2020 has started off strong in the world of biopharma partnerships. Already, Nurix have struck a $2.6 billion deal with Sanofi for a proprietary drug discovery platform, and Astex Pharmaceuticals and Taiho Pharmaceuticals announced a $2.6 billion deal with MSD (Merck & Co.) for exclusive worldwide rights to therapies being developed for oncological indications. But as much as we enjoy speculating about the deal trends for this new year, let’s first take a look at how the 2019 deal landscape closed off.

Top deals and highlights in 2019

2019 was an eventful year in the world of biotech and pharma deals, comprising strategic and unexpected transactions that have contributed to the consistently dynamic industry landscape. Looking at the top transactions from the past year, the top 10 M&A deals (see table 1) achieved an aggregated value of around $245 billion. At the same time, the top 10 partnership deals (see table 2) totaled at an aggregated value of approx. $49 billion. Compared to 2018, we can confidently say that 2019 was a year of high value deals. As a matter of fact, the aggregate values of both deal types yielded a year-over-year increase of $129 billion and $14.5 billion, respectively.

Celgene and Bristol-Myers Squibb (BMS) kicked down the doors of 2019 with the announcement of the second largest pharmaceutical acquisition deal in history; only $16 billion less than Pfizer’s acquisition of Warner-Lambert for $90 billion back in 1999. The second largest acquisition of 2019, valued at $63 billion and also considered one of the top 10 valued acquisitions of all time, is AbbVie’s acquisition of Allergan. This strategic move allowed AbbVie to diversify and expand its revenue base and leadership in immunology, hematologic oncology, medical aesthetics, neuroscience, women’s health, eye care and virology.

Beyond the deal value size, our analysis indicated that eight of the top ten valued acquisitions in 2019 included portfolios of marketed therapies and pipeline candidates within neuroscience, rare diseases, and of course, oncology. Other exciting news included Takeda’s foreign takeover of Shire, securing Takeda’s spot in the list of top 20 global pharmaceutical companies by market cap. Takeda is, however, not the only Japanese pharmaceutical company on the list after Astellas making their second largest deal ever by acquiring Audentes, expanding their territory in the world of gene therapies.

Shifting our focus towards partnership deals, the top 10 largest deals have values ranging from $2-14 billion. Chinese companies have made it to the list on both the licensee and licensor side, aligning with earlier predictions of how the 2019 licensing landscape would evolve on that side of the globe. We can also see Big Pharma strategically in-licensing both precision healthcare as well as gene therapy assets and expertise.

The top 2019 partnership deal spot is won by the marketed therapy Otezla®, in-licensed by Amgen from Celgene for a total of $13.4 billion. Otezla® is used in the treatment of inflammatory diseases such as psoriatic arthritis and plaque psoriasis. Market exclusivity for the product is set to expire in 2023, but the therapy is being developed for several additional indications. Japanese pharma Takeda hasn’t exclusively been playing the acquisition game, but has also made an appearance on the top partnership deals list by out-licensing Xiidra® to Novartis for a potential $5.3 billion. Another noteworthy company in the space is Gilead, with two appearances in the list of top 10 partnership deals by size, with deals struck in oncology and rare diseases.

Outlook of 2020

There are several emerging factors that have potential to pave the way for industry growth in 2020.

Regulatory changes

It will be important to keep an eye on the U.S. FDA’s organizational changes as well as its new leadership. Earlier announcements have for example unveiled plans of establishing a new office to improve review processes of new drugs. More specifically, the FDA ex-commissioner Scott Gottlieb revealed that the agency will focus on creating more structured approaches to the evaluation of biomarkers, while developing a standardized approach to using personalized medicine and digital data. This is an essential step towards enabling the growing landscape of personalized medicine and will hopefully reduce the current regulatory uncertainty. Together with the rise of digital technologies in healthcare, these regulatory improvements will most likely lead to an increase in deals within the precision medicine space. In particular, we expect to see precision oncology companies continuing to be acquired by Big Pharma, as we have seen with recent acquisitions of Array Biopharma and Loxo Oncology.

Growing gene and cell therapy space

Oncology remains the top therapeutic area in terms of deal activity levels. A position taken from hypertension in 2010 and held ever since. We can only speculate which area that will be the next contender, however, we would argue that the gene and cell therapy market might get interesting. 2019 saw the market launch of four gene and cell therapies that resulted in a collective total sales of $2 billion after a decade of several launched and withdrawn advanced therapy medicinal products (ATMP). This means that the gene and cell therapy market is starting to establish itself with the most deal growth expected within cardiovascular, muscular, and neurological disorders.

Pressed drug pricing

In line with 2019, drug pricing is also an important issue on the radar for 2020. Legislative proposals have been made to address how to lower prescription drug costs in the US, among which is a proposal to establish a US federal agency that would oversee drug pricing. The coming elections could have a huge impact in how these legislative proposals will proceed. Looking at the current administration, Bernstein analyst Ronny Gal believes that the current administration will take minimal action on drug costs this year. Despite taking this news into consideration, the long-term fate of healthcare pricing reduction is still unknown. And taking things a step further, the resulting impact of pricing reduction is also a bit of a brain teaser. On one hand, pricing reduction will most likely have a negative impact on valuations, likely causing deal volume and/or deal sizes to decrease. However, lower drug pricing may also affect the buying power of licensees/acquirers due to negatively impacted cash flow. Simplifying a bit, the resulting deal landscape will in the end be dependent on the ratio of licensor/acquired valuation decrease to licensee/acquirer cash flow decrease.

