8 Key Highlights! What Do Global Pharma Industry BD and M&A Trends Forecast for 2024?

Where Pharma is Investing for the Future of Medicine: Biopharma Deal Making in 2024

8 Key Highlights! What Do Global Pharma Industry BD and M&A Trends Forecast for 2024?

Clarivate is a leading global professional information service company that provides authoritative data and analytical tools across various fields, including scientific research, patent applications, and legal services. Recently, this renowned organization released its annual report titled “Where Pharma is Investing for the Future of Medicine: Biopharma Deal Making in 2024,” which has garnered widespread attention in the industry.

This 35-page report delves into the merger and acquisition (M&A) and partnership trends in the biopharma industry for the year 2023, revealing that despite the downturn in the capital market, large pharmaceutical companies within the industry are still seeking to enhance their product lines and innovation capabilities through strategic mergers and partnerships. The report particularly highlights the active deal-making in areas such as antibody-drug conjugates (ADCs), multi-specific antibodies, the application of artificial intelligence (AI)/machine learning (ML) in drug discovery, and the rise of contract development and manufacturing organizations (CDMOs). It also points out the challenges faced by the industry, such as patent cliffs, high global interest rates, geopolitical tensions, and the impact of the U.S. Inflation Reduction Act (IRA) on drug pricing.

By analyzing these trends and challenges, the report emphasizes the importance of cooperation between biotech and pharmaceutical companies and how such partnerships can achieve innovation and improve patient treatment outcomes.

For those short on time, here’s a one-minute quick scan of the eight core highlights:

  1. Recovery of M&A and Partnership Activities in the Biopharma Industry
    • In 2023, the value of M&A activities in the biopharma industry surged by 80%, reaching $139.86 billion, indicating the industry’s potential interest in achieving growth through strategic alliances.
    • Although overall financing activities declined in 2022, data from 2023 show a slight rebound, with a total amount of $70.9 billion, of which follow-on offerings raised the most funds, reaching $26 billion.
  2. Revival of M&A in the Neuroscience Field
    • Large pharmaceutical companies showed a strong interest in neuroscience assets in 2023, especially in the treatment of schizophrenia and Parkinson’s disease, signaling a revival in this field.
    • For instance, Bristol-Myers Squibb’s acquisition of Karuna Therapeutics for $14 billion and AbbVie’s proposed acquisition of Cerevel Therapeutics for $8.7 billion both demonstrate the emphasis large pharmaceutical companies place on the neuroscience field.
  3. MSD’s Large-Scale Expenditure in 2023
    • MSD became the leader in the biopharma partnership field in 2023, completing 11 deals with a total value of $33.4 billion, including a partnership with Daiichi Sankyo worth up to $22 billion for antibody-drug conjugates (ADCs).
    • This series of transactions reflects MSD’s commitment to expanding its oncology and immunology product lines and also showcases the company’s pursuit of external innovation.
  4. The Continued Dominant Position of ADCs in Deal Making
    • ADC technology continues to dominate biopharma deals, with nearly a quarter of large partnerships in 2023 involving ADCs.
    • The $22 billion partnership between MSD and Daiichi Sankyo is the largest ADC deal of the year, highlighting the significance and market potential of ADCs in cancer treatment.
  5. Realizing the Potential of Multi-Specific Antibodies
    • Multi-specific antibodies, especially bispecific and trispecific antibodies, are becoming a hot topic in the biopharma field, with multiple large partnerships and acquisition cases indicating this trend.
    • For example, the $1.737 billion partnership between Elpiscience and Astellas Pharma, and the $900 million partnership between Celltrion and Cyron Therapeutics, both focus on the development of multi-specific antibodies.
  6. Accelerating Drug Discovery with Artificial Intelligence/Machine Learning
    • The application of artificial intelligence (AI) and machine learning (ML) in drug discovery and development continues to grow, with several large partnerships and investment cases proving this point.
    • For instance, the $4.05 billion partnership between Evotec and Bristol Myers Squibb, and the $2.76 billion partnership between Valo Health and Novo Nordisk, both utilize AI/ML technology to accelerate the drug discovery process.
  7. CDMOs as New M&A Targets
    • Contract development and manufacturing organizations (CDMOs) are emerging as new M&A targets in the biopharma industry, especially as supply chain security and domestic production capabilities become focal points.
    • Novo Holdings’ $16.5 billion acquisition of Catalent Inc is an example that illustrates the importance of CDMOs in the biopharma value chain.
  8. The Central Role of Partnerships in Innovation
    • The article emphasizes that despite challenges in capital financing, partnerships between biotech and pharmaceutical companies remain key to driving innovation.
    • With an initial rebound in financing activities in 2024, biotech companies have the opportunity to further develop their assets through partnerships with pharmaceutical companies, who are also seeking partners that can fill gaps in their product lines and strategic priorities.
A little time? Then get to know more about these eight major trends.

