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  • Jonathan Poyer

Biotech M&A Picking Up Speed





May brought more M&A with the announcement Astellas Pharma (4503 JT) reached a deal to acquire Iveric Bio (ISEE) for $5.9 billion. The deal was only a ~20% premium to the prior day's close as there was takeout speculation already in the stock. The transaction value was a more modest ~3x of 2030 consensus revenue estimates compared to the nearly ~5x Merck and Pfizer paid for recent deals despite the fact that Astellas is facing a pending loss of exclusivity(LOE) for their top selling Xtandi.



Big pharma and biotech earnings are increasingly being overshadowed by pending LOEs, which should continue to drive M&A throughout the year. Cash flow durability concerns were exacerbated by a proposed EU pharma reform that would change the calculation of statutory drug exclusivity. The draft EU legislation would limit guaranteed data exclusivity from 10 years to 8 years, but provide the opportunity for extensions (+2 years for EU-wide launches, +1 year for major new indications, +0.5 years for clinical data vs a comparator, +0.5 years for an critical unmet medical needs) to a potential maximum of 12 years vs the prior 11. Should the new rules be adopted it would create incremental "winners" and "losers" similar to most other changes to the complex system of drug exclusivity. It's important to note; however, that EU patent based exclusivity would remain unaffected.


A couple of high profile launches continued to disappoint as Biogen (BIIB) failed to report positive revenue from the Alzheimer's' therapy Leqembi recently approved under the accelerated pathway. BIIB is optimistic that the upcoming full approval by FDA (July 6 PDUFA) will finally allow for CMS reimbursement by late July, unlocking the potential for revenue growth. Consensus 2023 Leqembi estimates remain $40-45 million.



Likewise, Biomarin (BMRN) disappointed investors by announcing they still have not treated a patient in the commercial setting with the revolutionary hemophilia A gene therapy Roctavian despite launching the drug in the EU late last year.



Seres Therapeutics (MCRB) announced the watershed regulatory approval oral microbiome therapy VOWST for the prevention of recurrence of C. difficile infection. The therapy will be priced at $17.5K per course with the launch planned for June.



Culling of the development stage herd is now expanding to large cap players with Novartis (NVA) reporting it was cutting 10% of its clinical pipeline (n=20 phase 1 and 2 programs). Likewise, Biogen (BIIB) also announced it was cutting several phase 2 and 3 programs. Lanett Co (LCI) announced it was filing Chapter 11 bankruptcy as the spec pharma company looked to restructure debt and Sangamo Therapeutics (SGMO) announced a 27% reduction in force. Even high flying Illumina (ILMN) that trades >50x 2025 PE highlighted that it will reduce annualized run rate expenses by more than $100M beginning later in 2023 which will accelerate progress toward higher margins.



The increased pruning of development programs and other cost cutting is being felt in the research support ecosystem. Danaher (DHR) and other life sciences support companies are starting to call out weakness in bioprocessing and tools demand.



M&A is becoming increasingly more likely for the top drug candidates while discontinuation is becoming more likely for those at the bottom.

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