When is a preclinical drug worth a mother lode of cash? This top 20 list offers a few answers

When Vertex is intent on a target, the execs are known to splash out big time for experimental products.

Bioregnum Opinion Column by John Carroll

That gung-ho spirit was on full display in late 2022 when the biotech handed over $250 million in cash for a preclinical DM1 treatment from Entrada Therapeutics. In their Q1 report, Vertex would go on to say that the Entrada deal was part of $347 million spent on acquired IPR&D charges in the quarter.

Among those deals, Vertex agreed to expand a tie-up with gene-editing pioneer CRISPR Therapeutics on a cure for diabetes.

In making the move to pick up the Entrada program, Vertex established itself as the top cash dealmaker in the preclinical space since the start of 2022, as tracked by Chris Dokomajilar at DealForma. And the big biotech underscored a major interest in DM1 that has been out front for years now.

While preclinical deals, in general, have been characterized by low upfront and big milestones, the DealForma list shows that even without human data — the gold standard in biotech that has only risen in value in the past 2 years — preclinical deals can still fetch considerable sums of cash.

— At the end of last year, Kelun-Biotech scored $175 million from Merck — plus an unrevealed equity stake — with a total deal value that topped out close to $9.5 billion, a record sum for all the deals dating back to the start of 2022. That was the latest in a string of ADC deals orchestrated for the Chengdu, China-based biotech. And it was a clear indication of Merck R&D chief Dean Li’s belief that he had found a valuable source of next-gen ADCs in China.

— Another $175 million came from Neurocrine to bag Voyager’s gene therapies for a variety of preclinical assets, including one targeting Parkinson’s. That deal at the beginning of 2023 came despite the failure of a mid-stage Parkinson’s pact dating back to 2019, which came with a cost of $165 million upfront in cash and equity. Evidently, Neurocrine still believes that Voyager, now run by Al Sandrock, has the keys to a major franchise. But they have a long way to go before proving it.

— GSK’s new R&D chief, Tony Wood, was reengineering the pipeline when he agreed late last year to fork over $170 million to Wave Life Sciences for preclinical RNA editing program targeting alpha-1 antitrypsin deficiency, WVE-006. As he saw it, oligonucleotide therapies were going mainstream, and he was out to jump in with a new treatment, along with other potential targets outlined in the deal.

Dokomajilar adds that there are some important notes to add to the lists:

We’re still seeing a majority of all licensing and option deals being signed at the earliest discovery stages, and most of these deals are for multi-target programs. The responsibilities are still on the out-licensor to deliver a number of targets or compounds for the in-licensing partner to then select and advance forward. Program stacking is also real when it comes to the headline topping deal value announcements. In 2022, the announced total deal value for the twentieth largest multi-target discovery deal was more than double those of the bottom five preclinical asset deals. It’s important to adjust deal comps by the number of targets.

In some respects, the asset deals are the exceptions to the rules that govern dealmaking. As pharmas became more interested in derisked drug programs, they’ve pushed aggressively into deals for mid- to -late-stage assets.

The big money is still in Phase II.

The median upfront in cash and equity for Phase II drugs is $165 million for the past 16 months, reports DealForma. That shrinks to $75 million for Phase I and $62 million for preclinical programs. Move to the platform and discovery field, and the upfronts dwindle down to $45 million. Move back up the ladder to pivotal drugs, and the number swells to $200 million.

But preclinical deal totals still outnumber the clinical assets by far. In 2022, as the industry underwent a painful contraction as public markets froze over, preclinical and platform deals combined commanded the lion’s share of the deals, setting a record for deals dating back to the 2008 crisis. And they’re still running strong in the first 4 months of 2023.

So what separates the big upfronts from the average? There’s a lively discussion that’s been running for years on the risks involved in drug development, and general consensus is that 90%-plus of all preclinical assets founder on the long and winding trail through the clinic.

For Entrada, the risks involved were made more than clear just days later when another treatment they were pursuing for Duchenne’s muscular dystrophy was put on clinical hold.

For Vertex, with a fat revenue stream swelled by its mega blockbuster monopoly on cystic fibrosis, it’s a chance to do something transformative. Something where $250 million pales in comparison to the possible payoff awarded by success in providing another life-altering therapeutic to patients.

And clearly, they believe in its future. Risky as that may be.

Here’s a full look at all the top 20 deals by assets and then the top 20 in plays made for platform tech in the preclinical arena.

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