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European Biopharmaceutical Review

Encouraging Synergies

Nigel Sheail at Roche analyses the trend of establishing new and strong relations between the pharma and biotech industries

Partnering deal-making is an increasing trend among large pharmaceutical companies. The biotechnology industry offers a rich source of opportunities to complement and leverage value in innovation together with pharma. Roche has particularly benefited from partnering and maintains that it is an integral element of its business strategy. Other pharmaceutical companies are also likely to support the increasing trend for partnering, including those who did not traditionally engage in deal-making. For example, AstraZeneca and Merck have recently realigned their company structures to strengthen their activities with the biotech industry – through in-licensing, as well as mergers and acquisitions.

Analysts have also noted the trend – Wood Mackenzie for example, estimates that products in-licensed between 1995- 2006 generated a revenue of $50 billion for the top 25 pharma companies in 2006 – a figure that represents 13 per cent of the collective revenue for those companies. Their forecast up to 2011 points to a growing trend of at least 15 per cent of revenue, excluding any earnings from additional in-licensing deals made in that time (1). Recombinant Capital estimates that the number of pharma-biotech alliances per year over the past decade has also increased – just under 400 deals were announced in 1997, while around 600 to 700 have been announced per year since 2001 (2).

Whilst interest in deal-making is rising within the pharma industry, the biotech industry is also growing. Consequently, the parameters of deal-making are changing and, as time goes on, various other trends are emerging. Geographic patterns reflect the relative maturities of the regional biotech industries – with the greatest activity observed in the US, ahead of Europe and Japan. The most frequently reported deals reflect the dynamics of such major markets as antiinfectives, oncology and metabolism (1). The emerging trends attracting the most discussion are the earlier stages of in-licensing, the rising costs of deals and the complexities of deal structures involving co-development and cocommercialisation rights.

DEBATABLE TRENDS

Late-stage deals have typically been those most sought-after. The reasons are obvious – clinical proof of efficacy means that these assets have reduced risk. Historically, Phase II deals have also been attractive due to the surge in market value that is associated with proof-of-concept. However, the current trend is for increased deal-making in earlier stages for preclinical and Phase I opportunities, for which there are various explanations.

One is the fact that late-stage deals are becoming rarer, as these opportunities enter partnerships while at the same time pharma seeks to sustain its dealmaking momentum. Despite the increased risk in early stage opportunities, this should not necessarily be seen as a negative – on the plus side, companies have the opportunity to work together sooner and maximise on synergies at an earlier stage.


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Nigel Sheail leads the Global Licensing Group in the Pharma Partnering department of Roche Pharmaceuticals. Nigel has been responsible for a broad range of deals – from research technology collaborations through to Phase III product licensing opportunities. He also helped to establish two spin-off companies, BioXell and Basilea. Initially trained as a Molecular Biologist, Nigel later qualified as a Chartered Accountant and has held a number of functions within the pharmaceutical industry; both with Roche and GlaxoSmithKline. Prior to joining Pharma Partnering, Nigel worked for Roche as the Global Controller for Research and served as Finance Director, responsible for the establishment of Roche’s operations in China. He is also treasurer of the Swiss Pharma Licensing Group.
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