Don't let a slump in biopharma deals get you down — yet; The controversy on drug prices is taking a toll
Endpoints assesses the big biopharma stories of the week, with a little added commentary on what they mean for the industry.
Hey, what about that big upswing predicted for biopharma M&A?
Dealmakers in biopharma are ending April with a considerable amount of grumbling. This was the year that M&A was supposed to take off, with a new president bullishly asserting plans to reform taxes in a way that would free up billions in Big Pharma cash held overseas.
Didn’t happen. Donald Trump is so far bogged down on Obamacare reform and not able to deliver a much ballyhooed tax reform pledge — for now.
“Most people would say they are disappointed with the pace of M&A,” Geoffrey Hsu, a partner at the deal-oriented OrbiMed Advisors, told Bloomberg. “Frankly, we were expecting more to happen by this time.”
The newswire service concluded that Q1 deals were down 13% cash-wise, compared to the same period a year ago.
True, dealmakers are hard to please. It’s a feast or famine world in M&A, and lean pickings cause a lot of dissatisfaction.
The year, though, is a long way from over. Don’t let a Q1 report make you too unhappy. Concerned, yes. Unhappy, no.
Drugmakers face a turning point on pricing — putting the focus where it belongs
Another big trend that is drawing considerable attention these days is the immense pressure being put on drug makers to rein in prices. Payers in the US are getting better at applying pressure right on the most sensitive parts of the industry, and President Trump started his administration stomping on the industry’s rep for sticker shock.
Credit Suisse put its thumb right on the pulse, though, with a new report this week showing just how important annual price hikes are to the big players. Their analysts conclude:
Arguably, this is the most important issue for a Pharma investor today. Despite public scrutiny, we estimate US net price rises contributed c$8.7bn in 2016 to net income, 100% of sector EPS growth. US net price growth was >100% of Biogen, Lilly, and AbbVie’s total net income growth. BioMarin, Gilead, Novo and Regeneron were the least reliant on US net price rises.
In this brave new world, only the innovative can thrive. And that means more partnering with biotech — the true source of innovation in the drug world. I suspect we’ll see a growing scramble for the best experimental drugs later in the year. And that means valuations should continue to point north.
A controversial Marathon is marginalized
Kudos to PhRMA, which has been making life more uncomfortable for the companies that set the pace for Martin Shkreli. Far too many companies have found it easy to get cheap drugs and jack up the price by astronomical amounts.
In this new biopharma world we’re living in, that kind of conduct won’t fly. You can’t be in the club now unless you’re dead serious about investing in important new therapies. That’s not enough, but it is a healthy start. And PTC Therapeutics may want to think over their strategy one more time.
You have a photo op coming up Saturday morning. Don’t miss it.
Tomorrow MassBio and some of the top leaders of the Boston area biotech sector want to create a moment for everyone to register their opposition to some of the recent moves from President Trump on immigration, H1B visas and NIH funding.
It has come to no surprise to me that the vast majority of the industry hates what it’s been seeing over the last few months. Biotech thrives when it can recruit the best and the brightest from all over the world, and the US is home to the most dynamic drug development sector in the world because of it.
NIH funding, meanwhile, creates the scientific foundation that biopharma rests on. Cutting funding significantly now would mean laying waste to a generation of young scientists looking to make their mark.
So at 10am on Saturday everyone is being asked to give up some of their free time and join the crowd on Kendall Square for an aerial shot to capture a picture of the industry’s solidarity on this issue. Too bad it’s not a weekday, when most people would only have to walk over from their offices. But that might have stopped traffic.