 Home > Active Ingredient News > Drugs Articles > Pfizer and Amgen win annual TOP mergers and acquisitions! There is no big explosion in Biotech mergers and acquisitions in 2022, and the wave of mergers and acquisitions in China is far from coming

Pfizer and Amgen win annual TOP mergers and acquisitions! There is no big explosion in Biotech mergers and acquisitions in 2022, and the wave of mergers and acquisitions in China is far from coming

 Last Update: 2022-12-30
 Source: Internet
 Author: User

Tags

health benefits berries

fbs media

Search more information of high quality chemicals, good prices and reliable suppliers, visit www.echemi.com

Although in theory the relationship between M&A and IPO always goes up and down, when IPOs plummet, biopharmaceutical acquisitions do not have the expected "big bang"
.

In the past few years, as large pharmaceutical companies have laid out new technologies and new platforms, the pharmaceutical industry has merged Purchases hit record highs
.
The deal focused on immuno-oncology and rare diseases, areas of pharmaceutical research that resulted in significant clinical trials and significant value
to the acquirer.

The deal is focused on immuno-oncology and rare diseases

However, these deals are not cheap
.
Biotech companies have become accustomed to getting funding from venture capital and IPO channels, which makes them less receptive to acquisitions and forces potential acquirers to provide more money to lock in deals
.

For venture capital firms, M&A is one of
the main ways to exit the investment and then reap the rewards.
open After the acquisition of Biotech by a large pharmaceutical company, the capital flows back to the venture capital company, completing an investment cycle
.
Therefore, only a substantial increase in the number and amount of mergers and acquisitions can catalyze a sharp rebound
in the entire market.

In 2021, the entire biopharmaceutical mergers and acquisitions reached a five-year low, and mainstream industry analysis believes that 2022 will Recovery, has M&A rebounded so far? Have Big Pharma with lots of cash started harvesting? Have popular M&A targets changed? Why are M&A deals between Chinese biopharmaceutical companies still difficult to be active?

01Why is the wave of mergers and acquisitions in China delayed?

Primary market financing, IPO, mergers and acquisitions, and refinancing are the main capital tools of enterprises, as well as investment institutions The main entry and exit channels
.
In theory, the relationship between M&A and IPO always goes up and down
.
When both IPOs and primary markets are cold, industry expectations naturally focus on mergers and acquisitions of large companies, but this theory seems to exclude China's biomedical market
.

At the beginning of the year, when CSPC Pharmaceutical Group acquired Miscang Biotechnology, the industry wondered whether the domestic "merger and acquisition wave" would come; In the middle of the year, when Sinobio announced the acquisition of F-star, it was revealed that Mabing Biologics and CStone Pharmaceuticals were "sold.
" When the rumors were heard, the industry once again wondered whether the "M&A wave" would come? However, the reality is that the acquisition of Zhongsheng Pharmaceutical has been blocked, and the rumors of I-Mab Biologics and CStone Pharmaceuticals are still rumors, and the wave of mergers and acquisitions
has not only not occurred but also decreased sharply, and there are even fewer M&A targets.

According to the statistics of E Drug Manager Rong Media, between October 1, 2021 and September 30, 2022, a total of 121 M&A transactions occurred in the medical and health sector, a sharp decrease
from 392 in 2021.
Among them, there were 12 and 3 M&A transactions in the field of small molecule and large molecule drug R&D, respectively, which was far from 20 and 31 in the previous range, especially in the field of
large molecule biopharmaceuticals.

Number and amount of disclosed M&A cases in various fields of domestic pharmaceutical industry in 2022 (: 100 million yuan)

Source: E drug manager financial media based on public data

M&A in the pharmaceutical track is not mature, and there are fewer
independent M&A.
Three biological drugs in the aforementioned statistics For example, the largest transaction value was the acquisition of Garden Pharmaceutical by Garden Biotech for 1.
07 billion yuan in cash and a premium of 8 times, which also received two letters
of concern from the Shenzhen Stock Exchange.
It is understood that Garden Biology and Garden Pharmaceutical are controlled by the same actual controller, Shao Qinxiang; The acquisition of Xi'an Huitian by Tiantan Biotech is a capital increase acquisition, which is the former's strategic layout of blood product business; Only the merger and acquisition between Zhongke Huarui and Suning Global Yi is independent
.

