In-licensing has become central to Big Pharma's strategy for growth, and it's paying off more than ever.

Three years into a new CEO's regime, Chiron is trying to forge a unique compromise between research and commercial focus and the stability which comes from a diversified business. But Chiron is at a crossroads: its earnings growth, boosted significantly by a now complete cost-reduction program, doesn't look sustainable without major new products. And those Chiron does not appear to have. Moreover, its major shareholder, Novartis, has an option to buy the company and top management fears they will should the stock show significant signs of weakness, brought on, perhaps, by investments (and consequent earnings reductions) in potential high-growth areas. In effect, Chiron managers are afraid to invest significantly for fear of what Novartis will do should the stock price fall. Moreover, to some degree, Chiron is caught by its business diversity: it can't focus its spending on any one area, particularly biopharmaceuticals, without starving its other businesses--but without a significant increase in R&D spending, particularly in the drug unit, observers don't see how Chiron, which has been uniquely unsuccessful with its pipeline projects, can drive the long-term earnings growth it needs.

In Vivo presents another installment of our quarterly review of dealmaking--in this case November 2000-January 2001. Our data comes from Windhover's Strategic Transactions Database. We include medical device financings by industry segment and by deal type; medical device M&A; diagnostic financings and alliances by product category; pharma and biotech alliances by technology segment; pharma and biotech alliances by deal type, and pharma and biotech financings by market segment and therapeutic category.

Genitope is using a novel gene expression technology in cancer immunotherapy. Starting with a tumor sample, it produces patient-specific idiotype antibodies which target B cell tumors and stimulate an immune response. The strategy is equivalent to that used in over a decade of clinical studies by Ron Levy of Stanford University, who encouraged Genitope founder Dan Denney to start the company.