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# Why Big Pharma is licensing earlier (and paying more)
- URL: https://www.hibiotech.com/licensing-earlier-paying-more/
- Published: 2026-10-21T12:00:00.000Z
- Updated: 2026-10-24T16:17:42.000Z
- Description: Seven in ten recent deals happened at preclinical or phase 1 — capturing three quarters of upfront cash. The patent cliff has turned early-stage biology into a seller's market.
- Author: The Hi, Biotech Newsroom
- Tags: Funding & Deals

Roughly seven in ten recent biopharma licensing deals were struck at preclinical or phase 1 stage, and those deals captured about three quarters of upfront cash. A decade ago the modal deal waited for phase 2 proof-of-concept. The shift is the single most consequential change in how early-stage biotech gets financed, and it traces back to one wall on one calendar: the patent cliff.

## The cliff is doing the negotiating

Between now and the early 2030s, the industry's biggest revenue engines face generic erosion, with Keytruda's expiry the marquee event. Every business development team in pharma has run the same model, and the model says the same thing: wait for proof of concept and you pay peak prices for assets everyone can see are good, or you accept the risk and pay for the option instead. Pharma has chosen the option. Early-stage biology has, in effect, become a seller's market with the buyers bidding for risk.

The result is that upfront payments have inflated for assets that, in any previous decade, would have been judged unlicensable. A first-in-class mechanism with phase 1 safety data and a biomarker story can now command nine figures in committed cash. The rationale is sound: acquiring at preclinical lets a company steer development with its own clinical teams, its own regulatory strategy, and a decade of patent life still ahead of the asset.

## What the seller gives up

The premium has a price, and it is paid by the biotech accepting it. Partnering at phase 1 means selling the asset's upside at the moment of maximum information asymmetry, when the buyer has deeper clinical expertise than the seller. Programs get steered toward the acquirer's strategic priorities, not the founders' scientific instincts. The milestone waterfall, which looks rich on paper, encodes the buyer's development preferences in financial concrete.

There is also a subtler consequence for the ecosystem. When big pharma behaves like a lead investor, it sets de facto research priorities across the entire early-stage pipeline. The mechanisms that license well get built. The mechanisms that do not, regardless of scientific merit, do not get funded in the first place.

## What to watch

Two numbers will tell you if the trend persists: the share of upfront cash paid at preclinical or phase 1, currently around three quarters, and the spread between milestone structures and actual milestone attainment, which is quietly becoming the industry's most expensive lie. A market paying premiums for uncertainty eventually prices the uncertainty. The question for 2027 is whether it does so through smaller upfronts or through more option-and-expansion structures that push the risk back down the table.

> **The brief:** The patent cliff has turned big pharma into the sector's most aggressive early-stage investor, paying record upfronts for preclinical and phase 1 assets. The premium is real, and it is financed by surrendering upside and steering rights. Watch the upfront share and the milestone attainment gap.