Pfizer's fortunes overshadow first-quarter dealmaking

Aside from Seagen, small takeouts dominate the first quarter.

Pfizer accounted for almost a quarter of biopharma’s buyout spend last year, a contribution that looks set to grow considerably in 2023. This is thanks to the $45bn it has pledged to spend on Seagen – antitrust approval pending – in the sector’s biggest buyout since the Abbvie-Allergan deal in 2019.

Excluding this huge transaction, however, drug developers spent a mere $8.8bn on buyouts in the first quarter, according to Evaluate Pharma. The volume of dealmaking remains in line with activity levels seen last year but, with the exception of Pfizer, the sector seems reluctant to spend big.

The analysis below concerns only full company acquisitions where the target was a pure-play drug developer. Other types of M&A deals, like business unit buys, product acquisitions or licensing deals, are not considered; also excluded are takeovers of device makers or diagnostics groups, for example.

It is worth noting that the figures above include deals that have yet to close. Heightened FTC scrutiny of pharma deals is causing antitrust clearance to take much longer than in the past – Pfizer has said the Seagen acquisition might not clear until early 2024, and Sanofi yesterday delayed close of its Provention buy to give more time for FTC scrutiny.

Last year’s biggest move, Amgen’s $28bn bid for Horizon, is also stuck in regulatory limbo, although the big biotech says it hopes that this will close in the first half. Few expect these deals to be turned down in totality, although disposals might have to be made, news on which will be a big focus.

Some believe that the newly onerous antitrust process is making buyers think carefully before making a move. This is possibly increasing the appeal of smaller deals, which are more easily cleared; the sector has been favouring so-called bolt-on deals for some time now, for various reasons including the perception that huge mega-mergers are valuing destroying. 

Apart from Seagen the first-quarter deals were small, with a huge valuation gap between that transaction and all others. Valuations are depressed, of course, and this lies at the root of another theme for 2023: the string of opportunistic moves that emerged.

Tough economic circumstances are forcing many developers to consider their options, and buyers are further flexing their muscles by insisting on contingent payments. Of the 10 first-quarter company takeouts with disclosed deal terms, eight employed either CVRs or downstream payments, dependent on predetermined future successes.

The equity markets remain tough, the IPO window is barely open and venture firms are keeping the purse strings tight. For sellers at the smaller ender of the sector these factors will make for difficult times at the negotiation table in the coming months. 

Biggest biopharma buyouts announced in Q1 2023
Acquirer  Target  Status  Deal terms 
Pfizer Seagen Open Total value $43bn
Sanofi Provention Bio Open Total value $2.9bn
Astrazeneca Cincor Closed $1.3bn up front (plus CVR worth a further $500m) 
Chiesi Amryt  Open $1.25bn up front (plus CVR worth a further $225m)
Ipsen Albireo  Closed $952m up front (plus CVR worth a further $227m) 
Source: Evaluate Pharma.

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