Expanding biosimilar market

Beyond 2020, the decade might see an expanding biosimilar market caused by a row of biologic patent expirations. It is unclear how this expanding market will impact global deal making. On the one hand, this expansion could impact the pricing of biologics via the classical post-exclusivity market takeover route; on the other, opinions on whether biosimilars are on par with leading biologics in terms of safety and efficacy still remain discordant. This particularity gives originators significant pricing power, illustrated by Humira®’s country-specific discounts from 2019. It will be curious to see this dynamic play out in the launch of other biosimilars, and their influence on the attractiveness of new biologics. Global deal frequency, especially in regions such as Latin America, may grow, however deal sizes might decrease. Building upon previous predictions from 2019, we also expect to see China continuing their growth as a key player within the pharmaceutical industry in the coming decade, partially driven by reformed priority review and approval process that allows domestic drug developers to compete with multinational counterparts. With these changes we expect a more levelled global playing field in the world of biopharma deals, with an increase in both frequency and size of deals that involve Chinese companies.

By: Robert Ljungberg, Business Analyst

Table 1. Top 10 M&A deals (Pharma and biotech)

Acquired (Acquirer)  Deal value Assets involved Date (announced or completed) Source
Celgene (Bristol-Myers Squibb) $74 billion Includes leading franchises in oncology, immunology and inflammation, and cardiovascular disease Completed: Nov 20, 2019 Link
Allergan (AbbVie) $63 billion Majority acquisition, includes leading franchises in immunology, hematologic oncology, neuroscience and virology Announced: Jun 25, 2019 Link
Shire (Takeda) $62 billion Includes treatment in gastroenterology, neuroscience, oncology, rare diseases and plasma-derived therapies Completed: Jan 8, 2019 Link
Array (Pfizer) $11.4 billion Includes small molecule medicines for the treatment of cancer Completed: Jul 30, 2019 Link
The Medicines Company (Novartis) $9.7 billion Includes a potentially transformational investigational cholesterol-lowering therapy Announced: Nov 24, 2019 Link
Loxo Oncology (Eli Lilly) $8.0 billion Includes a pipeline of highly selective potential medicines for patients with genomically defined cancers Completed: Feb 15, 2019  Link
Tesaro (GlaxoSmithKline) $5.1 billion Includes major marketed products such as Zejula (niraparib), an oral poly ADP ribose polymerase (PARP) inhibitor currently approved for use in ovarian cancer Completed: Jan 22, 2019 Link
Spark (Roche) $4.3 billion Includes a gene therapy pipeline for genetic diseases, including blindness, hemophilia and neurodegenerative diseases Completed: Dec 17, 2019 Link
 BTG (Boston Scientific) $4.2 billion Includes specialty pharmaceutical business comprising of acute care antidotes to treat overexposure to certain medications and toxins Completed: Aug 19, 2019 Link
Audentes (Astellas) $3 billion Includes AT132, which is being developed for XLMTM, a life-threatening, rare neuromuscular disease Announced: Dec 2, 2019 Link

 

Table 2. Top 10 partnership deals (Pharma and biotech)

Licensee (Licensor)  Deal value (deal breakdown) Asset of interest; latest development stage at deal signing; indication  Date Source
Amgen (Celgene) $13.4 billion (complete asset acquisition) Otezla® (apremilast); marketed; inflammatory diseases Completed: Nov 21, 2019 Link
AstraZeneca (Daiichi Sankyo) $6.9 billion ($1.35 billion upfront, $3.8 billion in regulatory and milestone payments, and $1.75 billion in sales-related milestone payments) DS-8201 (trastuzumab deruxtecan); phase 3; HER2-expressing breast and gastric cancers Announced: Mar 28, 2019 Link
Gilead (Galapagos) $5.4 billion ($4.0 billion upfront, $1.1 equity investment, and $0.3 billion in milestone payments) GLPG1690 and filgotinib; phase 3 and pending approval; idiopathic pulmonary fibrosis and rheumatoid arthritis Completed: Jul 14, 2019 Link
Novartis (Takeda) $5.3 billion ($3.4 billion upfront, $1.9 in milestone payments) Xiidra® (lifitegrast ophthalmic solution); marketed; dry eye disease Completed: Jul 1, 2019 Link
GlaxoSmithKline (Merck KGaA) $4.2 billion ($0.3 billion upfront, $0.6 billion in development milestone payments and $3.3 billion in commercial milestone payments) M7824 (bintrafusp alfa); phase 2; PD-L1 expressing advanced non-small cell lung cancer Announced: Feb 5, 2019 Link
Nanjing Chia Tai Tianqing Pharmaceutical Company NJCTTQ (Abpro) $4 billion ($60 million in near-term R&D funding, plus potential milestones payments and royalties) DiversImmune and Multimab (platform); preclinical; immuno-oncology candidates in ophthalmology and autoimmunity Announced: Feb 28, 2019 Link
Undisclosed (WuXi Biologics) $3 billion Manufacturing contract for the undisclosed party’s vaccine product Announced: May 20, 2019 Link
Gilead Sciences (Nurix Therapeutics) $2.3 billion ($45 million upfront, up to $2.3 billion in milestone payments) Targeted protein degradation drugs; oncology and other challenging diseases Announced: Jun 19, 2019 Link
Swedish Orphan Biovitrum AB Sobi (AstraZeneca) $2.3 billion ($1.5 billion upfront, $20 million in cash per year for three years, $0.47 billion in sales milestone payments, $0.29 billion in regulatory submission and development milestone payments) U.S. rights to Synagis® (palivizumab); marketed; prevention of serious lower respiratory tract infection (LRTI) caused by respiratory syncytial virus (RSV) Completed: Jan 24, 2019 Link
Genentech (Skyhawk) $2 billion (undisclosed upfront and up to $2 billion in milestone payments and royalties) SkySTAR™ technology platform (small molecules that modulate RNA splicing); oncology and neurological diseases Announced: Jul 16, 2019 Link