June 22, 2017
By Alex Keown, BioSpace.com Breaking News Staff

 

SAN DIEGO – A well-known business book is called “The Art of the Deal” and dealmaking in the biotech sphere has certainly become an art form.

Since the booming year of mergers and acquisitions in 2015, the rate of dealmaking in the pharma industry has declined. According to the recently published InVentiv Health Consulting Report, dealmaking this next year should be robust, but will fall below the levels of activity seen in 2015. The results of the study were released during a Super Session at BIO International on Tuesday. The study shows that this next year will likely be a seller’s market in the industry, as companies looking to acquire will narrow their therapeutic focus and compete over assets in “hot therapeutic areas.”

“2017 is likely to be pale in comparison to acquisitions in 2015,” said Neel Patel, managing director of InVentiv Health Consulting. “2015 was an unprecedented year.”

Patel added that while dealmaking may not be as strong as 2015, he said companies will begin to think creatively about new partnership opportunities.

“True innovators can expect to benefit from the emergence of new buyers and more financing options from the capital markets, permitting them to hold on to assets through commercialization in some disease areas. However, success with this strategy requires a clear understanding of the long-term potential of their assets in a rapidly evolving buyer’s market and payer landscape,” Patel said.

At BIO, a group of panelists from companies across the sector, including Pfizer (PFE), Janssen and Horizon Pharma (HZNP), discussed the state of the deal landscape for 2017 and how this year will likely remain subpar in comparison to the massive dealmaking done in 2015.

Each of the panelists discussed some of the important drivers of why certain deals are made, but when it came down to it, they all agreed that any acquisition or licensing deal must make sense for the company’s bottom line.

The survey suggests that buyers are becoming more risk averse and are waiting for later stage products with more data before stoking potential deals. Some preclinical assets are still enticing enough for companies to go after, the survey also noted. Therapeutic areas where deals, whether full out acquisition or licensing, are expected to be the hottest include CAR-T therapy, CRISPR-Cas9, cancer vaccines, biosimilars and antibody drug conjugates.

Daniel Karp, vice president of worldwide business development at Pfizer, said M&A practices are a strong tool that companies have, but must be diligent when looking at options on the table. When a deal is available, Karp said it’s important for Pfizer to see if the asset is something that is better off being developed by Pfizer, or leaving it outside the company. Karp said dealmakers have to look at what kind of transaction is available and determine how it might benefit the company’s portfolio and investors.

“Deals are not a one-size fits all model,” Karp said.

Bob Carey, chief business officer at Horizon Pharma, agreed. Carey said the company has built its business through deals, such as its acquisition of Raptor, but they have to look at deals on a “solution-based approach.” That means they have to determine what kind of deal is in the best interests of the company and how it should be structured.

The survey results, prepared by InVentiv, seem to reflect that idea. Financing and investment options mean that asset innovators are able to keep the rights to their products much longer because deal options have moved beyond outright acquisition. The InVentiv study indicated that financing to small-cap and private biopharma companies saw significant continued growth in 2015 and remained steady through 2016 at $20 billion. Financing in the $6 to $8 billion range may be the new normal, Patel said.

While investors are keeping an eye on potential legislation coming from Washington that could shape dealmaking, the study shows that the biggest factors impacting potential deals will be internal company issues, as opposed to external political ones. The study shows buyers’ ability to finance acquisitions, followed by the ability of buyers to access debt will be the two biggest factors facing dealmaking. However, the survey noted that the stated plans by the White House to reform the tax code and allow U.S. companies to repatriate cash parked in overseas accounts could spark a new wave of life science dealmaking.

 

 

BioSpace source:

http://www.biospace.com/News/bio2017-biotech-dealmaking-will-be-robust-in-2017/460900/source=TopBreaking?intcid=homepage-seekernewssection-tabtopbreakingnews

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