Campbell Alliance: Strategy. Results.
DEALMAKERS’ INTENTIONS 2015
By Neel Patel, Jeff Stewart, and Carlos Loya
Last year was the best year in history for life sciences
dealmaking. 2014 saw more than 180 merger and
acquisition (M&A) deals across the pharmaceutical and
biotechnology industry, totaling $218 billion in combined
M&A, financing, and up-front licensing payments. So,
what’s next?
(63%), but in 2014 M&A was less than half (40%) of the
total, with financing and partnering each accounting for
about half of the remaining dealmaking. In short, the
2014 dealmaking rush represented an engine firing on
all cylinders with participation spread across a wider
group of companies.
Was 2014 the peak, or was it a hint of what’s to come in
2015 and beyond? To get a sense of what the immediate
future holds, Campbell Alliance surveyed dealmakers
throughout the industry on their intentions for the rest of
the year. This study provides a unique perspective on the
future of licensing and acquisitions and places findings in
a multi-year context. This is the seventh year that Campbell
Alliance has conducted the Dealmakers’ Intentions survey
of licensing decision makers, designed to be forwardlooking and capturing expectations for deal activity, supply
and demand for assets at different stages of development,
and approaches to valuation.
The representation of mid-to-small-cap (less than $50
billion) biopharma companies in partnering and M&A deals
has steadily increased since 2009. The wealth also has
been spread around. In 2009, only 6% of all M&A was
attributed to small-cap and mid-cap biopharma companies.
Over just five year, this number rose steadily to a full 66%
of M&A in 2014. It would appear the large-cap biopharma
companies are being partially displaced by mid-cap
companies and, perhaps, even by regional players who are
eroding some of the buying power of the larger companies.
What we have seen in our survey this year is a remarkable
continuation of 2014’s dealmaking, with some particularities
that are worth consideration as the biopharmaceutical
sectors move through the rest of the year and beyond.
The last time industry saw activity near the magnitude
of 2014 was 2009, the last wave of mega-merger
consolidation. But dealmaking in 2014 was different in a
critical way. In 2009 activity was mostly driven by M&A
1
Dealmakers’ Intentions 2015
Campbell Alliance: Strategy. Results.
Expectations Positive for 2015
The momentum has continued through the first quarter of this year.
It’s not just the availability of cash that’s driving M&A. A number of other factors may be influencing the increased M&A
trend, including stock performance, the payer environment, and tax inversions. Clearly, the market is rewarding companies
that engage in M&A. In 2014, the top 10 M&A buyers had a 63% greater return on investment than the overall large-cap
pharmaceutical index (DRG, Arca Pharmaceutical Index) from 2012 to May 2015 (Figure 2).
Payer power is also driving consolidation. Rebates as a percentage of gross US sales increased from 20% to 32% from
2007 to 2014 (Figure 3). Payers have gained considerable negotiating power over the last five or six years. Consolidation
on the manufacturer side can help provide the portfolio basket needed to level the negotiation playing field with payers.
Finally, biopharmaceutical companies have reduced their tax base by as much as 56% following tax inversions. Although
regulations have set barriers for inversion-centric M&A deals, the incentive to merge to invert remains. The large
differences among leading manufacturers’ tax rates creates additional mega-merger potential, exemplified in Pfizer’s
rumored interest in merging with top-10 rivals from the European Union, such as AstraZeneca and GlaxoSmithKline.1
All of these factors are pushing toward the M&A side of the dealmaking equation. Largely in line with historical results from
this survey, sellers have a more optimistic outlook than buyers regarding the extent of dealmaking in 2015. However, as seen
in Figure 4, both groups expect the greatest increase to be in acquisitions with earn-outs (51% of buyers and 57% of sellers),
and dealmakers express some bearishness in sentiment with regard to outright acquisitions. 20% of buyers and 16% of
sellers expect fewer outright acquisitions, suggesting an expectation of greater risk sharing in the deals that are made.
Supply and Demand by Therapeutic Area and Development Stage
Phase III is still king. Supply and demand are at the largest relative imbalance, with about three times the share of buyers
(36%) interested in acquiring phase III assets than the share of sellers (13%) seeking to part with these late-stage assets
(Figure 5). Buyers also are broadly interested in preclinical assets (34%). The difference is on the supply side, where there
are more than three times as many preclinical assets than phase III assets actively being pitched by sellers.
