Subin Baral Pharma companies are seemingly heeding that message, as many of the challenges mentioned haven\u2019t deterred dealmaking pursuits. Instead, activity has notably surged in recent months, echoing the theme of EY\u2019s latest annual Firepower report, spearheaded by Baral, of \u201cback in business.\u201d1<\/sup> After a flurry of deals announced in mid-to-late December, Baral notes that total M&A value for 2023 reached $215 billion, up 51% from 2022 and closer to pre-COVID-19 pandemic levels. The deals included:<\/p>\n Though deal volume grew only 2% last year, 2023\u2019s agreements were significantly larger, notes Baral. Cases in point: Amgen\u2019s $27.8 billion acquisition of Horizon Therapeutics and Pfizer\u2019s $43 billion purchase of Seagen, completed in October and December, respectively, and both after initial FTC antitrust concerns; and AbbVie\u2019s $10 billion buyout of ImmunoGen, announced in late November.<\/p>\n Adding to the momentum more recently was a spate of high-profile deals unveiled at the J.P. Morgan Healthcare Conference in early January. Those included:<\/p>\n Just this week, news broke of Sanofi\u2019s acquisition of Inhibrx, worth up to $2.2 billion, and Merck\u2019s macrocyclic peptide partnership with Unnatural Products for $220 million.<\/p>\n The reported positive vibes and renewed optimism expressed by C-suite leaders on hand at the JPM event aligned with expert expectations for biopharma M&A in 2024. PwC, in its yearly Deals Outlook Report, projects activity levels in the $225 billion to $275 billion range across subsectors.2 <\/sup>Executives, PwC predicts, will continue to deploy cash balances and pursue areas of innovation and clinical differentiation to help address growth threats in the latter half of the decade.<\/p>\n In its Industry Credit Outlook 2024 report, released in January, S&P Global Ratings also sees the M&A wave sustaining power in the near term, pointing to the strategic need for companies to accumulate economies of scale, and secure higher reimbursement rates from payers, despite the elevated interest rate environment.3<\/sup><\/p>\n Michael Abrams \u201cMany organizations are seeing extraordinary cash inflows\u2014and given the depressed valuations of smaller firms, it really has been a Big Pharma\u2019s buyers\u2019 market,\u201d Michael Abrams, managing partner, Numerof & Associates, tells Applied Clinical Trials<\/em>. \u201cConsolidation within the industry, I think, is going to continue\u2014with particular interest in oncology, rare disease, and immunology.\u201d<\/p>\n Despite healthy footing in the immediate future\u2014for example, Baral points out that the industry, according to EY reporting, has $1.37 trillion in capital available for dealmaking\u2014the looming patent cliff is poised to widen biopharma\u2019s \u201cgrowth gap\u201d considerably. The growth gap is defined as the difference between forecasted company revenue streams, along with projected sales from internal therapeutic candidates currently in clinical trials, and the revenue at risk from patent losses to top-selling, established brands and subsequent competition from generics and biosimilars. EY\u2019s Firepower report projects that Big Pharma will be faced with a growth gap of more than $120 billion by 2028, doubling from the $60 billion estimated by 2026. <\/p>\n \u201cWhat that means is there\u2019s not enough [quality] pipeline in the R&D system to be able to bridge the gap that that we expect the industry will have. That is a prime trigger for access to external innovation, M&A, partnership, etc.\u201d Baral tells ACT.<\/em><\/p>\n At the same time, Baral is quick to remind that these organizations\u2014the traditional pharma behemoths\u2014\u201cdidn\u2019t wake up yesterday thinking, \u2018holy cow, now we have a risk of a patent cliff.\u2019” In reality, they have long factored such events into their ongoing planning and problem-solving in product lifecycle management. Today, these efforts are more routinely prioritizing the need for specialization, and, hence, in M&A pursuits, a sharpened focus on areas where companies can add tangible value.<\/p>\n \u201cThe key, going forward, is that the assets with the right science and the right data behind them will continue to get a lot of traction and valuation,\u201d says Baral, citing in particular the treatment promise, and, by extension, increased dealmaking interest, in therapeutic settings such as:<\/p>\n \u201cThe onus is now back on the sellers to really prove that their asset has legitimacy to take it to the next phase of development, so that they can entice the buyer pool to come to the table,\u201d says Baral.<\/p>\n The path from there, if a deal is ultimately struck\u2014and the job of beginning to secure and maximize the long-term value\u2014remains a major theme of biopharma M&A. In many cases, the stories are still being written.