A survey of biopharmaceutical dealmakers by Campbell Alliance, the consulting firm of inVentiv Health, suggests that 2015 will set a new record for mergers and acquisitions and licensing of biopharmaceutical assets. The survey also revealed early signs of a potential slow-down in licensing of assets.
This is the seventh year that Campbell Alliance has surveyed dealmakers to provide a forward-looking glimpse of what the rest of the year will hold and identify areas of greatest opportunities for buyers and sellers. A report on the survey was released during a Super Session today at the BIO International Convention in Philadelphia, "Riding the Bull Market: What's in Store for Biotech Dealmakers in 2015?"
"The level of dealmaking activity last year was the highest it has been since 2009 and activity in 2015 is set to surpass it," said Neel Patel, Vice President, Campbell Alliance. "But this time, M&A activity is being fueled by small and mid-cap biopharma buyers, who are flush with cash. And the details of what we found across the sector should be of interest to anyone evaluating buying or selling an asset in 2015."
Patel said buyers find themselves in a highly competitive environment while sellers benefit from well capitalized buyers and more options than in the past.
"The message for sellers is that the market continues to create options," said Patel, who moderated the BIO Super Session. "Sellers are able to retain assets longer as a result of the better financing environment, the emergence of 'new' buyers and options to commercialize through specialty indications and contract commercial services."
He said that buyers face a tough environment marked by increased competition for assets and the need to negotiate with sellers who have options. To access the assets they want, buyers may need to position themselves more aggressively through M&A with earn-outs or outright acquisitions versus licensing. Patel said the window of robust financing (cheap debt and access to public equity), tax inversions and pricing power may close over time.
The survey also found:
• The record pace of acquisitions and financing has continued into 2015, but there are early signals of a potential slowdown in traditional licensing.
o Acquisitions with earn-outs can substitute for traditional licensing.
o Greater financing options are available to emerging companies who can reasonably "go it alone."
• The narrowed discount rate gap to historic norms has removed a temporary bridge between optimistic sellers and pessimistic buyers.
• A seller's market exists for phase III CNS, preclinical and phase III oncology and phase III women's health assets.
• A buyer's market exists for preclinical respiratory, women's health and ophthalmology assets.
• Hot areas/technologies of interest are largely linked with oncology as buyer demand within the therapeutic area remains high.
• High-interest, oncology-related technology includes cancer vaccines, antibody drug conjugates, personalized medicine and immuno-oncology.
• Innovation has gravitated toward oncology where pricing and access risk is relatively low. Trial costs and length similarly are low versus other therapeutic areas.
• The conversion rate for deals has steadily increased over the past few years, which is a reflection of the robust dealmaking environment. This dealmaking environment has created bandwidth constraints in the evaluation of deals for buyers.
•
Additional information about Dealmakers' Intentions 2015, including access to a white paper summary of the results, is available here: inVentivHealth.com/CampbellAlliance/Dealmakers.