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Figure 1 | Perceptions and data on deal-making. a | The percentage
of responses to the four options shown in the chart for the statement:
The current market for deals favours in a survey involving business
development executives from pharmaceutical companies (69 responses)
and biotechnology companies (59 responses), conducted to support
the PharmaDeals 2011 Royalty Rate Report from PharmaVentures.
b | Licensing deal numbers and mean upfront values between 2006 and
2010. Source: PharmaDeals v4, PharmaVentures analysis.
DEAL WATCH
Is deal-making becoming more difficult?
There has been much speculation on the
impact of economic volatility and financial
stress on deal-making over the past few
years. To investigate perceived and actual
trends, we conducted a survey involving
more than 180 business development
executives (BDEs) that covered deal-making
activities between 2006 and 2010, and
we compared the results with data on
deal-making during thisperiod.
Given that many biotechnology companies
have struggled with financial problems, it
might be expected that deal values would
drop; indeed, the most popular response
from BDEs at biotechnology companies
(36% of respondents) was that licensees
have greater power in driving deal terms as
a result of the current environment (FIG.1a).
However, the most popular response from
BDEs at pharmaceutical companies (44%
of respondents) was the opposite: they felt
that the current environment has increased
the negotiating power of biotechnology
companies in deal-making. A further sign of
a perception gap between negotiating parties
is that 55% of BDEs from biotechnology
companies who responded felt that upfront
payments have dropped (compared to 31%
who thought they had risen), whereas BDEs
from pharmaceutical companies again largely
held the opposite view; 51% felt that upfront
payments had risen and 32% thought they
haddropped.
However, the data do not strongly support
either of these perceptions. In the context
of an overall collaborative deal volume that
shows a slight fall between 2006 and 2010,
the mean upfront deal value at the end of the
5-year period is at ~95% of its 2006 starting
point (FIG.1b).We conclude that deal-making
is strongly affected by issues other than the
recent, persisting pressures in the financial
environment in particular, it is affected by
the long-standing failure of the research and
development model of licensee pharmaceutical
companies to produce sufficient late-stage
assets, even through deal-making. Thus,
on the pharmaceutical side of deal-making,
major pressure to generate near-term
revenue to compensate for declining sales
of blockbuster drugs that have lost patent
protection could lead to competition between
pharmaceutical companies for high-quality
assets from biotechnology companies. This
could counteract weaknesses in the negotiating
position of biotechnology companies owing
to the recent financial environment, leading
to the trends observed in the underlying data,
which indicate that average upfront deal values
and deal volumes have remained steady in
recent years. Nevertheless, the perception
gap between BDEs from the biotechnology
companies and pharmaceutical companies
identified in the survey suggests that
deal-makers could be working harder just to
standstill.
Nigel Borshell is a Director and Tibor Papp is Head of
Corporate Advisory at PharmaVentures Limited, Florey
House, Oxford Science Park, Oxford OX4 4GP, UK.
Correspondence to N.B.
email:nigel.borshell@pharmaventures.com
The authors declare no competing financial interests.
NEWS & ANALYSI S
404 | JUNE 2011 | VOLUME 10 www.nature.com/reviews/drugdisc
BIOBUSINESS BRIEFS
2011 Macmillan Publishers Limited. All rights reserved