<\/p>\n \u201cIt could be a multibillion-dollar multinational buying a startup, development-stage company with a different culture, different dynamics, and a different focus,\u201d says Baral in describing one scenario. \u201cHow do you manage and balance the integration process so that you don\u2019t lose the continuity of the development spirit, the passion for science that these entrepreneurial companies have\u2014and so they don\u2019t get stifled by the big corporate red tape, if you will, that can hinder the development cycle?\u201d<\/p>\n Not surprisingly, licensing and partnership arrangements, centered on acquiring or collaborating on drug or technology assets, are also garnering increased interest in the current business climate, with particular appeal to prospective buyers. According to data from Syneos Health\u2019s 2024 Dealmakers\u2019 Intentions Survey, 2023 experienced a significant uptick in deal value generated from partnerships.4<\/sup> Such agreements, collectively, totaled close to $400 billion last year, up more than 60% from 2022. Syneos surveyed 169 members of the biopharma community who participate on one or both sides of a deal. Among emerging areas of partnering Syneos identifies is cell and gene therapies, with 67% of respondents stating they are actively or opportunistically seeking deals in the space. Interest likely grew further after UK and US regulators approved the first-ever CRISPR\/Cas9 gene-editing treatment for sickle cell disease late last year.<\/p>\n Executives surveyed anticipate similar to slightly higher levels of partnering in 2024, with buyers, Syneos reports, more bullish about striking traditional licensing arrangements\u2014expecting sellers to continue to seek out partners given the still-likely constrained capital markets and financing picture. At the same time, the report notes that \u201csellers with the right molecule may spot attractive opportunities to partner with larger, integrated service providers offering flexible and scalable capability to help cope with evolving needs.\u201d<\/p>\n The apparent tighter vice on pending deals of late by the FTC, and contentions of anticompetitive practices, have clouded the licensing picture somewhat as well. Notably, in December, Sanofi decided to terminate its proposed acquisition of an exclusive license to finance further development of Maze Therapeutics\u2019 experimental drug for Pompe disease, which has completed Phase I trials.5<\/sup> The partnership was first announced last May. The FTC decided to challenge the arrangement, claiming it would create a monopoly for drugs to treat the rare and potentially fatal genetic condition. Sanofi, in its statement,6<\/sup> cited the delay and protracted litigation for pulling out of the deal, which the FTC had valued at $755 million.<\/p>\n \u201cThat set off some concerns and alarm bells,\u201d says Abrams. \u201cWe have to better understand exactly what it was that the FTC found objectionable there. But, overall, deals like that will continue.\u201d<\/p>\n There is similar sentiment around the M&A-FTC dynamic as well. The agency\u2019s challenge last year of the Amgen-Horizon union and its antitrust review of Pfizer-Seagen (both deals were ultimately settled and cleared, respectively) triggered worries at the time of potentially dampening dealmaking appetites. Though acknowledging that the FTC will likely remain focused on biopharma (the agency contends industry consolidation has contributed to rising healthcare costs), S&P Global, in its report, doesn\u2019t believe the continued scrutiny will put a dent into M&A volumes in 2024. Acquisitions, however, may take longer to complete in this heightened climate, S&P Global adds.<\/p>\n \u201cIt is a deterrent, but it\u2019s not stopping companies from pursuing deals,\u201d Baral tells ACT<\/em>. \u201cMaybe there will be higher thresholds that they\u2019ll have to clear with the regulators to get the deal approved.\u201d<\/p>\n The potential ripple effects from the IRA on dealmaking aggression may be more complicated to track\u2014particularly with the legislation\u2019s uncertain fate in an election year. The bill, passed in August 2022, allows the Centers for Medicare & Medicaid Services (CMS) to negotiate prices on certain expensive and branded prescription medicines. CMS\u2019s first 10 drugs to be negotiated were announced in August 2023, triggering several lawsuits from Big Pharma. A report issued this month by Vital Transformation argued that a proposed expansion to the IRA, which would increase government price setting to up to 50 selected Medicare drugs starting in 2029\u2014and extend the program to the commercial market\u2014would severely hamper the biopharma industry, including, the report says, $55 billion in lost partnership investments for the most impacted companies.7<\/sup> The healthcare consultancy also alludes to \u201ccurrent drops in investments since the introduction of the IRA.\u201d<\/p>\n Likely swaying such investment decisions today, Abrams says, is the IRA\u2019s favorable position on new large-molecule biologics compared to small-molecule drugs. Provisions allow the former 13 years of immunity from mandated price negotiations, while setting a nine-year exemption period for the latter.