Acquisitions by Major Pharmaceutical Companies to Expand their Pipelines of Drugs

Big Bucks for Big Bets: How Acquisitions Fuel Pharmaceutical Pipelines

The race for innovation in the pharmaceutical industry is a marathon, not a sprint. To stay ahead of the curve and maintain a robust pipeline of potential drugs, major pharmaceutical companies (Pharma) are increasingly turning to acquisitions. These multi-billion dollar deals offer a faster track to bringing new treatments to market, but they come with significant risks and rewards.

The Pipeline Problem: Why Acquisitions Matter

Developing a new drug is a lengthy and expensive process. On average, it takes 10-15 years and over $2Bn to bring a drug from discovery to market, with a high chance of failure at each stage. This long and uncertain journey creates constant pressure for Pharma to maintain a healthy pipeline of potential drugs in various stages of development.

Acquisitions offer a shortcut to this process. By acquiring smaller biotechnology companies (Biotech's) with promising drug candidates in their pipelines, Pharma's can gain access to innovative drugs that could potentially become blockbusters. This not only reduces the time it takes to get new treatments to patients but also mitigates some of the inherent risks associated with internal drug development.

What Makes a Biotech Attractive for Acquisition?

Several factors make Biotech a prime target for acquisition by Pharma. These include:

1. Stage of Development: Ideally, Biotech's lead drug candidate should be in late-stage clinical trials, minimizing the risk of failure. However, earlier-stage assets with high scientific potential can also be attractive
2. Therapeutic Area: The drug candidate should address a high-value unmet medical need or target a large patient population
3. Complementary Expertise: The Biotech's expertise should complement the Pharma's existing pipeline or therapeutic focus
4. Financial Considerations: The acquisition price should be reasonable and reflect the potential value of the drug candidate

Recent Examples of Acquisition Activity

The trend of Pharma's acquiring biotechs to bolster their pipelines is evident in recent deals. Here are a few noteworthy examples:

1. 辉瑞 Acquisition of Seagen (2023): This $30Bn deal grants Pfizer access to Seagen's promising portfolio of cancer treatments, strengthening their oncology pipeline
2. Merck Group 's Acquisition of Acceleron (2023): Merck acquired Acceleron for $11.5Bn, gaining access to their late-stage treatment for pulmonary arterial hypertension
3. 礼来 Acquisition of Covance (2019): This $6.5Bn deal allowed Lilly to expand its clinical trial capabilities by acquiring Covance, a leading contract research organization

A Focus on Specific Therapeutic Areas

The recent surge in acquisitions also highlights a trend of Pharma targeting specific therapeutic areas with high unmet medical needs or significant commercial potential. Here are two specific examples:

• AbbVie 's String of Acquisitions in Immunology: Facing potential competition for its blockbuster drug Humira, AbbVie has embarked on a series of acquisitions focused on bolstering its immunology pipeline

In March 2024, AbbVie acquired Landos Biopharma, Inc. , a company developing a novel treatment for Inflammatory Bowel Disease (IBD). This deal, unlike some of AbbVie's other recent multi-billion dollar acquisitions, is smaller but strategically aligns with its focus on immunology. Landos' drug candidate targets a different pathway than those acquired or licensed by other major players in the IBD space, showcasing the diverse approaches being pursued in this area.

• Merck's Acquisition of Prometheus Biosciences (2023): Highlighting another successful acquisition in immunology, Merck acquired Prometheus Biosciences, Inc. for $10.8Bn in June 2023. This acquisition grants Merck access to Prometheus' lead candidate, PRA-023, a promising treatment for ulcerative colitis and Crohn's disease. This deal exemplifies the growing importance of immunology within the pharmaceutical industry, with companies like Merck investing heavily in this area.
• 荷商葛蘭素史克藥廠 Acquisition of BELLUS Health (2023): GSK, a major pharmaceutical company, acquired Bellus Health , a company developing a treatment for Refractory Chronic Cough (RCC), for $2Bn. While RCC is a niche condition, it affects millions of people globally and has a significant impact on quality of life. This acquisition highlights GSK's strategic move to address an unmet medical need and expand its portfolio beyond traditional areas.

The Risks and Rewards of Acquisition-Fueled Growth

While acquisitions offer a faster path to innovation, they come with significant challenges. Some of the potential drawbacks include:

• High Costs: Acquisition deals can be expensive, putting a strain on the acquirer's financial resources
• Integration Challenges: Merging two different companies with distinct cultures and processes can be complex and time-consuming
• Failure of Acquired Assets: The acquired drug candidates may not succeed in clinical trials, resulting in a significant financial loss

However, the potential rewards of a successful acquisition can be substantial:

• Faster Time to Market: Acquired drug candidates can reach patients sooner compared to internally developed drugs
• Enhanced Innovation: Acquisitions can bring in fresh scientific expertise and innovative technologies
• Strengthened Market Position: Expanding the pipeline with promising drugs can solidify the Pharma's market position

Looking Ahead: The Future of Acquisition-Driven Growth

The trend of Pharma acquisitions is likely to continue in the coming years. As the pharmaceutical industry grapples with rising R&D costs and the pressure to bring innovative treatments to patients faster, acquisitions will remain a valuable strategy for building robust pipelines and staying competitive. Additionally, with the rise of new technologies like gene editing and artificial intelligence, we might see Pharma acquiring companies focused on these emerging fields to stay ahead of the innovation curve.

Sources:

1. https://www.biopharmadive.com/news/abbvie-landos-acquire-deal-immune-crohns-colitis/711225/
2. https://www.merck.com/news/merck-completes-acquisition-of-prometheus-biosciences-inc/
3. https://www.gsk.com/en-gb/media/press-releases/gsk-reaches-agreement-to-acquire-late-stage-biopharmaceutical-company-bellus-health/

Author: Dr.Medha Sansanwal , Insights10