Biopharma M&A engine fires up as new year rings in big deals

Bristol-Myers Squibb (BMS) Co.’s $74 billion bid for Celgene Corp. – which, if it closes, will become the largest M&A in biopharma history – “made for a fascinating opening” to the J.P. Morgan Healthcare Conference (JPM), said Jamie Munro, global practice leader, portfolio and licensing at Clarivate Analytics, especially given Celgene’s historic placemark as the initial presenting company in the Grand Ballroom of the Westin St. Francis Hotel.

Those duties were shared this year during a fireside chat by Giovanni Caforio, BMS chair and CEO, and Mark Alles, Celgene’s chair and CEO. (See BioWorld, Jan. 4, 2019.)

Some $2.5 billion in expected savings by 2022, or roughly 13 percent of pro forma combined spend, from the deal “speaks to significant portfolio rationalization and head count reduction,” Munro told BioWorld. “Interesting times.”

Munro and Laura Vitez, life sciences senior deals analyst at Clarivate, delivered their annual “Deals & Portfolio Review,” based on 2018 licensing and M&A data from Cortellis Deals Intelligence, in San Francisco during the week of JPM19.

The early 2019 biopharma dealmaking pace grew even more frenzied on JPM’s opening day, as Eli Lilly and Co. – cited by analysts as a pharma under pressure following the BMS salvo – plunked down $235 per share in cash, or about $8 billion, for Loxo Oncology Inc. to bring aboard targeted cancer assets that include recently approved Vitrakvi (larotrectinib) and a pipeline of near-term candidates.

Lilly, of Indianapolis, fell roughly in the middle of 2018 dealmaking volume – combined M&As, licenses, joint ventures and research deals – for the top 30 pharmas in 2018, according to Cortellis data, well behind front-runners Roche Holding AG, Novartis AG, Merck & Co. Inc., Johnson & Johnson, AstraZeneca plc and Pfizer Inc. Its Loxo pick-up could help address the pressure to generate internal investment and create shareholder value that Lilly was likely to feel in the wake of BMS-Celgene, Munro said in an interview with BioWorld.


2018: A year of ‘BD predictability’

Although “every year is interesting,” 2018 was notable for its BD predictability, he added. The number of deals in the life sciences space declined to 4,014 from 4,522 in 2017, yet total deal size increased to $428 billion from $392 billion the previous year, suggesting that “people are willing to pay if the deals deliver,” he said.

M&A deal value lagged the 10-year zenith of $347 billion achieved in 2014, but back-to-back years of growth in aggregate M&A dollars – combined with the early 2019 blockbuster deals – suggested the stage is set for a breakout year. (See Figure 1)


Figure 1. Ten years of life sciences M&A transactions. Source: Cortellis Deals Intelligence.


In adjusted dollars, the average and median size of licenses also hit 10-year highs of $371 million and $101 million, respectively.


Since 2014, the uptick in overall licensing activity has been pretty significant.”
– Jamie Munro, global practice leader, portfolio and licensing at Clarivate Analytics

By therapeutic area, oncology continued its stranglehold on licensing arrangements, with 515 deals, and the sector’s top 10 transactions focused on immuno-oncology (I-O), according to Munro. In comparison, 183 licenses were inked in 2018 for neurology/psychiatric assets as the second highest category, with 129 for infectious disease agents.

In terms of licensing transactions that exceeded $1 billion, 14 of 29 focused exclusively on cancer assets and seven exclusively on neurology. Fifteen deals focused on cell/gene therapy or oligonucleotides, but pacts involving oncolytic viruses also appeared for the first time among major BD plays.

Seven of the top 20 up-front cash payments in 2018 licensing transactions were for discovery-stage deals in neurology (three), oncology (two) and autoimmune/inflammation (two). The largest up-front discovery deal was Biogen Inc.’s $1 billion, 10-year extension for its partnership with Ionis Pharmaceuticals Inc., which included a $375 million up-front payment and $625 million for the purchase of approximately 11.5 million Ionis common shares at $54.34 apiece, or a premium of about 25 percent. (See BioWorld, April 23, 2018.)


The China story is ‘coming to the fore’

Although ex-U.S. dealmaking remains dwarfed by activity within the States, Chinese biopharmas showed a healthy appetite for inter-regional buyside deals in 2018, Munro said, with the aim of expanding the country’s access to innovative medicines.

“As with everything with China, the growth was quite significant,” he observed. The largest such transaction, Munro said, was the potential $722 million, including $20 million up front, bispecific antibody platform deal that provided Beigene Ltd. with rights to the Azymetric and EFECT platforms from Zymeworks Inc. along with global development and commercialization rights for up to three additional bispecific antibodies. For up to $430 million more, including $40 million up front, Zymeworks also sent rights to its HER2-targeted bispecific antibodies ZW-25 and ZW-49 in Asia (excluding Japan), Australia and New Zealand to Beigene. (See BioWorld, Nov. 28, 2018.)

“The China story is something we predicted, and now it’s coming to the fore,” Munro said.


For further analysis of the life sciences dealmaking landscape, join Jamie Munro and Laura Vitez for the “Deals and Portfolio Review: Lessons for pharma from a challenging year” webinar on Feb. 6.