<\/p>\n \u201cIt\u2019s likely to tilt the M&A surge toward large-molecule drugs. What that could translate to is a very real strategic shift in pipelines toward biologics,\u201d Abrams tells ACT<\/em>. \u201cThe legislation has effectively raised the risk and shortened the timeframe where manufacturers can hope to recruit their investment in any new medicine.\u201d<\/p>\n Such IRA drug distinctions could theoretically boost the impetus around efforts to revive the IPO market in biotech. After a quiet 2023, venture capital-infused activity in the life sciences has shown signs of life early in the new year,8<\/sup> aligning with expert sentiment of an expected, gradual uptick and resetting of sorts for biotech valuations. This may bode well for the perhaps preferred deal targets of today: young startup and emerging clinical-stage companies with promising and differentiated therapies in development. For example, Syneos\u2019s survey found that those companies focused on artificial intelligence (AI)-based discoveries\u2014or attempting to advance biopharma-specific technology innovation\u2014may attract buyers at premium prices for much of 2024.<\/p>\n Of course, despite the optimistic signs of late, and the synergy with Big Pharma\u2019s dealmaking surge in benefitting the wider ecosystem, investment challenges remain, including the still \u201cdisconnect between where Big Pharma is interested in versus where biotech needs money,\u201d says Baral. He points as well to the added hoops and assurances VCs are asking for today when deciding whether to fund early proof-of-concept assets to the maturity levels normally needed to attract interest and engagement from large pharma.<\/p>\n \u201cBiotech has always been a very resilient industry; it\u2019s in its DNA,\u201d adds Baral. \u201c\u2026 But [VCs] are very selective in where they are going to put their investment. The thresholds are much higher for a lot of these companies to prove why someone should invest in their technology and science.\u201d<\/p>\n Baral, nevertheless, sees the door open for additional flurries of IPO activity and investment in the coming months. Private equity-backed financing is also poised to return to the scene more actively this year, experts believe, as well as other funding structures to help support R&D activities and advance hopeful new medical treatments and interventions.<\/p>\n \u201cThe FOMO (fear of missing out) factor it at work for some of the investment community, but there’s a high level of perceived risk as well,\u201d says Abrams. \u201cI think the issue is whether the investors that focus on that space get bolder and less risk-sensitive. \u2026 There are a lot of considerations in driving this business and obviously there are potential big payouts, too. But you really have to negotiate the business end of it. What it takes to do that is changing day by day.\u201d<\/p>\n Spikes and valleys in M&A and dealmaking activity have been fairly routine and expected occurrences over the years in the biopharmaceutical sector. Just when they\u2019ll strike, however, and the trajectories triggered as a result, are becoming less easy to pin down these days. That\u2019s due in large part to a wildly evolving and complex operating […]<\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"author":2,"featured_media":497385,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[49],"tags":[],"acf":[],"gt_translate_keys":[{"key":"link","format":"url"}],"_links":{"self":[{"href":"https:\/\/platohealth.ai\/wp-json\/wp\/v2\/posts\/497379"}],"collection":[{"href":"https:\/\/platohealth.ai\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/platohealth.ai\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/platohealth.ai\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/platohealth.ai\/wp-json\/wp\/v2\/comments?post=497379"}],"version-history":[{"count":1,"href":"https:\/\/platohealth.ai\/wp-json\/wp\/v2\/posts\/497379\/revisions"}],"predecessor-version":[{"id":497384,"href":"https:\/\/platohealth.ai\/wp-json\/wp\/v2\/posts\/497379\/revisions\/497384"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/platohealth.ai\/wp-json\/wp\/v2\/media\/497385"}],"wp:attachment":[{"href":"https:\/\/platohealth.ai\/wp-json\/wp\/v2\/media?parent=497379"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/platohealth.ai\/wp-json\/wp\/v2\/categories?post=497379"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/platohealth.ai\/wp-json\/wp\/v2\/tags?post=497379"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
Global life sciences deals leader
EY<\/em><\/p>\n<\/div>\n<\/div>\n![](\"https:\/\/platohealth.ai\/wp-content\/uploads\/2024\/01\/the-twists-and-turns-in-biopharma-dealmaking-2024-trends.jpg\")
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Managing partner
Numerof & Associates<\/em><\/p>\n<\/div>\n<\/div>\n![](\"https:\/\/platohealth.ai\/wp-content\/uploads\/2024\/01\/the-twists-and-turns-in-biopharma-dealmaking-2024-trends-1.jpg\")
<\/div>\n<\/div>\n<\/div>\nCLOSING THE GAP(s)<\/strong><\/h2>\n
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<\/div>\n<\/div>\n<\/div>\nA LENS ON LICENSING<\/strong><\/h2>\n
IRA IMPLICATIONS<\/strong><\/h2>\n
A BENEFIT FOR BIOTECH?<\/strong><\/h2>\n
References<\/strong><\/h2>\n
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