Specialty Pharma: Eating Big Pharma's Lunch, Not Just its Leftovers?

Since last covered in this space (see "In-Licensing in Specialty Pharma, Revisited," IN VIVO, Nov. 2004 Also see "In-Licensing in Specialty Pharma, Revisited" - In Vivo, 1 November, 2004.), the popularity of the in-licensing focused specialty pharma business model has continued to grow—particularly among venture capital investors, who have grown weary of the vagaries of drug discovery. With eyes on the sales- and acquisition-fueled growth of such specialty pharma successes as cancer specialist MGI Pharma Inc. —whose sales grew 43% in 2005—and Cephalon Inc. —whose 19% growth in 2005 put it over the $1 billion mark for the first time—VCs are largely eschewing platform and discovery-stage companies in favor of those that, while not necessarily staying out of the discovery game altogether (Cephalon and MGI, after all, started as drug discoverers), are focused on market entry, be it via in-licensing, acquisition, or otherwise.

In Exhibit 1, we've broken out in-licensing deal counts and dollar volume by specialty pharma since 2001, splitting the deals by whether the product acquired was already marketed, or in...