In Part 1 of this series, we looked at why the ADC land grab is happening now and how ADCs fit into the broader oncology landscape.
In Part 2, we examined ADC design—antibody, payload, linker, conjugation—and discussed what people mean by first-, second-, and “third-generation” ADCs.
In Part 3, we connected patent cliffs with the ADC rush and framed ADCs as part of big pharma’s long-term portfolio strategies.
In this fourth part, we move one step closer to practice and focus on how to read ADC deals themselves. Headlines about “multi-billion-dollar ADC acquisitions,” “mega-licensing deals,” and “China ADC partnerships” may look like a world reserved for specialists. But once you understand the basic structures and key terms, even non-specialists can interpret the strategic meaning of these transactions.
We will walk through the main deal types—M&A, global licenses, regional and co-development deals, platform and CDMO agreements—and explain each type’s logic and risks. Finally, we will provide a practical checklist that pharma executives, investors, and consultants can use when reading ADC-related press releases.
Why Do ADC Deals Look So Complicated?
Because Value Is Layered Across Multiple Levels
The first reason ADC deals look complicated is that value is spread across multiple layers:
- 1) cash flows from already approved ADCs,
- 2) expansion potential for those ADCs (new indications, earlier lines),
- 3) follow-on ADC pipelines on the same platform,
- 4) underlying platform technologies (payloads, linkers, conjugation),
- 5) manufacturing networks and CMC know-how.
Deal prices—both in M&A and in large licensing—often reflect all of these layers combined. If we try to explain the numbers solely by the value of a single product, the logic often looks distorted. The first step in reading ADC deals is to ask: “Which layers of value is this company actually buying?”
Because Risk and Time Are Stacked Vertically
Another source of complexity is that ADC deals bundle assets at different risk levels and time horizons:
- Phase 3 or approved ADCs: near-term cash flows,
- Phase 1/2 ADCs: medium-term options,
- preclinical and discovery-stage ADCs or payload platforms: long-term options.
Press releases usually quote a single headline number (upfront plus potential milestones), but in reality that number is a bundle of risk-adjusted future cash flows. Rather than asking “Is this expensive or cheap?” in absolute terms, it is more useful to ask which risk layers and time slices are being priced into the deal.
Because Rights and Governance Structures Are Complex
ADC deals also involve complex rights structures and governance mechanisms:
- territories: global vs regional (e.g., US, EU, China, Japan),
- indications: specific tumor types vs broader rights plus options for expansions,
- development responsibilities: who leads development and commercialization; which parts are co-developed or co-promoted.
Joint steering committees (JSCs) and joint development committees (JDCs) are typically set up to coordinate decisions, and contracts spell out in detail how decisions are made and who has final authority if disagreements arise. Most of this never appears in press releases, which is why the real substance of a deal often lies beneath the surface.
Four Representative Types of ADC Deals
Type 1: Full Acquisition of ADC-focused Companies (M&A)
The most visible pattern is the acquisition of ADC-focused companies outright. These transactions usually involve:
- one or more approved ADCs,
- a pipeline of follow-on ADCs on the same or related platforms,
- platform technologies and experienced teams.
For the acquirer, this offers a way to obtain:
- near-term cash flows from marketed ADCs,
- medium- to long-term growth from pipeline ADCs,
- people and know-how that are hard to build quickly in-house.
The downside is that acquisition premiums can be substantial, and post-merger integration is challenging: portfolio reprioritization, talent retention, cultural alignment, and manufacturing integration all matter.
Type 2: Global Licensing with Co-development
The second major pattern is global licensing with co-development. In this structure:
- the biotech side is the ADC originator with platform technologies and early clinical data,
- the pharma side brings late-stage development, regulatory, and global commercial capabilities.
Typical features include:
- upfront payments plus development, regulatory, and commercial milestones,
- tiered royalties on net sales,
- co-development or co-promotion in certain indications or territories.
In ADCs, we increasingly see large upfront payments even at early stages, reflecting the perceived option value of promising ADC platforms and the urgency created by patent cliffs.
Type 3: Regional Licensing and Co-promotion (Often Including China)
A third pattern frequently seen in ADCs—especially when Chinese or other Asian companies are involved—is regional licensing combined with co-development or co-promotion. Common elements include:
- local companies retaining rights in their home markets (e.g., mainland China),
- big pharma partners taking rights in the US, EU, and other global territories,
- shared development or co-promotion arrangements in selected indications.
This setup leverages local regulatory and clinical expertise while accelerating global expansion. However, it also raises questions about harmonizing trial designs, CMC standards, and quality systems across regions, making governance and contractual detail especially important.
Type 4: Platform and CDMO Agreements
A fourth pattern that is particularly relevant for ADCs involves:
- platform deals for payloads, linkers, or conjugation technologies, and
- strategic CDMO or manufacturing agreements for ADC-specific production capacity.
For example:
- granting exclusive or preferential access to a particular payload class,
- securing priority manufacturing capacity for a portfolio of ADCs.
These arrangements are not just about single products. They are about locking in the infrastructure required to scale ADC production, and are often key enablers of broader ADC strategies.
Key Contract Elements: What Really Matters in ADC Deals
1) Economics: Upfronts, Milestones, and Royalties
The most visible aspect for non-specialists is the economic package, typically consisting of:
- upfront payments at signing,
- milestones tied to development, regulatory, and commercial events,
- royalties on net sales, often tiered by sales volume.
Because ADCs are expensive to develop and produce—and oncology prices are high— headline deal values often look large. The key question is: “At which development stages, and under which scenarios, do the cumulative payments actually materialize?”
