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The line graph below shows the M&A deals for the first 24 days of January for each year from 2018 to 2024. By hovering over each line, you can see detailed data for each day, including the number of M&A deals. While this data is not exhaustive, it provides a sense of the variations in M&A activity across this time period.
M&A attractive as several Big Pharmas face looming patent cliffs
Several trends continue to drive this optimistic forecast. Large pharmaceutical giants like Pfizer need to fill looming revenue gaps from patent expirations. For example, Pfizer’s blockbuster blood thinner Eliquis faces patent expiration in 2026. Its breast cancer drug Ibrance faces patent expiration in 2028. Additionally, Pfizer’s kidney cancer drug Inlyta faces patent expiration in 2025. Cancer immunotherapy Keytruda, accounting for more than one-third of Merck’s sales, is set to begin losing patent exclusivity in 2028 in the U.S. and Europe.
Amgen and other major players face similar patent cliffs that will pressure them to develop new blockbuster drugs. Many Big Pharmas have considerable cash stockpiles sufficient for gobbling up innovative biotech firms. In the middle of 2023, the top 10 Big Pharmas had more than $120 billion in cash. Additionally, biotechs continue to face a challenging funding climate, making them more amenable to acquisition rather than IPOs.
ADC, CAR-T deals surge as pharma seeks cancer growth
Hot emerging areas in oncology include antibody-drug conjugates which precisely target cancer cells while sparing healthy tissue. There has been a surge of multi-billion dollar M&A deals and licensing agreements involving ADCs, as Big Pharma companies attempt to gain access to next-generation ADC technologies to fill impending revenue gaps. For example, Pfizer acquired Seagen for $43 billion, AbbVie is acquiring ImmunoGen for $10.1 billion, and Merck paid $4 billion upfront to partner with Daiichi Sankyo on 3 late-stage ADCs.
In diabetes and cardiovascular disease, SGLT2 inhibitors such as empagliflozin demonstrate unexpected benefits in heart failure patients that may go beyond simple blood sugar control. Additionally, GLP-1-based drugs such as semaglutide and tirzepatide show promise in protecting high risk diabetes patients from cardiovascular complications. In 2023, NEJM published the first paper highlighting the promise of semaglutide in reducing cardiovascular risk factors.
Clouds on the horizon for biopharma M&A in 2024?
While M&A activity continues to be resilient, some headwinds persist. Continued sharpened FTC scrutiny and regulatory reviews could pose headwinds for larger deals, with megadeals remaining potentially rare in 2023. And while biotech valuations dropped sharply from 2021 highs, as McKinsey has noted, competition remains fierce for innovative biotechs with strong late-stage data that can help fill pending revenue gaps for major drug companies.
In recent years, the industry has responded to uncertainty with creative deal structures with a focus on joint ventures for shared R&D, complex co-commercialization profit-sharing, and flexible, milestone-based licensing agreements. Royalty Pharma’s $1.5 billion deal to purchase future royalties on Roche’s SMA drug Evrysdi from PTC Therapeutics, for instance, featured backend-loaded milestone payments rather than a large upfront fee. In addition, there has been an uptick in the use of pre-agreed contingent value rights (CVRs). As Reuters noted, Bristol Myers Squibb used CVRs in a recent deal, making extra payments contingent on achieving regulatory and sales milestones. The use of CVRs in biotech deals has increased from 17% in 2018 to 30% in early 2023.
Given this precedent, the industry could continue to see fewer mega-mergers but more joint ventures, profit-sharing agreements, structured financing, and even reverse mergers with special purpose acquisition companies.
Filed Under: M&A trends, Oncology
