From Decline To Rebound: Biotech M&A Expected To Bounce Back

2022 was an unremarkable year for biotech mergers and acquisitions (M&A) as the industry experienced a decline in both the number and value of deals. This was mainly due to economic and geopolitical uncertainties, causing potential buyers to exercise caution. According to insights, the total value of all M&A transactions signed in 2022 dropped significantly by 55 percent, falling from $225 billion to just $103 billion. However, the biotech M&A landscape is poised for a turnaround as major pharmaceutical companies, including AstraZeneca, Pfizer, Sanofi, Merck, and GSK, have announced billion-dollar acquisitions totaling around $60 billion. This surge in acquisitions brings hope for a resurgence in biotech M&A activity.

In January 2023, AstraZeneca announced its $1.8 billion acquisition of US-based CinCor Pharma to strengthen its pipeline for hypertension and chronic kidney disease treatments. On March 13, Pfizer proposed acquiring Seagen for an astonishing $43 billion, solidifying its position in oncology. The same day, Sanofi acquired Provention Bio for $2.9 billion to enhance its diabetes medicine portfolio. Merck acquired Prometheus Biosciences, specializing in immune-mediated diseases, for $10.8 billion on April 16. On April 18, British pharmaceutical company GSK announced its $2.0 billion acquisition of Canadian firm BELLUS Health, gaining access to a potentially groundbreaking treatment for chronic cough.

Other notable deals include Chiesi Farmaceutici’s acquisition of Amryt Pharma for $1.47 billion, expanding its rare disease offerings. BioNTech SE, a major mRNA company based in Germany, is set to acquire UK-based AI startup InstaDeep for £562 million (~$701 million). Additionally, Swedish Orphan Biovitrum AB (SOBI) plans to acquire CTI BioPharma Corp for $1.7 billion, aiming to strengthen its portfolio of blood-related cancer therapies.

These deals primarily focus on areas such as cancer, rare diseases, diabetes, and immune system disorders, which have shown significant success in clinical trials and have proven to be highly profitable. Experts believe that one of the driving factors behind the increase in dealmaking is the impending patent cliff.

The rise in M&A has two primary drivers. Firstly, larger pharmaceutical companies continuously seek new products and candidates, prompting them to acquire and collaborate with biotech firms to support their internal R&D. Secondly, biotech companies, facing funding limitations due to reduced private and public financing, are selling themselves earlier than usual.

Moving to the APAC region, several pharmaceutical companies have recently announced acquisitions. The largest acquisition was made by Japan-based Astellas Pharma, which acquired US-based Iveric Bio for $5.9 billion. This acquisition strengthens Astellas’ product portfolio in the field of ophthalmology treatments. In another notable deal, US-based mRNA giant Moderna made its first acquisition by purchasing Japanese DNA supplier OriCiro Genomics K.K. for $85 million.

Other notable deals in the region include Sun Pharma’s acquisition of Concert Pharmaceuticals for $576 million and Olympus’ purchase of Taewoong Medical of Korea for $370 million. Additionally, Sisram Medical, an Israel-based company, acquired PhotonMed of China for $38 million. It is noteworthy that Japan has emerged as the dominant player in the region, with Japanese companies involved in five out of six acquisitions. Surprisingly, there were no announced acquisitions from China. The biotech industry in the region saw several modest M&A deals, with Astellas being the sole participant in a billion-dollar transaction.

Experts predict a surge in dealmaking due to positive market trends. The recent deals have seen multiple bidders vying for the same assets, a departure from previous years where the majority of deals had only one bidder. With equity valuations stabilizing and many equity valuations remaining depressed, large pharmaceutical companies, facing revenue gaps, are expected to accelerate their dealmaking efforts in the second half of 2023 and into 2024.

Chinese biotech firms, with decreased valuations resulting from COVID-19 and geopolitical tensions, are expected to be prime targets for consolidation. M&A activity is also expected to rebound as domestic Chinese companies aim to expand globally, acquire new technology, and introduce new products. South Korea’s biotech industry is predicted to experience significant M&A activity and a resurgence of private equity deals, particularly in the provider and services sectors, with strategic acquirers in the pharma and medtech fields playing a leading role in deal value.

In Australia, biotech executives remain optimistic post-pandemic, as big pharma seeks to fill revenue gaps and overcome challenges in R&D. Takeover bids for ASX-listed commercial-stage biotechs are expected to increase, with biotech companies preparing for potential unsolicited takeover bids from large pharmaceutical companies.