The bottom line is this: preclinical is a relative buyer’s market while phase III is a relative seller’s market.
Buyer interest in phase III assets is not surprising. Much of the risk has been mitigated at this stage and buyers are willing
to pay a premium to shed that risk. But the magnitude of interest in preclinical assets relative to the other phases is
intriguing. There are two likely explanations for buyers’ interest in preclinical assets. First, products at this stage can be
acquired less expensively. Second, buyers are in competition to get into hot areas or to acquire hot assets early.
Summary Results From Dealmakers’ Intentions 2015
•2015 could be on the path to surpass
last year in dealmaking activity, and
2014 already was the highest level
of dealmaking since the last wave of
mega-merger consolidation in 2009.
•The greatest seller’s markets may
be found in central nervous system
(CNS) products, and the greatest
buyer’s markets may be found in
ophthalmology and antivirals.
•Buyers are almost three times more
interested in acquiring phase III
assets than sellers are in parting with
these late-stage assets.
•Phase III assets in CNS (excluding
pain) and women’s health have
witnessed a significant increase in
buyers’ interest.
•The 2013 discount rate gap
catalyzed unprecedented licensing
activity in 2014.
The discount rate gap has collapsed
to historic norms, which may indicate
a relative slowdown in licensing, as
implied in Q1 2015.
•After a steep decline from 2012 to
2013 in the cumulative conversion
rate in dealmaking, the conversion
rate has steadily increased to 5.1% in
2014, getting close to the peak
of 7.8% recorded in our 2011 survey.
•Sellers have a more optimistic
•Despite the large number of assets
outlook than buyers regarding the
in pre-clinical oncology, demand
extent of dealmaking in 2015, and
exceeds supply in that segment.
both groups expect the greatest
•Immuno-oncology has emerged as the
increase to be in acquisitions with
most significant new area of interest
Dealmakers’ Intentions 2015
earn-outs.
in 2015, and cancer vaccines have
Dealmaking Trends
replaced orphan products as the
“hottest” area for licensing in 2015.
2014 was an unprecedented
year in
deal making within the life sciences industry. Based on activity from January to
Dealmakers’
Intentions
2015
May 2015, this year is on the potential path to surpass the record
Dealmaking Trends
250
Figure 1
M&A, Partnering and Financing in Life Sciences
2014 was an unprecedented year in deal making within the life sciences industry. Based on activity from January to
Financing
M&Athe record
Partnering
May 2015, this year is on the potential
path to surpass
200
250
Value of Deals
Value
(US$b)
of Deals (US$b)
Based on the first quarter of the year, 2015 could be on the path to surpass 2014’s huge amount of dealmaking activity
and become even more of a breakout year for M&A and financing. In 2014, M&A activity was driven by small and mid-cap
biopharma buyers flush with cash. Financing to small-cap (less than $1 billion) and private biopharma companies saw a
significant increase in 2014 (Figure 1), driven largely by a robust initial public offering (IPO) market.
M&A, Partnering and Financing in Life Sciences
Financing
150
200
M&A
Partnering
100
150
50
100
0
50
2009
2010
2011
2012
2013
2014
2015
(Jan to May)
2009
2010
2011
2012
2013
2014
2015
(Jan to May)
0
Source: Source: BCIQ DealMakers Database, Accessed: June 2015
-3Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Source: Source: BCIQ DealMakers Database, Accessed: June 2015
2
-33
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Dealmakers’ Intentions 2015
Campbell Alliance: Strategy. Results.
Figure 2
Figure 2
Figure 3
M&A Top 10 (Total Deal Value, 2012-2015)
Actavis plc
ACT
$ 95,022
Valeant Pharmaceuticals
International Inc.
VRX
$ 28,488
Johnson & Johnson
JNJ
$ 22,450
TMO
$ 14,525
Thermo Fisher Scientific Inc.
Total Deal Value ($M)
MRK
$ 13,575
Amgen Inc.
AMGN
$ 13,030
Roche
RHHBY
$ 12,939
GILD
$ 11,775
Merck & Co. Inc.
