New York's Yankee Stadium was once again the venue for Pharm Exec's annual crack at the bat on trends and best practices in biopharmaceuticals licensing and M&A for the year ahead. Our panel
of five experts from big and small pharma as well as academia were joined on February 26 by co-host Campbell Alliance, which
provided an advance look at its Survey of Dealmaker Intentions, due for rollout at the BIO Annual Meeting in Chicago later
this month. The key findings of the group: dissecting payer preferences well in advance is now the essential "due diligence"
for any deal; the debate on whether Big Pharma should scale the ivory tower of partnerships with academia is over; and the
next wave of dealmaking involves risky bets on cell-based process and signaling technologies that offer entirely new ways
to develop medicines. Never has it been truer that "the art of the deal" is all about stretching the horizon of commercial
opportunity beyond what a company can do in-house, by itself. The following is our edited summary of the conversation.
—William Looney, Editor-in-Chief.
Campbell Alliance has conducted its executive-level Survey of Dealmaker Intentions for the past five years; a period that
observers would concede has been one of the most volatile in memory. What is distinctive about the past 12 months and how
is this weighing on the current business calculations of pharma companies and the host of new partners emerging in this space?
Is the market for deals trending up for 2013?
Rich Rieger, Campbell Alliance: We polled 129 key decision-makers here in the United States and in Europe, nearly three-quarters of who rank at the VP level
or higher. The focus is on licensing activity rather than M&A transactions. The latest results, indicate that 2012 was a modestly
successful year for Phase II and Phase III licensing deals, reversing the downward trend that had been a fixture since we
launched the survey in 2007.
I suspect that the overall dealmaking climate might be even more positive if the survey included M&A data, as we are seeing
less concern among companies that once regarded M&A's as an option to avoid due to the dilutive impact on earnings. Reliance
on in-licensing may be shifting to actual M&A activity. In fact, one approach that is flying high on the radar is the "earn
out" deal structure, which is almost a hybrid of the traditional M&A cash back/equity financing model and the milestone payments
that drive negotiations in the in-licensing space. The "earn out" is a useful way of establishing a contingent value for an
asset, which is attractive to companies that want to better quantify their risk exposure by tying payment to a goal or an
event that has to happen. Earn outs are becoming a mainstream practice and in our view will be a central part of dealmaking
in the year ahead.