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Tuesday, November 13, 2007
NEWS FLASH
Pharma's sudden shift upstream in the hunt for early stage deals
Suddenly everything changed in 2006. Where pharmaceutical companies led the dance with the biotech sector with in-licensing and merger
and acquisitions focused on mid- to late-stage projects, sometime last year all that changed with an abrupt shift of focus upstream
toward early stage deals.
The motivations driving this change were the subject of an intensive 90-minute Interactive Workshop at BIO-Europe 2007 entitled "The
Trend towards Early Stage M&A and Licensing - What are the New Rules to the Dating Game?"
Led by Ellen Bergmann from Mayer Brown LLP, panelists included Henning Afflerbach, Vice President for Business Development
Pharma with Direvo Biotech; Dr. Debbie Allen, the Director of Business Development at Polytherics Limited; Dr. Lubor Gaal, Director
for Licensing Europe at Bristol Myers Squibb and Dr. Ji Li, the Licensing Director for Amgen.
Sweetening the attractiveness of these early-on deals with not only richer offers but also powerful financial incentives, Big Pharma
drove values sky-high, according to Bergmann.
With a graphic that focused the discussion, Bergmann showed that while the valuation of early stage deals grew steadily from 2003
to reach $78 million by 2005, they suddenly jumped to $175 million in 2006. Yet the value of mid-stage deals slowed in the same
period and then fell in 2006 to $127 million, from a peak of $160 million in 2005.
According to Bergmann: "Big Pharma is not keen to do early stage deals but has become more flexible than they have ever been in order
to get a deal done. The reason is simply an intensifying competition to get a deal.
The pool of potential companies for deal-making is getting smaller and smaller due to acquisitions and exclusive collaborations which
puts pressure on closing the available properties.
Bergmann added, "These deals are not about one compound.. The winners are biotechs holding either a number of compounds or an entire
technical platform."
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