Drug delivery continues to be an increasingly important sector in the pharmaceutical industry and an area in which effective deal making is essential for survival and growth. A great proportion of small companies specialising in drug delivery systems rely upon deals for revenues, and larger pharmaceutical companies need access to their expertise and innovative technologies for the development of new products. A third category comprises drug delivery companies that have transitioned into fully integrated pharmaceutical companies. The market is attractive: the market for drugs using special delivery systems has grown from $26 B in 2000 to over $60 B in 20061 and now accounts for over one tenth of the total pharmaceutical market.

Effective deal making is particularly important in the present economic climate with western economies experiencing a signifi cant downturn compared to recent years. A marked loss of confi dence in equity markets has continued to weaken public share offerings such that they are not currently viewed as an attractive means of raising the money that is required for rapid growth of drug delivery companies. Indeed, following the burst of the technology bubble in 2001 and the subsequent drop of market indices, 2006 and 2007 showed some slow recovery. For example, NASDAQ posted 88% and 92% of the 2001 value in 2006 and 2007, respectively, but has slipped back in the fi rst 6 months of 2008 to 2005 levels. By the second half of 2008, the biotech/pharma IPO window has completely shut down and markets have dropped dramatically. The pharmaceutical and biotech sectors have a tendancy to operate in something of a bubble, and whilst not experiencing the dramatic downturns of other sectors, there has nonetheless been significant drops and the drug delivery sector appears to have been hit particularly hard. As a result there has been even more pressure on dealmakers to strike the right deals and strategic alliances to fuel growth. The rapid rise in the number and value of deals recorded in PharmaVentures' PharmaDeals® v2 Agreements Database shows the increasing reliance upon the development of strategic alliances for gaining access to innovation and the funds that are required for product development and corporate expansion.

Effective Deal Making in Drug Delivery encompasses issues that are vitally important to successful deal making within the drug delivery sector. The report begins with an assessment of the current and evolving drug delivery market, drug delivery companies and the challenges that are facing the drug delivery sector. The key driving factors that underlie the drug delivery sector are considered, including improving the therapeutic index of drugs, improving patient benefit and compliance, increasing the length of patent protection and product life cycle management. The report also reviews the business strategies that are employed for the commercialisation of drug delivery systems and an in-depth analysis addresses drug delivery alliances and their fi nancial terms.

Integral to this report is a searchable management tool, available via the PharmaDeals® web site, which comprises over 29,000 deals that occurred from May 1996 to the end of the third quarter of 2008. This comprehensive source of drug delivery deals enables the gathering of competitive deal information including fi nancial information. In addition, the database assists in obtaining knowledge of company relationships and partnerships that are vital to most drug delivery companies' strategic business objectives.

The report also examines the drug delivery deal making activity of the top 10 pharmaceutical companies by healthcare sales, to help the reader understand the partnering activities of the largest healthcare companies. The valuation methodologies that can be used when formulating deal terms are also described,including principles and rationale, deal benchmarking and fi nancial spreadsheet modelling.

The report includes an account of the process by which drug delivery deals are typically established from the initial steps of identifying the corporate needs, business opportunities and potential partners, through to the establishment of feasibility studies and full commercial alliances. Additionally, examples of genuine drug delivery agreements are provided that cover a variety of deal types including clinical & commercial, marketing, mergers & acquisition and fi nance deals. These agreements, less the redacted portions, can be accessed via the PharmaDeals® v2 Agreements database.

The drug delivery sector represents a dynamic, rapidly evolving sector as companies vie for partnering positions that will maximise commercial returns. Both market needs and technology innovation continue to drive this special sector, and it will be interesting to witness its evolution over the ensuing years.

