Biotechnology and pharmaceutical companies spend billions of dollars annually in acquisitions, collaborations, and IP licensing agreements. These agreements lead to more innovations in terms of therapies and technologies to treat various illnesses and diseases.
In 2020, biotech and pharma companies only spent 12% of their budget on IP related activities in 2020, a stark contrast to 20% in 2019. As a result, many inventors were not able to commercialize their innovations and spending was down to $140 billion from $306 billion in 2019.
Last year's slump created an estimated $1.47 trillion in funds available for acquisitions, which may lead to a spending spree in 2021. In line with this, here are some of the trends in 2021 that will likely shape dealmaking in the biotech and pharma industries:
Oncology will continue to be the most active sector in this industry as research and development to bring cancer treatment to the market remains strong. This is unsurprising given that projections of revenue from cancer treatments would account for 21.7% of industry revenue by 2026. Cancer is the second-leading cause of death globally, next to ischemic heart disease.
For the last five years, some of the deals in the oncology sector included those of Gilead's $21 billion purchase of the manufacturer of Trodelvy, an antibody-drug conjugate. This chemical obtained approval for the treatment of adults with metastatic triple-negative breast cancer. It works as an immune targeted therapy medicine.
Out of the 35 multi-billion dollar deals from 2013 to 2018, 32 were on immuno-oncology technologies.
This year, Sanofi also entered into a $125 million upfront plus $1 billion in potential milestones and royalties licensing agreement with Biond Biologics for the latter's BND-22 experimental antibody. This antibody targets solid tumors.
Cell and Gene Therapies
Cell and gene therapy technologies have therapeutic goals. Gene therapy targets the DNA or RNA of the body and modifies them in such a way as to cure genetic diseases. This has the potential of reversing or minimizing the progress of certain degenerative conditions. Cell therapy infuses or transplants whole cells to treat acquired or genetic diseases.
To date, there are 289 novel cell and gene therapies in development. They are either awaiting the FDA's review or undergoing clinical trials.
Due to the promising outlook for these technologies, 2021 will continue to see deals involving them. Among the leading companies in this sector are Sanofi, Novartis, Bayer, Celgene, Biogen, and Bristol-Myers Squibb. All of these companies have bought start-ups engaged in developing cell and gene technologies.
Bayer made the most recent acquisition in October 2020 when it bought Asklepios BioPharmaceuticals for $2 billion. Asklepios develops adeno-associated virus gene therapies to treat rare and genetic illnesses.
In 2020, rare disease assets were the major theme in dealmaking. AstraZeneca purchased Alexion Pharmaceuticals for $39 billion. Among the rare diseases that Alexion holds patents for their medications are atypical hemolytic uremic syndrome, a chronic and ultra-rare disease that can damage vital organs; and hypophosphatasia, a genetic, chronic, progressive, and life-threatening metabolic disease. For COVID-19, the company is on a phase-3 study of ULTOMIRIS for patients hospitalized due to severe COVID-19.
Sanofi also bought Principia Biopharma for $3.7 billion. Principia owns the patent for rilzabrutinib, a potential treatment for pemphigus, a rare group of skin disorders that cause blisters or pus-filled bumps.
The current projection for the rare disease treatment market is at $255 billion by 2026. Some of the companies developing treatments for this sector seek orphan drug status to obtain government assistance in the process. Orphan drugs are not profitable to produce because only very few people have rare disorders. Hence the need for the government to finance their research and development.
Platform Technologies and Versatile Assets
Patented platform and versatile technologies--like CRISPR-cas9, CAR-T, and gene editing tools--have taken a greater role in delivering treatments. As a result, they have become important in dealmaking.
For this year, Boehringer Ingelheim acquired NBE-Therapeutics for $1.4 billion. NBE-Therapeutics owns the patent for an antibody-drug conjugate platform. This platform aims to treat triple-negative breast cancer. Sanofi also bought Kymab for $1.1 billion to gain use of the latter's antibody platform.
Last year, the most notable acquisitions included Merck's $1 billion collaboration to develop the T Cell enganger platform, TRACTr, whose patent is owned by Janux Therapeutics. Other notable acquisitions were AstraZeneca's deal with Daiichi Sankyo to access the latter's DS-1062 drug that has the potential to treat many tumors, and Johnson & Johnson's deal with Momenta to develop the highly versatile antibody nipocalimab.
There is a possibility that 2021 will see large-scale acquisitions taking place in biotech and pharma industries similar to AstraZeneca's buyout of Alexion. However, most of the deals will be on "targeted agreements" considering the continuing uncertainty that the covid-19 pandemic brought to the world. There will be more collaborations among small-to-medium companies that can leverage their assets while reducing risks.
Among the pharmaceutical companies that favor targeted agreements are Eli Lilly, Bristol Myers Squibb, and Merck & Co. Merck made 120 small to medium agreements in 2020. Targeted deals can range from $1 billion to $5 billion in value and could involve only specific technologies or drugs. The cost involved in a targeted agreement is much lower as opposed to larger deals that can expose a company to bigger financial risks.
Specific Synergies and Overlaps
Just like 2020, synergies and overlaps will remain popular among companies in life sciences. This is because they can lead to specializations, which in turn, creates bigger returns on investment. For instance, when Merck entered into a collaboration agreement with Seattle Genetics for $1.6 billion, the purpose was to create a combination therapy composed of Merck's Keytruda and Seattle Genetics' ladiratuzumab. The combination therapy can likely increase the potency and efficacy of the treatment for oncology patients. Similarly, Bristol Myers' buyout of Forbius was mainly to gain access to technologies that can enhance its cancer therapy drug, Opdivo.
This year, high-value acquisitions will continue to involve overlaps with the purchaser's existing product portfolio.