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Dealmakers Intention Survey 2015

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1
Campbell Alliance: Strategy. Results.
By Neel Patel, Jeff Stewart, and Carlos Loya
DEALMAKERS’ INTENTIONS 2015
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, nancing, and up-front licensing payments. So,
what’s next?
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 ndings 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 forward-
looking and capturing expectations for deal activity, supply
and demand for assets at different stages of development,
and approaches to valuation.
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
(63%), but in 2014 M&A was less than half (40%) of the
total, with nancing and partnering each accounting for
about half of the remaining dealmaking. In short, the
2014 dealmaking rush represented an engine ring on
all cylinders with participation spread across a wider
group of companies.
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 ve 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.
2 3
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.
• Buyers are almost three times more
interested in acquiring phase III
assets than sellers are in parting with
these late-stage assets.
• Sellers have a more optimistic
outlook than buyers regarding the
extent of dealmaking in 2015, and
both groups expect the greatest
increase to be in acquisitions with
earn-outs.
• 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.
• Phase III assets in CNS (excluding
pain) and women’s health have
witnessed a signicant increase in
buyers’ interest.
• Despite the large number of assets
in pre-clinical oncology, demand
exceeds supply in that segment.
• Immuno-oncology has emerged as the
most signicant new area of interest
in 2015, and cancer vaccines have
replaced orphan products as the
“hottest” area for licensing in 2015.
• 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.
Summary Results From Dealmakers’ Intentions 2015
Figure 1
Campbell Alliance: Strategy. Results.
Expectations Positive for 2015
Based on the rst 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 nancing. In 2014, M&A activity was driven by small and mid-cap
biopharma buyers ush with cash. Financing to small-cap (less than $1 billion) and private biopharma companies saw a
signicant increase in 2014 (Figure 1), driven largely by a robust initial public offering (IPO) market.
The momentum has continued through the rst quarter of this year.
It’s not just the availability of cash that’s driving M&A. A number of other factors may be inuencing 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 ve or six years. Consolidation
on the manufacturer side can help provide the portfolio basket needed to level the negotiation playing eld 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, exemplied in Pzer’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.
-3-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Dealmakers’ Intentions 2015
Dealmaking Trends
2014 was an unprecedented year in deal making within the life sciences industry. Based on activity from January to
May 2015, this year is on the potential path to surpass the record
Source: Source: BCIQ DealMakers Database, Accessed: June 2015
0
50
100
150
200
250
2009 2010 2011 2012 2013 2014 2015
(Jan to May)
Value of Deals (US$b)
Financing M&A Partnering
M&A, Partnering and Financing in Life Sciences
-3-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Dealmakers’ Intentions 2015
Dealmaking Trends
2014 was an unprecedented year in deal making within the life sciences industry. Based on activity from January to
May 2015, this year is on the potential path to surpass the record
Source: Source: BCIQ DealMakers Database, Accessed: June 2015
0
50
100
150
200
250
2009 2010 2011 2012 2013 2014 2015
(Jan to May)
Value of Deals (US$b)
Financing M&A Partnering
M&A, Partnering and Financing in Life Sciences
4 5
Dealmakers’ Intentions 2015 Campbell Alliance: Strategy. Results.
Figure 3
-1- -1- Copyright © 2015. All Rights Reserved.
Confidential Property of Campbell Alliance Group, Inc.
Figure 2
Stock Performance of Top 10 M&A (2012-2015YTD)
Source: BCIQ DealMakers Database, Accessed: June 2015
$1
$2
$3
1/3/2012 1/3/2013 1/3/2014 1/3/2015
Performance of $1 invested 2012
CA M&A Index ^DRG Index
M&A Top 10 (Total Deal Value, 2012-2015)
Company Ticker Total Deal Value ($M)
Actavis plc ACT $ 95,022
Valeant Pharmaceuticals
International Inc. VRX $ 28,488
Johnson & Johnson JNJ $ 22,450
Thermo Fisher Scientific Inc. TMO $ 14,525
Merck & Co. Inc. MRK $ 13,575
Amgen Inc. AMGN $ 13,030
Roche RHHBY $ 12,939
Gilead Sciences Inc. GILD $ 11,775
Shire plc SHPG $ 11,506
Bristol-Myers Squibb Co. BMY $ 11,475
64%
2012 2013 2014 2015
Figure 2
-2- -2- Copyright © 2015. All Rights Reserved.
Confidential Property of Campbell Alliance Group, Inc.
Rebates as Percentage of Gross US Pharma Sales
Source: Credit Suisse US Rebate Analysis, 2014
0%
10%
20%
30%
40%
50%
60%
2007 2008 2009 2010 2011 2012 2013
Discount From Gross Sales
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
21.7%
19.7%
24.8%
26.2% 28.2%
31.9%
30.2%
6 7
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.
