One month into 2018, biotech merger and acquisition (M&A) deal activity has already skyrocketed. Acquisitions from colossal drug makers Celgene and Sanofi total more than $26bn combined, and the companies have indicated a focus to expand their oncology and haematology portfolios.
Over the course of January 2018, Sanofi planned to acquire Abylnx for $4.8bn and haemophilia-focused Bioverativ for $11.6bn. Meanwhile, Celgene snatched up the chimeric antigen receptor T-cell (CAR-T)-specialist Juno Therapeutics for approximately $9bn just weeks after acquiring Impact Biomedicines for up to $7bn, with $1.1bn upfront and additional milestone payments. The question now becomes, what implications these deals will have for both pharmaceutical companies and for other players in the biotech industry, and whether or not the streak is likely to continue.
Sanofi outbid NovoNordisk’s offer and secured its second acquisition within a week, buying out the Belgium biotech Ablynx for $4.8bn. Sanofi agreed to pay €45 (approximately $56) per share in cash for Ablynx. Sanofi CEO Olivier Brandicourt said that the acquisition of Abylnx was critical for Sanofi to expand its late-stage pipeline and bolster its growth in the rare blood disorder arena. Another strategic play preceding this result involved Sanofi entering a deal to acquire Bioverativ (a Biogen spinoff, focusing on hemophilia) for $11.6bn, a 64% premium to the closing price of $64.11 per share from the previous Friday. Sanofi has viewed rare diseases as an alternative to its diabetes business, which is currently being threatened by increasing competition and pricing pressure. The French drugmaker has been waiting for the right time to make a deal since missing out on buying Medivation to Pfizer in 2016 and Actelion to Johson & Johnson in early 2017.
Celgene’s Q3 2017 earnings showed lower than expected revenues, leading to a decrease of 24% in the share price over a six month period and to significant sales target cuts. Most of the reduction originated from a failed Crohn’s disease drug trial. Additionally, the company’s blockbuster oncology drug, Revlimid (lenalidomide), which is approved for hematologic malignancies including multiple myeloma, myelodysplastic syndromes, and mantle cell lymphoma, faces patent expiration in 2022 and has encountered difficulty expanding into new indications. Amid shareholder fears, Celgene CEO Mark Alles reassured investors that buying Impact Biomedicines was a positive move for the company. Impact Biomedicines’ fedratinib, a highly selective JAK2 kinase inhibitor, is currently being evaluated for myelofibrosis and polycythemia vera.
The rationale behind this deal is to counteract the difficulty that Revlimid will endure after its patent expiration. Soon afterwards, the company announced the Juno acquisition, which Celgene believes will fill the predicted revenue decline post-2022. Juno’s CAR-T drug lisocabtagene maraleucel (JCAR017) is in Phase II for refractory diffuse large B-cell lymphoma (DLBCL), including non-Hodgkin Lymphoma (NHL), and is projected to reach global peak revenues of $3bn. Although Celgene expects lisocabtagene maraleucel to gain approval in 2019, this therapy is a late market entrant behind Novartis’ Kymriah and Gilead’s Yescarta, both of which are CAR-T therapies that were approved in 2017. Celgene is taking a huge risk by assuming that Juno’s lisocabtagene maraleucel can successfully steal market share from the other two CAR-T therapies.
Fundamentally, large drug developers are facing pressure from maturing markets and require opportunities to spark revenue growth. GlobalData believes that Merck, Pfizer, and Amgen are all plausible candidates to expand via M&A. All these large pharma companies have huge off-shore cash stores and are likely to make an acquisition to boost their mid-late stage pipeline. Companies that remain as likely targets generally include those with therapies that have recently gained approval or are likely to gain approval within high-impact disease areas. Generally, interest is strong in companies that focus in oncology, rare diseases, and gene-editing technologies, such as BioMarin, Clovis Oncology, Puma Biotech, and bluebird bio.
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With the sudden activity in M&A observed in January 2018, this trend is expected to continue throughout the year. GlobalData anticipates that many other large pharma firms will join the race and boost their product portfolios through M&As. As a result of the major surge in growth of the biotech industry through improved earnings, economic growth, and recent deal activity, the sector is poised to reach an all-time record high.
GlobalData (2017). PharmaPoint: Hemophilia A and B – Global Drug Forecast and Market Analysis to 2026, June 2017, GDHC148PIDR
GlobalData (2017). PharmaFocus: Visual Analysis of Immuno-Oncology Development and Opportunities, August 2017, GDHC009PFR
GlobalData (2017). Expert Insight: Biotech Outlook in 2018: What Are the Key Drivers, and Will the Surge Continue?, December 2017, GDHC1518EI