Biopharmaceutical deal-making continued to rebound in the third quarter of 2021 from pandemic-induced lows, even as the aggregate transaction value fell year over year, according to S&P Global Market Intelligence data.
Healthcare equipment company Baxter International Inc.'s $12 billion acquisition of connected-care device-maker Hill-Rom Holdings Inc. and Merck & Co. Inc.'s purchase of rare-disease company Acceleron Pharma Inc. for $11 billion were the largest deals of the quarter.
Aggregate deal value for the first nine months of 2021 exceeded full year 2020, though not yet reaching the heights of 2019, when megadeals from Bristol-Myers Squibb Co. and AbbVie Inc. topped the charts. However, the total number of deals for the nine-month period surpassed the total for 2019 and fell just short of full year 2020.
The latest quarter's 709 deals — the highest volume for any third quarter in the past six years — included mid-sized deals from biopharma giants such as Amgen Inc., Bayer AG and Pfizer Inc. Paris-based Sanofi accounted for two deals, ending a dry spell for European deal-making by acquiring messenger RNA company Translate Bio Inc. in August for a transaction value of $2.4 billion, followed by U.S. transplant biotech Kadmon Holdings Inc. for $1.8 billion in September.
The turn back toward deal-making after the drought wrought by the COVID-19 pandemic's uncertainty was expected sooner or later and looks set to continue, RBC Capital Markets analyst Brian Abrahams told S&P Global Market Intelligence in an interview.
"M&A activity should pick up as we get towards the back end of the year — if you look at biopharma balance sheets of larger companies, and maturing franchises, there's certainly a need for M&A," Abrahams said. "If you look at historical trends, whenever there's been a big decline in the pace of M&A, it's almost always been followed by a pickup in activity."
Some ongoing factors outside of the pandemic have also contributed to the slowdown, said Abrahams, who cited the U.S. Federal Trade Commission's increasingly stringent approach toward consolidation in all markets in recent years, leading some companies to opt for large-scale partnerships over outright acquisitions.
Easier access to capital in recent years has also allowed smaller companies to finance themselves for longer without turning to M&A as an exit strategy, Abrahams added.
Companies that could still be on the lookout for acquisitions include big U.S. biotech outfits with healthy balance sheets and a need to pick up new assets, such as Vertex Pharmaceuticals Inc., Biogen Inc., Amgen Inc. and Gilead Sciences Inc., the analyst said.
Most of these companies are likely looking for bolt-on deals in the small-to-mid-sized range, Abrahams continued.
"In Vertex's case, the growth of their cystic fibrosis franchise was faster than the market, and probably even than the company, had expected," Abrahams said. "They're a victim of their own success as the rest of their pipeline tends to be on the earlier stage side — it might make sense for them to consider selectively bringing in other assets to fill out the later-stage part of their pipeline portfolio."
Abrahams pointed to cancer and rare diseases as spaces that are likely to remain in the deal-making spotlight. Panna Sharma, CEO of cancer-drug maker Lantern Pharma Inc., told Market Intelligence that smaller companies making oncology drugs see M&A as a positive from the sell-side perspective.
"Depending on the stage of your portfolio and the ambitions of the management team, being acquired can largely be a positive for the industry and for patients," Sharma said. "Funding drug development [costs] a billion dollars and then launching to market is another billion dollars, and those are two very different skill sets."
Smaller biotechs are also ready to fill the gaps left by blockbuster drugs facing generic competitors for the first time, Sharma said. "Big biopharma companies will definitely be bolstering their portfolios because a lot of medicines are coming off patents and they want to fill the pipeline," the CEO added.