Ask just about any biotech CEO about licensing strategies and you can almost guarantee that at some point the chief will mention that the best deal valuations come after the developer has a solid set of proof-of-concept data. But the Wall Street Journal's Jason Douglas writes that the shopworn biotech strategy no longer applies in an age when Big Pharma companies are spending more on development and less on research.
Citing a string of early-stage and preclinical biotech deals, the Journal concludes that the average upfront for a Phase I product in 2009 was 68 percent higher ($46 million) than the year before. For Phase II, the jump was a more modest 39 percent. One reason for the big hike: The better risk vs. reward factor. Pharma is ready to accept the higher risk at an earlier stage, when it's still easy to write off any experimental products that can't cut it in a trial.
Francesco De Rubertis, a partner at Index Ventures, says the math is simple. If a developer recruits a staff of scientists and spends $30 million to get it ready for its first clinical trial, "it becomes a no-brainer to pay out $50 million for a Phase I asset."
- here's the story from the Wall Street Journal