Just as financings are hitting record levels, biopharma deals should finish out 2020 on top, based on solid partnerships signed in the first three quarters of the year.
While mergers and acquisitions have slowed this year, particularly in the third quarter, several big-money M&As slated to close in the fourth quarter could move the needle, putting this year within the top three highest values.
So despite worldwide economic devastation caused by the SARS-CoV-2 virus, the biopharma industry appears to not only be rebounding, but it is doing extremely well by historical standards. About a fifth of all deals are focused on the COVID-19 pandemic as the industry develops vaccines and therapeutics. More than $101 billion, an amount that is 48% above the second highest year, has been raised through public and private financings for biopharma companies this year.
Deals reach new heights
As for deals – defined as licensings, collaborations and joint ventures – the industry has completed 1,501 in the first three quarters of 2020. That is the second highest amount to the 1,608 from last year.
The 2020 deals have reached a total projected value of $140.7 billion, which is 88% and 93% of the totals in 2019 and 2014, the two top years, respectively. At $160.3 billion for 2019 and $150.6 billion for 2014, the amounts encompass all four quarters, whereas 2020 still has fourth-quarter deals to add into its totals.
In fact, the only way the biopharma industry will not hit the record this year is if deals in the fourth quarter total up to be less than half of what was seen for each of the first three quarters.
In the third quarter, 486 deals worth $52.6 billion – the most money for any quarter this year – were completed. About $30.9 billion, or about 59% of the total, came from 12 deals that were valued at above $1 billion. That compares to 476 deals valued at $40.8 billion in the first quarter and 539 deals valued at $47.2 billion in the second quarter. The $1 billion-plus deals included 13 in the first quarter worth a total of $23 billion and 14 deals in the second quarter worth about $32.3 billion, representing about 56% and 68% of the overall totals for those quarters, respectively.
The top third-quarter deals include Tango Therapeutics Inc.’s $6.3 billion global deal in August with Gilead Sciences Inc. for targeted immune therapies for cancer and Astrazeneca plc’s $6 billion deal with Daiichi Sankyo Co. Ltd. in July for DS-1062 to treat non-small-cell lung cancer and triple-negative breast cancer. The largest deal of September was a $4.2 billion worldwide partnership between Seattle Genetics Inc. and Merck & Co. Inc. for ladiratuzumab vedotin against breast cancer and solid tumors.
About 21% of the deals this year are focused on vaccines and therapeutics for the COVID-19 pandemic. The third quarter recorded 108 such deals with only a few disclosing terms, including a $210 million agreement between Union Therapeutics A/S and TFF Pharmaceuticals Inc. in August to develop niclosamide for COVID-19, and Astrazeneca’s $174 million deal with Emergent Biosolutions Inc. to support manufacturing of its vaccine, AZD-1222. A total of six deals focused on COVID-19 in the third quarter recorded projected values of $475.7 million. The second quarter had 157 COVID-19-focused deals valued at $1.44 billion and the first quarter had 54 valued at $895 million. Altogether, there have been 319 deals valued at $2.8 billion that have targeted the pandemic during the first nine months of 2020.
M&As moving into third
While the 100 M&As completed in the first three quarters are valued at $127.7 billion, the amount is well below the two top full years of 2015 and 2019, which had $256.4 billion and $223.8 billion, respectively, in M&A values. The year 2020, however, is tracking above the $90.7 billion in 2018 and $72.6 billion of 2017 and only slightly below the $157 billion of 2016 and $143 billion of 2014.
Still, without the $63 billion Abbvie Inc. purchase of Allergan plc in May, which accounts for half of the year total so far, 2020 would be the worst year for biopharma M&As in the past seven. With that one M&A, however, as well as several significant M&As expected to close in the fourth quarter, the year will likely land in the top three in the BioWorld database.
Johnson & Johnson completed its $6.5 billion acquisition of Momenta Pharmaceuticals Inc. on Oct. 1, becoming the first major M&A that has closed in the fourth quarter. On deck are Nestle Health Sciences $2.6 billion acquisition of Aimmune Therapeutics Inc. and Gilead’s $21 billion buyout of Immunomedics Inc., both of which are slated to close in the fourth quarter.
Notably, the Immunomedics acquisition would be the fifth biggest biotech M&A ever, behind Celgene Corp./Bristol Myers Squibb Co. ($74 billion) in 2019, Genentech Inc./Roche Holdings AG ($46.8 billion) in 2009, Baxalta Inc./Shire plc ($32 billion) in 2016, and Actelion Ltd./Shire plc ($30.18 billion) in 2017.
On. Oct. 5, BMS announced plans to acquire heart drug company Myokardia Inc. for $13.1 billion, which upon completion would fall at No. 9 on BioWorld’s top list of biotech M&As, or No. 10 if the Immunomedics/Gilead merger also closes. The Myokardia/BMS M&A is expected to close in the fourth quarter.
Even if all large pending M&As close as expected before the end of the year, the totals would not touch the $102 billion in completed M&As that occurred during the fourth quarter of 2019, which included the Celgene/BMS deal for $74 billion. Therefore, 2020 will likely finish out the year behind both 2015 and 2019, but well ahead of all other years.
With only $8 billion in value from 30 completed M&As, the third quarter is the weakest of 2020, behind the $74.2 billion from 39 M&As in the second quarter and the first quarter’s $45.5 billion and 31 M&As.
The first quarter recorded eight completed M&As with values above $1 billion each, while the second quarter posted four and the third quarter had two: Sanofi SA’s acquisition of Principia Biopharma Inc. for $3.68 billion, which closed at the end of September, and Alexion Pharmaceuticals Inc.’s purchase of Portola Pharmaceuticals Inc. for $1.4 billion in July.