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TrendsHot Topic

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Big Pharma continued to cultivate large deal-making values, representing the majority of overallbiopharma deal spending between 2011 and 2015.

Ref Code: DMKC0152639Downloaded on:Author: Amanda Micklus

Trends Hot Topic DMKC0152639 | Published on 23/02/2016

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Report reference: DMKC0152639 Published on: 23/02/2016

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CONTENTS 6 EXECUTIVE SUMMARY

9 KEY POINTS AND OVERALL TOTALS9 Deal volume increased but Big Pharma's overall share was small9 Big Pharma represented the majority of deal-making spend10 2014 and 2015 were stand-out years in Big Pharma deal-making11 Bibliography

13 COMPANY ANALYSIS AND CASE STUDIES14 AstraZeneca was the leading dealmaker by overall volume within the Big Pharma peer set20 Johnson & Johnson signed key cancer deals and formed an innovation initiative24 Roche continued oncology momentum but deal-making showed importance of other

therapeutic areas27 Pfizer's in-licensing fluctuated while out-licensing efforts increased32 Overall, out-licensing increased by 42% and Amgen and Eli Lilly evenly split in- and out-

licensing36 Bibliography

41 THERAPY AREA ANALYSIS41 Oncology dominated Big Pharma deal volume49 Infectious disease agreements declined, but there is potential for a turnaround50 Endocrine, metabolic, and genetic disorders gained speed52 Oncology also led in terms of partnership dollar values54 Oncology was also the focus of most out-licensing deals56 Bibliography

59 DEAL ECONOMICS59 Johnson & Johnson was the top dealmaker by dollars spent within the Big Pharma peer set62 Payment metrics on deals generally increased63 Average deal values increased65 A higher proportion of deal value was still locked up in milestones66 There were more than two-dozen billion-dollar deals between 2011 and 2015

70 PHASE ANALYSIS70 Early-stage candidates dominated partnerships73 Marketed drugs and Phase II candidates led in aggregate up-front payments74 Phase II and marketed drugs tended to have higher average up-fronts

77 GEOGRAPHIC BREAKDOWN OF DEAL-MAKING78 Regional deal-making took off80 Bibliography

81 DEAL STRUCTURES

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LIST OF FIGURES

81 R&D was the most common component of deal structures83 Option-based deal-making decreased83 Bibliography

85 APPENDIX85 About the author85 Scope85 Methodology

9 Figure 1: Big Pharma’s deal-making volume, 2011–1510 Figure 2: Big Pharma’s deal values and share of overall deal-making value, 2011–1511 Figure 3: Mid-to-higher-value deals dominate in Big Pharma’s deal-making, 2011–1513 Figure 4: Big Pharma’s deal volume, by company, 2011–1513 Figure 5: Big Pharma’s licensing deal volume CAGR, 2011–1515 Figure 6: AstraZeneca's deal-making activity: shrinking divide between in-licensing and out-

licensing, 2011–1517 Figure 7: AstraZeneca's in-licensing deals, by therapy area, 2011–1518 Figure 8: AstraZeneca's out-licensing deals, by deal type, 2011–1519 Figure 9: AstraZeneca's out-licensing deals, by therapy area, 2011–1520 Figure 10: Johnson & Johnson’s deal-making activity: greater focus on in-licensing, 2011–1522 Figure 11: Johnson & Johnson's in-licensing deals, by therapy area, 2011–1524 Figure 12: Roche's deal-making activity: in-licensing increased while out-licensing decreased,

2011–1525 Figure 13: Roche’s in-licensing deals, by therapy area, 2011–1527 Figure 14: Roche’s out-licensing deals, by therapy area, 2011–1528 Figure 15: Pfizer's deal-making activity, 2011–1529 Figure 16: Pfizer’s in-licensing deals, by therapy area, 2011–1531 Figure 17: Pfizer's out-licensing is led by divestments of rights, 2011–1531 Figure 18: Pfizer out-licensed in similar therapy areas to in-licensing but in different deal

structures, 2011–1532 Figure 19: Big Pharma’s out-licensing increased but is still outpaced by in-licensing, 2011–1533 Figure 20: Big Pharma’s in-licensing/out-licensing activity, by company, 2011–1534 Figure 21: Eli Lilly's in-licensing deals, by therapy area, 2011–1536 Figure 22: Eli Lilly’s out-licensing deals, by therapy area, 2011–1541 Figure 23: Big Pharma’s in-licensing deals, by therapy area, 2011–1541 Figure 24: Big Pharma’s deal volume, by therapy area, 2011–1542 Figure 25: Big Pharma’s in-licensing deals, by therapy area and phase of development,

2011–1548 Figure 26: Top oncology in-licensing dealmakers, 2011–1549 Figure 27: Big Pharma’s infectious disease in-licensing deals, by infection type, 2011–1552 Figure 28: Big Pharma’s in-licensing deals, by total deal value, 2011–1553 Figure 29: Value of up-front and milestone payments of in-licensing deals, by therapy area,

2011–15

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LIST OF TABLES

54 Figure 30: Big Pharma’s out-licensing deals, by therapy area, 2011–1559 Figure 31: Big Pharma’s big spenders in in-licensing deals, 2011–1562 Figure 32: Big Pharma’s licensing payments, by payment metric, 2011–1563 Figure 33: Big Pharma’s in-licensing deals, by payment metric average, 2011–1564 Figure 34: Big Pharma’s average up-front payments in in-licensing deals, by phase of

development, 2011–1565 Figure 35: Total up-front payment values and up-front payments as a percentage of in-

licensing deal value, 2011–1570 Figure 36: Big Pharma’s in-licensing deals, by phase of development at deal signing, 2011–1570 Figure 37: Share of preclinical and Phase I in-licensing deals increases, 2011–1571 Figure 38: Strong representation across all phases in Big Pharma’s in-licensing deals, 2011–1572 Figure 39: Marketed products dominated Big Pharma’s out-licensing deals, 2011–1573 Figure 40: Big Pharma’s in-licensing deal economics, by phase of development, 2011–1575 Figure 41: Big Pharma’s average up-front payments for in-licensing deals, by phase of

development, 2011–1575 Figure 42: Big Pharma’s average total deal values for in-licensing deals, by phase of

development, 2011–1577 Figure 43: Big Pharma’s in-licensing deal volume, by licensed geography, 2011–1577 Figure 44: Big Pharma’s out-licensing deal volume, by licensed geography, 2011–1578 Figure 45: Big Pharma’s worldwide in-licensing deals decreased and regional carve-outs

increased, 2011–1579 Figure 46: Geographic breakdown of in-licensing geography by Big Pharma peer set, 2011–1581 Figure 47: Big Pharma’s in-licensing deals, by deal structure, 2011–1581 Figure 48: Big Pharma’s out-licensing deals, by deal structure, 2011–1582 Figure 49: Development and research/discovery consistently featured in Big Pharma’s in-

licensing deals, 2011–15

45 Table 1: Big Pharma's lucrative immuno-oncology deals, 2011–1560 Table 2: Big Pharma’s in-licensing deal values, by company, 2011–1567 Table 3: Top 10 Big Pharma in-licensing deals, by deal value, 2011–1585 Table 4: Datamonitor Healthcare's Big Pharma peer set

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EXECUTIVE SUMMARY Big Pharma deal-making volume and value experienced large increases, especially in 2014 and 2015:

Between 2011 and 2015, Big Pharma companies signed a total of 1,158 drug-focused deals. Five-year volume rose dramatically: in 2015, Big Pharma penned 306 alliances, a 46%increase over 2011's 209 transactions, equating to a compound annual growth rate ofapproximately 10%. Big Pharma, on average, only represented 18% of the total number of biopharma deals, butput in the majority of the monetary value in those partnerships – a total of $133bn versus the$254bn in all comparable biopharma alliances (including the Big Pharma peer set). 2014 and 2015 were stand-out years in Big Pharma deal-making, with each year featuringmore than double the number of billion-dollar deals made in each of the first three years ofthe time period evaluated.

The top four dealmakers of the five-year period collectively penned a total of 528 deals (in- and out-licensing), and each company forged most of their in-licensing deals in oncology:

AstraZeneca was the top Big Pharma dealmaker, penning 169 alliances. The company also ledin volume by out-licensing with 51 deals. Johnson & Johnson was second behind AstraZeneca in total deals at 141, but tiedAstraZeneca for in-licensing volume at 118. Johnson & Johnson's key oncology in-licenseswith Pharmacyclics and Genmab brought it the now-marketed products Imbruvica (ibrutinib)and Darzalex (daratumumab), respectively. Behind AstraZeneca and Johnson & Johnson was Roche at 111 deals. Oncology remained apriority but other areas of research gained momentum in in-licensing including neurology andinfectious disease. Pfizer came in fourth in deal volume with 107 alliances. The company's in-licensing wasdriven by immuno-oncology, including a key tie-up in 2014 with Merck KGaA to co-developand co-commercialize Merck's anti-programmed death ligand-1 antibody avelumab. Out-licensing efforts increased, particularly in oncology where Pfizer accomplished traditionalpartnerships, distribution agreements, and co-development deals.

The rate of Big Pharma's in-licensing activity outpaced that of out-licensing:

Big Pharma companies signed two-to-three times as many in-licensing agreements as out-licensing deals annually between 2011 and 2015. Out-licensing gained speed with a 42% increase in these deal types between the start andend of the five-year period.

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Amgen had a nearly equal split between its in- and out-licensing activities, which was notsurprising given the company's biotech business model. Eli Lilly evenly balances in- and out-licensing, and set up a new venture funding model withcapital fund partners to further those efforts.

Oncology, infectious disease, and endocrine, metabolic, and genetic disorders (EM&GD) were the topthree therapeutic areas for Big Pharma in-licensing:

Approximately 32% of Big Pharma in-licensing involved oncology drugs, of which almost halfwere in the immuno-oncology field. Oncology also led in in-licensing partnership values. Most Big Pharma out-licensing focused on oncology as well, and involved collaborative dealstructures such as co-development. AstraZeneca was the most active oncology in-licenser inthe Big Pharma peer group; its highest-valued deal was a license agreement with InovioPharmaceuticals in immuno-oncology, worth $728m. Infectious disease accounted for 13% of in-licensing deals, but the category's annual sharestarted to shrink in 2013 as EM&GD deals increased. Bacterial infection-focused dealsaccounted for 30% of total infectious disease agreements, indicating the increasing efforts tocombat drug-resistant infections. EM&GD represented 12% of Big Pharma deals. Sanofi, which has the leading diabetes drug onthe market, Lantus (insulin glargine), achieved the most EM&GD deals of any Big Pharma,penning 19 in-licensing agreements.

During the five-year period, payment metrics on in-licensing deals generally increased:

Up-front, milestones, and total deal values gradually increased between 2011 and 2015, withthe exception of decreases between 2012 and 2013 in total milestones and total deal value,and some fluctuations in up-front figures. A Big Pharma company paid out an average of $44m up-front in an alliance in 2011.However, deals have become more expensive; in 2015, the average price increased to nearlytwice the 2011 value at $74m. One prime reason for this increase is oncology's larger share indeal volume and the higher prices paid in oncology deals. Well over the majority of the value of deals are tied into various types of milestones,including development, regulatory, and commercial, and are therefore neither guaranteed norpaid up front. In 2014, deal values took off considerably. Most notably, the $4.4bn in up-fronts that yearrepresented 41% of all up-fronts made during 2011–15. Johnson & Johnson spent the most money on in-licensing over the five-year period, payingout $18.4bn in total deal value.

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Big Pharma balanced its in-licensing efforts for drugs across all development phases, but preclinicalcandidates led:

For deals where the phase was disclosed, in-licenses for preclinical candidates topped the listin terms of volume and total deal value over the five-year period. Approved/marketed drugs led in Big Pharma out-licensing. Average up-fronts paid in Phase II and approved/marketed drug alliances tended to be higherthan most other phases.

Worldwide deals are no longer the norm, with most Big Pharma alliances covering rights in selectregions across the major markets:

Regional deals made up 33% of the total group of Big Pharma in-licensing deals, comparedwith 28% that were conducted worldwide. There was a steady increase in regional agreements which totaled 72 in 2015, representing a64% increase over the 44 deals made in 2011. Starting in 2011 and continuing since, the share of collaborations for global rights is less thanthat of regional deals among Big Pharma. North America was the most partnered region for Big Pharma out-licensing.

Big Pharma companies continued to structure most in-licensing deals with an R&D component:

Over the five-year period, 23% of in-licensing deals included development or co-development, followed by R&D at 21%. Big Pharma out-licensing also involved collaborative deal structures, includingdevelopment/co-development and commercialization. Option-based deals, which gained popularity as a way for the licensee to de-risk a potentialasset before it was officially taken in-house, decreased slightly.

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KEY POINTS AND OVERALL TOTALS An analysis of drug-focused licensing deals (out-licensing and in-licensing) made by Big Pharmacompanies shows an uptick in partnering between 2011 and 2015. The peer set increased deal volumeby nearly 100 transactions, a 46% increase between the beginning and the end of the five-yearperiod. Deal values rose even more significantly, by 160%. Deal volume increased but Big Pharma's overall share was small Between 2011 and 2015, Big Pharma companies signed a total of 1,158 drug-focused deals, growingat a compound annual growth rate of 10%. Following a minimal drop of 26 transactions between2011 and 2012, the annual figures steadily increased year-on-year. In 2015, Big Pharma penned 306alliances, a 46% increase over 2011's 209 transactions. This represented a turnaround from theslowdown in deal-making activity and values observed for all of biopharma after the US financialcrisis that began in 2008 (In Vivo, 2014). Despite an overall increase in Big Pharma’s deal-making activity, the peer set only represented 18% ofthe total number of biopharma deals signed over the five-year period. Big Pharma's comparativelysmaller representation in deals is likely attributed to the increased participation of specialty pharmacompanies such as Valeant Pharmaceuticals or Allergan, and more partnerships between smaller firmsincluding biotech-to-biotech deals. After averaging around 15% from 2011 to 2013, Big Pharmacompanies began to steadily increase their share of deals, reaching a peak of 23% in 2015.Furthermore, the number of alliances increased by 24% from 2014 to 2015, the biggest year-on-yearincrease within the time period reviewed, and a potential sign that the peer group's share in totaldeal-making activity is likely to rise.

Figure 1: Big Pharma’s deal-making volume, 2011–15

Source: Medtrack

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Big Pharma represented the majority of deal-making spend Despite accounting for less than a quarter of deal volume, Big Pharma has contributed the majority ofthe monetary value of biopharma partnerships over the past five years. Overall, Big Pharma allianceswere worth $133bn, compared with the $254bn from all comparable biopharma alliances (includingthe Big Pharma sample), equal to 52% of the total value. There were some fluctuations in dollar valueduring the time period, and in both 2011 and 2013, Big Pharma's deal value represented less than50% of total spend. These peaks and valleys were not due to substantial increases or decreases in thenumber of deals; in fact, in 2012, which featured a higher total value than in 2011 and 2013, therewas a 12% reduction in transaction volume from 2011. Instead, the deals that were made in 2012were simply more expensive; the year featured four billion-dollar-plus agreements, more than the onesuch deal in 2011 and three in 2013. For example, Genmab and Johnson & Johnson/Janssen's antibodydiscovery agreement from 2012, involving Genmab’s DuoBody platform, was valued at $4bn, thesecond-highest transaction in the five-year period (Strategic Transactions, 2012).

2014 and 2015 were stand-out years in Big Pharma deal-making 2014 and 2015 each boasted more than double the number of billion-dollar deals done in the firstthree years of the time period evaluated. In 2014, Big Pharma penned eight billion-dollar deals, threeof which were in the $1bn range and the rest over $2bn. Among the leading partnerships signed in2014, Pfizer's immuno-oncology tie-ups with both Merck KGaA and Cellectis, each valued at $2.9bn,tied for the third-largest deals done during the five-year period. Pfizer and Merck are co-developingand co-commercializing Merck's programmed death-1 inhibitor avelumab alone and in combinationwith other drugs for multiple tumors (Strategic Transactions, 2014a), while Pfizer and Cellectis willwork on chimeric antigen receptor T-cell therapies against 15 oncology targets (StrategicTransactions, 2014b). At $31bn, 2014's total deal-making value for Big Pharma was an impressive

Figure 2: Big Pharma’s deal values and share of overall deal-making value, 2011–15

Source: Medtrack

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90% increase over 2013's $16bn, which happened to be the lowest single-year sum. In 2015, 14 billion-dollar-plus partnerships were made, led by Sanofi and Hanmi's broad diabetescollaboration covering preclinical through to Phase II candidates (Strategic Transactions, 2015a). At$4bn, Sanofi and Hanmi's deal was also the highest-valued transaction in the five-year period. In2015, Sanofi also signed three other alliances in the billion-dollar range, with RegeneronPharmaceuticals ($2bn; immuno-oncology) (Strategic Transactions, 2015b), Lexicon Pharmaceuticals($2bn; diabetes) (Strategic Transactions, 2015c), and BioNTech ($2bn; immuno-oncology) (StrategicTransactions, 2015d). In all, Big Pharma accounted for $47.1bn in 2015 deal-making value, a five-yearhigh and more than twice 2011's $18bn aggregate. In addition, 2015's dollar figure represented 58%of all money that went into biopharma alliances, the biggest percentage of any individual year. Thehigher 2015 figure may be explained by the sheer increase in volume – at 306, 2015 featured themost number of deals signed. However, it is important to note that the majority of alliances over thefive-year period did not have a disclosed value. While 2015 does boast the largest dollar figure, it alsoincluded the biggest sample size (88) of deals with a reported value.