The Resurgence of M&A and Cooperation Activities in the Biopharmaceutical Industry
After a period of sluggishness in the biotechnology industry in 2023, there was a significant recovery in the value of mergers and acquisitions (M&A). Despite industry challenges such as macroeconomic headwinds and rising cost capital, as well as the impact of increased reviews by IRA (uncertain exactly what it refers to) and competition authorities, the biotechnology index rose significantly from the end of 2023 to the beginning of 2024, and investor interest returned. This recovery was driven by a record number of FDA-approved products in 2023, most of which came from biotech companies, and multiple large M&A transactions, not only concentrated in the fields of cancer and rare diseases, but also including treatments for central nervous system diseases. The total value of M&A transactions in 2023 reached $139.86 billion, an increase of approximately 80% compared to 2022, demonstrating the strong demand of the industry for innovative therapies and technologies. Although the number of M&A transactions was relatively small, the value of individual transactions increased significantly, reflecting the trend of companies strengthening innovation in key strategic areas.
The Revival of M&A in the Field of Neuroscience
Pharmaceutical companies such as Bristol-Myers Squibb and AbbVie actively expanded their research and treatment product lines in the field of neuroscience by acquiring companies such as Karuna Therapeutics and Cerevel Therapeutics, especially in the treatment of diseases such as schizophrenia and Parkinson’s disease. These acquisitions not only demonstrated the companies’ pursuit of scientific development but also reflected the strategy of the pharmaceutical industry to acquire innovative drugs and technologies through M&A in the face of the challenges of patent expiration and intensified market competition. At the same time, these transactions also attracted the attention of the US Federal Trade Commission (FTC), showing the review intensity of regulatory agencies on the possible impact of M&A in the pharmaceutical industry on market competition and conditions.
After 2022, MSD Continued to Spend Massively in 2023
The article pointed out that after the cooperation boom in 2022, MSD became a larger investor in 2023. Facing the issue that the patents of its blockbuster drugs are about to expire within the next five years, MSD urgently needs to replace the losing income through cooperation and acquire platform technologies that can produce next-generation transformative drugs. Despite the relatively sluggish capital market, many biotech companies turned to cooperative financing to fund their development, providing pharmaceutical companies with the opportunity to access breakthrough science. In 2023, MSD led in the field of bio-cooperation, conducting 11 transactions with a total value that could reach 33.4 billion US dollars, among which the agreement with Daiichi Sankyo was as high as 22 billion US dollars, becoming the largest transaction of the year. This indicates that although biotech companies face the challenge of a limited number of potential buyers, large pharmaceutical companies such as MSD continue to promote the development of innovative drugs through high investment.
The Continued Dominance of ADCs in the Transaction Field
In 2023, antibody-drug conjugates (ADCs) occupied a significant position in the cooperative transactions in the biopharmaceutical field, and nearly a quarter of the billion-dollar-plus cooperative transactions involved ADCs. Among them, the transaction between Merck (MSD) and Daiichi Sankyo of Japan was worth up to 22 billion US dollars, involving three potential first-in-class ADC candidate drugs, demonstrating the huge potential and market attractiveness of ADCs in the field of tumor treatment. In addition, cooperation between other companies such as Bristol Myers Squibb and SystImmune also showed active transaction activities in the ADC field. These cooperations not only increased the company’s tumor treatment product line but also enhanced its competitiveness in this market. The article emphasizes that as regulatory agencies such as the US Food and Drug Administration (FDA) provide increasingly clear guidance on the clinical pharmacology and optimal dose strategies of ADCs, the prospects for the research and development and approval of ADCs are clearer, indicating the continued growth of this field is crucial.
The Realization of the Potential of Multispecific Antibodies
Multispecific antibodies, especially bispecific and trispecific antibodies, are becoming a hot spot for research and development in the biopharmaceutical field. These antibodies can target multiple antigens or epitopes simultaneously, providing new possibilities for disease treatment. In 2023, multiple large-scale cooperations and acquisition cases indicated active transaction activities in the field of multispecific antibodies. For example, the 1.737 billion US dollars cooperation between Elpiscience and Astellas Pharma, and the 900 million US dollars cooperation between Celltrion and Cyron Therapeutics, both focused on the research and development of multispecific antibodies. These cooperations not only demonstrated the companies’ pursuit of scientific development but also reflected the strategy of the pharmaceutical industry to acquire innovative drugs and technologies through M&A in the face of the challenges of patent expiration and intensified market competition. As these multispecific antibody projects enter more advanced development stages, it is expected to bring new breakthroughs in the treatment of various diseases.
