It has been a bit of a writing hiatus as I have been in the middle of delivering a few short, intense projects. But getting back to it, I wanted to share an article from Biopharma Dive on the current uncertainty in biotech dealmaking (Link) and a few thoughts on how this impacts acquiring companies.
Things have likely gotten worse even since this article was published on the 6th May, with the big orange man’s late-night Truth Social announcement on Sunday, 11th May that he would sign an executive order to slash drug prices in the US (Link)
“There’s always uncertainty,This is uncertainty on steroids.” – Andrew Merken, Shareholder at Law Firm Polsinelli
Given the chaos around Donald Trump’s administration, especially the Tariffs and financial actions, it’s unsurprising that many companies are acting cautiously.
The article points out that sellers hold less negotiating power and expect lower pricing, while buyers are more cautious than ever. They prefer to sit on cash and are not worried about FOMO when no one else is moving.
“Deals are taking 3-4 months to complete where they used to take a few weeks” Stuart Cable, Goodwin Proctor
One of the sources, an experienced M&A lawyer, pointed to unprecedented slowness in completing deals, lengthier due diligence processes, and the killing of some deals without an apparent reason as indicators of the current challenges.
Having sat on the buyer side of a fair few diligence processes over the last year, we have seen companies probing deeper into the findings, especially where we have been critical around products or portfolios they were initially positive about.
Just because there is an opportunity and you have money to spend, it doesn’t mean it should be done unless there is a promising molecule or portfolio with a genuine commercial opportunity.
One benefit of the current uncertainty for buyers with money and a willingness to purchase is the ability to get a good deal. As the image below shows, triple-digit premium acquisitions of biotech companies are levelling off. As a company with cash, now is the time to look for biotechs or drugs that are solving an unmet need, have a sensible pathway to access, are not dependent on “perfect” conditions, fit within your broader portfolio and direction, and negotiate a reasonable price.
Even with the big-ticket acquisitions slowing down, several of the sources in the article report that activity for early-stage partnerships and collaborations continues bubbling away.
Having worked with several BD&L teams on earlier-stage opportunity assessments (such as the one in this Project History Link), I can definitely see the benefits of partnering earlier.
One, the cost is much lower per partnership, allowing a greater volume of partnerships to be made. This results in a more venture capital-like approach where one or two big successes provide good returns.
Two, pharma can bring its commercialisation experience earlier into the process, with new product planning or similar functions providing valuable input to the clinical development.
So savvy BD&L teams may be considering taking this venture-capital approach, while the current instability makes large acquisitions more risky.
Even though the financial markets are turbulent and there is uncertainty about what the Donald will do next week, there is no uncertainty about the fact that there are substantial unmet needs across most major therapeutic areas.
Continued landscaping and understanding of where there is need, and tracking of companies in these spaces, is never a harmful activity to be conducting, and if this is something where you need guidance or support, get in touch at sv@sivan-consulting.com