A glance at the 2023 and early 2024 life science dealmaking environment shows fewer, but higher-value, transactions. Life science companies are demonstrating their willingness to splash out to build portfolio depth in key areas but remain selective about their partnership decisions in the wake of uncertainty around the impending patent cliff, globally high interest rates, geopolitical tensions and the medication pricing impact of the recently enacted Inflation Reduction Act (IRA) in the U.S. As companies face the prospect of major revenue challenges over the next few years, securing inorganic growth through strategic alliances is increasingly attractive.
As a result, 2023 saw an upsurge in merger and acquisition (M&A) and deal activity. According to BioWorld, M&A values in 2023 jumped 80% over 2022, and deal values reached BioWorld’s highest level ever recorded.
Doubling down on strategic therapeutic areas
Pharma once again finds itself having to narrow its sights on partnerships that deliver the next blockbuster and enable differentiation from the competition—all while navigating increasing regulatory scrutiny and shifting patient and payer expectations.
A prime example of strategic spending is Merck & Co./MSD, which continued its spending spree to strengthen its oncology portfolio. Following high-dollar deals in 2022 for antibody drug conjugates (ADCs) in the oncology space with Mersana Therapeutics and Kelun-Biotech, Merck/MSD once again led biopartnering activity in 2023. This time, the company paid top dollar for ADCs targeting solid tumors from Daiichi Sankyo, with the value of this single deal equaling all of its 15 deals in 2022. Other oncology-related deals for Merck/MSD included its acquisitions of Image Biosciences Inc and Harpoon Therapeutics.
In the neuroscience space, Bristol Myers Squibb acquired Karuna Therapeutics to gain access to KarXT. Initially under regulatory review to treat schizophrenia, KarXT is also being investigated for Alzheimer’s disease psychosis, Alzheimer’s disease agitation and bipolar I disorder. The acquisition complements BMS’s existing programs tackling neurodegenerative and neuromuscular diseases, including 20 programs in the discovery space and five in the clinic. Contributions to these programs come from BMS’s partnership with Evotec SE for neurodegeneration therapies, which the company renewed for the second time in 2023 at a value that landed the deal in the top 10 for the year.
Extending revenue through biologics
Under the IRA, small molecule drugs become eligible for price negotiation after nine years, while biologics are granted a safe harbor of 13 years. This could further fuel interest in ADCs and other antibodies for companies looking to maximize revenue, and ADCs and polyspecific antibodies have featured in many of the recent top deals.
The top ADC deal was that between Merck/MSD and Daiichi Sankyo. Coming in second place, Bristol Myers Squibb bolstered its oncology pipeline, which previously consisted of only two acquired ADCs, through ADC-related deals with Mainland China-based SystImmune, a Sichuan Biokin Pharmaceutical Co Ltd subsidiary, and with Germany-based Tubulis. This represents the first partnership for Tubulis, moving its ADC technologies closer to clinical proof of concept and opening the doors for future collaborations.
Amsterdam-based Synaffix B.V., a Lonza company, had a busy 2023. It entered multiple partnerships to provide access to its clinical-stage antibody conjugation technology, GlycoConnect™, and ADCs developed from the platform. Two of its five agreements, with MacroGenics Inc and Amgen, fell within the top-valued deals for 2023, and other lucrative deals occurred with SOTIO Biotech, Hummingbird Bioscience and ABL Bio Inc. These add to the company’s previous licensing agreements with Genmab A/S, Kyowa Kirin Co Ltd, ProfoundBio, Innovent Biologics Inc, ADC Therapeutics SA, Emergence Therapeutics AG and others.
With regulatory approvals of bispecific antibodies reaching double digits, biopharma is building on the ability of these therapies to overcome the limitations of monoclonal antibodies by continuing to innovate and partner in this space. Two of the top five polyspecific antibody deals in 2023 involved trispecific or tetraspecific antibodies — between Mainland China-based WuXi Biologics and GSK plc and between Celltrion Inc and Cyron Therapeutics Co Ltd, both for oncology targets.
Other partnerships of note include one for a couple of Shanghai-based Elpiscience Biopharma Ltd’s preclinical bispecific antibody assets, licensed by Tokyo-based Astellas Pharma Inc, with the option to license two more. Both products are based on Elpiscience’s Bispecific Macrophage Engager (BiME®) platform and will undergo collaborative early-stage research between the two companies. This continues work between the companies that started with a shared interest in the concept of macrophages and a desire to investigate Claudin18.2 as a target for the BiME platform.
In addition, BioNTech signed a deal with Biotheus Inc for exclusive options to a preclinical-stage bispecific antibody candidate for oncology. This adds to the multiple high-value ADC deals BioNTech signed in 2023 for oncology targets and aligns with its plans to diversify and grow its pipeline of oncology candidates to include ADCs, cancer vaccines, cell therapies and more.
Partnering at the heart of innovation
Pharmas rely on biotechs to fill gaps in expertise, technology and resources, which will continue to drive opportunities for biotechs to partner or pursue acquisition to further their assets and continue innovation. As pharmas are increasingly selective about how they spend their money, biotechs would benefit from aligning their strengths with pharma companies’ priorities.
For more on how pharmas and biotechs are navigating a challenging financing environment, please view our recent webinar, Raising money in uncertain times: How private life science companies can overcome fundraising challenges.
