H1 2024 – a steady start for biopharma M&A

Following a wave of sizeable biopharma transactions announced in the final quarter of 2023, we came into 2024 with optimism that deal making in the sector would continue to perform amid challenging conditions globally.

So far, 2024 has shown signs of promise with steady deal volume. Whilst there remains an absence of mega deals, the deal landscape has featured a number of deals in the $1-2bn range and, as in 2023, big pharma continues to be the dominant driver of that activity.

Novo Holdings' proposed $16.5bn acquisition of CDMO, Catalent, was the largest biopharma-related deal announced in the first half of the year. Meanwhile, other notable transactions include Gilead's acquisition of liver disease biopharma, Cymabay Therapeutics, for $4.3bn and Vertex Pharmaceuticals' announced acquisition of clinical stage immunotherapies-focused Alpine Immune Sciences for $4.9bn.

Up-coming patent cliffs, pricing pressures and an increasingly challenging regulatory environment remain significant themes resulting in companies continuing to utilise M&A as a strategic tool to fill pipeline and revenue gaps. With growth generation remaining a priority, H1 2024 has seen big pharma continuing to favour smaller and mid-size targets with clinical stage / de-risked assets as well as areas of potential differentiation.  

In terms of therapeutic areas, oncology, immunology and rare diseases have been big hitters of H1 2024. Oncology deals saw interest in two modalities, namely (i) radiopharmaceuticals, demonstrated in Novartis' proposed acquisition of Mariana Oncology for up to $1.75bn and Astrazeneca's acquisition of Fusion Pharmaceuticals for up to $2.4bn; and (ii) ADCs, as seen in Johnson & Johnson's $2bn acquisition of Ambrx Biopharma and Genmab's $1.8bn acquisition of ProfoundBio. Announced immunology deals included the Vertex / Alpine deal and Biogen's acquisition of Human Immunology Biosciences for up to $1.8bn and rare disease deals included Astrazeneca's acquisition of Amolyt Pharma for up to $1.05bn and the Gilead / CymaBay transaction.

Obesity-focused targets themselves have not dominated the list of larger deals of H1 2024. However, the continuing impact of the obesity-based boom can be seen in the Novo Holdings / Catalent deal (with Novo Nordisk due to acquire three of Catalent's fill-finish sites from Novo Holdings to help it meet demand for its GLP-1 products).

Following steady, but subdued, VC activity in 2023, H1 2024 has seen biopharma investment levels increasing and 2024 IPO volume looks set to surpass 2023's total. Similar to M&A trends, oncology and immunology have been popular investment targets, with neurology and metabolic also seeing steady levels of investment. Despite this cause for optimism, conditions remain challenging and uncertain as demonstrated by recent global stock market volatility. These conditions combined with the impending US elections are expected to put investors and prospective IPO candidates into "wait and see" mode, possibly already reflected by the decline of US IPOs since the flurry in the first two months of the year.  Further, despite investment levels increasing, investors continue to be selective and conditions are, perhaps, only becoming more favourable for the strongest assets. Against this backdrop, we expect M&A to remain a key option for private biopharma companies looking for financing to accelerate R&D and growth.

Other trends from 2023 remain. Despite sitting on record levels of dry powder, private equity activity is still quieter than some anticipated perhaps, in part, due to the challenging leveraged finance market conditions continuing. Meanwhile, regulators globally continue to remain active with increased scrutiny in the sector making anti-trust and FDI key considerations in life sciences transactions.

In terms of outlook for the second half of 2024, biopharma M&A activity looks set to remain buoyant as deal makers grow increasingly confident in conducting transactions in the current climate. If VC investment gains momentum and IPO activity looks more promising, then we may even see a rush to snap up promising biopharma companies before valuations recover.