By Jennifer Van Brunt
The frenzied partnering activity between large pharmaceutical houses and biotechnology companies has proceeded without a noticeable hitch for almost five years now. Even though the global pharmaceutical industry has experienced a series of major mergers and acquisitions during that same time period, theoretically reducing the number of potential big pharma partners for biotech firms, there seems to be no end in sight to the potential combinations and permutations of collaborative relationships between the two sectors of the global community. In fact, not only are there more new deals with every quarter that passes, but they're becoming noticeably richer.
Big pharma is increasingly willing to spend top dollar to tap into new biotech-based drug discovery technologies, especially those that have demonstrated the ability to speed the process of identifying new targets or lead compounds, or those that are ready to exploit the flood of raw genetic information that's pouring from efforts to sequence the genomes of humans and other species. There's an awesome amount of information available — the trick is being able to harness it in some meaningful way. And in its earnestness of purpose, big pharma is plunking down huge amounts of cash (now or later) to try and assure its future success.
By The Numbers
The new collaborations and licensing agreements — which are focused mainly on drug discovery and development and for this analysis do not include marketing, manufacturing and/or distribution agreements — between biotech firms and big pharmas have grown from a mere 69 new alliances in 1993 to 226 nascent relationships in 1997. That's an increase of more than 225 percent in just five years. Likewise, the total value of these new alliances has surged from about $1.38 billion in 1993 to $4.36 billion in 1997 — an increase of more than 215 percent. (See the graphs on p. 2 for year-to-year comparisons.) But because only about half of all announced collaborations each year for the last five years have ever disclosed the potential precommercialization worth of the transaction to the biotech partner, there's not necessarily a direct relationship between the two measures.
There's another caveat that goes with these figures: They apply to new, R&D-based alliances only. Not only do these numbers not take into account biotech-big pharma relationships that can be classed as strictly manufacturing, supply, marketing, sales and distribution transactions (which also have grown considerably over the last few years), but they do not include already established research collaborations that have been renewed, expanded or extended by the big pharma partner. Those categories will be addressed in the Jan. 26, 1998, issue of BioWorld Financial Watch.
Nevertheless, over the span of five years, biotech firms, both private and public, have forged a total of 757 new drug discovery-based partnerships with big pharmaceutical companies. Those deals lumped together are worth a stated value of $13.7 billion in precommercialization payments (assuming, as always, that the terms and specific goals of any individual collaboration as originally outlined stand up to the test of time).
Of those 757 new deals, a handful stand out merely because they are so exceptionally rich. These are the individual collaborations that are worth at least $100 million in precommercialization payments to the biotech partner. At the end of the third quarter of 1997, only 19 out of a total of 690 new R&D-based alliances inked since the start of 1993 qualified to join the "100 Million Dollar Club." By the end of 1997, another four deals had qualified for membership in this elite group. But because one of those almost reached the $200 million mark — Ligand Pharmaceuticals Inc.'s $194 million deal with Eli Lilly and Co. in October — and another surpassed it entirely — Millennium Pharmaceuticals Inc.'s $218 million alliance with Monsanto Co., also in October — the hurdle has just been raised another notch.
Rich Deals Get Richer
There's no doubt that the broad-based genomics collaboration struck between Cambridge, Mass.-based Millennium (NASDAQ:MLNM) and agricultural giant Monsanto (NYSE:MTC), of St. Louis, is the most deluxe deal of all times in the biotech partnering arena. But since Monsanto's focus is on agricultural biotechnology, does it even qualify? Most assuredly so — after all, it's the technologies that take the lead, whether they are applied to improving drought resistance in wheat or creating a drug for treating obesity. Plus, Monsanto gets use of Millennium's technologies across all areas of the life sciences, including pharmaceuticals, the focus of its G.D. Searle & Co. subsidiary, which is located in Skokie, Ill. And since Millennium has the rights to use any technologies developed by Monsanto's new subsidiary — which it is establishing in Cambridge just for this collaboration — in areas outside the plant and agricultural fields, there's no telling what new human health applications could emerge from the partnership.
Ligand's alignment with pharmaceutical giant Eli Lilly, of Indianapolis, is also ripe with prospects. Not only is it worth as much as $194 million to San Diego-based Ligand (NASDAQ:LGND), but it's been structured such that Ligand can tap into Lilly's arsenal of drugs if it so chooses. The alliance also gives Ligand a strong partner to continue the development of drug candidates that were under the aegis of its former joint venture company, Allergan Ligand Retinoid Therapeutics Inc.
Biogen Inc. has also struck gold through its $145 million partnership with Merck & Co. Inc., of Whitehouse Station, N.J., on drugs for treating asthma and other inflammatory diseases. The deal, signed in December, is the first major R&D based collaboration that Biogen, of Cambridge, Mass. (NASDAQ:BGEN), has signed with a big pharma company in years. (The others have been mainly licensing deals, which by themselves have proved to be a reliable source of income for Biogen through royalty streams.) Importantly, Biogen has not only kept rights to its technology (which involves inhibiting VLA4 receptor molecules found on the white blood cells that migrate to sites of inflammation) for smaller indications of its choosing — especially multiple sclerosis, where it already has a marketing presence — but it has established a presence in the Japanese market through an arrangement with an affiliate of Lilly's.
The fourth new member of the 100 Million Dollar Club is Aurora Biosciences Corp., of La Jolla, Calif. — a relative newcomer to the biotech scene but already facile at the art of productive partnering. In December, Aurora (NASDAQ:ABSC) inked a $100 million deal with Merck, giving the big pharma partner access to its ultra-high-throughput screening system (UHTSS) as well as its other drug discovery technologies. In fact, Merck will help foot the development costs for UHTSS — along with Aurora's other UHTSS syndicate partners, Bristol-Myers Squibb Co., of New York, Eli Lilly and the Parke-Davis division of Warner-Lambert Co., of Morris Plains, N.J.
Thus, a total of 23 out of the 757 new R&D-based biotech-big pharma collaborations signed between 1993 and 1997 qualified to joint the 100 Million Dollar Club. That's only about 3 percent of the total, but it appears that the number of qualifying deals has begun to escalate in the last year. Even an occasional marketing arrangement can hit the 100-million-dollar mark — a subject that will be explored in the Jan. 26, 1998, issue of BioWorld Financial Watch.