Pharma deals at 41st JP Morgan Healthcare conference 1 Feb 2023
Often, pharma companies take advantage of the attention focused on the JP Morgan Healthcare conference to announce deals. The calibre of these deals is a bellwether of the current state of the market.
In its own Outlook 2023 report, JP Morgan reflected on the challenges for investors around the globe in 2022, including high inflation, global rate hikes, and the impact of the war in Ukraine. Both stocks and bonds suffered large losses. However, the company stated that it saw a way forward in 2023, predicting that the global tightening cycle would probably end this year. It suggested that the suppressed 2022 market presented new opportunities through lower equity valuations and higher bond yields.
In 2022, only 11 companies went public and the IPO market contracted more than 90%, reported Matthew Leskowitz, managing director of healthcare investment banking at Goldman Sachs during a panel discussion at the conference. This year, in relation to deals, Evaluate analysts reported an improvement on 2022, but highlighted the fact that 2023 looked to be a buyer’s market, with the deals struck reflecting the caution of investors and a need for return on investment to release balance payments.
Leskowitz stated that there had been a move away from very large-scale M&A to “single-digit billion-dollar type bolt-on deals”. He added, “Many of the deals in this environment are of commercial or near commercial assets.”
On the first day of the JP Morgan Healthcare conference, three such ‘bolt-on’ buyouts were announced, but each included payments contingent upon results. Such risk-mitigation strategies were predicted to continue through the year if market conditions do not pick up.
A point to note was that all the buyers in these deals were European. AstraZeneca stepped into treatment-resistant hypertension with its offer to buy mid-stage, single asset CinCor Pharma, which is developing baxdrostat in this indication. It is offering $1.3bn upfront, with a further $500m payable upon submission of ‘a baxdrostat product’ to the FDA or EMA as part of a $10 per share contingent value right (CVR). The deal is expected to be finalised in the first quarter of 2023.
Meanwhile Ipsen moved on Albireo with a $952m buyout aimed at its product Bylvay, an IBAT inhibitor being developed for rare liver conditions. Again the deal featured a $10 per share CVR that could be some distance off, with analysts reporting that the payout will only be actioned if the FDA approves Bylvay in biliary atresia by the end of 2027. This deal is likely to close in the first quarter of the year.
Third deal of the day was Chiesi’s offer of $1.3bn upfront for rare disease firm Amryt. A further $225m will be paid if its designated orphan drug Filsuvez, for inherited skin disease epidermolysis bullosa, gains FDA approval by the end of 2024 and receives a priority review voucher.
Meanwhile, Japan-based Zeon Corporation moved to buy Edge Precision Manufacturing in order to take advantage of its micro-featured thermoplastic device manufacturing capabilities. The companies had a close relationship before the deal, with Edge using many Zeon materials. Zeon wants to benefit from simplification of the supply chain and to gain access to Edge’s customer network. Financial details were not disclosed.
Rounding off the day’s deal announcements, Asia-Pacific centred Novotech bought its contract research organisation partner EastHORN, expanding its reach into the European market and positioning it for greater access to more diverse patient populations. This capability would provide biotech clients with in-country expertise to assist their global drug development programmes.
While the global markets clearly remain depressed, with the threat of recession and possible escalation of the war in Ukraine, Leskowitz noted in the panel discussion, “If you actually parse through the data, it’s not all doom and gloom – there is capital available to higher quality teams and higher quality assets.”
2023 looks set to be a year where investors are more discerning and disciplined with their capital.
Read PMC’s previous round-up of healthcare trends from the 41st JP Morgan Healthcare conference here.