Key Contributors to DealValue at AstraZeneca

Myriam de Grijs

2015

Project Aims

1. How competitive is AstraZeneca in ‘deal making’?

2. What factors contribute to deal value at AstraZeneca, and other leading biopharmaceutical companies?

Methodology

Data collection

Desk research

Interviews

Data analysis

- Deal volume

- Deal focus

- Deal spending

- Deal type, etc.

Tally and thematic analysis

Scope

Time frame: deals closed January 2014 – April 2015

Deal types included: acquisitions, business unit swaps, business unit acquisitions, asset(s) acquisitions, rights agreements for asset(s), licensing deals, option deals for asset(s), option deals for company, partnerships, research collaborations, clinical trial collaborations, and collaborations for the development and commercialization of asset(s)

Companies: top 15 biopharmaceuticals according to 2014 revenue

Findings

How competitive is AstraZeneca in ‘deal making’?

Deal volumeFigure 2: Total deal volumes, according to deal type.

.

2

3

1

2

1

4

1

11

2

2

3

4

1

1

4

1

1

1

1

1

1

2

3

2

4

4

8

3

7

5

2

5

2

2

2

8

4

3

3

9

2

1

2

2

3

3

3

3

1

3

2

2

2

1

2

2

1

3

10

8

8

1

2

1

2

1

1

3

1

2

0 5 10 15 20 25 30 35

Gilead Sciences (3)

Abbvie (3)

Teva (4)

Amgen (5)

Bayer (7)

GlaxoSmithKline (9)

Novartis (10)

Pfizer (12)

Lilly (12)

Sanofi (18)

Roche (20)

Johnson&Johnson (21)

Bristol-Myers Squibb (24)

Merck & Co. (24)

AstraZeneca (32)

acquisition of company or business unit

acquisition of asset(s) or rights to asset(s)

licensing agreement

preclinical research collaboration

partnership across various stages of development

clinical trial collaboration

option deal on asset(s)

option deal on company

Deal spending

$60.00

$251.00

$470.00

$525.00

$1,018.00

$1,336.00

$2,007.50

$3,002.50

$3,874.00

$4,552.25

$5,448.00

$9,609.75

$13,807.00

$16,518.00

$19,135.00

Amgen (1/5)

Lilly (6/12)

Gilead Sciences (1/3)

Abbvie (2/3)

Sanofi (5/18)

Bristol-Myers Squibb (9/24)

Johnson&Johnson (7/21)

Bayer (4/7)

Teva (4/4)

AstraZeneca (6/30)

GlaxoSmithKline (4/9)

Roche (8/20)

Merck & Co. (7/24)

Novartis (6/10)

Pfizer (8/12)

Figure 3: Total spending on ‘deal making’ in Millions.

Deal focus

on

colo

gy

end

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and

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etab

olic

imm

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gy

and

in

flam

mat

ion

cen

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syst

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card

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lar

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us

and

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es

resp

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ory

op

hth

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hae

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gy

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mat

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wo

man

’s

Hea

lth

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lect

ed

tro

pic

al

dis

ease

s

tran

spla

nta

tio

n

Johnson&Johnson 4 2 3 1 2 3

Novartis 6 1 1

Roche 10 2 1 1

Pfizer 4 2 2 1

Sanofi 3 2 3 1 1 5 1

Merck & Co. 12 1 1 4

GlaxoSmithKline 1 1 5 1

AstraZeneca 15 3 1 1 1 4

Bayer 2 1 1 1 1

Gilead Sciences 1 1 1

Teva 1 3

Amgen 3

Abbvie 1 1

Lilly 7 1 1 2

Bristol-Myers Squibb 17 1 1 1 1 1

Figure 4: Who is closing deals where?

Deal focus

oncology, 17

respiratory, 4

CRISPR, 4

metabolic, 3

central nervous

system, 1

immunology, 1

infectious diseases, 1 multiple

therapeutic areas, 1

Figure 5: AstraZeneca’s total deal volume per therapeutic area.

88

25

19

16

12

10

87

5 3

oncologyinfectious diseasesmultiple therapeutic areasmetabolic diseasecentral nervous systemundisclosed therapeutic arearespiratoryimmunologycardiovascularother

Figure 6: Total deal volume per therapeutic area for the top 15 biopharmaceutical companies.

Benchmarking exerciseFigure 7: Graph depicting all licencing deals for preclinical oncology assets closed by the top 15 biopharmaceutical companies, for which the upfront values are publicly disclosed. The x-axis depicts the top 15 biopharmaceutical company, the partnering company and the modality of the asset(s).

