This article is a sample from the DealForma Annual Deal Trends Report provided to database subscribers. Data for this analysis was compiled using the DealForma biopharma deals database. We applied initial filters for mergers and acquisitions, therapeutic areas, asset stages at M&A, and deal payment terms. From there, we exported the data to Excel and used pivot tables and charts to do the rest. All data are based on publicly disclosed figures. We invite you to answer interesting questions on biopharma business development and licensing using our data and carefully curated profiles on deals, pipelines, companies, funding, and business executives by visiting dealforma.com to schedule your personalized demo.
Life sciences M&A was closely watched in 2019, especially after starting off the year with Bristol-Myers Squibb’s $74 billion buyout of Celgene. Industry watchers were not disappointed as the year closed with 229 announced deals valued at $241 billion, capping one of the best years for life sciences M&A activity over the past 12 years. A second megadeal, AbbVie’s $63 billion takeout of Allergan in June, bolstered the numbers, but it was Big Pharma’s continued drive to acquire biotech innovation that drove real excitement in the space.
This was evidenced very early in the year as Roche announced it would pay $4.3 billion for Spark Therapeutics, making a strong foray into gene therapies, and Eli Lilly bought Loxo Oncology for $8 billion.
Biopharma M&A Analysis
We looked at DealForma’s extensive database to see how 2019 biopharma M&A deals shaped up in more detail. The total M&A deal value of biopharma therapeutics and platforms, diagnostics, and medtech companies rose 36 percent over 2018 while deal volume dropped 19 percent from the previous year. Most of the value was in cash and equity upfront with only 6 percent contingent on milestones.
Average upfront cash and equity of 2019 M&A deals at $2.3 billion was almost double the average upfront cash and equity of 2018 M&A deals at $1.3 billion. This is due in large part to the two megadeals, whereas median upfront cash and equity rose 22 percent in 2019 to $180 million and was bolstered by a spate of mid-size high value deals in the fourth quarter of 2019.
Indeed, at the start of the fourth quarter of 2019, biotech was in the doldrums, but was lifted by a spate of deals that emphasized biotech’s promising new technologies and came at premiums often exceeding 100 percent:
Private Biopharma M&A
Of the 25 biopharma M&A deals valued at $1 billion and above, only three were for private biotech companies: Merck’s acquisition of Peloton Therapeutics, a mid-stage developer of small molecules targeting renal cancer for $1.05 billion in upfront cash and another $1.15 billion dependent on the achievement of specific milestones; Roche’s acquisition of Promedior, a mid-stage developer of small molecule pulmonary therapies, for $1 billion in upfront cash and up to $390 million in potential milestones; and Ipsen’s acquisition of rare disease play Clementia Pharmaceuticals for $1.04 billion in upfront cash and another $263 million in potential milestones.
But private biopharmaceutical companies continue to make up about 30 percent of all M&A transactions, on par with contract development, manufacturing, and services companies.
In 2019, 64 private biotech companies were acquired for a total deal value of $14.4 billion, $5.8 billion upfront and $8.6 billion in contingent payments, an almost 22 percent drop from the 82 private biotech acquisitions in 2018. Still it should be noted that median M&A upfront for these companies rose 48 percent to $62 million from $42 million in 2018.
Small and Mid-Cap Biopharma M&A
Mid Cap biotech companies continue to account for only a handful of deals, and while the number of small cap biotech targets has grown, the total deal value of small and mid-cap biopharma M&A dropped 63 percent to $42.7 billion in 2019 compared to $113.9 billion in 2018. Again the median upfront cash rose 62 percent to $985 million in 2019 compared to $607 million in 2018.
Biopharma M&A Deals in 2020?
How does this bode for M&A activity in 2020? Though the biotech industry’s original members lost Celgene in 2019, the remaining class of Big Biotechs — Amgen, Biogen, Gilead Sciences, along with Regeneron and Vertex — have weathered the ups and downs of drug development and remain strong. And there is a rising class of mid- to large-cap companies that could be takeover targets: Alnylam, Sarepta, BioMarin, to name a few. Positive data from trials of emerging gene therapies, RNAi therapies, and cell therapies bode well for a strong year for the industry as years of research are bearing fruit with the advent of medicines that have the potential to improve patients’ lives and cure disease.