Special report on the overview of biopharmaceutical transactions in the second quarter of 2021

Financing in the life sciences field provides investors with a relatively safe haven in an uncertain environment

In a period of economic uncertainty, the biopharmaceutical industry has always been regarded as a safe haven

As a result, the biopharmaceutical industry has received huge investment, and the amount of investment continued to grow in the first half of 2021

Mike Ward, head of Clarivate Analytics’ life sciences department: “The capital market is very generous to the biotech industry, and companies have no incentive to acquire biotech companies.

In general, the number and total amount of financing and transactions in the first half of 2021 have exceeded the number and total amount of each year in the past ten years

The three largest deals concluded in the first half of 2021 are: 

• Eisai and Bristol-Myers Squibb reached a $3.

• NeurMedix acquired Biovie Inc for $3 billion in June to obtain NE-3107 for the treatment of neurodegenerative diseases and malignant tumors

• Takeda Pharmaceuticals acquired Anima Biotech's mRNA translation regulator for the treatment of neurological diseases for US$2.

In 2020, COVID-19-related transactions will dominate the biopharmaceutical transactions.

Overall, financing continues to show an upward trend 

If the financing trends in the next two quarters remain unchanged, the total financing in 2021 may exceed last year's record of $134.

• The total financing of the biopharmaceutical industry in the first half of 2021 (US$71 billion; Figure 1) increased by nearly 10% from the first half of 2020 (US$64.

 • The number of financing increased by 15%, from 775 in the first half of 2020 to 892 so far in 2021 (Figure 2)

In the field of public financing, follow-up issuance has always been slow, while initial public offerings (IPOs) continue to show strong momentum 

Subsequent issuance is the only financing sector that has dropped significantly from last year

• Despite the similar number of transactions (172 and 169, respectively; Figure 4), the total amount of funds raised in the first half of 2021 was US$17.

• The number of transactions in the second quarter of 2021 is less than half of the first quarter of 2021 (total fundraising of US$11.

 • in the second quarter reached biggest deal was $ 690 million follow-on offerings conducted by Therapeutics Inc.

Initial public offerings (IPOs) accounted for a large proportion of trading activities in the first half of the year
.
The 76 transactions in the first half of 2021 raised a total of US$13.
4 billion, while the 36 transactions in the first half of 2020 raised a total of US$8.
7 billion (Figure 5 and Figure 6)
.

Private equity financing breaks historical records in the first half of 2021 

Venture capital (VC) financing also made a significant contribution to the total financing volume reached in the first half of the year
.
 

• A record 400 transactions raised a record high of US$22.
1 billion (Figures 7 and 8)
.

• Compared to 250 transactions in the first half of 2020 and a total of US$12.
7 billion in funding, the first half of 2021 has almost doubled
.

U.
S.
biotech companies take the lead in global financing activities 

After in-depth research on the data provided by the BioWorld platform, it is found that biotechnology companies headquartered in the United States have raised most of the funds through private equity financing and venture capital, accounting for 67% of the total global fundraising
.
In the first half of 2021, the amount of capital raised by Massachusetts-based companies accounted for 28.
4% of all VC financing
.
The funds raised by biopharmaceutical companies in mainland China accounted for 14.
2% of the total global funding, slightly higher than 12.
3% of companies located in the San Francisco Bay Area and 9.
5% of companies located in San Diego
.
The funds raised by the UK-based company accounted for 8.
5% of the total global fundraising, and accounted for more than half of the total fundraising of European biotech companies
.

Records set in terms of transaction volume and transaction volume in the first half of 2021

In the first half of 2021, 1,027 transactions were concluded, with a total transaction value of US$82.
7 billion, slightly higher than the first half of 2020, and exceeding the transaction volume and transaction value of the full year of 2017 (1,015 transactions and US$81 billion, respectively) (Figure 9) And Figure 10)
.

The transaction volume related to COVID-19 is declining, and cell therapy and gene therapy continue to dominate 

In the first half of 2021, there were 125 transactions related to COVID-19 treatment drugs and vaccines
.
 

• These transactions accounted for approximately 12% of the total transaction volume, which is less than about 20% of the total transaction volume during 2020.
• The total value of the 10 transactions with disclosed terms is approximately US$1.
8 billion 

• In February of this year, South Korea's Genexine, Inc.
and Kalbe Genexine Biologics signed a $1.
1 billion cooperation agreement, which accounted for a large proportion of the total transaction amount
.
The two companies agreed to develop and commercialize GX-17 (efineptakin-α) for the treatment of malignant tumors and COVID-19 throughout the Middle East and Asia 

• In addition, up to now, 122 cooperation agreements have been reached between the industry and non-profit organizations or government agencies, amounting to US$6.
8 billion 

