Box 1. 

Percent of product sales in 2006 attributable to development paths.

Source: Recombinant Capital

Data from Recombinant Capital suggest that the most value in drug development comes from alliances, not M&A, because alliances often end with the biotech junior partner regaining full rights to what is still a promising product. This rights reversion is often followed by either repartnering or commercialization of the compound by the originator biotech firm.

Mark Edwards, from Recombinant, points out that of the 260 biotech drugs approved by 2006, 23 had been partnered, terminated and then repartnered in development. A further 14 were partnered, terminated and then developed independently by the originator. Repartnered drugs include big names, such as Betaseron (interferon beta-1b), Synagis (palivizumab), Cialis (tadalafil), Byetta (exenatide) and Tarceva (erlotinib). "Once investors realize this, they are likely to be much more favorably disposed to big ticket alliances, even compared with M&A," says Edwards.