Gilead Sciences Inc.
Rebates as Percentage of Gross US Pharma Sales
Shire plc
SHPG
$ 11,506
Bristol-Myers Squibb Co.
BMY
$ 11,475
60%
$3
64%
$2
30%
20% 19.7%
28.2%
26.2%
21.7%
30.2%
31.9%
2012
2013
24.8%
10%
2007
2013
1/3/2013
2014
1/3/2014
CA M&A Index
2015
1/3/2015
^DRG Index
Source: BCIQ DealMakers Database, Accessed: June 2015
4
40%
0%
$1
2012
1/3/2012
-1-
50%
Discount From Gross Sales
Ticker
Performance of $1 invested 2012
Company
Stock Performance of Top 10 M&A (2012-2015YTD)
Copyright © 2015. All Rights Reserved.
Confidential Property of Campbell Alliance Group, Inc.
2008
2009
2010
2011
Abbott/Abbvie
Amgen
AZN
Bristol-Myers
Elan/BIIB
Forest
GSK
Eli Lilly
Pfizer
Wyeth
J&J
Merck
Schering-Plough
Novartis
Novo Nordisk
Sanofi
Shire
AVG
Source: Credit Suisse US Rebate Analysis, 2014
-2-
5
Copyright © 2015. All Rights Reserved.
Confidential Property of Campbell Alliance Group, Inc.
Dealmakers’ Intentions 2015
Campbell Alliance: Strategy. Results.
Dealmakers’ Intentions 2015
Assets Across Different Stages of Development
The “middle market” of phase I-II
assets has a dynamic all its own.
Buyer interest is narrow, but the share
of sellers actively seeking partners
for these assets is also relatively
small. The supply/demand dynamic is
more balanced here than for
preclinical or phase III assets, and
thus deals done for phase I or phase
II are more likely to represent realistic
value expectations.
identify some areas of demand or
supply surplus. Among CNS indications,
both excluding as well as including pain,
demand exceeds supply, while in the
areas of ophthalmology and antivirals
that are not vaccine specific we see a
relative glut of assets.
• Phase III women’s health (seller’s
market)
• Preclinical women’s health (buyer’s
market)
Phase III assets in CNS (excluding
pain) and women’s health have
witnessed substantial increase in
buyers’ interest (Figure 8). Among
CNS products, a significant amount
of mid-stage risk exists, so it is not
surprising that buyers would be
looking to acquire these assets at a
later stage. In the oncology space,
meanwhile, preclinical assets have
consistently overshadowed asset
• Preclinical oncology (seller’s
Dealmakers’
Intentions
Comparing
the therapeutic
areas of 2015
market)
interest
for buyers with by
the assets
Expectations
Deal Type
available from sellers (Figure 7) helps
• Phase III oncology (seller’s market)
Sellers have a more optimistic outlook than Buyers regarding the extent of dealmaking in 2015, with both groups
expecting the greatest increase to be in acquisitions with earn-outs.
Figure 4
Expectations by Deal Type – “Buyers” vs. “Sellers”
Traditional
Licensing/Partnership
Buyers
Sellers
9%
54%
7%
Acquisition With
Earn-out
FPO
16%
Buyers
5%
Sellers
4%
41%
37%
Outright Acquisition
Sellers
37%
52%
20%
Buyers
More Deals
33%
44%
43%
51%
51%
39%
57%
Fewer
acquisitions?
Buyers, 36%
Buyers, 34%
• Preclinical ophthalmology (buyer’s
market)
• Phase III CNS excluding pain
(seller’s market)
About the Same
Buyers’ Interest vs. Sellers’ Asset Availability
• Preclinical respiratory (buyer’s
market)
This year, the highest areas of supply/
demand imbalance are:
Fewer Deals
Figure 5
• Phase III pain (seller’s market)
As we do each year, we report here
on the specific combinations of
therapeutic areas and stages
of development with the highest
supply and demand imbalances
(Figures 8-10).
Buyers and sellers share similar
interests in what they consider to
be key therapeutic areas with deal
potential (Figure 6). Oncology, central
nervous system (CNS) (excluding
pain), and cardiovascular are the top
three, consistent with 2014.
