By Claire Jeong, Research Analyst, LSN

In last week’s newsletter, you may have read about LSN’s review of 2017 licensing deals and how licensing deals are happening even earlier. Despite the high risk, pharmaceutical companies all across the globe are aggressively seeking partnership opportunities in hopes of identifying breakthrough therapies.

During RESI San Francisco – our first conference of the year – we invited 5 panelists from the world’s leading pharmaceutical companies to share their insights on early-stage partnerships. How do they assess value? How can companies differentiate themselves, especially those who are in an overcrowded space?

Moderated by Chris Haskell, VP, Head of West Coast Innovation Center, Bayer HealthCare, the Big Pharma panelists were:

• Kevin Lynch, Vice President, Search & Evaluation, AbbVie
• Chris Sheldon, Head, Oncology Search & Evaluation, AstraZeneca
• Lesley Stolz, Head, JLABS California, Johnson & Johnson Innovation
• Chris DeRespino, Director, Transactions, Amgen

Some takeaway points from the panel discussion:

Understand the value that you bring with your technology. Demonstrating strong scientific expertise is key. Knowing how your technology is differentiable and providing a cogent explanation on why your technology might work seem like obvious pointers, but this is particularly important for companies who are in overcrowded indications. Most likely, the potential pharma partners who you will be in conversation with are already familiar with what has succeeded and failed.

Know why you want to work with a certain group and think of this as a long-term relationship. Every pharmaceutical company is different, so it is essential to do research on your potential partners and fully understand how they could benefit your company. When they provide suggestions and feedback on how to improve, make sure that these are fully understood and addressed at the next meeting. After all, large pharmaceuticals aren’t there just to provide you with an excess of capital. They want to work with likeable management teams with whom they can develop a cooperative relationship over many years.

It is better to keep things simple in an introductory discussion. You will not need to provide every single piece of information that is attributed to your company’s work. Eventually, detailed materials (i.e. patents, detailed data on a given asset, etc.) will be reviewed as needed, but the initial conversation should be focused on understanding what your company is doing and what differentiates your technology.

Don’t be afraid to follow up, but understand that the process takes a while. Most pharmaceutical companies are organized into groups based on therapeutic area and expertise. It can take a while for these groups to review the entire portfolio and send promising opportunities up the corporate ladder. In an initial conversation, it is good to ask when you will hear back so that you can act accordingly based on those expectations. Eventually, large pharmaceuticals will make sure you receive a response from them, one way or the other.

By Lucy Parkinson, Director of Research, LSN

It’s no surprise that pharma companies continue to make licensing deals at a rapid pace; in 2017, LSN’s Licensing Deals platform on average logged one new deal every 3 days.

Taking an overview of the data LSN gathered in this pacy year of dealmaking, we can see a few patterns emerging over the course of the year that show where pharma appetite is currently focused. (LSN’s Licensing Deals platform only logs reported deals in which some financial information is available, whether it’s an up-front payment or future milestones. Deals reported without any financial details are not included in our sample set. Corporate M&A activity isn’t included either – just in-licensing).

Deals Are Getting Earlier

Some deals involved a research platform rather than a drug asset; however, in deals that involved a new drug, 2017 saw a substantial shift toward preclinical and Phase I opportunities. Last year, Phase II assets accounted for 35% of deals; this has slipped to 29%. Overall, Phase II and III deals have gone from representing almost 50% of deals to under 30%. Pharma has become substantially more aggressive about making deals early in an asset’s development cycle. Conversely, as pharma has been moving down this path for years, there may be fewer attractive late stage assets on the shelf than there were in previous years.

Oncology Remains King, But Interest Increases in GI and Metabolic Diseases

Not every deal report specifies the lead indication area for the asset, but among those that do, cancer is overwhelmingly the most active field for pharma licensing deals. However, we have seen some movement in other fields compared to 2016. In particular, appetites for digestive system, metabolic and endocrine therapeutics were higher in 2017.

New Modalities Come Into Play

The LSN Licensing Deals platform is in some cases able to provide information about an asset’s modality, and we saw a great range of therapeutic technologies involved in deals in 2017. Antibodies, drug delivery and kinease inhibitors or agonists remain key technologies; there were also several new deals announced in the vaccine space.

2017 saw several newer technologies become pipeline presences; prodrugs, RNai therapeutics, and gene and cell therapies each garnered several licensing deals, and there were also 2 deals involving microbiome therapeutics.

Asia Pharmas Go Global For New Assets

Have you been talking to the top 10 global pharmaceutical companies about a potential strategic partnership for your asset? That’s a good start, but in 2017 a total of 77 different licensees announced deals for new pipeline assets, from long-established majors to young firms looking to expand on their own in-house successes. These licensee firms include pharmas based all over the world, including several rising pharma powers in China. We saw many of firms based in the Asia region making deals with early stage companies in the West.

If you’re curious, 2017’s most publicly active licensee was Takeda, followed by Johnson & Johnson, Sanofi and Merck. However, with such a large number of licensees snapping up promising new drugs ever earlier in the development cycle, major firms are going to have to fight hard to keep up in therapeutic innovation. If you’re a startup CEO, it’s never too early to start locking in your strategic deals, and there’s a large universe of potential targets.

 

By James Huang, Research Analyst, LSN

This year, I had the fortune and pleasure to both organize and sit in on the China Medtech Panel at RESI JPM. The four panelists from Guoqian Venture Capital, Button Capital, Elite Capital, and Unistone Ventures all provided great information and many new insights into how the Chinese markets work. What most stood out to me was their elucidation of key differences between China and the US that many entrepreneurs fail to see, and their explanation of how life science startups can best situate themselves to deal with these differences.

1. China’s Markets Are Very Different from US Markets

According to our RESI panelists, one cannot assume that the market in China is the same as the market in the US or other Western countries. Many companies think that they’ll do great in China simply by running population metrics and not taking into account that China’s health system functions very differently compared to Western countries. China’s system has a different reimbursement process, China’s hospitals are all state-run and follow a different ruleset, and the government plays a large part in pricing. As a result, many digital health companies based in the US and Europe have no market in China, and many other device and therapeutics companies that assume they have a large market in China may not actually have that market.

The investors specifically talked about what they called “fake demand.” Basically, many companies will pitch to them that they have a large opportunity in China based off of research that they’ve done, but the investors say that often times, the demand that these companies claim to see is not accurate based on what they know at all. Part of the issue they say is that companies apply metrics from the US and Europe to China, assuming that many procedures and payment methods are all the same, when in fact a surgical procedure that’s done in the US might not be used at all in China.

2. Keys to Success in China for Foreign Companies

So how does a company correctly understand where they stand within Chinese markets? According to the panelists, the best way is to find a strong partner within China who can help them. The partner could be a strategic, an investor in China, etc. so long as they have roots in China and have experience working in China. Having someone native to China working as a partner is key since they’ll have experience with the system there and oftentimes, many strategic partners and investors have prior experience working with the government as well.

However, how does one identify these strong partners and access them? For manufacturing partners, many public Chinese medical device and therapeutic companies are constantly looking for innovative technologies to license to China. In fact, we’ve been seeing a trend where many Chinese pharmaceuticals and medical device manufacturers have started setting up offices and incubators within the US in order to identify more technologies to license back to China. Alongside Chinese investors, these groups have become more prevalent at conferences such as RESI. As the demand for innovative technologies increase, conferences like RESI will become better places to meet Chinese partners. After the USA, China is the second most represented country among investor profiles on the LSN Investor Platform, and we only expect that constituency to grow in the future. If you’re aiming to source an investor or partner from China, it’s important to use all the information sources and potential meeting points available to build a connection.