Majority of Big Pharma deal value is theoretical, not a given.
By Amanda Micklus, Principle Analyst
21 March 2016
I am a Principal Analyst for the strategy team at Datamonitor Healthcare. I have a Bachelor of Science degree in Chemist...
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Big Pharma deals have continued to get more expensive as typical payment metrics, such as up-front fees, on in-licensing transactions have gradually increased. Datamonitor Healthcare analyzed drug-focused in-licensing agreements by Big Pharma companies during 2011–15 to understand trends in deal-making.
While deal economics have indeed increased, well over the majority of the value of these agreements are tied into various types of milestones, including development, regulatory, and commercial, and therefore are neither guaranteed nor paid up-front. As a result, the partner often never sees this money. Excluding 2014, an average of just 7% of Big Pharma deal value was spent up-front, and the rest allocated to potential payments, often referred to as “biobucks”.
2014 was an outlier, with 15% of total deal value attributed to up-front payments. That year included eight transactions that had an up-front value of at least $100m. There were several big deals within that group including Merck & Co’s $1bn payment to Bayer for regional rights to the marketed soluble guanylate cyclase modulator Adempas (riociguat) plus pipeline candidates; AstraZeneca’s $875m purchase of respiratory assets from Almirall; and Pfizer’s worldwide license to MercK KGaA’s programmed death ligand-1 inhibitor avelumab for $850m.
Total up-front payment values and up-front payments as a percentage of in-licensing deal value, 2011–15
Datamonitor Healthcare’s Big Pharma Licensing Trends, 2011–15 is a comprehensive analysis on the last five years of Big Pharma licensing, containing trends on phases, deal economics, and therapeutic areas among other metrics.
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