Biopharma M&A and Strategic Collaboration Insights (Q2'23)

The latest edition of Oppenheimer & Co. Inc.’s Quarterly Biopharma M&A and Strategic Collaboration Insights Report is now available upon request.

Key Takeaways:

YTD’23 M&A Activity Has Already Cleared FY’21 Levels and Is on Track to Surpass FY’22

• 2023 Biopharma M&A started off blazing hot with the $42.8B acquisition of Seagen and several notable $1B+ acquisitions including Prometheus Biosciences, IVERIC bio, Chinook Therapeutics and Provention Bio

• Additionally, there has been considerable acquisitions of assets in FY’23, including Bausch + Lomb’s purchase of Novartis’ XIRDA for $2.5B and Amphastar Pharmaceuticals’ acquisition of Baqsimi for $1.1B (both including milestones).
• At a high level, Q2’23 activity was comparable to Q1’23 in terms of aggregate transaction value, deal counts, and asking prices
• Premiums for publicly traded targets in Q2’23 remained in line with Q1’23 levels (~120%): up from FY’21 and comparable to FY’22 levels (92% and 120% respectively)
• Commercial and clinical stage companies make up the vast majority of YTD’23 M&A activity (~63% and ~34% of total TV): biologics (ADCs and mAbs) representing a new favorite among investors, while there is still significant interest in small molecule companies despite continued pressure exerted by IRA legislation

• In terms of strategic collaboration activity, Q2’23 was in line with Q1’23; however, upfront cash payments were down slightly while milestone payments increased: likely a reflection of the continued challenges in the equity market

• There was a substantial increase in strategic collaboration deals for discovery / platform stage companies during Q2’23

• Small molecules, ADCs, and cell & gene therapy focused companies remain the hottest targets for partnerships on a treatment modality basis

• Oncology and CNS companies represent the most active therapeutic areas for strategic collaborations

• Recent earnings calls with Big Pharma support a continued appetite for M&A that will be fueled by IRA implications and a need for top line growth to drive shareholder value

Deal Catalysts

• Excess cash reserves at big pharma and large biotech and the need for top line growth

• Steep and fast‐approaching patent cliff for big pharma

• Mega‐blockbusters set to lose exclusivity over the next six years represent the biggest threat to commercial drug sales in decades

• Three drugs facing near‐term loss of exclusivity have generated $50.5B in combined LTM global revenues alone: Merck’s Keytruda ($21.9B), AbbVie’s, Humira ($20.0B), and BMS’ Opdivo ($8.5B)

• A challenging IPO market underpinned by low biotech valuations

• Profound clinical data and positive newsflow

• Declining COVID‐19 vaccine revenue

Deal Headwinds

• Ambiguous macroeconomic outlook coupled with rising costs/inflation concerns

• Increased FTC scrutiny (e.g. FTC issued Opinion and Order for Amgen / Horizon and Illumina / Grail)

• Fragile supply chains and escalating costs of talent / human capital

• Decreasing risk appetite to take on early‐stage programs whose funding requirements will eat into profits

• Bottom line P&L impacts from the new drug price negotiation legislation beginning in 2026 signed in to law through the IRA

Please reach out to Michael Margolis, R.Ph. ([email protected]), Daniel Parisotto, Ph.D ([email protected]), or Robert Lewis ([email protected]) directly to request a copy.