Pharma M&A, Shifts and Trends

After a bearish couple of years, the biopharma dealmaking arena is undergoing a clear resurgence in 2024. However, unfortunately for up-and-coming biotechs striving to make their mark, 2023 saw a dip in the volume of deals—a sign that industry giants remain cautious in placing their bets, even as the value of deals rose by a healthy 7% (and the value of M&A activity soared 80%!). Nevertheless, the industry remains resilient, and there's an unmistakable sense of momentum building—a palpable anticipation of what lies ahead.

Where pharma chooses to invest now holds the promise of shaping the very future of medicine. From groundbreaking technologies like antibody drug conjugates and artificial intelligence to strategic partnerships and bold M&A moves, the landscape is teeming with opportunity. As partnering approaches pre-pandemic levels and M&A activity surges, the stage is set for transformative breakthroughs that could redefine the entire healthcare landscape.

How to understand the mega-mergers uptick??

While the pharmaceutical industry is dealing with external economic and geopolitical uncertainties, an additional challenge has emerged: the looming patent cliff and its unfolding impact from 2025 through 2030.?

To mitigate financial and market losses following the loss of exclusivity for key medications, M&A between large companies are a sound strategy. These are well-established corporations that have procedural agility, governance, and administrative prowess and are capable of integrating businesses to optimize operations, technology and investments in research and development (R&D).?

The M&A approach ensures a broader pipeline of products shielded by existing patent laws and also opens up new business opportunities while minimizing risks, a critical factor for every operation in the sector.?

Financial institutions and risk assessors such as JP Morgan and Moody’s, together with major media outlets, have recognized this shift in M&A practices. Reuters, for instance, noted that: “The buying spree by drugmakers late last year was part of their strategy to help offset expected revenue declines as patents on blockbuster therapies expire.”??

The pursuit of innovation is another driving force behind these mega-mergers. Access to cutting-edge tools such as antibody drug conjugates, AI/machine learning and genetic editing is essential for developing disruptive drugs, as recently highlighted in the annual Drugs to Watch report by Clarivate. ?

The acceleration of M&A mega deals in the pharmaceutical industry is tangible. According to PwC data, 54% of CEOs in the sector plan at least one acquisition in the next three years. The firm also expects M&A levels of activity to reach $275 billion this year.?

The new perspective in these M&A operations lies in the deepening of the research framework to make the right choices and, of course, to establish strong alliances that add value and fill the gaps of current and future needs.?

Cooperation and long-term success??

Looking beyond traditional M&A, commercial and partnership agreements emerge as strategic alternatives for companies in the sector. The recent collaboration between Takeda (in Japan) and Protagonist (a California-based biotech), as reported by BioWorld, exemplifies this trend. Under a $1.7 billion commitment, the two companies will jointly develop and commercialize rusfertide in the United States with a 50/50 profit split. ?

What’s behind this collaboration? Less risk, a solid structure and broader market exposure are the core motivations, as noted by both sides. “The agreement with Protagonist represents an important step forward in our strategy of acquiring late-stage assets in the rare disease space to leverage our existing infrastructure and expertise,” said Julie Kim, president of Takeda’s U.S. business unit and U.S. country head.?

“As we progress towards a fully integrated pharmaceutical company, this deal mitigates the inherent execution risks of a first-time commercial launch”, added Dinesh Patel, CEO of Protagonist.?

In the pharmaceutical market, as in many others, partnerships between mega-companies is the imperative trend in seeking competitive advantage, development of new products, value generation and long-term success.?