Bio­phar­ma­ceu­ti­cal Deal­mak­ers’ In­ten­tions in 2018: Sup­ply and De­mand Ex­pec­ta­tions and Im­bal­ances

By Neel Pa­tel and Sachin Pur­war

In the decade since our first an­nu­al Deal­mak­ers’ In­ten­tions Study in 2009, there has been a per­sis­tent trend of buy­ers steadi­ly sharp­en­ing their ther­a­peu­tic ar­eas of fo­cus to gain com­pet­i­tive ad­van­tage while be­com­ing more se­lec­tive about who they en­gage with in the process. At the same time, com­pa­nies have been dri­ven to keep pace with tech­no­log­i­cal ad­vances — e.g., the ex­plo­sion in T-cell im­munother­a­py, ge­nomics, com­pan­ion di­ag­nos­tics — or risk ir­rel­e­vance. The law of sup­ply and de­mand is al­ways at work, how­ev­er, and ac­cord­ing to our 2018 Deal­mak­ers’ In­ten­tions Study has the po­ten­tial for sig­nif­i­cant im­pact on deal­mak­ing in the on­col­o­gy space and oth­er ther­a­peu­tic ar­eas com­pared to pre­vi­ous years.

Read the full study find­ings.

To gain more in­sight in­to 2018 deal­mak­ing trends and in­flu­ences, Sy­neos HealthTM  sur­veyed deal­mak­ers across the in­dus­try to as­sess their in­ten­tions for the next 12 months and put these find­ings in­to con­text for the year ahead. This year, we sur­veyed 66 mem­bers of the bio­phar­ma­ceu­ti­cal com­mu­ni­ty who par­tic­i­pate on ei­ther or both sides of deals and who are pre­dom­i­nant­ly ex­ec­u­tive-lev­el in­flu­encers on de­ci­sion-mak­ing. The 2018 Deal­mak­ers’ In­ten­tions Study, the 10th in our se­ries, cap­tures their ex­pec­ta­tions for deal ac­tiv­i­ty, sup­ply and de­mand for spe­cif­ic as­sets at dif­fer­ent de­vel­op­ment stages, and var­i­ous fac­tors af­fect­ing deal­mak­ing. In this sec­ond ar­ti­cle in a two-part se­ries, we take a close look at the sup­ply and de­mand pic­ture for 2018, by both de­vel­op­ment stage and ther­a­peu­tic area.

Sup­ply and De­mand by De­vel­op­ment Stage

Fol­low­ing the trend in pre­vi­ous years, buy­ers are con­tin­u­ing to show a strong in­ter­est in late-stage as­sets rel­a­tive to sell­ers (Fig. 8). How­ev­er, it seems that sell­ers are more in­vest­ed in see­ing pre-clin­i­cal as­sets through to Phase I and II be­fore look­ing to make a deal. There is a rel­a­tive shift from 2017 to 2018 in sell­er sup­ply to buy­er de­mand from pre-clin­i­cal (+35 per­cent) as­sets in­to Phase I (-15 per­cent) and Phase II (-24 per­cent) as­sets. This could par­tial­ly be a func­tion of the read­i­ly avail­able fi­nanc­ing cap­i­tal that is al­low­ing them to in­vest more in de­vel­op­ment and seek a stronger re­turn on cap­i­tal. It could al­so be that there is a stronger in­ter­est among buy­ers in ob­tain­ing pre-clin­i­cal as­sets that they can de­vel­op them­selves to beef up their pipelines at rel­a­tive­ly fa­vor­able prices.

Sup­ply and De­mand by Ther­a­peu­tic Area

As an­tic­i­pat­ed, on­col­o­gy re­mains the top ther­a­peu­tic area of in­ter­est for buy­ers and sell­ers. How­ev­er, it has be­come a much more at­trac­tive, op­por­tunis­tic mar­ket for buy­ers due to the spread be­tween an­tic­i­pat­ed sup­ply and de­mand in­creas­ing from 2 per­cent in 2017 to a fair­ly sig­nif­i­cant 15 per­cent in 2018. Twen­ty-one per­cent of buy­ers sur­veyed ex­pressed in­ter­est in on­col­o­gy as­sets, while 36 per­cent of sell­ers re­port­ed on­col­o­gy as­set sup­ply (Fig. 9). This sug­gests that pre­mi­ums in the on­col­o­gy space could start see­ing a po­ten­tial de­cline in the com­ing year for prod­ucts that are not high­ly dif­fer­en­ti­at­ed. Oth­er ar­eas where we are see­ing a sup­ply sur­plus in­clude in­fec­tious dis­ease (both an­tivi­ral and an­tibi­ot­ic) as well as in the CNS/psy­chi­a­try space. For sell­ers this means they have to be very mind­ful not on­ly about dif­fer­en­ti­at­ing their as­set but al­so mak­ing sure the core me­chan­ics of com­mer­cial suc­cess are be­ing con­sid­ered – things like pa­tient pop­u­la­tion tar­get­ing, ev­i­dence gen­er­a­tion that builds the val­ue sto­ry, and the like.

