Biotech deal-making grows in importance as Big Pharma restructures

The tough IPO market has clearly forced developers to build up their deal-making muscles over the past three years. Without a big cash-out for investors on a timely basis, deals have loomed ever larger in importance.

We've been seeing a lot more smart biotechs doing licensing deals at an early stage this year. Preclinical pacts are not at all uncommon. And they're not all small-change pacts, contrary to what you might expect. To keep their need for venture cash in line, and hold on to equity, a smart deal-making strategy early in the process makes a lot of sense.

But just as deals have become more important, they're clearly getting harder to hold on to. As we concluded in our recent study on top deal terminations of the year, pharma companies are not only restructuring pipelines and shopping out their own unneeded programs, they're also a lot quicker to pull the trigger on a termination if a trial goes wrong or development risks spike. So not only do biotechs have to get smarter about collaborations, they also need to build in an exit door so they can take all their IP with them if a partnership turns sour.

The bottom line on deals is likely to keep the business development teams busy in 2012. Big Pharma still needs new technology and new products, and they're still often not very good at growing them without a lot of help. For biotechs with smart science and an inside track on a novel therapy, there are buyers willing to come to the table. They'll be back at the bargaining next year as well.

Special Report: The top 10 biotech deal terminations of 2011