Today early-stage partnering is a core component of both biotech and
pharmaceutical business strategy, allowing companies to access promising new
and emerging compounds and technologies. To become a successful player within
the life science industry it is crucial to understand the changing dynamics of
the industry' s early stage deal-making trends.
Pharmalicensing' s revised second edition of "Early Stage and Discovery Deals:
Strategy, Structure and Payment Terms" analyzes the early stage dealmaking
trends and discusses the basics of dealmaking structures, covering payments
terms and deal valuations.
Updated with new data including case studies from 2006 and contracts this
report aims to assist and guide leading professionals involved in business
development through the complex process of early stage dealmaking.
Order this report to
Discover the benefits of early stage partnering
Examine the current partnering model
Uncover ways to find the right partner
Accumulate tips for structuring and maintaining the right deal
Understand the cost differences between in-licensed projects and in-house
pre-clinical projects
Report sections include
Extensive selections of case studies from 2006, featuring companies such
as Amgen AstraZeneca, GlaxoSmithKline
A Comprehensive presentation of headline deal values at different phases
of early stage development
Detailed company contracts, highlighting real values and information
Table of Contents
Table of Contents
Executive summary
Executive summary
1. Introduction
2. What are the benefits of early-stage partnering?
2.1. The role of partnering in corporate strategy
2.1.1. What are the benefits of out-licensing?
2.1.2. In-licensing: A way of giving an off-patent drug a new life
2.2. The revenue from in-licensed products is predicted to have an annual
growth rate of 10%
2.3. Partnering for pipeline development
2.3.1 One company' s tactics: GlaxoSmithKline' s approach to in-licensing
3.1. Licensing to partnering
3.2. The traditional licensing model
3.3. The transition from straight-forward transactional exchanges to
complex partnering agreements
3.4. Who benefits from the risk and reward sharing?
3.5. Sharing knowledge is a big part of the deal structure
3.6. What does the partnering model teach us?
3.7. Complex partnering models
3.7.1. Process
3.7.2. How to structure a successful deal
3.7.3. Financing - What aspects should be considered?
3.8. A shift in early stage dealmaking
3.8.1. Biotechs competing with pharma for deals
4. Early-stage deal strategies and structures
4.1 Successful out-licensing
4.2. When do companies partner?
4.2.1. Who benefits from early stage licensing?
4.2.2. License late: A safer but more costly avenue for the licensee
4.3. Early and late-stage deals - a cost comparison
4.3.1. What do companies spend on partnering and how successful are the
in-licensed projects?
4.4.1. Alliances between biotechnology companies are taking over
Case study 4.1 - MedImmune / Infinity Pharmaceuticals
Case study 4.2 - PTC Therapeutics / CV Therapeutics
Case study 4.3 - Predix Pharmaceuticals / Amgen Inc
Case study 4.4 - Medtronic / RVX Therapeutics
Case study 4.5 - Enzon Pharmaceuticals / Santaris Pharma
4.4.2. Upfront payment: An important part of the deal structure
See case study 4.1 - MedImmune / Infinity Pharmaceuticals
Case study 4.6 - GlaxoSmithKline / ChemoCentryx
Case study 4.7 - Infinity Pharmaceuticals / Novartis
4.4.3. Why is University out-licensing associated with very early-stage
projects?