Ther­a­peu­tic ar­eas show­ing a de­mand sur­plus in­clude hema­tol­ogy, res­pi­ra­to­ry/pul­monolo­gy and re­nal. When we broke out the de­mand in­dex by tri­al phase (Fig. 11), no clear pref­er­ence emerged this year among buy­ers and sell­ers about the stage at which they pre­fer to make deals. This sug­gests that they are cur­rent­ly more fo­cused on iden­ti­fy­ing the best strate­gic fit and op­por­tu­ni­ty for their com­pa­nies.

The spe­cif­ic com­bi­na­tions of ther­a­peu­tic ar­eas and states of de­vel­op­ment an­tic­i­pat­ed to have the high­est sup­ply and de­mand im­bal­ances this year are sum­ma­rized in Table 1.

Table 1

Hottest Ar­eas for Li­cens­ing

CAR-T cell ther­a­py and CRISPR/Cas9 con­tin­ue to be among the hottest ar­eas for li­cens­ing in 2018, but in­ter­est in im­muno-on­col­o­gy and mi­cro­bio­mes has in­creased con­sid­er­ably since 2017. The top 10 ar­eas of in­ter­est in 2018 (in or­der) are:

  1. Im­muno-on­col­o­gy
  2. CAR-T cell ther­a­py
  3. CRISPR/Cas9
  4. Mi­cro­bio­me
  5. Can­cer vac­cines
  6. Ul­tra-rare
  7. Oth­er genome edit­ing
  8. An­ti­body-drug con­ju­gates
  9. Per­son­al­ized med­i­cine/ com­pan­ion di­ag­nos­tics
  10. Epi­ge­net­ics

While large-cap con­sol­i­da­tions may still be in our fore­see­able fu­ture, the over­ar­ch­ing trend of the last decade — i.e., the growth in emerg­ing com­pa­nies and the new fi­nanc­ing op­tions avail­able to them — means that small­er com­pa­nies have many deal­mak­ing op­por­tu­ni­ties avail­able to them. But as the 2018 Deal­mak­ers’ In­ten­tions Study demon­strates, these com­pa­nies will need to fo­cus on clear­ly demon­strat­ing prod­uct dif­fer­en­ti­a­tion and val­ue to ap­peal to in­creas­ing­ly dis­crim­i­nat­ing buy­ers while avoid­ing com­mon pit­falls in the deal­mak­ing process.

This is the sec­ond post in a se­ries re­lat­ed to the 2018 Deal­mak­ers’ Study. Our first post re­port­ed on high-lev­el deal­mak­ing trends, ex­pec­ta­tions by deal type, and fac­tors in­di­cat­ing buy­ers are be­com­ing a bit more se­lec­tive about the as­sets they are pur­su­ing and more risk averse. Fol­low us on our LinkedIn pages (Neel and Sachin) and check back on End­points to find ad­di­tion­al in­sights on fac­tors im­pact­ing bio­phar­ma­ceu­ti­cal deal­mak­ing.

Au­thors: Neel Pa­tel is Man­ag­ing Di­rec­tor, Com­mer­cial Strat­e­gy and Plan­ning for Sy­neos Health Con­sult­ing, and Sachin Pur­war is Di­rec­tor, Com­mer­cial Strat­e­gy and Plan­ning for Sy­neos Health Con­sult­ing. Sy­neos Health Con­sult­ing is an in­dus­try-lead­ing con­sult­ing firm spe­cial­iz­ing in the bio­phar­ma­ceu­ti­cal in­dus­try and part of Sy­neos Health, the on­ly ful­ly in­te­grat­ed bio­phar­ma­ceu­ti­cal so­lu­tions or­ga­ni­za­tion. We pro­vide ser­vices across a com­pre­hen­sive range of key ar­eas, in­clud­ing com­mer­cial strat­e­gy and plan­ning, med­ical af­fairs, risk and pro­gram man­age­ment and pric­ing and mar­ket ac­cess. Rec­og­nized by Forbes mag­a­zine as one of Amer­i­ca’s Best Man­age­ment Con­sult­ing Firms for three years run­ning, our in­dus­try fo­cus and depth of func­tion­al ex­per­tise, com­bined with strong sci­en­tif­ic and mar­ket knowl­edge, unique­ly po­si­tion us to tack­le high­ly com­plex busi­ness and mar­ket chal­lenges to de­vel­op ac­tion­able strate­gies for our clients. For more in­for­ma­tion, please vis­it sy­­lu­tions/con­sult­ing.