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

Oppenheimer & Co. Inc. July 12, 2023

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

biomea fusion deal

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.

Michael Margolis
Name:

Michael A. Margolis, R.Ph.

Title:

Senior Managing Director, Co-Head of Healthcare, Head of Healthcare Life Sciences

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