Bibliography In Vivo (2014) S&P Vs. Pharma Partnership Deal Volume. Available from:

Figure 3: Mid-to-higher-value deals dominate in Big Pharma’s deal-making, 2011–15

Source: Medtrack

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https://www.pharmamedtechbi.com/Publications/IN-VIVO/32/11/SampP-Vs-Pharma-Partnership-Deal-Volume [Accessed 21 October 2015]. Strategic Transactions (2012) Janssen Biotech teams up with Genmab to create antibodies. Availablefrom: https://www.pharmamedtechbi.com/deals/201220317 [Accessed 11 January 2016]. Strategic Transactions (2014a) Pfizer to build its immuno-oncology pipeline through tie-up withMerck KGAA. Available from: https://www.pharmamedtechbi.com/deals/201420418 [Accessed 11January 2016]. Strategic Transactions (2014b) Cellectis, Pfizer to develop CART therapies for cancer. Available from:https://www.pharmamedtechbi.com/deals/201420226 [Accessed 11 January 2016]. Strategic Transactions (2015a) Sanofi pays €400mm up front for rights to Hanmi's Quantum Project indiabetes. Available from: https://www.pharmamedtechbi.com/deals/201520552 [Accessed 11 January2016]. Strategic Transactions (2015b) Regeneron and Sanofi ride the wave of success; partner again in newantibody deal. Available from: https://www.pharmamedtechbi.com/deals/201520371 [Accessed 11January 2016]. Strategic Transactions (2015c) Sanofi gets rights to Lexicon's oral diabetes project sotagliflozin.Available from: https://www.pharmamedtechbi.com/deals/201520553 [Accessed 11 January 2016]. Strategic Transactions (2015d) Sanofi enters cancer immunotherapy deal with BioNTech. Availablefrom: https://www.pharmamedtechbi.com/deals/201520546 [Accessed 11 January 2016].

https://www.pharmamedtechbi.com/Publications/IN-VIVO/32/11/SampP-Vs-Pharma-Partnership-Deal-Volume

https://www.pharmamedtechbi.com/Publications/IN-VIVO/32/11/SampP-Vs-Pharma-Partnership-Deal-Volume

https://www.pharmamedtechbi.com/deals/201220317







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COMPANY ANALYSIS AND CASE STUDIES During 2011–15, Big Pharma firms balanced deal-making with a mixture of both in-licensing, ortaking in rights to drugs, and out-licensing, which can include divestments, partnering, or other formsof collaboration in which the company contributes its own products. By overall deal volume counts,AstraZeneca was the most active within the Big Pharma peer set, penning a total of 169 alliancesduring the five-year period. Johnson & Johnson, Roche, and Pfizer followed AstraZeneca in transactioncounts, each signing over 100 deals.

Figure 4: Big Pharma’s deal volume, by company, 2011–15

Source: Medtrack

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AstraZeneca was the leading dealmaker by overall volume within the Big Pharma peerset AstraZeneca was the top Big Pharma dealmaker over the five-year period reviewed, entering into 169alliances in total between 2011 and 2015. The company’s in-licensing activity annually was, onaverage, more than double the rate of its out-licensing, but the divide between the two deal modelsshrunk over the five-year period. AstraZeneca made a significant addition to its pipeline when itbought MedImmune in 2007 (Strategic Transactions, 2007), and continued to make smaller bolt-onacquisitions in the years that followed. Pfizer tried to buy AstraZeneca in mid-2014 (StrategicTransactions, 2014a), mainly driven by the tax benefits of an inversion structure, but the dealeventually broke down and was not completed because of the US Treasury's new rules eliminating theeconomic advantages of such a deal, plus the fact that Pfizer would not up its bid. In 2015, Pfizerended up announcing an alternate tax-motivated deal, a $160bn takeover of Allergan, the largestbiopharma acquisition to date (Strategic Transactions, 2015a). Following the dissolution of thePfizer/AstraZeneca transaction, AstraZeneca has pledged to move forward to build its pipeline andgrow revenues. Datamonitor Healthcare, however, forecasts that AstraZeneca's standing among theBig Pharma peer set is going to decrease from sixth in 2007 to 10th by 2024 (see Datamonitor

Figure 5: Big Pharma’s licensing deal volume CAGR, 2011–15

Source: Medtrack

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Healthcare's 2015 Big Pharma Outlook for more details). ONCOLOGY WAS ASTRAZENECA'S TOP THERAPEUTIC AREA FOR IN-LICENSING More than one-third of AstraZeneca's in-licensing collaborations were in oncology, one of thecompany's key therapy areas with sales forecasted to increase at a compound annual growth rate(CAGR) of 8.2% between 2014–24, or overall growth of nearly $4bn in sales (see DatamonitorHealthcare's AstraZeneca analysis for more details). In oncology, two of AstraZeneca's highest-valueddeals both involved RNA therapeutics, an area that has attracted the attention of other Big Pharmacompanies including Merck & Co and Johnson & Johnson. These second-generation RNA technologiesdiffer and are potentially more promising than early-generation RNAi, which has largely beenabandoned by Big Pharma over the last 10 years due to the challenges of delivering small interferingRNA, also known as siRNA. In addition to its innovative potential, RNA is likely an attractive field forAstraZeneca considering that 50% of the company's pipeline now consists of large molecules (Schott,2015). In 2012, AstraZeneca partnered with Regulus Therapeutics (a joint-venture entity set up in2007 by oligonucleotide pioneers Isis Pharmaceuticals [now called Ionis Pharmaceuticals] and AlnylamPharmaceuticals) on three preclinical microRNA targets (in addition to cancer, the alliance alsoinvolved cardiovascular and metabolic diseases). The agreement could potentially be worth $526mand candidates are already progressing, including a microRNA-19 program for cancer (StrategicTransactions, 2012a). AstraZeneca also teamed up with Moderna in a 2013 deal worth $420m thattakes advantage of the biotech's messenger RNA therapeutics technology in not only oncology butalso in cardiometabolic and renal disorders (Strategic Transactions, 2013a). AstraZeneca invested inModerna as part of the biotech's $450m Series C financing in early 2015, one of the largest venturerounds to date (Strategic Transactions, 2015b).

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In addition to RNA, AstraZeneca's other big oncology deals focused on immuno-oncology, led by two2015 agreements with Heptares and Inovio. Heptares granted AstraZeneca exclusive rights toadenosine A2A receptor antagonists, including HTL1071, which the Big Pharma will evaluate forstimulating anticancer responses in T cells. Heptares received $10m up-front and $500m inmilestones (Strategic Transactions, 2015c). Inovio licensed MedImmune exclusive rights to Phase I/IIINO3112; MedImmune plans to combine the candidate with its own immunotherapies for humanpapilloma virus-related cancers. The agreement is worth up to $728m in up-front and milestonepayments (Strategic Transactions, 2015d). The programmed death (PD)-1 inhibitor durvalumab leads AstraZeneca's internal immuno-oncologypipeline. The company had hoped to pursue the antibody as a monotherapy and third-line or latertreatment, which would have been the third PD-1 blocker to market following Merck & Co's Keytruda(pembrolizumab) and Bristol-Myers Squibb's Opdivo (nivolumab). However, based on preliminaryresults from AstraZeneca's ATLANTIC trial in patients with PD ligand-1 (PD-L1)-positive non-small celllung cancer (NSCLC) that lacks epidermal growth factor receptor or ALK alterations, the companystated the data could not likely be used for regulatory filings of durvalumab as a monotherapy(AstraZeneca, 2015). AstraZeneca is now aggressively pursuing durvalumab combinations, includingthose among its own pipeline as well as external candidates. It currently has more than two dozen

Figure 6: AstraZeneca's deal-making activity: shrinking divide between in-licensing and out-licensing, 2011–15

Source: Medtrack

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collaborations testing durvalumab combinations, and Datamonitor Healthcare predicts the companywill continue immuno-oncology deal-making, including evaluating both monotherapies andcombinations, at an active pace.

INFECTIOUS DISEASE AND ENDOCRINE, METABOLIC, AND GENETIC DISORDERS WERE ALSOREPRESENTED IN ASTRAZENECA'S IN-LICENSING ACTIVITY Endocrine, metabolic, and genetic disorders (EM&GD) and infectious disease were also strong areas forAstraZeneca's in-licensing between 2011 and 2015, each representing approximately 10% of thecompany's deals. AstraZeneca's efforts to continue growing in the diabetes market were evidentthrough its in-licensing EM&GD deals, most of which were centered on this indication. The diabetesgroup included option-based drug discovery deals with NGM Biopharmaceuticals to develop peptidesand antibodies targeting enteroendocrine cells (Strategic Transactions, 2013b), and with the JoslinDiabetes Center for research into protecting and regenerating the insulin-producing beta cells(Medtrack, 2015). AstraZeneca's diabetes sales are projected to grow by more than $2bn between2014 and 2024 (see Datamonitor Healthcare's AstraZeneca analysis for more details). Many ofAstraZeneca's diabetes medicines came from the firm's 2013 purchase of Bristol-Myers Squibb'sdiabetes operations (Strategic Transactions, 2013c), including several products from Amylin, whichBristol-Myers Squibb acquired in 2012 (Strategic Transactions, 2012b).

Figure 7: AstraZeneca's in-licensing deals, by therapy area, 2011–15

Source: Medtrack

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The infectious disease category is a smaller part of AstraZeneca's portfolio, accounting for only 5.8%of the company’s therapy area share by sales in 2014 and its sales are estimated to fall at a -4.4%CAGR from 2014 to 2024 (see Datamonitor Healthcare's AstraZeneca analysis for more details). Thelarge number of in-licensing deals in infectious disease could imply that AstraZeneca intends toexternalize more in this area. Several of the company's infectious disease alliances werecollaborations with non-profits or academic partners, including the Liverpool School of TropicalMedicine and Drugs for Neglected Diseases Initiative, covering indications such as Chagas disease andleishmaniasis, while industry deals, including ones with FOB Synthesis and LegoChem Biosciences,focused on drug-resistant bacterial infections (Medtrack, 2016). One of AstraZeneca's most significant investments over the five-year period was neither in oncologynor any of the company's other top therapeutic categories, but rather in the respiratory area. Theinvestment was a $2bn deal ($875m up-front and $1bn in total milestones) for rights to Almirall'srespiratory portfolio and pipeline, including the marketed chronic obstructive pulmonary disease(COPD) product Tudorza (aclidinium) plus asthma and COPD candidates in various stages ofdevelopment (preclinical through to Phase III) (Strategic Transactions, 2014b). The addition of theseassets strengthens AstraZeneca's respiratory franchise, which already includes Symbicort(budesonide/formoterol) and Pulmicort (budesonide). The respiratory category was AstraZeneca'ssecond-largest therapeutic area in 2014, behind EM&GD, accounting for 19.4% of totalpharmaceutical sales, and annual sales are forecasted to remain over $5bn through to 2024. Aforecasted CAGR of 0.8%, however, means the product group is not expected to grow much during2014–24 (see Datamonitor Healthcare's AstraZeneca analysis for more details). The first of Symbicort'spatents expired in 2014 in the US (the patent on the device expired in 2011), and Pulmicort facespatent expiry in 2018 in the US for both the device and composition (Medtrack, 2016). The Almirallagreement, along with AstraZeneca's outright acquisition of Takeda's respiratory business for $575min 2015 (Strategic Transactions, 2015e), are part of AstraZeneca's strategy to replenish its respiratorysales. ASTRAZENECA LED IN OUT-LICENSING DEAL VOLUME AstraZeneca settled the most out-licensing deals of any Big Pharma in the peer set, completing a totalof 51 over the five-year period. The company's out-licensing grew at a CAGR of 41% between 2011and 2015, the second-largest CAGR of any Big Pharma company. Novo Nordisk experienced thelargest growth in out-licensing during the five-year period, slightly higher at 44%, but this is based ona comparatively smaller data set than AstraZeneca's. AstraZeneca's out-licensing deal volume hadbeen fairly flat between 2011 and 2014, but in 2015 the company doubled its out-licensing effortswith 20 such transactions, nearly half of its five-year total (Medtrack, 2016). MOST OF ASTRAZENECA’S OUT-LICENSING STILL INVOLVED COLLABORATION Only a minority (16%) of AstraZeneca's out-licensing deals, however, were divestments, indicatingthat the company is still involved and has a vested interest in many of the partnered assets. Forexample, 34% of the alliances were classified as research/discovery, co-development, or co-promotiondeals, including several in which AstraZeneca is contributing a drug of its own to a collaborative studywith universities or research institutes (Medtrack, 2016).

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Of the company's total out-licensing agreements made over the five-year period, 38% were in theoncology area and many involved collaborative deal types. One stand-out exception in oncology wasthe sale of AstraZeneca's Caprelsa (vendetanib) to Genzyme for $300m ($165m up-front and $135min milestones) (Strategic Transactions, 2015f). Caprelsa is indicated for symptomatic or progressivemedullary thyroid carcinoma in patients with unresectable locally advanced or metastatic disease, arare disease that fits in Genzyme's business more strategically than AstraZeneca's. Even whenAstraZeneca's out-licensing activity did involve straight-out partnering, the company still retained astake in the asset. One prime example is Celgene's license of AstraZeneca's immuno-oncologycandidate durvalumab. While the Big Pharma company continues to focus in-house on developmentof the antibody for solid tumors, Celgene's worldwide rights cover hematological cancers. Celgenepaid $450m up-front in the deal, one of the largest up-fronts in 2015 (Strategic Transactions, 2015g),and plans to conduct four combination studies of durvalumab with its own drugs in various cancertypes, including relapsed/refractory multiple myeloma and non-Hodgkin’s lymphoma (NHL) (BusinessWire, 2015).

Figure 8: AstraZeneca's out-licensing deals, by deal type, 2011–15

Source: Medtrack

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Johnson & Johnson signed key cancer deals and formed an innovation initiative Johnson & Johnson (including Janssen and other subsidiaries) was second to AstraZeneca in terms ofnumber of deals signed with 141 in total. Johnson & Johnson, however, tied with AstraZeneca in thevolume of in-licensing deals made at 118 within the five-year period. Johnson & Johnson's deal-making activity began to sharply increase in 2012, peaking at 31 transactions each in 2014 and 2015.The company's out-licensing activity on the other hand is small, only representing 15% of its totalalliances between 2011 and 2015. Most of its out-licensing agreements included the sale of rights todrugs or licensing, as opposed to co-development or co-promotion. Over the time period, Johnson &Johnson experienced no growth in out-licensing deal volume.

