Biopharma buyouts bounce back
Developers brush off antitrust scrutiny and drug price curbs and succumb to the urge to merge.
Amy Brown & Edwin Elmhirst
4 July, 2023
After a relatively slow couple of years on the buyout front, biopharma is picking up the pace. Sector M&A spending topped $80bn in the first half of the year, new data from Evaluate Pharma reveal, putting 2023 on track to be the busiest for takeovers since 2019.
This year’s tally is propped up by Pfizer’s largesse; its $43bn swoop on Seagen will in all likelihood end up as 2023’s largest M&A move. The string of bolt-on deals coming behind that transaction shows that large developers are taking advantage of tough economic times to build their pipelines.
One big question is whether this momentum can be maintained as the US antitrust watchdog, the FTC, continues to bare its teeth. The agency’s decision to challenge Amgen’s acquisition of Horizon, last year’s biggest deal at $28bn, took the sector by surprise. That news only came in May, however, so it is probably too soon to tell whether the action has prompted executives to push pause on business development.
The impact of the US drug price legislation, known as the IRA, is another potential dampener. Some industry watchers have suggested that the new law will cause biological products to be favoured over small molecules, as well as making multi-indication products, including those used in orphan settings, less attractive.
Still, any influence the IRA might have on M&A needs to be measured over longer time periods than are assessed here. The spending boost seen so far in 2023 is in part being driven by what many hope to be a short-lived phenomenon: an unwelcoming equity market, and a rebasing of valuations across the smaller end of the sector over the last 18 months.
To put the graph above in context, the $83bn recorded in the first half is almost equal to the $96bn in M&A deals seen in 2022, and $91bn in 2021. For this analysis, only acquisitions of pure-play drug developers are included; sectors like medtech and digital health are excluded. Other deal types include business unit buys and minority and majority stake purchases.
A major caveat here, and one that is particularly relevant this year, is that some of these transactions are not yet closed. Pfizer’s Seagen move and, as previously mentioned, Amgen’s Horizon acquisition, remain under FTC scrutiny. Although it is considered unlikely that the watchdog will successfully scuttle these deals. if it did the numbers above would be in for some big revisions.
As for notable deals so far this year, the first half saw 12 transactions of $1bn or more, with eight of these happening in the second quarter. Novartis features twice in the list of blockbuster deals, as both buyer and seller. The Swiss firm's Chinook purchase ranks as the fourth largest transaction so far this year, while its sale of certain eye care assets to Bausch & Lomb for $1.8bn falls further down the list.
The cost of capital is rising globally and regulatory headwinds are strengthening, reasons to believe this momentum might stall. But on the flip side, drug developers will always need fresh blood. The need for pipeline replenishment is the ultimate dealmaking force in biopharma, and this pressure will always keep the deal wheels turning.
