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2023 Mergers and Acquisitions



A ‘blistering’ start to M&A in 2023 stokes hopes of a market rebound, as insiders predict a surge in deals


Big drugmakers have started 2023 with their checkbooks out, signing several multibillion-dollar takeovers in what some industry insiders see as the start of an M&A surge focused on snagging blockbuster drugs.


The upswing in deals follows a year of falling stock prices and startups that have struggled to access private capital. Those two trends are related: The drawdown has pulled down valuations to reasonable levels at a time when pharma giants have cash and need to reload their pipelines. As Jefferies analyst Michael Yee summed up in a recent note to investors: “Lower valuations and hungry pharma.”


“Every single major pharma company is in shopping mode, right,” said John Maraganore, the former CEO of Alnylam Pharmaceuticals who now advises a range of startups and investment groups, in an interview with Endpoints News. “I am generally optimistic that the surge of M&A, which typically catalyzes a lot of bullishness in the biotech market, will ultimately fuel a better second half of the year as inflation comes under better control.”


Drugmakers’ remarks will be closely watched in the coming week for how they talk about deals during their first-quarter earnings calls.

Already, biopharma companies have tallied $64 billion in M&A deals this year. In the last few weeks alone, Pfizer said it will pay $43 billion for Seagen, Merck agreed to acquire Prometheus Biosciences for $10.8 billion, and GSK said it will buy Bellus Health for $2 billion. It’s a “blistering” pace on track for $300 billion by year’s end, according to research by the investment-banking firm Torreya, and that could approach the all-time deal record of $328 billion in 2019.


“We’re really seeing what we expected would come,” said Kevin Oliver, a former Merck deal veteran who now runs business development at the China-based Simcere Pharmaceutical Group.


Maraganore’s prediction is backed up by hints in securities filings, which reveal that beyond the known winners, multiple companies with big checkbooks lost out and may still have appetite.


According to public disclosures, Sanofi and Johnson & Johnson were in talks to acquire Horizon Therapeutics, which Amgen agreed to acquire for $28 billion last December. There were three other undisclosed parties interested in Seagen before Pfizer reached a $43 billion deal. And sources familiar with Merck’s deal for Prometheus have acknowledged that the 75% premium paid for the biotech was a reflection of a competitive negotiation process.


In addition, AbbVie lifted a $2 billion self-imposed M&A cap in February, signaling an interest in bigger deals. Bill Anderson and Chris Viehbacher will settle into new respective CEO roles at Bayer and Biogen, and both could soon be looking for more acquisitions. Viehbacher has stoked M&A expectations with his background, which includes leading Sanofi through acquiring Genzyme.


The mood has helped drive up the closely watched $XBI biotech index by about 9% since the Pfizer-Seagen deal was announced on March 13. Still, the pain of the last two years is nowhere near over. Venture funding hit multi-year lows for biotechs in the first quarter of 2023, and the XBI is about 50% off its all-time high from February 2021. And macro factors like interest rates still loom large.


Immunology sees a ‘renaissance,’ oncology & platform bets cool


While potential acquirers are plentiful, takeover targets have become more focused on later-stage assets with big sales potential.


Maraganore said pharma is looking to buy either revenue-generating businesses with growth prospects like Horizon or Seagen, or late-stage potential blockbusters like Prometheus or Takeda’s $4 billion-plus buy of Nimbus Therapeutics’ TYK2 inhibitor.


Recent deals show surging interest in immunology, such as Merck’s buyout of Prometheus centered around an experimental inflammatory bowel disease drug.


“Auto-immune and inflammatory diseases are definitely having a renaissance,” Raymond James biotech analyst Dane Leone said.


Other hot areas include cardiometabolic and neurology, analysts said, with the key element of having big patient populations that can support $1 billion-plus in annual sales.


“I wouldn’t be remotely surprised if Biogen did something in psychiatry,” said Paul Matteis, a Stifel analyst who covers the company, adding that the biotech has said it would also consider deals in immunology and rare diseases.


Other once-hot areas have become less attractive. Targeted oncology has “cooled off a bit for the moment,” Leone said, while immuno-oncology is narrowing its focus onto drugs that can be co-formulated with an existing therapy, like Bristol Myers Squibb’s Opdualag. An explosion of cancer startups and drugs has left oncology a crowded space, with too many biotechs chasing similar ideas.


There’s also less appetite for platform technologies, analysts said. In the pre-Covid days, pharma giants acquired earlier-stage startups like cell and gene therapy players Spark Therapeutics and Audentes Therapeutics. Some of those have panned out, but others have disappointed. Sanofi, for example, posted an impairment charge of about $1.7 billion last October from its $2.5 billion purchase of Synthorx, an early-stage biotech.


“A Spark-type transaction does not feel like it’s the transaction of 2023,” Matteis said.

Not just Big Pharma


Beyond the behemoths, biotechs with strong balance sheets are also preparing.


Genmab CEO Jan van de Winkel told Endpoints this month he wouldn’t shy away from immunology M&A. And at an investor conference in March, Neurocrine executives said they have a $3 billion to $4 billion “goalpost” for deals and are “as aggressive as we’ve ever been,” according to a transcript provided by AlphaSense.