M&A in the pharmaceutical track is not mature, and there are fewer independent M&A

"China's M&A wave is far from coming," says Song Gaoguang, partner at Northern Light Ventures, "because China's M&A system has not yet been built
.
" Mergers and acquisitions often occur between private enterprises, and China's private medical enterprises have a very short development cycle, starting from the 80s, and have been mainly
making generic drugs.
The real capital accumulation is the period of innovative drug dividends from 2010 to the present
.
Due to the short period of time, these established private pharmaceutical companies have accumulated relatively limited
capital.
”

Because China's M&A system has not yet been established
.
Mergers and acquisitions often occur between private enterprises, and China's private medical enterprises have a very short development cycle, starting from the 80s, and have been mainly
making generic drugs.
The real capital accumulation is the period of innovative drug dividends from 2010 to the present
.
Due to the short period of time, these established private pharmaceutical companies have accumulated relatively limited capital

Taking private pharmaceutical companies listed on Hong Kong stocks and A-shares as an example, As of December 31, 2021, Hengrui, Zhongsheng Pharmaceutical and CSPC held cash and cash equivalents of RMB13.
1 billion, RMB9.
6 billion and RMB9.
1 billion respectively, with a median premium of 62%, and the acquisition funds were not sufficient
.

"On the one hand, capital accumulation is limited, on the other hand, they use funds more cautiously, the funds of these private pharmaceutical companies are accumulated bit by bit through sales, and most of the equity of these pharmaceutical companies is concentrated.
" For the founder family, once the loss is its own loss
.
M&A failures tend to be the majority
.
In addition, the inflated valuation of domestic targets and the relatively limited cost performance of product quality are also factors
restricting mergers and acquisitions.
Song Gaoguang continued to analyze.

"Only when a batch dies, the valuation continues to fall to a reasonable range, and the companies of various models have a clear division of labor and perform their own duties, can they really operate.
"
A BD leader of a traditional pharmaceutical company said
.

02 Rebound, short-lived

M&A in the European and American biopharmaceutical markets outside of China is quite mature and more reflective of changes
in the global market.
There was no "big bang" in biopharmaceutical acquisitions in 2022, and the first quarter opened slowly The bureau rebounded modestly in the second quarter, returned to the slump in the third quarter, and analysts expect a further recovery
in the fourth quarter.

"The second quarter of this year was one of the busiest times for acquisitions in recent years," lamented
one M&A dealmaker.
According to Biopharma From April to June this year, at least 14 M&A transactions worth more than $50 million occurred, which is about 2~3 times that of the same period in the past four years
.
In terms of volume, excluding large transactions ($20 billion and above), the transaction value in the second quarter of this year will exceed the cumulative amount of the second quarter of the past four years, to about $23.
4 billion.

However, the busyness of the second quarter was short-lived, and the third quarter was not maintained
.
For now, 2022 will be a slow year for M&A spending, with the number of M&A deals in the first three quarters showing a sequential decline Trend, the total is only $53 billion
.
Excluding large mergers, it could refresh the minimum threshold for 2018, when acquisitions totaled about $84 billion
.

Notably, without Pfizer, this year would see a significant reduction
in trading activity.
According to the former According to statistics, Pfizer accounted for one-third
of the total acquisition funds this year.
The big pharma company announced in April that it was acquiring ReViral and acquiring the latter's respiratory syncytial virus treatment pipeline totaling $525 million from the sale of COVID vaccines and coronavirus drugs, and Biohaven, a pharmaceutical company, for $11.
6 billion in cash (a 33% premium) in May Pharmaceutical, which acquired its blockbuster migraine listed drug and pipeline under development; Acquired Global Blood Therapeutics in August for $5.
4 billion, Obtained innovative therapies
for sickle cell disease.