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.
Comparing the therapeutic areas of
interest for buyers with the assets
available from sellers (Figure 7) helps
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 specic we see a
relative glut of assets.
As we do each year, we report here
on the specic combinations of
therapeutic areas and stages
of development with the highest
supply and demand imbalances
(Figures 8-10).
This year, the highest areas of supply/
demand imbalance are:
• Phase III CNS excluding pain
(seller’s market)
• Preclinical oncology (seller’s
market)
• Phase III oncology (seller’s market)
• Phase III women’s health (seller’s
market)
• Phase III pain (seller’s market)
• Preclinical respiratory (buyer’s
market)
• Preclinical women’s health (buyer’s
market)
• Preclinical ophthalmology (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 signicant 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
Dealmakers’ Intentions 2015
Figure 4
FPO
availability since the inception of our survey, though there
has been a re-emergence of interest in phase III oncology
assets as well.
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.
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.
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.
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 signicant new area of interest
in 2015 (Figure 11).
A number of recent events are likely driving interest in
immuno-oncology, including high-prole 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—
Campbell Alliance: Strategy. Results.
Figure 5
-5-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Dealmakers’ Intentions 2015
Expectations by Deal Type
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.
Expectations by Deal Type “Buyers” vs. “Sellers”
Source: Campbell Alliance Dealmakers' Intentions 2015. N=63 for Buyers and N=76 for Sellers.
Fewer
acquisitions?
9%
7%
20%
16%
5%
4%
54%
52%
37%
33%
44%
39%
37%
41%
43%
51%
51%
57%
Buyers
Sellers
Buyers
Sellers
Buyers
Sellers
Fewer Deals About the Same More Deals
Traditional
Licensing/Partnership
Outright Acquisition
Acquisition With
Earn-out
-6-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Dealmakers’ Intentions 2015
Assets Across Different Stages of Development
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.
Source: Campbell Alliance Dealmakers' Intentions 2015. N=63 for Buyers and N=76 for Sellers.
Buyers’ Interest vs. Sellers’ Asset Availability
Sellers, 46%
Sellers, 19% Sellers, 23% Sellers, 13%
Buyers, 34%
Buyers, 14% Buyers, 16%
Buyers, 36%
Preclinical Phase I Phase II Phase III
8 9
Dealmakers’ Intentions 2015
Figure 7
Figure 6
FPO
FPO
Campbell Alliance: Strategy. Results.
a developer of chimeric antigen receptor and high-afnity
T cell receptor technologies—had major success with its
initial public offering late last year.
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
infrastructure needed for launch, and the relatively favorable
payer environment. Considerable pricing power exists
in orphan or ultra-rare indications, and with the macro
environment of payer pressure increasing, companies are
expressing growing interest in these markets.
Discount Rates
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 ows. Conversely, a high seller
discount rate can deate 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 signicantly more in the buyer’s hands than in the
seller’s hands, as the buyer’s cost of capital is less.
Figure 8
-7-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Dealmakers’ Intentions 2015
Expectations for Deals by Therapeutic Area
Buyers 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.
Source: Campbell Alliance Dealmakers' Intentions 2015. N=63 for Buyers and N=76 for Sellers.
31%
15%
7%
6%
2%
8%
3%
4%
2%
4%
6%
2%
3% 3% 3%
Oncology CNS (Excluding Pain) Cardiovascular Immunology
Metabolics Pain Dermatology Gastointestinal
Antiviral (Non-Vaccines) Respiratory Women's Health Antibiotic
Vaccines Other Ophthalmology
29%
10%
7%
7%
2%
3%
3%
6%
6%
6%
4%
2%
3%
6%
6%
Therapeutic
Areas of Interest
for Buyers
Therapeutic
Areas Available
From Sellers
Demand
Surplus
Sellers’ Market
Supply
Surplus
Buyers’ Market
This is a bit hard to read
without the TA next to the
numbers.
Also, you have “demand
surplus” written for both
seller’s market and buyer’s
market… should be ‘Supply
Surplus’ for buyers market
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.
-0.06
-0.04
-0.02
0.00
0.02
0.04
0.06
0.08
Relative Demand
Sellers’ Market Buyers’ Market
-17-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Dealmakers’ Intentions 2015
Therapeutic Areas Where Buyers Expect to Play
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
Source: Campbell Alliance Dealmakers' Intentions 2015. Results from those respondents who indicated they are exclusively Buyers and both Buyers and Sellers (n=61).
