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Up-Front Deal Economics May Not Match Drugs’ Likelihood Of Approval

In earlier development phases, most of the therapeutic classes with higher approval rates tend on average to have the larger up-front alliance payments. But in Phase III, licensees are paying top dollar for candidates in areas with the lowest likelihoods of approval.

After sharply rising since 2010, new US drug approvals, including those for synthetics and biologics, were down 31% to 27 in 2013 from 2012’s 15-year high of 39. (See[A#06140101003].) According to Informa’s BioMedTracker, a drug candidate that’s in Phase I has a just over 10% chance of getting approved someday, across all major indications. (See “Clinical Development Success Rates for Investigational Drugs

,” Nature Biotechnology, 2014; 2:40–51.) Do biopharma partnership economics reflect this likelihood of approval? An historical look back doesn’t produce...

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