The Biotechnology Innovation Organization (BIO) revealed that at its recent BIO International Convention (BIO 2017) in San Diego a staggering 41,400 partnering meetings were held, which represented a 16 percent increase over the BIO 2016 numbers. The BIO data reveal that companies involved in the sector rely on collaborations in order to succeed. The costs of drug development simply do not allow a company to "go it alone" anymore.

The outcomes to the BIO partnering meetings will become apparent in future months and will certainly add to the growing number of deals that we are witnessing being struck every year. Evidence the fact that it has been an extremely active first half of the year with a river of ink flowing on biopharma collaborations signed during that period.

BioWorld has, in fact, recorded an almost 54 percent uptick in deal volume in the first half of the year compared to the number recorded at June 30 last year. (See Biopharma Deals: Jan. – June 2015-17, below.)

Comparing quarters, the number of deals that were signed during the first and second quarters of 2017 remained about the same. (See Biopharma Deals: 2017, below.)

Declining values

Although deal volume was way up, the total of the deal values for all those collaborations that revealed financial terms was 21 percent lower than the $41 billion registered in the first half of 2016. The drop can be attributed simply to the fact that there was a greater number of multibillion-dollar value partnerships struck last year, including the Allergan plc $3.3 billion collaboration in Alzheimer's disease and other neurological disorders, with GPCR specialist Heptares Therapeutics. The agreement gave Allergan exclusive rights to a number of selective muscarinic receptor agonists discovered by Heptares, who received $125 million up front, with development milestones of up to $665 million payable up to the launch of the first of three products, followed by $2.5 billion in sales milestones. The Welwyn Garden City, U.K.-based company will also be in line for double-digit royalties on sales. (See BioWorld Today, April 8, 2016.)

Xencor Inc. also entered a deal with Novartis AG that could be worth as much as $2.4 billion-plus, with $150 million up front, and the rest being delivered as potential milestone payments. The arrangement sees the companies develop and commercialize Xmab-14045 for acute myeloid leukemia, and Xmab-13676 for B-cell malignancies. Novartis also gets global rights to Xencor's bispecific technology to develop four more targets of its choosing. (See BioWorld Today, June 29, 2016.)

The first half of 2017, however, has seen some significant bio-dollar deals inked. For example, Pieris Pharmaceuticals Inc. signed an alliance with Astrazeneca plc under which it will receive $57.5 million in up-front and near-term milestone payments and up to $2.1 billion more in development milestones and commercial payments, as well as tiered royalties on product sales. (See BioWorld Today, May 4, 2017.)

The lead asset in the agreement is PRS-060, an interleukin-4 receptor alpha inhibitor in development for asthma, which is due to enter the clinic in the second half of this year. The alliance includes four other programs, and Pieris will also have U.S. co-development and co-commercialization options on two of those. Pulling the trigger on those options would alter the headline value of the deal, but either way, the company is now playing in the big league in terms of innovative approaches to respiratory disease.

Assembly Biosciences Inc.'s preclinical gastrointestinal (GI) microbiome programs and additional GI programs were inviting enough to a $50 million up-front payment from Allergan. Development milestones for the programs are set at up to about $630 million and commercial milestones could approach $2.15 billion for up to six different indications. The payments are tied to the successful development of two ulcerative colitis and Crohn's disease candidates, ABI-M201 and ABI-M301, respectively, as well as two additional compounds to be identified by Assembly for irritable bowel syndromes with diarrhea, constipation or a mix of both. Tiered royalties based on net sales were also included in the deal. (See BioWorld Today, Jan 11, 2017.)

Cancer focus still attracts deals

Analyzing the deals by their primary therapeutic focus, BioWorld found that approximately 183, or 30 percent, involved oncology, reflecting the continued competition for assets as companies look to strengthen technologies and pipelines in that area through creative dealmaking. (See Number of Biopharma 2017 Deals by Therapeutic Focus: Q1 to Q2, right.)

Among the dealmakers was Immatics Biotechnologies GmbH, which secured $30 million up front with more than $1 billion reserved for development, regulatory and commercial milestones from an immuno-oncology alliance with Amgen Inc. focused on developing two bispecific T-cell engager molecules that target intracellular tumor-associated peptide, or Tumap, antigens. (See BioWorld Today, Jan. 10, 2017.)

In the collaboration, Immatics will combine its Xpresident target discovery and its T-cell receptor (TCR) discovery capabilities with Amgen's expertise in developing bispecific T-cell engagers based on its Bite technology. The aim of the alliance is to develop bispecific Bite molecules comprising an affinity matured TCR and a CD3 binder, which direct a T-cell response against defined Tumaps presented in complex with a human leukocyte antigen.

That $1 billion pact contributed to the almost $10 billion in total transactional values involving deals focused on cancer therapeutics. (See Value of Biopharma 2017 Deals by Therapeutic Focus: Q1 to Q2, right.)

Although deals involving therapeutics targeting the central nervous system ranked second in deal volume, their combined transactional value was well below other indications such as infectious, cardiovascular and gastrointestinal diseases.

In terms of value, the largest CNS deal went to Bristol-Myers Squibb Co. (BMS), which licensed its BMS-986168 antibody to Biogen Inc., which will pay more than $300 million with further potential milestone payments amounting to $410 million. The company said BMS-986168 will enter a phase II Alzheimer's disease study in the near future. (See BioWorld Today, April 14, 2017.)

All quiet on the M&A front

At the present time, big biopharma companies appear to be content with working with partners rather than pulling the trigger on major acquisitions, even though those companies have more than enough cash in the bank to complete such transactions.

Novartis AG, for example, revealed 16 partnership deals in the first half of the year, including a potential $1.6 billion deal with Ionis Pharmaceuticals Inc. and its spinout, Akcea Therapeutics. (See BioWorld Today, Feb. 17, 2017.)

The transaction involves the development and commercialization of AKCEA-APO(a)-LRx and AKCEA-APOCIII-LRx, for which Basel, Switzerland-based Novartis is paying Ionis and Akcea $75 million up front and making a $100 million equity investment in Ionis.

The two therapies target a pair of different CV risk factors, APO(a) and ApoCIII, not well addressed by current treatment options.

Merck & Co. Inc. (16 partnerships signed) and Pfizer Inc. (11 partnerships) were also the most active among the big pharma companies.

At this time last year, the sector had seen eight $1 billion-plus M&A deals being struck involving biopharma companies; year to date in 2017, there have been only two: Takeda Pharmaceutical Co. Ltd.'s $5.2 billion acquisition of Cambridge, Mass.-based Ariad Pharmaceuticals Inc., and Allergan's acquisition of Lifecell Corp., a company that makes regenerative medicine products for tissue reinforcement, from privately held Acelity LP for $2.9 billion in cash.

It could be that the trigger on marquee M&A deals will be pulled when collective biopharma share price valuations drop. The exception to that is in the highly competitive immuno-oncology space, where a number of companies are looking to build a position.

Certainly for the right I-O asset money would not be a problem. According to the EY M&A Outlook and Firepower Report 2017, pharma companies have more than enough firepower to pull the trigger on both marquee and bolt-on deals. (See BioWorld Insight, Jan. 17, 2017.)

Helping catalyze M&A deal volume will be a favorable tax environment, which is expected to follow the anticipated new administration's tax reform plans.