Biopharma Deal Trends: Upfront Payments Rise as Earnout Potential Declines

In a shifting landscape of pharmaceutical industry dealmaking, recent data reveals a notable trend: while the average earnout potential in biopharma deals has decreased over the past five years, upfront payments have seen a steady increase since 2017. This development, highlighted in a recent analysis by SRS Acquiom, a U.S. loan agency and post-closing shareholder representative, offers insights into the evolving dynamics of industry partnerships and acquisitions.

Earnout Potential and Upfront Payments: Diverging Trends

The mean earnout potential for biopharma deals from mid-2023 to mid-2025 stood at $437 million, based on SRS Acquiom's analysis of 64 deals. This figure represents a significant decline from the $494 million recorded in the mid-2021 to mid-2023 period, and an even steeper drop from the COVID-19 era's $683 million.

In contrast, upfront payments have shown a consistent upward trajectory. The most recent period saw average upfront payments reach $386 million, up from $303 million in the previous two-year period and $272 million from mid-2019 to mid-2021. This trend suggests a shift in deal structures, with acquiring companies seemingly more willing to commit larger sums upfront while reducing potential long-term payouts.

Milestone Achievement Rates and Earnout Collection

The data also sheds light on the challenges companies face in meeting milestone events and collecting earnouts. As of mid-2025, only 22% of biopharmas represented by SRS Acquiom had hit milestone events, unchanged from 2023 but notably lower than the 34% recorded in 2021.

A deeper dive into 128 biopharma deals with at least one milestone due by mid-2025 reveals a stark reality: 45% of these deals hadn't garnered any earnout money, while a mere 5% had collected between 75% and 100% of their potential earnout worth. This suggests that the majority of companies are struggling to realize the full value of their deal structures.

Missed Opportunities and Timing of Milestone Achievements

The analysis of 609 milestone events across the 128 deals paints a sobering picture of missed opportunities. Biopharmas missed these milestones 73% of the time, accounting for 443 events and leaving a staggering $27.4 billion in uncollected biobucks on the table. Only 22% of events (136) resulted in milestone earnouts, totaling $6.5 billion.

Timing also plays a crucial role in milestone achievement. Of the 136 paid events, 56 occurred within the first two years of deal closing, highlighting the importance of early-stage success. In contrast, only eight milestone collections took place more than seven years after closing, underscoring the long-term nature of some biopharma developments and the patience required in realizing deal value.