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GSK/Actelion: Phase III Value Is in the Eye of the Beholder

GSK paid a very large upfront fee ($148mm) for access to Actelion's Phase III insomnia candidate almorexant, but still some were disappointed; the Big Pharma is only paying 40% of the costs of the Phase III program. The truth is that even late-stage primary care assets--especially those with novel mechanisms of action--are under intense regulatory scrutiny and licensors are having to take on more risk.

Can investors be disappointed by licensing deals with nine-figure up-front payments? In the case of GlaxoSmithKline PLC’s worldwide (ex-Japan) co-development and co-promotion pact with Actelion Pharmaceuticals Ltd. for the Phase III orexin receptor antagonist almorexant for insomnia and other indications the answer is yes, but there was no unanimity of opinion. [See Deal]

In mid-July GSK fronted CHF 150 million ($148 million) for almorexant and pledged an additional CHF 415 million in pre-commercial...

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