Even well-funded startups are searching. Lux Capital’s Josh Wolfe said he expects a surge of tuck-in acquisitions over the next two quarters, hinting that the private startup Eikon Therapeutics, where he sits on the board, could be active.


The most recent buyers also aren’t out of the hunt, particularly as they feel out how the Inflation Reduction Act may impact future revenues and reload before major patent cliffs. Analysts estimate Pfizer has roughly $60 billion in deal capacity after Seagen, with that deal bringing Pfizer about $5 billion shy of its target of adding $25 billion in risk-adjusted 2030 revenues through deals. Merck is bracing to lose IP protection on its key moneymaker Keytruda in 2028.

Deals won’t save everyone


Valuations have come down, but in the end, buyers want top assets.


“It’s true they are lower,” Vertex CFO Charles Wagner said at Cowen’s healthcare conference in March on valuations. “But most important to us is finding deals that are on strategy. And so there is no valuation at all which we’ll do something off strategy.”


And because of the focus on future blockbusters, rather than early science lottery tickets, there are fewer companies that fit the bill. Maraganore ballparked that 25% of biotechs — at most — clear that bar.


“The vast majority of biotechs out there are undifferentiated, and unfortunately, many of them aren’t going to make it,” he said. “There should be some appropriate survival of the fittest in this environment where we end up with a much stronger group of companies on the other side.”


And it’s little balm to small, private companies that rely on VC funding. Ali Behbahani, a general partner at the VC firm NEA, said the M&A uptick has far less impact on his world of early-stage investing.


“I’d love to believe we’re going to see a huge wave of M&A coming, and maybe we will,” he added. “Historically we’ve seen it, but it doesn’t make up for the big shortfall of being able to take 100 companies public a year and raising that capital.”


Ref: https://endpts.com/biotech-ma-gets-off-to-a-blistering-start-in-2023-as-insiders-predict-surge-in-deals/



M&A deals in life sciences sector to rebound in 2023, says EY



2022 was a slow year for dealmaking in the global life sciences industry. But as companies face a rapidly changing market, and conditions for deals improve, 2023 is set to become a more active year for life sciences deals, according to a new report by EY.


With ‘only’ $105 billion in life sciences M&A deals completed in 2022, last year was the industry’s lowest dealmaking year by value since 2017. Compared to 2021, deal volume was down 27%, while deal value slumped by 53%.

The development aligned with broader global dealmaking trends for all industries – due to disruptive uncertainties, ongoing geopolitical conflicts and macroeconomic volatility, overall M&A investment worldwide saw a similarly considerable drop.




In the biopharma segment, M&A investment fell 42%, with much investment focus going towards alliances rather than acquisitions. The medtech segment saw an even larger drop. Despite the massive $16.6 billion acquisition of Abiomed by Johnson & Johnson in the United States, merger & acquisition value plunged by 62%.


2023 set for a rebound?

For this year EY’s experts expect that dealmaking activity will pick up. Early signs already unfolded late 2022, when Amgen announced it will pay a massive $28.5 billion to acquire Horizon Therapeutics, which markets the thyroid ocular disease blockbuster Tepezza (teprotumumab-trbw)*.

“And there are strong reasons to suspect Amgen will not be the only big player making a return to the big dealmaking table in 2023”, said Subin Baral, global deals leader for the life sciences industry at EY.

Meanwhile, a smaller but sizeable deal closed last week: AstraZeneca expanded its cardiovascular capacities with the $1.8 billion acquisition of CinCor.



For one, the life sciences industry has deep reserves of deployable capital – funding that can readily be put to use (comparable to ‘dry powder’ in private equity). According to EY’s calculations, the biopharma industry alone holds over $1.4 trillion in deployable capital: an 11% increase on 2021, and the highest level recorded since EY started tracking the metric in 2014.


Second, the M&A drop in 2022 has dragged valuations down, meaning that companies are now incentivised to acquire ‘cheap’ targets. They will however face stiff competition in this space – EY suggests that private equity funds are increasingly turning to life sciences in their hunt for attractive deals, and buy-and-build platforms.


Third, there is an ongoing innovation renaissance in the life sciences sector, including advances in cell and gene therapies, mRNA, digital technologies and data analytics. “Turning to deals – or partnerships and alliances with innovative players – can be an effective way to accelerate ambitions,” said Baral.


A more long-term driver, revenue erosion is another factor that will come to play in 2023. As leading products lose patent protection and face competition from lower-priced generic and biosimilar challengers, the biopharma industry is set to experience significant revenue erosion over the next decade.


“Companies therefore need strong pipelines and a deep therapeutic focus to realise value, which will give them further incentive to seek high-value acquisitions,” Baral stated.


Making dealmaking work

While the life sciences industry “has got the resources, the incentives and the opportunities to lean into making major M&A moves again in 2023,” said Baral, the sector will have to adapt its M&A processes to the changed environment. In addition, the EY leader advises companies to “take a more strategic and end-to-end perspective” as to how deals can deliver value to core strategies.


Ref: https://www.consultancy.eu/news/8404/ma-deals-in-life-sciences-sector-to-rebound-in-2023-says-ey

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