The interests of Buyers and Sellers in preclinical and Phase III assets differ significantly, with Buyers almost three
times more interested in acquiring Phase III assets than Sellers are in parting with these late-stage assets.
Buyers, 14%
Buyers, 16%
Sellers, 19%
Sellers, 23%
Phase I
Phase II
Sellers, 46%
Preclinical
6
Phase III
Source: Campbell Alliance Dealmakers' Intentions 2015. N=63 for Buyers and N=76 for Sellers.
-6Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
availability since the inception of our survey, though there
has been a re-emergence of interest in phase III oncology
assets as well.
Meanwhile, we can expect to see a great deal of
competition in the coming year in late-phase CNS,
both in pain and excluding pain.
Focusing on the therapeutic categories where companies
are seeking to out-license, pre-clinical ophthalmology has
emerged as a major area (Figure 9). However, historically
there has only been a small set of buyers among
companies like Genentech, Regeneron, and Allergan. The
recent consolidation in the space, with Actavis’s purchase
of Allergan, has only shrunk the number of buyers, which
will exacerbate the supply-and-demand imbalance.
Hottest Areas for Licensing
Cancer vaccines have replaced orphan products as the
“hottest” area for licensing in 2015, and immuno-oncology
has emerged as the most significant new area of interest
in 2015 (Figure 11).
A number of recent events are likely driving interest in
immuno-oncology, including high-profile approvals such as
Bristol-Myers Squibb Co.’s Opdivo for the treatment of
patients with metastatic squamous non-small cell lung
cancer. Roche received a second Breakthrough Therapy
Designation from FDA for its investigational cancer
immunotherapy atezolizumab (MPDL3280A) for the
treatment of people with PD-L1-positive non-small cell lung
cancer. At the same time, emerging companies in this
space have been making inroads. Juno Therapeutics—
Despite the large number of assets in pre-clinical oncology,
a large demand surplus remains in that segment. Phase III
oncology, which has been somewhat quiet recently as
buyer interest shifted to earlier phases of development,
has bounced back. This could be the result of opportunistic
plays, as many less-exciting assets that did not get
scooped up by buyers at earlier stages of development
nonetheless could nicely bolster a portfolio.
Source: Campbell Alliance Dealmakers' Intentions 2015. N=63 for Buyers and N=76 for Sellers.
-5Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Sellers, 13%
7
Dealmakers’ Intentions 2015
Campbell Alliance: Strategy. Results.
Dealmakers’ Intentions 2015
Expectations for Deals by Therapeutic Area
Figure 6Buyers and Sellers share similar interests in what they consider to be key therapeutic areas with deal potential.
Oncology, CNS (excluding pain), and Cardiovascular are the top three, and are consistent with interests in 2014.
6%
31%
6%
4%
2%
FPO
Therapeutic
Areas of Interest
for Buyers
4%
3%
8%
2%
6%
29%
3%
2%
4%
Therapeutic
Areas Available
From Sellers
6%
6%
15%
3%
7%
3% 2%
7%
Oncology
CNS (Excluding Pain)
Cardiovascular
Immunology
Metabolics
Pain
Dermatology
Gastointestinal
Antiviral (Non-Vaccines)
Respiratory
Women's Health
Antibiotic
Dealmakers’ Intentions 2015
Vaccines
Expectations
for DealsOther
by TherapeuticOphthalmology
Area
market… should be ‘Supply
Surplus’ for buyers market
10%
6%
7%
Figure 8
Sellers’ Market
Buyers’ Market
Demand
Surplus
Supply
Surplus
-7Comparing the therapeutic areas of
interest for Buyers with
the assets available from Sellers, a demand surplus
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
exists in CNS indications, both excluding as well as including pain, while we are seeing a relative glut of assets in the
Figure
7
areas
of ophthalmology and antivirals that are not vaccine specific.
Buyers’ Market
Consistent with previous years, Oncology, Cardiovascular and CNS (excluding pain) show greatest demand. Phase III
assets in CNS (excluding pain) and Women’s Health have witnessed significant increase in Buyers’ interest.
