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.
If there has been anything stable in the pharmaceutical industry, it is an upward trend in late-stage deal prices. And yet, despite the increasing average deal price, the number of big deals is down. In several recent prominent examples, Big Pharma has sharpened its pencils--and said no. The implication: investors will no longer be able to equate late-stage products with blockbuster deals.