2, legacy pharmaceutical companies typically pay biotech licensors a midpoint value of ~$220 million for Phase III drugs, compared with only ~$65 million for drugs in Phase I clinical trials. While these headline figures, often referred to as biodollars, illustrate the increased value of later-stage deals, they include cash payments actually received by the biotech company as well as payments that might one day be received if specific criteria (which we call milestones) are met.
Closer examination of the terms of licensing deals reveals an even bigger disparity in the actual cash payments. For example, while a biotech company might receive $5-10 million in up-front cash in a Phase I deal, the remainder of the ~$65 million is made up of highly uncertain success-based payments that may never materialize. By contrast, the typical Phase III deal includes $40-100 million ...