1 Introduction
2 Market Overview
- 2.1 Types of Drug Delivery
- 2.2 Development of The Drug Delivery Market
- 2.3 The Current and Evolving Market
- 2.4 Future Market Challenges
- 2.5 Drug Delivery Companies
  - 2.5.1 Principal Players in Drug Delivery
  - 2.5.2 The Changing Landscape: M&a Activity
  - 2.5.3 The True Scope of The Drug Delivery
  - Sector
3 Key Drivers in Drug Delivery
- 3.1 Improving The Therapeutic Index
- 3.2 Patient Compliance
- 3.3 Patent Prolongation
- 3.4 Life Cycle Management
4 Commercialisation Strategies
- 4.1 Introduction
- 4.2 Returns to Innovation
- 4.3 Drug Delivery Product Offerings
- 4.4 Exploitation Strategies
- 4.5 Business Models
- 4.6 Product, Strategy and Business Models for Drug Delivery Technology
- 4.7 Applicability to Segments of The Pharmaceutical Product Life Cycle
- 4.8 Assessment of Attractiveness of Each Option
  - 4.8.1 Divestment to A Service-Based Company
  - 4.8.2 Licensing to Pharmaceutical Companies
  - 4.8.3 Sales of Devices
  - 4.8.4 Service Offering
  - 4.8.5 Development of Drugs in Collaboration with Other Companies
  - 4.8.6 in-House Drug Development
- 4.9 Compatibility of Product Offerings
- 4.10 Conclusion
5 Alliances in Drug Delivery
- 5.1 Drug Delivery Deals Database
- 5.2 Drug Delivery Deal Activity
- 5.3 Financial Analysis of Drug Delivery Deals
6 Major Pharmaceutical Company Drug
- Delivery Deal Activity
- 6.1 Johnson & Johnson
- 6.2 Pfizer
- 6.3 Glaxosmithkline (Gsk)
- 6.4 Novartis
- 6.5 Sanofi -Aventis
- 6.6 Roche
- 6.7 Astrazeneca
- 6.8 Merck & Co
- 6.9 Abbott Laboratories
- 6.10 Wyeth
7 Valuation Methods
- 7.1 Integrated Benchmarking and Enpv Calculation
- 7.2 Other Methods
- 7.3 Benchmarking
  - 7.3.1 Feasibility Search
  - 7.3.2 Information Gathering and Analysis
  - 7.3.3 Approximate Valuation
  - 7.3.4 Refi Nement of Valuation
- 7.4 Expected Net Present Value
- 7.5 Agreement Structure
  - 7.5.1 Value Sharing
  - 7.5.2 Risk Sharing
- 7.6 Valuation of Drug Delivery Systems
  - 7.6.1 Enabling Technology
  - 7.6.2 Enhancing Technology
8 Drug Delivery Alliance Development
- Process
- 8.1 Needs Identifi Cation
  - 8.1.1 Driving Factors
  - 8.1.1.1 Market Drivers
  - 8.1.1.2 Technology Drivers
  - 8.1.2 Tools Needs Identifi Cation
  - 8.1.2.1 Portfolio Analysis
  - 8.1.2.2 Value Chain Analysis
- 8.2 Identifying Opportunities and Partners
- 8.3 Development of Commercial Relationships
9 Drug Delivery Agreements
Tables
- 1 Typical Maximum Doses per Administration
- 2 Marketed Recombinant Biopharmaceuticals among The Top 200 Selling Prescription Drugs
- 3 Publicly Quoted Specialty Pharmaceutical Companies That Focus on Drug Delivery
- 4 Elan's Partnering Activity
- 5 Major Patent Expirations, 2008-2012
- 6 Strategies for The Exploitation of Innovation
- 7 Business Models
- 8 Generic Strategies for Commercialisation
- 9 Product Offerings and Target Segments
- 10 Compatibility of Product Offerings
- 11 Number of Drug Delivery Deals by Therapeutic Area, 1997-October 2008
- 12 Number of Drug Delivery Deals by Product Type, 1997-October 2008
- 13 Average Total Deal Values for Drug Delivery Deals, 1997-October 2008
- 14 Average Upfront Payments for Drug Delivery Deals, 1997-October 2008
- 15 Average Milestone Payments for Drug Delivery Deals, 1997-October 2008
- 16 Average Equity Investment Payments for Drug Delivery Deals, 1997-October 2008
- 17 Top Ten Pharmaceutical Companies by 2007 Worldwide Healthcare Revenue
- 18 Johnson & Johnson Drug Delivery Deals
- 19 Alza Drug Delivery Deals (Part of Johnson & Johnson)
- 20 Pfi Zer Drug Delivery Deals
- 21 Pharmacia Drug Delivery Deals
- 22 Glaxosmithkline Drug Delivery Deals
- 23 Novartis Drug Delivery Deals
- 24 Sanofi -Aventis Drug Delivery Deals
- 25 Roche Drug Delivery Deals
- 26 Astrazeneca Drug Delivery Deals
- 27 Abbott Drug Delivery Deals
- 28 Merck & Co. Drug Delivery Deals
- 29 Wyeth Drug Delivery Deals
- 30 Benchmarking Methodology Overview
- 31 Sources of Information
- 32 Cumulative Probabilities
- 33 Example Enpv Calculation
- 34 Pharmaceutical Industry Event Calendars
- 35 Key Factors Leading to Successful Alliancesbetween Companies
- 36 Drug Delivery Agreements Linked to
Figures
- 1 Pharmaceutical Company R&d Drug Delivery Projects by Route of Delivery
- 2 Drug Delivery Mergers and Acquisitions, 1997-2008
- 3 Effect of Controlled Release Formulations
- 4 Doses of Chemotherapeutic Agent Required to Achieve Maximum Effect
- 5 Estimated Value in 2008 Worldwide Sales of The Top 200 Prescription Drugs by Year of US Patent Expiry
- 6 Life Cycle Management
- 7 All Deal Activity, 1997-2008
- 8 Drug Delivery Deal Activity, 1997-2008
- 9 All Deals According to Deal Type, 1997-2008
- 10 Drug Delivery Deals According to Deal Type 1997-2008
- 11 Number of Drug Delivery Deals by Therapeutic Area, 1997-2008
- 12 Number of Drug Delivery Deals by Product Type, 1997-2008
- 13 Percentage of All Deals with Some Financial Information, 1997-2008
- 14 Percentage of Drug Delivery Deals with Some Financial Information, 1997-2008
- 15 Integrated Valuation Methods
- 16 Ideal Benchmarking Deal Cluster
- 17 Example Pharmaceutical Deal Force Field
- 18 Attrition by Therapeutic Area
- 19 Success Rates for Life Cycle Management Projects
- 20 Pharmaceutical Product Decision Tree
- 21 Enhanced Revenues Due to Drug Delivery System
- 22 Enhancement of Patent Life
- 23 Drug Delivery Alliance Development Process

Pharmaceutical Market Research

Effective Deal Making in Drug Delivery

Effective Deal Making in Drug Delivery

Contents

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