Figure 9: AstraZeneca's out-licensing deals, by therapy area, 2011–15

Source: Medtrack

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JOHNSON & JOHNSON INNOVATION WAS LAUNCHED Johnson & Johnson launched an initiative in 2012 to establish regional innovation centers throughoutthe world to advance life sciences discoveries. The business unit, called Johnson & Johnson Innovation,partners with the corporate venture arm Johnson & Johnson Development Corporation (JJDC) andJLABS, its biotech incubator network, to collaborate with start-ups to provide R&D expertise, businessmodel development, and funding. According to Robert Urban, PhD, who leads Johnson & Johnson'sinnovation hub in Boston, the newly formed entities that work with JLABS have no obligation toJohnson & Johnson in terms of deal-making, but they must be "remarkable companies" (Urban, 2015).Johnson & Johnson Innovation signed nine partnerships over the five-year period, mostly centered onneurology and oncology. Aduro Biotech teamed up with the Innovation group twice in 2014, licensingprostate and lung cancer candidates derived from Aduro's live-attenuated double-deleted Listeriamonocytogene platform. Together those deals are worth $1bn in potential payments (Medtrack,2016). Continuing that momentum, Johnson & Johnson Innovation arranged several new pharma-focused agreements at the start of 2016 (Pink Sheet Daily, 2016a). JOHNSON & JOHNSON BUILT UP ITS HEMATOLOGICAL CANCER PORTFOLIO IN ONCOLOGY DEALS Oncology was the focus of most of Johnson & Johnson's five-year deal-making activity, representing29% of its alliances. Unsurprisingly, some of the company's highest-valued transactions were also inthe oncology area, namely Janssen Biotech's 2011 global agreement for Pharmacyclics's Bruton’styrosine kinase inhibitor ibrutinib, which at the time was in Phase II for NHL, chronic lymphocyticleukemia (CLL), and multiple myeloma. The deal included a $150m up-front payment with up to

Figure 10: Johnson & Johnson’s deal-making activity: greater focus on in-licensing, 2011–15

Source: Medtrack

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$825m in development and regulatory milestones. The partners also have a 50/50 share on profits andlosses (Strategic Transactions, 2011). The US Food and Drug Administration (FDA) approved the drugas Imbruvica in 2013 for mantle cell lymphoma, followed by approvals in CLL/small-cell lymphocyticlymphoma and Waldenström’s macroglobulinemia (Biomedtracker, 2016). Johnson & Johnson was oneof the rumored bidders when Pharmacyclics went up for sale, but AbbVie ended up buying thebiopharma company in 2015 for $21bn (Strategic Transactions, 2015h) in a move largely to reduce itsreliance on Humira (adalimumab). AbbVie now splits Imbruvica profits with Johnson & Johnson.Imbruvica is a key growth driver for Johnson & Johnson; sales of the drug are forecasted to reach$3bn at its peak in 2024, a significant increase from 2014 sales of $196m (see DatamonitorHealthcare's Johnson & Johnson analysis for more details).

In another big oncology deal, Janssen and Genmab teamed up in 2012 to develop the latter'sdaratumumab, an anti-CD38 HuMax antibody for relapsed/refractory multiple myeloma. As part of thedeal, Johnson & Johnson's corporate venture arm JJDC took an 11% stake in Genmab for $80m, andJanssen also spent $55m in cash up-front and pledged up to $1bn in development, regulatory, andsales milestones (Strategic Transactions, 2012c). This was Johnson & Johnson's second-biggest dealoverall behind its 2012 $4bn DuoBody antibody discovery agreement, also with Genmab (StrategicTransactions, 2012d). The FDA approved daratumumab as Darzalex in November 2015 for fourth-linetherapy in multiple myeloma (FDA news release, 2015). The Pharmacyclics and Genmab dealscontributed to building Johnson & Johnson's hematology/oncology portfolio and should help offsetdeclining sales, beginning in 2018 due to the patent expiration of and anticipated generic competition

Figure 11: Johnson & Johnson's in-licensing deals, by therapy area, 2011–15

Source: Medtrack

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for Velcade (bortezomib). Johnson & Johnson's Ortho Biotech co-promotes Velcade in the US withTakeda Pharmaceutical's Millennium Pharmaceuticals (now called Takeda Oncology) (StrategicTransactions, 2006), and under a 2003 deal, Ortho has ex-US rights (Strategic Transactions, 2003).Besides Velcade, the only legacy product Johnson & Johnson had in myeloma was Doxil (pegylatedliposomal doxorubicin hydrochloride), which now faces generic competition. In the myeloma pipeline,Johnson & Johnson is testing a couple of candidates it obtained from the Pharmacyclics and Genmabagreements, including Imbruvica in the multiple myeloma indication and a subcutaneous version ofdaratumumab, using Halozyme Therapeutics' ENHANZE technology, also for multiple myeloma(Biomedtracker, 2016). HEPATITIS C WAS THE FOCUS OF MULTIPLE INFECTIOUS DISEASE ALLIANCES Approximately 17% of Johnson & Johnson's in-licensing deals focused on infectious disease between2011 and 2015, second behind oncology. Infectious disease was the company’s third-leading therapyarea in 2014 by sales, at $5bn or 16.2% the company’s total pharma sales. Between 2014 and 2024,however, the category will experience a -8.0% CAGR due to generic competition to Prezista(darunavir) in HIV (although Johnson & Johnson's fixed-dose combination Prezcobix[darunavir/cobicistat] is forecasted to counter some of that loss); Incivek (telaprevir), approved forhepatitis C virus (HCV) and withdrawn from the US market in 2014, but still available in othercountries (Johnson & Johnson's Tibotec has ex-North American rights from Vertex Pharmaceuticals)(Biomedtracker, 2016); and Olysio (simeprevir), also in HCV, because of heightened competition fromGilead's Harvoni (sofosbuvir/ledipasvir) (see Datamonitor Healthcare's Johnson & Johnson analysis formore details). In particular, hepatitis C was an area of concentration for Johnson & Johnson's dealsand was an indication of interest in five of the 14 infectious disease deals, including an $875mcollaboration with Achillion Pharmaceuticals in 2015 to develop the biotech's ACH3102, ACH3422,and sovaprevir with the goal of producing a short-acting, pan-genotypic, oral regimen for the disease(Medtrack, 2016). PARTNERSHIPS REFLECT THE IMPORTANCE OF IMMUNOLOGY AND INFLAMMATION ANDNEUROLOGY TO JOHNSON & JOHNSON Immunology and inflammation and neurology were also important therapeutic areas for Johnson &Johnson's in-licensing, accounting for 15% and 16% of the company’s total deal-making, respectively.Immunology and inflammation is a key market for the company, supported by the continued growthof Remicade (infliximab) and newer drugs Simponi (golimumab) and Stelara (ustekinumab). In 2014,31.7% of Johnson & Johnson's revenue derived from immunology and inflammation, making it thecompany's largest therapeutic category, and sales from the market are forecasted to reach nearly$13bn in 2024, representing a 2.2% CAGR from 2014 (see Datamonitor Healthcare's Johnson &Johnson analysis for more details). Leading drug Remicade has faced biosimilar competition in Europe(from Hospira) since 2015, and in the US, the FDA is reviewing a biosimilar from Celltrion, so Johnson& Johnson may look to in-licensing to offset that sales erosion. Smaller biotechs such as Phenex Pharmaceuticals, Modern Biosciences, and Ionis Pharmaceuticalspartnered with Johnson & Johnson in million-dollar deals involving various indications such asautoimmune disorders of the gastrointestinal tract, rheumatoid arthritis, psoriasis, and inflammatory

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bowel disease (Medtrack, 2016). Johnson & Johnson's largest immunology and inflammation alliancecompleted during the five-year time period, however, was recently terminated. In an agreement thatcould have been worth $945m, Janssen received in 2012 exclusive global rights (outside of Japan) toAstellas Pharma's Phase II oral Janus kinase inhibitor ASP015K for moderate-to-severe rheumatoidarthritis (Medtrack, 2016). However, effective 15 January 2015, Janssen returned the candidatefollowing a strategic portfolio review which was based on an analysis of the depth of the company'simmunology pipeline and the decision to invest in other core areas (PharmAsia News, 2014). Johnson & Johnson's central nervous system group of deals involved several agreements in the riskyAlzheimer's disease market. Janssen tied up with Shionogi, Evotec, Alector, and the Centre forCollaborative Drug Research to discover new Alzheimer's treatments, in addition to the areas of painand migraine (Medtrack, 2016). Roche continued oncology momentum but deal-making showed importance of othertherapeutic areas Roche was the third most active Big Pharma dealmaker between 2011 and 2015, signing a total of111 transactions. The company's in-licensing volume steadily increased over the five-year period.While Roche executed 35 out-licensing deals (third behind AstraZeneca and Pfizer), out-licensingdecreased at a CAGR of -8% between 2011 and 2015.

Figure 12: Roche's deal-making activity: in-licensing increased while out-licensing decreased, 2011–15

Source: Medtrack

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ONCOLOGY REMAINED A TOP FOCUS AREA FOR ROCHE Oncology represented 62.1% of Roche’s 2014 sales (see Datamonitor Healthcare's Roche analysis formore details) and was the focus of 43% of Roche's in-licensing deals during the five-year period.According to Sophie Kornowski-Bonnet, head of partnering at Roche, oncology remains a priority forthe company (Pink Sheet, 2016a). Similar to other Big Pharma firms, Roche's most expensiveagreements involved immunotherapies. In exchange for $150m up-front and up to $1bn inmilestones, New Link Genetics granted Roche's Genentech unit exclusive worldwide rights to NLG919,a Phase I indoleamine 2,3-dioxygenase (IDO) inhibitor (Strategic Transactions, 2014c). The companiesalso formed a research collaboration to test next-generation IDO/tryptophan 2,3-dioxygenaseinhibitors. Further, Roche and Genentech are evaluating in Phase Ib a combination of their PD-L1inhibitor atezolizumab with NLG919 (Trialtrove, 2015). Combinations in immuno-oncology havebecome an increasingly important area of research. Roche launched a committee in 2015 that reviewsproposals for such combinations in deal-making, recognizing, says Jason Coloma, who leads thecompany's efforts in oncology and cancer immunotherapy partnering, that "you won’t have everythingin house…you just can’t research and develop and market all of these therapy options" (Pink Sheet,2016b). In another billion-dollar deal, Roche received rights to Immatics Biotechnologies' tumor-associated peptide-based cancer vaccines and other immunotherapies for gastric cancer, prostatecancer, and NSCLC (Medtrack, 2016).

Figure 13: Roche’s in-licensing deals, by therapy area, 2011–15

Source: Medtrack

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NEUROLOGY BECAME AN IMPORTANT AREA FOR ROCHE’S IN-LICENSING Neurology has been a smaller focus area for Roche; in 2014, this category only accounted for 2% ofsales (see Datamonitor Healthcare's Roche analysis for more details). However, this is set to changefollowing a reorganization of Roche's Pharma Research and Early Development unit and arecommitment to neuroscience (Pink Sheet, 2016a). Neurology's share in Roche's drug sales isforecasted to increase at a CAGR of 11.4% between 2014 and 2024, the highest growth rate for anyof the company’s therapy areas, driven by gantenerumab (currently in Phase II/III for Alzheimer'sdisease) and ocrelizumab (Phase III for multiple sclerosis) (Datamonitor Healthcare, Company Analysis,Forecast Analysis, April 2015). Approximately 20% of Roche's in-licensing deals were in the neurology area, second behind oncology,and covered conditions including pain, Parkinson's disease, stroke, Huntington's disease, andAlzheimer's disease. The company's largest neurology deal focuses on the development of Evotec'smonoamine oxidase-B inhibitor sembragiline for Alzheimer's. Evotec received $10m up-front andcould get $820m in total milestones, but the candidate's future is in question after a read-out of datain 2015 showed it failed to demonstrate benefit on the primary endpoint. Roche says it will review allsecondary endpoints before making a decision on how to proceed (Medtrack, 2016). PARTNERING IN INFECTIOUS DISEASE COULD HELP COMBAT PEGASYS LOSS In 2014, infectious disease was Roche's third-largest therapy area, representing 8.7% of sales. Thecompany's infectious disease portfolio is forecasted to experience a -11.0% CAGR from 2014 to 2024,including a significant loss in Pegasys (peginterferon alfa-2a) sales due to competition frominterferon-free regimens (see Datamonitor Healthcare's Roche analysis for more details). Between 2011 and 2015, infectious diseases accounted for 18% of deals, the company's third mostactive therapy area for in-licensing. Partnering has become increasingly important for Roche'sinfectious disease efforts, with R&D focusing on hepatitis B virus, influenza, and antibiotics for tough-to-treat strains (Pink Sheet, 2016a). After being largely absent from antibiotics research for decades,Roche re-entered the market with a deal in 2013 to work on Polyphor's macrocycle antibioticPOL7080 for Pseudomonas aeruginosa (Strategic Transactions, 2013d). While Roche ended upterminating the agreement a couple of years later, the company has continued to forge alliances tohelp combat antibiotic resistance. For instance, in early 2015, Fedora Pharmaceuticals and Meiji SeikaPharma licensed Roche worldwide rights (outside of Japan) to their beta-lactamase inhibitor OP0595,which may be combined with a beta-lactam antibiotic to treat severe infections caused byEnterobacteriaceae, including multidrug-resistant strains (Medtrack, 2016). ONCOLOGY ALSO LED ROCHE’S OUT-LICENSING ACTIVITIES In out-licensing, oncology was also Roche's top therapeutic area, represented in the majority (53%) ofRoche's out-licensing partnerships. This indicates that while Roche is actively in-licensing drugs inoncology, it is also carefully reviewing its in-house pipeline to determine which candidates fit with itsstrategic priorities. For example, Genentech received $10m in up-front and technology transfer feesfor licensing its GDC0917, an inhibitor of apoptosis proteins, to Curis. Roche's oncology out-licensing

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also included the partnering of older drugs, for instance Xeloda (capecitabine) with Mylan and Ostac(clodronic acid) with RIEMSER Pharma (Medtrack, 2016).

Pfizer's in-licensing fluctuated while out-licensing efforts increased Pfizer has gone through significant transformation in recent years. The company implemented cost-saving measures as it faced the patent cliff with Lipitor (atorvastatin calcium), consolidated itsportfolio between innovative and established products, and made smaller drug discovery deals alongwith larger strategic acquisitions. Pfizer bulked up in biosimilars with the $17bn Hospira takeover in2015 (Strategic Transactions, 2015i). Also in 2015, Pfizer bought Allergan for $160bn (StrategicTransactions, 2015a), a move that both reduces the combined company's tax rate by 7–8% and also,according to Pfizer, will be beneficial to its R&D organization as it brings together two schools ofthought on R&D: acquiring external programs (via Allergan's model) and continuing emphasis oninternal discovery and early-stage research (from Pfizer) (Pink Sheet Daily, 2016b). Between 2011 and 2015, Pfizer penned a total of 107 deals and showed some fluctuation in activityyear-on-year. Within the Big Pharma peer set, Pfizer was ranked fourth in total deal volume, but wasthe only company to experience a negative CAGR from 2011 to 2015 in the number of both in- andout-licensing transactions. After a decrease from 2011–12, in-licensing volume sharply increased andpeaked in 2014, followed by a decline in deals in 2015. The company's out-licensing efforts in theearly part of the five-year period nearly matched the activity of in-licensing one-for-one; in 2012,

Figure 14: Roche’s out-licensing deals, by therapy area, 2011–15

Source: Medtrack

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Pfizer actually conducted slightly more out-licensing than in-licensing. Despite the slight tapering offof out-licensing since, Pfizer signed a total of 38 such deals over the five-year period, the second-highest amount behind AstraZeneca. The large number of out-licensing deals is not surprising giventhe company’s efforts to streamline R&D and reduce its size. Post-Allergan transaction closing, thepotential for even more out-licensing is greater, especially as Pfizer plans to eventually split up itsinnovative and established drugs businesses (Pink Sheet Daily, 2015).

PFIZER'S ONCOLOGY DEALS WERE DRIVEN BY IMMUNO-ONCOLOGY Oncology accounted for nearly one-third (32%) of all in-licensing deals made by Pfizer, anoverwhelmingly big share compared with all other therapeutic areas, reflecting its importance toPfizer's strategic direction. In 2014, oncology sales represented only 6.1% of Pfizer's total pharmarevenues, but this is forecasted to increase at a CAGR of 7.3% out to 2024 (representingapproximately $2.8bn in growth), the highest growth of all therapy areas in Pfizer's portfolio. By2024, oncology is expected to more than double its share within Pfizer's business, to approximately14%, second behind infectious disease. Sutent (sunitinib) is currently the company's top-sellingcancer drug, but anticipated generic competition is forecasted to drive sales down by $924m by 2024.To help supplant that loss, it is expected that Pfizer’s newly approved breast cancer product Ibrance(palbociclib), the first cyclin-dependent kinase inhibitor to reach the market, and biosimilartrastuzumab will help offset revenue losses due to generic erosion (see Datamonitor Healthcare's

Figure 15: Pfizer's deal-making activity, 2011–15

Source: Medtrack

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Pfizer analysis for more details). Pfizer's oncology in-licensing was driven by immuno-oncology, with more than 50% of the dealsfocused on this subset. The company forged a few agreements to combine its drugs with partner'simmune checkpoint inhibitors. For example, Pfizer is evaluating combinations of its Phase I antibodyPF05082566 separately with both Merck & Co (in combination with anti-PD-L1 antibody Keytruda)and Kyowa Hakko Kirin (in combination with anti-CCR4 antibody mogamulizumab) (Medtrack, 2016).Pfizer also signed several billion-dollar immuno-oncology in-licensing deals during the five-yearperiod. It is co-developing and co-commercializing Merck KGaA's anti-PD-L1 antibody avelumab as amonotherapy and in combination with other drugs for multiple tumors. As part of the sametransaction, Merck will be co-promoting Xalkori (crizotinib), an existing targeted therapy for NSCLC inPfizer's portfolio. Overall, the Merck KGaA/Pfizer deal is worth $3bn in up-front and milestone fees(Strategic Transactions, 2014d). Pfizer's other big immuno-oncology in-licensing transactions includeda $1bn deal with BioAtla to develop and sell the biotech's antibodies targeting cytotoxic T-lymphocyte-associated protein 4, as well as a $3bn collaboration with Cellectis for allogeneicchimeric antigen receptor T-cell immunotherapies (Medtrack, 2016).

