For many early-stage life sciences companies, mergers and acquisitions (M&A) and other collaborations are fundamental to advancing promising new discoveries. An acquisition by a larger, more established company often represents a necessary and anticipated milestone in an early-stage company’s journey to bring a new breakthrough from the lab to the patient.
David Epstein, CEO of oncology startup Ottimo Pharma, recently explained that the company’s strategy hinges on being acquired to unlock the intensive resources and expertise needed to conduct late-stage clinical trials, and eventually bring its lead therapy to market. If successful, Ottimo’s investigational therapy could represent a first-in-class treatment for patients with a variety of solid tumors.
Ottimo’s intent to pursue an acquisition has created a clear exit point and incentive for venture capital (VC) and other investors, helping the company secure $140 million in initial funding. As more than 80% of life sciences companies operate without a profit, this exit point serves as a critical driver of continued investment in the American life sciences industry.
In another example, Novazyme’s acquisition by Genzyme helped bring a first-of-its kind treatment to patients with Pompe disease, a rare and deadly genetic condition. By combining Novazyme’s specialized expertise in genetic disorders with Genzyme’s established commercial infrastructure, the combined company was able to bring a breakthrough treatment option to patients.
These are just two of the many examples that underscore how life sciences M&A provides a vital path for early-stage companies to advance promising breakthroughs. The high-stakes process of drug development can take 10-15 years, cost more than $2.6 billion, and has a failure rate of nearly 90%. Few pre-profit companies can navigate this journey alone.
By allowing companies of all sizes to specialize in what they do best and seek out opportunities to partner when it makes sense, life sciences M&A enables companies to “pass the baton” and fuels America’s innovative life sciences ecosystem.
Unfortunately, recent policy shifts from the Federal Trade Commission and Department of Justice have threatened to disrupt this critical pathway for companies of all sizes to be able to collaborate and bring new, competitive breakthroughs to market. In particular, the 2023 merger guidelines and new Hart-Scott-Rodino premerger notification rule have risked broadly deterring M&A and could prevent many innovative treatments from reaching patients in need.
Rather than continue this worrying trend, policymakers must recognize and support the unique and fundamental role of life sciences M&A in driving innovation, competition and growth across the American life sciences industry.