Interview, Fireside Chat
What’s with All the Bio M&A in 2019?: A Quick Take
- M&A activity is projected to maintain its pace throughout 2019, driven by a "perfect storm" of patent cliffs, excess cash, and decreased valuations, despite the possibility of slowing activity in specific sectors.
- IPO exit activity is forecasted to continue at a slightly slower rate during 2019.
- Companies are expected to adopt a risk-averse stance, favoring "rent versus buy" technology models and option agreements to enable R&D productivity without immediate P&L impacts or large early-stage bets.
- Biotech acquisitions are anticipated to focus on late-stage to marketed-stage companies, while large bets in competitive areas like oncology and immuno-oncology may occur earlier in development, potentially at Phase 1.
- Purely transactional partnerships are likely to emerge later for assets expected to generate revenue within a two to three-year window.
- Strategic trends favor companies maintaining commercial rights in the US while out-licensing ex-US rights to become standalone entities, rather than fully transferring assets immediately.
- Platform capabilities offering sustained cash flows and the ability to deliver multiple assets, such as AAV vector platforms and end-to-end manufacturing solutions for gene therapy, are becoming key strategic assets for big pharma.
- Corporations are expected to utilize venture arms to invest early in platform technologies followed by setting up partnership or co-development agreements for later-stage handoffs.
- Control over manufacturing and distribution is likely to be prioritized for assets critical to a big pharma business, except for niche specialized items like gene therapies or AAVs requiring specific know-how.
- Founder credibility with potential partners will increasingly depend on the ability to articulate the total addressable market and treatment paradigm position over a five to ten-year horizon.
- Assets that do not attract significant executive interest ("a busload of executives") during final negotiations are unlikely to achieve premium pricing.