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The 2010 Dealmakers’ Intentions Study ResultsThe 2010 Dealmakers’ Intentions Study Results
Presentation to BIO SuperPresentation to BIO Super‐‐SessionSession
Dealmakers’ Intentions Survey for 2010Dealmakers’ Intentions Survey for 2010Why Is Dealmaking So Important Right Now?Why Is Dealmaking So Important Right Now?
In 2008 and 2009, with limited VC funding and a near disappearance of IPOs, the In 2008 and 2009, with limited VC funding and a near disappearance of IPOs, the primary means of realizing value for biotech companies has been through dealmaking.primary means of realizing value for biotech companies has been through dealmaking.
$3 500
$4,000 $4,000
VC FundingVC FundingFunding Through IPOsFunding Through IPOs
Dealmakers’ Intentions Survey for 2010Dealmakers’ Intentions Survey for 2010Why Should We Focus on the Largest Companies?Why Should We Focus on the Largest Companies?
Companies with revenue greater than $1 billion contribute approximately 70% of Companies with revenue greater than $1 billion contribute approximately 70% of meaningful licensing and acquisition deals.meaningful licensing and acquisition deals.
Big Pharma Share of Licensing DealsBig Pharma Share of Licensing Deals11 Big Pharma Share of AcquisitionsBig Pharma Share of Acquisitions22
60%60%
70%70%
80%80%
60%60%70%70%80%80%
30%30%
40%40%
50%50%
60%60%
hare of D
eals
hare of D
eals
30%30%40%40%50%50%60%60%
are of Deals
are of Deals
0%0%
10%10%
20%20%
1 2
ShSh
0%0%10%10%20%20%
1 2
ShSh20082008 2009200920082008 20092009
1Share of the pharmaceutical and biotech licensing deals with an up‐front payment greater than $15M where the in‐licensor was a company with revenue greater than $1B (62 deals in 2008 and 59 deals in 2009)
Sources: Windhover Strategic Transactions Database for identification of deals; Campbell Alliance analysis
Sources: Windhover Strategic Transactions Database for identification of deals; Campbell Alliance analysis
p y g $ ( )2Share of the pharmaceutical and biotech acquisitions with value greater than $100M where the in‐licensor was a company with revenue greater than $1B (28 deals in 2008 and 31 deals in 2009)
Dealmakers’ Intentions Survey for 2010Dealmakers’ Intentions Survey for 2010Characteristics of RespondentsCharacteristics of Respondents
We received responses from senior decision makers representing a variety of company We received responses from senior decision makers representing a variety of company types.types.
R d tR d t TitlTitlR d tR d t TitlTitl CC TTCC TTRespondentRespondent TitlesTitles((n=156n=156))
RespondentRespondent TitlesTitles((n=156n=156))
Other 1%Other 1%
CompanyCompany TypesTypes(n=156n=156)
CompanyCompany TypesTypes(n=156n=156)
Other 1%Other 1%
SVP and Above
Director/Director/Sr. DirectorSr. Director DevelopmentDevelopment
Dealmakers’ Intentions Survey for 2010Dealmakers’ Intentions Survey for 2010Respondent Role in DealsRespondent Role in Deals
We received responses from both inWe received responses from both in‐‐ and outand out‐‐licensors who had been active deal licensors who had been active deal makers in makers in 2009.2009.
R d t R l i Li iR d t R l i Li i N b f D l C l t d i 2009N b f D l C l t d i 2009Respondent Role in Licensing(n=156)
Dealmakers’ Intentions Survey for 2010Dealmakers’ Intentions Survey for 2010General Expectations for Deal ActivityGeneral Expectations for Deal Activity
Overall, the respondents with commercial operations expect levels of Phase III Overall, the respondents with commercial operations expect levels of Phase III dealmaking to remain steady. dealmaking to remain steady.
Expectations for Phase III DealsExpectations for Phase III Deals
Dealmakers’ Intentions Survey for 2010Dealmakers’ Intentions Survey for 2010General Expectations for Deal ActivityGeneral Expectations for Deal Activity
These respondents were even more optimistic about Phase II deal making activity.These respondents were even more optimistic about Phase II deal making activity.
E t ti f Ph II D lE t ti f Ph II D lExpectations for Phase III DealsExpectations for Phase III Deals
Expectations and IntentionsExpectations and IntentionsIntentions by Therapeutic AreaIntentions by Therapeutic Area
Dealmaking intentions are concentrated in a few therapeutic areas.Dealmaking intentions are concentrated in a few therapeutic areas.
