BIOTECHS RAISING PROFILES IN DEALMAKING, BUT BIG PHARMA FIRMS ARE STILL TOP DOG

by Jennifer Boggs

As the tag line for the upcoming Allicense meeting in San Francisco suggests, this year's focus is on the "next generation" of dealmaking. But that isn't just an industry buzzword.

There's been a cataclysmic shakeup of the sector in the last several years, from big pharma mega mergers to a recession to increased regulatory and pricing pressures. While the biopharma industry that has emerged from those macro events is a stronger one – perhaps, as some analysts have suggested, even bubble-proof – today's dealmaking is a different ballgame, one that features more players than ever.

"In the old days, if you were looking to partner, you had a list of 10 to 15 firms to call," said Laura Vitez, analyst at Thomson Reuters Recap. "Today, you're not doing yourself justice if you just look at those 10 to 15."

She and fellow Recap analyst Vinay Singh conducted a marketplace analysis, looking to identify the major players in dealmaking – licensing and M&A pipeline-filling deals – in 2013. Their working hypothesis was that smaller companies were encroaching on what had largely been big pharma's territory, in some areas even taking over the lion's share of dealmaking activity.

But that wasn't exactly the case.

Instead, the list of top dealmakers still leads with the same familiar names. It's just that "the list is a lot longer," Vitez said.

Roughly one-fourth of licensing deals in 2013 were done by the top 20 firms – calculated based on total annual pharmaceutical revenue – but in-licensing dollars from the top 20 comprised 56 percent of the total $20 billion spent. Still, that means deals by smaller companies totaled an impressive $9 billion.

Celgene Corp., in particular, inked a series of significant deals in 2013. Though not among the top 20, revenue-wise – Celgene places at No. 26 on the list with $6.4 billion in revenue – the Summit, N.J.-based firm shelled out $165.5 million in up-front money for rights to Morphosys AG's multiple myeloma antibody in a potential $818 million deal in July. Only a few weeks later, it offered $100 million up front for HDAC inhibitors discovered by Acetylon Pharmaceuticals Inc., in a deal that could bring Acetylon up to $1.1 billion in milestones and comes with a buyout option. (See BioWorld Today, July 3, 2013, and July 29, 2013.)

An analysis of M&A deals for the year tells "a similar but somewhat separate story," Singh said. The top 20 firms did 15 percent of the M&A deals for therapeutic assets, representing about one-fourth of the total $60 billion spent on those assets in 2013.

Much of that came from the $10.4 billion buyout of Onyx Pharmaceuticals Inc. by Amgen Inc., which landed as No. 12 on the top 20 list, with revenues of $18.2 billion. Also cracking the top 20 was fellow big biotech Gilead Sciences Inc., with revenues of $10.8 billion, putting it at No. 18. (See BioWorld Today, Aug. 27, 2013.)

When it comes to in-licensing and acquiring promising assets, biotechs are holding their own against the deep pockets of big pharma. "Companies like Amgen and Celgene are entering competitive bidding situations, and they are winning," Vitez said.

BIG PHARMA STILL ON TOP

Still big biotech isn't likely to supplant big pharma as the top dealmakers any time soon. Despite massive restructurings, revenue lost to the dreaded patent cliff and a continued decline in R&D productivity, big pharma continues to contribute the most money by far to biopharma dealmaking, mostly by virtue of simply being so big.

The mega mergers of recent years have widened that gap. Since 2000, Pfizer Inc., for example, has snagged Warner-Lambert, Pharmacia, Wyeth and King Pharmaceuticals Inc. – all companies that had grown via their own earlier merger activity. That puts New York-based Pfizer at the top of the revenue list, posting 2013 pharmaceutical revenue totaling a whopping $51.6 billion.

To put that into perspective, one of biotech's biggest growth stories, Celgene, recorded revenue of $6.4 billion. So it's no surprise that big pharma's bandwidth for dealmaking still far outstrips big biotech.

Astrazeneca plc, for instance, "announced 42 deals in at least nine different therapeutic sectors in the last three years," Vitez said. "No matter how hard the guys at Biogen Idec work, they're not going to come close to that."

Not that Cambridge, Mass.-based Biogen's dealmaking efforts have been too shabby. It made it onto Recap's list of the top 12 most active dealmakers of 2013 – figures are based on deals where terms are disclosed – as the fifth most active, putting it up there with big pharmas such as London-based Glaxosmithkline plc and Whitehouse Station, N.J.-based Merck & Co. Inc.

Topping that list were Astrazeneca and Johnson & Johnson, each of which announced 16 deals last year, followed by Roche AG with 12 deals, Pfizer with 10 and smaller firms Celgene and Merck KGaA both disclosing seven deals.

Interestingly, big pharma's overall internal R&D spend was down year over year in 2013, noted Singh, a sign that those firms might be acknowledging that smaller biotechs are more adept at earlier-stage discovery and R&D.

A report published earlier this year conducted by the EMA, for example, looked at the 94 novel drugs approved in Europe from 2010 to 2012 and found that, while 87 percent of those approvals were granted to pharma firms, more than half of the products started out in biotech labs. (See BioWorld Today, Feb. 4, 2014.)

With partnering and acquisition proving more lucrative strategies for big pharma, its dealmaking activity is unlikely to wane.

"Going in [to the analysis], we had expected to see a more distinct role reversal" in dealmaking, Singh said. But while the smaller biotechs are "stepping into the territory, those same 10 to 15 [big pharma firms] are not falling off by any means.

"They're still getting deals done and still spending a lot of the money," he added.

Another plus for the industry is the trend toward early stage deals. Of the total 111 discovery-stage deals in 2013, the top 20 players were responsible for 46. They inked 16 of the 50 platform technology in-licensing deals.

The big firms also did 23 preclinical-stage deals, 16 clinical-stage and four deals for approved drugs. (See chart below.)

That there were fewer late-stage deals isn't surprising; there are simply fewer assets out there. But the rise in discovery deals is good news for innovation.

"It looks like science is back," Vitez said. "People aren't afraid of science right now."

Editor's note: Allicense 2014: The Next Generation of Dealmaking will be held in San Francisco, April 29-30. Visit Allicense.com to register or to learn more information about this year's meeting.

Fuente: BioWorld

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