“Partnerships are the lifeblood of the life sciences industry,” we wrote in inviting you to vote for the Clarivate Analytics Cortellis Deal of the Year. We saw thousands of biopharma executives and investors – like you – prowling the hotel meeting rooms and coffee shops around Union Square during the 36th Annual J.P. Morgan Healthcare Conference in San Francisco recently in search of such deals. Laptops were armed with elaborate slide decks depicting mechanisms of action, market size metrics, management rosters and more. We’ll see more activity in the coming months: The Biotechnology Innovation Organization (BIO) booked a record 41,400 partnering sessions at its 2017 convention, a number that will surely be eclipsed at BIO 2018 in Boston in June.
“But,” we then asked on our voting page, “what makes a good deal?”
We at Clarivate debated that question intensely as we whittled down the list of the 4,234 announced licensing deals and mergers and acquisitions (M&As) for 2017 tracked and curated in our Cortellis database to the five finalists that we have asked you to vote on from each side.
And it is no doubt a question running through your mind as you scan the collection of finalists and get ready to choose (Click here to vote!).
We admit that we agreed from the outset that size does matter. Moving the needle in the industry requires a certain financial critical mass. We established minimums of $150 million all-in for licensing deals and $250 million for M&As. “Big money” was a recurring comment as we sifted through the front-runners internally. But what other ingredients drove these deals? Our panel of nine judges included deals experts who work on our Cortellis Deals Intelligence and Cortellis Competitive Intelligence databases; the staff writers, editors and analysts who report on deals for BioWorld, the daily biopharma news service; and our professional services team who work with companies directly on business development, portfolio & licensing and competitive intelligence challenges.
Our ruminations fell into these five main categories:
What’s the first thing you notice about a deal? The dollars, Euros or yen involved? Sure. What’s next, though, is often the science or, at the very least, the therapeutic area. Like you, our team thinks a lot about the science of drug development, and the intricate difficulty of much of it in 2017 dazzled. As one team member observed about a nominee: “Lots of options and flexibility (though I have to admit I like this one in part because it’s really cool technology).” Another added, with a nod to a deal’s challenges ahead, “Interesting science, though still a lot to prove in the clinic.”
What else do we notice right off? The players: Who is involved in the deal? Business involves risk, of course, and the willingness – sometimes even the urgency – to take an educated risk often makes for a compelling deal. Our judges liked to see partners taking on a seemingly intractable disease or a traditionally conservative company making a bold stroke. We saw lots of smart and deliberate moves that bolstered a player’s pipeline and ambitions in a particular therapeutic area. We observed unexpected choices or moves in spaces that need a big win. “Transformative” was perhaps the most enthusiastic endorsement that came up about a deal.
This was not seen as essential to a good deal, but it certainly came up with increasing frequency. More than 50 different countries were represented on the sellside among the more than 2,000 licensing deals tracked in Cortellis in 2017, as our colleagues Laura Vitez, commercial insights manager for Cortellis, and Jamie Munro, global head of portfolio & licensing at Clarivate, reported during their biopharma and dealmaking year-in-review presentation held concurrently with the J.P. Morgan conference. The range demonstrates the true global nature of today’s life sciences industry. As one of our judges asked about one such cross-border deal: “Model for more?”
Was there something unique or original about the partnership? “Creatively structured deal – there are multiple ways it could play out,” one internal expert commented. How rigorously did a buyer or licensor scour the competitive landscape to find just exactly the right fit technologically or a stealth partner under everyone else’s radar? One of our judges commended the “creative partner-finding” she observed with one pairing. A spin-out, said another, was “always interesting: It keeps the innovation rolling!”
And, ultimately, we judged whether liaisons would lead to …
It takes two to make a partnership and a good deal, by definition, offers something positive for both sides. It may take years to determine a deal’s outcome, the extent of the wins, but some early observations about 2017 entries included:
- “Great potential, but also many unknowns.”
- “Nice collaboration and separate option deal, offering upside to both partners.”
- “Careful structuring of clinical stage options reduces risk for both parties.”
- “Nice exit!”
- “Solid upfront!”
- “Very creative split on indications/rights.”
- “Smartly structured early sale; true win-win. Timing was important.”
- “I like the co-development angle and risk-sharing approach in a space that hasn’t had much uptake. Sink or swim together.”
And, one final comment, which puts the end result of all of this dealmaking into perspective: “Should be a win for patients.”