BioWorld Insight Contributing Writer

After a rocky 2009 for dealmaking, in which big pharma was busy digesting mega mergers and managing bottom-line pressure, biotech companies and investors alike were looking forward to a solid 2010. (See BioWorld Insight, Jan. 25, 2010.)

For the most part, they got it.

According to data released by MedTRACK, the biomedical database from Life Science Analytics, pharma deals were up 20 percent year to date through October, compared to the same time period in 2009.

Simos Simeonidis, analyst at Rodman & Renshaw, thought those figures sounded just about right. "The number of deals wasn't higher or lower than expected," he told BioWorld Insight.

Cancer drugs were a hot commodity, making up 24 percent of the deals in MedTRACK's database, but that's to be expected. "Oncology is always the highest. It has been for many, many years," said Sarah Terry, president of Life Science Analytics.

Terry also highlighted the deals made for metabolic and endocrinology drugs. While they only made up seven percent of the deals in 2010, it was a relatively large increase over the 5 percent seen in 2009.

Biggest Dealmakers

Through Oct. 2010, MedTRACK reported that Pfizer Inc. had done 51 deals, just ahead of Sanofi-Aventis SA and Novartis AG with 50 and 49 deals, respectively. Given its large size after the acquisition of Wyeth Pharmaceuticals, Pfizer topping the list isn't all that surprising. Sanofi-Aventis' ranking is a little more impressive, having risen up from 14th place last year.

Those numbers include partnerships and acquisitions involving not just biotechs, but also biosimilars and companies in emerging markets, both of which made up a substantial portion of the database. "Big pharmas are avidly trying to cover their risk [on follow-on biologics] by making a play into FOBs with both R&D and manufacturing deals," said Terry.

Looking only at pharmaceutical-biotech collaborations, Pfizer still topped the list with 22 deals, according to BioWorld Snapshots data through mid-December. GlaxoSmithKline plc, which was fifth on MedTRACK's list, shot up to tie Novartis at 18 biotech deals apiece, while Roche AG managed 16 partnerships with biotechs.

Yet the pharmas boasting the most partnerships were not necessarily shelling out the most money in 2010, according to BioWorld Snapshots. The biggest pharma-biotech partnership of the year was MacroGenics Inc.'s potential $2.16 billion antibody discovery deal with Boehringer Ingelheim GmbH, followed by Rigel Pharmaceuticals Inc.'s potential $1.3 billion deal with AstraZeneca plc for worldwide rights to Phase II rheumatoid arthritis drug R788 (fostamatinib disodium), and Aileron Therapeutics Inc.'s potential $1.1 billion stapled peptide deal with Roche. (See BioWorld Today, Feb. 17, 2010, Aug. 25, 2010, and Oct. 27, 2010.)

The acquisitions database of BioWorld Snapshots, on the other hand, doesn't show any clear winner in terms of quantity: Pfizer, Novartis and Eli Lilly and Co. each announced two acquisitions of biotechs in 2010. In terms of size, the biggest take outs of 2010 – like Novartis' $10.2 billion buy out of Alcon Inc. and Merck KGaA's $7 billion buy out of Millipore Corp. – didn't involve true biotechs. The largest pharma-biotech acquisition was Astellas Pharma Inc.'s $4 billion buy-out of OSI Pharmaceuticals Inc. (See BioWorld Today, May 18, 2010.)

And biotechs themselves were just as active on the buying side as pharma, snatching up even smaller companies. BioMarin Pharmaceutical Inc. and Gilead Sciences Inc. both announced two acquisitions in 2010, and Cephalon Inc. took the top prize with four acquisitions in 2010, three of which involved biotechs. Celgene Corp., too, has been an active acquirer recently.

2010: Private Companies Rejoice

One of the most striking trends in 2010 dealmaking was the number of partnerships and acquisitions of privately held companies, Simeonidis told BioWorld Insight.

He pointed to Celgene's acquisition of Gloucester Pharmaceuticals Inc., but there are plenty of other examples.

Just over half of the partnership deals announced in December involved privately held biotechs, including Avila Therapeutics Inc.'s $810 million covalent drug discovery deal with Sanofi, Neurimmune Holding AG's $427 million neurology deal with Biogen Idec Inc., Anaphore Inc.'s $345 million Atrimer discovery deal with Mitsubishi Tanabe Pharma Corp., Oncolys BioPharma Inc.'s $286 million HIV deal with Bristol-Myers Squibb Co., and more.

The increased interest in compounds developed by privately held companies isn't a knock on public companies, but rather the reality that there are plenty of biotechs that could have gone public, but decided against it because of the lackluster initial public offering (IPO) market. Partnering their compounds is another way for companies to get an infusion of cash to pay for the development of their pipeline.

2011: Party at the Extremes

While Terry doesn't see the drug industry as back on stable footing just yet, she thinks "2011 might be the year." Simeonidis concurred, saying that he expected the "same amount of deals if not more" in 2011.

If December 2010 was a prognosticator of the level of activity in 2011, partnership activity could be primed to pop. In total, 36 deals were announced in December, although that is only two more than were announced in December 2009, which also brought an end-of-year deal-making spike.

Simeonidis predicts a bipolar nature to the deals in 2011, since he thinks the most valuable assets to pharma are those at the extreme ends of development.

Preclinical and Phase I drugs will induce deals because pharma has decided it's better and cheaper to outsource research to biotech companies. "Big pharma is cutting down early stage R&D because they don't want to do it in house," said Simeonidis.

At the other end of the spectrum, Human Genome Sciences Inc., Vertex Pharmaceuticals Inc. and Dendreon Corp. could all be acquisition targets according to Simeonidis because they either have a drug on the market or will likely have one soon.

Specialty pharmas such as United Therapeutics Corp. could go the way of King Pharmaceuticals Inc., which Pfizer is in the process of purchasing. With multiple drugs on the market, specialty pharmas offer both top- and bottom-line growth if they're acquired by their larger brethren. (See BioWorld Insight, Oct. 25, 2010.)

Biotech companies with Phase II assets may not be left out in the cold, but Simeonidis forecasts a reduction in the number of deals that are done and the prices big pharmas are willing to pay for mid-stage compounds.

Promising, differentiated Phase II compounds will be acquired or licensed, but big pharma will be more selective than it was a few years ago, Simeonidis predicted. "Given all the high-profile failures, they are very cautious," he said.

Big pharma "would rather miss the next big thing than license a blow up," he concluded.