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Market Research Report
Biotech Financing in the Credit Crisis: Strategies for a radically altered landscape
| Published by |
Datamonitor |
| Published |
December, 2008 |
Product code |
79859 |
| Content info |
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| Price |
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This publication has been discontinued on July 19, 2011.
Abstract
Overview
Introduction
Since the financial meltdown, the relationship between Pharma and Biotech has
been turned on its head. Previously, pharma companies had no choice but to
license Biotech drugs at high prices in order to fill their sparse late stage
pipelines.
Scope
- Overview licensing trends up until the credit crisis
- Strategic analysis of biotech' s funding crisis
- Insight into how the biopharma market is expected to change and adapt
- Recommendations and potential financial solutions for biotech
Report Highlights
While Pharma is likely to prefer acquiring biotech targets out right, rather
than navigating the road of complex licensing agreements, Datamonitor expects
that licensing agreements will remain among Pharma and self sufficient biotech
companies. Although snapping up struggling Biotechs through M&A will be a
priority for Pharma.
Biotech companies are tackling their funding crises on two fronts; firstly, by
cutting costs and reducing their high cash-burn rates, and secondly attempting
to access quick cash from external sources. However, this is becoming a tough
task.
The lack of deals on the horizon, Biotech' s funding crisis, and subsequent
loss of confidence in the industry, have all led the market cap of
non-profitable US biotech companies to fall by a third since September 2008.
Reasons to Purchase
- Understand how licensing trends have evolved in recent years, and what
impact the financial crisis has had
- Assess how Pharma and Biotech' s relationship has changed and the
repercussions of this
- Identify cost saving and cash raising strategies in order to weather the
funding crisis
Table of Contents
- CHAPTER 1 EXECUTIVE SUMMARY
- Scope of the report
- Key findings
- CHAPTER 2 LICENSING TRENDS AND THE CREDIT CRISIS
- Why has Pharma' s R&D been in crisis?
- Until the financial meltdown, licensing was becoming an increasingly
expensive and complex option for Pharma
- The credit crunch has given Pharma a stay of execution from its R&D
crisis
- Cash and time is on Pharma' s side
- Pharma has been given a stay of execution, but still needs to address
its internal R&D crisis
- Licensing deals made by Big Pharma continue to fall
- The majority of Big Pharma are making fewer licensing deals
- Pharma' s competition to restock pipelines has driven up licensing
costs in recent years
- There has been a dramatic decline in $0-50m deals since Q1 2008 due
to the credit crunch
- Competition and high deal prices have traditionally led Pharma to
license earlier-stage drug candidates
- Pharma is now looking to license Phase III bargains from cash-hungry
biotech companies
- Oncology, anti-infective and CNS drugs remain popular in-licensing
targets
- CHAPTER 3 BIOTECH' S FUNDING CRISIS
- Biotech funding options - then... and now
- Biotech funding options - then
- Biotech funding options - now
- Traditional strategies to improve biotech valuations no longer apply
- Financing deals are harder to come by
- The death of IPOs - at least for now
- Bankruptcy - a likely end for numerous struggling biotech
- Selling - M&A, licensing and divesting
- Companies will forgo licensing agreements due to the short window of
opportunity
- M&A - potential buyers
- Biotech acquisition targets
- M&A - announced and completed
- Future M&A targets
- Divesting - a less drastic alternative to a complete takeover
- Reverse mergers have a poor track history
- CHAPTER 4 FINANCIAL SOLUTIONS FOR BIOTECH
- Biotech need to cut costs and raise cash fast
- Putting Biotech on ice - to buy time, Biotech needs to spend less
- Suspend any unessential R&D
- Restructure and retaining only core personnel
- Outsourcing where possible rather than carrying out functions in-house
- Spin-out high cash-burning units
