As we head to BIO International 2018, a look at the changing landscape of biopharma dealmaking

“In general, things are healthy. There is a great deal of capital that companies can access. The pipelines are strong, and so is innovation.”

That was Richard Harrison’s top-view assessment of the biopharma industry as he set the stage during a webinar titled “Trends in Dealmaking, Fundraising and Partnerships: The Changing Landscape” presented by the Life Sciences division of Clarivate Analytics on May 9.

Harrison, Clarivate’s chief scientific officer, was joined in the presentation by Peter Winter, editor of BioWorld Insight, also from Clarivate, and Willie Reaves, director of partnering products & services at the Biotechnology Innovation Organization (BIO), which co-hosted the event.

“In general, things are healthy. There is a great deal of capital that companies can access. The pipelines are strong, and so is innovation.”
– Richard Harrison, Chief Scientific Officer, Clarivate Analytics

Harrison opened the talk by showing the audience a chart tracking biopharma M&A activity over the last decade (See Figure 1). While 2017 was up in both the number of transactions and overall deal value vs. 10 years ago, the results were down compared to the last few years.

Figure 1. Ten years of life sciences M&A transactions (adjusted $$).

One of the key factors influencing biopharma deals, particularly on the M&A side, has been the robustness of the initial public offering (IPO) market, Harrison said, which has given smaller companies options.

“What that meant is that companies on the sell side could decide if they wanted to stay independent and finance their work in the public markets or if they wanted to sell to pharma,” Harrison noted. The existence of such options on the sell side can bring “elevated expectations” to the deal table, perhaps complicating some potential M&A deals, Harrison added.

Another clear factor, he noted, was that U.S. companies were holding out to see how tax reform in the U.S might make an impact. With the passing of tax cuts, and the effective lowering of corporate rates, he said he expects to see more M&A deals as companies harness cash that has been freed up.

Licensing paced by oncology and neurosciences

Harrison talked through several trends visible in Clarivate’s Cortellis database on biopharma licensing, including a look at key 2017 deals. The landscape was dominated by oncology, he noted, to no one’s surprise (See Figure 2).

Figure 2. 2017 licenses by therapeutic area.

“There was almost exactly the number of oncology licensing transactions as there were last year [in 2016] and the year before,” he said.

But he directed the audience’s attention to the neurosciences, which demonstrated the second-largest number of licenses for the year. “There is a very strong neurosciences pipeline,” he said. “We know the industry doesn’t yet have the answers there, but people are working very hard to put the pieces together to get us there.”

Harrison also highlighted the burgeoning geographic diversity among the licensors in biopharma. He said that while the U.S. was the headquarters location for more than half of the sellside companies involved in 2017 transactions, with about 25% from Europe and another 14% from Asia and Australia, in all nearly 50 countries were represented. “That’s a lot of places in the world now that are contributing to life sciences innovation,” he said.

Going public?

BioWorld’s Winter in his discussion on IPOs also underscored the industry’s global profile. He said that, increasingly, Nasdaq has drawn players from Asia and Australia and that some of the top IPO results have come from Europe (See Figure 3). “There is no doubt that our industry has come of age and is truly global,” he said.

“There is no doubt that our industry has come of age and is truly global.”
– Peter Winter, Editor of BioWorld Insight from Clarivate Analytics

Figure 3. Notable IPOs 2008-2017.

Winter described a change in how companies have come to perceive IPOs. Whereas going public was once viewed as the ultimate goal for a biopharma, now companies view it as one route among several – another option, as Harrison had pointed out, also. Winter recalled the intense licensing activity that Harrison had presented, noting that many such partnerships could eventually lead to an acquisition. As a result of that change in perspective, Winter predicted that the number of IPOs each year will likely level off. “My projection is that 30 or 40 might become the norm,” he said.

So far, the public markets have been strong in 2018, Winter added, with 14 IPOs recorded by BioWorld in Q1. The events collectively raised about $1.2B, with a handful of companies able to raise in excess of $100M each.

‘Segment, segment, segment’

BIO’s Reaves closed the session with tips on getting the most out of the one-on-one partnering set-up at BIO 2018 in Boston by segmenting searches to identify the ideal target companies. “The key word here is segment, segment, segment,” he said.

He listed the busiest therapeutic areas and the most popular assets listed so far in the partnering system, from vaccines and cell therapies to biosimilars and medical devices. Antibodies, proteins and peptides topped the list (See Figure 4). He noted also that the ontology behind the Therapeutic Area Search in the BIO partnering system has been provided by Clarivate, which means that Cortellis subscribers enjoy “consistent terminology” across their data as they conduct their searches for the meeting.

Figure 4. Most Popular Asset Types (BIO 2018).

At BIO 2017 in San Diego, the partnering system tracked 41,408 meetings, the most ever, Reaves said. But, he said BIO “looks forward to breaking that record” in Boston, and expects to eclipse 45,000.

You may access and view the entire presentation here.

We also invite you to meet with Clarivate Analytics in Boston at BIO International 2018. Visit booth 1143 to receive a free BioPharma Financings Report (choose from 15 therapeutic areas available).