Biotech deal costs soar

Thu Sep 20, 2007 5:27am EDT

LONDON, Sept 20 (Reuters) - The price of acquiring promising medicines from biotech firms is soaring, reflecting big drugmakers' growing hunger for assets to fill their thinning pipelines, according to new research.

Lehman Brothers said on Thursday costs had risen by around 45 percent annually over the last three years and pharmaceutical companies were now promising an average of $400 million in potential milestone payments under licensing agreements.

Deals between biotech and big pharma companies are typically based on milestones, under which money is paid to the originator company according to an experimental drug's progress through clinical trials or regulatory approval.

The number of deals struck has remained essentially flat but there has been a marked growth in collaborations worth at least $500 million.

"We believe deal term inflation reflects large-cap pharma-biotech's declining R&D productivity and growing reliance on in-licensing deals to maintain late-stage pipelines," the brokerage said in a note.

This year, one-third of deals with disclosed financial terms exceeded $500 million in total milestone payments, compared with less than 10 percent before 2005.

The world's leading drug manufacturers are under increasing pressure to improve their success rate in launching new medicines, with many of the world's top-selling drugs facing patent expiry by 2012 [nL18152367].

((Reporting by Ben Hirschler; editing by Sue Thomas; email: ben.hirschler@reuters.com; Reuters Messaging: ben.hirschler.reuters.com@reuters.net; +44 20 7542 5082)) Keywords: BIOTECHNOLOGY DEALS/

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