- Merging with other biotechs to strip out redundancies
- Selling - the company, assets, and royalty streams
- Pay cuts for biotech directors
- Funding strategies for Biotech
- Government support - Pharma needs to lobby governments for cash
- US - Biotech lobbying Congress for tax rebates
- EU - UK Biotech lobby' s government for cash
- Novel investor strategies - more risk, but few alternatives
- Grants - only companies with drugs in development for chronic,
debilitative and fatal diseases will be considered
- CHAPTER 5 BIBLIOGRAPHY
- Publications and online articles
- Datamonitor resources
- Databases
- Exchange rates
- List of Tables
- Table 1: Highest value US licensing deals made by the top 20 Pharma
companies, Q1-Q3 2008
- Table 2: Weaker investor confidence in US Biotech is reflected in IPO
and market cap valuations, 2006-08
- Table 3: Ideal target biotech companies - attractive pipelines, a year
or less in cash left, and less than $50m cash on hand, Q4 2008
- Table 4: US public biotech company divestment deals since September 2008
- Table 5: Biotechs that could be potentially used as public shells for
reverse mergers, Q4 2008
- Table 6: EUROTRANS-BIO Biotech funding organizations
- Table 7: Exchange rates, 2007
- List of Figures
- Figure 1: Global ethical sales for the top 50 Pharma companies, 2006-12
- Figure 2: $115 billion worth of branded drugs from the top 50 pharma
companies face patent expiry through 2012
- Figure 3: Number of approvals for New Molecular Entities (NMEs)
declining by an average of 1.5 a year, 2000-07
- Figure 4: External factors affecting product portfolios in the
pharmaceutical industry, 2008
- Figure 5: The line between licensing and M&A is becoming
increasingly blurred
- Figure 6: Schematic of trends affecting Biotech-Pharma licensing deals
- Figure 7: Cash and equivalents and short-term investments for top 20
pharma and biotech companies ($m), Q2 2008
- Figure 8: Number of US licensing deals made by the top 20 Pharma
companies, Q1 2006 - Q3 2008
- Figure 9: Number of US in-licensing deals made by the top 20 Pharma
companies, Q1 2006-Q3 2008
- Figure 10: Number of US licensing deals valued at $0-50m, made by the
top 20 Pharma companies, Q1 2006-Q3 2008
- Figure 11: The rising cost of licensing deals, 2000-05
- Figure 12: Mean deal value by phase of drug (phase linked to furthest
developed drug if deal is for multiple drugs) of deals made by the top 20
Pharma companies, Q1 2006-Q3 2008
- Figure 13: Proportion of US licensing Phase I and III deals made by the
top 20 pharma companies, Q1 2006-Q3 2008
- Figure 14: Proportion of US licensing deals by therapy area made the top
20 pharma companies, Q1 2006-Q3 2008
- Figure 15: More than half of biotech companies analyzed have a year or
less in cash, Q4 2008
- Figure 16: The majority of traditional sources of finance are now closed
to Biotech following the 2008 ' financial meltdown'
- Figure 17: Eight mistakes that hurt your biotech company' s valuation
- Figure 18: Number of US Biotech financing deals, Q1 2006-Q4 2008
- Figure 19: Capital raised from Biotech financing deals has declined
throughout 2008
- Figure 20: Number of US IPOs in 2008 is at an all-time low
- Figure 21: Needs and challenges that drive Pharma-Biotech deals are
complementary
- Figure 22: Pharma will forgo forming partnership agreements,
prioritizing M&A
- Figure 23: Pros and cons of M&As without prior partnership
agreements during the financial crisis
- Figure 24: The most attractive biotech companies are also in need of the
most cash, Q4 2008
- Figure 25: Ideal acquisition targets for Pharma are Biotechs with
attractive pipelines, high cash-burn rates and limited cash on hand
- Figure 26: Publicly owned US biotech company (market cap under $1
billion) acquisitions announced since September 2008
- Figure 27: Publicly owned US biotech company (market cap under $1
billion) acquisitions announced since September 2008
- Figure 28: Ideal target Biotechs - attractive pipelines, a year or less
in cash left, and limited cash on hand
- Figure 29: The top 20 Pharma could increase profits by $202 billion to
2013 simply by cutting costs
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