TO MITIGATE ENBREL AND CELEBREX LOSSES, PFIZER STEPPED UP ITS IMMUNO-INFLAMMATIONIN-LICENSING Besides oncology, much of Pfizer's in-licensing activity occurred in immunology and inflammation.This therapeutic category is currently ranked third in Pfizer's portfolio, accounting for 17.2% of

Figure 16: Pfizer’s in-licensing deals, by therapy area, 2011–15

Source: Medtrack

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pharma sales, but is forecasted to experience a CAGR of -5.7% from 2014 to 2024, representing a lossof over $3bn ($4bn expected in 2024 compared with $8bn in 2014) mainly due to declines in sales ofEnbrel (etanercept) and Celebrex (celecoxib) (see Datamonitor Healthcare's Pfizer analysis for moredetails). Some of Pfizer's immunology and inflammation deals between 2011 and 2015 were in drugdiscovery, providing potentially newer candidates to replenish the company's pipeline in this area.Pfizer also teamed up with BIND Biosciences, gaining exclusive options on BIND's Accurinnanoparticle drug candidates in inflammatory disorders, plus other diseases. The agreement is worth$210m. Pfizer is also working with Karo Bio under a $217m deal to research small-moleculeRORgamma modulators for autoimmune diseases (Medtrack, 2016). PFIZER USED OUT-LICENSING TO SHARE DEVELOPMENT RISK AND OFFLOAD NON-CORE ASSETS Pfizer's efforts to shed assets or partner non-core or deprioritized drugs were evident in its out-licensing activity. Following its merger with Wyeth in 2009, Pfizer has been on a quest to "getsmaller" in recent years, exemplified by the spin-offs of its animal health and nutritional businesses,as well as deals with smaller biotechs and Big Pharma. More than two-thirds of Pfizer's out-licensingdeals involved selling rights or traditional licensing. One such example involved Pfizer partnering itsdry powder inhaler delivery platform with Mylan, which will have exclusive rights to commercializePfizer's generic versions of GlaxoSmithKline's asthma/COPD drugs Advair Diskus and Seretide Diskus(salmeterol/fluticasone) under a $348m deal (Medtrack, 2016). Respiratory R&D was one of severalareas that Pfizer discontinued in 2011 following an R&D restructuring (Cressey, 2011). Oncology was the most heavily out-licensed therapy area with 27% of such deals made in thismarket. Many of the deals involved distribution services with companies including DiplomatPharmacy, a specialty pharmacy, and Biologics Inc., which provides oncology services, for Pfizer'scancer treatments such as Xalkori or Inlyta (axitinib) (Medtrack, 2016). Other deals featured licensingor acquisition of rights, including Clovis Oncology's worldwide license to Pfizer's PF1367338/CO338,an oral inhibitor of poly (ADP-ribose) polymerase-1 (PARP-1) and PARP-2, for up to $262m. In mid-2015, the FDA granted the candidate, now known as rucaparib, breakthrough therapy designation as amonotherapy for germline or somatic BRCA-mutated advanced ovarian cancer in patients who havereceived at least two prior platinum-containing therapies (Medtrack, 2016). Pfizer's reasons for out-licensing rucaparib were not specified, just that the company at the time had a large oncologypipeline. Rucaparib came to Pfizer via Wyeth, which itself got the drug when it acquired AgouronPharmaceuticals in 1999 (Pink Sheet Daily, 2015). A smaller percentage (18%) of Pfizer's out-licensing deals were co-development or co-promotioncollaborations. Pfizer's partnership with Eli Lilly for the anti-nerve growth factor antibody tanezumabwas one such example from the neurology area. Neurology itself represented 10% of Pfizer's overallout-licensing (third behind oncology and EM&GD), while conversely, neurology was one of thecompany's smaller in-licensing areas. This is notable for the fact that in 2014, neurology was Pfizer'ssecond-highest therapy area by sales. The therapy area is forecasted to lose $6bn in sales between2014 and 2024, at a CAGR of -9.9%, mainly due to sales loss from Lyrica (pregabalin). Neurology stillremains an area of concentration for Pfizer (see Datamonitor Healthcare's Pfizer analysis for moredetails). Allergan's neurology assets, namely Botox (onabotulinumtoxinA), may help revive this

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category. Pfizer received $200m up-front from Eli Lilly to share in the development and profit ofPfizer's tanezumab, in Phase III for osteoarthritis and chronic low back pain, and in Phase II for cancerpain (Biomedtracker, 2016). Pfizer may also receive up to $350m in regulatory milestones and $1bn insales milestones, equating to a total deal value of $2bn. The FDA had the candidate on partial clinicalhold due to cases of worsening osteoarthritic pain during studies, and the hold was lifted in early2014. If approved, the companies will jointly promote the product worldwide (Medtrack, 2016).

Figure 17: Pfizer's out-licensing is led by divestments of rights, 2011–15

Source: Medtrack

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Overall, out-licensing increased by 42% and Amgen and Eli Lilly evenly split in- and out-licensing Externalization has always been a critical part of Big Pharma's business ecosystem, and that trendcontinues. The rate of Big Pharma's in-licensing activity outpaced that of out-licensing in each of thefive years examined. On average, Big Pharma companies signed two-to-three times as many in-licensing agreements annually as out-licensing deals between 2011 and 2015. Out-licensing is a keytactic for Big Pharma's business model for many reasons, including divesting non-core assets ormonetizing potentially innovative drugs that simply do not fit with a company's current strategy. Out-licensing volume slightly decreased in both 2012 and 2013, but has steadily risen since then. Therewas a 42% increase in out-licensing between the start and end of the five-year period.

Figure 18: Pfizer out-licensed in similar therapy areas to in-licensing but in different deal structures, 2011–15

Source: Medtrack

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AMGEN DID MORE OUT-LICENSING THAN IN-LICENSING Within the Big Pharma peer set, Amgen strayed the most from the other companies in terms of itsvolume of in-licensing compared with out-licensing. Instead, the company had nearly an equal splitbetween in- and out-licensing of its five-year total of 46 deals, signing just two more out-licensingtransactions than in-licensing (24 versus 22). Amgen historically operates from more of a biotechbusiness model, which is likely the reason behind this. Among those alliances that had a disclosedvalue, the biotech firm could reap nearly $900m in potential payments from its out-licensing efforts.Tesaro, for example, holds rights to Amgen's small-molecule inhibitors of anaplastic lymphoma kinase,including TSR011 for NSCLC and other cancers, in an agreement worth $138m (Medtrack, 2016). Inaddition to straight out-licensing, many of Amgen's deals were structured with development, co-development, or commercialization components. Amgen and Watson signed a co-developmentcollaboration in 2011 focused on oncology biosimilars, where Watson agreed to contribute up to$400m in co-development costs. The deal includes biosimilars trastuzumab, bevacizumab, rituximab,and cetuximab (Medtrack, 2016). Amgen is now working with Teva, which bought Allergan's genericbusiness in 2015; Allergan is the new name of the combined Actavis/Allergan business, and Actaviswas the combined Watson/Actavis.

Figure 19: Big Pharma’s out-licensing increased but is still outpaced by in-licensing, 2011–15

Source: Medtrack

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ELI LILLY USED A CREATIVE VENTURE FUNDING MODEL TO CAPITALIZE ON OUT-LICENSING During the five-year period, Eli Lilly, similar to Amgen, also nearly evenly split its deal-making activitybetween in- and out-licensing. Nearly half of Eli Lilly's in-licensing is in oncology, an area that isforecasted to fluctuate in sales between 2014 and 2024. Eli Lilly is expected to experience its biggestsetback with generic competition to the chemotherapeutic Alimta (pemetrexed) beginning in 2022(see Datamonitor Healthcare's Eli Lilly analysis for more details). Some of the company's largest-valued in-licensing deals were also in oncology, including a 10-year antibody agreement withInnovent ($1.5bn) and an antibody-drug conjugate collaboration with ImmunoGen ($626m)(Medtrack, 2016).

Figure 20: Big Pharma’s in-licensing/out-licensing activity, by company, 2011–15

Source: Medtrack

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To monetize drugs coming from its own research that do not fit in with its pipeline, as well ascapitalize on assets from other companies, Eli Lilly formed what was called a "mirror" strategy in 2010(START-UP, 2010) and teamed up with capital fund partners, including TVM Capital and HealthCareVentures, to create venture funds to finance those projects, which are housed within single-assetcompanies. Eli Lilly holds the option to buy some of the assets once certain goals are achieved (PinkSheet, 2013). While the company conducted a large number of oncology out-licensing transactions(22% of all of its out-licensing, including several with non-profits wherein the company iscontributing its drugs for research), neurology accounted for a slightly larger proportion of out-licensing deals at 25%. One such agreement came about as part of the mirror portfolio. In 2011,Arteaus Therapeutics acquired Eli Lilly's calcitonin gene-related peptide inhibitor LY2951742 formigraine. After reviewing Phase II data, Eli Lilly reacquired the candidate three years later (Medtrack,2016). In another neurology out-licensing (outside of the mirror strategy), Eli Lilly partnered theneurokinin 1 receptor antagonist tradipitant with Vanda Pharmaceuticals in an agreement worth upto $100m (Medtrack, 2016). Vanda had been testing the small molecule in alcohol abuse treatment,but in 2013 the company said it was no longer planning any future studies. Tradipitant has instead

Figure 21: Eli Lilly's in-licensing deals, by therapy area, 2011–15

Source: Medtrack

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advanced to Phase II in pruritus (Biomedtracker, 2015). In comparison, Eli Lilly did very few neurologyin-licensing deals over the five-year period. This therapy area was the company’s second-largest interms of sales in 2014, accounting for 20.8% of total sales, behind the EM&GD category. Neurologysales are forecasted to decline at a CAGR of -9.1% between 2014 and 2024, mainly because ofCymbalta (duloxetine) generics (see Datamonitor Healthcare's Eli Lilly analysis for more details). EliLilly's decreased in-licensing and increased out-licensing could indicate a deprioritization on thecompany’s own part in this area while reallocating more resources toward EM&GD, which is expectedto maintain the leading spot through to 2024 and also represented 21% of Eli Lilly's in-licensing,second behind oncology.

Bibliography AstraZeneca (2015) Durvalumab ATLANTIC trial supports clinical activity and AstraZeneca’s overallimmuno-oncology strategy. Available from: https://www.astrazeneca.com/our-company/media-centre/press-releases/2015/Durvalumab-ATLANTIC-trial-supports-clinical-activity-and-AstraZenecas-overall-immuno-oncology-strategy.html [Accessed 13 January 2016]. Business Wire (2015) Celgene in Collaboration with Astrazeneca Announce Initiation of Fusion Clinical

Figure 22: Eli Lilly’s out-licensing deals, by therapy area, 2011–15

Source: Medtrack

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Development Program in Immuno-Oncology. Available from:http://www.businesswire.com/news/home/20151207005644/en/Celgene-Collaboration-Astrazeneca-Announce-Initiation-Fusion-Clinical [Accessed 13 January 2016]. Cressey D (2011) Pfizer slashes R&D. Available from:http://www.nature.com/news/2011/110209/full/470154a.html [Accessed 15 January 2016]. FDA news release (2015) FDA approves Darzalex for patients with previously treated multiplemyeloma. Available from:http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm472875.htm [Accessed 14January 2016]. PharmAsia News (2014) Janssen Returns Astellas’s JAK Inhibitor. Available from:https://www.pharmamedtechbi.com/Publications/Pharmasia-News/2014/12/3/Janssen-Returns-Astellass-JAK-Inhibitor [Accessed 14 January 2016]. Pink Sheet (2013) Lilly’s Venture Strategy Matures As PoC Data Catalysts Approach. Available from:https://www.pharmamedtechbi.com/publications/the-pink-sheet/75/39/lillys-venture-strategy-matures-as-poc-data-catalysts-approach [Accessed 20 January 2016]. Pink Sheet (2016a) Roche’s pRED Team Reviews R&D Wish List As Firm Continues Push To Diversify.Available from: https://www.pharmamedtechbi.com/publications/the-pink-sheet/77/6/roches-pred-team-reviews-rampd-wish-list-as-firm-continues-push-to-diversify [Accessed 19 January 2016]. Pink Sheet (2016b) Roche Doubles Down On Collaborations In Immuno-Oncology, No Signs OfStopping. Available from: https://www.pharmamedtechbi.com/publications/the-pink-sheet-daily/2016/1/15/roche-doubles-down-on-collaborations-in-immunooncology-no-signs-of-stopping[Accessed 19 January 2016]. Pink Sheet Daily (2011) Pfizer Outlicenses PARP Inhibitor To Clovis. Available from:https://www.pharmamedtechbi.com/publications/the-pink-sheet-daily/2011/6/3/pfizer-outlicenses-parp-inhibitor-to-clovis [Accessed 15 January 2016]. Pink Sheet Daily (2015) Pfizer’s Allergan Acquisition Paves The Way For A Split – But Delayed.Available from: https://www.pharmamedtechbi.com/publications/the-pink-sheet/77/48/pfizers-allergan-acquisition-paves-the-way-for-a-split--but-delayed [Accessed 15 January 2016]. Pink Sheet Daily (2016a) J&J Starts The Year With A Bang With 22 Early-Stage Deals. Available from:https://www.pharmamedtechbi.com/publications/the-pink-sheet-daily/2016/1/7/jampj-starts-the-year-with-a-bang-with-22-earlystage-deals [Accessed 14 January 2016]. Pink Sheet Daily (2016b) Why Pfizer’s R&D Chief Dolsten Is Enthusiastic About Allergan. Availablefrom: https://www.pharmamedtechbi.com/Publications/The-Pink-Sheet-Daily/2016/1/13/Why-Pfizers-RampD-Chief-Dolsten-Is-Enthusiastic-About-Allergan [Accessed 14 January 2016].