2) Rights: Territory, Indications, and Options
Rights structures deserve equal attention:
- territory: global vs specific regions (US, EU, China, Japan, etc.),
- indications: limited to certain tumor types vs broader rights plus expansion options,
- options: rights of first negotiation/refusal (ROFN/ROFR) for future assets or indications.
Some deals grant full rights for all indications in all territories. Others carve out specific tumors or regions, or give partners options to expand later. Even when press releases simplify these details, it is useful to ask: “How much freedom does each party retain to act on its own in the future?”
3) Governance: Joint Committees and Decision Rules
In co-development and co-promotion deals, governance can be as important as economics. Joint steering committees (JSCs) and joint development committees (JDCs) typically define:
- who chairs the committees,
- which decisions require joint agreement (trial design, major investments, target changes),
- who has final decision-making authority if there is a deadlock.
These details rarely appear in public documents but can make or break a partnership. For big pharma–big pharma or global–China collaborations, governance design is especially critical.
4) IP, Technology, and Manufacturing: Who Owns What, and Who Makes It?
Finally, ADC-specific IP and manufacturing considerations matter a great deal:
- allocation of background IP (existing technologies) and foreground IP (new inventions),
- rights to improvements or new payloads generated during the collaboration,
- responsibility and control over manufacturing and CDMO relationships.
ADCs involve multiple steps—payload and linker synthesis, antibody production, conjugation, fill-finish—often across different sites or companies. Where knowledge and capabilities accumulate has direct implications for bargaining power and future deal flexibility.
Valuing ADC Deals: Four Simple Corrective Lenses
Lens 1: Risk-adjusted NPV (rNPV) Intuition
You do not need to run detailed spreadsheets, but it helps to have an intuition for risk-adjusted net present value (rNPV):
- earlier-stage projects carry lower probabilities of success and thus larger discounts,
- each additional indication adds branches to the cash flow tree,
- platform deals add multiple potential projects to that tree.
When you see a headline like “total deal value up to X billion dollars,” it is helpful to ask how that compares to the risk-adjusted NPV and how much premium is being paid on top.
Lens 2: Comparables (Comps) Across Similar Deals
A second basic tool is to compare the deal with similar transactions:
- similar targets and payload classes,
- similar development stages and data packages,
- platform-including vs single-asset deals.
No two deals are identical, and context matters. Still, asking whether the economics are broadly in line with, above, or below comparable deals helps anchor your intuition.
Lens 3: Platform Premium
A distinctive feature of ADC deals is the platform premium.
- Some deals mostly value a single ADC,
- others pay significantly for the underlying platform and its ability to generate multiple ADCs.
The more adaptable and extensible a platform is, the more room there is for a premium on top of single-product economics. A useful question is: “How many future ADCs could this platform realistically support?” This perspective often makes “expensive” deals more understandable.
Lens 4: Perceived “Discounts” and Risks in China/Asia ADC Deals
For ADC deals involving Chinese or other Asian players, observers sometimes perceive “discounts” relative to Western peers, driven by factors such as:
- lower clinical development costs and faster timelines in some settings,
- a high volume of ADC programs and targets under active development,
- uncertainties around global acceptance of CMC, quality, and clinical data.
These dynamics can make headline valuations look low relative to US/EU assets. However, when regulatory, geopolitical, and tech-transfer risks are fully accounted for, the story becomes more nuanced. We will revisit this in Part 5 when we discuss the rise of Chinese and Asian ADC players in more detail.
A Practical Checklist for Reading ADC Deal Press Releases
To close, here is a practical checklist for non-specialists reading ADC deal announcements.
Ten Key Questions
- 1. Is the deal about a single ADC, or about a broader ADC portfolio/platform?
- 2. Are the rights global, or limited to specific territories (US, EU, China, Japan, etc.)?
- 3. Are indications narrowly defined, or are there options for expansion into new tumors and lines?
- 4. What is the development stage (preclinical, Phase 1/2/3, approved)?
- 5. How are upfronts, milestones, and royalties balanced across risk and time?
- 6. Is development/co-promotion shared, or does one party clearly lead?
- 7. Who controls manufacturing and CMC, including CDMO relationships and capacity?
- 8. Are there options or rights of first negotiation/refusal for future ADCs or payloads?
- 9. How does the deal fit with the buyer’s patent cliffs and oncology portfolio?
- 10. If Chinese or other Asian players are involved, how are regulatory, quality, and data-export risks managed?
You do not need to answer all ten perfectly. Even focusing on questions 1–4 and 9 will significantly improve how you interpret the strategic meaning behind ADC deal headlines.
My Reflections
ADC deals may look like a mix of big numbers and complex contracts, but underneath, they are essentially responses to a simple question: “How should we design our revenue and portfolio over the next ten years under patent-cliff pressure?” If we analyze them through the lenses of value layers, risk and time, and portfolio fit, many apparently disparate transactions start to follow a common logic.
To me, ADC deals are one of the clearest interfaces between science and business. The same target and payload can be valued very differently depending on structural design, clinical strategy, portfolio context, and manufacturing plans. This is why some understanding of business matters increasingly for scientists, and some understanding of science increasingly matters for business leaders, in the ADC era.
In Part 5, we will focus on the rise of Chinese and other Asian ADC players and their impact on global deal structures. We will explore how the ADC map—once dominated by US and European players—is being redrawn, and where Japanese companies and investors might position themselves in this evolving landscape.
This article has been edited by the Morningglorysciences team.
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