2013 Dealmakers Outlook - Pharmaceutical Executive


2013 Dealmakers Outlook

Pharmaceutical Executive

Looney: Do these Survey findings concur with what those of you active in dealmaking are seeing in the field today?

Les Funtleyder, Polliwogg: There is a lot of cash out there available for deals, but it is equally true that in the public market the valuations for biotech firms have experienced a big lift—growing at a rate considerably higher than the norm for Big Pharma. No one knows precisely why this is happening: in my recent book, "Healthcare Investing," I suggest it may be due to the inverse relationship between interest rates and biotech investing: when rates are low, biotech assets go higher. The market now expects this—and so the thinking is if you have to pay up anyway, then why not just wait until an asset matures and you can better gauge its commercial potential.

Mahmood Ladha, AstraZeneca: Tax and balance sheet implications aside, our approach to targeting an asset as a licensing opportunity or a direct acquisition is largely agnostic. We focus instead on the asset's stage in its projected lifecycle and on a very close understanding of what the two parties want to achieve in the transaction. This is what is important to us. I'd also comment that, while it is true most companies would prefer deals that involve assets in late stage development, the reality is there are few opportunities right now, especially among Phase III candidates. I'm just not aware of many available that fit our strategy.

Patrick Gallagher, Noven Pharmaceuticals: We too look for late stage assets, but these tend to be priced much higher than is acceptable under our financial criteria.

Ladha: Timing is very important. We have a good understanding of the assets that are out there at any given point in time. We look at many opportunities and often we decide to take a pass. But then something changes and we come back for a second look, building on the interactions we already had. The trust and knowledge obtained through these prior discussions are put to good use and this time it results in a deal. We did several transactions in the past year that built on previous contacts. The message for us is it pays to be patient; for the seller, it pays to be persistent.

Vidal de la Cruz, Fomento Pharma: My experience is primarily as an out-licensor, which requires a degree of fortitude that is often not reflected in these surveys. I have joked that "BD" isn't an abbreviation for business development but for "Bufo Deosculatore," or, loosely translated, "frog kisser." When you are out-licensing, this is figuratively what you have to do: kiss a lot of frogs and hope that one of them turns into a winner. There are many rejections from potential partners, but we do find that many companies will take another look when there are updates to a program. It's no easy task.

Looney: What does the survey say about the key therapeutic areas of interest this year? Perhaps the courtship is easier when you can find common cause around a particular disease.

Rieger: Oncology and CNS disorders remain the areas of greatest interest. Diseases of the immune system are gaining rapidly, and we see a revival of interest in vaccines and antibiotics. As a category, orphan drugs are the hot ticket along with antibody drug conjugates. Regarding the latter, the buzz is centered on the promise that this will lead to new and better ways to deliver drugs for maximum therapeutic effect. Likewise, the continued commitment around CNS—Alzheimer's disease in particular—prove that the industry is still willing to take the risks and engage in areas where the need is great because the current standard of care is so poor. In the oncology space, there is excitement linked to our increased understanding of the biology and genetics of tumors, which is leading to more personalized treatments. Yet venture capital firms seem to be pulling back a bit in financing oncology start-ups. This is creating more interest in company to company partnership deals that can help fund the next phase of growth.

Funtleyder: We are also seeing strong interest in immunology drugs. Science is finding immunological effects in many chronic conditions, like diabetes. Some experts believe that inflammation is at the root of all diseases.


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