Amgen saves biopharma’s buyout year

Beaten-down biopharma was given a well-needed boost in the closing weeks of 2022, when Amgen won the bidding for Horizon Therapeutics. The $28bn deal also rescued the sector’s M&A stats, taking the total capital committed to just over $90bn.

Remarkably, transactions struck by just two companies – Pfizer and Amgen – account for more than half of that figure. The former is spending its Covid cash while the latter is trying to replace fading blockbusters, a motivation expected to drive deal making at other large developers in the coming months.

Three small deals that emerged yesterday at the JP Morgan healthcare conference probably give a taste of what is to come – smallish bolt-on deals that come with risk-sharing structures. With biotech valuations still depressed, acquirers have the power to dictate terms.

“The M&A environment has turned on its head from a seller’s to a buyer’s market,” Subin Baral, global life sciences deals leader at EY, told Evaluate Vantage. “The onus is on the seller to make sure they are a compelling asset.”

This power play was on show in 2022, with companies as diverse as Epizyme, Radius and F-Star finally accepting the new reality and selling out at depressed valuations.

Biopharma’s top-line M&A stats reflect this trend. The table above shows that the number of transactions did not really dip last year, though the total sum committed hit a five-year low. The median deal value dropped to a four-year low.

This picture would look a lot sorrier had Amgen not decided to pay up for Horizon. A big question is whether the sector is in for another long wait for the next big deal; the last transaction of comparable size was Astrazeneca's late-2020 takeout of Alexion, for $39bn.

Valuations at the more established end of the sector have been mostly unaffected by the market rout – many large developers have benefitted from their so-called defensive qualities. This means that filling revenue gaps will be expensive, though the looming patent cliff at the end of this decade will eventually force hands.