Most biotech analysts have been concentrating heavily on the weakened flow of venture dollars into the industry. But if you look at the licensing side of the business, you'll also find some solid reasons for concern.
"I think deals are getting smaller," says Deloitte Recap senior biotech analyst Chris Dokomajilar, "but most of that hit came out of milestone events."
On the buy side, pharma companies are much more aware of how much they're committing to deals these days. And biotechs are willing to give up more on the back end in order to get more upfront. That push and shove has kept upfront sums relatively stable, while downstream you can see the promised flow of potential deal dollars dwindling.
With IPOs largely excluded from most biotechs' game plans, "the sell side has gone back to doing deals to get undiluted capital," says the analyst. "They want more upfront at the cost of milestone totals. The sell side is more realistic. They're not doing over-inflated deals."
"The big push from pharma is more controlled, with smaller expenditures. They have to justify what they are spending on R&D." And as a result we're seeing fewer broad platform deals in favor of single-product pacts, where pharma can focus with razor sharpness on success or failure.
Don't look for any shift in the deal trend anytime soon, adds the analyst, who sums up the numbers in this buyer's market as a solid reflection of the "back-to-reality" school of pacts. "What we need to see is the old school venture capital coming in."
But the trend also doesn't look good on the VC end of things.
Deloitte Recap pulled a list of the top 20 deals of the first half. To get a better picture of the trend, click here to read the full report >> -- John Carroll, Editor-in-Chief. Follow me on Twitter and LinkedIn.