In comparison to the heightened growth of M&A (merger and acquisition) activity in the life sciences space in recent years, 2022 showed a slowdown in activity, specifically a reduction of 35% in the first nine months of 2022 according to S&P Global Market Intelligence, from an average quarterly investment of $1,107 million in 2020 and 2021, to $762 million for the first three quarters of 2022. This is, in part, due to the turbulent economic and geo-political climate across the world, most notably seen through surges in interest rates leading to a more volatile market and increased costs for financing. Keeping the events of 2022 in mind as we look ahead to 2023, it’s likely that many dealmakers will remain cautious and risk averse. There is likely to be a continuation of partnerships to minimize risk while maximizing opportunity. Reflecting upon the past year, below we outline a few of the most notable 2022 M&A trends in the life sciences industry based on major deals.
- Rethinking Payment Structure Contingencies to Balance Risk
- Big Pharma Dealmakers Eying Rare Disease Targets
- Strategic Partnerships Favored by Biotechs
M&A Trends in Life Sciences
Rethinking Payment Structure Contingencies to Balance Risk
As life sciences companies are eyeing acquisition targets earlier on in the development lifecycle, there has been an increased need to de-risk deals through milestone-based agreements, which require certain results to be seen as part of the payment term structure. This is a shift from traditional licensing deals for targets, which are closer to commercialization.
An example of milestone-based terms structure can be seen through AstraZeneca’s acquisition of Neogene Therapeutics; the deal was important to improve AstraZeneca’s capabilities in cell therapy but comes at a cost given the development stage of the private start-up. Adjusting the payment structure terms for companies earlier on in development raises a greater need for transparency in reporting and monitoring of R&D activities. This also causes additional negotiation cycles to reach a mutually agreeable set of terms that define the milestones and contingencies during drug development as opposed to commercial royalties.
March 2022: AbbVie acquires Syndesi Therapeutics
AbbVie purchased Syndesi Therapeutics SA, a clinical stage biotechnology company and a portfolio company of Novo Holdings, for around $1 billion. AbbVie paid Syndesi shareholders a $130 million upfront payment with the potential for Syndesi shareholders to receive additional contingent payments of up to $870 million. This acquisition gives AbbVie access to Syndesi’s portfolio of novel modulators and strengthens AbbVie’s neuroscience portfolio.
November 2022: Johnson & Johnson acquires Abiomed
In a deal broadening J&J’s MedTech business unit, a deal was made to acquire all outstanding shares of Abiomed for a value of approximately $16.6 billion through a tender offer. Abiomed shareholders will also receive a non-tradeable contingent value right (CVR) entitling up to $30 per share in cash if clinical and commercial milestones are met. This deal not only diversifies J&Js cardiovascular portfolio, but also broadens the potential for global access to patients in need of cardiovascular medical technology.
November 2022: AstraZeneca acquires privately held Neogene Therapeutics
This deal represents AstraZeneca’s first significant acquisition in the cancer cell therapy space, paying $200 million for the start-up upfront with an additional $120 million in milestone payments if targets are met. AstraZeneca believes this acquisition can unlock “targets previously inaccessible” in cell therapy.
Big Pharma Dealmakers Eying Rare Disease Targets
There is a continued trend of large companies expanding into more niche life science markets through the acquisition of smaller, specialized companies. The Pfizer acquisition of Biohaven and Arena Pharmaceuticals is a notable example. Some key markets that saw expansion in the first half of 2022 are rare diseases, acute migraine headaches, cancer treatment, and next-generation therapies. Acquired companies are also benefiting from these acquisitions by receiving an influx of capital and learning from the operational excellence of the acquirer.
April 2022: GlaxoSmithKline acquires Sierra Oncology
GlaxoSmithKline plc. acquired Sierra Oncology Inc., a biopharmaceutical company focused on targeted therapies for the treatment of rare forms of cancer, for $55 per share of common stock in cash, representing an approximate total equity value of $1.9 billion. The addition of Sierra Oncology will provide breakthroughs in the cancer treatment field. A few months later in July, GSK officially completed their spinoff of consumer healthcare business Haleon to focus more heavily on innovative drugs and vaccines, as exemplified by the recent acquisitions of Sierra Oncology and Affinivax.
May 2022: Pfizer acquires Biohaven Pharmaceuticals
Pfizer, for $11.6 billion, acquired Biohaven, the maker of NURTEC® ODT, an innovative dual-acting migraine therapy approved for both acute treatment and episodic prevention of migraine in adults. Pfizer will acquire all outstanding shares of Biohaven not already owned by Pfizer for $148.50 per share in cash. Biohaven common shareholders, including Pfizer, will also receive 0.5 of a share of New Biohaven. This deal expands Pfizer’s innovative internal medicine pipeline and acute migraine treatment to drive enhanced growth through 2030 and beyond.
August 2022: Pfizer acquires Global Blood Therapeutics
Pfizer acquired Global Blood Therapeutics for $5.4 billion to enhance its presence in rare hematology. The acquisition drives growth by bringing leading sickle cell disease expertise, portfolio, and pipeline to Pfizer. This will help provide solutions to rare blood diseases and sickle cell diseases.
October 2022: Sumitovant Biopharma acquires Myovant
While having already owned 52% of Myovant shares, Sumitovant takes full control of Myovant for $1,7B for $27 per share in cash. The transaction is intended to ensure employees at Myovant receive additional resources to support business growth and commercialization of a pipeline focused on addressing patient needs in women’s health and prostate cancer.
December 2022: Amgen announces intent to acquire Horizon Therapeutics
After a contentious line of suitors between Johnson & Johnson and Sanofi, Amgen offered $28 billion in cash to takeover Horizon. This deal, the largest in 2022, is marked at approximately $47.9% premium on the closing share price of $78.76 per Horizon share on November 29, 2022. Amgen expects to close the deal in early 2023, with returns expected by 2024.
Strategic Partnerships Favored by Biotechs
Amidst an unstable economy and geopolitical climate, the life sciences industry is experiencing a mix of patent expiry challenges along with increased competition. These factors combined contributed to a need for increased collaboration among Big Pharma and smaller start-ups. Partnerships and alliances have been a favored alternative by many organizations seeking to avoid risk while progressing along their strategic development goals.
When considering a strategic alliance, be sure to understand the potential partner’s strategy, resources, and any potential synergies as part of the due diligence process. This will ensure long-term alignment and a value-added opportunity as the market shifts continue.
Looking Ahead in 2023
As we move through this year, we expect to see continued M&A consideration across the life sciences industry. Our M&A consulting team continues to have a pulse on the latest trends, insights, and capabilities required by due diligence teams and executives alike when progressing through the deal process. To better understand how these trends impact your business, reach out to us.
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