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https://www.pharmamedtechbi.com/publications/the-pink-sheet/77/48/pfizers-allergan-acquisition-paves-the-way-for-a-split--but-delayed

https://www.pharmamedtechbi.com/publications/the-pink-sheet/77/48/pfizers-allergan-acquisition-paves-the-way-for-a-split--but-delayed

https://www.pharmamedtechbi.com/publications/the-pink-sheet-daily/2016/1/7/jampj-starts-the-year-with-a-bang-with-22-earlystage-deals

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Schott C (2015) AstraZeneca company presentation. BioPharm America 2015; Boston, Massachusetts;15 September 2015. START-UP (2010) Lilly's Evolving Corporate Venture Model. Available from:https://www.pharmamedtechbi.com/publications/start-up/15/9/lillys-evolving-corporate-venture-model [Accessed 26 January 2016]. Strategic Transactions (2003) Millennium in giant cancer deal with Ortho Biotech. Available from:https://www.pharmamedtechbi.com/deals/200320429 [Accessed 14 January 2016]. Strategic Transactions (2006) J&J gets US co-promotion rights to Millennium's Velcade. Availablefrom: https://www.pharmamedtechbi.com/deals/200620697 [Accessed 14 January 2016]. Strategic Transactions (2007) AstraZeneca buys MedImmune for $15.6bn. Available from:https://www.pharmamedtechbi.com/deals/200710064 [Accessed 13 January 2016]. Strategic Transactions (2011) Janssen Biotech gets rights to Pharmacyclics' PCI32765. Available from:https://www.pharmamedtechbi.com/deals/201120498 [Accessed 14 January 2016]. Strategic Transactions (2012a) Regulus pens development deal with AZ for three preclinical programs.Available from: https://www.pharmamedtechbi.com/deals/201220356 [Accessed 13 January 2016]. Strategic Transactions (2012b) BMS acquires diabetes player Amylin for $6.8bn. Available from:https://www.pharmamedtechbi.com/deals/201210104 [Accessed 13 January 2016]. Strategic Transactions (2012c) Janssen Biotech gets rights to Genmab's Phase I/II HuMax-CD38.Available from: https://www.pharmamedtechbi.com/deals/201220379 [Accessed 14 January 2016]. Strategic Transactions (2012d) Janssen Biotech teams up with Genmab to create antibodies. Availablefrom: https://www.pharmamedtechbi.com/deals/201120498 [Accessed 14 January 2016]. Strategic Transactions (2013a) AZ pays $240mm up front for mRNA collaboration with Moderna.Available from: https://www.pharmamedtechbi.com/deals/201320126 [Accessed 13 January 2016]. Strategic Transactions (2013b) MedImmune and NGM to develop new therapies for diabetes andobesity. Available from: https://www.pharmamedtechbi.com/deals/201320256 [Accessed 13 January2016]. Strategic Transactions (2013c) AstraZeneca buys diabetes business from BMS for $2.7bn up front, plusearn-outs. Available from: https://www.pharmamedtechbi.com/deals/201310177 [Accessed 13January 2016]. Strategic Transactions (2013d) Polyphor licenses P. aeruginosa candidate POL7080 to Roche;terminated. Available from: https://www.pharmamedtechbi.com/deals/201320478 [Accessed 19

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January 2016]. Strategic Transactions (2014a) Pfizer ups offer for AstraZeneca to $84.19 per share; AZ board notinterested. Available from: https://www.pharmamedtechbi.com/deals/201410067 [Accessed 13January 2016]. Strategic Transactions (2014b) AstraZeneca buys Almirall's respiratory franchise for $875mm plusearn-outs. Available from: https://www.pharmamedtechbi.com/deals/201410123 [Accessed 13January 2016]. Strategic Transactions (2014c) NewLink partners immune checkpoint inhibitor NLG919 withGenentech. Available from: https://www.pharmamedtechbi.com/deals/201420379 [Accessed 19January 2016]. Strategic Transactions (2014d) Pfizer to build its immuno-oncology pipeline through tie-up withMerck KGAA. Available from: https://www.pharmamedtechbi.com/deals/201420418 [Accessed 28January 2016]. Strategic Transactions (2015a) Pfizer, Allergan combine in $160bn deal. Available from:https://www.pharmamedtechbi.com/deals/201510240 [Accessed 13 January 2016]. Strategic Transactions (2015b) Moderna closes $450mm third round. Available from:https://www.pharmamedtechbi.com/deals/201530003 [Accessed 13 January 2016]. Strategic Transactions (2015c) AZ gets exclusive rights to Heptares' adenosine A2A receptor blocker asa cancer immunotherapy. Available from: https://www.pharmamedtechbi.com/deals/201520388[Accessed 13 January 2016]. Strategic Transactions (2015d) MedImmune pays $27.5mm up front for rights to Inovio's cancervaccine. Available from: https://www.pharmamedtechbi.com/deals/201520397 [Accessed 13 January2016]. Strategic Transactions (2015e) AstraZeneca buys Takeda's respiratory business for $575mm. Availablefrom: https://www.pharmamedtechbi.com/deals/201510263 [Accessed 13 January 2016]. Strategic Transactions (2015f) Genzyme gets global rights to AZ's Caprelsa for $165mm up front.Available from: https://www.pharmamedtechbi.com/deals/201520368 [Accessed 13 January 2016]. Strategic Transactions (2015g) Celgene pays AZ $450mm up front for rights to MedImmune'sMEDI4736. Available from: https://www.pharmamedtechbi.com/deals/201520196 [Accessed 13January 2016]. Strategic Transactions (2015h) AbbVie pays $20bn in cash and stock for Pharmacyclics. Availablefrom: https://www.pharmamedtechbi.com/deals/201510046 [Accessed 14 January 2016].













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Strategic Transactions (2015i) Pfizer pays $15.4bn in cash, $1.75bn in debt for Hospira. Availablefrom: https://www.pharmamedtechbi.com/deals/201510023 [Accessed 15 January 2016]. Urban R (2015) Johnson & Johnson Innovation company presentation. BioPharm America 2015;Boston, Massachusetts; 15 September 2015.


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THERAPY AREA ANALYSIS Oncology dominated Big Pharma deal volume Between 2011 and 2015, nearly two-thirds of Big Pharma's in-licensing deals were in oncology, anoverwhelming indication of the importance of this therapeutic area and the investment that BigPharma is making to find improvements over existing treatments and potentially a cure for thisdisease. As of mid-2015, Big Pharma companies have approximately 279 candidates in the pipeline forcancer, well over two times that of any other therapeutic area. The peer set's oncology sales areforecast to grow by $18bn between 2014 and 2024 at a compound annual growth rate (CAGR) of2.4% (see Datamonitor Healthcare's 2015 Big Pharma Outlook for more details).

In the five-year period examined, Big Pharma firms signed 250 in-licensing agreements involving orfocusing on cancer assets, more than twice the amount of deals in any other therapeutic area.Annually, however, oncology has not always taken such an overwhelming share. In 2011 and 2012,the therapy area was almost level with infectious disease for the top spot among partnerships, eachrepresenting about 22% of deals. Starting in 2013 there was a shift and oncology has since growntremendously, accounting for around 41–42% of alliances in both 2014 and 2015. The high level ofunmet need in oncology, coupled with the potential for scientific advances as well as the high pricesoncology drugs command – and the relatively low payer management within this category, at least inthe US – are the key attractions for a wider presence in the oncology field.

Figure 23: Big Pharma’s in-licensing deals, by therapy area, 2011–15

Source: Medtrack

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The majority of Big Pharma's oncology in-licensing deals (approximately 57%) were signed at theearly stage of a drug's development cycle, spanning preclinical to Phase I. This varied among thetherapeutic areas. Like oncology, the infectious disease and neurology categories also featured morealliances signed at Phase I or earlier, and the reason behind this could be the more early-stageresearch involved in specialty indications, particularly oncology and neurology. On the other hand,ca rd io logy and de rmato logy d rugs were most o f ten l i censed a t the pend ingapproval/approved/marketed or Phase III stages. Conversely, these were likely for more primary careindications or established markets.

Figure 24: Big Pharma’s deal volume, by therapy area, 2011–15

Source: Medtrack

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IMMUNO-ONCOLOGY WAS A KEY DRIVER OF CANCER DEALS Nearly 50% of the 250 cancer in-licensing deals made were driven by immuno-oncology, an emergingfield in which the body's immune system is activated to fight and destroy cancer. Immuno-oncology'sshare in the total pipeline (Big Pharma and beyond) is also expanding, having increased nearly nine-fold from 2010 to Q3 2015, and is mainly driven by an influx of candidates at the preclinical stage(Citeline, 2015). While it is early days for immuno-oncology – the field "is still evolving, and we're stilltrying to understand why patients benefit from immune-oncology drugs," said Ioamis Sapountzis,global head of oncology business development and licensing at Boehringer Ingelheim (Sapountzis,2015) – that has not stopped or slowed down Big Pharma's push to continue developing thesemedicines. Immuno-oncology has been dominated by the programmed death ligand-1 (PD-L1) target,namely the first two approved drugs in this class, Merck & Co's Keytruda (pembrolizumab) and Bristol-Myers Squibb's Opdivo (nivolumab), sales of which are expected to grow at a CAGRs of 50.3% and95%, respectively, to 2024 (see Datamonitor Healthcare's 2015 Big Pharma Outlook for more details). Aside from PD-1, other immuno-oncology targets are the focus of drug development efforts, includingTIM3, LAG3, OX40, as well as T-cell therapies including chimeric antigen receptor T-cells (seeDatamonitor Healthcare's Immuno-Oncology for more details). NewLink Genetics, for example, isaggressively pursuing inhibition of indoleamine 2,3-dioxygenase (IDO), an immune checkpoint, andhas licensed its lead candidate indoximod to Roche. The partners plan to evaluate IDO/tryptophan-2,3-dioxygenase combinations, and also recently completed patient enrollment for a Phase II study of

Figure 25: Big Pharma’s in-licensing deals, by therapy area and phase of development, 2011–15

Source: Medtrack

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indoximod combined with taxane chemotherapy for metastatic breast cancer (Medtrack, 2016). Several other companies are teaming up in collaborations to study the effects of combinations thatmay increase survival compared with immuno-oncology agents used alone (Pink Sheet, 2015a).AstraZeneca and MedImmune have been pursuing the combo route for their PD-L1 inhibitordurvalumab. In late 2015, AstraZeneca announced that it would likely not be using data from itsATLANTIC trial, based on preliminary results, to support filing of durvalumab as a monotherapy(AstraZeneca, 2015). The Big Pharma company has been evaluating combinations both within its ownpipeline, for example with tremelimumab, a cytotoxic T-lymphocyte-associated protein 4 inhibitor(Pink Sheet, 2015b), and externally via deal-making with companies including Immunocore, JunoTherapeutics, and Innate Pharma. In an out-licensing arrangement, AstraZeneca also partnered withCelgene to test durvalumab in hematological cancers including non-Hodgkin’s lymphoma (NHL),myelodysplastic syndromes, and multiple myeloma (Medtrack, 2016). Celgene paid $450m up-frontfor rights and launched the FUSION program to study multiple durvalumab combinations, withCelgene's pomalidomide, CC486, and azacitidine (Business Wire, 2015a). In late 2015, Bristol-MyersSquibb scored the first ever US approval for an immunotherapy combination of its two drugs Opdivoand Yervoy (ipilimumab) in BRAF V600 wild-type unresectable or metastatic melanoma (Scrip, 2015a).The combination was also approved in January 2016 for all melanoma patients, regardless of BRAFmutation status (Pink Sheet Daily, 2016a). Collaborations to study novel immunotherapy combinationshave been increasing since 2010, and from 2014 to 2015 nearly doubled from 34 to 67 (Medtrack,2016; Trialtrove, 2016). Combination deals will likely continue to grow due to the current uncertainlyover which combinations will work and for what cancer types. In addition, because many of thesecombination agreements are pre-competitive and do not involve any financial terms as of yet, overthe course of the next few years as trial results come out for combinations, there will come the timefor partners to sign definitive agreements and to iron out specific details about further developmentand eventual commercialization. PFIZER AND MERCK KGAA PUSH FORWARD WITH AVELUMAB Over the five-year period, approximately $36bn in deal value (including up-front payments andpotential milestones) was attributed to immuno-oncology. Among the most lucrative was Pfizer'sworldwide license to Merck KGaA's anti-PD-L1 antibody avelumab, in development for Merkel cellcarcinoma, melanoma, and breast, colorectal, gastrointestinal, non-small cell lung, ovarian, andprostate cancers (Strategic Transactions, 2014a). The alliance potentially paves the way for Pfizer andMerck KGaA to compete with the likes of Merck & Co and Bristol-Myers Squibb in the PD-L1 market.In April 2015, Pfizer and Merck KGaA began Phase III trials of avelumab in Stage IIIb/IV non-small celllung cancer. The partners have also signed up Dako AS to develop a companion diagnostic (StrategicTransactions, 2015a), and are studying a combination of avelumab with Syndax's entinostat in ovariancancer (Strategic Transactions, 2016). Pfizer paid Merck $850m up-front (the largest up-frontpayment in all oncology in-licensing deals) plus up to $2bn in regulatory and commercial milestones.The agreement also pairs up Merck KGaA and Pfizer to co-promote the latter's Xalkori (crizotinib) inthe US and some other markets, and to advance Pfizer's own PD-L1 antagonist into Phase I. In Q32015, the US Food and Drug Administration (FDA) granted fast track designation to avelumab inmetastatic Merkel cell carcinoma (Business Wire, 2015b).

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Table 1: Big Pharma's lucrative immuno-oncology deals, 2011–15

Deal date Licensee Licenser Subject of deal Total up-front payment

($m)

Total announced

milestones ($m)

Total deal value ($m)

3 February 2014 Merck & Co Ablynx Nanobody candidates

(including bi- and tri-

specifics) directed at

immune checkpoint

modulators

41 6,724 6,779

18 June 2014 Pfizer Cellectis CAR-T immunotherapies

directed at 15 targets

selected by Pfizer

80 2,775 2,855

17 November 2014 Pfizer Merck KGaA Merck's avelumab; co-

promotion of Pfizer's

Xalkori; and co-

development on Pfizer's PD-

L1 antagonist

850 2,000 2,850

28 July 2015 Sanofi Regeneron REGN2810, a Phase I PD-1

inhibitor; preclinical

programs targeting LAG3,

GITR, and PD-L1;

development of bispecific

antibodies for hematologic

and solid cancers

640 n/a 2,170

Downloaded by carla.holloway on 13/10/2016

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($m)

Total announced

milestones ($m)


16 September 2015 Amgen Xencor XmAb technology to create

bispecific antibodies,

including a preclinical

bispecific T-cell engager

program directed at CD38

and CD3 for multiple

myeloma

45 1,700 1,745

24 November 2014 Bristol-Myers Squibb Five Prime Therapeutics Combination of Opdivo

with FPA008, a CSFR1

inhibitor for NSCLC,

melanoma, head and neck

cancer, pancreatic cancer,

colorectal cancer, and

malignant glioma

350 1,390 1,740

3 November 2015 Sanofi BioNTech Up to five cancer

immunotherapies, each

consisting of a mixture of

synthetic messenger RNAs

60 1,500 1,560


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($m)

Total announced

milestones ($m)


20 March 2015 Eli Lilly Innovent Biologics CD-20-targeting antibody

in hematologic

malignancies; preclinical

immuno-oncology molecule

for development in China;

up to three preclinical

bispecific immuno-

oncology candidates

outside of China

n/a 1,400 1,456

30 August 2012 Janssen Biotech Genmab Human CD38-directed

monoclonal antibody

Darzalex

55 1,000 1,140

5 January 2015 Amgen Kite Pharma CAR-T immunotherapies

based on Kite's eACT

platform

60 1,050 1,110

CAR-T = chimeric antigen receptor T-cell; eACT = engineered autologous cell therapy; NSCLC = non-small cell lung cancer; PD-L1 = programmed death ligand-1

Source: Medtrack


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ROCHE WAS AMONG THE LEADING DEALMAKERS IN ONCOLOGY The Big Pharma companies that did the bulk of the deal-making overall also tended to do more cancerdeals. So unsurprisingly, AstraZeneca was the most active oncology in-licenser in the Big Pharma peergroup, followed by Johnson & Johnson. For Roche, which came in third behind AstraZeneca andJanssen, oncology has historically been a pillar of its business, driven by its investment and latercomplete acquisition of Genentech in 2009. Roche is forecasted to maintain its leading spot in theoncology market through to 2024, although its share within the Big Pharma peer set will decreasefrom 38% in 2014 to 31% in 2024 (see Datamonitor Healthcare's 2015 Big Pharma Outlook for moredetails). Some of Roche's largest-valued cancer deals have been drug discovery agreements with biotechs,including Immatics Biotechnologies, which licensed IMA942 and other cancer vaccines in a dealvalued at over $1bn, and Array BioPharma, which could get up to $713m for partnering its checkpointkinase 1 inhibitor ARRY575 with Genentech. In an agreement that could have been worth $1bn(Roche's largest oncology in-licensing deal), Roche had rights to Molecular Partners' DARPin biologicsconjugated to toxic agents. However, the alliance was later canceled as a result of Roche'sdiscontinuation of its Pseudomonas exotoxin conjugate programs (Medtrack, 2016). One of Roche's more interesting oncology deal structures was one that Genentech crafted with FormaTherapeutics in 2011 (although financing terms were not disclosed) (Medtrack, 2016). Genentechreceived an option on Forma's preclinical tumor metabolism candidate, a small-molecule nicotinamidephosphoribosyltransferase inhibitor (Pharmaprojects, 2016), for money up-front, R&D funding, anddevelopment milestones. If Genentech exercises the option, it would buy out the entire program foradditional fees and milestones, all of which will be paid directly to Forma's venture backers, providinginvestors with an untraditional exit concerning this one asset (START-UP, 2011). A few years later,Forma struck another option-based deal with Celgene, which may end up buying the entirety of Formaand its holding companies (Strategic Transactions, 2014b).

