Insight journal - Deals and alliances

Pharma and biotech clinical stage partnering – recent trends 2009 to 2014

Posted on 02 September 2014

Tags: , , , , ,

Partnering trends for the top pharma and biotech companies reviewed with over 2,000 deals analyzed – including summary biopharma deal financials.

New analysis by Current Partnering has revealed recent trends in pharma and biotech partnering at clinical stage of development – from phase I to phase III – including average deal financials.

The article is an abstract from the report: Clinical Stage Partnering Terms and Agreements

A biopharma clinical stage partnering deal is where a licensor partners with a licensee company to complete the clinical development program and then subsequently launch the product.

Pharma and biotech clinical stage partnering is crucial for small biopharma (licensor) companies looking for investment to progress development of a drug candidate, whilst for larger companies (licensees) it provides an opportunity to build or plug product pipelines with promising new candidates.

For the licensee this means that whilst significant clinical costs may be incurred, the chances of achieving a successful product is also within reach, since the candidate(s) will come with substantial data supporting the potential clinical opportunity.

For the licensor it is often the lack of funds and expertise that prevent the company from going it alone. With any partnership comes compromises, and for the licensor they will be giving up potentially large commercial revenues for a small proportion in the form of royalties and advance payments in the form of upfront and development and commercial milestone payments.

Analysis of data provided by Current Agreements, the leading life sciences deals and alliances database, shows that clinical stage partnering makes up about 25% of all deals where a stage of development is disclosed. The following figure shows the breakdown in biopharma deal making by stage of development between 2009 and July 2014.

Figure 1: Number of biopharma partnering deals signed at each stage of development 2009-2014

 

clinical2sep2014

 

 

 

 

 

 

 

 

 

 

 

Source: Current Agreements, 2014

The figure points to greater partnering activity observed in the discovery and preclinical stages of development, however this represents quantity over quality, since only viable candidates will have survived the selection process of discovery and preclinical investigation and therefore be available to partner at the clinical stage.

The clinical stage development deal frequency can alternatively be represented as in the following figure, showing a peak in partnering in 2009 followed by a consistent drop in the number of deal per year since.

Figure 2: Clinical stage partnering frequency 2009-2014

 

clinical1sep2014

 

 

 

 

 

 

 

 

 

 

 

Source: Current Agreements, 2014

Why partner at clinical stage?

For licensors (out-licensing)

Licensing out a late-stage development compound often forms the basis of a company's business strategy, driven by potential of securing additional revenues streams.

A change in therapeutic focus may drive licensing out at a later stage of development. For example, a medium to large pharmaceutical company may decide to shift focus away from a therapeutic area. Rather than abandon a development program, licensing late stage development products to other medium to large or specialist pharmaceutical companies can obtain value for the licensor.

Another reason for licensing out late stage development products is to accelerate or maximize revenue returns from a development program investment. For example, a company that lacks presence or expertise in markets outsides its location may license the product to a third party for commercialization in those outside markets.

A lack of capacity, expertise or resources to continue development of an agent may also drive licensing-out.

For example, specialist pharmaceutical companies may choose to license out selected parts of their pipeline for indications requiring additional clinical trials or a large sales force, or indications that are not currently the target of existing clinical programs, whilst keeping indications that can be sold to niche groups of physicians by small dedicated sales teams (e.g. hospital-only antibiotics).

Companies may also choose to license out a technology that has applications in very different fields, for example animal healthcare.

A merger or acquisition may force licensing out. Under these circumstances, companies may have to divest launched products or compounds in the development pipeline with overlapping indications and markets.

Successful licensing out maximizes the company's return on its product development investment, and can help to deliver on investor demands for capital and dividend growth.

For licensees (in-licensing)

Licensing in late stage compounds can populate pipelines quickly, prop up failing pipelines, or fill development gaps left by failed compounds. It can also provide access to other technologies and expertise outside the core competencies of the licensee company. Licensing in can also prevent a competitor from getting hold of a compound, and can maintain a company's competitiveness.

Licensing in a drug delivery or formulation technology can give an off-patent drug or a drug with an expiring patent a new lease of life, or allow use in a slightly different indication or a new market.

For example:

  • an oral version of an intravenous drug allowing out-patient use
  • a powder or taste-masked formulation of a difficult to swallow or unpleasant-tasting drug allowing pediatric/geriatric use
  • a once-daily/sustained release formulation of a bid/tid agent

Several large pharmaceutical companies have used this strategy together with intensive marketing to convert customers and physicians to a patent-protected formulation to minimize the effect of the original patent expiry, although regulatory authorities are increasingly concerned about the role of this practice to inflate company profits at the expense of the public drugs bill.

Licensing in or out can facilitate a change in strategic focus or direction, either by adding to the pipeline in a specific area or removing products that are away from the therapeutic or mechanistic focus area.

Partnering can allow a company to gain 'quids' (non-cash benefits) in the form of expertise and/or recognition in a given therapeutic area, in preclinical or clinical development, or in marketing and sales, with the support of a partner.

What to pay for a clinical stage partnering opportunity?

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 Clinical Stage Partnering Terms and Agreements 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.

The analysis showed that headline values, upfront payments and royalty rates all increase with clinical stage of development, whereas milestone payment value increased from phase I to phase II but declined at phase III. This may be explained by the advanced stage of the opportunity, with greater emphasis on commercial royalty payments.

The following figure shows summary data from the analysis.

Figure 3: Summary median payment terms for clinical stage partnering deals 2009-2014

 

clinical3sep2014

 

 

 

 

 

Source: Current Agreements, 2014

The above is sourced from the Clinical Stage Partnering Terms and Agreements report.

The report provides a detailed and comprehensive analysis of clinical 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 2,000 clinical stage partnering deals as announced between 2007 and March 2013, including contract documents where available.

For full details of clinical stage partnering terms – see: Clinical Stage Partnering Terms and Agreements

In addition…

Licensors are increasingly seeking to maximize the return on their assets by seeking to extend involvement into product launch, marketing and promotion. This allows access to a share of sales revenues. This has been reviewed in detail in the report Co-promotion and Co-marketing Partnering Terms and Agreements.

On the other hand, licensees are likely to increasingly resist the demand for high upfront or licensing fees.

Partnering will continue to dominate biopharma clinical development; however licensees will increasingly scrutinize and select only a few opportunities as they come to be better able to identify the best candidates and mitigate against the high costs of clinical and partnering failure.

The article is an abstract from the report: Clinical Stage Partnering Terms and Agreements

The Clinical Stage Partnering Terms and Agreements in Pharma and Biotech report provides full details of over 2,000 clinical stage deals announced since 2009 and includes average deal terms including headline, upfront, milestone and royalty rates. In addition the report provides insight into the terms included in a clinical stage agreement, together with real world clause examples. More details here.

Sources

The above information has been abstracted from the following resources:

 

Related

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

Other reporta: Discovery Stage Partnering Terms and Agreements in Pharma and Biotech

Preclinical Stage Partnering Terms and Agreements in Pharma and Biotech

View: glossary definition for clinical 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

Subscribe: Current Agreements life sciences partnering, M&A and financing deals database – find out more

Follow us on: LinkedIn Current Partnering | LinkedIn Business Development Network | @Currentpartner on Twitter

 

Print Friendly, PDF & Email

Leave a Reply