Deals of the Decades

One of the most unusual assignments I encountered over my career came from Jurgen Drews in his capacity as president of global R&D at Roche.  “I know what I’m seeing” said Dr. Drews, “but what am I missing?”

In the spirit of that assignment, I’ve taken one last look at several decades of biopharma alliances to identify five seminal deals that somehow haven’t yet been highlighted in these “best practices” articles.  I’ll call these Deals of the Decades – one biopharma alliance from each decade, spanning the 1980s to our current half-decade.

Protein Design Labs (later PDL Biopharma) partnered with Roche in 1989 to humanize the mouse anti-Tac antibody targeting the IL-2 receptor to treat autoimmune diseases.  No monoclonal antibody product had been approved by the FDA since J&J’s OKT3 in 1986, as the HAMA response (human anti-mouse antibodies) was found to occur in one-third to one-half of patients treated with mouse antibodies. 

Chimeric antibodies (labeled “xi” in the generic name), such as ReoPro, were the first step forward, but PDL went much further – replacing all but the complementarity-determining regions (CDRs) with human counterparts.  PDL succeeded, first with the development of Zenapax, which was FDA approved in 1997 for the prevention of acute rejection of kidney transplants, then with broad licensing of its Queen patent for humanization of mouse monoclonals (labeled “zu”) to leading developers of monoclonals (including Alexion, Genentech, MedImmune, and Seattle Genetics), and then through multiple restated and expanded agreements with Roche (and later Biogen) for use of daclizumab for treatment of asthma, chronic transplant therapy and multiple sclerosis.  Until the arrival of fully human monoclonals (labeled “u”), PDL provided a lifeline to one of the two foundational technologies of the biotech industry.

During the 1990s, Millennium Pharmaceuticals (MPI) strung together a series of alliances with top tier pharma, including Roche (1994), Astra (1995), Lilly (1995, 1996 & 1997), Wyeth (1996), and Bayer (1998).  While the first five deals were about genes as drug targets for biologics, in the Wyeth and especially the Bayer alliance MPI turned its attention to the validation of druggable targets to discover small molecule leads.  Until this time, small molecule drug discovery had been the exclusive preserve of top pharma.  Once MPI opened these floodgates, however, dozens of biopharma alliances rushed through, offering multiple approaches to target validation, screening and synthetic compound generation aimed at developing small molecule drugs.  Over time, deals involving small molecule drugs became the most frequently signed, and amended, biopharma alliances.

The economics of biopharma alliances soared in the 2000-09 period.  Upfront payments grew 10-fold; development & regulatory (Dev/Reg) milestones increased 3-6 fold; and sales milestones rose 3-fold.  These increases spanned agreements from discovery stage through Phase III at signing – but it’s hard to deny that the ImClone deal for Erbitux was the founder of this feast.  When Bristol-Myers Squibb (BMS) agreed to purchase 20% of ImClone’s equity for $1 billion (at $70/share, a 40% premium), plus $200 million upfront and $800 million in Dev/Reg milestones, the implicit valuation of biopharma compounds (& alliances) jumped by roughly an order of magnitude.

Yes, the ImClone-BMS alliance was a tumultuous journey, but when Lilly outbid BMS in 2008 to acquire ImClone outright for the right to co-promote Erbitux, Lilly paid $70/share, confirming that the valuation posited by BMS wasn’t an outlier after all.

RNAi is the technology of the 2010-19 decade that demonstrates most clearly that innovation still resides within the biopharma genome.  That Regeneron was willing to co-develop with Alnylam a new class of drugs, RNAi therapeutics, with deal economics competitive with terms offered by top pharma shows that new treatment modalities and emergent commercialization partners have substantially transformed the biopharma industry from the comfortable oligarchy of the 1980s and 1990s.

Although the 2020s aren’t yet half spent, I’ll climb out on a limb to predict that antibody-drug conjugates (ADCs), including bi-specifics and tri-specifics, will take top honors as the most successful drug treatment modality of the current decade.  Whether via alliance, such as Genmab’s with AbbVie, which was the first of the mega-ADC deals of this decade, or acquisitions such as Immunomedics (by Gilead for $21 billion in 2020) or Seagen (by Pfizer for $43 billion in 2023), ADCs have demonstrated a breadth and depth of usage that may soon rival the success of monoclonals after they were rejuvenated by PDL in the late 1980s.

I’ve now reached the end of my list of deal sections that seem worthy of a “best practices” article.  It’s been satisfying to sift through the issues that have helped define, and refine, the biopharma alliance experience.  Thanks for coming along for the ride!

You can see the introduction to this series of articles about best practices in biopharma licensing, or go directly to links to previously posted articles here.