Global mergers and acquisitions (M&A) activity last year was expected to decline from 2019 levels, mainly due to the Covid-19 pandemic and resulting uncertainty around the global economy, trade tensions between the US and China, and the presidential election in the US.
However, James Baillieu from Bird & Bird reveals that this was not the case in pharma. Here, he shares the biggest deal trends in the sector and what is on the horizon for the coming year.
The life sciences industry has been instrumental in the response to the Covid-19 pandemic, with key industry players including Pfizer/BioNTech, AstraZeneca/Oxford University and Moderna racing to develop vaccines, and others developing antibody tests and other treatments.
Given the severe impact of the pandemic, you would be forgiven for thinking that M&A activity in the sector may have ground to a halt in 2020. However, while deal activity temporarily slowed as the pandemic took hold, there was a swift and robust resumption of M&A activity after dealmakers became confident working remotely.
This is perhaps not as surprising as it first seems because the drivers behind pharma M&A still apply. Long-term demand for healthcare continues to rise, driven by ageing populations and chronic disease in the West, as well as increasing demand resulting from higher incomes in the East.
Against this backdrop of increasing demand and rapid technological innovation, biopharma companies must continually replenish their R&D pipelines as patents on their most profitable products expire and generic competition impacts revenues.
If you dig behind the headlines, it is easy to spot a few key trends in the sector.
Disruption and the rise of tech
For years now, there has been a proliferation of “healthtech” companies and big pharma has grappled with the disruption caused by big tech and data. This has led to a blurring of industry lines, with pharma companies buying tech companies to digitalise their offerings and big tech companies breaking into the healthcare market.
AI and machine learning are disrupting traditional drug development by accelerating tasks such as drug discovery, clinical trials and data analysis. Improved software and apps, as well as improvements in internet speed and connectivity, have enabled the delivery of medical care from home and the development of services that ‘wrap around’ the care being provided to patients.
The next round of mega mergers
Mega mergers enable big pharma to bolster their portfolios and diversify into more profitable and higher growth areas (such as rare diseases) while driving economies of scale and reducing costs. The pharma sector has seen its fair share of mega mergers over the years: think Merck/Schering Plough, Pfizer/Wyeth or Glaxo Wellcome/Smithkline Beecham in years gone by and more recently Bristol-Myers Squibb/Celgene and AbbVie/Allergan, to name just a few.
The post-pandemic wave of mega mergers has perhaps already kicked off with AstraZeneca’s announcement in mid-December that it will acquire US rare disease specialist Alexion for $39 billion.
Bolt-ons and divestitures
Mega mergers enable big pharma to bolster their portfolios and diversify into more profitable and higher growth areas (such as rare diseases) while driving economies of scale and reducing costs”.
Big pharma continues to make ‘bolt-on’ acquisitions, especially in attractive areas like cell and gene therapy, oncology and next-generation biologics. These relatively modest acquisitions help big pharma replenish their drug pipelines while allowing early-stage R&D to be undertaken off balance sheet. In recent years, competition between big pharma companies for the hottest emerging companies has pushed up valuations.
Increased regulatory scrutiny of deals
While deals continue apace, executing them is becoming more complex. Several countries have long-standing investment screening regimes, such as the Committee on Foreign Investment in the United States (CFIUS), which has been in place since 1975. There has been a general trend over the last few years towards strengthening controls over foreign investments and acquisitions, which following the Covid-19 pandemic has also come to include companies operating in the life sciences and healthcare sectors.
The increased scrutiny of deals around the world – including those in life sciences and related sectors – will make foreign investment rules an increasingly important consideration for acquirors and investors undertaking cross-border deals.
The arrival of Covid-19 vaccines in late 2020 shows that there is light at the end of the pandemic tunnel, although it will inevitably take some time for populations to be vaccinated and some sense of normality to return. That said, with confidence returning and pharma companies still needing to replenish their drug pipelines while dealing with the digitalisation of healthcare, one thing is certain: 2021 will be a busy year for pharma dealmakers.
Ava gets FDA Clearance for fertility tracker
Ava, a digital healthcare company focused on women’s reproductive health said it has received FDA clearance for its Ava Fertility Tracker, making it the first and only FDA-cleared fertility tracking wearable.
A fertility tracking sensor bracelet and accompanying app, Ava Fertility Tracker is already the first and only wearable, machine learning device to aid women in ovulation prediction and facilitation of conception. The device was successfully certified under the new European Device Regulation (MDR). Now, backed by the FDA clearance of its 501(k) application, Ava can also point to the efficacy of the Ava Fertility Tracker as comparable to time-trusted methods.
“The FDA clearance validates Ava’s efficacy as comparable or superior to standard products found in every pharmacy,” explains Ava Chief Medical Officer Maureen Cronin.
Global fight against antibiotic resistance
SuperTrans Medical (STM), a biopharmaceutical company developing novel antibiotics that target difficult-to-treat, multi-drug resistant bacteria, has published First-In-Class, successful pre-clinical results and announced plans to begin clinical trials in Australia later this year for its lead candidate STM-001.
Offering new hope in the plight against antimicrobial resistance (AMR), STM has applied its patented permeator technology to the widely used antibiotic vancomycin through a process of “intelligent repurposing”.
“Antibiotic-resistant infections are a serious threat to global health and with only four new classes of antibiotics introduced since the early 1960s, clinicians just don’t have enough to work with. With the highly promising safety and efficacy results we’ve seen with our approach to date, we believe that STM-001, as a repurposed antibiotic could bring a much-needed new option forward to combat these urgent threats,” said Dr Lewis Neville, CEO, SuperTrans Medical.
Solution preventing leg amputations
Osteopore International, a Singapore homegrown company that specialises in 3D printed bioresorbable implants, in collaboration with Maastricht University Medical Centre (UMC+), has successfully developed a bioresorbable 3D printed cage that prevents leg amputations in patients with severe lower leg fractures. The 3D printed cage helps a patient regenerate new bone cells and has been successfully designed and implanted in its first patient in the Netherlands.
Manufactured in Singapore, and developed with Osteopore’s proprietary 3D printing and materials technology, the 3D printed cage is made of biodegradable material and is customised based upon a computed tomography (CT) scan of the patient’s lower leg. This 3D printed cage stimulates the patient’s new bone cells to grow within it, eventually breaks down into water and carbon dioxide and is replaced by the patient’s own regrown bone tissue
Orpha Labs initiates compassionate use programme
Orpha Labs AG announced its compassionate use program to make ORL-101 available to physicians providing care for Leukocyte Adhesion Deficiency Type II (LAD-II) patients. ORL-101 is a novel formulation of an ultra-pure L-fucose currently in development for the treatment of LAD II patients.
Orpha Labs’ Founder and Chief Executive Officer Alp Bugra Basat, MD, said, “We are proud to announce this development. ORL-101 is the first product authorized for compassionate use in a program for LAD-II patients, an important step in our work to bring products into clinical development to help patients with ultra-rare disorders.”