Case study 4.8 - National Institutes of Health (NIH) / Regeneron
Case study 4.9 - GlaxoSmithKline / Alimentary Pharmabiotic Centre
Case study 4.10 - Biota / NIAID
Case study 4.11 - Cystic Fibrosis Foundation / Vertex Pharmaceuticals
4.5. Licensing strategy case studies
Case study 4.12 - Crucell / Immunobiological Laboratories Co Ltd
Case study 4.13 - Galapagos / Cellzome
Case study 4.14 - Memory Pharmaceuticals
Case study 4.15 - Caprion Pharmaceuticals / Boehringer Ingelheim
Case study 4.16 - Cambridge Antibody Technology / AstraZeneca
Case study 4.17 - Biorigen / New Life Scientific
Case study 4.18 - GTC Biotherapeutics / LFB Biotechnologies
4.6. Deal types
5. Payment strategies
5.1. Deciding a strategy
5.2. Payment options
5.2.1. Upfront payments
5.2.1.1. Conditionality of upfront payments
5.3.2. Loans
5.3.3. Convertible loans
5.3.4. Equity
5.3.5. R&D funding
5.3.6. Annual fixed payments
5.3.7. Milestone payments
5.3.8. Innovative forms of payment - ' quids'
5.3.8.1. Products
5.3.8.2. Extended rights to pipeline/technology
5.3.8.3. Benefit from skills transfer
5.3.8.4. Public relations - An important factor for the early-stage
company
5.3.8.5. Other quids
5.3.9. Royalties
5.3.9.1. Issues affecting royalty rates
5.3.9.2 Royalties on combination products
Case study 5.1 - Elan Corporation plc / Abbott Pharmaceutical PR Ltd
6.2.4.2. Networking for early biopharmaceutical executives
6.2.5. Becoming partner of choice
6.3. Deal timeframes
6.4. Deal valuation
6.4.1. Factors contributing to the deal valuation
6.4.1.1. Intellectual property
6.4.1.2. Development phase
6.4.1.3. Cost of clinical trials
6.4.1.4. Risks associated with commercializing too late
6.4.1.5. Benchmark values
6.4.1.6. Preclinical/clinical data
6.4.1.7. Risk of failure
6.4.1.8. Size and value of therapeutic market
6.4.1.9. Competition for licensing rights
6.4.1.10. Partner' s expertise/reputation in given field
6.4.1.11. Impact on internal R&D programs
6.4.2. Due diligence as a valuation tool
6.5. Keeping a deal successful
6.5.1. Commitment to the deal
6.5.2. Know your partner
6.5.3. Thorough due diligence
6.5.4. Patent and IP management
6.5.5. Comprehensive deal agreement
6.5.6. Feasible and achievable milestones
6.5.7. Proactive management of issues
6.5.8. Regular communication
6.5.9. Tracking of payments and royalties
6.6. When to negotiate termination
6.7. What makes a deal ' newsworthy' ?
7. Deal terms and trends - An analysis of early stage deals
7.1. Why are deal-terms put in the public domain?
7.2. Does survey data reflect the real deal?
7.3. Headline valuations
7.5. Components of the deal
Appendix 1 - Glossary of terms
Appendix 2 - Resources
Appendix 3 - Complex deal terms: an outline
Appendix 4 - Press releases
Case Study 4.1
Case study 4.2
Case study 4.3
Case study 4.4
Case study 4.5
Case study 4.6
Case study 4.7
Case study 4.8
Case study 4.9
Case study 4.10
Case study 4.11
Case study 4.12
Case study 4.13
Case study 4.15
Case study 4.16
Case study 4.17
Case study 4.18
Case study 5.1
Appendix 5 - References
Appendix 6 - Biographies
Acknowledgements
Pharmalicensing
Pharmalicensing Order Form
List of Tables
Table 1. GSK' s - Centers of Excellence for Drug Discovery consists of 7
individual centres. 13Table 2. R&D project mathematical valuation models
need to be more complex in order to reflect reality.
Table 3. Big pharmas dealmaking trends show that they prefer to invest in
similar development stages.
Table 5. The top 5 deal values in Jan 2006 - Oct 2006 combined reached a
total of more than $US 1.6 billion.
Table 6. Top 5 upfront payments between Jan-2006 and Oct-2006.
Table 7. The top 5 valued University deals, Jan-2006 to Oct-2006.
Table 8. A summary of different deal types.
Table 8. Payment strategies - components of the deal
Table 9. Variants affecting royalty payments
Table 11. Attributes that attract partners
Table 11. Major early-stage partnering events
Table 12. A selection of networking clubs worldwide
Table 14. Early stage deals deal frames - from contact to signature
Table 15. Factors contributing to deal valuation
Table 16. Ongoing due diligence to keep a deal successful
Table 17. A preclinical project is worth significantly less than a phase I
or phase II project.
List of Figures
Figure 1. Amount raised from partnering 1980-2005. 7
Figure 2. Between Jan 2006 - Oct 2006, 6 early stage deals were valued at
over $US 100 million.
Figure 3. Deals disclosing upfront payments between Jan 2006-Oct 2006.
Figure 4. The values of University deals are significantly lower than
biotech deals between Jan 2006 and Oct 2006.
Figure 6. Key information sources for partnering executives
Figure 7. Lead Molecule R&D projects have increased most in value Jan.
2003 to Oct. 2006.
Figure 8. Breakdown of discovery deals from 2003 to October 2006*
Figure 9. Breakdown of lead discovery deals from 2003 to October 2006*
Figure 10. Preclinical deals from 2003 to October 2006*
Figure 11. Average total upfront payments by stage of development at deal
closing ($ million)
Figure 13. Average royalty rates by stage of development at deal closing
(%)
