Opportunities arise for once-spurned partners

The ability of a small developer to retain ownership of a prized asset has a lot to do with wider market conditions. And right now those conditions are terrible.

The Biohaven board would certainly have considered this fact while weighing up whether to sell out to Pfizer, presumably having rejected such a proposal six months earlier. Which begs the question – which other groups might be regretting an earlier independent streak, and would now look favourably on an offer from a larger partner that had once seemed too cheap?

Aurinia is a prime example. If rumours were true Aurinia attracted the interest of Bristol Myers Squibb last year, talk that caused shares in the small biotech to almost double. The stock is now trading at a third of that price, and the company's market cap is struggling to stay above $1bn.

As a small company undertaking a solo launch Aurinia is considered a high-risk proposition by investors, many of whom would applaud a buyer emerging. Whether they would be happy with a deal struck at these depressed levels, having enjoyed a substantially higher valuation only six months ago, is another question.

Welcoming the land grab?

The problem for small companies, and their investors, is that the stuttering stock markets and wider economic malaise could easily deteriorate further. Calling time sooner rather than later could prove a wise move (Six months on, Biohaven succumbs to Pfizer, May 10, 2022).

Larger developers do not always want to buy an entire company, of course, particularly when interesting assets are early stage, and still high risk. But if they are on the hook for significant payments down the road, and a project is looking promising, a slump in the target’s valuation could make a land grab a no-brainer.

The table below calls out a few possible candidates, where parties on both sides of the table could find themselves considering their options.

Some of these projects probably represent too much of a bet at this stage for the bigger partner to make a move. Gilead is surely happy to have Arcus at arms length after Roche's anti-Tigit blow-up yesterday. 

Others might look more tempting. The potential of Sarepta's SRP-9001 and Sage's depression assets remains under debate, but both of these companies have seen serious valuation declines. And, if Glaxosmithkline is really serious about mRNA as a modality, Curevac also looks considerably cheaper now than 12 months ago.  

Seres and Morphosys in particular look very beaten down. Investors would probably not object if their larger partners made a move.

Conditions are perhaps not dire enough for these smaller developers to give up just yet. But propositions of full marriage will certainly be taken more seriously now than when these licensing deals were first struck.