A recent article from BioPharma Dive highlights the challenging landscape for biopharmaceutical initial public offerings (IPOs), and the critical role that mergers & acquisitions play in connecting promising innovations with the resources and investment needed to bring new, early-stage innovations to patients.
M&A helps biopharmaceutical companies combine their complementary resources and expertise to be able to advance new treatments and cures, while also providing companies with a return on investment that helps support future innovation. Amid ongoing challenges for many biopharmaceutical companies raising capital through IPOs, the article notes that M&A has taken on increased importance in allowing companies to overcome these financial and economic pressures and ultimately develop and deliver new breakthroughs to patients.
Highlights from the article are included below:
- “M&A is a crucial piece of the biotech ecosystem. Acquisitions help pharmaceutical companies build their pipeline, while giving biotechs and their backers a financial return on their investment.”
Significant Financial Headwinds Spur Need for Increased M&A
- “But IPOs have since slowed…Taking their place have been private biotech acquisitions, a phenomenon industry watchers say is driven by the abundance of mature, but not yet public, drug startups.”
- “The sector’s IPO slowdown over the last few years has created a glut of biotechs that haven’t yet made it to Wall Street. Those companies are ‘still private and awaiting the right window to go public,’ wrote Jefferies analysts last month, and ‘explains why many M&A deals have taken place in the private sector.”
- “The type of startup now getting acquired bears that theory out. Most had a drug candidate in [Phase 1] human trials when they were bought, and seven were in or nearing Phase 2 testing.”
Example: Hi-Bio Sought M&A to Advance its Early-Stage Pipeline
- “Hi-Bio, which sold to Biogen for $1.15 billion in May, is one example. The company was formed around a pair of immune disease drugs licensed from biotech MorphoSys.”
- “As those programs advanced, Hi-Bio began evaluating its options, according to CEO Travis Murdoch. But an IPO wasn’t the company’s ‘primary consideration.’ Additionally, bankrolling multiple Phase 3 trials, and building commercial infrastructure, would have required a very large capital raise. The company had to balance what was best for its shareholders, employees and the future of its drug research.”
- “’That’s a complex decision,’ Murdoch said. But obtaining Phase 2 data is ‘a very natural inflection point,’ after which ‘acquisitions often happen.’”
- “Other biotech companies may be making similar decisions to give their experimental medicines a better chance at being successfully commercialized, [Murdoch] said.”
To read the full article, click here.