The annual healthcare conference hosted by J.P. Morgan each January is often viewed as a forum for pharmaceutical and biotechnology company dealmaking. However, over the past three years, the meeting hasn’t lived up to its reputation, with only a smattering of acquisitions and drug licensing deals.
A trio of biotech buyouts announced Sunday and Monday gave this year’s J.P Morgan meeting something of a jumpstart and suggest an uptick in M&A activity that began in the second half of last year could stick around.
On Sunday, Italy’s Chiesi said it would acquire Amryt Pharma for $1.25 billion upfront, agreeing to pay a 107% per share premium over the closing price of rare disease drug developer’s stock at the end of last week. And then, on Monday, AstraZeneca announced a $1.3 billion buyout of CinCor Pharma and Ipsen revealed a deal for Boston-based Albireo that’s worth $952 million upfront.
The collective $3.5 billion in upfront consideration is the most pledged to acquisitions to begin J.P. Morgan’s conference since 2019, when Lilly agreed to buy Loxo Oncology for $8 billion. That year’s meeting also came one week after Bristol Myers Squibb’s $74 billion deal for Celgene.
Still, none of the three deals disclosed Sunday and Monday are particularly large, especially as both Amryt and Albireo own already approved medicines. AstraZeneca’s purchase price for CinCor, meanwhile, includes the $522 million in cash, cash equivalents and marketable securities the biotech had on its balance sheet as of Sept. 30, 2022.
All three deals included contingent value right, or CVR, agreements — essentially a security that gives shareholders in the acquired company the right to additional payments, should certain agreed-upon milestones be achieved. These CVRs are often used as a tool to bridge differences in valuations between buyers and sellers and have become relatively common in life sciences deals.
In CinCor’s case, AstraZeneca will pay the biotech’s shareholders another $500 million upon an unspecified regulatory submission for the company’s drug baxdrostat. The experimental medicine is in testing for treatment-resistant hypertension and chronic kidney disease. AstraZeneca also views it as a potential partner for cardiorenal disease drug Farxiga.
Chiesi, meanwhile, agreed to hand over an additional $225 million in CVR payments should certain milestones related to Amryt’s skin disease drug Filsuvez be met, while Ipsen promised another $10 per Albireo share if the Food and Drug Administration approves that company’s treatment Bylvay for the liver condition biliary atresia.
The three deals follow share price declines for the soon-to-be acquired biotechs, in line with the broader sector’s downturn last year. The market retrenchment has made many drug companies cheaper, which analysts expect to spur further dealmaking.
“We believe the [Amryt] transaction underscores our view that while ‘value’ plays in biopharma have somewhat been overlooked in 2021 [and] 2022, value cannot be ignored for too extended a period by the market,” wrote Brandon Folkes, an analyst at Cantor Fitzgerald, in a Sunday note to clients.
Still, AstraZeneca, Ipsen and Chiesi paid significant premiums over their respective target’s closing price Friday, and large pharmaceutical executives have previously noted how biotech leaders aren’t always willing to negotiate on their depressed valuations.