Neil Eisberg | Editor
While headline-making deals were in relatively short supply during 2020, smaller deals including financing and more limited deals made it a record year for the biopharma sector, according to Clarivate, an analytical consultancy that claims to accelerate the pace of innovation.
There were only two major pharma mergers in 2020: AbbVie’s $63bn acquisition of Allergan and the as yet uncompleted acquisition of Alexion Pharmaceuticals by AstraZeneca for $39bn. According to Clarivate, four out five mergers are so-called bolt-on deals, in which pharma companies acquire specific drug development activities and potential product pipelines to support their existing businesses and enable them to achieve their strategic objectives.
Deal-making, involving the formation of collaborations, with associated sharing of risk, resources and potential profits, amounted to almost 2000 transactions in 2020 with a total valuation of almost $200bn.
The biopharma sector tends to be based on smaller companies focused on specific research targets, either independently or in collaboration with pharma majors. Indeed, these industrious smaller companies tend to be key drivers of pharmaceutical advances and are therefore seen as desirable collaborators and potential acquisition targets. As Clarivate points out: ‘Nine out of ten best-selling medicines were acquired through such activity.’
The world’s best-selling drug, the monoclonal antibody drug Humira, for example, was actually discovered by Cambridge Antibody Technology and developed in collaboration with BASF Pharma, which was acquired by Abbott (AbbVie).
The Covid-19 pandemic has focused attention on the pharmaceutical sector generally, and in particular the biopharma sector, which was already seeing something of a pre-pandemic renaissance. Indeed, according to Bioworld, part of Clarivate, around one in five deals had a Covid focus, but only accounted for 2.5% of the total deal value of $198.2bn, which represented an increase of 23.7% over 2019, the previous record year.
In terms of pure biopharma merger and acquisition (M&A) activity, a total of 147, worth $181.3m, were recorded by Clarivate, down 19% from the 2019 value, and well down on the $256bn record in 2015.
In terms of financing, Clarivate estimates the biopharma sector has taken in more than $500bn over the ten-year period 2011-202, more than double the amount for the previous decade. In terms of numbers of such transactions, there were 1580 in 2020, up 42% over the previous year. Altogether, global private and public biopharmas raised around $134bn, almost double the previous record amount of around $69bn that was raised in 2015, and larger than the combined amount raised in 2018 and 2019. For private companies alone, there was another record, up 64% on the previous record in 2018 of $17.4bn.
In terms of collaborations, licensings and joint ventures, Clarivate has recorded a record 2,067 deals with a combined projected value of $198.2bn, making 2020 the highest grossing year over the previous record in 2019, with a 23.7% increase.
Now whether this record-breaking run will continue in 2021 remains to be seen, as the US pharma sector is expected to see a generally tougher M&A regulatory environment, along with other industrial sectors, under the new Biden administration, according to many observers.
The US Federal Trade Commission (FTC) is understood to be reconsidering its approach to mergers, which have in the past been examined from the point of view of competition on a product-by-product basis.
Acting FTC Chair Rebecca Kelly Slaughter has indicated that, together with FTC counterparts in other countries, and the US Department of Justice and State Attorneys General, a working party is to be established to look at how recent deals have had an impact on the pharma sector. Slaughter is reported as saying that deals between Bristol Myers Squibb and Celgene, between AbbVie and Allergan and the Upjohn business of Pfizer and Mylan have been the subjects of recent concerns.
Apart from its product-by-product approach, some analysts believe the FTC may look at whether deals might damage innovation or whether they might remove a competitive threat. There are also thoughts that the review might move onto other aspects like alleged price-fixing by the producers of generics and so-called ‘pay-for-delay’ agreements.
While in other countries, like the UK, competition authorities are able to block mergers, currently the FTC has to go before a federal judge with a convincing case that a deal would hurt competition, however, this might also be included in the review.
There might also be the possibility that previous deals may come under greater scrutiny.
The US pharma sector will therefore be watching closely how this review proceeds and the possible new directions it might take. Despite such concerns, some observers have tended to downplay the impact of this initiative, however, the process is likely to dampen down M&A enthusiasm until the likely outcomes become clearer.