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Infectious disease agreements declined, but there is potential for a turnaround The infectious disease category, which at 13% of total in-licensing deal volume is placed secondbehind oncology, noticeably started to shrink starting in 2013 in annual partnership counts, while theoncology and endocrine, metabolic, and genetic disorder (EM&GD) categories gained momentum.Almost half (46%) of the infectious disease agreements over the five years focused on viral diseases,but bacterial infections also represented a large amount of deals at 30%. Many Big Pharmacompanies have backed away from infectious disease research in recent years because of lack ofincentives, mainly the instability of financial return on investment in developing novel antibioticsdespite the public health need to curb antibiotic resistance. However, with the introduction in the USof the Qualified Infectious Disease Product (QIDP) designation in 2012 (providing for fast track andpriority review eligibility, and an additional five years of exclusivity to be added to other exclusivities),there could be a shift in the pipeline and an uptick in deal-making in the future (Pink Sheet, 2012).Roche, for example, signed several deals with the smaller biotechs Polyphor, Spero, Discuva, andFedera Pharmaceuticals/Meiji Seika Pharma between 2013 and 2015, signaling a return to antibioticdevelopment (the Polyphor alliance was later terminated, however [Medtrack, 2016]). In addition, inearly 2016, 85 pharmaceutical and diagnostics companies came together at the World EconomicForum to issue a declaration that asks international governments to commit funding that wouldcreate markets in which developers would be rewarded for their research to combat drug-resistantinfections, including pricing that better reflects the benefits of treatments (Review on AntimicrobialResistance, 2016). Should such changes actually be implemented, the likelihood of even moreinfectious disease deals being made would greatly increase.

Figure 26: Top oncology in-licensing dealmakers, 2011–15

Source: Medtrack

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Endocrine, metabolic, and genetic disorders gained speed Not that far behind infectious disease in terms of in-licensing deal volume was the EM&GD category,representing 12% of Big Pharma deals over the past five years. EM&GD is expected to pass oncologyin 2020 as the leading therapeutic area in terms of Big Pharma prescription drug sales, mainly due tokey launches in diabetes and dyslipidemia, as well as growth in insulins and glucagon-like peptide-1agonists (see Datamonitor Healthcare's 2015 Big Pharma Outlook for more details). The risingprevalence of diabetes in developed and emerging markets and pharma’s growing interest in rarediseases are key drivers behind investment in these fields. In addition to tax benefits, orphanindications have traditionally experienced lower pricing and reimbursement hurdles, although withthe entry of some new orphan drugs with prices considered excessive by some payers, this maychange going forward. Nevertheless, Datamonitor Healthcare expects rare diseases to retainsignificant presence in deal-making as Big Pharma continues its push toward personalized andstratified medicine. SANOFI LED IN EM&GD DEALS Sanofi, which has the leading diabetes drug on the market in Lantus (insulin glargine), did the mostEM&GD deals of any Big Pharma in the time period evaluated, signing 19 in-licensing agreements(including those by Genzyme as well). One of the company's most notable deals was with MannKindfor the inhaled insulin product Afrezza (Medtrack, 2016). For $150m up-front, Sanofi receivedworldwide rights to the rapid-acting insulin powder, which had a troubled development path and

Figure 27: Big Pharma’s infectious disease in-licensing deals, by infection type, 2011–15

Source: Medtrack

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went to the FDA twice before getting approved in June 2014 (Biomedtracker, 2016). The deal wouldhave also included potentially $775m in milestones, and a 65% Sanofi/35% MannKind profit split, butSanofi terminated the agreement in early 2016 due to slow sales, which only totaled $3.4m in H12015 (Pink Sheet Daily, 2016b). MannKind says it will support Afrezza with a new sales effort, but theproduct has a lot to prove following the disappointing launch and subsequent market withdrawal in2008 of the first inhaled insulin, ironically Sanofi's own product Exubera, which Pfizer bought in 2006(Strategic Transactions, 2006). The delivery device for Afrezza is much smaller and MannKind claims itis easier to use and more efficient than Exubera's (Pink Sheet, 2015c). While the MannKind deal unraveled, Sanofi still forged several other alliances in diabetes that couldhelp fill its pipeline, including billion-dollar agreements in 2015 with both Lexicon Pharmaceuticalsand Hanmi Pharmaceutical (Medtrack, 2016). Sanofi is also banking on Toujeo (insulin glargine [rDNAorigin]), Lyxumia (lixisenatide), and LixiLan (lixisenatide/insulin glargine) to help reduce dependenceon Lantus, especially as the drug faces biosimilar competition (see Datamonitor Healthcare's Forecast:Type 2 Diabetes in the US, Japan, and 5EU for more details). NOVO NORDISK HAD LOWER DEAL VOLUME BUT A DEFINED FOCUS ON METABOLIC DISEASE Novo Nordisk had a good showing in the EM&GD group of deals, signing six alliances, together wortha potential $705m. The company has teamed up with Emisphere Technologies three times toreformulate its pipeline diabetes and obesity candidates with Emisphere's Eligen oral drug deliverytechnology (Medtrack, 2016). Overall, among the Big Pharma firms, Novo was one of the lower-volume dealmakers (alongside AbbVie and Teva), but the slower deal-making is not surprising. Novoalready has a strong portfolio in diabetes, led by NovoLog/NovoRapid (insulin aspart [rDNA origin]),and in obesity, Victoza (liraglutide) is already a multi-billion dollar product, with sales forecasted toincrease even more in late 2016 if the drug’s additional indication in type 2 diabetes is approved inthe US and EU (see Datamonitor Healthcare's Novo Nordisk analysis for more details). Sanofi isexpected to overtake Novo in 2020 as the leader in EM&GD, reaching $25bn in sales in 2024(approximately 23% of Big Pharma's share in EM&GD) (see Datamonitor Healthcare's 2015 BigPharma Outlook for more details). ELI LILLY AND BOEHRINGER INGELHEIM MADE ADVANCEMENTS THROUGH DIABETESCOLLABORATION Eli Lilly and Boehringer Ingelheim have also been strong forces in diabetes, thanks to their 2011 co-development alliance involving multiple candidates including dipeptidyl peptidase-IV inhibitors andsodium-glucose cotransporter-2 (SGLT-2) inhibitors (Medtrack, 2016). Their agreement, worth $2bn,has already produced two marketed products: Jardiance (empagliflozin), approved in 2014 for type 2diabetes and the third entrant in the SGLT-2 class behind Johnson & Johnson's Invokana(canagliflozin) and AstraZeneca's Farxiga (dapagliflozin); and Tradjenta (linagliptin), approved in 2011for type 2 diabetes (Biomedtracker, 2016). As part of their collaboration, Eli Lilly and BoehringerIngelheim developed a follow-on to Sanofi's Lantus, already launched in some European countries asAbasaglar/Abasria. As part of a patent settlement in Q3 2015, Sanofi granted Eli Lilly and BoehringerIngelheim rights to launch the follow-on product in the US, branded as Basaglar. The FDA approvedBasaglar in December 2015 under the 505(b)(2) abbreviated pathway; therefore in the US, the drug is

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not considered a biosimilar (Scrip, 2015b). Under Eli Lilly and Boehringer Ingelheim's patentsettlement with Sanofi, they are permitted to launch Basaglar in the US on 15 December 2016(Strategic Transactions, 2015b). Oncology also led in terms of partnership dollar values Oncology also led Big Pharma in-licensing activity in terms of dollar value by therapeutic area,surpassing $51bn in total potential payments, including $4bn in up-front funds and $35bn inannounced milestones (the highest in all three metrics in any therapeutic category). Oncology dealvalues were nearly three times that of the other therapeutic areas. EM&GD followed oncology with$18bn, including $2bn up-front and $11m in milestones. The immunology and inflammation, and infectious disease categories came in at $12bn and $11bn,respectively for total potential value. A couple of rheumatoid arthritis tie-ups involving Janus kinase(JAK)1 inhibitors signed in 2012 helped boost the immunology and inflammation total. Abbott (nowAbbVie) teamed up with Galapagos to develop the selective JAK1 inhibitor filgotinib for moderate-to-severe active rheumatoid arthritis in an agreement worth $1bn. In a $945m deal, Janssen had licensedex-Japanese rights to Astellas's ASP015K, also a JAK inhibitor, for moderate-to-severe rheumatoidarthritis, but the partners canceled the agreement (Medtrack, 2016). Further boosting the immunologyand inflammation total, GlaxoSmithKline divested to Novartis rights to Arzerra (ofatumumab) inautoimmune diseases, particularly in multiple sclerosis. Arzerra is approved for chronic lymphocyticleukemia and was part of the oncology business sale to Novartis in 2014; at the time,GlaxoSmithKline retained rights to the drug in autoimmune diseases (Strategic Transactions, 2015c).Over 40% of the infectious disease total is from Bristol-Myers Squibb's sale of its early- and late-stage HIV pipeline to ViiV Healthcare (majority owned by GlaxoSmithKline), potentially creating abigger competitive force in the HIV market besides Bristol-Myers Squibb, which retained ownership ofits launched HIV medicines, and Gilead (Medtrack, 2016).

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CARDIOLOGY AND RESPIRATORY HAD STRONG SHOWINGS IN UP-FRONT VALUES The cardiology and respiratory categories, which had comparatively lower transaction volumes (5%and 4%, respectively) and total deal values ($7bn and $6bn, respectively), were among the groupswith the higher up-front totals. At $2bn up-front, cardiology was the third-highest within thetherapeutic areas, but it is worth noting that the cardiology category included the most drugspartnered at the pending approval/approved/marketed product stage than any other therapy area,which is likely the reason behind the larger payments. The majority of the cardiology figure was fromMerck & Co's $1bn payment to Bayer for regional rights to soluble guanylate cyclase modulators,including the marketed pulmonary hypertension product Adempas (riociguat) and Phase IIb vericiguat.Bayer also concurrently acquired Merck's consumer health business in a separate deal (Medtrack,2016). Respiratory also surpassed the $1bn up-front mark, mostly from one outlier deal: Almirall's sale– for $875m up-front – of its respiratory franchise to AstraZeneca, which could also pay up to $1bnin development, launch, and sales milestones (Medtrack, 2016).

Figure 28: Big Pharma’s in-licensing deals, by total deal value, 2011–15

Source: Medtrack

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Oncology was also the focus of most out-licensing deals Between 2011 and 2015, 30% of Big Pharma's out-licensing was in oncology, the highest percentageof any category. The fact that oncology is a leading area for both in- and out-licensing reflects thatBig Pharma is constantly evaluating pipelines and portfolios, reviewing the assets that it believes maybe better developed by a partner, whether through a joint collaboration of efforts or via a divestment,and is also analyzing innovative technologies to bring in-house.

Figure 29: Value of up-front and milestone payments of in-licensing deals, by therapy area, 2011–15

Source: Medtrack

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Most of the oncology out-licensing agreements (20%) involved development or co-development,meaning the Big Pharma peer set has not completely off-loaded these drugs and still maintains astake in them. One prime example is AstraZeneca's partnership with Celgene in immuno-oncology.Celgene paid AstraZeneca $450m up-front for exclusive rights to the PD-L1 inhibitor durvalumab.While AstraZeneca is focusing on developing durvalumab in several solid tumor indications, theCelgene deal will focus on durvalumab treatment of blood cancers including NHL, myelodysplasticsyndromes, and multiple myeloma. Similarly, Amgen is taking advantage of its biosimilar capabilitiesby teaming up with Allergan to develop four biosimilars in oncology (Medtrack, 2016). BIG PHARMA'S NEUROLOGY OUT-LICENSING OUTPACED IN-LICENSING Neurology was also an active area for Big Pharma out-licensing, accounting for 12% of deals. Incomparison, this therapy area only represented 9% of in-licensing. Neurology is still a research focusfor many Big Pharmas, and consequently many of the out-licensing deals, as in oncology, involveddevelopment. Pfizer and Eli Lilly's billion-dollar agreement for the anti-nerve growth factor candidatetanezumab, for example, pairs up the companies to co-develop and co-commercialize the drug(Medtrack, 2016). The neurology group did include some strategic divestments by Big Pharma to smallbiotechs. One notable area of interest was the class of calcitonin gene-related peptide (CGRP)antagonists in migraine. Labrys Biologics acquired a shelved Big Pharma asset that eventuallyattracted a huge pay-out from another Big Pharma. In early 2013, Pfizer sold Labrys its CGRPantagonist LBR101. Teva acquired Labrys outright for $200m up-front in mid-2014. During the five-

Figure 30: Big Pharma’s out-licensing deals, by therapy area, 2011–15

Source: Medtrack

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year period, Merck also divested a CGRP antagonist (to Allergan for $250m), and Eli Lilly sold its CGRPcandidate to Arteaus Therapeutics (incidentally, the Big Pharma company ended up buying thecompound back after the release of positive Phase II data) (Medtrack, 2016). Amgen is another BigPharma aiming to get a CGRP-targeted product to market. Bibliography AstraZeneca (2015) Durvalumab ATLANTIC trial supports clinical activity and AstraZeneca’s overallimmuno-oncology strategy. Available from: https://www.astrazeneca.com/our-company/media-centre/press-releases/2015/Durvalumab-ATLANTIC-trial-supports-clinical-activity-and-AstraZenecas-overall-immuno-oncology-strategy.html [Accessed 13 January 2016]. Business Wire (2015a) Celgene in Collaboration with Astrazeneca Announce Initiation of FusionClinical Development Program in Immuno-Oncology. Available from:http://www.businesswire.com/news/home/20151207005644/en/Celgene-Collaboration-Astrazeneca-Announce-Initiation-Fusion-Clinical [Accessed 13 January 2016]. Business Wire (2015b) Merck KGaA, Darmstadt, Germany, and Pfizer Announce InvestigationalImmunotherapy Avelumab Receives FDA Fast Track Designation for Metastatic Merkel Cell Carcinoma.Available from: http://www.businesswire.com/news/home/20151007005668/en/Merck-KGaA-Darmstadt-Germany-Pfizer-Announce-Investigational [Accessed 13 January 2016]. Citeline (2015) Anticancer Immunotherapy – A New Weapon Against Cancer. Available from:https://citeline.com/anticancer-immunotherapy-new-weapon-cancer/ [Accessed 21 January 2016]. Pink Sheet (2012) With GAIN In Place, Antibiotic Improvements Depend On FDA Implementation.Available from: https://www.pharmamedtechbi.com/Publications/The-Pink-Sheet/74/33/With-GAIN-In-Place-Antibiotic-Improvements-Depend-On-FDA-Implementation [Accessed 21 January 2016]. Pink Sheet (2015a) How To Catch The Next Wave Of Cancer Immunotherapy. Available from:https://www.pharmamedtechbi.com/publications/the-pink-sheet/77/43/how-to-catch-the-next-wave-of-cancer-immunotherapy [Accessed 26 October 2015]. Pink Sheet (2015b) AstraZeneca Immuno-Oncology Hopes Buoyed By Tremelimumab. Available from:https://www.pharmamedtechbi.com/Publications/The-Pink-Sheet/77/49/AstraZeneca-ImmunoOncology-Hopes-Buoyed-By-Tremelimumab [Accessed 21 January 2016]. Pink Sheet (2015c) MannKind’s Plan To Get Afrezza Inhaled Insulin Off The Ground. Available from:https://www.pharmamedtechbi.com/publications/the-pink-sheet/77/40/mannkinds-plan-to-get-emafrezzaem-inhaled-insulin-off-the-ground [Accessed 22 October 2015]. Pink Sheet Daily (2016a) Bristol Cements Lead In Immunotherapy. Available from:https://www.pharmamedtechbi.com/publications/the-pink-sheet-daily/2016/1/25/bristol-cements-lead-in-immunotherapy [Accessed 26 January 2016].