Acceleration of Drug Discovery by AI / ML
The application of artificial intelligence (AI) and machine learning (ML) technologies in the biopharmaceutical industry is accelerating the drug discovery process and has become an important part of the industry. In 2023, several top AI/ML cooperations continued previous ones, aiming to further discover promising candidate drugs in specific disease areas or additional therapeutic areas. As drugs discovered with the assistance of AI/ML gradually approach approval and commercialization, it is expected that large pharmaceutical companies will be more actively cooperating with leading biotech companies to acquire these tools and technologies. In addition, the article listed several important AI/ML cooperation cases, including the cooperation between Evotec SE and Bristol Myers Squibb in the field of neurodegenerative diseases, and the cooperation between Valo Health Inc and Novo Nordisk A/S in the field of cardiovascular metabolic diseases, demonstrating the huge potential and value of AI/ML in drug discovery.
CDMO as a New M&A Target
With the continuous growth of the demand for new drugs in the biopharmaceutical industry, contract development and manufacturing organizations (CDMO) are becoming a new investment hotspot. This trend is mainly driven by several factors: (1) Cost-effectiveness: CDMO provides an effective way for biopharmaceutical companies to expand the scale of new drug production without the need for large-scale investment in building their own facilities. (2) Complex drug production: With the rise of biopharmaceuticals, genes, and cell therapies, the production process is increasingly complex, and CDMO can provide professional production technology and experience. (3) Supply chain vulnerability: The COVID-19 pandemic exposed the vulnerability of the pharmaceutical supply chain, especially in the case of reliance on overseas CDMO. Therefore, some biopharmaceutical companies are seeking to localize production or at least find CDMO partners closer. (4) Policy factors: The “Biosecurity Act” proposed by the United States may limit the use of CDMO services from specific entities (such as WuXi AppTec in China) supported by US federal funds, which may lead to the rush to purchase CDMO assets.
The development prospects of the CDMO industry may be reflected in: Industry consolidation: It is expected that there will be further consolidation in the CDMO industry, and large CDMO companies will seek to expand their scale and enhance production capacity. Localization trend: Due to policy factors and supply chain security considerations, the localization trend of CDMO services will become increasingly obvious. Technological upgrading: CDMO companies will need to continuously invest in new technologies to meet the increasingly complex needs of drug production and maintain a competitive advantage.
Cooperation models between biopharmaceutical companies and CDMO: (1) Long-term cooperation: Establish long-term cooperative relationships to ensure stable production capacity and cost control. (2) Flexible cooperation model: According to different project needs, choose a flexible cooperation model, such as on-demand production or risk sharing. (3) Technology sharing: Share technology with CDMO partners to jointly develop new production processes and solutions.
In conclusion, the CDMO industry is in a stage of rapid development, providing important production support for biopharmaceutical companies. With industry consolidation and technological upgrading, CDMO will play a more important role in future drug production.
The Core Role of Partnerships in Innovation
This part emphasizes the importance of cooperation between pharmaceutical companies and biotech companies in filling the gaps in expertise, technology, and resources to drive innovation and improve patient treatment outcomes. Despite the drought in overall capital financing, biotech companies still have the opportunity to cooperate with or be acquired by pharmaceutical companies to advance their assets and innovations. Data at the beginning of 2024 shows that the value of various financing methods (such as IPO, follow-on issuance, public and other issuances, and private equity financing) has increased significantly, indicating that biotech companies may have more sources of funds. Pharmaceutical companies are becoming more picky in spending, so biotech companies should match their advantages with the priorities of pharmaceutical companies to obtain cooperation opportunities.
  • Where pharma is investing for the future of medicine: biopharma deal making in 2024
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