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Therapeutic Licensing and M&A Deals

June 24, 2014
Licensing deals for therapeutic candidates in 2013 dropped to the lowest volume in at least eight years for deals with disclosed values totaling over $10M. Total upfront payments to biotechs were also at an eight year low, with only $1.9B paid to biotechs in 2013. This is a 50 percent drop from peak levels. However, there is a silver lining in the data: Preclinical deal volume saw a slight increase in 2013, and has not dropped by the same extent as the clinical product licensing. This points to the overall trend of large pharma and biotechs emphasizing their commitment to earlier stage deals.

During the last eight years, the industry has seen four waves of activity 1) The licensing boom of 2006-2007, when pharma companies looked to in-license their way out of the patent cliff and externalize pipelines; 2) The financial crisis of 2008-2009 coinciding with a pullback in R&D spending at major firms as well as major industry consolidation (i.e. Pfizer/Wyeth, Roche/Genentech, Merck/Schering) which reduced the net number of buyers; 3) Digestion of past deal activity 2010-2012; 4) The return of the IPO in 2013, which gave biotechs a long missed option on the table – go it alone. As money moved back into the sector, in the form of IPOs and follow-ons, companies could finance mid and late stage trials on their own.

2013 M&A was strong, with the highest dollar amount in four years. The biggest deal of the year was Amgen buying Onyx for ~$10.4B. Perrigo bought Elan for $8.6B, and Shire bought Viropharma for $4.2B. Taking out the big multi-billion deals over the last eight years, we find that M&A value has been even around $25B, with 40-50 significant (>$10M) acquisitions per year.