It is expected that the fourth quarter will recover Is the state expected by the "mainstreams"? The trading status that has opened high since October increases this possibility
.
According to statistics, as of October 24, the biopharmaceutical field happened Six M&A transactions of more than US$50 million, with a cumulative transaction value of approximately US$3.
146 billion
.
The largest transaction was Sumitomo Pharmaceutical's acquisition of Myovant for US$1.
7 billion (a premium of approximately 50%) Sciences
。

It is expected that the fourth quarter will recover Is the state expected by the "mainstreams"? The trading status that has opened high since October increases this possibility

In addition, AbbVie, Eli Lilly, AstraZeneca, and LG Chem all took action in October, including Astra Kang and Eli Lilly are both in the field of gene therapy and rare diseases; AbbVie and Incyte strengthened the immune landscape
.
AstraZeneca's next step, its subsidiary Alexion, announced the acquisition of clinical-stage genes for $68 million LogicBio, a company, acquired its gene-editing platform GeneRide and gene delivery capsid platform sAAVy, as well as 10 product
pipelines.
Eli Lilly announced a $610 million investment USD acquisition of genetic medicine company Akouos
.

The start continued in November when Johnson & Johnson agreed to buy the heart pump maker for $16.
6 billion (a premium of more than 50%) Abiomed, the largest medtech deal
so far in 2022.
Although not from the biotech field, it may be a signal
.
The fourth quarter of every year is the peak period for M&A deals, and as the year draws to a close, can M&A transactions win back this year?

03Big Pharma "Dull"

Unless pharmaceutical companies significantly accelerate the pace of M&A, there won't be enough M&A size to reward VC and IPO investors invest money, not to mention offer attractive returns
.
Only a significant increase in M&A activity is likely to drive a full rebound
in the market.

On the positive side, Big Pharma has more cash to trade than ever before, and they are willing to
pay high prices for the right company.

However, the reality is not so ideal, and Big Pharma seems to be imsensitive to mergers and acquisitions this year
.
Johnson & Johnson, for example
, had plenty of cash but delayed M&A deals.
Johnson & Johnson Chief Financial Officer Joseph Volcker said on the third-quarter earnings call, "As we finalize our plans for 2023, we will consider prioritizing Johnson & Johnson's resource deployment.
"

Those initiatives, programs, and services
that bring the most value to patients.
Although Johnson & Johnson has $34 billion in cash, Johnson & Johnson does not act
"rashly.
" "The market is a bit funny and the current volatility is not good for mergers The buying environment is because there are potential sellers holding historical highs in market value
.
”

Johnson & Johnson is not in a hurry to M&A is supported
by performance.
Due to the steady growth of mature drugs and increased sales of new drug launches, the company expects to see "high" again in the year of market growth
".
Johnson & Johnson has publicly stated that from the current pipeline and sales situation, Johnson & Johnson's pharmaceutical sales revenue target is still likely to be reached by 2025 $60 billion
.
So in this regard, any M&A activity will just be the icing on the cake
.

Similarly, according to Biopharma dive, only seven large pharmaceutical companies have made M&A transactions of more than $50 million
.
At the beginning of the year those have harvested Potential buyers such as Novartis, Merck and Moderna did not appear on
the list of $50 million M&A deals.

In fact, many companies have recently spent a lot of time and effort transforming themselves into a state
of focus on core therapeutic areas and continued innovation.
Novartis Since the beginning of this year, it has focused on core areas through structural adjustments, spin-offs and other means; GSK withdrew from the Cell Therapy 2.
0 alliance and abandoned the solid tumor cell immunotherapy project it had spent heavily ongoing; Roche increasingly focused on tumors and neurological diseases
.

The example of Johnson & Johnson reveals the reasons behind the lack of
M&A.
On the one hand, Big Pharma will indeed be The 2024-2028 period faces patent expirations and pipeline challenges, but this time the patent cliff has a relatively moderate impact compared to the previous small molecule patent cliff, so Big Pharma is willing to wait patiently until sellers' expectations adapt to the new, more conservative reality
.

The reasons behind the lack of M&A

On the other hand, there are many assets that are still not in place for valuation, and Biotech founders who are on the verge of "danger" are still receiving high valuations The gap
to the low valuation.
And even if valuations are rebalanced, it is imperative
that the premium required to complete the transaction allow the full value of the transaction to be realized.

In 2019-the first half of 2021, biopharma buyers typically paid at least twice the market value of the companies they
acquired.
While premiums for some trades remain in the triple digits this year, Pfizer is trading with the same as Pfizer Biohaven, GSK and Sierra Oncology, Affinivax The premium of other transactions decreased by 40%~80%.

