2014 a good year for licensing transactions, says MoFo

Law firm Morrison & Foerster (MoFo) has released its latest BioMeter report, recapping upfront licensing transactions among life sciences companies for all of 2014. The report confirms strong industry momentum, which is said to be continuing into the current year.

The average licensing payment tracked by BioMeter for all of 2014 was $58.7 million, a sharp increase from 2013’s average of $33.9 million and the highest median value since the launch of the BioMeter Index in 2006. This increase was aided by a $1 billion payment from Merck to Bayer for a family of soluble guanylate cyclase modulators; but even without that deal, the average payment across all stages of product development would still be at its highest since 2006 at $48.7 million.

Average payments increased at all development phases, with valuations rising as products advanced towards market approval:

• Preclinical and discovery transactions showed a record BioMeter value of $28 million, compared to $22 million in 2013
• Phase 1 product averaged $45 million compared to $40 million in 2013
• Phase 2 payments jumped to $83.5 million compared to $47 million in 2013
• Phase 3 products increased to $101 million from only $46 million in 2013
• FDA-approved products increased to $213 million, compared to merely $51 million in 2013

BioMeter credits these increases to the continued strength of the IPO market and access to capital allowing asset-rich biotech sellers to drive higher valuations for their innovations. Companies are less willing to accept modest upfront payments when the opportunity to raise capital on their own - and retain all the rights to their product - exists. It is also suggested that the drug and medical device industries are looking to accelerate growth more through acquisition than traditional R&D spending.

Demand for innovative products has also held steady. Total transaction volume has remained stable since 2012, with patent expirations, threats of generic competition, continuing unmet medical needs and higher margins on novel therapies driving demand for innovative therapies.

The weak spot in the year was approved products, according to BioMeter. While the average BioMeter value for market-ready products increased to $212.6 million, there were only six upfront payment transactions in this category, dominated by the $1 billion Merck/Bayer payment. This suggests a limited market for approved products.

The BioMeter report can be found at the MoFo website.