0%
10%
20%
30%
40%
50%
60%
70%
Share of Respondents
Preclinical Phase I Phase II Phase III
Areas with a notable change vs. previous year(s)
10 11
Dealmakers’ Intentions 2015
Figure 10
Figure 9
FPO
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 at to down while M&A and nancing
will be sharply up.
Success Rates for Licensing/
Acquisitions
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 nancing 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 nancing options are
available to emerging companies
who can reasonably “go it alone.”
The collapsed discount rate
gap to historic norms has
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 attening or slowdown
in partnering relative to M&A
and nancing.
The conversion rate for deals has
steadily increased over the past few
years, which is a reection 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
Campbell Alliance: Strategy. Results.
-9-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Dealmakers’ Intentions 2015
Campbell Biopharma Asset Demand Index
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
supply of assets.
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.
A Demand Index Identifies the Areas of the Highest Mismatch Between Supply and Demand
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
Relative Demand
Preclinical Phase I Phase II Phase III
Buyers’ Market
Sellers’ Market
Demand
Surplus
Areas with a notable change vs. previous year(s)
Supply
Surplus
-18-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Assets Available Therapeutics Areas Where My Company is Currently Seeking to Out-License
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.
Preclinical Ophthalmology
Source: Campbell Alliance Dealmakers' Intentions 2015. Results are expressed as share of respondents having at least one asset currently avai lable for out-license (n=76).
0%
10%
20%
30%
40%
50%
60%
70%
Share of Respondents
Preclinical Phase I Phase II Phase III
Areas with a notable change vs. previous year(s)
12 13
-12-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
25%
28%
73%
Dealmakers’ Intentions 2015
Success Rates for Licensing/Acquisitions
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.
Source: Campbell Alliance Dealmakers’ Intentions 2015. Includes answers from 82 respondents who answered this question.
FDA Approval of Phase I Drugs based on “Cli nical Development Success Rates fFor Investigational Drugs”; Hay, Thomas, Craighead, Economides & Rosenthal; Nature Biotech January 2014.
Confidential Disclosure Agreement (CDA)
Binding Offer
Completed Transaction
~4,300 Opportunities Considered in 2014
2011 2012 2013 2014
Historical Cumulative Conversion Rate
7.8% 1.3% 3.5% 5.1%
STAGE
CONVERSION
RATES
2014 Cumulative
Deal Conversion
Rate
5.1%
25%
28%
73%
-21-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Dealmakers’ Intentions 2015
Why Deals Fail
Respondents cite difference in opinion on commercial value and term expectations as primary reasons for deal
failure. However, they don’t believe existing partnering processes need major overhaul.
Overall Reason for Deal Failures
Source: Campbell Alliance Dealmakers' Intentions 2015. Includes answers from 82 respondents who answered this question.
38%
29%
13%
7%
7%
4%
2%
Differing opinions of commercial
potential
Unreasonable term expectations
Lack of robust clinical data to establish
proof of concept
Lack of trust
Shift in corporate policies
Legal issues (e.g., IP or pending
litigation)
New clinical data
Differing Opinions of
Commercial Potential
Unreasonable Term Expectations
Lack of Robust Clinical Data
to Establish Proof of Concept
Lack of Trust
Shift in Corporate Policies
Legal Issues
(e.g., IP or Pending Litigation)
New Clinical Data
74% Fail for
Factors Under
Negotiators’
Control
Dealmakers’ Intentions 2015
Figure 12
Figure 11
Campbell Alliance: Strategy. Results.
Figure 14
Figure 13
-10-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Share of Respondents
Dealmakers’ Intentions 2015
“Hot” Areas
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.
“Hot” Areas for Licensing in 2015
Areas that have emerged most
notably over the last one year
Source: Campbell Alliance Dealmakers' Intentions 2015. Includes answers from 92 respondents. Respondents could select multiple areas.
-11-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Median Discount Rates
Dealmakers’ Intentions 2015
Buyers’ vs. Sellers’ Discount Rates
The discount rate gap between Buyers and Sellers has widened slightly in 2015 creating a more ‘deal-friendly’
environment.
The discount rate gap between in-licensers and out-licensers has increased to 3% in 2015 indicating a more favorable
environment for deals
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
The 2013 discount rate gap catalyzed unprecedented dealmaking activity in 2014, which has not abated despite a return to historical
norms
15%
18%
15% 15%
13%
10%
13% 12%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2012 2013 2014 2015
Sellers
Buyers
Source: Campbell Alliance Dealmakers' Intentions 2015. N=63 for Buyers.
