherited. His “Board”, i.e., his nobles, would never have supported Louis’ call for taxes and men to fight the English yet again.
His negative BATNA was simply untenable. But, by acknowledging reality, Louis preserved his kingdom and laid the foundations for France’s future strength. He would have made Papa Charles proud.
In our world, the same principle applies. Executives who fail to develop alternatives from the beginning are often compelled to accept suboptimal deals (or no deals at all). Those who build strategic, financial, and scientific BATNAs over time can negotiate from a position of strength, and not one with limited options.
In sum, you cannot invent a BATNA(s) when you are desperate. BATNAs must be designed into the fabric and framework of a company from the time it is founded. Strong BATNAs give companies time, credibility, and freedom. They can transform negotiations from acts of survival into exercises in strategy and optionality.
The companies that thrive, like the kings whose names we discuss hundreds of years later, are those that prepare their alternatives long before they sit for the next video call.
References
Fisher, R., & Ury, W. (1981). Getting to Yes: Negotiating agreement without giving in. Penguin Books.
Velez, C. N. (2024). Partnering for Growth: Business development and licensing in pharma and biotech. Lacerta Bio Press. Available from https://www.amazon.com/Partnering-Growth-Business-Development-Licensing/dp/B0FVB9NHY3/
Wikipedia contributors. (2025, October 23). Treaty of Picquigny. In Wikipedia, The Free Encyclopedia. Retrieved October 28, 2025, from https://en.wikipedia.org/wiki/Treaty_of_Picquigny
Image of Louis XI from Jacob de Litemont, Public domain, via Wikimedia Commons, https://commons.wikimedia.org/wiki/File:Louis_XI_(1423-1483).jpg
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