M&A slows to a trick­le in 2017, but Big Phar­ma could be on deck for mega deals

Free-flow­ing cash for star­tups, sky-high val­u­a­tions, and un­cer­tain­ty about tax re­form led to un­ex­pect­ed stag­na­tion in M&A this year. But big deals could be on the hori­zon as large phar­ma­ceu­ti­cal com­pa­nies get squeezed to de­liv­er top line growth.

Af­ter a lack­lus­ter 2016 (thanks to un­cer­tain­ty in an elec­tion year), many ex­perts in the in­dus­try pre­dict­ed — with Pres­i­dent Trump firm­ly seat­ed in the White House — that we would see an uptick in merg­ers and ac­qui­si­tions in 2017. They were wrong. Be­sides Gilead’s near­ly $12 bil­lion move on Kite, 2017 was rather qui­et on the M&A front, ac­cord­ing to a new re­port by Eval­u­atePhar­ma’s EP Van­tage.

Ex­perts are now won­der­ing if ac­quir­ers are on stand­by, wait­ing to see what will hap­pen with tax re­form be­fore mov­ing for­ward on big pur­chas­es. And it makes sense. It’s es­ti­mat­ed that big phar­ma and biotech has rough­ly $171 bil­lion held in oth­er ter­ri­to­ries to avoid the 35% cor­po­rate tax rate here in the US. If that mon­ey can come back over thanks to repa­tri­a­tion, then these com­pa­nies will have a lot more play mon­ey to take shop­ping.

Oth­er rea­sons for the slow­down in M&A this year could be climb­ing val­u­a­tions of small and mid-sized bio­phar­mas — es­pe­cial­ly in hot ar­eas of de­vel­op­ment. Some­times those big buy­outs came back to bite the buy­ers (look­ing at you, Medi­va­tion).

One of the per­haps most in­ter­est­ing rea­sons for the slow M&A could be the in­dus­try’s rel­a­tive­ly easy ac­cess to cap­i­tal. As you can see in the chart be­low, ven­ture cap­i­tal­ists have been giv­ing out big­ger chunks of cash to com­pa­nies — rem­i­nis­cent of the boom times of 2014. When com­pa­nies can raise their own mon­ey for more ex­pen­sive, lat­er-stage de­vel­op­ment, then they’re less like­ly to look for buy­ers. On top of big ven­ture deals, the IPO mar­ket has been hot this year, with even pre­clin­i­cal com­pa­nies go­ing pub­lic with rel­a­tive suc­cess.

But this deal hia­tus, both in 2016 and 2017, is like­ly putting pres­sure on big phar­mas, the Van­tage re­port says. Com­pa­nies re­ly­ing on old­er drug fran­chis­es are par­tic­u­lar­ly im­pli­cat­ed.

“Com­pa­nies that re­ly on lega­cy prod­ucts in ar­eas like di­a­betes or heart dis­eases are in huge trou­ble,” Lon­car In­vest­ments CEO Brad Lon­car told EP Van­tage. “In these ar­eas, pay­ers have the pow­er. This might mean we see M&A, and that would be the top in­gre­di­ent for hav­ing a good 2018.”

These large phar­ma­ceu­ti­cal com­pa­nies are the ones that saw some less-than-stel­lar fi­nan­cial per­for­mance ear­li­er this year. Missed ex­pec­ta­tions for the growth prospects of Cel­gene and Bio­gen, for ex­am­ple, caused a sig­nif­i­cant sell­off.

The EP Van­tage re­port spec­u­lates that poor fi­nan­cial per­for­mance of some big play­ers could mean bar­gain prices for some M&As down the road.

“So if val­u­a­tions of big cap biotechs re­main de­pressed, and progress on tax re­form emerges, then per­haps 2018 will see more, larg­er deals. Pfiz­er is still most fre­quent­ly named as an en­thu­si­as­tic big buy­er – fa­vorite tar­gets for the ru­mor mill cur­rent­ly in­clude Bris­tol-My­ers Squibb and Bio­gen. And ex­ec­u­tives from oth­er large play­ers – Mer­ck & Co and Gilead for ex­am­ple – have re­cent­ly made it clear that they are look­ing around.”

In short, this re­port in­di­cates that small and mid-stage com­pa­nies will con­tin­ue to see high val­u­a­tions, easy ac­cess to cash, and a friend­ly IPO mar­ket — as long as un­fore­see­able macro­eco­nom­ic fac­tors don’t tank the mar­ket. Large-cap com­pa­nies, how­ev­er, may see shrink­ing val­u­a­tions, af­ford­able price tags, and more sig­nif­i­cant con­sol­i­da­tion (should tax re­form go their way).

Com­mu­ni­cat­ing the val­ue of pre­ci­sion med­i­cine

By Natasha Cowan, Content Marketing Manager at Blue Latitude Health.
Many stakeholders are confused by novel precision medicines, including patients and healthcare professionals. So, how can industry help them to navigate this complexity?

