Dive Brief:
- 2018 is shaping up to be the second strongest dealmaking year in the last decade based on M&A activity during the first quarter, reports Syneos Health in its Dealmakers' Intentions Survey. Total deal values could reach between $200 billion to $250 billion this year, second to 2015's mark of $425 billion.
- The share of large-cap pharmas participating in M&A deals is actually decreasing, from a high of 82% in 2009 to just about 57% in 2017. Deals are being driven by alternative sources now, like mid-sized and regional buyers, as well as an increase in financial alternatives.
- The report presented at the BIO International Convention surveyed 66 members of the biopharma community who participate on either or both sides of deals and who are involved in decision making to gauge expectations for deal activity over the next year.
Dive Insight:
Unless you've been living in a cave, you know that oncology is the hottest therapeutic area in the industry. But what you might not realize is that market forces suggest the market is overheating, says report author and Syneos Health Managing Director of Commercial Strategy & Planning Neel Patel.
"Supply of oncology assets has eclipsed demand; an early sign of an area, as an industry, that we may have over-invested in," he said in an interview.
He noted the increase in supply is in part due to the number of "fast follow-ons" currently in development, like the checkpoint inhibitors that seem to be in every drug developer's pipeline. The high valuations in the space and the rise of immuno-oncology has led many drug developers that weren't traditionally oncology players pivoting to the space.
"This suggests that premiums in the oncology space could start seeing a potential decline in the coming year for products that are not highly differentiated," said the report, which notes the spread between supply and demand has increased from 2% in 2017 to 15% in 2018.
Other areas seeing a supply surplus are central nervous system drugs and infectious disease drugs.
Meanwhile, there is a demand surplus for hematology, respiratory/pulmonology and renal drugs.
But the report points out that no clear preference for a development stage emerged this year, indicating buyers and sellers are concentrating most on how assets fit into their current portfolios.