In early 2006, we noted in this space that in-licensing on the part of specialty pharmaceutical start-ups was rising relative to Big Pharma's in-licensing rate, with specialty pharmas even out-competing Big Pharma in some specific cases for rights to promising clinical programs. Since then, however, Big Pharma's unprecedented late-stage spending spree has far outpaced spec pharma's licensing, particularly in clinical stage deals.

2006's most intriguing Series As reflect VCs' continued emphasis on risk reduction through reprofiling in biotech, and big gains in funding for diagnostics and device start-ups.

M&A is competitive, and not all subjects are willing ones. Senior executives at Novartis, Big Pharma's number two acquirer, describe their system for identifying acquisition targets, understanding their priorities and walking away if prices get out of hand.

Given the competition for increasingly rare pipeline-fillers, most of today's licensing and M&A deals are auctions--a term used loosely to describe any situation where there's more than one bidder for an asset. But auctions come in various flavors; knowing which one to use requires a deep understanding of your asset, and its value to others.