http://www.businesswire.com/news/home/20151007005668/en/Merck-KGaA-Darmstadt-Germany-Pfizer-Announce-Investigational

http://www.businesswire.com/news/home/20151007005668/en/Merck-KGaA-Darmstadt-Germany-Pfizer-Announce-Investigational

https://citeline.com/anticancer-immunotherapy-new-weapon-cancer/

https://www.pharmamedtechbi.com/Publications/The-Pink-Sheet/74/33/With-GAIN-In-Place-Antibiotic-Improvements-Depend-On-FDA-Implementation

https://www.pharmamedtechbi.com/Publications/The-Pink-Sheet/74/33/With-GAIN-In-Place-Antibiotic-Improvements-Depend-On-FDA-Implementation

https://www.pharmamedtechbi.com/publications/the-pink-sheet/77/43/how-to-catch-the-next-wave-of-cancer-immunotherapy

https://www.pharmamedtechbi.com/publications/the-pink-sheet/77/43/how-to-catch-the-next-wave-of-cancer-immunotherapy

https://www.pharmamedtechbi.com/Publications/The-Pink-Sheet/77/49/AstraZeneca-ImmunoOncology-Hopes-Buoyed-By-Tremelimumab

https://www.pharmamedtechbi.com/Publications/The-Pink-Sheet/77/49/AstraZeneca-ImmunoOncology-Hopes-Buoyed-By-Tremelimumab

https://www.pharmamedtechbi.com/publications/the-pink-sheet/77/40/mannkinds-plan-to-get-emafrezzaem-inhaled-insulin-off-the-ground

https://www.pharmamedtechbi.com/publications/the-pink-sheet/77/40/mannkinds-plan-to-get-emafrezzaem-inhaled-insulin-off-the-ground

https://www.pharmamedtechbi.com/publications/the-pink-sheet-daily/2016/1/25/bristol-cements-lead-in-immunotherapy

https://www.pharmamedtechbi.com/publications/the-pink-sheet-daily/2016/1/25/bristol-cements-lead-in-immunotherapy

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Pink Sheet Daily (2016b) MannKind’s Future Uncertain After Sanofi Terminates Afrezza Deal. Availablefrom: https://www.pharmamedtechbi.com/Publications/The-Pink-Sheet-Daily/2016/1/5/MannKinds-Future-Uncertain-After-Sanofi-Terminates-Afrezza-Deal [Accessed 21 January 2016]. Review on Antimicrobial Resistance (2016) Global pharmaceutical industry calls on governments towork with them to beat the rising threat of drug resistance. Available from: http://amr-review.org/sites/default/files/Press%20notice%20Jan%2021%202016.pdf [Accessed 21 January2016]. Sapountzis I (2015) Immuno-oncology: new advances + new targets + new partnerships = new cures?BioPharm America presentation; Boston, Massachusetts; 15 September 2015. Scrip (2015a) BMS' Opdivo/Yervoy OK'd; 1st U.S. Immuno-Oncology Combo. Available from:http://www.scripintelligence.com/home/BMS-OpdivoYervoy-OKd-1st-U.S.-Immuno-Oncology-Combo-360779 [Accessed 1 October 2015]. Scrip (2015b) Lantus Follow-On Basaglar OK'd, But Can Lilly Sell It? Available from:http://www.scripintelligence.com/home/Lantus-Follow-On-Basaglar-OKd-But-Can-Lilly-Sell-It-362183 [Accessed 21 January 2016]. START-UP (2011) Forma To Play To Its Strengths With Genentech Deal. Available from:https://www.pharmamedtechbi.com/publications/start-up/16/7/forma-to-play-to-its-strengths-with-genentech-deal [Accessed 22 October 2015]. Strategic Transactions (2006) Pfizer to buy Sanofi-Aventis' share of Exubera for $1.3bn. Availablefrom: https://www.pharmamedtechbi.com/deals/200620019 [Accessed 21 January 2016]. Strategic Transactions (2014a) Pfizer to build its immuno-oncology pipeline through tie-up withMerck KGAA. Available from: https://www.pharmamedtechbi.com/deals/201420418 [Accessed 21January 2016]. Strategic Transactions (2014b) Celgene and Forma enter second collaboration; Celgene gets buy-outoption. Available from: https://www.pharmamedtechbi.com/deals/201420132 [Accessed 21 January2016]. Strategic Transactions (2015a) Merck, Pfizer partner with Dako to create companion diagnostic foravelumab. Available from: https://www.pharmamedtechbi.com/deals/201520485 [Accessed 21January 2016]. Strategic Transactions (2015b) Sanofi and Lilly settle Basaglar patent litigation. Available from:https://www.pharmamedtechbi.com/deals/201520487 [Accessed 21 January 2016]. Strategic Transactions (2015c) Novartis now completely owns ofatumumab in new GSK transaction.Available from: https://www.pharmamedtechbi.com/deals/201520422 [Accessed 21 January 2016].

https://www.pharmamedtechbi.com/Publications/The-Pink-Sheet-Daily/2016/1/5/MannKinds-Future-Uncertain-After-Sanofi-Terminates-Afrezza-Deal

https://www.pharmamedtechbi.com/Publications/The-Pink-Sheet-Daily/2016/1/5/MannKinds-Future-Uncertain-After-Sanofi-Terminates-Afrezza-Deal

http://amr-review.org/sites/default/files/Press%20notice%20Jan%2021%202016.pdf

http://amr-review.org/sites/default/files/Press%20notice%20Jan%2021%202016.pdf

http://www.scripintelligence.com/home/BMS-OpdivoYervoy-OKd-1st-U.S.-Immuno-Oncology-Combo-360779

http://www.scripintelligence.com/home/BMS-OpdivoYervoy-OKd-1st-U.S.-Immuno-Oncology-Combo-360779

http://www.scripintelligence.com/home/Lantus-Follow-On-Basaglar-OKd-But-Can-Lilly-Sell-It-362183

http://www.scripintelligence.com/home/Lantus-Follow-On-Basaglar-OKd-But-Can-Lilly-Sell-It-362183

https://www.pharmamedtechbi.com/publications/start-up/16/7/forma-to-play-to-its-strengths-with-genentech-deal

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Strategic Transactions (2016) Merck KGAA, Pfizer, and Syndax enter ovarian cancer trial collaboration.Available from: https://www.pharmamedtechbi.com/deals/201620003 [Accessed 21 January 2016].


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DEAL ECONOMICS Between 2011 and 2015, approximately $125bn in total deal value went into Big Pharma in-licensingdeals, equating to an average of $25bn per year. Total deal value includes various types of keypayments, most importantly up-front fees, which are paid upon the signing of an agreement, andmilestones, which are tied to achievements reached over the alliance's lifetime. Milestones, especiallylater-stage payments, are often called "biobucks," referring to the notion that these fees may not everget paid because of the high associated risk, such as commercial success or sales goals. Big Pharmacompanies spent a total of $11bn in up-front payments over the five-year period and pledged morethan $69bn in announced milestones. Johnson & Johnson was the top dealmaker by dollars spent within the Big Pharma peerset Johnson & Johnson shelled out the most money overall in Big Pharma deal-making (in-licensing only)during the five-year period. The company signed approximately $18bn in total deal value, but only$671m of that was via up-front fees. Johnson & Johnson increased its annual partnership volumealongside the amount of investment it put into in-licensing, with the exception of a fairly small figure($156m) in 2013. The deals also spanned a range of development phases, from early discoveryresearch up to Phase II. The company not only signed the highest total value among the Big Pharmapeer set across five years, but also managed to allocate the second-highest amount in a single year –over $7bn in 2012 – which included its two billion-dollar deals with Genmab (one for its bispecificantibody discovery technology, DuoBody, and the other for daratumumab, then in Phase I/II), anoption-based agreement with Forma Therapeutics worth $700m and focused on tumor metabolismtarget discovery, and a $945m alliance with Astellas Pharma for the Phase IIb Janus kinase inhibitorASP015K (later terminated) (Medtrack, 2016).

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SANOFI'S DIABETES AND ONCOLOGY DEAL-MAKING DROVE UP VALUES Sanofi came in behind Johnson & Johnson with $17bn in total value, but allocated a higher portion($2bn) to up-front fees. The company had a stand-out year in 2015 in terms of deal values, spendingan aggregate $970m up-front and $12bn in total pledged payments. Sanofi's largest 2015 dealscovered two key areas, diabetes and immuno-oncology, and similar to Johnson & Johnson, theyincluded candidates ranging from preclinical through to Phase III. Sanofi's immunotherapy deal withBioNTech, worth $2bn, was signed at the discovery stage, while the other immunotherapy alliancewith Regeneron, valued at $2.2bn (including a big up-front payment of $640m), included candidatesin the preclinical stage as well as the Phase I REGN2810. Sanofi's $2bn deal with LexiconPharmaceuticals was for rights to Phase III sotagliflozin, a dual inhibitor of sodium-glucosecotransporters-1 and -2, while its $4bn agreement with Hanmi Pharmaceutical covered Phase IIefpeglenatide, Phase I HM12470, and a preclinical glucagon-like peptide-1 agonist (Medtrack, 2016).

Figure 31: Big Pharma’s big spenders in in-licensing deals, 2011–15

Source: Medtrack

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ASTRAZENECA SPENT A LARGE UP-FRONT SUM AstraZeneca paid out the most of any of the Big Pharmas at deal signing: a $2bn up-front total.

Table 2: Big Pharma’s in-licensing deal values, by company, 2011–15

Company Total deal value ($m)* Up-front ($m) Milestones ($m)

Johnson & Johnson 18,386 671 9,783

Sanofi 16,610 1,638 10,225

Roche 13,936 561 7,204

Pfizer 11,064 1,565 6,071

Merck & Co 9,884 1,421 7,031

Eli Lilly 8,795 812 4,261

AstraZeneca 8,354 1,719 3,702

Bristol-Myers Squibb 7,980 516 3,544

GlaxoSmithKline 6,506 136 3,551

Novartis 6,027 867 1,774

AbbVie/Abbott 5,708 868 4,120

Amgen 4,577 169 3,418

Boehringer Ingelheim 3,085 103 1,615

Novo Nordisk 2,010 1,393 2,010

Bayer 1,260 15 746

Teva 765 121 825

*Includes up-front, milestone, R&D, and other types of licensing payments.

Source: Medtrack

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Nearly three-quarters of that figure came towards the end of the five-year period, in 2014 and 2015.At $875m, the company's biggest up-front payment went on purchasing Almirall's respiratorybusiness in 2014. Multiple products were involved, including marketed drugs such as Eklira(aclidinium) and a pipeline of preclinical through to Phase III asthma and chronic obstructivepulmonary disease candidates. In 2015, AstraZeneca paid $250m up-front to co-develop InnatePharma's anti-NKG2A antibody IPH2201 in Phase II studies as a monotherapy and in combinationwith AstraZeneca's anti-programmed death ligand-1 durvalumab for multiple cancers (Medtrack,2016). Payment metrics on deals generally increased Totals for all three major licensing payment metrics – up-front, milestones, and total deal values –gradually increased between 2011 and 2015, with the exception of decreases between 2012 and 2013in total milestones and total deal value, and some fluctuations in the up-front figures. The declines in2013 milestones and total deal value were primarily because 2013 had fewer large-money deals thanin other years. The up-front total of $4bn in 2014 was a five-year high, representing 41% of all up-fronts made between 2011 and 2015. Eight deals featured initial sums of more than $100m, includingBayer and Merck's soluble guanylate cyclase modulator deal at $1bn – the largest up-front paidduring 2011–15 – and AstraZeneca's purchase of Almirall's respiratory franchise ($875m).Interestingly, 2015 also had eight deals, with up-fronts over $100m. Further, 2015 had more alliances(46) with reported up-front values compared with 2014's 33 alliances. Therefore 2014's lower-valueddeals, coupled with the alliances with huge up-fronts, helped make the big difference for that yearcompared with 2015. It is important to note that a limitation of the analysis on deal economics stemsfrom the fact that the totals on all three payment metrics are only for those deals with disclosedvalues. Included in this limitation is the possibility that deals with higher values are more likely to bereported than those with smaller figures. Within the universe of total in-licensing agreements overthe five-year period (a total of 827), 18% had a disclosed up-front, 15% had a milestone figure, and34% had a total deal value.

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Average deal values increased Average up-front and milestone payments, along with average deal values, gradually increased overthe five-year period, demonstrating that the cost of deal-making continues to get more expensive(note, however, that the average figures only represent those from deals with disclosed values). Theonly declines seen were in the average total deal value figure in 2013 and the average up-front figurein 2012 and 2015. Average up-front payments fluctuated more compared with average milestonesand total deal value, but generally they remained fairly flat between 2011 and 2013 (ranging from$39m–58m), after which they rose to $134m in 2014. Companies signed multiple hundred-million-dollar up-front deals in 2014 that drove up the average, and 2014 proved to be somewhat of anoutlier year as the average up-front in 2015 went back down to $74m. The change in average up-front from $44m in 2011 to $74m in 2015 may be explained by oncology's bigger share in dealvolume in 2015 compared with 2011, alongside the higher prices paid in oncology deals. There wasalso a bigger proportion of Phase I agreements in 2015 versus 2011, and average up-fronts in Phase Igrew over the five-year period.

Figure 32: Big Pharma’s licensing payments, by payment metric, 2011–15

Source: Medtrack

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The larger deals in 2014 also translated to higher up-front averages broken down by phase; 2014tended to have bigger averages across most phases. In general, up-front averages have been trendingup in the preclinical through Phase III groups, although each phase did experience some declines incertain years. Up-front payments for filed for approval, approved, or marketed drugs saw the mostfluctuation during the five years. The peak in 2011 was from a single deal: the $387m up-front in EliLilly and Boehringer Ingelheim's diabetes collaboration (which included the filed [at the time] forapproval candidate Tradjenta [linagliptin]). Both Bayer and Merck & Co's cardiovascular agreement($1bn up-front), and Almirall's sale of its respiratory business to AstraZeneca ($875m) helped propel2014's average to $416m (Medtrack, 2016).

Figure 33: Big Pharma’s in-licensing deals, by payment metric average, 2011–15

Source: Medtrack

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A higher proportion of deal value was still locked up in milestones While Big Pharma deals are indeed becoming more expensive, well over the majority of the value ofthese agreements are tied into various types of milestones, including development, regulatory, andcommercial, and therefore are neither guaranteed nor paid up-front. As a result, the partner oftennever sees this money. Excluding 2014, an average of just 7% of Big Pharma deal value was spent up-front. 2014 was an outlier, with 15% of total deal value attributed to up-front payments.

Figure 34: Big Pharma’s average up-front payments in in-licensing deals, by phase of development, 2011–15

Source: Medtrack

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There were more than two-dozen billion-dollar deals between 2011 and 2015 Approximately 30 in-licensing deals done in the five-year time period reached $1bn or higher in totaldeal value. Within the top 10 alliances of that dataset, half of the deals were signed in 2014, anoutlier year, contributing to the large figures of that year. In addition, the top 10 was nearly evenlysplit between Big Pharma-biotech agreements, and Big Pharma deals within the peer set orpartnerships with other larger pharma companies (including mid-sized companies or specialtypharmas). The therapeutic subjects of the agreements were spread among key areas, but immuno-oncology was well represented.

Figure 35: Total up-front payment values and up-front payments as a percentage of in-licensing deal value, 2011–15

Source: Medtrack

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Table 3: Top 10 Big Pharma in-licensing deals, by deal value, 2011–15

Deal date Partners

(licensee/licenser)

Deal subject Disease targets Up-front ($m) Milestones ($m) Total deal value

($m)

5 November 2015 Sanofi/Hanmi Efpeglenatide, a long-acting GLP-1 receptor agonist; a weekly insulin; and GLP-1/insulin

combination

Diabetes 437 3,822 4,258

12 July 2012 Janssen

Biotech/Genmab

DuoBody bispecific antibody drug discovery Multiple diseases 6 175 (per product) 3,666

18 June 2014 Pfizer/Cellectis CAR-T immunotherapies Multiple myeloma 80 2,775 2,855

17 November 2014 Pfizer/Merck KGaA Merck's anti-PD-L1 antibody avelumab; Pfizer's anti-PD-1 antibody; co-promote on

Pfizer's Xalkori

NSCLC and various

other tumor types

850 2,000 2,850

3 February 2014 Merck & Co/Ablynx Nanobody candidates (including bi- and trispecifics) directed toward immune checkpoint

modulators

Oncology 41 2,660 2,331

6 April 2015 Bristol-Myers

Squibb/uniQure

Gene therapies against 10 cardiovascular targets, including the calcium-binding protein

S100A1

Congestive heart

failure

82 2,207 2,307

28 July 2015 Sanofi/Regeneron Immunotherapies, including REGN2810, a PD-L1 inhibitor; potential preclinical candidates

targeting LAG3, GITR, and PD-L1

Oncology 640 n/a 2,170

6 May 2014 Merck & Co/Bayer Co-development of soluble guanylate cyclase modulators for cardiovascular diseases

including Bayer's Adempas and Phase IIb vericiguat

Cardiovascular

failure, pulmonary

arterial hypertension

1,000 1,100 2,100


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Table 3: Top 10 Big Pharma in-licensing deals, by deal value, 2011–15

Deal date Partners

(licensee/licenser)

Deal subject Disease targets Up-front ($m) Milestones ($m) Total deal value

($m)

30 July 2014 AstraZeneca/Almirall Divestment of Almirall's respiratory assets including the marketed drug Eklira plus pipeline

candidates

Asthma, COPD 875 1,220 2,095

31 October 2013 Eli Lilly/Pfizer Pfizer's Phase III tanezumab, an anti-nerve growth factor antagonist for osteoarthritis,

chronic low back pain, and cancer pain

Cancer pain, chronic

pancreatitis, chronic

pelvic pain syndrome,

diabetic neuropathy,

endometriosis,

interstitial cystitis,

low back pain,

osteoarthritis

200 n/a 1,800

Note: numbers may not add up due to rounding and number of deals with reported up-front vs milestone vs total deal values.

