Biotech Bulletin: M&A Spotlight
As 2024 begins, the biotech sector is poised for a significant resurgence, largely driven by an uptick in M&A activities. After years of underperformance, the industry is witnessing a revival in biopharma M&A, with deal values soaring to $128 billion in 2023, up from $61 billion in 2022. This shift in momentum is marked by major acquisitions, like Pfizer’s $43 billion deal for Seagen, and Merck’s $10.8 billion acquisition of Prometheus Biosciences.
Easing concerns over antitrust regulations, demonstrated by the clearance of Amgen’s $27.8 billion acquisition of Horizon Therapeutics, are encouraging more companies to engage in mergers and acquisitions.
Additionally, with large-cap biopharma companies holding around $199 billion in cash and reducing dividends and stock buybacks, there’s a clear indication of a stronger focus on M&A.
Supporting this positive trajectory is the FDA’s near 50% increase in novel drug approvals in 2023, marking a return to historical averages and signaling a healthy pipeline for the industry. Moreover, analysts forecast a revival in the biotech IPO market in 2024, as high-interest rates begin to stabilize, offering a promising outlook for companies and investors alike.
The S&P Biotech ETF (XBI) itself has shown signs of recovery with a 7.6% rise in 2023, hinting at a broader biotech resurgence in 2024. The IPO market, which saw a decline in 2023, is expected to gradually reopen, favoring companies with strong clinical data.
M&A activity is anticipated to remain robust in 2024, with deal totals potentially ranging from $225 billion to $275 billion. This indicates a sector resilient to economic challenges and adaptable to market dynamics. The Inflation Reduction Act in the U.S., focusing on drug pricing, may further influence biotech strategies, possibly leading to more acquisitions, especially of smaller firms facing funding challenges.
PRISM Analysis
M&A Madness: Novartis Continues Buying Spree
Novartis (NYSE: NVS) remains at the center of January’s flurry of M&A activity after entering three different agreements on Monday. The Wall Street Journal also reported this afternoon that the company is in advanced talks to buy Cytokinetics (Nasdaq: CYTK).
Merck Scoops Harpoon in $680M Deal
Harpoon Therapeutics, Inc. (Nasdaq: HARP) has agreed to be acquired by Merck (NYSE: MRK) in a cash deal valued at approximately $680 million. Harpoon’s share price rose 111% on Friday afternoon and surged a further 111% in Monday morning trading.
Johnson & Johnson Acquires Ambrx in $2B Win for Advanced Prostate Cancer
Biopharmaceutical company, Ambrx (Nasdaq: AMAM), has announced it will be acquired by Johnson & Johnson for $28.00 per share in cash, for a total equity value of approximately $2.0 billion. The transaction is expected to close in the first half of 2024. Ambrx’s shares rose 101% following the news.
Novartis and Lilly Collaborate with Alphabet for AI Drug Discovery
Novartis Pharma (NYSE: NVS) and Eli Lilly and Co (NYSE: LLY) have entered into strategic research collaborations with Isomorphic Labs, a unit of Alphabet (Nasdaq: GOOG). Isomorphic Labs, uses artificial intelligence (AI) and machine learning to help discover new drugs.
Trader’s Lens
$HARP is the leader today in the Prism MarketView Biotech index and up over 100% after being bought by Merck for $680 million.
