Oncology Partnering Deal Trends: Early Stage Deals Dominate with Highest Potential Deal Values

by | Dec 10, 2018

Data for the this analysis was compiled using the DealForma database on deals. We applied initial filters for deal types, therapeutic areas, stage at signing, and deal payment terms. From there, we exported the data to Excel and used pivot tables and charts to do the rest. All data are based on publicly disclosed figures. We invite you to answer interesting questions using our data and carefully curated profiles on deals, pipelines, companies, funding, and business executives by visiting dealforma.com to schedule your personalized demo.

Partnerships are the lifeblood of the biopharmaceutical industry — a way to bolster pipelines and access innovation for Big Pharma, a source of capital for the innovator, and a way to accelerate development and commercialization of promising potential therapies. But what is the most advantageous time for a biotech company to partner an asset, and at what stage of development and valuations are deals taking place?


Deal Analysis Methodology

As the annual JP Morgan Healthcare Conference Week, perhaps the most important and best attended event in the industry for dealmaking, fast approaches, we decided to look at DealForma’s extensive database for historical partnering trends. Looking at deals announced from January 1, 2008 through November 26, 2018, we decided to narrow our focus to development and commercialization deals and joint ventures focused primarily on cancer therapeutics with upfront cash or total milestones of at least $5 million. We excluded R&D only deals, option deals, and asset purchases. We also focused on deals that at least covered a major market. We looked at deals from platform/discovery through Phase III assets at deal signing. We ended up with 420 partnering deals primarily focused on oncology assets.


For our analysis we excluded the Nektar Therapeutics/Bristol-Myers Squibb announced in February 2018 as an outlier. It included $1 billion in an upfront payment, an $850 million equity investment, and Nektar retaining ownership of its investigational immunotherapy drug, which was to be tested in combination with Bristol’s cancer drugs.


While the database can be used to break down deals based on structure, for this analysis we focused on two things: deal value and number of deals by stage of asset at deal signing. The data is looked at as a whole and also broken down into two periods: 2008 – 2012 when the capital markets were tight and the economy was struggling to right itself from the recent recession, and 2013 – 2018 when markets opened up and money flowed into biotech, and new technologies such as immunotherapies, combination therapies, and cell therapies made huge advances.


Cancer Deal Activity by Stage at Signing

The total number of completed oncology development and commercialization deals rose by one third from the first five year period 2008 – 2013 to the last five plus years to date. Some of this can be attributed to the mega-M&A deals of early 2009: Pfizer acquiring Wyeth, Merck acquiring Schering-Plough, and Roche acquiring the rest of Genentech, which necessitated focusing on merging their organizations. Also, due to the collapse of the stock markets in 2008 and lower biotech valuations, acquiring assets through M&A rather than licensing became an attractive option.

Over time, there is also a strong trend toward earlier stage deals. Whereas in 2008, platform/discovery deals made up just a quarter of all deals, by 2018 they accounted for more than half of the oncology partnering development and commercialization major market deals. As far as number of deals, it peaked in 2015 at 58, of which more than one third were platform/discovery deals and only one tenth were for Phase III assets.

In fact, the number of platform/discovery years for oncology assets have doubled when comparing the five years from 2008 through 2012 with the next five plus years to date. This is due to a number of factors including the continued externalization of R&D by big pharmaceutical companies, and as drug development has gotten more complex, Big Pharma/Big Biotech can use their expertise to better shape the direction of research programs.

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Upfronts, Milestones, and Total Deal Values 

What about changes in the value of biotech assets? The data show that innovative biotech companies are in a stronger position today as far as the value of their assets.

Potential partners are increasingly willing to raise overall values of the earliest stage deals, mainly through developmental and sales milestones.

Platform and discovery median total deal values have risen from $462 million in the period between 2008 and 2012 to $535 million in the period between 2013 and the present as promising new technologies such as gene and cell therapies, gene editing, and immunotherapies have gained traction. This is due both to increases in upfront cash and potential milestones. For a look at the highest payers in 2018, see our earlier data set which was featured in Endpoints News.

On the other end of the asset spectrum, total deal values for Phase III assets have remained relatively unchanged even as the potential for milestone payments has grown. It is also interesting to note that deal values for Phase I and Phase II assets have dropped between the 2008-2012 period and the 2013-2018 period.


Platform / Discovery Deals Bringing in Larger Upfronts

Two examples of oncology focused development and commercialization deals highlight some of the difference in higher value placed on platform/discovery stage assets today. Both deals involved exclusive global rights to multiple assets derived from the collaboration and no shared costs.


These were deals for platform/discovery stage assets.


In February 2010, GlaxoSmithKline paid Proteologics $3 million in upfront cash and an equity commitment for up to six small molecules developed using its ubiquitin platform with the potential for up to $1.1 billion in milestone payments plus royalties if all the molecules were successfully developed.


Eight years later, in July 2018, Merck tapped Sutro Biopharma to leverage its cell-free protein synthesis platform to develop immune modulating cytokines for oncology and autoimmune indications. Merck paid Sutro $60 million in upfront cash with the potential for up to $1.6 billion in milestones plus royalties if multiple therapies are successfully developed.


Deal comps analyses like this are simple to perform across multiple therapeutic areas, technologies, targets, and mechanisms using the DealForma platform. Better yet, subscriptions to the database include analyst time to have the work done for you. Schedule your demo today.

Marie Daghlian is a freelance writer and editor who reports on the business of biotechnology and healthcare technologies and on rare diseases for Global Gene’s Rare Daily. She also covers the industry for Big4Bio, a daily newsletter focused on the four major biotech centers in the United States.

Chris Dokomajilar is the Founder / CEO of DealForma and has been an industry analyst for over a decade. He analyzed the data and produced the charts for this article. More about Chris.

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