Recent trends in preclinical partnering for the top pharma and biotech companies reviewed, over 2,000 deals analyzed – including summary of biopharma deal financials.
A new analysis by Current Partnering has revealed recent trends in pharma and biotech partnering at preclinical stage of development– including average deal financials.
The article is an abstract from the report: Preclinical Stage Partnering Terms and Agreements
A biopharma preclinical stage partnering deal is where a licensor partners with a licensee company to complete preclinical and clinical development, followed by product registration and launch, subject to the successful completion of each phase of development.
Pharma and biotech preclinical 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.
Preclinical partnering or licensing is a core part of most company's business strategy, whether it is to bring in new technologies or products, partner out opportunities to ensure revenue streams and commercialization, or to access third party expertise to accelerate access to the market.
The licensee generally takes overriding control of the continuing preclinical and clinical development, although the activity may be governed by a joint development committee made up of representatives from each company, with the licensor funded to complete some or all of the future activities.
Analysis of data provided by Current Agreements, the leading life sciences deals and alliances database, shows that preclinical stage partnering makes up about 22% of all deals where a stage of development is disclosed.
The following figure shows the breakdown in biopharma preclinical stage deal making between 2009 and July 2014.
Figure 1: Number of biopharma partnering deals signed at preclincal stage of development 2009-2014
Source: Current Agreements, 2014
Attributes of preclinical deals
- The pre-clinical drug candidate derived from the discovery process is available for partnering
- The licensor has committed funds to the development of the drug candidate to include pre-clinical assessment
- The licensor is seeking to find a partner to support funding of clinical studies
- The licensor may be willing to hand over all further development and applications of the preclinical candidates 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 from the signing of the agreement
- The licensee is seeking to minimize costs until successful completion of preclinical assessment or commencement of phase I 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 lower range of those on offer drug compounds in the drug development process.
What to pay for a preclinical 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 Preclinical 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.
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 preclinical stage partnering deals 2009-2014
The report Preclinical Stage Partnering Terms and Agreements in Pharma and Biopharma provides a detailed and comprehensive analysis of preclinical 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 preclinical stage partnering deals as announced between 2009 and 2014, including contract documents where available.
The above information has been abstracted from the following resources:
- Preclinical Stage Partnering Terms and Agreements in Pharma and Biopharma
- Current Agreements life sciences partnering, M&A and financing deals database
View: glossary definition for preclinical 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