Buyers’ Interests - Therapeutic Areas Where My Company Is “Likely” or “Extremely Likely”
to Conduct an In-Licensing/Acquisition Deal in 2015
70%
Preclinical
Phase I
50%
40%
30%
20%
0%
0.06
0.04
0.02
0.00
-0.02
FPO
-0.04
Source: Campbell Alliance Dealmakers' Intentions 2015. Results from those respondents who indicated they are exclusively Buyers and both Buyers and Sellers (n=61).
-17Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
-0.06
Source: Campbell Alliance Dealmakers' Intentions 2015. N=63 for Buyers and N=76 for Sellers. Demand Index is calculated by subtracting the share of respondents with at least one asset to out-license from
the share respondents likely or very likely to in-license for at least one therapeutic area for at least one stage of development.
-8Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
8
Phase II
Phase III
Areas with a notable change vs. previous year(s)
10%
0.08
Relative Demand
Dealmakers’ Intentions 2015
Therapeutic Areas Where Buyers Expect to Play
60%
Source: Campbell Alliance Dealmakers' Intentions 2015. N=63 for Buyers and N=76 for Sellers.
Sellers’ Market
If in-licensers and out-licensers have different commercial
expectations for an asset, a wide gap in the discount rate
helps in creating a zone of potential agreement for the deal.
When buyers have a low discount rate, they attribute a
higher value to future cash flows. Conversely, a high seller
discount rate can deflate the value of an over-optimistic
forecast. In 2013 we saw a large gap in the sellers’ and
buyers’ discount rates. This large gap created a more
favorable licensing environment because the same asset is
worth significantly more in the buyer’s hands than in the
seller’s hands, as the buyer’s cost of capital is less.
Despite dropping somewhat, ultra rare (orphan) products
remain an area of strong interest, driven by the relatively
rapid clinical-trial path, the relatively low commercialization
This is a bit hard to read
infrastructure needed for launch, and the relatively favorable
without the TA next to the
payer environment. Considerable pricing power exists
numbers.
in orphan or ultra-rare indications, and with the macro
Also, you have “demand
environment of payer pressure increasing, companies are
surplus” written for both
seller’s market and buyer’s
expressing growing interest in these markets.
6%
Share of Respondents
3% 3% 3%
2%
Discount Rates
a developer of chimeric antigen receptor and high-affinity
T cell receptor technologies—had major success with its
initial public offering late last year.
9
Dealmakers’ Intentions 2015
Campbell Alliance: Strategy. Results.
Dealmakers’ Intentions 2015
Therapeutic Areas Where Companies Are Seeking to Out-License
Preclinical oncology assets have consistently overshadowed asset availability since inception of our survey.
The 2013 discount rate gap catalyzed
unprecedented licensing activity in
2014. That licensing activity appears
to be abating along with the collapse
of the discount rate gap to historic
norms. In the 2015 survey, the
discount rate gap between buyers
and sellers widened again slightly
in 2015, increasing from 2% to 3%,
which generally indicates a normal to
somewhat positive driver for licensing
but nothing akin to the discount rate
gap seen in 2013 (Figure 12). If the
2015 dealmaking trend continues on
its current upward course, licensing will
be flat to down while M&A and financing
will be sharply up.
Figure 9 Preclinical Ophthalmology
Assets Available – Therapeutics Areas Where My Company is Currently Seeking to Out-License
70%
Preclinical
Phase II
Phase III
Areas with a notable change vs. previous year(s)
60%
Share of Respondents
Phase I
50%
40%
30%
20%
FPO
10%
0%
Success Rates for Licensing/
Acquisitions
Dealmakers’ Intentions 2015
Campbell Biopharma Asset Demand Index
Source: Campbell Alliance Dealmakers' Intentions 2015. Results are expressed as share of respondents having at least one asset currently available for out-license (n=76).
-18Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Buyers’ demand for preclinical and Phase III assets overshadows supply across several therapeutic areas which will
likely result in significant increase in asset value. Preclinical oncology remains in high demand despite abundance in
Figure
10
supply
of assets.
