2012 Dealmakers Outlook

Jun 01, 2012
By Pharmaceutical Executive Editors

Photo Credit: John Halpern
With Yankee Stadium as the backdrop, Pharm Exec convened on April 10 its annual panel of heavy hitters in business development to crack the bat on best practices in licensing and M&A for the year ahead. The 11 starters [see list, "Participants"] are our biggest group to date, and the discussion proved equally wide-ranging, building on the latest findings from co-host Campbell Alliance's 2012 Survey of Dealmaker Intentions. The detectable trend is the desirability of making a deal, with a particular focus this year on snapping up Phase II assets. The market is hungry enough to end its wait for that perfect, late Phase III compound ready to hit the streets at minimal risk. Oncologics remain the target of choice and there is more interest in claiming promising therapies at a much earlier stage of development.

Overall, what the dealmakers panel found striking is the widening circle of players: academia has found its business roots and is proving a tough negotiator; patient/disease groups are beginning to pinch hit for sidelined venture capitalists as a source of development financing; and new arrivals from emerging countries are beginning to test the waters with deals to gain a foothold on the US market money tree. The conclusion is "know thy partner" will be crucial to a profitable marriage. With the cost of assets rising and payers demanding a more extensive up-front case for value, it's no time for rookies.

William Looney

William Looney, Pharm Exec: The Campbell Alliance Survey of Dealmaker Intentions is now in its fourth year. This is long enough to filter out the background noise and identify distinctive trends in the attitude of investors toward a sector with a historically high risk profile. What are the expectations for deals in 2012 and do we see a transition from the caution that branded previous surveys?

Jeff Stewart, Campbell Alliance: Our survey polled 160 decision-makers, about three quarters of whom were at the VP level or higher. Overall, the outlook for the year is positive. A key finding is that players on both sides of the negotiating table expect increases in the number of deals for Phase II assets. You will recall that in 2011 the emphasis was on sweeping up compounds that had progressed to Phase III because these are perceived as less risky in making it to commercialization. Clearly, investors are more confident about the science and market potential in some therapeutic areas and this has increased the allure of medicines that have established their bona fides at the Phase II (b) stage of testing.

What is interesting is a divide in expectations about deals at Phase III. While in-licensors among the group expect a rebound increase in Phase III deals, those who out-license are projecting a drop. This spread between the in-licensors and out-licensors is the most pronounced in the survey's four-year history. It's hard to identify precisely what is driving the gap, but it is clear that Big Pharma—flush with cash—is desperate to acquire late stage assets that complement their therapeutic portfolios. The desire to supplement their stretched in-house development pipelines is contributing to the tagline: it's a seller's market. What the out-licensors seem to be saying, however, is that they don't expect to have a lot to put on the table, or that financing conditions may improve so they can do the commercializing themselves.

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