Precision medicine represents a new paradigm in healthcare. It embodies the shift from treating many patients with the same therapy, to having the tools to identify the best treatment for every patient.

Mer­ck buys a fledg­ling neu­rode­gen­er­a­tive biotech spawned by an old GSK dis­cov­ery al­liance. What’s up with that?

Avalon Ventures chief Jay Lichter has a well-known yen for drug development programs picked up in academia. And what he found in Haoxing Xu’s lab at the University of Michigan pricked his interest enough to launch one of his umbrella biotechs in San Diego.
Xu’s work laid the foundation for Avalon to launch Calporta, which has been working on finding small molecule agonists of TRPML1 (transient receptor potential cation channel, mucolipin subfamily, member 1) for lysosomal storage disorders. And that pathway, they believe, points to new approaches on major market neurodegenerative diseases like Parkinson’s, ALS and Alzheimer’s.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 65,400+ biopharma pros reading Endpoints daily — and it's free.

GSK's asth­ma bi­o­log­ic Nu­cala scores in rare blood dis­or­der study

GlaxoSmithKline’s asthma drug Nucala, which received a resounding FDA rejection for use in chronic obstructive pulmonary disease (COPD) last year, has shown promise in a rare blood disorder.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 65,400+ biopharma pros reading Endpoints daily — and it's free.

Spe­cial re­port: Twen­ty ex­tra­or­di­nary women in bio­phar­ma R&D who worked their way to the top

What differentiates a woman leader in biopharma R&D from a man?

Not much, except there are fewer of them in senior posts. Data suggest women are not more risk-averse, family-oriented or less confident than their male counterparts — indeed the differences between the two sexes are negligible. But a glance at the top R&D positions in Big Pharma leaves little doubt that upward migration in the executive ranks of biopharma R&D is tough.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 65,400+ biopharma pros reading Endpoints daily — and it's free.

FDA Vas­cepa re­view spot­lights new safe­ty sig­nals, pos­si­ble min­er­al oil spoil­er as Amarin hunts a block­buster ap­proval

An in-house FDA review of Amarin’s Vascepa raises a set of hurdles the biotech will have to clear if the biotech expects to get the long-awaited FDA approval that could set it on a path to superstar status. But it appears that Amarin has survived another potential setback without introducing a major new threat to its prospects.

The stakes don’t get much higher, with analysts saying a win this week for Amarin could lead to billions in new sales — provided the agency stamps it with an OK. And investors liked what they say in the FDA review this morning, bumping the stock $AMRN 17%.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 65,400+ biopharma pros reading Endpoints daily — and it's free.

FDA puts Sol­id Bio’s lead gene ther­a­py pro­gram on hold — again — af­ter an­oth­er pa­tient is hurt by SGT-001

Solid Biosciences continues to be plagued by safety issues.

Close to 18 months after the gene therapy biotech was able to quickly shed an FDA hold on their lead Duchenne muscular dystrophy program for SGT-001, regulators have stepped back in to force another halt after another patient was hit hard by a set of serious adverse events remarkably similar to the first set.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 65,400+ biopharma pros reading Endpoints daily — and it's free.

FDA slaps a hold on an AML tri­al as Mark­er scraps a fail­ing ovar­i­an can­cer pro­gram, sink­ing shares

The FDA has placed a hold on a Phase II AML trial from the small immuno-oncology biotech Marker Therapeutics. Marker disclosed the issue two weeks after responding to FDA concerns, adding it to the Q3 release Tuesday. The company also announced it was scrapping a Phase II ovarian cancer program it determined was unlikely to succeed.

The agency’s concern centers around two reagents used in manufacturing for their trial for acute myeloid leukemia patients who have received a stem cell transplant. The reagents are from third parties and not present in the final product, Marker said.

Eli Lil­ly-backed biotech grabs $100M to dis­patch an­ti­body-oligonu­cleotide con­ju­gates af­ter mus­cu­lar dy­s­tro­phy

Hold up your hand. Make a fist. Now open it. And again.

If you can do it fully and with ease, then the proteins in your hand are likely working properly. If you can’t then they may not be. In people with myotonic muscular dystrophy, something more atomic is going on.

In those folks, the problem is RNA. Certain base pairs repeat far beyond normal, up to 11,000 superfluous letters in some cases. The extended strands form “clumps.” Proteins misform and can’t function properly. They often allow one movement but not the reverse, a condition called myotonia that gives the dystrophy its name.

As­traZeneca sets stage for mar­ket­ing ap­pli­ca­tion with promis­ing piv­otal lu­pus drug da­ta

After fumbling in its first late-stage lupus study, AstraZeneca disclosed that a second pivotal trial testing its experimental drug, anifrolumab, had met the main goal, in August. Earlier this week, the British drugmaker broke out the numbers from its successful study.

Last year, anifrolumab failed to meet the main goal of diminishing disease activity in the 460-patient TULIP I study, a 52-week trial that tested two doses of the drug versus a placebo. But in the 373-patient TULIP II study, the higher dose (300 mg) was compared to patients given a placebo — patients in both arms were on baseline standard care.