Mergers and acquisitions (M&A) have remained relatively languid within the healthcare sector as we moved into the latter half of 2023. However, there is an air of expectancy that this lethargy might be lifted soon. Experts, such as M&A lawyer Matt Gardella from Mintz, argue that market conditions hint towards a resurgence in biopharma M&A activity. According to Gardella, three conditions might precipitate the influx of deals: a looming patent cliff, dwindling valuations, and a languid IPO market.
Major pharma firms are increasingly concerned about a potential patent cliff between the present day and 2030. High-cost blockbuster drugs such as AbbVie’s Humira losing market exclusivity, and Merck’s Keytruda set to go off patent in 2028, are strong propellants for this worry. Companies are proactively seeking late-stage assets held by biotech firms that could potentially be approved within the next seven years to offset forecasted downward revenue trends.
Recently, Biogen unveiled its plans to acquire Reata Pharmaceuticals for $7.3 billion. In April, Sanofi purchased Provention for $2.9 billion, and in February, AstraZeneca announced the completion of its $1.3 billion acquisition of CinCor.
The second dynamic making biopharma ripe for M&A lies in the dwindling valuations of publicly-listed biotech companies. This is turning heads of corporations who are revisiting the biotech acquisitions sphere after straying away due to inflated valuations in the past. A stark fall by 30% from October 2021 to January 2023 has been reported in overall biotech companies’ valuations.
The weak IPO market forming the third prong of this M&A resurgence expectation has borne witness to only nine biotech IPOs finishing July. According to Gardella, due to lack of alternatives and hostile market conditions, many late-stage biotech firms could be acquired by large drugmakers.
However, increased antitrust scrutiny from federal regulators might pose a hurdle to this M&A resurgence. An exemplar of this is the ongoing effort by the FTC to block the $28 billion deal between Amgen and Horizon Therapeutics.
Predictions indicate that despite these potential regulatory concerns, M&A activity within biopharma may still see significant growth in the forthcoming months.