• The largest round of venture capital in the second quarter of 2021 is a $336 million Series C investment raised by Adagio Therapeutics Inc.
, which is developing the monoclonal antibody drug ADG-20 to treat COVID-19

Cell therapy and gene therapy represent another hot transaction area.
In the first half of 2021, a record of 105 transactions was set, with a transaction value of 13 billion US dollars, accounting for approximately 16% of the total transaction volume, including the largest transaction so far in 2021 5 transactions in: 

• Gilead’s Kite teamed up with Shoreline Biosciences Inc.
to spend US$2.
3 billion to develop tumor allogeneic cell therapies

• Merck and Artiva Biotherapeutics Inc.
cooperate to spend US$1.
9 billion to develop cancer treatment drugs

• Takeda Pharmaceutical Co.
, Ltd.
and Ensoma cooperate to spend US$1.
3 billion to develop drugs for rare diseases

• Vertex Pharmaceuticals Inc.
cooperated with Obsidian Therapeutics Inc.
to spend US$1.
3 billion to develop gene therapy drugs using Cytodrive technology platform 

• Vertex Pharmaceuticals Inc.
partnered with CRISPR Therapeutics to spend US$1.
1 billion to focus on the development of CTX-001 for the treatment of sickle cell disease and β-thalassemia

Transaction volume surged, but M&A activity still slowed

The total value of M&A in the first half of 2021 (US$31.
7 billion) was at the lowest level since 2016 (Figure 11), accounting for only 27% of the record total value of M&A in the first half of 2020 (US$119.
6 billion), and only accounting for the total value of M&A in 2019 ( 96.
9 billion U.
S.
dollars) 33%
.
Considering that a large amount of money has been invested in biotechnology companies, which has reduced investors' motivation to acquire, this result is not surprising
.

Karen Carey, Senior Analyst at Bioworld: "The amount and total amount of financing reached so far is amazing
.
In terms of IPO, private equity and VC financing, the amount of funds raised in this industry exceeds the amount of funds raised in any year in history (except in 2020, This year’s fundraising amount is extraordinary
.
) When companies get capital easier, they are often reluctant to make mergers and acquisitions
.
Large-scale mergers and acquisitions such as AbbVie’s $63 billion acquisition of Allergan last year may not happen again.

These large-scale mergers and acquisitions have affected the number of mergers and acquisitions in other years
.
As these companies are acquired, fewer and fewer companies can ask for such high prices
.
"

In addition, in the face of the global COVID-19 epidemic, many pharmaceutical companies have chosen to save money
.
As shown in Figure 11, although the value of M&A transactions in the first half of 2020 was significantly higher than in previous years, many of these M&A activities had already started before the outbreak of the COVID-19 epidemic, and M&A transactions showed a slowdown in the second half of 2020
.

It is worth noting that the number of mergers and acquisitions reached in the first half of 2020 and the first half of 2021 are similar (Figure 12), indicating that high-volume mergers and acquisitions have biased the total number of mergers and acquisitions in 2020
.
For example, AbbVie acquired Allergan for US$63 billion in May 2020, accounting for a large part of the total funding of US$74.
2 billion in the second quarter of 2020 (from 41 mergers and acquisitions)
.

However, in the first half of 2021, all M&A transactions did not reach $8.
7 billion.
This transaction amount is the threshold for entering the top 20 biotech developers listed by BioWorld
.
In contrast, Jazz Pharmaceuticals plc's acquisition of GW Pharmaceuticals plc has the highest transaction value of only US$7.
2 billion (Table 1)
.

In addition to this acquisition (which may be a transformation for Jazz Pharmaceutical plc), the other mergers and acquisitions on the list are "reinforcement" acquisitions that complement the existing advantages of these companies
.
In addition, as shown in recent merger records, few companies have been able to merge at the same high price as in previous years
.

Diagnostic reagents become more and more important

Follow-up transactions for the COVID-19 epidemic will focus on establishing or improving diagnostic capabilities (including companion diagnostic products)
.
For example, QIAGENN.
V.
is collaborating to develop and commercialize companion diagnostic reagents for drug candidates from more than 25 companies
.
 

In 2020, the diagnostic reagent company raised a large amount of funds
.
These companies are currently targets to be acquired in 2021
.
Liquid biopsy companies are more favored because liquid biopsy is superior to solid tumor biopsy and has advantages including non-invasive and detection of biomarkers in blood, urine and sputum
.
 

Exact Sciences, a provider of tumor screening and diagnostic reagents, completed the acquisition of Thrive Early Detection Corp, a developer of early screening reagent CancerSEEK, in January 2021.
It announced its intention to acquire in October 2020, involving up to US$2.
15 billion in cash.
And stock consideration
.
 

