Contrary to the growth seen in previous years, the number of European early-stage, pharma-biotech deals identified in 2007 has decreased. However, the maximum amounts granted in individual deals by pharmaceutical players is constantly growing, and is now three times higher than in 2005. For the third consecutive year, research into early stage deals between pharmaceutical (large, medium and small pharmaceutical and biopharma companies) and biotech companies has led to some interesting results. These deals concern molecules in research or in preclinical development, or technologies in the initial stages of development. With the aim of outlining the main trends of this market specifically in Europe, this article will focus on agreements which involved at least one European player.

Early stage agreements seem to be a strategic choice that has been pursued by pharmaceutical companies for some years. The barometer of early stage deals set up in 2005 paints a particularly puzzling picture of 2007; indeed, the assessment is severe. Whereas the number of deals was around 100 in 2006 and 125 in 2005, the listed deals in 2007 fell to less than 50. This two-fold decrease is rather surprising, and the reasons behind this apparent shift in the trend are worth exploring.

ARE EARLY STAGE DEALS LOSING THEIR APPEAL?

The pharmaceutical players have considered these types of deals as a very attractive way to feed their pipeline with promising molecules and technologies. After a significant two-fold increase in average upfront payments (from $12 to $26 million) and average milestone payments (from $203 to $430 million) between 2005 and 2006, the trend in the following year shows a stagnation, but global amounts remain at a high level.