A Demand Index Identifies the Areas of the Highest Mismatch Between Supply and Demand
0.5
Preclinical
Relative Demand
0.4
Phase I
Phase II
Phase III
Areas with a notable change vs. previous year(s)
0.3
Sellers’ Market
0.2
Demand
Surplus
0.1
0.0
-0.1
Supply
Surplus
Buyers’ Market
After a steep decline from 2012 to
2013 in the cumulative conversion rate
in dealmaking, the conversion rate has
steadily increased to 5.1% in 2014,
getting close to the peak of 7.8%
recorded in our 2011 survey (Figure
13). This positive trend is consistent
with the greater activity in successful
deals we have seen over the last
two years.
Of course, 5.1% is a low conversion
rate, so why do so many deals fail? Are
the failure points under dealmakers’
control? According to our survey,
the answer is a resounding “yes!”
Respondents attribute deal failure to
different commercial and deal term
expectations (Figure 14). In contrast,
lack of robust clinical data to establish
proof of concept actually represents
a very small percentage among the
reported rationales for deal failure.
Looking at the reasons for deal failure
in the aggregate, by a large margin
the reasons for failure are factors
within a negotiator’s control. Differing
opinion of the commercial potential
of the asset and unreasonable term
expectations can be mitigated by
presenting credible, fact-based
forecasts or employing creative
deal structures such as earn-outs or
contingent value rights.
The major constraint on the process
of evaluating and making deals is the
buyer’s own capacity to evaluate deals.
To improve the in-licensing/acquisition
process, 33% of buyers believe that
improved bandwidth in dealmaking
is needed (Figure 15). While 28% of
buyers desire better assets for review,
dealmaking more often falls short due
to internal operations, diligence, and
partnership management. Companies
may want to consider externalizing
one or more of those activities to
streamline the process.
Strategic Implications
Based on the responses to the 2015
Dealmakers Intentions survey, we see
several implications for dealmakers:
•The record pace of acquisitions
and financing has continued into
2015, but there are early signals
of a potential slowdown in traditional
licensing.
–Acquisitions with earn-outs can
substitute for traditional licensing.
–Greater financing options are
available to emerging companies
who can reasonably “go it alone.”
–The collapsed discount rate
gap to historic norms has
Source: Campbell Alliance Dealmakers' Intentions 2015. Total respondents=105. Demand Index is calculated by subtracting the share of respondents with at least one asset to out-license from the share
respondents likely or very likely to in-license for at least one therapeutic area for at least one stage of development.
-9Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
10
11
removed a temporary bridge
between optimistic sellers and
pessimistic buyers.
•A seller’s market exists for
phase III CNS, preclinical and
phase III oncology, and phase III
women’s health.
•A buyer’s market exists for preclinical
respiratory, women’s health, and
ophthalmology.
•Hot areas/technologies of interest
are largely linked with oncology as
buyer demand within the therapeutic
area remains high.
–High-interest oncology-related
technology includes cancer
vaccines, antibody drug conjugates,
personalized medicine, and
immuno-oncology.
–Innovation has gravitated toward
oncology where pricing and access
risk is relatively low. Trial costs and
length similarly are low versus
other therapeutic areas.
•The discount rate gap between
buyers and sellers indicates a
potential flattening or slowdown
in partnering relative to M&A
and financing.
•The conversion rate for deals has
steadily increased over the past few
years, which is a reflection of the
robust dealmaking environment.
This dealmaking environment has
created bandwidth constraints in
the evaluation of deals for buyers.
The message for sellers is that the
market continues to create options
for value creation. Sellers are able
to retain assets longer as a result
Dealmakers’ Intentions 2015
Campbell Alliance: Strategy. Results.
Dealmakers’ Intentions 2015
Success Rates for Licensing/Acquisitions
Dealmakers’ Intentions 2015
“Hot” Areas
After a steep decline from 2012 to 2013 in the cumulative conversion rate in dealmaking, the conversion rate has
steadily increased, consistent with the greater activity in successful deals over the last two years.
Figure 13
Cancer vaccines have replaced orphan products as the “hottest” area for licensing in 2015, and immuno-oncology
Figure has
11 emerged as the most significant new area of interest in 2015.
