Pharmaceutical Industry Update: ROFNs, Licensing Deals, and Strategic Partnerships

In recent developments within the pharmaceutical industry, companies are leveraging Right of First Negotiation (ROFN) agreements and strategic partnerships to navigate the complex landscape of drug development and commercialization. A comprehensive analysis by Jefferies has shed light on the efficacy of these agreements, while several high-profile collaborations have reshaped the competitive landscape.

ROFNs: Not Always a Golden Ticket to M&A

Jefferies' recent report on ROFN agreements in the pharmaceutical sector reveals that these clauses, often included in licensing deals, do not consistently lead to mergers and acquisitions. The analysis, which examined 50 ROFN agreements over the past decade, found that many large pharmaceutical companies do not follow through with acquisitions despite having first negotiation rights.

However, Sanofi has emerged as an exception to this trend. The company's recent $470 million acquisition of Vigil Neuroscience, which stemmed from a ROFN clause in a previous licensing deal, has reignited interest in these agreements. Sanofi's strategy of including ROFNs in its licensing deals has been particularly notable, with outstanding agreements with Ventyx Biosciences, Zucara, and MeiraGTx.

Other companies with active ROFNs include Pfizer and Axsome Therapeutics, Gilead and Nektar Therapeutics, and Catalyst Pharmaceuticals and Santhera Pharmaceuticals. These agreements cover a range of assets and potential collaborations, highlighting the diverse applications of ROFNs in the industry.

Strategic Partnerships and Licensing Deals

Several significant partnerships and licensing agreements have recently shaped the pharmaceutical landscape:

1. AbbVie and Aldeyra Therapeutics: In November 2023, AbbVie secured a deal worth up to $400 million for Aldeyra's dry eye disease therapy, reproxalap. The agreement includes a 60%-40% profit split for U.S. sales and royalties on ex-U.S. sales. However, the regulatory process for reproxalap has faced challenges, with two FDA rejections citing a lack of demonstrated efficacy.

2. AstraZeneca and Conduit Pharma: In an unusual arrangement, AstraZeneca licensed three compounds (AZD1656, AZD5658, and AZD5904) to Conduit Pharma in August 2024. Conduit, which specializes in acquiring and developing Phase II-ready assets, is now advancing these compounds in new indications such as lupus and autoimmune disorders. AstraZeneca retained a ROFN and took ownership of common stock in Conduit as part of the deal.

3. Eli Lilly and Innovent Biologics: Building on a decade-long partnership, Eli Lilly and Innovent Biologics have continued to expand their collaboration. In 2022, Innovent acquired in-China rights to Lilly's Cyramza and Retsevmo, along with a ROFN on future commercialization of the BTK inhibitor Jaypirca in China. This ROFN was exercised in December 2024.

4. Biogen and Denali Therapeutics: Despite initial promise, this partnership has faced setbacks. Biogen has scaled back its involvement in joint neurodegenerative disease programs, terminating work on an Alzheimer's project in August 2024. The companies continue to advance the LRRK2 inhibitor BIIB122/DNL151 in a Phase IIb trial for Parkinson's disease.

These partnerships and licensing deals underscore the dynamic nature of the pharmaceutical industry, where companies continuously seek to optimize their pipelines and market positions through strategic collaborations and targeted investments.