Dealmakers’ IntentionsDealmakers’ Intentions(Share of respondents(Share of respondents rating their likelihood to complete a Phase II or IIIrating their likelihood to complete a Phase II or III
Dealmakers’ IntentionsDealmakers’ Intentions(Share of respondents(Share of respondents rating their likelihood to complete a Phase II or IIIrating their likelihood to complete a Phase II or III(Share of respondents (Share of respondents rating their likelihood to complete a Phase II or III rating their likelihood to complete a Phase II or III
deal in the therapeutic area as a 5 or greater on a scale of 7)deal in the therapeutic area as a 5 or greater on a scale of 7)(Share of respondents (Share of respondents rating their likelihood to complete a Phase II or III rating their likelihood to complete a Phase II or III
deal in the therapeutic area as a 5 or greater on a scale of 7)deal in the therapeutic area as a 5 or greater on a scale of 7)
Source: Campbell Alliance Dealmakers’ Intentions Survey 2010. N=66 (only including respondents who work for companies with commercial operations [i.e., revenue above $0] and who described their role as exclusively in‐licensing, mostly in‐licensing, or equally in‐ and out‐ licensing)
Immunology (12%)Immunology (12%)
Expectations and IntentionsExpectations and IntentionsExpectations for Deal ValuesExpectations for Deal Values
Dealmakers expect deal values to go up in the areas of expressed interest.Dealmakers expect deal values to go up in the areas of expressed interest.
Dealmakers’ Intentions(Share of respondents anticipating at least a 10% increase in up front payments
Dealmakers’ Intentions(Share of respondents anticipating at least a 10% increase in up front payments(Share of respondents anticipating at least a 10% increase in up‐front payments
for Phase II deals in the selected therapeutic areas)(Share of respondents anticipating at least a 10% increase in up‐front payments
for Phase II deals in the selected therapeutic areas)
CNS (excluding Pain)CNS (excluding Pain)
OncologyOncology
MetabolicsMetabolics
VaccinesVaccines
AntiviralsAntivirals
PainPain
( g )( g )
Value represents the share of respondents who identified themselves as having a role of
AntibioticsAntibiotics
ImmunologyImmunology
DermatologyDermatology
RespiratoryRespiratory
Women's HealthWomen's Health identified themselves as having a role of “mostly” or “exclusively” in‐licensing and choosing either “increase by 10%‐20%” or
“increase by more than 20%” when asked for expectations on up‐front payments for Phase II
n=~35 (varied by therapeutic area) individuals who described their role as mostly or exclusively in‐licensing
Expectations and IntentionsExpectations and IntentionsProduct AvailabilityProduct Availability
Supply is also high in the areas of expressed interest . . . Supply is also high in the areas of expressed interest . . .
Comparison of Areas Where 10 Top Companies Express Licensing Interest and Est. # of Products AvailableComparison of Areas Where 10 Top Companies Express Licensing Interest and Est. # of Products Available
Therapeutic AreaNumber of Companies Expressing
Licensing InterestEstimated Number of Phase II and III Products Available for Licensing
Companies Included: Johnson & Johnson, Pfizer, Bayer, GSK, Novartis, sanofi‐aventis, Roche, AstraZeneca, Merck, Abbott, BMS, and Eli LillyNote: Therapeutic area included if company expressed licensing interest in any disease state within the therapeutic areaSources: Company websites and partnering brochures
Expectations and IntentionsExpectations and IntentionsLicensing InventoryLicensing Inventory
. . . making the “inventory” of available assets greatest in some of the areas of highest . . . making the “inventory” of available assets greatest in some of the areas of highest demand.demand.
*The inventory measure represents the ratio of potentially available Phase II and Phase III assets divided by the number of deals completed in 2009 that had an up‐front value of more than $10M.
Expectations and IntentionsExpectations and IntentionsDeal TimingDeal Timing
So we looked at when our Dealmakers thought a deal should be done.So we looked at when our Dealmakers thought a deal should be done.
When InWhen In‐‐Licensors Say OutLicensors Say Out‐‐Licensors Should Do the DealLicensors Should Do the DealWhen InWhen In‐‐Licensors Say OutLicensors Say Out‐‐Licensors Should Do the DealLicensors Should Do the Deal
Before End of Phase IIBefore End of Phase II Immediately Following Phase IIImmediately Following Phase II Following Phase IIIFollowing Phase III
n=42 to 69 depending on therapeutic area; only included respondents who indicated their role is exclusively or mostly in‐licensing or equally in‐ and out‐licensing.
Expectations and IntentionsExpectations and IntentionsDeal TimingDeal Timing
In three areas, we found a comparatively high share of inIn three areas, we found a comparatively high share of in‐‐licensors who see an licensors who see an opportunity to license prior to the completion of Phase II.opportunity to license prior to the completion of Phase II.
When InWhen In‐‐Licensors Say OutLicensors Say Out‐‐Licensors Should Do the DealLicensors Should Do the DealWhen InWhen In‐‐Licensors Say OutLicensors Say Out‐‐Licensors Should Do the DealLicensors Should Do the Deal
Before Endof Phase IIBefore Endof Phase II Immediately Following Phase IIImmediately Following Phase II Following Phase IIIFollowing Phase III
n=42 to 69 depending on therapeutic area; only included respondents who indicated their role is exclusively or mostly in‐licensing or equally in‐ and out‐licensing.
Expectations and IntentionsExpectations and IntentionsHot AreasHot Areas
These biases separate what is truly “hot” from what is simply “in the neighborhood.”These biases separate what is truly “hot” from what is simply “in the neighborhood.”
