
Buyouts provide no shortcut to success
M&A is back, but how often do deals pay off?

After a lull in acquisitions, deals are back on the agenda. But how reliable are company takeouts as a way of restocking pipelines? Somewhat less than other avenues, according to a new analysis by Evaluate Vantage.
In a potentially worrying trend, the lead assets from these deals were less likely to gain approval than the industry average. This is surprising given that big pharma business development teams have presumably taken a good look at the companies they are acquiring, and then deemed their assets to have a high chance of success.
Definition of success
Obviously, this does not always work out. Sanofi’s purchase of Principia, for example, always looked risky, and is now in big trouble. Still, it is too soon to say whether this buyout is a failure, given that it was only agreed fairly recently and Principia’s lead project, tolebrutinib, has not yet been fully tested.
As such, most of the acquisitions covered by this analysis are several years old, to give assets a fair shot at approval.
The data also exclude companies involved in medtech or digital health, and only concern full company buyouts, not licensing deals or acquisitions of individual products or business units. The most advanced asset at the time of the takeover was assumed to be the driver of the deal; if the target company had several projects at the same stage of development, the buyout was counted as a success if any of these reached the market.
Vantage set out to evaluate what proportion of company takeovers could be deemed “successful”. Whether the most advanced project included in an acquisition eventually gained approval was used as a proxy for success – and deals were only counted if this asset was in the clinic at the time of the transaction.
More recent deals, particularly those concerning early-stage assets, need time to prove their worth, of course. So this analysis used the industry median time to approval for each phase of development, provided by Evaluate Omnium, as a benchmark.
For an asset in phase 3 this is nearly four years. So phase 3 projects acquired within the last four years that remain in development were discounted, and the deal is not judged a success or failure. Over the three phases, 250 deals were cut out on this basis, because the lead project still had time to run on this industry median time to approval.
Projects that achieved a faster-than-average approval were kept in, however, and these deals were judged a success.
Expected approval times | |
---|---|
Development stage | Median time to approval |
Phase 1 | ~ 9 years |
Phase 2 | ~ 6.5 years |
Phase 3 | ~ 4 years |
Filed | ~ 10 months |
Source: Evaluate Omnium. |
Some deals will always be riskier than others, of course. Those signed at a later stage should be more likely to result in an approved product than early-stage buys – something that is usually reflected in the acquisition price.
But these numbers suggest that assets acquired via company buyouts, across the phases of development, are less likely to get approved than the industry average. Groups currently shopping for deals take note.
Despite all this, company acquisitions still get done, and the reason is clear: when things work out, they can work out really well. The table below shows a list of deals that have paid off – and then some – for the buyer.
Bristol Myers Squibb’s move for Opdivo’s developer, Medarex, is the most notable, although at the time the group was more interested in Yervoy. The reason Merck & Co’s similarly serendipitous purchase of Schering-Plough is not included here is that the project that eventually became Keytruda was preclinical at the time of that deal.
It will be some time before it becomes apparent whether the current M&A crop was worth it.
Notable clinical-stage projects acquired in M&A deals | ||||||
---|---|---|---|---|---|---|
Product | Acquiring company | Target company | Deal date | Status on acquisition | Deal value ($m) | NPV+PV ($m) |
Opdivo | Bristol Myers Squibb | Medarex | 2009 | Phase 1 | 2,400 | 82,200 |
Entyvio | Takeda |
Millennium Pharmaceuticals (via Leukosite)
|
2008 | Phase 2 | 8,800 | 20,053 |
Prezista | Johnson & Johnson | Tibotec-Virco | 2002 | Phase 2 | 320 | 18,882 |
Sovaldi | Gilead | Pharmasset | 2012 | Phase 3 | 11,200 | 16,824 |
Yervoy | Bristol Myers Squibb | Medarex | 2009 | Phase 3 | 2,400 | 16,494 |
Erleada | Johnson & Johnson | Aragon Pharmaceuticals | 2013 | Phase 2 | 1,000 | 16,345 |
Zytiga | Johnson & Johnson | Cougar Biotechnology | 2009 | Phase 3 | 970 | 13,688 |
Lynparza | Astrazeneca | Kudos Pharmaceuticals | 2006 | Phase 2 | 210 | 12,680 |
Tecfidera | Biogen | Fumapharm | 2006 | Phase 3 | 535 | 11,143 |
Cimzia | UCB | Celltech Group | 2004 | Phase 3 | 2,770 | 10,810 |
Source: Evaluate Pharma. NPV=net present value & PV=present value, representing future and past product-associated cash flows respectively. |