In May 2020, NeoGenomics Inc.
spent US$25 million to complete a minority investment in Inivata Ltd, a liquid biopsy platform company in the commercial stage, and announced plans to acquire the company at a fixed price of US$390 million by the end of 2021
.

Assets in the early stage of research and development have raised a lot of funds

Another growth trend is investment in companies in the drug discovery and preclinical stages, which set a record in 2020, with total investments accounting for 62% of total VC investments and 23% of total transactions in 2021 1, 5
.
Public funds are also turning more to companies in the early stage of research and development, such as Sana Biotechnology Inc.
, which focuses on the development of in vivo and in vitro cell engineering platforms for the development of tumors, diabetes, cardiovascular diseases, CNS diseases and genetic diseases.
Therapeutic drugs
.
Although it plans to submit an initial new drug application (IND) from 2022 to 2023, the company has been listed in the first quarter of 2021 and has a market value of US$676 million
.
The previously discussed cell therapy and gene therapy transactions also belong to this area
.

Many companies use options in these early-stage company transactions
.
Bristol-Myers Squibb will receive an advance payment of US$200 million and up to US$1.
36 billion in drug development, regulatory and commercial milestone payments to obtain Agenus Inc’s proprietary bispecific antibody project AGEN1777 (the project is in the late stage of preclinical development) worldwide Exclusive license
.
In another oncology-related transaction, GlaxoSmithKline will pay iTeo Therapeutics Inc.
an advance payment of US$625 million for the development of the monoclonal antibody EOS448, and an additional US$1.
45 billion for R&D and Commercial milestone payment
.

Assessing the early stage asset transaction profile is still challenging 

Many companies in the preclinical stage, or drug discovery companies and assets have very limited information available, and it is difficult to evaluate them, especially companies that develop first-in-class drugs
.
Many companies rely on benchmarking data from previous transactions or similar transactions by other companies
.
When there is a large difference in the valuation of the two parties, the negotiation process will be prolonged if it is not based on objective data
.
It is not uncommon for the transaction to take 6-12 months from the statement of the transaction intention to the announcement of the completion of the transaction, and even some transactions cannot be completed at all
.
 

By making robust, objective and neutral forecasts of asset value and success rate, a fair trading environment can be created and the speed of transaction negotiations can be accelerated (see Figure 13 for an example)
.
This can be achieved through the use of artificial intelligence methods, such as automated machine learning techniques
.
Expert insights on the relevant data points of the prediction model can be used as auxiliary conditions
.

Looking to the future

For the second half of this year and in the future, what should biopharmaceutical companies expect? As far as the current situation is concerned, the high probability of the transaction situation is to maintain the same development trend as before
.
Because as many funds that focus on the life sciences field become more aware of this field, and there is greater motivation for medical innovation in the life sciences field, biopharmaceutical companies are likely to continue to obtain stable investment
.
 

M&A activity may continue to be quiet
.
But there are some exceptions that deserve attention.
For example, AstraZeneca acquired Alexion Pharmaceuticals15 for $39 billion.
The transaction was completed on July 21.
This is the third most expensive biotechnology acquisition so far
.
 

Investment in the field of cell therapy and immuno-oncology may increase ,

The reason is:

Biopharmaceutical companies continue to develop new therapeutic drugs in this field and look for new indications for existing therapeutic drugs
.
On the other hand, the rate of investment in gene therapy may be slowed down by a series of disappointing treatment results recently
.
This reminds people that these therapeutic drugs are in their infancy and may take many years to fully develop and mature, as are monoclonal antibodies
.
 

Although investment in COVID-related assets seems to be gradually decreasing, some of these technologies (most notably mRNA vaccines) may be applied in other areas
.
It is worth noting that BioNTech has established a production base in the United States
.
Chief Business and Commercial Officer Sean Marett recently told Clarivate Analytics’ Mike Ward: “We now have access to the market, and regulators are also familiar with the CMC part
.
Therefore, we will produce another one for other therapeutic applications (such as tumors or infections).
The mRNA vaccine for sexual diseases is no stranger to regulatory agencies
.
They have begun to understand us, and this is good news for us
.
In fact, we now have such a complete infrastructure, which allows us to see other opportunities.
"
.
 

Neuroscience may be the next hot field
.

Despite the controversy, the approval of Aduhelm may promote the development of the nervous system field, prompting companies such as Roche, GlaxoSmithKline and Takeda Pharmaceuticals to invest more in this field
.
From a social and economic perspective, diseases such as Alzheimer's disease, Parkinson's disease or major depression are still a huge medical burden on a global scale
.
For life science companies, this is a huge opportunity to promote investment in molecular drugs and companies aimed at the treatment of these diseases, and to conclude related transactions
.
In any case, a series of investment activities for life science companies are likely to make 2021 a new year for financing and transaction volume; at the same time, it can promote medical innovation and is expected to push human health forward
.