Sources: Windhover Strategic Transactions Database for identification of deals; Campbell Alliance analysis
Total 24 18 7 10 30%
Expectations and IntentionsExpectations and IntentionsHot AreasHot Areas
The upThe up‐‐front payments for oncology therapies in new but increasingly well characterized front payments for oncology therapies in new but increasingly well characterized mechanisms reveal the value of products in “hot” areas.mechanisms reveal the value of products in “hot” areas.
Business Model ImplicationsBusiness Model ImplicationsExpectations of Tried and True Business Model PathwaysExpectations of Tried and True Business Model Pathways
Some companies had a plan to pursue the “tried and true” pathway of developing a Some companies had a plan to pursue the “tried and true” pathway of developing a first product through Phase II proof of concept . . .first product through Phase II proof of concept . . .
Biotechnology Business Model PathwaysBiotechnology Business Model Pathways
ConceptConceptRefinerRefiner
First Application First Application DeveloperDeveloper
Business Model ImplicationsBusiness Model ImplicationsExpectations of Tried and True Business Model PathwaysExpectations of Tried and True Business Model Pathways
. . . finding a partner . . .. . . finding a partner . . .
Biotechnology Business Model PathwaysBiotechnology Business Model Pathways
ConceptConceptRefinerRefiner
First Application First Application DeveloperDeveloper
Post POC DeveloperPost POC Developer(Patron Model)(Patron Model)
Business Model ImplicationsBusiness Model ImplicationsExpectations of Tried and True Business Model PathwaysExpectations of Tried and True Business Model Pathways
. . . and returning to their core capability to build out additional products in a pipeline.. . . and returning to their core capability to build out additional products in a pipeline.
Biotechnology Business Model PathwaysBiotechnology Business Model Pathways
ConceptConceptRefinerRefiner
First Application First Application DeveloperDeveloper
Post POC DeveloperPost POC Developer(Patron Model)(Patron Model)
Business Model ImplicationsBusiness Model ImplicationsNew Business Model Pathways for Some CategoriesNew Business Model Pathways for Some Categories
Instead, some firmsInstead, some firms——particularly those in Category 3particularly those in Category 3——are finding that they must are finding that they must adopt an independent postadopt an independent post‐‐POC development model.POC development model.
Biotechnology Business Model PathwaysBiotechnology Business Model Pathways
ConceptConceptRefinerRefiner
First Application First Application DeveloperDeveloper
Post POC Developer(Patron Model)
Post POC DeveloperPost POC Developer(Independent Model)(Independent Model)
Business Model ImplicationsBusiness Model ImplicationsNew Business Model Pathways for Some CategoriesNew Business Model Pathways for Some Categories
A few are even finding that they need to prepare for independent commercialization.A few are even finding that they need to prepare for independent commercialization.
Biotechnology Business Model PathwaysBiotechnology Business Model Pathways
ConceptConceptRefinerRefiner
First Application First Application DeveloperDeveloper
Post POC Developer(Patron Model)
Post POC DeveloperPost POC Developer(Independent Model)(Independent Model)
First Region First Region CommercializerCommercializer(FIPCO Model)(FIPCO Model)
Licensing OperationsLicensing OperationsThe Pipeline Challenge for InThe Pipeline Challenge for In‐‐LicensorsLicensors
InIn‐‐Licensors have their own challenges. Primary among these is keeping a full pipeline Licensors have their own challenges. Primary among these is keeping a full pipeline of opportunities.of opportunities.
Attrition in the Licensing PipelineAttrition in the Licensing PipelineAttrition in the Licensing PipelineAttrition in the Licensing PipelineAttrition in the Licensing PipelineAttrition in the Licensing PipelineAttrition in the Licensing PipelineAttrition in the Licensing Pipeline
Opportunities ReviewedNumber of Opportunities Reviewed( i b i )
Ten Programs Move to CDA
pp
Number of Programs Moving to CDA (varies by company size)
(varies by company size)
21%
49%
Share of Programs Moving from CDA to Binding Terms
Source: Campbell Alliance Dealmakers’ Intentions Survey 2010. Only includes responses from individuals with in‐licensing responsibilities within companies with commercial operations.
Licensing OperationsLicensing OperationsThe Pipeline Challenge for InThe Pipeline Challenge for In‐‐LicensorsLicensors
A large share of the burden for filling the top of the funnel falls on Business A large share of the burden for filling the top of the funnel falls on Business Development leaders.Development leaders.
In‐Licensors First Contact for Opportunities(N=36)
In‐Licensors First Contact for Opportunities(N=36)
Licensing OperationsLicensing OperationsThe Pipeline Challenge for InThe Pipeline Challenge for In‐‐LicensorsLicensors
Opportunities must be identified from a variety of sourcesOpportunities must be identified from a variety of sources——but industry partnering but industry partnering meetings have taken a leading role.meetings have taken a leading role.
In‐Licensors Source for Opportunities(N=31)
In‐Licensors Source for Opportunities(N=31)
OtherOther
Partnering MeetingPartnering Meeting(proactive)(proactive)Scientific LiteratureScientific Literature