The threat of patent expiration goes deep!

Biopharma revenue growth is slowing significantly in recent years as the threat of a new wave of biological product patent expirations deepens, and the industry has been slow to develop new treatments to replenish its pipeli.

To bridge this innovation gap, Big Pharma is accelerating the use of mergers and acquisitions (M&A) in conjunction with allianc.

M&A in full swing

2020 and 2021 have been the years with lower M&A value over the past few yea.

That doesn't mean a slowdown in M&A in 2021, though, and the year-over-year increase in biopharma deal volume means the biopharma giants have opted for smaller add-on deals rather than transformative M&A opportuniti.

More recently, big pharma companies including Pfizer, GlaxoSmithKline, Bristol-Myers Squibb and others have gotten in on the acti.

On May 10, Pfizer, which has enough "new crown vaccine cash", announced the acquisition of Biohaven Pharmaceuticals for US$16 billion in cash to obtain its blockbuster migraine drugs and pipelines under development, becoming the largest in the pharmaceutical industry since the beginning of 202 merger ca.

On May 31, GlaxoSmithKline, which has been struggling with revenue growth, acquired clinical-stage biopharmaceutical company Affinivax for $3 billion to bolster its vaccine pipeli.

On June 3, Bristol-Myers Squibb, facing the biggest patent cliff pressure, acquired Turning Point Therapeutics for $1 billion to strengthen the company's position in the field of lung cancer treatme.

Within a month, the three major pharmaceutical giants completed the top three mergers and acquisitions in the biopharmaceutical industry so far this ye.

Even some pharmaceutical companies that have never competed in M&A are getting involv.

Purchasing goals are clearer

Of course, cell and gene therapies in oncology, rare diseases, and neurology are undoubtedly the priority directions for Big Pharma as they look for their next inflection point targe.

For example, the maturation of CRISPR gene-editing technology, and newly validated mRNA and RNAi technology platforms are bearing fruit, could help Big Pharma get back on the path to grow.

Big pharma is flush with cash, while smaller biotechs are trading at far lower valuations, creating opportunities for mergers and acquisitio.

The developed biotech index, represented by the United States, peaked at the end of 2021, mainly because biotech companies had a great opportunity to innovate in the face of COVID-19, but the index declined sharply in 202 The future of biotech companies is very different — mature companies with products on or nearing IPOs have suffered less after the pandemic, while smaller companies with early-stage product candidates have fallen further, with net losses overa.

Novartis CEO Vas Narasimhan said on the company's first-quarter earnings call that it is taking a closer look at what makes sense in the biotech space and what innovations can help the company overcome the challenges ahe.

"We have to be science-led (to come to M&A), (ask oneself before M&A) Is there science and good data to support the acquisition?"

Johnson & Johnson Chief Financial Officer Joe Wolk said on the company's first-quarter earnings call that more than $20 billion in cash flow will provide the company with the firepower it needs to bring in new asse.

One of J&J's best-selling products, Remicade (infliximab), is already facing biosimilar competition and continued sales declin.

"If the right opportunity arises, J&J will be able to make small, mid-sized, and even large-scale acquisitions," Wolk sa.

"I think the company is in a very good position to make future income from today's ca.

"

Popular Choice Alliance

In fact, a deal that brings benefits to a biopharmaceutical company doesn't have to be an acquisiti.

Ernst & Young said in a recent report that pharmaceutical companies continue to shift their capital allocation from mergers and acquisitions to favor alliances and strategic partne.

Since the beginning of 2020, major biopharma companies have deployed 5 times more firepower on alliances than mergers and acquisitio.

Pharmaceutical companies seek to allocate funds sustainably in 2022, and alliances that lead to broader, more strategic partnerships to access new talent and innovation fit the bi.

Alliances are also another way to offset risk, giving both parties a chance to demonstrate value and build trust in each oth.

Belén Garijo, Chairman of the Executive Board and CEO of Merck AG, said recently: "To increase the chances of success, companies must have relevant expertise and a strong culture of cooperati.

This is why we rigorously evaluate cooperation with us during our due diligence proce.

the cultural fit of the organizati.

”

Still, with the lower upfront costs of alliance partnerships, Big Pharma may err on the side of hedging risk and not provide smaller partners with the support they need to reach the next inflection poi.

Interestingly, EY research shows that on several metrics, biopharma companies are prioritizing alliances with smaller companies paying lower upfront payments in 202 As of N.

30, 2021, there were 31 deals with more than $100 million in advances, 38 in 2020, and the average advance was down nearly $30 million year-over-year last ye.

In conclusion, mergers and acquisitions or partnering with smaller biopharmaceutical companies (such as forming alliances) can help pharma companies significantly close the innovation gap they may face in the coming yea.

Of course, there are also significant advantages to improving the internal corporate ecosystem, including increased efficiency, greater creativity and innovation, and faster time-to-market for the pharmaceutical industry, compared to the pharmaceutical industry's traditional methods of driving growth (in-house R&D and M&.

Compared to mergers and acquisitions, internal corporate ecosystems provide a less risky and faster way to fill a company's innovation pa.