In some cases, Biotechs are selling themselves near or near all-time lows, such as Radius Health and the acquisition
of Epizyme.
This means that as capital becomes harder to come by, more Biotech companies are willing to explore alternative ways of financing
.

Of course, for the acquisition of high-quality assets, Big Pharma spares no effort
.
Big pharma companies want assets that have first-class or best potential and have rigorous scientific provenance
.
So companies engaged in this type of product There's still great value
to be gained.

04M&A wind has changed

The biopharmaceutical sector has not had a major M&A for two years in a row, and acquirers prefer early-stage small and medium-sized biotech companies
.
PwC's report this year shows that there is currently the best area for biotech deal turnover It seems to be between
$5 billion ~ $15 billion.

A big deal that has already taken place this year is still pending
.
Earlier, foreign media reported that Merck was preparing to acquire Seagen for $30 billion, which would have been the most anticipated one in 2022 Huge deals
.
But some analysts say that excessive valuations may force Merck to look for other portfolios
.
Recently, it has been reported that this deal may have failed, Because the two companies could not agree on
pricing.
However, Merck's deal for Seagen was never officially confirmed
.

Big mergers and acquisitions have always been a means for multinational pharmaceutical companies to expand their assets and quickly become giants, and now the top ten multinational pharmaceutical companies are all there
.
But since last year, the preferences of multinational pharmaceutical companies have obviously changed, from large M&A shifts to small and medium-sized M&A
.
Pfizer's CEO said at the JPM conference earlier this year that he would increase investment in small and medium-sized biotechnology companies
.

From the big M&A shifts to small and medium-sized M&A

According to statistics, as of October 31, only two M&A transactions of more than $5 billion occurred in 2022, 4 in 2021, 4 in 2020 and 6 in 2019
.
Deals under $500 million set a new record again, with 21 transactions in the first ten months, accounting for a proportion of total transactions Nearly 60%, compared to 42% in 2021 and 32%
in 2020.

Another distinguishing feature is the increase
in acquisitions of late-stage public companies by big pharma.
This is related to being The valuation of the target of the acquisition is related
to the preference of the acquirer.
On the one hand, after a year and a half of valuation adjustments, companies in the secondary market are more heavily discounted than in the primary market; On the other hand, most of the main products of the acquired targets are in clinical trials Later
.
For example, Sierra, acquired by GSK for US$1.
9 billion, went public in 2015 and its main products are in clinical phase
III.

Increased acquisitions of late-stage public companies by Big Pharma

Overall, the proportion of transactions with a premium rate of more than 100% for M&A targets decreased from 38% in 2019 to 23% in 2022.
Trades with a premium rate of less than 25%.
The proportion rose to 18% from 6%
in 2019.

In contrast, venture capital firms are biased towards investing in early-stage biotech companies
.
An investor engaged in early-stage investing said that preclinical investing is almost a safe "hiding place" to invest himself Biotech companies that will be engaged in early-stage research in the next 12 to 18 months have little concern
.

"The division of labor in the U.
S.
biotech industry is quite clear
.
The purpose of large pharmaceutical companies is to maximize the commercial value of trading products through their strong commercial operation capabilities, rather than undertake Take high scientific research risks; The core purpose of venture capital institutions is to do early incubation investment, that is, to pass high The results of schools and research institutions are transformed and sold to large pharmaceutical companies to achieve a cycle
.
Song Gaoguang further explained to E drug manager Rong Media, "Clinical phase II is one of the 'deaths' in the drug development process Valley', the risk is greatly reduced after phase II, which is the reason why
large pharmaceutical companies prefer to acquire late-stage clinical product companies at this stage.
”

This article is an English version of an article which is originally in the Chinese language on echemi.com and is provided for information purposes only. This website makes no representation or warranty of any kind, either expressed or implied, as to the accuracy, completeness ownership or reliability of the article or any translations thereof. If you have any concerns or complaints relating to the article, please send an email, providing a detailed description of the concern or complaint, to service@echemi.com. A staff member will contact you within 5 working days. Once verified, infringing content will be removed immediately.