CAR-T = chimeric antigen receptor T-cell; COPD = chronic obstructive pulmonary disease; GLP-1 = glucagon-like peptide-1; NSCLC = non-small cell lung cancer; PD-L1 = programmed death ligand-1

Source: Medtrack


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PHASE ANALYSIS The risk of drug development was mirrored, but balanced, by Big Pharma in terms of the phases mostoften partnered in in-licensing deals. The peer group had a fairly even split in alliances among allstages of a drug's lifecycle, but preclinical alliances led. Early-stage candidates dominated partnerships By overall counts, the majority of Big Pharma's in-licensing transactions are classified in the"unknown" phase, which represents either research-stage (ie drug discovery) compounds or thosecandidates where the phase was not specified. For deals where the phase was disclosed, licenses forpreclinical candidates topped the list and accounted for 30% of the agreements, an importantindicator that Big Pharma is not averse to in-licensing opportunities at the early stages of a drug’slifecycle. Similarly, there was a strong showing in deals signed at Phase I at 22%. On an annual basis,the share of alliances done in preclinical and Phase I have been gradually increasing. In 2011,preclinical and Phase I deals represented 26% and 21% of the total volume, respectively; by 2015,those figures increased to 32% and 30%, respectively.

Figure 36: Big Pharma’s in-licensing deals, by phase of development at deal signing, 2011–15

Source: Medtrack

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Big Pharma in-licensing for marketed products (or approved/pending approval drugs) hadcomparatively lower deal volume counts than most other phases, representing 16%. Deal activity forthis phase signals the peer group's increased externalization efforts to build up pipelines to supportlong-term growth, while de-emphasizing reliance on approved products that likely have a shorterpatent life and are therefore at risk to generic competition sooner. The opposite effect was seen in BigPharma out-licensing. Among the deals where the phase was disclosed, nearly half (45%) were fordrugs that are already approved, while only 8% involved preclinical compounds.

Figure 37: Share of preclinical and Phase I in-licensing deals increases, 2011–15

Source: Medtrack

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Figure 38: Strong representation across all phases in Big Pharma’s in-licensing deals, 2011–15

Source: Medtrack

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Marketed drugs and Phase II candidates led in aggregate up-front payments For in-licensing deals that had disclosed economics, those signed-for drugs that were in Phase IIsecured the most in up-front payments: a total of $4bn over the five-year period. Marketed productdeals also scored high in total up-front fees at $3bn, but only slightly ahead (by $100,000) of Phase Ialliances at $3bn. Aggregate deal values mirrored volume with the preclinical category’s total thelargest at $39bn. Phase II and III total deal values were also in the top three, at $32bn and $26bn,respectively.

Figure 39: Marketed products dominated Big Pharma’s out-licensing deals, 2011–15

Source: Medtrack

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Phase II and marketed drugs tended to have higher average up-fronts While preclinical deals dominated in volume and total value, annual average up-front payments forpreclinical candidates tended to be among the lowest compared with other phases, which saw higheraverages. This is due to the sheer volume of alliances and the wider range of up-fronts for preclinicalcandidates, spanning a low of $1m to a high of $650m (from Sanofi's immuno-oncology deal withRegeneron [Medtrack, 2016] over the five years). Phase II and marketed drugs garnered higher up-fronts per year. Some of the bigger tie-ups in thePhase II group included the AstraZeneca/Almirall respiratory business sale ($875m) and the MerckKGaA/Pfizer agreement for the immuno-oncology candidate avelumab ($850m). Both of those dealshappened to occur in 2014, when up-front averages increased significantly across all phases. Theyear-on-year averages in the marketed group fluctuated the most, declining since 2011 and then

Figure 40: Big Pharma’s in-licensing deal economics, by phase of development, 2011–15

Source: Medtrack

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reaching a peak in 2014 at $416m. The 2014 figure was boosted by two major deals: Merck's rights toBayer's Adempas (riociguat) for pulmonary arterial hypertension and chronic thromboembolicpulmonary hypertension ($1bn); and the aforementioned AstraZeneca/Almirall respiratory businesssale ($875m), which also included marketed products (Medtrack, 2016). Phase III candidates also showed lower up-front averages versus other phases. However, Phase III up-fronts started to trend up in 2013, reaching a high of $180m in 2015, while payments in most otherphases that year saw a decline. The 2015 Phase III average was brought up by Novartis' acquisition offull rights to GlaxoSmithKline's Arzerra (ofatumumab) in autoimmune diseases, where the drug is stillunder development. The transaction included an up-front payment of $300m (Medtrack, 2016).

Figure 41: Big Pharma’s average up-front payments for in-licensing deals, by phase of development, 2011–15

Source: Medtrack

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Figure 42: Big Pharma’s average total deal values for in-licensing deals, by phase of development, 2011–15

Source: Medtrack

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GEOGRAPHIC BREAKDOWN OF DEAL-MAKING Big Pharma companies tended to partner regionally, licensing rights for certain select countries withinthe major markets around the world (ie regions within one of the major five markets tracked byMedtrack including Asia-Pacific, Europe, Middle East and Africa, North America, and South andCentral America). Exactly one-third of in-licensing deal volume over the five-year period coveredregional territories. In comparison, worldwide deals represented 28%. Rights for just North America –arguably the most lucrative because of the US – followed at 24%.

The same three geographies were also at the top of the out-licensing agreements. North America wasthe most partnered-in region, accounting for 27% of the out-licensing deal volume. Divestments inNorth America, however, were a relatively small proportion and other deal structures, includingdevelopment and licensing, were also part of the agreements. This indicates that Big Pharma plans tomaximize sales by joining up on sales and marketing efforts. Big Pharma out-licensing in NorthAmerica was followed closely by regional territories at 26% and then worldwide at 23%.

Figure 43: Big Pharma’s in-licensing deal volume, by licensed geography, 2011–15

Source: Medtrack

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Regional deal-making took off Regional deal-making has been trending upwards since 2007 (START-UP, 2011). Between 2011 and2015, the same held true: there was a steady increase in regional agreements, which totaled 72 in2015, a 64% increase over 2011's 44 deals. Starting in 2011 and continuing since, the share ofalliances including global rights was less than that of regional deals annually. Historically, Big Pharmafirms typically gained global rights in the majority of their deals, under the thinking that they werebetter equipped in terms of R&D and sales and marketing infrastructure to bring a drug to market.That conventional wisdom has changed, though, and smaller partners are bringing more bargainingpower to the table, sometimes even retaining rights to their products in major geographies like theUS. Even so, as regional deal-making has increased, so have agreements for rights in just NorthAmerica. In reviewing individual company totals among the Big Pharma peer set, half of the firms did moreregional deals than worldwide. Notably, more than 50% of GlaxoSmithKline’s and Novo Nordisk'salliances were for regional rights. Novartis and AbbVie signed more worldwide deals than the otherBig Pharmas, and in Asia, the leading Big Pharma was Eli Lilly, indicating that company's interest inexpanding its reach in this territory.

Figure 44: Big Pharma’s out-licensing deal volume, by licensed geography, 2011–15

Source: Medtrack

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Figure 45: Big Pharma’s worldwide in-licensing deals decreased and regional carve-outs increased, 2011–15

Source: Medtrack

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Bibliography START-UP (2011) Tracking Big Pharma's Appetite For Regional Deals. Available from:https://www.pharmamedtechbi.com/Publications/Start-Up/16/4/Tracking-Big-Pharmas-Appetite-For-Regional-Deals [Accessed 22 October 2015].

Figure 46: Geographic breakdown of in-licensing geography by Big Pharma peer set, 2011–15

Source: Medtrack

https://www.pharmamedtechbi.com/Publications/Start-Up/16/4/Tracking-Big-Pharmas-Appetite-For-Regional-Deals

https://www.pharmamedtechbi.com/Publications/Start-Up/16/4/Tracking-Big-Pharmas-Appetite-For-Regional-Deals

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DEAL STRUCTURES R&D was the most common component of deal structures Collaboration on development was a key component of both Big Pharma in- and out-licensingtransactions. Over the five-year period, 23% of in-licensing deals included development or co-development, followed by research and discovery at 21%. When it came to partnering Big Pharmaassets, the same held true: co-development was also a big part of Big Pharma out-licensing,accounting for 17% of the alliances. Out-licensing also involved other collaborative efforts, includingcommercialization (14% of the deals) and research/discovery (7%). Unsurprisingly, the out-licensingdeals did involve divestments, representing 16%. In terms of in-licensing agreements broken down byphase, the development/co-development deal structure led on all of the development-stage phases –preclinical through to Phase III. When Big Pharma brought in an approved or marketed product,however, most of the deals involved acquisition of rights and little development.

Figure 47: Big Pharma’s in-licensing deals, by deal structure, 2011–15

Source: Medtrack

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Between 2011 and 2015, there were no significant changes in the ways that Big Pharma companiesstructured their alliances. Deals that included a research and development component, in which thecompanies share in the R&D funding and perform discovery and development activities, wasconsistently the most common attribute included on in-licensing transaction structures. In 2011,development/co-development-structured deals represented 22% of in-licensing deals, and that figureremained constant throughout the following years. Other deal structures have shown some smallerincreases in the share of alliances, including research/discovery and licensing, which involves rights todevelop, manufacture, or market a drug. Acquisitions, on the other hand, have slightly decreased inshare, from 14% in 2011 to 12% in 2015.

Figure 48: Big Pharma’s out-licensing deals, by deal structure, 2011–15

Source: Medtrack

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Option-based deal-making decreased There was a slight decrease in option-based in-licensing deals over the five-year period. Built-inoptions, which gained popularity as a way for the licensee to de-risk a potential asset before it wasofficially taken in-house, peaked in 2009 among all pharmaceutical alliances and started trendingdownward (In Vivo, 2012). In 2011, option-based agreements accounted for 5% of Big Pharma deals.That decreased to 3% the following year and has remained flat at 4% since then. The decreasedreliance on options as part of a deal could be the result of some of the other creative deal structuresthat have been implemented recently, including build-to-buy companies formed around singlecompounds; instead of the option being a negotiating factor in a partnership, build-to-buy dealsposition the option as an outright acquisition of the biotech company itself, usually with pre-arrangedterms with a specific partner and a capped return. Inception Sciences, a biotech incubator, has beenworking on this strategy in partnership with Versant Ventures and has formed several companies inpartnership with Roche and Bayer (START-UP, 2016). Bibliography In Vivo (2012) Considering All Options: Pharma’s Wait-And-See Deals Might Have Peaked. Availablefrom: https://www.pharmamedtechbi.com/Publications/IN-VIVO/30/6/Considering-All-Options-

Figure 49: Development and research/discovery consistently featured in Big Pharma’s in-licensing deals, 2011–15

Source: Medtrack

https://www.pharmamedtechbi.com/Publications/IN-VIVO/30/6/Considering-All-Options-Pharmas-WaitAndSee-Deals-Might-Have-Peaked

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Pharmas-WaitAndSee-Deals-Might-Have-Peaked [Accessed 22 October 2015]. START-UP (2016) Here To Stay: Inception Sciences Shows Why Build-To-Buy Works. Available from:https://www.pharmamedtechbi.com/publications/start-up/21/1/here-to-stay-inception-sciences-shows-why-buildtobuy-works [Accessed 28 January 2016].

https://www.pharmamedtechbi.com/Publications/IN-VIVO/30/6/Considering-All-Options-Pharmas-WaitAndSee-Deals-Might-Have-Peaked

https://www.pharmamedtechbi.com/publications/start-up/21/1/here-to-stay-inception-sciences-shows-why-buildtobuy-works

https://www.pharmamedtechbi.com/publications/start-up/21/1/here-to-stay-inception-sciences-shows-why-buildtobuy-works

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APPENDIX About the author Amanda Micklus has worked for multiple Informa products for 10 years, most recently as an analystwith Datamonitor Healthcare on the Strategy team. She has spent the majority of her time as a dealsanalyst with Strategic Transactions, researching and writing analyses on trends in biopharma andmedtech deal-making. She also authors deal-making trends articles for Informa's In Vivo and START-UP publications. Prior to joining Strategic Transactions, Amanda spent five years in the pharmaindustry, working as a market research analyst and information searcher at Purdue Pharma. Amandaholds a Bachelor of Science degree in Chemistry-Business from the University of Scranton, and aMaster of Science in Library & Information Science degree from Long Island University. Scope The analysis covered licensing agreements done by the Big Pharma peer set between 2011 and 2015.To ensure the dataset universe represented the pharmaceutical industry, the focus of the analysis wason Big Pharma's deals for drugs or drug candidates only. Alliances for technologies, medical devices,diagnostics, consumer products, contract research, healthcare services, chemical supplies, andveterinary health were excluded. Methodology SECONDARY RESEARCH Informa's Medtrack was the main source for deal data, and was supplemented with backgroundinformation on individual deals from Informa's Strategic Transactions. The analysis covered partnership deals by the Big Pharma peer set, as defined by DatamonitorHealthcare. The companies included are shown in the table below. The analysis also took intoconsideration their major subsidiaries.

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Table 4: Datamonitor Healthcare's Big Pharma peer set

AbbVie*

Amgen

AstraZeneca

Bayer**

Boehringer Ingelheim

Bristol-Myers Squibb

Eli Lilly

GlaxoSmithKline

Johnson & Johnson

Merck & Co

Novartis

Novo Nordisk

Pfizer

Roche

Sanofi

Teva

*Since the spin-off from Abbott Laboratories occurred in January 2013 and this report covers deals prior to this year, Abbott Laboratories'

deals were also included.

**Bayer is diversified in other businesses including agriculture, so the data analysis was restricted to Bayer HealthCare and Bayer HealthCare

Pharmaceuticals.

Source: Datamonitor Healthcare

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The analysis covered partnerships announced between 2011 and 2015, but excluded deals that wereannounced prior to 2011 but were classified by Medtrack as concluded within the 2011–15timeframe. The analysis did include deals that were later terminated. The deals reviewed were for drug products across all phases of development, from research throughmarketed, in the following industries:

pharmaceutical and biotechnology drug delivery enabling/drug discovery technologies academic and research institutions.

The following industries were excluded from the analysis:

technologies medical devices diagnostics consumer products contract research healthcare services chemical supplies veterinary health.

Among the partnerships reviewed, the following subcategories were included:

Acquisition – Deals involving the acquisition of a product and/or technology, within a giventerritory or territories. Note that in the out-licensing exhibits, this category was labeled asDivestment. Commercialization – Deals involving the marketing, co-marketing, commercialization,promotion, and/or co-promotion of products and/or technologies, within a given territory orterritories. Joint venture – A partnership in which two or more companies establish a new corporateentity to carry out research, development, marketing/commercialization, or other activitiessuch as manufacturing/supply. Licensing – An agreement in which the source company(s) grants the partner company the

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rights to use, develop, manufacture, and/or market a given product(s) or technology, usuallyfor initial up-front fees, milestone payments, royalty payments, and/or potential profitsharing. Includes in-licensing, out-licensing, cross-licensing, and sub-licensing partnerships. Manufacturing, supply, and distribution – A partnership deal involving the manufacture,supply, production, or distribution of a product or technology. Option – A contract giving a buyer the right, but not the obligation, to buy or sell anunderlying asset at a specific price on or before a certain date. Note: Medtrack counts anoption deal as a separate record if the overall agreement also includes a straight licensingcomponent. Research and development – Deals in which two or more partners share in the funding of theresearch and development of a drug(s) or technology(s) in a given territory or territories.

The commercialization and research/discovery categories are broader labels that may include morespecific deal structures; for commercialization, this could include marketing, co-marketing, and co-promotion, and for research/discovery, co-development/development. Some deals were classified atthe broader level (commercialization or research/discovery) due to the information disclosed about thedeal, and therefore that is why they appear separately in the pie charts. The following subcategories were excluded:

patent settlement/infringement letter of intent.

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