The power of the biotechnology sector is growing, with the effect that big pharma is throwing caution to the wind in its dealings with the sector, according to a new report from KPMG. With big drug companies left scrabbling for novel products to fill gaps in their pipeline, biotechs have finally found themselves on a level playing field - and are becoming much smarter in the way they structure a deal.

Stephen Oxley, European Head of Pharmaceuticals at KPMG, commented: “Small biotech firms are finding themselves in a position they haven’t been in before - on a relatively level playing field with big drug companies who want their science. Subsequently, the major pharma firms are prepared to take on more risk than normal, doing more deals on products still in early stage development to ensure that they get their hands on the new projects coming through the pipeline. Meanwhile, biotech firms are negotiating deals that give them higher ownership levels and more long-term involvement in a drug.”

But, Oxley warned: “Determining when to license a drug remains a major problem for biotech companies. The longer they wait to license a drug, the larger the probable reward but also the risk. This results in awful lot of agonising going on in the biotech sector over licensing decisions. Whatever they decide to do, a partnership should not be entered into lightly and should not be viewed as a short-term fix. A biotech shouldn’t just look for the largest reward at the time but this is often what happens. Although that’s an important issue, I would argue that some of the negotiated aspects of the deal are just as critical in the long term.”