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Nature Biotechnology: Biopharma Dealmakers June 2011

Posted on 28 June 2011

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Current Agreements has been used as one of the data sources for this article that looks at oncology dealmaking and trends.

Article name: Dealmaking Trends in Oncology

Written by: Suzanne Elvidge


"According to the Current Agreements database, there were 3,359 deals in 2010, and oncology deals were the most common, at 16% of the total (Figure 1).

The global financial downturn began in 2007 and, although the biopharma industry is traditionally buffered from financial turmoil, it has had a significant impact on oncology dealmaking, with numbers of deals falling from 630 in 2007 to 517 in 2009 (Figure 2). Recovery has commenced: in 2010, the number of overall deals returned to 2007 levels, with a 22% increase between 2009 and 2010. If deals continue to increase at this rate, they could double in number by 2014. Even if the increase is only 5% there could be almost 800 deals in 2014.

The bounce-back is also likely to be driven by the remaining high level of unmet need in cancer. The provision of an alternative treatment when there was none is a powerful market position. This means high values are still placed on promising new therapies, even in a challenging pricing and reimbursement environment.

“In early-stage research, we have seen a move from licensing agreements to option deals, which allow the licensor to continue R&D and give the licensee first refusal on any leads emerging from the research. This gives the smaller companies a solid financial basis for their research from milestone payments, with the security of a probable partner at the end,” says Steve Poile, CEO, Wildwood Ventures, provider of the Current Agreements database. “These types of deals are increasing because of the financial climate: money, even in industry, is short.”

Early-stage development is risky, with only a small percentage of leads from discovery reaching the market. Attaching an option agreement to these deals eliminates the risk for the licensee. OncoMed Pharmaceuticals and Bayer Schering Pharma forged an agreement for OncoMed to receive option and milestone payments for any lead candidates arising from the collaboration (see Case study 2). Also, OncoMed will benefit from technology and know-how associated with the larger company, which can be a significant advantage for a small biotech company that is less than a decade old. Optioned deals provide considerable flexibility for the licensee and can often be terminated at any stage, or the option can simply not be exercised.

Although there are advantages for small biotechs entering into these types of deals, there are also disadvantages. “Because the option provides the licensee with first refusal at agreed terms, if the partnering compound is better than anticipated, the opportunity to license out to the highest bidder is lost. This situation does not sit well with investors seeking to maximize the return on successful investments,” explains Poile. This could mean that, as funds become more available, the number of option-based deals will begin to fall again."

Read the full article at Nature Biotechnology's Biopharma Dealmakers


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