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2023 biopharma M&A trends
M&A activity has rebounded to a degree in 2022 and 2023, but deal-making is still below some of the top years in recent decades, including 2011, 2014, and 2015. While M&A remains a fact of life in biopharma, buyers are selective about disease focus areas. Oncology, immunology and obesity/cardiometabolic therapies are a focus of many recent deals. Similarly, recent acquisitions tend to focus on de-risked targets in phase 3 or already on the market, reflecting acquirers’ risk aversion.
Despite increasing interest rates and FTC scrutiny, biopharma M&A activity remains resilient. “I do think that the market is remaining consistent,” said Rebecca A. Guzman, a partner at Duane Morris LLP. Guzman serves as a vice chair of the M&A division at the firm. “The regulatory landscape is obviously changing, and it’s something we’re continuing to watch. But I don’t foresee it necessarily having an impact on people’s strategy of continuing to build their pipeline.”
A buyer’s market
Rebecca Guzman
With the biotech industry facing a challenging phase over the past couple of years, with an uptick in layoffs, falling stocks and shuttered companies, acquirers tend to have sway in deal-making. But investors’ willingness to invest in early-stage assets depends on their risk profile.
A significant number of Big Pharma companies have venture arms dedicated to investing in earlier stage companies, with an understanding that developing external pipelines can be more efficient than what they can achieve within their four walls. “It’s not necessarily because they aim to eventually acquire all of these companies, but rather to accelerate the market overall — a rising tide lifts all ships, so to speak,” Guzman said.
With the biotech sector facing a challenging funding environment and scant IPO opportunities, M&A is the de facto exit strategy for many biotech firms with late-stage assets. Against that backdrop, there is a surge in deal capacity, according to IQVIA, with the top 15 pharma companies having a combined deal capacity of $0.8 trillion.
On top of that, Big Pharma companies continue to grapple with patent cliffs over the next several years. “In that regard, when you have a lot of cash on hand, there are really two main things you can do: give it back to your investors or reinvest it to try to make the pie bigger,” Guzman said.
Many companies are opting for the latter, making use of their strong financial positions to acquire biotech firms with late-stage assets in competitive areas. For example, in October, Roche entered an agreement to acquire Telavant, a biotech company developing therapies for inflammatory and fibrotic diseases. Telavant’s leading investigational product, RVT-3101, is a fully human monoclonal antibody targeting TL1A, which modulates the location and severity of inflammation and fibrosis. The drug candidate offers promise for ulcerative colitis and Crohn’s disease.
Similarly, also in October, Eli Lilly announced its plans to acquire Point Biopharma, a radiopharmaceutical company with a pipeline of clinical and preclinical-stage radioligand therapies in development for the treatment of cancer, for $1.4 billion.
In March, Pfizer said it plans on acquiring Seagen, a biotech company focused on developing cancer treatments, for a cool $43 billion.
More momentum to come?
Biopharma companies are increasingly looking to M&A to drive near-term revenue. As IQVIA noted, some 83% of transactions in the first half of 2023 focused on assets in phase 3 or already on the market. In addition, acquirers tend to prefer strategic bolt-on acquisitions, valued at less than $6.5 billion, over mega deals. Such deals accounted for 83% of all M&A transactions over the past five years, IQVIA reckoned.
As acquirers experiment with a more cautious and calculated M&A approach, savvy acquirers are likely to gain a competitive edge in a rapidly evolving market. Here, experienced Big Pharma companies with experience commercializing products are at an advantage. “There’s a common saying: ‘buy the approval, sell the launch,’” Guzman said.
By focusing on de-risked, phase 3 or market-ready assets, Big Pharma can ensure a quicker path to revenue generation, mitigating the risks associated with early-stage development. More M&A activity could be coming, Guzman projected: “I think it’s only a matter of time before there’s an additional uptick based on various market conditions and the ever-evolving regulatory framework,” she said. “I do think that we’re going to bounce back and that we’ll reach a point of more consistency.”
Filed Under: Drug Discovery, Drug Discovery and Development
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