Pharma dealmaking and collaboration shine brightly through the fog

MUNICH – The value of up-front payments in global biopharma licensing agreements is still climbing, and global M&A spending on R&D-stage companies so far in 2015 is the best in more than a decade. Despite the gathering clouds on both the funding and reimbursement fronts – and despite the strictly nonmetaphorical fog that delayed the arrival of many delegates – those who made it to the introductory session of the 21st BIO-Europe Fall meeting Monday heard some upbeat messages from David Thomas, director of industry research and analysis, at the Washington-based Biotechnology Industry Organization (BIO).

With two months of the year still left, the aggregate value of all licensing deals (with a minimum $10 million up front) is $5.4 billion, not far off the $5.8 billion record attained during all of 2014. BIO logged 130 deals last year; the running total so far this year is 115. "We potentially have a record-breaking year," Thomas told delegates.

The cash raised is already ahead of the $5 billion raised in venture capital funding in 2014. And that total doesn't include the $43 billion in "biobucks" that are also attached. For median deals, he said, sales milestones are shrinking, while more value is being loaded up front.

Some 10 percent of the deals analyzed were in immuno-oncology. Another big trend was the increased emphasis on earlier-stage programs. "It's a seven-year high for phase I deals," Thomas said. There are, he said, 5,070 clinical-stage drug development programs that are industry sponsored, of which 70 percent are run by small companies (defined as having revenues less than $1 billion). Some 42 percent of those are partnered, representing about 1,400 programs.

Large pharma firms have a further 1,500 in-house development programs under way, reflecting the significant role that smaller companies now play in the innovation strategies of big companies.

On the M&A front, Thomas had already logged $23.3 billion worth of deals before the news broke of Dublin-based Shire plc's acquisition of Burlington, Mass.-based Dyax Corp. for $5.9 billion. (That deal would not figure in the reckoning, however, as Dyax already has a marketed product.) (See story in this issue.)

The two standout transactions remain Cheshire, Conn.-based Alexion Pharmaceuticals Inc.'s $8.6 billion acquisition of Synageva Biopharma Corp. and Summit, N.J.-based Celgene Corp.'s $7.3 billion takeout of Receptos Inc. (See BioWorld Today, May 7, 2015, and July 16, 2015.)

The running total easily surpasses that of 2011, the "Pharmasset year," when Foster City, Calif.-based Gilead Sciences Inc.'s $11 billion purchase of the hepatitis C drug developer accounted for the bulk of the $15.3 billion logged that year.

Just one of the top 10 deals analyzed involved an oncology firm, Thomas said. A number of areas were featured, including rare diseases, inflammation, neurology, ophthalmology and respiratory disease. The number of deals is not up on last year – 31 so far vs. 33 for 2014. But their value is climbing.

INNOVATION AND COLLABORATION

Big pharma's increasing reliance on external innovation, sourced either through M&A or licensing deals, makes its ability to nurture that innovation all the more important.

How to build a culture that can sustain innovation was the opening theme in the wide-ranging plenary session that followed Thomas' presentation. "You have to create an environment where the creativity of scientists can survive," Bahija Jallal, executive vice president at London-based Astrazeneca plc and head of its Medimmune biologics arm, told delegates. But she said it was important not to get too hung up on size, referring to her own study of innovation in the tech industry.

"A lot of the innovative ones are not small – they're pretty big," she said. What impressed her most was an "amazing" rigor in hiring. "Every single person in the organization knew what the mission was." And if big pharma can sometimes get down on itself for its lack of innovation – and there is no shortage of critics willing to help – its success at building out the pipeline in immuno-oncology is worthy of celebration, even if celebration is something the industry doesn't do very well or very loudly.

"We are in a transformational time in immuno-oncology," Jallal said. For her, the turning point came in 2013, when the first data on PD-1 and PD-L1 inhibition in non-small-cell lung cancer showed that the basic concept was applicable outside of melanoma and renal cancer, which were always considered to be immunological diseases. "Every single cancer is game now," she said. "We're just scratching the surface – with everything that's happening right now we're just scratching the surface."

The promise of combination therapies has driven an unprecedented level of collaboration, much of it on a nonexclusive basis. Session moderator Mark Edwards, managing director of Bioscience Advisors, told delegates that 26 combination trials were announced so far during 2015. He asked the panel if that amounted to "a feeding frenzy."

"Combinations are the way to go. I think the term 'feeding frenzy' is a somewhat loaded term," replied John Glasspool, executive vice president and head of corporate strategy and customer operations at Baxalta Inc., of Bannockburn, Ill. "I am somewhat concerned that many of them are empiric. I do think there is a risk of something being undermined."

Allal took an opposing view, on the basis that certain things can only be established in the clinic. "I'd rather be in this position than be in the conservative position," she said. "For me, it's very positive what we're seeing."

Five to 10 years ago, noted Simon Sturge, chief operating officer of the health care arm of Darmstadt, Germany-based Merck KgaA, companies would have sought to compete rather than cooperate to the extent that they have. "The world is much smaller, and the mindset is to collaborate." He summed up the old attitude by comparing it with his native Britain's attitude to Europe, as illustrated in an old newspaper headline: "Fog in the English Channel, Continent isolated." Britain still has issues with its place in Europe. But big pharma, it seems, has shed its inhibitions about collaboration. The meeting continues Tuesday.

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