“Hot” Areas for Licensing in 2015
STAGE
CONVERSION
RATES
Share of Respondents
18%
16%
~4,300 Opportunities Considered in 2014
Areas that have emerged most
notably over the last one year
14%
12%
25%
Confidential Disclosure Agreement (CDA)
2014 Cumulative
Deal Conversion
Rate
10%
8%
28%
Binding Offer
6%
5.1%
4%
73%
Completed Transaction
2%
0%
Dealmakers’ Intentions 2015
Buyers’ vs. Sellers’ Discount Rates
Dealmakers’
Intentions
Historical Cumulative
Conversion Rate 2015
Why Deals Fail
The discount rate gap between Buyers and Sellers has widened slightly in 2015 creating a more ‘deal-friendly’
environment.
Dealmakers’ Intentions 2015
Buyers’
20% vs. Sellers’ Discount Rates
environment.
14%
12%
15%
13%
20% 10%
18% 8%
12% 2%
10% 0%
8%
Median Discount Rates
10%
15%
13%
15%
13%
12%
10%
2013
2012
Sellers
Buyers
15%
13%
2014
6%
12%
2015
Sellers
Buyers
The
4% discount rate gap between in-licensers and out-licensers has increased to 3% in 2015 indicating a more favorable
environment
for deals
2%
0%If in-licensers and out-licensers have similar commercial expectations for an assets a wide gap in discount rate helps in creating a zone
of potential agreement for the deal
2012rate gap catalyzed unprecedented
2013
2014
2015despite a return to historical
 The 2013 discount
dealmaking activity
in 2014, which has not abated
norms
The discount rate gap between in-licensers and out-licensers has increased to 3% in 2015 indicating a more favorable
Source: Campbell Alliance Dealmakers' Intentions 2015. N=63 for Buyers.
environment
for deals
 If in-licensers and out-licensers have similar commercial expectations-11for an assets a wide gap in discount rate helps in creating a zone
of potential agreement for the deal Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
 The 2013 discount rate gap catalyzed unprecedented dealmaking activity in 2014, which has not abated despite a return to historical
norms
Source: Campbell Alliance Dealmakers' Intentions 2015. N=63 for Buyers.
12
-11Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
5.1%
2011
2012
2013
2014
Overall Reason for Deal Failures
Figure 14
15%
18%
16% 6%
14% 4%
has widened slightly in 2015 creating a more ‘deal-friendly’
15%
3.5%
Respondents cite difference in opinion on commercial value
-12- and term expectations as primary reasons for deal
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
failure. However, they don’t believe
existing partnering processes need major overhaul.
Median Discount Rates
-10Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
18%
1.3%
Source: Campbell Alliance Dealmakers’ Intentions 2015. Includes answers from 82 respondents who answered this question.
FDA Approval of Phase I Drugs based on “Clinical Development Success Rates fFor Investigational Drugs”; Hay, Thomas, Craighead, Economides & Rosenthal; Nature Biotech January 2014.
Source: Campbell Alliance Dealmakers' Intentions 2015. Includes answers from 92 respondents. Respondents could select multiple areas.
The12
discount
rate gap between Buyers and18%
Sellers
16%
Figure
7.8%
Differing
Opinions of
Differing opinions
of commercial
Commercial Potential
potential
38%
29%
Unreasonableterm
Termexpectations
Expectations
Unreasonable
Lack of robust
clinical
data Clinical
to establish
Lack
of Robust
Data
toproof
Establish
Proof of Concept
of concept
13%
Lack
Lackof
oftrust
Trust
7%
Shift
Shiftinincorporate
Corporatepolicies
Policies
7%
Legal issues (e.g., IP Legal
or pending
Issues
(e.g., IP or
Pending Litigation)
litigation)
New
New clinical
Clinicaldata
Data
4%
2%
Source: Campbell Alliance Dealmakers' Intentions 2015. Includes answers from 82 respondents who answered this question.
-21Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
13
74% Fail for
Factors Under
Negotiators’
Control
Dealmakers’ Intentions 2015
Campbell Alliance: Strategy. Results.
of the better financing environment,
the emergence of “new” buyers, and
options to commercialize through
specialty indications and contract
commercial services.
want, buyers may need to position
themselves more aggressively through
M&A with earn-outs or outright
acquisitions versus licensing. The
window of robust financing (cheap
debt and strong stock performance),
Buyers face a tough dealmaking
tax inversions, and pricing power may
environment marked by increased
close over time. This closing window
competition for assets and the need
will drive dealmaking and valuations
Dealmakers’
2015
to negotiate
with sellersIntentions
who have
over the short-term. Thus, buyers
options.
