The always excellent Bruce Booth wrote a good summary of the key Preclinical deals we’ve seen so far this year. The post is available here.
Some of his broader questions are especially interesting:
Are these types of deals going to replace the typical Series B round? – For certain cases, such as highly innovative science, the answer could very well be yes. After all, while Big Pharma is still hungry for Revenue (cf., Pfizer & ADHD), they’re simultaneously still looking for early-stage assets. Knowing that big VC rounds are difficult, Pharma could step into the breach and grab assets (not companies) with minimal upfronts. What this means for the VC/LP community is an open question.
Will the dearth of interesting unpartnered Phase 2-3 programs that exists today begin to shift backward in development as earlier deals are being done? – We were remarking recently that there do seem to be a lot of unpartnered Phase II & III assets. Assets which may have been partnerable only a few years ago seem to be dying on the vine because the innovators lack the cash, and the value proposition is not sufficiently compelling. So what happens then? Do the dollars flow into earlier programs because their value proposition is more compelling, even if the risk is higher due to lack of Phase I data? It’s an interesting question, and certainly one worth monitoring.
If this shift does occur, what happens to those unpartnered assets? One option we’re exploring with a few companies is the shifting of product development away from the US/EU and towards other markets, where the clinical development requirements may be a bit less onerous. Burrill has spoken about this in the past.
Also, will we finally see the emergence of a market for milestone payments like that which has emerged in the royalty space? – Absolutely. It’s a market waiting to be made. As with the monetization of Receivables, Royalties, etc., as long as there is a contract in place with dollars specified, then that contract can be monetized. It will depend on how that risk is accounted for when pricing the instrument. But it will be tremendous challenge for investors to accurately price these, especially if milestones are tied to clinical trial performance & results.