Navigating the right Deals in Oncology

I published a new business article in Nature Biopharma Dealmakers together with Christiaan de Bloeme and my colleagues at Aglaia. The article uses recent oncology dealmaking trends to provide insights on strategies for dealmaking in the current challenging markerts. It provides pointers about the requirements to pursue a deal, the right timing, how to maximize deal value and how to adapt to the current challenging market.

The article makes use of Aglaia's proprietary database (Oncodealigence®) that now contains data on 114 full-acquisition deals and 240 partering or licensing deals of oncology therapeutics ventures from 2015 through 2022 for which deal economics were disclosed.

Take home messages:

• Early dealmaking appears to be the norm in oncology nowadays, as 39% of acquisitions and 73% of non-acquisition deals from 2015 to 2022 involved preclinical ventures (Fig. 1). The fierce competition among big pharma and biotech for oncology drugs and the high valuations of phase-2-stage companies presumably drives pharma to make earlier-stage deals—instead of buying one phase 2 company, a big pharma could acquire or partner with many more preclinical ventures, accepting that several of them may fail.

• The mean potential deal value of a preclinical acquisition ($359 million) was much lower than that for a preclinical licensing deal ($540 million) or partnering deal ($985 million). However, partnering or licensing deals were considerably more backloaded than acquisitions, as mean upfront payments for acquisitions ($130 million) were 2.5–4.2-fold higher. Biotechs and their backing investors likely prefer deals with upfront payments that provide good initial return on investments, rather than going for bigger deals that are mostly based on contingent milestone payments.

• Contrary to the common belief, the data suggest that oncology ventures don’t become a lot more valuable once they enter the clinic. Companies that are about to transition to the clinic should therefore raise financing that will bring the company to the next deal inflection point in phase 2

• A common mantra is that platform companies can only do deals when their platforms are clinically de-risked. However we found that about half of the platform companies were still preclinical at the time of the deal (Fig.3). This means there is an opportunity for early-stage oncology platform companies to bring a licensor or partner on board already early on, which in turn will help to attract venture funding.

• Together, our data and considerations suggest that early-stage companies do not always achieve the most value possible in acquisition deals. We suggest special purpose vehicles (SPVs) as a means to leverage the full economic potential of a platform, but also create tremendous flexibility.

Find the article here:

https://www.nature.com/articles/d43747-023-00002-6