What therapy areas are attracting the most interest among in-licensors?
Stewart: Oncology leads the pack, followed by cardiovascular, CNS, metabolic, and respiratory drugs, respectively. At the bottom are
dermatology, vaccines, and women's health. Oncology has a unique characteristic in that interest is high at all levels of
the development cycle, including pre-clinical and Phase I and II; in fact, the interest in doing deals here is higher for
Phase II and pre-clinical compounds than for those "sure bets" in Phase III. This is likely due to awareness that a good cancer
drug open for licensing in Phase III is a rarity. All the other major therapeutic segments—with the exception of immunology,
which has a market profile similar to cancer—show a preference for Phase III candidates.
Is the continuing interest in oncology leading to saturation in terms of available opportunities? Has the "low hanging fruit"
disappeared from the proverbial tree?
Stewart: There is no doubt that it is harder to find the perfect compound. But if you look over a multi-year cycle and compare the
number of late-stage assets out there to the actual number of deals consummated each year, we estimate a 20-year backlog of
unlicensed oncology assets are in the hands of parties that lack the wherewithal to bring them forward to commercialization.
It's not exactly low hanging fruit, but it's an exaggeration to claim the oncology field is played out.
Do the conclusions of this year's survey conform to the expectations of those of you engaged in active deal-making negotiations?
Rob Wills, J&J: There is a proliferation of proposals out there in the market—but not every one is an opportunity. Contacts today are like
a form of speed dating: as an example, at each annual BIO meeting, my company will typically get more than 600 requests for
a quick, 30 minute exchange. And most of these encounters revolve around potential oncology products.
Jack Talley, EpiCept: In oncology, I don't see much interest in pre-clinical deals; the preference is for Phase II and beyond. Demonstrating proof
of concept and then building on it to make the case for an improvement over the current standard of care remains the mantra
of choice in driving negotiations.
Al Altomari, Agile Therapeutics: What the survey data doesn't show is the fundamental issue of perception—how players approach the art of a deal. Today, Big
Pharma dominates the deal-making environment. And what Big Pharma wants to acquire are products able to secure registration
without extensive additional investments in development, to begin generating revenue as quickly as possible. What the biotech
start-ups want is the capital to launch and grow their company. It is important to understand how these basic values shape
the motivation of each party to finalize a transaction. I don't think there is adequate understanding of what the young start-up
company needs, nor is there much clarity on how much Big Pharma wants to risk in paying out for an asset. The big companies
are most comfortable with the classic textbook licensing deal, while young players are seeking a lot more flexibility in return
for their commitment. It's a real disconnect.
Bart Dunn, NuPathe: Opportunity is finely parsed for small companies. Their bets are limited. So if you have a great late-stage asset, with a
strong probability of success on the regulatory pathway, then why out-license when there is the potential to hit a home run
by commercializing it? Yes, commercialization is costly and carries some execution risk, but out-licensing means you are giving
away a lot of value over time. Many times it makes more sense to hedge your risk and keep a large chunk of the value through
a commercialization partnership. But one plus one has to equal something north of three.