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Pharmaceutical/Biotechnology Deal Statistics Quarterly, Q2 2008

Executive Summary

Highlights from the Q2 2008 review of pharmaceutical and biotechnology dealmaking: Despite the dearth in biopharmaceutical financings in the quarter (total money raised was just $2 billion) acquisitions thrived with total M&A volume of $11.8 billion. And biopharma alliance activity reached $2.7 billion in potential deal value during 2008's second quarter with only a handful more deals than the first quarter, but a 43% increase in dollar volume.

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Biotechs remain voracious consumers of capital, but tapping the equity markets is often prohibitively dilutive. Royalty financing can provide lower-cost-of-capital funding while putting a price on assets the market often ignores. This cash can also allow biotechs to hold onto R&D projects longer, eventually pushing up the price of licensing deals. But although royalty financiers are eager, they are limited in the amount of risk they are willing to take; new players in the business though may nevertheless increase competition and drive prices up.

Can Out-Partnering Help Vault Pfizer Over the "Second Cliff"?

The industry's genericization problem will seriously constrain Big Pharma's ability to pay for late-stage development on all its products. One potential solution is being developed by Pfizer, whose top R&D execs see out-partnering as a way to free up resources for key programs and to expand R&D capacity. In this interview with R&D boss Martin Mackay, Mackay reports that Pfizer is building up a war-chest of out-licensing and partnering candidates, pursuing a wide variety of transactions--including project financing, straight out-licensing and spinoffs. But the extent of Pfizer's long-term commitment to out-partnering still isn't clear.

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