This summer, large biotechnology deals took a vacation.
In the three-month stretch from July through September, just six acquisitions worth at least $50 million were announced, according to data compiled by BioPharma Dive. The tally is half of what was seen in the same period last year, and smaller than the 10 deals of that size unveiled between April and June.
Together, the half-dozen acquisitions in the third quarter carry a total consideration of more than $8.8 billion. Yet most of that sum comes from one deal: Biogen’s proposed purchase of Reata Pharmaceuticals. Biogen’s offer of $172.50 per share put a 59% premium on Reata, and valued the rare disease drugmaker at approximately $7.3 billion.
The dry spell of mergers and acquisitions could be coming to an end, though, if a recent string of buyouts is any indication.
The first weeks of October brought four deals collectively worth at least $6.7 billion. The list includes Eli Lilly’s takeover of radiopharmaceuticals maker Point Biopharma; Kyowa Kirin’s purchase of gene therapy developer Orchard Therapeutics; and Bristol Myers Squibb’s acquisition of cancer-focused Mirati Therapeutics.
This activity may serve as fodder to some on Wall Street who’ve been forecasting an uptick in biopharma deals. For instance, analysts at the investment firm Piper Sandler wrote in an Oct. 9 note to clients how they “cannot ignore a number of converging factors” that could accelerate M&A of small- and medium-sized companies “over the next several quarters.”
Among the various factors, Piper analysts highlighted how the balance sheets of many large drugmakers are at “unprecedented” levels. Pfizer alone had nearly $45 billion in cash, cash equivalents and short-term investments by early July. And companies like Lilly and Novo Nordisk expect major influxes of cash from their in-demand medicines for obesity.
Large, splashy acquisitions also may not be as attractive now that the Federal Trade Commission, under the leadership of chairperson Lina Khan, has sought to more closely scrutinize biopharmaceutical tie-ups and the use of patents to impede market competition.
The Piper analysts noted, too, that big players are under pressure to shore up their businesses since the passing of the Inflation Reduction Act, which created new drug pricing stipulations that could significantly impact some of the pharmaceutical industry’s most lucrative products. Medicare now has the power to negotiate prices on an initial crop of 10 top-selling drugs that includes Bristol Myers’ blood thinner Eliquis, Amgen’s anti-inflammation therapy Enbrel, Novartis’ heart failure medicine Entresto and one of Novo Nordisk’s insulins.
M&A, therefore, may be a more useful tool for these companies now, allowing them to relatively quickly refill their pipelines and portfolios with new drugs.
Still, dealmaking is cyclic. One week of increased activity or one particularly flashy buyout doesn’t promise that more are on the way. Analysts have, at various points over the last few years, predicted biopharma M&A levels would rise because of the challenges facing would-be buyers. Yet the number of bigger-ticket deals inked so far this year is fewer than in the same period in 2022. And the annual amount spent on these deals has remained far from the record-setting total seen in 2019.
Of the acquisitions disclosed in October, Bristol Myers’ is the largest. It agreed to buy Mirati for $58 per share, valuing the target company at $4.8 billion. Mirati investors will also get a so-called contingent value right, which could be worth an additional $12 per share provided one of biotech’s drugs hits certain milestones. The deal announcement also came on the heels of Bloomberg reporting that Sanofi was interested in buying Mirati.
Andrew Berens, an analyst at Leerink Partners, believes another bidder for Mirati could emerge. Bristol Myers’ offer is “significantly below what we see as the strategic value of the company, with a number of potentially value-adding catalysts in the near term,” Berens wrote this week in a note to clients.