RE:Big pharma is set to keep signing bigger deals in 2024August 17, 2024 - There’s plenty of capital sitting on the sidelines—and investors can only wait so long to deploy it. Venture firms typically have to write checks within a certain period of time or return the money to their own investors. Perceptive Advisors, a life sciences portfolio holding company,
has until May 2026 to spend a $515 millionfund it closed in 2021.
Several other venture capital firms are approaching similar cliffs:
Many closed their last funds in 2020and 2021, when the COVID-19
pandemic sparked new interest in biotechnology investment.
The same time pressure applies for pharmaceutical companies
looking to acquire smaller firms or license their assets. Arda Ural,
EY’s Americas industry markets leader for health sciences and
wellness, says Big Pharma has about $1.2 trillion in capital available
for mergers and acquisitions, down just slightly from the $1.37 trillion
the sector had in December.
Ural explained that it’s not the deal volume that has risen ... it’s the average
biopharma acquisition size, which has increased by 77% as the life sciences s
ector’s biggest players – the Big Pharma multinationals – have begun to
dominate industry dealmaking once again.
The huge growth potential of the oncology market is reflected in companies’ M&A
spending over the past five years, which has heavily prioritized oncology.
The changing regulatory landscape is also focusing attention on rare diseases;
with legislation such as the IRA unlikely to affect their price-point orphan drugs
have become one of the biggest M&A targets.
Meanwhile, the expiration of several major patents means some
pharmaceutical companies are staring down billions of dollars in
revenue loss over the next several years, Ural says. That could
eventually outweigh the macroeconomic factors that create risk,
including geopolitical tensions, high interest rates, and inflation.
“This cannot sustain in the long term,” Ural says. “Something’s
got to give.”