Up-Front Deal Value Doesn't Reflect Peak Commercial Potential

26 Aug 2015

• By Amanda Micklus

There's no correlation between the up-front payment made in the deal and the peak sales for the drug that was the product of the deal. Second in a series of follow-ups to IN VIVO’s 2014 study comparing/contrasting likelihood of approval and up-front payments on alliances, and the outcomes of relevant deals.

As average up-front payments increase in licensing deals, so do actual approval rates of the drugs generated by those deals. (See [A#2015800103].) Many of the approved products were in therapeutic areas such as neurology and cancer, despite the prediction for lower likelihood of approval in those classes vs. others (See Also see "Up-Front Deal Economics May Not Match Drugs’ Likelihood Of Approval" - In Vivo, 18 June, 2014..) Taking these points at face value, one could argue that the higher prices paid by the licensees in those alliances are justified because more approved drugs came about as a result.

Part 3: Terminated Deals