Top licensing deals of 2012 – Glimmers of hope

Licensing in the pharma sector is gradually becoming more of a buyer’s market. Yet drug developers are still signing big deals with their big pharma partners, with even a preclinical project squeaking into the top 10 biggest up-front payments in 2012.

Phase II remains the place to be for drug developers seeking to extract maximum value, although the biggest up-front payments were for products either on the market or nearing regulatory approval (Product deal values continue to head south in 2012, February 13, 2012). While average deal values might be on the decline, there appears to be no falloff in the number of deals at the top end of the scale (see tables).

Past the peak

There can be no doubt that 2009/2010 was a peak in dealmaking activity as big pharma scrambled to fill empty R&D pipelines. But worries about the 2012 patent cliff have subsided, so those heady days are gone – except for developers working in certain therapy areas.

The decline in dealmaking activity has come in concert with a drop in M&A activity that has seen the biggest players drop out of the takeout game altogether (M&A activity cools in 2012 as break-ups loom, February 7, 2013).

Still, it might be premature to draw conclusions about the effect that the approaching break-ups of some companies have had on business development activities, and only today Roche paid a chunky $65m up front to license in Octreolin from the private company Chiasma (Peptide delivery holy grail forms basis of Roche’s Chiasma deal, February 18, 2013).

But it stands to reason that companies trying to rationalise corporate structures might also be wary of adding projects on which they cannot be certain of following through. Indeed, the biggest deal of 2012 on up-front payment terms was between two companies with entirely different corporate concerns: Forest Laboratories, which urgently needed to boost sales, and Johnson & Johnson, which is now mulling a spin-out of its diagnostics division (As patent storm peaks Lilly and Astra have furthest to fall, February 9, 2012; J&J considers diagnostics sale, but why stop there?, January 24, 2013).

Top 10 biggest deals in 2012 - ranked by up-front payment
Rank Product Therapeutic category Company Deal partner/product source Status on deal date Up-front payment ($m) Deal value ($m)
1 Bystolic Cardiovascular Forest Laboratories Johnson & Johnson Marketed 445 445
2 Nexium OTC Gastro-intestinal Pfizer AstraZeneca Filed 250 250
3 Toctino Dermatology GlaxoSmithKline Basilea Pharmaceuticals Marketed 232 312
4 GLPG0634 Musculoskeletal Abbott Laboratories Galapagos Phase II 150 1,350
5 AIC246 Systemic anti-infectives Merck & Co AiCuris Phase II 136 549
6 EC145 Oncology & immunomodulators Merck & Co Endocyte Phase III 120 1,000
7 Recothrom Blood The Medicines Company Bristol-Myers Squibb Marketed 115 115
8 Visudyne Sensory organs Valeant Pharmaceuticals International QLT Marketed 113 133
9 Jetrea Sensory organs Novartis ThromboGenics Filed 98 488
10 EPZ-5676 Oncology & immunomodulators Celgene Epizyme Preclinical 90 250

The deal to buy Bystolic royalties from J&J, reached in April 2012, assured Forest that it will extract the full value of a product on a trajectory taking it tantalisingly close to blockbuster status. It was secured before Forest scored some other pipeline wins that could have helped ease shareholder pressure to sell out. Likewise, most of the value of Basilea’s deal on the hand eczema treatment Toctino with GlaxoSmithKline’s Stiefel dermatology division is buried in the up-front payment. 

At the other end of the spectrum, the privately held Epizyme managed to sneak into the top 10 up-front payments by licensing to Celgene ex-US rights to a preclinical project that has produced a clinical-stage leukaemia candidate in EPZ-5676.

Top 10 biggest deals in 2012 - ranked by deal value
Rank Product Therapy category Company Deal partner/product source Status on deal date Up-front payment ($m) Deal value ($m)
1 MP0260 Sensory organs Allergan Molecular Partners Preclinical 63 1,463
2 GLPG0634 Musculoskeletal Abbott Laboratories Galapagos Phase II 150 1,350
3 HuMax-CD38 Oncology & immunomodulators Johnson & Johnson Genmab Phase II 55 1,055
4 EC145 Oncology & immunomodulators Merck & Co Endocyte Phase III 120 1,000
5 ASP015K Oncology & immunomodulators Johnson & Johnson Astellas Pharma Phase II 65 945
6 Food Allergy Vaccine Respiratory Sanofi Selecta Biosciences Research project - 900
7 Cancer Research Program Oncology & immunomodulators Boehringer Ingelheim FORMA Therapeutics Research project 65 815
8 Endometriosis Research Project Genito-urinary Bayer Evotec Research project 15 763
9 Sym004 Oncology & immunomodulators Merck KGaA Symphogen Phase II 25 614
10 Ablynx/Merck Research Program Central nervous system Merck & Co Ablynx Research project 8 588

Price of things to come

A preclinical deal topped the bio-dollar rankings, with Switzerland's Molecular Partners winning the promise of a chunky $1.46bn from Allergan should MP0260 and back-up compounds meet all their targets in age-related macular degeneration, along with discovery of other agents for eye-related disease (EP Vantage Interview – Molecular Partners maximises monopoly on DARPins, August 31, 2012).

It may come as no surprise that preclinical deals represented half of the top 10 ranking for deal values – back-end loading the deals recognises the potential value of the candidates while recucing risk to the licensors.

However, three rather advanced projects are near the top of the list – Galapagos’s phase II GLPG0634, partnered with AbbVie in autoimmune indications; J&J’s deal with Genmab on HuMax-CD38, also known as daratumumab, in multiple myeloma; and Endocyte’s phase III EC145, partnered with Merck & Co in cancer.

The biggest deals in the past decade
Deal date Number of deals >$100m up front Number of deals >$1bn value
2012 8 4
2011 7 2
2010 7 4
2009 11 5
2008 10 3
2007 6 8
2006 7 3
2005 2 0
2004 3 0
2003 2 0
2002 5 0

All are $1bn-plus bio-dollar deals, a category that, while small, shows no sign of abating despite the dropoff in the number of deals and their corresponding payments. Indeed, such tie-ups are absent in the years before 2006, although the sector saw a peak in mega-deals in 2007.

Likewise, $100m up-front payments have not dropped appreciably in the past three years, following a peak of 11 reached in 2009.

This signals that there still is room in the market for big deals on the best drugs, even as the average values have fallen. The trick is building that better mousetrap that will have pharma partners beating a path to your door.

Working in the right area of medicine is helpful here. EP Vantage will next reveal which therapy areas are the best to work in for promise of the big deals with big pharma.

All data sourced to EvalutePharma.

To contact the writers of this story email Jonathan Gardner or Joanne Fagg in London at news@epvantage.com or follow @JonEPVantage or @JoEPVantage on Twitter

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