Mid-sized Players Dining Out on Big Pharma Leftovers
Big Pharmas are beginning to shy away from expensive licensing deals, at least until they begin to see returns on their existing blockbuster agreements. This reluctance is opening the door for mid-sized firms-particularly Europeans-to transform themselves through increased and more creative dealmaking. Moreover, the transition by traditionally in-licensing based firms like Spain's Esteve to out-licensers will accelerate the prominence of Europe's mid-sized players.
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Europe's financing environment makes it difficult to build big biotech from scratch. But sustainable biopharma firms are nevertheless emerging--mostly through the transformation of existing pharma assets.
Europe's financing and regulatory environment means that it has been, and will continue to be, very difficult to build Amgen-style big biotech from scratch here. But a sustainable industry of large biotechs is nevertheless emerging-mostly through the transformation of existing big or mid-sized pharma assets. Big Pharma spin outs, created to circumvent prohibitive labor laws, and small, R&D-embracing in-licensing firms are two important sources. But so are the mid-sized drug firms--another largely European phenomenon. The potential transformation of UCB into a big biotech, triggered by the acquisition of Celltech, is the most recent example.
Celltech could not get the deal value it expected for its late-stage anti-inflammatory treatment--perhaps indicating a Big Pharma reluctance to pay the kinds of prices it has been paying. So UCB struck while it could. Led by new management it seized the opportunity to make what is a transforming move for the midsized European company-from undersized primary care group into a specialist, biopharma firm ranked alongside--indeed above--European biotech bellwether, Serono. If it works, the deal provides a model for other mid-sized European pharmas, looking for a way out of the primary care trap and, like UCB, to use mid-size advantages to power a sustainable long-term strategy.