-11-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Median Discount Rates
Dealmakers’ Intentions 2015
Buyers’ vs. Sellers’ Discount Rates
The discount rate gap between Buyers and Sellers has widened slightly in 2015 creating a more ‘deal-friendly’
environment.
The discount rate gap between in-licensers and out-licensers has increased to 3% in 2015 indicating a more favorable
environment for deals
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
The 2013 discount rate gap catalyzed unprecedented dealmaking activity in 2014, which has not abated despite a return to historical
norms
15%
18%
15% 15%
13%
10%
13% 12%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2012 2013 2014 2015
Sellers
Buyers
Source: Campbell Alliance Dealmakers' Intentions 2015. N=63 for Buyers.
14 15
-22-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Dealmakers’ Intentions 2015
Improving the In-Licensing/Acquisition Process
33% of Buyers believe that improved bandwidth in dealmaking is needed. While 28% of Buyers desire better assets
for review, dealmaking more often falls short due to internal operations, diligence and partnership management.
33%
28%
14%
12%
7% 6%
Improving the In-Licensing/Acquisition Process: Key Opportunities
Source: Campbell Alliance Dealmakers' Intentions 2015. Includes answers from 82 respondents who answered this question.
Access to capital
Do more of the same things my
company does now
Sellers are not the only ones
who are resource constrained.
Improved bandwidth
50%
25%
25%
More effective asset screens
Asset targeting to more preferable
classes
Increased deal flow
Better assets to review
63%
25%
13%
Deeper technical understanding
of target assets
More accurate forecasting
Improved pricing and market
access review
Improved diligence
67%
33%
Better internal
communications
Development of SOPs
Improved process
consistency
50%
25%
25%
More effective communication of my
company’s value as a partner
Better rapport building between the
target partner and my company
More effective negotiation
Improved partnership
management
of the better nancing environment,
the emergence of “new” buyers, and
options to commercialize through
specialty indications and contract
commercial services.
Buyers face a tough dealmaking
environment marked by increased
competition for assets and the need
to negotiate with sellers who have
options. To access the assets they
want, buyers may need to position
themselves more aggressively through
M&A with earn-outs or outright
acquisitions versus licensing. The
window of robust nancing (cheap
debt and strong stock performance),
tax inversions, and pricing power may
close over time. This closing window
will drive dealmaking and valuations
over the short-term. Thus, buyers
should look to manage the signal-to-
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.
Dealmakers’ Intentions 2015
Figure 15
Campbell Alliance: Strategy. Results.
We surveyed 105 licensing professionals in the rst quarter of 2015.
Survey respondents are mostly senior company ofcers. 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.)
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%).
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 out-
license.
Survey Respondents
Reference: 1. The Wall Street Journal. Pzer Inc. Might be Merging with GlaxoSmithKline. Available at https://www.wallstreet.org/2015/05/pzer-inc-nysepfe-might-be-merging-with-
glaxosmithkline-nysegsk/1412944.html. Accessed 5/28/2015.
Figure 16
-16-
Copyright © 2015. All Rights Reserved. Confidential Property of Campbell Alliance Group, Inc.
Respondent Characteristics
Dealmakers’ Intentions 2015
Characteristics of 2015 Respondents
We collected responses from 105 senior decision makers, primarily from the United States, who participate on both
sides of the dealmaking activity.
0%
20%
40%
60%
80%
100%
Headquarters Corporate Role Licensing Role Title
United
States
Europe
Japan
Asia (except Japan)
Senior Vice
President
and Above
Vice
President
Director
Manager
Other
Finance
Business
Development
Corporate
Development
Executive
(CEO, COO)
Both
Out-Licensing /
Divestitures
In-Licensing/
Acquisitions
Source: Campbell Alliance Dealmakers' Intentions 2015.
16
Dealmakers’ Intentions 2015
Neel Patel
Vice President
Campbell Alliance
The Campbell Alliance Dealmakers’
Intentions Study is the only forward-
looking measure of dealmaking in the
pharmaceutical and biotech industry.
Dealmakers’ Intentions is a
work produced by the Corporate
Development Practice at
Campbell Alliance.
Scan here to download an electronic
version of this white paper or visit
inVentivHealth.com/CampbellAlliance
/Dealmakers
Download a free summary of this
year’s survey results
Request an on-site presentation
of the full report to your team
Carlos Loya
Engagement Manager
Campbell Alliance
Jeff Stewart
Director
Campbell Alliance
Contacts
Campbell Alliance: Strategy. Results.
inVentivHealth.com/CampbellAlliance
Headquarters Address
370 Lexington Avenue, Suite 1100, New York, NY 10017
Telephone: 919.844.7100 | Fax: 646.805.0351 | Toll Free: 888.297.2001
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