Mergers, collaborative risk-sharing, joint ventures and other co-promotion arrangements between big pharmaceutical and life sciences companies are increasingly common and the trend is set to continue, according to a report from PricewaterhouseCoopers (PWC).
Indeed, one only has to look at the flurry of such deals - big and small - being announced by these firms every week.
According to PWC, the highest quarterly dollar amount ever recorded for life sciences (including medical devices) merger and acquisition (M&A) deals was recorded in the first quarter of 2007, at $2.6bn, while the second quarter witnessed an unprecedented number of M&A deals - 223.
Innovation has been lacking within big pharma pipelines for a number of years and compared with 20 years ago there are fewer new drugs being produced. Less than one-third of the drugs that do reach the market earn enough money to match or exceed the average R&D cost per new medicine, which averages $800m.
Big pharma firms are now seeking to invest in new drug technologies, as well as continue making the small molecule drugs that currently form the staple of the industry, said the report, titled: "Top eight health industry issues in 2008."
As such the industry is grabbing out at any opportunity it sees that could lead it to its next big market hit and smaller life sciences firms, which typically churn out the biologic candidates that are being tipped as the drugs of the future, are a popular source being used to tap into innovation.
Amidst the scrambling, the tables are turning on the big pharmaceutical companies, who once had a significant advantage against the smaller players in the strength of their R&D pipelines.
According to the report, if a big pharmaceutical companies buys small molecule drug technology from an external source, they usually then develop it on their own in-house, but due to the unique expertise involved with some of the biologic drugs, they are typically heavily reliant on the life sciences companies that they acquire such technology from during the development phase.
Realising the market potential of some of their candidates, these life sciences companies, however, are increasingly often "not willing to simply sell their research, they also want a vested interest in the outcome" and are striking deals that force the big firms to match their innovative research with suitable financial resources and a share in the profits.
Such deals can include co-development and co-marketing arrangements; the payment of royalties and milestones; options to obtain the rights to the products from a drug development programme that the pharma company rejects; and non-exclusive licensing of technology.
