Big buck bio deals slow to emerge on quiet licensing scene

Insights

If 2013 is looking slow on the licensing front, it is also shaping up to be lacking in billion-dollar product deals. Only one traditional-style licensing pact breached that magical mark in the first half of the year, a very early stage and broad research collaboration between Gilead and Macrogenics that is highly unlikely to pay out anything close to that amount (see tables).

Elsewhere, the $3.25bn sale of Tysabri to Biogen Idec and the ultimately shareholder-scuppered acquisition of Theravance royalties by Elan crossed the billion dollar threshold, while a straight licensing deal struck by Celgene came close. With licensing activity across the board this year seemingly quiet, a dearth of big deals perhaps is not a surprising finding. But it will only add to concerns that the biotech bubble is inflating asset prices, and seller expectations, to levels that buyers are not willing to entertain.

Top 5 biggest deals in H1 2013 - ranked by deal value
Rank Product Therapy category Company Deal partner/source Status on deal date Up-front payment ($m) Deal value ($m)
- Tysabri Central Nervous System Biogen Idec Elan Marketed 3,250 3,250
1 Gilead/MacroGenics DART Program Oncology & Immunomodulators Gilead Sciences MacroGenics Research project 30 1,115
2 MOR202 Oncology & Immunomodulators Celgene Morphosys Phase II 92 910
3 Lu AE58054 Central Nervous System Otsuka Holdings Lundbeck Phase II 150 825
4 Isis/Roche Huntington's Disease Project Central Nervous System Roche Isis Pharmaceuticals Research project 30 659
5 Cancer Antibody Research Project Oncology & Immunomodulators Pfizer CytomX Therapeutics Pre-clinical 25 635

Aside from the sale of Tysabri - an outlier on value and a product acquisition rather than a licensing deal - only Gilead signed a deal potentially worth more than $1bn in the first half, and the word potentially is particularly important in this case. The companies entered an alliance to develop and commercialise four programmes based on MacroGenics’ Dart technology, a bi-specific antibody platform. The private Maryland company stands to receive up to $30m in license fee payments and $85m in pre-clinical milestones across the four programmes, as well as up to $1bn in clinical, regulatory and commercialisation milestone payments - considering all programmes are pre-clinical the total sum is unlikely to be paid out.

The only single-product licensing deal that came close to $1bn was Celgene’s acquisition of rights to Morphosys’s multiple myeloma drug MOR202. The anti-CD38 antibody has yet to generate clinical data but it belongs to a hot class of compound, a fact that no doubt flattered its value (MorphoSys squares up to Genmab in multiple myeloma, June 27, 2013).

Celgene made a $61m equity investment in the German biotech at the same time as the deal, which if included takes the transaction value even closer to $1bn.

Celgene also signed another potentially huge deal this year, with Forma Therapeutics, to discover and develop drugs to regulate protein homeostasis targets. Again the actual value, in terms of upfront fee and ultimate worth, was hard to calculate and hence it does not feature in the top five in this analysis. The big biotech committed $200m in R&D payments and an upfront fee – the split was undisclosed - while Forma stands eligible for up to $315m associated with the first ex-US license signed, and up to $430m for any further programmes licensed.

Elsewhere among the top five biggest deals, Roche’s Huntington’s collaboration with Isis was also very early stage, the valuation again highly spurious. However Lundbeck secured respectable deal terms from Otsuka for its phase II Alzheimer’s candidate; the $150m up-front ranks as the highest paid out in a single-product licensing deal in the first half, the table below shows.

The biggest up-front was paid by AstraZeneca to Moderna Therapeutics, $240m, giving the pharma giant an option to select up to 40 drug products for clinical development, from Moderna’s work with messenger RNA therapeutics in cardiometabolic illnesses and cancer. Under the very early stage collaboration, a further $180m in technical milestones are also available.

Top 5 biggest deals in H1 2013 - ranked by up-front payment
Rank Product Therapy category Company Deal partner/source Status on deal date Up-front payment ($m) Deal value ($m)
- Tysabri Central Nervous System Biogen Idec Elan Marketed 3,250 3,250
1 AstraZeneca/Moderna Cancer Project Oncology & Immunomodulators Astrazeneca Moderna Therapeutics Research project 240 420
2 Lu AE58054 Central Nervous System Otsuka Holdings Lundbeck Phase II 150 825
3 MOR202 Oncology & Immunomodulators Celgene Morphosys Phase II 92 910
4 ALV003 Gastro-Intestinal AbbVie Alvine Pharmaceuticals Phase II 70 70
5 Octreolin Endocrine Roche Chiasma Phase III 65 595

An analysis by EP Vantage earlier this year tracked the volume of $1bn licensing deals and up-fronts greater than $100mm, over the last decade (Top licensing deals of 2012 – Glimmers of hope, February 18, 2013). Based on the score in each of these categories so far in 2013, this year could see the fewest big ticket licensing deals since 2005.

The licensing scene does seem to be getting quieter, as EP Vantage revealed yesterday (Phase II values remain high but pharma licensing slows, August 14, 2013). With big pharma no longer fighting to fill late-stage pipelines with the same vigour as a few years ago, it is perhaps not surprising that fewer big deals, terms ramped by competition, are emerging. But it must also be possible that the biotech bubble, that is responsible for inflating company valuations to unbelievable levels, is persuading licensors to seek unrealistic terms for their assets.

It is notable that three of this year’s biggest deals are very early stage, so these biodollar valuations are based on scenarios unlikely to materialise. Another aspect to emerge from the data is the on-going demand for oncology projects and therapies to address central nervous system complaints, which dominate the top five tables.

The analysis below, which shows product deals struck by therapy area, also highlights this point.

With unpartnered mid or late-stage assets, particularly in the must-have therapy areas, a scarce resource, it would not be surprising if the second half of the year was just as quiet on the big deal front.

Clinical stage deals by therapy area
Product deal count Up-front payments ($m) Total deal value ($m)
H1 2013 2012 2011 H1 2013 2012 2011 H1 2013 2012 2011
Oncology & immunomodulators 24 63 101 137 504 663 1,559 5,400 6,857
Systemic anti-infectives 13 39 37 10 204 50 121 774 226
Central nervous system 12 33 48 180 192 247 1,050 1,802 3,161
Musculoskeletal 7 13 15 45 339 185 560 3,088 432
Genito-urinary 6 3 7 - - - 55 - -
Various 6 15 7 - 28 5 - 86 23
Cardiovascular 5 12 16 25 - 2 665 65 9
Endocrine 5 9 15 127 - 409 677 - 3,146
Blood 4 4 7 50 - 2 185 2 364
Gastro-intestinal 4 13 22 70 85 23 70 504 76
Sensory organs 4 1 10 - 0 45 - 0 420
Dermatology 2 10 8 - 40 - - 52 -
Respiratory 0 12 16 0 22 58 0 82 150
Totals 92 227 309 644 1,415 1,689 4,942 11,855 14,863

To contact the writers of this story please email Amy Brown or Joanne Fagg in London at news@epvantage.com or follow @AmyEPVantage and @JoEPVantage on Twitter

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