Takeout spend ticks up
M&A is back on the menu, but there are still reasons to be cautious.
After a dire first quarter for biopharma deals, investors will be hoping that a recent flurry of M&A activity – albeit largely on buyers’ terms – could signal the start of better times for the space.
A look at the second-quarter numbers, compiled by Evaluate Pharma, shows that a respectable $25bn was committed in the period, with the Pfizer-Biohaven deal counting for a big chunk of that figure. In terms of deal count, however, the quarter saw one of the lowest tallies in recent memory.
The final chart below shows that the second quarter is often the quietest three-month period of the year, so perhaps a pick up is on the way. There are other reasons for optimism among those hoping for a resurgence in acquisitions, to reinvigorate investor interest in the sector.
For one, the second quarter was dominated by full company takeovers, unlike the prior period, which saw a large contribution from other deal types such as majority and minority stake purchases and business unit buys (Takeover-driven resurgence fails to materialise for biotech, April 13, 2022).
The second quarter also saw numerous public companies get picked up, which could help lure would-be shareholders back to biotech. True, some of these were low-ball purchases, with certain targets seemingly having accepted the new reality.
But there were still some big deals, at least by recent standards. The largest was Pfizer’s $11.6bn purchase of Biohaven, with the big pharma predicting that the latter’s migraine franchise could bring in $6bn at peak. This currently seems high but Pfizer, flush from its Covid success, will be easily able to absorb such a bolt-on.
This analysis does not concern licensing deals, or takeouts of companies involved in medtech or digital health. Only acquisitions of pureplay developers are considered.
|Biggest biopharma M&A deals announced in Q2 2022|
|Pfizer||Biohaven Pharmaceutical Holding||Open||$11.6bn in cash up front|
|Bristol Myers Squibb||Turning Point Therapeutics||Open||$4.1bn in cash up front|
|GSK||Affinivax||Open||$2.1bn in cash up front (total deal value $3.3bn)|
|GSK||Sierra Oncology||Open||$1.9bn in cash up front|
|Halozyme Therapeutics||Antares Pharma||Closed||$960m in cash up front|
|Source: Evaluate Pharma.|
Bristol’s move for Turning Point also looks expensive, assuming that the $4.1bn price tag was based solely on that target’s lead asset, repotrectinib.
And GSK faced suggestions that it had overpaid for Sierra Oncology; the UK group has been trying to buy itself a better pipeline ahead of its consumer spinout, but it will no longer look so desperate if its respiratory syncytial virus vaccine can live up to expectations.
One conclusion that could be drawn from these criticisms of overpaying is that pharma remains happy to spend big on desired assets. This should be reassuring for investors in smaller developers.
Still, none of the above acquisitions falls into mega-merger territory, and it might take something bigger to convince the markets that M&A really is back on the menu.
One such example would be a takeout of Seagen, with Merck & Co said to be in the frame. Seagen currently has a market cap of $33bn, so if this deal happens it would more than double the total spent on M&A so far this year.
After a long weekend in the US, biotech watchers hoping for news on that front were disappointed (at least by time of press). A small $100m deal by Astrazeneca concerning a spin out of Teneobio failed to whet whistles.
Jefferies analysts, for one, hope that the worst of the bear market has now passed, and that things should “perk up” towards the end of this year. They reckon that if big binary readouts from the likes of Alnylam and Karuna are positive, and if there’s more M&A, generalists could start to return to biotech.
At the moment, though, these look like fairly big ifs.