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As biologic pathway targets are validated, competition for the mode of action intensifies. In the 2012–2016 period, the upfront value of a biologic product deal rose from ~US$20 to 60 million (IMS MIDAS, 2016), tripling in four years. These valuations increased due to three factors:

 Innovation output from biotechs has increased in scale and quality. This is possible due to greater scientific understanding of disease, advancement in scientific techniques, and their wider availability.

 Investment strategies are increasingly incorporating biologics into the pipeline with large pharma driving the trend. This competition, particularly between companies with deep pockets, is driving up deal values.

 There has been prolonged availability of capital at low interest rates, promoting deal making across all sectors.

The Valeant, Turing, and Mylan pricing scandals attracted heavy criticism in late 2015 and 2016. The resulting attention from policy makers in the United States has concerned investors, reducing expectations of future pharmaceutical market potential and growth. This has contributed toward the fall of the NASDAQ biotech index by 21% since September 2015. President Trump's pronouncements after his election have served to increase the uncertainty of an already nervous and volatile sector. The number of biologic product deals signed has also risen. Between 2008 and 2012, these numbers were relatively stable at ~250 deals per annum. However, in 2015, the number of deals announced reached 400. A relevant question to be posed is: Where are these biologic assets being sourced from?

Historically, most biologic product deals have been executed early in the drug development cycle. This trend is becoming more pronounced. Between the 2006–2010 and 2011–2015 periods, deals for biologic drugs in development to Phase II increased by over 60%. If we look at deal growth in absolute terms, the bulk of biologic deal increase is coming from very early stage, discovery/preclinical (392 more deals, 71% of deal growth) (DRG Deal Database, 2017).

There are not many high‐potential late‐stage biologics left to acquire. Demand for pipeline biologic therapies has increased but it will take several years before reactive supply will progress to the late stage.

 High valuation of biologic products is pushing players who are unwilling to invest heavily to look earlier in the development of promising candidates.

 Players in the industry now have many years of experience developing biologics. They have taken them from scientific concept through to market blockbusters. As a result of this experience, more players have comfort in conducting early stage deals.

 The greater risk of early deal making has been balanced with the increased usage of contracted milestones within deals.²⁰