The Passion for Late-Stage Deals (Second of a two-part series)
Executive Summary
Late-stage compounds are more expensive than ever; deals are now pushing the boundaries of economic viability. Drug companies are therefore looking for ways to cost-effectively expand their late-stage pipelines and expand their criteria for in-licensing candidates. In order to keep valuable development-stage products moving through its pipeline, rather than stopping some in favor of others it judges to be superior, Lilly has been trying to out-license assets to companies with spare development capacity. Lilly can buy the products back later if they prove worthwhile.Meanwhile, Abbott's late-stage dealmaking, while hardly inexpensive, aims to increase the set of choices, lower the cost, and increase the profitability of in-licensing by focusing on franchise markets.
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Late-Stage Dealmaking Takes Off
Some VCs insist that only 25%-30% of device investments find a successful exit -- significantly better than the 10% of biotech deals, but still far from a sure thing. As a result, over the past year or so, there has been a marked increase in interest in late-stage dealmaking -- investments made at Series C or later or via alternative vehicles such as PIPE deals and SPACs.
GSK Ventures: Recycling R&D Assets
GSK's Ventures swaps unexploited and non-core R&D assets for equity in promising young companies, giving their programs a second chance in someone else's hands-at no cost.
In Context: Aventis-Genta after Bristol-ImClone
Bristol-Myers Squibb's licensing arrangement for ImClone's Erbitux--both its upfront cash value and its subsequent level of disappointment--continues to define the industry's late-stage dealmaking. Genta's development and marketing alliance with Aventis for Genta's phase III anti-cancer chemosensitizer, Genasense, is no exception: the deal is both bigger, and smaller, than it might once have been had BMS and ImClone not stirred up the dealmaking pot. The Genta product was one of the only remaining unpartnered, important late-stage cancer projects available from a biotech company. It commanded a hefty price --at $135 million in upfront and near-term assured cash terms, and another $345 million in milestones. Before ImClone, Aventis says, it could have gotten this deal for less money. But if the ImClone transaction hadn't gone suddenly south (the FDA in December refused to accept ImClone's BLA submission for Erbitux), Aventis might also have had to pay far more.