To
access
the
assets
they
should look to manage
the signal-toImproving the In-Licensing/Acquisition
Process
noise ratio related to their dealmaking
bandwidth constraints and be careful
with their capital.
For those engaged in buying or
selling assets throughout the rest of
2015, the environment will have its
challenges but will also be one of the
most exciting in recent memory.
Improving the In-Licensing/Acquisition Process: Key Opportunities
More effective communication of my
company’s value as a partner
25%
More effective negotiation
25%
Better internal
communications
Respondent Characteristics
Headquarters
Improved bandwidth
33%
12%
100%
Do more of the same things my
company does now
Deeper technical understanding
of target assets
More accurate forecasting
Improved pricing and market
access review
Corporate Role
Licensing Role
In-Licensing/
Acquisitions
Europe
28%
Better assets to review
More effective asset screens
63%
25%
50%
Asset targeting to more preferable
classes
25%
Increased deal flow
25%
13%
40%
Executive
(CEO, COO)
Senior Vice
President
and Above
Sellers are not the only ones
who are resource constrained.
60%
Improved diligence
Title
Asia (except Japan)
Japan
80%
14%
33%
Characteristics of 2015 Respondents
6%
67%
Development of SOPs
Survey respondents are divided between out-licensing and in-licensing. This includes those who report they exclusively
in-license
(10%) and those
who exclusively
out-license (30%). The remaining 60% report they both in-license and outDealmakers’
Intentions
2015
license.
sides
Figure
16 of the dealmaking activity.
Access to capital
7%
Improved process
consistency
Survey respondents are mostly senior company officers. The majority (62%) report their title as Senior Vice President
or above, and another 17% report their level as Vice President. The remaining survey respondents are Director level
(8%), Manager level (4%), and Other (10%). (See Figure 16.)
We collected responses from 105 senior decision makers, primarily from the United States, who participate on both
50%
Better rapport building between the
target partner and my company
We surveyed 105 licensing professionals in the first quarter of 2015.
Survey respondents are divided among Business Development (22%), C-suite excluding CFOs (55%), and Corporate
Development (22%). The remaining respondents are in Finance roles (1%).
33% of Buyers believe that improved bandwidth in dealmaking is needed. While 28% of Buyers desire better assets
Figurefor
15 review, dealmaking more often falls short due to internal operations, diligence and partnership management.
Improved partnership
management
Survey Respondents
Both
United
States
Corporate
Development
Vice
President
20%
Director
Business
Development
Manager
Source: Campbell Alliance Dealmakers' Intentions 2015. Includes answers from 82 respondents who answered this question.
-22Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
0%
Other
Out-Licensing /
Divestitures
Finance
Source: Campbell Alliance Dealmakers' Intentions 2015.
-16Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Reference: 1. The Wall Street Journal. Pfizer Inc. Might be Merging with GlaxoSmithKline. Available at https://www.wallstreet.org/2015/05/pfizer-inc-nysepfe-might-be-merging-withglaxosmithkline-nysegsk/1412944.html. Accessed 5/28/2015.
14
15
Dealmakers’ Intentions 2015
Contacts
Neel Patel
Vice President
Campbell Alliance
Jeff Stewart
Director
Campbell Alliance
Carlos Loya
Engagement Manager
Campbell Alliance
The Campbell Alliance Dealmakers’
Intentions Study is the only forwardlooking measure of dealmaking in the
pharmaceutical and biotech industry.
Scan here to download an electronic
version of this white paper or visit
•Download a free summary of this
year’s survey results
inVentivHealth.com/CampbellAlliance
/Dealmakers
•Request an on-site presentation
of the full report to your team
Dealmakers’ Intentions is a
work produced by the Corporate
Development Practice at
Campbell Alliance.
Campbell Alliance: Strategy. Results.
inVentivHealth.com/CampbellAlliance
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Telephone: 919.844.7100 | Fax: 646.805.0351 | Toll Free: 888.297.2001
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