$14.00 $20.00 $25.00 $27.00 $50.00 $60.00$125.00$76.00

$300.00

$530.00

$2,300.00

$298.00

$525.00 $575.00

$0.00

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

Novartis AG AstraZeneca Plc Roche Holding AG Merck & Co., Inc. Bristol-Myers Squibb Co. Amgen Inc. Johnson & Johnson Inc.

Oxford BioMedica plc. Immunocore ltd. Curadev Pharma Privateltd.

Ablynx NV. CytomX Therapeutics,Inc.

Kite Pharma, Inc. MacroGenics, Inc.

CAR T-cells anti-CD3 antibodyfragment with high

affinity T-cell receptors

small-molecule bi- and tri-nanobodies probodies CAR T-cells humanized CD19 x CD3bispecific DART protein

Mill

ion

s

upfront payment potential royalties and/or milestones

Findings

What factors contribute to deal value at AstraZeneca,

and other leading biopharmaceutical companies?

Interviews

108

7

5

54

432

0

1

2

3

4

5

0 1 2 3 4 5 6 7

Men

tio

ns

by

exte

rnal

sta

keh

old

ers

(ou

t o

f fo

ur)

Mentions by AstraZeneca staff (out of six)

Oncology

Evolving deal types and structuring

Top three or nothing

Big pharma hesitant towards phase I/II/III assets

Pressure for deal flow

Modalities

Collaborations

Leadership

Pressure from Pfizer bid (AstraZeneca)

Orphan indications

Figure 8: Visual representation of themes identified as ‘key contributors to deal value at AstraZeneca’ by interviewees. The x-axis represents the number of times a theme was mentioned by AstraZeneca staff, the y-axis represents the number of times a theme was mentioned by external stakeholders, and the bubble size represents total number of times a theme was mentioned.

Phase of developmentFigure 9: Total deal volume closed by the top 15 biopharmaceutical companies, according to the asset(s) stage of development. Phase I clinical trial collaborations excluded.

Figure 10: Total deal volume closed by AstraZeneca, by asset(s) stage of development. Phase I clinical trial collaborations excluded.

109

10 6 717

28

no. of deals

18

21 1

3

Phase of development

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

preclinical ($37.14) phase I ($35.56)

phase II($22.50)

phase III($191.67)

approved and/orcommercialized

($90.00)

Mill

ion

sFigure 11: Licensing deals per development stage. Mean of upfront values paid per development stage in brackets (Millions). One data point represents the upfront value paid for one deal.

Conclusion

What factors contribute to deal value at AstraZeneca, and other leading biopharmaceutical companies?

Internal strategy and leadership

Properties of the asset AstraZeneca wishes to access

External pressures for performance

- Pascal Soriot- Science-led strategy- Oncology, respiratory and

metabolism

Conclusion

What factors contribute to deal value at AstraZeneca, and other leading biopharmaceutical companies?

Internal strategy and leadership

Properties of the asset AstraZeneca wishes to access

External pressures for performance

- Pfizer takeover- Shareholder and analyst

expectations- Top 3 or nothing

Conclusion

Internal strategy and leadership

Properties of the asset AstraZeneca wishes to access

External pressures for performance

What factors contribute to deal value at AstraZeneca, and other leading biopharmaceutical companies?

- Competition for a therapeutic area (demand vs supply)

- Development stage - Modality- Revenue stream- Multiple assets or a

single asset deal- Geographic location - Deal type and

structuring

Figure 12: Effect of geographic location onthe average pricing of an asset, in Millions

$1,086.77

$3,511.85

$80.93

$813.91

$2,763.43

$29.93$0.00

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

$3,500.00

$4,000.00

all deal types acquisitions ofcompany or

business unit

licensing deals

North America elsewhere

Based on the findings, what would this thesis recommend to AstraZeneca?- Carve out a clear strategy for each core therapeutic area

- Draw upon analysis presented in thesis as a starting point for future negotiations and valuations, e.g. figure 13 below.

Recommendations

Figure 13: Effect of deal type on deal structuring, based on all deals closed for preclinical stage oncology asset(s)closed by top 15 biopharmaceutical companies with full finances disclosed.

upfront payment (M) potential royalties and/or milestones (M)

acquisition of business unit or company $445.94 $502.50

47.02% 52.98%

collaboration $86.40 $866.80

9.06% 90.94%

licensing deal $45.86 $657.71

6.52% 93.48%

Questions