2010 Dealmaking forecast: Partly cloudy
Have we had a shake-out in the biotech industry? Are there valuable assets that have been stranded with the recent stall—and arguably collapse—of the financial markets?
The Vice President for Business Development Practice at Campbell Alliance, Ben Bonifant offered a review of executive opinion to kick off discussion for the BIO-Europe panel session, ‘Looking for a Silver Lining: 2009 and Prospects for the Year Ahead.’
“As it turns out,” said Bonifant, “2009 will not hit the heights of dealmaking that the industry reached as recently as 2007, yet it is also clear we have not bottomed out. So why does it feel so different for executives?”
Through October, he reported, “it appears late stage deal volume will be low in 2009 and the exceptionally high levels of past dealmaking would be difficult to match regardless of the economic environment,” he said, adding, “and, so far, we have not seen the second half surge that emerged in 2007 and 2008.”
Given the uptick in phase III deals at the end of 2008, an expectation for continued deal making seemed encouraging. Source: Campbell Alliance 2009
However, he added that dealmaking interest will remain high in vaccines and oncology, the former experiencing a record year of deal activity.
The sense of an industry that is off its mark may come from the anticipation of an uptick that will not materialize, he suggested.
Another finding emerging from the survey was that “given the less enthusiastic expectations expressed by individuals in commercial organizations, out-licensors may need to temper their enthusiasm for deal activity levels.”
Michael Yeomans, the Senior Vice President for Global Business Development and Licensing at Bayer Schering Pharma, said “he was also quite surprised by the level of deal activity in 2009 with the restriction caused by strategies for conserving cash.”
While he remains circumspect about prospects moving forward, he added encouragingly that, “for good quality assets we can find the funding though we have also found the pricing higher than ever for these assets.”
Yeomans said Bayer Schering Pharma concluded four oncology deals this year that proved highly competitive.
Shelagh Wilson, head of GlaxoSmithKline’s newly created European Centre of Excellence for External Drug Discovery (CEEDD), agreed that late stage opportunities have become few and far between “and quite expensive.”
“We are looking at an earlier stage, seeking to move into innovative areas, which means entering into new sciences,” she said, “it requires us to become less risk-adverse to develop differentiated medicines that will change treatment.”
An early stage investor, Regina Hodits with Atlas Ventures, agreed that quality assets will continue to attract dealmaking, saying “as long as we focus on new treatment modalities and new biologic mechanisms, there will always be a buyer.”
Hodits said that in the past three deals she has done for Atlas, she has been pleased to see corporate investors at the table as well.
“Our interest in seeing this corporate participation is not just for the funding of the deal, but to give a clearer view into that crystal ball to see what pharma is seeing in this company,” she said. “It provides a validation from partners, who like us, believe the product or technology is on the right track.”
As the panel discussion searched for the silver lining in the recent shake up, Barbara Yanni, Vice President and Chief Licensing Officer for Merck & Co., presented the brightest view of the industry with full confidence in the future of dealmaking.
“It is tough to say there has been a statistically significant shift in one therapeutic area or another,” she said. “Some categories can jump from two deals, or even no deal, to as many as five in a single year.”
“However, the past year should prove to be representative for partnering activity at Merck,” she said.
“We have done dozens of deals consistently year to year, from 45 to 50, and I expect this year to finish in that range. In fact, I never expected our level of activity to go down,” she added.
“We are seeing a lot of early stage that is interesting for us, but phase II and phase III deals as well,” said Yanni. “We do deals across all stages of development and balanced across a broad number of therapies, which helps to take the risk out of the portfolio.”
“Though we intend to merge with Schering-Plough in the USA, I expect it will grow the revenues, and as a result only grow the investment resources,” she concluded.
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