Insight journal - Deals and alliances

Discovery stage in pharma and biotech partnering – Trends from 2009 to 2014

Posted on 02 September 2014

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Numerous pharma and biotech partnering deals have been signed at the discovery stage over the past few years; discovery stage deals remain the most popular stage at which deals are announced.

Discovery stage partnering is a crucial part of the commercialization process as smaller companies that have developed candidate drugs to a stage requires an injection of funds and/or expertise to ensure it progresses smoothly through clinical development.

Discovery stage can be defined as a compound discovered as a result of a drug discovery program that shows potential as a candidate drug for the target indication.

An analysis by Current Partnering has revealed recent trends in pharma and biotech partnering at discovery stage of development– including average deal financials.

The article is an abstract from the report: Discovery Stage Partnering Terms and Agreements in Pharma and Biotech

A biopharma discovery stage partnering deal is where a licensor partners with a licensee company to complete discovery research, followed by clinical stage and then product registration and launch, subject to the successful completion of each phase of development.

Whilst many deals are signed at the discovery development stage, increasingly larger biopharma companies are seeking some form of confirmation that a drug candidate is of genuine potential. This normally means providing proof of concept in the form of at the very least a full preclinical package or more normally demonstration of phase I success.

Analysis of data provided by Current Agreements, the leading life sciences deals and alliances database, shows that discovery stage partnering makes up about 36% of all deals where a stage of development is disclosed since 2009.

The following figure shows the breakdown in biopharma discovery stage deal making between 2009 and July 2014.

Figure 1: Number of pharma and biotech partnering deals signed at discovery stage of development 2009-2014

 

discovery1 sep2014

 

 

 

 

 

 

 

 

 

 

Source: Current Agreements, 2014

Attributes of discovery stage deals

  •  The discovery technology and/or the drug series derived from the discovery process is available for licensing
  •  The licensor has committed funds to the development of the discovery technology and may have applied it to deliver a number of drug candidates
  •  The licensor is seeking to find a partner to support funding of preclinical and subsequent studies
  •  The licensor may be willing to hand over all further development and applications of the discovery technology to the licensee
  •  The licensor may be seeking to license only the drug candidate series whilst retaining the discovery technology
  •  The licensor is seeking upfront payments and milestones commencing with selection of lead compounds
  •  The licensee is seeking to minimize costs until successful completion of early clinical studies, at which point it would be willing to pay option and/or milestone payments
  •  The licensee likely to agree to a significant milestone upon successful completion of phase I clinical studies in preference to significant upfront payment
  •  Royalty commitments are likely to be at the lowest range of those on offer drug compounds in the drug development process

What to pay for a discovery stage partnering opportunity in a pharma and biotech partnering deal?

Pharmaceutical companies are increasingly committing greater resources and budgets to partnering.

This is in part due to the acceptance that strong pipelines need a high proportion of in-licensed compounds to deliver the required level of new compounds to satisfy investor demands. However, the increasing cost of successfully bidding for the best partnering opportunities is also contributing to the trend, and is raising the question of when overbidding for a finite number of partnering opportunities will prove to be a bad investment choice in the future.

Since the partnering process can often be subject to competing factors such as respective party’s power at the negotiation table, each parties near term needs and objectives, perceived value of the opportunity under discussion, and real world market opportunity based on market potential and satisfaction, every deal and specific financials will be different.

However, most deals will have a number of factors in common in terms of financials – they will all have a headline value which is comprised of upfront or license fee, development and commercial milestone payments, R&D funding payments, equity purchases, and royalties paid on any product commercialized as a result of the partnership. Most deals will consist of some or all of these components.

An analysis of payment deal terms was undertaken for the Discovery Stage Partnering Terms and Agreements in Pharma and Biotech report using data supplied by Current Agreements, the leading life sciences deals and alliances database. Each deal is in the public domain with financials disclosed.

Partners regard quantitative deal information as commercially sensitive and as such do not disclose it, unless required by national regulatory legislation. The consequence is that such information has attained a high value in the eyes of competitors and dealmakers, in that it provides valuable guidelines and benchmarks for future dealmaking, ensuring that companies are not receiving too little, or paying too much for a certain technology or candidate compound.

The following figure provides a summary of upfront, milestone and royalty payment data analyzed in this report.

Figure 2: Summary median payment terms for discovery stage partnering deals 2009-2014

discovery2 sep2014

 

Source:Discovery Stage Partnering Terms and Agreements in Pharma and Biotech

Shamini Thiagarajan

The report Discovery Stage Partnering Terms and Agreements in Pharma and Biotech ia detailed and comprehensive analysis of discovery stage partnering deals, providing access to in-depth data on deal financials including median deal terms, payment term spread, access to each financial deal term data point available, and access to over 4,000 discovery stage partnering deals as announced between 2009 and July 2014, including contract documents where available.

Sources

The above information has been abstracted from the following resources:

Related

Buy report: Discovery Stage Partnering Terms and Agreements in Pharma and Biotech

Other reports: Clinical Stage Partnering Terms and Agreements in Pharma and Biotech

Preclinical Stage Partnering Terms and Agreements in Pharma and Biotech

View: glossary definition for discovery stage partnering

View: Current Partnering Insight’s Partnering Scorecard – view top life science partnering deals by value

View: Current Partnering Insight’s Deal Metrics – the latest deal trend infographics for life science deal making

View: Current Partnering Insight’s Big Pharma Company Tracker – latest trends in big pharma deal making activity

View: Current Partnering Insight’s Big Biotech Company Tracker – latest trends in big biotech deal making activity

Signup: Current Partnering Dealmakers Update – weekly newsletter providing the latest life science industry deal news, deal making trends, partnering events – sign up now

Signup: Current Agreements Deals Review – monthly newsletter – reviewing the previous month’s life science deal making – partnering, M&A and financing – sign up now

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